Alamos Gold Reports Second Quarter 2022 Results
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 2022 Results
Toronto, Ontario (July 27, 2022) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter ended June 30, 2022.
“We achieved several key short- and long-term objectives in the second quarter. Production was in-line with guidance and costs well below quarterly guidance reflecting solid performances at our Canadian operations and a strong start from La Yaqui Grande which achieved initial production ahead of schedule. With La Yaqui Grande expected to drive stronger production in the second half of the year, we remain on track to achieve full year guidance,” said John A. McCluskey, President and Chief Executive Officer.
“La Yaqui Grande will be a key contributor to stronger operational and financial results over the shorter term, and as outlined in our Phase 3+ Expansion Study, Island Gold will be the driver of higher production, lower costs and significantly stronger free cash flow generation over the long term. The Phase 3+ expansion will transform Island Gold into one of the largest, lowest cost and most profitable gold mines in Canada. With increasing cash flow from our operations, we can fund this high-return growth internally while generating strong free cash flow over the next several years,” Mr. McCluskey added.
Second Quarter 2022
- Produced 103,900 ounces of gold, a 5% increase from the first quarter and in line with guidance
- Young-Davidson continued its strong operational performance, with mining rates exceeding 8,000 tonnes per day (“tpd”) for the fourth consecutive quarter, driving production of 46,400 ounces and record mine-site free cash flow1 of $30.8 million
- Island Gold produced 37,300 ounces, a 52% increase from the first quarter of 2022 leading to mine-site free cash flow1 of $20.2 million
- Announced the Phase 3+ Expansion of Island Gold to 2,400 tpd outlining a larger, more profitable, and valuable operation with production expected to more than double to an average of 287,000 ounces per year at industry low mine-site all-in sustaining costs of $576 per ounce starting in 2026
- Completed construction of La Yaqui Grande ahead of schedule in June, and produced 5,000 ounces at total cash costs of $451 per ounce. Mining and stacking rates continue to ramp up and are expected to drive stronger consolidated production from the Mulatos District at significantly lower costs in the second half of the year
- Sold 102,164 ounces of gold at an average realized price of $1,871 per ounce for revenues of $191.2 million
- Total cash costs1 of $895 per ounce, and AISC1 of $1,170 per ounce per ounce were significantly lower than the first quarter and consistent with annual guidance, reflecting higher grades mined at Island Gold, the strong start at La Yaqui Grande, and the weaker Canadian dollar
- Realized adjusted net earnings1 for the quarter of $29.3 million, or $0.07 per share1. Adjusted net earnings includes adjustments for a non-cash, after tax inventory net realizable value adjustment at Mulatos of $14.7 million and unrealized foreign exchange losses recorded within both deferred taxes and foreign exchange of $12.5 million, partially offset by other gains totaling $4.3 million
- Reported net earnings of $6.4 million, or $0.02 per share
- Cash flow from operating activities was $75.7 million ($85.3 million, or $0.22 per share, before changes in working capital1)
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- Free cash flow1 was $6.7 million in the quarter, driven by strong operating results at Young-Davidson and Island Gold. With the completion of construction at La Yaqui Grande, free cash flow is expected to increase in the second half of the year
- Shareholder returns totaled $18.0 million in the quarter. This included the quarterly dividend of $9.8 million, or $0.025 per share (annualized rate of $0.10), as well as the repurchase of 1.1 million shares at a cost of $8.2 million ($7.41 per share) under the Company's Normal Course Issuer Bid ("NCIB")
- Closed the sale of the Esperanza Gold Project to Zacatecas Silver for total consideration of up to $60 million, including up front consideration of $5 million cash, and $10 million of Zacatecas Silver shares
- Ended the quarter with cash and cash equivalents of $121.5 million, equity securities of $22.5 million, and no debt
- Announced a Company-wide target of a 30% reduction in absolute Greenhouse Gas ("GHG") emissions by 2030 which is expected to further improve the Company's industry low GHG emissions intensity
- Recipient of the Casco De Plata safety award by the Mining Chamber of Mexico (CAMIMEX) in recognition of outstanding health and safety performance and governance at Mulatos
.(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.
