In a Sept. 23 research note, iA Securities analyst George Topping reported that Barkerville Gold Mines Ltd. (BGM:TSX.V) agreed to sell to Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) the remaining Barkerville shares Osisko does not already own, for CA$338 million, or CA$0.58 per share fully diluted. Barkerville shareholders will receive about 0.0357 of a common share in Osisko Gold Royalties.
The analyst noted that iA Securities recommends Barkerville shareholders tender their shares to the offer or market and instead buy a Barkerville peer, such as Sabina Gold & Silver Corp. (SBB:TSX; RXC:FSE; SGSVF:OTCPK) or Probe Metals Inc. (PRB:TSX.V), for low-risk junior mining exposure. This is because post deal, the Osisko Group (Osisko Gold Royalties and Osisko Mining Inc. (OSK:TSX)) will own 48+% of Barkerville versus 32+% previously.
Topping pointed out, too, that Barkerville shareholders may find the transaction disappointing because they lose the direct exposure to Cariboo's future growth and because "the stock never reached its full potential under the weight of financing costs."
Accordingly, iA Securities revised its rating on Barkerville to Tender from Buy and lowered its target price to CA$0.58 per share from CA$0.95. The stock is currently trading at around CA$0.47 per share.
For Osisko Gold Royalties, the acquisition is accretive in the medium term, however, may alienate investors in the name solely for the royalties focus, Topping wrote. "The transaction represents a 44% premium to the company's trailing 20-day volume-weighted average price or a 26% premium based on Barkerville's Friday closing price of $0.46 per share."
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Disclosures from iA Securities, Barkerville Gold Mines Ltd., Research Update, September 23, 2019
Conflicts of Interest: The research analyst and or associates who prepared this report are compensated based upon (among other factors) the overall profitability of iA Securities, which may include the profitability of investment banking and related services. In the normal course of its business, iA Securities may provide financial advisory services for the issuers mentioned in this report. iA Securities may buy from or sell to customers the securities of issuers mentioned in this report on a principal basis.
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Company Related Disclosures:
Barkerville Gold Mines Ltd.: The analyst has visited the issuer’s operations. No payment or reimbursement was received from the issuer for the associated travel costs.
Osisko Gold Royalties Ltd.: The analyst has visited the issuer’s operations. No payment or reimbursement was received from the issuer for the associated travel costs.
Osisko Mining Inc.: In the past 12 months, Industrial Alliance Securities Inc. has managed or co-managed a public offering of securities for the issuer. The analyst has visited the issuer’s operations. No payment or reimbursement was received from the issuer for the associated travel costs.
Probe Metals Inc.The analyst has visited the issuer’s operations. No payment or reimbursement was received from the issuer for the associated travel costs.
Sabina Gold and Silver Corp.:In the past 12 months, Industrial Alliance Securities Inc. has managed or co-managed a public offering of securities for the issuer. The analyst has visited the issuer’s operations. No payment or reimbursement was received from the issuer for the associated travel costs.
