Update: Alamos Gold Gets Its EIA Approved For Its Agi Dagi Project In Turkey

Aug.20.14 | About: Alamos Gold (AGI)


Alamos Gold Announced that the Turkish Ministry of Environment and Urbanization signed off on the company's Environmental Impact Assessment (EIA) for its Agi Dagi Project.

This fits with my May projection that the company will bring the Agi Dagi Project into production in late 2016/early 2017--18 months after the adjacent Kirazli Project begins producing.

This is good news, especially given the company's Mulatos Project has been performing terribly with lower production and higher costs: this should shift emphasis onto the company's other assets.

Alamos Gold (NYSE:AGI) just announced that it received government approval for its environmental impact assessment for its Agi Dagi Project. For those not familiar with the company the Agi Dagi Project is one of two adjacent projects in Turkey heading towards production.

(Source: Alamos Gold's corporate presentation)

Kirazli is the first heading towards production next year. Agi Dagi should follow 18 months later, which puts production in late 2016-early 2017.

Getting government approval on the environmental front is a big deal for the company. Admittedly, as a high cost project, Agi Dagi doesn't have much value at $1,300/oz. gold. Using the current mine plan it has a $60 million NPV using a 10% discount rate. However the mine life can be extended, and it offers substantial leverage to a rising gold price. For those who expect the gold bull market to continue in the next couple of years--as I do--the project should be coming online during the next up-leg in gold prices, making it invaluable for the company.

As a Turkish mine investors have been skeptical of Agi Dagi and Kirazli, but the fact that the former, larger project received government approval on the environmental front is a bullish development. So long as gold prices remain weak and the company's Mulatos Project continues to perform poorly this stock will likely underperform its peers. But as I argued in May it is setting up for a strong performance longer term, and I think weakness can be bought.

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