Build a Mine, Generate Cash Flow, Build the Next OneThu, 10/17/2019 - 16:06
Q: What is the company’s strategy to increase its foothold in the country?
A: Minera Alamos was formed by the team that successfully built and operated El Castillo in Durango, which now is run by Argonaut Gold. We are not only the same team, we are also approaching projects exactly the same way. Minera Alamos is a Mexican-focused mining company that has been operating in the region for 12 years. Well executed mining can be very beneficial; we want to create mine operations that support local communities and their surroundings.
We recently put together two assets, Santana in Sonora and La Fortuna in Durango, both now through the major steps in the permitting process. In 2020, we will transition from being a developer to a producer. This is a very exciting transformation for the company as it will be a reminder to the industry that we are mine builders that have executed this activity before with successful operations in Mexico.
Q: After receiving the green light from the government, how has the Santana mine advanced?
A: In June, we received the technical approval for our Santana mine and then in August the environmental approvals from the federal government. This was important for us as it kept our timelines to begin construction of the first mine intact. A company can have all the money it requires to build something, but if it does not have the permits, it cannot do anything. We received tremendous help from the Sonora government and communities to get the permits approved. We hope that this will be good not only for the company but it will also show that Mexico has great potential for investment and is a mining-focused country. Despite the permitting being conducted during an election year, from start to finish the process took a little over 12 months and shines a positive light on permitting in Mexico.
With the permits that we have, we will be able to get the funding package that we need in place to build this mine. We will largely employ local people and almost all of our team is Mexican. The funding package is being set up right now and will be ready around September or October 2019. We look to start construction before the end of 2019. During this time, we also will be focused on expanding the resource size of the project. Most of that exploration is going to be done out of cash flow once the company starts producing.
Q: What are the technical characteristics of the Santana mine and what are the expected results from the project?
A: Based on the initial resources, the mine will kick off with approximately an eight-year mine life. Nevertheless, resource expansion drilling is expected to add many years of additional mining, even with the increasing production rates we expect to deliver in due course. The capital costs to build the mine are estimated at slightly less than CA$10 million.
At this project, we expect annual gold production to start at approximately 30,000 ounces per year. We expect this to grow toward 45,000-50,000 ounces per year within 12 to 18 months as we expand the overall resource through ongoing drilling focused on new targets and the expansion of the two starter open pits.
Q: Once the Santana mine ramps up, what will be Minera Alamos’ strategy for its Fortuna asset?
A: La Fortuna represents a 12-month construction project. In terms of funding, there is a lot of discussion that needs to take place for us to be in a position in which we could switch our construction teams when Santana is finished. We are not going to rest with our first mine because we want to get the second mine built and then look for other opportunities in Mexico. We have had a great experience operating in the country due to its sense of collaboration and its highly knowledgeable people.