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Osisko Tables Preliminary Assessment Study On Canadian Malartic Project

Posted on: Monday, 31 March 2008, 06:00 CDT

Osisko Exploration Ltee. (TSX: OSK)(Deutsche Boerse:EWX) is pleased to announce results of the Preliminary Assessment Study (the "Study") of its 100% owned Canadian Malartic Gold Project located in Malartic, Quebec. The Study was compiled by BBA Inc., with the collaboration of RSG Global Consulting, G Mining Services, Genivar, Golder Associates and the Osisko Technical Group. Osisko released its current inferred resource of 8.4M oz gold in mid-2007 (see July 5, 2007 press release). For the purposes of this Preliminary Assessment Study, only in-pit inferred resources between surface and a vertical depth of 400 metres were considered. A gold price of $775 per ounce was assumed for the financial analysis, and current market prices for all materials were applied. All dollar amounts presented in this press release are expressed in US dollars. An exchange rate of 1.10 was used with respect to Canadian expenditures.

Results of the Study are highly encouraging and Osisko is continuing to work towards definitive feasibility on the Canadian Malartic Project, expected to be delivered by year end. The Study shows that over the first three years of production, Canadian Malartic will average 572,000 ounces of gold per year at an average head grade of 1.05 g/t Au and with cash costs averaging $314 per ounce (including royalties). Over the first three years, the operation would generate pre-tax cash flow of $731 M. Over a projected 14 year mine life the current deposit would produce an average of 457,800 ounces of gold per year at an average cash cost of $381 per ounce (including royalties), generating pre-tax operating cash flow of $2.58 billion, with over $1 billion pre-tax cash flow generated in the first five years of production. The Study shows an Internal Rate of Return (using a 5% discount rate) of 22.2 percent and possible Payback Period of 39 months.

 Summary highlights of the Study are shown in the table below: ------------------------------------------------------------------------ Estimated Mined Gold (oz)           7,794,000   (Whittle Pit constrained) ------------------------------------------------------------------------ Estimated Net Recoverable Gold (oz) 6,547,000     (based on 84% recovery) ------------------------------------------------------------------------ Average Annual Gold Production (oz)   457,800    (572,000 - Years 1 to 3) ------------------------------------------------------------------------ Cash Cost per ounce   - before royalties                      $369     ($ 301 - Years 1 to 3)   - with royalties                        $381     ($ 314 - Years 1 to 3) ------------------------------------------------------------------------ Initial investment (CAPEX)               $760 M ------------------------------------------------------------------------ CAPEX per ounce                          $116 ------------------------------------------------------------------------ Sustaining Capital                        $59 M ------------------------------------------------------------------------ Closure Costs                             $52 M ------------------------------------------------------------------------ Operating Cash flow pre-tax            $2,582 M ------------------------------------------------------------------------ IRR - pre-tax (5% discount)              22.2% ------------------------------------------------------------------------ Payback                                    39 months ------------------------------------------------------------------------ Mine Life                                14.3 Years ------------------------------------------------------------------------ 

Capital expenditures are estimated at $760 M (which includes contingency of $72.6 M), giving the project a capital expenditure per recoverable ounce of $116, within current industry norms for the best gold projects in the world. Osisko has already paid approximately $30 M towards capital expenditures in the form of capital equipment purchases (milling equipment) and the relocation plan (home and land purchases and initial Sector 7 development), leaving remaining capital investment requirement of the project at approximately $733 M (including contingency of $72.6 M). It is also estimated that only 15 percent of operating costs will be diesel purchases, limiting the project exposure to rising oil prices.

Sean Roosen, President and CEO of Osisko commented: "We are very pleased with the positive results of our Preliminary Assessment Study. Canadian Malartic continues to demonstrate that it is a solid world class gold project in what the 2007 Fraser Institute survey indicates is the best mining jurisdiction in the world. At $116 per ounce of construction and development costs, we are in line with other similar sized projects globally. While our capital outlay estimate reflects the increased cost pressure that all new projects have been facing in the current market environment, we believe that our early call in procuring our SAG mill, initial two ball mills and other ancillary equipment minimizes the impact of the inflation experienced by our industry. We are now moving forward quickly toward our goal of making Osisko the next premium intermediate gold producer, with no legacy issues and very limited exposure to either geopolitical or energy cost volatility.

