Osisko gets $75 million financing

Societe generale de financement du Quebec will give Osisko Mining Corp. (OSK-T) $75 million in financing to further the development of the Canadian Malarctic gold project into a large-scale open pit, bulk tonnage operation.

The agreement in principle is for financing that is structured as a senior non-guaranteed debenture, convertible at the discretion of the SGF into Osisko shares at $9.18 per share.

The loan will carry an interest rate of 7.5% and the initial capital must be reimbursed by Dec. 15, 2014 — five years after the initial disbursement, which is expected before Dec. 15 this year.

“We don’t need the money right away,” Sean Roosen, Osisko’s president and chief executive said in a telephone interview. “We’d like to draw that down as soon as we get into construction.”

The terms of the deal – a 40% premium to the strike price – is also very competitive, he said. “It’s a very decent rate. This is an unheard of deal. We’re getting good deal terms compared with senior deal terms. This is unsecured so it’s a bit different. It gives us the room to work on other debt facilities.”

In order for the debenture to go ahead, Osisko must nail down an additional $225 million in financing. Osisko must also receive all the permits it needs to develop the project. 

According to Roosen, the final mining permit is close at hand, and “if all goes well we should be ready to pour concrete in mid-August.”

The company has $440 million in working capital but is trying to raise additional financing.

Currently it has 44.27 million warrants at an exercise price of $5.45 per share that will expire on Nov. 17, 2009. The exercise of these warrants will result in proceeds of an additional $241 million dollars to the Osisko treasury.

The project, which requires investment of $1 billion, is important for the Abitibi-Temiscamingue region and putting it into production will result in important economic benefits for the region and for Quebec, Roosen noted.

Canadian Malarctic, about 20 km west of Val-d’Or, in the heart of Quebec’s mineral-rich Abitibi belt, has proven and probable reserves 6.3 million ounces of gold.

At presstime Osisko was trading at $6.62 per share. The company has traded between $1.40 and $7.55 per share over the last year and has 260.7 million shares outstanding.