Executive Summary / Key Takeaways

• Debt-Free Transformation: OR Royalties achieved debt-free status in Q3 2025 for the first time in over a decade, ending with $57 million in cash and receiving an additional $49 million from the MAC Copper sale, creating unprecedented financial flexibility for opportunistic acquisitions while maintaining a 44-consecutive-quarter dividend track record.

• Self-Funded Growth Engine: The company targets 40% organic growth in Gold Equivalent Ounces by 2029 through development assets like Dalgaranga (first production H1 2026) and the Odyssey second shaft, with management emphasizing this growth is "completely bought and paid for" requiring zero contingent capital from OR.

• Pure-Play Precious Metals Leverage: Approximately 95% of GEOs come from precious metals (65% gold, 30%+ silver) with cash margins approaching 97%, providing exceptional torque to rising commodity prices while maintaining lower risk than operating mining companies.

• Mid-Tier Competitive Advantage: While smaller than sector giants Franco-Nevada (FNV) and Wheaton Precious Metals (WPM), OR's focused Canadian/Australian portfolio, debt-free balance sheet, and 87% year-over-year cash flow growth position it as a nimble alternative with superior financial health to leveraged peers like Sandstorm Gold (SAND).

• Critical Execution Variables: The thesis hinges on successful ramp-up of back-half weighted 2025 production (80,000-88,000 GEO guidance), resolution of Mantos Blancos silver grade sequencing, and disciplined capital allocation in a competitive deal environment where management has demonstrated willingness to walk from overpriced opportunities.

Setting the Scene: The Royalty Model Reimagined

OR Royalties Inc., originally founded in 2014 as Osisko Gold Royalties Ltd and headquartered in Montreal, operates as a precious metals royalty and streaming company with a strategic twist. Unlike traditional mining companies that bear operational risks and capital intensity, OR provides upfront financing to miners in exchange for perpetual royalties or fixed-price streams on future production. This model generates extraordinary cash margins—consistently above 96%—because the company never touches a shovel, yet captures leveraged exposure to commodity price upside.

The royalty sector sits at an attractive intersection of the mining value chain. As miners face escalating capital costs and shareholder pressure to reduce debt, they increasingly turn to royalty financing as an alternative to equity dilution. This creates a steady pipeline of opportunities for well-capitalized royalty companies. OR has carved out a distinct niche by focusing on Tier-1 jurisdictions—primarily Canada, the United States, and Australia—where regulatory stability and established infrastructure reduce political risk while maintaining high-quality asset exposure.

OR's current positioning reflects a deliberate evolution. The 2024 strategic reset involved writing off the troubled Eagle Mine in Yukon to zero and excluding it from all future outlooks, while deploying nearly $300 million into accretive transactions like the Dalgaranga royalty. This demonstrated management's willingness to take swift, decisive action on underperforming assets while redeploying capital into higher-return opportunities. The May 2025 name change to OR Royalties Inc. signaled a refined identity: honoring its Quebec roots while emphasizing its pure precious metals focus, all while retaining the recognizable "OR" ticker on NYSE and TSX.

Business Model & Segment Dynamics: Four Layers of Value

Precious Metals Core: The 95% Engine

OR's business revolves around precious metals royalties, which generated approximately 95% of GEOs in Q3 2025. Gold directly contributed 65% of revenue, while silver exceeded 30%, creating a natural hedge within the precious metals complex. This concentration is intentional—management explicitly positions OR as a "precious metal vehicle" offering investors transparent leverage to gold and silver prices without the operational risks of mining.

The economic power of this model becomes clear when examining cash margins. At 97% in Q3 2025, OR retains nearly every dollar of revenue as operating cash flow. This compares favorably to operating miners who typically post margins of 30-50% after accounting for mining costs, processing, and capital expenditures. For investors, this means every dollar increase in gold or silver prices flows directly to the bottom line, amplified by the royalty structure that takes a percentage of revenue rather than profit.

Copper as Strategic Diversification

The remaining 5% of GEOs comes from the CSA copper stream in Australia, acquired through the MAC Copper transaction. While small, this positions copper as a strategic diversifier rather than a core focus. The CSA stream is particularly valuable because Harmony Gold (HMY)'s acquisition of MAC Copper closed in October 2025, with Harmony committing to optimize production to 50,000 tons per annum—a 25% expansion from 2024 levels.