The Study shows that on its own, the main deposit provides strong returns in the current environment. It will be the foundation for further growth of the Company through the drill definition of new resources on our current targets, potential new discoveries in other areas on our large land position, and the possibility of new acquisitions within trucking distance from our proposed mill site.

Over the next twelve to eighteen months we will be drill-defining several of our near-surface mineralized zones that have the potential to provide higher grade resources for blending opportunities and increased early debt pay-down, such as the South Barnat Zone. We will also look at deeper targets as we have only really explored to depths of 400 meters to date."

Location

The Canadian Malartic Project is located 25km west of Val d'Or in the rich gold mining district between Val d'Or and Cadillac. The Project is easily accessible by road being located near highway 117 and is serviced by a railway. Electrical power is easily accessible with the Project being located within 9km from Hydro-Quebec's electrical power grid. The region also benefits from a strong contractor and supplier base to the mining industry and an experienced mining workforce. The greater Malartic area produced some 8.7 M ounces of gold during the period ranging from 1938 to 1983.

 Capital Investment Program The initial capital investment program amounts to US $760 M and is summarized below: --------------------------------------------------------------------- Mining - Equipment                    $92.9 M        - Pre-production               $22.2 M                  $115.1 M Mineral Processing Plant                                       $351.0 M Tailings and Water Management                                   $27.9 M Electrical and Communication                                    $19.7 M Administration Buildings and Infrastructure                     $29.2 M Community Development and Relocation Program                    $82.0 M Indirects                                                       $51.5 M Owner's Cost                                                    $11.0 M ---------------------------------------------------------------------                                                                $687.4 M Contingency                                                     $72.6 M --------------------------------------------------------------------- Total                                                          $760.0 M 

The Company has entered into commitments on many long-lead items and has received firm quotations which it expects to execute within the next 30 days for total purchases of $200 M. Accordingly, no contingency has been applied to those purchases. A contingency provision of 15% has been estimated on the remaining project outlays. The level of accuracy of the capital investment estimate is +/- 25%.

The investment program is scheduled over a two year period. Sustaining capital is estimated at $59 M and mainly for additional mining equipment. Closure cost provisions amount to $52 M.

Mining

The preliminary mining plan has been established using the inferred resources calculated by RSG Global Consulting Pty. Ltd. An open pit optimization was performed using Whittle software, which is based on the Lerchs-Grossmann algorithm. The pit optimization resulted in an estimated mining resource conversion rate of 92 percent relative to the published inferred resource.

 Summary of the annual mining excavation plan is as follows: -------------------------------------------------------------------------- Period  Ore mined  Waste mined  Total Mined  Stockpile Reclaim Total moved               (kt)         (kt)         (kt)               (kt)        (kt) -------------------------------------------------------------------------- -1          6,568        8,432       15,000                         15,000 -------------------------------------------------------------------------- 1          24,193       23,807       48,000                         48,000 -------------------------------------------------------------------------- 2          28,715       19,285       48,000                         48,000 -------------------------------------------------------------------------- 3          18,071       29,929       48,000              5,921      53,921 -------------------------------------------------------------------------- 4          16,482       31,518       48,000              3,594      51,594-------------------------------------------------------------------------- 5          16,104       33,896       50,000              3,970      53,970 -------------------------------------------------------------------------- 6          15,627       34,373       50,000              4,448      54,448 -------------------------------------------------------------------------- 7          18,747       31,253       50,000              1,328      51,328 -------------------------------------------------------------------------- 8          22,116       27,884       50,000                         50,000 -------------------------------------------------------------------------- 9          23,541       26,459       50,000                449      50,449 -------------------------------------------------------------------------- 10         18,446       16,554       35,000              1,776      36,776 -------------------------------------------------------------------------- 11         19,731       15,269       35,000                345      35,345 -------------------------------------------------------------------------- 12         20,501       14,499       35,000                         35,000 -------------------------------------------------------------------------- 13         21,793       13,207       35,000                         35,000 -------------------------------------------------------------------------- 14         17,062        7,888       24,950              3,400      28,350 -------------------------------------------------------------------------- 15                                                       6,647       6,647 -------------------------------------------------------------------------- Total     287,697      334,253      621,950             31,878     653,828 -------------------------------------------------------------------------- 

The deposit will be mined by conventional open pit mining methods using an initial fleet of 12 - 218 tonne haul trucks, two electric hydraulic shovels, and various ancillary equipment to support the mining operations.

