Kirazlı is a low-cost, high-return, fully funded growth project. Positive feasibility studies were completed on Ağı Dağı and Kirazlı in 2017 with both projects contemplated as stand-alone open-pit, heap-leach operations. Alamos expects to first develop Kirazlı and then utilize its cash flows to fund the development of Ağı Dağı. As outlined in the feasibility study, Kirazlı is expected to produce an average of 104,000 oz of gold at mine-site all-in sustaining costs1 of $373 per ounce over a five year mine life.
In conjunction with the Ministry of Forestry and Water Affairs – State Hydraulic Works (DSI), a water reservoir was constructed by Alamos and completed in 2019. In addition to supplying the process water requirements of the Kirazlı mine, the water reservoir will supply clean drinking water and irrigation to several nearby communities – a key element of Alamos Gold’s commitment to its host communities and our sustainability and social responsibility objectives. In addition, power will be supplied from the commercial electricity grid with a new dedicated 30-kilometre-long overhead line connecting the Çanakkale utility substation to the Kirazlı mine substation.
Alamos has had an active presence in Turkey since 2010. Over that time frame, the Company’s Turkish operations have met all legal and regulatory requirements, complied with best practices relating to sustainable development including meeting the highest environmental and social management standards, created hundreds of jobs, and developed trusting relationships with the local communities. Alamos and the Subsidiaries have invested over $250 million in Turkey, unlocked over a billion dollars worth of project value, and contributed over $20 million in royalties, taxes and forestry fees to the Turkish government. Over the life of the project, government revenues alone are expected to total $551 million. Additionally, Alamos and the Subsidiaries have invested $25 million to date towards various community and social initiatives.
In October 2019, well into construction of the Kirazlı project, the government failed to grant a routine renewal of the Company’s mining licenses, despite the Company having met all legal and regulatory requirements for their renewal. In October 2020, the Turkish government refused the renewal of the Company’s Forestry Permit. The Company had been granted approval of all permits required to construct Kirazlı including the Environmental Impact Assessment approval, Forestry Permit, and GSM (Business Opening and Operation) permit, and certain key permits for the nearby Ağı Dağı and Çamyurt Gold Mines. These permits were granted by the Turkish government after the project earned the support of the local communities and passed an extensive multi-year environmental review and community consultation process.
In April 2021, the Company announced that its Netherlands wholly-owned subsidiaries Alamos Gold Holdings Coöperatief U.A, and Alamos Gold Holdings B.V. (the “Subsidiaries”) will file an investment treaty claim against the Republic of Turkey for expropriation and unfair and inequitable treatment, among other things, with respect to the Kirazlı, Ağı Dağı and Çamyurt gold development projects in Turkey. The claim was filed in May 2021 under the Netherlands-Turkey Bilateral Investment Treaty (the “Treaty”), and is expected to exceed $1 billion, representing the value of the Company’s Turkish assets.
In its effort to secure the renewal of its mining licenses, the Company has attempted to work cooperatively with the Turkish government, has raised with the Turkish government its obligations under the Treaty, has sought to resolve the dispute by good faith negotiations, and has made considerable effort to build support among stakeholders and host communities. The Turkish government has failed to provide the Company with a reason for the non-renewal or a timeline for renewal of its licenses.
Bilateral investment treaties are agreements between countries to assist with the protection of investments. The Treaty establishes legal protections for investment between Turkey and the Netherlands. The Subsidiaries directly own and control the Company’s Turkish assets. The Subsidiaries invoking their rights pursuant to the Treaty does not mean that they relinquish their rights to the Turkish project, or otherwise cease the Turkish operations. The Company will continue to work towards a constructive resolution with the Republic of Turkey.
Alamos acquired the Ağı Dağı and Kirazlı advanced-stage development projects in 2010, from Teck Resources and Fronteer Development Group for total consideration of $90 million. That same year, positive preliminary economic assessment technical reports were published on both projects, followed by positive pre-feasibilities studies in 2012. Updated positive feasibility studies were completed on both projects in 2017.