Management maintains a "positive constructive view on copper" and would acquire more high-quality copper assets like CSA if opportunities arise. However, they remain disciplined, avoiding dilutive diversification for its own sake. This measured approach preserves OR's identity as a precious metals pure-play while retaining optionality on base metals upside, particularly as electrification trends drive long-term copper demand.

Producing Assets: The Cash Flow Foundation

OR's portfolio of 22 producing assets forms the bedrock of current cash flows. In Q3 2025, these assets delivered 20,326 GEOs, a 3% sequential improvement, tracking toward the midpoint of 80,000-88,000 GEO guidance for the full year. The geographic concentration in Canada provides stability—over 93% of GEOs originate from North American assets, reducing currency and political risks.

The Canadian Malartic complex stands as the crown jewel, delivering approximately 150,000-157,000 ounces of aggregate gold production in Q3 2025, higher than planned due to elevated grades at the Barnat pit. This single asset's performance can move OR's overall GEOs by 5-10%, illustrating both the power of concentration and the risk of dependence. The Odyssey underground mine, part of the Malartic complex, produced 22,400 ounces in Q3, slightly ahead of plan with ore mined at 3,634 tons per day versus a 3,500 target, demonstrating operational momentum.

Development Pipeline: The 40% Growth Engine

OR's most compelling strategic differentiator is its development pipeline, which management claims will drive 40% organic GEO growth by 2029 without requiring any contingent capital. This is a crucial distinction from mining companies that must continuously invest billions in new projects. OR's royalties are already secured; it simply waits for operators to develop the assets.

Dalgaranga represents the near-term catalyst. First production is expected in H1 2026, with Ramelius' production profile showing nearly 275,000 ounces of gold in fiscal 2030 alone. Cariboo and Spring Valley, two shovel-ready gold projects, are expected to contribute approximately 16,000 GEOs in aggregate once fully operational. The potential second shaft at Odyssey could add 15,000 GEOs—what management calls the "single biggest individual asset growth driver"—though public disclosure isn't expected until late 2026 or early 2027.

This pipeline's value is amplified by OR's financial position. While competitors might need to issue equity or take on debt to fund new royalties, OR can fund growth entirely from internal cash generation, avoiding dilution and maintaining its debt-free status.

Financial Performance: Margin Expansion Meets Balance Sheet Strength

The Cash Flow Inflection

Q3 2025 marked a financial inflection point for OR. The company generated $71.6 million in quarterly revenue—a record—representing 71% year-over-year growth. More importantly, cash margins held near 97%, translating to $64.6 million in operating cash flow. This 87% year-over-year increase in cash flow per share ($0.34 versus $0.19) demonstrates operational leverage beyond what revenue growth alone suggests.

The composition of earnings reveals quality. Net earnings of $0.44 per share included a $54 million non-cash gain from revaluing the Osisko Development equity investment, but adjusted earnings of $0.22 still represented a doubling from Q3 2024's $0.11. This shows the underlying royalty business is generating real cash, not accounting gains.

The Debt-Free Milestone

By Q3 2025, OR achieved debt-free status for the first time in over 10 years, paying down its revolving credit facility entirely. The company ended the quarter with $57 million in cash, which became $106 million when including the $49 million received from the MAC Copper sale in October. This creates approximately $1 billion in available liquidity when including undrawn credit facilities.

In the royalty sector, deal flow is cyclical and opportunistic. The best transactions often emerge during mining industry downturns when operators need capital quickly. Companies with leveraged balance sheets cannot act decisively. OR's debt-free position provides the flexibility to pursue accretive deals without issuing dilutive equity or paying high interest rates, creating a counter-cyclical advantage.

Dividend Discipline

OR declared its 44th consecutive quarterly dividend of $0.055 per share in Q3 2025, following a 20% increase in May. The payout ratio of 25.73% leaves substantial room for growth while retaining capital for acquisitions. Management has signaled that if commodity prices remain stable, they will likely recommend another dividend increase in May 2026, maintaining an annual review cadence.

