By 2006, Osisko Mining Corp. knew it had a major gold discovery near the town of Malartic in northwest Quebec. But it also had a serious problem.
“Everything was fine and dandy with the drilling, except that when you were standing by the drill, you could throw a rock at the closest house,” chief executive Sean Roosen recalls.
Five years later, Osisko is hosting an opening ceremony for the Canadian Malartic gold mine on Monday. It will be the biggest gold mine in Canada once it reaches full production, with an estimated 625,000 ounces of gold output a year for the first five years. And as the project starts generating major cash flow, Osisko will enter the big leagues of Canada’s mining sector.
But getting here hasn’t been easy. Mr. Roosen remembers almost losing the company following the financial crisis in 2008. And there was that little matter of the town being in the way of the mine.
The company’s roots began in 2002 when Bob Wares, then chief operating officer, searched through a Quebec database for possible drill targets near the legendary Val d’Or gold mining camp.
The region has produced countless mines over the years, but almost all of them are of the high-grade, underground variety. Osisko went looking for low-grade, bulk tonnage deposits in the region instead. That was rarely done, simply because it went against the established geologic model of the camp.
After studying reams of data, Osisko found some interesting drill intercepts around Malartic, where there was a past-producing mine. The project was available for auction, so Mr. Roosen’s team bought it for the laughable price of $80,888. It is almost certainly the biggest bargain in Canadian mining history.
Osisko started drilling aggressively, and soon realized that a lot of the potential gold ounces were right in the town of Malartic (population 3,600). It meant a big open-pit mine was only possible if the townspeople would agree to be relocated. Mr. Roosen and his team went door-to-door talking to the locals, and the response to the mine turned out to be positive. Malartic was in an economic depression so severe that even the local Tim Hortons had to close.
Starting in 2007, Osisko physically moved more than 200 homes to a new subdivision of town, a process that went smoother than almost anyone imagined. With that finished, it could talk seriously about a mine that seemed far-fetched to investors for a very long time.
“We were not well-received in the market at the beginning. Being low-grade and having to move a town did not catch too much investor satisfaction,” Mr. Roosen says.
By late 2008, Osisko was well into its feasibility study on Canadian Malartic when it faced a new challenge: the global financial crisis, which made raising money almost impossible. The company had two problems: It did not have nearly enough money to build the US$930-million mine, and the US$180-million of cash that it did have made it a takeover target.
“A lot of investment bankers on Bay Street were calling us and saying that someone was interested in our company. They didn’t really want the deposit, they wanted the cash. That was a pretty scary time,” Mr. Roosen says.
For the rest of this article, please go to the National Post/Financial Post website: http://business.financialpost.com/2011/05/29/birth-of-a-gold-major/