EX-99.1 2 exhibit99-1.htm EXHIBIT 99.1 Osisko Gold Royalties Ltd.: Exhibit 99.1 - Filed by newsfilecorp.com

 

 

Unaudited Condensed Interim

Consolidated Financial Statements

 

For the three and nine months

ended

September 30, 2023

 

 


Osisko Gold Royalties Ltd
Consolidated Balance Sheets
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

      September 30,     December 31,  
                      2023                     2022  
  Notes   $     $  
               
Assets              
               
Current assets              
               
Cash 3   70,754     90,548  
Short-term investments     6,509     -  
Amounts receivable     7,315     11,700  
Other assets     4,047     2,546  
      88,625     104,794  
               
Non-current assets              
               
Investments in associates 4   314,633     319,763  
Other investments 5   99,454     73,504  
Royalty, stream and other interests 6   1,553,282     1,378,253  
Goodwill     111,204     111,204  
Other assets     8,920     8,783  
      2,176,118     1,996,301  
               
Liabilities              
               
Current liabilities              
               
Accounts payable and accrued liabilities     7,557     6,825  
Dividends payable 8   11,108     10,121  
Lease liabilities     1,141     921  
      19,806     17,867  
               
Non-current liabilities              
               
Lease liabilities     7,127     6,701  
Long-term debt 7   315,390     147,950  
Deferred income taxes     96,235     86,572  
      438,558     259,090  
               
Equity              
               
Share capital 8   2,094,048     2,076,070  
Contributed surplus     78,661     77,295  
Accumulated other comprehensive income     43,658     47,435  
Deficit     (478,807 )   (463,589 )
      1,737,560     1,737,211  
      2,176,118     1,996,301  

 

The notes are an integral part of these unaudited condensed interim consolidated financial statements.
2
Osisko Gold Royalties Ltd
Consolidated Statements of Income (Loss)
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

      Three months ended
September 30,		     Nine months ended
September 30,		  
      2023     2022     2023     2022  
  Notes   $     $     $     $  
            (Note 2)           (Note 2)  
                           
Revenues 10   62,069     53,661     182,156     155,895  
                           
Cost of sales 10   (4,337 )   (4,407 )   (12,638 )   (11,344 )
Depletion 10   (16,894 )   (14,161 )   (43,356 )   (37,310 )
Gross profit     40,838     35,093     126,162     107,241  
                           
Other operating expenses                          
General and administrative 15   (11,697 )   (5,186 )   (25,214 )   (14,962 )
Business development     (1,337 )   (1,203 )   (4,130 )   (3,884 )
Impairment of royalty and stream interests 6   (17,490 )   -     (24,119 )   -  
Operating income     10,314     28,704     72,699     88,395  
Interest income     1,115     3,054     5,348     6,020  
Finance costs     (6,086 )   (5,480 )   (12,401 )   (16,949 )
Foreign exchange (loss) gain     (3,390 )   14,482     (3,543 )   23,011  
Share of (loss) income of associates     (4,754 )   (1,143 )   8,268     383  
Other losses, net 10   (19,862 )   (1,034 )   (41,962 )   (13,352 )
(Loss) earnings before income taxes     (22,663 )   38,583     28,409     87,508  
Income tax recovery (expense)     2,664     (10,569 )   (9,599 )   (24,631 )
Net (loss) earnings from continuing operations   (19,999 )   28,014     18,810     62,877  
Net loss from discontinued operations 2   -     (244,655 )   -     (268,475 )
Net (loss) earnings     (19,999 )   (216,641 )   18,810     (205,598 )
                           
Net (loss) earnings attributable to:                          
Osisko Gold Royalties Ltd's shareholders     (19,999 )   (158,647 )   18,810     (141,162 )
Non-controlling interests     -     (57,994 )   -     (64,436 )
                           
Net (loss) earnings per share from continuing operations attributable to Osisko Gold Royalties Ltd's shareholders  
 
11		                        
Basic and diluted     (0.11 )   0.15     0.10     0.35  
                           
Net (loss) earnings per share attributable to Osisko Gold Royalties Ltd's shareholders  
11		                        
Basic and diluted     (0.11 )   (0.86 )   0.10     (0.79 )

The notes are an integral part of these unaudited condensed interim consolidated financial statements.
3
Osisko Gold Royalties Ltd
Consolidated Statements of Comprehensive Income (Loss)
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

    Three months ended
September 30,		     Nine months ended
September 30,		  
    2023     2022     2023     2022  
    $     $     $     $  
          (Note 2)           (Note 2)  
                         
Net (loss) earnings   (19,999 )   (216,641 )   18,810     (205,598 )
                         
Other comprehensive income (loss)                        
                         
Items that will not be reclassified to the consolidated statement of income (loss)                        
                         
Changes in fair value of financial assets at fair value through comprehensive income   5,230     (11,256 )   3,986     (42,533 )
Income tax effect   (1,198 )   801     (1,523 )   4,324  
Share of other comprehensive loss of associates   (1,419 )   (1,368 )   (2,758 )   (1,368 )
                         
Items that may be reclassified to the consolidated statement of income (loss)                        
                         
Cumulative translation adjustments   15,797     45,341     1,775     56,527  
                         
Deemed disposal of an investment in an associate                        
  Reclassification to the statements of income (loss) of the other comprehensive income, net of income tax   -     -     -     (294 )
                         
 Share of other comprehensive loss of associates   (3,605 )   -     (5,266 )   -  
                         
Other comprehensive income (loss)   14,805     33,518     (3,786 )   16,656  
                         
Comprehensive (loss) income   (5,194 )   (183,123 )   15,024     (188,942 )
                         
Comprehensive (loss) income attributable to 
  Osisko Gold Royalties Ltd's shareholders:		                        
From continuing operations   (5,194 )   (131,190 )   15,024     (129,883 )
From discontinued operations   -     (51,933 )   -     (59,059 )
                         
Comprehensive (loss) income attributable to:                        
Osisko Gold Royalties Ltd's shareholders   (5,194 )   55,471     15,024     74,156  
Non-controlling interests   -     (186,661 )   -     (204,039 )


The notes are an integral part of these unaudited condensed interim consolidated financial statements.
4
Osisko Gold Royalties Ltd
Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

      Three months ended
September 30,		     Nine months ended
September 30,		  
  Notes   2023     2022     2023     2022  
      $     $     $     $  
            (Note 2)           (Note 2)  
Operating activities                          
Net (loss) earnings from continuing operations     (19,999 )   28,014     18,810     62,877  
Adjustments for:                          
Share-based compensation     3,967     2,052     9,124     5,010  
Depletion and amortization     17,223     14,423     44,248     38,108  
Impairment of royalty and stream interests 6   17,490     -     24,119     -  
Expected credit loss and write-off of other investments 10   17,349     276     37,480     1,180  
Finance costs     122     1,831     369     5,333  
Share of loss (income) of associates     4,754     1,143     (8,268 )   (383 )
Change in fair value of financial assets at fair value through profit and loss     2,513     758     6,267     15,824  
Net gain on dilution of investments     -     -     (4,842 )   (3,604 )
Loss on the deemed disposal of an associate 4   -     -     3,057     -  
Foreign exchange loss (gain)     3,399     (14,260 )   3,424     (22,729 )
Deferred income tax (recovery) expense     (3,146 )   9,888     7,584     23,261  
Other     108     26     344     36  
Net cash flows provided by operating activities
  before changes in non-cash working capital items		     43,780     44,151     141,716     124,913  
Changes in non-cash working capital items 12   (316 )   6,916     (5,410 )   1,626  
Net operating cash flows provided by continuing operations     43,464     51,067     136,306     126,539  
Net operating cash flows used by discontinued operations     -     (13,030 )   -     (65,116 )
Net cash flows provided by operating activities     43,464     38,037     136,306     61,423  
                           
