High-grade drill results from Alamos Gold’s (TSX: AGI; NYSE: AGI) Puerto Del Aire (PDA) and Cerro Pelon deposits signal future growth in Mexico’s Mulatos district.
Results from both targets expanded high-grade gold mineralization, holding potential for increased reserves and an extended mine life beyond the current 2030 reserve horizon, the company reported on Wednesday. Alamos plans to release a development plan for PDA soon.
“Our PDA development plan will outline another high-return project that will nearly triple the current mine life of the Mulatos district,” company president and CEO John McCluskey said in a release. “The addition of a mill to process higher-grade sulphide mineralization will also create new opportunities within the district, including at Cerro Pelon, where we expect to declare an initial resource in early 2025.”
Alamos’s expansion at PDA and Cerro Pelon comes as global demand for gold rises amid economic uncertainty. With high-grade discoveries and plans to extend Mulatos’ mine life, Alamos is poised to boost production beyond its current 160,000-170,000 oz. guidance this year. This positions the company to capitalize on strong gold prices and contribute to global supply as demand for safe-haven assets grows.
High-grade hits
Part of a 55,000-metre drilling program in the district this year, results from PDA extended high-grade mineralization across several zones, including GAP-Victor, PDA3, and the PDA Extension. Highlights include 5.43 grams gold tonne over 18 metres from 74 metres depth in the GAP-Victor zone and 36.2 grams gold over 0.9 metre from 297 metres depth in the PDA Extension.
Cerro Pelon, located 9 km from PDA, also returned strong results with new high-grade feeder structures discovered below the old oxide deposit. These zones, measuring 45-125 metres wide and up to 170 metres deep, returned 5.5 grams gold over 27.9 metres and 12.47 grams gold (9.41 grams gold cut to cap higher-grade samples at 40 grams gold) over 6.5 metres.
The company aims to publish its first underground resource estimate for Cerro Pelon by early next year.
Growth strategy on track
The new drill results follow a 33% increase in proven and probable reserves to 5.4 million tonnes grading 5.6 grams gold per tonne for 969,000 oz. of metal at PDA in 2023. Mulatos currently hosts proven and probable reserves of 16.7 million tonnes at 2.7 grams gold for 1.5 million oz. of metal.
PDA’s location next to the Mulatos pit allows it to benefit from existing infrastructure, reducing development costs, Alamos said.
These results are part of Alamos’ broader growth strategy through high-return projects. The company has budgeted US$19 million for exploration in the Mulatos district in 2024.
Alamos expects to grow gold output from 485,000-525,000 oz. this year to over 900,000 oz. by 2026 by adding PDA and the Lynn Lake project in northern Manitoba.
Early last month, Alamos shares surged after the company reported record second-quarter production of 139,100 oz. gold, exceeding its target and achieving a 300% increase in free cash flow to US$106.9 million.
The company’s Toronto-listed shares last traded at $24.75, up 47% over the past 12 months, having touched $14.80 and $27.57. It has a market capitalization of $10.4 billion.
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