Stornoway Diamond to be acquired by Osisko Gold
Osisko Gold Royalties Ltd. is buying Stornoway Diamond Corp. in partnership with its creditors as the Longueuil, Que.-based gem miner files for bankruptcy protection.
The agreement stemming from a June letter of intent will see Osisko and other creditors assume all debts and liabilities of Stornoway while continuing to operate its Renard diamond mine in Quebec by supplying $20 million in working capital, according to a company filing to the provincial Superior Court.
“The continued downward pressure on the market price for rough diamonds, as well as a variety of other factors and circumstances, have contributed to the corporation’s inability to generate positive free cash flow in 2019, and to maintain an adequate level of working capital,” the company said in the filing.
“It’s in the best interests” of the company “as well as those of their respective stakeholders to seek protection” after no other third-party bids for the miner emerged since June, it added.
Montreal-based Osisko is to reinvest its 9.6-per-cent revenue stream from Renard back into the mine for at least a year, the company said.
The Renard mine in the James Bay region, Quebec’s first diamond mine, was built with $946 million in financing and began commercial production in 2017 of about 1.6 million carats a year, according to its website.
Osisko, formed in 2014, focuses on the North American precious metal offtake market with more than 135 royalties and a portfolio of resource companies such as a 32.6-per-cent interest in Barkerville Gold Mines Ltd., a 16.6-per-cent interest in Osisko Mining Inc. and a 19.9-per-cent interest in Falco Resources Ltd., according to its website.
Deloitte Restructuring Inc. is to be hired to oversee the process under the Companies’ Creditors Arrangement Act to realign its business and financial affairs.
Stornoway’s common shares and convertible debentures will soon be delisted from trading on the Toronto Stock Exchange and will be worthless, the company said.