Vancouver — In the late 1990s,
The large deposit lies on the Salamandra property in the Sierra Madre mountain range, 220 km east of Hermosillo in Sinaloa state. The former owners envisioned a 17,500-tonne-per-day open-pit mine. Capital costs were projected to be US$120 million, with operating costs for the heap-leach operation pegged at US$5 per processed tonne at a gold recovery rate of 66%. The 1999 study projected only a marginal profit for a large, bulk-tonnage, heap-leach operation at gold prices below US$325 per oz.
The majors subsequently sold the project to National Gold in March 2001 for $10.5 million, due over four years. In August of that year, the terms of the purchase agreement were revised; as a result, all but the $250,000 already paid was deferred until 2008 and 2010 unless the gold price rises above US$300 and US$325 per oz., respectively.
Finding it difficult to raise the necessary financing to advance the project, National Gold optioned half of Salamandra to Alamos Minerals in October 2001; in return, Alamos agreed to spend $2.4 million on exploration and make certain payments once production is reached.
The two junior companies decided to merge in October 2002. Under the terms of that agreement, shareholders of Alamos received one share of the new company, Alamos Gold, for every two shares of Alamos held, and shareholders of National received one share of Alamos Gold for every 2.3 shares of National held. The merger closed in late February 2003.
Back in September 2002, the partners tabled a scoping study, conducted by Denver-based Pincock Allen & Holt, which indicates that the higher-grade core of the deposit, dubbed the Estrella zone, could economically produce 100,000 oz. gold annually over 12 years.
The plan envisions total production of 1.2 million oz. gold at an average cash operating cost of US$169 per oz., with initial capital costs amounting to US$34 per oz. At US$300 per oz. gold, capital costs could be recovered over 2.8-4.3 years. Total initial capital costs ring in at US$40.8 million, including US$3 million for working capital.
The scoping study takes into account a development plan for mining the Estrella zone selectively, followed by heap leaching using 3-stage crushing. Gold recoveries range from 55% for sulphide-rich material to more than 90% for oxides, averaging out at 67% over the life of the mine.
Some 2.7 million tonnes of ore would be processed per year at a stripping ratio of 0.83-to-1.
At US$300 per oz. gold, the proposed Estrella pit contains a measured and indicated resource of 32 million tonnes running 1.77 grams gold. At last count, the total Mulatos deposit contained a measured resource of 43.9 million tonnes grading 1.66 grams gold, plus an indicated resource of 13.1 million tonnes at 1.4 grams gold and a inferred portion of 12.3 million tonnes at 1.37 grams gold.
Over the next nine months, Alamos intends to improve the economics of developing the Estrella zone by studying the impact of finer crushing to improve recovery, looking at selective mining and processing of higher grade ores, and altering the mine plan to increase ore grade and defer waste. The junior will also reconfigure the site layout to reduce haulage costs, consolidate facilities to lower capital cost, investigate reusable heap-leach pads to lower pad cost, and decrease reagent and closure cost. The end result will be an independent feasibility study to support bank financing.
Looking to expand the overall resource base, the company has approved a $500,000 exploration program designed to test seven additional large areas of intense acid sulfate alteration on the property. Five of the targets have either historic gold production or significant drill intercepts. The mineralization lies in the same stratigraphic horizon, and appears to be part of a 30-by-15 km alteration package.
Alamos is also addressing the concerns of the local group known as Ejido Mulatos and other inhabitants of the village of Mulatos. In early September, the group launched legal action in Mexico concerning the amount allegedly owed to them by National Gold under a 1995 surface rights lease agreement over the property. The Ejido Mulatos is a group formed to administrate the common agricultural land in Mexico. It claims it is owed US$337,000 plus interest and costs for 2002 and is contesting the validity of the agreement.
Alamos claims the action is without cause because the surface agreement allows for the reduction of the amount of land to be utilized under the lease. In early 2002, the size of the acreage under lease was reduced and the corresponding annual lease payment due to the Ejido was slashed to US$51,000 from US$330,000.
In an attempt to smooth over the dispute, the company has hired a local coordinator to improve communications.
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