« Back to Articles
On one side of a giant gravel barrier, the sleepy town of Malartic goes about its daily business. On the other side, enormous trucks are hauling material around a sprawling mine site and a processing plant is under rapid construction. In the middle of next year, this project will officially become Canada's biggest gold mine-- certainly the one with the biggest social impact as well. Yet until a few years ago, it was not even on the drawing board. It is the type of rapid success story that is almost unimaginable outside Quebec, the most mining-friendly jurisdiction in the world. With the support of the local community and an astounding 13 government agencies, Osisko Mining Corp. has earned the legal and social licence it needed to built this mine in the midst of Malartic in northwest Quebec. The mine infringes on the town so closely that Osisko had to physically move more than 200 houses to make it happen. It was one of the most socially sensitive projects in Canadian history, and the $130-million initiative went off without a hitch. The result is a big win for the company, and the town. "We went door to door and said to people that if you want this project, you've got to help us fight for it. And they did," says Osisko chief executive Sean Roosen. A few years ago, Malartic (population 3,600) was in an economic depression, decades removed from the days when it was a thriving mining town in the Abitibi region. The unemployment rate was well above 40%, and conditions got so bad that even the local Tim Hortons went out of business. Today, it feels like a different place. The homes were relocated to a pretty subdivision alongside a new golf course, and there is plenty of new infrastructure, including an elementary school, community centre, adult education centre and daycare. Thanks to the mine, unemployment has plunged to about 15%, and apart from one combative resident who has refused to move his house, seemingly everyone is supportive of the project. Osisko says it has never seen so much as a slashed tire or a spray-painted sign. John Hayes, an analyst at BMO Capital Markets, says the company maintained a strong dialogue with the town every step of the way, and understood exactly what it needed to do to get the project permitted and get the town behind it. "Osisko set the standard on how to do a project like this," he says. On the other side of the wall, construction of the Canadian Malartic mine is in full swing. The property is now 62% complete, and mounds of equipment lie everywhere. The site is crawling with large vehicles, including six enormous Caterpillar 793 trucks, which can haul 240 tonnes of material at a time (there will eventually be 12). Commercial production is expected to officially start in the second quarter of 2011. Mr. Roosen and his business partners John Burzynski and Bob Wares bought the Canadian Malartic property in a bankruptcy auction in 2004 for the laughably cheap price of $80,000. They re-imagined the old deposit as a large, low-grade open pit, and ended up identifying nine million ounces of reserves and more than 11 million ounces including resources. They managed to move fast. In 2006, they first identified a resource for Canadian Malartic. In 2008, the home relocation program got underway. And in August 2009, mine construction began. Osisko was aggressive, which is a key reason it could develop the $930-million mine so quickly. When the financial crisis struck and commodity prices melted down in late 2008, most mining companies cut their capital spending sharply and tried to do everything possible to conserve cash. Osisko, on the other hand, jumped into the capital markets in early 2009 and completed a $403-million equity financing. It was a time when no one thought such a thing was possible for a junior mining company with no cash flow. "It was a game-changer for us. It changed Osisko's profile in the marketplace," Mr. Roosen said. In total, Osisko managed to raise about $1-billion in 2009, allowing it to purchase the mining equipment that it needed for the mine. It was the perfect time to be doing that, because almost nobody else was buying and the company was able to get its hands on what it needed quickly. Mr. Hayes says he was not surprised that Osisko was able to raise money when so many other companies could not. "There's not a lot of good quality projects, period. And this one stood out because of the resource, the management team and the jurisdiction. It all came together." Osisko took a gamble by raising money when it did, as the company did not get final government approval to build the mine until August. But it paid off. "We maintained a healthy balance sheet, enabling us to take risks with our timelines," Mr. Roosen says. "We never took our foot off the gas." There have been some distractions along the way -- most notably from Goldcorp Inc., which bought a minority position in Osisko that immediately fueled takeover rumours. But Mr. Roosen says that Osisko never lost track of what it wanted to do: build Canada's next mid-tier gold producer. The company hammered that point home last March, when it struck a $372-million deal to buy Brett Resources Inc., giving it the Hammond Reef gold project in northern Ontario. Osisko sees it as an ideal fit. The project has a number of similarities to Canadian Malartic (including a challenging permitting process) and it gives the company something to do with its highly skilled mine-building team once it is finished construction in Malartic. "It's Canadian Malartic without the relocation," Mr. Roosen says. At the same time, Osisko is hoping to find another mine about 90 kilo-metres north of Malartic, where it is involved in a joint venture on the Duparquet project with Clifton Star Resources Inc. If everything goes as planned, Canadian Malartic and Hammond Reef would give Osisko annual production of more than one million ounces a year by 2015, and all of it from politically-friendly jurisdictions in Quebec and Ontario. But there is still a long way to go. So far, almost everything has gone right for Osisko, and the company has built a $4.5-billion mining giant out of nothing in a very short period of time. But mining companies often run into unforeseen problems just as a project moves into production, and analysts and investors will be watching closely to see if Canadian Malartic makes a smooth transition. Besides the investment community, Osisko has a whole town pulling for it.
