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Osisko Enters into Agreement to Acquire a Cash-Flowing Silver Stream on the High-Grade CSA Mine

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Osisko Enters into Agreement to Acquire a Cash-Flowing Silver Stream on the High-Grade CSA Mine

 

 

 

 

 

Osisko Gold Royalties Ltd (TSX:OR) (NYSE:OR) is pleased to announce that its wholly-owned subsidiary, Osisko Bermuda Limited has entered into a binding agreement with Metals Acquisition Corp. (NYSE:MTAL) with respect to a US$90 million silver stream to facilitate MAC’s acquisition of the producing CSA mine in New South Wales, Australia. MAC announced today that it has entered into an agreement to acquire 100% of the shares of the owner of CSA from a subsidiary of Glencore plc.  OBL has also provided MAC with an option to draw up to an additional US$100 million in upfront proceeds through the sale of a copper stream, subject to the parties finalizing definitive terms and conditions.

 

“We are excited to partner with MAC on the acquisition of the CSA mine,” said Sandeep Singh, President and Chief Executive Officer of Osisko. “The acquisition of a silver stream on CSA meets all of Osisko’s stringent acquisition criteria. The stream will provide long-life precious metals cash flow in a top tier jurisdiction at an attractive return. CSA has a long mine life and a tremendous history of reserve replacement with significant further upside. Near-term opportunities to extend the already-long mine life and optimize production have already been identified.

 

We are pleased to have supported, on a bilateral basis, a team of the caliber of MAC’s, and look forward to the conclusion of this transaction and further developing our meaningful relationship. Lastly, the copper stream funding alternative provides additional value potential to Osisko and funding alternatives to MAC as they go through their SPAC closing process.”

 

TRANSACTION HIGHLIGHTS

  • Immediately Enhances Osisko’s Cash Flow
    • 100% of payable silver delivered to OBL for the life of the Mine, with ongoing payments equal to 4% of the spot silver price at the time of delivery
    • 2019-2021 average annual payable silver production of ~431koz, or ~5,600 gold equivalent ounces annually1
  • Exposure to Premium Copper Asset in a Tier 1 Mining Jurisdiction
    • One of the highest grade copper mines in Australia with a multi-decade operating history of consistent production
    • Track-record of reserve and resource replacement, with greater than 100% of mined reserves having been replaced since 2011
    • Recent investments of approximately US$130 million to sustain and optimize operations through current mine life and beyond
  • Near-Term Opportunities to Extend Mine life and Enhance Value
    • MAC targeting a mine life of 15+ years from existing drill tested zones
    • Significant exploration potential from both near-mine and regional targets along a highly prospective geological trend within the 350km2 property package
    • Several areas identified to improve process efficiency, optimize operations and rationalize costs
    • Significant resource and mine life upside by potentially lowering the cut-off grade
  • Experienced Management Team with Track-Record of Creating Value for Stakeholders
    • Proven Australian mining professionals with extensive mining experience and track-record of value creation for stakeholders
    • Partnership opportunities on future strategic activity, as well as a right of first refusal in favour of OBL on royalties or streams on any asset owned by MAC for three years following the closing of the Acquisition Transaction

 

TRANSACTION DETAILS

  • OBL will make an upfront cash payment to MAC of US$90 million. The Silver Deposit will be payable in full on closing of the Silver Stream, with proceeds to be used to fund in part the purchase price payable by MAC for the Acquisition Transaction.
  • OBL will be entitled to receive 100% of payable silver produced from CSA for the life of the Mine.
  • OBL will make ongoing payments for refined silver delivered equal to 4% of the spot silver price at the time of delivery.
  • MAC and certain of its subsidiaries, including the operating subsidiary, will provide OBL with corporate guarantees and other security over their assets for its obligations under the Silver Stream, which shall be subordinated only to the senior project debt facility.
  • OBL has agreed to subscribe for US$15 million in equity of MAC as part of its concurrent equity financing.
  • MAC will grant OBL a ROFR in respect of the sale, transfer or buy-back of any royalty, stream or similar interest in the products mined or otherwise extracted from any property owned or acquired by MAC or an affiliate between the closing date and the 3rd anniversary of the closing date.
  • Closing of the Silver Stream and Equity Subscription is expected in the second half of 2022, and is subject to certain conditions precedent, including, among others, closing of the Acquisition Transaction. Closing of the Acquisition Transaction is subject to, among other things, MAC shareholder’s approving the Acquisition Transaction, and certain regulatory approvals.
  • OBL has also provided MAC an option to draw up to an additional US$100 million in upfront proceeds through the sale of a copper stream referenced to production from CSA.  Should MAC elect to utilize any portion of the Copper Stream Option, upfront proceeds payable by OBL would be used to fund in part the purchase price payable by MAC for the Acquisition Transaction. The Copper Stream Option is subject to, among other things, the parties finalizing definitive terms and conditions.

