Good morning, ladies and gentlemen. I will now turn the call over to Scott Parsons, Alamos Gold's Senior Vice President, Investor Relations. Please go ahead.
Thank you, Operator, and thanks to everyone for attending this morning's conference call to discuss Alamos Gold's acquisition of Argonaut Gold. In addition to myself, we have on the line today from Alamos, John McCluskey, President and Chief Executive Officer; Greg Fisher, Chief Financial Officer; Luc Guimond, Chief Operating Officer. From Argonaut, we have Richard Young, President and Chief Executive Officer; and Marc Leduc, Chief Operating Officer. All will be available during the Q&A session of the call. We have prepared a presentation to accompany the conference call, which is available for viewing through the webcast and for download from the Alamos Gold and Argonaut websites. Before we begin, please note this disclaimer concerning forward-looking statements.
We refer all participants to our forward-looking statements and resources disclosure in Alamos Gold and Argonaut Gold's joint press release, as well as slides two and three from today's presentation, and caution that mining and exploration are subject to a number of risks and uncertainties, particularly with respect to the mining and processing of ore, recovery rates, operating plans, and the conversion of mineral resources to proven and probable reserves, to name a few. There could be no assurance that forward-looking statements made in this press release, presentation, and conference call, based on the information on hand today, will prove accurate. Future results and events could differ materially from those anticipated in such statements and should not be relied upon. Technical information to Alamos Gold in this presentation has been reviewed and approved by Chris Bostwick, Alamos Gold's Senior Vice President, Technical Services, and a qualified person.
Also, please bear in mind that all of the dollar amounts mentioned in this conference call are in U.S. dollars unless otherwise noted. Now I'll turn the call over to John McCluskey, President and Chief Executive Officer of Alamos Gold.
Thank you, Scott, and good morning, everyone. I'm very pleased to be joined by Richard Young to announce Alamos Gold's friendly acquisition of Argonaut Gold and its key asset, Magino. I would also like to take this opportunity to welcome Argonaut's exceptional group of employees to Alamos. I look forward to working together as we close the transaction and integrate our operations. We'll start with slide five. The Magino Mine is a long-life asset located in Northern Ontario, Canada, adjacent to our Island Gold Mine. Given their close proximity, we will be combining the two operations, creating one of the largest, lowest cost, and most profitable gold mines in Canada. The integration of the two mines is expected to unlock significant near- and long-term value, with total pre-tax operating and capital synergies of approximately $515 million, which we will detail later in the presentation.
This includes G&A and operating savings by processing ore from both operations through the existing Magino mill, and capital synergies with the mill and tailings expansions at Island Gold no longer required. In addition to the significant synergies, the transaction is accretive across all key financial and operating metrics, including net asset value, cash flow, production, and mineral reserves per share. The combination of Magino and Island Gold strengthens and further diversifies our portfolio of assets. In the near term, our production increases to over 600,000 ounces per year. Longer term, we now have the capacity to grow our production to over 900,000 ounces per year. The integration of the two assets also creates opportunities for further longer-term production upside at both Magino and Island Gold through a potential expansion of the Magino mill.
Our exposure to Canada continues to grow, with nearly 90% of our net asset value now supported by Canadian assets in one of the best jurisdictions in the world. We are the third-largest gold producer in Canada and growing, given our pipeline of high-return organic growth projects. Magino will be a key part of that growth. Since achieving initial production last June, the Argonaut team have worked through a number of challenges at Magino that are common with new operations while dealing with capital constraints and tough market conditions. The challenges are well-defined, and Argonaut has made good progress over the last several months, ramping up mining and milling rates toward design rates. With Alamos's strong balance sheet and significant technical and operating expertise, we are well-positioned to complete the ramp-up and optimization of Magino and unlock the full potential of the operation.
