Alamos Gold Reports Second Quarter 2024 Results Record production and lower costs drive record free cash flow of $107 million
Alamos Gold Inc.
Brookfield Place, 181 Bay Street, Suite 3910, P.O. Box #823 Toronto, Ontario M5J 2T3 Telephone: (416) 368-9932 or 1 (866) 788-8801
All amounts are in United States dollars, unless otherwise stated.
Alamos Gold Reports Second Quarter 2024 Results
Record production and lower costs drive record free cash flow of $107 million
Toronto, Ontario (July 31, 2024) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter ended June 30, 2024.
“Alamos delivered a record performance in the second quarter. Production exceeded quarterly guidance, increasing to a record 139,100 ounces. Combined with lower costs, this drove a number of financial records including free cash flow of $107 million,” said John A. McCluskey, President and Chief Executive Officer. “We also continue to create value through exploration and our various growth initiatives. The Phase 3+ Expansion is progressing well, and the integration of Island Gold with our recently acquired Magino mine is well underway. We expect the integration of the two operations to drive substantial synergies and unlock significant longer-term upside potential supported by the broad-based exploration success we are seeing across the Island Gold District. We remain well positioned to achieve full year guidance, and deliver significant production growth, at declining costs over the next several years,” Mr. McCluskey added.
Second Quarter 2024 Operational and Financial Highlights
- Produced a record 139,100 ounces of gold, exceeding quarterly guidance of 123,000 to 133,000 ounces, driven by strong performances from Island Gold and La Yaqui Grande. With the solid first half performance, the Company is well positioned to achieve full year production and cost guidance
- Sold 140,923 ounces of gold at an average realized price of $2,336 per ounce, generating record quarterly revenue of $332.6 million. This represented a 27% increase from the second quarter of 2023 and marked the second consecutive quarter of record revenue
- Record free cash flow1 of $106.9 million, reflecting strong mine-site free cash flow from all three operations, including quarterly free cash flow of $69.9 million at Mulatos and record quarterly free cash flow from Young-Davidson of $40.1 million. This was a significant increase from consolidated free cash flow of $24.4 million in the first quarter of 2024, while continuing to fund the Phase 3+ Expansion at Island Gold
- Record cash flow from operating activities of $194.5 million (including $190.6 million, or $0.48 per share before changes in working capital1), an 80% increase from the first quarter of 2024 reflecting strong operating performance and margin expansion
- Cost of sales of $172.6 million or $1,225 per ounce were in line with full year guidance
- Total cash costs1 of $830 per ounce and all-in sustaining costs ("AISC"1) of $1,096 per ounce decreased 9% and 13%, respectively, from the first quarter of 2024, driven by higher grades at both Island Gold and Young-Davidson
- Adjusted net earnings1 for the second quarter were $96.9 million, or $0.24 per share1. Adjusted net earnings includes adjustments for net unrealized foreign exchange losses recorded within deferred taxes and foreign exchange of $15.9 million, and other adjustments, net of taxes totaling $10.9 million. Reported net earnings were $70.1 million, or $0.18 per share
- Cash and cash equivalents increased 31% from the first quarter of 2024 to $313.6 million on June 30, 2024. This was net of a $36.9 million private placement into Argonaut Gold ("Argonaut") in April, and ongoing investment in the Phase 3+ Expansion. The Company was debt-free as the end of the second quarter. Subsequent to quarter-end, the Company drew down $250 million on its credit facility to extinguish Argonaut's term loan, revolving credit facility and gold prepaid advance of 10,000 ounces, all inherited as part of the acquisition
1 | Alamos Gold Inc
- Paid dividends of $10.0 million, or $0.025 per share for the quarter
