Minera Alamos (MAI) - Low Cost Experienced Miner Builders. That simple

Minera Alamos is a Gold development company aiming to become a Gold producing company in 2021. The Company has 3 good-quality Mexican assets, including the 100%-owned Santana open-pit, heap-leach development project that is currently under construction. They also have the newly acquired 100%-owned Cerro de Oro oxide Gold project that has considerable past drilling and metallurgical work completed and could enter the permitting process rapidly. The La Fortuna open pit Gold project (100%-owned) has an extremely robust and positive preliminary economic assessment (PEA) completed and the main Federal permits in hand. 

Minera Alamos is a Gold-focused, Mexican based company which is built around its operating team that has brought 3 mines into production in Mexico over the last 13 years. If you are a fundamentalist investor that should lend you a lot of comfort.

We caught up with Doug Ramshaw, President of Gold Developer, Minera Alamos to find out what the company has been up to since we last spoke to them in December and to see how the 3 projects are advancing.

Company Overview

Minera Alamos is currently in the process of completing the construction phase of its first of what will be 3 mines in Mexico at Santana, which will cost between CAD$10M-$12M in total. The start of construction was delayed until June ‘20 due to Covid shutdowns in Mexico, but should be completed by the end of March, looking at first Gold production by end Q2/21.

Timing for Production at Santana: Process & Delays

Santana is a heap-leap carbon plant and the material will start arriving at the pads in early April so that the leach cycle can start. Minera Alamos is not building an ADR as they're shipping loaded carbon, so are building a very basic carbon plant aiming for first Gold towards the end of Q2/21. The first Gold production will be modest, but that will ramp up over the course of the year towards 2022, which will be the first year that will give formal production guidance. The hope that they're spinning off free cash from the operation by Q4/21.

Mining in Mexico: Culture, Permits, & Importance of the Social Licence

Covid restrictions have impeded government officials and their ability to travel for site inspections during the construction which has delayed construction at Santana but didn't actually stop development. The permitting process in country didn't change for Minera Alamos despite other headlines coming out of Mexico, which were company specific, rather than industry wide.

Minera Alamos has managed to move from discovery through to production with relative ease. At Cerro de Oro, their 2nd asset, they expect to have surface rights agreements in the coming weeks that will allow them to submit federal permit applications and are anticipating being in a position to start construction maybe as early as Q1/22 of next year. Cerro de Oro was acquired in August of 2020 and could be in production a little over 2 years later from then. There are very few jurisdictions in the world where you could look at a timeline from picking up a project to having it in production around the 2 year timescale. Mexico is one of them.

The cultural component is important to this process too and the Minera Alamos team is largely Mexican and highly regarded within the community as they understand the culture. Of course they are also providing employment and the tax receipts, but they are cognisant that they are guests in the country and understand that they need to behave accordingly.   

Cerro De Oro's Resource Estimate: Meeting Expectations? 

Cerro De Oro has a conservative resource estimate, using high mining costs and a low Gold price to prove profitability in any Gold environment. Cerro de Oro has a nice starting resource base to work from which will get bigger towards 100,000oz a year going forward. There will be a dual track of news this year from production at Santana and alongside the development of Cerro de Oro.

Financing it All: Cash Flow & Future Raises

Minera Alamos started the year with about CAD$18M in cash and zero debt plus they had about CAD$3M of Prime Mining stock. They are currently at around CAD$16M in cash plus the CAD$3M in stock which is more than enough capital to get Santana finished and up and running and with the extra capital, they will be advancing Cerro de Oro. Once Santana is in production, they will use the free cash to start construction at Cerro de Oro. There is no need for the company to go back to the market for any more fundraising. 

Progress at La Fortuna 

Fortuna, their 3rd asset, has been delayed a couple of months following the delay in Santana due to Covid. Minera Alamos needs to decide whether to build Cerro de Oro and Fortuna at the same time with an overlap in the build or whether the plan of sequential building whilst establishing a solid foundation in the company is more sensible. Many junior mining companies have tried to do too much too quickly which is where they make mistakes. 

The plan to have Santana in operation in 2021, Cerro de Oro in operation towards the end of 2022 and Fortuna in operation in 2024 might be more sensible as if they move too quickly, they could run into problems. Work will continue at Fortuna throughout the year to expand the resource and add value to the project with the aim to start Fortuna with a 7-8 year mine life as opposed to a 5 year life.

Business Model: Benefits of the Low CapEx Heap Leach Approach

The strategy for Minera Alamos is to develop very low capex, heap leach assets, all of which can be profitable even in a low Gold environment. The team has experience in doing it before in Mexico, so will follow the same formula. Although heap leach isn't exactly glamorous, it has made some of the world's biggest mining companies and it's a perfect low capital build. Minera Alamos will continue to look for projects like these because they represent a tremendous opportunity, and all current projects work in a lower gold price environment. In a high price Gold environment, the difference between how they have modelled it and what they're selling it for should be felt in the balance sheet and they seem pleased by that.

It was good to catch up with Minera Alamos, and we are looking forward to next quarter to see what they come up with and what they are talking to the market about. We look forward to lots of news flow from them this year on Santana as it heads towards production and Cerro de Oro as the resources expansion continues.

To find out more, go to Minera Alamos' Website.