An underground drill at Alamos Gold's Island Gold mine
Canadian miner Alamos Gold has opted for a larger, more profitable and valuable operation at its Island Gold mine, in Ontario, with the company proceeding with an expansion to 2 400 t/d, instead of a previously contemplated 2 000 t/d.
Announcing the results of the Phase 3+ expansion study on Tuesday, Alamos said that Island Gold would produce an average of 287 000 oz/y, starting in 2026 upon completion of the shaft. This is a 22% increase from the 2020 Phase 3 expansion study (P3 2000), which worked on 236 000 oz/y and a 121% increase from the mid-point of the 2022 production guidance of 130 000 oz.
Alamos said that the updated study’s cost structure was consistent with the P3 2000 study, with productivity gains and economies of scale offsetting inflation.
The average total cash costs will be $432/oz, well below the mid-point of the 2022 guidance of $575/oz. Average mine-site all-in sustaining costs are estimated to be $610/oz, a 30% decrease from the mid-point of 2022 guidance of $875/oz.
Mineral reserves and resources have increased to 5.1-million ounces, supporting the Phase 3+ increase in production rates, which will create a bigger, longer-life, more profitable and valuable operation.
Compared with the P3 2000 study, the new expansion study is based on an 18-year mine life to 2039, which is a four-year increase from the previous study, while operating at 20% higher production rates of 2 400 t/d.
The growth capital is estimated to be $756-million and sustaining capital $777-million, with both these up from the P3 2000 study, reflecting the expansion, a larger mineable resource and industry-wide inflation. The previous study estimated growth capital of $538-million and sustaining capital of $576-million.
However, total capital intensity decreased 4% to $344/oz, reflecting the bigger mineable resource with increased ounces per vertical metre driving the lower capital intensity and contributing to the stronger economics.
The new study also yielded stronger economics, with an after-tax net present value (NPV), using a 5% discount, of $1.6 billion, which was 25% up from the P3 2000 study, using a base case gold price assumption of $1 650/oz. The after-tax internal rate of return (IRR) is 23%, up from 20% in the P3 2000 study.
Using current gold prices of $1 850/oz, the NPV rises to $2-billion, a 31% increase from the P3 2000 study, and after-tax IRR climbs to 25%.
Alamos intends to internally fund the expansion.
“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,” said president and CEO John McCluskey.
He added that the exploration story continued to unfold with a mineral reserve and resource base that had nearly tripled over the past four years.
“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 McCluskey.