Alamos ends $1B fight in Turkey with $470M sale

Canadian miner Alamos Gold (TSX, NYSE: AGI) is selling its Turkish subsidiary to Middle East-based Tumad Madencilik Sanayi, a unit of conglomerate Nurol Holding, ending a billion-dollar legal battle with Ankara.

The $470-million (C$648-million) deal, expected to close this year, hands over the Kirazlı, Ağı Dağı and Çamyurt projects in northwestern Turkey to Tumad. It also sets out that arbitration proceedings launched in 2021 by Alamos’ Netherlands units against Turkey will remain suspended and be permanently discontinued once contractual milestones are met.

Alamos plans to use proceeds to pay down debt and advance its key growth projects, including the stage three-plus expansion at its Island mine in Ontario, the Lynn Lake project in Manitoba, and the Puerto Del Aire project in Mexico.

“These projects could be fully funded by the free cash flow profile in the coming years, but this transaction further strengthens the balance sheet,” BMO Capital Markets mining analyst Brian Quast said in a note on Monday. “We had been previously modeling the Turkish assets at an in-situ value of $54 million. Therefore, compared to our estimates, the additional proceeds from this transaction have increased our corporate net asset value from $8.1 billion to $8.3 billion.”

Free cash flow

Alamos Gold’s free cash flow may hit $584 million in 2026, $409 million in 2027 and $1 billion in 2028, BMO estimates. 

Analysts at Jefferies said investing in its Canadian and Mexican projects would drive Alamos’ production growth by over 80% to 1 million oz. of gold by 2029.

Shares in Alamos Gold gained 1.4% to C$46.27 apiece in Toronto Monday afternoon, valuing the company at C$19.5 billion. 

Alamos entered Turkey in 2010 but faced persistent setbacks. Its most high-profile clash came in 2019, when mining concessions for the Kirazlı gold project, near Mount Ida, expired amid mass protests. Activists accused Alamos of excessive tree cutting and planned cyanide use. The miner clarified at the time that cyanide would be used in the final step of the extraction process and that it had taken measures to ensure there would be no impact in the forested area.

In response, Alamos filed a $1-billion arbitration claim against the Turkish government for what it called “unfair and inequitable treatment.” 

The Kirazlı project was projected to produce 104,000 oz. of gold annually over five years at all-in sustaining costs of $373 per ounce.