Alamos Reports Third Quarter 2018 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 Reports Third Quarter 2018 Results
Toronto, Ontario (November 1, 2018) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the third quarter ended September 30, 2018 and reviewed its operating, exploration and development activities.
“We made excellent progress in the third quarter towards both our near and long-term objectives. We met our quarterly production guidance and remain well positioned to achieve full year guidance. We completed the Phase I expansion at Island Gold on schedule and are having ongoing success on the exploration front which has translated into significant Mineral Reserve and Resource growth in the year since we acquired the mine. We’re also advancing on the lower mine expansion at Young-Davidson which will unlock the full potential of the mine and drive significant free cash flow growth,” said John A. McCluskey, President and Chief Executive Officer.
Third Quarter 2018 Highlights
- Produced 124,000 ounces of gold, consistent with quarterly guidance of 120,000 to 125,000 ounces, and 16% above the third quarter of 2017, reflecting the inclusion of production from Island Gold
- Gold production for the first nine months of 2018 achieved a record 379,400 ounces, a 23% increase from the same period in 2017. The Company remains well positioned to achieve full-year production guidance of 490,000 to 530,000 ounces
- Sold 119,401 ounces of gold in the third quarter at an average realized price of $1,229 per ounce, $16 per ounce above the average London PM Fix, for revenues of $146.7 million. Revenues declined relative to the second quarter reflecting lower gold sales and a $78 per ounce decline in the realized gold price
- Cost of sales of $1,152 per ounce, total cash costs1 of $817 per ounce and all-in sustaining costs ("AISC")1 of $1,048 per ounce were higher than full year guidance reflecting lower mining rates at Young-Davidson, higher costs at El Chanate and planned higher sustaining capital at Island Gold
- Given higher than budgeted costs at Young-Davidson and El Chanate through the first nine months of 2018, the Company is revising its full year consolidated total cash cost guidance from $740 to $810 per ounce and AISC guidance from $950 to $990 per ounce
- Realized net earnings of $7.2 million, or $0.02 per share
- Reported an adjusted net loss1 of $1.9 million or $0.00 per share1, primarily reflecting adjustments for unrealized foreign exchange gains recorded within both deferred taxes and foreign exchange of $8.7 million
- Generated cash flow from operating activities of $45.2 million ($41.6 million, or $0.11 per share, before changes in working capital1), a decrease from the second quarter primarily reflecting a lower realized gold price and lower gold sales
- Ended the quarter with no debt and cash and cash equivalents of $224.8 million
- Announced a significant increase in Mineral Reserves and Resources at Island Gold as of June 30, 2018
- Successfully commissioned the Phase I expansion at Island Gold on schedule, increasing mill capacity to 1,100 tonnes per day
- Paid a semi-annual dividend of $0.01 per common share, or $3.9 million, to shareholders on October 30, 2018, representing the Company's 18th consecutive semi-annual dividend
(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.
Highlight Summary
| Three Months Ended September 30, | Nine Months Ended September 30, | ||
|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 |
Financial Results (in millions)
| Operating revenues | $146.7 | $128.8 | $488.7 | $381.1 |
| Cost of sales(1) | $137.6 | $100.6 | $432.3 | $320.2 |
| Earnings from operations | $0.6 | $20.9 | $28.7 | $38.9 |
| Net earnings (loss) | $7.2 | $28.8 | ($1.1) | $31.3 |
| Adjusted net (loss) earnings(2) | ($1.9) | $13.7 | $15.3 | $18.4 |
Cash provided by operations before working capital and $41.6 $51.3 $158.9 $130.6 cash taxes(2)
| Cash provided by operating activities | $45.2 | $43.4 | $166.5 | $114.9 |
| Capital expenditures (sustaining)(2) | $19.6 | $10.8 | $42.4 | $31.2 |
| Capital expenditures (growth)(2) | $30.5 | $26.2 | $102.8 | $86.2 |
| Capital expenditures (capitalized exploration)(3) | $5.0 | $1.2 | $14.8 | $5.9 |
Operating Results
Gold production (ounces) (4) 124,000 107,000 379,400 309,100 Gold sales (ounces) 119,401 100,551 378,718 303,329
Per Ounce Data
Average realized gold price $1,229 $1,281 $1,290 $1,256 Average spot gold price (London PM Fix) $1,213 $1,278 $1,282 $1,251 Cost of sales per ounce of gold sold $1,152 $1,000 $1,141 $1,056 (includes amortization) (1)
Total cash costs per ounce of gold sold (2) $817 $720 $813 $777 All-in sustaining costs per ounce of gold sold (2) $1,048 $884 $992 $946
Share Data
Earnings per share, basic $0.02 $0.10 $0.00 $0.11 Adjusted earnings per share, basic (2) $0.00 $0.05 $0.04 $0.06 Weighted average common shares outstanding (basic)
389,854 300,448 389,572 294,853 (000’s)
Financial Position (in millions)
Cash and cash equivalents (5) $224.8 $200.8
(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) Includes capitalized exploration at Mulatos and Island Gold.
