OR Royalties Inc. (OR)

Market Mispricing Rationale

Primary Risks To Thesis

OR Royalties' thesis is exposed to the risks disclosed for royalty and stream holders. The company depends on third-party owners and operators for mine operation, development, permitting, construction, ramp-up, production timing, reserve and resource conversion, and public forecasts used in guidance. Results may differ from operator production forecasts, Mineral Resource and Mineral Reserve estimates, or assumed commodity prices. The portfolio is also exposed to title, permit, licence, litigation, geological, metallurgical, slope-failure, cave-in, flooding, natural-disaster, civil-unrest, uninsured, political, regulatory, taxation, trade-policy, foreign-exchange, capital-availability, financing, and geopolitical risks. Acquisition and growth risks include closing and integration of acquired royalties and streams, availability of accretive opportunities, potential capital needs, use of the credit facility, and reliance on operators to advance assets included in the 2026 guidance and 2030 outlook.

Recent Developments

In Q1 2026, OR Royalties earned 22,740 GEOs, generated record royalty and stream revenue of $102.8 million, produced cash flows from operating activities of $71.9 million, reported a 96.8% cash margin, earned net income of $73.6 million, and reported adjusted earnings of $75.0 million. The company repurchased 322,470 common shares for $12.9 million and declared a $0.055 per-share quarterly dividend paid on April 15, 2026. During the quarter it acquired an additional 1.0% NSR royalty on Namdini for total cash consideration of up to $103.5 million, signed a definitive agreement to acquire Terraco for $168.0 million, signed a definitive agreement with Gold Fields to acquire eight royalties for $115.0 million plus a $52.0 million deferred-payment obligation arrangement, and received 4,290 ounces of gold from the Cascabel stream reduction right. After quarter end, OR Royalties closed Terraco using a credit-facility drawdown, agreed to acquire a $28.0 million Murray Brook precious-metals stream, sold its non-core Osisko Metals position for $34.8 million, received the first Dalgaranga royalty payment, and declared a $0.065 per-share dividend payable July 15, 2026.

Recommended Action

Requires analyst review. The source-only action stance is to route OR Royalties for analyst review focused on whether Q1 2026 GEO delivery, cash margin, adjusted earnings, capital allocation, and transaction pipeline support the 2026 guidance and 2030 GEO outlook. The review should also test the balance between high-margin royalty economics and operator-dependent execution risk, including the post-quarter Terraco credit-facility draw, pending Gold Fields portfolio close, Murray Brook stream close, and development milestones at Windfall, Cariboo, Spring Valley, Canadian Malartic Odyssey, Mantos Blancos, CSA, and other assets. The approved sources support monitoring and analyst review only; they do not support an automated rating, target, or definitive portfolio action.

Valuation Summary

Requires analyst review. The approved packet provides source-backed operating and financial inputs but no independent valuation model or approved comparable-company analysis. Inputs for analyst review include Q1 2026 royalty and stream revenues of $102.8 million, operating cash flow of $71.9 million, cash margin of $99.5 million or 96.8% of revenue, net earnings of $73.6 million, adjusted earnings of $75.0 million, 22,740 GEOs earned, cash of $94.9 million at March 31, 2026, $186.1 million of equity investments, no debt at March 31, 2026, 2026 guidance of 80,000 to 90,000 GEOs at about 97% cash margin, and a 2030 outlook of 120,000 to 135,000 GEOs. The gold-market context source adds that total Q1 2026 gold demand, including OTC, reached 1,231 tonnes and a record value of $193 billion, which is relevant for reviewing precious-metals exposure and revenue sensitivity.

