Osisko Mining's focus fixed on Malartic gold

MINING REPORTER

Sean Roosen is sitting pretty right now but he's not sitting still.

The burly chief executive officer of Osisko Mining Corp. isn't content to wait for a takeover bid to roll in, even after major bullion producer Goldcorp Inc. revealed it has amassed a 13-per-cent stake in his Montreal-based company.

"I think everybody should feel pretty happy about such a quality investor coming to the show," Mr. Roosen said in an interview yesterday.

Osisko is pressing on with the development of its $930-million Canadian Malartic gold project in Quebec. With 6.3 million ounces of gold reserves and growing, Canadian Malartic is the country's largest untapped gold deposit.

Despite daunting logistical challenges - which include having to move 200 houses, a daycare centre, church and school in the small town of Malartic to build the mine - Osisko expects to begin full-scale construction as soon as it receives its final mining permits some time in the next few months.

After staging a stunning recovery from the depths of the market meltdown last fall, Osisko has become Canada's most valuable mine developer, boasting a market capitalization of nearly $2-billion. It has secured 80 per cent of the financing needed to build the Canadian Malartic project and expects to have the rest in place this fall.

"We've got the bow pointed into the waves, we've set the jib and we're sailing as fast as we can towards production," Mr. Roosen said.

With its own development property nearby and a need to replenish its declining gold reserves with large-scale projects, Goldcorp has long been seen as a logical buyer of Osisko. One source close to the Vancouver company said Goldcorp hopes to diminish the chances of a full-blown auction for the junior miner. "Who wants to go up against Goldcorp if they've already got this chunk?" he said.

Including unexercised warrants, Goldcorp's stake in Osisko is about 15 per cent.

In the past, other mining companies have acquired toeholds in junior miners before launching a full takeover offer. For example, Newmont Mining acquired a 15-per-cent stake in Miramar Mining Corp. before launching a $1.5-billion takeover in 2007.

According to documents filed with the Securities and Exchange Commission, if Goldcorp acquires more than two-thirds of Osisko's shares in the next 18 months, it will pay the difference in price to the seller or sellers of the Osisko shares and warrants it acquired this week.

Goldcorp is also understood to be concerned that Osisko may be considering potential acquisitions of its own. "Goldcorp likes this deposit because it is huge ... getting it cleanly on its own is certainly in Goldcorp's interest," said a source familiar with Goldcorp's plans.

Mr. Roosen would not rule out the possibility of doing a deal with a fellow junior miner. Once Canadian Malartic is built, Osisko will be looking for new projects. "We're extremely active," Mr. Roosen said.

TD Newcrest analyst Greg Barnes said Goldcorp's investment could flush out other potential Osisko bidders, including Barrick Gold Corp. and Kinross Gold Corp.

One gold miner unlikely to bid for Osisko is Agnico-Eagle Mines Ltd. David Smith, Agnico's vice-president of communications, said Osisko's market value has become too large for it to consider a deal. He said Agnico has no plans to stray from its "historical corporate strategy, which is acquire small and think big."

Mr. Roosen, however, doesn't think that Goldcorp's interest will dissuade other potential buyers. "The fact that we are so well financed opens the door to other bidders who might have been scared of the [capital expenditures]for the project. I think it is a pretty level playing field for everyone at this point," he said.