The fears that Osisko Mining Corp. , once the darling of the Canadian mining world, would hit a nasty slump have all but come true.
Last fall, investors started to worry that the Quebec-based miner would take a hit when development issues plagued its Canadian Malartic mine, and the cautious tone forced Osisko's stock to trail its peers. Those worries have since become a reality, and Osisko has plummeted.
When the miner reported quarterly earnings last week, gold production came in at about 91,000 ounces, off from earlier guidance of 108,000 ounces. Osisko admitted that the installation of its first crusher hampered development and acknowledged that its been having troubles with its supply chain. That isn't the most promising news because a second crusher is supposed to arrive in June and be installed in July. And to make matters worse, the company is now dealing with the aftermath of a recent fire.
On a conference call last week, chief executive officer Sean Roosen said the company is now 2.5 to 3.5 months behind on its transition from production of 35,000 tonnes a day to 55,000 tonnes a day.
With so much pessimism around production, investors have fled from the stock. Osisko is down about 30 per cent year-to-date, and more importantly, has lost 57 per cent from its peak over the last year. To put that in perspective, Barrick Gold Corp. is off 33 per cent from its one-year peak, Goldcorp Inc. is off 40 per cent from the peak and Yamana Gold Corp. is down 26 per cent from its peak.
As the delays pile up, analysts have become wary. Brad Humphrey at Raymond James Financial, for instance, now expects that this year's frustrations will creep into the fourth quarter of 2012. In other words, there's still a long way to go.
But on the positive side, he noted, Osisko's grade is coming in better than expected, averaging 1.05 grams per tonne, up from 0.96 grams per tonne in the fourth quarter.