Alamos Gold Reports Fourth Quarter and Year-End 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 Fourth Quarter and Year-End 2022 Results
Toronto, Ontario (February 22, 2023) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter and year ended December 31, 2022.
“We closed 2022 with our strongest performance of the year. This included record production and our lowest costs of the year driving stronger free cash flow of $18 million in the fourth quarter. We met our full year production and cost guidance, with the latter coming in below the mid-point of guidance, a solid result given industry-wide cost pressures. This reflects not only the strong ongoing operational performance of all three mines, but the quality of our assets,” said John A. McCluskey, President and Chief Executive Officer.
“As outlined in our three-year guidance, we expect this trend to continue with a 9% increase in production in 2023 and 17% decrease in all-in sustaining costs by 2025. We continue to benefit from our investment in low-cost growth with La Yaqui Grande performing extremely well and a key driver of our near-term improving performance. We are also making significant progress on the Phase 3+ Expansion at Island Gold which will be the driver of a further increase in production and lower costs once completed in 2026. Additionally, we continue to add value through exploration with Mineral Reserves increasing for the fourth consecutive year, at 3% higher grades. This reflects higher-grade additions at Island Gold and PDA which we expect will be high-margin ounces, supporting our growing, low-cost production base,” Mr. McCluskey added.
Fourth Quarter 2022
- Record quarterly production of 134,200 ounces of gold, a 9% increase from the third quarter, driven by strong performances at all operations including a significant increase in production from the Mulatos District. Full year production was in-line with the mid-point of guidance
- Mulatos District production increased 15% from the third quarter to total 49,100 ounces, at substantially lower costs driving mine-site free cash flow1 of $28.8 million. This reflected the ramp up of low-cost production at La Yaqui Grande
- Island Gold had its strongest quarter of 2022, producing 40,500 ounces while continuing to make substantial progress on the Phase 3+ Expansion including completing the pre-sink of the shaft
- Young-Davidson continued to be a consistent performer, producing 44,600 ounces and generating mine-site free cash flow1 of $24.0 million
- Sold 133,164 ounces of gold at an average realized price of $1,741 per ounce, for record revenues of $231.9 million. The average realized gold price was $15 per ounce above the London PM fix for the quarter
- Total cash costs1 of $810 per ounce, and all-in sustaining costs ("AISC"1) of $1,138 per ounce were the lowest of the year, and below annual guidance, reflecting low-cost production growth at La Yaqui Grande, and the weaker Canadian dollar. Full year total cash costs and AISC were both below the mid-point of annual guidance, a solid performance given industry-wide inflationary pressures
- Realized adjusted net earnings1 for the quarter of $33.7 million, or $0.09 per share1. Adjusted net earnings includes adjustments for net unrealized foreign exchange gains recorded within both deferred taxes and foreign exchange of $12.0 million, partially offset by other losses totaling $5.1 million
- Reported net earnings of $40.6 million
- Generated cash flow from operating activities of $102.3 million ($109.3 million, or $0.28 per share, before changes in working capital1), the highest quarterly cash flow generated in the past two years
- Free cash flow1 increased to $17.5 million driven by strong operating results. The Company expects to continue generating strong free cash flow over the next several years while funding the Phase 3+ Expansion at Island Gold
- Paid a quarterly dividend of $9.9 million, or $0.025 per share (annualized rate of $0.10)
- Cash and cash equivalents increased to $129.8 million at the end of the year, along with equity securities of $18.6 million, and the Company remains debt-free
- Provided exploration updates at Island Gold and Puerto Del Aire (Mulatos), extending high-grade gold mineralization beyond existing Mineral Reserves and Resources at both deposits
- Announced the sale of non-core royalties, including a silver stream on the Esperanza Project in Mexico, for proceeds of $5 million. The sale is expected to close by the end of February, 2023
Full Year 2022
- Produced 460,400 ounces of gold, achieving the mid-point of annual guidance. All three operations performed well, meeting their respective production guidance