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Highlight Summary
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 |
Financial Results (in millions)
| Operating revenues | $191.2 | $195.1 | $375.7 | $422.5 |
| Cost of sales(1) | $151.9 | $126.9 | $287.4 | $266.2 |
| Earnings (loss) from operations | $25.7 | ($168.5) | $20.0 | ($92.2) |
| Earnings (loss) before income taxes | $30.2 | ($172.7) | $15.9 | ($97.6) |
| Net earnings (loss) | $6.4 | ($172.5) | ($2.1) | ($121.3) |
| Adjusted net earnings(2) | $29.3 | $38.7 | $47.3 | $87.8 |
| Earnings before interest, depreciation and amortization(2) | $92.0 | $94.4 | $154.9 | $214.0 |
Cash provided by operations before working capital and $85.3 $97.2 $156.2 $216.8 cash taxes(2)
| Cash provided by operating activities | $75.7 | $86.7 | $122.2 | $186.0 |
| Capital expenditures (sustaining)(2) | $20.1 | $26.7 | $42.7 | $50.3 |
| Capital expenditures (growth)(2) (3) (5) | $43.3 $53.8 | $101.9 | $114.1 | |
| Capital expenditures (capitalized exploration)(4) | $5.6 | $6.4 | $11.7 | $11.9 |
| Free cash flow(2) | $6.7 | ($0.2) | ($34.1) | $9.7 |
Operating Results
Gold production (ounces) 103,900 114,200 202,800 240,000 Gold sales (ounces) 102,164 107,581 200,630 234,063
Per Ounce Data
Average realized gold price $1,871 $1,814 $1,873 $1,805 Average spot gold price (London PM Fix) $1,871 $1,816 $1,874 $1,805 Cost of sales per ounce of gold sold (includes $1,487 $1,180 $1,432 $1,137 amortization) (1)
Total cash costs per ounce of gold sold (2) $895 $791 $943 $773 All-in sustaining costs per ounce of gold sold (2) $1,170 $1,136 $1,264 $1,079
Share Data
Earnings (Loss) per share, basic and diluted $0.02 ($0.44) ($0.01) ($0.31) Adjusted earnings per share, basic and diluted(2) $0.07 $0.10 $0.12 $0.22 Weighted average common shares outstanding (basic)
391,761 392,759 391,837 392,762 (000’s)
Financial Position (in millions)
Cash and cash equivalents(6) $121.5 $172.5
(1) Cost of sales includes mining and processing costs, royalties, and amortization expense. For the three and six months ended June 30, 2022, cost of sales includes a $22.3 million non-cash inventory net realizable value adjustment at Mulatos District.
(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) Includes growth capital from operating sites.
(4) Includes capitalized exploration at Island Gold, Young-Davidson and Mulatos District.
(5) Includes capital advances of nil for the three and six months ended June 30, 2022 ($3.4 million and $20.2 million for the three and six months ended June 30, 2021).
(6) Comparative cash and cash equivalents balance as at December 31, 2021.