The addition of Magino will make Alamos a stronger company and enhance our unique position as a growing intermediate producer with declining costs and one of the lowest political risk profiles in the sector. We've been very selective throughout our history when it comes to acquisitions and have demonstrated a strong long-term track record of value creation. We expect that track record to continue with Magino. The details of the transaction are summarized on slide six. The acquisition of Argonaut is by way of a Plan of Arrangement, with Alamos shareholders owning 95% of the combined company and Argonaut shareholders holding the remaining 5%. Under the terms of the agreement, 0.0185 Alamos common shares will be issued for each Argonaut common share, a value of $0.34 per share.
In addition, Argonaut shareholders will retain exposure to Argonaut's U.S. and Mexican assets through a newly formed SpinCo with an estimated value of $0.06 per share. This represents total consideration of approximately $0.40, a 34% premium to yesterday's closing price, or a 41% premium based on the 20-day volume-weighted average of both companies. Alamos expects to issue approximately 20 million common shares as part of the transaction, representing an equity value of approximately $276 million on a fully diluted in-the-money basis and an enterprise value of $516 million. The transaction is subject to customary court and regulatory approvals and will require approval of 66 2/3% of Argonaut's shareholder vote cast. The transaction includes customary non-solicitation covenants, termination fees, and senior officer and director lockups.
The board of directors of Alamos Gold and Argonaut Gold have unanimously approved the arrangement, and Argonaut's board recommends that shareholders vote in favor of the transaction. In addition, Argonaut's two largest shareholders have entered into lockup agreements in support of the transaction, representing 40% of its shares outstanding. The shareholder meeting materials, including the Information Circular, will be mailed in May, with the transaction expected to close in July. The benefits to Alamos shareholders are detailed on slide seven. The integration of the adjacent Island Gold and Magino mines and the ability to leverage one larger centralized milling and tailings facility at Magino is going to drive significant synergies. We expect operating and capital synergies will total $515 million based on Island Gold's current mine plan, with further upside as the deposit continues to grow.
Given the rapid ongoing growth of the Island Gold deposit, the larger mill and tailings facility has become increasingly valuable. With access to an already constructed mill at Magino, we no longer will require the mill expansion at Island Gold, further de-risking the phase III expansion. The acquisition is accretive across key financial and operational metrics as we continue to create value on a per-share basis, including net asset value, cash flow, production, and reserves. The acquisition adds a fourth core long-life producing asset in Canada, with a large reserve and resource base totaling over five million ounces and exploration upside. It will provide an immediate boost to our near- and longer-term production profile, with our combined production rate increasing approximately 25% to over 600,000 ounces per year. Longer term, we have the capacity to increase production to over 900,000 ounces per year.
Through further optimization and expansion of a centralized mill at Magino, fed by both Magino and Island Gold ore, there is potential to take long-term production even higher, improving our already strong growth profile. The acquisition firmly positions us as the third-largest gold producer in Canada and further increases our exposure to one of the best jurisdictions in the world. We expect to continue increasing this exposure through our portfolio of organic growth projects. These include the phase III expansion at Island Gold, which is well underway, and our Lynn Lake project in Manitoba. This transaction does not change our timelines for Lynn Lake, with early-stage work already underway and more significant construction activities expected to ramp up in 2025. With a solid balance sheet and stronger overall cash flow generation with the acquisition, we are well-positioned to continue executing on our organic growth plans.
Now I'd like to turn the call over to Richard Young, President and Chief Executive Officer of Argonaut Gold, to review the benefits for the Argonaut shareholders.
Well, thank you, John. This is a positive transaction for both companies, and I'm pleased to be here with John to present this to our respective shareholders. I'd like to start by thanking the entire Argonaut team across our asset base. Our employees at Magino will be joining a world-class asset in Island Gold. Together, both operations are stronger, with longer and brighter futures. Over to slide eigth. The team has made considerable progress at Magino over the last several years, taking it from a project to its first gold pour last June, followed by commercial production in November.
