Osisko Development Advances Cariboo Gold Project Towards Production

• Osisko Development is focused on developing the Cariboo Gold Project in British Columbia, which has 2 million ounces in reserves and over 3 million additional ounces in resources.
• The project is nearing the final permitting stage, with hopes to begin a bulk sample in October and start production at 4,950 tons per day, and initially to produce around 220,000 ounces of gold annually.
• The company sees potential to expand production to 10,000-15,000 tons per day in the future by developing additional underground levels and nearby deposits.
• Key advantages include high grades averaging 3.78 g/t gold, low-cost hydroelectric power, and proximity to labor and infrastructure.
• Management aims to build Osisko Development into a 500,000-600,000 ounce per year producer, though they would consider acquisition offers if presented.

Osisko Development Corporation (TSXV:ODV) is on the cusp of bringing online what could become one of Canada's next significant gold mining operations. The company's flagship Cariboo Gold Project in British Columbia is advancing rapidly towards production, with final permitting expected in the near term. For investors seeking exposure to a large-scale gold development story in a tier-one jurisdiction, Osisko Development presents a compelling opportunity worth closer examination.

Interview with Founder & CEO Sean Roosen

Cariboo: Canada's Next Major Gold Mine

The Cariboo Gold Project, located in central British Columbia, stands as Osisko Development's primary focus. With 2 million ounces of gold in reserves and over 3 million additional ounces in measured, indicated, and inferred resources, Cariboo represents a substantial gold endowment with room for further growth. The project is currently in the final stages of permitting, having received its Environmental Assessment Certificate in October 2023.

Sean Roosen, founder of the Osisko group of companies and a key figure behind Osisko Development, provided insight into the project's timeline:

"We filed our EA Certificate request in 2019. We received the full EA certificate, the first company through it, in October of 2023. So the EA process is complete, and now we're in the final operating permit and construction permit, which we hope to go to referral to the government sometime at the end of October or early November."

This progression puts Osisko Development on track to potentially become the next major gold mine to receive full permitting in Canada. The company is targeting an initial production rate of 4,950 tons per day, translating to approximately 220,000 ounces of gold annually in the early years of operation.

Resource Potential and Exploration Upside

One of the most intriguing aspects of the Cariboo project is its exploration potential. Roosen highlighted a key metric that underscores the deposit's robustness:

"We're averaging 14,000 ounces per vertical meter that we've gone down. For every 100 meters that we've gone down, we've averaged 1.4 million ounces."

This impressive ounce-per-vertical-meter figure suggests significant potential for resource expansion at depth. The company has drill-tested the deposit to depths beyond 1,000 meters, indicating the possibility of a long-life mining operation. Furthermore, with 4.4 kilometers of strike length already identified and only a fraction of the company's 83-kilometer land package explored, there's ample room for new discoveries.

Technical Innovations and Operational Efficiency

Osisko Development is implementing several technical innovations to enhance operational efficiency and reduce costs. Notably, the company has pioneered the use of a roadheader, an all-electric mining machine that grinds rock without the need for drill and blast techniques. This technology is expected to be usable for 50-70% of development work, potentially reducing development costs by around $1,000 per meter.

The project also benefits from its location, with access to low-cost hydroelectric power at approximately 5 cents USD per kilowatt-hour. This, combined with the high-grade nature of the deposit (averaging 3.78 g/t gold), positions Cariboo to be a potentially low-cost producer in the Canadian mining landscape.

Scalability and Long-term Growth Potential

While the initial production target of 220,000 ounces per year is significant, Osisko Development sees potential for substantial growth. Roosen outlined the company's vision:

"The next two mines are probably vertically just below this one. The most important thing about this project is we have 4.4 km of strike length, so we can generate a lot of stopes."

This scalability could allow for future expansion to 10,000 or even 15,000 tons per day, potentially doubling or tripling annual gold production. The company is also eyeing additional nearby deposits, including one about 8 kilometers away that may have open-pit potential.

"Corporately, the big target for me is to set the stage to be a $10 billion company. We have the asset base to do that. The steps to get there: number one, get operating at a couple hundred thousand ounces a year with this."

Financial Considerations and Market Valuation

The project's economics appear robust, even at conservative gold price assumptions. The company's feasibility study used a gold price of $1,700 per ounce, yielding an internal rate of return around 20%. With gold prices currently much higher, around $2,400-$2,500 per ounce, the project's potential returns could be significantly enhanced.

