Exhibit 4.8

 



 

Management’s Discussion and Analysis

For the three months ended March 31, 2014

 

The following management discussion and analysis (“MD&A”) of the consolidated operations and financial position of Osisko Mining Corporation (“Osisko” or the “Company”) and its wholly owned subsidiaries for the three months ended March 31, 2014 should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements and related notes for the three months ended March 31, 2014 and the audited consolidated financial statements for the year ended December 31, 2013. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the Accounting Standards Board. Management is responsible for the preparation of the consolidated financial statements and other financial information relating to the Company included in this report. The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting. In furtherance of the foregoing, the Board of Directors has appointed an Audit Committee composed of independent directors and not members of management. The Audit Committee meets with management and the auditors in order to discuss results of operations and the financial condition of the Company prior to making recommendations and submitting the financial statements to the Board of Directors for its consideration and approval for issuance to shareholders. The information included in this MD&A is as of May 14, 2014, the date when the Board of Directors has approved the Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2014 following the recommendation of the Audit Committee. All monetary amounts included in this report are expressed in Canadian dollars, the Company’s functional and reporting currency, unless otherwise noted. This MD&A contains forward-looking statements and should be read in conjunction with the risk factors described in the “Caution Regarding Forward-Looking Statements” section.

 

Mr. Luc Lessard, Eng., Senior Vice President and Chief Operating Officer of Osisko, Mr. Robert Wares, D.Sc, P.Geo., Senior Vice President, Exploration and Resource Development of Osisko and Mr. Donald Gervais, P.Geo., Technical Services Manager at the Canadian Malartic mine, are the Qualified Persons who have reviewed this Management’s Discussion and Analysis and are responsible for the technical information reported herein, including verification of the data disclosed.

 

Table of Contents

 

	
About Osisko
    	
2
    
	
Highlights
    	
2
    
	
Proposed Acquisition of Osisko by Yamana Gold Inc.   and Agnico Eagle Mines Limited
    	
3
    
	
Outlook
    	
4
    
	
Canadian Malartic Mine
    	
4
    
	
Exploration and Development
    	
8
    
	
Sustainability and Community Relations
    	
10
    
	
Human Resources
    	
10
    
	
Gold Market, Energy and Currency
    	
11
    
	
Selected Quarterly Financial Information
    	
13
    
	
Overview of Financial Results
    	
14
    
	
Liquidity and Capital Resources
    	
16
    
	
Cash Flows
    	
17
    
	
Contractual Obligations and Commitments
    	
20
    
	
Off-balance Sheet Items
    	
20
    
	
Outstanding Share Data
    	
20
    
	
Risks and Uncertainties
    	
21
    
	
Disclosure Controls and Internal Controls over   Financial Reporting
    	
21
    
	
Basis of Presentation of Consolidated Financial   Statements
    	
21
    
	
Critical Accounting Estimates and Judgements
    	
21
    
	
Changes in Accounting Policies
    	
22
    
	
Financial Instruments
    	
22
    
	
Non-IFRS Financial Performance Measures
    	
22
    
	
Caution Regarding Forward-Looking Statements
    	
24
    
	
Corporate Information
    	
25
    


 











 


	
Osisko Mining Corporation
    	
 
    	
Management’s   Discussion and Analysis
    
	
2014 — First Quarter Report
    	
 
    	
 
    




 

About Osisko

 

Osisko is incorporated under the Canada Business Corporations Act and is focused on acquiring, exploring, developing and mining gold properties, with the aim of becoming a leading mid-tier gold producer.

 

The Company’s flagship asset is the Canadian Malartic mine located in Malartic, Québec. The Canadian Malartic deposit was acquired in late 2004, with drilling commencing in March 2005. Following an intensive drilling program, a $1 billion capital construction project was completed in early 2011 with the first gold poured in April 2011. Canadian Malartic reached commercial production on May 19, 2011. Since the beginning of commercial production and up to April 30, 2014, the Canadian Malartic mine has produced 1,240,930 ounces of gold.

 

Osisko acquired two advanced exploration projects, Hammond Reef (2010) and Upper Beaver (2012), both located in Ontario, Canada. The Company also has other exploration projects located in the Americas.

 

Highlights

 

·      Record gold production of 140,029 ounces at cash costs per ounce(1) of $636 (US$577);

·      Record earnings from Canadian Malartic of $77.6 million;

·      Record operating cash flows of $91.9 million;

·      Record net earnings of $24.2 million or $0.06 per share;

·      Investment of $32.9 million in mining assets and projects;

·      Increased cash and cash equivalents by $47.6 million;

·      Cash resources(2) now stand at $258.1 million;

·      Repayment of $10.3 million in debt;

·      Net debt position(3) of $64.0 million at March 31, 2014;

·      Average grade milled of 1.13 g/t Au;

·      Updated life of mine plan for Canadian Malartic: average annual gold production of 597,000 ounces at cash costs(1) of US$525;

·      Discovery of new “Odyssey North” and “Odyssey South” gold zones at Canadian Malartic;

·      Discovery of “Canadian Kirkland” gold zone on Kirkland property;

·      Agreement with Yamana Gold Inc. and Agnico Eagle Mines Limited for the sale of 100% of the issued and outstanding common shares of Osisko for an implied price of $8.15 per common share.

 




(1)  Non-IFRS financial performance measures have no standard definition under IFRS. See “Non-IFRS Financial Performance Measures” section of this MD&A.

(2) Cash resources is a non-IFRS measure and includes cash and cash equivalents and restricted cash.

(3) Net debt position is a non-IFRS measure and includes gross long-term debt (long-term debt excluding unamortized debt issuance costs and accretion) less cash and cash equivalents and restricted cash.

 

2











 

Proposed Acquisition of Osisko by Yamana Gold Inc. and Agnico Eagle Mines Limited

 

Following the hostile take-over bid launched by Goldcorp Inc. on January 13, 2014, the Company embarked on a robust value maximizing process which resulted in the announcement of a friendly transaction with Yamana Gold Inc. (“Yamana”), and Agnico Eagle Mines Limited (“Agnico Eagle”), for a total consideration estimated at $3.9 billion or $8.15 per common share.

 

The total offer consists of approximately $1.0 billion in cash, $2.3 billion in Yamana and Agnico Eagle shares, and the creation of a new company (incorporated on April 29, 2014 under the name Osisko Gold Royalties Ltd) with an implied value of approximately $575 million.

 

Terms of the agreement

 

Under the agreement, Yamana and Agnico Eagle will form a joint acquisition entity (each company owning 50%) which will acquire, by way of a plan of arrangement (the “Arrangement”), all of the outstanding common shares of Osisko. Upon closing of the transaction, Yamana and Agnico Eagle will each own Osisko, and will form a joint committee to operate the Canadian Malartic mine in Québec. The partners will also jointly explore and potentially develop the Kirkland Lake assets, and continue the exploration at Hammond Reef, Pandora, and Wood Pandora properties, located in Ontario and in Québec.

 

Upon implementation of the agreement, each outstanding common share of Osisko will be exchanged for:

 

(i)      $2.09 in cash;

(ii)     0.26471 of a Yamana common share (a value of $2.43 based on the closing price of $9.18 for Yamana shares on the Toronto Stock Exchange as of April 15, 2014);

(iii)    0.07264 of an Agnico Eagle common share (a value of $2.43 based on the closing price of $33.45 for Agnico Eagle shares on the Toronto Stock Exchange as of April 15, 2014);

(iv)    one new common share of Osisko Gold Royalties Ltd with an implied value of $1.20 per share.

 

Pursuant to the Arrangement, certain assets of Osisko will be transferred to Osisko Gold Royalties Ltd, the shares of which will be distributed to Osisko shareholders as part of the consideration. The following will be transferred to Osisko Gold Royalties Ltd:

 

(i)      a 5% net smelter return royalty (“NSR”) on the Canadian Malartic mine;

(ii)     a 2% NSR on all existing exploration properties including Kirkland Lake, Hammond Reef, Pandora and Wood Pandora assets;

(iii)    $155 million cash;

(iv)    all assets and liabilities of Osisko in the Guerrero camp in Mexico;

(v)     publicly traded equity investments in associates and other publicly traded companies.

 

The total value of the transaction is estimated at $3.9 billion, or $8.15 per common share of Osisko on a fully diluted basis. Following the completion of the transaction, Osisko shareholders will own approximately 14% of Yamana and approximately 17% of Agnico Eagle.

 

As a result of the Goldcorp Inc. hostile take-over bid, the conducting of the value maximization process and the successful completion of the proposed transaction, the Company has incurred significant costs in the first quarter ($7.5 million) and is expected to incur additional significant charges in the second quarter. The charges will include professional fees for advisors and change of control payments for senior management and some employees.

 

Annual & Special Shareholders Meeting

 

Osisko’s Annual and Special Shareholders Meeting will be held on May 30, 2014 at 1:30pm at the Fairmont Queen Elizabeth Hotel in Montreal. Shareholders are invited to approve the Plan of Arrangement for the Yamana and Agnico Eagle transaction.

 

3











 

Outlook

 

Mill throughput is expected to stabilize at approximately 55,000 tonnes per operating day in 2014 with the completion of optimization programs currently in progress. Together with increased contribution from higher grade material in the now accessible northern pit wall, it is anticipated that gold production for the current year will increase to between 525,000 to 575,000 ounces (an increase of 11% to 21% over the record 2013 production of 475,277 ounces gold).

 

Cash costs per ounce (4) are estimated between $580 and $635, a 24% to 16% reduction in costs from 2013. Cash costs per ounce(4) in US dollars are estimated at US$527 to US$577 using an exchange rate of 1.10.

 

Capital expenditures for 2014 are estimated at $148.0 million:

 

	
(In millions of dollars)
    	
 
    	
 
    
	
Canadian   Malartic(1)
    	
 
    	
125.8
    
	
Exploration   and evaluation — capitalized
    	
 
    	
22.2
    
	
Capital   expenditures
    	
 
    	
148.0
    


 




(1)   Includes $65.6 million related to stripping and pit preparation activities.

 

Canadian Malartic Mine

 

The Canadian Malartic mine is a large open pit operation located within the Town of Malartic.

 

Canadian Malartic commenced commercial production in May 2011. Following a prolonged ramp-up period which necessitated modifications to the plant, the operations continued to progress to name-plate capacity of 55,000 tonnes per operating day. The operations have now been stabilized and continued optimization programs are now being pursued.

 

Following an improvement in the grade at 1.13 g/t Au processed, the mine established a quarterly gold production record of 140,029 ounces in the first quarter of 2014. Average daily throughput reached 50,444 tonnes per operating day compared to 48,667 tonnes per operating day in the first quarter of 2013 and 54,043 tonnes in the fourth quarter of 2013. Cash costs per ounce(4) for the first quarter of 2014 amounted to $636 (US$577). The mine generated record operating earnings of $77.6 million, compared to $55.0 million in the corresponding quarter of 2013. The increase in profit from mine operations is mainly due to an increase in revenues of $52.8 million compared to an increase in mine operating costs of $30.1 million.