We have dealt with some startup challenges, but as I will touch on later, we have identified the issues, we're in the process of implementing changes, and we are seeing steady improvement. With a much stronger balance sheet and a deeper and experienced team, we are confident that Alamos has the financial capacity and the team to complete the ramp-up and optimization of the Magino mine, unlocking its full potential. Our shareholders are receiving an immediate premium and will own 5% of the combined company, providing exposure to a much larger, better capitalized, and well-run company. This includes a diversified portfolio of high-quality, low-cost operating mines in North America, a strong growth pipeline, and a solid balance sheet to support that growth. Argonaut shareholders will also participate in ongoing exposure at Magino's operating and exploration upside, with considerable synergies to be realized through this combination.
Additionally, Argonaut shareholders will retain ownership in the Florida Canyon Mine in the United States and our Mexican assets through SpinCo, an attractive new junior gold producer. We look forward to participating in the success of the combined company and the SpinCo as shareholders of both companies. Now I'll turn the call back over to John to present the new pro forma portfolio of assets.
Thank you, Richard. Slide 10 provides an overview of the combined company. Magino will be our third producing mine in Canada and fourth in North America, taking our combined production to over 600,000 ounces per year. We also have a portfolio of growth projects, including the phase III expansion at Island Gold that is currently underway, the Lynn Lake project in Manitoba, where we plan on making a construction decision next year, and the PDA project in Mexico, where we plan to release a mine plan in the second quarter. Slide 11 illustrates the impact that Magino will have on our production outlook. The addition of Magino will take annual gold production from just over 500,000 ounces currently to over 600,000 ounces per year post-acquisition. Longer term, with development of the PDA and Lynn Lake, our growth potential increases to over 900,000 ounces.
This is all underpinned by a portfolio of high-quality, long-life assets with average mine lives of over 15 years. Our costs are already well below the industry average, and we expect our low-cost production growth to drive further decreases over the next several years. One thing not highlighted in this slide is the additional upside potential at both Magino and Island Gold. Through an optimization and larger expansion of the centralized Magino mill, there's potential to expand mining rates at both operations, supporting further production upside. Slide 12 highlights the accretion we will see across some of our key operating metrics. Our production is expected to increase 25% on an absolute basis to 630,000 ounces. But more importantly, our production per share is increasing 18%. Similarly, our total reserves are increasing 22% to 13 million ounces, or 16% on a per-share basis.
With the addition of a third producing mine in Canada, we maintain very favorable low political risk, with nearly 90% of our net asset value based in Canada and just under 80% of our production over the next three years. Slide 14 illustrates the various synergies that we expect to realize from the transaction, which totaled $515 million over the life of both mines on a pre-tax basis, or a net present value of $250 million on a discounted basis. Through the utilization of a centralized mill at Magino, the expansion of the mill at Island Gold will no longer be required. Combined with the use of the larger tailings facility at Magino for both operations, we expect this will result in $140 million of capital savings over the life of the mine.
A centralized mill will result in lower processing costs and lower consolidated G&A for the combined operation, resulting in annual savings of $25 million, or $375 million, over the life of the mine. With three operations in Canada in close proximity to each other, we will have an increased purchasing power for consumables. In addition, having recently completed construction, the Magino operation has a substantial amount of tax pools available that could be brought forward and used at Alamos's other Canadian assets. This is expected to defer any meaningful cash taxes payable in Canada by three years to 2028. Slide 15 demonstrates what is driving these synergies: the close proximity of the two operations. The two deposits are right beside each other, and the incremental haul distance from the Island Gold shaft to the Magino mill is only two km.
Combining these two assets and using a centralized mill is going to unlock tremendous ongoing value as we continue to define new mineral reserves and resources in the district. Slide 16 further demonstrates how close Island Gold and Magino deposits are and how large their combined mineral endowment is. The deposits are within 300 meters of each other across a four kilometer strike, and they contain combined mineral reserves and resources totaling 11.5 million ounces. This includes 6.1 million ounces of total reserve and resources at Island Gold and 5.4 million ounces at Magino, with upside potential at both. Slide 17 illustrates our plan for incorporating the centralized mill and tailings facility at Magino. For the remainder of this year, we will continue to use our current mill to process Island Gold ore. Magino will continue to ramp up operations towards designed rates of 10,000 tons per day.
