Gold Fields' C$2.16B Osisko bid may spark gold sector consolidation – Osisko CEO

➤ The premium paid for Osisko is likely the highest paid in about a decade.

➤ The deal could spur more mergers and acquisitions in the gold sector.

➤ Osisko's CEO is open to developing another project, in gold or beyond.

John Burzynski, Osisko Mining's executive chairman and CEO. Source: Osisko Mining.

South Africa-listed miner Gold Fields Ltd. is set to acquire the other half of Canada-listed Osisko Mining Inc. that it does not already own in a C$2.16 billion deal announced Aug. 12. The proposal, one of the largest transactions for a nonproducing gold developer in recent years, could spark more mergers and acquisitions in the gold sector, John Burzynski, Osisko's executive chairman and CEO, told S&P Global Commodity Insights. The all-cash transaction comes with a 55% premium to Osisko's 20-day volume-weighted average trading price up to Aug. 9.

The deal will give Gold Fields full control over Osisko's Windfall Lake gold project in Quebec, which is being targeted for production in 2026 or 2027. Burzynski has spent the past nine years shepherding Windfall from a modest-sized gold deposit to one with over 7 million ounces in resources. The CEO was tight-lipped about what may come next for him professionally, but he is open to taking on another deposit.

S&P Global Commodity Insights caught up with Burzynski on Aug. 13 to discuss the deal and its implications for the sector. The following conversation has been edited for clarity and length.

S&P Global Commodity Insights: You have been building up Windfall for almost a decade to a 7 million-plus ounce gold project. How does it feel to be in the final chapter?

John Burzynski: It's been nine years from start to finish here. And we always talk about that in the business: It usually takes about 10 years, if you do everything right, from finding something to finishing a project. It's a great outcome for shareholders, certainly.

It's been a very lethargic market for mining investors over the last eight or nine years despite the tremendous rise in the price of gold, particularly over the last year to year-and-a-half. [The high gold price] hasn't, frankly, reflected in the share prices of the equities. Producers are making record margins, but unless you're in the producer class, you're irrelevant until you get to the finish line.

So, in one sense, this is a way for Osisko Mining investors to get that premium that we would have expected by the time we get into production. But they're saving about three years, right?

Are you getting a strong premium for the exploration upside at Windfall — given the potential for growth at a gold project like this — or is it constrained to the known deposit?

Nobody ever pays for the future.

It's a funny thing. The stock market doesn't lie. It values companies at what people are willing to pay for it — what you have in your first case, mineable scenario. At Windfall, it's based on the 4 million ounces we used in our feasibility study. Obviously, we believe it's a much bigger deposit. But normally, when people model these things [the upside doesn't] really play a part in the valuation of the company or the share price of the day.

I certainly expect this mine to be a generational mine. It will go for decades and decades based on, as a geologist, what I understand of it.

But as a transaction, this is probably the highest premium deal — certainly, as an all-cash bid — I can remember in the last 10 years.

When would you expect Windfall to get across the finish line in terms of permitting and production?

We're basically anticipating the permits in the first half of next year. This puts Windfall in the position to be in production probably very late in 2026 or early 2027.

It's a pretty low-risk project at this point, but there's never no risk in mining, right? We've seen some things happen to companies, particularly in the developer space over the last couple of years, where, as a single-asset company, you're very vulnerable to something that comes out of left field.

If anything, this transaction takes that risk, obviously, to zero because the shareholders now get the chance to realize a significant profit.

When you look at the gold M&A landscape, what does this deal tell you about the appetite of big producers for more projects?

It's a transaction of scale with a significant premium.

I heard a lot of comments from different people [Aug. 12] that they're hoping this is what sparks, basically, a kickoff in consolidation. I know a lot of people coming back from the Diggers and Dealers Conference in Australia, where I think that was the main theme of the conference. And our aptly timed deal, just as [the conference] was closing, kind of put a line under the topic.

Perhaps this is the beginning of further consolidation in the business. I know a lot of people have been waiting for that for a long time.

Did Windfall's location in Quebec — a stable jurisdiction, known for gold mines — play an important role in getting a premium price?

Absolutely. I mean there's no place like home. And particularly Quebec.

It's a very predictable and very safe jurisdiction. If there is an uptick in M&A activity, I'm not sure how much that's going to spill out into the riskier jurisdictions. But one of the underlying issues that all of the precious metal producers have is that there aren't a lot of targets to acquire. There may be a bit of a flurry of consolidation, but there just hasn't been a lot of work done in the last 10 years to develop new discoveries.

When we started on Windfall 10 years ago, we had a list. We looked at literally thousands of gold projects both domestically and globally, and we came up with a list of eight things that we thought might make something that we'd want to spend the next 10 years on. Windfall was on that list. And pretty much everything else on that list was acquired.

So as far as new projects, really what has to happen is there has to be a big increase in exploration spending to find new projects. There are a lot of smaller projects that haven't really been on people's radar. [The sector] is going to be forced to relook at those existing projects if they want any chance of growth at all.

What is next for you? Are you looking to develop another gold deposit or something different, maybe outside gold?

Too early to say. In the last 20 years, I've been lucky to work with groups of people where we have been successful in finding two world-class deposits [Windfall and, before that, the Canadian Malartic deposit]. I think I've got a third one in me. Certainly, we've done a lot of work on things outside of gold in terms of following ideas and discoveries.

We developed a couple of lists over the last 20 years of things we never really got to look at, because once you find one [like Windfall] you stop, drop, roll and focus on that.

We'll be going back to those lists. Stay tuned.