Osisko Mining expects winnings from Windfall

Osisko Mining president and CEO John Burzynski addresses delegates at The Northern Miner’s Canadian Mining Symposium in London in May. Photo by Martina Lang.Osisko Mining president and CEO John Burzynski addresses delegates at The Northern Miner’s Canadian Mining Symposium in London in May. Photo by Martina Lang.

Osisko Mining’s (TSX: OSK) 400,000-metre drill program at its Windfall project in Quebec should lead to a resource update before year-end, a feasibility study and permitting in 2018, and construction in 2019, president and CEO John Burzynski announced at The Northern Miner’s Canadian Mining Symposium in London.

“We could pour gold as early as 2020,” Burzynski said during a presentation at the one-day mining event at Canada House on May 9. “It’s an aggressive time frame … we’ve got an aggressive program, with lots of drills and more drills coming.”

Twenty-two drill rigs are turning at the project and Osisko will have 25 rigs by the start of June, in what is easily the largest drill program on any one deposit in Canada, and arguably the largest anywhere in the world.

“We started with a 50,000-metre drill program in October 2015, increased that to 100,000, and then to 150,000 and last December we added 250,000,” Burzynski said. “You’ll likely see us increasing that drill program again because all the current metres are going within the main deposit, and outside the main deposit we have another proximate 3,300 sq. km that has similar exploration potential.”

The company consists of essentially the same management team, engineers and geologists, as well many of the same directors, who were responsible for putting the Canadian Malartic mine into production — the largest gold mine in Canada. The mine moved from first drill hole to first gold pour in a little over six years, but was taken over in a bidding war that culminated in a $4-billion offer from Agnico Eagle Mines (TSX: AEM; NYSE: AEM) and Yamana Gold (TSX:YRI; NYSE: AUY) in 2014.

Workers in the core shack at Osisko Mining’s Windfall Lake gold project in Quebec. Credit: Osisko Mining.

Workers in the core shack at Osisko Mining’s Windfall Lake gold project in Quebec. Credit: Osisko Mining.

Today’s Osisko wants to repeat the success it had at Canadian Malartic and become an intermediate mining company. Since acquiring its flagship Windfall project from Eagle Hill Resources two years ago, it has expanded the project’s footprint from its predecessor’s November 2014 resource estimate. That estimate outlined an indicated resource of 748,000 oz. (2.76 million tonnes grading 8.42 grams gold per tonne) and an inferred resource of 860,000 ounces (3.51 million oz. grading 7.62 grams gold per tonne).

“You’ll often hear me say that we believe we have a footprint for a 3 million oz. deposit,” Burzynski said. “We have a tremendous system here.”

Windfall is 200 km northeast of Val-d’Or and 115 km east of the town of Lebel-sur-Quévillon, and lies within the Urban-Barry greenstone belt in the eastern part of the Abitibi subprovince. The greenstone belt has an east–west extent of 135 km and is 4 to 20 km wide.

The wholly owned project is one of the highest-grade, resource-stage gold projects in Canada. Most mineralization occurs in the main zone, a southwest-to-northwest-trending zone of stacked mineralized lenses measuring 600 metres wide and at least 1,400 metres long. The deposit is well defined from surface to 500 metres deep, and remains open along strike and at depth. Mineralization has been found 30 metres from surface in some areas and as deep as 870 metres in others, with potential to extend mineralization up and down-plunge, and at depth.

Burzynski noted that previous operators at the Windfall property — including Osisko Mining, when it started working on the project — had assumed it was another classic shear-hosted vein deposit, but it’s not. This revelation came in mid-2016, while the company was re-logging 180,000 metres of core from prior operators, and had started its own drilling.

“Very much like Canadian Malartic was a brand-new deposit style … this is a brand-new model,” the mining executive said. “There is no corollary in the Archean that we are aware of. It’s an intrusive-hosted, pyrite gold stockwork. There are veins associated with the deposit, but those are later mobilizations of later generations of porphyries.”

Once Osisko realized that it was an intrusive event, there were two implications, he said. First, that it was probably a lot more continuous than anyone had thought, and second, that there could be a lot more volume.

“In the past this deposit had a history of people believing that it was discontinuous, largely because previous operators were trying to match As with Bs and Cs with Es, because they didn’t understand the model,” Burzynski said. “But once we realized we were dealing with an intrusive, and reoriented what mineralization belonged to what mineralization, it was clear to us that we were dealing with something that looked almost like the fingers of a hand.”

Now Osisko is working on a series of five porphyries that created the mineralization. There were three later phases of intrusives that pushed mineralization around, “which was some of the smoke that was being chased by some of the earlier operators,” he said. “There were high-grade, thin veinlets that effectively was remobilization, and if you focused on them, it would be hard to put a resource on, and you’re staying away and missing the larger picture.

