The decision follows the company saying two weeks ago it would start phase three expansion at its Island Gold mine in Ontario, which was expected to lift its output by 72%.
Alamos said the decision to build La Yaqui Grande was based on results of a positive internal economic study and the project being 7km from its existing Mulatos operation.
Initial production for the five-year mine was slated for the second half of 2022.
The study estimated initial capex of US$137 million and at a $1,750 per ounce gold price, Alamos said Mulatos was expected to self-finance La Yaqui Grande's development.
The study put average annual gold production at 123,000oz and all-in sustaining costs at $578/oz.
The base case after-tax NPV5 of $165 million and IRR of 41% were based on assumptions of a $1,450/oz gold price, $18/oz silver and a MXN/USD foreign exchange rate of 21:1.
Alamos said the NPV jumped to $260 million and IRR to 58% using a $1,750/oz gold price.
President and CEO John McCluskey said La Yaqui Grande represented Alamos' next low-cost, high-return project in the Mulatos district.
"This follows the success of the La Yaqui Phase I and Cerro Pelon projects which were both developed on budget and ahead of schedule," he said.
"Given its bigger scale and low-cost profile, La Yaqui Grande is expected to drive strong free cash flow growth from the Mulatos District in 2022 and beyond."
Alamos also has the Young-Davidson mine in Ontario.
It's due to release its second quarter financial results after market close today.
Its shares (TSX: AGI) hit a one-year high intraday of C$15.52, before closing up 0.6% to $15.35 to value it at $6 billion (US$4.5 billion).