Osisko Mining Corporation

TSX : OSK
FRANKFURT : EWX


Osisko Mining Corporation

November 11, 2011 09:35 ET

Osisko Reports Third Quarter 2011 Results Net Profit of $9.3 Million

MONTREAL, QUEBEC--(Marketwire - Nov. 11, 2011) - Osisko Mining Corporation (the "Company" or "Osisko") (TSX:OSK)(FRANKFURT:EWX) is pleased to report its review of activities and financial results for the quarter ended September 30, 2011.

Third Quarter Highlights

  • Gold production of 73,814 ounces (YTD 120,419 ounces including pre-production period)
  • Earnings from mine operations of $38.3 million (YTD $39.9 million)
  • Net profit of $9.3 million
  • Cash flow generated from operating activities of $49.5 million
  • Commencement of construction of $32 million pre-crush circuit (currently 30 percent complete)
  • Grade reconciliation to the resource block model is currently plus 3 percent.

Sean Roosen, President and Chief Executive Officer, commenting on the third quarter results: "We are pleased with our financial results as we continue through the ramp up process at the Canadian Malartic Mine. We realized an average price of US$1,695 per ounce of gold sold in the past quarter, a cash margin of US$756 per ounce over our Q3 cash cost per ounce. Our operating performance continues to improve and with the completion of the pre-crushing circuit in the first quarter of 2012, we will be able to capture increasingly significant cash margins and generate solid cash flows in this strong gold market. Our flagship Canadian Malartic Mine will provide us with a strong financial base for our future growth as we seek opportunities to enhance shareholder value."

Since commencement of commercial production on May 19, 2011 the mine has generated a cumulative profit of $39.9 million. The monthly financial performance continues to improve reflecting the normal modifications made during a ramp up period.

The quarterly profit amounted to $9.3 million ($0.02 per share) compared to a loss of $10.2 million ($0.03 per share) in the corresponding period in 2010. The third quarter results include $13.2 million of non-cash items, including a write-off of $4.9 million on the Goldboro project and three other grassroots projects, stock option expense of $2.3 million, non-cash foreign exchange loss of $4.3 million and unrealized loss on investments of $4.0 million, partially offset by a gain on premium of flow-through shares in the amount of $2.3 million. The exclusion of these non-cash charges would result in an adjusted profit of $22.5 million ($0.06 per share) for the quarter. There were no mining operations prior to May 2011.

For the year-to-date, the loss totaled $19.8 million ($0.05 per share) compared to a loss of $20.9 million ($0.06 per share) in the corresponding period in 2010. The exclusion of non-cash items of $31.1 million (write-off of property, plant and equipment of $16.3 million, stock option expense of $7.8 million, non-cash foreign exchange loss of $2.8 million and unrealized loss on investments of $8.5 million, partially offset by a gain on premium of flow-through shares in the amount of $4.3 million) would result in an adjusted profit of $11.3 million ($0.03 per share) for the year-to-date.

Canadian Malartic Mine

The Canadian Malartic Mine produced 73,814 ounces of gold in the third quarter from the treatment of 3.0 million tonnes of ore. Production statistics since commercial production are as follows:

Q3 2011 Q2 2011 (43 days) Total
Ore Tonnes Mined (t) 3,004,468 829,419 3,833,887
Tonnes Milled (t) 3,086,324 1,470,783 4,557,107
Grade (g/t Au) 0.85 0.65 0.79
Recovery Au (%) 87.0 88.0 87.3
Gold Ounces Produced (oz) 73,814 27,100 100,914
Grade (g/t Ag) 0.73 0.58 0.68
Recovery Ag (%) 56.7 60.3 57.7
Silver Ounces Produced (oz) 40,751 16,432 57,183
Cash Cost per Ounce ($) 918 1,094 965
Cash Cost per Ounce (US$) 939 1,120 987

While costs have decreased $176 per ounce from the previous quarter, the presently high production costs are attributable to normal inefficiencies experienced in the ramp up of a new mine as well as the current lower than design throughput. The previously announced construction of a pre-crushing plant is expected to resolve this operating condition and operating costs are anticipated to be significantly reduced as throughput increases by approximately 50% to reach the design capacity of 55,000 tonnes per day. To date, $11.1 million has been spent on the total direct project cost of $32.0 million.

The mine generated an operating profit of $38.3 million from the sale of 72,100 ounces of gold at a realized price of US$1,695 per ounce ($1,681 per ounce) compared to an average market price of US$1,702; and 49,800 ounces of silver at a realized price of US$34 per ounce ($34 per ounce) compared to an average market price of US$39 per ounce. The remaining ounces are categorized in inventory.

