Roughly one month after acquiring Virginia Mines to become the fourth-largest company in the royalty space, Osisko Gold Royalties has secured another agreement — for a copper royalty. However, as part of its agreement with Highland Copper the gold-focused royalty and stream company also has the option to earn a silver net smelter royalty on the copper miner's Michigan projects.
Roughly one month after acquiring Virginia Mines (TSX:VGQ) to become the fourth-largest company in the royalty space, Osisko Gold Royalties (TSX:OR) has secured another agreement — for a copper royalty. However, as part of its agreement with Highland Copper (TSXV:HI), the gold-focused royalty and stream company also has the option to earn a silver net smelter royalty (NSR) on the copper miner's Michigan projects. Looking at the copper side of things, Osisko will provide Highland Copper with a C$10-million secured loan in exchange for a 3-percent sliding-scale NSR royalty on all metals produced from the White Pine North project. The loan will be provided once Highland completes its acquisition of the project or by December 31 2015, whichever comes earlier. The base-rate NSR will increase by 0.01 percent for every $0.01-percent increase in the copper price above $3 per pound. Certainly, it seems odd that a precious metals royalty and stream company would strike a deal with a copper-focused junior. However, according to Haywood Securities analyst Stefan Ioannou, the option to purchase a silver royalty could very well have been the sweeter part of the deal for Osisko, meaning the agreement makes a lot more sense. "At the end of the day, it's the silver that's probably what they're really after in terms of enhancing their overall profile as Osisko," he said. Osisko also has the option to purchase a 100-percent NSR on all of the silver produced at Highland Copper's White Pine North and Copperwood projects for a cool US$26 million. It must exercise that right within 60 days of Highland Copper delivering a feasibility study on the projects. Furthermore, Osisko can nominate one director to Highland Copper's board following the completion of the secured loan, and another director should it exercise its silver royalty option.