Osisko Development Secures US$50 Million Funding to Commence Underground Development at Cariboo Gold Project
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Insights
Osisko Development Corp.'s recent acquisition of a US$50 million credit facility is a strategic move to finance its Cariboo Gold Project. The terms of the credit, including the interest rates and the maturity date, indicate a relatively short-term financing solution, which suggests a focus on near-term development rather than long-term capital structure. The non-dilutive nature of the facility is favorable for current shareholders as it avoids the potential for share value dilution that equity financing could cause.
The company's commitment to maintaining a tangible net worth of at least C$500 million and liquidity of C$25 million underscores a strong financial covenant that could reassure investors of Osisko's financial health. However, the incremental interest rate increase every 90 days could pressure the company to expedite its development process or refinance the loan to prevent rising interest costs. This could impact the company's financial flexibility, especially if project timelines are delayed or if there are cost overruns.
The Cariboo Gold Project's advancement through the funding of detailed engineering and pre-construction activities is a critical step in the mining lifecycle. The decision to begin underground development is indicative of the project's progress and the company's confidence in the orebody's potential. The use of roadheader and ore sorter technologies could enhance operational efficiency and ore processing, potentially reducing costs and environmental impact.
However, the reliance on the anticipated receipt of permits in Q2 2024 introduces a regulatory risk factor. Any delays in permitting could affect the project's timeline and, subsequently, the company's ability to meet its financial obligations under the credit facility. Furthermore, the specific allocation of funds toward the Cariboo Project, rather than the Tintic Project, reflects strategic capital allocation, which could yield significant returns if the Cariboo orebody proves to be as productive as expected.
Osisko Development Corp.'s securing of a US$50 million credit facility is a signal to the market of the company's growth trajectory and the potential of the Cariboo Gold Project. The financial terms and conditions, including the ticking fee and duration fees, are not uncommon in the industry but do place a time-bound financial burden on the company, incentivizing timely project advancement. The market's response to this news will likely hinge on Osisko's ability to adhere to its development timeline and on gold market dynamics, as the project's value is intrinsically linked to commodity prices.
Investors may view the partnership with National Bank of Canada as a vote of confidence in Osisko's management and project viability. However, it is essential to monitor commodity price fluctuations, as a downturn in gold prices could adversely affect the project's profitability and Osisko's ability to service the debt. The project's success and the company's financial performance are pivotal in influencing investor sentiment and the stock's performance.
MONTREAL, March 04, 2024 (GLOBE NEWSWIRE) -- Osisko Development Corp. (NYSE: ODV, TSXV: ODV) ("Osisko Development" or the "Company") is pleased to announce the Company has entered into a credit agreement with National Bank of Canada (the "Lender") providing for a US
The Credit Facility will be exclusively used to fund ongoing detailed engineering and pre-construction activities at the Company's
Sean Roosen, Chairman and CEO, commented, "We are very pleased to secure funding that will enable us to commence the development of a 1.2 kilometer underground drift at Cariboo and advance important design and engineering work ahead of the anticipated receipt of permits in Q2 2024. Completing this work is a significant step in further de-risking the Project ahead of a construction decision by accessing the orebody and demonstrating the performance of the roadheader and ore sorter technologies, while we continue to progress toward sourcing a fully-funded solution for the Project. Importantly, this facility is non-dilutive with no early repayment penalties, and provides us with financial flexibility to refinance the facility prior to maturity. We appreciate National Bank's strong support towards our vision of building Canada's next gold mining district at Cariboo. Although the facility does not extend to our Tintic Project, it provides for more efficient capital allocation of our existing cash resources as we advance our ongoing porphyry drilling efforts and exploration of epithermal gold targets at Tintic."
KEY TERMS OF THE CREDIT FACILITY
- Credit Limit: US
$50 million . - Term & Maturity Date: 12 months from the closing date, being March 1, 2025, which may be extended, at the Lender's sole and absolute discretion, to August 1, 2025, upon written request by the Company at any time between December 1, 2024, and February 1, 2025 (the "Maturity Date").
- Repayment: The full outstanding credit under the Credit Facility, and all accrued and unpaid interest thereon, shall be repaid on the Maturity Date.
- Interest rate: The draws made under the Credit Facility can be by way of a base rate loan or a term benchmark loan, on which differing interest rate will apply. Interest will be payable on the outstanding principal amount at a rate per annum equal to the following, provided that each such rate shall be increased by
0.50% per annum each 90 days following March 1, 2024:- For a Base Rate Loan: the greater of (i) the federal funds effective rate plus
0.50% and (ii) the National Bank variable rate of interest for United States dollar loans in Canada, plus (iii)4.00% per annum. - For a Term Benchmark Loan: (i) the Secured Overnight Financing Rate ("SOFR"); plus (ii) an additional
0.10% /0.15% /0.25% per annum for one / three / six month draws, respectively, plus (iii)5.00% per annum.
