Alamos buys Magino gold mine in Ontario for US$325M

Alamos Gold (TSX: AGI; NYSE: AGI) is acquiring Argonaut Gold (TSX: AR) and its past-troubled Magino mine in northern Ontario in an all-share deal valued at US$325 million to become Canada’s third-largest gold producer.

The transaction, scheduled to close in July, is expected to create US$515 million in cost-savings over about two decades of production from Alamos’ Island mine and the neighbouring Magino located northeast of Lake Superior, the companies said Wednesday. Alamos will use Magino’s larger mill and tailings facilities instead of Island’s. Total Alamos output is expected to increase by about a quarter to around 630,000 oz. gold per year.

“The addition of Magino will make Alamos a stronger company and enhance our unique position as a growing intermediate producer, with declining costs, and one of the lowest political risk profiles in the sector,” Alamos president and CEO John McCluskey said during a webcast.

“With respect to our whole phase three expansion and some of the aspects of going into that, the fact that we were just about to practically rebuild a new mill. We just don't have to do that now,” McCluskey said. “There were costs that we were going to incur this year on the tailings lift for our existing tailings facility, about US$20 million in costs. That's just something we don't have to do at this point.”

The acquisition gives Alamos a fourth long-life producing asset in addition to its two mines in Ontario – Young-Davidson and Island – and Mulatos in Mexico. It has the Lynn Lake development project in Manitoba, which received federal environmental approval last year, as well as others in Turkey and Oregon.