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Osisko Development Announces Preliminary Economic Assessment for the Cariboo Gold Project and Refiling Certain Continuous Disclosure Documents

Press Release

MONTREAL, May 24, 2022 – Osisko Development Corp. (“Osisko Development” or the “Company”) (TSX.V-ODV) is pleased to announce the results from its Preliminary Economic Assessment (“PEA” or the “Study”) completed by BBA Engineering Ltd., consultants for the Cariboo Gold Project (“Cariboo” or the “Project”) in Central British Columbia (“BC”).1

The PEA provides a technical and economic update based on the updated underground Mineral Resource Estimate (“MRE”) from the 2021 diamond drill campaign and current costs and economic estimates. The MRE contains 27.1 million tonnes (“Mt”) at an average grade of 4.0 grams per tonne gold (“g/t Au”) for a total of 3.47 million ounces (“M oz”) in the Measured and Indicated Category (consisting of a Measured Resource of eight thousand ounces of gold (47,000 tonnes grading 5.1 g/t Au) and an Indicated Resource of 3.46 million ounces of gold (27 million tonnes grading 4.0 g/t Au)) and 14.4 Mt at a grade of 3.5 g/t Au for a total of 1.6 M oz in the Inferred category (Table 6). These mineral resources have informed an 8,000 tonnes per day (“tpd”) scenario over a 12-year operating mine life, which highlights the potential growth of the Cariboo Gold Project. The PEA is available on the Company’s website and the profile of the Company at www.sedar.com. The Company notes that mineral resources are not mineral reserves as they do not have demonstrated economic viability. The Company notes that a preliminary economic assessment is preliminary in nature, it includes inferred mineral resources that are considered too speculative geologically to have economic consideration applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.

The PEA illustrates potential economics for a low cost, large scale, underground gold mine, with industry leading operating costs. The study outlines total gold production of 2.8 million gold ounces, resulting in an average annual gold production profile of 236,000 ounces with an All-In- Sustaining Cost (“AISC”) per ounce of $1,222 (US$962) (AISC is a non-IFRS measure – please see under the heading “Non- IFRS Measures” below). The Project after-tax net present value (“ NPV”) (5% discount rate) is $764 million with an after-tax internal rate of return (“IRR”) of 21.4% at a gold price of $2,223 (US$1,750) per ounce, and $912 million and 24.5% at a spot gold price for May 19, 2022 at $2,343 (US$1,845) per ounce.

The PEA recommends that the Company continues to work towards a feasibility study and completes the following steps:

  1. Incorporate all drilling results from 2021 and 2022 currently in progress in the resources.
  2. Complete the development of the ramp and extraction of the 10,000-tonne (“t”) bulk sample that will help support the evaluation and testing of the proposed roadheader mining equipment and ore sorting equipment and gain experience to maximize the full potential of these technologies.
  3. Integrate the information and experience gained with the bulk sample into the development strategy of the mine and the feasibility study planning.
  4. Continue exploration program with drilling (infill and exploration), geological mapping, and grab sampling to test the depth extensions of known high-grade vein corridors and identify new targets.

The Company plans to proceed with a feasibility study in connection with the work plan recommended by the PEA.

The Company advises that this clarifying news release is being issued at the request of the Autorité des marchés financiers following a continuous disclosure review. Certain previous economics described in the Table 1 below in relation to the Project disclosed by the Company were not supported by a technical report prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and are superseded by the economics set out in the current NI 43-101 report and the Company cautions the reader not to rely on such previous economics. The Company is also filing a restated version of its annual managements’ discussion and analysis and annual information form to, as applicable, remove the unsupported technical information and qualify other disclosure.

The previous economics were made public by the Company in connection with the environmental assessment for the Cariboo Project. These economics were prepared in accordance with the requirements for major projects in British Columbia to be assessed for potential environmental, social, economic, health and cultural effects by the Environmental Assessment Office, as required by the Environmental Assessment Act (British Columbia) (the “Environmental Assessment Act”) . The previous economics do not include numbers verified to a NI 43-101 standard, and do not include the suite of investor focused economics, including the IRR and NPV for the project. These previous economics were to engineering standards. You will find below a table showing the differences between the previous economics and the economics contained in the PEA.

