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Bullboard - Stock Discussion Forum Alexandria Minerals Corp ALXDF

Alexandria Minerals Corp is a Canadian based gold exploration and development company. Its project consists of Orenada, Akasaba, Sleepy, Manitoba and Ontario properties together with the Other Quebec properties. It is mainly focused on exploring the cadillac break property which is located in Val-d'Or, Quebec. The cadillac break property consists of approximately 21 contiguous projects of over... see more

GREY:ALXDF - Post Discussion

Alexandria Minerals Corp > Bad News PRB Investors, Why I Now Think Osisko is the One
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Post by NextPhase on Feb 27, 2018 6:35pm

Bad News PRB Investors, Why I Now Think Osisko is the One

Hey all,

While digging for more information on historical drill results for Orenada, I was instantly sidetracked after seeing the following headline on my google search from June 2017: 

GENESIS METELS RAISES C$4M, WELCOMES ERIC SPROTT AND OSISKO MINING AS SIGNIFICANT SHAREHOLDERS, DRILLING AT CHEVRIER STARTS IN JULY.

Link: https://www.criticalinvestor.eu/analysis/gold/genesis-metals-raises-c4m-welcomes-eric-sprott-and-osisko-mining-significant 

So, not a huge deal, because that could easily be a random coincidence, where two investing entities see the same potential in the same company. However, this hint of collaboration was enough for me to search on both Osisko and Sprott together, and these results are much more interesting. :-)

Barkerville Gold Mines Announces Sale of Shares by Controlling Shareholder to Osisko Mining Corp.

TORONTO, ON – August 9, 2016 –Barkerville Gold Mines Ltd. (TSXV: BGM) (the “Company”) announces that 2176423 Ontario Ltd., a company controlled by Eric Sprott, the controlling shareholder of the Company (“2176423”), has entered into an agreement with Osisko Mining Inc. (“Osisko”), pursuant to which it will sell an aggregate of 50,000,000 common shares of the Company (the “Barkerville Shares”) representing approximately 17% of the outstanding Barkerville Shares. 2176423 agreed to sell 25,000,000 Barkerville Shares in exchange for 8,097,166 common shares of Osisko. 2176423 further agreed to sell the remaining 25,000,000 Barkerville Shares for an aggregate purchase price of $20,000,000, payable in cash. The Barkerville Shares were acquired by Osisko at a price of $0.80 per Barkerville Share.


An important difference between the Barkerville and Alexandria situations exist. Prior to this deal between Sprott and Osisko, on July 9, 2015 Eric Sprott essentially took over Barkerville Gold on a debt-to-equity conversion. Since Alexandria has almost no debt, IMO, it's still unlikely ES could dramatically increase his ownership of AZX this quickly without seeing people noticing. Either way, I see significant resistance to an unfriendly deal, especially without a nice premium to the market cap after the upcoming resource estimate.

Even with this worst-case scenario of a hostile takeover, Barkerville Gold saw its share price increase from ~0.26, when ES first filed an Early Warning Report in March 2015, to ~0.70 after Eric Sprott’s debt-to-equity swap was announced. After being brought into the Osisko sphere, Barkerville was able to raise $15.8 million at 0.95 per share from Osisko Royalties. Although the share prices eventually pulled back to 0.48-0.5 range in early 2017, the share price almost tripled to a high of $1.39 in May 2017. BGM's share price since then has drifted back to the 0.6 level, but long-term shareholders, who purchased shares at any time in 2015, had plenty of opportunity to cash out at 4 or 5 to 1.

Next I found a video of Rick Rule gushing over Osisko's exploration team. https://www.bnn.ca/video/rick-rule-discusses-osisko-mining~1122734 The exploration team is led by Sean Roosen, CEO and BoD Chair for Osisko. Gold Royalties and BoD Chair for Osisko Mining.

The company describes itself as the leading Canadian Gold Exploration and Development Company, and their vision seems to be a gold streamer that can also drill. They simply want to match talent and capital with exploration properties in safe districts.

