BEAVER CREEK, COLORADO — Osisko Mining (TSX: OSK) says it will hang “for sale” signs on most of its properties — except for its wholly owned Windfall project in Quebec, one of the highest-grade, resource-stage gold projects in Canada.
“We’ve had a pivot point over the last eight weeks, and our absolute focus is on Windfall,” John Burzynski, Osisko Mining’s president and CEO, announced during a presentation at the recent Precious Metals Summit in Beaver Creek, Colorado. “What Windfall represents is not a deposit or a camp. We actually think we have a district here.”
Workers examining core at Osisko Mining’s Windfall gold property, 200 km northeast of Val-d’Or, Quebec. Credit: Osisko Mining.
The company — which consists of the same management team, the same engineers and geologists, and a lot of the same directors that were key to the success of Osisko Mining’s first iteration, which put the Canadian Malartic mine into production in 2011 — says Windfall has all the makings of another success story.
When the company got its hands on the project last year, its previous owner Eagle Hill Exploration had defined a 1.5 million oz. gold resource in two main zones (Cariboo and 27), and completed a preliminary economic assessment.
“We liked it as a small, high-grade deposit in Quebec,” Burzynski said. “We were kind of hoping we could make it bigger and, being the Osisko guys we are, we like to drill. We drilled 2 million metres as Osisko One, and so we launched into our first 50,000-metre program at Windfall.”
The program kicked off in October 2015. In June 2016 Osisko increased it to 100,000 metres, and is now bumping up to 150,000 metres.
Osisko Mining’s Windfall gold project in Quebec. Credit: Osisko Mining.
“In Canada it’s the largest drill program of any project, and it’s probably one of the largest drill programs going on anywhere in the world,” Burzynski said of the project, which is 200 km northeast of Val-d’Or and 115 km east of the town of Lebel-sur-Quévillon.
“When we talk to investors about how it’s going, we don’t have an empirical number … but the deposit is starting to feel like a 3 million oz. deposit,” he said. “We like to say the deposit is open in every direction except up, and we’re working on that. We started with four rigs and we increased it to six, and we’re going to 10 by the end of the month, and we’ll probably add rigs for the exploration ground.”
Burzynski noted that while the deposit had a reputation for being discontinuous, Osisko’s team has found the opposite.
“The companies who operated on the project before had limited access to capital. They did sporadic drill programs,” he said. “What’s changed in these last eight weeks is that we’ve unravelled the geology of this deposit. It’s not like any other deposit in the Abitibi … it’s not a shear-hosted vein system, which is what people had classified it as. It’s an intrusive-hosted pyrite system. Much like Malartic was a game-changing model when we rediscovered it in 2005, this is something that is a game-changer in the Abitibi. It’s the first of its type.”
Burzynski and his team have already grown Windfall and it is now larger and more continuous than when it started. Osisko expects to release an updated resource in December or January. In the meantime, Windfall’s indicated resources stand at 2.76 million tonnes grading 8.42 grams gold per tonne for 748,000 contained oz. gold, and an inferred resource of 3.51 million tonnes averaging 7.62 grams gold for 860,000 oz. gold. The resource uses a cut-off grade of 3 grams gold, assumes an underground extraction scenario with a gold price of US$1,200 per oz., and 96% metallurgical recoveries.
Most mineralization averages 10 grams over 5 metres, with high-grade pockets of up to 248 grams over 12.4 metres. Drill holes in the gold zones show grade distribution along the entire mineralized interval, the company states, and preliminary metallurgical tests indicate a 95.7% gold recovery using a standard gravity and flotation circuit, followed by cyanidation.
“Certainly in Canada it’s the largest drill program of any project, and it’s probably one of the largest drill programs going on anywhere in the world right now.”
John Burzynski
President and CEO, Osisko Mining
Most mineralization is in the Main zone, a southwest- to northeast-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 a 500-metre depth, and remains open along strike and at depth. Mineralization has been identified 30 metres from surface in some areas and 870 metres in others, with potential to extend mineralization up and down-plunge, and at depth.
In August, Osisko announced a discovery 3.7 km west of the main Windfall deposit that it is calling the Fox discovery. The discovery was made with a drill intercept that averaged 3.22 grams gold per tonne over 11.6 metres.
“As a hole and intercept, 3 grams over 11 metres is not all that exciting, but what it represents to us is very exciting,” Burzynski said. “We don’t think it’s another zone, we think it’s a distil expression of another deposit. It’s the same geology, the same mineralization and the same alteration. And the way it lies in the geology, it matches up with the model that we’ve created for the main Windfall deposit.”
Burzynski likened exploration work at the Fox discovery with the game of Battleship, where each player searches for the enemy’s fleet of ships and destroys them.
