Alamos makes headway in Turkey

Alamos Gold (AGI-T) has outlined a positive mining scenario at its Turkish gold assets, Kirazli  and Agi Dagi, and revealed an inferred resource for its Camyurt project, also in Turkey’s northwest.

A new prefeasibility study shows Kirazli  and Agi Dagi could produce an average of 166,000 oz. gold and 545,000 oz. silver annually, over a combined nine-year life.

The study predicts first gold production at Kirazli in 2014, followed by Agi Dagi in 2016.
Kirazli and Agi Dagi, which sit 19 km apart in Canakkale province on the Biga Peninsula, are envisioned as 15,000- and 30,000-tonne-per-day operations, respectively.  

Alamos expects to obtain final environmental impact assessment approval for Kirazli in early 2013 and for Agi Dagi by mid-2013, instead of in late 2012 due to the throughput rates being higher than projected in a March 2010 scoping study,

Despite the adjustment, the company says the first anticipated gold pour at Kirazli remains unchanged at late 2014.

But Agi Dagi’s production timeline has been pushed from 2015 to late 2016, Haywood Securities  analyst Kerry Smith notes. Agi Dagi’s previous anticipated throughput was 15,000 tonnes per day, while Kirazli’s was 10,000 tonnes per day.

“This bigger design comes at an increased cost — US$424-million total capital expenditure (capex), compared to our US$335-million estimate — although a large proportion of the increase is attributable to the higher throughput,” he writes in a June 28 note.

Of the US$424-million capex, US$146 million will go towards building Kirazli and US$278 million will go towards Agi Dagi.

BMO Capital Markets’ analyst David Haughton writes in a note that the pre-production and sustaining capital costs of US$424 million and US$70 million, respectively, were below his forecast of US$550 million and US$20 million, which included Camyurt.

Mine life is pegged at five years at Kirazli and seven years at Agi Dagi. Over this time, the two should produce 1.5 million oz. gold and 4.9 million oz. silver at total cash costs, net of silver credits, of US$579 per oz.

The study calculates a post-tax net present value of US$276 million, and a 22.3% internal rate of return using a 5% discount rate, and gold price of US$1,239 per oz.

Smith says the prefeasibility highlights strong returns for the projects, which have minimal execution risk once permitted.
Along with the study, Alamos announced an initial resource estimate at Camyurt containing 640,000 oz. gold and 3.8 million oz. silver in inferred, from 24.6 million tonnes grading 0.81 gram gold and 4.77 grams silver per tonne.

“Camyurt is only 3 km from Agi Dagi and would require very little incremental capital to develop, as this project would be processed at Agi Dagi with either ore trucking or a conveyor to move ore to the plant,” Smith explains.

BMO’s Haughton suggests that the company could fund its development projects using cash-on-hand and cash from operations.

At the end of March Alamos had cash and short-term investments of US$263 million, and no debt.

For the year, Alamos forecasts gold production of 200,000 to 220,000 oz. from its flagship ­Mulatos mine in Mexico.

Mulatos is expected to remain the company’s main asset after ­developing its Turkish assets.

On the prefeasibility and resource news, the junior fell 9% to $14.52 on 1.4 million shares traded.