All eyes on Windfall
The Canadian Malarctic mine in Quebec was supposed to become the cornerstone asset of Osisko Mining as the company, which discovered and built it, grew into a bigger and better intermediate Canadian gold producer.
Having been forced to sell the last company he built with partners Sean Roosen and Bob Wares, after putting together an irresistable asset, John Burzynski has put some thought into how to defend his current venture, the new Osisko Mining, from a hostile takeover.
“Land mines,” he jokes. “And barbed wire,” Burzynski says, laughing. “I wish!”
Led by Burzynski as president and CEO, Osisko Mining 2.0 is once again in possession of a prized asset – the high-grade Windfall Lake gold project, located 200 km northeast of Val-d’Or, in the Eeyou Istchee James Bay region of Quebec.
And this time, gold is in the midst of setting new highs – making intermediate and senior gold producers even hungrier for ounces to replace their declining reserves.
With its latest resource update, in February, Windfall has grown to 5 million oz. gold in total – comprised of 4.1 million indicated tonnes grading 9.1 g/t gold and 14.5 million inferred tonnes grading 8.4 g/t gold. Building on a 2018 preliminary economic assessment (PEA) for the project, the company is drilling at a furious pace – it hit the million metre mark earlier this year – to prepare an updated and upgraded resource later this year, followed by a feasibility study next summer.
The exploration success thus far, combined with the Osisko team’s past success and the hot gold market mean there are a lot of eyes on Windfall.
“Certainly, there’s a scarcity value, not just nationally but internationally in terms of new gold deposits,” Burzynski says.
But the new Osisko has some protection against potential hostile offers. The current gold rally means there wouldn’t be much appetite among shareholders for an opportunistic bid. (In addition, Osisko Gold Royalties, which owns a 5% NSR royalty on Canadian Malartic and is led by Roosen as CEO and chair, holds 16% of the stock.)
But the main way to protect the company is just to stay the course.
“We’ll just keep driling as quickly as we can to try and stay in front of all those guys,” Burzynski says. “The only certain defence against a hostile takeover is a high share price and a high valuation on your deposit. I think we’ve been able to achieve that by drilling as much and as quickly as we could.”
Urban–Barry greenstone belt
Osisko Mining acquired Windfall in 2015, when the founders of the original Osisko decided to recreate the company with some assets from Osisko Gold Royalties, plus several other acquisitions. One of the acquisitions was of Eagle Hill Exploration, which had defined a 1.5 million oz. gold resource at Windfall.
An initial 50,000-metre drill campaign was planned just to decide whether to keep the asset as the new Osisko figured out where to focus its energy.
The company quickly determined that previous operators had misinterpreted the geology. That was easy to do as the Urban–Barry greenstone belt, where Windfall is located, has only seen a fraction of the drilling other camps in the Abitibi (Timmins, Val-d’Or) have seen.
“We did a little bit of age dating on the intrusives related to Windfall and some of the other local gold intrusive deposits and we found that they all fall within about 2.69 to 2.72 billion years old, so immediately that got us pretty excited because what it told us what was that Windfall is not a singularity; there was a belt mineralizing event along a similar feature like the Porcupine-Destor Break or the Cadillac Break,” Burzynski explains.
Unlike the other Abitibi camps, Burzynski says the initial work Osisko did at Windfall indicated that mineralization isn’t located along a primary fault, but between fault sets.
“In the minds of a lot of the old prospectors and mining companies in the Abitibi, if you were 100 metres away from the main break, you were too far away and had to get back to the break and start drilling again, because mineralization on any of the classic gold mines in Val-d’Or or Timmins is intimately related with the main break,” he explains.
“What we initially saw at Windfall was that the bulk of the Eagle Hill resource was located between two faults – it looks like there’s a large, regional synestral fault system, so you have extentional faults and intrusives that came into the open space.”
The company has identified five main intrusive events, all with their own chemistry, and has found that the second mineralizing event is the one that’s associated with the gold.
“If you identify that porphyry, you’ve identified the gold event,” Burzynski adds.
With a better understanding of the geology (it classifies Windfall as an Archean intrusion-related gold system, with gold occuring as a contact-style mineralization) Osisko has so far defined the deposit along roughly 2 km of strike, and to a vertical depth of 1,500 metres. The mineralization occurs in lenses that are about 5 to 10 metres thick and stacked en echelon about 100 to 200 metres thick.
The current resource is contained in four zones – the Main zone, Underdog, Lynx and F zones.
The high-grade Lynx portion of the deposit, discovered in 2016, has accounted for the lion’s share of resource growth at Windfall, with wider widths and an average grade of 11.3 g/t.
“Lynx appears to be the main feeder system and Lynx is parallelling what we call the Bank Fault, which would be the equivalent of the Cadillac Break or Porcupine-Destor Break for us, and we’ve been chasing that downplunge,” Burzynski says.
