VANCOUVER — It’s tempting to say that Osisko Mining (TSX: OSK) is “back.” The statement makes a great article hook, but in truth the bones of the company never went anywhere following a tumultuous bidding war two years ago that culminated in a $3.9-billion takeover by Agnico Eagle Mines (TSX: AEM; NYSE: AEM) and Yamana Gold (TSX: YRI; NYSE: AUY).
When the smoke cleared, Osisko management stood atop a spin-out company with $155 million in cash, a 5% royalty on the crown-jewel Canadian Malartic gold mine in Malartic, Que., and a bevy of interests in earlier-stage exploration projects.
Questions inevitably arose over whether the core team — anchored by The Northern Miner‘s 2009 “Mining persons of the Year” John Burzynski, Sean Roosen and Robert Wares — would slide comfortably into the royalty and streaming business with the newly-minted Osisko Gold Royalties (TSX: OR; NYSE: OR).
“It’s poetic in a sense because it was around two years ago we signed the documents on the sale of Canadian Malartic and turned the page on that chapter of our story,” current president and CEO Burzynski reminisces during an interview. “We had sort of a mixed bag with royalties and assets we’d intended to advance and develop down the road, and a lot of people wondered whether we’d even go back to mining. We took a bit of a step back at that point because it had been a very emotional battle for us.”
Osisko had always viewed Canadian Malartic as a cornerstone asset that would lead to bigger things before a hostile bid from Goldcorp (TSX: G; NYSE: GG) triggered the often-cantankerous fight over the mine. But now, roughly two years to the day after the ink dried on the Yamana-Agnico deal, the company has regained its old moniker and pledged to rebuild itself into a significant gold producer.
“We were sitting around the table last summer in the depths of a pretty awful market when a lot of companies were throwing in the towel and turning off the lights,” Burzynski continues. “We realized that it was a very similar environment to when Bob, Sean and I started the original Osisko. It was a situation where we again saw opportunity to go in and acquire land in these brownfield mining camps, which happens so infrequently because many of these land packages have been staked for over one hundred years.”
The vehicle for the rebirth was Oban Mining, which had $10 million in cash and a market capitalization of $8 million when the Osisko team decided to take its second shot at the big leagues in June 2015. Over the past 12 months the company has completed 15 deals, three financings, and now has $75 million in cash and a $280 million market capitalization. On June 14, Oban changed its name to Osisko Mining.
The company has returned to its old stomping grounds in Quebec, and earmarked its wholly-owned Windfall Lake and Marban projects as potential near-term production flagships. Osisko has always had a reputation for big drill programs, and it will have completed nearly 200,000 metres across the two properties by the end of the year.
“Windfall has really been a focal point for us since we started down this road last year. The first priority was getting programs rolling in the Urban Barry camp because we’d always had eyes on the potential there,” Burzynski explains. “So we ended up consolidating the package, and relying on André Gaumond and his team from Virginia Mines. Over the years they’ve perfected a till-sampling technique, which was used to discover Goldcorp’s Éléonore mine. They’ve covered our claims, and we completed additional geophysics because there is a sulphide relationship with the gold.”
Windfall lies 115 km east of the town of Lebel-sur-Quévillon, and hosts intrusion-related gold mineralization described as “atypical greenstone-hosted deposits,” which tend to show a close spatial association with high-level porphyry stocks and dykes.
Current indicated resources within the Main zone total 2.8 million tonnes of 8.42 grams gold per tonne for 748,000 contained oz. Property-wide inferred resources include 3.5 million tonnes of 7.62 grams gold for 860,000 contained oz.
Osisko has almost completed a 55,000 metre program at Windfall that will underpin a new resource estimate expected in the fourth quarter. Exploration is focused on definition drilling above, and expansion drilling above and below the Red Dog intrusion. The company hopes it can push regional gold resources at Windfall towards 3 million oz.