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| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 |
Gold production (ounces)
| Young-Davidson | 46,400 | 45,100 | 98,300 | 93,100 |
| Island Gold | 37,300 | 33,200 | 61,800 | 75,400 |
| 20,200 | 35,900 | 42,700 | 71,500 |
Mulatos District(7)
Gold sales (ounces)
| Young-Davidson | 46,662 | 45,284 | 98,187 | 93,306 |
| Island Gold | 36,797 | 33,632 | 60,165 | 73,514 |
| 18,705 | 28,665 | 42,278 | 67,243 |
Mulatos District
Cost of sales (in millions)(1)
| Young-Davidson | $59.8 | $61.3 | $124.4 | $123.3 |
| Island Gold | $32.0 | $25.6 | $56.2 | $54.7 |
| $60.1 | $40.0 | $106.8 | $88.2 |
Mulatos District
Cost of sales per ounce of gold sold (includes amortization)
| Young-Davidson | $1,282 | $1,354 | $1,267 | $1,321 |
| Island Gold | $870 | $761 | $934 | $744 |
| Mulatos District(1) | $3,213 | $1,395 | $2,526 | $1,312 |
Total cash costs per ounce of gold sold (2)
Young-Davidson $866 $941 $852 $906 $590 $502 $650 $483 Island Gold Mulatos District $1,566 $893 $1,568 $906
Mine-site all-in sustaining costs per ounce of gold sold (2),(3)
| Young-Davidson | $1,087 | $1,157 | $1,064 | $1,115 |
| Island Gold | $848 | $830 | $939 | $777 |
| $1,636 | $1,144 | $1,717 | $1,084 |
Mulatos District
Capital expenditures (sustaining, growth, capitalized exploration and capital advances) (in millions)(2)
| Young-Davidson(4) | $13.1 | $19.6 | $35.8 | $41.5 |
| Island Gold(5) | $29.3 | $29.2 | $62.7 | $58.7 |
| Mulatos District(6) | $21.3 | $31.6 | $47.3 | $65.1 |
| Other | $5.3 | $6.5 | $10.5 | $11.0 |
(1) Cost of sales includes mining and processing costs, royalties, and amortization. For the three and six months ended June 30, 2022, cost of sales at Mulatos District includes $22.3 million non-cash inventory net realizable value adjustment.
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) Includes capitalized exploration at Young-Davidson of $1.3 million and $2.3 million for the three and six months ended June 30, 2022 ($1.5 million and $2.5 million for the three and six months ended June 30, 2021).
(5) Includes capitalized exploration at Island Gold of $4.1 million and $9.2 million for the three and six months ended June 30, 2022 ($3.9 million and $8.4 million for the three and six months ended June 30, 2021).
(6) Includes capitalized exploration at Mulatos District of $0.2 million for the three and six months ended June 30, 2022 ($1.0 million for the three and six months ended June 30, 2021).
(7) The Mulatos District includes both the Mulatos pit, as well as La Yaqui Grande.
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Environment, Social and Governance Summary Performance
Health and Safety
- Recordable injury frequency rate1,2 of 1.50, an 8% decrease from the first quarter of 2022
- Lost time injury frequency rate1 of 0.08, an 11% decrease from the first quarter of 2022
- Competed in the Ontario Mine Rescue Competition, with Young-Davidson’s Gary Bennett winning the Individual Technician Competition
During the second quarter of 2022, the recordable injury frequency rate decreased with 18 recordable injuries, consistent with the first quarter of 2022 but with more hours worked. One lost time injury was reported in the quarter, consistent with the first quarter of 2022, though at a lower frequency rate due to additional hours worked. 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.
The World Health Organization declared COVID-19 a pandemic on March 11, 2020. The Company responded rapidly and proactively and implemented several initiatives to help protect the health and safety of our employees, their families and the communities in which we operate. Specifically, each mine site activated established crisis management plans and developed site-specific plans that have enabled them to meet and respond to changing conditions associated with COVID-19. Given the significant precautionary measures taken by the Company, and thanks to the dedication of its employees, contractors and stakeholders, operations remain relatively unaffected by COVID-19.
Environment
- Announced its Company target of a 30% reduction in absolute GHG emissions by 2030 from the 2020/2021 average baseline year
- Zero significant environmental incidents in the second quarter of 2022 and year-to-date
- One minor fine at Mulatos related to a regulatory non-compliance at the mine camp for using an unlicensed contractor for recycling of used cooking oil. This oversight was due to a recent regulation change in Mexico
- Work permits received for Island Gold for the construction of the shaft site access road and creek crossing
- Advanced both federal and provincial permitting for the Lynn Lake Project
19 minor spills occurred during the first quarter, including 16 at Island Gold and 3 at Mulatos. All spills were immediately cleaned and remediated with no anticipated long-term effects. The Company is committed to preserving the long-term health and viability of the natural environment that surround 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.
