Thoughts on Osisko and Miningman3During this joyous season decided to see what informative posts have been made during the last week. Lo and behold I see that Billy Bob (Miningman3) the $180,000 super mining consultant has entertained the board with his usual display of dazzling intellect or lack thereof. I'm thinking the $180,000 should probably read $1.80 and even then he would be overpaid. I can't resist the ad hominem attacks.
Even poor Viena had to face Billy Bob's(Miningman3) (ir)rational thinking style. (LMAO) In one quote Billy Bob talked of N43-101 resources of between 6-8 million ounces. Viena then correctly pointed out that the N43-101 compliant resource was 8.4 million ounces. Miningman3 then complained and said that is wrong because those ounces aren't reserves even though his intial statement revolved around N43-101 resources. That's when I started shaking my head again.
Miningman3 in his latest post seems fixated on a price of $40 an ounce as a a potential takeover price for Osisko or a market cap slighlty in excess of of $500 million. Only a month ago he was saying Osisko wouldn't be taken over unless the share price went down to a $1.00 or $1.25 (market cap of around $200 million). Does anybody else get the sense the poor guy is naive ( euphemism for idiot). It's Christmas. I'm being nice.
When Viena asked for any rational for the $40 an ounce or any recent takeovers that had used that as a valuation metric Billy Bob came back with not a successful bid but a rejected offer for NovaGold????. Obviously if the offers were rejected they were not sufficient. The$35 an ounce offer for Novagold by Barrick was clearly a lowball bid and was rightly rejected at the time by Novagold. Barrick already owned 50% of the Donlin project and was trying to steal the remaining 50%. The share price of Novagold subsequently went down as the cost of theDonlin project skyrocketed in excess of $5 billion and their remaining mine in Alaska had to shut down. The rejected offer and Novagold's subsequent decline are two separate issues.
The correct reponse or comparables for an Osisko takeover would be to look at the most recent actual takeovers in Canada not rejected takeovers. These would be Gold Eagle by Goldcorp and Miramar by Newmont. At the time the Gold Eagle takeover was announced it was a $1.5 billion takeover. Eventually shareholders ended up with $725 million in cash and 15.6 million common shares of Goldcorp. Not bad. This was for a company that basically had not reserves or even resources at the time but an exploration target potential report of between 9-13 million ounces. The other most recent takeover was Miramar by Newmont for also a $1.5 billion cost. Prior to that we also had Cumberland (350,000 ounce producer) by Agnico Eagle for $710 million.
Given that Osisko is approaching producer stage in 2010 and will be producing in excess of 700,000 ounces at a cash cost of under $300 with South Barnat and an IRR of close to 30% it is not surprising that this summer a takeover price of $1.8 billion was bandied about on Bay Street. As someone else had posted the Adjusted Market Capitalization valuation approach will not be used by a major when assessing a takeover price. It will be be based on primarily the economics of the project (IRR and NPV). If there was any uncertainty regarding Osisko it revolved around getting financing but I think that issue has been put to bed. Pretty much a done deal given the positive economics.
Should be an exciting and profitable 2009 for Osisko shareholders. MERRY CHRISTMAS TO EVERYONE!!
As for Billy Bob (Miningman3) I am reminded of the statement "TWO THINGS ARE INFINITE: THE UNIVERSE AND HUMAN STUPIDITY". But you do provide comic relief!!!!!!!