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Issue 7:

Doing things differently: Osisko Mining sets aggressive goals to be the best

Bigger. Better. Different. From the beginning, the developers of Canadian Malartic mine in Quebec, Canada, had aggressive goals in mind. And when Osisko Mining Corporation begins producing gold in mid-2011, there’s little doubt in the mining industry that the company will succeed.

“The mining industry is usually conservative,” says Mine Manager François Vézina. “We’re not. Our goal is to have the latest of everything. We are being open-minded, and we’re pushing that for several reasons: We want to minimize our impact on the environment. And we want to have the best, most efficient operations possible.”

This site under construction will be Canada’s biggest open-pit gold mine. With a gold deposit of nearly 9 million ounces and a goal to produce over 600,000 ounces of gold annually for more than 12 years, the stage is set for Osisko to become one of the top-tier gold producers in the world.

“We set about to make Osisko a premium gold producer,” says Osisko President and CEO Sean Roosen. “And we’re on target to make that happen. We were able to come up with a new geological model and now we’re successfully moving from an exploration company to a mining company.”

When Osisko’s Canadian Malartic mine begins producing gold in mid-2011, it will become the biggest open-pit gold mine in Canada and make Osisko one of the top-tier gold producers in the world.

Building partnerships

Canadian Malartic benefits from being in one of North America’s richest gold regions. And while the geology itself will have a major impact on the mine’s success, the approach taken in the development of this site will be a key contributor.

“We’ve always prided ourselves on being progressive in terms of integrating mining and community, and being proactive at the beginning of a project,” says Roosen. “We took this to heart right from the beginning. This is a partnership with the community, our suppliers, our employees and our company. We’re all in this together — and together, we’ll all win.”

The project is one of the most socially sensitive in Canadian mining history, given its location in the heart of the Malartic community. But bringing residents on board with a partnership approach has been key to its rapid success. “We went door to door and said to people that if you want this project, you’ve got to help us fight for it,” Roosen has said. “And they did.”

In addition to community support, Osisko made it a priority to bring in investors, suppliers, contractors and partners who are willing to work together with Canadian Malartic’s success as the goal.

Contractors were selected not in competition with one another, but based on what they could bring to the partnership, says Canadian Malartic General Manager Denis Cimon. “All our suppliers are from the area, and the bids weren’t competitive. We know what we want. We know the contractors and providers. We selected based on their expertise and split the pie.”

Two of those partners are Caterpillar Inc. and Hewitt Equipment Ltd., the local Cat dealer providing the majority of the site’s heavy equipment and state-of-the-art mining technologies, as well as support, maintenance and operator training.

“We’re constantly talking,” says Vézina. “We talk about service, sales, safety, parts and equipment options. We’re building confidence in each other.”

Hewitt began working with Osisko long before the company purchased its first piece of equipment. “We knew some of the key players from their other projects,” says William Harvey, Hewitt Mining Manager for the Canadian Malartic project. “And when we learned they were developing this project, we started working closely with the Osisko team on different fleet scenarios and financing requirements.”

Caterpillar Mining Manager George Moubayed was also part of the early discussions. “We put in a lot of man-hours and conducted simulations. We used Cat® Fleet Production and Cost Analysis (FPC) software to determine fleet requirements and predict long-term productivity and equipment costs. At that time, we didn’t even know if they would buy Cat equipment.”

These strong partnerships reflect Osisko’s corporate values. “We focus on developing good relationships,” says Osisko Director of Communications Hélène Thibault. “Of course there are legalities, and contracts to sign and guarantees to make. But the biggest insurance of a contract is the name of the company.”

Problems are a normal part of operations, says Cimon. “If our trucks aren’t running, we’re in trouble,” he says. “But equipment problems hurt Caterpillar and Hewitt, too. Cat’s name is on the trucks, and Hewitt is responsible for their performance. We know they care about how this equipment runs. Of course, we’re all here to make money. But beyond that, we have a good relationship. We face problems together, as a group. Everyone wins.”

Focusing on productivity

As committed as Osisko is to bringing good things to the people of Malartic and minimizing its impact on the environment there, the company is equally dedicated to becoming one of the world’s most productive mines. And one way to achieve that is by having the most advanced equipment and technology available for mining.