…and they seem to be aggressive to accomplish this vision. Looking at their latest MDA, the word “acquisition” was mentioned 63 times! Here is how they describe their business model and strategy:

Business Model and Strategy The Company’s objective is to maximize returns for its shareholders by growing its asset base, both organically and through accretive acquisitions of precious metal and other high-quality royalties, streams and similar interests, and by returning capital to its shareholders by dividend payments. The Company believes it can achieve this by putting its team’s strong technical expertise to work seeking out high margin growth opportunities that provide exposure to the upside of commodity prices and optionality of mineral reserve growth and new discoveries. Osisko’s main focus is on high quality gold assets located in favourable jurisdictions and operated by established mining companies, as these assets are expected to support a premium valuation in the marketplace. The Company will also evaluate opportunities in other commodities and jurisdictions. Given that a core aspect of the Company’s business is the ability to compete for investment opportunities, Osisko plans to maintain a strong balance sheet and ability to deploy capital. The Company may also invest or maintain investments in gold bullion as part of its overall treasury management, through the acquisition of gold bullion on the market or through holding in-kind royalties received.


Now Alexandria isn’t an established mining company, but the unproven companies just get dumped into the “accelerator” model. What is the accelerator model? Here are the bullet points they provided:
 
  • Leverage Osisko Group’s solid experience in exploration, engineering, construction & financing to advance projects on which Osisko owns royalties or royalty options
  • Support accelerator companies at board level and key management roles
  • Maintain key shareholder position to drive further benefits to Osisko Gold Royalties
  • Tax efficient way of deploying capital as investments in flow-through shares shelter royalty income
If Osisko is indeed the suitor, then my main question is how they will treat Alexandria. Will it be another company within the accelerator model or will they break up its properties with hammer to feed these different companies in different ways. Personally, I think the second scenario is more likely, and Osisko Royalties simply provides financing in exchange for royalties. 

What are these accelerator companies? Well oddly enough, the first two are Osisko Mining and Osisko Metals. In addition to Osisko branded companies, Barkerville Gold and Falco Resources fall under this umbrella and influence. Don’t let these different names fool you, these are essentially the same company with different focuses. Osisko’s royalty arm could easily finance the exploration activity associated with its unique “accelerator” model, especially for both Osisko Mining and Osisko Metals.

Currently, Osisko Mining’s main focus is Windfall, a gold project located in the same region of Quebec but around 125 km northwest from Val-d’Or. This project is nearing a new PEA in June 2018 and construction in 2019.

Originally, the first Osisko Mining’s flagship property was Malartic mine, which was previously acquired by Agnico-Eagle (wink wink) and Yamana with much fanfare in 2014. The deal was for $3.53 billion, which had turned into a bidding war from efforts by Agnico Eagle blocking a Goldcorp hostile takeover. So, it’s safe to say they are familiar with the region and with Agnico Eagle. Osisko Royalties maintains a 5% stream on Malartic, which remains its key assets. Agnico Eagle could support this deal, because they see Osisko able to move Alexandria’s properties from early-stage exploration to preproduction more quickly competently.

After reading the highlights of Osisko Mining, it’s clear Alexandria would be a good fit for their strategy, (found in their corporate presentation).
  • Osisko is focused on a clear strategy of consolidation in the Abitibi
  • Target M&A opportunities review
  • Osisko is focused on pursuing a path to become an intermediate producer in the near future (3 years)
  • Drill test targets rapidly, advance or divest the rest

Here is Osisko Mining’s About Us

Osisko is a mineral exploration company focused on the acquisition, exploration, and development of precious metal resource properties in Canada. Osisko holds a 100% in the high-grade Windfall Lake gold deposit located between Val-d'Or and Chibougamau in Qubec and holds a 100% undivided interest in a large area of claims in the surrounding Urban Barry area (82,400 hectares), a 100% interest in the Marban project located in the heart of Qubec's prolific Abitibi gold mining district, and properties in the Larder Lake Mining Division in northeast Ontario, including the Jonpol and Garrcon deposits on the Garrison property, the Buffonta past producing mine and the Gold Pike mine property. The Corporation also holds interests and options in a number of additional properties in northern Ontario. Osisko continues to be well financed with approximately $190 million in cash and investments.
 

On slide 8 of their corporate presentation, they list Cadillac-Malartic in Val-d’Or’ their main focus for an “Emerging Mining District”.on their exploration programs. Outside of Windfall, the company’s main preoccupation is with Marban Block, which is just west of Val-d’Or’s city limits.

