viewMinera Alamos Inc

Minera Alamos on brink of first mine development down in Mexico


The Minera Alamos team, headed up by chief executive Darren Koningen and president Doug Ramshaw, is trying to replicate the success of Castle Gold

Minera Alamos Inc -

Quick facts: Minera Alamos Inc

Price: 0.66 CAD

Market: TSX-V
Market Cap: $289.23 m
  • Two high-quality, open pit development-stage assets
  • Proven mine-building team
  • Three successful mines put into production in last 12 years

What Minera Alamos does:

Minera Alamos Inc (CVE:MAI) is advancing high-quality development gold projects in the Sonora and Durango states of Mexico.

The Minera Alamos team, headed up by chief executive Darren Koningen and president Doug Ramshaw, is trying to replicate the success of junior Castle Gold, which advanced its El Castillo mine in Durango state from generating around 30,000 ounces a year to up to 75,000 ounces of the yellow metal, before the group was sold nine years ago for C$130mln. El Castillo is now generating around 100,000 ounces annually.

Koningen was vice president of operations at Castle Gold and worked alongside Chester Miller, a huge figure in mining and the pioneer of heap leaching, to advance El Castillo.

Ramshaw was CEO of Corex Gold (CVE:CGE), which announced a merger with Minera Alamos in January 2018. That union added Corex's Santana gold project in Sonora to Minera's La Fortuna project, the Guadelupe De Los Reyes project, both in Durango, and the Los Verdes property which, significantly, lies directly north of Santana and thus consolidated the land position.

Santana is the group's "near term production opportunity" and has seen a successful bulk test mining program. The firm is nearing commercial production at the open-pit heap leach project. First gold is earmarked for the middle of 2020. Minera plans to develop Santana first and use cashflow from that mine to advance its other projects.

Overall, the aim is to develop low capex, high margin assets with expansion opportunities while continuing to make strategic acquisitions.

In April this year, the firm optioned its rights to acquire the Guadalupe gold property to Prime Mining Corp, which was then known as ePower Metals, and in late August said it had acquired a 16% stake in Prime after closing on the agreement to option.

The Guadalupe project in Sinaloa, Mexico boasts a mineral resource of 380,000 gold ounces at a grade of 1.7 grams per ton and over 6 million ounces of silver grading at 28.7 grams per ton. Guadalupe is envisaged as an open pit mine with heap leach processing.

How is it doing:

In September this year, Minera told investors it had now received formally the ETJ (Estudio Tecnico Justificativo), which along with the MIA (Manifestacion de Impacto Ambiental) or environmental impact assessment for Santana, gives it "all the necessary rights" to begin building commercial-scale gold operations.

In addition, the possession of the MIA-ETJ documentation is the critical prerequisite to begin applications for other permits including those for explosives use and storage that will be necessary after construction, the company said.

Recently, at Santana, the company also said it has found a new zone of mineralization called 'Gold Ridge' - comprising new Nicho-style gold-silver surface anomalies to the east of the Nicho deposit - as part of its previously announced second phase drill program.

Meanwhile, at La Fortuna, a preliminary economic assessment (PEA) released last August demonstrated robust project economics including an after-tax internal rate-of-return (IRR) of 93% and an all-in sustaining cost (AISC) of $440 per ounce. The net present value of the starter pit, with a discount of 7.5%, was put at US$69.8 million. The report envisages a simple open-pit mine with an initial 40,000-50,000 ounce annual production and a low CAPEX start-up.

The project already has 300,000 ounces of resource defined. A 2,000 tonnes per day (tpd) mill was acquired in 2017 and a 1,100 tpd starter operation is contemplated, which could be expanded to 2,000 tpd.

Minera has received notification confirming the completion of the technical review phase for the change of land use to construct mining facilities at the site, allowing initial groundworks to begin, and it is waiting for the next stage of the permit process.

What the broker says:

Roth Capital recently started covering Minera Alamos with a 'Buy' rating and C$0.35 price target for the shares (current price: C$0.21).

It reckons Santana should reach commercial production by year-end 2020 - a project, on which Minera has completed a bulk sample to confirm a historical resource, but no NI 43 101 resource estimate.

"We believe this is one of the key drivers in the company's current discount to our valuation. We also note that management expects to release an initial resource estimate in early 2020, which should serve as a significant catalyst, in our view," said Roth analyst Joe Reagor in a note to clients.

"La Fortuna is further along on the technical side with a resource estimate and PEA. However, the project has a higher capital cost to develop and is nearing the end of the permitting process. We believe La Fortuna will enter production in 2022," he added.

Inflection points: 

  • Initial resource estimate for Santana
  • Production start at Santana
  • More on permitting at La Fortuna

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