“New techniques, new equipment, new instruments, better mining methods — we’re looking at every possible way to be as productive as possible,” says Paul Johnson, General Manager, Technical Services. “This mine will move 200,000 tons a day. We need the best equipment on the market, and we want to leverage technology to use that equipment in the most efficient manner possible.”

That’s one reason Canadian Malartic will be operating a fleet of up to 26 Cat 793F mining trucks, the fifth generation of the 227-tonne (250-short-ton) 793. The site is the first in the world to use production F Series trucks. “It has a better engine, higher horsepower, and operates more efficiently,” says Vézina. The 793F is powered by the 16-cylinder Cat C175-16 diesel engine, which meets EPA Tier 2 emission requirements, and comes with an optional quiet pack to reduce external noise.

Osisko is also the first to purchase the Extended High Lift (EHL) option for the Cat 994F wheel loader, which enables the machine to load the 793 more efficiently. The EHL linkage provides 736 mm (29 inches) more dump clearance compared to the high lift linkage. For faster cycle times, the operator can back the 994F away from the truck without racking back the bucket. The additional lift also enables the operator to dump the last pass without pushing material.

Cat 994F wheel loader and Cat 793F mining truck

“We like doing things differently and we like being first,” says Vézina. “We were looking for the most productive equipment on the market and we believe we found it. We also wanted an integrated solution for our equipment and we were able to get that by partnering with Hewitt and Caterpillar.”

Harvey believes Osisko’s focus on integration will be a key to the mine’s success. “This is a true integrated solution,” he says. “Loading, hauling, power, lift trucks, rentals, technologies — with Caterpillar, we’re able to provide them all. Cat Financial even came on board to provide financing. We’re able to deliver a one-source solution.”

Through its structured finance program, Cat Financial offers customized solutions that range from leasing and project financing to specialized structured financing with an emphasis on small mines and start-ups. The group is focused on greenfield or brownfield projects where credit decisions are based on the projected future cash flow of the business. The structured finance program provided a US$83 million structured lease for Osisko.

Leveraging technology

In addition to choosing the most productive equipment it can find, Osisko is relying on a number of state-of-the-art technologies to maximize productivity. For example, Canadian Malartic’s mining fleet — haulage trucks, electric hydraulic shovels, drills, graders and dozers — will be the first in Quebec to be outfitted with MineStar. MineStar determines where trucks should be going and how much material they should be loading throughout the day. Because the technology tracks materials, the ore containing gold and waste all go to the right place. Increased production is another benefit: Trucks are assigned with accuracy and consistency, considering downstream events that human minds cannot perceive.

“MineStar adds additional capabilities to improve overall mining operations,” says Cat Mining Technology Marketing Manager Brent Deener, who worked with Osisko in the selection of its equipment technologies. “The system takes machine data gathered in the field, existing ore control and material identification information, and links it to business enterprise systems at the site.”

A controller uses the MineStar system to manage operations at Canadian Malartic mine.

Cimon believes this technology is necessary for Osisko to achieve its aggressive production goals. “An operation this size takes synchronization,” he says. “And the only way to do that is through technology. We think MineStar is one of the best technologies we could buy. Now we’re challenging Hewitt and Caterpillar to help us take it to the next level and figure out how to use that data to increase profitability.”

Osisko also selected the Cat Computer Aided Earthmoving System (CAES), which uses satellite technology, machine-mounted components, a radio network and office management software to deliver real-time productivity information to machine operators on an in-cab display.

“CAES gives operators the data they need to maximize the efficiency of the machine,” says Deener. The system monitors ore bodies, bench height, volume of material cut and filled, and cycle times. It can be used on a variety of machines and in dozens of applications.

Osisko will leverage CAES on its Cat D10 track-type-tractors to improve grade control during construction of the site — building roads and benches, constructing berms and dumps, etc.

“They’ll also benefit from using this Cat technology on shovels,” says Deener. “CAES will enable bench elevation as well as automatically identify the type and quality of material being loaded. That information allows MineStar to send the truck to the right location.”

