Regulus Resources (TSXV: REG; US-OTC: RGLSF) and Osisko Gold Royalties (TSX: OR; NYSE: OR) have announced a strategic partnership that grants Osisko rights on existing royalties covering claims on Regulus’ AntaKori copper-gold-silver project in Peru for an upfront cash payment of US$12.5 million.
“Through this investment we have a unique opportunity to gain exposure to one of the largest and highest grade undeveloped copper-gold projects in the world, located in a premier jurisdiction, and to work with a management team with a proven track record of delivering world-class projects,” Sean Roosen, Osisko’s chairman and CEO, said in a statement.
AntaKori consists of 18 mining concessions stretching across 2.2 sq. km, about 53 km northwest of Cajamarca and 620 km northwest of Lima. The project is adjacent to two operating mines: Gold Fields’ (NYSE: GFI) Cerro Corona gold-copper mine and the Tantahuatay gold mine owned by Compania Minera Coimolache S.A.
The AntaKori project contains 2.6 billion lb. copper, 2.3 million oz. gold and 61 million contained oz. silver within 250 million indicated tonnes grading 0.48% copper, 0.29 gram gold per tonne, and 7.5 grams silver per tonne.
Inferred resources add a further 2.4 billion lb. copper, 2.2 million oz. gold and 67 million oz. silver in 267 million tonnes grading 0.41% copper, 0.26 gram gold per tonne, and 7.8 grams silver per tonne.
The resource estimate is based on 17,000 metres of historical drilling and 23,000 metres Regulus drilled in its Phase I drill program.
Under the partnership agreement, if Regulus acquires any existing royalties within the current project area or within a 1 km area surrounding the project on its wholly owned claims, Osisko will have the option to acquire 50% of the royalty by paying 75% of the amount Regulus paid for the royalty.
Osisko also has the right of first refusal on all future royalty or stream transactions to claims on AntaKori, where Regulus has 100% ownership or any additional claims Regulus might acquire with 100% ownership within the current project area or within a 1 km area of interest surrounding the project.
Should Regulus receive a royalty or stream as consideration for the sale of AntaKori, Osisko will have the right of first refusal should Regulus later chooses to sell that royalty or stream.
Additionally, Regulus will issue to Osisko 5.5 million warrants having a term of three years and an exercise price of $2.25 per share, representing a 48% premium to the volume-weighted average price of Regulus’ shares over the 20-trading day period ended Sept. 30, 2020.
“Osisko has a track record of being able to identify high-quality assets, and their investment in AntaKori provides a strong endorsement of our vision for the future development of the project,” John Black, Regulus’ CEO, said in a statement.
“Through this transaction we have been able to reduce outstanding royalties on the AntaKori project, thereby improving the overall value of the project, while at the same time raising a significant sum of money. Additionally, we will continue to look for opportunities to acquire outstanding royalties with our partner.”
Under the partnership’s first transaction, Regulus has acquired a royalty from a private vendor on the project’s Mina Volare claim, which represents a 1.5% or 3% net smelter royalty return depending on location.
Osisko has elected to acquire 50% of the royalty for 75% of Regulus’ purchase price, with Osisko’s acquisition cost for the royalty included in the upfront payment. Regulus retired the remaining 50% of the royalty with the royalty on the Mina Volare claim reduced to a 0.75% or 1.5% depending on location, in favour of Osisko.
The Mina Volare claim contains about 75% of the indicated resources and about 50% of the inferred resources within AntaKori, Regulus said.
The company has completed 16,358 metres of a planned 25,000-metre Phase II drill program. The program was suspended earlier this year due to the Covid-19 pandemic.
“We are now fully financed to complete our Phase II drill program which will restart shortly,” Black said. “We are mobilizing rigs and expect to commence drilling in the coming week.”
At press time in Toronto, Regulus was trading at $1.68 per share within a 52-week trading range of 47¢ and $1.74. The company has roughly 102 million common shares outstanding for a $171-million market capitalization.