Investing activities                          
Acquisitions of short-term investments     (2,676 )   -     (6,473 )   -  
Acquisitions of investments     -     (1,494 )   (53,279 )   (8,174 )
Proceeds on disposal of investments     5,022     -     5,028     2,960  
Acquisitions of royalty and stream interests 6   (26,768 )   (23,073 )   (239,530 )   (32,363 )
Cash outflow from deconsolidation of Osisko Development 2   -     (133,138 )   -     (133,138 )
Other     (37 )   (15 )   (43 )   (18 )
Net investing cash flows used by continuing operations     (24,459 )   (157,720 )   (294,297 )   (170,733 )
Net investing cash flows used by discontinued operations     -     (20,539 )   -     (114,984 )
Net cash flows used in investing activities     (24,459 )   (178,259 )   (294,297 )   (285,717 )
                           
Financing activities                          
Bought deal equity financing     -     -     -     311,962  
Share issue costs     -     -     -     (13,941 )
Increase in long-term debt, net of discount on banker's acceptances  
 		   19,802     -     206,711     -  
Repayment of long-term debt, net of discount on banker's acceptances     (28,151 )   -     (41,614 )   (113,120 )
Exercise of share options and shares issued under the share purchase plan     57     123     10,619     1,057  
Normal course issuer bid purchase of common shares     -     (16,451 )   -     (21,330 )
Dividends paid     (10,321 )   (9,770 )   (29,366 )   (28,248 )
Withholding taxes on settlement of restricted and deferred share units     -     -     (4,349 )   (2,224 )
Other     (265 )   (776 )   (711 )   (1,207 )
Net financing cash flows (used) provided by continuing operations     (18,878 )   (26,874 )   141,290     132,949  
Net financing cash flows (used) provided by discontinued operations     -     (1,529 )   -     245,833  
Net cash flows (used) provided by financing activities     (18,878 )   (28,403 )   141,290     378,782  
                           
Increase (decrease) in cash before effects of exchange rate changes on cash     127     (168,625 )   (16,701 )   154,488  
Effects of exchange rate changes on cash                          
    Continuing operations     594     15,529     (3,093 )   23,837  
    Discontinued operations     -     4,355     -     6,519  
Increase (decrease) in cash     721     (148,741 )   (19,794 )   184,844  
Cash - beginning of period     70,033     449,283     90,548     115,698  
Cash - end of period 3   70,754     300,542     70,754     300,542  

Additional information on the consolidated statements of cash flows is presented in Note 12.

The notes are an integral part of these unaudited condensed interim consolidated financial statements.
5
Osisko Gold Royalties Ltd
Consolidated Statement of Changes in Equity
For the nine months ended September 30, 2023
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

    Number of                 Accumulated              
    common          
    other              
    shares     Share   Contributed     comprehensive              
    outstanding     capital   surplus     income (i)     Deficit     Total  
          $     $     $     $     $  
                                     
Balance - January 1, 2023   184,037,728     2,076,070     77,295     47,435     (463,589 )   1,737,211  
                                     
Net earnings   -     -     -     -     18,810     18,810  
Other comprehensive loss   -     -     -     (3,786 )   -     (3,786 )
Comprehensive (loss) income   -     -     -     (3,786 )   18,810     15,024  
                                     
Dividends declared   -     -     -     -     (32,371 )   (32,371 )
Shares issued - Dividends reinvestment plan   104,059     2,019     -     -     -     2,019  
Shares issued - Employee share purchase plan   13,151     248     -     -     -     248  
Share options - Share-based compensation   -     -     3,720     -     -     3,720  
Share options exercised   777,935     13,099     (2,638 )   -     -     10,461  
Restricted share units to be settled in common shares:                                    
  Share-based compensation   -     -     4,469     -     -     4,469  
  Settlement   166,161     2,245     (4,534 )   -     (1,643 )   (3,932 )
  Income tax impact   -     -     (144 )   -     -     (144 )
Deferred share units to be settled in common shares:                                    
  Share-based compensation   -     -     938     -     -     938  
  Settlement   25,926     367     (377 )   -     (5 )   (15 )
  Income tax impact   -     -     (68 )   -     -     (68 )
Transfer of realized loss on financial assets at fair value through other comprehensive income, net of income taxes   -     -     -     9     (9 )   -  
Balance - September 30, 2023   185,124,960     2,094,048     78,661     43,658     (478,807 )   1,737,560  

(i) As at September 30, 2023, accumulated other comprehensive income comprises items that will not be recycled to the consolidated statements of income (loss) amounting to ($10.0) million and items that may be recycled to the consolidated statements of income (loss) amounting to $53.7 million.

The notes are an integral part of these unaudited condensed interim consolidated financial statements.
6
Osisko Gold Royalties Ltd
Consolidated Statement of Changes in Equity
For the nine months ended September 30, 2023
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

          Equity attributed to Osisko Gold Royalties Ltd's shareholders              
    Number of                       Equity     Accumulated                          
    common                       component of     other                 Non-        
    shares     Share           Contributed     convertible     comprehensive                 controlling        
    outstanding     capital     Warrants     surplus     debentures     income(i)     Deficit     Total     interests     Total  
          $     $     $     $     $     $     $     $     $  
Balance - January 1, 2022   166,493,597     1,783,689     18,072     42,525     14,510     58,851     (283,042 )   1,634,605     145,456     1,780,061  
                                                             
Net loss   -     -     -     -     -     -     (141,162 )   (141,162 )   (64,436 )   (205,598 )
Other comprehensive income   -     -     -     -     -     11,279     -     11,279     5,377     16,656  
Comprehensive income (loss)   -     -     -     -     -     11,279     (141,162 )   (129,883 )   (59,059 )   (188,942 )
                                                             
Bought deal financing   18,600,000     311,962     -     -     -     -     -     311,962     -     311,962  
Share issue costs, net of income taxes of $3.7 million   -     (10,247 )   -     -     -     -     -     (10,247 )   -     (10,247 )
Net investments from minority shareholders   -     -     -     -     -     -     -     -     210,361     210,361  
Acquisition of Tintic by Osisko Development   -     -     -     -     -     -     -     -     109,656     109,656  