The mine production daily rate, including waste, is estimated at 120,000 tonnes per day. The ore to waste ratio is estimated at 1.16 to 1. The pit design includes an inter-ramp pit slope of 55 degrees.

Mining costs have been estimated at an average of $1.52 per tonne mined. Fuel price assumption is based on $83 per barrel of oil. The average annual fuel consumption is estimated at 28 million litres.

Mineral Processing

The plant design is a conventional cyanidation and carbon in pulp plant with a nominal throughput capacity of 55,000 tonnes per day (20 M tonnes per annum) based on 92% plant availability. Gold recovery is estimated at 84% based on an average head grade of 1.2g/t Au for design criteria.

Grind is estimated at P80 = 65 microns with an average leach time of 30 hours.

The design is based on numerous tests being conducted at various laboratories. On-going optimization studies are currently underway.

In order to minimize the environmental impact of the Project, the use of thickened tailings disposal technology has been selected. The actual proposed plan is to dispose of the tailings over the former East Malartic tailings area.

The mineral processing costs, including tailings operations and power, are estimated at $4.55 /tonne milled.

Operating Costs

Total operating costs, including $0.60/tonne for general and administration costs, are estimated at $8.43 per tonne milled or an average of $369 per ounce before royalties.

 The summary per year is outlined below, based on an average gold recovery  of 84%: -------------------------------------------------------------------------- Year       Tonnes      Average           Gold     Cost/ounce    Cost/ounce            Milled        Grade     Production      Excluding     Including            (000's)     (g/t Au)     (000's oz)     Royalties     Royalties -------------------------------------------------------------------------- 2011       20,075         1.02            556            311           325 -------------------------------------------------------------------------- 2012       20,075         1.13            615            277           289 -------------------------------------------------------------------------- 2013       20,075         1.00            544            319           331 -------------------------------------------------------------------------- 2014       20,075         0.82            447            383           394 -------------------------------------------------------------------------- 2015       20,075         0.74            403            436           448 -------------------------------------------------------------------------- 2016       20,075         0.65            354            500           512 -------------------------------------------------------------------------- 2017       20,075         0.76            414            428           440 -------------------------------------------------------------------------- 2018       20,075         0.83            450            398           410 -------------------------------------------------------------------------- 2019       20,075         0.90            486            374           385 -------------------------------------------------------------------------- 2020       20,075         0.76            411            390           401 -------------------------------------------------------------------------- 2021       20,075         0.76            413            390           402 -------------------------------------------------------------------------- 2022       20,075         0.81            438            371           383 -------------------------------------------------------------------------- 2023       20,075         0.87            474            347           359 -------------------------------------------------------------------------- 2024       20,075         0.87            473            319           330 -------------------------------------------------------------------------- 2025        6,647         0.39             70            530           542 -------------------------------------------------------------------------- Total     287,697         0.84          6,547            369           381 -------------------------------------------------------------------------- Rate of Return Under the Base Case scenario at a gold price at $775 per ounce, the Internal Rate of Return (IRR) is estimated at 22.2% before taxes and is unleveraged. The table below outlines sensitivities under various price scenarios: ------------------------------------------------------------------------- Gold Price($)   IRR(%)   NPV at 5% discount(M $)   NPV at 0% discount(M $) -------------------------------------------------------------------------          650     13.0                     394.5                     904.7 -------------------------------------------------------------------------          775     22.2                     952.3                   1,710.8 -------------------------------------------------------------------------          900     30.5                   1,464.1                   2,516.9 -------------------------------------------------------------------------         1000     36.8                   1,891.9                   3,161.7 ------------------------------------------------------------------------- 

Financing

The Company has initiated discussions with financial institutions with respect to funding the Project. The Company currently has cash resources of approximately $160 M, and has invested $30 M as progress payments on capital expenditures. In addition, the Company has negotiated a $20 M unsecured financing with the Solidarity Fund QFL which is expected to close in early April.

