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From the day he launched Osisko Gold Royalties Ltd. in June, chief executive Sean Roosen knew that a merger with Virginia Mines Inc. was too logical to pass up.
The transaction was finally unveiled on Monday, as Osisko announced a $479-million all-stock deal to buy Virginia Mines and create a powerful Quebec-based royalty company that generates cash from the province’s two biggest gold mines.
“It was evident that this was a pretty natural evolution,” Mr. Roosen said in an interview. His prior company, Osisko Mining Corp., built the giant Canadian Malartic mine. When Osisko was sold for $3.7-billion this year, Osisko Royalties was spun off and granted a 5% royalty on Canadian Malartic.
Virginia Mines is led by André Gaumond, a Quebec entrepreneur who has struck a dizzying number of mining deals across his home province. His best discovery was the Éléonore project, which Goldcorp Inc. acquired nine years ago for US$420-million. Mr. Gaumond kept a royalty on Éléonore that is now paying off, as Goldcorp brought the mine into production this year.
Mr. Roosen thinks these are the two best royalties in the gold business. By putting them together, Osisko transforms into a $1.3-billion company that can compete with the three dominant players in the mining royalty space: Franco-Nevada Corp., Silver Wheaton Corp. and Royal Gold Inc.
Those three firms are full of experienced dealmakers, and they have taken advantage of market volatility to acquire many royalties and metal streams in recent years. Mr. Roosen said Osisko will be on the lookout for more acquisitions as well, but cautioned he will not do deals that will lower the quality of his royalty portfolio.
“I don’t want to just bulk up for the sake of bulking up,” he said. “So don’t expect us to do a lot of deals fast. We do a nauseating amount of due diligence before we move.”
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