Excerpt from Stockwatch Gold-Today John Burzynski's Osisko Mining Inc. (OSK) dipped to an intraday low of $3.40 before ending the day down 19 cents to $3.58 on 8.16 million shares. The drop follows word the company has formed a 50:50 joint venture with Gold Fields Ltd. on its Windfall Lake gold project in northwestern Quebec. Goldfields is paying $300-million on signing and another $300-million once all the needed permits are in hand for the project.
Mr. Burzynski, chairman and CEO, was "very pleased" to partner with Gold Fields at Windfall, lauding the arrangement as "the start of what we believe will prove to be a long and fruitful partnership." The arrangement further strengthens the company's balance sheet, Mr. Burzynski beams, and allows his company to further derisk -- and further dilute -- its interest in Windfall, all while bringing the company "a very important step closer to realizing [its] objective of becoming a leading Canadian gold producer."
Mr. Burzynski cheers that the full terms of the arrangement bring Gold Fields' acquisition cost to $1.2-billion, with exploration commitments, contributions to preconstruction work and project capital added atop the $600-million in cash payments to Osisko -- assuming, that is, the project is ultimately permitted and approved by the partners consistent with the Windfall feasibility study.
That study, revealed late last year, was based on a reserve of 12.18 million tonnes grading 8.06 grams of gold per tonne, about 3.16 million ounces. (The full resource lists 7.4 million ounces of gold and four million ounces of silver, all at higher grades than the reserve, which suffers the typical dilution resulting from a more rigorous calculation.)
The capital cost of the plan, which called for a 3,400-tonne-per-day mine, was not for those faint of heart or light of wallet with a projected expenditure just short of $800-million. The bottom line was attractive nevertheless, with an internal rate of return of nearly 34 per cent and a discounted net present value of $1.17-billion, both after taxes. Osisko's share of that valuation is now halved, but it has enough cash and more to cover its share of construction -- at least before any cost overruns that is.