- Provided an exploration update at Young-Davidson having intersected a new style of higher-grade gold mineralization from the mid mine, in zones within the hanging wall of the Young-Davidson deposit. These zones are located between 10 and up to 200 metres (“m”) south of existing infrastructure and Mineral Reserves and Resources, highlighting the upside potential with grades intersected well above the current Mineral Reserve grade of 2.31 g/t of gold
- Announced the completion of the acquisition of Argonaut on July 12, 2024. As part of the acquisition, Alamos acquired Argonaut’s Magino mine, located adjacent to Alamos’ Island Gold mine in Ontario, Canada. Argonaut’s assets in the United States and Mexico have been spun out as a newly created junior gold producer named Florida Canyon Gold Inc. (“Florida Canyon Gold”) of which the Company owns an equity interest of 19.9%
- Completed a gold sale prepayment agreement (“gold prepayment”) on July 15, 2024 for total consideration of $116 million in exchange for the delivery of 49,384 ounces in 2025. The proceeds of the gold prepayment were used to eliminate gold forward sale contracts, previously entered into by Argonaut, totaling 179,417 ounces in 2024 and 2025 with an average price of $1,838 per ounce. The transaction has eliminated more than half of the Argonaut hedge book and associated mark-to-market liability, while providing significantly increased exposure to rising gold prices
- Provided a comprehensive exploration update at Island Gold where exploration drilling continues to extend high-grade gold mineralization across the Island Gold Deposit, as well as within several hanging wall and footwall structures. Delineation and definition drilling has also defined wide, higher-grade zones within the Island East area. The success on both fronts is expected to drive further growth in high-grade Mineral Reserves and Resources with the 2024 year end update
- Published Alamos’ 2023 ESG Report, outlining the Company’s progress on its ESG performance
.(1) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
2 | Alamos Gold Inc
Highlight Summary
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 |
Financial Results (in millions)
| Operating revenues | $332.6 | $261.0 | $610.2 | $512.5 |
| Cost of sales(1) | $172.6 | $157.8 | $346.2 | $313.0 |
| Earnings from operations | $138.8 | $88.6 | $220.2 | $163.6 |
| Earnings before income taxes | $128.2 | $92.1 | $203.8 | $164.3 |
| Net earnings | $70.1 | $75.1 | $112.2 | $123.5 |
| Adjusted net earnings(2) | $96.9 | $59.3 | $148.1 | $104.7 |
Earnings before interest, taxes, depreciation and $180.5 $138.9 $306.2 $258.8 amortization (2)
Cash provided by operations before working capital and taxes $190.6 $138.3 $325.5 $265.5 paid (2)
| Cash provided by operating activities | $194.5 | $141.8 | $303.4 | $236.1 |
| Capital expenditures (sustaining)(2) | $20.9 | $23.4 | $47.4 | $50.3 |
| Free cash flow(2) | $106.9 | $61.6 | $131.3 | $72.1 |
| Capital expenditures (growth) (2) | $58.8 | $49.8 | $110.4 | $101.8 |
| Capital expenditures (capitalized exploration) | $7.9 | $7.0 | $14.3 | $11.9 |
Operating Results
139,100 136,000 274,800 264,400 Gold production (ounces)
140,923 131,952 273,772 264,620 Gold sales (ounces)
Per Ounce Data
Average realized gold price $2,336 $1,978 $2,207 $1,937 Average spot gold price (London PM Fix) $2,338 $1,976 $2,208 $1,933 Cost of sales per ounce of gold sold $1,225 $1,196 $1,265 $1,183 (includes amortization) (1)
Total cash costs per ounce of gold sold (2) $830 $847 $869 $834 All-in sustaining costs per ounce of gold sold (2) $1,096 $1,112 $1,178 $1,144
Share Data
| Earnings per share, basic | $0.18 | $0.19 | $0.28 | $0.31 |
| Earnings per share, diluted | $0.17 | $0.19 | $0.28 | $0.31 |
| Adjusted earnings per share, basic(2) | $0.24 | $0.15 | $0.37 | $0.27 |
| Weighted average common shares outstanding (basic) (000’s) | 398,275 | 395,346 | 397,546 | 394,657 |
Financial Position (in millions)
$313.6 $224.8 Cash and cash equivalents
(1) Cost of sales includes mining and processing costs, royalties, and amortization expense.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
