Source: Streetwise Reports 06/20/2018
A BMO Capital Markets report outlined the pending arrangement between the two entities.
In a June 18 research note, Andrew Kaip, an analyst with BMO Capital Markets, reported that Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) acquired a silver stream from Falco Resources on its Horne 5 project in Quebec for CA$180 million (CA$180M). “The silver stream has an internal rate of return of 14% at spot silver, which in our view is attractively priced relative to recent producing stream transactions in the range of 5–8%,” wrote Kaip.
Per the agreement, Osisko will pay CA$25M when the deal closes, followed by a series of amounts in stages as certain milestones are achieved. The company may increase the stream to 100% of Horne 5’s silver production with an optional CA$40M up front and a final CA$60M when Falco gets project financing.
BMO estimated that via the stream, 1.6 million ounces of silver would be delivered to Osisko annually for 18-plus years starting in 2021. “Osisko will pay a delivery charge of 20% of spot silver to a maximum of US$6 per ounce from a 5 kilometer area of interest,” Kaip indicated. At that rate, the stream has an NPV5% of US$90M.
The transaction going through is contingent upon whether or not Glencore wants to acquire the stream. Should it want to, it has 60 days to notify Falco of its intent.
Along with the silver stream, Osisko bought a CA$7M secured debenture from Falco that “will be converted into units of Falco (one share and a half warrant), contingent on approval of the conversion by disinterested shareholders,” Kaip explained.
Along with a “potential stream conversion at Falco,” Kaip noted that additional catalysts for Osisko include boosted metals deliveries from its Orion deal and further opportunities for streams, royalties and/or equity investments.
On Osisko, BMO has a Market Perform rating and a CA$15 per share target price. The latter reflects a greater than 20% return as the company is trading today at around CA$12.28 per share.
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From:: The Gold Report