Minera Alamos Inc (CVE:MAI) has been on a positive roll of late as it continues in its bid to be a commercial gold producer in Mexico.
Today (Wednesday) it reached a permit milestone at its La Fortuna gold project in Durango state, Mexico, which puts it on a path to receiving a full formal approval to develop the project, which earlier this year was the subject of an "excellent" preliminary economic assessment (PEA).
READ: Minera Alamos releases positive Preliminary Economic Assessment at La Fortuna
The pre-tax NPV (net present value) was put at US$103.8mln (C$134.8mln) at a discount rate of 7.5% and IRR (internal rate of return) of 122%. The report put pre-production capital costs at US$26.9mln (C$34.9mln) with a pre-tax payback period of nine months.
The project is permitted for a 2,000 tpd (tons per day) operation with the PEA based on a starting rate of 1,100 tpd.
In addition, in recent weeks, its Santana project has thrown up decent drill results and the latest release said the potential for a new porphyry system had been confirmed via surface sampling.
It followed the recent success of a Phase 1 drill hole at the property, which hit a broad zone hosting significant gold, silver and copper mineralization.
The group is now forward to further defining this Divisadero target in its upcoming Phase 2 drill program.
So, Minera Alamos has the assets and management to realize its aim of becoming a commercial gold producer in Mexico.
The team, headed up by chief executive Darren Koningen and president Doug Ramshaw, is trying 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).
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 added 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 gold per year.
"I've always been a believer in wanting to build a real company – not just build a stock and a story," a bullish Ramshaw has told Proactive recently, 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 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$33 million is looking to get down to business right away.
Minera is targeting Santana to be in production first, and like El Castillo, at around 25,000 to 30,000 ounces a year, with the free cash flow generated used to advance the next two projects after that.
Next up would be Fortuna in Durango.
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.
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.
Ambitious exploration plans
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 3 million ounces within three to four years and reckons they are already at the 1.2 million 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.
The company also 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 into 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 continuing to shape up nicely for Minera down in Mexico.