Minera Alamos (CVE:MAI) has the assets and management to realise its aim of becoming a commercial gold producer in Mexico.
The team, headed up by chief executive Darren Koningen and president Doug Ramshaw, wants to replicate the success of junior Castle Gold, which advanced its El Castillo mine in Durango state from generating around 30,000 ounces a year to 75,000 ounces of the yellow metal, before the group was sold nine years ago for C$130mln (and El Castillo is now generating around 100,000 oz annually).
The Minera Alamos link
How does all this link with Minera Alamos?
Well, Koningen was vice president of operations at Castle Gold and worked alongside Chester Miller, a huge figure in mining and the pioneer of heap leaching, to advance El Castillo.
The union adds Corex's Santana gold project, which is potentially within less than 12 months of commercial production to Minera's La Fortuna project, the Guadelupe De Los Reyes project and the Los Verdes property (which, significantly lies directly north of Santana and thus consolidates the land position).
The aim is to have three gold mines up and running in around as many years, potentially generating 150,000 ounces of year gold.
"I've always been a believer in wanting to build a real company – not just build a stock and a story," a bullish Ramshaw tells Proactive, adding that the key metric to focus on is a strong bottom line.
He believes investors are tired of the continual cycle of some companies returning again and again to equity markets to get cash every time they want to advance any aspect of their business.
Slow, steady growth
Minera's aim to is to build out the quality assets it has at low cost and to grow the business steadily.
"If you build a business that is focusing on achieving bottom line profitability through slow, steady growth – walking before it runs – you can protect yourself and your shareholders..," says Ramshaw.
And the combined group, which now has a market cap of around C$45mln is looking to get down to business right away.
Minera is targeting Santana to be in production first, and like El Castillo, at around 25 to 30,000 ounces a year, with the free cashflow generated used to advance the next two projects after that.
Permits expected by third quarter
Ramshaw explains how, all being well, permits for commercial mining at Santana are expected to be received by the third quarter, with construction starting in the fourth quarter this year. First commercial gold production could theoretically be as early as the first quarter of 2019.
Santana was recently boosted when positive results were returned from bulk heap-leach testing.
The work showed the site could be a "robust commercial heap leaching operation". Capital expenditure needed to get Santana into production is expected to be small at C$7-C$9mln.
Next up would be Fortuna in Durango, explains Ramshaw, where a PEA (preliminary economic assessment) is expected in the coming weeks and around 40,000 ounces per year output is targeted.
Capex is expected to be a little more as it likely to be a conventional milling operation rather than the ultra-cheap heap leach method.
Thirdly, Guadelupe De Los Reyes is a gold and silver project covering 6,000 hectares in the Mexican state of Sinaloa. Ramshaw explains this is also a potential heap leach operation, which could start generating at around 40,000 ounces.
Aim is 150,000 ounces a year production profile
He says that Minera is aiming for a production base of around 100,000 ounces a year from its assets in three years, potentially adding a further 50,000 ounces from scaling up via exploration/expansions, or further acquisition of cheap assets in the current bear gold market.
The firm's exploration goals, to run alongside its production targets, are also ambitious. Ramshaw says the group is looking ultimately to prove up resources of around 3mln ounces within three to four years and reckons they are already at the 1.2mln ounce mark. All its assets will have exploration on them this year.
He says this two-pronged strategy is important; that the firm is a developer/ producer but also an explorer, as there are still swathes of the investor market, which are "more interested in drill results than bottom line profitability".
Significant too, at Minera, is that Santana and Guadelupe are heap leach projects, about the most low-cost mining method there is. In layman's terms, crushed ore is heaped onto a pad and cyanide dripped over it, and the gold is "leached out' in liquid form to be sold in concentrate.
"It's about cutting costs, not corners," says Ramshaw, who points to Minera director Chester Millar, who founded the process and has 50 years' experience of building majors up from grass roots.
Team bench strength
Ramshaw is generally upbeat on the future gold price, but notes that the robust Minera assets should make money even at US$1,100 an ounce.
He also highlights that the grades at Guadelupe De Los Reyes are 1.5 to 2.5 times' those seen at the deposits of the Great Basin of the USA, which only adds more to its attractiveness.
Financing looks strong
In terms of financing, Minera Alamos is in good shape with around C$5.5mln in the bank. Ramshaw says this won't be quite enough to get Santana up and running but it's not far off.
The company benefits from having Osisko Gold Royalties backing it.
Osisko has rights for 19.9% of share ownership and one option to fill the financing shortfall at Santana could be a similar but smaller royalty transaction to that which Osisko has already entered in to with Minera at the La Fortuna project.
And once the group has an asset throwing off cash, funding further development will be easier.
So, it's all shaping up nicely for Minera down in Mexico and there should be plenty of newsflow over the remainder of 2018. In a pressured mining environment, and with gold potentially about to turn, it could well be a stock to watch.