Osisko Metals (TSX.V:OM) is a leading junior explorer and developer that was established 16 months ago with a vision of creating value for shareholders in the base metal sector. Since then, the company has consolidated its position in Canada’s two premier historic zinc mining camps — Pine Point (NWT) and Bathurst (NB) —raising $52 million for exploration and development for both of these assets. “Between both camps we launched a combined 100,000 metre drill campaign, which is likely the largest base metal exploration programme in the base metal sector,” says president and CEO Jeff Hussey. “We are on the cusp of our first major milestone at our flagship project, Pine Point, as we approach the release of a maiden NI43-101 Resource.”
Osisko Metals shares synergies with the other Osisko companies that have created over $9 billion in shareholder value in 14 years. These include Osisko Mining (TSX:OSK), a household name in the Canadian gold industry, and a royalty streaming company in Osisko Gold Royalties (TSX:OR).
Both OSK and OR have equity positions in Osisko Metals and two founding members of Osisko sit on the board of directors. “Bob Wares is our executive chairman, and a major influence on the company’s vision, project generation, and financing,” Hussey reveals.
“John Burzynski is a director who has helped us with his extensive network and knowledge on capital markets. John also brought the Pine Point project to our table and this has become the flagship project for the company.
“We also have Luc Lessard, who sits on the board and who was the original Osisko COO in charge of construction of the Canadian Malartic mine, which was his 11th career mine build and who is looking forward to building his 12th.
“These individuals give us a lot of depth in project generation, exploration, development, construction, and commissioning – all the skills needed to find, develop, and finance mining projects. We’re the first venture into the base metals sector with the Osisko brand name and will do our upmost to keep up to the reputation of creating value.”
When Osisko Metals was established, its leadership reviewed numerous assets and identified a set of key criteria to select a unique portfolio of projects. Hussey says that having worked for Noranda for twenty years at several base metal mines, it is clear that geology, metallurgy and infrastructure are instrumental to developing base metal assets.
“You want to be able to extract the metals using conventional metallurgy and get your product to tidewater without building expensive infrastructure. We were also looking for upside and Pine Point has all three in spades, as there is significant brownfield exploration potential both at depth and along strike from known mineralisation.
“Being former producers, both mining camps have all the necessary infrastructure to handle an operation of the size we are hoping to develop. The decades of historical production also provide us with a strong confidence in the excellent conventional flotation metallurgy at both Pine Point and Bathurst.”
Before delving into the Pine Point and Bathurst camps, it is important to understand the context of the base metals market over the last five to 10 years, which has been vital in shaping the company’s strategy of developing both zinc assets.
Hussey explains that when the decade-long Chinese Super Cycle (CSC) hit in 2002, commodity prices tripled and in response, this led to significant over-production and corresponding increases in global metal inventories. The resulting oversupply of zinc peaked on the London Metal Exchange (LME) in 2013 at 1.5 million tonnes (Mt), more than double previous peaks.
Zinc prices dropped and remained low between 2010 and 2017, hitting a decade low of about 70 cents per pound in 2016. Prior to the CSC, the metal inventory varied for decades between 300-600,000 tonnes on the LME.
However, from 2013-17, zinc metal inventories were depleted by 75% as mines shut down and production decreased, which brought global inventories back down to critical levels. Correspondingly zinc prices surged between 2016-18.
Unlike the previous spike in zinc prices in 2006-07 when CSC demand was peaking, today current producers are simply unable to increase their production. This, combined with a relatively barren development project pipeline hindered by more than a decade of sparse exploration, leads Osisko Metals to believe that supply will remain tight and very supportive of zinc prices for several years. Currently metal inventories are at 155,000 tonnes, half of typical critical levels.
“When we started the company we could see these supply and demand fundamentals developing and in response we initially positioned ourselves in Bathurst. We then searched the base metals space for stranded assets with which we could develop and create value.
“We purchased Pine Point and now we are doing just that, creating new value. We are currently converting historical resources in both camps through definition drilling to upgrade deposits to comply with NI43-101 standards, then we can start economic studies and de-risk projects once the mineral resource base is solidly established.
“In both camps the brownfield exploration potential is significant and we look forward to exploring the ‘blue sky’ upside following our historical resource conversion programmes.”
Pine Point Mining Camp
The Pine Point Mining Camp is located in the Northwest Territories of Canada and was purchased by Osisko Metals in February 2018 for approximately $35 million by way of Plan of Arrangement with Pine Point Mining. The project hosts a 50Mt unclassified, historical, near surface resource base that the company aims to convert into a NI43-101 Mineral Resource Estimate as quickly as possible through an aggressive definition drill campaign.