Following the expected closing of the transaction in July, we will continue the ramp-up and optimization of the mill with the target of reaching a throughput rate of 11,200 tons per day by year-end. This will be sufficient to handle ore from both Magino and Island Gold. From then on, the Island Gold mill will no longer be required, resulting in a significant decrease in processing costs for Island Gold ore. In 2025, we will work on further optimization and expanding the Magino mill in order to accommodate higher throughput rates from Island Gold once the phase III expansion is completed in 2026. We expect to be able to expand the Magino mill to an operating rate of 12,400 tons per day to accommodate ore from both Magino and the expanded Island Gold at a modest capital cost.
With the transition to the Magino mill, we will no longer need to expand the Island Gold tailings facility. With a permitted capacity of 150 million tons, the Magino tailings facility has more than sufficient capacity to accommodate Magino's reserves and Island Gold's growing reserve and resource base. Now looking at slide 18, with a 20-year defined mine life at Island Gold, a 19-year mine life at Magino, and a centralized mill with expansion potential, there is significant longer-term potential for higher production rates at both mines. Island Gold's impressive track record of reserve and resource growth continues, including having increased one million ounces beyond what was incorporated into the 2022 phase III expansion study to now sit at 6.1 million ounces. With the deposit open laterally and at depth, and new opportunities emerging in the hanging wall and footwall of the deposit, we expect that growth to continue.
The shaft infrastructure being developed at Island Gold will have excess capacity that can support higher skipping rates. The Magino processing facility currently has a nameplate capacity of 10,000 tons per day. However, expansion scenarios to increase that capacity to between 15,000 and 20,000 tons per day are being evaluated. In addition, the operation is permitted for a processing rate as high as 35,000 tons per day. Slide 19 highlights the impressive growth of the Island Gold deposit and why we expect that to continue. When we completed the 2,000-ton-per-day expansion study in 2020, Island Gold contained 3.7 million ounces of reserves and resources. By 2022, reserves and resources had increased by 40% to 5.1 million ounces, supporting the 2,400-ton-per-day phase III expansion study in 2022.
Since the release of the 2022 study, reserves and resources have increased another 21%, or 1 million ounces, to now sit at 6.1 million ounces, supporting a mine life in excess of 20 years. There remains considerable opportunity for further growth. The main structure is open laterally and at depth, and there are numerous emerging opportunities in the hanging wall and footwall zones, including mine depletion to date. 7.5 million ounces have been discovered at Island Gold as it continues to establish itself as one of the highest-grade and fastest-growing deposits in the world. The acquisition of Magino not only gives us the infrastructure to accommodate that growth, but also opens up opportunities for expansion over the longer term. I'll now turn the call back to Richard to provide more detail on the key assets to this transaction.
Thank you, John. Turning to slide 20. The Magino Mine is located in Northern Ontario, approximately 40 km northeast of Wawa, right beside the Island Gold Mine. Magino is a large-scale open-pit deposit containing 2.4 million ounces of reserves and total reserves and resources of 5.4 million ounces. Construction of the project commenced in early 2021, with first gold pour in June 2023 and commercial production declared in November of 2023. A feasibility study was released in early 2022 outlining a 10,000-ton-per-day open-pit mining and milling project with average annual production of 117,000 ounces over a 19-year mine life. The 10,000-ton-per-day mill capacity was chosen to manage initial capital costs. However, studies are underway to evaluate an expansion of the process facility to between 15,000-20,000 tons per day. Moving to slide 21. The ramp-up of the mine and mill had been slower than we anticipated.
However, the issues are well understood. We are implementing changes to address these issues, and we are seeing steady improvements. Mining rates have increased steadily through the year and are approaching design rates. Our focus is now on improving grade control through a number of initiatives. This includes the implementation of high-precision mining, drilling, and blasting practices, all designed to reduce dilution. We're already seeing the early benefits, and I have every confidence the improvements will continue. Over to slide 22. Similar to our mining rates, our milling rates are improving, and our challenges are well understood. The biggest challenge within the mill has been unscheduled maintenance downtime due to premature wear of poor-quality components and consumables. These components are being replaced and the issue systematically addressed, which is expected to drive higher throughput rates over the coming quarters.
