The Company has been active in the Guerrero District of Mexico where it has accumulated a large land package in an area with operating gold mines and advanced exploration projects.
Building on its flagship Canadian Malartic Mine, the Company hopes to discover and build new gold mines to ensure continued growth. These new projects will be developed only if they meet rate-of-return criteria and the Company has the financial capabilities to conduct such expansion.
Improved Financial Flexibility
During the second quarter, the Company amended its $150 million credit facility with CPPIB Credit Investments Inc. ("CPPIB"), a wholly-owned subsidiary of the CPP Investment Board, with CPPIB making available to the Company an additional $100 million delayed draw term loan. The key terms of the amendment are as follows:
-- The initial cash repayment schedule has been extended by one year to the third quarter of 2013. The reimbursements are based on 50% of free cash flow up to $60 million per annum.-- CPPIB will make available a delayed draw term loan of $100 million for working capital and general corporate purposes. Osisko may draw funds under this facility in $20 million increments, and any funds outstanding are reimbursable by December 31, 2013. No funds were drawn to date on this facility. There are no standby fees related to this tranche.
As part of the agreement, Osisko has agreed to reduce the strike price of share purchase warrants to $10 per warrant for Tranche A (previously $10.75) and Tranche B (previously $19.25). Of the total 12.5 million of warrants, 5.5 million Tranche B warrants can be accelerated at Osisko's discretion if the share price trades at a 50% premium to the exercise price for a period of 15 days. Tranche A warrants expire on September 24, 2014 and Tranche B warrants are set to expire on December 31, 2015.
During the fourth quarter, the Company received from an equipment supplier a non-interest bearing advance of $14.7 million to fund the acquisition of major components as part of the rebuild program. The advance will be repaid over the next two years.
Outlook for 2013
Following the modifications and commissioning of the pre-crushing circuit and the second pebble crushing unit, it is anticipated that mill throughput should be stabilized in 2013. Gold production is estimated between 485,000 - 510,000 ounces for the year. As a result of gaining access to higher grade material in the second half of the year, it is anticipated that gold output will be higher in the second semester. Cash costs are estimated between $780 - $825 per ounce. This anticipates a 9 - 14% cost reduction from 2012.
Capital expenditures for 2013 are estimated at $220 million as follows:
--------------------------------------------------------- ($Million) --------------------Canadian Malartic 98Hammond Reef 10Upper Beaver 70Exploration 42 -------------------- 220---------------------------------------------------------
The Company expects to release the Hammond Reef Feasibility Study in the first semester of the year.
Following the acquisition of Queenston Mining on December 28, 2012, the Company has assumed the leadership of the Upper Beaver advanced exploration program. It is also focused on integrating the Queenston Exploration group into Osisko. For 2013, focus will be on the initial development of the 1,300 meter exploration shaft, including engineering, design and fabrication of the head frame and hoisting facilities, initial collar excavation and preparation for shaft sinking.
