Osisko eyes Windfall joint venture with Northern Star

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Osisko Mining Inc. [OSK-TSX] has announced an investment agreement with Northern Star Resources Ltd. [NST-ASX] and said the Australian company intends to negotiate an earn-in joint venture partnership on Osisko’s Windfall Gold deposit in Eeyou Istchee James Bay, Quebec.

The investment agreement is for a private placement of $154 million in a convertible senior unsecured debenture with North Star. The debenture is due December 1, 2025 and bears an interest rate of 4.75% per annum.

In addition, Osisko and Northern Star have agreed to negotiate the terms of an earn-in and joint venture on up to a 50% interest in the Windfall project.

Back in April, 2021, Osisko said a positive preliminary economic assessment (PEA) provides a robust base case for developing the Windfall gold deposit in an underground dual ramp-access mine with a central processing mill at the site.

The PEA envisages average production of 300,000 ounces annually during the first seven years of full production at an average grade of 8.1 g/t gold. It also forsees a peak recovery of 328,000 ounces in year six, and average production of 238,000 ounces annually over an estimated mine life of 18 years. The all-in-sustaining cost is pegged at US$610 an ounce.

Other highlights include average annual after-tax cash flow of $253 million in the first seven years of full production, and cumulative life-of-mine after-tax cash flow of $2.6 billion.

The PEA considers a capital expenditure of $544 million, including power line construction and a $55 million contingency as well as the creation of approximately 400 direct jobs and 200 indirect jobs during operation. Other PEA highlights include average annual after-tax cash flow of $253 million in the first seven years of full production, and cumulative life-of-mine after-tax cash flow of $2.6 billion.

In a press release on November 30, 2021, Osisko Chairman and CEO John Burzynski outlined the likely benefits of the agreement with Northern Star, an Australian gold mining company with operations in Western Australia and Alaska. “The potential of joining forces with Northern Star, a well-respected gold producer with a depth of experience in mining underground high-grade deposits similar to the Windfall project, would help de-risk the remaining work ahead to bring the Windfall Project to successful production.’’ Burzynski said he is confident that Northern Star will be a “very strong partner.”

Under the terms of the investment deal, the debenture may be converted by Northern Star at any time after the first anniversary of closing, subject to acceleration in the event of a change of control, at a conversion price of $4.00 per common share of Osisko.

Upon entering into the earn-in and joint venture agreement, Northern Star may convert the debenture into an interest in the property at a conversion premium of 125%.

In addition, the debenture may be redeemed by Osisko at any time after the second anniversary of closing for cash or common shares [provided the volume weighted average trading price of the common shares is not less than 125% of the conversion price for the 20 consecutive trading days ending five days prior to the notice of redemption.

On November 30, 2021, Osisko shares jumped 6.5% or 19 cents to $3.12 on volume of 994,870. The shares are currently trading in a 52-week range of $4.00 and $2.33.


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