 

CSA MINE OVERVIEW

 

CSA is a high-grade, long-life, underground copper-silver mine located approximately 12km west-northwest of the town of Cobar in New South Wales, Australia. The Mine is comprised of several mining and exploration leases covering an area of over 350km2 in a proven poly-metallic base metals province. CSA was first discovered in the 1870’s, and large scale production commenced in the mid 1960’s.

 

Mineralization at CSA is classified as a Cobar-style deposit, which is hosted in siltstone with defined Zn-Pb to Cu zonation and structurally controlled emplacement. Mineral reserves and resources as at December 31, 2021 are presented in Table 1 below.

 

Underground mining at CSA is performed using top-down, long-hole open stoping mining methods. In certain areas of narrower mineralization, the Avoca mining method is also employed. Mined ore is hauled via truck to one of two primary underground crushers, following which crushed ore is hoisted to surface via two hoisting shafts. Ore is currently sourced from multiple lodes on different mine levels up to a vertical depth of 1.75km.

 

On surface, ore is processed through conventional grinding, flotation and filtration circuits with a nominal capacity of 1.5Mtpa to produce a high-quality copper concentrate with significant quantities of silver. Since 2011, CSA has produced approximately 512kt of copper and 6Moz of silver. MAC is currently targeting a mine life of at least 15 years based on existing drill tested zones, with significant further upside from near-mine and regional targets.

 

Since 2019 the operator has invested approximately US$130 million in infrastructure to reduce costs and position the mine for future growth. Major projects included ventilation upgrades, shaft refurbishment, mill replacements, processing circuit optimization and construction of an on-site paste backfill plant. These infrastructure projects will support further mine life extensions beyond the current mine plan.

 

CSA is located along a highly prospective geological trend that is known to host major deposits in the Cobar region. In recent years, near-mine exploration has led to the discovery of the QTS Central orebody and the QTS South Upper orebody, and highlights the potential for additional high value deposits close to existing infrastructure (see Figure 1 below). Exploration success has led to mineral reserves increasing by approximately 31kt of contained copper since 2011, despite cumulative production of approximately 512kt of copper since that time. Drilling is ongoing on multiple mineralized lodes and an updated mineral resource estimate is expected in 2022.

 

On the broader CSA land package, there has been limited historical drilling completed by the operator. Recent exploration focus has been on the implementation of high-resolution geophysical surveys and structural modelling to create a sustainable exploration model in support of future drilling campaigns. Eleven prospective exploration targets have been identified for further evaluation.

 

CSA is the largest employer in the Cobar region, and enjoys strong relationships with local stakeholders. The company also has a number of environmental programs in place to ensure best practices are followed, and has committed to working towards reducing carbon emissions from operations through utilizing an electric mining fleet where possible and evaluating green energy alternatives.

 

Table 1 – Mineral Reserves & Resources (2021). Resources are reported inclusive of reserves, and are estimated according to the CIM and JORC codes. The cut-off grade for the resources and reserves is 2.5% copper. Totals may not sum due to rounding. Notes regarding the estimations can be found at the following weblink: https://www.glencore.com/investors/reports-results/reserves-and-resources?item
Category Ore
(Mt)
Cu Grade
(%)
Cu
Contained
(kt)
Ag Grade
(g/t)
Ag
Contained
(Moz)
Proven 4.2 4.0 168 16.4 2.1
Probable 2.6 3.6 94 14.1 1.1
Total Reserves 6.8 3.8 262 15.6 3.3
           
Measured 3.9 5.7 226 24 3.0
Indicated 3.5 4.9 170 20 2.2
Total Measured and Indicated 7.4 5.4 396 22 5.3
Inferred 4.0 5.4 217 20 2.6

Figure 1 – Near-Mine Exploration Potential is available at

https://www.globenewswire.com/NewsRoom/AttachmentNg/b14150ad-b0c8-487d-99fd-7e0b083189e6

 

For more information, please refer to MAC’s press release dated March 17, 2022 filed on EDGAR at www.sec.gov.

 

About Metals Acquisition Corp.

 

MAC was formed as a blank cheque company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses with a focus on the metals and mining sector. MAC is led by a highly experienced management team and board of directors with a track record of creating value for stakeholders.

 

For more information, please visit MAC’s corporate website at

https://www.metalsacquisition.com/.

 

Qualified Person

 

The scientific and technical content of this news release has been reviewed and approved by Guy Desharnais, Ph.D., P.Geo., Vice President, Project Evaluation at Osisko Gold Royalties Ltd, who is a “qualified person” as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects.

 

About Osisko Gold Royalties Ltd

 

Osisko is an intermediate precious metal royalty company focused on the Americas that commenced activities in June 2014. Osisko holds a North American focused portfolio of over 160 royalties, streams and precious metal offtakes. Osisko’s portfolio is anchored by its cornerstone asset, a 5% net smelter return royalty on the Canadian Malartic mine, which is the largest gold mine in Canada.

 

Posted March 17, 2022

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