VANCOUVER, BC / ACCESSWIRE / March 30, 2023 / (TSXV:OGN)(OTCQX:OGNRF) Orogen Royalties Inc. ("Orogen" or the "Company") is pleased to report operating and financial results for the fiscal year ended December 31, 2022, and updates on corporate and operational activities.
"Fiscal 2022 marks Orogen's first year of profitability resulting from strong revenue from our royalty and prospect generation business coupled with tight cost controls," commented Orogen's CEO, Paddy Nicol. "The Ermitaño gold-silver mine in Mexico, where Orogen holds a 2% NSR royalty, delivered solid revenue and 2023 guidance from operator First Majestic Silver points to another strong year. We transacted on eight mineral projects that profitably supported our prospect generation business and added eight new royalties. Orogen now holds 44 royalty and mineral property interests including 23 royalties, 14 projects under option, two alliances, and five projects available for option or sale. Finally, we are very encouraged by the recent developments on AngloGold Ashanti's Silicon project in Nevada, where Orogen holds a 1% NSR royalty. Gold and silver resources at the Central-Silicon area continue to display exceptional promise with additional potential to come from the Merlin area, thought to be one of the most significant exploration targets in the greater Silicon camp."
Fiscal 2022 Year End Highlights
All amounts are in Canadian dollars unless otherwise stated.
- Net Income from Operations: Net income was $840,178 or $0.005 per share compared to a net loss of $2,831,445 or $0.02 per share in 2021, representing a $3,671,623 increase in net income. This was due to a significant increase in royalty revenue, a profitable prospect generation business, and a 7% reduction in general and administrative expenses.
- Royalty Revenue: Royalty revenue of $3,744,776 was earned from the Ermitaño royalty during the fiscal year ended December 31, 2022, with 1,588 attributable gold equivalent ounces ("GEOs") sold at average price of US$1,791 per ounce. This is an increase of $3,135,488 or 515% compared to a revenue of $609,288 earned in 2021. The Company holds a 2.0% uncapped and non-buyable net smelter return ("NSR") royalty on the Ermitaño Mine with First Majestic Silver Corp. ("First Majestic") as the operator that began commercial production in the fourth quarter of 2021.
- Prospect Generation: Net income of $316,761 from prospect generation activities compared to $288,733 reported in 2021, representing a 10% increase. During the year, the Company recorded $881,118 (2021 - $1,654,845) in revenues and $564,357 (2021 - $1,366,112) in expenses that includes exploration expenditures and impairment costs.
- G&A Expenses: General and administrative expenses of $3,257,516 were incurred in 2022 compared to $3,508,917 incurred in 2021, representing a 7% reduction.
- Cash flow: Cash flow of $687,115 was generated from operating activities in 2022 compared to $3,529,230 that was used in operating activities in 2021. Cash flow generated from operating activities, excluding changes in non-cash working capital, was $786,053 in 2022 compared to $2,371,252 that was used in 2021.
- Working Capital: The Company has working capital of $12,083,375 at December 31, 2022 compared to $10,239,343 at the beginning of the fiscal year. The Company has no long-term debt.
For complete details of the Company's financial results, please refer to the audited consolidated financial statements and MD&A for the year ended December 31, 2022 and 2021. The Company's filings are available on SEDAR at www.sedar.com and on Orogen's website at www.orogenroyalties.com. Please also see non-IFRS Measures at the end of this news release.
Summary of Results
Consolidated Statement of Income and Comprehensive Income
|For the Year Ended December 31|
Income from Royalties
Income from Prospect Generation activities
Operating income (loss) before other adjustments
Other income (loss)
Gain (loss) on marketable securities fair value adjustment
Net income (loss) before income tax
Income tax recovery (expenses)
Net income (loss) and comprehensive income (loss) for the period
Basic income (loss) per share
Diluted income (loss) per share
Non-IFRS and Other Measures
Average realized gold price per GEO
Cash flow from operating activities, excluding changes in non-cash working capital
To date, the Company has over 44 royalty and mineral property assets in Canada, United States, Mexico, Argentina and Kenya including 23 royalties, 14 mineral properties under option, two alliances and five projects that are available for sale or option. During the year ended December 31, 2022, the Company sold two projects, entered into six earn-in agreements, and added eight royalty assets to its portfolio. The Company capitalized $1,816,452 in acquisition and exploration expenditures, and received $2,605,094 in recoveries from project sales, expense reimbursements and payments from partners on active earn-in agreements, joint ventures, or alliances. A gain of $842,797 was recognized because of these activities resulting in a net income of $316,761 after impairment and exploration expense deductions for the Company's prospect generation business.
