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08:39 AM EDT, 08/16/2016 (MT Newswires) -- Osisko Gold Royalties Ltd (OR.TO) announced Tuesday that, as part of streamlining its operations to focus on royalties and incubation investment, it has granted Osisko Mining Inc. an option to earn 100% of its interest on its portfolio of exploration properties held in Quebec's James Bay and Labrador Trough areas.
OR said under terms of the agreement, the "highly regarded" Quebec based exploration portfolio will be optioned to Osisko Mining, which will have the right to acquire 100% of its ownership of the portfolio in return for time-based exploration expenditures. According to OR, Osisko Mining will "benefit from the years of expertise brought to bear on these projects" from the former Virginia Mines exploration team (acquired by Osisko Royalties in 2015), and "will be able to continue significant exploration programs through the integration of this team into Osisko Mining as part of the transaction."
Under the terms of the agreement, Osisko Mining may earn 50% of Osisko Royalties' interest following expenditures totaling $19.2 million, and 100% if its interest upon completing the total investment of $32 million over a 7 year period. Osisko Royalties will retain an escalating net smelter return royalty ranging from 1% to a maximum of 3.5% on the properties. New properties acquired by Osisko Mining in the designated area during the 7 year term of the agreement will also be subject to the agreement, subject to certain conditions. Osisko Royalties will undertake not to participate in any exploration activities and will be bound not to compete with Osisko Mining in areas covered by the agreement, except for the continuation of activities of its Coulon copper-zinc project held by Osisko Royalties and other Quebec institutional shareholders.
Sean Roosen, Chief Executive Officer of Osisko Royalties, said: "With today's deal, we continue to pursue our program of firmly establishing Osisko Gold Royalties as a leading intermediate royalty company, while maintaining exposure to the exciting land position acquired as part of the Virginia Mines acquisition in early 2015 through our holdings in Osisko Mining. This transaction demonstrates our commitment to our focus on the royalty business while indirectly supporting the creation of exploration and development value for our shareholders through our significant position in Osisko Mining."
As part of the agreement, Osisko Royalties will exercise its option (negotiated on June 30, 2015) on properties held by Osisko Mining as of August 25, 2015, by paying $5 million. Under terms of this agreement, Osisko will receive a 1% NSR royalty on Osisko Mining's Windfall property and Urban Barry property package in return for a cash payment of $5 million, additional to its original equity investment of $17.8 million in August 2015. The transaction is subject to finalization of the documentation with an effective date of October 1, 2016.
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