Osisko Funds Canadian Malartic

VANCOUVER– With another major financing agreement signed, Osisko Mining (OSK-T, OSKFF-O) has all the funds it needs to build a major new gold mine at its Canadian Malartic project.

The company announced a deal with CPPIB Credit Investments, a subsidiary of the CPP Investment Board, for a $150-million loan divided into two tranches. In exchange for 7 million warrants, Osisko will first have access to a $75-million loan that completes its funding requirements for mine development. The warrants are exercisable for five years at $10.75, which represents a 30% premium to Osisko’s 15-day, volume-weighted average share price.

Osisko will also have access to another $75 million as of the end of March 2010. If the funds are drawn, the company will hand over another 5.5 million warrants with similar terms. Osisko says it will only draw on the second tranche to meet additional capital expenditure requirements arising from a positive feasibility decision on South Barnat. The loans carry an annual interest rate of 7.5%.

The new loan deal fulfills Osisko’s obligations under another financing agreement. In July, the company struck a deal with provincially owned Socit gnrale de financement du Qubec (SGF) for a $75-million convertible-debenture financing. The debentures would carry an interest rate of 7.5% and be convertible at $9.18 per share. However, the deal required Osisko to come up with another $225 million in financing.

That effort is now complete. In September, the company closed a $149.5-million bought-deal financing, underwritten by Thomas Weisel Partners Canada and BMO Capital Markets. Add that to the latest CPPIB deal and Osisko has gone beyond the needed $225 million.

But a discussion of Osisko and money would be lacking without mention of the biggest financing in history.

In February, Osisko bagged $403 million, issuing 88.55 units with each comprising a share and half a warrant and whole warrants exercisable at $5.45 apiece until Nov. 17.

Those well-in-the-money warrants will most likely bring another $241 million into the Osisko treasury before that November deadline. All told, the company has access to more funding than it needs to develop its mine.

And the company expects the capex estimate — which currently sits at US$789 million — to decrease in an updated feasibility study incorporating the higher-grade South Barnat deposit, as well as new cost estimates reflecting today’s lower prices.

The Canadian Malartic deposit hosts 183 million tonnes of reserves grading 1.07 grams gold for 6.3 million oz. gold, based on a gold price of US$775 per oz. Raising the price to US$1,000 per oz. adds 1 million oz. gold to reserves.

South Barnat already hosts measured and indicated resources of 42.5 million tonnes grading 1.64 grams gold, for 2.2 million oz.

And South Barnat continues to show strength. The day before announcing the new loan agreement, Osisko revealed new drill results from South Barnat, stemming from a third-phase definition drill program on deeper portions of known mineralized zones and from condemnation drilling that unintentionally hit gold.

Some of the best results from infill holes in known mineralized zones were: 88 metres of 1.23 grams gold, followed by 51.5 metres of 1.64 grams gold in hole 3554; 129.5 metres of 2.16 grams gold in hole 3611; and 176.2 metres of 1.11 grams gold in hole 3663.

Mineralized intercepts from condemnation drilling that instead hit new gold zones included 25.4 metres of 2.72 grams gold in hole 3577, 107.5 metres of 0.6 gram gold in hole 3632, and 91.5 metres of 0.83 gram gold in hole 3638.

All of the results pouring in from six drills active on the property will be used to calculate a new global resource. That resource will then guide a new reserve estimate within a merged pit for the Canadian Malartic and South Barnat deposits. The estimates are expected before the end of the year.

Osisko released news of its final loan agreement after market close, on a day when its share price fell 8¢ to close at $8.25. The company has a 52-week trading range of $1.40-9.24 and 284 million shares outstanding.