Total general and administrative expenses for the 2022 fiscal year was $3,257,516, a 7% reduction compared to $3,508,917 incurred in 2021 and this was due to a reduction in salary expense that was offset by higher accounting, legal, general overhead, and professional fees. Lower head count and salary costs charged to alliances contributed to lower salary expenses for 2022.
The Company reported its highest net income in the fourth quarter, and this was due an increase in royalty revenue, significant reduction in G&A expenses, and a gain from fair value adjustments of marketable securities.
During the three-month ended December 31, 2022, the Company reported net income of $939,271 compared to a net loss of $2,304,254 reported during the same period in 2021 and this represents an increase of $2,973,525 in net income and this was due to:
- Royalty Revenue: $904,681 (2021 - $609,288) in royalty revenue generated from the Ermitaño mine. This represents 424 GEOs (2021 - 268 GEOs) based on an average price of US$1,726 (2021 - $1,795) per ounce, a 9% increase in production compared to the average production of the last three quarters.
- Prospect Generation: The Company reported a loss of $86,154 (2021 - loss $1,211,182) from prospect generation activities from $216,058 (2021 - $154,930) in revenues less $302,212 (2021 - $1,366,112) in expenses including impairment cost of $155,548 (2021 - $1,403,648).
- G&A Expenses: The Company incurred $716,859 (2021 - $1,415,896) in general and administrative expenses, representing a 49% reduction due to lower expenses in most categories including share based compensation, salaries, and professional fees.
- Marketable Securities Fair Value Adjustment: The Company recognized a gain of $677,076 (2021 - $90,670) in adjusting marketable securities to fair value. The gain was due to an improvement in the value of the Company's equity investment portfolio compared to the previous quarter.
Ermitaño (Sonora, Mexico)
First Majestic operates the Ermitaño mine where the Company holds an uncapped and non-buyable 2.0% NSR royalty. During the 2022 fiscal year, First Majestic reported that the Ermitaño mine contributed to more than 60% of the plant feed at the Santa Elena operation after it commenced commercial production in later 2021. The Company received total royalty revenue of $3,744,776 (US$2,844,357) with 1,588 GEOs sold at an average price of US$1,791 per ounce. Highlights include the following:
- Successful expansion of liquid natural gas powerplant at the Santa Elena mine from 12 MW to 24 MW to supply lower cost, cleaner power to operations which includes the Ermitaño mine.
- Strong production from the Ermitaño mine continued with its second highest quarterly production in Q4. First Majestic expects production between 7.8 and 8.7 million silver equivalent ounces for 2023 as it transitions to full production at the Ermitaño mine.
- First Majestic expects underground development will focus exclusively in the Ermitaño mine to achieve 2,500 tonnes per day of underground ore extraction throughout 2023.
- Approximately 20,000 metres of infill drilling at the Ermitaño mine to convert Inferred Resources to Indicated Resources and mine expansion for 2023.
In accordance with First Majestic's 2023 guidance, using a silver to gold ratio of 84:1 and gold price of US$1,800 per ounce, the Company forecasts that production between 92,000 and 103,000 gold equivalent ounces is forecasted for the Ermitaño mine for 2023 resulting in revenue of approximately US$3.4M for 2023, a 20% increase in revenue compared to 2022.
Note: For full updates on the Santa Elena mine, refer to First Majestic's MD&A for the year ended December 31, 2022 that was filed on SEDAR (www.sedar.com) on February 23, 2023.
