Osisko quietly stakes 10,000 sq. km in Mexico

Press releases from Osisko Mining (OSK-T) were coming fast and furious in mid-October, with announcements that the company has produced its half-millionth ounce of gold from its flagship Canadian Malartic mine in Malartic, Que., and another reporting record production in the third quarter of 103,753 oz. gold.

But it was the first press release of the bunch, in which the company said it had staked 10,000 sq. km in an emerging gold belt in Mexico, that may be the most intriguing.

The company did not identify where in Mexico it had staked its immense piece of ground, and requests for details were declined for “strategic reasons.”

But what is known is that Osisko has identified a large magmatic-hydrothermal system with a coincident 5 sq. km gold-copper-silver soil and lithogeochemical anomaly, all located within a 14 sq. km hydrothermal alteration zone.

“This is an enormous land package, and the first that Osisko will have in Mexico,” geologist and mine specialist at Euro Pacific Canada Christina McCarthy says. 

Some Mexico experts speculate the ground could be in Oaxaca or the Guerrero gold belt, an emerging mine district that has become well-known in the past two years.

Other companies in the Guerrero belt include Cayden Resources (CYD-V), Oroco Resource (OCO-V), Minaurum Gold (MGG-V) and Citation Resources (CTT-V). The belt spans more than 80 km and is north of Acapulco in Guerrero state.
But wherever Osisko’s land package is located, McCarthy says, the company’s move into the country “further proves that Mexico is becoming an attractive location for mining.”

Osisko notes that its geologists initiated a systematic greenfields exploration program in Mexico late last year, starting with a high-density stream sediment survey consisting of more than 4,000 samples, followed by detailed mapping, geochemistry and geophysics over anomalous areas.

Osisko began exploration drilling at Canadian Malartic in March 2005. It started building the mine in August 2009, and finished it within 19 months. Since the start of operations in April 2011, it has produced 487,072 oz. gold.

John Hayes of BMO Capital Markets expects Osisko will produce 411,000 oz. gold in 2012 at cash costs of US$859 per oz. gold. He forecasts 2013 production — likely the company’s first full year of production at full capacity — will total 660,000 oz., at total cash costs of US$617 per oz.

As of Jan. 1, 2012, reserves at Canadian Malartic stood at 48.7 million proven tonnes at 0.8 gram gold per tonne and 295 million probable tonnes at 1 gram gold, for 10.7 million contained oz. gold.

At press time Osisko was trading at $9.37 per share within a 52-week range of $6.25 to $13.31. The company has 389 million shares outstanding.