“We have one hole in — we don’t know if it’s a PT boat or an aircraft carrier — but we’re going to march it back and see if we can’t find ourselves a coincident Windfall,” he says.
“When we started the drill campaign at Windfall last October we used André Gaumond’s teams [formerly of Virginia Mines] to repeat the exploration they used to find Éléonore … we came up with 130 different targets, and the way the work has gone, the geologists have run into a bit of a problem in that they’re not sure which discovery or which zone to drill first.”
Financing doesn’t appear to be a problem for the company, either. In early September, Osisko announced a $27.5-million bought-deal financing (10 million common shares at $2.75 per share). Most of the proceeds will go to exploration. “Having access to capital right now hasn’t seemed to be our problem,” Burzynski said. “We’re well financed.”
“The [recent] financing wasn’t an intended thing,” he added. “We saw some of the investors we have — larger institutional investors — were having difficulty finding stock. At the same time, we were talking with our engineers and they came back with a $25-million number that would be necessary for the ramp — and it was coincidentally good timing.”
Core samples from Osisko Mining’s Windfall gold property. Credit: Osisko Mining.
The ramp will cross all four zones and take a year and a half to build, and it will help the company sample the main zones and create drill stations to chase the deposit to depth.
Burzynski added that more money could come to the treasury if the company sells other assets and exercises warrants.
He estimates that Osisko is looking at capex of half a billion dollars to build a mill of the 3,000- to 5,000-tonne-a-day scale at Windfall.
“We’d probably end up with half of that amount in the treasury — $250 million, assuming a sale of Marban, so we’re probably in the market for another $250 million, as we get to the mine build.”
The time line is fast-paced. The company had its first engineering meeting only three weeks ago, yet management says it could turn Windfall into a producing mine within three and a half years. The company expects to reach the feasibility study stage in mid-2017, with permitting in early 2018.
“It took us 11 months to permit Canadian Malartic from bumper to bumper,” he said. “Because this isn’t near a town — it’s in the Plan Nord area — it’s an abbreviated permitting process. We don’t have to have what they call the BAP, the public meetings.”
Burzynski predicted a busy year ahead, with a growing drill program and a lot of news.
He added that management has no intention to sell Windfall, and it still has a bitter taste in its mouth from Goldcorp’s (TSX: G; NYSE: GG) hostile attempt to buy the first Osisko Mining and its Canadian Malartic mine in 2014. Osisko eventually reached a deal for a joint takeover by Yamana Gold (TSX: YRI; NYSE: AUY) and Agnico Eagle Mines (TSX: AEM; NYSE: AEM).
“We weren’t willing sellers at the time and came out of that long, bitter battle with Goldcorp as a new royalty company,” he said, referring to Osisko Gold Royalties (TSX: OR; NYSE: OR). The royalty company’s cornerstone asset is a 5% net smelter return royalty on Canadian Malartic. In early 2015, Osisko Gold Royalties merged with André Gaumond’s Virginia Mines, which discovered the Éléonore gold deposit, and whose exploration team was recognized as one of the best in Canada.
“We’ve seen an increase in the value of Osisko Royalties from the $500-million market cap it had when we started post the takeover two years ago, where it trades at a $2-billion market cap,” Burzynski said. “We’re not about to sell the royalty company, because it turns out that it’s a pretty good business, but to keep the technical teams busy and active and not lose them, we decided to recreate Osisko Mining.” (Burzynski noted that most royalty companies have a staff of eight, while Osisko Royalties had 94.)
“We were intent on creating an intermediate mining company and this time, hopefully, we have protected ourselves a little better by having 19.9% held through Osisko Royalties and the group.”
Osisko Mining has a $460-million market cap, $141 million in cash and another $40 million in warrants.
“We’ve done it again,” Burzynski said at the end of his presentation.
“We were successful over the course of Osisko One. What we were hoping to do [here] has exceeded expectations. We thought [initially] we’d need a number of deposits to do this, but it looks like Windfall is turning out to be that same kind of deposit that’s going to be a company maker.”
The core photo doesn’t look much like an intrusive, as described to be the main host rock. Any comment?
Very astute observation Matt! The first couple of metres does appear to be a volcanic/clastic of some sort, but the mineralized interval – the 30 cm section in the lower part of the photograph – appears to be in a more silicified or sericitized unit, which could be an intrusive – too altered to tell. It’s sooo hard to say without looking at the core!
Osisko reckons that during the Archean, crosscutting porphyry dykes introduced gold into the system. So the majority of the gold they’re finding occurs mainly as pyrite stockworks within intrusives, but a smaller percentage occurs within shear-zones and colloform veins. Osisko has a lot of sweet photos in their Windfall presentation on their website that will demonstrate their findings 🙂 Thanks so much for asking, and hope that helps!
Lesley