(Reuters) - Osisko Gold Royalties Ltd <OR.TO said it would buy royalty company Virginia Mines Inc VGQ.TO for about C$479 million ($424 million) to create a company valued at C$1.3 billion.
Osisko said its all-stock offer was worth C$14.19 per Virginia Mines share, representing a 41 percent premium to the stock’s close on Friday.
Under the deal, each Virginia share will be exchanged for 0.92 Osisko shares.
The combined company would be owned 61 percent by Osisko, the companies said in a statement on Monday.
Osisko has a 5 percent of net smelter return (NSR) royalty from the 525,000 ounce-per-year Malartic gold mine in Quebec.
Virginia has a 2.2-3.5 percent NSR royalty from production at the Eleonore gold mine in Quebec.
Output from the Eleonore mine, which started production in October, is expected to increase to 600,000 ounces annually by 2018, the companies said.
Osisko’s financial adviser was Maxit Capital LP, while Macquarie Capital Markets Canada Ltd was its strategic adviser. Legal counsels were Bennett Jones LLP and Lavery de Billy LLP.
BMO Capital Markets advised Virginia. Xplora Mines SA also advised the company, with the support of McCarthy Tetrault LLP.
Reporting By Shubhankar Chakravorty in Bangalore; Editing by Savio D'Souza and Ted Kerr