Malartic gold deposit - Quebec

10.7 Million Ounce Gold RESERVE (at $1000/oz POG)

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Message: Research Capital Report--Potential to become Canada's largest gold Mine...

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Research Capital Report--Potential to become Canada's largest gold Mine...

posted on Mar 30, 09 10:44AM

MINING 30 MARCH 2009
O S I S K O MI N I N G C O R P O R A T I O N
OSK-TSX: $5.75 — HOLD
TARGET PRICE: $6.12; PROJECTED RETURN: 6.4%
BARRY ALLAN 416.860.7612
Barry.Allan@researchcapital.com
John McClintock 416.860.7613
POTENTIAL TO BECOME CANADA’S LARGEST GOLD MINE

http://supplytracking.com/Potentialt...

Key Risks
OSK has a high component of developmental risk and an
above-average operating risk profile due to the low-grade
nature of deposit.
Corporate Prof i le
Osisko Mining Corp. (www.osisko.com) has the Canadian
Malartic deposit near Val d’Or, Quebec. The deposit is currently
a 6.3 Moz reserve being developed as an open-pit gold mine,
processing 55,000 tpd of ore. At capacity, the mill should
produce >600 koz of gold per year at cost <US$350/oz. Funding
for the US$789 million capital cost is largely in place – the
primary challenge is the physical construction of a mine and mill
of this size.
EVENT – SITE VISIT TO THE CANADIAN MALARTIC SITE
We recently had the opportuni ty to visi t Osisko’s Malartic si te in the Val
d’Or region of northwestern Quebec.
HIGHLIGHTS – A WELL-ADVANCED DEVELOPMENT SITE
A huge project: The Canadian Malartic project is by al l measures a
major project. Estimated capi tal to construct the mine and mil l is
US$789 mil lion, of which US$82 mil lion has been spent and another
US$204 mi ll ion commi tted. Of these amounts, ~50% of the relocation of
a portion of the town of Malartic has been completed, and major longlead
i tems for the mi ll have been locked, of which the SAG and bal l mi ll
components have al ready arrived at si te. The target is to construct a
55,000 tpd open-pit and mine by the end of 2010.
A significant reserve and resource that has the potential to grow:
The recently-completed feasibil i ty study publ ished a reserve of 183.3
mil lion tonnes grading 1.07 g/t, containing 6.3 Moz of gold. However,
dril ling has identi fied a higher-grade extension to the defined reserve,
and when additional dri ll ing is incorporated in the next reserve/resource
statement, there is the potential to add a signi ficant amount of highergrade
tonnage. This area, cal led South Barnat, is believed by OSK to
contain 1.81 Moz at 2.02 g/t, which suggests that the potential for
reserves of ~7.5 Moz at a grade of ~1.3 g/t is reasonably good. The new
reserve/resource should be out mid-year.
Challenges have been identified and addressed: The on-si te
development team largely consists of the group that bui lt the Gros
Rosebel mine (previously Cambior, now IAMGOLD). The team
recognizes that a deposit of ~1.07 g/t has l imited tolerance for error.
Hence, metal lurgy and rock hardness have received particular attention,
and the focus now is to construct the mil l site. We were favourably
impressed by the attention to detail .
Funding risk largely removed: OSK recently raised the equity funds to
largely remove the financing risk of the mine. While there could stil l be a
small gap in the funds required, we are qui te sure that senior banks wi l l
be happy to complete the last bit of funding requi red to complete the
mine (~US$75-$100 mi ll ion).
VALUATION – ABOUT DEVELOPMENT RISK AND MAKING MILESTONE
OSK is about additional reserve/resource potential , and about making
development milestones. Major hurdles have al ready been achieved
(funding). While the current NPV of OSK at an 8% dcf is in the order of
$6.12/sh, we recognize that i f al l funding and development milestones
are met, come late 2010 OSK should be worth in the order of $9.63/sh, a
return potential of 57.3%. OSK is currently trading at C$143/oz of
resource.
RECOMMENDATION – LOOK TO ADD ON WEAKNESS
Valuation is a bit stretched, but we would look to add on weakness.
VALUATION CATALYSTS – NEXT RESOURCE RELEASE IN Q2/ 09
This report has been created by Analysts that are employed by Research Capi tal Corporat ion, a Canadian Investment Dealer.
For further disclosures, please see last page of this report.
www. researchcapi tal .com
Toronto 416.860.7600 Mont real 514.399.1500 Vancouver 604.662.1800 Calgary 403.265.7400

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