GHG Emissions Reduction Target
In June 2022, the Company released its target of a 30% reduction in absolute GHG emissions by 2030. This target includes scope 1 and scope 2 GHG emissions, inclusive of all GHG emissions covered by the Kyoto Protocol. This is a significant milestone in Alamos’ sustainability journey and considered a credible target by definition of the Carbon Disclosure Project (“CDP”).
Alamos is already an industry leader in GHG emission intensity with an average of 0.38 tCO2e per ounce of gold produced across its three operating mines (base year 2020/2021), 43% lower than the mining industry average of 0.67 tCO2e per ounce of gold. The 30% absolute reduction in GHG emissions will decrease Alamos’ emission intensity by 55%. This includes the development of the Lynn Lake project, which is expected to begin producing within the target period.
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As part of the Company’s emission reduction strategy, Alamos developed an Energy and Greenhouse Gas Management Standard in support of its Sustainability Performance Management Framework. This included completing Energy and Carbon Management System assessments at its operating sites to develop a baseline for its existing Energy Management programs. Alamos reviewed and costed over 30 different GHG emission reduction opportunities across the organization and utilized a Marginal Abatement Cost Curve to prioritize the projects that will support the achievement of its emission reduction target.
Options investigated included renewable energy and clean grid capacity, green fleet (hybrid or battery electric vehicles), electrification of process, and conversion to cleaner fuels. Electric conveyance systems were installed during the lower mine expansion at the Young-Davidson Mine reducing the Company’s reliance on diesel consumption and the Company is working to connect to grid power at Mulatos to offset diesel power generation. The Company is also considering increasing use of biodiesel vs. conventional diesel at all operations, and replacing propane with compressed natural gas for mine-air heaters at underground operations.
The Company’s target to reduce GHG emissions is in support of Canada’s Paris Accord Commitment and the World Gold Council’s (WGC) commitment for members to adopt the recommendations of the Task Force on Climate- Related Financial Disclosure (TCFD).
Community
- Continued Indigenous community engagement, including the signing of a Community Benefits Agreement with the Michipicoten First Nation for Island Gold on April 4, 2022
- Various community donations across all operations including funding for emergency vehicles and medical equipment to the District of Timiskiming Paramedic Service, the Temiskaming Hospital Foundation, and the municipality of Sahuaripa
- Sponsored a basketball camp with the Kirkland Lake Swamp Donkeys basketball club and the Matachewan and Beaverhouse First Nations
- Installation of solar street lighting in the village of Matarachi, Mexico
- Continued support for local students in Sahuaripa, Matarachi and Hermosillo, with 70 students supported through the Company’s Scholarship Program
Alamos 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, and to offer support during the COVID- 19 pandemic. Ongoing investments in local infrastructure, health care, education, cultural and community programs have continued through the COVID-19 pandemic, with appropriate health and safety protocols.
Governance and Disclosure
- Published Lynn Lake Gold Project website to increase transparency and disclosure for local stakeholders interested in the project and associated opportunities
- Recipient of the Casco De Plata safety award by the Mining Chamber of Mexico (CAMIMEX) in recognition of outstanding health and safety performance and governance at Mulatos
Alamos maintains the highest standards of corporate governance to ensure that corporate decision-making reflects its values, including the Company’s commitment to sustainable development. During the quarter, the Company continued to advance its implementation of the Responsible Gold Mining Principles, developed by the World Gold Council as a framework that sets clear expectations as to what constitutes responsible gold mining.
(1) Frequency rate is calculated as incidents per 200,000 hours worked.
(2) The classification of medical treatment injuries was updated retroactive to 1 January 2020 to align with OSHA standards, resulting in changes to previously reported recordable injury rates.