 

During April 2014, gold production totaled 37,008 ounces despite a 5-day scheduled shut-down for plant maintenance. Production exceeded budget by 16%.

 




(4)  Non-IFRS financial performance measures have no standard definition under IFRS. See “Non-IFRS Financial Performance Measures” section of this MD&A.

 

4











 

Quarterly mine statistics are as follows:

 

	
 
    	
 
    	
2014
    	
 
    	
2013
    	
 
    
	
(in $000’s)
    	
 
    	
Q1
    	
 
    	
Q4
    	
 
    	
Q3
    	
 
    	
Q2
    	
 
    	
Q1
    	
 
    	
Total
    	
 
    
	
Revenues
    	
 
    	
212,131
    	
 
    	
185,774
    	
 
    	
171,298
    	
 
    	
159,195
    	
 
    	
159,381
    	
 
    	
675,648
    	
 
    
	
Mine operating costs
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Production costs(1)
    	
 
    	
(96,288
    	
)
    	
(94,545
    	
)
    	
(91,788
    	
)
    	
(90,043
    	
)
    	
(80,928
    	
)
    	
(357,304
    	
)
    
	
Royalties
    	
 
    	
(2,729
    	
)
    	
(2,422
    	
)
    	
(2,144
    	
)
    	
(2,274
    	
)
    	
(1,992
    	
)
    	
(8,832
    	
)
    
	
Cash generated from mine   operations(2)
    	
 
    	
113,114
    	
 
    	
88,807
    	
 
    	
77,366
    	
 
    	
66,878
    	
 
    	
76,461
    	
 
    	
309,512
    	
 
    
	
Depreciation
    	
 
    	
(35,205
    	
)
    	
(34,791
    	
)
    	
(37,902
    	
)
    	
(23,683
    	
)
    	
(20,982
    	
)
    	
(117,358
    	
)
    
	
Share-based compensation
    	
 
    	
(298
    	
)
    	
(331
    	
)
    	
(477
    	
)
    	
(576
    	
)
    	
(494
    	
)
    	
(1,878
    	
)
    
	
Earnings from mine operations
    	
 
    	
77,611
    	
 
    	
53,685
    	
 
    	
38,987
    	
 
    	
42,619
    	
 
    	
54,985
    	
 
    	
190,276
    	
 
    


 




(1)    Production costs net of non-cash share-based compensation presented separately.

(2)    Cash generated from mine operations is a non-IFRS financial performance measure with no standard definition under IFRS. See “Non-IFRS Financial Performance Measures” section of this MD&A.

 

Cash flows and earnings generated from the Canadian Malartic mine were higher in the first quarter of 2014 as a result of record production and sales despite lower realized average prices. In the first quarter of 2014, 140,029 ounces of gold were produced and 146,132 ounces were sold compared respectively to 106,047 ounces and 95,511 ounces in the first quarter of 2013.

 

Mining

 

Approximately 15.6 million tonnes of ore and waste and 1.4 million tonnes of re-handling from stockpiles were moved during the first quarter of 2014 (190,000 tonnes/day), compared to 14.2 million tonnes of ore and waste and 1.6 million tonnes of re-handling from stockpiles during the first quarter of 2013 (176,000 tonnes/day). These results were achieved despite the difficult weather conditions (extreme cold) which caused equipment failures. In addition, as the mine is located in an urban area, the utilization of the mining fleet is occasionally reduced to meet the noise-level restrictions. Operating procedures restrict blasting activities when winds are from the southerly direction as a precautionary measure to protect the community from potential NOx emissions. Grade reached an average of 1.13 g/t Au in the first quarter of 2014 compared to 0.88 g/t Au in the first quarter of 2013 as higher grade materials were accessible in the northern part of the pit.

 

Quarterly mine production is as follows:

 

	
 
    	
 
    	
Ore
    	
 
    	
Waste(1)
    	
 
    	
Total Mined
    	
 
    	
Re-handling
    	
 
    	
Total Moved
    	
 
    	
Overburden
    	
 
    
	
 
    	
 
    	
(t)
    	
 
    	
(t)
    	
 
    	
(t)
    	
 
    	
(t)
    	
 
    	
(t)
    	
 
    	
(t)
    	
 
    
	
Q1 2014
    	
 
    	
4,456,486
    	
 
    	
11,188,470
    	
 
    	
15,644,956
    	
 
    	
1,422,513
    	
 
    	
17,067,469
    	
 
    	
762,882
    	
 
    
	
Q4 2013
    	
 
    	
4,905,712
    	
 
    	
9,907,438
    	
 
    	
14,813,150
    	
 
    	
1,419,571
    	
 
    	
16,232,721
    	
 
    	
159,592
    	
 
    
	
Q3 2013
    	
 
    	
4,423,224
    	
 
    	
11,334,861
    	
 
    	
15,758,085
    	
 
    	
1,767,602
    	
 
    	
17,525,687
    	
 
    	
304,535
    	
 
    
	
Q2 2013
    	
 
    	
3,604,314
    	
 
    	
10,009,579
    	
 
    	
13,613,893
    	
 
    	
2,036,802
    	
 
    	
15,650,695
    	
 
    	
870,567
    	
 
    
	
Q1 2013
    	
 
    	
4,090,870
    	
 
    	
10,157,993
    	
 
    	
14,248,863
    	
 
    	
1,626,651
    	
 
    	
15,875,514
    	
 
    	
1,783,318
    	
 
    
	
Total 2013
    	
 
    	
17,024,120
    	
 
    	
41,409,871
    	
 
    	
58,433,991
    	
 
    	
6,850,626
    	
 
    	
65,284,617
    	
 
    	
3,118,012
    	
 
    
	
Q4 2012
    	
 
    	
3,553,080
    	
 
    	
7,846,981
    	
 
    	
11,400,061
    	
 
    	
2,121,248
    	
 
    	
13,521,309
    	
 
    	
627,476
    	
 
    
	
Q3 2012
    	
 
    	
4,852,977
    	
 
    	
9,215,070
    	
 
    	
14,068,047
    	
 
    	
1,976,746
    	
 
    	
16,044,793
    	
 
    	
1,408,530
    	
 
    
	
Q2 2012
    	
 
    	
3,234,013
    	
 
    	
9,545,522
    	
 
    	
12,779,535
    	
 
    	
2,460,224
    	
 
    	
15,239,759
    	
 
    	
1,739,705
    	
 
    
	
Q1 2012
    	
 
    	
4,037,282
    	
 
    	
8,457,681
    	
 
    	
12,494,963
    	
 
    	
1,405,929
    	
 
    	
13,900,982
    	
 
    	
1,954,030
    	
 
    
	
Total 2012
    	
 
    	
15,677,352
    	
 
    	
35,065,254
    	
 
    	
50,742,606
    	
 
    	
7,964,147
    	
 
    	
58,706,753
    	
 
    	
5,729,741
    	
 
    


 




(1)    Including topographic drilling of 1.2 million tonnes in 2014, 4.9 million tonnes in 2013 and 2.5 million tonnes in 2012.

 

5









 

During the quarter, a total of 319 equipment hours were lost due to noise and weather constraints compared to 1,510 equipment hours in the first quarter of 2013. Quarterly statistics are as follows:

 

	
 
    	
 
    	
Number of Hours
    	
 
    	
(%)
    	
 
    
	
Q1 2014
    	
 
    	
319
    	
 
    	
0.3
    	
 
    
	
Q4 2013
    	
 
    	
7,670
    	
 
    	
6.3
    	
 
    
	
Q3 2013
    	
 
    	
5,180
    	
 
    	
4.3
    	
 
    
	
Q2 2013
    	
 
    	
4,470
    	
 
    	
3.9
    	
 
    
	
Q1 2013
    	
 
    	
1,510
    	
 
    	
1.4
    	
 
    
	
Q4 2012
    	
 
    	
2,840
    	
 
    	
2.5
    	
 
    
	
Q3 2012
    	
 
    	
5,830
    	
 
    	
5.3
    	
 
    
	
Q2 2012
    	
 
    	
4,510
    	
 
    	
4.6
    	
 
    
	
Q1 2012
    	
 
    	
1,660
    	
 
    	
1.9
    	
 
    


 

On February 26, 2014, the Québec Government adopted a decree authorizing the operation of the Gouldie deposit. Since then, the pre-stripping activities have been initiated.

 

Milling

 

Production in the first quarter of 2014 averaged 50,444 tonnes per operating day compared to 48,667 tonnes per operating day for the first quarter of 2013. In coordination with the technical advisors, the Canadian Malartic team continues to work on improving the mill throughput and enhancing operating efficiencies.

 

Mill feed for the first quarter of 2014 averaged 1.13 g/t Au compared to 0.88 g/t Au in the first quarter of 2013. Access to the northern part of the pit allowed higher grade to be mined and processed. Recoveries continued to exceed average feasibility forecasts averaging 88% for the first quarter of 2014.

 

Operating statistics at the mill are as follows:

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Tonnes
    	
 
    
	
 
    	
 
    	
Total
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Tonnage
    	
 
    	
Tonnes
    	
 
    	
per
    	
 
    
	
 
    	
 
    	
Available
    	
 
    	
Operating
    	
 
    	
 
    	
 
    	
Processed
    	
 
    	
per
    	
 
    	
Operating
    	
 
    
	
 
    	
 
    	
Hours
    	
 
    	
Hours
    	
 
    	
(%)
    	
 
    	
(t)
    	
 
    	
Operating Hour
    	
 
    	
Day (1)
    	
 
    
	
Q1 2014
    	
 
    	
2,160
    	
 
    	
2,042
    	
 
    	
95
    	
 
    	
4,363,365
    	
 
    	
2,137
    	
 
    	
50,444
    	
 
    
	
Q4 2013
    	
 
    	
2,208
    	
 
    	
2,054
    	
 
    	
93
    	
 
    	
4,647,677
    	
 
    	
2,263
    	
 
    	
54,043
    	
 
    
	
Q3 2013
    	
 
    	
2,208
    	
 
    	
2,061
    	
 
    	
93
    	
 
    	
4,682,530
    	
 
    	
2,272
    	
 
    	
54,133
    	
 
    
	
Q2 2013
    	
 
    	
2,184
    	
 
    	
2,014
    	
 
    	
92
    	
 
    	
4,444,042
    	
 
    	
2,207
    	
 
    	
52,592
    	
 
    
	
Q1 2013
    	
 
    	
2,160
    	
 
    	
2,082
    	
 
    	
96
    	
 
    	
4,234,001
    	
 
    	
2,033
    	
 
    	
48,667
    	
 
    
	
Q4 2012
    	
 
    	
2,208
    	
 
    	
2,052
    	
 
    	
93
    	
 
    	
4,088,021
    	
 
    	
1,992
    	
 
    	
47,535
    	
 
    
	
Q3 2012
    	
 
    	
2,208
    	
 
    	
2,071
    	
 
    	
94
    	
 
    	
3,756,768
    	
 
    	
1,814
    	
 
    	
43,181
    	
 
    
	
Q2 2012
    	
 
    	
2,184
    	
 
    	
1,960
    	
 
    	
90
    	
 
    	
3,236,281
    	
 
    	
1,651
    	
 
    	
38,074
    	
 
    
	
Q1 2012
    	
 
    	
2,184
    	
 
    	
1,890
    	
 
    	
87
    	
 
    	
2,965,456
    	
 
    	
1,569
    	
 
    	
35,728
    	
 
    


 




(1)        2014: In Q1 2014, the mill was shut down for 3.5 days mainly due to SAG mill liner change.

