Alio Gold Inc. (TSX:ALO) (NYSE AMERICAN:ALO)
(“Alio Gold” or the “Company”), is pleased to provide a project
update and announce that the Company has received approval for its
Change of Land Use application from SEMARNAT (Mexico’s Secretary of
Environment and Natural Resources) for its high grade, high margin
Ana Paula Project located in Guerrero, Mexico (“Ana Paula” or the
“Project”).
Key Highlights
- Permitting milestone achieved with approval of Change of Land
Use application
- Financing proposals received indicate Project highly
financeable
- Advancing the definitive feasibility study towards completion
with an investment decision expected in the second quarter of
2018
“Obtaining approval for our Change of Land Use
application is the second major milestone in the permitting of Ana
Paula after approval of our Environmental Impact Assessment back in
April,” said Greg McCunn, Chief Executive Officer. “As we launch an
exciting exploration initiative to enhance the already robust
economics of Ana Paula, we are also continuing to move the Project
forward towards an investment decision in the second quarter of
2018. Now that major permitting milestones are behind us, our focus
is on completing the definitive feasibility study and arranging
project financing. In addition, we are enhancing community and
social efforts to ensure we continue to maintain respectful and
mutually beneficial relationships with the surrounding
communities.”
Permitting
The permitting for the project is now well
advanced with the two main permits approved: in April of 2017 the
Company received approval of the Environmental Impact Assessment
(MIA); and, this week, Alio received approval of the Change of Land
Use (ETJ) application. As well, the Company has received municipal
authorization for its archeological permit.
The Company expects to construct the project on
approximately 370 ha of privately owned land. During the second
quarter of 2017, the Company applied for a Change of Land Use
Permit for this land and last week a committee of SEMARNAT approved
the application. Subsequent to that decision, a delegation from
SEMARNAT visited the Project site and the Company expects to
receive a formal request for payment of the Change of Land Use fees
in early October. The Company expects to pay these fees immediately
and receive a formal permit 15 days after payment. The Company is
continuing to finalize purchase and lease terms for the land with
approximately 75% of the land required for the Project already
purchased or signed to 30 year lease agreements.
Final permit applications still to be submitted
include the permits for water use and discharge and off-site
services. The water use and discharge application requires a
detailed water balance and identification of discharge and
extraction points that will only be available upon completion of
the DFS. Permits for off-site services which includes power line
connections, water piping, road access and the camp also require
final layouts and technical information being generated in the
DFS.
Definitive Feasibility
Study
Following the completion of the Pre-Feasibility
Study (“PFS”) in May 2017 that demonstrated robust project
economics a Definitive Feasibility Study (“DFS”) was initiated in
July 2017. Key highlights from the PFS1 include:
- Proven & Probable Mineral Reserves of 13.4 Mt at 2.36 g/t
for 1,021,000 contained ounces of gold
- NPV5% = $223 million and IRR of 34% after tax at $1,250/oz
gold
- Initial Capital Cost of $137.2 million
- First quartile operating costs with cash costs of $489/oz and
site All-in Sustaining Costs of $524/oz
- Gold recovery of 85%
- Mine life of 7.5 years from an open pit producing 868,000
ounces of gold
1The Ana Paula technical report titled “NI
43-101 Preliminary Feasibility Study, Guerrero, Mexico”, dated May
16, 2017 is available on Alio Gold’s SEDAR profile at
www.sedar.com.
The DFS is being prepared by the same group of
consultants that prepared the PFS which provides for strong
continuity. The study is expected to be completed in the second
quarter of 2018. The company expects to spend approximately $24
million over the one year period from July 1, 2017 to June 30, 2018
advancing the Project, including costs for the DFS as well as all
associated owners costs and site costs.
Further metallurgical testwork planned as part
of the DFS is now underway and will continue until the end of 2017.
The testwork will include a geochemical analysis to track
deportment of key impurities, including arsenic, through the
process and kinetic tests of leach tails. It will also include
additional grindability testing and ambient oxidization (“AOX”)
optimization tests for grind size, retention time, density and
reagent consumption. Piloting of the AOX circuit on various
domain/production composites is also planned.
A field program of geological mapping, borehole
drilling, and seismic evaluation for the tailings, waste dump and
plant site areas is in progress to confirm the geotechnical design
parameters for use in the DFS.
Key offsite infrastructure for the Project is
also being engineered to a higher level of detail in the DFS
including power, road access and water supply. Power to the site is
readily available from multiple power sources adjacent to the mine
site, and a systems impact study and a facilities study are
underway. Power consumption is expected to average 9.7 MW per year
at an estimated cost of $0.08/kWh.
