O3 Mining (OIII) - 250,000m Resource Expansion Drilling Funded

O3 Mining Inc., an Osisko Group company, and is a gold explorer and mine developer ready to produce from its highly prospective gold camps in Québec, Canada. O3 Mining benefits from the support, previous mine-building success and expertise of the Osisko team as it grows towards being a gold producer with several multi-million ounce deposits in Québec.

The company has 2 very important projects in Quebec, Marban and Alpha. There is over 3.9Moz at the Val D’Or property, one of the best mining areas in the world. O3 is currently moving the Marban project towards production in 2026 and there is a lot of exploration potential which could increase the amount of resources for the company and increase the value for shareholders.

We had a discussion recently with Jose Vizquerra, CEO at O3 Mining, a Toronto based junior gold company with some particularly attractive properties in the Val d’Or greenstone belts of Québec. He shared his insights with us.

Overview of O3 Mining

O3 Mining Inc., part of the Osisko Group of Companies, is a Canadian gold exploration and mine development company focused on establishing production at its highly prospective gold holdings in Québec and Ontario Canada. The company's purpose is to deliver superior returns to its shareholders and long-term benefits to its stakeholders.

The company is well capitalized and maintains a 100% interest in all its Québec properties, which cover 137,000 hectares in the province.  O3 has a market cap of $151 M.  There are 64 M shares outstanding.

Management at O3

The management team consists of two others in addition to Vizquerra. They are Blair Zaritsky, CFO and Louis Gariepy, Vice President Exploration. A nine-member board assists the management team at O3.

O3 Projects

O3’s flagship assets are its Cadillac Break properties in Val d’Or region of Québec. O3’s Cadillac Lake holdings are divided among the Marban group, the Central Cadillac group and the East Cadillac group. They are located along the Cadillac-Larder Lake fault zone in the southeastern Abitibi Greenstone Belt of the Archean (early Precambrian) Superior Province of the Canadian Shield. Since the early 1900’s, over 100 M ounces of gold had been produced from various properties along this major tectonic zone. 

In addition, the company holds the Gwillin and other properties in the Chibougamau region of Québec. Gold mineralization is present at Gwillin and locally occurs at very high grades. 

In Ontario, O3 holds other land tracts including the Wydee Gold property, the Matachewan property and others. These holdings are prospective for gold and potentially other minerals.

In total, these projects host 2.4 M measured and indicated ounces of gold at 1.22 g/y Au, and 1.5 M ounces of inferred gold resources at 2.27 g/t Au.

The Marban Story

Work at the Marban project is going very well, said the CEO, and it’s on track for maiden production in or around 2026. Two thirds of the gold resource is already in the measured and indicated category, leaving only one-third to convert to that status to get from PEA to Pre-Feasibility level. In addition, the resource around Marban is being expanded as well. The business plan is simple, he told us: it’s to invest around $256M and bring the project into production by 2026. O3 is currently working up different scenarios to bring Marban through a Pre-Feasibility Study and then to Feasibility and on to becoming a producer.

Setting Up To Be Taken Out?

We commented on his plan for production by 2026, suggesting that since this was a long way off that people may lose interest in the story. Would it be better to be taken out by a competitor, we asked?

Vizquerra answered that yes, by doing things properly, the potential for takeover is real. He continued that the most important goal is to maximize value for the shareholders, and that is achieved by focusing on what they can control. Taking proper business steps, executing a prudent plan, bringing projects into production are among the most important things they can control, he said. 

The CEO believes that Marban is much larger and has more value than what is right now being released by the company: Net present value of around $423M at a 5% discount.

Vizquerra continued, saying that they could have Canadian Malartic or Eldorado or Wesdome or anyone else taking us over for the good job that they are engaged in at Marban and elsewhere. In the end, being taken over can be thought of as a prize for doing one’s business well, he said. 

CEO’s View on the Gold Market

We asked the CEO’s opinion on the gold market and how it may affect his business, potential takeovers, and other things, given the inherent volatility of the beast. He had a simple reply, that the markets are going to do what the markets are going to do. O3 cannot control the market but they can control what they do. They are focused on controlling their spend, executing their drilling, and refining their development model, he summarized. It’s a marathon, not a spring, he offered.

We asked his view about some of the players coming into the gold market recently, particularly those who are generalists or those looking for quick gains. He responded that savvy people look at metrics. At the end of the game, it’s all about creating cash flow, he continued.