(4) Gold production from Island Gold has been included in this table for the period subsequent to November 23, 2017 only. Gold production from Island Gold for the three and nine months ended September 30, 2017 was 26,659 and 76,541 ounces respectively.
(5) Comparative Cash and cash equivalents balance as at December 31, 2017.
2 | Alamos Gold Inc
| Three Months Ended September 30, | Nine Months Ended September 30, | ||
|---|---|---|---|
| 2018 | 2017(1) | 2018 | 2017(1) |
Gold production (ounces)
Young-Davidson 49,000 55,800 129,100 143,500 Mulatos 43,300 36,300 139,900 117,300 Island Gold (1) 22,000 76,800
- —
El Chanate 9,700 14,900 33,600 48,300
Gold sales (ounces)
Young-Davidson 46,853 55,267 133,649 145,462 Mulatos 42,300 30,330 136,285 109,270 Island Gold (1) 20,561 75,321
- —
El Chanate 9,687 14,954 33,463 48,597
Cost of sales (in millions)(2)
Young-Davidson $59.8 $53.4 $173.5 $155.3 Mulatos $41.9 $29.0 $134.7 $105.3 Island Gold (1) $22.3 $77.8
- —
El Chanate $13.6 $18.2 $46.3 $59.6
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,276 $966 $1,298 $1,068 Mulatos $991 $956 $988 $964 Island Gold (1) $1,085 $1,033
- —
El Chanate $1,404 $1,217 $1,384 $1,226
Total cash costs per ounce of gold sold (3)
Young-Davidson $824 $572 $845 $647 Mulatos $771 $785 $784 $782 Island Gold (1) $671 $597
- —
El Chanate $1,301 $1,137 $1,285 $1,156
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
Young-Davidson $1,029 $744 $1,034 $824 Mulatos $846 $864 $847 $852 Island Gold (1) $1,051 $759
- —
El Chanate $1,332 $1,164 $1,312 $1,187 Capital expenditures (sustaining, growth and capitalized exploration) (in millions)(3)
Young-Davidson $22.1 $22.0 $63.5 $63.3 Mulatos(5) $6.8 $8.9 $23.5 $34.9
| Island Gold(1),(6) | $17.8 | $49.3 | ||
| El Chanate | $0.2 | $0.3 | $0.5 | $1.2 |
| Other | $8.2 | $7.0 | $23.2 | $23.9 |
- —
(1) Operating and financial results from Island Gold are included in Alamos’ consolidated financial statements for the period subsequent to November 23, 2017. Gold production from Island Gold for the three and nine months ended September 30, 2017 was 26,659 and 76,541 ounces, respectively.
(2) Cost of sales includes mining and processing costs, royalties and amortization.
(3) 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.
(4) 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.
(5) Includes capitalized exploration at Mulatos of $0.3 million and $2.3 million for the three and nine months ended September 30, 2018 ($1.2 million and $5.9 million for the three and nine months ended September 30, 2017).
(6) Includes capitalized exploration at Island Gold of $4.7 million and $12.5 million for the three and nine months ended September 30, 2018.
3 | Alamos Gold Inc
Outlook and Strategy
| 2018 Guidance | Total | |||||||
| Young- | Mulatos | Island | El | Turkey (5) | Original | |||
| Davidson | Gold | Chanate | Other (2) | Current | ||||
| Gold production (000’s ounces) | ||||||||
| Current Guidance | 180-190 | 170-180 | 100-110 | 40-50 | — | — | 490-530 | |
| Original Guidance 200-210 150-160 90-100 40-50 — — 480-520 | ||||||||
| Cost of sales, including $208 $175 $108 $58 — — $536 amortization (in millions)(4),(6) | ||||||||
| $549 | ||||||||
| Cost of sales, including $1,125 $1,000 $1,025 $1,285 — — $1,075 amortization ($ per ounce)(4),(6) | ||||||||
| $1,145 | ||||||||
| Total cash costs ($ per ounce)(1),(6) $675 $800 $575 $1,200 — — $740 | $810 | |||||||
| All-in sustaining costs — — $950 ($ per ounce)(1),(6) | ||||||||
| $990 | ||||||||
| Mine-site all-in sustaining costs $850 $900 $825 $1,200 — — — ($ per ounce)(1),(3),(6) | ||||||||
| — | ||||||||
| Amortization costs $450 $200 $450 $85 — — $335 ($ per ounce)(1) | ||||||||
| $335 | ||||||||
| Capital expenditures (in millions) | ||||||||
| Sustaining capital(1) $35-40 $8-10 $25-27 — — — $68-77 | $68-77 | |||||||
| Growth capital(1) $35-40 $18-20 $25-28 — $25 $46 (2) $224-234 | $149-159 | |||||||
| Total capital expenditures(1) $70-80 $26-30 $50-55 — $25 $46 $292-$311 | $217-$236 |
(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) Includes capitalized exploration at all operating sites and development projects.
