Abitibi Company Belts Osisko With Injunction

Thom Calandra |

MONTREAL -- A Quebec prospector just filed an injunction against Canada's largest gold miner, which is in the process of merging with two other miners.

The partner in joint venture CHL Malartic in Quebec filed the inunction today (Friday)

Abitibi Royalties filed the action against its partner, Osisko Mining

Abitibi ($RZZ:CA) ($ATBYF) says it is enforcing its contractual rights with Osisko Mining ($OSK:CA), which is holding its annual gathering for shareholders today in Montreal.

This legal action follows our TCR distribution of material showing what appears to be an Osisko flowchart with no mention of an Abitibi Royalties joint venture at CHL Malartic.

Abitibi Royalties and Golden Valley Mines CEO Glenn Mullan tells us from Quebec, Canada, Friday, that the legal action is not a comment on Osisko's plans to merge with Agnico-Eagle ($AEM) and Yamana Gold ($AUY).

"This protects our shareholders. Today was a Quebec deadline for filing the injunction," Mr. Mullan says.

Abitibi Royalties has a pact with Osisko that involves what Mr. Mullan says is a net smelter return and a 30 percent carried interest on properties near Quebec's Malartic, which is Canada's largest producer of gold. If this arrangement comes to fruition, commercial estimates of Abitibi Royalties' interest run as high as $80 million in royalties and shared profit in the area.

Privately, I am told that Osisko ($OSK:CA) executives, led by Sean Roosen, have given Abitibi Royalties "almost zero clarity" on the looming net-smelter return royalty and accompanying joint venture.

Several bankers also tell me Osisko and its plans for a separate new-co, with the CHL Malartic possibly inside it, are at "the extreme end of the frustration scale" for Mr. Mullan and his team, based largely at Val d'Or, Quebec, where he lives.

“Sean (Roosen) plumps along like a pigeon on top of a gold mine, which I suppose he is,” one broker told me. I am fresh back from Montreal and a tour of Argex Titanium ($RGX:CA) ($ARGEF) and of graphite developer Nouvau Monde Mining ($NOU:CA).

I saw Mr. Mullan in Montreal this week. At the time, Mr. Mullan, who is a successful collector of net smelter return rights across Canada, made no mention of a looming injunction against Osisko except to say he saw forthcoming data and other reports as "supportive for our rights as shareholders in GZZ and RZZ." (His words.)

Osisko has a forceful response to all this.

In the response, Osisko says "the CHL Prospect is undeveloped and includes the Jeffrey Zone, which comprises a portion of Osisko's current reserve estimate but is not considered material by Osisko. No mining permits are currently held on the CHL Prospect. There are no known resources or reserves on eight of the ten claims of the CHL Prospect."

Please see our previous TCR coverage, which stretches back on this subject for three years

I own RZZ and GZZ shares. Golden Valley owns 60 percent of Abitibi Royalties. I have visited the project. I have followed the Osisko-Abitibi Royalties partnership from Day One three years ago, and have owned RZZ, and GZZ, for that long as well.

Ahead of us: Blockbuster news on lending for a Greenland ruby mine developer -- only for TCR subscribers

-- Thom Calandra

THE CALANDRA REPORT: Subscribe*

*$110 yearly: Does Not Recur

or

THE CALANDRA REPORT: Subscribe**

**$110: Will Recur Yearly

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AEM Agnico Eagle Mines Limited 40.91 -0.19 -0.46 1,846,211
AUY Yamana Gold Inc. (Canada) 3.02 -0.01 -0.33 17,832,842
FISB 1st Capital Bank 11.60 0.00 0.00 0

Comments

Emerging Growth

Nano One Materials Corp.

Nano One Materials Corp is a technology company. The Company manufactures storage materials for lithium ion batteries.

Private Markets

Uber

Uber connects riders with safe, reliable, convenient transportation providers at a variety of price-points in cities around the world. Uber makes money from charging their drivers 20% of the fare…

Santo Diablo Mezcal

Santo Diablo Mezcal has been created to capitalize on a boom sector of the beverage market currently full of many small unmemorable products by producing one sexy, household, easily recognizable…