Alamos to reacquire Island Gold royalty for $75M

Alamos Gold (TSX: AGI) has announced that it has entered into an agreement to acquire a 3% net smelter return (NSR) royalty on production from four claims at its Island Gold mine in Ontario for $75 million, reducing its company-wide cost guidance for this year by US$13 per ounce.

The royalty, acquired from a private company, covered 71% of the current project reserves and a further 1.1 million oz. of inferred resources.

At the site level, Alamos expects all-in sustaining costs (AISCs) to decrease by US$40 per oz., to US$740 to US$780 per ounce.

As a result of this transaction, the effective NSR on Island Gold reserves will decrease to 2.2%, down from 4.4%, previously.

“The acquisition of the royalty further reduces costs at what is already a low-cost operation while also increasing our exposure to the tremendous exploration upside,” John McCluskey, the company’s president and CEO, said in a press release. “Since we acquired Island Gold in 2017, the mineral reserve and resource base has doubled, with the deposit approaching 4 million oz. across all categories. With the deposit open laterally and down-plunge across several areas of focus, we see excellent potential for this growth to continue at a greatly reduced royalty on future production.”

In January, the company released exploration results from Island Gold, with high-grade intercepts outside the resource limits.

This year, the asset is expected to contribute 130,000 oz. to 145,000 oz., out of a total of 425,000 oz. to 465,000 oz. on a company-wide basis.