The mine operating statement for the production period is as follows:

Q3 2011
($000)
YTD 2011(1)
($000)
Gold sales (ounces) 72,100 80,400
Silver sales (ounces) 49,800 49,800
Revenues 122,879 135,308
Operating Costs 66,913 93,773
Stockpile Costs 997 3,403
Total 67,910 97,176
Royalties and Refining 1,927 2,537
Depreciation 12,488 17,448
Total Production Costs 82,325 117,161
Inventory variation 2,262 (21,779 )
Total Costs 84,587 95,382
Net Mining Profit 38,292 39,926
1. YTD 2011 represents the period since commercial production (starting May 19, 2011)

Mining activities were affected by the noise levels of mining operations due to the necessity of having additional smaller mobile mining units working on the pre-strip (which is approaching completion) and availability of loading units (since rectified). Open pit operations mined on average 130,000 tonnes per day during the third quarter (stripping, ore and waste) and throughput to the mill averaged 36,742 tonnes per operating day, 67% of design capacity on a per operating day basis. Daily mill throughput in the quarter was affected by two planned shut-downs for liner changes/modifications in the SAG mill.

Tonnes milled during the quarter were 3,086,324 at an average grade of 0.85 g/t, with recovery of 87 percent for a gold output of 73,814 ounces. Grade reconciliation to the resource block model is currently plus 3 percent.

The operating statistics are as follows:

Total
Available
Hours
Operating
Hours
% Tonnage
(t)
Tonnes/
Hour
Tonnes/
per
Operating
Day
Q2 2,184 1,793 82 2,481,196 1,384 29,894
Q3 2,208 1,890 86 3,086,324 1,633 36,742
* In Q3 8 days of shutdown were required for SAG mill liner change and maintenance and in Q2 8 days of shutdown were required for ramp-up testing and adjustments.

A new daily throughput record of 50,159 tonnes processed was established on August 15, 2011.

Mining in higher grade areas will continue to progress in the fourth quarter of 2011 and the first quarter of 2012 as pre-strip operations open up these areas to pit development. Crushing and grinding optimisation work continues. Osisko has completed engineering work and is in the process of construction of the pre-crush circuit in preparation for the anticipated ramp up from 55,000 to 60,000 tonnes per day.

The Company has re-purchased a 1% royalty interest from Géoconseils Jack Stoch Limitée in consideration for the issuance of 460,000 common shares of Osisko. This royalty was encumbering a portion of the Canadian Malartic and Barnat deposits and is part of a 2.5% Gross Metal Royalty interest that was granted as a result of the acquisition of certain claims of the Canadian Malartic property in March 2006. Following this purchase, only 60% of the recoverable gold ounces at the entire Canadian Malartic Mine are subject to a 1.5% Net Smelter or Gross Metal Royalty, based on the most recently published reserve estimates.

Exploration and Development

A new resource estimate for Hammond Reef was released on November 7, 2011. New drilling by Osisko and Brett Resources from January 2010 to July 2011 (approximately 300,000 meters) has significantly increased the size of the deposit. Global inferred resource now stands at 10.52 million ounces of gold (based on 0.30 g/t Au lower cut-off), and in-pit inferred resource reaches 6.86 million ounces at a diluted grade of 0.63 grams per tonne gold, based on a Whittle-optimized pit shell using a gold price of US$1,200 per ounce, a corresponding lower cut-off grade of 0.28 grams per tonne gold and a waste/ore strip ratio of 1.25.

Additional drilling subsequent to July 2011 is anticipated to allow for the upgrade of the entire in-pit deposit to indicated category by the end of the first quarter of 2012 and measured and indicated category by the end of the second quarter 2012.

The Company continues to aggressively pursue growth of reserve and resource base through intensive drilling programs around the Canadian Malartic Mine, at its Hammond Reef Project and on various grassroots projects in Eastern Canada. A total of 86,141 metres (318 holes) were drilled during the third quarter, mostly from the definition drilling program at Hammond Reef.

During the third quarter, Osisko entered into a binding agreement with Energía y Minerales Sociedad Del Estado, the La Rioja state mining corporation in Argentina, regarding the development of the Famatina gold project.


The Company decided during the third quarter to terminate its option to acquire an interest in the Goldboro Gold Property of Orex Exploration. As a result, a write-off of $3.3 million was recorded in the third quarter. The Company also abandoned other grassroots projects for a total of $1.6 million.