3 | Alamos Gold Inc
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 |
Gold production (ounces)
| Young-Davidson | 44,000 | 45,200 | 84,100 | 90,200 |
| Island Gold | 41,700 | 30,500 | 75,100 | 63,400 |
| Mulatos District(7) | 53,400 | 60,300 | 115,600 | 110,800 |
Gold sales (ounces)
| Young-Davidson | 45,057 | 43,570 | 84,867 | 89,246 |
| Island Gold | 39,766 | 28,183 | 73,896 | 61,910 |
| Mulatos District | 56,100 | 60,199 | 115,009 | 113,464 |
Cost of sales (in millions) (1)
| Young-Davidson | $66.7 | $59.3 | $132.1 | $121.2 |
| Island Gold | $30.7 | $27.6 | $64.1 | $58.5 |
| Mulatos District | $75.2 | $70.9 | $150.0 | $133.3 |
Cost of sales per ounce of gold sold (includes amortization) (1)
| Young-Davidson | $1,480 | $1,361 | $1,557 | $1,358 |
| Island Gold | $772 | $979 | $867 | $945 |
| Mulatos District | $1,340 | $1,178 | $1,304 | $1,175 |
Total cash costs per ounce of gold sold (2)
| Young-Davidson | $1,030 | $955 | $1,104 | $948 |
| Island Gold | $493 | $678 | $591 | $651 |
| Mulatos District | $907 | $847 | $873 | $843 |
Mine-site all-in sustaining costs per ounce of gold sold (2),(3)
| Young-Davidson | $1,203 | $1,212 | $1,334 | $1,222 |
| Island Gold | $805 | $1,072 | $943 | $1,016 |
| Mulatos District | $963 | $894 | $933 | $903 |
Capital expenditures (sustaining, growth, and capitalized exploration) (in millions) (2)
| Young-Davidson(4) | $19.0 | $13.5 | $39.2 | $30.9 |
| Island Gold(5) | $56.1 | $54.7 | $110.7 | $111.7 |
| Mulatos District(6) | $7.8 | $6.5 | $11.7 | $12.2 |
| Other | $4.7 | $5.5 | $10.5 | $9.2 |
(1) Cost of sales includes mining and processing costs, royalties, and amortization expense.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based
(4) Includes capitalized exploration at Young-Davidson of $1.4 million and $2.4 million for the three and six months ended June 30, 2024 ($1.2 million and $2.6 million for the three and six months ended June 30, 2023).
(5) Includes capitalized exploration at Island Gold of $3.4 million and $6.9 million for the three and six months ended June 30, 2024 ($3.0 million and $5.4 million for the three and six months ended June 30, 2023).
(6) Includes capitalized exploration at Mulatos District of $3.1 million and $5.0 million for the three and six months ended June 30, 2024 ($2.8 million and $3.9 million for the three and six months ended June 30, 2023).
(7) The Mulatos District includes La Yaqui Grande and Mulatos.
4 | Alamos Gold Inc
Environment, Social and Governance Summary Performance
Health and Safety
- Total recordable injury frequency rate1 ("TRIFR") of 1.76 in the second quarter, down from 1.79 in the first quarter
- Lost time injury frequency rate1 ("LTIFR") of 0.20 in the second quarter as compared to nil in the first quarter
- Year-to-date TRIFR of 1.78 and LTIFR of 0.10
During the second quarter of 2024, Alamos had 18 recordable injuries across its sites including two lost time injuries (“LTI”).
Alamos strives to maintain a safe, healthy working environment for all, with a strong safety culture where everyone is continually reminded of the importance of keeping themselves and their colleagues healthy and injury-free. The Company’s overarching commitment is to have all employees and contractors return Home Safe Every Day.
Environment
- Zero significant environmental incidents and two minor reportable events in the second quarter of 2024
- Received approval from the province for a routine tailings raise at the Island Gold and Young-Davidson Mines
- Received Environmental Compliance Approval Air and Noise from the Ministry of Environment, Conservation and Parks at Island Gold
- Continued reclamation activities at Mulatos for the Cerro Pelon, El Victor and San Carlos pits
The two minor reportable events during the quarter involved an oil spill (1,000 litres) following the accidental puncture of a container, and a dust concern due to strong winds, at the Young-Davidson mine. The area of the oil spill was contained and remediated with no anticipated long-term effects for either event.