Effect of changes in ownership of a subsidiary on non-controlling interest

   -     -     -     -     -     -     (32,184 )   (32,184 )   32,184     -  
Dividends declared   -     -     -     -     -     -     (30,453 )   (30,453 )   -     (30,453 )
Shares issued - Dividends reinvestment plan   86,806     1,252     -     -     -     -     -     1,252     -     1,252  
Shares issued - Employee share purchase plan   15,289     230     -     -     -     -     -     230     -     230  
Share options - Share-based compensation   -     -     -     2,051     -     -     -     2,051     2,487     4,538  
Share options exercised   63,936     1,148     -     (237 )   -     -     -     911     -     911  
Restricted share units to be settled in common shares:                                                            
Share-based compensation   -     -     -     2,361     -     -     -     2,361     1,383     3,744  
Settlement   135,789     1,523     -     (3,084 )   -     -     (227 )   (1,788 )   270     (1,518 )
Income tax impact   -     -     -     (179 )   -     -     -     (179 )   -     (179 )
Deferred share units to be settled in common shares:                                                            
Share-based compensation   -     -     -     744     -     -     -     744     462     1,206  
Settlement   29,975     395     -     (407 )   -     -     -     (12 )   95     83  
Income tax impact   -     -     -     (149 )   -     -     -     (149 )   -     (149 )
Normal course issuer bid purchase of common shares   (1,636,158 )   (18,252 )   -     -     -     -     (3,078 )   (21,330 )   -     (21,330 )
Warrants expired unexercised   -     -     (18,072 )   18,072     -     -     -     -     -     -  

Transfer of realized gain on financial assets at fair value through other comprehensive income, net of income taxes

   -     -     -     -     -     (14,604 )   14,604     -     -     -  
Deconsolidation of Osisko Development   -     -     -     -     -     (515 )   -     (515 )   (443,295 )   (443,810 )
Balance - September 30, 2022   183,789,234     2,071,700     -     61,697     14,510     55,011     (475,542 )   1,727,376     -     1,727,376  

(i)  As at September 30, 2022, accumulated other comprehensive income comprises items that will not be recycled to the consolidated statement of income (loss) amounting to ($8.8) million and items that may be recycled to the consolidated statement of income (loss) amounting to $63.8 million. 

The notes are an integral part of these unaudited condensed interim consolidated financial statements.
7
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

1. Nature of activities

Osisko Gold Royalties Ltd and its subsidiaries (together, "Osisko" or the "Company") are engaged in the business of acquiring and managing royalties, streams and similar interests on precious metals and other commodities that fit the Company's risk/reward objectives. Osisko is a public company domiciled in the Province of Québec, Canada, whose shares trade on the Toronto Stock Exchange and the New York Stock Exchange, and is constituted under the Business Corporations Act (Québec). The address of its registered office is 1100, avenue des Canadiens-de-Montréal, Suite 300, Montréal, Québec. The Company owns a portfolio of royalties, streams, offtakes, options on royalty/stream financings and exclusive rights to participate in future royalty/stream financings on various projects. The Company's main asset is a 5% net smelter return ("NSR") royalty on the Canadian Malartic mine, located in Canada.

2. Basis of presentation

These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The condensed interim consolidated financial statements should be read in conjunction with the Company's annual consolidated financial statements for the years ended December 31, 2022 and 2021, which have been prepared in accordance with IFRS as issued by the IASB. The accounting policies, methods of computation and presentation applied in these unaudited condensed interim consolidated financial statements are consistent with those of the previous financial year.

Certain new accounting standards and interpretations have been published that are currently effective requirements or forthcoming requirements. These standards are not expected to have a material impact on the Company's current or future

reporting periods and are therefore not discussed herein.

On September 30, 2022, Osisko ceased to consolidate Osisko Development Corp. ("Osisko Development") as management determined that Osisko was no longer in a position of control over Osisko Development. Immediately after, management determined it was able to exert significant influence on Osisko Development and subsequently accounted for its investment as an associate under the equity method. On September 30, 2022, the Company derecognized the assets and liabilities of Osisko Development from its consolidated balance sheet and recorded its interest in Osisko Development at fair value as an investment in an associate at $207.0 million. The activities of Osisko Development represented one of two distinct business segments of the Company, namely the exploration, evaluation and development of mining projects segment. This segment was deemed to have been disposed of on September 30, 2022 and its results of operations and cash flows have been reclassified as discontinued operations. Refer to the annual consolidated financial statements of Osisko for the years ended December 31, 2022 and 2021 for more details.

3. Cash

As at September 30, 2023 and December 31, 2022, the cash balances were as follows:

    September 30,     December 31,  
    2023     2022  
    $     $  
             
Cash held in Canadian dollars   24,991     24,192  
Cash held in U.S. dollars (US$33,848; US$48,993)   45,763     66,356  
Total cash   70,754     90,548  

 
8
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

4. Investments in associates

Nine months ended     Year ended  
    September 30,
2023 		    December 31,
2022 		 
    $     $  
             
Balance - Beginning of period   319,763     125,354  
Acquisitions   271     2,361  
Share of income (loss), net (i)   8,268     (2,438 )
Share of other comprehensive loss   (8,024 )   (1,368 )
Net gain on ownership dilution   4,842     3,604  
(Loss) gain on deemed disposal (ii)   (3,057 )   11,854  
Transfers to other investments (Note 5)   (7,159 )   (15,343 )
Impairments   (271 )   (2,361 )
Investments in associates held by Osisko Development and deconsolidated on September 30, 2022 (Note 2)   -     (8,900 )
Reclassification of interest held by the Company in Osisko Development (Note 2)   -     207,000  
Balance - End of period   314,633     319,763  

(i) The net share of income or loss is adjusted to the extent that management is aware of material events that affect the associates' net income or loss during the period.

(ii) In 2023, the loss on deemed disposal is related to an investment in an associate that was transferred to other investments as the Company has considered that it has lost its significant influence over the investee.

5. Other investments

Nine months ended     Year ended  
    September 30,
2023		     December 31,
2022		  
    $     $  
Fair value through profit or loss (warrants and convertible instruments)            
Balance - Beginning of period   24,217     47,981  
Acquisitions   -     4,438  
Disposal   (5,000 )   -  
Exercise of warrants   -     (80 )
Interest capitalized (i)   2,888     -  
Change in fair value (i)   (6,267 )   (17,236 )
Acquisition of Tintic by Osisko Development (Note 2)   -     (10,827 )
Foreign exchange revaluation impact   -     50  
Investments held by Osisko Development and deconsolidated on September 30, 2022 (Note 2)   -     (109 )
Balance - End of period   15,838     24,217  
             
Subtotal reported to next page   15,838     24,217  

(i) In January 2023, a convertible secured senior note of $17.6 million with Falco Resources Ltd. was amended. The accrued interest receivable of $2.9 million was capitalized to the capital of the note, the interest rate was increased from 7% to 8% per annum, the conversion price of the note was reduced from $0.55 to $0.50 per common share and the maturity date of the note was extended to December 31, 2024. In addition, the Company has the ability to apply the loan or a portion of the loan against future stream payments due to the operator when certain triggering events will be met. During the nine months ended September 30, 2023, the Company recognized a reduction in the fair value of the convertible secured senior note of $4.8 million.