- For a Base Rate Loan: the greater of (i) the federal funds effective rate plus
- Voluntary Prepayments: Subject to the terms and conditions of the credit agreement, the Company may prepay the outstanding loans under the Credit Facility at any time, subject to a minimum prepayment amount of US
$1 million . - Mandatory Prepayments: Mandatory prepayments are required in certain events, including in the case of asset dispositions, debt incurrence and equity raises, for which
100% of the net cash proceeds must be prepaid and a change of control, for which all of the obligations under the Credit Facility must be prepaid. - Security: The obligations under Credit Facility are guaranteed by the Company and secured by a first-ranking security interest against all of the present and future assets and property of Barkerville and the shares of Barkerville as held by the Company.
- Representations, Warranties and Covenants: The credit agreement contains terms and conditions with respect to the Credit Facility customary for a transaction of this nature, including representations, warranties, borrower covenants, permitted liens and indebtedness, assignment rights and events of default. Specifically, the Company covenants to maintain its tangible net worth (being shareholders' equity less goodwill and intangible assets) to be at least C
$500 million as calculated as at the last day of each fiscal quarter and the Company and Barkerville, on a consolidated basis, shall maintain liquidity (being all unrestricted cash plus available credit under the Credit Facility) of at least C$25 million as of the last day of each fiscal quarter. - Fees: In connection with the Credit Facility and National Bank’s services, the Company agreed to pay the following fees to National Bank: (a) an upfront fee of
2.00% per annum on the principal amount, which has been paid in full; (b) a ticking fee equal to1.00% of the committed principal amount of the Credit Facility, calculated on annualized basis, accruing daily commencing 30 days from the December 20, 2023 until January 31, 2024, which amount has been paid in full by the Company; and (c) duration fees of: (i)0.75% of the committed principal amount, payable as of May 30, 2024 if the Credit Facility remains outstanding on such date; (ii)1.00% of committed principal amount, payable as of August 28, 2024 if the Credit Facility remains outstanding on such date; and (iii)1.25% of committed amount, payable as of November 26, 2024 if the Credit Facility remains outstanding on such date.
The summary of the key terms of the Credit Facility above is qualified in its entirety by the full text of the Credit Agreement, a copy of which will be available on SEDAR+ (www.sedarplus.ca) under the Company's issuer profile.
ABOUT OSISKO DEVELOPMENT CORP.
Osisko Development Corp. is a North American gold development company focused on past-producing mining camps located in mining friendly jurisdictions with district scale potential. The Company's objective is to become an intermediate gold producer by advancing its
For further information, visit our website at www.osiskodev.com or contact:
| Sean Roosen | Philip Rabenok |
| Chairman and CEO | Director, Investor Relations |
| Email: sroosen@osiskodev.com | Email: prabenok@osiskodev.com |
| Tel: +1 (514) 940-0685 | Tel: +1 (437) 423-3644 |
CAUTION REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained in this news release may be deemed "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation (together, "forward-looking statements"). These forward-looking statements, by their nature, require Osisko Development to make certain assumptions and necessarily involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements. Forward-looking statements are not guarantees of performance. Words such as "may", "will", "would", "could", "expect", "believe", "plan", "anticipate", "intend", "estimate", "continue", or the negative or comparable terminology, as well as terms usually used in the future and the conditional, are intended to identify forward-looking statements. Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including the assumptions, qualifications and limitations relating to advancement and development of the Cariboo Gold Project, the use of proceeds of the funds drawn down from the Credit Facility, the impact of the Credit Facility on the Company and its financial position and allocation, the contemplated work plan and activities at the Cariboo Gold Project and the scope thereof and associated costs thereto, the ability of the Company to receive permits in the timing contemplated (if at all), the ability of the Company to build the next gold mining district at Cariboo, the ability to reach a construction decision in respect of the Cariboo Gold Project and the timing thereof (if at all), the impact and performance of roadheader and ore sorter technologies and the ability of the Company to fulfill the conditions for drawdowns under the Credit Facility. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements, including risks associated with fulfilling the conditions to a drawdown under the Credit Facility; the ability of the Company to comply with covenants under the Credit Facility; risks related to exploration and potential development of the Cariboo Gold Project; the accuracy of the estimated costs for the development activities at the Cariboo Gold Project and risks relating to cost overruns; risks relating to performance of technologies deployed at the Cariboo Gold Project; the ability to seek additional funding for the Cariboo Gold Project and the Tintic Project; business and economic conditions in the mining industry generally; fluctuations in commodity prices and currency exchange rates; uncertainties relating to interpretation of drill results and the geology, continuity and grade of mineral deposits; the issuance of required permits within the timeframe contemplated; regulatory framework and presence of laws and regulations that may impose restrictions on mining; the need to obtain additional financing to develop properties and uncertainty as to the availability and terms of future financing; and other risk factors facing the Company as disclosed in the Company's most recent annual information form, financial statement and management's discussion and analysis as well as other public filings on SEDAR+ (www.sedarplus.ca) and SEC's EDGAR website (www.sec.gov) under the Company's issuer profile.
Although the Company's believes the expectations conveyed by the forward-looking statements are reasonable based on information available as of the date hereof, no assurances can be given as to future results, levels of activity and achievements. The Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by law. Forward-looking statements are not guarantees of performance and there can be no assurance that these forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.
FAQ
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