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Outlook and Strategy
| 2022 Guidance | |||||
| Young- | Island Gold | ||||
| Mulatos | Other (2) | Total | |||
| Davidson |
Gold production (000’s ounces) 185 - 200 125 - 135 130 - 145 440 - 480 Cost of sales, including amortization (in millions)(4) $610 Cost of sales, including amortization ($ per ounce)(4) $1,325 Total cash costs ($ per ounce)(1) $850 - $900 $550 - $600 $1,225 - $1,275 — $875- $925 All-in sustaining costs ($ per ounce)(1) $1,190 - $1,240 Mine-site all-in sustaining costs ($ per ounce)(1)(3) — $1,125 - $1,175 $850 - $900 $1,325 - $1,375
Capital expenditures (in millions)
| Sustaining capital(1) | $50 - $55 | $35 - $40 | $5 - $10 | — | $90 - $105 |
| Growth capital(1) | $5 - $10 | $145 - $160 | $50 - $55 | $15 | $215 - $240 |
| Total Sustaining and Growth Capital(1) | $55 - $65 | $180 - $200 | $55 - $65 | $15 | $305 - $345 |
| Capitalized exploration(1) | $4 | $20 | — | $3 | $27 |
| Total capital expenditures and capitalized exploration(1) | $59 - $69 | $200 - $220 | $55 - $65 | $18 | $332 - $372 |
(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 and calculation of these measures.
(2) Includes growth capital and capitalized exploration at the Company's development projects (Lynn Lake and Esperanza).
(3) 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.
(4) 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.
The Company’s objective is to operate a sustainable business model that can support 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 delivered on two key long-term objectives during the second quarter which have solidified its strong outlook. This included achieving initial low-cost production at La Yaqui Grande and announcing the Phase 3+ Expansion of Island Gold, which will create a larger, more profitable and valuable operation.
Construction of La Yaqui Grande was completed in June, ahead of schedule and marking a significant transition for the Mulatos District. La Yaqui Grande is expected to drive Mulatos District costs lower in the second half of the year and generate significant free cash flow over the next five years. La Yaqui Grande represents another in a long line of discoveries and high-return projects developed within the Mulatos District that have continued to extend the mine life. Despite the inflationary environment, the impact of COVID-19, and several scope changes, the total construction cost of $161 million was within 13% of the July 2020 estimate, demonstrating the Company's ability to execute in a challenging environment.
In addition, the Company announced a Phase 3+ Expansion of Island Gold, which will result in a step change in production, with mining rates increasing to 2,400 tpd from the current rate of 1,200 tpd. This is expected to more than double gold production to average 287,000 ounces per year at industry low mine-site all-in sustaining costs of $576 per ounce starting in 2026 upon completion of the shaft. The larger, longer-life operation reflects the significant increase in Mineral Reserve and Resources since the Phase 3 study was completed in 2020, supporting a 43% increase in mineable resources to 4.6 million ounces of gold grading 10.59 g/t Au. Given strong ongoing cash flow from operations, the majority of the Phase 3+ Expansion capital is expected to be self-funded by Island Gold.
The Company provided inaugural three-year production and operating guidance in January 2022, which outlined growing production at significantly lower costs over the 2022 to 2024 period. Refer to the Company’s January 17, 2022 guidance press release for a summary of the key assumptions and related risks associated with the comprehensive 2022 guidance and three-year production, cost and capital outlook.
The Company produced 202,800 ounces in the first half of the year, and with stronger production expected in the second half driven by the ramp up of La Yaqui Grande, the Company remains well positioned to meet full year
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production guidance of between 440,000 and 480,000 ounces. Third quarter production is expected to increase to between 115,000 and 125,000 ounces, with a further increase expected in the fourth quarter. Consistent with full year guidance, total cash costs are expected to decrease in the second half of the year compared to the first half with the ramp up of low-cost production at La Yaqui Grande, higher grades at Island Gold, and the weaker Canadian dollar.
At Young-Davidson, mining rates of 8,160 tpd exceeded targeted rates for the fourth straight quarter, driving strong first half production of 98,300 ounces and mine-site free cash flow of $54.0 million. With the solid performance through the first half of the year, Young-Davidson is on track to achieve full year production and cost guidance. The operation generated a record $100 million in mine-site free cash flow in 2021. With the strong ongoing performance, Young- Davidson is expected to generate similar mine-site free cash flow in 2022 and over the long term.
