Lisa Wright is a business reporter with the Toronto Star, which has the largest circulation in Canada. The paper has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion.
It began with dreams of a glittering gold price and a gutsy geological gamble. And it took shape in Malartic, population 3,600, a town 520 kilometres northwest of Montreal that literally sits on a gold mine. The highly anticipated project became Canada’s largest gold mine when it opened in June.
But when Osisko Mining Corp. started drilling in 2005, they quickly made a discovery. “We realized the biggest problem was that there were 205 houses and six institutional buildings sitting right on top of it (the deposit),” recalls Osisko chief executive Sean Roosen.
“After we drilled 30 holes we said, ‘Well, that’s a pretty interesting deposit. Unless we can convince the good folks of Malartic to move, it’s a no go.’” That wasn’t the only hurdle.
Osisko had to talk Bay St. into a $1 billion financing for the big move and mine construction in the remote Quebec town amid a severe market downturn.
Malartic is located in the storied Abitibi gold-mining region that runs along the Ontario-Quebec border and was historically an underground mining camp. Osisko scooped up its first land parcel for the Malartic property for the rock-bottom price of $85,000 from Quebec bankruptcy liquidators in 2005.
Osisko’s geoscientists suspected there was a different geology than what had previously been found in the area, and that would be a launching pad for the next generation of gold mines there.
“We started with the thesis that the historical, geological interpretation of the region was very different from what had traditionally been applied there,” says Roosen.
“To have low-grade, bulk tonnage of this homogenous generation in this camp had never been documented before,” he says, noting there were plenty of naysayers when they originally went in.
By the time Osisko drilled the first hole in March 2005, Malartic was a dying town where unemployment was so high even the local Tim Horton’s had to shut down. The Domtar saw mill was about to close and when it did, it took more than half the town’s struggling businesses with it.
Roosen and his associates went door-to-door looking for support for the project and managed to get a majority of residents on board after extensive public consultations. There was one lone holdout — a man whose property was recently expropriated by court order.
The rest eventually made financial settlements minus legal battles, with offers well above market value and with the creation of a more modern neighbourhood, 1.5 kilometres from the old one, that included a new elementary school, daycare and community centre and playground.
“We physically picked up 142 houses and moved them. The biggest house we moved was a 4,000-square-footer. It was a very interesting process,” says Roosen.
While building the mining camp and raising capital, Osisko also built dozens of new houses in the $160 million relocation project.
At first, Osisko couldn’t get much traction in financial markets.
“The thought was the grade was too low (to be economic), that we would never move the town, that we would never get a permit, and that this was a very contrarian geological concept,” recalls Roosen.
But once he hired eight top guns in mine development from former gold miner Cambior in 2007, Roosen says, “we had a realistic shot at building this mine ourselves. It’s hard to convince the market that you can build these things, so you need credible people on board before investors are going to give you a billion dollars.”
The very determined group of veteran mining engineers and geologists was able to pull off the rare feat of seeing the project through from discovery to production. Usually a large, established producer with deep pockets takes over from a junior firm and assumes the huge expense of building the mine once the discovery and exploration work are done.
“You usually drill it off and put on the proverbial lipstick and high heels” to attract top dollar from the seniors, jokes Roosen.
“But I always knew if we didn’t build it ourselves we wouldn’t get paid for it properly. My view was that we could manage the risk of the relocation of the town better than anyone else because we were a single asset company and it was the only thing we had to do,” he explains.
And in a testament to just how aggressive the Osisko team is, the company managed to get the job done “bumper to bumper” in just six years — roughly five years faster than it normally takes to open a gold mine.
Roosen also credits the fact that the project is located in Quebec, which is renowned as one of the most mining-friendly jurisdictions in the world.
Over the last decade, gold miners have quite literally gone to great lengths to find the scarce precious metal in far-flung and politically troubled locales such as Tanzania and Kazakhstan. But they’re starting to look again in their own backyard for prospective deposits.
“Gold is having a bit of a resurgence in Canada,” says gold mining analyst Don Blyth of Paradigm Capital Inc. in Toronto.
For the rest of this article, please go to the Toronto Star website: http://www.thestar.com/business/article/1018309–sitting-on-a-gold-mine