Mr. Vincent Metcalfe reports
OSISKO ACQUIRES GOLD ROYALTY ON VICTORIA GOLD'S FULLY-FINANCED, SHOVEL-READY EAGLE GOLD PROJECT IN CANADA
Osisko Gold Royalties Ltd. has signed a term sheet with Victoria Gold Corp. to acquire a 5-per-cent net smelter return (NSR) royalty for $98-million on the Dublin Gulch property which hosts the Eagle gold project located in Yukon, Canada.
Eagle is a shovel-ready gold project which currently hosts 2.7 million ounces in proven and probable gold reserves from 123 million tonnes of ore with a grade of 0.67 gram of gold per tonne, as outlined in a National Instrument 43-101 feasibility study, and when in production is expected to produce approximately 200,000 ounces of gold annually at an operating cost of approximately $550 (U.S.) per ounce. The project is permitted for construction and operations.
The acquisition of the royalty provides Osisko with:
A meaningful NSR royalty on a shovel-ready, fully financed project in Canada; Near-term cash flow from a premier jurisdiction through the addition of an average 10,000 ounces of gold annually over the projected 10-year mine life of Eagle, starting in 2020; Additional potential growth through the addition of the Olive deposit and further exploration.
As part of the term sheet, Osisko has also agreed to purchase on a private placement basis, 100 million common shares of Victoria at a price of 50 cents per common share, for total financing by Osisko of $148-million including the royalty purchase.
In connection with the financing, Victoria has entered into documentation with Orion Mine Finance and Caterpillar Financial Services Ltd. with respect to a construction financing package totaling approximately $505-million in aggregate (including the financing) that is expected to fully finance the development of the project through to commercial production.
Sean Roosen, chair and chief executive officer of Osisko, commented on the transaction: "We are very pleased to partner with Victoria to develop Canada's next premier gold mine, and to generate important benefits for all project stakeholders. The addition of the Eagle royalty strengthens our Canadian asset base and adds near-term Canadian gold to Osisko's growth profile from a fully permitted, fully financed and shovel-ready project located in Yukon, a premier mining jurisdiction.
"Having been to the project and met with many of the stakeholders, we are looking forward to investing in and working with Victoria in the Yukon to bring this project to fruition. With the gold price currently over $1,700 per ounce, this is a great time to be building a gold project in Canada as there is availability both from suppliers and in the work force. In addition, the robust economics of this project set the stage to start what we believe will be a project that brings economic change to the area and will be a meaningful contributor to the Yukon economy, both in the near term and long term, as the local work force acquires important skills and experience that will be applied to future projects."
The royalty purchase
As part of the royalty purchase, Osisko will advance $98-million, in exchange for a 5-per-cent NSR royalty on all metals and minerals produced from the property, which includes the Eagle and Olive deposits, until an aggregate of 97,500 ounces of refined gold have been delivered to Osisko, and a 3-per-cent NSR royalty thereafter.
The financing of the royalty is expected to be carried out in two tranches, with the first tranche of $49-million to be financed upon the satisfaction of certain conditions including (but not limited to) the execution by Victoria and Orion of definitive credit agreements in respect of the Orion debt facilities and the occurrence of the closing date under such facilities, and the second tranche of $49-million to be financed pro rata to drawdowns under the subordinated debt component of the Orion debt facilities.
The private placement
Osisko has agreed to purchase 100 million common shares of Victoria for aggregate proceeds of $50-million. The proceeds of the private placement will be used primarily for the purpose of advancing construction of Eagle, and for working capital purposes. Following the private placement, Osisko expects to have ownership over approximately 121 million common shares of Victoria, representing approximately 15.7 per cent of the issued and outstanding Victoria common shares. All securities issued to Osisko under the private placement will be subject to a four-month hold period from the date of issuance of the securities, pursuant to applicable securities legislation. Additionally, Osisko will have a right to nominate one member to Victoria's board of directors.
Closing of the transaction is subject to execution of definitive documentation, satisfaction of conditions precedent and regulatory approvals.
The Dublin Gulch property and the Eagle gold project
Victoria Gold's 100-per-cent-owned Dublin Gulch gold property is situated in the central Yukon, Canada, approximately 375 kilometres north of the capital city of Whitehorse, and approximately 85 kilometres from the village of Mayo. The property is accessible by road year-round, and is located within Yukon Energy's electrical grid.
The property covers an area of approximately 555 square kilometres, and is the site of Victoria's Eagle gold deposit. The Eagle gold mine is expected to be Yukon's next operating gold mine and, between the Eagle and Olive deposits, include proven and probable reserves of 2.7 million ounces of gold from 123 million tonnes of ore with a grade of 0.67 gram of gold per tonne, as outlined in a National Instrument 43-101 feasibility study. The NI 43-101 mineral resource for the Eagle and Olive deposits has been estimated to host 191 million tonnes averaging 0.65 gram of gold per tonne, containing 4.0 million ounces of gold in the measured and indicated category, inclusive of proven and probable reserves, and a further 24 million tonnes averaging 0.61 gram of gold per tonne, containing 500,000 ounces of gold in the inferred category.
About Osisko Gold Royalties Ltd.
Osisko Gold Royalties is an intermediate precious metal royalty company focused on the Americas that commenced activities in June, 2014. Following the acquisition of the Orion portfolio, it now holds a North American-focused portfolio of over 130 royalties, streams and precious metal offtakes. Osisko's portfolio is anchored by five cornerstone assets, including a 5-per-cent NSR royalty on the Canadian Malartic mine, which is the largest gold mine in Canada. Osisko also owns a portfolio of investments in publicly held resource companies, including a 15.5-per-cent interest in Osisko Mining Inc., a 32.7-per-cent in Barkerville Gold Mines Ltd. and a 12.7-per-cent interest in Falco Resources Ltd.
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