Osisko CEO touts new mining royalty firm with ‘a little extra punch’ – by Peter Koven (National Post – July 18, 2014)

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The mining royalty space already has some serious players for investors to choose from, but Sean Roosen is convinced his new offering stands out from the pack.

“We’ve got a couple of areas where we think we bring a little extra punch to the table,” the chief executive of Osisko Gold Royalties Ltd. said in an interview.

The stock started trading last month and was well-received from the start, opening above the implied valuation at launch and remaining there ever since. The company does not even have a website yet (apart from a splash page), but has generated plenty of investor interest.

That is not surprising. The royalty firm was spun out of this year’s $3.7-billlion takeover of Osisko Mining Corp., which was one of the mining sector’s most successful companies of the past decade. The team at Osisko Mining, led by Mr. Roosen, found and built the massive Canadian Malartic mine in Quebec, a world-class gold mine.

Nearly all the key players behind Osisko Mining are working together again at the royalty firm, including Mr. Roosen, John Burzynski (senior vice-president) and Brian Coates (president). They have a dedicated investor following who made money with Osisko Mining and are keen to do it again.

Osisko Royalty was put in a good position to succeed: It has $157-million of cash, a 5% royalty on the Canadian Malartic mine, a 2% royalty on other properties that belonged to Osisko Mining (including promising assets in Ontario’s Kirkland Lake camp), and 9,000 square kilometres of exploration ground in Mexico that could be spun out. A dividend policy is in the works.

For all that, the company has a market value of $750-million. By almost any metric, it has a premium valuation compared to traditional mining companies. That fact is not surprising, because every gold royalty company has a premium valuation.

Put simply, the mining royalty firms (Franco-Nevada Corp., Silver Wheaton Corp. and Royal Gold Inc.) have thrived while most of the mining sector suffered over the past couple of years. That is very much by design. These companies move into action when a downturn hits, supplying capital to needy miners struggling to find it anywhere else.

The royalty firms have plenty of negotiating power in these scenarios, and by acquiring royalties and metal streams on promising projects, they get cash flow from the mines without any of the operating risk.

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