Summary from the Company's financial position and results are as follows:

(in millions of dollars)

September 30, 2011 December 31, 2010(1)
Cash Position(2) 173.5 397.9
Working Capital 103.3 282.9
Total Assets 2,000.8 1,958.9
Total Debt 306.8 287.9
Shareholders' Equity 1,610.7 1,594.0
Q3 2011 Q3 2010
Net earnings (loss) 9.3 (19.8)
Cash flow from operations 49.5 (18.5)
(1) Revised under IFRS
(2) Includes Cash and Cash equivalents, Short-term investments and Restricted cash.

The unaudited condensed interim consolidated financial statements and Management Discussion and Analysis for the period ended September 30, 2011 will be filed on SEDAR on November 14, 2011.

Non-IFRS Financial Performance Measures

The Company has included certain non-IFRS measures including "cash cost per ounce", "adjusted profit" and "cash margin per ounce" to supplement its financial statements, which are presented in accordance with International Financial Reporting Standards ("IFRS"). Refer to the Company's third quarter 2011 Management Discussion and Analysis.

Third Quarter 2011 Results Conference Call

Osisko will host a conference call on Monday, November 14 at 11:00 AM ET, where senior management will discuss the financial results and provide an update of the Company's activities. Those interested in participating in the conference call should dial in at 416-981-9000 (Toronto local and international), or 1-800-773-0519 (North American toll free). An operator will direct participants to the call. The call will be retransmitted for 14 days with the following dial in number: 416-626-4100 or Toll-free 1-800-558-5253, access code 21545826.

About Osisko Mining Corporation

Osisko Mining Corporation operates the Canadian Malartic Gold Mine in Malartic, Quebec and is pursuing exploration on a number of properties, including the Hammond Reef Gold Project in Northern Ontario.

Mr. Luc Lessard, P. Eng., Senior Vice-President and COO of Osisko, is the Qualified Person who has reviewed this news release and is responsible for the technical information reported herein, including verification of the data disclosed.

Osisko Mining Corporation
Consolidated Balance Sheets
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
September 30,
2011
December 31, 2010
$ $
Assets
Current assets
Cash and cash equivalents 152,759 358,493
Short-term investments - 17,068
Restricted cash 17,159 11,176
Accounts receivable 41,235 30,731
Mining taxes receivable - 2,058
Inventories 42,270 -
Other current assets 7,572 7,329
260,995 426,855
Non-current assets
Restricted cash 3,575 11,202
Investment in an associate 1,678 2,158
Other investments 19,259 40,851
Property, plant and equipment 1,715,269 1,477,818
2,000,776 1,958,884
Liabilities
Current liabilities
Accounts payable and accrued liabilities 76,592 73,519
Current portion of long-term debt 81,094 70,405
157,686 143,924
Non-current liabilities
Long-term debt 225,690 217,481
Provisions 5,407 3,494
Deferred mining taxes 1,275 -
390,058 364,899
Equity attributable to Osisko Mining Corporation shareholders
Share capital 1,650,751 1,606,051
Warrants 13,166 13,166
Contributed surplus 52,530 43,390
Equity component of convertible debenture 8,005 8,005
Accumulated other comprehensive income (loss) (6,283 ) 11,019
Deficit (107,451 ) (87,646 )
1,610,718 1,593,985
2,000,776 1,958,884
Osisko Mining Corporation
Consolidated Statements of Income (Loss)
For the three and nine months ended September 30, 2011 and 2010
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
Three months ended
September 30,
Nine months ended
September 30,
2011 2010 2011 2010
$ $ $ $
Revenues 122,879 - 135,308 -
Mine operating costs
Production costs (74,647 ) - (84,045 ) -
Royalties (1,192 ) - (1,351 ) -
Depreciation and depletion (8,748 ) - (9,986 ) -
Earnings from mine operations 38,292 - 39,926 -
General and administrative expenses (6,577 ) (10,464 ) (24,563 ) (20,455 )
Exploration and corporate development expenses (7,774 ) (972 ) (20,934 ) (1,543 )
Other gains (losses) - - (485 ) -
Earnings (loss) from operations 23,941 (11,436 ) (6,056 ) (21,998 )
Interest income 454 981 1,964 2,282
Finance costs (6,995 ) - (10,766 ) -
Foreign exchange loss (4,331 ) (191 ) (2,817 ) (99 )
Share of loss of associate (29 ) (412 ) (480 ) (610 )
Other gains (losses) (1,758 ) 898 1,326 (468 )
Earnings (loss) before income and
mining taxes
11,282 (10,160 ) (16,829 ) (20,893 )
Income and mining tax expense (1,980 ) (5 ) (2,976 ) (11 )
Earnings (loss) for the period 9,302 (10,165 ) (19,805 ) (20,904 )
Attributable to:
Osisko Mining Corporation 9,302 (10,230 ) (19,805 ) (20,904 )
Non-controlling interests - 65 - -
9,302 (10,165 ) (19,805 ) (20,904 )
Earnings (loss) per share
Basic 0.02 (0.03 ) (0.05 ) (0.06 )
Diluted 0.02 (0.03 ) (0.05 ) (0.06 )
Osisko Mining Corporation
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2011 and 2010
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
2011 2010
$ $
Operating activities
Loss for the period (19,805 ) (20,904 )
Adjustments for:
Interest income (1,964 ) (2,282 )
Share-based compensation 7,780 9,607
Depreciation 10,304 320
Finance costs 10,765 -
Write-off of property, plant and equipment 16,276 -
Unrealized foreign exchange loss (gain) 3,395 (1,084 )
Share of loss of associate 480 610
Gain on sale of available-for-sale financial assets (5,041 ) -
Unrealized net loss on financial assets at
fair value through profit and loss
8,515 468
Deferred gain - premium on flow-through shares (4,282 ) -
Provisions 395 -
Deferred income and mining tax expense 2,976 -
Other non-cash gain (639 ) -
29,155 (13,265 )
Change in non-cash working capital items 16,885 (11,988 )
Net cash flows used in operating activities 46,040 (25,253 )
Investing activities
Net decrease in short-term investments 17,068 52,558
Net decrease in restricted cash 1,644 7,151
Decrease in cash collateral investments - 3,450
Acquisition of investments (12,283 ) (24,447 )
Proceeds on disposal of investments 12,038 3,891
Property, plant and equipment, net of government credits (297,254 ) (341,279 )
Acquisition of assets - 33,885
Interest received 2,169 2,139
Net cash flows used in investing activities (276,618 ) (262,652 )
Financing activities
Debt issuance costs (635 ) -
Finance lease payments (3,823 ) (9,641 )
Long-term debt repayments (2,083 ) -
Issuance of common shares, net of issue expenses 38,776 19,733
Interest paid (7,391 )
Net cash flows generated from financing activities 24,844 10,092
Decrease in cash and cash equivalents (205,734 ) (277,813 )
Cash and cash equivalents – beginning of period 358,493 673,777
Cash and cash equivalents – end of period 152,759 395,964