It’s not necessarily about ore grade, he said. For example, he went on, open-pit gold mines have often produced better cash flow than other mines types, even though the overall grade of the ore may be lower. 

Bringing it back full circle, he said that some new entrants into this market space need to realize it’s all about metrics, economic, and cash flow. Discounted free cash flow is necessary, he said, to make sure that your NPV at the end makes money. 

Cash and Deployment Plan

Next, we moved on to O3’s capital on hand and how it is to be deployed.  We reminded Vizquerra that the last time we spoke with him that he had over $62M in cash and about $75M in investments and that they were going to deploy that in a roughly fifty-fifty allocation between Marban and Alpha. We also queried him as to the potential for acceleration of the pre-feasibility and permitting processes at Marban.

Permitting takes time, he told us. The project will be producing more than 10,000 t/day. It will take longer for this size of production to work its way through the regulatory process because not only is provincial oversight involved, but federal as well. Therefore, 2026 is actually a good and realistic timeframe, he said. These resources are going to be larger, bigger and better than many, he believes, and in order to do things properly and systematically, it takes time. Investors need to understand that, the CEO said.

As far as cash goes, O3 likes to have about two years of spend in house; that’s where we are now, sat the CEO. He went on to say there is no urgency to go to the markets for more capital now. Our plan is indeed to spend over the next 24 months about half of our working cash at Marban and the other half at Alpha. They feel very comfortable with that, he summarized.

People may be evaluating O3’s assets at ridiculously low prices, he said, but that’s OK: Leadership is going to continue to do due diligence and simply execute their plan.

What Else Is There Besides Marban and Alpha?

We queried Vizquerra a bit more deeply regarding the depth of other assets in his company project portfolio. He relayed that there are many of their projects that could add quite a bit of value for shareholders. He mentioned the recent Garrison deal with Moneta, the results at the Bulldog project, and the activity at Camlfo, in particular, as other important company business, which in addition to Marban and Alpha, form the basis of a nice value pyramid. 

The company has undervalued fundamental value and currently is in no need of additional cash, summarized Vizquerra. What he does need, he said, is the support of the marketplace to help them to get investors to understand that they have a great set of opportunities at O3. 

Osisko Legacy Issues?

We shifted the topic a bit, wondering if the reputation of Osisko, the parent company of O3, may have become a bit tarnished by some earlier proceedings and whether that may be a deleterious factor for O3. He responded firstly that he is the CEO of O3, and that is where he can exert his control. Secondly, he pointed out that Osisko has been successful in making money for the shareholders, although there may be a few that disagree with some things, he said.

Bringing it back to his charge, he followed up by saying, “We believe in our strategy and what we intend to do with this company”, he said. O3 intends to be patient and return value to the shareholders in a very big way, he told us.

Retail Versus Institutional Holders

The analysts appear to agree with the CEO, suggesting that share price could easily double into the $5 range. Vizquerra agreed, saying that they are creating a brand with O3.

The institution guys get this, we suggested, but perhaps the retail trade needs to perk up a bit. The CEO believes that they will kick in as well. After all, he said, they are hunting elephants in elephant country, a reference to the world-class gold-mining jurisdiction that they are operating in.  He’s certain that within 24-month’s time, O3 will come up with a big score.

Additional Musings On the Market

We asked the CEO his thoughts on the market. He started off by saying that there are a lot of things going on lately in the market.  It is sophisticated and it has been changing, he said. Pandemic-related subsidies, particularly in the United States, have caused capital to be invested in certain areas such as technology and crypto currency. These subsidies will dry up at some point, then the capital deployment game will change again, he predicted. Gold price comes down every time the economy begins to show signs of a pick-up, he went on. But his perspective sees gold going up, one way or another. He knows that above all, none of this is something he can actually control.

Final Thoughts From the CEO

He left us with this thought: He cannot control gold price or if the majors want to take advantage of smaller companies like his. But at Marban, O3 can produce profitably with gold at $822 an ounce. If the price of gold moves higher, for whatever reason, it’s all upside.

They are moving forward at Marban with a NPV of $423M with the 2.5 M oz. already declared. Every additional ounce improves what they have, he said. They want to be cash flowing by 2026, he reiterated. And, in addition, they’re looking to make more discoveries on their properties as well, he said. 

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To find out more, go to the O3 Mining Website