 
9
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

5. Other investments (continued)

Nine months ended     Year ended  
    September 30,
2023		     December 31,
2022		  
    $     $  
             
Subtotal from previous page   15,838     24,217  
             
Fair value through other comprehensive income (common shares)            
Balance - Beginning of period   18,337     94,231  
Acquisitions (Note 6)   53,008     5,260  
Transfer from associates (Note 4)   7,159     15,343  
Change in fair value   3,986     (43,486 )
Disposals   (28 )   (21,634 )
Foreign exchange revaluation impact   1,154     -  
Investments held by Osisko Development deconsolidated on September 30, 2022 (Note 2)   -     (31,377 )
Balance - End of period   83,616     18,337  
             
Amortized cost (notes)            
Balance - Beginning of period   30,950     26,798  
Acquisitions   -     5,175  
Repayments   -     (2,960 )
Allowance for expected credit loss and write-offs (i)   (30,615 )   -  
Foreign exchange revaluation impact   (335 )   1,937  
Balance - End of period   -     30,950  
Total   99,454     73,504  

Other investments comprise common shares, warrants and convertible instruments, mostly from companies publicly traded in Canada and in the United States of America, as well as loans receivable (notes) from associates (private companies).

(i) On June 30, 2023, the Company determined that the credit risk related to its loans to Stornoway Diamonds (Canada) Inc. ("Stornoway"), the operator of the Renard diamonds mine, had increased significantly since initial recognition. As a result, the Company recorded an allowance for expected credit loss of $13.3 million (US$10.0 million) against the loans receivable ($11.5 million, net of income taxes) and $6.6 million (US$5.0 million) related to accrued interest against the amounts receivable for an aggregate expected credit loss of $19.9 million (US$15.0 million). The lifetime expected credit loss was estimated as the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive, discounted at the original effective interest rate. Cash flows expected to be received were based on the expected capacity of the borrower to repay the financial instrument, which was highly dependent on a number of factors and assumptions, including: forecast diamond prices, production levels, operating costs, internal capital investments required to maintain the operations and other factors related to mining operations.

On October 27, 2023, Stornoway announced it was temporarily suspending operations at its Renard mine and placing itself under the protection of the Companies' Creditors Arrangement Act ("CCAA"). The growing uncertainty of the diamond price in the short and medium term, coupled with the significant and sudden drop in the price of the resource on the world market, have had a major impact on Stornoway's long-term financial situation. This was in part due to the halt in the import of rough diamonds by India and by the global geopolitical climate. As a result, the Company considered the loans to be credit-impaired and, with no reasonable expectation of any material cash flow recovery, wrote-off $17.3 million (US$12.8 million) on September 30, 2023 to fully provision its loans.

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Company compares the risk of default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this assessment, the Company considers both quantitative and qualitative information that is reasonable and supportive, including forward-looking information that is available without undue cost of effort. The loss allowances for financial assets are based on assumptions about the risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the allowance for expected credit loss calculation, based on the Company's past history and existing market conditions, as well as forward-looking estimates at the end of each reporting period. Changes in the judgements used in determining the risk of default and the expected loss rates could materially impact the allowance or the write-off.

 
10
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

6. Royalty, stream and other interests

          Nine months ended
September 30, 2023		  
    Royalty
interests		     Stream
interests		     Offtake
interests		     Total  
    $     $     $     $  
Balance - January 1   879,075     484,590     14,588     1,378,253  
Additions   27,072     212,458     -     239,530  
Depletion   (18,430 )   (24,926 )   -     (43,356 )
Impairment   (9,000 )   (15,119 )   -     (24,119 )
Currency conversion adjustments   (251 )   3,251     (26 )   2,974  
Balance - September 30   878,466     660,254     14,562     1,553,282  
                         
Producing                        
Cost   644,224     782,228     -     1,426,452  
Accumulated depletion and impairment   (444,020 )   (278,755 )   -     (722,775 )
Net book value - September 30   200,204     503,473     -     703,677  
                         
Development                        
Cost   366,458     211,441     33,186     611,085  
Accumulated depletion and impairment   (816 )   (55,336 )   (28,179 )   (84,331 )
Net book value - September 30   365,642     156,105     5,007     526,754  
                         
Exploration and evaluation                        
Cost   322,721     676     9,555     332,952  
Accumulated depletion and impairment   (10,101 )   -     -     (10,101 )
Net book value - September 30   312,620     676     9,555     322,851  
Total net book value - September 30   878,466     660,254     14,562     1,553,282  

Main acquisitions

Silver stream - CSA mine

In June 2023, Osisko Bermuda Limited ("Osisko Bermuda"), a wholly-owned subsidiary of the Company, closed the previously announced silver purchase agreement (the "CSA Silver Stream") with Metals Acquisition Limited ("Metals Acquisition") concurrently with the closing of the acquisition by Metals Acquisition of the producing CSA mine in New South Wales, Australia ("CSA") from a subsidiary of Glencore plc (the "CSA Acquisition Transaction"). The closing date of the CSA Acquisition Transaction and the Silver Stream was June 15, 2023 (the "Closing Date").

Pursuant to the CSA Silver Stream, Osisko Bermuda paid an upfront cash deposit to Metals Acquisition of US$75.0 million ($99.4 million) (the "Silver Deposit"). Osisko Bermuda will purchase an amount of refined silver equal to 100% of the payable silver produced from CSA for the life of the mine and will make ongoing payments for refined silver delivered equal to 4% of the spot silver price at the time of delivery. The CSA Silver Stream was effective as of February 1, 2023. Metals Acquisition and certain of its subsidiaries, including the operating subsidiary following closing of the CSA Acquisition Transaction, provided Osisko Bermuda with corporate guarantees and other security over their assets for its obligations under the CSA Silver Stream.

 
11
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

6. Royalty, stream and other interests (continued)

Main acquisitions (continued)

Silver stream - CSA mine (continued)

Metals Acquisition has granted Osisko Bermuda a right of first refusal in respect of the sale, transfer or buy-back of any royalty, stream or similar interest in the products mined or otherwise extracted from any property owned or acquired by Metals Acquisition or an affiliate between the closing date and the later of the seventh anniversary of the Closing Date or the date on which Osisko Bermuda or any affiliate ceases to hold or control more than 5% of the issued and outstanding common shares of Metals Acquisition.

In conjunction with the CSA Silver Stream, Osisko Bermuda subscribed for US$15.0 million ($19.9 million) in equity of Metals Acquisition as part of its concurrent equity financing. 

Copper stream - CSA mine

In June 2023, Osisko Bermuda closed the previously announced copper purchase agreement (the "CSA Copper Stream") with Metals Acquisition concurrently with the closing of the CSA Acquisition Transaction. Deliveries under the CSA Copper Stream will commence on June 15, 2024.

