Canadian Mining Journal


Osisko reveals details of mystery project in Guerrero State

VANCOUVER — Back in October of 2012, Montreal-based gold producer Osisko Mining (OSK-T) made a rather odd announcement. The company reported it had staked just shy of 10,000 km2 in Mexico, but explained it wouldn't be telling anyone...

VANCOUVER — Back in October of 2012, Montreal-based gold producer Osisko Mining (OSK-T) made a rather odd announcement. The company reported it had staked just shy of 10,000 km2 in Mexico, but explained it wouldn’t be telling anyone exactly where its new project would be located for “strategic reasons”.

The veil of secrecy was lifted further on July 4 when Osisko revealed it was well into exploration efforts on the Guerrero gold belt (GGB), and released assays from a 20-hole reconnaissance drill program at its Cuervo anomaly.

It was not much of a stretch to pinpoint Osisko’s new project in Guerrero, where Goldcorp (G-T, GG-N) operates its long-running Los Filos gold mine, and juniors like Torex Gold Resources (TXG-T) and Newstrike Capital (NES-V) are sitting on advanced stage, multi-million ounce gold deposits.

Details are still spotty on where exactly Osisko is operating in the GGB, but the company did reveal that it has identified six main anomalies nearing drill stages, including the Milagro anomaly, which has a 4 km by 1 km soil and lithogeochemical signature. Osisko has reportedly completed prospective geology over around 11,800 km2, including roughly 7,700 stream-sediment samples, 2,800 rock samples, and 3,800 soil samples.

Osisko has tacked on around 320 km2 worth of geophysics over the area, and subsequently released assay results from a drill program at Cuervo, which indicates the presence of gold-silver-copper skarn mineralization across a 4 km by 2 km corridor. Additional mapping and sampling has extended the defined mineralization along strike.

Osisko’s drill program appears to be a standard scout initiative with intercepts running from surface to a maximum depth of around 120 metres. The company hit some fair gold values, but it is the copper content in its skarn mineralization that tend to stand out a bit more, especially in regards to some of the longer intervals.

Highlights from the maiden program at Cuervo include: 68 metres of 1.26 g/t Au, 31.5 g/t Ag, and 0.53% Cu from 40 metres depth in hole EC-015; 24 metres grading 1.26 g/t Au, 6 g/t Ag, and 0.23% Cu from surface in hole EC-017; 23 metres averaging 1.06 g/t Au, 7.86 g/t Ag, and 0.58% Cu from surface in hole EC-005; and 6 metres of 0.64 g/t Au, 40 g/t Ag, and 1.26% Cu from 12 metres depth in hole EC-001.

Milagro is likely Osisko’s next drilling destination and represents the company’s largest target, where skarn and epithermal mineralization are developed within a 20 km by 10 km area of hydrothermal alteration. Osisko’s main target within Milagro is a 4 km by 1 km soil and rock anomaly produced by discontinuous outcrops of gossans developed after the oxidation of magnetite-sulphide bearing skarn.

Rock samples from the discontinuous gossans outcrops returned values as high as 8.2 g/t Au, with more than 25% of samples with values above 0.5 g/t. Osisko’s drill-ready target is open to the north, and the company expects to receive all necessary permits in the second half of 2013.

The company has been hit hard by falling gold prices, however, and announced during the first quarter that it would be cutting its Mexican exploration budget in half. Osisko determined it would be decreasing discretionary spending by around $80 million, with principle savings derived from its exploration and development projects.

Osisko’s updated budget pegs capital expenditures for 2013 at $134 million, with $31.6 million slated for exploration initiatives, which represents a $10.4 million reduction. The company reported $140 million in cash and equivalents at the end of the first quarter, and generated $62.5 million in operational cash flow over the first three months of 2013.

Osisko has traded within a 52-week range of $2.98 and $10.62, and closed at $3.56 per share at the time of writing. The company maintains 437 million shares outstanding for a $1.55 billion press time market capitalization.

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