The Company is committed to preserving the long-term health and viability of the natural environment that surrounds its operations and projects. This includes investing in new initiatives to reduce our environmental footprint with the goal of minimizing the environmental impacts of our activities and offsetting any impacts that cannot be fully mitigated or rehabilitated.
Community
Ongoing donations, medical support and infrastructure investments were provided to local communities, including:
- Various sponsorships to support local youth sports teams and community events, and donations to local charities and organizations around the Company's mines
- Continued to advance a long-term power project at Island Gold in partnership with Batchewana First Nation
- Continued to provide local community support including road maintenance, dust suppression, and water distribution to Matarachi and surrounding areas around the Mulatos Mine
The Company believes that excellence in sustainability provides a net benefit to all stakeholders. The Company continues to engage with local communities to understand local challenges and priorities. Ongoing investments in local infrastructure, health care, education, cultural and community programs remain a focus of the Company.
Governance and Disclosure
- Published Alamos' 2023 Environmental, Social and Governance ("ESG") Report, outlining the Company's progress on its ESG performance across its operations, projects and offices
- Mulatos was awarded the Empresa Socialmente Responsable award for the 16th consecutive year in recognition of the mine’s ethical and sustainable practices
- Published Alamos’ 2023 Report on Conformance to the Responsible Gold Mining Principles ("RGMP"s) in accordance with the World Gold Council’s RGMP framework
- Published Alamos’ inaugural 2023 Report on Modern Slavery in accordance with Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act
- Published Alamos’ Extractive Sector Transparency Measures Act 2023 Annual Report, outlining payments made to governments in Canada and abroad related to our activities on a country and project basis
5 | Alamos Gold Inc
The Company maintains the highest standards of corporate governance to ensure that corporate decision-making reflects its values, including the Company’s commitment to sustainable development.
(1) Frequency rate is calculated as incidents per 200,000 hours worked.
6 | Alamos Gold Inc
Outlook and Strategy
| 2024 Guidance - excludes Magino (4) | |||||
| Young- | Island Gold | ||||
| Davidson | Mulatos | Lynn Lake | Total |
Gold production (000's ounces) 180 - 195 145 - 160 160 - 170 485 - 525 Cost of sales, including amortization (in millions)(3) $620 Cost of sales, including amortization ($ per ounce)(3) $1,225 Total cash costs ($ per ounce)(1) $950 - $1,000 $550 - $600 $925 - $975 — $825 - $875 All-in sustaining costs ($ per ounce)(1) $1,125 - $1,175 Mine-site all-in sustaining costs ($ per ounce)(1)(2) $1,175 - $1,225 $875 - $925 $1,000 - $1,050 — Capital expenditures (in millions)
Sustaining capital(1) $40 - $45 $50 - $55 $3 - $5 — $93 - $105 Growth capital(1) $20 - $25 $210 - $230 $2 - $5 — $232 - $260
Total Sustaining and Growth Capital (1) -
$60 - $70 $260 - $285 $5 - $10 — $325 - $365
producing mines
Growth capital - development projects $25 $25 Capitalized exploration(1) $10 $13 $9 $9 $41
Total capital expenditures and capitalized $70 - $80 $273 - $298 $14 - $19 $34 $391 - $431 exploration(1)
(1) Refer to the "Non-GAAP Measures and Additional GAAP" disclosure at the end of this press release and associated MD&A for a description of these measures.
(2) For the purposes of calculating mine-site all-in sustaining costs at individual mine sites, the Company does not include an allocation of corporate and administrative and share based compensation expenses to the mine sites.
(3) Cost of sales includes mining and processing costs, royalties, and amortization expense, and is calculated based on the mid-point of total cash cost guidance.
(4) 2024 Guidance does not include the Magino Mine with the acquisition closing in July. Updated guidance is expected to be provided in September 2024.