Pursuant to the CSA Copper Stream, Osisko Bermuda paid an upfront cash deposit to Metals Acquisition of US$75.0 million ($99.4 million). Osisko Bermuda will be entitled to receive refined copper equal to 3.0% of payable copper produced from CSA until the 5th anniversary of the Closing Date (the "First Threshold Stream"), then 4.875% of payable copper produced from CSA until 33,000 metric tonnes have been delivered in aggregate (the "Second Threshold Stream"), and thereafter 2.25% of payable copper produced from CSA for the remaining life of the mine. Osisko Bermuda will make ongoing payments for refined copper delivered equal to 4% of the spot copper price at the time of delivery. On the 5th anniversary of the Closing Date, Metals Acquisition will have the option to exercise certain buy-down rights by paying a one-time cash payment to Osisko Bermuda. Metals Acquisition and certain of its subsidiaries, including the operating subsidiary following closing of the CSA Acquisition Transaction, provided Osisko Bermuda with corporate guarantees and other security over their assets for its obligations under the CSA Copper Stream.

In conjunction with the CSA Copper Stream, Osisko Bermuda subscribed for US$25.0 million ($33.1 million) in equity of Metals Acquisition as part of its concurrent equity financing.

Gibraltar silver stream amendments

In June 2023, Osisko completed certain amendments to its 75% silver stream (the "Gibraltar Silver Stream") with respect to the Gibraltar copper mine ("Gibraltar"), located in Canada, which is operated by a wholly-owned subsidiary of Taseko Mines Limited ("Taseko"). On March 15, 2023, Taseko announced the completion of its acquisition of an additional 12.5% interest in Gibraltar from Sojitz Corporation giving Taseko an effective 87.5% interest. Osisko and Taseko have amended the Gibraltar Silver Stream to increase Osisko's effective stream percentage by 12.5% to 87.5%. Further to this, Osisko and Taseko have also extended the step-down silver delivery threshold to coincide with Taseko's recently updated mineral reserve estimate for Gibraltar. Osisko paid a total consideration of US$10.25 million ($13.6 million) to Taseko, and committed to help support ongoing Environmental, Social and Governance initiatives at Gibraltar with $50,000 per year for the following three years.

Copper and gold NSR royalty - Costa Fuego copper-gold project

In July 2023, Osisko closed the acquisition of a 1.0% copper NSR royalty and a 3.0% gold NSR royalty from Hot Chili Limited ("Hot Chili") covering the Costa Fuego copper-gold project in Chile, for a total cash consideration of US$15.0 million ($19.9 million) Osisko has granted Hot Chili an option to buy-down a portion of the royalty, which can only occur upon a change of control and which is exercisable until the fourth anniversary of the transaction close. The buydown option reduces the copper and gold royalties by 0.5% respectively (resulting in a 0.5% copper NSR royalty and 2.5% gold NSR royalty), in exchange for payment in an amount equal to 130%, 140%, or 150% of the up-front price paid by Osisko if exercised before the 2nd, 3rd or 4th anniversary of the transaction close. Hot Chili has granted Osisko a corporate right of first offer on all future potential royalty and streaming opportunities, as well as certain other rights on proposed future royalty financings.

 
12
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

6. Royalty, stream and other interests (continued)

Main impairments

Renard diamonds stream - Stornoway Diamond (Canada) Inc.

On October 27, 2023, Stornoway announced it was temporarily suspending operations at its Renard mine and placing itself under the protection of the CCAA. The growing uncertainty of the diamond price in the short and medium term, coupled with the significant and sudden drop in the price of the resource on the world market, have had a major impact on Stornoway's long-term financial situation. This was in part due to the halt in the import of rough diamonds by India and by the global geopolitical climate. These elements were considered indicators of impairment, among other facts and circumstances, and, accordingly, management performed an impairment assessment as at September 30, 2023. The impairment assessment resulted in an impairment charge of $15.1 million ($11.1 million, net of income taxes) on the Renard diamond stream.

As at September 30, 2023, the Renard diamond stream was written down to its estimated recoverable amount, being a nominal value, which was determined by the estimated net proceeds to be received from the sales of diamonds held in inventory at the date Stornoway suspended its activities. The main valuation inputs used were the expected diamond prices per carat to be realized and probabilities allocated to each expected sale to be realized. No discount rate was applied considering that the diamonds are expected to be sold within a relatively short period of time.

          Year ended December 31, 2022  
    Royalty
interests		     Stream
interests		     Offtake
interests		     Total  
    $     $     $     $  
Balance - January 1   703,113     438,032     13,656     1,154,801  
Acquisitions   123,359     850     -     124,209  
Depletion   (27,362 )   (23,993 )   -     (51,355 )
Impairment   (1,818 )   -     -     (1,818 )
Currency conversion adjustments   8,282     21,149     932     30,363  
Recognition of royalty and stream interests following the deconsolidation of Osisko Development (Note 2)   73,501     48,552     -     122,053  
Balance - December 31   879,075     484,590     14,588     1,378,253  
                         
Producing                        
Cost   634,058     566,348     -     1,200,406  
Accumulated depletion and impairment   (423,634 )   (238,938 )   -     (662,572 )
Net book value - December 31   210,424     327,410     -     537,834  
                         
Development                        
Cost   367,845     211,755     33,245     612,845  
Accumulated depletion and impairment   (753 )   (55,252 )   (28,229 )   (84,234 )
Net book value - December 31   367,092     156,503     5,016     528,611  
                         
Exploration and evaluation                        
Cost   304,685     677     9,572     314,934  
Accumulated depletion and impairment   (3,126 )   -     -     (3,126 )
Net book value - December 31   301,559     677     9,572     311,808  
Total net book value - December 31   879,075     484,590     14,588     1,378,253  

 
13
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

7. Long-term debt

The summary of the long-term debt is as follows:

    September 30,     December 31,  
    2023     2022  
    $     $  
             
Revolving credit facility   316,040     150,000  
Unamortized discount on banker's acceptances   (650 )   (2,050 )
Long-term debt, net of discount on banker's acceptances   315,390     147,950  
Current portion   -     -  
Non-current portion   315,390     147,950  
    315,390     147,950  

Revolving credit facility

A total amount of $550.0 million is available under the revolving credit facility (the "Facility"), with an additional uncommitted accordion of up to $200.0 million.

The Facility has a maturity date of September 29, 2026. The annual extension of the Facility and the uncommitted accordion are subject to acceptance by the lenders. The Facility is to be used for general corporate purposes and investments in the mineral industry, including the acquisition of royalty, stream and other interests. The Facility is secured by the Company's assets.

The Facility is subject to standby fees. Funds drawn bear interest based on the base rate, prime rate or secured overnight financing rate ("SOFR"), plus an applicable margin depending on the Company's leverage ratio. In March 2023, the Company repaid an amount of $15.0 million on the Facility. In June 2023, the Company drew US$140.0 million ($186.9 million) under the Facility to finance acquisitions of stream interests, including the acquisition of the CSA Silver Stream and CSA Copper Stream (Note 6). In July 2023, the Company drew US$15.0 million ($19.8 million) under the Facility to finance acquisitions of royalty interests, and subsequently repaid an amount of US$10.0 million ($13.2 million) and $15.0 million on the Facility. As at September 30, 2023, the effective interest rate on the drawn balance was 6.8%, including the applicable margin.

