Alamos Gold doubles exploration budget to $50 million

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Alamos Gold Inc. [AGI-TSX, NYSE] said Wednesday February 24 that it will double its global exploration budget this year to $50 million.

Alamos is an intermediate gold producer with production from mines in North America, including the Young-Davidson and Island Gold mines in northern Ontario, and the Mulatos mine in Mexico.

The company is planning to build the Lynn Lake open pit mine in northern Manitoba by 2025.

The company said Island Gold remains the primary focus of its exploration efforts with $25 million budgeted for that asset. Another $9 million will be dedicated to Mulatos with Young-Davidson and Lynn Lake each receiving $7 million.

Alamos also said its proven and probable mineral reserves have increased to 9.9 million ounces of gold (204 million tonnes at 1.50 g/t gold), from 9.7 million ounces at the end of 2019, with increases at Island Gold, Young-Davidson and Lynn Lake more than offsetting 555,000 ounces of mining depletion.

“We had an excellent 2020 on the exploration front despite a smaller-than-planned program due to COVID-19,” said Alamos President and CEO John McCluskey. “We more than replaced global mineral reserves, and added another million ounces of high-grade mineral reserves and resources at Island Gold,” he said.

“Island Gold is now approaching five million ounces of combined reserves and resources with excellent potential for this growth to continue with the deposit open laterally and at depth,” McCluskey said. “This growth further increases the value of the operation beyond what was outlined in a Phase 111 expansion study this past year and reaffirms the decision to put in a shaft.”

As outlined in the study, Island Gold has a 16-year mine life based on reserves and resources at the end of 2019. The increase in mineral reserves and resources in 2020 is expected to significantly extend mine life.

On Wednesday, Alamos Gold shares rose 2.6% or 25 cents to $9.72 on volume of 465,274. The shares are trading in a 52-week range of $15.52 and $4.43.

Annual gold production is expected to increase by 17% in 2021 to between 470,000 and 510,000 ounces. The increase will be driven by higher production from Young-Davidson which is poised to be the company’s flagship operation.

As production ramps up at Young-Davidson, the company is predicting an 8% drop in total cash costs in 2021 to between US$710 and US$760/oz.

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