* To update reserves by end of year
* Sees around 2 mln ounces from South Barnat area
* Mine to start production in 2011 (In U.S. dollars unless noted)
TORONTO, Nov 19 (Reuters) - Osisko Mining OSK.TO expects to show a 30 percent increase in gold reserves when it releases an updated study in the next few weeks, the company’s chief executive said on Thursday.
The Canadian company is constructing the Malartic gold project in western Quebec, and expects to it eventually produce between 500,000 and 800,000 ounces a year once production starts in 2011.
Speaking at the Knight-Tumazos Metals and Mining investor conference in New York, Osisko Chief Executive Sean Roosen said the company would release an updated reserve estimate before the end of the year.
The updated study will show the results of drilling meant to convert resource ounces to reserves on the South Barnat portion of the property, which is a separate gold deposit located about 1 km from the main deposit.
“Probably a 30 percent increase in reserves,” Roosen said.
Malartic currently holds 6.3 million ounces of reserves, based on a gold price of $775 an ounce, and should see 1.8-2.2 million ounces added from South Barnat, said Roosen.
Assuming a long-term gold price of $1,000, the project would get another 1 million ounces of reserves from rock surrounding the current planned pit.
Gold prices breached record levels in October and have continued to rise, hitting a new peak on Wednesday, and sitting just shy of $1,050 an ounce on Thursday.
Osisko has fully funded the C$1 billion ($940 million) mine, which it is building in the town of Malartic, Quebec. The company has moved an entire neighborhood to mine the deposit.
Osisko’s progress has helped more than double its share price this year, and it now boasts a market capitalization of about C$2.3 billion, despite producing no ounces to date.
Despite the high value, Osisko has been seen as a takeover target for cash-rich gold majors looking to add a large near-term project.
Goldcorp G.TO said in August it had taken a stake in the company, which Roosen estimated at 14 percent.
Osisko’s shares were up 22 Canadian cents at C$8.16 on the Toronto Stock Exchange on Thursday afternoon.
$1=$1.06 Canadian Reporting by Cameron French; editing by Rob Wilson