The Facility includes covenants that require the Company to maintain certain financial ratios, including the Company's leverage ratios and meet certain non-financial requirements. As at September 30, 2023, all such ratios and requirements were met.

 
14
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

8. Share capital

Shares

Authorized

Unlimited number of common shares, without par value

Unlimited number of preferred shares, issuable in series

Issued and fully paid

185,124,960 common shares

Normal Course Issuer Bid

In December 2022, Osisko renewed its normal course issuer bid ("NCIB") program. Under the terms of the 2022 NCIB program, Osisko may acquire up to 18,293,240 of its common shares from time to time in accordance with the normal course issuer bid procedures of the TSX. Repurchases under the 2022 NCIB program are authorized from December 12, 2022 until December 11, 2023. Daily purchases will be limited to 81,963 common shares, other than block purchase exemptions, representing 25% of the average daily trading volume of the common shares on the TSX for the six-month period ending November 30, 2022, being 327,853 Common Shares.

During the nine months ended September 30, 2023, the Company did not purchase any common shares under the NCIB program (1,636,158 common shares for $21.3 million during the nine months ended September 30, 2022).

Dividends

The following table provides details on the dividends declared for the nine months ended September 30, 2023:

Declaration date     Dividend
per share		     Record
date		     Payment
date		     Dividend
payable		  
      $                 $  
                           
February 23, 2023     0.055     March 31, 2023     April 14, 2023     10,160,000  
May 10, 2023     0.060     June 30, 2023     July 14, 2023     11,103,000  
August 9, 2023     0.060     September 29, 2023     October 16, 2023     11,108,000  
      0.175                 32,371,000  

During the three and nine months ended September 30, 2023, the Company issued respectively 41,753 and 104,059 common shares under the DRIP, at a discount rate of 3%.

As at September 30, 2023, the holders of 9.5 million common shares had elected to participate in the DRIP, representing dividends payable of $0.6 million. Therefore, 36,346 common shares were issued on October 16, 2023 at a discount rate of 3%.

 
15
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

9. Share-based compensation

Share options

The Company offers a share option plan to its directors, officers, management, employees and consultants.

The following table summarizes information about the movement of the share options outstanding:

    Nine months ended
September 30, 2023		     Year ended
December 31, 2022		  
          Weighted           Weighted  
    Number of     average     Number of     average  
    options     exercise price     options     exercise price  
          $           $  
Balance - Beginning of period   3,511,922     13.55     3,730,580     14.09  
Granted (i)   728,700     18.08     684,100     14.25  
Exercised   (777,935 )   13.45     (309,749 )   13.56  
Forfeited / Cancelled   (22,135 )   13.67     (35,135 )   13.48  
Expired   (8,666 )   13.50     (557,874 )   18.02  
Balance - End of period   3,431,886     14.54     3,511,922     13.55  
Options exercisable - End of period   1,942,318     13.49     1,916,888     13.40  

(i) Options were granted to officers, management and employees.

The weighted average share price when share options were exercised during the nine months ended September 30, 2023 was $19.60 ($16.26 for the year ended December 31, 2022).

The following table summarizes the share options outstanding as at September 30, 2023:

 


              Options outstanding     Options exercisable  
                    Weighted              
                    average              
              Weighted     remaining           Weighted  
  Exercise           average     contractual           average  
  price range     Number     exercise price     life (years)     Number     exercise price  
  $           $                 $  
  12.70 - 14.50     2,604,453     13.46     2.3     1,880,385     13.38  
  15.97 - 21.64     827,433     17.93     4.6     61,933     16.73  
        3,431,886     14.54     2.9     1,942,318     13.49  

 
16
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

9. Share-based compensation (continued)

Share options (continued)

The options, when granted, are accounted for at their fair value determined by the Black-Scholes option pricing model based on the vesting period and on the following weighted average assumptions:

    Nine months ended
September 30, 2023 		    Year ended
December 31, 2022 		 
Dividend per share   1.5%     1.5%  
Expected volatility   41%     41%  
Risk-free interest rate   3.8%     2.6%  
Expected life   47 months     47 months  
Weighted average share price   $18.08     $14.25  
Weighted average fair value of options granted   $5.88     $4.38  

The expected volatility was estimated using Osisko's historical data from the date of grant and for a period corresponding to the expected life of the options. Share options are exercisable at the closing market price of the common shares of the Company on the day prior to their grant.

The fair value of the share options is recognized as compensation expense over the vesting period. During the three and nine months ended September 30, 2023, the total share-based compensation related to share options amounted to $1.9 million and $3.7 million, respectively ($0.8 million and $1.9 million during the three and nine months ended September 30, 2022, respectively).

Deferred and restricted share units

The Company offers a DSU plan and a RSU plan, which allow DSU and RSU units to be granted to directors, officers and/or employees as part of their long-term compensation package.

The following table summarizes information about the DSU and RSU units movements:

    Nine months ended
September 30, 2023		     Year ended
December 31, 2022		  
    DSU (i)     RSU (ii)     DSU (i)     RSU (ii)  
                         
Balance - Beginning of period   429,575     852,803     376,203     878,397  
Granted   55,345     235,540     78,200     275,520  
Reinvested dividends   3,853     7,914     6,018     13,483  
Settled   (26,678 )   (298,313 )   (30,846 )   (278,806 )
Forfeited   -     -     -     (35,791 )
                         
Balance - End of period   462,095     797,944     429,575     852,803  
                         
Balance - Vested   406,606     -     350,822     -  

(i) Unless otherwise decided by the Board of Directors of the Company, the DSU units vest the day prior to the next annual general meeting and are payable in common shares, cash or a combination of common shares and cash, at the sole discretion of the Company, to each non-executive director when he or she leaves the board or is not re-elected. The value of the payout is determined by multiplying the number of DSU units expected to be settled at the payout date by the closing price of the Company's shares on the day prior to the grant date. The fair value is recognized over the vesting period. On the settlement date, one common share will be issued for each DSU unit, after deducting any income taxes payable on the benefit earned by the director that must be remitted by the Company to the tax authorities. The DSU units granted in the first nine months of 2023 have a weighted average value of $21.21 per DSU unit (DSU units granted during the first nine months of 2022 having a weighted average value of $14.27 per DSU unit).

 
17
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

9. Share-based compensation (continued)

Deferred and restricted share units (continued)

(ii) The RSU units vest and are payable in common shares, cash or a combination of common shares and cash, at the sole discretion of the Company, three years after the grant date, one half of which depends on the achievement of certain performance measures. The value of the payout is determined by multiplying the number of RSU units expected to be vested at the payout date by the closing price of the Company's shares on the day prior to the grant date. The fair value is recognized over the vesting period and is adjusted for the performance-based components, when applicable. On the settlement date, one common share is issued for each RSU units, after deducting any income taxes payable on the benefit earned by the employee that must be remitted by Osisko to the tax authorities. The RSU units granted in the first nine months of 2023 have a weighted average value of $17.87 per RSU unit (RSU units granted during the first nine months of 2022 having a weighted average value of $14.25 per RSU unit).

