March 21, 2014 / 4:45 AM / in 4 years

Osisko updates mine plan, builds case for standalone entity

TORONTO, March 20 (Reuters) - Osisko Mining Corp on Thursday released an updated mine plan for its flagship Canadian Malartic gold mine in Quebec and the miner stressed that the C$2.9 billion ($2.6 billion) hostile bid from larger rival Goldcorp significantly undervalues its asset base.

Montreal, Quebec-based Osisko’s new mine plan envisages an increase in gold output along with a sharp drop in production costs on the back of improved ore grades and a weaker Canadian dollar.

The improved mine economics, coupled with the recent rally in the price of gold, highlight how Goldcorp’s bid undervalues the company, said Osisko’s chief executive officer, Sean Roosen.

“The fundamental problem we have here is that the value gap is far too large. We had a damaged gold space coming out of 2014. Goldcorp, to their credit, tried to take advantage of that, but we are now in March and it is a different gold market and our shareholders are in a different state of mind,” said Roosen in an interview with Reuters.

Goldcorp launched the unsolicited cash-and-stock bid in January to win control of Osisko’s Malartic gold mine. Based on Goldcorp’s latest closing price, the bid currently values Osisko at C$6.63 a share. Osisko’s Toronto-listed stock closed Thursday at C$7.59 a share, indicating that investors expect a sweetened bid to emerge.

Shares in both Osisko and Goldcorp have risen significantly since January, along with the price of gold. Although the price of spot gold has pared gains this week after touching a six-month high of more than $1,390 an ounce, it continues to trade at around the $1,333 an ounce level, well above where it was at the beginning of the year.

“Our shareholders are telling me that they’re more bullish than they were in January and they’re standing in with us,” said Roosen, adding that he is confident that Goldcorp’s current bid will fail to win over the majority of Osisko’s shareholders.

Roosen said a stronger bullion price has also boosted the level of interest in the company from potential rival suitors.

“As the gold price has strengthened and people have gotten healthier there are more and more interesting players that have shown up,” he said. “I can’t give any details on it, but I can say the process has increased in size, not decreased.”

Roosen, who also addressed shareholders and analysts at an investor presentation in Toronto, stressed that he sees investors standing to benefit the most if Osisko remains an independent, standalone entity.

“My message to shareholders is you do not need a transaction right now. This mine’s running fine and it’s going to outperform on every metric,” he said.

$1 = 1.1179 Canadian dollars Reporting by Euan Rocha; Editing by Matt Driskill

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