The rescheduling of the feasibility study adds further downward pressure to the stock which had already been losing value in recent weeks amid the backdrop of the industry-wide issues of inflation, lingering Covid-19 issues, supply chain impacts, and a weakening gold price.
Osisko Development's share price closed at a record low of C$9.80 on May 25, having dropped 3% day on day.
The stock, which listed on the Toronto Stock Exchange in December 2020, saw a record high close of C$26.67 on February 9, 2021. It has fallen from C$14.34 since April 19 of this year.
"As recently as late April, company disclosures guided the release of a Cariboo project feasibility study in H1/22. As such, we view the release of an updated PEA instead as a disappointing development," Canaccord Genuity Capital Markets analyst Kevin MacKenzie said.
Meanwhile, the key operational findings of the PEA for the Central British Columbia project included a phased construction with an initial build enabling a 2,000 tonnes per day mine and expansion raising the throughput to 8,000tpd.
The average life of mine—initially seen as 12 years—was assessed to see annual production of 236,000 ounces per year with peak production of 316,000oz and an average of 297,000oz when operating at 8,000tpd.
The LOM all-in sustaining cost is envisioned to be US$692 and first gold pour is targeted for Q1 2024.
At a base case gold price of US$1,750/oz, the initial capital requirement is viewed as C$121.5 million with an expansion capital requirement of C$716.1 million.
The after-tax NPV (5%) and IRR are projected to be C$764 million and 21.4$ with the paypack period pre-tax seen at 5.8 and 6 years post-tax.
The annual after-tax free cash flow is set at C$112 million over the LOM.
"The recent inflation and difficulty with the supply chain has put to the forefront the challenges the mining industry is facing," Osisko Development's chair and CEO Sean Roosen said.
He noted that the planed phased approach with an initial project able to produce 75,000oz/year at low capital cost—"providing us access to the deposits from underground to do further exploration and seek to unlock more potential value outside of the current mine design that has an average mine depth of 350 metres".
"We believe this is a more prudent approach in the actual economic context without compromising the full potential of the Cariboo gold project," he said.
Analysts at National Bank of Canada said the small start option is encouraging given the mitigation of financing and development risk.
"We had previously identified a financing gap of over C$165 million based on our assumption for development capex of C$450 million. The PEA shows the reduction in upfront capital eliminates this funding gap, and at first glance we now model a funding surplus of around C$164 million," they said.
"However, while the Phase II development requirements will be mitigated by cash flow thrown off from the mine, it will likely need to be augmented by additional financing," the analysts added.
