Location

Alamos Gold Inc. (TSX:AGI)(NYSE:AGI) (“Alamos”
or the “Company”) reported that it has reached an agreement to
acquire the surface rights for the Cerro Pelon and La Yaqui satellite deposits
at its Mulatos mine allowing for the start of permitting and development
activities. Closing of the agreement is subject to completion of due diligence
and other customary closing conditions and is scheduled for the end of June
2014
.

“We are very pleased
to have successfully negotiated an agreement to acquire the surface rights for
our Cerro Pelon and La Yaqui satellite deposits. Both deposits exemplify our
development pipeline in that they are economically robust, technically simple,
open pit, heap leach projects that are inexpensive to build and operate. Cerro
Pelon and La Yaqui represent a significant source of near term, low cost,
production growth that we expect will drive production at Mulatos back to approximately
200,000 ounces per year, while sharply lowering operating costs. With modest
capital and very low operating costs, we expect these deposits to generate
significant free cash flow,” said John A. McCluskey ,
President and Chief Executive Officer.

Cerro Pelon and La
Yaqui Project Highlights

  • Incremental
    low-cost production starting in 2016
  • Combined
    average production of 33,000 ounces of gold per year over a combined 5
    year mine life with peak annual production of nearly 50,000 ounces of gold
  • Production
    is additive to Mulatos with Cerro Pelon and La Yaqui operating with
    independent crushing circuits and heap leach pads
  • Combined
    average life of mine total cash costs (including royalties) below $500
    per ounce
  • Significantly
    higher combined mineral reserve grade of 1.6 grams per tonne of gold
    (“g/t Au”), nearly double the 2014 budget of 0.85 g/t for open
    pit, heap leach production
  • Modest
    pre-production capital expenditures of approximately $21 million
    to construct both projects and minimal sustaining capital
  • Significant
    exploration potential at Cerro Pelon

Cerro Pelon and La Yaqui
are located approximately 3 kilometres and 7 kilometres (straight line),
respectively from the existing Mulatos operation. The deposits are near
surface, highly oxidized and amenable to open pit, heap leaching. With their
combined mineral reserve grade of 1.6 g/t Au nearly double the 2014 budget,
these projects are expected to significantly lower the overall cost profile at
Mulatos.

Development plan –
Initial Production Expected in 2016

The focus over the next
18-24 months will be on permitting and developing the two deposits with initial
production expected in 2016. The near term focus will be on compiling
environmental impact assessments (MIA) for both Cerro Pelon and La Yaqui with
approvals expected in approximately 12-15 months. This will be followed by a
6-8 month construction period at La Yaqui and 8-10 month construction period at
Cerro Pelon. Initial production from La Yaqui is expected in 2016 followed by
Cerro Pelon in 2017. Each project will operate with stand alone heap leach pads
and portable crushing circuits which will not displace existing throughput
capacity from the main Mulatos crushing circuit and heap leach pad. Total
initial capital to construct both projects is expected to be approximately $21
million
. In conjunction with the completion of the environmental
baseline studies, the Company intends on performing further detailed economic
analysis, including securing updated input cost quotes.

Mining and
Processing

Both Cerro Pelon and La
Yaqui will be mined via conventional open pit methods utilizing traditional
drill, blast, loading and hauling. Ore from Cerro Pelon will be mined and
stacked at a throughput rate of 2,200 tonnes per day (“tpd”) over a 4
year mine life based on current reserves. La Yaqui
will be mined and stacked at a rate of 1,500 tpd over a 3 year mine life based
on current reserves. Contract mining and crushing will be employed at both
operations. Following leaching, the gold-bearing solution will be processed
through independent carbon columns at each project and the loaded carbon will
be transported to the existing Mulatos plant for final processing. Both
deposits are highly oxidized with initial metallurgical test work demonstrating
recoveries above 80%. The Company is budgeting more conservative average
combined life of mine recoveries of 75%.

Exploration

Given the lack of access,
very little exploration activity has taken place at Cerro Pelon and La Yaqui in
recent years. Additionally, both reserve pits remain based on designs utilizing
an $800 per ounce gold price with Cerro Pelon offering the most
exploration potential through further drilling. Cerro Pelon will be a focus of
exploration efforts in the second half of 2014 and into 2015 with an initial
12,000 metre (“m”) drill program planned.

