On the back of my first interview with the Minera Alamos (TSXV:MAI, OTCQB:MAIFF) President Doug Ramshaw there were a few questions and topics that we could not get to. Doug joins me for a follow up to answer some of these questions. We discuss the relationship between Minera Alamos and Osisko Gold Royalties. This ties in with a couple questions on funding options for the Company’s near term production assets. We also get some more information on the management team and the environment in Mexico for resource companies.
Haywood Securities has initiated coverage of Minera Alamos (TSXV: MAI) with a buy rating and 12-month target price of C$0.40 per share—a 281% return from the junior’s current share price of C$0.11.
“Minera Alamos holds two development projects in its project portfolio that can be quickly ramped up to production, with the potential to produce ~ 100,000 ounces of gold over the next few years,” mining analyst Kerry Smith states in a research note. “The company’s strategy of finding, building and expanding low capex, near term projects in Mexico is something that the management team has successfully done before. With permits expected shortly, construction could begin in Q3/19 at Santana, and we suggest clients position themselves while the company is undervalued.”
“Minera Alamos holds two development projects in its project portfolio that can be quickly ramped up to production"
In addition to Santana, an open-pit heap leach development project in Sonora state, Minera Alamos is advancing La Fortuna, an open-pit project in Durango state, and has an option to acquire Guadalupe de Los Reyes in Sinaloa state.
The management team is headed up by CEO Darren Koningen, who was a founding member and vice president of mine development of Castle Gold Corp., and was involved in the development and commissioning of the El Castillo heap leach gold mine in Mexico. Castle Gold was acquired by Argonaut Gold (TSX: AR) in 2009 for C$130 million.
Minera Alamos’ vice president of project development, Federico Alvarez, and its vice president of exploration, Miguel Cardona, were also part of the Castle Gold success story. Alvarez served as vice president of operations at Castle Gold and Argonaut Gold and supervised production at El Castillo, while Cardona managed exploration for Castle Gold, overseeing resource expansion at El Castillo from 400,000 ounces of gold to 1.2 million ounces prior to its acquisition in 2009.
Smith estimates the company could bring Santana into production at initial capital costs of about $10 million. If it receives its final permits before the end of June, he reckons the project could be brought into production within nine months.
“We envision a potential 30,000 to 40,000 ounce per year heap leach operation in Phase 1 with all-in sustaining costs expected to average ~ $785 per oz. over a 10-year mine life," Smith forecasts. "Expansion opportunities, as additional resources are added, can be relatively quick and cheap given the modest capex for incremental leach pad space and use of a mining contractor.”
Smith notes that while a resource estimate has not yet been completed, test mining has started and estimates a 300,000 to 500,000 ounce deposit grading about 0.8 gram gold per tonne.
Meanwhile at La Fortuna, Minera Alamos completed a preliminary economic assessment last year, which outlined annual production of 43,000 ounces of gold over a five-year mine life. The open-pit operation is projected to run at 1,100 tonnes per day with average AISCs of $577 per oz. and initial capex of $27 million.
“With final EIA approval expected in Q2/19 and a six-month construction window,” Smith writes, “production could start up in 2020, although this project would be built after Santana.”
The junior acquired La Fortuna from Argonaut Gold in May 2016 for $2 million in cash and a 2.5% net smelter return royalty.
La Fortuna’s measured and indicated resources currently weigh in at 3.47 million tonnes grading 2.78 grams gold per tonne, 16.5 grams silver per tonne and 0.22% copper for 309,800 ounces of contained gold, 1.84 million ounces of silver and 7,600 tonnes of copper. In the inferred category, La Fortuna contains an estimated 156,300 tonnes grading 1.72 grams gold, 8.5 grams silver and 0.09% copper for 8,600 ounces of gold, 42,700 ounces of silver and 100 tonnes of copper.
Finally, Guadalupe de Los Reyes, where Minera Alamos is earning a 100% stake, has a indicated resource of 6.84 million tonnes grading 1.73 grams gold per tonne and 28.71 grams silver per tonne for 380,100 ounces of gold and 6.32 million ounces of silver. Inferred resources add 3.2 million tonnes grading 1.49 grams gold and 34.87 grams silver for 155,200 ounces of gold and 3.64 million ounces of silver.
