Mulatos District: A Look Into the Future

Alamos Gold is advancing its Mulatos District operations in Sonora, Mexico, with plans to expand production through the Puerto Del Aire (PDA) underground project. The company expects to commence construction in mid-2025 following the approval of an amended environmental permit in January 2025. 

John McCluskey, President and CEO, Alamos Gold, highlighted the company’s growing, diversified profile as an intermediate gold producer with three operating mines in North America: Young-Davidson and Island Gold in Ontario, Canada, and Mulatos in Sonora, Mexico. According to McCluskey, the company is operating at a rate of over 605,000oz/y, with a long-term target of 900,000oz. He also noted the company’s declining cost profile, with all-in-sustaining costs (AISC) currently at US$1,275/oz, aiming to reduce them to US$1,175/oz. “You have to be profitable, or you are not going to last. We operate at a standard where, even if there were a significant drop in metal prices, we would remain profitable,” he added.

Mulatos and PDA Project’s Potential

The PDA project, located adjacent to the existing Mulatos pit, is expected to begin production by mid-2027. According to McCluskey, PDA’s mineral resources stand at 1.2Moz, which are projected to produce an average of 127,000oz/y over the first four years and 104,000oz/y over the current mine life. “This will allow us to continue producing at Mulatos going into 2035, and we hope that as we conduct this work, we will find more that will extend production even further into the future,” he added.

The mine-site AISC is estimated at US$1,003/oz. The project, which will mark a transition from existing open-pit mining to underground mining, will require an initial capital investment of US$165 million to put in a 2,000t/d mill and develop the underground infrastructure, with a capital intensity of US$195/oz, to be funded by the Mulatos District's operations. McCluskey noted that the company was initially concerned about permitting, as a delay could create a gap between the end of open-pit operations and the start of underground mining. “I am very happy to say that in January 2025, the new administration granted the permit to develop the underground mine. That is very important since over 1,000 direct jobs depend on this mining operation,” he noted.

At a gold price of US$1,950/oz, the PDA project is expected to deliver a 46% after-tax internal rate of return (IRR) and a net present value (NPV) of US$269 million. If gold prices reach US$2,500/oz, the after-tax IRR would increase to 73%, with an NPV of US$492 million. The company also sees additional upside potential through incorporating higher-grade ore from the Cerro Pelon deposit.

Alamos Gold reported record free cash flow of US$240 million from the Mulatos mine site in 2024. For 2025, the company forecasts gold production from the Mulatos District between 130,000oz and 140,000oz, with an expected AISC of US$1,025/oz to US$1,075/oz.

The Mulatos District has a long track record of exploration success. Over the past six years, Alamos Gold has added 1.6Moz to its Mineral Reserves and Resources in the region. The PDA deposit remains open in multiple directions, providing further exploration potential. Cerro Pelon also offers growth opportunities, with an initial measured and indicated resource of 104,000oz grading 4.5g/t Au, which is open for further exploration.

Since entering the region, Alamos Gold has invested over US$20 million in community development initiatives. Projects include the construction of an elementary school, medical clinic, community center, and water and electricity infrastructure. The company provides 200 scholarships annually and has donated computers and medical supplies. Alamos Gold has maintained a certification for social responsibility for 17 consecutive years. 

At Mexico Mining Forum 2025 PDAC, McCluskey emphasized the promising future of mining in Mexico, noting the country's rich, untapped mineral resources, which are not found in other parts of the world. "Mexico has mineral resources, oil reserves. But if they are sitting on the ground and nobody finds them, what is it worth? It takes entrepreneurship and it takes thoughtful people. It is a big gamble, but some people will do it, and someone, despite being rare, will have success and will benefit the whole country,” he concluded.