The Company’s objective is to operate a sustainable business model that supports growing returns to all stakeholders over the long-term, through growing production, expanding margins, and increasing profitability. This includes a balanced approach to capital allocation focused on generating strong ongoing free cash flow while reinvesting in high-return internal growth opportunities, and supporting higher returns to shareholders.
The Company's outstanding operational and financial performance continued in the second quarter of 2024, achieving a number of new records. This included record production of 139,100 ounces, which exceeded quarterly guidance, at substantially lower costs reflecting strong performances at all three operations. With the solid first half performance, the Company is well positioned to achieve full year production and cost guidance issued in January 2024. Updated 2024 guidance, incorporating the recently acquired Magino mine, is expected to be released in September 2024.
Record production and rising gold prices drove record revenue in the quarter. In addition, lower costs generated a significant increase in operating margins, driving operating cash flow and free cash flow sharply higher to new records. Free cash flow increased to $106.9 million in the second quarter, up more than 300% from the first quarter of 2024 while continuing to fund the Phase 3+ Expansion at Island Gold. The expansion is progressing well and remains on track to be completed during the first half of 2026, which will be a significant driver of further free cash flow growth over the longer-term through growing production and declining costs.
With the completion of the acquisition of Argonaut earlier this month, the integration of the Magino and Island Gold mines is well underway. Given their close proximity, the integration of the two operations is expected to create one of the largest and lowest cost gold mines in Canada and drive pre-tax synergies of approximately $515 million over the life of the mine through the use of shared infrastructure. This includes immediate capital savings with the mill and tailings expansions at Island Gold no longer required, and significant ongoing operating savings through the use of the larger and more efficient Magino mill. This not only de-risks the Phase 3+ Expansion, but also creates opportunities for further expansions of the combined Island Gold and Magino operations.
The addition of Magino has increased company-wide gold production to an annual rate of approximately 600,000 ounces per year with longer term production potential of over 900,000 ounces per year. Production in the third quarter of 2024 is expected to be between 145,000 and 155,000 ounces, including ounces produced from Magino from the acquisition date of July 12, 2024. Costs will be above the top end of the current guidance range, reflecting higher production costs from Magino.
7 | Alamos Gold Inc
The Company's other growth initiatives continue to advance including preparatory work on the Lynn Lake project ahead of an expected construction decision in 2025, and finalizing work on a development plan for the Puerto Del Aire ("PDA") project, expected to be released in early September. The PDA development plan is expected to outline another attractive project and significantly extend the mine life of the Mulatos District.
Additionally, the Company continues to create value through ongoing exploration success across its asset base. As outlined in May, underground exploration drilling at Young-Davidson from the mid-mine intersected a new style of higher-grade gold mineralization in zones within the hanging wall of the deposit. These zones are located between 10 and up to 200 m south of existing infrastructure and Mineral Reserves and Resources, highlighting the upside potential with grades intersected well above the current Mineral Reserve grade of 2.31 g/t Au. In addition, as announced earlier this month, underground and surface exploration programs at Island Gold continue to extend high-grade mineralization beyond the extent of the main deposit as well as within the hanging wall and footwall. This is expected to drive another increase in high-grade Mineral Reserves and Resources at Island Gold. Near-mine exploration success also highlighted the longer-term upside opportunities to supply multiple sources of ore through the expanded Magino mill.
The Company ended the second quarter with $313.6 million of cash and cash equivalents, up 31% from the first quarter. The Company was debt-free at the end of the second quarter. Subsequent to quarter-end, the Company withdrew $250 million on its credit facility to extinguish Argonaut's term loan, revolving credit facility, and gold prepaid advances, all inherited as part of the acquisition, and continued to maintain a strong liquidity position of more than $550 million. Combined with strong ongoing free cash flow generation, the Company remains well positioned to internally fund its organic growth initiatives including the Phase 3+ Expansion, optimization of the Magino mill, and development of the PDA and Lynn Lake projects.