Silicon (Nevada, USA)
Orogen holds an uncapped and non-buyable 1.0% NSR royalty on 79 square kilometres of ground at the Silicon project that includes the Silicon deposit and the Merlin area located Nye County, Nevada, US. The project is owned and operated by AngloGold Ashanti NA ("AngloGold"). As disclosed in AngloGold's Mineral Resource and Mineral Reserve Report as at December 31, 2022, the following activities were completed as at December 31, 2022:
- Exploration drilling comprised of 262 RC drill holes, 65 DD holes and 40 RC pre-collar/diamond tail for a total of 146,109 metres.
- Detailed geological mapping at 1:5,000 scale has been completed over a total of 58 square kilometres.
- Ground geophysics was carried out on the project including a total of 1,307 kilometres of induced polarization/resistivity, ground magnetics and gravity surveys.
- Geochemical sampling comprising outcrop rock chip sampling and 2.6 x 2.3 kilometres soil survey was also carried out at various phases of the exploration program.
- Drilling program is continuing to infill and further delineate the deposit as well as collect test work material in support of the planned pre-feasibility study that includes the Merlin area.
A US $50 million exploration budget including 12 drill rigs is planned for Silicon, Merlin and the greater district for 2023.
Total mineral resource declared by AngloGold on the Silicon deposit is 4.22 million ounce gold and 17.7 million ounce silver at the Central-Silicon zone, including indicated resources of 3.4 million and inferred resources of 800,000 ounces gold. This is a change from an inferred mineral resource of 3.37 million ounces gold declared in 2022. The increase in mineral resource ounces was a result of successful greenfields exploration, supported by an open pit optimization at US$1,750 per ounce gold to demonstrate reasonable prospect of economic extraction. Testing completed in 2022 provided more details regarding metallurgical variability of the transitional and unoxidized material. This resulted in a reduction in heap leach recovery compared to the previous assumptions. Continued studies will further refine the recovery estimates and evaluate the addition of a third processing option that may be more suitable for those materials. The table below illustrates the year-on-year changes in mineral resource1:
Additional highlights include the following:
- Indicated resources of 121.56 million tonnes grading 0.87 g/t gold for 3.4 million ounces and 3.98 g/t silver for 15.54 million ounces.
- Additional inferred resources of 36.03 million tonnes grading 0.70 g/t gold for 800,000 ounces and 1.92 g/t silver for 2.23 million ounces.
- Silicon pre-feasibility study to integrate Merlin area for potentially larger scale mining activity is expected to be completed in 2023.
These results show that resources at the Silicon deposit have increased both in confidence and size. AngloGold has invested a significant amount of capital to date for Silicon and the surrounding district including US$614 million in acquisition of Corvus Gold Inc. and Coeur Sterling Inc. The pre-feasibility study report on Silicon, including the Merlin area, will be an important milestone for Orogen as it will provide a more complete indication of scale and size of the project.
Note: AngloGold's Mineral Resource and Mineral Reserve Report as at December 31, 2022 was filed on March 17, 2023 and can be found at www.anglogoldashanti.com or on EDGAR at www.sec.gov.
Qualified Person Statement
All technical data, as disclosed in this press release, has been verified by Laurence Pryer, Ph.D., P.Geo., VP Exploration for Orogen. Dr. Pryer is a qualified person as defined under the terms of National Instrument 43-101.
Certain technical disclosure in this release is a summary of previously released third-party information and the Company is relying on the interpretation provided. Additional information can be found on the links in the footnotes.
About Orogen Royalties Inc.
Orogen Royalties is focused on organic royalty creation and royalty acquisitions on precious and base metal discoveries in western North America. The Company's royalty portfolio includes the Ermitaño gold and silver Mine in Sonora, Mexico (2.0% NSR royalty) operated by First Majestic Silver Corp. and the Silicon gold project (1.0% NSR royalty) in Nevada, U.S., being advanced by AngloGold Ashanti. The Company is well financed with several projects actively being developed by joint venture partners.
On Behalf of the Board
OROGEN ROYALTIES INC.
