* Offer of C$6.00 per share at 20 pct premium
* Osisko sets sights on Queenston's Upper Beaver project
* Osisko says acquisition to add 16 pct to its global
* Queenston shares jump 15 percent
By Bhaswati Mukhopadhyay and Euan Rocha
Nov 12 Canadian gold miner Osisko Mining Corp
will buy Queenston Mining Inc for about C$550
million ($549 million) on a fully diluted basis to gain access
to the Upper Beaver project in Ontario's Kirkland Lake region.
Queenston owns one of the largest land parcels around the
Kirkland Lake. Its holdings include over half-a-dozen past
producing gold mines such as Upper Beaver, Upper Canada,
Sylvanite and Golden Gate, which produced over 3.5 million
ounces between 1913 and the mid-1980s, historical records show.
"We thought the opportunity was now ... we saw it (Upper
Beaver) as a strategic asset," Osisko Chief Executive Sean
Roosen said on a conference call.
The Upper Beaver project, which has a relatively low capital
exposure, has necessary permit to begin advanced exploration and
is expected to go into production in 2016, Roosen said.
Upper Beaver is expected to produce 1.1 million ounces of
gold at an average rate of 120,000 ounces annually over a
10-year mine life, according to a preliminary economic
assessment conducted in February.
Osisko, which has more than 10.7 million ounces in reserves
at its flagship Canadian Malartic project, said the acquisition
will add about 16 percent to its global resources.
Analysts said there is a possibility of rival bids due to
Queenston's large prospective land position in a politically
stable, mining-friendly jurisdiction.
"We place the probability of a separate takeover offer at 25
percent," analyst Adam Melnyk of Desjardins Capital Markets said
in a note to clients.
Stifel Nicolaus analyst Craig Stanley said though a
competing bid was unlikely, companies that could be interested
include Gold Fields Ltd, Agnico-Eagle Mines Ltd
and AuRico Gold.
Agnico-Eagle owns 9.21 percent of Queenston's shares,
according to Thomson Reuters data.
Holders of about 30 percent of Queenston shares have agreed
to vote in favor of the deal, but the companies did not disclose
if Agnico had agreed to lock up its shares.
AuRico last year acquired Northgate Minerals, which owned
the Young-Davidson project in Matachewan, 60 km (38 miles) west
of Kirkland Lake.
Montreal-based Osisko's stock fell as much as 8 percent to
C$9.08 on the Toronto Stock Exchange, while Queenston's shares
jumped 15 percent to C$5.74.
Shares of Kirkland Lake Gold, which also owns
projects in the area, rose 3 percent on Monday.
The Kirkland Lake properties currently have 2.1 million
ounces of gold in the indicated category and 1.9 million ounces
in the inferred category, the companies said.
Gold was discovered in Kirkland Lake around 1911. The seven
mines along the town's main strip produced over 24 million
ounces of gold between 1911 and the 1990s, making it one of the
most prolific gold mining camps in Canadian history and earning
the town the sobriquet of the "mile of gold".
Osisko said Queenston shareholders will receive 0.611 of an
Osisko share for each Queenston share held. The offer of C$6.00
per share represents a premium of 20 percent to Queenston's
Friday close of C$5.01.
The deal is valued at C$507.6 million based on 84.6 million
Queenston shares outstanding as of Nov. 6, according to Thomson
The deal, which includes a C$22 million break fee to Osisko,
will add to the company's net asset value per share and
longer-term production and cash flow per share.
Dundee Capital Markets and Primary Capital advised Osisko,
while BMO Capital Markets was Queenston's financial adviser.