Alamos Gold Inc. (
TSX:AGI;
NYSE:AGI) (“Alamos” or the “Company”) today announced that
it has entered into an agreement to acquire and cancel a 3% net
smelter return (“NSR”) royalty payable on production from the
Island Gold mine (the “Royalty”) for total cash consideration of
C$75 million ($54 million).
The Royalty was acquired from a privately held company and is
payable on gold production within four patented claims (the
“Subject Claims”) that comprise the majority of currently defined
Mineral Reserves and Resources within the Island Gold deposit. The
acquisition and elimination of the royalty will immediately reduce
operating costs and increase operating cash flow while providing
increased exposure to Island Gold’s significant exploration
potential.
Transaction highlights:
- Acquisition and cancellation of the Royalty on all future gold
production from the Subject Claims that comprise the majority of
the Island Gold deposit. As of December 31, 2019, the Subject
Claims contained: • 0.9 million ounces of Mineral Reserves,
representing 71% of Island Gold’s total Mineral Reserves,
and • 1.1 million ounces of Inferred Mineral Resources (see
Table 1)
- $40 per ounce, or 7%, decrease in Island Gold’s 2020 total cash
cost guidance to between $480 and $520 per ounce and $40 per ounce
decrease in mine-site all-in sustaining cost guidance to between
$740 and $780 per ounce
- Increased exposure to Island Gold’s substantial exploration
potential with combined Mineral Reserves and Resources having
doubled to 2.0 million ounces within the Subject Claims since the
end of 2016, including: • 0.5 million ounce increase in
Mineral Reserves to 0.9 million ounces, net of 0.3 million ounces
of mining depletion. This reflects the discovery of new Mineral
Reserves and strong conversion rate of Inferred Mineral Resources
to Reserves of 83% since the end of 2016, and • 0.5 million
ounce increase in Inferred Mineral Resources to 1.1 million
ounces
- Increased exposure to higher gold prices. At spot gold prices
of approximately $1,530 per ounce, Alamos will save $46 per ounce
on production from the Subject Claims. In 2019, royalty payments to
the Subject Claims totalled C$8 million
- Reduction in effective NSR royalty rate on Island Gold’s
Mineral Reserves to 2.2% from approximately 4.4%
“The acquisition of the royalty further reduces costs at what is
already a low-cost operation while also increasing our exposure to
the tremendous exploration upside. Since we acquired Island Gold in
2017, the Mineral Reserve and Resource base has doubled with the
deposit approaching four million ounces across all categories. With
the deposit open laterally and down-plunge across several areas of
focus, we see excellent potential for this growth to continue at a
greatly reduced royalty on future production,” said John A.
McCluskey, President and Chief Executive Officer.
Island Gold and Consolidated 2020 Cost Guidance Reduced
with Elimination of Royalty
Mineral Reserves within the Subject Claims currently account for
71% of total Mineral Reserves at Island Gold. In 2020, over 90% of
Island Gold’s gold production is expected to come from within the
Subject Claims. With the elimination of the Royalty and associated
cost savings, the Company has lowered its 2020 total cash cost and
mine-site all-in sustaining cost guidance by $40 per ounce. On a
consolidated basis, total cash cost and all-in sustaining cost
guidance has also been reduced by $13 per ounce as detailed
below.
|
|
2020 Initial Guidance |
2020 Revised Guidance |
Island Gold |
|
|
|
|
|
|
|
Gold Production |
000 oz |
130-145 |
130-145 |
|
|
|
|
Cost of Sales(1) |
$/oz |
$880 |
$840 |
Total Cash Costs(2) |
$/oz |
$520-560 |
$480-520 |
Mine-site AISC(2) |
$/oz |
$780-820 |
$740-780 |
|
|
|
|
Consolidated – Alamos Gold |
|
|
|
|
|
|
|
Gold Production |
000 oz |
425-465 |
425-465 |
|
|
|
|
Cost of Sales(1) |
$/oz |
$1,130 |
$1,117 |
Total Cash Costs(2) |
$/oz |
$770-810 |
$757-797 |
Mine-site AISC(2) |
$/oz |
$1,020-1,060 |
$1,007-1,047 |
(1) Cost of sales includes mining and processing
costs, royalties, and amortization expense, and is calculated based
on the mid-point of total cash cost guidance.(2) Refer
to the "Non-GAAP Measures and Additional GAAP" disclosure at the
end of this press release and the Q4 2019 MD&A for a
description and calculation of these measures.
