Osisko takes stake in Barkerville

Osisko Mining’s (TSX: OSK) acquisition of a 17% stake in Barkerville Gold Mines (TSXV: BGM) is part of a broader strategy of accumulating direct and indirect interests in what Osisko says could become long-life Canadian gold mines.

“We’re trying to build the next intermediate mining company, so our focus is on projects that are mineable at today’s gold prices within the next five years, and Barkerville fits that profile, so we invested in it,” John Burzynski, Osisko Mining’s president and CEO, tells The Northern Miner.

“There is real scarcity value to good deposits out there,” he says. “You can count on two hands, in our opinion, the ones that are mineable within the coming five years.”

The historic pit at Barkerville Gold Mines’ Bonanza Ledge project in south-central British Columbia. Photo by Lesley Stokes.

Barkerville has consolidated 1,177 sq. km of land across a belt that is 60 km long by 20 km wide in south-central B.C.’s Cariboo gold district. Its priorities this year are to start small-scale production on the property’s Bonanza Ledge and BC vein, expand the resource and initiate a feasibility study at its Cow Mountain deposit, and develop regional targets through greenfield exploration.

The junior is well funded, with $44.5 million in cash and short-term investments.

Osisko is paying US$20 million in cash for 25 million Barkerville shares and issuing 8.1 million of its own shares at $2.47 per share for another 25 million Barkerville shares. The transaction values Barkerville at 80¢ per share. The junior was trading at 68¢ per share when the deal was announced on Aug. 8.

Mining analyst Tara Hassan of Haywood Securities applauded the transaction, despite the price. “Although the transaction was completed at a sizeable [17%] premium to Barkerville’s close price, the implied acquisition price still places Barkerville’s valuation below current in-situ multiples, leaving room for upside through both multiple expansion and exploration success.

“Barkerville is positioned to enter small-scale production in early 2017 and deliver an updated resource that will kick-start the feasibility study process for a larger operation,” Hasan continued. “Osisko is being proactive in acquiring this stake ahead of a catalyst-heavy period.”

Osisko Mining’s acquisition of Barkerville shares follows a move in February by Osisko Gold Royalties (TSX: OR; NYSE: OR) to take a 16.2% stake in Barkerville.

Sean Roosen, chairman and CEO of Osisko Gold Royalties, is also co-chairman of the board at Osisko Mining, along with fellow co-chair Ned Goodman, the founder of Dundee Corporation.

Roosen is also co-chairman of Barkerville’s board.

Drillers at Barkerville Gold Mines’ Cow Mountain gold project in British Columbia. Credit: Barkerville Gold Mines.

In June, Oban Mining, where Burzynski served as president and CEO, changed its name to Osisko Mining. The original Osisko Mining earned international recognition with its exploration and development team — which included members of Oban Mining’s board and senior management — topped off by the discovery, development and operation of the Canadian Malartic mine in northwestern Quebec. (The earlier Osisko Mining was acquired in 2014 by Agnico Eagle Mines [TSX: AEM; NYSE: AEM] and Yamana Gold [TSX: YRI; NYSE: AUY]).

“As a group we’ve reviewed thousands of projects in Canada and abroad over the last three or four years, first as Osisko Mining, then as Osisko Gold Royalties and then (again) as Osisko Mining,” Burzynski says. “We’ve identified projects we liked, and as the new Osisko Mining we’ve purchased or invested in some of them … Barkerville is one of the few assets that we see as interesting in Canada that can be built and be mineable within the next three to five years.”

Barkerville’s Bonanza Ledge mine, situated southwest of Barkerville Mountain, is the junior’s most prospective asset in the short-term. The company received a positive pre-feasibility study for Bonanza Ledge in September 2009 and updated it in June 2013. In April 2015, Barkerville completed the first phase of test mining there, with 91,234 tonnes processed at a head grade of 8.66 grams per tonne, yielding 23,726 oz. gold and a total 93.4% recovery.

Barkerville’s main assets in the area — Bonanza Ledge, Cow Mountain and Island Mountain — occur within 6 km of prospective, Proterozoic-aged stratigraphy in the heart of B.C.’s most productive historical placer district, which yielded up to 3 million oz. gold.

The Cow Mountain deposit hosts 35.8 million indicated tonnes grading 2.4 grams gold for 2.8 million contained oz. gold, and 27.5 million inferred tonnes at 2.3 grams gold for 2 million oz. gold, using a 0.5-gram-gold cut-off grade.

Barkerville came under attack in 2012, under previous management, when the company announced that Cow Mountain contained 10.6 million oz. gold. The British Columbia Securities Commission issued an 11-month cease-trade order and called on the company to revise the estimate to meet National Instrument 43-101 standards.

A new management team was put in place in 2015, which has revitalized the company. Among its accomplishments, the team has eliminated $28 million in debt and payables, and in the last year alone, has raised more than $36 million in capital.