Sometimes, it doesn't pay to be ahead of the game.
Brad Humphrey with Raymond James Equity Research initiated coverage of Montreal-based Osisko Mining Corp. Wednesday with a Market Perform rating and $10.10 target price, largely because the company is already well into the development process of its prized primary asset, the 100% owned Canadian Malartic gold mine in northern Quebec.
"We typically favour those precious metal companies that offer attractive growth profiles, boast quality assets and have strong management teams," Mr. Humphrey said in a note to clients. "Osisko is currently in construction mode an thus an analysis across such metrics is somewhat more challenging."
Of course, Mr. Humphrey does not fault Osisko for doing such a good job developing the gold project, which has great potential.
Expected to enter production in the second half of 2011, Mr. Humphrey forecasts eventual output of more than 600,000 ounces a year at a cost of US$365 an ounce over a 15-year life span.
The conservative stance is instead predicated on the company's stock valuation, which has already largely factored in the mine's value. And a dearth of other news will likely keep Osisko's share price flat for a while.
"With the company in the construction stage for the next 12 or so months followed by commissioning, the company could be entering a period of relatively quiet news flow," he said. "We believe further upside in the share price is farily limited until the project progresses to production and executes according to design."
Larger producers may also wait for the mine to enter full ramp-up mode, reducing start up risks, before launching a takeover offer.