MONTREAL, QUEBEC--(Marketwired - Feb. 27, 2017) - Osisko Gold Royalties Ltd (the "Company" or "Osisko") (TSX:OR)(NYSE:OR) is pleased to announce that it has agreed to acquire a silver stream with reference to silver produced at the Gibraltar copper mine ("Gibraltar"), located in British Columbia, Canada, from Gibraltar Mines Ltd. ("Gibco"), a wholly-owned subsidiary of Taseko Mines Limited ("Taseko"). Osisko will pay Taseko a cash consideration of US$33 million for the silver stream. In addition, Osisko will make ongoing payments of US$2.75 per ounce of silver delivered.
Sean Roosen, Chair and CEO of Osisko noted: "Osisko is pleased to partner with Taseko on the Gibraltar mine to create our first silver stream. Our agreement with Taseko further strengthens and diversifies our Canadian portfolio with a long-life asset with a proven operator that will immediately be accretive to our portfolio of assets. This investment also provides Osisko shareholders with silver price optionality over multiple cycles, with potential exploration and expansion upside."
Russell Hallbauer, President and CEO of Taseko, stated, "We are very happy with our agreement with Osisko on this transaction, partnering with a group that has become a world-class precious metal royalty and streaming company in such a short amount of time. We look forward to a long and prosperous relationship."
TRANSACTION HIGHLIGHTS
Adds to Osisko's Existing High-Quality Portfolio
- Osisko has agreed to acquire Taseko's 75% share of payable silver production from the Gibraltar mine until the delivery of 5.9 million ounces of silver, and 35% of Taseko's share of payable silver production thereafter.
- Gibraltar is the second largest open pit copper mine in Canada and fourth largest in North America. The life of mine yearly average production from Gibraltar is approximately 140 million pounds ("lb") of copper and 2.5 million lb of molybdenum. With a large reserve of 3.2 billion lb of recoverable copper and 58 million lb of molybdenum, the estimated mine life of the project is 23 years (proven and probable reserves as of January 1, 2016).
- With the addition of the Gibraltar silver stream, Osisko's 2017 production is forecasted to come entirely from mines in Canada, a mining-friendly and low-risk jurisdiction.
Immediate Production and Cash Flow
- The acquisition immediately increases Osisko's production and cash flow profile with expected annual silver production of approximately 200,000 ounces for the next 14 years, increasing to an average of 350,000 ounces for the remainder of the 23 year reserve life of Gibraltar.
- Full year delivery is expected for 2017: the stream effective date is January 1, 2017.
Long-term production and exploration upside potential
- Current reserves are sufficient to support mining activities at Gibraltar until 2039 with the potential for extension should the current measured and indicated resources be converted into reserves.
- On September 20, 2016, Taseko announced the discovery of a new high grade copper-gold-silver zone northwest of the perimeter of the Extension Pit at Gibraltar. Taseko continues to explore for additional discoveries along strike of the two main shear zones looking for parallel structures within the host tonalite.
Deal structured in Canada
- All the parties to the agreement are residents of Canada.
Terms of the Agreement
- Osisko has agreed to acquire Taseko's 75% share of payable silver production from the Gibraltar mine until the delivery of 5.9 million ounces of silver.
- Once Osisko has received 5.9 million ounces of silver, Osisko will receive an amount of silver equivalent to 35% of Taseko's attributable Gibraltar mine silver production.
- Osisko will pay Taseko a cash consideration of US$33 million for the silver stream as an advance payment against the purchase price for the sale of silver to Osisko.
- The effective date of the transaction is January 1, 2017. Any silver in respect of which a delivery is made to an offtaker after January 1, 2017, is subject to the stream.
- The silver payability rate will be 90% of contained silver in concentrate, which is in accordance with Taseko's existing concentrate offtake agreements.
- Osisko will make ongoing payments of US$2.75 to Taseko, per silver ounce delivered.
- Silver deliveries will be the secured, subordinated obligation of Gibco, but will be guaranteed by Taseko.