8 | Alamos Gold Inc
Second Quarter 2024 Results
Young-Davidson Financial and Operational Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 |
Gold production (ounces) 44,000 45,200 84,100 90,200 Gold sales (ounces) 45,057 43,570 84,867 89,246
Financial Review (in millions)
| Operating Revenues | $106.1 | $86.3 | $188.8 | $172.6 |
| Cost of sales(1) | $66.7 | $59.3 | $132.1 | $121.2 |
| Earnings from operations | $38.6 | $25.9 | $55.4 | $49.9 |
| Cash provided by operating activities | $59.1 | $48.9 | $93.9 | $82.6 |
| Capital expenditures (sustaining)(2) | $7.7 | $11.1 | $19.3 | $24.3 |
| Capital expenditures (growth)(2) | $9.9 | $1.2 | $17.5 | $4.0 |
| Capital expenditures (capitalized exploration)(2) | $1.4 | $1.2 | $2.4 | $2.6 |
| Mine-site free cash flow(2) | $40.1 | $35.4 | $54.7 | $51.7 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,480 | $1,361 | $1,557 | $1,358 |
| Total cash costs per ounce of gold sold(2) | $1,030 | $955 | $1,104 | $948 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,203 | $1,212 | $1,334 | $1,222 |
Underground Operations
| Tonnes of ore mined | 717,565 | 736,078 | 1,384,627 | 1,457,005 |
| Tonnes of ore mined per day | 7,885 | 8,089 | 7,608 | 8,050 |
| Average grade of gold(4) | 2.18 | 2.14 | 2.07 | 2.18 |
| Metres developed | 2,186 | 2,238 | 4,100 | 4,933 |
Mill Operations
| Tonnes of ore processed | 725,647 | 696,718 | 1,391,425 | 1,398,672 |
| Tonnes of ore processed per day | 7,974 | 7,656 | 7,645 | 7,727 |
| Average grade of gold(4) | 2.18 | 2.13 | 2.07 | 2.18 |
| Contained ounces milled | 50,832 | 47,774 | 92,442 | 97,987 |
| Average recovery rate | 90% | 91% | 90% | 91% |
(1) Cost of sales includes mining and processing costs, royalties and amortization.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
(4) Grams per tonne of gold ("g/t Au").
Young-Davidson produced 44,000 ounces of gold in the second quarter, 10% higher than the first quarter and slightly lower than the prior year period. Production for the first half of the year totaled 84,100 ounces. The strong improvement from the first quarter of 2024 was driven by higher mining rates and grades mined and processed. With grades expected to increase in the second half of the year and milling rates expected to remain at design rates of 8,000 tpd, Young-Davidson remains on track to achieve full year guidance.
Underground mining rates averaged 7,885 tpd in the second quarter, a significant increase from the first quarter reflecting the delivery of two new hybrid production scoops and temporary downtime during the previous quarter to replace the head ropes in the Northgate shaft. Milling rates averaged 7,974 tpd in the second quarter, consistent with annual guidance and the increase in mining rates.
Grades mined averaged 2.18 g/t Au in the second quarter, a 12% increase from the first quarter, and consistent with annual guidance. Mill recoveries averaged 90% in the quarter, in line with guidance.
Financial Review
Revenues increased to a record $106.1 million in the second quarter, 23% higher than the prior year period, driven by the higher realized gold price and an increase in gold ounces sold. For the first half of the year, revenues of $188.8 million were 9% higher than the prior year, as higher realized gold prices offset the lower ounces sold.
Cost of sales of $66.7 million in the second quarter were 12% higher than the prior year period, reflecting higher tonnes processed and ounces sold, as well as inflationary pressures on unit costs. Underground mining costs were
9 | Alamos Gold Inc
CAD $55 per tonne in the second quarter, an 11% decrease from the first quarter, reflecting higher mining rates. Cost of sales of $132.1 million for the first half of the year were 9% higher than the comparative period primarily due to higher input costs.
Total cash costs were $1,030 per ounce in the second quarter, an 8% increase as compared to the prior year period, driven by inflationary pressures. Total cash costs decreased 13% from the first quarter, reflecting higher mining rates and grades. Total cash costs were $1,104 per ounce for the first half of year, 16% higher than the comparative period due to inflationary pressures and lower production in the first quarter of 2024.