(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 guidance.
(5) Capital guidance at Kirazlı has been reduced to $25 million from the original budget of $100 million.
(6) Company-wide cost of sales, total cash costs, and all-in sustaining costs guidance have been updated from original guidance. The Company has not revised guidance for cost of sales, total cash costs, and mine-site all-in sustaining costs at individual mine sites.
The Company continues to deliver on its strategic objectives of increasing cash flow from operations while advancing its portfolio of low-cost development projects. Gold production in the third quarter of 124,000 ounces was at the top end of the Company’s forecast of between 120,000 and 125,000 ounces, and represented a 16% increase relative to the third quarter of 2017, reflecting the inclusion of production from Island Gold. With record production of 379,400 ounces through the first nine months of 2018, the Company is well positioned to achieve full year production guidance of 490,000 to 530,000 ounces, which was increased earlier in the year.
Gold production in the fourth quarter is expected to increase slightly relative to the third quarter at lower total cash costs and AISC, bringing full-year production above 500,000 ounces. The reduction in costs is expected to be driven by higher grades and throughput at both Young-Davidson and Island Gold.
Total cash costs of $817 per ounce and AISC of $1,048 per ounce were higher than budget in the third quarter, driven primarily by higher costs at Young-Davidson and El Chanate, as well as planned higher sustaining capital at Island Gold. As a result of higher than budgeted costs at Young-Davidson and El Chanate through the first three quarters, the Company has increased 2018 total cash cost guidance from $740 to $810 per ounce, and AISC guidance from $950 to $990 per ounce. The Company expects lower costs in 2019.
Young-Davidson produced 49,000 ounces in the third quarter, a 25% increase from the second quarter. The operation is on track to achieve revised guidance of between 180,000 and 190,000 ounces for the year.
The near-term focus at Young-Davidson remains on maximizing efficiency from the upper mine infrastructure, while completing development and construction of the lower mine. The upper mine infrastructure was designed for 6,000 tpd and has been operated at up to 7,200 tpd in the fourth quarter of 2017, but has averaged 6,500 tpd over the past two years. The lower mine infrastructure, which will be used over the long term, is designed for 8,000 tpd. Construction of the lower mine and tie-in to the upper mine is scheduled to be completed in the first half of 2020.
Young-Davidson is expected to be operating from the lower mine in the second half of 2020, after which higher underground mining rates will drive production higher and operating costs lower. Combined with a significant reduction in capital, this will result in substantial free cash flow growth. Until such time, gold production, operating
4 | Alamos Gold Inc
costs and capital spending are expected to remain at levels consistent with the past two years. Young-Davidson has generated $48 million of positive free cash flow over the past two years and will continue to fund the lower mine construction from operating cash flow.
Island Gold produced 22,000 ounces in the third quarter, consistent with budget. With year-to-date production of 76,800 ounces, the operation is well positioned to meet its 2018 production guidance of between 100,000 and 110,000 ounces, an 11% increase from original guidance (based on the mid-point).
The Phase I expansion of the Island Gold mill to 1,100 tpd was completed on schedule in September. The mill was successfully commissioned with throughput increasing to average approximately 1,100 tpd in September and October. Higher milling rates and grades are expected to drive stronger production and lower costs in 2019 and beyond. The Company expects a 30% increase in gold production and significant free cash flow growth at Island Gold in 2019.
Exploration results at Island Gold continue to exceed expectations with a significant increase in Mineral Reserves and Resources announced in the third quarter of 2018. Since the acquisition of Island Gold in November 2017, Mineral Reserves have increased 365,000 ounces, before mining depletion, with Mineral Reserve grades also increasing 17% to 10.69 g/t Au as the deposit continues to grow in size and quality. Measured and Indicated Mineral Resources have also increased 130,000 ounces while Inferred Mineral Resources have increased 184,000 ounces. Ongoing exploration success will be incorporated into an evaluation of the most effective and economic approach to a further expansion of the operation beyond 1,100 tpd.