 

2013: In Q4 2013, the mill was shut down for 6 days for scheduled maintenance. In Q3 2013, the mill was shut down for 5.5 days for scheduled maintenance. In Q2 2013, the mill was shut down for 6.5 days, including 5.5 days for scheduled maintenance. In Q1 2013, the mill was shut down for 3 days for maintenance on the conveyor and for SAG mill liner change.

 

2012: In Q4 2012, the mill was shut down 6 days for scheduled maintenance and the second pebble installation. The throughput at the mill was reduced at 42,000 tonnes per day for a 15-day period during the installation of the second pebble crusher. In Q3 2012, the mill was shut down for a scheduled 5-day period for a liner change (secondary crushers, SAG and ball mills). In Q2 2012, the mill was shut down for a 6-day period following a fire at the mill. In Q1 2012, the mill was shut down for a 7-day period for the installation of the first unit of the secondary crusher and one day for maintenance.

 

6











 

Production statistics are as follows:

 

	
 
    	
 
    	
2014
    	
 
    	
2013
    	
 
    
	
 
    	
 
    	
Q1
    	
 
    	
Q4
    	
 
    	
Q3
    	
 
    	
Q2
    	
 
    	
Q1
    	
 
    	
Total
    	
 
    
	
Tonnes milled (t)
    	
 
    	
4,363,365
    	
 
    	
4,647,677
    	
 
    	
4,682,530
    	
 
    	
4,444,042
    	
 
    	
4,234,001
    	
 
    	
17,024,120
    	
 
    
	
Grade (g/t Au)
    	
 
    	
1.13
    	
 
    	
1.04
    	
 
    	
0.90
    	
 
    	
0.87
    	
 
    	
0.88
    	
 
    	
0.92
    	
 
    
	
Recovery Au (%)
    	
 
    	
88.2
    	
 
    	
88.6
    	
 
    	
89.2
    	
 
    	
89.7
    	
 
    	
88.0
    	
 
    	
88.9
    	
 
    
	
Gold ounces produced (oz)
    	
 
    	
140,029
    	
 
    	
137,321
    	
 
    	
120,208
    	
 
    	
111,701
    	
 
    	
106,047
    	
 
    	
475,277
    	
 
    
	
Gold ounces sold (oz)
    	
 
    	
146,132
    	
 
    	
136,826
    	
 
    	
123,151
    	
 
    	
109,503
    	
 
    	
95,511
    	
 
    	
464,991
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Grade (g/t Ag)
    	
 
    	
1.26
    	
 
    	
1.06
    	
 
    	
1.09
    	
 
    	
1.12
    	
 
    	
0.86
    	
 
    	
1.04
    	
 
    
	
Recovery Ag (%)
    	
 
    	
76.8
    	
 
    	
72.9
    	
 
    	
68.4
    	
 
    	
69.5
    	
 
    	
71.5
    	
 
    	
70.5
    	
 
    
	
Silver ounces produced (oz)
    	
 
    	
135,515
    	
 
    	
115,562
    	
 
    	
112,637
    	
 
    	
110,823
    	
 
    	
83,597
    	
 
    	
422,619
    	
 
    
	
Silver ounces sold (oz)
    	
 
    	
141,817
    	
 
    	
106,907
    	
 
    	
117,750
    	
 
    	
95,205
    	
 
    	
73,683
    	
 
    	
393,545
    	
 
    


 

Operating Costs

 

Cash costs per ounce(5) in the first quarter of 2014 stood at $636 (US$577), compared to $804 (US$798) in the first quarter of 2013. The improvement is mainly the result of increased throughput and gold production, improved efficiencies and reduction in contractors’ costs. As the operations at Canadian Malartic are further optimized, the operating costs should continue their downward trend.

 

Reserves and Resources

 

As of January 1, 2014, the updated ore reserve estimates stood at 9.37 million ounces at the Canadian Malartic mine. The reserve base is calculated at US$1,300 per ounce of gold and is presented in the table below:

 

Reserve and global resource estimates

with a cut-off grade of 0.263 to 0.332 g/t Au

 

	
 
    	
 
    	
Tonnes
    	
 
    	
Grade
    	
 
    	
Au
    	
 
    
	
Category
    	
 
    	
(M)
    	
 
    	
(g/t Au)
    	
 
    	
(M oz)
    	
 
    
	
Proven Reserves
    	
 
    	
65.9
    	
 
    	
0.92
    	
 
    	
1.94
    	
 
    
	
Probable Reserves
    	
 
    	
215.3
    	
 
    	
1.07
    	
 
    	
7.43
    	
 
    
	
Proven & Probable   Reserves
    	
 
    	
281.2
    	
 
    	
1.04
    	
 
    	
9.37
    	
 
    
	
Measured and Indicated Resources(1)
    	
 
    	
327.0
    	
 
    	
1.06
    	
 
    	
11.10
    	
 
    
	
Inferred Resources
    	
 
    	
48.1
    	
 
    	
0.75
    	
 
    	
1.16
    	
 
    


 




(1)            Includes proven and probable reserves.

 

The Company continues to work with Québec’s Ministry of Transport and the Town of Malartic on the deviation of a portion of the highway 117 to gain access to the higher grade Barnat deposit, included in the reserve and resource estimates table above. The final layout has been completed, the environmental impact study is expected to be completed by the beginning of the second quarter of 2014 and a request for public hearings will be made by the Company. It is expected that the Barnat deposit will provide higher ore grade mill feed.

 

On February 26, 2014 the Québec Government adopted a decree authorizing the exploitation of the Gouldie deposit, which allowed the Company to begin the pre-stripping activity.

 




(5) Non-IFRS financial performance measures have no standard definition under IFRS. See “Non-IFRS Financial Performance Measures” section of this MD&A.

 

7











 

Exploration and Development

 

Prior to mid 2009, the Company’s efforts were focused solely on the development of its flagship asset, the Canadian Malartic mine. Following the securing of the financing, the necessary authorizations and the construction release, the Company began to seek other opportunities to complement the Canadian Malartic mine. The overall objective is for Osisko to achieve the status of a leading intermediate gold producer with annual production of 1 million ounces. The strategy is to create value through the identification and development of gold reserves and resources.

 

To build on its gold mining asset base, the Company has acquired advanced exploration projects, has entered into exploration agreements, has staked ground, and has invested in various public and private exploration companies with promising gold projects. Osisko continues to focus its efforts on its new Kirkland Lake area properties and in Mexico.

 

Osisko enjoys flexibility on its major projects, a benefit of being the sole owner, and thus can select the rate of execution of its investment programs without concern for compromising ownership rights.

 

Upper Beaver Project and Kirkland Lake — Larder Camp

 

On December 28, 2012, Osisko acquired Queenston Mining Inc., a Canadian mineral exploration and development company with a primary focus on its holdings in the historic Kirkland Lake gold camp comprising 230km2 of exploration lands and the Upper Beaver Project. Queenston Mining Inc. (“Queenston”) changed its name to Osisko Mining Ltd. on January 16, 2013.

 

The Queenston transaction provides the Company with a major foothold in a prolific gold camp that has produced in excess of 40 million ounces. Queenston had consolidated the land package over the past 20 years. To date, there have been several satellite deposits identified that could feed a regional mill.

 

The Upper Beaver Project has the following resources as calculated by SRK Consulting, as of November 5, 2012.

 

	
 
    	
 
    	
Tonnes
    	
 
    	
Au
    	
 
    	
Cu
    	
 
    	
Contained Au
    	
 
    	
Contained Cu
    	
 
    
	
Category
    	
 
    	
(000’s)
    	
 
    	
(g/t)
    	
 
    	
(%)
    	
 
    	
(000’s ounces)
    	
 
    	
(000’s pounds)
    	
 
    
	
Indicated
    	
 
    	
6,870
    	
 
    	
6.62
    	
 
    	
0.37
    	
 
    	
1,461
    	
 
    	
56,006
    	
 
    
	
Inferred
    	
 
    	
4,570
    	
 
    	
4.85
    	
 
    	
0.32
    	
 
    	
712
    	
 
    	
32,218
    	
 
    


 

The work at Upper Beaver is focused on drilling deep holes to test extensions of known zones. The Company has completed 50,436 meters of drilling since January 1, 2013. Work is currently limited to completion of current holes and compiling information generated during the drilling phase to date, and on conducting basic geological review and interpretation over the land package held in the area.

 

At the end of 2013, an intensive drilling program has been initiated and in February 2014, Osisko announced the discovery of a potentially large, bulk tonnage disseminated gold deposit on its 100% owned Kirkland Lake project. This discovery, named the “Canadian Kirkland” zone, consists of a previously unreported type of mineralization in this world-class gold camp. For more information, please refer to Osisko’s press release dated February 21, 2014, New Discovery Named “Canadian Kirkland” Confirms Potential for Bulk Tonnage Gold in Kirkland Camp, available on Osisko’s website at www.osisko.com.

 

Hammond Reef Gold Project

 

Osisko acquired the Hammond Reef gold project located near Atikokan in Northwestern Ontario, through the acquisition of publicly traded Brett Resources Inc. in mid 2010 for $375.0 million. Hammond Reef is a large development project with potential to become a substantial open-pit mine. In the period, efforts were focused on the advancement of the environmental impact assessment.

 

8











 

A new resource estimate for Hammond Reef was released on January 28, 2013. As per the estimate, global measured and indicated resources currently stand at 5.43 million ounces gold at an average grade of 0.86 g/t Au and the global inferred resource stands at 1.75 million ounces gold at an average grade of 0.72 g/t (based on 0.50 g/t Au lower cut-off).

 

Hammond Reef Global Resource Estimates

 

	
Category
    	
 
    	
Grade (g/t)
    	
 
    	
Tonnes (M)
    	
 
    	
Cut-off (g/t)
    	
 
    	
Oz (M)
    	
 
    
	
Measured
    	
 
    	
0.90
    	
 
    	
123.5
    	
 
    	
0.5
    	
 
    	
3.59
    	
 
    
	
Indicated
    	
 
    	
0.78
    	
 
    	
72.9
    	
 
    	
0.5
    	
 
    	
1.83
    	
 
    
	
M+I
    	
 
    	
0.86
    	
 
    	
196.4
    	
 
    	
0.5
    	
 
    	
5.43
    	
 
    
	
Inferred
    	
 
    	
0.72
    	
 
    	
75.7
    	
 
    	
0.5
    	
 
    	
1.75
    	
 
    


 

Further, a whittle pit optimized undiluted resource was calculated (US$1,400 whittle pit shell), totaling 5.31 million ounces of gold at an average grade of 0.72 g/t in the measured and indicated category, and 0.28 million ounces of gold at an average grade of 0.65 g/t in the remaining inferred category.