Mine-site AISC were $1,203 per ounce in the quarter, in line with annual guidance and consistent with the prior period. Mine-site AISC of $1,334 per ounce for the first half of the year were above annual guidance and the comparative period due to the higher first quarter costs and the timing of sustaining capital expenditures. Both total cash costs and mine-site AISC are expected to decrease in the second half of the year to be consistent with annual guidance, reflecting higher grades.
Capital expenditures in the second quarter totaled $19.0 million, including $7.7 million of sustaining capital and $9.9 million of growth capital. Additionally, $1.4 million was invested in capitalized exploration in the quarter. Capital expenditures, inclusive of capitalized exploration, totaled $39.2 million for the first half of 2024.
Young-Davidson generated record mine-site free cash flow of $40.1 million in the second quarter, and $54.7 million for the first half of the year, driven by the strong operating performance and higher realized gold prices. Young- Davidson has generated over $100 million in mine-site free cash flow for three consecutive years. The operation is well positioned to generate similar free cash flow in 2024 and over the long-term, with a 15-year Mineral Reserve life.
10 | Alamos Gold Inc
Island Gold Financial and Operational Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 |
Gold production (ounces) 41,700 30,500 75,100 63,400 Gold sales (ounces) 39,766 28,183 73,896 61,910
Financial Review (in millions)
| Operating Revenues | $93.1 | $55.8 | $164.1 | $119.7 |
| Cost of sales(1) | $30.7 | $27.6 | $64.1 | $58.5 |
| Earnings from operations | $60.4 | $27.0 | $97.3 | $59.6 |
| Cash provided by operating activities | $70.8 | $50.2 | $111.7 | $86.7 |
| Capital expenditures (sustaining)(2) | $12.2 | $11.0 | $25.7 | $22.4 |
| Capital expenditures (growth)(2) | $40.5 | $40.7 | $78.1 | $83.9 |
| Capital expenditures (capitalized exploration)(2) | $3.4 | $3.0 | $6.9 | $5.4 |
| Mine-site free cash flow(2) | $14.7 | ($4.5) | $1.0 | ($25.0) |
| Cost of sales, including amortization per ounce of gold sold(1) | $772 | $979 | $867 | $945 |
| Total cash costs per ounce of gold sold(2) | $493 | $678 | $591 | $651 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $805 | $1,072 | $943 | $1,016 |
Underground Operations
| Tonnes of ore mined | 94,837 | 100,568 | 201,574 | 208,964 |
| Tonnes of ore mined per day ("tpd") | 1,042 | 1,105 | 1,108 | 1,154 |
| Average grade of gold(4) | 14.14 | 9.23 | 12.23 | 9.40 |
| Metres developed | 1,598 | 2,134 | 3,375 | 4,237 |
Mill Operations
| Tonnes of ore processed | 92,703 | 102,000 | 199,918 | 209,508 |
| Tonnes of ore processed per day | 1,019 | 1,121 | 1,098 | 1,158 |
| Average grade of gold(4) | 14.39 | 9.51 | 12.38 | 9.54 |
| Contained ounces milled | 42,895 | 31,180 | 79,546 | 64,262 |
| Average recovery rate | 98% | 97% | 98% | 97% |
(1) Cost of sales includes mining and processing costs, royalties, and amortization.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based
(4) Grams per tonne of gold ("g/t Au").
Island Gold produced 41,700 ounces in the second quarter of 2024, a 37% increase from the prior year period, driven by a 51% increase in grades processed. Production for the first half of the year was 75,100 ounces, an 18% increase compared to the comparative period. Given the strong first half performance, Island Gold is well positioned to achieve annual guidance.
Underground mining rates averaged 1,042 tpd in the second quarter, a 6% decrease from the prior year period and below annual guidance of 1,200 tpd. Mining rates were lower earlier in the quarter with the focus on maximizing the extraction of significantly higher grade ore within the 1025 mining horizon, as well as lower haul truck availability among older units in the fleet which are being replaced. Mining rates increased in the latter part of the quarter following the receipt of two new haul trucks.