During the fourth quarter, we demonstrated that mill is capable of achieving throughput rates well above nameplate capacity of 10,000 tons per day. Overall, the plan is complete, and the necessary work to improve equipment reliability and circuit optimization by mid-year, enabling an increase in throughput by approximately 10% by the fourth quarter. We have solid plans in place for both our mining and our milling operations that are showing improvements. I'm confident these improvements will continue with Alamos given their strong resources, deep, and very capable team. I look forward to seeing Magino reach its full potential with Alamos and the significant value to be created through its integration with Island Gold. Over to slide 23. Part of the potential will be through exploration upside. Magino already has a large established reserve of 2.4 million ounces, with another three million ounces of resources below the current reserve pit.
There's excellent potential that reserves will grow, extending an already long mine life of 19 years. An infill drill program focused on the conversion of some of those resources to reserves is well underway and expected to be complete in June. I'll now turn the call back over to John for a look at the combined company.
Thanks, Richard. We are confident in the progress that the Argonaut team is making and that the plan currently in place to complete the ramp-up of Magino will prove to be a success. Slide 24 highlights how the combined operation ranks in terms of Canadian mines. Post-expansion, the Island Gold Mine would rank as the sixth-largest Canadian mine. Combined with Magino, this will become not only the fourth-largest but also one of the lowest-cost and most profitable gold mines in Canada. This transaction is also increasing our overall ranking in terms of total Canadian production. We are firmly the third-largest producer, and through the phase III expansion and development of Lynn Lake, we have the capacity to double our rate of production in Canada to nearly 800,000 ounces per year over the next several years. Over to slide 25.
The acquisition of Magino fits well within our broader strategy of consolidating the underexplored Michipicoten Greenstone Belt. This started in 2017 with our acquisition of Richmont Mines, through which we acquired Island Gold along with an attractive 9,500-hectare land package with significant regional exploration potential. As our exploration success unfolded at Island Gold, in particular to the east, we acquired Trillium Mining in 2020, expanding our land package to 15,000 hectares. In 2023, we more than tripled our land package to 55,000 hectares with our acquisition of Manitou. With our acquisition of Argonaut, we have 60,000 hectares along strike from Island Gold and Magino. In addition to the 11.5 million ounces of reserves and resources contained within the Island Gold and Magino deposits, this land package includes many past-producing mines across 100-kilometer strike length.
I have no doubt that between Island Gold, Magino, and significant regional potential, this district will be producing gold for decades to come. Now moving to slide 29. In addition to consolidating the district, we've been active in acquiring and canceling royalties in our gold operation. This includes the repurchase of a 3% royalty in 2020 and a 10% NPI royalty in 2021. Given the ongoing growth of the deposit and the increase in gold prices, these acquisitions have significantly increased the value of the operation. I'll now turn back to Richard to provide an overview of SpinCo.
Well, thank you, John. Over to slide 30. As part of the transaction, Argonaut shareholders will retain exposure to Argonaut's US and Mexican assets through a newly created junior gold producer with a strong balance sheet and significant upside. SpinCo will own two producing mines with expected production of over 100,000 ounces of gold in 2024. This includes the Florida Canyon Mine in the United States and the San Agustin Mine in Mexico. SpinCo will also own La Colorada, which has the potential to deliver meaningful value through a restart of the operation and the development stage Cerro del Gallo project, both in Mexico. Collectively, these assets carry a consensus analyst value of over $170 million, giving SpinCo an attractive valuation. Argonaut shareholders will own 80% of SpinCo, with Alamos owning the remaining 20% as part of a $10 million financing to be completed upon SpinCo going public.
I'll now turn the call back over to John.
