Osisko moves to become even bigger gold player with Brett

Canadian junior gold explorer/developer is to take over fellow gold explorer Brett Resources in a friendly all-share deal which could position Osisko as a million ounce a year producer within the next few years.

LONDON -

High flying gold development junior, Osisko Mining (TSX:OSK), has made a major move to take over gold explorer Brett Resources (TSXV:BBR) in a friendly all-share deal worth some C$372 million at the current Osisko share price. The details are that Osisko has agreed to offer Brett shareholders 0.34 of an Osisko common share for each common share of Brett held. The boards of directors of both companies have unanimously approved this transaction and the board of directors of Brett will recommend its shareholders to take up the offer. The deal will give Brett shareholders approximately 10.8% of Osisko.

Osisko is already in the process of bringing its big shallow low grade Canadian Malartic gold project in Canada's Quebec to production in an open-pit operation that it estimates will produce 591,000 ounces of gold per year over a ten-year mine life. The NI-43 101 on the operation study shows projected operating costs of US$319 per ounce, ranking it in the lowest cost quartile among global gold producers.

Osisko rates the Canadian Malartic deposit as currently representing one the biggest gold reserves in Canada for a single deposit, and is still growing through ongoing drilling on new mineralized zones, like the Barnat deposit. An initial resource calculation was published on January 26, 2009, for this separate gold mineralization zone located northeast of the main deposit and for which the grades have consistently averaged nearly double those of the main Canadian Malartic deposit.

Current reserves for the Canadian Malartic property are put at 6.28 million ounces, plus an indicated resource of 1.4 million ounces and an inferred resource (including the Barnat deposit) of 2.75 million ounces. The maximum open-pitable depth is 375 meters and the potential at depth will be investigated during Phase Four of the exploration program. An extensive 200,000-metre definition and exploration drilling program is underway in 2009 on five mineralized zones and high potential exploration targets on the property. As of the end of February 2009, eight drills were operating on the Malartic property.

The Brett Resources Hammond Reef deposit is in the Atikokan area of Ontario and may also be of a similar size being another low grade shallow deposit where a large gold reserve has been estimated. A Preliminary Assessment Study of the project compiled by Scott Wilson Roscoe Postle Associates uses a Base Case Inferred Mineral Resource of 6.70 million ounces of gold (259.4 million tonnes grading 0.8 grams per tonne (g/t) gold (Au) at a cut-off grade of 0.30 g/t). Using a base case gold price of $825 per ounce, the study shows that the project has a net pre-tax cashflow (undiscounted) of $1,186 million with an after tax NPV of $413 million using a 5% discount rate. The mine would recover 5.13 million ounces of gold at a strip ratio of 1.43 to 1 over a 14-year mine life. Over a projected 14-year mine life the current deposit, which is still being extended with an ongoing drilling programme would produce an average of 369,000 ounces of gold per year at an average direct cash cost of $414 per ounce (net of silver credits.

The combination of the two projects could rapidly bring Osisko to become a significant mid-tier gold miner with all its operations in a politically stable area - Quebec in particular being rated the world's best location for mine development by the Fraser Institute. The combination of outputs from Canadian Malartic and Hammond Reef would initially be in the order of 1 million ounces of gold a year which could be reached by 2015..

Osisko is well financed having closed a C$403 million bought-deal financing in February. On a fully diluted basis Osisko would have over $C700 million in cash, making it one of the best-financed developers in the gold sector.

But Osisko's ambitions to become a major gold producer may not end there. It is concentrating on large near surface low grade gold deposits in traditional gold mining areas and entered into a joint venture with Clifton Star Resources late last year which controls another such deposit in the Abitibi region of Quebec, relatively close to Osisko'd flagship Canadian Malartic operation. Osisko has an agreement to earn 50% in the Clifton Star project which some observers feel could also turn out to be as big as Canadian Malartic.