 

Hammond Reef Undiluted Resource Estimates

within US$1,400 Whittle pit shell

 

	
Category
    	
 
    	
Grade (g/t)
    	
 
    	
Tonnes (M)
    	
 
    	
Cut-off (g/t)
    	
 
    	
Oz (M)
    	
 
    
	
Measured
    	
 
    	
0.75
    	
 
    	
175.3
    	
 
    	
0.32
    	
 
    	
4.25
    	
 
    
	
Indicated
    	
 
    	
0.61
    	
 
    	
54.1
    	
 
    	
0.32
    	
 
    	
1.06
    	
 
    
	
M+I
    	
 
    	
0.72
    	
 
    	
229.5
    	
 
    	
0.32
    	
 
    	
5.31
    	
 
    
	
Inferred
    	
 
    	
0.65
    	
 
    	
13.3
    	
 
    	
0.32
    	
 
    	
0.28
    	
 
    


 

Permitting

 

For the Hammond Reef gold project, permitting is subject to approvals from both Federal (Canadian Environmental Assessment Agency) and Provincial (Ministry of the Environment, Environmental Approvals Branch) authorities.

 

·                  The Ontario Minister of Environment provided approval to the Final Amended Terms of Reference for the environmental approval on July 4, 2012 while the Federal Agency had finalized the Environmental Impact Statement Guidelines for the preparation of the Environmental Impact Statement in October of 2011;

·                  A draft Environmental Assessment / Environmental Impact Statement report was submitted on February 15, 2013. The five week comment period ended on April 5, 2013. Comments were received from Aboriginal groups, the public and the government review team. Osisko held different meetings and teleconferences during the quarter with the governments, aboriginal groups and the public, to respond to the various comments raised;

·                  The final Environmental Impact Assessment was submitted for a conformity review on December 13, 2013 and Osisko is pursuing the obtention of permits.

 

Impairment

 

Osisko’s technical team is progressing on the feasibility study of the project. Due to significant inflation in the mineral industry over the past few years, the preliminary estimate of capital cost for a 60,000 tonnes per day operation ranges between $1.5 and $1.8 billion. Gold output is estimated to average 400,000 ounces per annum at a production cost of $800 to $850 per ounce. The mine life is estimated at 12 years for a total of 4.3 million ounces to be recovered. The group is continuing to review alternatives to optimize capital and operating costs and improve the returns. Under the current project scope, the Hammond Reef gold project requires higher gold prices to justify the investment.

 

In 2013, following an impairment testing of the Hammond Reef gold project, the project value was reduced to nil. The Company will continue to pursue low-cost permitting activities in the near-term and will continue to monitor market conditions and review optimization scenarios.

 

9











 

Guerrero (Mexico)

 

The Company has been active in Mexico in acquiring prospective ground to conduct grassroots activities. To date, the Company has acquired approximately one million hectares in the prolific Guerrero Gold Belt.

 

The Company continues to pursue initial grassroots activities including trenching and sampling, studying geochemistry and geophysical data, identifying drill targets and conducting initial drilling. Efforts were hampered by adverse weather conditions, which severely impacted local infrastructures. Osisko is working with various communities to repair the infrastructures and the exploration program resumed in October 2013.

 

Other grassroots projects

 

In the first quarter of 2014, due to disappointing results of drilling programs completed, some grassroots projects in Mexico and in Ontario were abandoned and a total amount of $2.2 million was written off.

 

Investment in exploration companies

 

In its search for exploration opportunities within the Americas, the Company’s strategy also includes investing in junior mining companies. As at March 31, 2014, Osisko has investments in several junior mining companies, including in Ryan Gold, Bowmore Exploration, Oban Mining, Threegold Resources, Falco Pacific Resource Group, Nighthawk Gold, Pershimco Resources, Orex Exploration and Mistango River Resources.

 

Sustainability and Community Relations

 

Osisko maintains an active stakeholder program to secure and retain its social license to operate. The program includes maintaining active dialogue with the various parties including governments, participating in community social and economic development projects, as well as funding various initiatives in health, education and sport.

 

The Company has received 6 notices of non-compliance in the first quarter of 2014 for its Canadian Malartic operations compared to 9 notices of non-compliance in the first quarter of 2013. The Company also responds to complaints/inquiries raised by the residents of Malartic. In the first quarter of 2014, some 32 complaints were filed compared to 63 in the first quarter of 2013. The notices of non-compliance and the complaints/inquiries relate to noise, dust, blast surpressions, and NOx emissions during blasting. All are investigated and formal responses are filed with the regulatory agency. Periodically, environmental monitoring results are revised with the Monitoring Committee and the community. In the first quarter of 2014, two meetings were held in February and March.

 

The Company continues to pursue mitigation measures and new operating practices to minimize its impact on the community. Several research program and on-going modifications to equipment or operating practices are being pursued or implemented.

 

Mitigation measures have been or are being implemented and include the following items:

 

·                  Implementation of a research and development noise reduction plan for mobile equipment;

·                  Development of a sound prediction system correlating weather conditions and noise dispersion. Recording of data has started and modeling will require at least 6 months of data to establish correlation;

·                  Installation of insulated walls (containers) along ramp and transport roads.

 

The Company will be publishing in May its 2013 annual Sustainability Report. The report will cover the 2013 activities and will be available on Osisko’s website at www.osisko.com.

 

Human Resources

 

The mining industry is faced with a highly competitive environment to attract and retain qualified human resources. Osisko has initiated several measures to recruit and retain employees. These include implementation of competitive remuneration programs, training and development opportunities, and providing a safe working environment. The Company has an extensive university and technical school support program by offering work term to students to complement their theoretical experiences with hands-on practical experience.

 

Mr. Robert Wares was appointed Senior Vice President, Exploration and Resource Development on February 18, 2014.

Mr. Wares, the founder of Osisko, had previously retired in 2012.

 

10









As at March 31, 2014, the Company employed 767 individuals at the following divisions:

 

	
 
    	
 
    	
March 31,
    	
 
    	
December 31,
    	
 
    	
December 31,
    	
 
    	
December 31,
    	
 
    
	
 
    	
 
    	
2014
    	
 
    	
2013
    	
 
    	
2012
    	
 
    	
2011
    	
 
    
	
Canadian Malartic
    	
 
    	
675
    	
 
    	
677
    	
 
    	
642
    	
 
    	
558
    	
 
    
	
Hammond Reef
    	
 
    	
3
    	
 
    	
3
    	
 
    	
25
    	
 
    	
103
    	
 
    
	
Upper Beaver / Kirkland Lake
    	
 
    	
28
    	
 
    	
28
    	
 
    	
64
    	
 
    	
—
    	
 
    
	
Exploration
    	
 
    	
10
    	
 
    	
10
    	
 
    	
26
    	
 
    	
43
    	
 
    
	
Corporate office
    	
 
    	
51
    	
 
    	
52
    	
 
    	
55
    	
 
    	
56
    	
 
    
	
 
    	
 
    	
767
    	
 
    	
770
    	
 
    	
812
    	
 
    	
760
    	
 
    


 

The Company has continued to intensify its efforts to improve its safety performance. The on-site accident frequency has improved significantly during 2013 and in the first quarter of 2014.

 

The Company continues to support the development of new mining talents by offering work terms to engineering and geology students. It also maintains an active training program for its employees.

 

In order to align the interest of the employees with those of the shareholders, the Company has a number of equity remuneration programs. Approximately 66% of employees (68% based on admissibility) participate in the Company’s share purchase plan. Directors and officers are also required to have minimum direct shareholdings in Osisko.

 

Gold Market, Energy and Currency

 

Gold Market

 

Precious metals have been under pressure for most of 2013. The gold price partially recovered some of its lost in the first quarter of 2014. The first quarter gold price averaged at US$1,293/oz, US$339/oz lower than the average gold price of the first quarter of 2013. Gold price closed at US$1,292 on March 31, 2014, an increase of $87/oz compared to December 31, 2013.

 

The market was driven by geopolitical and macro risks in the first quarter of 2014, among the following developments:

 

·                  U.S. economic data such as retail sales and employment have missed expectations;

·                  The Federal Reserve has started to reduce in January 2014 its asset purchase program, but should continue its monetary stimulus for some time to cut unemployment;

·                  Emerging markets saw a currency crisis break out in January 2014, raising fears of contagion;

·                  Weak economic data in China and concerns about the possibility of large scale defaults within the corporate bond and banking sectors;

·                  Geopolitical unrest, including protests in Venezuela and Thailand and the political crisis in Ukraine, helped to increase demand for gold as a safe haven by investors; and

·                  Exchange traded fund (“ETF”) activity has stabilized and funds are turning more bullish on gold, increasing their long position and reducing their short position exposure.

 

Osisko believes that despite the decrease in the gold price in 2013, the fundamentals of the gold market remains well in place, namely:

 

·                  Expansionary monetary policies and continued effects of the economic problems around the world;

·                  High level of government indebtedness;

·                  Diversification of central bank currency holdings, particularly in emerging markets;

·                  Continued geo-political instability.

 

The challenges of new production discoveries, high capital costs, suspension of major projects and permitting issues lead Osisko to believe that global production will remain stable or decline in the near/medium term.

 

11











 

The historical prices are as follows:

 

	
(US$/ounce)
    	
 
    	
High
    	
 
    	
Low
    	
 
    	
Average
    	
 
    	
Close
    	
 
    
	
2014 (Q1)
    	
 
    	
1,385
    	
 
    	
1,221
    	
 
    	
1,293
    	
 
    	
1,292
    	
 
    
	
2013
    	
 
    	
1,694
    	
 
    	
1,192
    	
 
    	
1,411
    	
 
    	
1,205
    	
 
    
	
2012
    	
 
    	
1,792
    	
 
    	
1,540
    	
 
    	
1,669
    	
 
    	
1,658
    	
 
    
	
2011
    	
 
    	
1,895
    	
 
    	
1,319
    	
 
    	
1,572
    	
 
    	
1,531
    	
 
    
	
2010
    	
 
    	
1,421
    	
 
    	
1,058
    	
 
    	
1,225
    	
 
    	
1,406
    	
 
    
	
2009
    	
 
    	
1,213
    	
 
    	
810
    	
 
    	
972
    	
 
    	
1,088
    	
 
    


 

Energy

 

Osisko’s Canadian Malartic operations benefit from Québec’s low-cost reliable hydro-electric power. The utilization of this clean renewable energy source reduces the impact of volatile oil prices on the operations. However, as with other mining operations but to a lesser extent, oil prices have an impact on operating costs.