- Young-Davidson produced 192,200 ounces, driving record mine-site free cash flow1 of $101.3 million
- Island Gold produced 133,700 ounces, while self funding $102.0 million of growth capital with the ramp up of construction activities on the Phase 3+ Expansion
- Mulatos produced 134,500 ounces, with a substantial improvement in second half production and costs following the completion of construction at La Yaqui Grande
- Sold 456,574 ounces of gold at an average realized price of $1,799 per ounce for revenues of $821.2 million
- Total cash costs1 of $884 per ounce, AISC1 of $1,204 per ounce, and cost of sales of $1,334 per ounce were in line with annual guidance
- Realized adjusted net earnings1 for the year of $107.9 million, or $0.28 per share1. Adjusted net earnings includes adjustments for a non-cash after tax inventory net realizable value adjustment at Mulatos of $22.4 million, a non-cash, after tax impairment charge of $26.7 million triggered by the sale of the Esperanza Project, a net unrealized foreign exchange loss recorded within both deferred taxes and foreign exchange of $17.7 million, and other losses totaling $4.0 million
- Reported net earnings of $37.1 million, or $0.09 per share
- Cash flow from operating activities of $298.5 million (including $361.6 million, or $0.92 per share before changes in working capital1)
- Returned $47.3 million to shareholders, including $39.2 million paid in dividends and $8.2 million of shares repurchased under the Company's Normal Course Issuer Bid ("NCIB") at a price of $7.41 per share
- Issued three-year guidance on January 12, 2023, which included increased production guidance for 2023 and 2024. Production is expected to increase 9% in 2023 at declining costs, with an 17% decrease in AISC expected by 2025. This is expected to drive strong free cash flow over the next three years while continuing to fund the Phase 3+ Expansion
- Reported year-end 2022 Mineral Reserves of 10.5 million ounces of gold, a 2% increase from the end of 2021 having more than replaced mining depletion for the fourth consecutive year. Mineral Reserve grades also increased 3% driven by higher grade additions at Island Gold and Mulatos. Additionally, Measured and Indicated Mineral Resources increased 14% to 3.9 million ounces and Inferred Mineral Resources increased 2% to 7.1 million ounces
.(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 December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 |
Financial Results (in millions)
| Operating revenues | $231.9 | $203.1 | $821.2 | $823.6 |
| Cost of sales(1) | $153.4 | $138.4 | $608.9 | $534.1 |
| Earnings (loss) from operations | $61.6 | $49.8 | $111.5 | $14.9 |
| Earnings (loss) before income taxes | $52.6 | $43.6 | $102.4 | $2.3 |
| Net earnings (loss) | $40.6 | $29.5 | $37.1 | ($66.7) |
| Adjusted net earnings(2) | $33.7 | $36.7 | $107.9 | $162.1 |
| Earnings before interest, depreciation and amortization(2) | $100.4 | $88.0 | $351.7 | $402.0 |
Cash provided by operations before working capital and $109.3 $91.8 $361.6 $410.9 cash taxes(2)
| Cash provided by operating activities | $102.3 | $88.1 | $298.5 | $356.5 |
| Capital expenditures (sustaining)(2) | $26.5 | $32.2 | $95.2 | $113.4 |
| Capital expenditures (growth)(2) (3) (5) | $50.2 | $51.2 | $191.9 | $218.0 |
| Capital expenditures (capitalized exploration)(4) | $8.1 | $8.2 | $26.6 | $27.0 |
| Free cash flow(2) | $17.5 | ($3.5) | ($15.2) | ($1.9) |
Operating Results
134,200 112,500 460,400 457,200 Gold production (ounces)
Gold sales (ounces) 133,164 112,966 456,574 457,517
Per Ounce Data
Average realized gold price $1,741 $1,798 $1,799 $1,800 Average spot gold price (London PM Fix) $1,726 $1,795 $1,800 $1,799 Cost of sales per ounce of gold sold (includes $1,152 $1,225 $1,334 $1,167 amortization) (1)
Total cash costs per ounce of gold sold (2) $810 $843 $884 $794 All-in sustaining costs per ounce of gold sold (2) $1,138 $1,237 $1,204 $1,135
Share Data
Earnings (loss) earnings per share, basic and diluted $0.10 $0.08 $0.09 ($0.17) Adjusted earnings per share, basic and diluted(2) $0.09 $0.09 $0.28 $0.41 Weighted average common shares outstanding (basic)
393,034 392,333 392,172 392,649 (000’s)
Financial Position (in millions)
Cash and cash equivalents(5) $129.8 $172.5
(1) Cost of sales includes mining and processing costs, royalties, and amortization expense. For the year ended December 31, 2022, cost of sales includes a $33.9 million non-cash inventory net realizable value adjustment, respectively, 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 twelve months ended December 31, 2022 (nil and $9.8 million for the three and twelve months ended December 31, 2021).
(6) Comparative cash and cash equivalents balance as at December 31, 2021.