Right. Moving to slide 31. M&A has been a key driver for Alamos and an area where we've been able to create significant value for shareholders. We've done this by staying disciplined and focusing on the long term. With all three of our producing mines, we paid a reasonable price, and then through expansions, optimizations, and exploration success, we've created more valuable operations. Island Gold is an excellent example of this and our most recent success story. We acquired it for $600 million in 2017. It's now worth more than three times that at $2.2 billion, and we expect the value will continue to grow given the magnitude of our ongoing exploration success. In total, we've created over $3 billion of value across our operating mines. We expect this track record to continue with the acquisition of Magino.
Upon closing, we will work on completing the ramp-up of the operation, followed by optimization and expansion. Ultimately, we will create a complex that leverages both Island Gold and Magino, unlocking considerable value above what each asset would provide alone. Finally, Slide 32. In summary, we believe this is a good transaction for both Alamos and Argonaut shareholders. The combination of the two companies is going to create significant value for shareholders. Together, we are building a stronger company, one that is uniquely positioned as a leading Canadian intermediate gold producer, one with all the attributes needed to continue delivering peer-leading shareholder returns. That concludes our formal presentation. I'll now turn the call back to the operator to open the call for your questions.
Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star, then one on your telephone keypad. You'll hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue. Our first question comes from Kerry Smith of Haywood Securities. Please go ahead.
Thanks, operator. John, just a couple of questions on your plans for the pro forma balance sheet. I guess with the hedging, I presume you'll just continue to deliver into the hedges that Argonaut had. I think they're at $1,850 or something. And then the other question I had was, what would your plans be on the debt that Argonaut was trying to refinance?
Hi, Kerry. It's Greg here. I'll take that question. On the hedges, you're right. We'll keep that in place, deliver into those. We'll look at opportunities to restructure those over time. With respect to the debt, we will pay off that debt, basically transfer it into our credit facility because the borrowing costs are significantly lower, and over time, we'll look to pay that off through our cash flows coming from the existing operations.
Okay, great. And then maybe Luc has answered to this question. There had been grade issues at Magino and cost issues as well relative to what they expected from the feasibility. So what was your assessment of the grade challenges and the cost challenges at the operation when you did your due diligence?
Yeah, hi, Kerry. I'd say from a grade perspective, based on our due diligence, certainly. I mean, it's like any mining operation. As they start into the mining phase, there are some early challenges with regards to the grade control. But through our due diligence process, we had a good review with the management team, and they're certainly on an action plan there to resolve some of the issues that they've had with regards to grade. Looking at the design with regards to their drilling and blasting patterns to get some less blast heat in that process to avoid some of the dilution aspect from the blasting practices. So they've made some adjustments there to be able to correct that.
They've implemented a fleet management system as well with regards to their equipment, so giving them better control on their dig lines, certainly for high-grade, low-grade, and waste removal from the mining process. So I think we certainly think they're on the right track, and over time, they're going to get much better control of that dilution. Certainly, under Alamos's control, we can bring some more value and some more expertise to that process to be able to control that dilution aspect. Then certainly, on the cost aspect, I think maybe touched on a little bit with regards to John and certainly Richard's narrative, some of the challenges that they've had with regards to availability of the plant and lower mining rates certainly have had some impact overall on their cost profile.
But again, we're very confident that we're going to be able to get that under control and put it into the right direction. But certainly, the management team from Argonaut are on top of that and are certainly headed in the right direction to resolve those issues even currently.
Luc, what do you think the run rate would be on a steady-state basis for the milling cost per ton in that plant?
Well, once you combine, I guess, both assets with regards to Island and Magino, I think our long-term run rate will be about $16 per ton.
Is that U.S. or Canadian?
Canadian.
Okay. Okay. The last question I had was, what is your thought on the 2024 guidance that Argonaut had given for Magino? I think it was 120,000-130,000 ounces in the cost guidance. Do you think that's a reasonable target, or do you think that that's something that you can achieve or that you might have to sort of revise at post-closing?
Well, look, at this point, I mean, certainly, based on our review with our due diligence, we've reflected certainly some improvements with regards to the mining phase moving forward. But we've also incorporated.
Once the deal closes, can you give me a rough idea?
