The Island Gold Mine outside Dubreuilville is poised to become one of Canada’s most prolific and profitable mines for decades to come.
Over the next four years, Alamos Gold's underground operation will get larger in scale, mine at a higher rate, deliver more ounces, and become one of the industry's lowest cost producers over a longer mine life.
“This is going to be an absolute juggernaut of an asset for Alamos in the years to come,” said company president-CEO John McCluskey in a June 29 presentation to industry analysts.
McCluskey and senior management discussed the new mine plan, released this week, for the fast-growing operation now undergoing its third wave of expansion since Alamos bought it off Richmont in 2017.
Over the next four years, Alamos will be pouring US$756 million into the development, up from the US$538 million price tag of two years ago.
Making the mine a bigger and lower cost operation will make it more efficient and productive, the company said.
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Alamos elected to update its 2020 expansion plans mainly because the Toronto mining company keeps finding more high-grade gold on its 15,000-hectare property, 83 kilometres northeast of Wawa.
Once the expansion is complete in 2026, Island Gold’s mining rate will more than double, moving 1,250 tonnes of ore per day to 2,400 tonnes.
It will become Canada’s seventh largest gold mine by annual production at 287,000 ounces, up from the 140,000 to 150,000 ounces currently produced.
No stranger to the exploration drill bit, the aggressive exploration programs that Alamos has been running shows that Island Gold's orebody is growing to the east and at depth, where the gold grades get higher.
The deposit has tripled in size over the last four years. From the initial 1.8 million ounces in gold reserves and resources at the time of 2017 acquisition, Island Gold now boasts 5.1 million ounces stemming from aggressive exploration drilling programs.
These new resources are within easy reach of current mining operations and close to where it’s sinking a new 1,379-metre shaft, necessitating the need to update their plans.
More gold discoveries have tacked on an additional four years of mine life, now extended to 18 years. And with more open-ended gold potential on the property, the operation appears to have the legs to run for years to come.
Already one of the Canada’s highest grade producers, average gold grades have jumped in that span from 8.7 grams per tonne (g/t) to north of 10 g/t.
With an All-in Sustaining Cost at $576 per ounce, Island Gold will become Canada’s lowest cost producer.
In terms of profitability, it will be in the top five once the expansion is complete.
“By building a bigger project we make this a more valuable operation in virtually every way,” said CFO Jamie Porter.
Increasing gold production from 3.1 million ounces to 4.5 million ounces over the mine's life will generate more than US$7.2 billion in revenue.
The low-cost nature of Island Gold makes it a very profitable operation, he said, as Island Gold will generate $2.8 billion in free cash flow.
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Since its acquisition, the mine has generated over $200 million in free cash, allowing the company to self-finance this expansion.
“Island Gold, we’re quite sure, is going to get considerably bigger,” said McCluskey, who described the expansion study numbers as “staggering.”
Over his 30-year mining career, McCluskey offered how rare it is to find a high-grade, low-cost gold operation with an 18-year mine life.
The expansion involves shifting away from a ramp to a shaft operation. It means fewer diesel trucks, dropping the fleet from 18 to five as the mine deepens, representing a 35 per cent reduction in their carbon footprint.
The shaft will bottom out at 1,373 metres but has the capacity to reach 2,000 metres, or two kilometres down.
Increased production will mean an expanded processing mill and a new paste backfill plant.
The Alamos crew appeared confident and comfortable on where they stand in their construction preparations.
Most of the earthwork activities around the site are complete with the tailings dam already expanded.
The spot where the new 59-metre steel headframe and shaft will go has been cleared off. All the hoist equipment has been ordered and a contractor selected.
Pre-shaft sinking work begins in August with the actual shaft sinking starting in the next year’s third quarter. First production from the shaft starts in the first quarter of 2026.
A new administration building is up, as is a new warehouse and a modern 262-room bunkhouse, kitchen and recreation facility to accommodate the workforce. Below ground, a new maintenance shop has been installed in order to put mechanics closer to the activity.
To better manage its capital spending, the company said building out Island Gold means delaying development of their Lynn Lake mine project in northern Manitoba, the next mine in the project pipeline.
Island Gold, which began production in 2007, is one of three mines in the Alamos fold.
Alamos started in 2014 with a single gold mine, Mulatos, in Mexico. Political risk and opportunities during a market downturn factored into their decision to look for undervalued Canadian operations with good upside.
They acquired both Island Gold and the Young-Davidson Mine, outside Matachewan, in 2017. Improvements were recently made at Young-Davidson in order to scale annual production up to 200,000 ounces.
Island Gold had been a modest underground mine with a relatively small 1.8-million-ounce resource. The Alamos crew saw tremendous potential and pursued its acquisition quite aggressively, purchasing it for $620 million. At current gold prices, the company said the value of Island Gold now exceeds $2 billion.
McCluskey said the numbers now speak for themselves. The operation has “far exceeded our expectations.”
Located in a gold-rich area of the Michipicoten greenstone belt, Alamos and its next-door neighbour, Argonaut Gold, are reviving a historically rich gold camp.
No stranger to the drill bit, as their exploration has gone deeper, the gold grades have increased.
With $22 million budgeted for exploration, Alamos’s focal point is the Island East portion of the property, close to the next shaft construction, where the highest grade drill intersections have been pulled on the property.
Exploration vice-president Scott Parson said they’ve only scratched the surface to Island Gold’s potential.
Most underground gold deposits in the Canadian Shield can extend below three kilometres depth. Island Gold has only been drilled down to a depth of 1.7 kilometres and remains open laterally and down plunge.
There’s considerable upside as well across the rest of the property.
Alamos picked up 5,000 hectares of ground by acquiring Trillium Mines in 2020. This area contains two former gold mines — Edwards and Cline — with more than a million ounces of past production and several spots where there’s been historic high-grade showings.
With a better handle on the area's geology, and keen understanding of where to find gold, Parson said the extra elbow room allows them to take a district-scale approach to targeting gold over a broader area.