Table 1: Project Economics

Information Previous economics PEA economics Explanation of the
differences
Production Rate (tpd) 4,750 tpd Up to 8,000 tpd Based on the Company’s
initial expectation a 4,750
tpd mine was used for the
environmental
assessment but in
accordance with the
MRE, its is expected that
production could increase
during the life of the mine
to up to 8,000 tpd
Mine Life 16 years 12 years Higher production rate
Initial Capital Cost and Projected initial capital Projected initial The differences are
Total Capital Cost cost of $400 to $450 capital cost of $122 influenced by number of
million and total capital million, expansion factors including:
cost over the life of capital cost of $716
mine estimated at just million and total • higher production
under $900 million capital over the life rate
of mine estimated at • additional
$1,364 million
resources
• additional
environmental
and engineering
data
• inflation.

The Key Operational Findings of the PEA are:

  • Phased construction approach with an initial construction enabling a 2,000-tpd mine and an

expansion raising the throughput at 8,000 tpd

  • Average life of mine (“LOM”) annual production of 236,000 ounces per annum
  • Peak production of 316,000 ounces and average of 297,000 ounces when operating at 8,000tpd o LOM AISC per ounce of $1,222 (US$962)

o  Projected to have an initial mine life of 12 years

  • First gold pour targeted for Q1 2024

The Key Financial Forecast of the PEA are (at a base case gold price of US$1,750/oz):

  • Initial capital requirement of $121.5 million
  • Expansion capital requirement of $716.1 million
  • LOM pre-tax undiscounted free cash flow of $2.0 billion (post-tax $1.3 billion)
  • Annual pre-tax free cash flow averages $167 million over 12 years of commercial production o Annual after-tax free cash flow of $112 million over 12 years of commercial production

o After-tax NPV (5%) of $764M o After-tax IRR of 21.4%

  • Payback period pre-tax of 5.8 years (post-tax 6.0 years)

Sean Roosen, Chair & Chief Executive Officer of Osisko Development, commented: “The PEA builds on previous technical work while incorporating the results of extensive drilling together with several improvements and optimizations. The capital and operating cost estimates rely on recent budgetary quotes reflecting the current cost environment and our project execution approach. The recent inflation and difficulty with the supply chain has put to the forefront the challenges the mining industry is facing. The Project provides an attractive potential gold production profile of approximately 297,000 ounces per year when operating at 8,000tpd over an 8-year period, making it one of the premier gold development projects in North America and key socio-economic contributor to the Cariboo region, particularly in Wells, Quesnel, and surrounding areas, and the Province of BC. This PEA highlights a phased approach with an initial project able to produce 75,000oz/year at low capital cost, but most importantly, 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 meters. We believe this is a more prudent approach in the actual economic context without compromising the full potential of the Cariboo Gold Project.”

Table 2: Key Economic Outputs of the Study

Description Units
Production Date (Operations Period)
Mine Life year 12
Average Process Throughput tpd 6,424
Average Process Throughput MMt2/ year 2,346
Gold Head Grade g/t 3.40
Contained Gold koz3 3,080
Recovery % 92.1
Total Gold Production koz 2,837
Average Annual Gold Production koz 236,000
Average Annual Full Years at 8,000tpd koz 297,000
Operating Costs (Average LOM)
Mining Cost $/t mined 52.73
Processing Cost $/t mined 24.00
Concentrate transport $/t mined 3.85
Tailings and Water Management $/t mined 5.81
G&A Cost $/t mined 7.63
Total Site Operating Costs $/t mined 94.02
Total Site Operating Costs US$/oz 734.85
AISC US$/oz 961.6
Capital Costs
Initial Capital $ MM 121.5
  • MMt means millions of tonnes.
  • koz means thousand ounces.
Expansion Capital $ MM 716.1
Life of Mine Sustaining Capital $ MM 527.2
Total Capital Costs $ MM 1,364.84
Financial Evaluation
Gold Price Assumption US$/oz 1,750
USD:CAD FX Assumption x 1.27
After-Tax NPV (5%) $ MM5 763.8
After-Tax IRR % 21.4
Payback year 5.8

Read More: https://osiskodev.com/wp-content/uploads/2022/05/ODV-Cariboo-PEA-PR-May-24-2022-Final_18373907_1.pdf

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