By Andrew Willis
November 20, 2009
Someone forgot to tell Osisko Mining (OSKFF.PK) it’s a takeover target.
The junior mining play owns what’s likely Canada’s next great gold mine, under the town of Malartic in west-central Quebec. For months, Osisko has been stalked by rivals, with Goldcorp (GG) emerging as significant minority shareholder.
However, rather than simply developing its single property and waiting for a near-inevitable offer, Osisko is doing exactly what it takes to become the next Goldcorp, or Barrick Gold (ABX). The company is attempting to use the balance sheet strength that comes from owning one great mine to build a strong portfolio of properties.
If successful, Osisko can further distance itself from a pack of junior companies, and move into the ranks of intermediate and even senior mining companies, with a corresponding rise in the valuation. Right now, this company sports a $2.3 billion market capitalization and its stock is up 423% over the past 12 months.
This week saw Osisko ink deals with two smaller mining companies, Clifton Star Resources and Orex Exploration. The Clifton Star arrangement is a joint venture on a mine in Quebec. The Orex deal gives Osisko an option on a mine in Nova Scotia. Both these agreements reflect the fact that Osisko has the cash needed to fund project beyond the Malartic mine - there is $700 million in its coffers.
Osisko’s strategic moves add a delicious tension to this stock, as potential suitors weigh the timing of any play they might make for the company.
Right now, analysts don’t give the company much credit for properties beyond Malartic. RBC Dominion Securities said Friday in a report: “While these new joint ventures have potential to create value for Osisko shareholders in the future, RBC Dominion has not included them in its current valuation.”
The clock is now ticking. If Osisko can become a multi-mine company, its jet-fuelled stock could rise even higher, making a takeover that much more expensive, or winning the company continued independence by making an acquisition too expensive to contemplate.
http://seekingalpha.com/article/174579-osisko-mining-developing-into-a-multi-mine-player?source=article_lb_articles
