Falco Resources has entered into a multimillion-dollar financing transaction with Osisko Gold Royalties, and will use the funds for its Horne 5 project.
Falco Resources (TSXV:FPC) has entered into a silver stream transaction with Osisko Gold Royalties (TSX:OR,NYSE:OR) through which Falco will receive C$180 million to help fund its Horne 5 project, the company announced on Monday (June 18).
In addition to the silver stream transaction, Falco also reported that Osisko will purchase a secured debenture having a principal amount of C$7 million from Falco.
“We are pleased to announce this financing with Osisko. The funds will be instrumental as Falco looks forward to building a high-quality, profitable, and environmentally safe project that will deliver significant economic benefit to all of our stakeholders,” stated Luc Lessard, president and CEO.
“The partnership with Osisko and its cornerstone investment further demonstrates its commitment to supporting the next significant mine build in Québec, a leading mining jurisdiction,” he added.
According to a press release from Falco, Osisko will provide the funds through multiple deposits, the first of which will be in the amount of C$25 million and will take place upon the closing of the silver stream transaction, net of any amounts owing by the company to Osisko.
The second deposit will consist of C$20 million and will take place once Falco receives all necessary material third-party approvals, licenses, rights of way and surface rights.
A third deposit of C$35 million will follow the receipt of all material permits required for the construction of a mine, a positive construction decision for the project and the raising of a minimum of US$100 million in equity, joint venture or any other non-debt financing for construction of the mine.
A fourth deposit of C$60 million will be finalized when total projected capital expenditure for the project has been demonstrated to be financed.
Finally, there is an option for a fifth and final deposit of C$40 million at the sole election of Osisko in order to increase its stream percentage, payable concurrently with the fourth deposit.
Falco stated, “[u]nder the terms of the stream agreement, Osisko will purchase 90 percent of the payable silver from the project, increasing to 100 percent of the payable silver from the project in the event the optional fifth deposit is paid.”
The firm also said, “[i]n exchange for the silver delivered under the stream agreement, Osisko will pay the company ongoing payments equal to 20 percent of the spot price of silver on the day of delivery, subject to a maximum payment of US$6.00 per silver ounce. The silver produced from the project and properties within a 5 kilometer area of interest will be subject to the silver stream transaction.”
Additionally, Falco has agreed to pay a C$2-million capital commitment fee, which will be payable upon Osisko funding the third deposit under the stream agreement.
The transaction is expected to close in September of this year.
Horne 5 has a mine life of 15 years and contains an estimated 26.3 million ounces of payable silver. A process plant will be commissioned in the first half of 2021 and full mine production is slated for 2022.
“Over the past three years, the Falco team has been extremely active advancing the Horne 5 project to its current state. In 2018, the team’s efforts will continue to intensify as we strive to replicate the development success of the world-class Canadian Malartic mine,” noted Lessard.
On Tuesday (June 19), shares of Falco Resources closed down 3.45 percent at C$0.56.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.