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| Three Months Ended December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 |
Gold production (ounces)
| Young-Davidson | 44,600 | 51,900 | 192,200 | 195,000 |
| Island Gold | 40,500 | 37,500 | 133,700 | 140,900 |
| Mulatos District(7) | 49,100 | 23,100 | 134,500 | 121,300 |
Gold sales (ounces)
| Young-Davidson | 44,781 | 53,006 | 192,186 | 194,937 |
| Island Gold | 39,145 | 38,101 | 130,652 | 139,946 |
| Mulatos District | 49,238 | 21,859 | 133,736 | 122,634 |
Cost of sales (in millions)(1)
| Young-Davidson | $62.2 | $62.6 | $250.5 | $244.4 |
| Island Gold | $35.2 | $33.1 | $120.4 | $112.3 |
| Mulatos District | $56.0 | $42.7 | $238.0 | $177.4 |
Cost of sales per ounce of gold sold (includes amortization)
| Young-Davidson | $1,389 | $1,181 | $1,303 | $1,254 |
| Island Gold | $899 | $869 | $922 | $802 |
| Mulatos District(1) | $1,137 | $1,953 | $1,780 | $1,447 |
Total cash costs per ounce of gold sold (2)
| Young-Davidson | $942 | $775 | $878 | $846 |
| Island Gold | $605 | $575 | $637 | $529 |
| $851 | $1,473 | $1,134 | $1,013 |
Mulatos District
Mine-site all-in sustaining costs per ounce of gold sold (2),(3)
| Young-Davidson | $1,284 | $1,017 | $1,133 | $1,072 |
| Island Gold | $863 | $871 | $918 | $863 |
| Mulatos District | $922 | $1,899 | $1,241 | $1,240 |
Capital expenditures (sustaining, growth, capitalized exploration and capital advances) (in millions)(2)
| Young-Davidson(4) | $20.6 | $24.8 | $71.5 | $88.6 |
| Island Gold(5) | $53.9 | $27.4 | $157.3 | $120.0 |
| Mulatos District(6) | $5.5 | $34.2 | $62.7 | $128.3 |
| Other | $4.8 | $5.2 | $22.2 | $21.5 |
(1) Cost of sales includes mining and processing costs, royalties, and amortization. For the year ended December 31, 2022, cost of sales includes a $33.9 million noncash inventory net realizable value adjustment, at the 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.
compensation expenses.
(4) Includes capitalized exploration at Young-Davidson of $1.5 million and $5.0 million for the three and twelve months ended December 31, 2022 ($2.7 million and $6.5 million for the three and twelve months ended December 31, 2021).
(5) Includes capitalized exploration at Island Gold of $4.9 million and $18.8 million for the three and twelve months ended December 31, 2022 ($5.2 million and $18.8 million for the three and twelve months ended December 31, 2021). Island Gold capital expenditures in 2021 exclude an NPI royalty repurchased for $15.7 million.
(6) Includes capitalized exploration at Mulatos District of $1.7 million and $2.8 million for the three and twelve months ended December 31, 2022 ($0.3 and $1.7 million for the three and twelve months ended December 31, 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
- Total recordable injury frequency rate1("TRIFR") of 1.26, a 39% decrease from the third quarter of 2022
- Lost time injury frequency rate1 ("LTIFR") of 0.09, an increase from zero in the third quarter of 2022; one fatal accident occurred at the Young-Davidson mine during the quarter, as discussed below
- Full-year TRIFR of 1.59 and LTIFR of 0.06, a decline of 22% and 71%, respectively from 2021
On the afternoon of November 29th, employees, family and friends were shocked and deeply saddened by the loss of a colleague in a fatal accident. The tragic accident involved a piece of mobile equipment underground at the Young-Davidson mine. The Company has cooperated fully with all investigative authorities.
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 in the fourth quarter of 2022 and for the full year
- Island Gold received additional construction permits for the mill expansion and shaft site storage areas
- Young Davidson submitted a Closure Plan Amendment to the Ministry of Mines
- Fish habitat compensation projects were completed at Young-Davidson as part of the mine’s commitments for the newly constructed tailings facility
- Continued to advance federal and provincial permitting at the Lynn Lake Gold project
One reportable spill occurred during the fourth quarter at Young-Davidson when a vendor’s compressed natural gas ("CNG") trailer malfunctioned, causing the release of some of its contents. The incident was immediately reported to local authorities and is being investigated by the vendor to determine the cause of the release. There were no injuries reported in relation to the incident and there was no impact to air intake fans feeding underground operations. 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.
Community
Ongoing donations, medical support and infrastructure investments being provided to local communities, including:
- Community road repairs and maintenance following heavy rainfall in the quarter at Mulatos
- Donation to, and partnership with, the Lady Dunn Health Centre’s Wish Campaign to support healthcare initiatives for the Wawa and regional community
- Health consultations at the Matarachi community clinic (dentistry, pediatrics, vaccinations, and general consultations) and campaigns in support of Breast Cancer Awareness Month
- Cultural and artistic programs, and community celebrations at Matarachi for Day of the Dead and Christmas
- Scholarship payments for students in Matarachi and Sahuaripa, and sponsorship of the Young Mining Professionals Scholarship Fund
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. Ongoing investments in local infrastructure, health care, education, cultural and community programs remain a focus of the Company.