The historical resources grade on average 5% zinc + lead (Zn+Pb), potentially minable by open-pit methods. “If there is one group that knows how to create value at the drill bit it’s Osisko,” says an assured Hussey, before revealing that the 2018 campaign is going according to plan.
A key focus for Osisko Metals within the Pine Point camp is the East Mill Zone, which has returned a string of highly encouraging near-surface intersections, including a 21.47% Zn+Pb over 9.98 metres, 20.48% Zn+Pb over 6.23 metres, 19.68% Zn+Pb over 6.30 metres and 16.61% Zn+Pb over 6.75 metres. It is the shallow nature of these high-grade intercepts across the property which is generating the most excitement, with the average depth of mineralisation above 100 metres.
“The mineralisation can be accessed through very shallow open pits that will require little capital to develop relative to other zinc mines. Approximately 90% of zinc production globally is underground and Pine Point is the only large tonnage, open pit, zinc-lead development project globally.”
Giving an example, Hussey calculates that open pit grading of 5-6% Zn+Pb is roughly equivalent to a 2% copper head grade, or a 2.5 g/t gold head grade, and if this is converted into a net smelter return (NSR), the value is superior to 90% of zinc, copper and gold open-pit development projects and mines globally.
Therefore, it is not difficult to see how the open-pit nature of this zinc asset could contribute to a highly profitable operation. For now, Osisko Metals is prioritising the conversion of historical resources through its own definition drilling, that will give the company greater confidence to use the previous Cominco data in its own economic studies.
Aside from drilling, the company is advancing and updating environmental baseline studies as part of the de-risking process and, on the development side, Osisko Metals is evaluating pre-concentration techniques that may lower capital expenditures and contribute to a lower cost operation.
“We also want to start brownfield exploration next year. The difficulty of Pine Point is that the style of mineralisation (known as MVT-type Zn+Pb mineralisation) is blind to conventional magnetic and electromagnetic geophysical techniques.
“Today, airborne gravity gradiometry has a good chance of detecting Zn+Pb mineralisation below and along strike from the known deposits that will provide ‘blue sky’ opportunity for our shareholders. This could lead to new discoveries that will further add to our resource base.”
Bathurst Mining Camp
The Bathurst Mining Camp (BMC) was the third largest VMS camp in the world in its heyday and it includes the highly prolific ‘Brunswick Horizon’ that hosted the largest underground zinc mine in the world, the Brunswick No. 12, as well as the Brunswick No. 6 open pit mine. Combined, they produced 150Mt of zinc, lead and silver ore over a 49-year period, until closure in 2013.
Osisko Metals first secured a position along the Brunswick Horizon in early 2017 and has since accumulated 63,000 hectares of land surrounding underexplored deposits in the BMC. Drilling began in September 2017 at Gilmour South and Mount Fronsac. Now the current focus is on the Key Anacon deposit, which was acquired in December last year.
“Key Anacon was held in private hands for over 60 years and is now the most exciting brownfield project in the BMC. We initially targeted the Main Zone that hosts a 1.9Mt historical resource.”
“In the early 1950s, Key Anacon Mines sunk a shaft and developed eight levels but it never went into production. It was however drilled in detail within the Main Zone but they left the deposit open along strike and at depth. We drilled one hole this year that went through the heart of the Main Zone, and it confirmed 12.1% combined Zn+Pb over a true thickness of 26 metres.”
Since the spring, Osisko Metals has been drilling at both the Main Zone and the Titan Zone at Key Anacon. The Titan Zone is located 1.5 km to the Northeast and is open in all directions. It has returned exploration success with the best intersection to date grading 6.07% zinc, 2.19% lead and 0.92% copper over 22.2 metres.
The Titan Zone resources were never definition-drilled nor estimated into the historical resources and the company currently has an additional zone that extends from surface to 800-1,000 metres depth.
The copper credits are also noteworthy within the zinc and lead rich zone and a pure copper zone extends below the deposit to the east for at least 1,000 metres. It is considered to be the richest copper feeder zone in the BMC. This will also be a focus of upcoming drill campaigns.
At the Main Zone and the Titan Zone, Osisko Metals is seeing mineralisation beyond the known boundaries of the historical resources, so the company plans to drill off both zones at Key Anacon and work toward a resource estimate in 2019.
Osisko Metals is also looking at other targets in the BMC since acquiring a portfolio of untested combined gravity/EM anomalies.
During its first year and a half of operation, Osisko Metals has charged to the forefront of the junior global base metals industry, drawing on access to capital and the network of expertise gained through synergies with OR and OSK, in order to secure and develop its position in two formerly producing world-class zinc mining camps in Canada.
“We are one of the most exciting explorers and developers in the base metal space. I think we are going to get a lot of traction going forward as we have done very well in executing our vision in our first year. We have a lot of gas in the tank to go forward and reach our objectives for the near future.”