Industry And Competitive Risks

OR Royalties' industry exposure is concentrated in gold, silver, copper, and other mined commodities, with precious metals representing most revenue. The AIF states that commodity prices underlying OR Royalties' agreements fluctuate daily and are affected by supply and demand, industrial development, inflation, interest rates, U.S. dollar strength, geopolitical factors, trade barriers, and tariffs; material price declines could reduce royalty and stream revenue or cause underlying mines to suspend or terminate production. The MD&A reported that 2025 revenue growth was mainly a result of higher metal prices, while gold ounces sold fell partly because Eagle Gold operations stopped. The World Gold Council Q1 2026 context shows a supportive but volatile gold market: total Q1 gold demand including OTC was 2% higher year over year, the value of quarterly demand rose 74% to a record level, bar and coin demand rose 42%, central banks bought 244 tonnes on a net basis, jewelry demand volumes fell 23%, gold-backed ETFs added 62 tonnes at a lower rate than the very strong prior-year quarter, and the LBMA PM gold price reached a record quarterly average before a notable correction. This mix supports commodity-market relevance but also highlights volatility and shifting demand composition. OR Royalties also competes for royalty and stream acquisitions against other capital providers, and the AIF states that a sound financial condition helps it compete for quality opportunities. If competition raises asset prices, if counterparties exercise buy-back or buy-down rights, or if OR Royalties cannot source assets that meet its return, structural, operator-quality, jurisdictional, and ESG criteria, future portfolio growth could lag internal outlooks.

Regulatory And Legal Risks

OR Royalties' regulatory and legal risks arise both from its own public-company, tax, contract, and reporting obligations and from the mine-level approvals required by third-party operators. The AIF states that properties on which OR Royalties holds royalties, streams, or other interests may require licences, permits, governmental approvals, and third-party consents, and there is no assurance operators can obtain or maintain them on favourable terms or in a timely manner. Development projects also depend on environmental approvals, construction permits, feasibility work, financing, and compliance with changing laws. Because royalty and stream rights are contractual, OR Royalties can be exposed if counterparties calculate payments differently, delay delivery, become insolvent, dispute obligations, or require litigation to enforce contract rights. The AIF notes that security arrangements can be difficult to realize upon, may be subordinate, and may not protect recoveries in bankruptcy. The company is also exposed to foreign-operation risk through underlying assets outside Canada, including political instability, expropriation, social unrest, less developed legal systems, uncertain mineral title, exchange controls, corruption, trade barriers, and tax changes. Tax risk includes potential PFIC consequences for U.S. investors, changes in tax laws or accounting rules, and the CRA's focus on income earned by foreign subsidiaries. Climate and environmental regulation is another source of legal and compliance risk: the AIF notes that mining is exposed to carbon, energy-efficiency, environmental, permitting, water, and reclamation requirements, and the ESG report states that OR Royalties relies on mining partners for asset-level sustainability performance while screening and monitoring ESG factors through due diligence and investment management.

Thesis Specific Risks

Distribution And Go To Market

OR does not distribute mined products through a conventional product sales channel. Its commercial activity is capital deployment into royalty, stream, offtake and similar agreements with mine operators, owners and developers, followed by receipt of royalty payments, metal deliveries or cash-settled amounts under those agreements. Metals received under streams and in-kind royalties are sold into commodity markets, and some timing differences can occur; for example, CSA copper is delivered on the last day of each quarter and may be sold in a later quarter. OR also accesses capital markets as a public issuer listed on the TSX and NYSE.

Geographic Exposure

OR's portfolio is geographically diversified across North America, South America, Australia, Africa, Asia and Europe, with revenues and asset values determined by the location of the underlying mining operations. In 2025, revenue by region was $177.6 million from North America, $51.6 million from South America, $27.4 million from Australia, $5.4 million from Africa and $15.4 million from Europe. Producing assets include operations in Canada, the United States, Mexico, Australia, Ecuador, Chile, Ghana, North Macedonia and Brazil. Key development and exploration assets add exposure to jurisdictions including Argentina, Armenia, Peru, New Zealand and other Canadian and U.S. projects.

Key Operating Levers

Key operating levers include acquiring and financing new royalty and stream interests, maintaining exposure to producing and development-stage assets, the production and ramp-up performance of third-party operators, realized commodity prices, metal delivery timing and the terms of individual royalty and stream contracts. Portfolio levers include Canadian Malartic production, silver deliveries from Mantos Blancos, CSA, Sasa and Gibraltar, CSA copper deliveries, first or increased payments from assets such as Namdini and Bralorne, and development milestones for projects such as South Railroad and Cascabel. Some interests are subject to operator buy-back or buy-down rights, including CSA copper stream and Cascabel royalty or stream rights, which can change future entitlement levels or generate one-time payments.

