Minera Alamos gets $14 million Osisko backing

Minera Alamos Inc. [MAI-TSXV; MAIFF-OTC] shares rallied Friday December 6 after the company said it has arranged a $14 million combined equity and royalty financing package with Osisko Gold Royalties Ltd. [OR-TSX, NYSE]. The funds will be used for construction of Minera’s 100%-owned Santana gold mine in Sonora, Mexico.

Minera Alamos is an advanced stage exploration and development company with a portfolio of Mexican development assets, including the La Fortuna open-pit gold project in Durango and the Santana open-pit heap leach development project in Sonora.

Under the terms of the financing, Osisko will purchase 30 million Minera Alamos common shares on a non-brokered private placement basis at 20 cents per share for aggregate proceeds of $6 million.

Osisko will acquire a perpetual 3% net smelter return royalty on the Santana property for a cash payment of $5 million.

Minera Alamos will be granted the right to draw down up to an additional $3 million in financing from Osisko to provide additional funding flexibility, if needed, during construction and start-up of the proposed Santana gold mine.

All common shares issued under the offering will be subject to a four-month hold period from the closing date. Completion of the offering will increase Osisko’s stake in Minera Alamos to 18.7% from 12.3%.

After trading in the shares resumed on Friday, Minera Alamos rose 8.3% or $0.02 to 26 cents. The shares are currently trading in a 52-week range of $0.085 and 24 cents.

“We appreciate the ongoing support and backing that our operating team has received from Osisko Gold Royalties,” said Minera Alamos CEO Darren Koningen. “This financing package allows the company to begin its transition from gold project developer to gold producer. Today’s news sets the stage for an extremely busy and exciting 2020 as our team executes our business plan to the benefit of all our shareholders.”

The 8,500-hectare Santana Project is accessible by pave highway and will be an open pit heap leach operation.

Minera Alamos has elected to move ahead with construction at Santana even though it has not completed a feasibility study of mineral reserves demonstrating the economic and technical viability of the project.

The company said it believes it is reasonable to make this decision without a feasibility study or technical report because of positive results received during the test mining phase completed in 2018-2019, where a 50,000 tonne bulk heap-leach test was performed.

Minera Alamos said the decision to proceed with construction is also based on the operating team’s previous success in putting similar operations into production over the last 12 months.

Construction is expected to take roughly six to eight months and will likely cost approximately $10 million. That amount is expected to cover construction of the carbon plant, pads, ponds and various earthworks at the mine site.