Osisko Quebec Gold Mine to Yield 628,000 Ounces a Year

Osisko Mining said Tuesday its Malartic gold project in Quebec should initially yield an average of 618,000 ounces of gold a year when it begins production in 2011, which would make it Canada's largest open-pit gold mine.

The mine, for which the company is moving an entire neighborhood in the small Abitibi area town of Malartic, should also produce 784,000 ounces of silver a year over its first five years, the company said in a feasibility study.

The mine's proven and probable gold reserve is estimated at 6.28 million ounces.

All told, output should average 591,000 ounces of gold and 754,000 ounces of silver a year over a 10-year mine life, at an average cost of $319 per gold ounce, when using the silver output as an offset.

Capital spending is expected to total $723m, and the company still has to raise $553m, it said.

This is seen as a challenge, as the global financial crisis has made credit virtually unobtainable for small mining companies. One solution could be a takeover by a larger player, which some analysts have already pegged as a likely scenario.

"I think obviously the biggest hurdle is the financing. But I think once you have the permits in place, a project of this scope, in this type of location, probably has a limited shelf life," said Brian Christie, an analyst at National Bank Financial.

Montreal-based Osisko is already in the process of moving a neighborhood of more than 200 houses, along with two schools and a seniors' home, in order to build the mine.

For its study, Osisko assumed a gold price of $775 an ounce. Spot gold closed at about $820 an ounce Tuesday.

The company's shares fell 13 Canadian cents to C$1.62, which Christie attributed in part to concerns about the company's financing needs.

Reporting by Cameron French, Reuters.