Osisko Gold Royalties bets on Sable Resources

Sable Resources (TSXV: SAE) says agreements potentially worth up to $12.6 million with Osisko Gold Royalties (TSX: OR) will finance exploration across its projects for the next four years.

Osisko is taking a 9.86% stake for $2.08 million in the junior grassroots explorer — acquiring 16 million units at 13¢ per unit — a 12% premium to Sable’s 30-day, volume-weighted average price per share.

Each unit consists of one common share and one-half of a common share purchase warrant, exercisable for three years at a price of 21¢ per share.

Sable Resources’ exploration properties in Mexico. Credit: Sable Resources.

The two companies will also enter into a royalty-purchase agreement that will help Osisko acquire a 1% net smelter return royalty (NSR) on Sable’s properties in Mexico for $5 million. The royalty will encompass any other properties Sable acquires in Mexico over four years.

Osisko will have the right to acquire another 1% NSR for $5.5 million on minerals produced from the junior’s properties in Mexico, or ones it may acquire over the same period.

Under the deal announced on Aug. 29, Sable will also give Osisko the right of first refusal over any royalties and streams on its properties, equity participation rights to keep its ownership interest — as long as the royalties company owns more than 5% of Sable’s outstanding common shares — and the right to nominate someone to the junior’s board of directors.

Sable has precious metal properties in Argentina, Canada, Mexico and Peru.

President and CEO Tom Obradovich said in a news release that Osisko’s strategic investment “demonstrates the confidence they have in our exploration team and quality of our projects,” and said the financing will allow it to drill test targets “with relatively low dilution to our existing shareholders.”

Once the deal closes, the mining executive noted, drilling will start at Sable’s permitted Vinata project, in Mexico’s Chihuahua state, 50 km south of the state capital. Sable has undertaken geological mapping and rock sampling at Vinata to define zones of anomalous gold and trace element geochemistry, as well as areas showing textural and vein characteristics of epithermal systems, the company states.

The junior’s other projects include Margarita, also in Chihuahua state, 120 km southwest of the state capital and 110 km northwest of the country’s historic Parral mining district. Two veins, Margarita–El Tren and El Caido, are the main exploration targets at Margarita, and can be traced along strike on surface for at least 1.8 km and 500 metres, respectively. The two veins sit 150 to 200 metres apart.

Sable’s third Mexican project, El Escarpe, is 190 km northwest of Mexico City and 90 km southeast of Guanajuato, in Queretaro state. The mineralization style is a volcanic-hosted, low to intermediate sulphidation epithermal system.

Outside of Mexico, Sable is earning a 100% stake in the Don Julio project in Argentina, 165 km from the city of San Juan, in San Juan province. The junior says Don Julio “may represent the southern extension of the well-endowed El Indio–Pascua mineral belt.”

In North America, Sable owns the Tulox project in south-central British Columbia.

News of Osisko’s investment sent shares of Sable up 12.5%, or 1.5¢, to 14¢ per share. At press time its shares were trading at 12¢. The company has traded in a 52-week range of 9¢ to 37¢ per share.

In July, CEO Obradovich and Sable’s vice-president of exploration, Ruben Padilla, signalled their confidence in the company by acquiring more shares.

According to SEDI, Padilla acquired 42,500 shares at 10¢ a share on July 15, 52,500 shares at 10¢ on July 16 and another 100,000 shares at the same price on July 22. Obradovich acquired 100,000 shares at 14¢ on July 4.

Sable has 146 million common shares outstanding for a $17.5-million market capitalization.