Osisko adds copper stream in Metals Acquisition’s billion-dollar Aussie deal 

Osisko Gold Royalties (TSX: OR; NYSE: OR) is offering Metals Acquisition (NYSE: MTAL.U) US$75 million in funding to help it purchase the CSA copper mine in Australia from Glencore (LSE: GLEN). 

Metals Acquisition will be able to draw on the US$75 million, which is from a copper stream on the mine, to help pay for its US$1.1 billion takeover of the site about 700 km northwest of Sydney, Osisko said in a news release. 

The copper stream is in addition to the silver stream Osisko agreed in March to buy from Metals Acquisition for US$90 million. That will be US$75 million in cash, depending on the silver spot price, plus US$15 million to buy shares in Metals Acquisition, according to revised terms of the agreement announced this week.

Glencore agreed to sell the mine in New South Wales state in March in terms that also included a US$50-million equity stake in Metals Acquisition and a 1.5% net smelter return on the life of the mine.

The refinancing gives Cayman Islands-based Metals Acquisition a firmer grip on purchasing one of Australia’s oldest producing copper mines as demand for the metal continues to accelerate not only in construction but in green technologies such as electric vehicle batteries. The CSA mine is to be the company’s primary asset so far after forming last year. 

Half-billion raised

Metals Acquisition has secured about US$500 million in debt and stream financing from international mine financiers including Osisko to complete the acquisition of CSA, Sandeep Singh, Osisko president and chief executive officer, said in his company’s release. 

“The silver stream and contingent backstop copper stream meet all of Osisko’s stringent investment criteria, and will provide near-term and long-life cash flows in a top-tier jurisdiction,” Singh said. 

The CSA mine has a multi-decade operating history of consistent production and a track-record of reserve and resource replacement, Singh said. 

The high-grade long-life underground copper-silver mine comes with with several mining and exploration leases on 350 sq. km. It was discovered in the 1870s and large-scale production began in the mid-1960s.

The details of the copper stream financing show Osisko gets no stream during the first year, but then 3% from the closing date’s first anniversary to the fifth, 4.875% after until 33,000 tonnes of copper have been delivered, then 2.25% for the remaining life of the mine.  

Mine deal amended

The silver stream for Osisko is all of the payable silver produced during the mine’s life against Osisko paying 4% of the spot silver price. The cost of the silver stream increases to US$90 million if the silver spot price is more than US$25.50 per oz. over the 10 business days immediately before the mine sale closes.

The mine produced about 431,000 oz. payable silver and 43,000 tonnes copper annually from 2019 to 2021. 

Last month Glencore and Metals Acquisition amended the details of the mine purchase. They said at least US$775 million is to be in cash with the potential to be scaled up to US$875 million.

As well, Glencore retains as much as US$100 million equity in the business; US$75 million in cash can be deferred until Metals Acquisition raises cash in equity offerings on the stock market; and US$150 million in cash can be structured as two contingent payments of US$75 million each if copper attains certain prices. 

Shares in Osisko Gold Royalties added 7¢ in Thursday afternoon trading in Toronto to $16.50, in a 52-week range of $11.90 and $18.59, valuing the company at $3.03 billion. 

Shares in Metals Acquisition rose US4¢ to US$10.03, in a 52-week range of US$9.57 and US$10.15, valuing the company at US$266 million.

Glencore closed 3.8% lower in London on Thursday at 555.87 pence, within a 52-week trading range of 573.35 pence and 571.9 pence, valuing the company at £71.3 billion.