Osisko Mining Piquing More Than Just Goldcorp's Interest

The company revalues its Canadian Malartic project and says that if it has to sell, the project is worth a lot more than what its rival is willing to pay.

Mar 24, 2014 at 11:49PM

A different place, a different time, and Canadian gold miner Osisko Mining (NASDAQOTH:OSKFF) might have had a bevy of suitors lining up to bid for its valuable Canadian Malartic project in northern Quebec. But a weakened market that's seen the price of gold tumble has left a long list of otherwise potential bidders nursing wounds, cutting costs, selling assets, and trying to bolster debt-ladened balance sheets. Ever since Goldcorp (NYSE:GG) made its bold, low-ball bid for the miner in January, there's been the expectation that someone would step forward with a higher offer, but no one's stepped up to counter it.


Canadian Malartic. Source: Osisko Mining

Not that there's not interest, mind you. Says Osisko, "lots" of companies have expressed interest as the miner seeks a second path around Goldcorp's offer, but nothing has materialized yet as the deadline for its standstill agreement inches closer to expiration. 

The two miners were set to square off in court earlier this month, but instead they announced that Goldcorp agreed not to take up and pay for any Osisko shares under its offer until April 15, in return for Osisko's agreeing to provide Goldcorp full access to its books for review by April 1. So on Thursday, Osisko released an updated mine plan that estimates a net present value of Canadian Malartic at $3.1 billion and a market value of around $4.4 billion, after accounting for the trading multiples of its peers.

Osisko says both show that Goldcorp's $2.9 billion offer is woefully inadequate and that it should expect the miner to waive more conditions and extend deadlines to give shareholders more time to accept its offer. Which is what Goldcorp did last week, extending its about-to-expire offer until April 4. But since there's a robust counterattack plan under way, Osisko wants to remind investors that Goldcorp can't do anything before April 15.

In reality, Osisko doesn't want to sell itself at all. Because it's so early in its development and because Canadian Malartic holds such promise, Osisko can and would do well as an independent miner. Its updated mine plan estimates that the project will produce on average 597,000 ounces of gold annually over the next 14 years, at all-in sustaining costs of just $691 an ounce.

If you take an average price to net asset value of some of the best gold mining companies, like Barrick Gold, Newmont Mining, and Yamana Gold, and applied it to their valuations, you'd get a price of around $10.10 per share for Osisko, 49% above where it closed on Friday.

That should give investors confidence that they don't have to accept Goldcorp's offer, or any offer for that matter, as they have a deep resource they'll be able to value for years to come. While there's the possibility that new offers will be made within the next few weeks, an independent Osisko Mining might be the best way to play this gold project after all.

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