 

The oil price variation during the past years is as follows (rounded to the nearest dollar):

 

	
(US$/barrel)
    	
 
    	
High
    	
 
    	
Low
    	
 
    	
Average
    	
 
    
	
2014 (Q1)
    	
 
    	
105
    	
 
    	
92
    	
 
    	
99
    	
 
    
	
2013
    	
 
    	
111
    	
 
    	
87
    	
 
    	
98
    	
 
    
	
2012
    	
 
    	
109
    	
 
    	
78
    	
 
    	
94
    	
 
    
	
2011
    	
 
    	
114
    	
 
    	
76
    	
 
    	
95
    	
 
    
	
2010
    	
 
    	
92
    	
 
    	
68
    	
 
    	
80
    	
 
    


 

Currency

 

The Company is subject to currency fluctuations for its Canadian Malartic operations as about 60% of its costs are denominated in Canadian dollars while the gold produced at Canadian Malartic is sold in US dollars.

 

The exchange rate for the US/Canadian dollar is outlined below:

 

	
 
    	
 
    	
High
    	
 
    	
Low
    	
 
    	
Average
    	
 
    	
Close
    	
 
    
	
2014 (Q1)
    	
 
    	
1.1251
    	
 
    	
1.0614
    	
 
    	
1.1033
    	
 
    	
1.1053
    	
 
    
	
2013
    	
 
    	
1.0697
    	
 
    	
0.9839
    	
 
    	
1.0299
    	
 
    	
1.0636
    	
 
    
	
2012
    	
 
    	
1.0418
    	
 
    	
0.9710
    	
 
    	
0.9996
    	
 
    	
0.9949
    	
 
    
	
2011
    	
 
    	
1.0604
    	
 
    	
0.9449
    	
 
    	
0.9891
    	
 
    	
1.0170
    	
 
    
	
2010
    	
 
    	
1.0778
    	
 
    	
0.9946
    	
 
    	
1.0299
    	
 
    	
0.9946
    	
 
    


 

12











 

Selected Quarterly Financial Information

(in thousands of dollars, except figures for ounces and amounts per ounce and per share)

 

	
 
    	
 
    	
Three months ended March 31,
    	
 
    
	
 
    	
 
    	
2014(4)
    	
 
    	
2013(4)
    	
 
    
	
Gold ounces produced
    	
 
    	
140,029
    	
 
    	
106,047
    	
 
    
	
Gold ounces sold
    	
 
    	
146,132
    	
 
    	
95,511
    	
 
    
	
Revenues
    	
 
    	
212,131
    	
 
    	
159,381
    	
 
    
	
Earnings from mine operations
    	
 
    	
77,611
    	
 
    	
54,985
    	
 
    
	
Net earnings
    	
 
    	
24,241
    	
 
    	
17,416
    	
 
    
	
Basic net earnings per share
    	
 
    	
0.06
    	
 
    	
0.04
    	
 
    
	
Diluted net earnings per share
    	
 
    	
0.05
    	
 
    	
0.04
    	
 
    
	
Total assets
    	
 
    	
2,266,385
    	
 
    	
2,716,288
    	
 
    
	
Total non-current liabilities
    	
 
    	
349,972
    	
 
    	
335,968
    	
 
    
	
Capital expenditures
    	
 
    	
32,894
    	
 
    	
65,698
    	
 
    
	
Operating cash flows
    	
 
    	
91,867
    	
 
    	
62,478
    	
 
    
	
Operating cash flows per share (1)
    	
 
    	
0.21
    	
 
    	
0.14
    	
 
    
	
Average selling price of gold (per ounce sold)
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
In CAD
    	
 
    	
1,430
    	
 
    	
1,645
    	
 
    
	
In USD (3)
    	
 
    	
1,294
    	
 
    	
1,627
    	
 
    
	
Cash costs per ounce (1)(2)
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
In CAD
    	
 
    	
636
    	
 
    	
804
    	
 
    
	
In USD (3)
    	
 
    	
577
    	
 
    	
798
    	
 
    
	
Cash margin per ounce (1)(2)
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
In CAD
    	
 
    	
794
    	
 
    	
841
    	
 
    
	
In USD (3)
    	
 
    	
717
    	
 
    	
829
    	
 
    
	
Shares outstanding (in thousands)
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Basic weighted average
    	
 
    	
439,546
    	
 
    	
436,502
    	
 
    
	
Diluted weighted average
    	
 
    	
441,906
    	
 
    	
436,943
    	
 
    


 




(1)         “Operating cash flows per share”, “cash costs per ounce” and “cash margin per ounce” are non-IFRS financial performance measures with no standard definition under IFRS. See “Non-IFRS Financial Performance Measures” section of this MD&A.

(2)          Using actual exchange rates at the date of the transactions.

(3)          Using the weighted average exchange rate for the period, based on monthly sales and costs.

(4)          Financial information in Canadian dollars and prepared in accordance with IFRS.

 

The average prices of gold and silver in US$ are summarized below:

 

	
 
    	
 
    	
Three months ended March 31, 2014
    	
 
    	
Three months ended March 31, 2013
    	
 
    
	
 
    	
 
    	
Realized prices
    	
 
    	
Market prices
    	
 
    	
Realized prices
    	
 
    	
Market prices
    	
 
    
	
 
    	
 
    	
per ounce
    	
 
    	
per ounce (i)
    	
 
    	
per ounce
    	
 
    	
per ounce (i)
    	
 
    
	
Gold
    	
 
    	
1,294
    	
 
    	
1,293
    	
 
    	
1,627
    	
 
    	
1,632
    	
 
    
	
Silver
    	
 
    	
20
    	
 
    	
20
    	
 
    	
30
    	
 
    	
30
    	
 
    


 




(i)                  Market prices are based on the average London PM fixing for gold and average fixing for silver.

 

During the first quarter of 2014, earnings from mine operations amounted to $77.6 million, net earnings were $24.2 million and operating cash flows reached $91.9 million, compared to earnings from mine operations of $55.0 million, net earnings of $17.4 million and operating cash flows of $62.5 million in the first quarter of 2013. The increase in production and sales as well as the decrease in production costs per ounce produced are responsible for the higher earnings from mine operations in the first quarter of 2014, even though the average realized price decreased by 22% in the first quarter of 2014 compared to the first quarter of 2013 as a result of lower market prices.

 

13











 

Overview of Financial Results

 

Financial Summary — First quarter of 2014 (compared to the first quarter of 2013)

 

·                  Net earnings of $24.2 million or $0.06 per basic share ($0.05 per diluted share) compared to net earnings of $17.4 million or $0.04 per basic and diluted share in 2013;

·                  Record revenues of $212.1 million in 2014 compared to $159.4 million in 2013;

·                  Record mine operating earnings of $77.6 million in 2014 compared to $55.0 million in 2013;

·                  Record operating cash flows of $91.9 million in 2014 compared to $62.5 million in 2013;

·                  146,132 ounces of gold sold at an average price of US$1,294/oz compared to 95,511 ounces of gold sold at an average price of US$1,627/oz in 2013.

 

During the first quarter of 2014, Osisko generated record net earnings of $24.2 million (net earnings per share of $0.06) compared to net earnings of $17.4 million (net earnings per share of $0.04) for the comparative period in 2013. The increase in production and sales as well as the decrease in production costs per ounce produced, partially offset by a lower realized gold price, resulted in higher earnings from mine operations in the first quarter of 2014. Osisko also incurred expenses of $7.5 million during the first quarter of 2014 as a result of the unsolicited take-over bid from Goldcorp Inc. announced on January 13, 2014.

 

Total precious metal sales amounted to $212.1 million in the first quarter of 2014, comprising of 146,132 ounces of gold and 141,817 ounces of silver, compared to precious metal sales of $159.4 million in 2013, comprising of 95,511 ounces of gold and 73,683 ounces of silver.

 

The Canadian Malartic mine generated record operating earnings of $77.6 million in the first quarter of 2014 compared to $55.0 million in 2013. The cash margin(6) amounted $794 per ounce in the first quarter of 2014, a decrease of $47 per ounce when compared to $841 per ounce in the first quarter of 2013. The decrease is the result of a lower average selling price of gold (a decrease of $215 per ounce), partially offset by a decrease of $168 per ounce in the cash costs per ounce(6).

 




(6) Non-IFRS financial performance measures have no standard definition under IFRS. See “Non-IFRS Financial Performance Measures” section of this MD&A.

 

14











 

Consolidated Statement of Income

 

The following table presents a summarized Consolidated Statement of Income for the Company’s most recently completed and comparative three-month periods (in thousands of dollars):

 

	
 
    	
 
    	
 
    	
 
    	
Three months ended March 31,
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
2014
    	
 
    	
2013
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    
	
Revenues
    	
 
    	
(a)
    	
 
    	
212,131
    	
 
    	
159,381
    	
 
    
	
Mine operating costs
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Production costs
    	
 
    	
(b)
    	
 
    	
(96,586
    	
)
    	
(81,422
    	
)
    
	
Royalties
    	
 
    	
(b)
    	
 
    	
(2,729
    	
)
    	
(1,992
    	
)
    
	
Depreciation
    	
 
    	
(b)
    	
 
    	
(35,205
    	
)
    	
(20,982
    	
)
    
	
Earnings from mine operations
    	
 
    	
 
    	
 
    	
77,611
    	
 
    	
54,985
    	
 
    
	
General and administrative expenses
    	
 
    	
(c)
    	
 
    	
(18,668
    	
)
    	
(7,387
    	
)
    
	
Exploration and evaluation expenses
    	
 
    	
(d)
    	
 
    	
(2,568
    	
)
    	
(3,079
    	
)
    
	
Write-off of property, plant and equipment
    	
 
    	
(e)
    	
 
    	
(2,220
    	
)
    	
(2,024
    	
)
    
	
Earnings from operations
    	
 
    	
 
    	
 
    	
54,155
    	
 
    	
42,495
    	
 
    
	
Other expenses — net
    	
 
    	
(f)
    	
 
    	
(6,705
    	
)
    	
(11,814
    	
)
    
	
Earnings before income and mining   taxes
    	
 
    	
 
    	
 
    	
47,450
    	
 
    	
30,681
    	
 
    
	
Income and mining tax expense
    	
 
    	
(g)
    	
 
    	
(23,209
    	
)
    	
(13,265
    	
)
    
	
Net earnings
    	
 
    	
 
    	
 
    	
24,241
    	
 
    	
17,416
    	
 
    


 

(a)         Revenues are comprised of the following:

 

	
 
    	
 
    	
Three months ended March 31, 2014
    	
 
    	
Three months ended March 31, 2013
    	
 
    
	
 
    	
 
    	
Average
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Average
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
selling price
    	
 
    	
 
    	
 
    	
Total
    	
 
    	
selling price
    	
 
    	
 
    	
 
    	
Total
    	
 
    
	
 
    	
 
    	
per ounce
    	
 
    	
Ounces
    	
 
    	
revenues
    	
 
    	
per ounce
    	
 
    	
Ounces
    	
 
    	
revenues
    	
 
    
	
 
    	
 
    	
($)
    	
 
    	
Sold
    	
 
    	
($000’s)
    	
 
    	
($)
    	
 
    	
Sold
    	
 
    	
($000’s)
    	
 
    
	
Gold
    	
 
    	
1,430
    	
 
    	
146,132
    	
 
    	
208,925
    	
 
    	
1,645
    	
 
    	
95,511
    	
 
    	
157,154
    	
 
    
	
Silver
    	
 
    	
23
    	
 
    	
141,817
    	
 
    	
3,206
    	
 
    	
30
    	
 
    	
73,683
    	
 
    	
2,227
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
212,131
    	
 
    	
 
    	
 
    	
 
    	
 
    	
159,381
    	
 
    


 

(b)         Production costs amounted to $96.6 million in the first quarter of 2014 compared to $81.4 million in the first quarter of 2013. Higher production costs of ounces sold in 2014 are mainly the result of higher sales, partially offset by a decrease in production costs per ounce produced. The increase in depreciation expense is mainly due to higher depreciable property, plant and equipment and higher production. In the first quarter of 2014, earnings from mine operations represented 37% of sales (mine operating costs were 63% of sales), compared to 34% (mine operating costs were 66% of sales), in the first quarter of 2013. The difference is mainly the result of reduced production costs on a per ounce basis.

