Osisko Gold Royalties Ltd. (OR.TO) and Virginia Mines Inc. (VGQ.TO) announced that they have entered into a definitive agreement to combine the two companies to create a new leading intermediate royalty company with two world-class gold royalty assets in Quebec.
The combined company will be named Osisko Gold Royalties Ltd and will have an estimated market capitalization of C$1.3 billion.
According to the companies, the transaction combines two top-quality, highly-complementary asset portfolios, including two long life revenue-generating gold royalties: Osisko's 5% net smelter return royalty on the Canadian Malartic mine, and Virginia's sliding-scale 2.2% - 3.5% NSR royalty on the Eleonore mine. Both the Osisko and Virginia royalties cover not only the operating mines, but also the high-potential land packages surrounding the mines.
Based on terms of the transaction, each Virginia share will be exchanged for 0.92 Osisko shares. The Arrangement Consideration represents consideration to Virginia shareholders of C$14.19 per Virginia share based on the closing price of Osisko common shares of C$15.42 per share on the Toronto Stock Exchange as at November 14, 2014. This value implies a 41% premium to the closing price of Virginia shares on November 14, 2014, and a 27% premium to Virginia based on both companies' 30-day VWAPs ending November 14, 2014.
It is noted that upon completion of the combination, existing Osisko and Virginia shareholders will own about 61% and 39% of the combined company pro forma the concurrent private placements by la Caisse de depot et placement du Quebec or CDPQ and le Fonds de solidarite FTQ, respectively, on a basic basis.
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