Sirios Resources (TSXV: SOI; US-OTC: SIREF) says the December acquisition of Osisko Development (NYSE, TSXV: ODV)-backed OVI Mining will give its Quebec Cheechoo gold deposit the financing and development push it has lacked.
The transaction is to transform the 31-year-old Montreal-based explorer into an Osisko-linked developer-in-waiting, with OVI head Jean-Félix Lepage set to step in as Sirios’s next CEO when the deal closes this quarter. Founder and outgoing CEO Dominique Doucet, 69, said he would stay close to the business as executive chairman and head of exploration while Lepage takes the lead on funding, studies and moving Cheechoo toward a build decision.
“I can admit there was a weakness in Sirios regarding financing,” Doucet told The Northern Miner in a phone interview. “We need the connection with that financing world and also the experience to build a mine.”
The transaction is also to see Osisko Development chairman CEO Sean Roosen, a serial mine builder, joining the Sirios board alongside Laurence Farmer, OVI’s chairman and a senior Osisko executive.
Deal details
Under the share-swap deal, announced Dec. 11, Sirios plans to issue about 132 million shares to OVI owners, or 2.34 Sirios shares for each OVI share. This will value OVI at 17.6¢ a share based on Sirios’s 7.5¢ close from the previous day.
Sirios shareholders are set to own about 75% of the combined company, with OVI owners holding the rest.
Sirios shares fell 2.3% Wednesday to 21.5¢, giving the company a market capitalization of $85.6 million (US$63 million). The stock has quadrupled in the past 12 months.
Osisko Development shares rose 2.8% to $5.48, extending their 12-month gain to 152%. The company has a market capitalization of $1.6 billion.
Flagship asset
Cheechoo, Sirios’s main asset, carries an indicated resource of 35 million tonnes grading 1.1 grams gold per tonne for 1.3 million oz., plus an inferred resource of 43 million tonnes grading 1.2 grams for 1.7 million oz., including a higher-grade underground portion. The company updated the estimate last July, lifting the deposit, in Quebec’s James Bay Lowlands, to about 3 million oz. in total after years of incremental drilling.
That resource update was the payoff for persistence in a district where discoveries can take a long time to mature, Doucet said.
Cheechoo stands out in Quebec because the deposit fits a reduced intrusion-related style more common in the Yukon and Alaska. Credit: Sirios Resources
“It takes a lot of projects, many years of effort,” he said. Sirios built “in-house knowledge of the geology” by returning year after year with modest programs, he added.
Cheechoo stands out in Quebec because the deposit fits a reduced intrusion-related style more common in the Yukon and Alaska, such as Kinross Gold’s (TSX: K; NYSE: KGC) Fort Knox mine – the kind of system that can grow into large tonnage deposits mined by open pit.
Moving ahead
Lepage, a mining engineer who spent eight years working at the nearby Éléonore mine before moving into development roles, said his priority is to drill before locking in economics.
“Before adding to the technical study, I think we want to push more on the drilling first,” Lepage said.
Plans are to drill a first round of about 30,000 to 40,000 metres aimed at growing the resource near areas already outlined. If results support it, he said Sirios wants to publish an updated resource before year-end and, based on that, consider launching a preliminary economic assessment in the first half of next year.
As it stands, Sirios has enough cash to handle planning and permitting for the next campaign and it is to tap the market for the larger drill program after closing. Many of the company’s warrants and options sit in-the-money, a potential source of additional near-term funding, Lepage noted.
Infrastructure-rich
Cheechoo benefits from its location near existing roads and infrastructure, Lepage said. Drill rigs can be moved by truck and the company already has a camp on site. Drilling can run most of the year, he added, with brief pauses during spring breakup and early winter transitions.
Quebec also helped set the site up for heavier work. Doucet pointed to a $1.2-million road upgrade last year, with about half of the cost covered by a grant through the province’s Société du Plan Nord.
Project pipeline
Beyond Cheechoo, the acquisition adds two district-scale exploration properties: Corvet Est and PLEX. Corvet Est covers ground once tied to the former Virginia Gold Mines’ discovery pipeline that led to Éléonore and has seen little meaningful exploration since 2012, according to Doucet.
Cheechoo will take the bulk of the budget, with the broader portfolio treated as longer-term option value, Lepage added.
The deal is as much about people as ground. After decades building an exploration shop in James Bay, the company will soon have the mine-building and capital-markets depth it needs to move from discovery to development, Doucet said.
“We’re transitioning into a new generation,” he said. “It’s a second life for the company.”
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