 

(c)          General and administrative expenses (G&A) increased by $11.3 million in the first quarter of 2014 compared to the corresponding period in 2013. The increase if mainly due to expenses of $7.5 million incurred as a result of the unsolicited take-over bid from Goldcorp Inc. in January 2014. Salaries and fringe benefits were $6.5 million in the first quarter of 2014 compared to $2.2 million in the first quarter of 2013, an increase of $4.3 million mainly due to a higher share-based expense on restricted and deferred share units as a result of the increase in share price. Share-based compensation from share options was $1.3 million in the first quarter of 2014 compared to $1.1 million in 2013. Other general and administrative expenses decreased by $0.7 million to reach $3.4 million in the first quarter of 2014. G&A expenses in the first quarter of 2013, following the acquisition of Queenston, increased G&A expenses during that period. These additional G&A expenses from the acquisition of Queenston were reduced to nil in the following quarters.

 

(d)         Exploration and evaluation expenses were $2.6 million in the first quarter of 2014 compared to $3.1 million in the first quarter of 2013. The reduction was due to lower investments in Mexico.

 

15











 

(e)          Write-offs of property, plant and equipment are related to abandoned exploration projects and amounted to $2.2 million in the first quarter of 2014 compared to $2.0 million in the first quarter of 2013.

 

(f)           Other net expenses in the first quarter of 2014 include finance costs of $6.2 million, a loss on foreign exchange of $2.9 million and a share of loss of associates of $0.3 million, partially offset by the recognition of a deferred gain on flow-through shares of $2.1 million and interest income of $0.7 million.

 

In the first quarter of 2013, other net expenses include finance costs of $7.9 million, a loss on foreign exchange of $2.3 million and a net loss on financial assets of $2.0 million, partially compensated by interest income of $0.5 million.

 

(g)          The effective income tax rate in the first quarter of 2014 is 49% compared to 43% in the first quarter of 2013 due to a variation in non-deductible expenses.

 

Liquidity and Capital Resources

 

As at March 31, 2014, the Company’s cash and cash equivalents and restricted cash amounted to $258.1 million compared to $210.5 million as at December 31, 2013, as summarized below:

 

	
 
    	
 
    	
March 31,
    	
 
    	
December 31,
    	
 
    
	
(In thousands of dollars)
    	
 
    	
2014
    	
 
    	
2013
    	
 
    
	
Cash and cash equivalents
    	
 
    	
209,028
    	
 
    	
161,405
    	
 
    
	
Restricted cash
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Current
    	
 
    	
560
    	
 
    	
560
    	
 
    
	
Non-current
    	
 
    	
48,490
    	
 
    	
48,490
    	
 
    
	
 
    	
 
    	
258,078
    	
 
    	
210,455
    	
 
    


 

Cash and cash equivalents increased by $47.6 million during the first quarter of 2014 as a result of the earnings before income and mining taxes of $47.5 million.

 

Restricted cash is composed mainly of the deposits with the Government of Québec amounting to $46.4 million required to cover the entire future costs of rehabilitating the Canadian Malartic mine site.

 

During the first quarter of 2014, the Company’s reimbursements to long-term debt providers totalled $10.3 million.

 

The following table summarizes the financings completed in the year 2013 and the first quarter of 2014:

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Gross
    	
 
    	
Net Cash
    	
 
    
	
 
    	
 
    	
No of Shares/
    	
 
    	
Price
    	
 
    	
Proceeds
    	
 
    	
Proceeds
    	
 
    
	
 
    	
 
    	
Units
    	
 
    	
($)
    	
 
    	
($000’s)
    	
 
    	
($000’s)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Q1 2014
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Exercise of Options
    	
 
    	
377,365
    	
 
    	
6.15
    	
 
    	
2,322
    	
 
    	
2,322
    	
 
    
	
Employee Share Purchase Plan — Employee Portion
    	
 
    	
131,993
    	
 
    	
4.61
    	
 
    	
609
    	
 
    	
609
    	
 
    
	
Total
    	
 
    	
509,358
    	
 
    	
 
    	
 
    	
2,931
    	
 
    	
2,931
    	
 
    
	
Year 2013
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Private placement — flow-through shares
    	
 
    	
1,416,400
    	
 
    	
6.25
    	
 
    	
8,853
    	
 
    	
8,769
    	
 
    
	
Exercise of Options
    	
 
    	
668,634
    	
 
    	
2.58
    	
 
    	
1,725
    	
 
    	
1,725
    	
 
    
	
Employee Share Purchase Plan — Employee Portion
    	
 
    	
461,768
    	
 
    	
5.00
    	
 
    	
2,307
    	
 
    	
2,307
    	
 
    
	
Total
    	
 
    	
2,546,802
    	
 
    	
 
    	
 
    	
12,885
    	
 
    	
12,801
    	
 
    


 

16









 

The amount of principal of long-term debt payments as at March 31, 2014, per calendar year, is as follows: 

(in millions of dollars)

 

	
 
    	
 
    	
 
    	
 
    
	
 
	
 
    	
 
    	
 
    	
 
    	
RQ and
    	
 
    	
 
    	
 
    	
CAT
    	
 
    	
CAT
    	
 
    	
 
    	
 
    
	
 
	
 
    	
 
    	
CPPIB
    	
 
    	
CDPQ(1)
    	
 
    	
FSTQ(2)
    	
 
    	
Loan
    	
 
    	
Finance lease
    	
 
    	
Total
    	
 
    
	
 
	
2014 (9 months)
    	
 
    	
30.0
    	
 
    	
—
    	
 
    	
3.8
    	
 
    	
5.4
    	
 
    	
25.4
    	
 
    	
64.6
    	
 
    
	
 
	
2015
    	
 
    	
40.0
    	
 
    	
—
    	
 
    	
1.7
    	
 
    	
0.6
    	
 
    	
38.9
    	
 
    	
81.2
    	
 
    
	
 
	
2016
    	
 
    	
40.0
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
19.0
    	
 
    	
59.0
    	
 
    
	
 
	
2017
    	
 
    	
40.0
    	
 
    	
75.0
    	
 
    	
—
    	
 
    	
—
    	
 
    	
4.9
    	
 
    	
119.9
    	
 
    
	
 
	
2018
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
2.4
    	
 
    	
2.4
    	
 
    
	
 
	
Less: imputed interest
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(5.1
    	
)
    	
(5.1
    	
)
    
	
 
	
Total debt
    	
 
    	
150.0
    	
 
    	
75.0
    	
 
    	
5.5
    	
 
    	
6.0
    	
 
    	
85.5
    	
 
    	
322.0
    	
 
    
																	


 




(1)   If Ressources Québec (“RQ”) and Caisse de dépôt et placement du Québec (“CDPQ”) do not exercise their option to convert the debentures into shares.

(2)   FSTQ may elect to convert the loan into shares in the event of a change of control.

 

The following table details the outstanding warrants as at March 31, 2014:

 

	
 
    	
 
    	
Number of
    	
 
    	
Exercise
    	
 
    	
Potential
    	
 
    
	
Expiry date
    	
 
    	
warrants
    	
 
    	
price
    	
 
    	
proceeds
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    
	
September 30, 2017
    	
 
    	
12,500,000
    	
 
    	
6.25
    	
 
    	
78,125,000
    	
 
    


 

Cash Flows

 

The following table summarizes the cash flows activities (in thousands of dollars):

 

	
 
    	
 
    	
Three months ended March 31,
    	
 
    
	
 
    	
 
    	
2014
    	
 
    	
2013
    	
 
    
	
Cash flows
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Operations
    	
 
    	
97,964
    	
 
    	
67,072
    	
 
    
	
Working capital items
    	
 
    	
(6,097
    	
)
    	
(4,594
    	
)
    
	
Operating activities
    	
 
    	
91,867
    	
 
    	
62,478
    	
 
    
	
Investing activities
    	
 
    	
(32,075
    	
)
    	
(41,933
    	
)
    
	
Financing activities
    	
 
    	
(12,169
    	
)
    	
(13,416
    	
)
    
	
Change in cash and cash equivalents
    	
 
    	
47,623
    	
 
    	
7,129
    	
 
    
	
Cash and cash equivalents — beginning of period
    	
 
    	
161,405
    	
 
    	
93,229
    	
 
    
	
Cash and cash equivalents — end of period
    	
 
    	
209,028
    	
 
    	
100,358
    	
 
    


 

Operating Activities

 

Cash flows from operating activities reached a record of $91.9 million in the first quarter of 2014 compared to $62.5 million in the first quarter of 2013. Excluding the non-cash working capital items, cash flows from operations amounted to $98.0 million compared to $67.1 million in the first quarter of 2013.

 

Cash flows from operating activities, before non-cash working capital items, increased significantly in the first quarter of 2014 compared to the corresponding period in 2013. The increase of $30.9 million is mainly the result of higher sales of $52.8 million partially offset by an increase in production costs and royalties of $15.9 million and expenses incurred as a result of the unsolicited take-over bid of Goldcorp Inc. amounting to $7.5 million.

 

17











 

Investing Activities

 

Cash flows used in investing activities amounted to $32.1 million in the first quarter of 2014 compared to $41.9 million in the first quarter of 2013.

 

During the first quarter of 2014, cash outflows related to investments in property, plant and equipment amounted to $32.9 million compared to $65.7 million in the corresponding period of 2013. Investments in the first quarter of 2014 are mainly related to Canadian Malartic (stripping costs, sustaining capital and expansion) and Kirkland Lake. Investments in the first quarter of 2013 are mainly related to Canadian Malartic.

 

During the first quarter of 2013, investing activities provided cash inflows of $19.4 million from a decrease in short-term investments received from the acquisition of Queenston Mining Inc. in December 2012 and $4.0 million from a decrease in restricted cash.

 

Financing Activities

 

Cash used by financing activities amounted to $12.2 million in the first quarter of 2014 compared to $13.4 million in the first quarter of 2013.

 

Cash used in 2014 is mainly the result of payments on the finance lease and long-term debt of $7.2 million and $3.1 million respectively and interest payments of $4.8 million. These cash outflows were partially offset by the issuance of common shares from the exercise of share options and the employee share purchase plan that generated $2.9 million.