Yeah. I mean, if you broke it down to the components on the equity basis, we're going to be issuing just over 20 million shares. So that's about, call it, $280 million. On the debt side, including their leases, it's about $325 million. And then transaction costs would be anywhere from $15 million-$20 million. So we're talking just over $600 million in total deal costs with respect to this transaction for Alamos.
Okay. Okay, great. Thanks very much, guys.
Once again, if you have a question, please press star, then one. Our next question comes from Matthew Murphy of Jefferies. Please go ahead.
Hi, John. Can you share how your thinking has changed on Magino over the years?
That could be a very long answer, Matt, but obviously, a lot's changed since we first started looking at it. Remember, we've been in the district since the end of 2017 when we first acquired Richmont Mines. And so that's seven years. Over that time, Magino has gone through a pretty substantial evolution. And over the last couple of years, all the capital has been spent. I think it's close to $1 billion in capital spent on developing that project. And it really took that kind of time to pass and, I guess, some of the realities to set in to really set the companies up for an opportunity to merge like this. It's obviously a big benefit to the Island Gold operation that there is a 10,000-ton-per-day mill up and running. It's a brand new mill.
We had some pretty tough critics from our side go up and look at it, and they really liked what they saw. It's a good mill. The permitted tailings facility at 150 million tons, it's hard to put a price on that. If you were to try to set out on the path to permitting a facility like that today, that could take up to a decade. So from our perspective, with an ever-growing mine and mineral reserve at Island Gold, we're just going to have a big that's a big de-risking event for us to acquire something with that type of tailings capacity. And then just with respect to our whole phase III expansion and some of the aspects of going into that, the fact that we were just about to practically rebuild a new mill. We just don't have to do that now.
There were costs that we were going to incur this year on the tailings lift for our existing tailings facility, about $20 million in cost. That's just something we don't have to do at this point. And so it's not like these synergies are some things that we're going to realize down the line. They're immediate. There's an immediate impact on the benefits that we derive through the merger. And it should be pretty obvious to all that Island Gold itself, it's almost 11-gram deposit. Having that sitting next door, Island Gold itself brings a lot of synergies to the combined operation. And frankly, it's the synergies that ultimately drove this deal. Both operations are bringing something important to the table, and on a combined basis, we saw the opportunity to create a lot of value for shareholders on both sides.
That's great, color. Thanks. Have you ever run any of the Island high-grade ore through the Magino mill? Should it be pretty straightforward to blend that in?
No. To this point, no, we have not run any of the Island ore through the Magino mill. But based on our due diligence with our metallurgical review with our team, we see no issues there to be able to combine both the Magino ore with the Island ore into the plant. And we don't expect recoveries to have any effect or be affected by that combination of the two ore streams. And ultimately, it's going to lower our overall unit cost, obviously, for milling.
And then can I just ask what the size of the tax pool is? I think you mentioned no cash taxes until 2028. Is that correct?
Yeah. So the tax pools at Magino are about CAD one billion. So we could utilize those against profits from the combined complex of Island and Magino as well as at Young-Davidson. So that, I mean, we were scheduled to pay cash taxes starting in 2025. That's now been deferred to 2028 by utilizing those pools. So it's really bringing the value of those pools forward.
Perfect. Okay. Thank you.
Once again, if you have a question, please press star, then one. Our next question comes from Carey MacRury of Canaccord Genuity. Please go ahead.
Hi. Good morning, John. Maybe just a question on what does this mean for Lynn Lake going forward? Is this something that you would now sort of push out while you sort of optimize the region, or is that something that could happen concurrently?
As we said in the presentation, this isn't going to affect our timeline whatsoever on Lynn Lake. Work at Lynn Lake in 2024 is unfolding exactly as we said. Basically, everything's right on schedule. We expect to be in a position to make a production decision on Lynn Lake in early 2025. We're fully expecting to do that. See no change.
Okay, great. And then maybe just on the mill expansion, can you just talk a little bit about what's required there, and is there a sense of what the capital would be?
Luc?
