Future plansIf NFG develops, as seems likely, into a high value exploration development project, then it could become too costly to be a target for a single major.
In similar scenario, the take out of Osisko’s Canadian Malartic open pit project resulted in an interesting take over outcome, which included the consideration of :-
- Shares in Agnico & Yamana
- Cash
- “Spinco” – a new company which received a 5% royalty on the project’s gold output.
The 5% NSR enable the sale to take place by permitting the purchasers to reduce their initial cap outlay in shares and cash.
The Canadian Malartic 2020 cash costs are $723 and AISC of $1050.
If NFG were in a position to prove up an early open pit operation, at substantially lower costs than the ~ 2gt Canadian Malartic pit, then the scope for NFG requiring a substantially higher NSR, than the 5% payable by AEM and YRI would be possible. Therefore, why not a ~20% NSR, if the production grades prove to be high, as drilling indicates they could be.
A high royalty contribution, payable to NFG shareholders, would command a premium PE valuation, in contrast to a mining operation.
This is early days, but it will be interesting to determine whether the NFG directors will attempt to accelerate the development of a highly prospective part of the NFG property, in order to generate funds for future exploration and self-generated funding for gold production.
https://www.yamana.com/English/investors/news/news-details/2014/Yamana-Gold-and-Agnico-Eagle-Announce-a-Friendly-Acquisition-Agreement-With-Osisko-Mining-Corporation/default.aspx Yamana and Agnico Eagle will jointly acquire 100% of Osisko's issued and outstanding common shares for a total consideration of approximately C$3.9 billion or C$8.15 per share. The total offer consists of approximately C$1.0 billion in cash, approximately C$2.33 billion in Yamana and Agnico Eagle shares, and shares of a new company ("Spinco") with an implied value of approximately C$575 million.