The team behind Osisko Gold Royalties Ltd. is bringing some much-needed consolidation to Canada’s junior mining sector by arranging a complicated merger of five different companies.
The deal brings the five unloved miners together into one entity that is well financed with $65 million of cash, has a well-regarded management team, and has a host of interesting gold projects in Ontario and Quebec. It is exactly the sort of transaction that investors have been clamouring for, as juniors need more scale, capital and trading liquidity if they hope to get noticed and develop their projects in the current rough market conditions.
“People have been talking about (consolidation). We decided to do it,” Osisko chief executive Sean Roosen said in an interview.
The focal point of the transaction is a junior called Oban Mining Corp., which was founded by members of the Osisko team. Oban will make friendly, all-stock offers to four tiny companies: Temex Resources Corp., Ryan Gold Corp., Eagle Hill Exploration Corp., and Corona Gold Corp. Osisko will invest up to $20 million in the company, and provide some management services.
The new Oban will be worth an estimated $122 million, and will own four projects holding more than six million ounces of gold resources. Roosen and Bay Street legend Ned Goodman will be the co-chairmen, and Osisko co-founder John Burzynski will be chief executive.
Roosen said part of the rationale for this deal is that Osisko and Goodman’s Dundee Corp. have some common investments and wanted to combine a portion of their holdings. Both firms are involved with Ryan Gold, Osisko is involved with Oban, and Dundee is the largest shareholder of Corona and Eagle Hill.
“We had all these pieces,” Roosen said. “And then we looked around and said, “What would it take to create an entity that’s sustainable and has the ability to hopefully re-rate in the marketplace and move these projects to where they have to go?”
People have been talking about (consolidation). We decided to do it
Before forming Osisko Gold Royalties last year, Roosen and Burzynski were two of the key figures behind Osisko Mining Corp., which was sold for almost $4 billion.
Getting five management teams to agree to this merger was a challenge, Roosen said. But he added that everyone understood the logic of it, and the transaction came together in a flurry of activity over the last month.
“There aren’t many companies out there that can sit down and say they’ve got the assets, and they’ve got the sponsorship, and they’ve got the balance sheet in this market,” mining veteran Rene Marion, who will join Oban’s board, said on a conference call.
“And I think the new Oban will have all of the above.”
The merger does not require shareholder approval from all five companies to proceed. So if shareholders from one of the companies vote it down, the other four could still merge.
In addition to the five-way merger, Oban will acquire a 19.9 per cent stake in a sixth company, BonTerra Resources Inc.