Minera Alamos (TSXV: MA; OTCQX: MAIFF) has bolstered its production potential with the acquisition of Sabre Gold Mines (TSX: SGLD; QTCQB: SGLDF) and its advanced-stage Copperstone gold development project in Arizona.
The acquisition, said Minera Alamos, would transform the company into a diversified North American gold producer beyond its existing Mexican operations led by the Santana gold mine in Sonora. The addition of Copperstone could add approximately 40,000 oz. of annual gold production, based on the project’s preliminary economic assessment (PEA) from last year.
The economics are based on a total resource estimate of 1.2 million tonnes grading 7.74 g/t gold (300,000 contained oz.) in the measured and indicated category and 970,000 tonnes grading 6.30 g/t gold (197,000 contained oz.) in the inferred category.
The 2023 PEA represents a restart plan for the past-producing mine at Copperstone that produced a reported 514,000 oz. of gold between 1987 and 1993 from open pit mining and later had a brief period of underground mining. Since all facilities envisioned in the PEA are located in “brownfields” locations, the project’s water and surface rights have in place for years, and the mine is fully permitted for restart.
The PEA gave Copperstone an after-tax net present value of US$89.3 million (using a 5% discount rate and US$2,000 gold price), an internal rate of return of 71.1% and a payback period of 1.3 years. The initial mine life is estimated at 5.7 years, and initial capital at US$36.3 million.
The reduced upfront capital is a result of the existing site infrastructure that had been installed from previous mining activities at Copperstone. According to Minera Alamos, a significant portion of the on-site infrastructure is in good repair and is available for the restart of site operations.
“The Copperstone project is an ideal addition to our portfolio of low-capex, late-stage development projects. The site has significant infrastructure and permits in place which will allow our technical group to quickly advance the project into production,” stated Darren Koningen, CEO of Mineral Alamos.
Acquisition terms
To acquire Sabre, Minera Alamos will issue approximately 76.5 million common shares to Sabre shareholders, representing a share exchange ratio of 0.693 to 1. Sabre will also settle certain debts with creditors by issuing shares at a 15% discount.
Upon completion of these transactions, existing Minera Alamos and Sabre shareholders will own 86% and 14% of the combined company, respectively.
Shares in Sabre Gold Mines nearly doubled following the announcement, up from $0.12 at Friday’s market close to a 52-week high of $0.23 on Monday morning. The gold junior has a market capitalization of $17.6 million.
Minera Alamos’ shares fell 2.6% to $0.38 apiece by 11:50 a.m. in Toronto, for a market capitalization of $174.8 million.
Bolstered portfolio
Minera Alamos estimates that the addition of Sabre’s Copperstone project will increase its total gold resource inventory by 35% to almost 1.9 million oz., including a 60% increase in estimated measured and indicated resources. The acquisition cost is estimated at only US$43/oz.
The acquisition adds another potential low-capex mine on top of the company’s Santana project, which entered production in 2021 and is currently going through the start-up of operations at the new Nicho Main deposit. Its Cerro de Oro oxide gold project in northern Zacatecas also has considerable past drilling, and the proposed mining project is currently being guided through the permitting process. The company also owns the La Fortuna open pit gold project in Durango, which has its main federal permits in place.
Minera Alamos intends to build out its Mexican assets in phases, with an eye on becoming a 150,000 oz./year gold producer. The addition of Copperstone, the company says, provides visibility to a further visibility to that goal.
The new project is expected to have a relatively rapid construction schedule that is currently anticipated at approximately 12 months. Minera Alamos said it is already in the process of optimizing new engineering design/plans for the project construction and is expanding its technical group to manage the increased activities.