Gold mineralization at
Cerro Pelon is primarily controlled by sub-vertical hydrothermal intrusion
breccias. Four distinct breccia zones have been identified to date; North,
South, West and Cliff Zones. The North and South Zones are well defined by
drilling, have strong silica alteration and contain the bulk of the
mineralization that has been defined to date.

A new review of the geology
and controls on mineralization is underway and this has shown that
mineralization is open to the SE and SW. Exploration drilling in 2014 will
therefore target a possible 200m strike extension to the deposit in a southerly
direction. In addition to this, another 100m of (previously untested) strike
extension between two of the zones themselves will be drilled. Infill and definition
drilling to tightly define all zones makes up the remainder of the planned
12,000m.

La
Yaqui

Cerro
Pelon

Combined

Initial Production

2016

2017

Mine Life

Years

3

4

5

Life of Mine Production

oz
Au

60,000

105,400

165,400

Average Annual Production

oz
Au

19,800

26,100

33,000

Total Ore Mined

tonnes

1,574,000

2,673,000

4,247,000

Throughput

tpa

550,000

800,000

Throughput

tpd

1,500

2,200

Waste-to-ore ratio

0.17

2.13

1.38

Average Grade

g/t
Au

1.58

1.64

1.62

Recoveries

%

75%

75%

75%

Total Cash Costs

US$/oz

$435

$525

$490

Initial Capital

US$mm

$7

$14

$21

About Alamos

Alamos is an established
Canadian-based gold producer that owns and operates the Mulatos Mine
in Mexico, and has
exploration and development activities in Mexico,
Turkey and the
United States
. The Company employs more than 550 people and is
committed to the highest standards of sustainable development. Alamos has
approximately $400 million in cash and cash equivalents, is
debt-free, and unhedged to the price of gold. As of May 27, 2014,
Alamos had 127,357,488 common shares outstanding (139,110,887 shares fully
diluted), which are traded on the TSX and NYSE under the symbol
“AGI”.

The TSX and NYSE
have not reviewed and do not accept responsibility for the adequacy or accuracy
of this release.

Cautionary Note

No stock exchange,
securities commission or other regulatory authority has approved or disapproved
the information contained herein. This News Release includes certain
“forward-looking statements”. All statements other than statements of
historical fact included in this release, including without limitation
statements regarding forecast gold production, gold grades, recoveries,
waste-to-ore ratios, total cash costs, potential mineralization and reserves,
exploration results, and future plans and objectives of Alamos, are
forward-looking statements that involve various risks and uncertainties. These
forward-looking statements include, but are not limited to, statements with
respect to mining and processing of mined ore, achieving projected recovery
rates, anticipated production rates and mine life, operating efficiencies,
costs and expenditures, changes in mineral resources and conversion of mineral
resources to proven and probable reserves, and other information that is based
on forecasts of future operational or financial results, estimates of amounts
not yet determinable and assumptions of management.

Exploration results that
include geophysics, sampling, and drill results on wide spacings may not be
indicative of the occurrence of a mineral deposit. Such results do not provide
assurance that further work will establish sufficient grade, continuity,
metallurgical characteristics and economic potential to be classed as a
category of mineral resource. A mineral resource that is classified as “inferred”
or “indicated” has a great amount of uncertainty as to its existence
and economic and legal feasibility. It cannot be assumed that any or part of an
“indicated mineral resource” or “inferred mineral resource”
will ever be upgraded to a higher category of resource. Investors are cautioned
not to assume that all or any part of mineral deposits in these categories will
ever be converted into proven and probable reserves.

Any statements that express
or involve discussions with respect to predictions, expectations, beliefs,
plans, projections, objectives, assumptions or future events or performance
(often, but not always, using words or phrases such as “expects” or
“does not expect”, “is expected”, “anticipates” or
“does not anticipate”, “plans”, “estimates” or
“intends”, or stating that certain actions, events or results
“may”, “could”, “would”, “might” or
“will” be taken, occur or be achieved) are not statements of
historical fact and may be “forward-looking statements.”
Forward-looking statements are subject to a variety of risks and uncertainties
that could cause actual events or results to differ from those reflected in the
forward-looking statements.

