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Alamos Gold announces Phase 3+ expansion of Island Gold

Published by , Deputy Editor
Global Mining Review,

Alamos Gold Inc. has reported results of the Phase 3+ expansion study (P3+) conducted on its Island Gold mine, located in Ontario, Canada. The P3+ expansion study outlines a larger, more profitable, and valuable operation than outlined in the Phase III expansion study released in 2020 (P3 2000 study). Based on the results of the P3+ expansion study, the company is proceeding with an expansion of the operation to 2400 tpd.

The P3+ expansion study has been updated to reflect the current costing environment. All economics, costs and capital referenced in this release for the previous P3 2000 study are based on estimates as of 2020 and do not reflect industry-wide cost and capital inflation since that time.

Phase 3+ expansion study highlights

Higher production: average annual gold production of 287 000 oz starting in 2026, upon completion of the shaft

  • This represents a 22% increase from the P3 2000 study and a 121% increase from the mid-point of 2022 production guidance of 130 000 oz.

Industry low costs: consistent cost structure with the P3 2000 study, with productivity gains and economies of scale offsetting inflation

  • Average total cash costs of US$432/oz (average US$425/oz from 2026), consistent with the P3 2000 study and 25% lower than the mid-point of 2022 guidance of US$575/oz.
  • Average mine-site all-in sustaining costs of US$610/oz (average US$576/oz from 2026), a 30% decrease from the mid-point of 2022 guidance of US$875/oz.

Larger, longer-life operation supported by significantly increased mineral reserve and resource

  • 43% increase in mineable resource to 4.6 million oz of gold (Au) grading 10.59 g/t.
  • 18 year mine life to 2039, a four year increase from the P3 2000 study, while operating at 20% higher production rates of 2400 tpd.

Lower capital intensity: lower total capital/oz over the life of mine

  • Growth capital of US$756 million and sustaining capital of US$777 million, both up from the P3 2000 study reflecting the expansion, a larger mineable resource, and industry-wide inflation.
  • Total capital intensity decreased 4% to US$344/oz reflecting the larger mineable resource with increased ounces per vertical metre driving the lower capital intensity and contributing to the stronger economics.
  • US$100 million of the increase in growth capital compared to the P3 2000 study reflects sustaining capital that has been brought forward to the expansion period for accelerated underground development and infrastructure to support the higher mining rate.
  • Expansion significantly de-risked given increased detailed engineering, capital committed and projects completed to date, including the majority of earthworks.

Stronger economics with expansion and larger mineable resource more than offsetting inflation to create a more valuable operation

  • After-tax net present value (NPV) (5%) of US$1.6 billion, a 25% increase from the P3 2000 study (base case gold price assumption of US$1650/oz and US/CAN foreign exchange rate of $0.78:1).
  • After-tax internal rate of return (IRR) of 23%, up from 20% in P3 2000 study.
  • After-tax NPV (5%) of US$2 billion, a 31% increase from the P3 2000 study, and an after-tax IRR of 25%, at current gold prices of US$1850/oz.

Industry low greenhouse gas (GHG) emission intensity

  • 35% reduction in life of mine GHG emissions relative to the current operation, supporting the company-wide target of a 30% reduction in GHG emissions by 2030.
  • 31% additional reduction in emissions/oz of gold produced from industry low levels.

Fully funded, balanced approach to growth: growing free cash flow expected starting in 2H22

  • With no significant capital expected to be spent on Lynn Lake until the P3+ expansion is well underway; the company is well positioned to fund the expansion internally while generating strong free cash flow over the next several years.
  • The company expects significant free cash flow growth in 2025 and beyond as production rates ramp up at Island Gold.

“Island Gold continues to grow in every sense with our planned Phase 3+ expansion driving the value of Island Gold to US$2 billion at current gold prices. Mineral reserves and resources have increased to 5.1 million oz, supporting the Phase 3+ increase in production rates, which will create a bigger, longer-life, more profitable and valuable operation. As a producing mine with a well-understood cost structure, this expansion is low risk from an execution perspective, and has a significantly reduced carbon footprint. The exploration story continues to unfold with a mineral reserve and resource base that has nearly tripled over the past four years, and with the deposit open laterally and down-plunge, we expect Island Gold will be one of the lowest cost and most profitable mines for decades to come,” said John A. McCluskey, President and CEO.

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