Recent assay highlights have reportedly reinforced the lateral and vertical continuity of high-grade gold mineralization in the Zone 27 and Caribou areas, and include: 2.5 metres at 41.8 grams gold per tonne from 40 metres depth in hole 16-626; 3.1 metres of 30.6 grams gold from 273 metres in hole 16-656; and 3.9 metres averaging 17.22 grams gold from 934 metres depth in hole 16-642.
Osisko plans to add another 50,000 metres to its exploration program at Windfall by the end of the year.
“Our first concern is size potential because you have to remember we’re talking about the least-explored greenstone belt in Quebec. Historically, the Windfall deposit has suffered a reputation as being disjointed,” Burzynski says.
“We think that’s a misconception because we’re seeing good continuity in our drilling, and we’ve been hitting new intercepts below the Red Dog dike and along a number of parallel zones. Our hope is we can do a combination open-pit and underground operation, and that’s why some of our drilling has focused on pulling together the near-surface mineralization because it could impact the scale of the mill you build,” he adds.
Osisko’s regional target generation work has also paid dividends. On June 3, the company reported a new gold discovery at Windfall roughly three km southwest of the main deposit. Drilling had been targeting two induced polarization (IP) anomalies when hole 16-666 cut 183.5 grams gold over 0.3 metre from 284 metres depth, and hole 16-652 intersected 12.72 grams gold over 1.5 metres from 209 metres depth.
Meanwhile, Marban is a different story since Osisko originally viewed it as a potential satellite deposit. The project sits 15 km due west of Val-d’Or, and about equal distance between the Canadian Malartic mill and Agnico’s Goldex mine. Wares spearheaded a 72,000 metre drill program at the project last year, which dovetailed into an updated resource estimate released on June 13.
Marban’s measured and indicated resource now stands at 1.83 million oz. gold in 47.6 million tonnes at 1.20 grams gold. In-pit resources total 1.48 million oz. gold in 37 million tonnes at an undiluted grade of 1.24 grams gold. Pit-constrained estimates are based on US$1,250 per oz. gold and a 0.4 gram gold cut-off grade.
“We have the same technical people in charge that did around one million metres of drilling at Canadian Malartic,” Burzynski elaborates. “I think the bullet point people missed is that there are close to one million ounces gold in that resource that run nearly two grams [gold per tonne.] That’s the magic of Marban. We view it as a satellite deposit for Canadian Malartic, and had initially acquired our position, probably five or six years ago, with that strategy in mind. We’re very familiar with the logistics there, and the ore is actually softer with a higher-grade component.”
The Osisko group also maintains a variety of equity interests in other juniors that could generate future royalties, or end up in the development pipeline down the road. For example, Roosen sits on the board of Falco Resources (TSXV: FPC; US-OTC: FPRGF), which recently released a preliminary economic assessment (PEA) on the Horne gold complex in Rouyn-Noranda, Quebec. Osisko Gold Royalties maintains a 16.2% equity stake in Falco, which is helmed by Canadian Malartic mastermind Luc Lessard.
“There are certain agreements in place wherein the royalty vehicle has first rights on royalties and streams in terms of Osisko Mining,” Burzynski says. “So that could offer us financing optionality down the road, and in terms of companies like Falco we’re certainly very familiar with Luc and his team. Could there be a grand coming together at some point? I’d certainly say it’s possible.”
Osisko has traded within a 52-week range of 96¢ and $2.70, and closed at $2.20 per share at press time. The company has 125.2 million shares outstanding for a $270.5 million market capitalization.
Burzynski said that he wished it had been possible to do “double” the amount of deals during the down cycle because a recent surge in gold prices has driven multiples higher and made transactions more difficult. It seems the company is content with the portfolio it managed to assemble over the past 12 months.
On June 27, Osisko took advantage of surging gold prices and announced a $25-million bought-deal financing wherein it would issue 7.57 million flow-through shares priced at roughly $3.33 each. The equity offering represents around a 45% premium on the company’s stock price at the time of signing.
“I’ve had an article from an Abitibi newspaper over my desk since the Agnico-Yamana deal became official, and the rough translation of the headline reads: ‘It’s all over for Osisko,’” Burzynski says. “Today I’m going to take that article down and tear it up.”