Island Gold produced 61,800 ounces in the first half of the year, including a 52% increase in second quarter production to 37,300 ounces at significantly lower costs relative to the first quarter reflecting higher grades and tonnes mined and processed. With production expected to be higher in the second half of the year, Island Gold remains on track to achieve full year guidance. Construction activities on the Phase 3+ Expansion are ramping up with shaft site clearing ongoing, and the pre-sink expected to commence in August. Capital spending is expected to also increase in the second half of the year to be consistent with full year guidance of between $180 and $200 million (excluding exploration).
The exploration budget at Island Gold is $22 million in 2022 with the focus on following up on another successful drilling campaign in 2021 that drove an 8% increase in high-grade Mineral Reserves and Resources to 5.1 million ounces of gold. This ongoing growth was incorporated into the Phase 3+ Expansion Study released in June.
Combined production from the Mulatos District totaled 42,700 ounces in the first half of 2022, including 5,000 ounces from the recently completed La Yaqui Grande project. With operations ramping up at La Yaqui Grande in the third quarter and increasing grades from the El Salto portion of the Mulatos pit in the fourth quarter, production from the Mulatos District is expected to increase significantly through the remainder of the year. As previously disclosed, total cash costs and mine-site AISC were well above annual guidance during the first half of 2022, but expected to trend significantly lower during the second half of the year as La Yaqui Grande represents a larger proportion of Mulatos District production.
The total capital budget for Lynn Lake in 2022 is $14 million, including $11 million for development activities and $3 million for exploration. Development activities in 2022 remain focused on environmental work in support of permitting, detailed engineering and other site access upgrades. The approval of the Environmental Impact Statement (“EIS”) for the project is expected in the latter part of 2022, following which the Company expects to release an updated feasibility study.
The Company's liquidity position remains strong, ending the second quarter with $121.5 million of cash and cash equivalents, $22.5 million in equity securities, and no debt. Additionally, the Company has a $500 million undrawn credit facility, providing total liquidity of $621.5 million.
As part of the Company's balanced approach to growth and capital allocation, the current focus is on the Phase 3+ Expansion at Island Gold. With no significant capital expected to be spent on developing Lynn Lake until the Phase 3+ Expansion is well underway, the Company remains well positioned to fund this growth internally while generating strong free cash flow over the next several years. The Company expects significant free cash flow growth in 2025 and beyond as production rates ramp up at Island Gold.
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Second Quarter 2022 Results
Young-Davidson Financial and Operational Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 |
Gold production (ounces) 46,400 45,100 98,300 93,100 Gold sales (ounces) 46,662 45,284 98,187 93,306
Financial Review (in millions)
| Operating Revenues | $87.3 | $82.1 | $184.1 | $168.2 |
| Cost of sales(1) | $59.8 | $61.3 | $124.4 | $123.3 |
| Earnings from operations | $25.9 | $20.8 | $56.5 | $44.9 |
| Cash provided by operating activities | $43.9 | $38.3 | $89.8 | $82.5 |
| Capital expenditures (sustaining)(2) | $10.2 | $9.8 | $20.6 | $19.3 |
| Capital expenditures (growth)(2) | $1.6 | $8.3 | $12.9 | $19.7 |
| Capital expenditures (capitalized exploration)(2) | $1.3 | $1.5 | $2.3 | $2.5 |
| Mine-site free cash flow(2) | $30.8 | $18.7 | $54.0 | $41.0 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,282 | $1,354 | $1,267 | $1,321 |
| Total cash costs per ounce of gold sold(2) | $866 | $941 | $852 | $906 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,087 | $1,157 | $1,064 | $1,115 |
Underground Operations
| Tonnes of ore mined | 742,516 | 682,857 | 1,478,820 | 1,384,019 |
| Tonnes of ore mined per day | 8,160 | 7,504 | 8,170 | 7,647 |
| Average grade of gold(4) | 2.24 | 2.22 | 2.30 | 2.23 |
| Metres developed | 3,097 | 2,868 | 6,344 | 6,220 |
Mill Operations
| Tonnes of ore processed | 705,014 | 688,127 | 1,442,742 | 1,421,348 |
| Tonnes of ore processed per day | 7,747 | 7,562 | 7,971 | 7,853 |
| Average grade of gold(4) | 2.25 | 2.22 | 2.32 | 2.22 |
| Contained ounces milled | 50,975 | 49,134 | 107,445 | 101,670 |
| Average recovery rate | 91% | 92% | 91% | 92% |
(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 46,400 ounces of gold in the second quarter of 2022, a 3% increase from the prior year period reflecting higher tonnes and grades processed. With first half production of 98,300 ounces, the operation is on track to meet full year production guidance.