The total share-based compensation expense related to the DSU and RSU plans for the three and nine months ended September 30, 2023 amounted to $2.1 million and $5.4 million, respectively ($1.3 million and $3.1 million for the three and nine months ended September 30, 2022, respectively).

Based on the closing price of the common shares at September 30, 2023 ($15.95), and considering a marginal income tax rate of 53.3%, the estimated amount that Osisko is expected to transfer to the tax authorities to settle the employees' tax obligations related to the vested DSU and RSU units to be settled in equity amounts to $3.5 million ($3.1 million as at December 31, 2022) and to $10.7 million based on all DSU and RSU units outstanding ($11.2 million as at December 31, 2022).

10. Additional information on the consolidated statements of income (loss)

    Three months ended
September 30,		     Nine months ended
September 30,		  
    2023     2022     2023     2022  
    $     $     $     $  
                         
Revenues                        
                         
Royalty interests   37,410     34,456     115,911     104,028  
Stream interests   24,659     19,205     66,245     51,867  
    62,069     53,661     182,156     155,895  
                         
Cost of sales                        
                         
Royalty interests   193     490     533     772  
Stream interests   4,144     3,917     12,105     10,572  
    4,337     4,407     12,638     11,344  
                         
Depletion                        
                         
Royalty interests   5,972     7,312     18,430     20,369  
Stream interests   10,922     6,849     24,926     16,941  
    16,894     14,161     43,356     37,310  

 
18
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

10. Additional information on the consolidated statements of income (loss) (continued)

    Three months ended
September 30,		     Nine months ended
September 30,		  
    2023     2022     2023     2022  
    $     $     $     $  
Other losses, net                        
                         
Change in fair value of financial assets at fair value through profit and loss   (2,513 )   (758 )   (6,267 )   (15,824 )
Net gain on dilution of investments in associates   -     -     4,842     3,604  
Net gain on acquisition of investments (i)   -     -     -     48  
Net loss on deemed disposal of an associate (ii)   -     -     (3,057 )   -  
Expected credit loss and write-off of other investments (iii)   (17,349 )   (276 )   (37,480 )   (1,180 )
    (19,862 )   (1,034 )   (41,962 )   (13,352 )

(i) Represents changes in the fair value of the underlying investments between the respective subscription dates and the closing dates.

(ii) Refer to Note 4.

(iii) Refer to Note 5.

11. Net (loss) earnings per share

    Three months ended
September 30,		     Nine months ended
September 30,		  
    2023     2022     2023     2022  
    $     $     $     $  
                         
Net (loss) earnings from continuing operations attributable to Osisko Gold Royalties Ltd's shareholders   (19,999 )   28,014     18,810     62,877  
                         
Net (loss) earnings attributable to Osisko Gold Royalties Ltd's shareholders   (19,999 )   (158,647 )   18,810     (141,162 )
                         
Basic weighted average number of common shares outstanding (in thousands)   185,516     184,839     185,159     179,101  
Dilutive effect of share options   -     11     787     201  
Diluted weighted average number of
  common shares (in thousands)		   185,516     184,850     185,946     179,302  
                         
Net (loss) earnings per share from continuing operations                        
Basic and diluted   (0.11 )   0.15     0.10     0.35  
                         
Net (loss) earnings per share                        
Basic and diluted   (0.11 )   (0.86 )   0.10     (0.79 )

As a result of the net loss for the three months ended September 30, 2023, all potentially dilutive common shares are deemed to be antidilutive for the period and thus diluted net loss per share is equal to the basic net loss per share. For the nine months ended September 30, 2023, 728,700 share options were excluded from the computation of diluted earnings per share as their effect was anti-dilutive. For the three and nine months ended September 30, 2022, 3,428,404 share options and the 13,106,160 common shares underlying the convertible debentures (which were repaid on December 31, 2022) were excluded from the computation of diluted earnings per share as their effect was anti-dilutive.

 
19
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

12. Additional information on the consolidated statements of cash flows

    Three months
ended September 30,		     Nine months
ended September 30,		  
    2023     2022     2023     2022  
    $     $     $     $  
                         
Interests received measured using the effective rate method   1,152     1,518     4,376     3,165  
Interests paid on long-term debt   6,335     555     11,415     8,286  
Income taxes paid   482     681     2,015     1,370  
                         
Changes in non-cash working capital items                        
(Increase) decrease in amounts receivable   (1,810 )   2,227     (5,097 )   (3,336 )
Decrease (increase) in other current assets   563     569     (1,501 )   1,342  
Increase in accounts payable and accrued liabilities   931     4,120     1,188     3,620  
    (316 )   6,916     (5,410 )   1,626  

13. Fair value of financial instruments

The following table provides information about financial assets and liabilities measured at fair value in the consolidated balance sheets and categorized by level according to the significance of the inputs used in making the measurements.

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and

Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

                September 30, 2023  
    Level 1     Level 2     Level 3     Total  
    $     $     $     $  
Recurring measurements                        
Financial assets at fair value through profit or loss (i)                        
Warrants on equity securities and convertible debentures and notes                        
Publicly traded mining exploration and development companies                        
Precious metals   -     -     15,700     15,700  
Other minerals   51     -     86     137  
Financial assets at fair value through other comprehensive income (i)                        
Equity securities                        
Publicly traded mining exploration and development companies                        
Precious metals   3,203     -     530     3,733  
Other minerals   79,884     -     -     79,884  
    83,138     -     16,316     99,454  

(i) On the basis of its analysis of the nature, characteristics and risks of equity securities, the Company has determined that presenting them by industry and type of investment is appropriate.

 
20
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

13. Fair value of financial instruments (continued)

                December 31, 2022  
    Level 1     Level 2     Level 3     Total  
    $     $     $     $  
Recurring measurements                        
Financial assets at fair value through profit or loss (i)                        
Warrants on equity securities and convertible debentures and notes                        
Publicly traded mining exploration and development companies                        
Precious metals   -     -     18,026     18,026  
Other minerals   844     -     5,347     6,191  
Financial assets at fair value through other comprehensive income (i)                        
Equity securities                        
Publicly traded mining exploration and development companies                        
Precious metals   6,288     -     3,530     9,818  
Other minerals   8,519     -     -     8,519  
    15,651     -     26,903     42,554  

(i) On the basis of its analysis of the nature, characteristics and risks of equity securities, the Company has determined that presenting them by industry and type of investment is appropriate.

During the nine months ended September 30, 2023, common shares having a fair value of $3.0 million were transferred from Level 3 to Level 1 as these common shares began trading on a recognized stock exchange. During the nine months ended September 30, 2022, there were no transfers among Level 1, Level 2 and Level 3.

