23. Share-based compensation

Share options

The Company and its subsidiary, Osisko Development, offer a share option plan (the "Plans") to their directors, officers, management, employees and consultants. Options may be granted at an exercise price determined by the respective Board of Directors but shall not be less than the closing market price of the common shares of the Company on the TSX on the day prior to their grant. No participant shall be granted an option which exceeds 5% of the issued and outstanding shares of the issuer at the time of granting of the option. The number of common shares issued to insiders of the issuer within one year and issuable to the insiders at any time under the Plans or combined with all other share compensation arrangements, cannot exceed 8% (10% under Osisko Development's plan) of the issued and outstanding common shares of the related issuer. The duration and the vesting period are determined by the Board of Directors. However, the expiry date may not exceed 7 years (10 years under Osisko Development's plan) after the date of granting.

Osisko Gold Royalties Ltd

The following table summarizes information about the movement of the share options outstanding under the Osisko's plan:

			2021				2020
			Weighted				Weighted
	Number of		average		Number of		average
	options		exercise price		options		exercise price
			$				$

Balance - January 1	4,240,869		14.22	4,939,344			14.40
Granted ⁽ⁱ⁾	763,700		13.27	1,201,100			13.51
Exercised	(1,043,903	)	13.75	(673,470		)	11.27
Forfeited / Cancelled	(58,866	)	13.45	(341,300		)	13.61
Expired	(171,220	)	16.04		(884,805	)	16.56
Balance - December 31	3,730,580		14.09		4,240,869		14.22
Options exercisable - December 31	1,881,416		14.78		2,988,713		14.96

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

The weighted average share price when share options were exercised during the year ended December 31, 2021 was $16.04 ($14.83 for the year ended December 31, 2020).

The following table summarizes the Osisko's share options outstanding as at December 31, 2021:

		Options outstanding		Options exercisable
			Weighted
			average
		Weighted	remaining		Weighted
Exercise		average	contractual		average
price range	Number	exercise price	life (years)	Number	exercise price
$		$			$

10.58 - 12.97	1,322,057	12.70	3.5	536,757	12.71
13.10 - 14.78	1,761,193	13.80	2.9	817,729	14.10
15.97 - 18.07	579,500	16.64	1.3	459,100	16.61
24.72 - 27.77	67,830	26.97	0.4	67,830	26.97
	3,730,580	14.09	2.8	1,881,416	14.78

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:

	2021	2020

Dividend per share	1.5%	1.5%
Expected volatility	40%	39%
Risk-free interest rate	0.7%	0.3%
Expected life	46 months	46 months
Weighted average share price	$13.27	$13.51
Weighted average fair value of options granted	$3.66	$3.56

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. In 2021, the total share- based compensation related to share options granted under the Osisko's plan amounted to $3.6 million ($2.8 million in 2020), including $0.2 million capitalized to mining assets and plant and equipment ($0.1 million in 2021).

Osisko Development Corp.

The following table summarizes information about the movement of the share options outstanding under the Osisko Development's plan:

			2021		2020
			Weighted		Weighted
	Number of		average	Number of	average
	options		exercise price	options	exercise price
			$		$

Balance - January 1	1,199,100		7.62	-	-
Granted⁽ⁱ⁾	1,005,600		6.47	1,199,100	7.62
Forfeited	(111,100	)	7.55	-	-
Balance - December 31	2,093,600		7.07	1,199,100	7.62
Options exercisable - December 31	-		-	-	-

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

The following table summarizes the Osisko Development's share options outstanding as at December 30, 2021:

		Options outstanding		Options exercisable
			Weighted
			average
		Weighted	remaining		Weighted
Exercise		average	contractual		average
price range	Number	exercise price	life (years)	Number	exercise price
$		$			$

5.40 - 5.63	412,800	5.48	4.8	-	-
7.10 - 8.10	1,680,800	7.46	4.1	-	-
	2,093,600	7.07	4.3	-	-

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:

	2021	2020

Dividend per share	-	-
Expected volatility	66%	63%
Risk-free interest rate	0.9%	0.4%
Expected life	45 months	48 months
Weighted average share price	$6.47	$7.62
Weighted average fair value of options granted	$3.16	$3.64

The expected volatility was estimated by benchmarking with companies having businesses similar to Osisko Development. The historical volatility of the common share price of these companies was used for benchmarking back from the date of grant and for a period corresponding to the expected life of the options.

The fair value of the share options is recognized as compensation expense over the vesting period. In 2021, the total share- based compensation related to share options granted under the Osisko Development's plan amounted to $2.3 million (insignificant in 2020), including $1.1 million capitalized to mining assets and plant and equipment.

Deferred and restricted share units

The Company and its subsidiary, Osisko Development, offer a DSU plan and a RSU plan, which allow DSU and RSU to be granted to directors, officers and/or employees as part of their long-term compensation package. Under the plans, payments may be settled in the form of common shares, cash or a combination of common shares and cash, at the sole discretion of the issuer. The plans are currently classified as equity-settled plans.

