VANCOUVER — Last October, Osisko Mining (TSX: OSK) made a rather odd announcement. The Montreal-based, Eastern Canada-focused gold miner reported it had staked just shy of 10,000 sq. km in Mexico, but wouldn’t be telling anyone the location of its new project for “strategic reasons.”
The secrecy ended on July 4, when Osisko revealed it is well into its exploration efforts on the Guerrero gold belt, and released assays from a 20-hole reconnaissance drill program at its Cuervo anomaly.
It was not much of a stretch to broadly locate Osisko’s new project in Guerrero, where Goldcorp (TSX: G; NYSE: GG) operates its Los Filos gold mine, and juniors like Torex Gold Resources (TSX: TXG) and Newstrike Capital (TSXV: NES) are sitting on advanced-staged, multi-million ounce gold deposits.
Details are still sketchy on where exactly Osisko is operating in the belt, but the company said it has identified six anomalies nearing drill stages, including Milagro, which has a 4 by 1 km soil and lithogeochemical signature.
Osisko has completed geological surveying over 11,800 sq. km, including 7,700 stream-sediment samples, 2,800 rock samples and 3,800 soil samples.
Osisko has tacked on around 320 sq. km of geophysical surveying over the area and has released assay results from a drill program at Cuervo, which indicates gold-silver-copper skarn mineralization across a 4 by 2 km corridor. Additional mapping and sampling has extended the defined mineralization along strike.
Osisko’s drill program appears to be a standard scout initiative, with intercepts running from surface to a maximum depth of around 120 metres. The company hit gold, silver and copper values in skarn.
Highlights from the maiden program at Cuervo include: 68 metres of 1.26 grams gold per tonne, 31.5 grams silver per tonne and 0.53% copper from 40 metres depth in hole 15; 24 metres grading 1.26 grams gold, 6 grams silver and 0.23% copper from surface in hole 17; 23 metres averaging 1.06 grams gold, 7.86 grams silver and 0.58% copper from surface in hole 5 and 6 metres of 0.64 gram gold 40 grams silver and 1.26% copper from 12 metres depth in hole 1.
Milagro is likely Osisko’s next drilling destination, and represents the company’s largest target, where skarn and epithermal mineralization are developed within a 20 by 10 km area of hydrothermal alteration.
Osisko’s main target within Milagro is a 4 by 1 km soil and rock anomaly produced by discontinuous gossan outcrops that formed after the oxidation of magnetite- and sulphide-bearing skarn.
Rock samples from the discontinuous gossans outcrops returned values as high as 8.2 grams gold, with more than 25% of samples with values above 0.5 gram gold. Osisko’s drill-ready target is open to the north, and the company expects to receive all its permits before 2014.
But the company has been hit hard by falling gold prices, and announced during the first quarter that it would cut its Mexican exploration budget in half.
Osisko will be decreasing discretionary spending by $80 million, with principal savings from its exploration and development projects.
Osisko’s updated budget pegs this year’s capital expenditures at $134 million, with $31.6 million slated for exploration initiatives, which represents a $10.4-million reduction.
The company reported $140 million in cash and equivalents in March, and generated $62.5 million in operational cash flow in the first quarter.
Osisko has traded within a 52-week range of $2.98 and $10.62, and closed at $3.56 per share at press time.
The company maintains 437 million shares outstanding for a $1.6-billion market capitalization.
The Cuervo discovery is about 11km due south of Chilpancingo and just west of the highway that connects Chilpancingo to Acapulco. Great spot to find a prospect.