Does Osisko have interests in Val-d’Or outside of this lone property, and are they aware of Alexandria Minerals? You bet! After Osisko acquired Niogold, Osisko Mining shares a 50/50 claim on Siscoe East with Alexandria Minerals, and after Osisko Royalties acquired Orion Royalties, Osisko gained an 1.7% NSR on Lamaque (a project previously owned by Integra, now by El Dorado). In addition, Osisko Royalties maintains dozens of agreements in Quebec with companies both inside and outside their influence, and at least seven deals near Val-d’Or alone.

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One of the main questions Alexandria investors have grappled with is: who could want such a diversified and spread out property package? We assumed the acquirer would want to sell these non-core properties to raise cash, allowing them to focus on Orenada moving forward. Surprisingly, Alexandria’s diversified and spread out property package fits the Osisko model perfectly.


How do I know this? Let’s start talking about Osisko Metals. What is the main goal of Osisko Metals? To gain a crazy amount of properties with zinc, lead, and copper. What does Wim and Hudvam have oodles of? That’s right, zinc and copper.

Osisko Metals is “seizing the momentum in the base metal sector to create shareholder value”, and it already controls Canada’s top two zinc camps: Bathurst Mining Camp and Pine Point Camp. In addition, it’s “selectively advancing perspective Quebec GenEx grassroots projects creating blue-sky opportunity”. They brag to have the “ability to rapidly advance projects thanks to its synergy with the other Osisko entities, where they have access to experience and technical expertise.

More importantly, Osisko Metals consider themselves “well-funded to develop resources and to continue to seize opportunities”.  They have roughly $38 million in cash (from their most recent presentation). It seems like Osisko Metals might be even more excited about Alexandria’s properties in Manitoba than the rest of the company would be for Orenada. By May 2017, Osisko Metals acquired 12 zinc properties in Quebec alone. They continue to be aggressive, because they see lagging mine supply to lift zinc prices with a supply crunch over the next decade, which they say is already impacting global inventories.

To further make this case, I found more excerpts from an article on mining.com, “Osisko's hybrid model could be the future of gold streaming”, and based on these quotes, Alexandria Minerals would seem to fit their business model.

Osisko believes in the hybrid streaming model:

“It’s a sustainable growth plan in terms of us being able to get in and provide both technical and financial wherewithal to put assets to work.”

Osisko is focusing on small deals:

“plenty of opportunity still exists in the space. “In terms of our size deals from zero to $200m or $200m – $500m still present tremendous opportunity for us.”

Osisko loves its accelerator business, which occupies 25% of its Osisko Royalties’ business.

“We’ve had good acceptance of our accelerator model. We match up management teams and assets under the Osisko umbrella, creating new companies like Osisko Mining, Barkerville Gold and Falco Resources.”

I'm still trying to figure how this partnership between Osisko and Eric Sprott / Sprott Asset Management works, but IMO, there seems to be something here.

...hmm, this seems like a match to me, what do you all think? I will continue to dig into this connection.

NP

Disclosure: I own AZX, this is not financial advice, do your own DD.

