Kirkland Lake ups stake in Osisko to 13.6%

Kirkland Lake Gold Ltd. [KL-TSX, NYSE; KLA-ASX] said Wednesday September 19 that it has acquired 14.7 million shares of Osisko Mining Inc. [OSK-TSX; OBNNF-OTC] for $25 million cash or $1.70 per share.

Combined with the 1.9 million shares it already owns, Kirkland Lake’s stake in Osisko will increase to 13.6% after the transaction closes.

While Kirkland Lake indicated that the purchase is for investments purposes, the company noted that the investment complements Kirkland Lake’s existing minority ownership interests in Bonterra Resources Inc. [BTR-TSXV, BONXF-OTC, 9BR1-FSE] and Metanor Resources Inc. [MTO-TSXV], which are on the verge of completing a recently announced business combination and have properties located near Osisko’s flagship Windfall Lake Project in the James Bay region of northern Quebec.

Osisko recently announced that the Windfall deposit contains an indicated resource of 2.38 million tonnes, grading 7.85 g/t gold, or 601,000 ounces. On top of that is an inferred resource of 10.6 million tonnes, grading 6.70 g/t gold or 2.28 million ounces.

Osisko says the resource estimate is the first step to defining the larger Windfall system, and is complemented by the recently announced Osborne-Bell mineral resource estimate.

The 100%-owned Osborne-Bell gold deposit is located 15 km northwest of the town of Lebel-sur-Quevillon, Quebec. It contains an inferred resource of 510,000 ounces of gold assuming a US$1,300 per ounce gold price and a lower cut-off grade of 3.0 g/t gold.

The company is planning to incorporate the Windfall gold deposit and Osborne-Bell into a single preliminary economic estimate, scheduled for the third quarter of 2018.

Kirkland Lake Gold is a mid-tier gold producer with 2018 production target of over 620,000 ounces of gold from mines in Canada and Australia. Its production profile is anchored by two high-grade, low cost operations, including the Macassa Mine in northeastern Ontario and Fosterville Mine in Victoria, Australia.

The company recently said it has expanded a new high-grade gold zone below its Taylor Mine in Northeast Ontario on the fabled Porcupine Destor Faullt.

The Taylor Mine, located in Matheson, is expected to produce between 60,000 and 70,000 ounces of gold this year, according to the company’s production guidance.

“Included in our plan to increase Kirkland Lake Gold’s annual production to a million ounces within five to seven years is growth in both production levels and mine life at Taylor Mine,” said Kirkland Lake President and CEO Tony Makuch.

With $260 million in cash on hand, the company remains well capitalized to complete organic initiatives which have the potential to increase Kirkland Lake’s gold production to the one-million-ounce target by 2022, analysts say.

On Wednesday, Kirkland Lake shares advanced 3% or 70 cents to $23.53. The shares are trading in a 52-week range of $30.94 and $14.76.