Osisko Gold Royalties Ltd. entered a letter of intent to acquire cash-strapped Stornoway Diamond Corp. with the help of Stornoway's secured creditors, according to separate Sept. 9 releases.
Stornoway, owner of the Renard diamond mine in Quebec, filed for creditor protection with the Superior Court of Quebec to restructure its business. The company said it has been unable to generate positive free cash flow this year in part due to subdued prices for rough diamonds.
In June, Osisko Gold and its financial partners agreed to provide a senior secured bridge credit facility of up to C$5.9 million to support Stornoway's strategic review.
Under the letter agreement, Osisko Gold and the creditors intend to form an entity to acquire Stornoway and assume all of its debts as well as obligations to the mine. Osisko Gold will keep its 9.6% diamond stream on the Renard mine, but agreed to reinvest proceeds from the stream for one year following closing.
Concurrent to the deal, Osisko Gold and some of the creditors entered a definitive working capital facility agreement to provide Stornoway with an initial C$20 million to keep the Renard operation running. Osisko Gold will contribute about C$7 million, including C$2.5 million upon signing the letter of intent.
