Canada’s Osisko Gold Royalties Ltd said on Monday it had agreed to buy a precious metals portfolio from U.S. private equity firm Orion Mine Finance Group for $1.13 billion (US$839.40 million), sending its shares up 10 percent.
The transaction is “transformative” for Montréal-based Osisko as it increases its portfolio of producing diamond, gold and silver assets to 16 from five, Eight Capital analyst Josh Wolfson said in a note to clients.
Osisko will pay Orion $675 million in cash and the remaining $450 million in Osisko shares for the assets. Caisse de dépôt et placement du Québec and the Fonds de solidarité FTQ will fund nearly 41 percent, or $275 million, of the cash portion by taking up shares in Osisko in a private placement.
The transaction price, which was higher than the market had originally expected, shows the stiff competition for so-called royalty and streaming deals at a time when higher metals prices have increased miners’ traditional funding options such as debt and equity, so reducing their need for alternative finance.
Streaming, royalties and offtakes are types of alternative finance for the mining sector and generally involve an upfront payment to a miner, which then repays it by supplying metal at a later date.
Competition for deals has also increased as new groups, including pension funds, have entered the sector. The sector’s biggest companies are Canada’s Wheaton Precious Metals Corp and Franco-Nevada Corp.
Reuters reported earlier this year that Orion was in talks to either sell or publicly list the portfolio. Sources had pegged the sale price at up to US$1 billion.
The portfolio consists of 74 royalties, streams and precious metals offtakes and will result in Osisko holding a total of 131 royalties and streams, the company said.
As a part of the deal, Osisko will be entitled to some production from the Renard diamond mine in Québec, Brucejack gold and silver mine in British Columbia, and the Mantos Blancos copper mine in Chile.
Shares in Osisko, which began business in 2014, and whose key asset was a royalty on the Canadian Malartic Mine in Québec, were $1.43 higher at $15.83 on the Toronto Stock Exchange in late morning trading.
Maxit Capital LP, BMO Capital Markets, National Bank Financial and PricewaterhouseCoopers were Osisko’s financial advisers. Orion’s financial advisers were CIBC World Markets Inc and Haywood Securities Inc.
By Nicole Mordant
(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Shounak Dasgupta and Grant McCool)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Osisko Gold Royalties Ltd