Underground mining rates continued to outperform, averaging 8,160 tpd in the second quarter and 8,170 tpd in the first half of 2022, representing the fourth consecutive quarter the operation has exceeded the targeted rate of 8,000 tpd. Grades mined averaged 2.24 g/t Au, within annual guidance of between 2.15 and 2.35 g/t Au. Grades mined in the second half of the year are expected to be consistent with the first half.
Mill throughput averaged 7,747 tpd in the second quarter at an average grade of 2.25 g/t Au. Tonnes milled were lower than the first quarter, reflecting a planned liner change in the mill. Mill recoveries averaged 91% in the quarter, in line with guidance and the prior year period.
Financial Review
Second quarter revenues of $87.3 million and year-to date revenues of $184.1 million were 6% and 9% higher, respectively, than the prior year periods driven by more ounces sold and a higher realized gold price.
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Cost of sales (which includes mining and processing costs, royalties, and amortization expense) of $59.8 million in the second quarter were lower than the prior year period, due to lower unit mining costs. Underground unit mining costs were CAD $48 per tonne in the quarter, an improvement from the prior year driven by economies of scale from higher mining rates. Cost of sales of $124.4 million in the first half of 2022 were slightly higher than the comparable period as lower mining costs were offset by a 7% increase in tonnes mined.
Total cash costs of $866 per ounce in the second quarter were 8% lower than the prior year period driven by higher grades processed and lower mining costs per tonne. Mine-site AISC of $1,087 per ounce in the second quarter were 6% lower than the prior year period, consistent with the lower total cash costs. Given the strong first half performance, Young-Davidson remains well positioned to meet full year total cash cost and mine-site AISC guidance.
Capital expenditures in the quarter included $10.2 million of sustaining capital and $1.6 million of growth capital. In addition, $1.3 million was invested in capitalized exploration in the quarter. Capital expenditures totaled $35.8 million in the first half of 2022, a 14% decrease from the prior year and in line with annual guidance.
Young-Davidson has consistently met or exceeded expectations since transitioning to the lower mine infrastructure in mid-2020, driving production higher, and significant free cash flow growth. This included mine-site free cash flow of $30.8 million in the second quarter of 2022 and $54.0 million for the first half of 2022.
10 | Alamos Gold Inc
Island Gold Financial and Operational Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 |
Gold production (ounces) 37,300 33,200 61,800 75,400 Gold sales (ounces) 36,797 33,632 60,165 73,514
Financial Review (in millions)
| Operating Revenues | $68.8 | $61.1 | $112.5 | $132.6 |
| Cost of sales(1) | $32.0 | $25.6 | $56.2 | $54.7 |
| Earnings from operations | $34.8 | $33.7 | $53.7 | $75.5 |
| Cash provided by operating activities | $49.5 | $42.9 | $76.9 | $98.4 |
| Capital expenditures (sustaining)(2) | $9.5 | $11.0 | $17.3 | $21.6 |
| Capital expenditures (growth)(2) (5) | $15.7 | $14.3 | $36.2 | $28.7 |
| Capital expenditures (capitalized exploration)(2) | $4.1 | $3.9 | $9.2 | $8.4 |
| Mine-site free cash flow(2) | $20.2 | $13.7 | $14.2 | $39.7 |
| Cost of sales, including amortization per ounce of gold sold(1) | $870 | $761 | $934 | $744 |
| Total cash costs per ounce of gold sold(2) | $590 | $502 | $650 | $483 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $848 | $830 | $939 | $777 |
Underground Operations
| Tonnes of ore mined | 112,203 | 117,673 | 215,192 | 220,950 |
| Tonnes of ore mined per day ("tpd") | 1,233 | 1,293 | 1,189 | 1,221 |
| Average grade of gold(4) | 10.02 | 8.52 | 9.22 | 10.75 |
| Metres developed | 1,902 | 1,907 | 3,341 | 3,858 |
Mill Operations
| Tonnes of ore processed | 114,448 | 111,898 | 215,097 | 221,183 |
| Tonnes of ore processed per day | 1,258 | 1,230 | 1,188 | 1,222 |
| Average grade of gold(4) | 10.09 | 8.85 | 9.18 | 10.91 |
| Contained ounces milled | 37,132 | 31,835 | 63,459 | 77,619 |
| Average recovery rate | 96% | 97% | 96% | 97% |
(1) Cost of sales includes mining and processing costs, royalties, and amortization.
