I like em both. Also a big fan of Timmins Gold and ATAC Resources (Check out their NR from today!)

http://goldstocksdaily.com/2010/08/03/osisko-mining-vs-detour-gold/

Osisko Mining and Detour Gold are extremely similar companies. They are both currently in the process of constructing large open pit mines in Canada and they both have market caps in the billions.

Osisko Mining

The Canadian Malartic mine is Osisko’s flagship project. Osisko purchased the property in 2005 for a mere $80,000 and now it’s worth billions. Construction started in late 2009 and it is scheduled to be completed by Q2 2011. Here are some highlights of the project:

• Annual production: 650,000 to 700,000 ounces of gold
• Cash production cost: $320 per ounce
• Capex: Roughly $1 billion
• 12.2 year mine life in a mining friendly jurisdiction
• Reserves of 8.97 million ounces

Once completed, Malartic will become the largest gold mine in Canada. Osisko also is in the process of acquiring the Hammond Reef project, but that won’t start production until 2015.

$671 million cash and $182 million long-term debt at the end of Q1 2010.

Detour Gold

Detour’s flagship project is Detour Lake, which is almost identical in size to Osisko’s Malartic project. Detour plans to start development by late 2010 and commence gold production in early 2013.

A Positive feasibility study announced in May 2010 concluded the following:

• Annual production: 650,000 ounces of gold
• Cash production cost: $437 per oz
• Capex: $992 million
• 16 year mine life in a mining friendly jurisdiction
• Reserves of 11.4 million ounces

The company currently has $550 million in cash and no debt.

And the winner is…

As you can see, Canadian Malartic and Detour Lake are extremely similar in scope and size.

Detour Gold has a market cap of $2.2 billion, compared with Osisko at $5.1 billion. Osisko is trading at 2 1/2 times the price of Detour yet both of their flagship projects are virtually identical. One reason why Osisko has a higher premium is because they are much closer to production. Malartic will start up in Q2 2011, Detour lake won’t enter production until early 2013. Osisko is fully funded now with plenty of cash to spare, Detour needs another $500 million as they only have $550 million in cash right now. Osisko also has the advantage in cash cost. I do however believe that Malartic will end up having a higher cash cost than $320 per oz, $350 -$375 per oz will be more realistic.

While I certainly do feel that Osisko deserves a higher premium than Detour, $3 billion is way too big of a spread. Osisko has very limited upside right now, if it gets taken out by Goldcorp or another major then the premium won’t be that great. Osisko does have Hammond Reef, but they are paying $372 million, so the market has already set the current value of that project.

As long as Detour remains on track, they will eventually reach the same multiple as Osisko. Detour is more risky right now since they haven’t started construction, but there is still a lot of value left in the shares. So the winner is Detour Gold.