Total production from the Mulatos district (including La Yaqui Phase I) was 43,300 ounces in the third quarter, exceeding budget for the third consecutive quarter. Production decreased from the second quarter of 2018 as expected, with underground mining at San Carlos coming to an end. With year-to-date production of 139,900 ounces, Mulatos is well positioned to meet its increased 2018 production guidance of between 170,000 and 180,000 ounces, representing a 13% increase from the mid-point of original guidance. The Company expects 2019 production to return to the previously guided range of 150,000 to 160,000 ounces per year.
El Chanate produced 9,700 ounces in the third quarter, and remains on track to meet production guidance of 40,000 to 50,000 ounces for the full year. This is down from 2017 reflecting lower mining rates with mining activities having ceased on October 30, 2018. Given the long leach cycle at El Chanate, the Company expects to benefit from ongoing gold production beyond 2018 through residual leaching.
The Company expects combined annual gold production of approximately 500,000 ounces in 2019 and 2020 with low cost production growth from Island Gold replacing higher cost production from El Chanate. Consolidated all-in sustaining costs are expected to decrease in 2019 reflecting the completion of the Phase I expansion at Island Gold and the end of the 5% royalty at Mulatos, with a further decline expected following the completion of the lower mine tie-in at Young-Davidson in 2020.
On July 25, 2018, the Company was granted the GSM (Business Opening and Operation) permit required for the construction of its Kirazlı project. To date, construction has been focused on the infrastructure projects required to support the mine development. The Company now estimates spending $25 million in 2018. This is down from the previous estimate as the Company delayed finalization of the mining services and earthworks contract pending clarity on recent amendments to a decree in Turkey requiring that certain contracts be denominated in Turkish Lira. The Company has now assessed the applicability of these changes and believes this decree is applicable to our mining services and earthworks contract. This contract is now being finalized, with construction activities expected to ramp up through the end of this year. The remainder of the $152 million initial capital budget for Kirazlı is expected to be spent in 2019 and 2020, with first production expected in the second half of 2020.
In addition to capital spending in Turkey, the Company has invested $5.2 million in development expenditures at Cerro Pelon, La Yaqui Grande and Lynn Lake thus far in 2018. Exploration spending of $27.0 million to date has been focused primarily at Island Gold.
With over $625 million of cash and available liquidity, no debt, and growing cash flow from its operations, the Company is well positioned to fund its growth.
5 | Alamos Gold Inc
Young-Davidson Financial and Operational Review
| Three Months Ended September 30, | Nine Months Ended September 30, | ||
|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 |
Gold production (ounces) 49,000 55,800 129,100 143,500 Gold sales (ounces) 46,853 55,267 133,649 145,462
| Operating Revenues | $57.3 | $70.8 | $171.9 | $182.9 |
| Cost of sales(1) | $59.8 | $53.4 | $173.5 | $155.3 |
| (Loss) earnings from operations | ($2.5 ) | $17.4 | ($1.6 ) | $27.6 |
| Cash provided by operating activities | $24.0 | $35.3 | $73.9 | $81.1 |
| Capital expenditures (sustaining)(2) | $9.5 | $9.4 | $25.0 | $25.4 |
| Capital expenditures (growth)(2) | $12.6 | $12.6 | $38.5 | $37.9 |
| Mine-site free cash flow(2) | $1.9 | $13.3 | $10.4 | $17.8 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,276 | $966 | $1,298 | $1,068 |
| Total cash costs per ounce of gold sold(2) | $824 | $572 | $845 | $647 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,029 | $744 | $1,034 | $824 |
Underground Operations
| Tonnes of ore mined | 552,500 | 602,072 | 1,691,443 | 1,758,442 |
| Tonnes of ore mined per day ("tpd") | 6,005 | 6,544 | 6,196 | 6,441 |
| Average grade of gold(4) | 2.59 | 2.89 | 2.44 | 2.69 |
| Metres developed | 2,811 | 3,344 | 9,034 | 10,011 |
Mill Operations
| Tonnes of ore processed | 670,912 | 694,900 | 1,938,395 | 2,018,994 |
| Tonnes of ore processed per day | 7,293 | 7,553 | 7,100 | 7,396 |
| Average grade of gold(4) | 2.43 | 2.65 | 2.28 | 2.43 |
| Contained ounces milled | 52,517 | 59,230 | 140,509 | 157,623 |
| Average recovery rate | 93 % | 93 % | 92 % | 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. Total cash costs and mine-site AISC are exclusive of net-realizable value adjustments.
(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 49,000 ounces of gold in the third quarter of 2018, lower than the comparative quarter of 2017; however, a 25% improvement from the second quarter of 2018 driven by higher milling rates and underground grades mined. This improvement has continued into October with production of 18,000 ounces for the month driven by higher grades and underground mining rates.