Products And Services

OR's economic interests are royalty, stream, offtake and similar contractual interests tied to mines and mineral projects. As of February 18, 2026, the portfolio included 179 royalties, 15 streams, 3 offtakes and 7 royalty options, including 22 producing assets. Producing interests include gold royalties such as Canadian Malartic, Eleonore, Island Gold, Seabee, Ermitano, Lamaque, Namdini, Pan, Tocantinzinho, Bald Mountain and Fruta del Norte; silver streams and royalties such as Mantos Blancos, CSA, Sasa, Gibraltar and Canadian Malartic; and copper or other interests including the CSA copper stream and Renard diamond stream. Stream agreements can entitle OR to metal deliveries in exchange for upfront or ongoing payments, such as the South Railroad silver stream, under which OR is entitled to 100% of silver production from specified deposits for life of mine while paying 15% of spot silver at delivery.

Regulatory And Operating Environment

OR is incorporated under Quebec corporate law and reports as a public issuer in Canada and the United States, with financial statements prepared under IFRS Accounting Standards. Its operating environment is shaped by the mining, environmental, permitting, taxation, land tenure, import-export and commodity regulations affecting the mines and projects on which it holds royalties, streams and other interests. OR generally does not operate the underlying mines and has limited access to operating data and properties, so payments and deliveries depend on third-party operators, their production decisions, permits, compliance with laws, financial condition and ability to deliver or sell mine products. The portfolio is also exposed to commodity price movements, foreign exchange rates, contractual enforcement, counterparty performance, buy-back and buy-down rights, and country-specific legal, political and tax regimes.

Revenue Drivers

Revenue is driven by gold equivalent ounces earned from royalty and stream interests, operator production levels, metal deliveries, realized prices for gold, silver and copper, and cash royalties or other commodity receipts. In 2025, OR earned 80,775 GEOs and generated $277.4 million of royalty and stream revenue. Major 2025 GEO contributors included the Canadian Malartic Complex royalty at 31,914 GEOs, Mantos Blancos silver stream at 12,830 GEOs, Eleonore at 5,123 GEOs, CSA silver stream at 4,782 GEOs, Sasa at 4,406 GEOs, Island Gold District at 3,274 GEOs and the CSA copper stream at 2,930 GEOs. Average realized prices in 2025 were $3,425 per gold ounce sold, $41.27 per silver ounce sold and $10,153 per copper tonne sold.

Industry Description

OR Royalties operates in the mining royalty and streaming industry, with a primary focus on precious metals. Its Annual Information Form states that the company acquires and manages royalties, streams, offtakes, options on royalty or stream financings, and exclusive rights to participate in future royalty or stream financings across mining projects. A royalty gives the holder a right to a percentage of metal produced, revenue, or profits from a project, while a stream gives the holder the right to purchase a portion of metal production at a predetermined price. OR Royalties' portfolio is anchored by a 3-5% net smelter return royalty on the Canadian Malartic Complex in Quebec. As of March 27, 2026, the company reported 179 royalties, 15 streams, 3 offtakes, 7 royalty options, and 23 producing assets, with additional producing, development, and exploration assets across multiple jurisdictions.

Industry Growth And Cyclicality

Growth in OR Royalties' addressable industry is linked to precious-metals mine production, mine expansions, project development, exploration success, and miners' willingness to finance assets through royalties and streams. The company's 2026 Asset Handbook points to portfolio maturation from operating assets, planned expansions, and development assets moving into construction or production, with 2026 guidance of 80,000 to 90,000 gold-equivalent ounces and a 2030 portfolio outlook of 120,000 to 135,000 gold-equivalent ounces. Gold market demand is also cyclical: the World Gold Council reported that Q1 2026 total gold demand including OTC rose 2% year over year to 1,231 tonnes, with bar and coin demand up 42%, ETF inflows positive, central banks buying 244 tonnes, jewelry volume down 23%, technology demand up 1%, and total supply up 2%. Commodity prices, investor demand, central-bank demand, inflation, interest rates, the U.S. dollar, geopolitics, and recycling all affect the cycle.

