trending Market Intelligence /marketintelligence/en/news-insights/trending/6fhgvutey0ubgegvx_1thg2 content esgSubNav
In This List

Haywood slashes Osisko Mining buy target after Windfall resource

Blog

Insight Weekly: US stock performance; banks' M&A risk; COVID-19 vaccine makers' earnings

Blog

Insight Weekly: LNG exports surge; investors unfazed by inflation; neobanks drive VC funding

Blog

Essential Metals Mining Insights November 2021

Blog

[Infographic]: 2021 World Exploration Trends


Haywood slashes Osisko Mining buy target after Windfall resource

After Osisko Mining Inc. released its first maiden resource covering the Windfall gold project in Quebec, Haywood Securities slashed its buy target 25% from C$6 to C$4.50 a share.

The cut in the target price comes after Osisko's share price dropped following the May 14 release of the resource on a project that is being heavily drilled by a veteran team of Canadian explorers who were involved in the development and sale of the Canadian Malartic gold mine as part of a C$3.9 billion deal in 2014.

In a May 24 research report, Haywood analyst Mick Carew described the impact of the resource release as negative and lowered his resource model from 3.8 million ounces of gold grading 8 g/t of gold to 3.6 million ounces of gold grading 7.1 g/t of gold. He also raised concerns over spending on the project, among other things.

"We are wary of exploration expenditures incurred for resource growth," Carew said in the note. He also said he was "concerned" about the percentage of measured and indicated resources versus lower-confidence inferred resources. "Both likely disappointed the market, resulting in a 25% drop in Osisko's share price," he said.

Carew estimated that Osisko has grown Windfall by 1.29 million ounces of gold, adding to about 1.6 million ounces of gold that had been defined by previous operators of the project. Osisko, Carew calculated, spent about C$143 million on the project since 2015, driving one of the biggest exploration programs by any junior with as many as 24 drill rigs on site at one time.

But, for Carew, it may have been too much too quickly given the outcome so far. Carew said, "we feel that the drill program at Windfall was ramped-up too soon, which could explain the ~$111-per-ounce rate of discovery drilling."

Osisko Mining President and CEO John Burzynski could not be reached by phone May 28, but in the May 14 release outlining the initial resource, he called the resource a "great start" and pointed to ongoing resource growth and grade-boosting conversion of inferred resources to indicated resource. Infill drilling, he said, "has produced higher average grades and is a focus of our ongoing program."

Osisko estimated Windfall resources at 2.4 million tonnes grading 7.85 g/t of gold and 10.6 million tonnes grading 6.70 g/t in the indicated and inferred categories, respectively.

Still, while Carew pulled back on share price expectations, he maintained a bullish view of the project overall. He said the Windfall deposit would likely be world-class with the current resource serving as a base for "resource growth well beyond 3 million ounces."

A clearer picture of the economics of the project is expected to come later this year with Osisko planning to release a preliminary economic assessment of the project in the third quarter.