This dividend track record serves two purposes. For income-oriented investors, it provides a base return. More importantly, it signals management's confidence in the durability of cash flows. Royalty companies cannot sustain progressive dividends unless their underlying assets produce predictable, growing cash flows. The 44-quarter streak is empirical evidence of portfolio quality.

Competitive Context: The Mid-Tier Advantage

Scale vs. Focus: Franco-Nevada and Wheaton

Franco-Nevada (FNV) dominates the sector with a $39 billion market cap and over 400 assets, including energy royalties that dilute precious metals exposure. While FNV's scale provides deal flow advantages, its diversification reduces gold price leverage. OR's 95% precious metals concentration offers purer torque to gold and silver rallies, which matters in a bull market.

Wheaton Precious Metals (WPM) operates a streaming model rather than pure royalties, providing fixed ounces at predetermined prices. This creates volume certainty but caps upside. OR's percentage-based royalties have no price ceiling, meaning every $100 increase in gold price flows directly to cash flow. In Q3 2025, this dynamic helped OR achieve 87% cash flow growth versus WPM's strong but more modest gains.

Financial Health vs. Peers

Royal Gold (RGLD) operates with a similar North American focus but carries a more diversified portfolio including base metals. OR's debt-free status contrasts with RGLD's moderate leverage, providing lower financial risk. Sandstorm Gold (SAND) operates with $315 million in debt and a 0.22 debt-to-equity ratio, making it more vulnerable to rising interest rates and limiting acquisition capacity.

OR's return on equity of 11.26% trails FNV's 14.17% and WPM's 13.05%, reflecting its smaller scale. However, its return on assets of 7.13% is competitive, suggesting efficient capital deployment. The key differentiator is growth trajectory—OR's 87% cash flow growth significantly outpaces the sector, indicating a company in expansion mode rather than maturity.

Barriers to Entry and Moat Durability

The royalty industry features high barriers to entry. New entrants need hundreds of millions in capital, specialized mine valuation expertise, and established relationships with major miners. OR's decade-long track record and management's Quebec mining roots provide entrenched access to deal flow that newcomers cannot replicate.

The company's moat rests on three pillars: portfolio diversification across 22 producing assets, financial flexibility from zero debt, and deep industry relationships. While smaller than FNV's 400+ assets, OR's portfolio is sufficiently diversified to withstand single-asset disruptions—except for Canadian Malartic, which represents a concentration risk that management actively monitors.

Outlook and Guidance: The Path to 2029

2025 Trajectory

Management guides to 80,000-88,000 GEOs for 2025, with a back-half weighted distribution (approximately 45% in H1, 55% in H2). Q3's 20,326 GEOs put the company on track for the midpoint of this range. The weighting reflects mine sequencing at Canadian Malartic, silver grade improvements at Mantos Blancos, and ramp-up of newer assets like Namdini.

The guidance assumes Mantos Blancos operates consistently at its 20,000 tonnes per day nameplate capacity and that Namdini contributes meaningful production in H2. Through September, OR tracked 2,000-2,100 GEOs below budget when not normalizing for commodity price ratios, due to higher gold prices relative to silver and copper. However, management correctly notes that higher gold prices more than offset this technical GEO shortfall through increased revenue and cash flow.

The 2029 Vision

OR's five-year outlook targets 40% organic GEO growth by 2029, entirely from existing development assets. This includes Dalgaranga (first production H1 2026), Windfall, Hermosa/Taylor, and Marimaca. Critically, management excludes the Eagle mine (previously 10,000 GEOs) from this outlook, demonstrating conservative planning.

The Odyssey second shaft represents the largest single growth driver, potentially adding 15,000 GEOs. Management expresses "strong conviction" that this project will be sanctioned, describing it as a matter of "when, not if." However, they have not yet included it in official guidance, creating potential upside surprise when formal approval occurs in late 2026 or early 2027.

Capital Allocation Discipline

Management maintains strict hurdle rates for new transactions, evaluating deals against conservative commodity price scenarios and requiring robust security features. The company's "robust organic GEO growth profile provides the luxury to walk away from transactions that do not meet its criteria." This discipline is crucial in a competitive market where some peers have loosened deal structures to win transactions.

The preferred transaction size ranges from $50-500 million, focusing on cash-flowing assets or advanced development projects that can contribute within the five-year outlook. This avoids early-stage exploration risk while maintaining near-term growth visibility.