- Taseko will grant Osisko 3 million common share purchase warrants ("Warrant"), with each Warrant entitling Osisko to purchase one common share of Taseko at a strike price to be set at a 50% premium to the 10-day VWAP prior to closing. The Warrants will expire on April 1, 2020. If at any point during the life of the Warrants, Taseko's share price trades at a premium of 25% above the Strike Price for a 30-day consecutive period, Taseko may force the exercise of the Warrants.
- Closing of the transaction is expected to occur in early March 2017 and is subject to the completion of customary conditions including obtaining regulatory approvals.
About the Gibraltar Mine
The Gibraltar copper mine is located in Central British Columbia, Canada. Gibraltar is owned 75% by Taseko and 25% by a Japanese consortium (Sojitz Corporation, 12.5%; Dowa Corp, 6.25%; Furakawa Corp, 6.25%). Gibraltar has a mineral reserve of 3.2 billion pounds recoverable copper and 58 million pounds recoverable molybdenum. Gibraltar's mill capacity is 85,000 tons per day ("tpd"). Processing at Gibraltar is conventional and consists of a typical crush, grind, and floatation circuit. Total production in 2016 was 133.2 million pounds of copper and 0.9 million pounds of molybdenum. Gibraltar produces a high quality 28%-copper concentrate (which contains a silver by-product), molybdenum concentrate and, at times, copper cathode. Copper concentrate is transported by truck to a rail loadout serviced by the CN Railway. From there, the railcars are shipped to the Port of Vancouver where the concentrate is loaded onto ocean freighters for shipment to final destination.
About Taseko
Taseko Mines Limited is a TSX and NYSE MKT-listed copper producer. The Company's principal producing asset is the 75%-owned Gibraltar copper mine in Central British Columbia. The company also owns the New Prosperity project, Aley niobium project and Florence copper project in Arizona.
About Osisko
Osisko Gold Royalties is an intermediate precious metal royalty company focused on the Americas that commenced activities in June 2014. It holds over 50 royalties, including a 5% NSR royalty on the Canadian Malartic Mine (Canada) and a 2.0-3.5% NSR royalty on the Éléonore Mine (Canada). It maintains a strong financial position with cash resources of $499.2 million at December 31, 2016 and has distributed $30.8 million in dividends to its shareholders during the past nine consecutive quarters. The Company also owns a portfolio of publicly held resource companies, including a 13.5% interest in Osisko Mining Inc., 13.3% in Falco Resources Ltd, and 16.9% interest in Barkerville Gold Mines Ltd.
Osisko's head office is located at 1100 Avenue des Canadiens-de-Montréal, Suite 300, Montréal, Québec, H3B 2S2.
Mineral Reserves and Resources
The Mineral Reserves and Mineral Resources for the Gibraltar deposit as of December 31, 2015, are as follows.
| Category (at 0.20% Cu Cut-off) | Size (M Tons) |
Grade | Recoverable Metal | Contained Metal | |
| Cu (%) | Mo (%) | Cu (B lbs) | Cu (B lbs) | ||
| P&P Reserves | 722 | 0.26 | 0.008 | 3.2 | 3.7 |
| M&I Resources | 1,066 | 0.25 | 0.008 | - | 5.3 |
The resource and reserve estimation was completed by Gibraltar mine staff under the supervision of Scott Jones, P.Eng., Vice President, Engineering and a Qualified Person under National Instrument 43-101. Mr. Jones has verified the methods used to determine grade and tonnage in the geological model, reviewed the long range mine plan, and directed the updated economic evaluation. The estimates used long term metal prices of US$2.75/lb for copper and US$11.00/lb for molybdenum and 0.85 C$/US$ foreign exchange. Mr. Jones has reviewed this release. Reserves and Resources were updated as of December 31, 2015.
Mr. Luc Lessard is the qualified person for this release as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects and has reviewed and verified the technical information contained herein. Mr. Luc Lessard is an employee of Osisko Gold Royalties and is non-independent.