The following table presents the changes in the Level 3 investments (comprised of common shares, warrants and convertible instruments) for the nine months ended September 30, 2023 and 2022:

    2023     2022  
    $     $  
             
Balance - January 1   26,903     34,934  
Acquisitions   -     4,438  
Warrants exercised   -     (59 )
Acquisition of Tintic by Osisko Development (Note 2)   -     (10,827 )
Transfer of common shares from level 3 to level 1   (3,000 )   -  
Disposals   (5,000 )   -  
Change in fair value - warrants exercised (i)   -     (318 )
Change in fair value - warrants expired (i)   (178 )   (404 )
Change in fair value - investments held at the end of the period (i)   (2,409 )   (4,250 )
Foreign exchange revaluation impact   -     50  
Deconsolidation of Osisko Development (Note 2)   -     (110 )
Balance - September 30   16,316     23,454  

(i)  Recognized in the consolidated statements of income (loss) under other losses, net.


 
21
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

13. Fair value of financial instruments (continued)

The fair value of the financial instruments classified as Level 3 depends on the nature of the financial instruments.

The fair value of the warrants on equity securities and the convertible instruments of publicly traded mining exploration and development companies, classified as Level 3, is determined using directly or indirectly the Black-Scholes option pricing model. The main non-observable input used in the model is the expected volatility. An increase/decrease in the expected volatility used in the models of 10% would have resulted in an insignificant variation of the fair value of the warrants and convertible instruments as at September 30, 2023 and December 31, 2022.

Financial instruments not measured at fair value on the consolidated balance sheets

Financial instruments that are not measured at fair value on the consolidated balance sheets are represented by cash, short-term investments, revenues receivable from royalty, stream and other interests, amounts receivable from associates and other receivables, notes receivable, other financing facilities receivable, accounts payable and accrued liabilities and long-term debt. The fair values of cash, short-term investments, revenues receivable from royalty, stream and other interests, amounts receivable from associates and other receivables and accounts payable and accrued liabilities approximate their carrying values due to their short-term nature. The carrying value of the liability under the revolving credit facility approximates its fair value given that the credit spread is similar to the credit spread the Company would obtain under similar conditions at the reporting date. The fair value of the non-current notes receivable and other financing credit facilities receivable approximate their carrying value as there were no significant changes in economic and risk parameters or assumptions related to the instruments since the issuance, acquisition or renewal of those financial instruments, with the exception of one note receivable for which an allowance was recorded on June 30, 2023 and a write-off on September 30, 2023 (Note 5) as the credit risk related to this note receivable had increased significantly.

 
22
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

14. Segment disclosure

The Chief Executive Officer (chief operating decision-maker) organizes and manages the business under a single operating segment, consisting of acquiring and managing precious metals and other royalties, streams and other interests. All of the Company's assets, liabilities, revenues, expenses and cash flows from continuing operations are attributable to this single operating segment. The following tables present segmented information for this single segment.

Geographic revenues

Geographic revenues from the sale of metals and diamonds received or acquired from in-kind royalties, streams and other interests are determined by the location of the mining operations giving rise to the royalty, stream or other interest. For the nine months ended September 30, 2023 and 2022, royalty, stream and other interest revenues were earned from the following jurisdictions:

    North
America (i)		     South
America		      
Australia		      
Africa		      
Europe 		     
Total		  
    $     $     $     $     $     $  
                                     
2023                                    
                                     
Royalties   114,392     1,111     122     286     -     115,911  
Streams   26,249     24,176     7,713     -     8,107     66,245  
                                     
    140,641     25,287     7,835     286     8,107     182,156  
                                     
2022                                    
                                     
Royalties   100,992     935     61     2,040     -     104,028  
Streams   26,986     17,221     892     -     6,768     51,867  
                                     
    127,978     18,156     953     2,040     6,768     155,895  
                                     
  (i) 90% of North America's revenues are generated from Canada during the nine months ended September 30, 2023 (92% during the nine months ended September 30, 2022).

For the nine months ended September 30, 2023, three royalty/stream interests generated revenues of $106.8 million ($95.4 million for the nine months ended September 30, 2022), which represented 59% of revenues (61% of revenues for the nine months ended September 30, 2022), including one royalty interest that generated revenues of $63.7 million ($56.6 million for the nine months ended September 30, 2022). For the nine months ended September 30, 2023, revenues generated from precious metals and diamonds represented 89% and 10% of revenues, respectively (85% and 14% of revenues for the nine months ended September 30, 2022).

 
23
Osisko Gold Royalties Ltd
Notes to the Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2023 and 2022
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)

14. Segment disclosure (continued)

Geographic net assets

The following table summarizes the royalty, stream and other interests by jurisdiction, as at September 30, 2023 and December 31, 2022, which is based on the location of the properties related to the royalty, stream or other interests: 

    North
America (i)		     South
America		     Australia     Africa     Asia     Europe     Total  
    $     $     $     $     $     $     $  
                                           
September 30, 2023                                          
                                           
Royalties   646,812     182,871     11,234     22,681     -     14,868     878,466  
Streams   214,771     169,128     197,947     -     30,150     48,258     660,254  
Offtakes   -     -     9,555     -     5,007     -     14,562  
                                           
    861,583     351,999     218,736     22,681     35,157     63,126     1,553,282  
                                           
December 31, 2022                                          
                                           
Royalties   664,985     157,552     17,345     24,228     -     14,965     879,075  
Streams   225,517     177,853     -     -     30,203     51,017     484,590  
Offtakes   -     -     9,572     -     5,016     -     14,588  
                                           
    890,502     335,405     26,917     24,228     35,219     65,982     1,378,253  
                                           
  (i) 81% of North America's net interests are located in Canada as at September 30, 2023 (81% as at December 31, 2022).

15. Related party transactions

As at September 30, 2023, notes receivable from associates of $6.5 million are included in short-term investments ($30.9 million as at December 31, 2022, included in other investments).

During the three and nine months ended September 30, 2023, general and administrative expenses include a share-based compensation expense of $1.5 million and a charge of $4.0 million related to severance payments to key management.

Until September 2023, Osisko was acting as a guarantor towards an insurance company that had issued environmental bonds to governmental authorities in the name of Osisko Development valued at approximately $17.9 million. In September 2023, the indemnity agreement between Osisko and the insurance company was terminated and, therefore, Osisko is no longer the guarantor of these environmental bonds.

16. Subsequent events

Acquisition of a royalty - Project Namdini

On October 30, 2023, Osisko announced the acquisition of a NSR royalty covering the Namdini gold project ("Namdini") in Ghana. Osisko has closed the transaction with Savannah Mining Limited ("Savannah"), acquiring a direct interest in 50% of Savannah's 2.0% NSR royalty for total consideration of US$35.0 million (excluding applicable taxes and levies of approximately US$7.7 million). The acquisition was financed by a drawdown on the revolving credit facility of US$35.0 million.

Dividends

On November 8, 2023, the Board of Directors declared a quarterly dividend of $0.06 per common share payable on January 15, 2024 to shareholders of record as of the close of business on December 29, 2023.

 
24