Risks and Asymmetries: What Could Break the Thesis

Concentration Risk at Canadian Malartic

Canadian Malartic's outsized contribution is the primary risk. While the asset has consistently outperformed plans, any operational disruption, grade deterioration, or permitting issue could materially impact OR's cash flows. Management mitigates this through diversification across 22 producing assets, but the reality is that Malartic remains the single largest driver of GEOs and revenue.

Commodity Price Volatility

OR's 95% precious metals exposure creates exceptional leverage to gold and silver prices. While this benefits shareholders in bull markets, a sustained price decline would disproportionately impact cash flows. The company's 97% cash margins provide no operational cushion against price drops—every 10% decline in gold price translates directly to a 6.5% decline in revenue (given gold's 65% revenue contribution).

Management's dividend policy could face pressure if prices fall significantly. While the 25.73% payout ratio provides buffer, the progressive dividend commitment depends on stable, predictable cash flows that commodity volatility could disrupt.

Execution on Development Pipeline

The 40% growth target by 2029 assumes successful development of multiple projects where OR has no operational control. Delays at Dalgaranga, slower ramp-up at Windfall, or deferral of the Odyssey second shaft could push growth further into the future. Management's "when, not if" confidence on Odyssey is encouraging but not guaranteed.

Silver Grade Sequencing

Mantos Blancos has experienced silver grade variability, with lower grades in H1 2025 followed by improvements in Q3. While throughput bottlenecks have been resolved, grade sequencing remains a natural variability risk that can impact quarterly GEOs by 5-10%.

Valuation Context: Premium for Quality

At $33.95 per share, OR trades at 43.5 times trailing earnings and 30.3 times operating cash flow. These multiples appear elevated relative to traditional royalty companies but reflect OR's unique positioning.

Peer Comparison

FNV trades at 42.6 times earnings with slower growth, while WPM commands 48.9 times earnings despite a streaming model that caps upside. RGLD's 27.7 P/E reflects its more mature, slower-growth profile. OR's 43.5 P/E sits in the middle, but its 87% cash flow growth significantly exceeds all peers.

Enterprise value to revenue of 25.9 times is in line with FNV (25.2x) and WPM (26.2x), suggesting the market values each dollar of OR's revenue similarly to larger peers. However, OR's debt-free status and superior growth justify a premium valuation relative to leveraged or slower-growing competitors.

Balance Sheet Premium

The zero debt-to-equity ratio stands out in a sector where even quality peers like RGLD maintain moderate leverage. This financial purity commands a valuation premium because it enables counter-cyclical acquisitions without dilution. The $106 million pro forma cash position provides immediate firepower for deals in the $50-500 million sweet spot.

Cash Flow Yield

OR's free cash flow yield of approximately 1.7% (based on $62.6 million annual FCF and $6.39 billion market cap) appears low but must be viewed in context. The company is reinvesting cash flow into growth rather than returning it all to shareholders. The 0.65% dividend yield plus 25.73% payout ratio suggests substantial room for dividend growth as the development pipeline matures.

Conclusion: A Precious Metals Pure-Play at an Inflection Point

OR Royalties has engineered a rare combination in the royalty sector: debt-free financial strength, a self-funded growth pipeline, and pure-play leverage to precious metals. The company's achievement of debt-free status in Q3 2025, combined with record cash flow growth and a 44-quarter dividend streak, demonstrates capital allocation discipline that larger peers struggle to match.

The central thesis hinges on two variables: successful execution of the 40% GEO growth target by 2029 and maintenance of capital discipline in an increasingly competitive deal environment. The development pipeline—led by Dalgaranga's 2026 start-up and the eventual Odyssey second shaft—provides visible growth without requiring shareholder dilution. Meanwhile, the 97% cash margins on 95% precious metals exposure create exceptional torque to gold and silver price rallies.

OR's mid-tier scale, once viewed as a disadvantage, has become a strategic asset. The company can move quickly on deals that larger peers must syndicate, while its debt-free balance sheet provides flexibility that smaller, leveraged competitors lack. Trading at 30 times operating cash flow, the stock prices in execution success, but the combination of organic growth, financial purity, and management discipline creates a compelling risk-reward profile for investors seeking leveraged exposure to precious metals without operational mining risk.