Based on the strong economics of the Phase III Expansion study for the Island Gold mine in Ontario, which includes a new 1,373-metre shaft, Alamos Gold (TSX: AGI; NYSE: AGI) announced that it is proceeding with an expansion of the underground mine to 2,000 tonnes per day, up from 1,200 tonnes per day.
The expansion study outlines average gold production of 236,000 oz. annually starting in 2025, once the shaft is complete, at all-in sustaining costs (AISCs) of US$534 per ounce. The capital cost estimate for the expansion is US$514 million, with an additional US$552 million required in sustaining capital over the next 16 years.
Based on a base-case gold price of US$1,450 per oz., the after-tax net present value estimate for the expansion comes in at US$1.02 billion, at a 5% discount rate, with a 17% internal rate of return.
“Island Gold has been a tremendous acquisition for Alamos Gold,” John McCluskey, the company’s president and CEO, said in a news release. “The Phase III Expansion study showcases the growing value of Island Gold. Already one of the most profitable mines in Canada, the expansion will increase production, lower costs and make this operation even more profitable. The expansion will also best position the operation to benefit from additional exploration success.”
As part of the study, Alamos evaluated five potential mining scenarios at the pre-feasibility level. This includes an expansion of the existing ramp as well as a shaft expansion to 1,600 tonnes per day. Ultimately, the company selected the 2,000-tonne per day shaft production option, which includes a shaft build, paste fill plant and mill and tailings facility expansions. Once the shaft is complete in 2025, Alamos expects to skip ore and waste to surface, increasing production and driving down costs. The material is currently trucked to surface.
Any permitting requirements for the shaft expansion are expected to be complete within 18 to 24 months.
The study envisions a 16-year mine, with a 9.6-million tonne mineable resource grading 10.45 grams gold per tonne.
According to Alamos, this includes existing mineral reserves as well as approximately 80% of measured and indicated and inferred resources, based on the historical conversion of inferred resources to reserves.
Prior to withdrawing production guidance in April due to the Covid-19 pandemic, Island Gold was expected to produce 130,000-145,000 oz. gold this year.
Earlier this month, the company announced that it has completed the lower mine expansion at its Young-Davidson underground mine in Ontario and started up the Northgate shaft. Mining rates are expected to ramp up to 7,500 tonnes per day by year-end.
— This article first appeared in the Canadian Mining Journal. The Northern Miner and the Canadian Mining Journal are part of Glacier Resource Innovation Group.