Odyssey Underground Expansion And Tier 1 Assets Will Drive Powerful Long Term Precious Metals Upside

Catalysts

About OR Royalties

OR Royalties is a precious metals and copper royalty and streaming company with a global portfolio focused on high-margin, long-life assets.

What are the underlying business or industry changes driving this perspective?

• The continued build-out of the Canadian Malartic complex, including the ramp-up of Odyssey Underground and the highly probable sanctioning of a second shaft, is poised to add approximately 15,000 incremental gold equivalent ounces and support a path to 1 million ounces annually from 2030. This development is expected to drive sustained revenue growth and higher earnings power over the next decade.
• A structurally stronger pricing environment for gold and increasingly meaningful exposure to silver, now over 30 percent of quarterly revenues, positions OR Royalties to benefit disproportionately from any further re-rating in precious metals prices. This could amplify top line growth and expand already peer-leading cash margins.
• The coming production contributions and expansion potential from Dalgaranga, CSA, Namdini and other Tier 1 jurisdiction assets create visible, largely paid-for volume growth in gold equivalent ounces through 2029. This should support rising revenues and scale-driven improvement in net margins.
• Large, fully permitted or near shovel-ready projects such as Cariboo, Spring Valley, Upper Beaver, Amulsar and South Railroad provide significant optional upside that is not yet in the 5 year outlook. These projects offer a path to step-change increases in future royalty volumes, diversified cash flows and long term earnings growth as they enter production.
• A debt-free balance sheet, roughly $1 billion of available liquidity and disciplined capital allocation in a deal rich royalty and streaming market give OR Royalties the ability to selectively secure high-return transactions in attractive jurisdictions. This supports accretive revenue growth and resilient free cash flow per share over time.

Assumptions

This narrative explores a more optimistic perspective on OR Royalties compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming OR Royalties's revenue will grow by 30.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 60.7% today to 62.5% in 3 years time.
• The bullish analysts expect earnings to reach $337.1 million (and earnings per share of $1.79) by about December 2028, up from $147.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 41.3x on those 2028 earnings, down from 47.6x today. This future PE is greater than the current PE for the US Metals and Mining industry at 22.3x.
• The bullish analysts expect the number of shares outstanding to grow by 0.77% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.15%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The business model remains highly leveraged to precious metals prices, with roughly 65 percent of revenue tied to gold and over 30 percent now from silver. A prolonged downturn in gold and silver prices or a widening gold to silver ratio could compress royalty volumes in gold equivalent ounce terms and reduce reported revenue and earnings growth despite stable underlying mine output, directly pressuring net margins.
• Several key growth drivers such as the Odyssey second shaft, Dalgaranga ramp up, CSA expansion and large optionality projects like Cariboo, Spring Valley, Upper Beaver, Amulsar and South Railroad are still in development or financing stages. Delays, cost overruns, permitting setbacks or a failure to secure project funding could materially lower the expected increase in gold equivalent ounces and undermine the anticipated expansion in revenue and earnings.
• The company increasingly depends on a concentrated set of cornerstone Tier 1 assets like Canadian Malartic and Odyssey Underground. Operational disruptions, maintenance shutdowns, grade underperformance or changes in mine plans at these assets could create sustained volume headwinds that offset commodity price benefits and weigh on both revenue and cash flow per share.
• Management emphasizes disciplined capital allocation in a competitive royalty and streaming market. However, the need to deploy approximately $1 billion of available liquidity over time to sustain growth raises the risk of overpaying for new royalties or accepting weaker security and contract terms during periods of elevated metal prices, which could erode future returns and dilute earnings accretion.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for OR Royalties is CA$80.37, which represents up to two standard deviations above the consensus price target of CA$61.95. This valuation is based on what can be assumed as the expectations of OR Royalties's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$84.45, and the most bearish reporting a price target of just CA$51.06.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $539.0 million, earnings will come to $337.1 million, and it would be trading on a PE ratio of 41.3x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of CA$51.21, the analyst price target of CA$80.37 is 36.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.