Path Forward

The Company is working to complete the feasibility study and the Environmental Impact Assessment by the end of the third quarter/early fourth quarter 2008. The infill drilling program at the Canadian Malartic Property is scheduled for completion at the end of March 2008, with full assay results being available in May. The measured and indicated resource estimate on the entire deposit is to be released in July 2008. Subsequently upon final pit design, a probable reserve calculation will be completed for Definitive Feasibility purposes.

Sean Roosen President and CEO noted: "We have an aggressive plan to move the Canadian Malartic Project to production by the end of 2010. During the next six months we will be focused on completing the Definitive Feasibility Study, optimizing the capital program, operating plans and securing project financing."

Detailed Report

The entire Preliminary Assessment Study will be available as of April 1, 2008 at www.sedar.com and on the Company's corporate website www.osisko.com.

Note: This Preliminary Assessment Study is conceptual in nature as it is based on the inferred resource, which at this stage does not have a high enough geostatistical level of confidence to provide the economic basis for a production decision. The Company is completing its infill drilling program and additional study, which if positive, may advance the Project to the Definitive Feasibility level.

Qualified Person

The Preliminary Assessment Study was prepared by BBA Inc. under the supervision of Mr. David Runnels, a registered professional engineer, an independent Qualified Person under the standards set forth by National Instrument 43-101. Mr. Luc Lessard, Vice-President Engineering and Construction for Osisko and a registered professional engineer, is the Company's designated Qualified Person for the purposes of the Study. Mr. Runnels and Mr. Lessard have reviewed and approved the contents of this press release.

Conference Call Osisko will host a conference call on Monday, March 31st at 10am EST where senior management, the Osisko Technical Group and BBA Inc. representatives will discuss the Study and will be available to respond to questions from analysts and investors. Those interested in participating in the conference call should dial in at 416-850-9144 (Toronto local and international), or 1-866-400-3310 (North American toll free). An operator will direct participants to the call.

Forward Looking Statements

Certain statements contained in this Press Release, including those regarding production, costs, timing of permitting, construction or production, future financial or operating performance and other statements that express management's expectations or estimates of future performance constitute "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. Information concerning the interpretation of mineral resource and reserve estimates and capital cost estimates may also be deemed as forward-looking statements as such information constitutes a prediction of what mineralization might be found to be present and how much capital will be required if and when a project is actually developed. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to: general business and economic conditions; the supply and demand for, deliveries of, and the level and volatility of prices of gold as well as petroleum products; the timing of the receipt of regulatory and governmental approvals for the Corporation's development project and other operations; the availability of financing for the Corporation's development project on reasonable terms; Osisko's estimation of its costs of production, its expected production and its productivity levels, as well as those of its competitors; power prices; the ability to procure equipment and operating supplies in sufficient quantities and on a timely basis; the ability to attract and retain skilled staff; engineering and construction timetables and capital costs for Osisko's development project; market competition; the accuracy of our resource estimate (including, with respect to size, grade and recoverability) and the geological, operational and price assumptions on which it is based; tax benefits and tax rates; the Corporation's ongoing relations with its employees, its business partners and joint venture partners and the community of Malartic.

These forward- looking statements involve risks and uncertainties relating to, among other things, changes commodity and, particularly, gold prices, access to skilled mining development and mill production personnel, results of exploration and development activities, the Corporation's limited experience with production and development stage mining operations, uninsured risks, regulatory changes, defects in title, availability of materials and equipment, timeliness of government approvals, actual performance of facilities, equipment and processes relative to specifications and expectations and unanticipated environmental impacts on operations. These factors are discussed in greater detail in the Corporation's most recent Annual Information Form filed on SEDAR. Other assumptions are also more fully described in the Study.

The Corporation cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on the Corporation's forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. The Corporation believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this Press Release should not be unduly relied upon. These statements speak only as of the date of this Press Release. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this Press Release. Moreover, these forward-looking statements may not be suitable for establishing strategic priorities and objectives, future strategies or actions, financial objectives and projections other than those mentioned above.

 Contacts: Osisko Exploration Ltd John Burzynski Vice-President Corporate Development 514-735-7131 www.osisko.com  Daniel Boase Investor Relations 416-742-5600 Toll Free: 1-866-580-8891  

SOURCE: Osisko Exploration Ltd.

Source: MARKET WIRE

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