The Osisko Buy-Out: A Bittersweet Bird in the Hand

One of the unfortunate occurances of value investing are your portfolio companies being taken out too cheaply. And so it goes, Osisko Mining and Gold Fields today announced a deal for GFI to acquire Osisko and thereby gain 100% control of the Windfall project and surrounding exploration.

The premium is okay. I will be up about 70% in less than a year with gold stocks generally struggling, but it is likely worth much, much more. I’m genuinely surprised management have agreed to the price of $4.90 CAD/share given what they have said and know about the project. Sometimes a bird in the hand is tempting if it saves you the bother of building a mine.

The details of the deal can be found here.

And here are my thoughts on Osisko from my H1 Review recently:

Osisko Mining: Is an extraordinary situation. You can buy an outstanding deposit, run by proven people, with huge upside optionality, with no further dilution required to first production and which is now buying back shares for 3x 2026 cash flow. Osisko’s first pour at Windfall is scheduled for H2 2025 or H1 2026. Their share (50%) of what should be 306 Koz/year would equate to $230m of cash flow annually given their projected AISC of <$800 and the current gold price. Osisko’s market cap is currently only $730m. These cash flows are likely to run for multiple decades and further optionality exists with their vast exploration rights in the Urban-Barry district, much of which shows similar geology to the Windfall area. Osisko has more 10-bagger potential than anything else I own.

I wouldn’t change any of it. There simply aren’t many undeveloped projects of this quality to be had right now.

Given that junior miners are currently incredibly cheap in general, I think Osisko could have run-up to $4.90 very easily when sentiment improved. In fact, part of the deal price is Gold Fields saving themselves construction outlays they had already committed to, while also acquiring all the optionality that comes with exploration rights to the promising, greater Urban-Barry district.

I continue to believe that there are quality miners that will 10-bag when the next gold bull market really gets going, so the search is now on to recycle these gains into the next most promising target. Prospects include Equinox, B2Gold, adding to my Barrick, Pan American or Impala or adding Anglo American Platinum, but I still have some work to do on this front.

If anyone has a decent thesis in the precious metals/ PGM sphere I’d love to hear it.

So for now I’ll have to settle for short-term gratification that could have been so much more with a bit more time.

Guy

I own Osisko Mining, Barrick, Pan American Silver and Impala Platinum shares.

As always, this isn't investment advice. Please do your own due diligence and seek professional advice if you're unsure about your finances.