Underground mining rates of 6,005 tpd were below budgeted levels in the third quarter. During the second quarter mill shutdown, underground ore was stockpiled, which was subsequently processed, and supplemented ore mined in the quarter. During July, mining rates were impacted by forest fires in proximity to the mine which impacted air quality and resulted in cancelled shifts and three days of downtime. In addition, power outages due to extreme weather caused another two days of downtime to both the mine and mill. This downtime impacted mining rates by approximately 400 tpd over the quarter. Mining rates improved in the latter part of the quarter and in October to average 6,500 tpd. Underground mining rates are expected to increase substantially following the completion of the lower mine tie-in in 2020.
Underground grades mined of 2.59 g/t Au for the third quarter increased 10% from the second quarter of 2018. The Company expects a further improvement in grades mined in the fourth quarter.
During the third quarter, 670,912 tonnes, or 7,293 tpd, were processed through the mill with grades averaging 2.43 g/t Au, representing a 12% increase from the second quarter of 2018. Mill throughput was below budgeted levels, primarily due to the mill shutdown in the early part of the quarter.
Mill recoveries of 93% were in line with expectations and the prior year period.
The Company remains on track to meet the updated production guidance at Young-Davidson of between 180,000 and 190,000 ounces, with the fourth quarter expected to be the strongest of the year.
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Financial Review
For the third quarter ended September 30, 2018, revenues of $57.3 million were $13.5 million lower than the comparative quarter, due to lower ounces sold and a lower realized gold price. Year-to-date 2018 revenues of $171.9 million were $11.0 million lower than the prior year with lower ounces sold partially offset by a higher realized gold price.
Cost of sales, which reflects mining and processing costs, royalties, and amortization expense of $59.8 million were higher than the comparative quarter of 2017 reflecting higher mining and processing costs. Year-to-date cost of sales were $173.5 million, an increase of $18.2 million due to higher mining and processing costs and amortization charges.
Total cash costs in the third quarter were $824 per ounce, a 44% increase from the third quarter of 2017 due to lower grades processed and a higher mining cost per tonne. Mining costs of CAD $54 per tonne in the quarter were above budget, reflecting the impact of lower throughput on fixed costs, as well as higher diesel and maintenance costs. Total cash costs of $845 per ounce for the nine-month period were 31% higher than the prior year period.
Mine-site AISC were $1,029 per ounce in the third quarter, 38% higher than the prior year quarter reflecting higher total cash costs and higher sustaining capital. Mine-site AISC for the nine-month period were $1,034 or 25% higher than the prior year period. Mine-site AISC have been above guidance throughout 2018 as a result of higher per-unit mining and milling costs, as well as the impact of higher sustaining capital on lower ounce production.
Capital expenditures were $22.1 million in the third quarter, including $9.5 million for sustaining capital and $12.6 million for growth capital, consistent with the same quarter of 2017. Major capital spending during the quarter included lateral development in the upper and lower mines, as well as expenditures on the water treatment plant. Capital expenditures of $63.5 million for the nine-month period were consistent with the prior year period and guidance.
Young-Davidson generated mine-site free cash flow of $1.9 million in the third quarter, lower than the prior year quarter, primarily due to lower gold sales and gross margins. Year-to-date free cash flow of $10.4 million was lower due to gold sales and higher costs.
7 | Alamos Gold Inc
Island Gold Financial and Operational Review
| Three Months Ended September 30, | Nine Months Ended September 30, | ||
|---|---|---|---|
| 2018 | 2017 (1) | 2018 | 2017 (1) |
Gold production (ounces) (1) 22,000 — 76,800 — Gold sales (ounces) (1) 20,561 — 75,321 —
| Operating Revenues | $25.3 | $— | $97.6 | $— |
| Cost of sales(2) | $22.3 | $— | $77.8 | $— |
| Earnings from operations | $2.7 | $— | $19.4 | $— |
| Cash provided by operating activities | $13.9 | $— | $59.6 | $— |
| Capital expenditures (sustaining)(3) | $7.8 | $— | $12.2 | $— |
| Capital expenditures (growth)(3) | $5.3 | $— | $24.6 | $— |
| Capital expenditures (capitalized exploration)(3) | $4.7 | $— | $12.5 | $— |
| Mine-site free cash flow(3) | ($3.9 ) | $— | $10.3 | $— |
| Cost of sales, including amortization per ounce of gold sold(2) | $1,085 | $— | $1,033 | $— |
| Total cash costs per ounce of gold sold(3) | $671 | $— | $597 | $— |
| Mine-site all-in sustaining costs per ounce of gold sold(3),(4) | $1,051 | $— | $759 | $— |
Underground Operations
| Tonnes of ore mined | 74,892 | 84,405 | 241,644 | 280,555 |
| Tonnes of ore mined per day ("tpd") | 814 | 917 | 885 | 1,028 |
| Average grade of gold(5) | 8.96 | 9.16 | 9.12 | 9.41 |
| Metres developed | 1,591 | 1,383 | 4,917 | 5,239 |
Mill Operations
| Tonnes of ore processed | 93,454 | 85,101 | 264,335 | 254,044 |
| Tonnes of ore processed per day | 1,016 | 925 | 968 | 931 |
| Average grade of gold(5) | 8.22 | 10.04 | 9.27 | 9.65 |
| Contained ounces milled | 24,708 | 27,470 | 78,793 | 78,818 |
| Average recovery rate | 96 % | 97 % | 97 % | 97 % |
(1) Financial results from Island Gold are included in Alamos’ consolidated financial statements for the period subsequent to November 23, 2017. Gold production from Island Gold for the three and nine-months ended September 30, 2017 was 26,659 and 76,541 ounces.
