Alamos Gold Inc. (TSX:AGI)

Business Summery

Alamos Gold Inc. is completing development of the Mulatos gold deposit in Sonora, Mexico, and expects to reach commercial production in the first quarter of 2006. Mulatos is contained within 213 square kilometers of mining concessions covering a large district of gold occurrences.

Phase I of the Mulatos Project relates to the development of the Estrella Pit, which is fully permitted for an open-pit, heap-leach operation. Alamos is initially expected to produce 150,000 ounces of gold per year from the two-million-ounce reserve base contained within Estrella and is drilling additional expansion targets associated with the deposit, including the El Salto / Mina Vieja and Escondida / El Victor areas.

Alamos poured the first dore bullion from the project on July 22nd, 2005 and is currently producing dore through the leaching of gold-bearing overliner material and run-of-mine ore from the top of Cerro Estrella. Currently development work is focused on increasing production of run-of-mine ore, stripping overburden, and achieving feasibility production rates of 10,000 tonnes of ore per day.

The Salamandra Property - A Spectacular Asset Purchased at a Low Price

On February 21, 2003 Alamos Minerals amalgamated with National Gold which resulted in the Company owning a 100% interest in the Salamandra Property. Mineral rights for all concessions comprising the Salamandra Property are controlled by Minas de Oro Nacional, S.A. de C.V. ("Minas de Oro Nacional"), a Mexican company which is wholly owned by the Company.

Estrella Pit - Development Plan

Construction began in the third quarter of 2004. All permits and agreements are in place to construct, commission and operate this project.

Alamos is currently producing dore from leaching gold-bearing overliner material and run-of-mine ore from the top of Cerro Estrella.

Construction at Estrella is well advanced; the development program is focused on increasing production from colluvium and run-of-mine ore, completing construction of the crusher/conveying system and achieving feasibility production rates.

At feasibility-level production the mine will operate at the rate of 10,000 tonnes per day and produce approximately 150,000 ounces of gold per year for the first several years.

Recent Developments: Alamos Gold Inc.: Bonanza Grade Intercepts Encountered in Escondida Hanging Wall Zone, Mulatos Deposit, Mexico

Alamos Gold Inc. announced that six surface reverse circulation holes recently drilled in the Escondida Hanging Wall Zone have encountered very high grade to bonanza grade gold mineralization. Vertical hole 05EI034 intersected 28.97 meters of 70.96 g/t Au, including 9.14m of 198.9 g/t Au. The Escondida Zone is located 500 meters northeast of the Estrella Pit, which is currently being mined.

The high-grade zone is a previously unrecognized style of mineralization consisting of coarse-grained native gold in the highest gold concentrations encountered to date in the greater Mulatos deposit area.

Coarse visible gold to 2mm grain size was panned from drill cuttings and frequently seen in coarse reject material, and reflects an entirely different mode of occurrence from the Estrella portion of the deposit. The high-grade zone is stratiform and occurs hanging wall to the lower grade portion of the Escondida deposit. Assay results from drill holes to date combined with three isolated higher-grade holes previously drilled delineate an area approximately 115m long by 50m wide that is open to the northeast and southeast. Drill intercepts are believed to be true thickness of the hanging wall zone. Assays results are pending from seven additional holes containing visible gold.

This discovery appears to confirm the Escondida deposit being the faulted extension of the historic high-grade deposit at Mina Vieja, which was responsible for the majority of previous gold production at Mulatos.

Fundamental Considerations

The Mulatos Gold Recources

Exploration
More than 40 km2 of new concessions were acquired in 2004, bringing the total district land position to more than 21,300 hectares. The most important acquisition is the highly prospective, 1,700-hectare Puebla concession in the El Realito project area.

In addition, Alamos staked new claims to cover large altered areas southeast of Mulatos in the Carboneras area, and around the historic Ostimuri gold-silver mine in the northwestern part of the district.

Technical Considerations

The gold price has spiked upward to a price level not seen since 1981. While the world - or at least part of it - wakes up to the fact the gold has been in a bull market since 2001 which will likely lead to much higher prices, the present level signals an overbought situation which has to correct in some way or another. At the beginning of June, we wrote: "The long-term picture shows that the precious metal bull-market is far from over and that the market is preparing itself for the next major up-leg which we expect to start unfolding during the coming weeks." (see www.gold-eagle.com/editorials_05/zihlmann060605.html). Today, the situation is different and some caution is certainly the rule of the day.

You will certainly see much higher prices over the long-term. At this stage however, you should much higher prices over the long-term. At this stage however, you should consider taking profit.

Peter Zihlmann


www.pzim.com
[email protected]
[email protected]