Canadian Mining Journal


GOLD-SILVER: Minera Alamos attracts new coverage

MEXICO – Haywood Securities has initiated coverage of Minera Alamos with a buy rating and 12-month target price of $0.40 per share – a 281% return from the junior’s current share price of $0.11.

“Minera Alamos holds two development projects in its project portfolio that can be quickly ramped up to production, with the potential to produce about 100,000 OZ. of gold over the next few years,” mining analyst Kerry Smith states in a research note. “The company’s strategy of finding, building and expanding low capex, near term projects in Mexico is something that the management team has successfully done before. With permits expected shortly, construction could begin in Q3 2019 at Santana, and we suggest clients position themselves while the company is undervalued.”

In addition to Santana, an open pit heap leach development project in Sonora state, Minera Alamos is advancing La Fortuna, an open pit project in Durango state, and has an option to acquire Guadalupe de Los Reyes in Sinaloa state.

The management team is headed up by CEO Darren Koningen, who was a founding member and VP of mine development of Castle Gold Corp., and was involved in the development and commissioning of the El Castillo heap leach gold mine in Mexico. Castle Gold was acquired by Argonaut Gold (TSX: AR) in 2009 for $130 million.

Minera Alamos’ VP of project development, Federico Alvarez, and its VP of exploration, Miguel Cardona, were also part of the Castle Gold success story. Alvarez served as VP of operations at Castle Gold and Argonaut Gold and supervised production at El Castillo, while Cardona managed exploration for Castle Gold, overseeing resource expansion at El Castillo from 400,000 oz. of gold to 1.2 million oz. prior to its acquisition in 2009.

Haywood’s Smith estimates the company could bring Santana into production at initial capital costs of about US$10 million. If it receives its final permits before the end of June, he reckons the project could be brought into production within nine months.

“We envision a potential 30,000 to 40,000 oz. per year heap leach operation in Phase 1 with all-in sustaining costs expected to average about US$785 per oz. over a 10-year mine life,” he forecasts. “Expansion opportunities, as additional resources are added, can be relatively quick and cheap given the modest capex for incremental leach pad space and use of a mining contractor.”

Smith notes that while a resource estimate has not yet been completed, test mining has started and estimates a 300,000 to 500,000 oz. deposit grading about 0.8 g/t gold.

Meanwhile at La Fortuna, Minera Alamos completed a preliminary economic assessment last year, which outlined annual production of 43,000 oz. of gold over a five-year mine life. The open pit operation is projected to run at 1,100 t/d with average AISCs of US$577 per oz. and initial capex of US$27 million.

“With final EIA approval expected in Q2 2019 and a six-month construction window,” Smith writes, “production could start up in 2020, although this project would be built after Santana.”

The junior acquired La Fortuna from Argonaut Gold in May 2016 for US$2 million in cash and a 2.5% net smelter return royalty.

La Fortuna’s measured and indicated resources currently weigh in at 3.47 million tonnes grading 2.78 g/t gold, 16.5 g/t silver and 0.22% copper for 309,800 oz. of contained gold, 1.84 million oz. of silver and 7,600 tonnes of copper. In the inferred category, La Fortuna contains an estimated 156,300 tonnes grading 1.72 g/t gold, 8.5 g/t silver and 0.09% copper for 8,600 oz. of gold, 42,700 oz. of silver and 100 tonnes of copper.

Finally, Guadalupe de Los Reyes, where Minera Alamos is earning a 100% stake, has an indicated resource of 6.84 million tonnes grading 1.73 g/t gold and 28.71 g/t silver for 380,100 oz. of gold and 6.32 million oz. of silver. Inferred resources add 3.2 million tonnes grading 1.49 g/t gold and 34.87 g/t silver for 155,200 oz. of gold and 3.64 million oz. of silver.

Osisko Gold Royalties owns 13% of Minera Alamos’ common shares outstanding.

Over the last year the junior has traded in a range of $0.085 and $0.145 per share, and has roughly 320 million common shares outstanding for a market cap of $33.6 million.

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