Industry Regulation And Structural Risks

OR Royalties is exposed to mining regulation through the operators of properties on which it holds royalties, streams, and other interests. Operators may require permits, licenses, environmental approvals, land access, community support, and compliance with changing tax, import, export, land-use, water, waste, safety, climate, and disclosure rules. The Annual Information Form notes risks from national and local regulatory changes, permitting and licensing regimes, taxation policy, political or economic developments, environmental rules, title disputes, social license, foreign operations, litigation, and amendments to mining laws. Because OR Royalties is a non-operating holder, it has limited control over mine plans, permitting, construction, production, maintenance, and disclosure by operators. Structural risks also include commodity price volatility, operator credit and delivery risk, buy-back or buy-down rights, concentration in Canadian Malartic, reserve and resource uncertainty, cyber risk, climate-related physical risk, and competition for new royalty or stream assets.

Market Share And Positioning

OR Royalties positions itself as a mid-tier, precious-metals-focused pure-play royalty and streaming company. The 2026 Asset Handbook describes a portfolio of production, development, and exploration assets, with 24 producing assets listed in the May 2026 presentation and at least 25 forecasted by the end of 2026. It also states that 95% of 2025 gold-equivalent ounces came from precious metals and that the top 10 producing assets represented about 90% of total gold-equivalent ounces earned. The portfolio is anchored by Canadian Malartic, which OR Royalties describes as its cornerstone asset and a 3-5% NSR royalty on one of the world's largest gold mines. The company reported 80,775 gold-equivalent ounces earned in 2025 and 22,740 gold-equivalent ounces earned in Q1 2026, while its producing-asset list includes Canadian Malartic, Mantos Blancos, CSA, Eleonore, Sasa, Island Gold District, Namdini, Gibraltar, Ermitano, and other mines across North America and international jurisdictions.

Pricing Power And Cost Position

OR Royalties' pricing exposure comes mainly through commodity-linked royalty, stream, and offtake contracts rather than through direct mine operating control. Gold-equivalent ounces are calculated by converting silver, copper, cash royalties, and other commodities using average metal prices, so realized revenue changes with gold, silver, copper, and other commodity prices. The Annual Information Form states that commodity prices fluctuate daily based on supply and demand, industrial development, inflation, interest rates, the U.S. dollar, and geopolitical factors. The royalty and streaming model can have a favorable cost profile because royalties generally have no direct mine capital cost requirements, and streams purchase metal at contract prices. In Q1 2026, OR Royalties reported revenue of $102.8 million and cash margin of 96.8%, with royalties carrying lower cost of sales than streams. However, the company remains exposed to operator production, metal recoveries, delivery timing, buy-down rights, currency, taxes, and severe price declines that can reduce or suspend production at underlying mines.

Supplier And Customer Dynamics

OR Royalties' counterparties are primarily mine owners and operators that grant royalties, streams, offtakes, or related rights, while the company's revenue is ultimately tied to metal production, delivery, refining, and sale from those underlying properties. The Annual Information Form states that OR Royalties usually has limited access to properties and relies on public disclosure and information from owners, operators, and qualified persons. Operators such as Agnico Eagle, Capstone Copper, Harmony Gold, Alamos Gold, Cardinal Namdini, Taseko Mines, First Majestic, Eldorado Gold, Lundin Gold, and others control mine plans, development schedules, production rates, maintenance, processing, permits, community relations, and capital allocation. Payments or metal deliveries can be delayed by lender restrictions, product sale or delivery timing, smelter and refiner capacity, expense recovery, reserve accounts, or operator insolvency. Customers and end markets for the produced metals include gold and silver markets, industrial users, investors, jewelry demand, central banks, refiners, and trading counterparties, with OR Royalties' role remaining contractual rather than operational.