Yeah. Our intent, certainly based on our due diligence with the improvements, certainly, that the Argonaut team is making with regards to the processing plant, we firmly believe they're on the right path. And with the optimization that they're looking to do, basically, with the whole flow stream from the Grizzly jaw crusher cone grinding circuit right through the whole plant, we're confident by the end of the year that we'll actually be at about 11,200 tons per day. And that's really within the operating budget of what Argonaut currently has in place. So in early 2025, we'd be in a position to actually feed 10,000 tons from the open pit Magino operation as well as the 1,200 tons from Island Gold.
Moving through the next year and a half, as we get into mid-2026, once our Shaft Phase 3+ Expansion's been completed, our mining rates will increase to 2,400 tons per day. There's some limited capital that would be required to then bring the stream from Magino of 10,000 feeding that plant and 2,400 tons a day feeding that plant from Island. Some very limited capital, really, pebble crusher, maybe an additional leach tank if required, but we think that the capacity is probably there. So it's very limited capacity. Maybe, I think, we're looking at about $40 million as far as capital to get it to 12,400 tons per day. The longer-term goal, as we've talked about, from 15,000-20,000 tons per day, Argonaut was already starting to look at that, but they're in the very early stages of that.
So there's certainly some more work that needs to happen around that. But additional components, probably another ball mill, probably some additional leaching. Also, the elution circuit would probably have to be added onto as well in order to accommodate that. But we're in the very early stages of being able to understand what that looks like.
All right. That's it for me. Congrats on the transaction, guys.
There are no further questions at this time. This concludes the question-and-answer session. If you have any further questions that have not been answered, please feel free to contact Mr. Scott Parsons at 416. Pardon me. We do have a question from Michael Siperco of RBC Capital Markets. Please go ahead.
Yeah. Thanks, guys. Just snuck in under the wire. A lot of my questions have been answered. Just one question for you, John, or the Alamos team. On the CapEx synergies, you highlighted the $150 million in capital. Presumably, that includes the $75 million or so from the planned spending on the Island mill expansion, the $20 million for tailings. Can you break down the rest of that number generally and maybe talk about what happened to the existing Island mill and any change to the timeline on the CapEx at Island Gold?
Yep. Happy to take that, Mike. I mean, the majority of the savings after the initial savings that you talked about, which is upfront or the near-term savings, would be the mill expansion at Island goes away as well as that tailings lift that we're doing this year. The longer-term savings are tailings lift to our existing Island tailings in the future. So there's a couple of lifts that would be needed in future years that are avoided as part of that. So that's the majority of the capital that's saved. And then in terms of what it does for our budget this year, we had $40 million scheduled for the mill expansion in 2024 as well as $20 million for that tailings lift.
That's $60 million of 2024 budget that we will no longer be required, offset by a little bit of capital that's going into the Magino mill, but that's built into Argonaut's budget.
On the existing Island mill, would that just be decommissioned, or are there any synergies in using the mill as part of the longer-term operation?
Yeah. As I mentioned, Michael, I think the Argonaut team certainly will continue on that path with regards to optimizing the mill to get it to 11,200 tons per day by the end of the year. So early 2025, we would basically decommission the Island Gold mill and just run the Magino mill solely.
No other changes planned at this point with respect to any other items in the Island Gold expansion? Shaft sinking continues apace, all the rest of it?
Correct. No other changes.
Yeah. No other changes. Correct.
That $75 million number for the total budget for the mill expansion within the expansion budget, is that the right number that we should be using?
Sorry. Yeah. I mean, the overall budget was about $80 million in the phase three study. We haven't seen inflationary pressures since there. We were just going through all the costing on that. We didn't have a final number, but it was probably going to be something slightly higher than $80 million. We just didn't have a final number as we finalized the engineering.
Okay. Got it. Thanks very much, all.
There are no further questions at this time. This concludes the question-and-answer session. If you have any further questions that have not been answered, please feel free to contact Mr. Scott Parsons at 416-368-9932, extension 5439, or Joanna Longo at 416-575-6965.