The site is currently accessed by a 7.5km
4-wheel drive road from the town of Cuetzala. For the initial
stages of project construction, this road will be upgraded to
improve road conditions and travel time. For the main project
construction access, two primary routes are being studied in
further detail to optimize both the cost of the road and ease of
access to the site for construction and operations materials.
The site is estimated to have a negative water
balance and a hydrological study has identified a prospective water
source to the south west of the Project site. A drill program has
commenced to identify potential water supply bores within pumping
distance to the site.
The DFS is also re-evaluating the plant and
infrastructure and confirming the plant location and facilities, as
well as reviewing on and off site infrastructure. It will also
update the site layout to assess construction access requirements,
construction and permanent camp locations and support facilities as
well as review constructability, schedule, operating and capital
cost estimates.
Refurbishment of the used equipment that was
purchased (Goldcorp’s El Sauzal operations) is underway following a
detailed inspection of both the SAG and Ball mills that was carried
out in mid-August.
The recently announced underground exploration
program is not expected to provide results that will be
incorporated into the DFS. Drill results are only expected by
mid-2018 at approximately the same time an investment decision is
expected to be made. If the exploration program is successful, the
mine plan will be optimized during construction to balance feed
from both the open pit and the underground mines for start-up and
commissioning. For further information on the underground decline
and exploration program click on the following link: ‘Alio Gold to
Commence Underground Decline and Exploration Program at Ana
Paula’.
Financing
The May 2017 Pre-Feasibility Study
(“PFS”) contemplated a capital spend of $137.2 million to
achieve commercial production at Ana Paula. With the completion of
the bought deal financing and subsequent planned increasing
investment in both Ana Paula and San Francisco the Company has cash
on hand of approximately $64 million and is looking to raise
between $90 and $100 million in project financing. To date varying
types of financing options have been contemplated and a number of
indicative proposals have been received which are currently being
reviewed. The proposals will be narrowed down and the Company
expects to move forward with select proposals to pursue a financing
package with a balance of the lowest overall cost, the least
restrictive covenants, and the flexibility to allow the Company to
pursue its growth strategy.
The financing is expected to be arranged over
the next six months with conditions precedent for drawing that
include the DFS being complete and in-line with the PFS.
About Alio Gold
Alio Gold is a Canadian gold mining company
engaged in exploration, development and production in
Mexico. Its principal assets include the producing San
Francisco mine in Sonora, Mexico and the development stage Ana
Paula project in Guerrero, Mexico. The Company also has a portfolio
of other exploration properties, all of which are located in
Mexico.
Cautionary Note to United States
InvestorsThe Company is subject to the reporting
requirements of the applicable Canadian securities laws, and as a
result it reports its mineral reserves and resources according to
Canadian standards. Canadian reporting requirements for disclosure
of mineral properties are governed by NI 43-101. The definitions of
NI 43-101 are adopted from those given by the Canadian Institute of
Mining, Metallurgy and Petroleum. U.S. reporting requirements are
governed by Industry Guide 7 (“Guide 7”) of the Securities and
Exchange Commission (the “Commission”). These reporting standards
have similar goals in terms of conveying an appropriate level of
confidence in the disclosures being reported, but embody different
approaches and definitions.
The Company reports “resources” in accordance
with NI 43-101. While the terms “Mineral Resource,” “Measured
Mineral Resource,” “Indicated Mineral Resource” and “Inferred
Mineral Resource” are recognized and required by Canadian
regulations, they are not defined terms under standards of the
Commission and generally, U.S. companies are not permitted to
report resources in documents filed with the Commission. As such,
certain information contained in this news release describing
mineralization and resources under Canadian standards is not
comparable to similar information published by United States
companies subject to the reporting and disclosure requirements of
the Commission. It cannot be assumed that all or any part of
Measured or Indicated Resources will ever be converted into Mineral
Reserves, and it cannot be assumed that all or any part of an
Inferred Mineral Resource exists, or is economically or legally
mineable. Under Industry Guide 7, mineralization may not be
classified as a “reserve” unless the determination has been made
that the mineralization could be economically and legally produced
or extracted at the time the reserve determination is made. In
addition, an Inferred Mineral Resource has a great amount of
uncertainty as to its existence and as to its economic and legal
feasibility, and it cannot be assumed that all or any part of an
Inferred Mineral Resource will ever be upgraded to a higher
category. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of a feasibility study. In
addition, the definitions of “Proven Mineral Reserves” and
“Probable Mineral Reserves” under CIM standards differ in certain
respects from the standards of the Commission.
