Alamos to buy Orsa for $3.5M

Cash-rich Alamos Gold (TSX: AGI; NYSE: AGI) has added Orsa Ventures (TSXV: ORN) to its shopping list. 

Nearly two weeks after making a friendly $69.4-million offer for Mexico-focused junior Esperanza Resources (TSXV: EPZ; US-OTC: ESPZF), Alamos has agreed to take over little-known Orsa for $3.5 million in cash, or 10¢ per share. Shares of Orsa —which had lingered the past month around 3¢ — catapulted on the announcement made before markets opened on July 23 by more than 230% to hit 11¢, before slightly dipping to close at 9.5¢. 

In a joint release, Alamos’ president and CEO John McCluskey said the acquisition fits the company’s strategy of including low-cost quality ounces to its pipeline.  

Orsa’s most promising asset is the Quartz Mountain gold property in Oregon, where it has an option to earn a 100% interest in the project from Seabridge Gold (TSX: SEA; NYSE-Arca: SA). The asset is described as a volcanic-hosted, hot-spring deposit located on the northern extension of the Basin and Range province of Nevada. 

Orsa notes that this geological province has generated 200 million oz. gold to date and accounts for nearly 80% of U.S. gold output. 

“We obviously like the jurisdiction,” says Scott Parsons, Alamos’ manager of investor relations. “We’re acquiring a sort of grassroots project with an established resource on it,” he says referring to Quartz Mountain, where Orsa said it would start a preliminary economic assessment this year. 

To date, mineralization at Quartz Mountain has been identified at the Crone Hill and Quartz Butte zones. The project hosts an inferred oxide and sulphide resource of 2.85 million oz. gold from 110.4 million tonnes grading 0.80 gram gold per tonne. That resource estimate, released last March, is based on 80,000 metres of drilling and a US$1,500 per oz. conceptual pit.   

Quartz Mountain would likely be mined as an open-pit, heap-leach operation, with leach tests demonstrating gold recoveries of more than 74% on the oxides, Salman Partners analyst David West writes in a brief note.

“Likely a longer-term project for Alamos, the Quartz Mountain project provides a low-risk asset that would likely require low initial capex once a construction decision was reached,” West adds. 

Orsa’s board has unanimously approved the transaction, expected to close in the fourth quarter, pending shareholder and regulatory approvals. 

Once the deal wraps up, Alamos will assume ownership of Orsa’s right to earn into Quartz Mountain as well as its other assets. The junior holds an option to earn 100% of the Angel’s Camp claims, which are contiguous with the Quartz Mountain claims in southern Oregon, from Americas Bullion Royalty (TSX:AMB; US-OTC: AMBCF) and Seabridge. In addition, it has two early stage exploration gold prospects in Nevada, namely Coal Canyon and Ashby. 

This acquisition would also provide some geographical diversification for Alamos. The debt-free firm operates its prized Mulatos gold mine in Mexico and is advancing its Kirazli and Agi Dagi gold-silver assets in Turkey. It has about $475 million in cash and equivalents, and likely could continue its shopping spree. 

Asked if Alamos plans to make other acquisitions this year, Parsons says that “we’re always looking at opportunities, and it really depends on what’s available in the market, the price and a number of other factors.”