There can be no assurance
that forward-looking statements will prove to be accurate and actual results
and future events could differ materially from those anticipated in such
statements. Important factors that could cause actual results to differ
materially from Alamos’ expectations include, among others, risks related to
international operations, the actual results of current exploration activities,
conclusions of economic evaluations and changes in project parameters as plans
continue to be refined as well as future prices of gold and silver, as well as
those factors discussed in the section entitled “Risk Factors” in
Alamos’ Annual Information Form. Although Alamos has attempted to identify
important factors that could cause actual results to differ materially, there
may be other factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such statements will prove to be
accurate as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue
reliance on forward-looking statements.

Note to U.S.
Investors

Alamos prepares its
disclosure in accordance with the requirements of securities laws in effect in Canada,
which differ from the requirements of U.S. securities laws. Terms relating to
mineral resources in this presentation are defined in accordance with National
Instrument 43-101 – Standards of Disclosure for Mineral Projects under the
guidelines set out in the Canadian Institute of Mining, Metallurgy,
and Petroleum Standards on Mineral Resources and Mineral Reserves. The
United States Securities and Exchange Commission
(the “SEC”)
permits mining companies, in their filings with the SEC, to disclose
only those mineral deposits that a company can economically and legally extract
or produce. Alamos may use certain terms, such as “measured mineral
resources”, “indicated mineral resources”, “inferred
mineral resources” and “probable mineral reserves” that the SEC
does not recognize (these terms may be used in this presentation and are
included in the public filings of Alamos, which have been filed with the SEC
and the securities commissions or similar authorities in Canada).

Cautionary non-GAAP
Measures and Additional GAAP Measures

Note that for purposes of
this section, GAAP refers to IFRS. The Company believes that investors use certain
non-GAAP and additional GAAP measures as indicators to assess gold mining
companies. They are intended to provide additional information and should not
be considered in isolation or as a substitute for measures of performance
prepared with GAAP. Non-GAAP and additional GAAP measures do not have a
standardized meaning prescribed under IFRS and therefore may not be comparable
to similar measures presented by other companies.

“Cash operating costs
per ounce” and “total cash costs per ounce” as used in this
analysis are non-GAAP terms typically used by gold mining companies to assess
the level of gross margin available to the Company by subtracting these costs
from the unit price realized during the period. These non-GAAP terms are also
used to assess the ability of a mining company to generate cash flow from
operations. There may be some variation in the method of computation of
“cash operating costs per ounce” as determined by the Company
compared with other mining companies. In this context, “cash operating
costs per ounce” reflects the cash operating costs allocated from
in-process and dore inventory associated with ounces of gold sold in the
period. “Cash operating costs per ounce” may vary from one period to
another due to operating efficiencies, waste-to-ore ratios, grade of ore
processed and gold recovery rates in the period. “Total cash costs per
ounce” includes “cash operating costs per ounce” plus applicable
royalties. Cash operating costs per ounce and total cash costs per ounce are
exclusive of exploration costs.

In conjunction with a
non-GAAP initiative being undertaken by the gold mining industry, the Company
adopted an “all-in sustaining cost per ounce” non-GAAP performance
measure in 2013. The Company believes the measure more fully defines the total
costs associated with producing gold; however, this performance measure has no
standardized meaning. Accordingly, there may be some variation in the method of
computation of “all-in sustaining cost per ounce” as determined by
the Company compared with other mining companies. In this context, “all-in
sustaining cost per ounce” reflects total mining and processing costs,
corporate and administrative costs, exploration costs, sustaining capital, and
other operating costs. Sustaining capital expenditures are expenditures that do
not increase annual gold ounce production at a mine site and excludes all
expenditures at the Company’s development projects as well as certain
expenditures at the Company’s operating sites that are deemed expansionary in
nature.

 

Contact Information: Scott K. Parsons Director, Investor Relations
(416) 368-9932 x 439

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