For detailed technical information related to
the Company’s exploration, development, and operating assets,
please refer to the Company’s website at www.aliogold.com or the
most recent Annual Information Form available on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov.
Cautionary Note Regarding
Forward-Looking StatementsCertain statements and
information contained in this news release constitute
“forward-looking statements” within the meaning of applicable U.S.
securities laws and “forward-looking information” within the
meaning of applicable Canadian securities laws, which we refer to
collectively as “forward-looking statements”. Forward-looking
statements are statements and information regarding possible
events, conditions or results of operations that are based upon
assumptions about future economic conditions and courses of action.
All statements and information other than statements of historical
fact may be forward-looking statements. In some cases,
forward-looking statements can be identified by the use of words
such as “seek”, “expect”, “anticipate”, “budget”, “plan”,
“estimate”, “continue”, “forecast”, “intend”, “believe”, “predict”,
“potential”, “target”, “may”, “could”, “would”, “might”, “will” and
similar words or phrases (including negative variations) suggesting
future outcomes or statements regarding an outlook.
Forward-looking statements in news release
herein by reference include, but are not limited to statements and
information regarding: the Company's future mining activities,
including mining capacity, recovery, cash costs, production and
mine life; the Company's reserves and resources estimates; the
Company’s exploration and development plans, including anticipated
costs and timing thereof; the Company’s plans for growth through
exploration activities, acquisitions or otherwise; and expectations
regarding future maintenance and capital expenditures, working
capital requirements, the availability of financing and future
effective tax rates. Such forward-looking statements are based on a
number of material factors and assumptions, including, but not
limited to: that contracted parties provide goods or services in a
timely manner, that no unusual geological or technical problems
occur, that plant and equipment function as anticipated and that
there is no material adverse change in the price of gold, costs
associated with production or recovery. Forward- looking statements
involve known and unknown risks, uncertainties and other factors
which may cause actual results, performance or achievements, or
industry results, to differ materially from those anticipated in
such forward-looking statements. The Company believes the
expectations reflected in such forward-looking statements are
reasonable, but no assurance can be given that these expectations
will prove to be correct and you are cautioned not to place undue
reliance on forward-looking statements contained herein.
Some of the risks and other factors which could
cause actual results to differ materially from those expressed in
the forward- looking statements contained in this news release
herein by reference include, but are not limited to: risks and
uncertainties relating to the interpretation of drill results, the
geology, grade and continuity of mineral deposits and conclusions
of economic evaluations; results of initial feasibility,
pre-feasibility and feasibility studies, and the possibility that
future exploration, development or mining results will not be
consistent with the Company’s expectations; risks relating to
possible variations in reserves, resources, grade, planned mining
dilution and ore loss, or recovery rates and changes in project
parameters as plans continue to be refined; mining and development
risks, including risks related to accidents, equipment breakdowns,
labour disputes (including work stoppages and strikes) or other
unanticipated difficulties with or interruptions in exploration and
development; the potential for delays in exploration or development
activities or the completion of feasibility studies; risks related
to the inherent uncertainty of production and cost estimates and
the potential for unexpected costs and expenses; risks related to
commodity price and foreign exchange rate fluctuations; the
uncertainty of profitability based upon the cyclical nature of the
industry in which the Company operates; risks related to failure to
obtain adequate financing on a timely basis and on acceptable terms
or delays in obtaining governmental or local community approvals or
in the completion of development or construction activities; risks
related to environmental regulation and liability; political and
regulatory risks associated with mining and exploration; risks
related to the uncertain global economic environment; and other
factors contained in the section entitled “Risks and Uncertainties”
per above.
Although the Company has attempted to identify
important factors that could cause actual results or events to
differ materially from those described in the forward-looking
statements, you are cautioned that this list is not exhaustive and
there may be other factors that the Company has not identified.
Furthermore, the Company undertakes no obligation to update or
revise any forward-looking statements included in, or incorporated
by reference in, this news release if these beliefs, estimates and
opinions or other circumstances should change, except as otherwise
required by applicable law.
For further information, please
contact:
Lynette GouldVice President, Investor
Relations604-638-8976lynette.gould@aliogold.com
Neither the TSX nor its Regulation Services
Provider (as that term is defined in the policies of the TSX) nor
the New York Stock Exchange MKT accepts responsibility for the
adequacy or accuracy of this news release.
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