Alamos Gold's Young-Davidson underground gold mine in northern Ontario, Osisko's backyard. Photo: Alamos Gold

Alamos Gold's Young-Davidson underground gold mine in northern Ontario, Osisko's backyard.
Photo: Alamos Gold

Osisko Eyeing AuRico Metals

Issue 132, July 2015

Osisko Gold Royalties is eyeing the royalty assets and cash sitting inside AuRico Metals, sources familiar with the matter tell Global Mining Observer.

Shares in AuRico only began trading last week and it is yet to launch its own website. The company was spun-out of a $1.5bn all-stock merger between its predecessor, also called AuRico, and Mexico-focused Alamos Gold.

The new company holds a 1.5 per cent royalty over the Young-Davidson mine in northern Ontario, rapidly emerging as Osisko's heartland, plus royalties over the Stawell and Fosterville gold mines in Australia's state of Victoria.

Until recently, the Australian mines were owned by Crocodile Gold, but in a sign of deal flow hotting-up in the gold market, Crocodile was swallowed in May by Vancouver-based Newmarket Gold, a onetime shell company that boasts billionaire Lukas Lundin and former Barrick boss Randall Oliphant on its A-list board.

In total, AuRico's royalty portfolio generates around C$8m ($6m) per annum in earnings before tax, a hefty income stream versus the company's C$65m market cap. It is also sitting on the Kemess copper-gold project in British Columbia and has more than C$25m in cash.

Osisko is eyeing the assets, according to sources, as it continues a breakneck run of deals. Chairman Sean Roosen bought-out Virginia Mines in December and has amassed equity positions in several gold explorers, including NioGold and Oban Mining.

If AuRico comes into play, Osisko may face competition for the assets. Its market cap is comfortably within reach of other deal-hungry royalty groups, including Sandstorm Gold, as well as the gold royalty majors, Royal Gold and Franco-Nevada, which share the philosophy that no deal is too small.

Like Osisko, Sandstorm has been busy mopping-up fringe royalty assets this year, whilst Franco will “outbid you every time if it makes sense,” one banker working with Osisko told Global Mining Observer earlier this year.

On heavy volume, AuRico's shares rose 11 per cent in Toronto on Tuesday and 7 per cent on Wednesday, last trading at C$0.60. The buying is being led by National Bank of Canada, Osisko's house bank, according to sources.

UPDATE: Sandstorm in Race for AuRico 

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Sandstorm Gold
in Race for AuRico Metals

Young-Davidson royalty clause acts as "poison pill", say sources pursuing AuRico