MONTREAL – Shares in Osisko Gold Royalties Ltd. fell by almost 10 per cent Monday after it announced a deal to buy the shares of Barkerville Gold Mines Ltd. it doesn’t already own.
Osisko, which has a 32.6 per cent stake in Barkerville, says the deal will give it a larger role in advancing and developing Barkerville’s Cariboo gold project in British Columbia.
The Montreal-based mining company also announced it was creating the North Spirit Discovery Group to privatize and surface value in resource development projects.
Osisko shares slipped to as little as $ 14.67 from Friday’s close of $ 16.26 after it announced it would issue 0.0357 of a common share of Osisko for each Barkerville share. Barkerville shares rose by as much as 21.7 per cent to 56 cents before drifting lower.
Osisko says the ratio implies a value of 58 cents per Barkerville share, representing a 44 per cent premium based on both companies’ trailing 20-day volume weighted average price, thus valuing Barkerville at $ 338 million.
Analyst Andrew Kaip of BMO Capital Markets says the deal is accretive but it increases risk by adding a project developer role for Osisko.
“Positively, management reiterated (Osisko) will remain a royalty/streaming company but, in our view, the move may not resonate with some investors, as it adds risk and uncertainty to what is supposed to be a safe business model,” he wrote.
The transaction if completed would result in Barkerville shareholders holding about nine per cent of Osisko’s equity.
This report by The Canadian Press was first published on Sept. 23.
Companies in this article: (TSX:BGM, TSX:OR)
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