President & CEO
To find out more about Orogen, please contact Paddy Nicol, President & CEO at 604-248-8648, and Marco LoCascio, Vice President of Corporate Development at 604-248-8648. Visit our website at www.orogenroyalties.com.
Orogen Royalties Inc.
1015 - 789 West Pender Street
Canada V6C 1H2
This news release includes certain statements that may be deemed "forward-looking statements". All statements in this presentation, other than statements of historical facts, that address events or developments that Orogen Royalties Inc. (the "Company") expect to occur, are forward-looking statements. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur.
Although the Company believe the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward-looking statements. Factors that could cause the actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, and continued availability of capital and financing, and general economic, market or business conditions. Furthermore, the extent to which COVID-19 may impact the Company's business will depend on future developments such as the geographic spread of the disease, the duration of the outbreak, travel restrictions, physical distancing, business closures or business disruptions, and the effectiveness of actions taken in Canada and other countries to contain and treat the disease. Although it is not possible to reliably estimate the length or severity of these developments and their financial impact as of the date of approval of these condensed interim consolidated financial statements, continuation of the prevailing conditions could have a significant adverse impact on the Company's financial position and results of operations for future periods.
Forward-looking information in this news release includes disclosures regarding NSR royalty payments to be paid to the Company by First Majestic Silver Corp. ("First Majestic"), the owners and operator of the Ermitaño mine located in Mexico and that the forecasted revenue which are based on First Majestic "NI 43-101 Technical Report on Mineral Resource and Mineral Reserve Estimates" having an effective date of June 30, 2021. In addition to the technical report, the disclosure herein also contains and the updated mineral reserve and resource estimates for the Ermitaño mine based on the Santa Elena Mineral Reserve, Resource Estimates with an effective date of December 31, 2021 as announced by First Majestic on March 31, 2022 and as disclosed in their December 31, 2021 AIF, and First Majestic's MD&A for the year ended December 31, 2022. Forward-looking statements are based on several material assumptions, which management of the Company believe to be reasonable, including, but not limited to, the continuation of mining operations in respect of which the Company will receive NSR royalty payments, that the commodity prices will not experience a material adverse change, mining operations that underlie the royalty will operate in accordance with the disclosed parameters and other assumptions may be set out herein.
Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Forward-looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. Except as required by securities laws, the Company undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors, should change.
Except where otherwise stated, the disclosure in this news release relating to properties and operations in which Orogen holds a Royalty are based on information publicly disclosed by the owners or operators of these properties and information/data available in the public domain as at the date hereof, and none of this information has been independently verified by Orogen. Specifically, as a Royalty holder and prospect generator, the Company has limited, if any, access to properties on which it holds Royalty or other interests in its asset portfolio. The Company may from time to time receive operating information from the owners and operators of the mining properties, which it is not permitted to disclose to the public. Orogen is dependent on, (i) the operators of the mining properties and their qualified persons to provide information to Orogen, or (ii) on publicly available information to prepare disclosure pertaining to properties and operations on the properties on which the Company holds Royalty or other interests, and generally has limited or no ability to independently verify such information. Although the Company does not have any knowledge that such information may not be accurate, there can be no assurance that such third-party information is complete or accurate. Some reported public information in respect of a mining property may relate to a larger property area than the area covered by Orogen's Royalty or other interest. Orogen's Royalty or other interests may cover less than 100% of a specific mining property and may only apply to a portion of the publicly reported mineral reserves, mineral resources and or production from a mining property.
The Company has included certain results in this news release that do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS") including total GEOs sold, average realized gold price per GEO, and cash flow from operating activities excluding changes in non-cash working capital adjustments. The Company's royalty revenue is converted to a gold equivalent ounce by dividing the royalty revenue received during the period by the average gold price of the period. The Company has also used the non-IFRS measure of operating cash flows excluding changes in non-cash working capital. This measure is calculated by adding back the decrease or subtracting the increase in changes in non-cash working capital to or from cash provided by (used in) operating activities.
SOURCE: Orogen Royalties Inc