Canadian Malartic’s drills, too, will benefit from Cat technologies. The Cat AQUILA Drill System uses high-precision GPS to direct the execution of drill patterns. The system offers reporting on machine and operator productivity and enables remote, real-time supervision of drilling activity and blast planning. It also records and measures drill parameters to optimize machine utilization.

In addition to efficiency gains, accurate drilling is especially important given the mine’s close proximity to the town.

“They need to engineer their blasts for maximum rock fragmentation with minimum vibration effects on the town,” says Deener. “They want to drill enough to get done what they need to get done — but no more. AQUILA is helping to make that possible.”

The site is employing AQUILA on a large blasthole drill as well as several smaller Cubex articulated drills. Using AQUILA on Cubex drills is a new application — in fact, Osisko saw the value and decided to adopt the technology while it was still in a pre-production phase, says Deener.

Osisko also is leveraging the latest technologies for its mill operations, says Cimon. “There are two mills this size in North America — one in Mexico and ours,” he says. “We’re going to be producing 55000 tonnes (60,627 short tons) a day. We need the best technologies to make that possible.”

An added benefit from the use of technologies is the reduction in manpower required to operate the mine. “It’s a different way of working,” says Cimon. “It still takes people; they’re just working more efficiently and they have a higher degree of skill. It allows us to produce more.”

Osisko has aggressive production goals and expects to ramp up quickly once operations begin. These efficiency-enabling technologies will help meet those goals, and they will also help Osisko remain cost effective even when commodity prices drop.

Providing support

As part of their partnership, Hewitt and Caterpillar will support equipment and help Osisko leverage technologies for the maximum benefit.

Hewitt will support Canadian Malartic primarily from its Val d’Or branch, which is just 32 kilometers (20 miles) away, providing parts inventory and components. The dealership will also have a Coordinator and Account Manager on site. While Osisko plans to do the majority of its own equipment service and maintenance, Hewitt and Osisko have a service agreement for some labor and to provide Scheduled Oil Sampling (SOS), a method of evaluating engine, hydraulic and drivetrain oil for early warning signs of damage. Once the site is in production and the equipment is running around the clock, Harvey expects the relationship to evolve.

Osisko has constructed a state-of-the-art maintenance shop to handle maintenance and repair of the equipment fleet at Canadian Malartic mine.

“We’ll work together with Caterpillar to support the site’s technology products,” says Harvey. “Hewitt is engaged in the installation and deployment process and we will be the key point of contact.”

Additional resources include the Cat Dealer Support Network and on-site resources provided by Caterpillar. Caterpillar and Hewitt will also support the mine’s efforts to integrate Cat technologies into all the equipment on site. For example, the mine would like to take data from its non Cat equipment and have it flow back through the MineStar system.

Assembling equipment

Their dealer-customer partnership is so seamless that Hewitt Equipment Ltd. has its own facility on Osisko’s property at Canadian Malartic. Osisko built a dedicated pad for assembly of the trucks, loaders and shovels.

The facility truly exemplifies best practices, says William Harvey of Hewitt. “It’s on Osisko’s property,” he says. “But our foreman has authority for that gate. The number one benefit is in health and safety, keeping assembly away from construction of the mine site. During assembly, we have four to six people working on equipment, four welders, a crane operator, tire installer, fire suppression team, an autolube team. We had one of our suppliers erect a facility on the pad for welding truck bodies. We have our technicians there, our tools, our lunchroom and office.”

It’s also good for Osisko because it’s a turnkey solution, says George Moubayed of Caterpillar. “They’ve given Hewitt all responsibility and don’t have to provide manpower.”

Looking to the future

The current focus at Canadian Malartic is to finish building the site and to hire enough employees and get them trained in time for a second quarter 2011 start-up. As production begins and Osisko starts turning a profit, exploration will continue as the company looks for more gold. “We’re still exploring,” says Cimon. “We’re investing US$400 million in the mill alone. We’d love to keep it running 25 years if we can.”

Osisko’s partners are excited by the possibilities. “This is one of the largest project I’ve ever been involved in,” says Jim Hewitt, President and CEO of Hewitt Equipment. “The people in charge of this company and this project know what they’re doing. They’re experts in their field and they’ve selected what we believe is the best equipment fleet in the industry. We’re proud to be associated with them, and it’s a great relationship.”

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