Qualified Persons
Chris Bostwick, FAusIMM, Alamos Gold’s Vice President, Technical
Services, has reviewed and approved the scientific and technical
information contained in this news release. Chris Bostwick is a
Qualified Person within the meaning of Canadian Securities
Administrator’s National Instrument 43-101 (“NI 43-101”).
About Alamos
Alamos is a Canadian-based intermediate gold producer with
diversified production from three operating mines in North America.
This includes the Young-Davidson and Island Gold mines in northern
Ontario, Canada and the Mulatos mine in Sonora State, Mexico.
Additionally, the Company has a significant portfolio of
development stage projects in Canada, Mexico, Turkey, and the
United States. Alamos employs more than 1,700 people and is
committed to the highest standards of sustainable development. The
Company’s shares are traded on the TSX and NYSE under the symbol
“AGI”.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Scott K. Parsons |
Vice President, Investor Relations |
(416) 368-9932 x 5439 |
|
All amounts are in United States dollars, unless otherwise
stated.
The TSX and NYSE have not reviewed and do not accept
responsibility for the adequacy or accuracy of this release.
Cautionary Note
This news release includes certain statements
that constitute forward-looking information within the meaning of
applicable Canadian and U.S. securities laws ("forward-looking
statements"). All statements in this news release, other than
statements of historical fact, which address events, results,
outcomes or developments that Alamos expects to occur are
forward-looking statements. Forward-looking statements are
generally, but not always, identified by the use of forward-looking
terminology such as “continue”, "expect", "anticipate",
"estimate", “guidance” or “potential” or variations of such
words and phrases and similar expressions or statements that
certain actions, events or results "may", "could", "would",
"might" or "will" be taken, occur or be achieved or the negative
connotation of such terms. In particular, this news release
contains forward-looking statements with respect to the anticipated
benefits of the acquisition and cancellation of the Royalty
including associated cost savings.
Alamos cautions readers not to place undue
reliance on the forward-looking statements which are not guarantees
of future events as a number of factors could cause results,
conditions, actions or events to differ materially from the
targets, outlooks, expectations, goals, estimates or intentions
expressed in the forward-looking statements. These factors include,
but are not limited to: fluctuations of the price of gold and
foreign exchange rates (particularly the Canadian dollar and U.S.
dollar); changes to current estimates of mineral reserves and
resources; changes to production estimates (which assume accuracy
of projected ore grade, mining rates, recovery timing and recovery
rate estimates and may be impacted by unscheduled maintenance,
labour and contractor availability and other operating or technical
difficulties); disruptions affecting operations; risks related to
obtaining and maintaining necessary permits, licenses and
authorizations required to carry out planned exploration or
development work; changes in project parameters as plans continue
to be refined;availability of and increased costs associated with
mining inputs and labour; contests over title to properties;
employee and community relations; changes in national and local
government legislation (including tax legislation), controls or
regulations and risk of loss due to sabotage and civil
disturbances.
For a more detailed discussion of such risks and
other factors that may affect the Company's ability to achieve the
expectations set forth in the forward-looking statements contained
in this news release, see the Company’s latest 40-F/Annual
Information Form and MD&A, each under the heading “Risk
Factors”, available on the SEDAR website
at www.sedar.com or on EDGAR at www.sec.gov. The
foregoing should be reviewed in conjunction with the information
found in this news release.
The Company disclaims any intention or
obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise,
except as required by applicable law.
