Alamos ramps up Mulatos production (October 17, 2005)

Having celebrated the first gold pour at its Mulatos gold mine in Mexico in July, Alamos Gold (AGI-T) is now pushing to achieve commercial production early in 2006 and explore neighbouring targets.

The open-pit mine is located 220 km east of Hermosillo in northwestern Mexico’s Sonora state, about 300 km south of the U.S. border.

Production is coming first from the Estrella pit, which hosts reserves of 36.4 million tonnes grading 1.63 grams gold per tonne, or about 1.9 million contained ounces. The deposit has three ore types — oxides, mixed oxides and sulphides, and sulphides — with overall recoveries expected to average 73%.

The Estrella zone is only one portion of the Mulatos deposit, which hosts a string of contiguous, near-surface zones with resources totalling 62.2 million grading 1.5 grams gold at a 0.6-gram lower cutoff.

The capital expense to build a heap-leach mine amounted to US$72 million, as outlined in a 2004 feasibility study by M3 Engineering. The funds were raised via a US$24-million equity financing in November 2004 and a US$50-million convertible-debenture placement eight months ago.

Mulatos’ production process is straightforward, with a 3-stage conventional crushing plant, a conveyor-and-stacking system, a heap-leaching facility and a carbon-in-column plant.

Mining rates are due to reach 10,000 tonnes of ore per day by the end of this year, which should allow for commercial production to be achieved in the first quarter of 2006.

At full steam, the mine will be producing 150,000 oz. gold annually for 10.5 years. Cash costs are expected to average US$178 per oz.

The Toronto-based junior acquired 100% of the project in 2003, after previous operators had outlined a deposit containing about 2 million oz. gold.

Alamos Gold owns 100% of the Mulatos mine, as well as 21.3 sq. km of concessions nearby.

The company is also carrying out advanced exploration programs aimed at expanding tonnage that could be mined by open-pit methods at the nearby El Salto, Mina Vieja and Escondida deposits. Alamos expects to release a new resource estimate for the property soon.

In May, workers began developing an underground drift in the Escondida-to-El-Victor portion of the Mulatos property, which will allow for exploration and development drilling from underground.