Osisko stakes one million hectares in Mexico

Press releases from Osisko Mining (OSK-T) were coming fast and furiously this week with announcements that the company had produced its half-millionth ounce of gold from its flagship Canadian Malartic mine and another reporting record production in the third quarter of 103,753 ounces of gold.

But it was the first press release of the week in which the company said it had staked about one million hectares in an emerging gold belt in Mexico that probably should have generated the most interest.

The company did not identify where in Mexico it had staked its immense piece of ground and requests for details were declined for “strategic reasons”. But what is known is that Osisko has identified a large magmatic-hydrothermal system with a coincident five square kilometre gold-copper-silver soil and lithogeochemical anomaly — all located within a 14-square-kilometre hydrothermal alteration zone.

“This is an enormous land package and the first that Osisko will have in Mexico,” says Christina McCarthy, a geologist and mine specialist in Toronto at Euro Pacific Canada. 

Some Mexico experts speculate the ground could be in Oaxaca or the Guerrero gold belt, an emerging mine district that has only become really well known in the past two years.

Other companies in the Guerrero belt include Cayden Resources (CYD-V), Oroco Resources (OCO-V), Minaurum Gold (MGG-V) and Citation Resources (CTT-V).  The belt spans more than 80 kilometres just north of Acapulco city in Mexico’s Guerrero state.

But wherever Osisko’s land package is located, McCarthy says, the company’s move into the country “further proves that Mexico is becoming an attractive location for mining.”

Osisko notes that its geologists initiated a systematic greenfields exploration program in Mexico late last year, starting with a high-density stream sediment survey consisting of more than 4,000 samples, followed up with detailed mapping, geochemistry and geophysics over anomalous areas.

Back in Canada, it was seven years ago in March 2005 that Osisko began exploration drilling at Canadian Malartic. It started building the mine in August 2009 and finished it within 19 months. Since the start of operations in April 2011, the mine has produced a total of 487,072 ounces of gold.

John Hayes of BMO Capital Markets expects Osisko will produce 411,000 ounces of gold in 2012 at total cash costs of US$859 per oz. gold. He forecasts 2013 production — likely the company’s first full year of production at full throughput rates — will total 660,000 ounces at total cash costs of US$617 per oz.

As of Jan. 1 2012 reserves at Canadian Malartic stood at 10.7 million ounces of gold.

At presstime in Toronto Osisko was trading at $9.37 per share within a 52-week range of $6.25-13.31. The company has about 389 million shares outstanding.