Forward Financial Outlook

Historical Performance Summary

OR Royalties earned 22,740 gold equivalent ounces in Q1 2026, compared with 19,014 in Q1 2025. Record revenues, higher cash flows from operations and materially higher net earnings show year-over-year improvement, while the business model retained a high cash margin of $99.5 million, or 96.8% of revenues.

Income Statement Analysis

Key Financial Ratios And Metrics

Q1 metrics included 22,740 GEOs earned, cash margin of $99.5 million or 96.8% of revenues, revenues of $102.8 million and operating cash flow of $71.9 million. IFRS cost of sales was $3.3 million and depletion was $10.7 million, leaving gross profit of $88.8 million.

Non Recurring Items And Trend Extrapolation

The quarter included gains related to a stream interest buy-down and sale of gold bullion, as well as accelerated capital deployment into 13 new royalties. Those items should be separated from recurring royalty and stream revenue when assessing trend quality.

Profitability

Valuation

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Governance Factors

OR's governance structure includes Board oversight, standing Board committees, the Executive Team, and an ESG Management Committee. The Board has ultimate responsibility for setting strategic direction, monitoring performance, ensuring compliance with regulations, approving policies, assessing policy implementation, and reviewing performance. As of February 1, 2026, the Board had eight directors, including the President and CEO, and four standing committees: Audit and Risk, Governance, Nomination and Sustainability, Human Resources, and Independent Investment Review. The Audit and Risk Committee is responsible for risk oversight, including review of the Enterprise Risk Assessment, and oversees accounting and financial reporting principles, internal audit controls and procedures, IT strategy, cybersecurity, data privacy, and related controls. The Governance, Nomination and Sustainability Committee provides oversight of corporate governance, Board nomination, sustainability matters, ESG strategy, climate-related matters, ESG policies and objectives, due diligence and post-investment monitoring, and the annual Sustainability Report. The Human Resources Committee oversees people-related ESG matters including remuneration, performance evaluation, succession planning, recruitment and retention, health and safety, and talent development. In 2025, 15% of executives' short-term performance-based compensation was tied to ESG-specific goals. Board diversity disclosures show seven of eight directors were independent, three of eight directors, or 37.5%, identified as female, 12.5% identified as ethnically or racially diverse, and Board and committee meeting attendance was 97%. OR reported zero Code of Ethics violations, zero whistleblower hotline reports, zero confirmed corruption incidents, 100% employee and director participation in cyber security training, and zero material cyber-related breaches in 2025.

Social Factors

OR's social disclosures cover its own workforce, responsible-investment screening of mining partners, human rights, community relations, health and safety, and diversity. As of December 31, 2025, OR had 27 full-time employees across three offices and no employees covered by collective bargaining agreements. The company reported zero full-time employee voluntary turnover in 2025, an average of 28 hours of corporate training per employee, 96% participation in its annual employee survey, and Great Place to Work Canada certification for the second consecutive year. Workforce diversity metrics show 41% of employees identified as female and 30% identified as ethnically or racially diverse; executive team diversity was 11% female. OR reported zero incidents of discrimination, zero fatalities, zero lost-time incidents, and no lost-time injuries or fatalities since inception. Its Human Resources, Health, and Safety Policy is based on principles from the International Labour Organization's Declaration on Fundamental Principles and Rights at Work and the Quebec Charter of Human Rights and Freedoms. OR's human-rights approach includes a Human Rights Policy aligned with the Universal Declaration of Human Rights, the UN Guiding Principles on Business and Human Rights, Canadian and Quebec human-rights charters, and the UN Global Compact; the company reported no human-rights violation allegations since inception and screens human-rights risks in new opportunities and ongoing investment management. Community relations disclosures include more than $625,000 of community investments in 2025, a 73% increase from 2024, more than $1.5 million of community investments since 2021, more than $17,500 of matched employee donations, a $500,000 commitment to the Parc du Frere-Jacques in Malartic, and collaboration with mining partners on community recycling, water treatment, education, health and wellness, and local community initiatives.