Osisko Gold Royalties Ltd. [OR-TSX, NYSE] said Tuesday October 6 that it is creating a new intermediate gold producer by spinning out a basket of mining properties, including its Cariboo gold project in east-central British Columbia to Barolo Ventures Corp. [BVC.H-TSXV].
Osisko also said it is transferring $116 million worth of marketable securities to Barolo and will proceed with a reverse takeover of the Vancouver-based exploration company before changing its name to Osisko Development.
The formation of Osisko Development creates a leading North American mine development company with a focus on becoming an intermediate gold miner with a near-term target of over 100,000 ounces of gold per year.
As part of the RTO, Osisko and Barolo are raising $100 million from a bought deal private placement of 13.35 million subscription receipts of “Spinco” (Osisko Development) priced at $7.50 each. Under an agreement, the underwriting syndicate has been granted a green shoe option to purchase up to an additional 3.3 million subscription receipts at the issue price, a move that could add roughly $25 million to the proceeds.
Trading in Barolo shares was halted after the close of trading October 5, 2020, just minutes after the announcement from Osisko Gold, which advanced 4.4% or 69 cents on Tuesday to $16.49. The shares are trading in a 52-week range of $17.50 and $6.35. Prior to the trading halt, Barolo was priced at 27 cents and traded in a 52-week range of 32.5 cents and 18 cents.
Osisko Gold Royalties is an intermediate precious metal royalty company with a focus on the Americas. It holds a portfolio of over 135 royalties, streams and precious metal offtakes. Its portfolio is anchored by a 5% NSR royalty on the Canadian Malartic Mine in Quebec, which ranks as the largest gold mine in Canada. Osisko also owns the Cariboo gold project in Canada as well as a portfolio of publicly held resource companies, including a 15.9% interest in Osisko Mining Inc. [OSK-TSX], a 17.9% interest in Osisko Metals Inc. [OM-TSXV, BWMXF-OTC] and an 18.3% interest in Falco Resources Ltd. [FPC-TSXV].
The company met its guidance by earning 78,006 gold equivalent ounces in 2019, generating total revenue of $140.1 million.
“We are very pleased to announce this spinout transaction, which will simplify Osisko Royalties into a pure-play royalty and streaming company, while maintaining exposure to company-making assets contributed to Osisko Development,” said Osisko President Sandeep Singh.
The assets being transferred to Osisko Development include the Cariboo gold project, the San Antonio gold project in Sonora Mexico, the Bonanza Ledge 11 project in British Columbia, exploration properties in Canada’s James Bay region and Guerrero, Mexico, plus a portfolio of equity positions worth $116 million.
Osisko is also transferring its technical team to Osisko Development to leverage the team’s mine building expertise. Osisko Royalties will also retain royalty and streaming interests in the transferred assets that, when in production, could potentially deliver approximately 20,000 gold equivalent ounces annually to Osisko Royalties.
The Cariboo gold project, Osisko Development’s flagship asset, is advancing through the permitting phase as a 4,750-tonne-per-day underground operation with a feasibility study on track for completion by the second half of 2021.
“The Cariboo gold project is an extremely scarce asset with current resources totalling 3.2 million ounces in the measured and indicated category and 2.7 million ounces in the inferred category on a brownfield site in B.C.,” Osisko said.
Upon closing of the RTO, Osisko Royalties is expected to own 88% of the outstanding resulting issuer shares. However, it expects the advancement of assets held by Osisko Development to be funded through public markets, a move that will eventually dilute Osisko Royalties’ ownership of the spinout company.