Osisko Gold Royalties (TSX: OR) owns 13% of Minera Alamos’ common shares outstanding.
Over the last year the junior has traded in a range of C$0.085 and C$0.145 per share, and has roughly 320 million common shares outstanding for a market cap of C$33.6 million.
(This article first appeared in The Northern Miner)
ePower Metals (TSXV: EPWR) announced that it has entered into a binding letter of intent with Minera Alamos for the assignment of the option to earn a 100% interest in the Los Reyes gold project located in the northwestern state of Sinaloa, Mexico.
In a press release, the Vancouver-based miner explained that the LOI stipulates a 30 day period to enter into a definitive agreement.
At present, Minera Alamos (TSXV: MAI) has the right to acquire a 100% interest in Los Reyes, pursuant to an option agreement entered into with Vista Gold Corp.
If the transaction goes through, ePower says it will change its name to "Prime Mining Corp.", and will focus its resources on the immediate development of Los Reyes.
Previously known as Guadalupe de los Reyes, the underground mine opened in the late 1800s.
"Los Reyes is an exceptional opportunity for exploration and potential development, to be fast-tracked through a PEA and a construction decision with low capital expenditure and reduced technical risks," Andrew Bowering ePower's incoming CEO, said in the media brief. "The company will work to complete a PEA technical study on the project while continuing to drill to expand existing data as well as promising new targets."
To acquire Minera Alamos' interest in Los Reyes, ePower must make a cash payment of $1.5 million and assume Alamos' remaining option payments of $3 million; issue 9,450,000 post-consolidation common shares and 3,350,000 common share purchase warrants entitling Minera Alamos to acquire further post-consolidation common shares; enter into a governance agreement, among other conditions.
Located 43 kilometres southeast of the mining centre of Cosala, Los Reyes has a mining history that stretches back into the 1700s and has seen mining activity as recently as the 1980s.
According to ePower, recent development work has focused on conventional milling and carbon in leach extraction of gold and silver.
Previously known as Guadalupe de los Reyes, the underground mine opened in the late 1800s and to date is the most significant source of gold production in the district. It is estimated to have produced 500-600K oz of gold and 40M oz of silver at reported grades of +10 g/t Au and +500 g/t Ag.
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Minera Alamos (TSXV: MAI) just received $2 million in early funding in connection with a royalty agreement through the execution of a secured senior convertible-to-loan agreement with Osisko Gold Royalties (TSX: OR).
In a media statement, the Toronto-based miner said the loan may be converted into a 1% NSR on the La Fortuna gold project pursuant to the Royalty Option Agreement entered into with Osisko in May 2017.
According to Minera Alamos, most of the new funds will be used to make a land use payment requested by the Mexican authorities in conjunction with the La Fortuna permit applications.
Following the completion of the change of land use payment, the Environment and Natural Resources Secretariat will be in a position to issue the formal approval documentation for the project.
"The receipt of formal permit notifications for the La Fortuna gold project represents a major milestone for the company. We are appreciative of the support provided by Osisko Gold Royalties allowing for us to meet the permitting payment deadlines," Minera Alamos CEO Darren Koningen said in the media brief. "We can now look forward to 2019 and the beginning of site preparation work leading to a construction decision later in the year."
The La Fortuna open-pit gold project is located in the northwestern Durango state, about 100 kilometres northeast of the city of Culiacán in the neighbouring Sinaloa state. It includes the historic La Fortuna mine together with the surrounding concessions, which total more than 6,200 hectares.
Exploration surveys performed between 1991 and 2008 led to the development of a resource block model which produced a Measured and Indicated resource of 4,800,000 tonnes at 2.0 g/t gold (308,000 contained ounces) at a 0.50 g/t gold cutoff grade.
Minera Alamos reported that a recently completed a PEA for the project demonstrated an after-tax internal rate-of-return in excess of 90%, a rapid payback of capital of approximately one year and low production costs for an initial 50,000 oz (AuEq) per annum operation.
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