On Tuesday, BMO Capital maintained its Market Perform rating and Cdn$26.00 price target on Osisko Gold Royalties Ltd (NYSE:OR:CN) (NYSE: OR) stock. The firm's stance comes in light of Osisko's recent gold stream transaction on the Cascabel project. The deal is seen as indicative of both the potential for larger-scale transactions in the industry and a growing trend toward syndication as a means to manage risk.
Osisko Gold Royalties, known for its portfolio of royalties and streams in the mining sector, is no stranger to the Cascabel asset, having engaged in a previous royalty transaction on the same project. The new gold stream agreement entails payments to SolGold, primarily during the construction phase of the mine.
BMO Capital views the internal rate of return (IRR) on this transaction as reasonable, taking into account the substantial expected mine life along with the inherent risks associated with the asset's development stage and geographical location.
The analyst from BMO Capital highlighted the transaction's reflection of a collaborative spirit within the sector, where companies are increasingly working together to mitigate risks through syndication. This approach allows for a distribution of exposure among participants, which can be particularly beneficial in dealing with larger and more complex deals.
The transaction is anticipated to have a positive, albeit modest, impact on Osisko's net asset value (NAV), with an estimated increase of approximately 1.5%. This reassessment aligns with the firm's evaluation of the risks and benefits associated with the Cascabel project, which is recognized for its significant potential lifespan.
Osisko Gold Royalties' involvement with the Cascabel asset, along with its latest financial commitment, underscores the company's ongoing strategy to invest in and manage a diverse portfolio of mining assets. BMO Capital's reiteration of the Market Perform rating and price target suggests a steady outlook for the company's stock as it continues to navigate the opportunities and challenges within the gold mining sector.
"In other recent news, Osisko Gold Royalties has been making notable progress according to its Q1 earnings and revenue results. The company reported a solid start to 2024, with Q1 earnings aligning with its annual guidance. It produced 22,259 gold equivalent ounces (GEOs), aiming to meet its yearly target of 82,000 to 92,000 GEOs. The revenue for the quarter was CAD60.8 million.
Jefferies has upgraded Osisko Gold Royalties' stock from Hold to Buy, citing robust revenue projections and a positive outlook for the company's performance throughout the year. On the other hand, BMO Capital maintained its Market Perform rating on Osisko, following the company's recently disclosed second-quarter GEO results.
In other company developments, Osisko reported record gold production at the Canadian Malartic mine and plans to add two production assets in the second half of the year. The company also anticipates closing one or two significant transactions this year. These are recent developments that have shaped the current state of Osisko Gold Royalties."
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