(2) Cost of sales includes mining and processing costs, royalties and amortization.
(3) 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. Total cash costs and mine-site AISC are exclusive of net-realizable value adjustments.
(4) 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.
(5) Grams per tonne of gold ("g/t Au").
Island Gold produced 22,000 ounces in the third quarter bringing year-to-date production to 76,800 ounces, well ahead of budget. The Company remains well positioned to achieve 2018 production guidance of 100,000 to 110,000 ounces which was increased earlier in the year from original guidance of 90,000 to 100,000 ounces.
Underground mining rates in the third quarter of 74,892 tonnes or 814 tpd were impacted by low contractor production drilling performance, as well as a scheduled one-week shutdown of the ramp. Underground mining rates improved later in the quarter, averaging approximately 1,100 tpd in September as well as October and are expected to remain at similar levels going forward, to match the expanded mill capacity. Underground grades mined of 8.96 g/t Au were higher than the second quarter and slightly above budget.
Mill throughput for the third quarter was 93,454 tonnes, or 1,016 tpd, an increase from 976 tpd in the second quarter and 925 tpd in the prior year quarter. The Phase I expansion was completed and commissioned during the month of September, with October mill throughput averaging over 1,100 tpd. Milled grades averaged 8.22 g/t Au, 18% lower than the prior year quarter, but consistent with the budget.
Financial Review
With the Company acquiring Island Gold on November 23, 2017, financial information prior to the acquisition date has not been included in the comparative table above.
Island Gold generated revenues of $25.3 million in the third quarter, lower than the first two quarters of 2018, resulting from lower ounces sold during the quarter. Revenues for the nine-month period were $97.6 million.
8 | Alamos Gold Inc
Cost of sales in the third quarter and nine-month period were $22.3 million and $77.8 million, respectively. Cost of sales includes ongoing amortization charges related to the purchase price of the asset, which increases amortization to approximately $450 per ounce based on current Mineral Reserves and Resources.
Total cash costs of $671 per ounce were higher than the prior quarter, reflecting lower tonnes mined and lower grades. On a year-to-date basis, total cash costs of $597 per ounce are in-line with annual guidance of $575 per ounce. Total cash costs are expected to decrease in the fourth quarter reflecting higher milled grades and mining rates.
Mine-site AISC of $1,051 per ounce were also higher than annual guidance of $825 primarily reflecting lower ounces sold during the quarter, and the timing of sustaining capital, as spending was well below budget for the first half of the year. Full year mine-site AISC of $759 per ounce remains below full year guidance.
Capital expenditures totaled $17.8 million in the third quarter, with spending focused primarily on lateral development, mining equipment, completion of the mill expansion, as well as capitalized exploration. Total capital expenditures in the third quarter included $7.8 million of sustaining capital and $10.0 million of growth capital (inclusive of capitalized exploration). Year-to-date capital expenditures totaled $49.3 million, including capitalized exploration, and are expected to be in line with guidance for the full year.
Mine-site free cash flow was negative $3.9 million during the third quarter due to timing of capital spending. On a year-to-date basis, Island Gold has generated mine-site free cash flow of $10.3 million driven by stronger than budgeted production and operating margins.
