MONTREAL – Osisko Gold Royalties Ltd (NYSE:OR) has struck a deal to acquire a 1.8% gross revenue royalty on the Dalgaranga Gold project, operated by Spartan Resources Limited in Western Australia, the company announced today. The agreement also includes a 1.35% royalty on additional exploration licenses in the region, with a collective transaction value of US$50 million.
The transaction, which is pending approval from Australia's Foreign Investment Review Board, is expected to close in the coming weeks. Osisko's investment aligns with its strategy of engaging in accretive transactions within premier mining jurisdictions and underscores its confidence in the Dalgaranga project's potential as a high-grade underground gold mine.
Dalgaranga, which has been subject to recent high-grade discoveries, notably the Never Never and Pepper deposits, is gearing up for a production restart anticipated within the next two years. The project's mill is fully-permitted, and approvals for future underground mining are underway. Spartan Resources is expected to update its Mineral Reserve Estimate and complete a Feasibility Study by the first half of 2025, which will inform its Final Investment Decision on the project's restart.
The Dalgaranga project boasts a global Mineral Resource Estimate of 8.70 million tonnes at 4.98 g/t gold for 1.393 million ounces in the Indicated category, and 7.44 million tonnes at 4.56 g/t gold for 1.089 million ounces in the Inferred category, as of June 30, 2024. These figures suggest a mine life exceeding 12 years, with the project expected to rank in the lowest quartile of the global gold cost curve once production resumes.
Spartan, a mid-sized miner with significant cash reserves and a track record of exploration and operational success, is also progressing with the construction of twin exploration declines at Dalgaranga. Additionally, the company holds the right to buy back up to 20% of the Dalgaranga Royalty and the Exploration Royalty until February 2027.
Jason Attew, President and CEO of Osisko, expressed optimism about the partnership with Spartan and the project's exploration upside. The transaction is based on a press release statement from Osisko Gold Royalties Ltd.
In other recent news, Osisko Gold Royalties reported robust earnings for the first half of 2024, earning 20,068 gold equivalent ounces (GEOs) in the second quarter. The company's revenue for this period was a solid $64.8 million, and it ended the quarter with $65.7 million in cash. Despite operational challenges at Victoria Gold's Eagle Mine, Osisko remains on track to meet its annual guidance, albeit with adjustments.
The company also successfully reduced its net debt to just over $40 million and paid a quarterly dividend of six and a half cents per share, with another dividend planned for later in the year. In addition to these financial achievements, Osisko highlighted its robust pipeline of opportunities, including its first delivery under the CSA copper stream.
Analysts noted the suspension of operations at Victoria Gold's Eagle Mine, which led to a non-cash impairment loss and an adjusted GEO guidance of 77,000 to 83,000 for 2024. However, Osisko's management expressed confidence in the company's financial flexibility and the prospects of returning capital to shareholders through dividends and buybacks. These developments are part of the recent news surrounding Osisko Gold Royalties.
InvestingPro Insights
Osisko Gold Royalties Ltd's recent acquisition of royalties in the Dalgaranga Gold project aligns well with the company's financial performance and market position. According to InvestingPro data, Osisko has demonstrated strong growth, with a revenue increase of 7.29% over the last twelve months as of Q2 2024, reaching $184.79 million USD. This growth trajectory supports the company's strategy of engaging in accretive transactions in premier mining jurisdictions.
The company's financial health is further underscored by its impressive gross profit margin of 95.09% for the same period, indicating efficient operations and potentially strong cash flow generation. This robust profitability position likely provides Osisko with the financial flexibility to pursue strategic acquisitions like the Dalgaranga royalty deal.
InvestingPro Tips highlight that Osisko has raised its dividend for 3 consecutive years, signaling confidence in its long-term cash flow generation. This consistent dividend growth, coupled with the current dividend yield of 1.04%, may appeal to income-focused investors in the mining sector.
Additionally, another InvestingPro Tip notes that Osisko operates with a moderate level of debt, which suggests a balanced approach to financial leverage. This prudent financial management could be advantageous as the company expands its royalty portfolio with investments like the Dalgaranga project.
For investors seeking more comprehensive insights, InvestingPro offers 10 additional tips for Osisko Gold Royalties, providing a deeper understanding of the company's financial health and market position.
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