Osisko Royalties spins out Osisko Development, raises $100M

Osisko Gold Royalties (TSX: OR; NYSE:OR) has announced the spin-out, through a reverse-takeover transaction (RTO), of Osisko Development. The newly formed developer will hold the past-producing Cariboo gold project in B.C. and the San Antonio gold asset in Mexico’s Sonora state, in addition to other mineral assets and a portfolio of equity positions in publicly listed companies.

To execute this transaction, Osisko Royalties has entered into a binding agreement, outlining the terms of the transfer of assets to Barolo Ventures, in exchange for shares of the corporation, in a reverse takeover.

As part of the deal, Osisko and Barolo have also engaged a syndicate of underwriters, with the underwriters agreeing to sell, on a bought-deal private placement basis, 13.35 million subscription receipts of the spin-out, at $7.5 per receipt, for gross proceeds of $100 million. The bankers also have the option, exercisable up to 48 hours prior to closing (the financing is expected to close around Oct. 29) to purchase up to 3.3 million additional receipts, for up to a further $25 million. Each receipt allows the holder to receive, at no additional cost and upon completion of the RTO, one share of the new issuer (after a 60-1 share consolidation of Barolo) and half of a warrant.

Sandeep Singh, Osisko Royalties’ president, noted how the transaction is expected to simplify the respective Osisko companies. “We are very pleased to announce this spin-out transaction, which will simplify Osisko Royalties into a pure-play royalty and streaming company, while maintaining exposure to the company-making assets contributed to Osisko Development,” he stated in a statement.

Singh also highlighted that the technical team is being transferred to Osisko Development to leverage its mine-building knowledge and that the royalty player will keep royalty and streaming interests in the assets transferred.

“We eagerly await the launch of Osisko Development, to advance a rare set of near-term producing and flagship gold assets. Our vision is to develop the Cariboo gold project into one of the predominant mining camps in Canada,” Sean Roosen, Osisko Royalties’ chair and CEO, said in a statement.

Upon closing of the RTO, Osisko Royalties would hold 88% of Osisko Development (expected to dilute as the assets are advanced), while 11.8% would be held by the holders of subscription receipts, with Barolo shareholders holding a 0.2% stake.

The board would include Sean Roosen as chair, in addition to Charles Page, John Burzynski and Joanne Ferstman. The management team would include Sean Roosen as CEO, Chris Lodder as president and Luc Lessard as chief operating officer.

Osisko Royalties holds over 135 royalties, streams and precious metal offtakes on North American mineral assets.

According to the release, the developer will aim for near-term production of over 100,000 oz. gold annually from the development-stage Bonanza Ledge II project in B.C., by the first quarter of next year, and from the San Antonio site, where a permit amendment is underway.

The past-producing San Antonio features gold heap leach potential, with additional upside in sulphide resources.

Production from the flagship Cariboo project would then follow. Permitting is ongoing at the site to allow a 4,750-tonne-per-day underground operation, with full permits expected in 2022, following a feasibility study release scheduled for the second half of next year.

The site includes a functioning mill and mineral resources of 21.4 million measured and indicated tonnes, at 4.6 grams gold per tonne, containing 3.2 million oz. gold, with a further 21.6 million inferred tonnes, at 3.9 grams gold per tonne, for an additional 2.7 million oz. gold.

In addition to the spin-out announcement, Osisko Royalties released drill results from Cariboo, with high-grade intercepts from areas outside of known zones of mineralization.

The company started a 40,000-metre drill program this year, focused on expanding the Lowhee zone and defining the Cow and Valley deposits.

Drill highlights from Cow, where results continue to define high-grade vein corridors, include 6 metres of 25.79 grams gold; and 0.5 metre of 6,530 grams gold. According to Osisko, the latter intercept is the highest-grade assay from all drilling to date at Cariboo.

Notable intercepts from the Lowhee zone on Barkerville Mountain included 13 metres of 20.66 grams gold; and 19 metres of 10.53 grams gold. This area, interpreted as an offset strike extension of Cow, has been defined over an area of 300 metres by 500 metres and to an average depth of 350 metres, and remains open.

At the KL zone, in the footwall of two existing deposits, drilling suggests 1.5 km of strike, with drill highlights of 6 metres of 11.87 grams gold and 10 metres of 8.84 grams gold.

At last year’s Proserpine Mountain discovery, 6 km from the Bonanza Ledge mine, drilling hit 6 metres of 17.78 grams gold, 50 metres from surface.

Three rigs are working at Cariboo and are expected to increase to eight this month.

“Since Osisko first got involved in the Cariboo project, we have been firm believers in its potential scale and importance within the sector. Recent drill results continue to confirm our thesis that Cariboo is not just a mining project, but a mining camp,” Sean Roosen, chair and CEO of Osisko Royalties, said in a statement.

— This article first appeared in the Canadian Mining Journal.