Osisko Metals (OM.V) has signed an investment agreement with Appian Natural Resources whereby the latter can earn a 60% stake in the Pine Point zinc project in the Northwest Territories by investing up to C$100M in the asset. Additionally, Appian is acquiring just over 20 million shares of Osisko Metals at an average price of C$0.248 which will result in an additional cash inflow of approximately C$5M on the Osisko level (which together with the initial C$8.3M payment will boost Osisko Metals’ cash position to a more healthy level from the working capital deficit shown in the Q3 2022 financials).
An initial C$75.3M will be contributed by Appian to move the project forward to a Final Investment Decision or construction approval. About C$19.8M of this amount is available from the moment of signing the joint venture agreement. A second cash payment of C$24.7M will be made to Osisko Metals which will consist of an initial payment of C$8.3M to acquire an initial 9% stake followed by a second payment of C$16.4M upon reaching a positive Final Investment Decision. This final milestone payment will fluctuate depending on how much cash Appian had to contribute to reach the FID. If it for instance needs C$80M or C$70M, the final payment will be decreased or increased so that the total amount spent on acquiring the 60% stake won’t exceed C$100M.
The current 29,000 meter winter drill program is ongoing with six drill rigs operating on the asset, and this drill program will be included in the investment agreement and pre-FID budget so Osisko should be getting some additional cash back from Appian.
Disclosure: The author has a long position in Osisko. Please read our disclaimer.