Cautionary Notes Concerning Estimates of Mineral Resources

This news release uses the terms measured, indicated and inferred resources as a relative measure of the level of confidence in the resource estimate. Readers are cautioned that mineral resources are not economic mineral reserves and that the economic viability of resources that are not mineral reserves has not been demonstrated. In addition, inferred resources are considered too geologically speculative to have any economic considerations applied to them. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies or economic studies except for Preliminary Assessment as defined under NI 43-101. Readers are cautioned not to assume that that further work will lead to mineral reserves that can be mined economically.

Note Regarding Certain Measures of Performance

This press release contains certain non-IFRS measures, including "cash cost per ounce", "adjusted profit" and "cash margin per ounce". The Company believes that these measures, together with measures determined in accordance with IFRS, provides investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Forward-Looking Statements

Certain statements contained in this press release may be deemed "forward-looking statements". All statements in this release, other than statements of historical fact, that address events or developments that Osisko expects to occur, are forward looking statements. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "scheduled" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur including, without limitation, further development of its Hammond Reef project and increasing of throughput at the mill to achieve design capacity at its Canadian Malartic Mine, timely installation of the pre-crush circuit, compliance with noise regulations, increasing of mining fleet availability, increasing of production. Although Osisko believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, including, without limitation, that all technical, economical and financial conditions will be met in order to warrant further development of its Hammond Reef project and that the diligent ongoing optimizing of its operations at Canadian Malartic mine will be achieved and will, accordingly, improve its operating performance, such statements are not guarantees of future performance and actual results may differ materially from those in forward looking statements. Factors that could cause the actual results to differ materially from those in forward-looking statements include gold prices, access to skilled consultants, mining development personnel,
results of exploration and development activities, Osisko's limited experience with production and development stage mining operations, uninsured risks, regulatory changes, defects in title, availability of personnel, materials and equipment, timeliness of government approvals, actual performance of facilities, equipment and processes relative to specifications and expectations, unanticipated environmental impacts on operations market prices, continued availability of capital and financing and general economic, market or business conditions. These factors are discussed in greater detail in Osisko's most recent Annual Information Form and in the most recent Management Discussion and Analysis filed on SEDAR, which also provide additional general assumptions in connection with these statements. Osisko cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Osisko believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.

Contact Information

  • John Burzynski
    Vice-President Corporate Development
    (416) 363-8653

    Sylvie Prud'homme
    Director of Investor Relations
    (514) 735-7131
    Toll Free: 1-888-674-7563
    www.osisko.com