Osisko Mining Corp.’s proposed $550-million acquisition of Queenston Mining Inc. and its flagship Upper Beaver project in Ontario is the latest in a move on the part of Canadian gold companies seeking acquisitions that are closer to home.
Osisko, whose main asset is the Canadian Malartic gold mine in the Abitibi region in Quebec, said the Queenston deal would give it a solid footing in Ontario’s Kirkland Lake region, where the Upper Beaver property is located.
“Queenston is an excellent strategic fit within our existing Canadian portfolio and in our view, is one of the best undeveloped high-grade opportunities and significant open pit targets in Canada,” Osisko president and chief executive officer Sean Roosen said in a news release Monday.
“Osisko has always sought to be a part of camps rather than isolated assets and this transaction provides us with a highly strategic land package in another prolific Canadian gold camp.”
Charles Oliver, senior portfolio manager at Sprott Asset Management, says the proposed deal reflects a growing shift of interest to North America and Canada on the part of mining companies seeking growth.
“There has been a significant increase in interest in safe jurisdictions such as North America and Canada,” he said. Companies are shying away from Africa, the location of significant activity in the recent past, as governments there raise taxes and royalty costs, he said.
Last April, for example, Iamgold Corp. scooped up Trelawney Mining and Exploration Inc., a low-key Ontario gold explorer in a move to offset its Africa-heavy portfolio.
Mr. Oliver said he wouldn’t be surprised to see a rival bid for Queenston emerge.
Agnico-Eagle Mines Ltd. would be a logical bidder given its existing 9-per-cent stake in Queenston, he said.
It might also make sense for Iamgold, which owns the Westwood property nearby, to take a look, he added.
Another producer in the area that could be interested in making a rival offer is Kirkland Lake Gold Inc., said Mr. Oliver.
Desjardins Securities analyst Adam Melnyk said in a research note that he places the odds for a potential competing bid at 25 per cent.
“We are not surprised by the announcement of a transaction for Queenston as we had previously noted that Qeenston’s stable of assets and its large prospective land position in a politically stable, mining-friendly jurisdiction could attract the interest of potential acquirers,” he said.
In addition to the Upper Beaver assets, Queenston has other gold properties in the Kirkland Lake gold camp region.
Terms of the proposed all-stock deal are for Queenston shareholders to receive 0.611 of an Osisko share for each Queenston share.
The transaction is valued at $6 per share, based on the closing price of Osisko’s stock last Friday on the Toronto Stock Exchange.
Queenston shareholders would end up owning 12 per cent of Osisko upon closing of the deal.
To close, the agreement must win approval of two-thirds of Queenston’s shareholders.
Osisko said it has locked up about 30 per cent of the issued and outstanding Queenston shares, including agreements with the company’s senior executives and board as well as other shareholders.
Also on Monday, Osisko reported record monthly gold production of 36,440 ounces at its Malartic mine in October.