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Alamos Gold inks deal to become Dubreuilville’s gold kingpin

Toronto miner to combine its Island Gold operation with Argonaut’s Magino pit
argonaut-gold-magino-mine-construction-oct-2022
Magino Mine mill (Argonaut Gold photo)

Two gold mines in the Dubreuilville area will soon be operating under the same flag.

In what’s being described as a “friendly acquisition,” Alamos Gold is consolidating mining operations on the Michipicoten Green Belt by picking up Argonaut Gold and its Magino Mine. 

The two Toronto companies have entered into a definitive agreement whereby Alamos will acquire all of the issued and outstanding shares of Argonaut. The transaction is expected to close in July.

Under the agreement, each Argonaut common shares outstanding will be exchanged for 0.0185 Alamos common shares and one share of a new spinoff company of Argonaut’s remaining mining assets in the U.S. and Mexico. 

The all-share transaction is valued at US$325 million.

The acquisition is expected to close in July. Alamos and Argonaut shareholders will own approximately 95 per cent and 5 per cent of this combined company, respectively. Argonaut shareholders will vote on the deal in June.

Alamos and Argonaut are next-door neighbours in the Dubreuilville gold belt, their respective mines only 300 metres apart.

This new arrangement will create Canada’s third largest gold mining company. It will be Alamos’ third Northern Ontario mine, along with Young-Davidson Mine in Matachewan.

Island Gold is one of Canada’s most prolific and productive mines. Magino, still a fledgling operation, has been sputtering to reach its operating and production milestones since entering commercial production last November.

Alamos entered the district seven years ago when it acquired Island Gold from Richmont Mines in 2017.

By integrating Magino, an open-pit operation, with Island Gold’s underground mine into one larger complex with shared infrastructure, Alamos said it expects to unlock immediate and long-term value worth approximately US$515 million.

By using Magino’s new mill and tailings facility, it means Island Gold will not have to expand its own mill and tailings infrastructure, a capital savings of US$140 million.

The Magino mill is only a two-kilometre haul distance from the Island Gold shaft.

Adding Magino to the mix will increase Alamos' combined gold production to more than 600,000 ounces per year, with longer term production potential of over 900,000 ounces per year. 

In 2024, the combined gold production of Magino and Island Gold is expected to reach 280,000 ounces. That will later jump to more than 400,000 ounces by 2026 when a mine expansion at Island Gold concludes. 

Both companies believe the Dubreuilville area has so much gold upside that there will production there for decades to come.

The two deposits contain 4.1 million ounces in mineral reserves and total reserves and resources of 11.5 million ounces, providing a mine life of more than 19 years. Both operations have significant exploration upside to keep mining beyond 20 years.

Argonaut's remaining mining assets in the U.S. and Mexico will be spun out to its existing shareholders into a proposed junior gold miner.

In a statement, John McCluskey, Alamos' president-CEO, called the acquisition of Magino a “logical and attractive transaction for both companies.”

“The combination of the adjacent Island Gold and Magino mines will immediately unlock tremendous value, with significant longer-term upside through further optimizations of the combined operation, and ongoing exploration success," McCluskey said. "Both assets complement each other well with large mineral reserve and resource bases, long mine lives, and existing infrastructure that can support the bright future for the larger combined operation."

Argonaut president-CEO Richard Young said they’re turning Magino over to good hands.

"After considering a broad range of alternatives, we believe this transaction provides a unique opportunity to place Magino in the hands of a well-capitalized and well-run company, who will be able to realize significant synergies given the proximity of the adjacent Island Gold Mine," Young said.

“We believe with adequate capital and an optimal expansion at Magino, the mine will deliver significant value to all stakeholders. We are grateful to our team at Magino for their significant contribution and hard work during mine and mill ramp-up.”