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").
(5) Includes capital advances of nil and $1.4 million for the three and six months ended June 30, 2022 ($0.7 million and $2.8 million for the three and six months ended June 30, 2021).
Island Gold produced 37,300 ounces in the second quarter of 2022, a 12% improvement from the prior year period reflecting higher grades mined and processed. Through the first half of 2022, Island Gold produced 61,800 ounces. With grades mined in the second half of the year expected to be consistent with the second quarter, Island Gold remains on track to meet full year production guidance.
Underground mining rates averaged 1,233 tpd in the second quarter, with grades averaging 10.02 g/t Au. Mining rates through the first half of the year averaged 1,189 tpd, in line with guidance of 1,200 tpd. Grades mined in the quarter were in line with full year guidance.
Mill throughput averaged 1,258 tpd, 5% above annual guidance of 1,200 tpd, reflecting high mill availability and the processing of approximately 8,000 tonnes of Island Gold ore at the Young-Davidson mill. Given current permit limits at Island Gold, stockpiled ore is expected be trucked to Young-Davidson for the remainder of the year as capacity is available, boosting production and cash flow. Mill recoveries averaged 96% in the quarter, consistent with annual guidance and the prior year period.
Financial Review
Island Gold generated revenues of $68.8 million in the second quarter, a 13% increase compared to the prior year period, reflecting 9% more ounces sold, and a higher realized gold price. For the first half of the year, revenues were
11 | Alamos Gold Inc
$112.5 million, lower than the comparable prior year period as a result of less ounces sold, partially offset by a higher realized gold price.
Cost of sales (includes mining and processing costs, royalties and amortization expense) of $32.0 million in the second quarter were 25% higher than the prior year period, reflecting higher ounces sold, partially offset by lower amortization on a per ounce basis given the increase in Mineral Reserve and Resources in 2022.
Total cash costs of $590 per ounce in the second quarter were higher than the prior year period, due to higher mining and processing costs, partially offset by higher grades processed. Mine-site AISC of $848 per ounce in the second quarter were consistent with the prior year period. Total cash costs and mine-site AISC are expected to be lower in the second half of the year, relative to the first half, reflecting higher grades mined.
Total capital expenditures were $29.3 million in the second quarter, including $4.1 million of capitalized exploration. Spending was focused on lateral development, as well as engineering, shaft site preparation and clearing for the shaft infrastructure, early procurement for the Phase 3+ Expansion, and other surface infrastructure. For the first half of the year, capital spending was $62.7 million, inclusive of capitalized exploration of $9.2 million, consistent with the prior year period. Capital spending is expected to increase in the second half of the year, with the pre-sink expected to commence in the third quarter.
Island Gold generated mine-site free cash flow of $20.2 million in the second quarter and $14.2 million in the first half of 2022, inclusive of all capital spending on the Phase 3+ Expansion and exploration. At current gold prices, Island Gold is expected to largely self-finance the Phase 3+ Expansion capital spending in 2022 and beyond.
12 | Alamos Gold Inc