TORONTO (miningweekly.com) – TSX- and NYSE-listed midtier gold miner Alamos Gold has acquired the surface rights to two satellite deposits of its flagship Mulatos mine, in Mexico, adding to the company’s strong development pipeline.

The Canadian miner said that Cerro Pelon and La Yaqui were located about 3 km and 7 km as the crow flies, respectively, from the existing Mulatos operation.

The deposits are near surface, highly oxidised and amenable to openpit heap leaching. With their combined mineral reserve grade of 1.6 g/t of gold being nearly double the company’s 2014 budget, these projects are expected to significantly lower the overall cost profile at Mulatos, which at $617/oz of gold sold was already considered to be one of the world’s lowest-cost operations.

The agreement now paved the way for Alamos to start permitting and development activities on the two deposits.

“Both deposits exemplify our development pipeline in that they are economically robust, technically simple, openpit heap-leach projects that are inexpensive to build and operate. Cerro Pelon and La Yaqui represent a significant source of near-term, low-cost, production growth that we expect will drive production at Mulatos back to about 200 000 oz/y, while sharply lowering operating costs.

“With modest capital and very low operating costs, we expect these deposits to generate significant free cash flow,” Alamos president and CEO John McCluskey said.

The focus over the next 18 to 24 months would be on permitting and developing the two deposits with first production expected in 2016.

The near-term focus would be on compiling environmental-impact assessments for both projects, with approvals expected in about 12 to 15 months.

This would be followed by a six-to-eight-month construction period at La Yaqui and eight-to-ten-month construction period at Cerro Pelon.

Each project would operate with standalone heap leach pads and portable crushing circuits that would not displace existing throughput capacity from the main Mulatos crushing circuit and heap leach pad.

The construction costs for both projects were expected to total about $21-million.

Alamos added that owing to a lack of access, very little exploration activity had taken place at Cerro Pelon and La Yaqui in recent years.

Further, both reserve pits remained based on designs using an $800/oz gold price, with Cerro Pelon offering the most exploration potential through further drilling. Cerro Pelon would be a focus of exploration efforts in the second half of the year and into 2015 with an initial 12 000 m drill programme planned.

Closing of the agreement is subject to completion of due diligence and other customary closing conditions and is scheduled for the end of June 2014.

Alamos’ TSX-listed shares gained 3.03% on Wednesday to close at C$9.17, however, the stock is down 32.63% from the start of the year.