While Windfall has been growing, there are many more targets (more than 100) on Osisko’s 2,700-sq.-km land package to test. Once infill drilling is completed, the team will begin with three principal targets within a 5-km radius of Windfall, including Fox.
Upcoming feasibility study
A 2018 PEA forecast that Windfall as it stood then (at around 3 million oz. gold) would cost $397 million to build and produce an average of 218,000 oz. gold per year over a mine life of 8.1 years.
The study projected Windfall could generate an after-tax internal rate of return of 32.7% and, using a discount rate of 5%, a net present value of $413.2 million.
“When we did the PEA in 2018, we were assuming a US$1,300 gold price and 6.7 gram deposit, and Windfall had very strong economics,” Burzynski says. “Now today at US$2,000 gold and 8.5 grams – it looks like it could end up at 9 – this is a very strong deposit.”
The study looked at a 3,200 t/d underground operation using long-hole mining methods, and combined mining at Windfall with mining at the Osborne-Bell deposit near Lebel-sur-Quévillon, also owned by Osisko. Since Lebel-sur-Quévillon, 115 km west of Windfall, has excellent infrastructure, including power, the study envisioned building a mill there.
However, with the Windfall deposit continuing to grow, the upcoming feasibility study will include an onsite mill. And the February Grande Alliance infrastructure announcement between the Eeyou Istchee James Bay Cree and the Quebec government means the company will have power available onsite.
The 30-year Grande Alliance agreement covers road, rail, port and power infrastructure in the region, including a powerline from Lebel-sur-Quévillon directly to the Windfall site.
“One of the key things about the Grande Alliance is this was an idea put forward by the Cree First Nation, so they’re in the driver’s seat as to which areas they would like to see development in. I think that’s going to make for much smoother sailing in terms of our timeline.”
The power line should shave about $100 million off the project capex, Burzynski estimates, with another $100 million coming from underground development savings. The PEA had not considered existing underground infrastructure – the company has developed a 7-km underground ramp at the project, which ideally will become a production ramp.
Taking into account a three-month government-mandated closure related to COVID-19, the infill drilling necessary to complete the feasibility study resource should be complete by the end of 2019 or early 2020. With the feasibility on track for next summer, and permitting expected to take 6-12 months with another 12 months for construction, Osisko could be pouring gold at Windfall as early as the second half of 2023.
And with that comes a second chance for the Osisko team to create a new intermediate gold miner.
“Over the course of my career, we’ve seen a lot if not most of what were the famous Canadian mining houses disappear and nobody’s really been focused on building new ones,” Burzynski says. “When Bob and Sean and I got together almost 20 years ago that was the whole goal for Osisko.”
He adds: “If it all works out the way we think it will, this could be a 250,000 oz. to potentially 300,000 oz. a year gold producer. And if we can find a few more Windfalls up and down the belt, you have organic growth within a district easily accessible to one milling operation that could be scaleable. That’s a pretty good start to growing a new Canadian intermediate miner.”
Drilling in ‘fast-forward’
Since joining Osisko Mining in March 2017, Alexandria Marcotte, Osisko’s vice-president, project co-ordination, has seen the project grow from five drill rigs up to 24.
With a target of 275,000 metres for this year – most of that focused on infill drilling with an eye towards next year’s feasibility study – there are 250-275 people at the camp at any one time, making it happen.
She says the whole exploration team is excited to be part of the project.
“Usually it takes a decade” to put a mine into production, Marcottte says. “A lot of that is because it takes so long to drill, and that’s what Osisko is good at: putting it in fast-forward – let’s just get to the part where we mine.”
While the team’s original theory of looking for gold on the contacts of the porphyry intrusions has proven very successful in guiding the exploration program, some surprises have come out of the drill program, Marcotte says.
“One of the biggest surprises is really the grade,” she says. “Usually you expect a bit of a dip in the grade as you infill, because high grade is hard to maintain – whereas for us it’s actually gone up as we do the infill.”
That drill program has also included Canada’s longest drill hole – a 3,467-metre hole called “Discovery 1” that was started last May and only completed in late January.
“As you go deeper, it’s logistics – it just takes time to get the core to surface,” Marcotte explains.
Osisko geologists wanted to drill the hole to get a better understanding of the depth of the system and see if the source of the gold could be found.
The company asked its drill contractor, Major Drilling, to start at a challenging flat angle.
“If you want to drill really deep, typically you start very steep – at a -85, -75 degree angle,” Marcotte says.
The first attempt, drilled at -56 degree angle, had to be abandoned after the hole deviated too much. But a second started several weeks later at a -51 degree angle was successful, with Major using 11 wedges to keep the hole on target.
Designed to test downplunge extensions of known zones on its way down to target, the hole did extend the Underdog and Triple 8 zones, while at depth, it hit large areas of 100 to 200 metres of roughly 1 g/t gold.
“We only ever see (that) around the high-grade zones,” says Burzynski, adding further drilling could show the area is somewhere near a down-plunge extension of the Lynx system.