Mining Markets


Alamos Gold gears up for growth in 2014

Mid-tier gold miner Alamos Gold (AGI-T) remained on track in 2012, meeting the lower end of its 200,000 to 220,000 oz. gold production target at its Mulatos mine, in Mexico's Sonora state.

Mid-tier gold miner Alamos Gold (AGI-T) remained on track in 2012, meeting the lower end of its 200,000 to 220,000 oz. gold production target at its Mulatos mine, in Mexico’s Sonora state.


A strong fourth quarter, which saw Mulatos churn out a record 67,800 oz. gold, helped the company reach its target.


The low-cost miner expects cash operating costs at its open-pit, heap-leap mine to come in at around US$360 per oz. for the year, slightly lower than its guidance of US$365-390 per oz. (Those numbers exclude a 5% royalty on production, which at a US$1,600 gold price, would bring cash costs per oz. to US$445-470.)


While it increased production by over 30% at Mulatos in 2012, 2013 won’t be another year of growth for the company. This year, Alamos expects to churn out 180,000 to 200,000 oz. at cash costs of US$415-435 (or US$500-520 per oz. of gold, including the 5% royalty).


The higher expected cash costs are a result of higher fuel, labour and cyanide costs, as well as lower grades at Mulatos (expected to average 11 grams gold per tonne this year compared with 13.4 grams in 2012).


At Mulatos, Alamos will plans to spend US$40.7 million this year, with roughly half going toward underground development to access high-grade ore, and half towards operational expenses, including equipment and a leach pad expansion.


Although production will be flat to declining this year, the debt-free company, which has around US$350 million in cash, is busy putting its next phase of growth in place.


The miner has budgeted US$69.3 million for development, including engineering and construction, at its projects in Turkey, which are slated for production as soon as 2014.


A 2012 prefeasibility study on its Agi Dagi and Kirazli projects in Turkey, which are about 19 km apart, showed that together, the projects could produce 1.5 million oz. gold and 4.9 million oz. silver, or 166,000 oz. per year over nine years.


The study forecast preproduction capex of US$424.4 million and total cash costs per oz. at US$579.


The project’s after-tax net present value was pegged at $275.6 million and its internal rate of return at 22.3%, using a discount rate of 5% and gold price of US$1,239 per oz.


Kirazli is expected to coming onstream in 2014 and Agi Dagi in 2016.


The company will also spend $10.6 million on exploration in Mexico in the Mulatos district, completing at least 72,000 metres of drilling and $11 million in Turkey, for at least 31,700 metres of drilling.


Its drill campaign in Turkey will include an infill drill program to upgrade resources at its Camyurt project near Agi Dagi. Camyurt currently hosts 639,500 oz. gold and 3.8 million oz. silver in 24.6 million tonnes grading 0.81 gram gold and 4.77 grams silver, at a cutoff grade of 0.2 gram gold per tonne.


On the news, Alamos shares dipped 4.25% to $16.46 on Tuesday afternoon. Haywood Securities mining analyst Kerry Smith has a sector outperform rating on Alamos with a price target of $23.


The stock has traded in a 52-week window of $13.84-$21 and the company has 120.9 million shares outstanding.