Comment by RYUcan on Feb 27, 2018 8:52pm
Well done NP! Dam that's some scary amount of digging. Are you sure Probe is out though? Osisko and Sprott might just put PRB and AZX together and put DP in charge then they will focus on the other properties? Would this be within their strategic capabilities? JMO
Comment by NextPhase on Feb 28, 2018 11:23am
No, I think a deal with Probe Metals is still a possibility, and you could make a decent case for Osisko, Probe Metals, or El Dorado to have serious interest in taking over Alexandria Minerals. The case for Probe Metals acquiring AZX is they would drastically increase their property size on the cheap. We suspect Alexandria's assets under Probe's management would be readjusted higher to ...more  
Comment by goldhunter11 on Feb 28, 2018 10:36am
NP, Good observation. Osisko empire is lurking around the corner as well. The three Osisko companies are intertwined, just like triplets joining at the hips. - True, Osisko Metals can take care of the orphan (copper) properties in Manitoba. - Osisko Mining is very active and perhaps too busy with Windfall to do any exploration on new grounds. - Osisko Royalty, is usually royalty collecting company ...more  
Comment by RYUcan on Feb 28, 2018 11:18am
Good post GH, this seems like the most likely of all the outcomes to me. Make it a 4way, Sprott will definitely have his hand in it, but how much? JMO
Comment by NextPhase on Feb 28, 2018 11:44am
RYUcan, This is the main question I have. Although Eric Sprott and Osisko clearly have a history from their deals in the past, the specific details of their partnership remain unknown to me. Outside of caring about how all of this new information affects our investments as AZX shareholders, I am genuinely interested in how Osisko and ES would structure a deal to takeover Alexandria. NP
Comment by goldhunter11 on Feb 28, 2018 12:22pm
RYUcan, Without saying ES will be in there to make this 3-way marriage happen. The 3-way marriage means the merging of the 3 companies PRB, QMX and AZX with PRB is the surving entity (the consolidator). It would absorp the other 2, via share exchanges and some asset transfer. ES and the Osisko empire would act as facilitators and benefactors. This is how it could be done: - OSK: would  stay ...more  
Comment by NextPhase on Feb 28, 2018 1:03pm
Outside of this lack of activity in 2017, it seems like OSK still considers the Marban Block Project an important part of their future. NP
Comment by goldhunter11 on Feb 28, 2018 3:51pm
NP, I should have added Marban Block and Siscoe East along with Windfall to make it more precise. But, the main reason for OSK to stay out of this is beacause they are too busy with their own things, especially Windfall. The number drills, exploration budget for Windfall and OSK short-term plan for this project, as shown in the Corp Presentation slide 19  (updated RE, PEA, Feasibility Study, ...more  
Comment by NextPhase on Feb 28, 2018 4:02pm
Yeah, everything with Osisko seems really interesting. Surprisingly, OSK and OR are near their 52 week lows, and their investors seem a bit grumpy and disgruntled about things. :-) Apparently, they are also late on an expected resource estimate... at least that's what I gather from the chatter I have seen. NP
Comment by Currower on Feb 28, 2018 5:45pm
Osisko is a valid possibility although they are more interested in the Gladiator deposit adjacent to Windfall. Nothing would stop Roosen from doing this deal with his friend Sprott's help. Do sharks have friends? I digress. I hope Agnico or KL or Osisko take it. Anything but Eldorado. I don't want to sell after a deal again like the Tahoe Lakeshore fiasco. I think we are in a Mexican ...more  
Comment by NextPhase on Feb 28, 2018 6:01pm
Yeah, I think this is basically GH's point. They may just consolidate both regions under different companies, so they can focus on their respective operations. I do know that Osisko Royalties is in buy-mode, because I *think* their Brucejack deal is expected to be bought out, and they need to replace that income. I agree that ELD is still not ideal, but I also don't think we would have ...more  
Comment by brandy2000 on Mar 03, 2018 7:06pm
So NP how would you know the mood of OSK shareholders and for that mater who cares. That comment would register well in an audience of just about every other Canadian gold junior. The recent distractions of AZX are a useless bit of insider fighting that has flung nearly 30% off the recent high. Earth shaking by EO at the wrong time farted all over this puppy. From this guys review mirror all that ...more  
Comment by easycoder on Mar 03, 2018 10:40pm
This post has been removed in accordance with Community Policy
Comment by brandy2000 on Mar 04, 2018 8:52am
Easycoder -  here is your song sheet https://www.cipherresearch.com/reports/151125_The-Importance-of-Being-Earnest-Valuing-Advanced-Gold-Explorers-and-Developers.pdf
Comment by nelson11 on Mar 04, 2018 12:42pm
Brandy2000- Thanks for link interesting-internal link also of interest attached https://www.cipherresearch.com/reports/150601_The-Real-Value-of-Gold-in-the-Ground.pdf nel
Comment by RYUcan on Feb 28, 2018 1:10pm
Yes I agree GH, just structuring at this point. AEM might want to increase their holdings in the area to position themselves nicely for a takeover in 2-2.5 years. JMO. Thanks for the feedback, I am not as competent on the DD as most on this board. RYUcan.
Comment by NextPhase on Feb 28, 2018 11:31am
GH, This scenario would add value to all parties, which is an important first step. It would be interesting to find out if PRB would be willing to operate under the umbrella of Osisko, and if Osisko is content with PRB's team to drill the Val-d'Or area without interfering outside of the royalties. I think it's clear this area will be consolidated soon, but the main question is how ...more  
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