Mining rates are expected to average similar levels in the third quarter reflecting planned downtime in the second half of July to upgrade the underground ventilation infrastructure. The ventilation upgrade was successfully completed during the last week of July with mining rates expected to increase to average 1,200 tpd in August and through the rest of the year. The upgrade to ventilation capacity was completed as part of the Phase 3+ Expansion and will support increased development rates in the near term and higher underground mining rates over the longer term following the completion of the Expansion.
11 | Alamos Gold Inc
Grades mined averaged 14.14 g/t Au in the second quarter, 53% higher than in the prior year period, reflecting the planned mining of higher-grade stopes, as well as positive grade reconciliation. Grades are expected to return to within guided levels in the second half of the year.
Mill throughput averaged 1,019 tpd for the quarter, consistent with the lower mining rates in the quarter, but lower than the prior year period. Mill recoveries averaged 98% in the second quarter, exceeding annual guidance, reflecting the higher grades processed.
Financial Review
Revenues of $93.1 million in the second quarter were 67% higher than the prior year period, driven by the increase in gold sales and the higher realized gold price. Similarly, revenues of $164.1 million during the first half of the year were 37% higher than the prior year.
Cost of sales of $30.7 million in the second quarter and $64.1 million for the first half of the year were 11% and 10% higher than the comparative periods, respectively, driven by higher gold sales. On a per ounce basis, cost of sales were 21% and 8% lower in the second quarter and first half of 2024, respectively, as compared to the prior year comparative periods, due to higher grades mined and processed.
Total cash costs of $493 per ounce and mine-site AISC of $805 per ounce in the second quarter were both lower than the prior year period, and annual guidance, driven by higher grades processed. For the first half of the year, total cash costs of $591 per ounce were consistent with annual guidance. Mine-site AISC of $943 per ounce were slightly above annual guidance due to timing of capital expenditure payments. Costs for the full year are expected to be in line with annual guidance.
Total capital expenditures were $56.1 million in the second quarter, including $40.5 million of growth capital and $3.4 million of capitalized exploration. Growth capital spending remained focused on the Phase 3+ Expansion shaft site infrastructure and shaft sinking which advanced to a depth of 403 m by the end of the second quarter. Additionally, capital spending was focused on lateral development and construction of the bin house. Certain other capital spending planned for 2024 have been deferred as a result of the acquisition of Magino. With its significantly larger mill and tailings facility, the previously planned expansion of the Island Gold mill and tailings facility is no longer required.
Mine-site free cash flow was $14.7 million for the second quarter despite the significant capital investment related to the Phase 3+ Expansion. At current gold prices, cash flow generated at Island Gold is expected to continue funding the majority of the Phase 3+ Expansion capital. The operation is expected to generate significant free cash flow from 2026 onward with the completion of the expansion.
Magino Operational Review
Subsequent to June 30, 2024, the Company acquired the Magino mine. The Magino operating results for the second quarter are presented below. These metrics are not included in the Company's results for the second quarter and are not indicative of Alamos' performance, as they occurred prior to closing of the acquisition on July 12, 2024.
During the second quarter of 2024, Magino produced 22,700 ounces of gold, a 36% increase compared to the first quarter of 2024. The operation continued to ramp up with higher mining and milling rates, driving stronger production compared to the first quarter of 2024.
Mining rates averaged 53,208 tpd (ore and waste) including 16,328 tpd of ore in the second quarter, both increasing from 51,703 tpd and 13,175 tpd, respectively, in the first quarter of 2024. Mill throughput averaged 8,370 tpd in the second quarter of 2024, a 33% increase compared to 6,308 tpd in the first quarter of 2024. Grades processed of 0.99 g/t Au in the second quarter were consistent with the first quarter, with recoveries increasing to average 94%.
In the third quarter, the Company expects downtime to implement various improvements to the grizzly, crushing and conveying ore flow, and mill liner design. As a result, third quarter production is expected to be relatively consistent with the second quarter. These improvements are expected to positively impact the fourth quarter's production and costs.
The Company expects to provide updated consolidated guidance incorporating Magino for the second half of 2024 in September 2024.
12 | Alamos Gold Inc