9 | Alamos Gold Inc
Mulatos Financial and Operational Review
| Three Months Ended September 30, | Nine Months Ended September 30, | ||
|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 |
Gold production (ounces) 43,300 36,300 139,900 117,300 Gold sales (ounces) 42,300 30,330 136,285 109,270
| Operating Revenues | $51.5 | $38.9 | $175.2 | $137.4 |
| Cost of sales(1) | $41.9 | $29.0 | $134.7 | $105.3 |
| Earnings from operations | $8.0 | $7.6 | $33.9 | $27.2 |
| Cash provided by operating activities | $16.1 | $13.1 | $56.3 | $42.0 |
| Capital expenditures (sustaining)(2) | $2.1 | $1.1 | $4.7 | $4.6 |
| Capital expenditures (growth)(2) | $4.4 | $4.9 | $16.5 | $11.9 |
| Capital expenditures (capitalized exploration)(2) | $0.3 | $1.2 | $2.3 | $5.9 |
| La Yaqui Phase I construction cost(2) | $— | $1.7 | $— | $12.5 |
Mine-site free cash flow, excluding La Yaqui construction $9.3 $5.9 $32.8 $19.6 costs (2)
| Cost of sales, including amortization per ounce of gold sold(1) | $991 | $956 | $988 | $964 |
| Total cash costs per ounce of gold sold(2) | $771 | $785 | $784 | $782 |
| Mine site all-in sustaining costs per ounce of gold sold(2),(3) | $846 | $864 | $847 | $852 |
Open Pit & Underground Operations
| Tonnes of ore mined - open pit(4) | 1,904,534 | 2,340,817 | 6,360,911 | 5,910,627 | |
| Total waste mined - open pit | 1,108,953 | 1,461,098 | 4,958,609 | 4,723,985 | |
| Total tonnes mined - open pit | 3,490,021 | 4,217,795 | 13,000,643 | 11,050,492 | |
| Waste-to-ore ratio (operating) | 0.58 | 0.62 | 0.78 | 0.80 | |
| Tonnes of ore mined - underground | 9,280 | 19,694 | 45,258 | 77,463 |
Crushing and Heap Leach Operations
| Tonnes of ore stacked | 1,465,876 | 1,748,328 | 5,018,456 | 5,050,642 |
| Average grade of gold processed(5) | 0.96 | 0.96 | 0.89 | 0.92 |
| Contained ounces stacked | 45,043 | 53,690 | 143,310 | 149,980 |
Mill Operations
| Tonnes of high grade ore milled | 29,806 | 30,769 | 91,680 | 101,879 |
| Average grade of gold processed(5) | 6.07 | 10.05 | 6.70 | 9.81 |
| Contained ounces milled | 5,815 | 9,938 | 19,744 | 32,140 |
| Total contained ounces stacked and milled | 50,858 | 63,628 | 163,054 | 182,120 |
Recovery ratio (ratio of ounces produced to contained ounces 85 % 57 % 86 % 64 % stacked and milled)
Ore crushed per day (tonnes) - combined 16,300 19,300 18,700 18,900
(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. Total cash costs and mine-site AISC are exclusive of net-realizable value adjustments.
(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 ore stockpiled during the quarter.
(5) Grams per tonne of gold ("g/t Au").
Mulatos produced 43,300 ounces in the third quarter, another stronger than expected performance driven by higher heap leach recoveries as well as continued mill production from the underground San Carlos mine.
With year-to-date production of 139,900 ounces, the Mulatos mine is on track to meet its increased production guidance of 170,000 to 180,000 ounces (original guidance was 150,000 to 160,000 ounces).
Total crusher throughput averaged 16,300 tpd for a total of 1,465,876 tonnes stacked in the third quarter at a grade of 0.96 g/t Au. This was lower than annual guidance and the prior year period due to temporary contractor personnel availability issues which limited mining rates. These issues were resolved in September. The waste-to-ore ratio of 0.58:1 was lower than the prior year quarter and guidance.
In the third quarter, 29,806 tonnes of ore from the San Carlos underground mine were milled at an average grade of 6.07 g/t Au. As guided in the second quarter, mining activities at San Carlos ceased during the third quarter, with the
10 | Alamos Gold Inc
mine operating approximately six months longer than expected at the beginning of the year. With no further production from the high grade mill, the Company expects fourth quarter production to be down from the third quarter. The Company expects 2019 production to return to the previously guided range of 150,000 to 160,000 ounces per year.
The recovery ratio of ounces produced to contained ounces stacked and milled was 85% in the quarter compared to 57% in the prior year period and guidance of 75%. The higher recoveries are mainly the result of lower stacking rates in the quarter and stronger than budgeted recoveries at La Yaqui Phase I.
Financial Review
For the three months ended September 30, 2018, revenues of $51.5 million were 32% higher than the prior year quarter, driven by a 39% increase in ounces sold, partially offset by lower realized gold prices. Revenues for the ninemonth period were $175.2 million, 28% higher than the prior year period due to higher ounces sold and higher realized gold prices.
