Osisko’s Windfall could be in production by 2024 – analysis

Since completing the longest diamond drill hole (3,467 metres) in Canadian history in January at its Windfall gold deposit in Quebec’s Abitibi greenstone belt, Osisko Mining (TSX: OSK) has continued to release a steady stream of news – despite the coronavirus pandemic.

In February the company updated the resource estimate for Windfall based on 2,941 drill holes completed between October 2015 and January 2020, outlining one of the highest grade resource-stage gold projects in Canada.

The mineralization occurs in three principal zones –Lynx, the Main Zone and Underdog – and the deposit has been defined from surface to a depth of more than 1,200 metres and remains open along strike and at depth. Indicated resources currently stand at 1.21 million oz. gold (contained within 4.13 million tonnes grading 9.1 grams gold per tonne) and inferred resources add another 3.94 million oz.  (14.53 million tonnes averaging 8.40 grams gold per tonne). The resource was based on a cut-off grade of 3.5 grams gold per tonne.

After suspending operations temporarily due to covid-19 in mid-March, Osisko resumed operations at Windfall in mid-May, closed a C$177 million bought deal financing in mid-June, and released more drill results, mainly from infill drilling at Windfall’s Lynx deposit.

In August, Osisko reported assays of 202 grams gold per tonne (uncut) over 28 metres starting 1,037.5 metres downhole; in September 115 grams gold (uncut) over 5.6 metres starting from 875 metres; in October 314 grams gold (uncut) over 3 metres starting from 843 metres; and 86.2 grams gold (uncut) over 14.5 metres from 858.5 metres in late November.

The most recent drill results, reported on Nov. 24, included 85 grams gold (uncut) over 10.8 metres starting from 929 metres downhole and 71.3 grams gold (uncut) over 4 metres from 882 metres.

Commenting on the company after the latest drill results, Kerry Smith of Haywood Securities, described Windfall as a “tremendous deposit with good predictability” and pointed to the company’s enormous drill program, which includes 22 rigs.

Smith said he expects the company will release an updated resource estimate by the first quarter of 2021 and a feasibility study in the early part of the second quarter.

The mining analyst believes Windfall could be in production by 2024 and producing 296,000 ounces of gold per year at all-in sustaining costs of below US$600 per ounce over a mine life of about 14 years.

The deposit “has the potential to be significantly larger than the current 5.1 million ounce resource over time,” Smith stated in research note to clients. “The resource is currently only to a vertical depth of about 1,200 metres and could easily have vertical continuity to double the current depth as all the zones are open up and down plunge along with many other targets.”

Smith has a target price of C$8.00 per share on the stock.

Over the last year, Osisko Mining has traded in a range of C$1.67 and C$4.85 per share and at presstime was trading at C$3.37 per share. The company has 342 million common shares outstanding for a market cap of about C$1.16 billion.

(This article first appeared in the Canadian Mining Journal)