 

Cash used in the first quarter of 2013 is mainly the result of payments on the finance lease and long-term debt of $6.1 million and $2.5 million respectively and interest payments of $5.4 million, partially offset by the issuance of common shares from the employee share purchase plan that generated $0.6 million.

 

18











 

Quarterly Information

 

The selected quarterly financial information for the past eight financial quarters is outlined below:

(in thousands of dollars, except for amounts per share)

 

	
 
    	
 
    	
2014(4)
    	
 
    	
2013(4)
    	
 
    	
2012(4)
    	
 
    
	
 
    	
 
    	
Q1
    	
 
    	
Q4
    	
 
    	
Q3
    	
 
    	
Q2
    	
 
    	
Q1
    	
 
    	
Q4
    	
 
    	
Q3
    	
 
    	
Q2
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash (1)
    	
 
    	
258,078
    	
 
    	
210,455
    	
 
    	
171,590
    	
 
    	
153,695
    	
 
    	
139,278
    	
 
    	
155,511
    	
 
    	
114,874
    	
 
    	
123,376
    	
 
    
	
Working   capital
    	
 
    	
178,409
    	
 
    	
132,350
    	
 
    	
80,055
    	
 
    	
83,595
    	
 
    	
68,731
    	
 
    	
91,951
    	
 
    	
36,177
    	
 
    	
71,145
    	
 
    
	
Total   assets
    	
 
    	
2,266,385
    	
 
    	
2,222,001
    	
 
    	
2,188,005
    	
 
    	
2,168,856
    	
 
    	
2,716,288
    	
 
    	
2,687,905
    	
 
    	
2,246,923
    	
 
    	
2,179,048
    	
 
    
	
Total   long-term debt
    	
 
    	
311,046
    	
 
    	
316,951
    	
 
    	
328,568
    	
 
    	
331,459
    	
 
    	
335,949
    	
 
    	
337,412
    	
 
    	
327,916
    	
 
    	
330,178
    	
 
    
	
Shareholders’   equity
    	
 
    	
1,761,244
    	
 
    	
1,731,068
    	
 
    	
1,706,919
    	
 
    	
1,690,138
    	
 
    	
2,180,064
    	
 
    	
2,162,018
    	
 
    	
1,765,295
    	
 
    	
1,722,515
    	
 
    
	
Revenues
    	
 
    	
212,131
    	
 
    	
185,774
    	
 
    	
171,298
    	
 
    	
159,195
    	
 
    	
159,381
    	
 
    	
191,080
    	
 
    	
158,503
    	
 
    	
157,134
    	
 
    
	
Earnings   from mine operations
    	
 
    	
77,611
    	
 
    	
53,685
    	
 
    	
38,987
    	
 
    	
42,619
    	
 
    	
54,985
    	
 
    	
73,169
    	
 
    	
63,503
    	
 
    	
49,984
    	
 
    
	
Earnings   (loss) attributable to Osisko shareholders
    	
 
    	
24,241
    	
 
    	
10,488
    	
 
    	
9,755
    	
 
    	
(492,762
    	
)
    	
17,416
    	
 
    	
12,866
    	
 
    	
28,343
    	
 
    	
18,984
    	
 
    
	
Basic   net earnings (loss) per share
    	
 
    	
0.06
    	
 
    	
0.02
    	
 
    	
0.02
    	
 
    	
(1.13
    	
)
    	
0.04
    	
 
    	
0.03
    	
 
    	
0.07
    	
 
    	
0.05
    	
 
    
	
Gold   production (oz)
    	
 
    	
140,029
    	
 
    	
137,321
    	
 
    	
120,208
    	
 
    	
111,701
    	
 
    	
106,047
    	
 
    	
101,544
    	
 
    	
103,753
    	
 
    	
92,003
    	
 
    
	
Gold   sales (oz)
    	
 
    	
146,132
    	
 
    	
136,826
    	
 
    	
123,151
    	
 
    	
109,503
    	
 
    	
95,511
    	
 
    	
111,104
    	
 
    	
95,424
    	
 
    	
95,675
    	
 
    
	
Cash   margin per ounce(2) ($/oz)
    	
 
    	
794
    	
 
    	
628
    	
 
    	
616
    	
 
    	
653
    	
 
    	
841
    	
 
    	
865
    	
 
    	
795
    	
 
    	
735
    	
 
    
	
Weighted   average shares outstanding (000’s)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
-   Basic
    	
 
    	
439,546
    	
 
    	
438,370
    	
 
    	
437,186
    	
 
    	
436,695
    	
 
    	
436,502
    	
 
    	
391,538
    	
 
    	
388,153
    	
 
    	
387,279
    	
 
    
	
-   Diluted
    	
 
    	
441,906
    	
 
    	
438,666
    	
 
    	
437,782
    	
 
    	
436,695
    	
 
    	
436,943
    	
 
    	
392,719
    	
 
    	
390,238
    	
 
    	
389,024
    	
 
    
	
Share   price ($/Share)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
-   High
    	
 
    	
7.96
    	
 
    	
8.32
    	
 
    	
5.83
    	
 
    	
6.06
    	
 
    	
8.32
    	
 
    	
10.09
    	
 
    	
10.62
    	
 
    	
11.71
    	
 
    
	
- Low
    	
 
    	
4.76
    	
 
    	
2.98
    	
 
    	
3.31
    	
 
    	
2.98
    	
 
    	
5.56
    	
 
    	
7.14
    	
 
    	
7.15
    	
 
    	
6.25
    	
 
    
	
-   Close
    	
 
    	
6.88
    	
 
    	
4.71
    	
 
    	
5.21
    	
 
    	
3.48
    	
 
    	
6.03
    	
 
    	
8.00
    	
 
    	
9.74
    	
 
    	
7.00
    	
 
    
	
Price   of gold (average US$)
    	
 
    	
1,293
    	
 
    	
1,276
    	
 
    	
1,326
    	
 
    	
1,415
    	
 
    	
1,632
    	
 
    	
1,722
    	
 
    	
1,652
    	
 
    	
1,609
    	
 
    
	
Closing   exchange rate(3) (US$/Can$)
    	
 
    	
1.1053
    	
 
    	
1.0636
    	
 
    	
1.0285
    	
 
    	
1.0512
    	
 
    	
1.0156
    	
 
    	
0.9949
    	
 
    	
0.9837
    	
 
    	
1.0191
    	
 
    


 




(1)     Includes cash and cash equivalents, restricted cash and short-term investments.

(2)     “Cash margin per ounce” is a non-IFRS financial performance measure with no standard definition under IFRS. See “Non-IFRS Financial Performance Measures” section of this MD&A for the definition of “Cash margin per ounce”.

(3)     Bank of Canada Noon Rate.

(4)     Financial information in Canadian dollars and prepared in accordance with IFRS.

 

During the second quarter of 2013, Osisko took an impairment charge of $530.9 million on its Hammond Reef gold project. Commercial production at Canadian Malartic began in May 2011 and the Company recorded its first sales on the Consolidated Statement of Income in the second quarter of 2011. The Company continued to invest in 2011, 2012 and 2013 in exploration and development projects, including the expansion of the Canadian Malartic mine, the Hammond Reef gold project and the Upper Beaver and Kirkland Lake properties. In December 2012, Osisko acquired Queenston Mining Inc. for $417.5 million.

 

19











 

Contractual Obligations and Commitments

 

The following table presents information on the contractual obligations of the Company as at March 31, 2014:

(in thousands of dollars)

 

	
 
    	
 
    	
Payments due by period
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Between
    	
 
    	
Between
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Less than
    	
 
    	
1 and 3
    	
 
    	
3 and 5
    	
 
    	
After 5
    	
 
    
	
 
    	
 
    	
Total
    	
 
    	
1 year
    	
 
    	
years
    	
 
    	
years
    	
 
    	
years
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    	
$
    	
 
    	
$
    	
 
    	
$
    	
 
    
	
Operating leases
    	
 
    	
1,180
    	
 
    	
894
    	
 
    	
286
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Purchase obligations
    	
 
    	
7,040
    	
 
    	
7,040
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
Obligations under finance leases(a)
    	
 
    	
90,659
    	
 
    	
39,104
    	
 
    	
47,249
    	
 
    	
4,306
    	
 
    	
—
    	
 
    
	
Long-term debt(a)
    	
 
    	
277,886
    	
 
    	
68,751
    	
 
    	
130,002
    	
 
    	
79,133
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
376,765
    	
 
    	
115,789
    	
 
    	
177,537
    	
 
    	
83,439
    	
 
    	
—
    	
 
    


 




(a) Including interests.

 

As at March 31, 2014, cash reserved for exploration and evaluation expenses to be incurred for the flow-through shares issue amounts to $1,734,000.

 

Related Party Transactions

 

The compensation paid or payable to key management for employee services is presented below:

(in thousands of dollars)

 

	
 
    	
 
    	
2014
    	
 
    	
2013
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
$
    	
 
    
	
Salaries and short-term employee benefits
    	
 
    	
1,420
    	
 
    	
869
    	
 
    
	
Share-based compensation
    	
 
    	
4,687
    	
 
    	
784
    	
 
    
	
 
    	
 
    	
6,107
    	
 
    	
1,653
    	
 
    


 

In case of a change of control, key management would be entitled to receive termination payments estimated at $31,926,000.

 

The increase in salaries and short-term employee benefits is mainly the result of additional fees paid to board members due to several board meetings held following the unsolicited take-over bid of Goldcorp Inc. The increase in share-based compensation is mainly the result of the increased compensation expense from the restricted and deferred share units as the market price of the Osisko common shares increased significantly during the first quarter of 2014.

 

Off-balance Sheet Items

 

The Company does not have any off-balance sheet arrangements other than operating leases for office space as well as letters of credit issued to government agencies. Those letters of credit are 100% secured by deposits (presented on the Company’s consolidated balance sheet under restricted cash) and are issued to government agencies with respect environmental guarantees. The government agencies may draw on the letters of credit in the event of a default by the Company under the terms of the agreements. As at March 31, 2014, the outstanding letters of credit had a value of $2.0 million.

 

Outstanding Share Data

 

As of May 14, 2014, 440,613,953 common shares were issued and outstanding. A total of 19,518,387 common share options were outstanding to purchase common shares under the Company’s share option plan and 12,500,000 common share purchase warrants were outstanding.

 

20











 

Risks and Uncertainties

 

The exploration for, development and mining of mineral deposits involve significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. For additional discussion of risk factors, please refer to the Company’s Annual Information Form for the year ended December 31, 2013 and the Management Information Circular dated as of May 1, 2014, which are available upon request from the Company or on its profile on www.sedar.com. There have been no material changes to risks and uncertainties since the release of the Management Information Circular.

