Osisko outlines 6.5M oz at Malartic

An initial inferred resource for the Canadian Malartic gold deposit in northwestern Quebec shows a resource of around 6.5 million oz.

Consulting firm RSG Global, engaged by owner Osisko Exploration (OSK-V, OSXLF-O), put the size of the resource at 178 million tonnes grading 1.1 grams gold per tonne, based on a cutoff grade of 0.5 gram gold per tonne. (Using three estimation methods, the resource’s size ranged from 171 to 178 million tonnes, at grades of 1.1 to 1.2 grams gold per tonne.)

A cutoff grade of 1 gram per tonne brings the resource down to about 85 million tonnes grading 1.6 grams gold per tonne. Altogether, the mineralized zone is a little less than 1.5 km long and 460 to 850 metres wide; the estimate considers mineralization down to 620 metres in places.

The resource was based on 41,700 metres of Osisko’s own drilling, plus over 240,000 metres of historical drill and assay data. It considered mineralization on the Canadian Malartic property alone, though it did project a 50-metre strike length of the mineralization across the eastern property line into the Sladen property, also controlled by Osisko. Recent drilling on Sladen has confirmed that at least a 240-metre strike length of the deposit’s eastward extension across the claim line is mineralized.

The resource calculation tops off a long period of exploration for Osisko, which has attempted to apply a porphyry-gold exploration model to the Canadian Malartic property. With the calculation now out, Osisko is operating on the premise that it will bring the deposit to a feasibility study.

The size of the resource appears to have taken the market by surprise. Osisko stock closed $1.31 higher, at $8.61, on the day of the announcement. Two investment houses also raised target prices on Osisko shares following the announcement, Canaccord Adams bumping its target to $11.20 from $8.10 and Westwind Partners increasing its to $10.65 from $9.20. Consensus views on the size of the resource before the announcement were mainly between 4.5 and 5 million oz., and the new targets reflected the difference between street estimates and the inferred resource.

Further infill drilling on the resource area has started, intended to upgrade the estimate to an indicated resource drilled at 30-metre intervals. Vice-president Robert Wares says that RSG was comfortable with calculating an indicated resource based on that denser drill spacing.

Wares also says that he expects historical data can be tested and verified, though Osisko’s and RSG’s current thinking was that historical assays may have to be cut by about 20%. The new estimate also excluded the old workings from the tonnage estimate.

Recent infill drilling has confirmed grades at or near the resource grade, mainly over widths of 20 to 40 metres, and mainly on the edges of the mineralized zone.

Drilling on the Sladen and southeastern extensions of the deposit, neither of which have been brought into the resource, is currently under way. The 240-metre mineralized extension on Sladen has been defined by drilling since the early part of the fall, and generally shows mineralization at gold grades between 0.6 and 1.4 grams per tonne over core lengths of 60 to 180 metres. Mineralized zones on the eastern end of the deposit appear to widen at depth.

Among the better results from the Sladen property were intersections of 181.5 metres grading 0.78 gram gold per tonne, 13 metres grading 1.34 grams per tonne, and 123 metres grading 1.13 grams per tonne.

Feasibility work is also in progress, with Osisko expecting results of metallurgical tests in the early part of 2007. Metallurgical testing by Lac Minerals in the late 1980s showed recoveries just under 90% in material grading around 2 grams gold per tonne.

Osisko engaged engineering firm Metso Minerals for a mill in November, via a letter of intent that vice-president John Burzynski describes as providing a “place in the line,” at a time when mill equipment is difficult to procure. The reservation is for a semi-autogenous grinder and two ball mills that would handle between 28,000 and 40,000 tonnes per day, implying annual milling of 10 to 14 million tonnes.

Similar operations include the Troilus gold deposit in north-central Quebec, operated by Inmet Mining (IMN-T, IEMMF-O), and the Cadia gold deposit in New South Wales, operated by Newcrest Mining (NCMGY-O). Troilus produced 159,000 oz. gold out of 6.5 million tonnes and Cadia, about 300,000 oz. out of 17 million tonnes in 2005.