The Wawa-area mine is touted by Alamos as a high-grade, low-cost producer with plenty of upside to add ounces over the next few years.
“We’re adding a high-quality asset in a great jurisdiction,” said Alamos Gold president-CEO John McCluskey in a Sept. 11 conference calls with analysts.
If the transaction is finalized this fall, he places Island Gold as a top-three operating asset that would propel Alamos among the top 10 North American gold miners, capable of producing more than 500,000 ounces a year.
“The addition of Island Gold elevates Alamos to a new level, solidifying its position as a leading intermediate gold producer,” said McCluskey in his remarks.
Shareholder meetings at both companies to approve the transaction will take place in mid-November.
Island Gold is located 83 kilometres northeast of Wawa and 15 kilometres from Dubreuilville.
Commercial production began in October 2007 with 430,000 ounces produced in the decade since.
Alamos operates the Young Davidson mine near Matachewan. It’s a six-hour drive between the two northeastern Ontario operations.
Alamos also owns the Mulatos and El Chanate mines in Mexico and has several gold prospects in the project pipeline in Canada, U.S., Mexico and Turkey, including its Lynn Lake gold deposit in Manitoba which is at the feasibility study stage.
The deal only involves the Island Gold Mine. Richmont announced it’s selling off its Quebec properties, including its Beaufor Mine.
Island Gold is considered to have significant exploration potential. Less than 15 per cent of the entire 7,700-hectare land package has been drilled off.
A mine and mill expansion is underway with ore production is scheduled to increase from 930 tonnes per day to 1,100 tonnes over the next few years.
Exploration along strike and at depth will add more reserves to the underground ramp and stope operation.
McCluskey explained the courtship process with Richmont Mines president Renaud Adams began in 2015. He had long admired the “phenomenal job” Adams was doing at Island Gold.
“This operation is just a show piece. It’s beautifully run,” he said.
The due diligence process went smoothly and there was an overall level of comfort between the two companies. The entire Richmont board of directors even visited the Young Davidson Mine last summer.
Alamos’ operating and exploration teams came back from Island Gold “extremely impressed by what they saw,” said McCluskey.
“There’s not a hitch in any of this and that’s how this deal came together as quickly as it did.”
Adams stated he was proud of his team’s accomplishments at Island Gold over the last three years “in taking it from a small underground mine to one of the lowest cost operations in Canada, and even in the Americas.”
Alamos, he said, is the right partner to unlock Island Gold’s potential.
Since 2014, production has doubled with costs declining by 40 per cent, a trend Adams expects to continue.
What Adams position or role will be in the newly enlarged company has not yet been defined.
During the conference call, the question alone prompted laughter from the management of the two companies.
McCluskey responded that it would be silly to think Adams would not be involved in some way but he cautioned the deal is still subject to shareholder approval.
“He’s done a great job at developing Island Gold. He brings continuity if he were to play an active role within Alamos. But the point of fact is we’ve got some work to do between now and closing, and we want to cover that ground before that becomes a topic of conversation.”