Updated expansion study for Alamos Gold’s Island mine ups capex in return for ‘more profitable operation’

Alamos Gold’s (TSX: AGI; NYSE: AGI) Island gold mine is expected to produce 287,000 oz. gold on average every year from 2026 onwards, which is 22% higher than the company’s previous estimate made in 2020 and more than double its 2021 production, according to the miner’s Phase 3+ expansion study.

The latest study is an update to the Phase 3 expansion study released two years ago and outlines a “more profitable and valuable operation” for the company, Alamos said.  

The average mill throughput is expected to increase to 2,400 tonnes per day from 2,000 tonnes per day, while the mine life is estimated to increase to 18 years from 16 in the previous study. The project’s capital expenditure has been pegged at US$756 million, up from US$538 million.

At a 5% discount rate, the phase 3+ study forecasts the project will generate a post-tax net present value of US$2 billion, compared to US$1.5 billion previously. The post-tax internal rate of return is now estimated at 25%, compared to 22%, using a metal price of US$1,850 per oz. gold.

“This is going to be one of the largest and most profitable gold mines in Canada. In terms of scale, it will rank as the seventh largest gold producer in Canada,” John McCluskey, Alamos Gold’s CEO, told The Northern Miner.