Cautionary Note to U.S. Investors –
Mineral Reserve and Resource Estimates
All Mineral Resource and Reserve estimates
included in this news release or documents referenced in this news
release have been prepared in accordance with Canadian National
Instrument 43-101 - Standards of Disclosure for Mineral Projects
("NI 43-101") and the Canadian Institute of Mining, Metallurgy and
Petroleum (the "CIM") - CIM Definition Standards on Mineral
Resources and Mineral Reserves, adopted by the CIM Council, as
amended (the "CIM Standards"). NI 43-101 is a rule developed by the
Canadian Securities Administrators, which established standards for
all public disclosure an issuer makes of scientific and technical
information concerning mineral projects. The terms "Mineral
Reserve", "Proven Mineral Reserve" and "Probable Mineral Reserve"
are Canadian mining terms as defined in accordance with NI 43-101
and the CIM Standards. These definitions differ materially from the
definitions in the Securities Exchange Commission (the “SEC”)
Industry Guide 7 ("SEC Industry Guide 7") under the United States
Securities Act of 1933, as amended, and the Exchange Act. Under SEC
Industry Guide 7 standards, a "final" or "bankable" feasibility
study is required to report reserves, the three-year historical
average price is used in any reserve or cash flow analysis to
designate reserves and the primary environmental analysis or report
must be filed with the appropriate governmental authority.
The terms "Mineral Resource", "Measured Mineral Resource",
"Indicated Mineral Resource" and "Inferred Mineral Resource" are
defined in and required to be disclosed by NI 43-101 and the CIM
Standards; however, these terms are not defined terms under SEC
Industry Guide 7 and are normally not permitted to be used in
reports and registration statements filed with the SEC. Investors
are cautioned not to assume that all or any part of mineral
deposits in these categories will ever be converted into Mineral
Reserves. "Inferred Mineral Resources" have a great amount of
uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. It cannot be assumed that all
or any part of an Inferred Mineral Resource will ever be upgraded
to a higher category. Under Canadian rules, estimates of Inferred
Mineral Resources may not form the basis of feasibility or
pre-feasibility studies, except in very limited circumstances.
Investors are cautioned not to assume that all or any part of an
Inferred Mineral Resource exists or is economically or legally
mineable. Disclosure of "contained ounces" in a Mineral Resource is
permitted disclosure under Canadian regulations; however, the SEC
normally only permits issuers to report mineralization that does
not constitute "reserves" by SEC standards as in place tonnage and
grade without reference to unit measures.
The SEC has adopted final rules, effective
February 25, 2019, to replace SEC Industry Guide 7 with new mining
disclosure rules under sub-part 1300 of Regulation S-K of the U.S.
Securities Act (the “SEC Modernization Rules”).
The SEC Modernization Rules replace the historical property
disclosure requirements included in SEC Industry Guide 7. As a
result of the adoption of the SEC Modernization Rules, the SEC now
recognizes estimates of “measured mineral resources”, “indicated
mineral resources” and “inferred mineral resources”. In addition,
the SEC has amended its definitions of “proven mineral reserves”
and “probable mineral reserves” to be substantially similar to
international standards. The SEC Modernization Rules will become
mandatory for U.S. reporting companies beginning with the first
fiscal year commencing on or after January 1, 2021.
Table 1: Island Gold Mineral Reserves and
Resources as of December 31, 2019
Island Gold Mineral Reserves and Resources as of December
31, 2019 |
|
Subject Claims |
Total – Island Gold |
% of Total |
|
Tonnes |
Grade |
Ounces |
Tonnes |
Grade |
Ounces |
Ounces |
|
(000's) |
(g/t Au) |
(000's) |
(000's) |
(g/t Au) |
(000's) |
(000's) |
Proven & Probable Mineral Reserves |
2,411 |
11.20 |
868 |
3,643 |
10.37 |
1,215 |
71% |
Measured & Indicated Mineral Resources |
426 |
5.74 |
79 |
879 |
6.51 |
184 |
43% |
Inferred Mineral Resources |
2,649 |
12.42 |
1,058 |
5,392 |
13.26 |
2,298 |
46% |
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