Osisko Metals (OM.V) has secured a financing package totalling C$8.5M which will help fund its exploration budget for 2021. In a first step, the company has sold a 0.5% NSR on the Pine Point zinc project to Osisko Gold Royalties (OR.TO, OR) for C$6.5M. An excellent price tag as Osisko Gold Royalties will only be able to recoup its original investment once the Pine Point project has generated C$1.3B in revenue. Throw in the required IRR for Osisko to make an investment in Pine Point, and you’ll likely end up at a required Net Smelter Revenue of C$2B before Osisko Gold Royalties breaks even on this royalty investment. And that’s an important vote of confidence but unfortunately this seems to have been missed by the market.
As far as keeping the dilution limited, selling a 0.5% NSR at that price was a solid move. Osisko Metals simultaneously raised C$1.98M in a private placement priced at C$0.48 per unit with each unit consisting of a common share of Osisko Metals as well as half a warrant whereby each full warrant allows the warrant holder to acquire an additional share at C$0.58 for a period of two years. CEO and Chairman Robert Wares and Osisko Mining (OSK.TO) originally planned to subscribe for C$504,000 each, but it looks like both now invested C$600,000. This means that at least 60% of the financing was absorbed by insiders, a nice vote of confidence.
During the AGM conference call, CEO Wares mentioned the 2021 exploration program at Pine Point will include a deeper dive into the hydrological situation at Pine Point as the water inflow remains one of the reasons why Osisko Metals isn’t getting the valuation it deserves. With zinc closing in on the US$1.25 level, one would have expected some more love from the market to Osisko Metals, but the true underlying value will have to come to surface at some point. Another interesting remark during the AGM conference call was Osisko Metals is looking to acquire a copper asset. Interesting, because that would give the company access to two of the most desired metals these days.
Disclosure: The author has a long position in Osisko Metals and participated in the private placement. Please read our disclaimer.