Osisko Gold Royalties Ltd

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

			2021				2020
	DSU⁽ⁱ⁾		RSU⁽ⁱⁱ⁾		DSU⁽ⁱ⁾		RSU⁽ⁱⁱ⁾

Balance - Beginning of period	408,564		1,242,902		325,207		1,190,038
Granted	64,720		293,610		97,995		504,560
Reinvested dividends	5,185		15,102		5,558		17,143
Settled	(102,266	)	(398,173	)	(20,196	)	(365,399	)
Forfeited ⁽ⁱⁱⁱ⁾	-		(275,044	)	-		(103,440	)
Balance - End of period	376,203		878,397		408,564		1,242,902
Balance - Vested	311,010		-		309,862		-

(i) Unless otherwise decided by the board of directors of the Company, the DSU 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 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, 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 granted in 2021 have a weighted average value of $15.54 per DSU ($12.35 per DSU in 2020).

(ii) On December 31, 2019, 150,000 RSU were granted to an officer (with a value of $12.70 per RSU), which vest and are payable in equal tranches over a three-year period (1/3 per year), in common shares, cash or a combination of common shares and cash, at the sole discretion of the Company. An additional 75,000 RSU were also granted (with a value of $12.70 per RSU) and vested during the three months ended March 31, 2020 following the acquisition by the officer of a total of 75,000 common shares of the Company. A total of 34,852 common shares were issued to the officer (after deducting the income taxes payable on the benefit earned by the employee that must be remitted by the Company to the tax authorities). The remaining RSU 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 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 in function of the applicable terms for the performance based components, when applicable. On the settlement date, one common share is issued for each RSU, after deducting any income taxes payable on the benefit earned by the employee that must be remitted by Osisko Development to the tax authorities. The RSU granted in 2021 have a weighted average value of $13.24 per RSU ($13.56 per RSU in 2020).

(iii) In 2021, 215,812 RSUs were forfeited by Osisko Development and RSUs were granted by Osisko Development in an equivalent value to the employees and officers that were transferred from Osisko to Osisko Development as of January 1, 2021 (refer to the Osisko Development table and notes on restricted share units outstanding presented below).

The total share-based compensation expense related to the Osisko's DSU and RSU plans in 2021 amounted to $4.7 million ($6.8 million in 2020, including $0.6 million capitalized to mining assets and plant and equipment expenses).

Based on the closing price of the common shares at December 31, 2021 ($15.48), 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 RSU and DSU to be settled in equity amounts to $2.6 million ($2.7 million as at December 31, 2020) and to $10.4 million based on all RSU and DSU outstanding ($14.2 million as at December 31, 2020).

Osisko Development Corp.

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

		2021			2020
	DSU⁽ⁱ⁾	RSU		DSU⁽ⁱ⁾	RSU⁽ⁱⁱ⁾
Balance - Beginning of period	170,620	-		-	-
Granted - Replacement RSU ⁽ⁱⁱ⁾	-	458,450		-	-
Granted ⁽ⁱⁱⁱ⁾	68,730	599,000		170,620	-
Forfeited	-	(21,270	)	-	-
Balance - End of period	239,350	1,036,180		170,620	-
Balance - Vested	-	-		-	-

(i) Unless otherwise decided by the board of directors of Osisko Development, the DSU 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 Osisko Development, 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 expected to be vested at the payout date by the closing price of the Osisko Development'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, after deducting any income taxes payable on the benefit earned by the director that must be remitted by the Osisko Development to the tax authorities. The DSU granted in 2021 have a weighted average value of $7.24 per DSU ($7.62 per DSU in 2020).

(ii) Following the closing of the reverse takeover transaction completed on November 25, 2020, which lead to the creation of Osisko Development and the subsequent transfer of certain Osisko employees to Osisko Development on January 1, 2021, Osisko and Osisko Development mutually agreed that a pro-rata portion of the outstanding long-term equity incentive compensation awarded by Osisko to the transferred employees in the form of RSU would be borne by Osisko Development. As a result, a pro-rata portion of the outstanding RSU awarded by Osisko (the "Osisko RSU") to the transferred employees were cancelled, and RSU (the "Replacement RSU") having a relative equivalent value were granted by Osisko Development. Accordingly, in June 2021, 458,450 Replacement RSU were granted to officers and employees who held Osisko RSU that were cancelled. The maturity date of the Replacement RSU is the same as the maturity date of the corresponding Osisko RSU that were cancelled. The replacement RSU are payable in common shares, cash or a combination of common shares and cash, at the sole discretion of Osisko Development.

(iii) The RSU granted vest and are payable in common shares, cash or a combination of common shares and cash, at the sole discretion of Osisko Development, three years after the grant date, one half of which depends on the achievement of certain performance measures. The RSU granted in 2021 have a weighted average value of $7.02 per RSU.

The total share-based compensation expense related to the Osisko Development's DSU and RSU plans in 2021 amounted to $3.3 million (insignificant in 2020), including $1.3 million capitalized to mining interests and plant and equipment.

Based on the closing price of the common shares at December 31, 2021 ($4.06), and considering a marginal income tax rate of 53.3%, the estimated amount that Osisko Development is expected to transfer to the tax authorities to settle the employees' tax obligations related to the vested RSU and DSU to be settled in equity amounts to nil (nil as at December 31, 2020) and to $2.8 million based on all RSU and DSU outstanding ($0.7 million as at December 31, 2020).