 

Disclosure Controls and Internal Controls over Financial Reporting

 

The Chief Executive Officer (the “CEO”), and the Chief Financial Officer (the “CFO”) of the Company are responsible for establishing and maintaining the Company’s disclosure controls and procedures (“DCP”) including adherence to the Disclosure Policy adopted by the Company. The Disclosure Policy requires all staff to keep senior management fully apprised of all material information affecting the Company so that they may evaluate and discuss this information and determine the appropriateness and timing for public release.

 

The CEO and the CFO are also responsible for the design of internal controls over financial reporting (“ICFR”). The fundamental issue is ensuring all transactions are properly authorized and identified and entered into a well designed, robust and clearly understood accounting system on a timely basis to minimize risk of inaccuracy, failure to fairly reflect transactions, failure to fairly record transactions necessary to present financial statements in accordance with IFRS, unauthorized receipts and expenditures, or the inability to provide assurance that unauthorized acquisitions or dispositions of assets can be detected. Internal control procedures provide for separation of duties for receiving, approving, coding and handling of invoices, entering transactions into the accounts, writing checks and wire requests and also require two signers on all payments.

 

The CEO and CFO have evaluated whether there were changes to the ICFR during the three months ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, the ICFR. No such significant changes were identified through their evaluation.

 

The Company’s management, including the CEO and CFO, believe that any disclosure controls and procedures and internal controls over financial reporting, no matter how well designed, can have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance that the objectives of the control system are met.

 

Basis of Presentation of Consolidated Financial Statements

 

The condensed interim consolidated financial statements for the three months ended March 31, 2014 have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including International Accounting Standard 34, Interim Financial Reporting. The condensed interim consolidated financial statements for the three months ended March 31, 2014 should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2013, which have been prepared in accordance with IFRS as issued by the IASB. The accounting policies, methods of computation and presentation applied in the condensed interim consolidated financial statements for the three months ended March 31, 2014 are consistent with those applied by the Company to the consolidated financial statements for the year ended December 31, 2013, except for the change in accounting policy disclosed in Note 3 to the condensed interim consolidated financial statements for the three months ended March 31, 2014. The Board of Directors has approved the consolidated financial statements on May 14, 2014.

 

Critical Accounting Estimates and Judgements

 

The preparation of financial statements in conformity with IFRS requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company also makes estimates and assumptions concerning the future. The determination of estimates requires the exercise of judgement based on various assumptions and other factors such as historical experience and current and expected economic conditions. Actual results could differ from those estimates.

 

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In preparing the condensed interim consolidated interim financial statements for the three months ended March 31, 2014, the significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual consolidated financial statements for the year ended December 31, 2013.

 

Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Changes in Accounting Policies

 

The Company has adopted the following new standard, effective January 1, 2014. This change was made in accordance with the applicable transitional provision.

 

IFRIC 21, Levies (“IFRIC 21”)

 

In May 2013, the IASB issued International Financial Reporting Interpretations Committee (IFRIC) 21, Levies. IFRIC 21 is effective for annual periods beginning on or after January 1, 2014 and is to be applied retrospectively. IFRIC 21 provides guidance on accounting for levies in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets. The interpretation defines a levy as an outflow from an entity imposed by a government in accordance with legislation and confirms that an entity recognizes a liability for a levy only when the triggering event specified in the legislation occurs. The adoption of IFRIC 21 did not affect the Company.

 

Financial Instruments

 

All financial instruments are required to be measured at fair value on initial recognition. The fair value is based on quoted market prices, unless the financial instruments are not traded in an active market. In this case, the fair value is determined by using valuation techniques like the Black-Scholes option pricing model or other valuation techniques. Measurement in subsequent periods depends on the classification of the financial instrument. A description of financial instruments and their fair value is included in the condensed interim consolidated financial statements for the three months ended March 31, 2014.

 

Non-IFRS Financial Performance Measures

 

The Company has included certain non-IFRS measures including “cash generated from mine operations”, “cash costs per ounce”, “operating cash flows per share” and “cash margin per once” to supplement its consolidated financial statements, which are presented in accordance with IFRS.

 

The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

 

Cash generated from mine operations

 

“Cash generated from mine operations” is defined as “Revenues” for a certain period less “Production costs” (excluding non—cash “Share-based compensation”) and “Royalties”. “Cash generated from mine operations” less “Depreciation” and “Share-based compensation” results in “Earnings from mine operations”. The reconciliation table can be found in page 5 of this MD&A.

 

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Cash costs per ounce

 

“Cash costs per ounce” is defined as the production costs of one ounce of gold excluding non-cash costs for a certain period. “Cash costs per ounce” is obtained from “Production costs” and “Royalties” less non-cash “Share-based compensation” and “By-product credits (silver sales)”, adjusted for “Production inventory variation” for the period, divided by the “Number of ounces of gold produced” for the period.

 

	
 
    	
 
    	
Three months ended March 31,
    	
 
    
	
 
    	
 
    	
2014
    	
 
    	
2013
    	
 
    
	
Gold ounces produced
    	
 
    	
140,029
    	
 
    	
106,047
    	
 
    
	
(in thousands of dollars, except   per ounce)
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Production costs
    	
 
    	
96,586
    	
 
    	
81,422
    	
 
    
	
Royalties
    	
 
    	
2,729
    	
 
    	
1,992
    	
 
    
	
Share-based compensation
    	
 
    	
(298
    	
)
    	
(599
    	
)
    
	
By-product credit (silver sales)
    	
 
    	
(3,206
    	
)
    	
(2,227
    	
)
    
	
Inventory variation
    	
 
    	
(6,774
    	
)
    	
4,686
    	
 
    
	
Total cash costs for the period
    	
 
    	
89,037
    	
 
    	
85,274
    	
 
    
	
Cash costs per ounce
    	
 
    	
636
    	
 
    	
804
    	
 
    


 

Operating cash flows per share

 

“Operating cash flows per share” is defined as the “Cash flows from operating activities” divided by the “Weighted average number of common shares outstanding” for a certain period.

 

	
 
    	
 
    	
Three months ended March 31,
    	
 
    
	
 
    	
 
    	
2014
    	
 
    	
2013
    	
 
    
	
Cash flows from operating activities ($000’s)
    	
 
    	
91,867
    	
 
    	
62,478
    	
 
    
	
Weighted average number of common shares   outstanding (000’s)
    	
 
    	
439,546
    	
 
    	
436,502
    	
 
    
	
Operating cash flows per share
    	
 
    	
0.21
    	
 
    	
0.14
    	
 
    


 

Cash margin per ounce

 

“Cash margin per ounce” is defined as the “Average selling price of gold per ounce sold” less “Cash costs per ounce produced” for the period.

 

	
 
    	
 
    	
Three months ended March 31,
    	
 
    
	
 
    	
 
    	
2014
    	
 
    	
2013
    	
 
    
	
Average selling price of gold (per ounce sold)
    	
 
    	
1,430
    	
 
    	
1,645
    	
 
    
	
Cash costs (per ounce produced)
    	
 
    	
636
    	
 
    	
804
    	
 
    
	
Cash margin per ounce
    	
 
    	
794
    	
 
    	
841
    	
 
    


 

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Caution Regarding Forward-Looking Statements

 

Certain statements contained in this MD&A constitute forward-looking statements. These statements relate to future events or the Company’s future performance, business prospects or opportunities. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These forward-looking statements include statements regarding the future price of gold and silver, the timely achievement of nameplate capacity, the timing and amount of estimated future mill throughput and production, operating, production and cash costs, currency fluctuations, the rescheduling of debt repayments, capital expenditures, expected ore grade, access to higher grade material, positive outcome of exploration activities, permitting timelines, the requirements of future capital, drill results and the estimation of mineral resources and reserves. 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. The Company 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 contained in this report should not be unduly relied upon. These statements speak only as of the date of this report. 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 report. Such statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about:

 

·      general business and economic conditions;

·                  the supply and demand for, deliveries of, and the level and volatility of prices of gold and silver as well as petroleum products;

·      impact of change in foreign currency exchange rates and interest rates;

·                  the timing of the receipt of regulatory and governmental approvals for the Company’s development project and other operations;

·      the availability of financing for the Company’s development for future projects;

·                  the Company’s estimation of its costs of production, expected production, capital expenditure requirements and productivity levels;

·      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 the Company’s development project;

·      market competition;

·                  the accuracy of the Company’s estimate of reserves and resources (including, with respect to size, grade and recoverability) and the geological, operational and price assumptions on which it is based;

·      change in governments regulations and policies, including change in tax benefits and tax rates;

·      environmental risks including increased regulatory constraints;

·      the ability to deviate Québec’s highway 117 to allow for the mining of the South Barnat deposit in Malartic;

·                  the Company’s ongoing relations with its employees, its business partners and the communities and aboriginal groups related to its exploration and mining activities;

·                  the obtaining of the requested precisions and amendments of its Canadian Malartic mine operating permits in a timely manner, further to discussions with the Ministère du Développement durable, de l’Environnement, de la Faune et des Parcs; and

·      the robustness of the Company’s process to pursue value maximizing alternatives;

·      completion of the proposed transaction with Yamana and Agnico Eagle.

 

Additional risk factors are described in more detail in the Company’s Annual Information Form filed with the securities commissions or similar authorities in certain of the provinces of Canada. The Company cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on the Company’s forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. The Company also cautions readers not to place undue reliance on these forward looking statements. 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. The forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement.

 

 

	
(Signed) Sean Roosen
    	
 
    	
(Signed) Bryan A. Coates
    
	
Sean Roosen 
    	
 
    	
Bryan A. Coates
    
	
President and Chief Executive Officer 
    	
 
    	
Vice President Finance and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
May 14, 2014
    	
 
    	
 
    


 

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Corporate Information

 

Osisko Mining Corporation

 

Corporate Office

1100 av. des Canadiens-de-Montréal

Suite 300

Montreal, Québec, Canada H3B 2S2

Tel.: (514) 735-7131

Fax: (514) 933-3290

Email: info@osisko.com                                   Web site: www.osisko.com

 

Directors and Officers

Victor H. Bradley, Chair of the Board

Marcel Côté, Vice Chair of the Board

Sean Roosen, President, Chief Executive Officer and Director

Staph Leavenworth Bakali, Director

John Burzynski, Vice President Corporate Development and Director

Michèle Darling, Director

Joanne Ferstman, Director

William A. MacKinnon, Director

Charles E. Page, Director

Gary Sugar, Director

Serge Vézina, Director

Denis Cimon, Vice President Technical Services

Bryan A. Coates, Vice President Finance and Chief Financial Officer

André Le Bel, Vice President Legal Affairs and Corporate Secretary

Luc Lessard, Senior Vice President and Chief Operating Officer

Elif Lévesque, Vice President and Controller

Robert Mailhot, Vice President Human Resources

Ruben Wallin, Vice President Environment and Sustainable Development

Robert Wares, Senior Vice President, Exploration and Resource Development

 

Legal Counsel

Bennett Jones LLP

Lavery, de Billy LLP

 

Auditors

PricewaterhouseCoopers LLP

 

Transfer Agent

Canadian Stock Transfer Company

 

Exchange listings

Toronto Stock Exchange - OSK

Deutsche Börse - EWX

 

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