“What the previous operators were doing for the first seven or eight years after they made the [Windfall] discovery was that they were drilling the leaves of the tree, and we think we’ve found the main feeder system for this deposit.”

Drill core from Osisko Mining’s Windfall Lake gold project in Quebec. Credit: Osisko Mining.

Drill core from Osisko Mining’s Windfall Lake gold project in Quebec. Credit: Osisko Mining.

When you’re dealing with a geologic unit, he added, you have a much larger volume to host your mineralization. “The fellows working on the project for the prior years were also convinced that there was no potential for the deposit to extend to the northeast,” he added. “Late last year we started a series of step-out holes on fairly aggressive 200-, 400-, 600-, 800- and 1,000-metre step-outs, all at the same time to try to prove that model, and we hit on every hole.”

The step-out holes have extended the deposit 1,000 metres northeast, and Osisko is now drilling everything from the 1,000-metre line back to the deposit, while it infill drills the deposit. It started a hole on a 1,400-metre step-out and on a 2,200-metre step-out, and has a 5 km step-out on the go right now. “We’ve determined the system is much larger than 3 km long, in terms of the intrusive and the alteration,” he says.

The area east of the main deposit also contained what Osisko calls the Lynx deposit, which management says is “a high-grade deposit within a high-grade deposit” that appears to be associated with the main feeder system into the primary deposit. The company has gotten a series of high-grade values at Lynx — things that run up to an ounce or two ounces, or three ounces per tonne — over anywhere from 1 up to 7 or 9 metres.

Assays from Lynx released in early May include 11.7 grams gold per tonne over 7.7 metres and 421 grams gold over 3.7 metres. A third hole returned 4.9 metres grading 10.4 grams gold, including 37.5 grams gold over 1 metre.

“Lynx was discovered with one hole pre-Christmas, and we’ve since put in 25 holes, and it’s giving us spectacular numbers,” Burzynski said. “We have a Lynx 1, a Lynx 2 and a Lynx 3 now, and we jokingly refer to it as our Lynx course … and as we continue to drill northeast, we suspect we will continue to see these Lynx zones.”

The company has also made two other discoveries in the last six months: Fox, west–northwest of the Windfall deposit, and Black Dog, 15 km southwest of Windfall.

“The gold mineralization style at both targets are similar to the intrusion-related mineralization style characteristic of the Windfall target,” Mick Carew of Haywood Securities said in an April research note. “This suggests the presence of a larger intrusion-related, mineralized system at Urban-Barry that may have produced multiple deposits along parallel-trending structures.”

“While we expect the Windfall deposit itself to double in size from the 1.6 million oz. already defined, it is the adjacent targets, including Fox, Lynx and Black Dog, that have caught our attention, suggesting the Urban-Barry project area could represent a district-scale play in Quebec,” Carew added.

Osisko is restarting work on a ramp that was started in 2007, but then abandoned and allowed to flood. “If they had continued that ramp another 300 metres, they would have ran straight into the main orebody,” Carew noted.

Osisko will start dewatering the ramp in mid-June, which could take two months. After this, it will clean up and continue driving the ramp forward, with the goal of reaching 800 metres deep. At this point, it can bulk-sample to test grade and recoveries, and create underground drill stations to test the lower part of the deposit.

In April, Osisko acquired land 103 km west of Windfall and 11 km from the town of Lebel-sur-Quévillon in Quebec that it says can host a mill complex and process material from the project. The property is next to a Hydro-Québec electric substation, and near a former Domtar pulp and paper mill, with access to a water-pumping station that has enough capacity to meet the needs of a milling complex. “We think that over time, this site would probably save us somewhere between $100 million and $200 million in capex and opex,” Burzynski said.

The Quévillon land package covers volcano-sedimentary Archean greenstones that host a number of gold showings and porphyry igneous intrusions that are of exploration interest. The property includes 30 known gold showings, as well as the historic Osborne-Bell gold deposit. The deposit will be the focus of new drilling and resource evaluation.

“The old Osborne-Bell deposit had a resource of 1.8 million oz. and we count it as zero in our book, and I would advise you to do the same at this point,” Burzynski said. “But we are going to go through the exercise of looking at that resource and doing our own drilling on it later this year, and will come back and tell you what we really think … but what we see so far is that the deposit looks very much identical to Windfall — it has the same porphyry mineralization style, the same alteration zones and relatively the same host rock. And what we feel is that we have a parallel belt here with the same potential to host Windfall-style deposits.”


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