Cost of sales of $41.9 million and $134.7 million for the three and nine-month periods, respectively, were higher than the prior year periods reflecting higher total tonnes moved and increased amortization related to mining at La Yaqui Phase I.
Total cash costs of $771 per ounce in the third quarter were slightly lower than $785 per ounce in the prior year quarter, resulting from a lower strip ratio. Total cash costs for the nine-month period of $784 per ounce were consistent with the $782 per ounce reported in the prior year period.
Mine-site AISC in the quarter of $846 per ounce were lower than the $864 per ounce reported in the prior year quarter, as lower cash costs were partially offset by higher sustaining capital during the quarter. Mine-site AISC for the ninemonth period of $847 per ounce were consistent with the prior year period and have remained below guidance of $900 per ounce throughout the year.
Mulatos generated mine-site free cash flow of $9.3 million for the quarter and has generated $32.8 million year-todate, both well ahead of budget, driven by stronger than expected production, higher gold prices and lower costs. Mulatos has generated strong cash flow in 2018, part of which has been invested in advancing the La Yaqui Grande and Cerro Pelon deposits through permitting, as well as funding ongoing exploration activities.
11 | Alamos Gold Inc
El Chanate Financial and Operational Review
| Three Months Ended September 30, | Nine Months Ended September 30, | ||
|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 |
Gold production (ounces) 9,700 14,900 33,600 48,300 Gold sales (ounces) 9,687 14,954 33,463 48,597
| Operating Revenues | $12.6 | $19.1 | $44.0 | $60.8 |
| Cost of sales(1) | $13.6 | $18.2 | $46.3 | $59.6 |
| (Loss) earnings from operations | ($1.0 ) | $0.9 | ($2.3 ) | $1.2 |
| Cash (used by) provided by operating activities | ($2.6 ) | $2.0 | ($1.8 ) | $4.2 |
| Capital expenditures | $0.2 | $0.3 | $0.5 | $1.2 |
Mine-site free cash flow (2)
| ($2.8 ) | $1.7 | ($2.3 ) | $3.0 | |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,404 | $1,217 | $1,384 | $1,226 |
| Total cash costs per ounce of gold sold(2) | $1,301 | $1,137 | $1,285 | $1,156 |
| Mine site all-in sustaining costs per ounce of gold sold(2),(3) | $1,332 | $1,164 | $1,312 | $1,187 |
Open Pit Operations
| Tonnes of ore mined | 1,316,936 | 1,625,109 | 2,569,013 | 3,579,459 | ||||
| Total tonnes mined | 2,893,428 | 5,191,704 | 8,157,062 | 18,490,606 | ||||
| Waste-to-ore ratio (operating) | 1.20 | 2.19 | 2.18 | 4.17 | ||||
| Average grade of gold(4) | 0.52 | 0.48 | 0.55 | 0.47 |
Crushing and Heap Leach Operations
| Total tonnes of ore stacked | 1,233,200 | 1,537,874 | 2,493,120 | 3,548,207 |
| Average grade of gold(4) | 0.52 | 0.48 | 0.55 | 0.50 |
| Total contained ounces stacked | 20,617 | 23,733 | 44,086 | 57,039 |
Ore crushed and run-of-mine ore stacked per day (tonnes) - 13,400 16,700 9,100 13,000 combined
(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. Total cash costs and mine-site AISC are exclusive of net-realizable value adjustments.
(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").
El Chanate produced 9,700 ounces of gold in the third quarter of 2018, down from 14,900 ounces in the prior year quarter, reflecting lower stacking rates as mining activities wind down. The Company ceased mining on October 30, 2018, with residual leaching continuing through 2019.
Financial Review
Third quarter revenues of $12.6 million were lower than the prior year quarter due to fewer ounces sold as the mining activities wind down. Revenues for the nine-month period were $44.0 million compared to $60.8 million in the prior year period.
Total cash costs per ounce of $1,301 for the third quarter and $1,285 for the nine-month period were higher than the respective prior year periods, reflecting lower ounces stacked in the period and higher processing costs. Mine-site AISC per ounce were $1,332 for the quarter and $1,312 for the nine-month period, higher than the respective prior year periods.
Mine-site free cash flow was negative $2.8 million in the quarter and negative $2.3 million year-to-date. El Chanate is expected to realize higher cash flows from residual leaching starting in the fourth quarter of 2018. Given El Chanate's higher cost structure, the Company has hedged El Chanate's fourth quarter 2018 gold production through gold collar contracts, ensuring a minimum gold price of $1,290 and participation up to a price of $1,479 per ounce.
12 | Alamos Gold Inc