Quebec-focused Osisko Mining’s (TSX: OSK) chairman and CEO, John Burzynski, expects the company’s flagship Windfall project’s resource to double to a staggering range of 15-20 million oz. gold at double-digit grades as the company progresses towards a construction decision.
“As we excavate deeper, reaching depths of 660 metres and beyond, we discover parts of the deposit boasting an average of 1 to 2 ounce per tonne,” Burzynski told The Northern Miner (see video below) during the Precious Metals Summit in Beaver Creek, Colo.
“Even a slight increase in the head grade could potentially amplify our annual production by 50,000 to 100,000 oz. per year, unlocking substantial upside.”
Drawing parallels with other prominent greenstone gold camps in the Abitibi belt, the Windfall Lake project promises a rich gold bounty. “Our belt mirrors the geology of the historic Val-d’Or and Timmins camps, which yielded over 100 million ounces each in the last century,” Burzynski said.
The company recently signed South Africa’s Gold Fields (NYSE: GFI; JSE: GFI) on as a 50-50 partner at Windfall. The deal brings in cash for both exploration and development of the mine, which will cost $788.6 million to build, according to a feasibility study released late last year.
Gold Fields paid $600 million for half of the project, about 700 km northwest of Montreal. The funds are payable in two equal tranches, one immediately and one after the province approves construction.
The Gold Fields partnership strongly backs the project’s financial framework.
“Gold Fields enters as a 50% joint venture partner, infusing the project with a total of $1.2 billion investment that includes both cash and capex payments,” Burzynski explains. “This strategy shields us from potentially soaring interest rates, placing us in a comfortable position with a cash reserve equivalent nearing $1 billion and a market cap grazing the $1-billion threshold.”
Other parts of the deal include Gold Fields paying $75 million yearly in regional exploration costs and $34 million this year as reimbursement for pre-construction spending already made. All expenses are to be split equally.
The feasibility study envisions yearly production of 306,000 oz. gold over a 10-year mine life.
The project, which would pay for itself in two years, has a $1.2-billion after-tax net present value at a 5% discount rate and an unlevered 34% after-tax internal rate of return, assuming a gold price of US$1,600 per ounce. The all-in-sustaining cost (AISC) is estimated at US$758 per ounce.
Windfall Lake has probable reserves of 12.2 million tonnes grading 8.06 grams gold per tonne for 3.2 million oz. of metal.
Burzynski was a co-founder with Sean Roosen and Robert Wares of the original Osisko Mining, which developed the Canadian Malartic mine – Canada’s largest open pit project. He said that he fully expects Windfall to match or even surpass the scale of Canadian Malartic in terms of annual production and cash flow.
Now owned by Agnico Eagle Mines (TSX: AEM; NYSE: AEM), the success and scale of Canadian Malartic stands as a testament to the expertise and capability of the Osisko Mining team.
Agnico, which consolidated ownership in Canadian Malartic by buying Yamana Gold’s Canadian assets in April, has forecasted total attributable output from the mine this year of 585,000 oz. gold at an AISC of US$873 per ounce.
Predicting a hefty surge in Osisko’s valuation, the CEO emphasized the prospects ahead once the project starts production.
“We anticipate our share of production to fluctuate between 150,000 and 200,000 oz. annually within the next two to three years. This production volume potentially elevates our company value to a range of $2 to $4 billion, driving a strong return of around 200% to 300% for our existing shareholders compared with today,” the Quebec-born mine entrepreneur said.
Burzynski says Osisko plans to start construction within about two years, should the permit be completed on time, allowing the company to continue driving the ramp down towards 800 metres.
“It’s in the budget to probably bring it down at least to the 720-level to get into those higher-grade areas.”
In addition to the ramp work planned by the joint venture, there are currently nine rigs working underground. Infill drilling on the Lynx, discovered in 2016, will better delineate the resource as the project moves toward mining.
Surveying the company’s share structure reveals about 350 million outstanding shares, with BlackRock commanding a dominant 16%. Following closely, Osisko Gold Royalties (TSX: OR) holds a significant 13% stake. “BlackRock, along with Franklin Fidelity, represents significant investments, collectively fostering a sturdy financial base that propels our current billion-dollar market cap,” Burzynski added.
Despite the Windfall project’s massive size, Osisko’s shares are down more than 10% over the past 12 months to trade at $2.70 apiece in Toronto on Thursday.
As the company works to drive the ramp down past 660 metres, it’s approaching very high-grade zones of Lynx — part of what makes Windfall an exceptional project. “By high grade, I mean whole sections of the deposit that average 12 ounces per tonne. It doesn’t take many of those tonnes to bring your head grade up a couple of grams,” Burzynski said.
“It’ll be a long-life mine — it’ll outlive all of us,” he said, predicting Windfall could be mined for 30 or 40 years.
“As the deposit opens up, I expect you’ll see opportunities to take that production rate from roughly 300,000 oz. to 400,000, even 500,000 oz. per year.”
The Precious Metals Summit continues Sept. 12-15 this week.