Roosen noted that a revised feasibility study using a $2,000 gold price is expected by the end of the year, which should provide updated economics reflecting the current strong gold price environment. This could potentially lead to a re-rating of the company's shares, which have been under pressure in recent years despite the advancing project and rising gold prices.

Management Track Record and Strategic Vision

Investors in Osisko Development gain exposure not just to the Cariboo project, but also to the proven track record of the Osisko group's management team. Roosen, who led the development of Canadian Malartic (now one of the world's largest gold mines) and founded Osisko Gold Royalties (a $4.3 billion royalty company), brings substantial experience in building large-scale mining operations.

The team's strategic vision extends beyond just developing Cariboo. Roosen stated:

"My goal was always to build a great Canadian mining house. I continue on with that GPS destination logged in, and whatever happens along the way happens."

This long-term perspective suggests a commitment to creating lasting shareholder value, whether through organic growth or potential M&A opportunities.

Market Position and Potential Catalysts

As the gold mining sector experiences increased M&A activity, Osisko Development's advancing project and large resource base could make it an attractive target for larger producers. However, the company's significant insider ownership (Osisko Gold Royalties owns 38% of the stock) provides some insulation against hostile takeover attempts.

Near-term catalysts that could drive share price appreciation include:

1. Final permitting approvals (expected in late 2024 or early 2025)
2. Results from the planned bulk sample (scheduled for October)
3. Updated feasibility study incorporating higher gold prices
4. Ongoing exploration results potentially expanding the resource base

Risks and Considerations

While Osisko Development presents a compelling investment case, it's important to consider potential risks. These include:

1. Execution risk inherent in mine development projects
2. Potential for capital cost inflation in the current economic environment
3. Gold price volatility
4. Regulatory and environmental risks, though mitigated by the project's location in a mining-friendly jurisdiction

The Investment Thesis for Osisko Development

• Large-scale, high-grad-e gold project nearing production in a top-tier jurisdiction
• Significant resource base (2 million ounces of gold in reserves) with substantial exploration upside (over 3 million additional ounces of gold in measured, indicated, and inferred resources)
• Experienced management team with a track record of creating shareholder value
• Potential for rapid production growth and economies of scale
• Attractive valuation relative to peers, with multiple near-term catalysts
• Exposure to strong gold price environment
• Potential M&A target in consolidating gold sector

Macro Thematic Analysis

The current macroeconomic environment presents a favorable backdrop for gold and gold mining equities. Persistent inflationary pressures, geopolitical tensions, and concerns about global economic stability have reinvigorated interest in gold as a safe-haven asset and inflation hedge. Central banks, particularly in emerging markets, have been net buyers of gold, further supporting demand.

The gold mining sector is experiencing a wave of consolidation, driven by major producers seeking to replenish reserves and secure future production. This trend benefits advanced-stage developers like Osisko Development, potentially positioning them as attractive acquisition targets.

Moreover, the focus on ESG (Environmental, Social, and Governance) factors in investment decision-making favors projects in stable jurisdictions with strong environmental and social practices. Osisko Development's Cariboo project, located in Canada and employing innovative, environmentally friendly mining techniques, aligns well with these criteria.

The disconnect between gold prices and gold equities valuations presents an opportunity for investors. While gold prices have remained robust, many gold mining stocks have lagged, creating potential for significant re-rating as this gap closes.

Osisko Development's focus on building a scalable, long-life asset in a tier-one jurisdiction positions it well to capitalize on these macro trends. As Sean Roosen aptly summarized the opportunity:

"We're in a cyclic business, and to see the gold price so disconnected from the gold equities is a little disconcerting, but we've seen some companies catch up on that valuation. We saw Alamos go to $11 billion now, a half million ounce a year production. So there are some companies that are gapping up, and most of them in good jurisdictions."

Key Takeaways

Osisko Development's Cariboo Gold Project represents a significant near-term gold production opportunity in Canada. With its large resource base, exploration upside, and potential for scalable production growth, the project could become a cornerstone asset in the Canadian gold mining landscape. The company's experienced management team and strategic vision for building a major gold producer provide additional layers of potential value creation. While risks inherent to mine development exist, the project's advanced stage and location in a mining-friendly jurisdiction mitigate some concerns. For investors seeking exposure to gold through a development-stage company with near-term production potential, Osisko Development presents a compelling opportunity worth serious consideration.