Osisko Gold Royalties has signed an agreement to acquire Virginia Mines for C$479m ($424m) to create a C$1.3bn ($1.2bn) Montreal-based gold royalty company, which will hold royalty interests in two major gold mines in the province of Québec, Canada.
Under the terms of the deal, the companies will merge their asset portfolios, including Osisko's 5% net smelter return (NSR) royalty on the Canadian Malartic mine and Virginia's sliding-scale 2.2% to 3.5% NSR royalty on the Éléonore mine.
The transaction will provide a royalty interest in Goldcorp's Éléonore mine, which stated production in 2011, to Montreal-based Osisko, which already owns a royalty in the Canadian Malartic asset.
Achieved commercial production in May 2011, the Canadian Malartic mine is producing approximately 525,000oz of gold a year.
The Éléonore mine will be ramping-up to around 600,000oz a year by 2018, according to operator Goldcorp.
Each Virginia share will be exchanged for 0.92 Osisko shares as part of the deal, which is structured as a plan of arrangement.
Osisko chairman and CEO Sean Roosen said: "Shareholders of both companies will benefit from increased diversification, superior trading liquidity, a strong balance sheet and a heightened ability to compete for future growth opportunities in the royalty business."
Upon completion of the transaction, existing shareholders of Osisko and Virginia will own approximately 61% and 39% of the combined company pro forma the concurrent private placements by la Caisse de dépôt et placement du Québec (CDPQ) and le Fonds de solidarité FTQ (Fonds), respectively.
Virginia Mines president and CEO André Gaumond said: "Combining the two best-performing Québec mining groups will create a strong Québec-based 'mining house' that is particularly important at a time when the Québec Government is promoting the development of the north through the Plan Nord initiatives."