Alamos Gold rallies on Turkish permit news

Alamos Gold Inc. [AGI-TSX, NYSE] said Wednesday July 25 that it had been granted the GSM (business opening and operation) permit required for the development of its Kirazli Project by the Canakkale governorship in Turkey.

Trading in Alamos was halted ahead of the news, which was announced before the close of trading on Wednesday. When trading resumed, the stock was up 4.8% or 34 cents to $7.41.

“We are very pleased to have achieved this key milestone,” said Alamos President and CEO John A. McCluskey. “With the environmental impact study and forestry permits having previously been approved, we have all the required permits to ramp up full-scale construction activities,” he said.

“As one of the lowest-cost and highest return gold projects in the world, Kirazli will be a significant driver of free cash flow growth with production expected in 2020.”

Alamos is a Canadian-based intermediate gold producer with diversified production from four operating mines in North America, including the Young-Davidson and Island Gold mines in northern Ontario, and the Mulatos and El Chanate mines in Sonora, Mexico.

The company has said it expects to produce between 490,000 to 530,000 ounces of gold from its fourth North American mines this year at an all-in sustaining cost of US$950 an ounce.

The Kirazli Project is located in Canakkale Province on the Biga Peninsula of northwestern Turkey. It is one of two 100%-owned Turkish projects that Alamos acquired from Teck Resources Ltd. [TECK.B-TSX, TECK-NYSE] and Fronteer Development for $90 million in January 2010. The other is the Agi Dagi Project, which is also located in Canakkale Province about 25 km from Kirazli.

The Kirazli Project covers 1,514 hectares of mineral tenure in two contiguous licenses covering a prominent northwest trending ridge with 500 metres of relief. As the project is located in a forestry reserve, surface rights are controlled by the State government of Canakkale.

As outlined in a 2017 feasibility study, Kirazli has a 44% after-tax Internal Rate of Return and is expected to produce over 100,000 ounces of gold during its first full year of production at mine-site all-in sustaining costs of less than $400 an ounce.

This is expected to bring the company’s consolidated production to 600,000 ounces per year, with significantly lowing the company’s cost profile.

The company said it will be mobilizing for full scale construction activities over the next two months. The initial capital estimate for Kirazli is $152 million, of which $50 to $60 million is expected to be spent in 2018, inclusive of the $10 million spent through the first half of 2018.

The bulk of the remaining capital will be spent in 2019 and the first half of 2020, the company said in a press release. Based on the current timelines, the company expects initial production from Kirazli in the first half of 2020.

It will be an open pit, heap leach operation, producing both gold and silver.