Golden opportunity
Price surge fuels hopes Canada’s richest gold country has more to give
This spring, John Burzynski, chief executive of Osisko Mining Inc., caught whiff of an opportunity to acquire land near the Cadillac-Larder break — a name that may not ring a bell with most Canadians, but is renowned gold country.
Running from western Quebec to Larder Lake, Ontario, it stands out among the world’s richest geological gold belts; and even today, more than a century after being discovered, it is dotted with mines that pump out hundreds of thousands of ounces of bullion every year.
Burzynski, and his partners have been to the Cadillac-Larder break before: They discovered the deposit that became the Canadian Malartic mine, currently the country’s largest gold mine, which last year produced 697,200 ounces of gold, worth about $1.3 billion at current prices. Although they no longer own the mine, they have been responsible for as much exploration in Canada as anyone else over the last few years, taking hundreds of thousands of meters of core samples out of the earth in search of the yellow metal.
Now, as gold prices surge through US$1,400 per ounce for the first time in six years, Buryznski and his team are returning to the Cadillac-Larder break with a roughly $40 million acquisition of Alexandria Minerals, which controls a choice land package near Val d’Or, Quebec that’s already known to contain gold.
The transaction is drawing interest because as analysts predict gold prices will soar, many investors are wondering whether Burzynski and his partners can strike gold twice, and hit another bonanza, or has Canada’s most prolific gold belt finally tapped out after decades of exploration and mining.
“Every time someone says all the mines have been found, I laugh,” said Burzynski. “Our business is rife with stories of the 10th company or the 20th company that went onto a property and found something that all the others had overlooked.”
With evolving geological modelling and new technology, there’s always a way to look at past producing mines and find more gold, he said.
Still, Walter Henry, acting chief executive of Alexandria, said there’s a reason why his company is selling out just as gold prices are surging.
Under the deal, Osisko Mining, through a subsidiary to be called O3 Mining Inc., agreed to an all-share purchase that values Alexandria at around $40 million, or seven cents per share including debt. The deal was approved by Alexandria shareholders on Friday.
Henry said it’s at least 30 per cent less than the roughly 10 cents per share that Alexandria was offered in 2018, but that deal was rejected.
“There’s gold in that ground, for sure,” he said.
But Henry added, “The type of gold that’s being found in the Cadillac Break, it’s not the type of geology where you’re going to hit a 2,000-ounce (gold) boulder.”
Instead, he said the geology tends towards low-grade, bulk tonnage gold deposits, which Henry argued means a company needs to spend a lot of money drilling out core samples to show that there’s enough gold to build a mine, but the mines tend to be expensive to build.
As Canada’s gold sector looks to break out of a prolonged downturn and period of declining funds raised for exploration, it is doubtful anyone could obtain financing for such a project, he said.
“For all the potential there, I just don’t know,” Henry said.