Governance and Disclosure
- Finalized six sustainability standards during the quarter and 34 to-date as part of Alamos’ Sustainability Performance Management Framework that addresses governance, health & safety, security, environment, and community relations management
5 | Alamos Gold Inc
- Top 35% ranking in 2022 Globe and Mail Board Games, a ranking of Canada’s corporate boards
- Received an ‘A’ ESG rating within Alamos’ most recent MSCI ESG Ratings Report
- Received a ‘Medium’ ESG Risk Rating from Sustainalytics, positioning Alamos in the top 22nd percentile of its industry
- Received a ‘B-’ climate change score from the Carbon Disclosure Project, ahead of the industry ‘C’ average
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.
6 | Alamos Gold Inc
Outlook and Strategy
| 2023 Guidance | |||||
| Young- | Island Gold | ||||
| Davidson | Mulatos | Lynn Lake | Total |
Gold production (000’s ounces) 185 - 200 120 - 135 175 - 185 480 - 520 Cost of sales, including amortization (in millions)(3) $625 Cost of sales, including amortization ($ per ounce)(3) $1,250 Total cash costs ($ per ounce)(1) $900 - $950 $600 - $650 $900 - $950 — $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 $950 - $1,000 $950 - $1,000 — Capital expenditures (in millions)
| Sustaining capital(1) | $50 - $55 | $45 - $50 | $10 | — | $105 - $115 |
| Growth capital(1) | $5 - $10 | $165 - $185 | $5 - $10 | $12 | $187 - $217 |
| Total Sustaining and Growth Capital(1) | $55 - $65 | $210 - $235 | $15 - $20 | $12 | $292 - $332 |
| Capitalized exploration(1) | $5 | $11 | $4 | $5 | $25 |
Total capital expenditures and capitalized $60 - $70 $221 - $246 $19 - $24 $17 $317 - $357 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.
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 had a successful 2022, continuing to deliver on its long-term objectives including strong operational execution at all its operations. Full year production was in-line with guidance and total cash costs and AISC were below the mid-point of guidance, a solid performance given industry-wide inflationary pressures. This included a strong finish to the year with record quarterly production and sales in the fourth quarter of 2022 at the lowest costs of the year, driving strong free cash flow growth. Mulatos was a significant contributor to this growth with the ramp up of low cost production at La Yaqui Grande, as was Young-Davidson which generated over $100 million of minesite free cash flow for the second consecutive year.
In addition, the Company delivered on several key catalysts in 2022 which have solidified its strong outlook. This included completing construction at La Yaqui Grande mid-year, and announcing the Phase 3+ Expansion of Island Gold, which will create a larger, more profitable and valuable operation. At Island Gold, the Phase 3+ Expansion is advancing well, while the strong operational performance continued to self-fund the ramp up in construction activities.
The Company continues to add value through successful exploration programs at its operating mines. This included more than replacing mining depletion to drive a 2% increase in Global Mineral Reserves to 10.5 million ounces (200 mt grading 1.63 g/t Au) and 3% increase in grades. This was driven by higher-grade additions at Island Gold and Puerto Del Aire ("PDA") in the Mulatos District. Island Gold continues to grow with Mineral Reserves increasing 9% to 1.5 million ounces, at 6% higher grades. PDA's Mineral Reserves increased 70% to 728,000 ounces with grades also increasing 4%. With both deposits open in multiple directions, and significant exploration programs planned at both operations, there is excellent potential for this growth to continue.
The Company provided three-year production and operating guidance in January 2023, which outlined higher production at significantly lower costs over the next three years. Refer to the Company’s January 12, 2023 guidance press release for a summary of the key assumptions and related risks associated with the comprehensive 2023 guidance and three-year production, cost and capital outlook. Production is expected to increase to between 480,000 and 520,000 ounces in 2023, a 9% increase from 2022, and remain at similar levels in 2024 and 2025. Production guidance was increased from previous guidance for 2023 and 2024 with stronger production expected from Island Gold and Mulatos. Additional upside potential exists in 2025 as production guidance excludes the higher-grade PDA project in the Mulatos District. This upside is expected to be outlined in a new development plan for PDA to be completed in the second half of 2023, which will incorporate the 70% larger Mineral Reserve outlined in the recently released 2022 Mineral Reserve and Resource statement.
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As outlined in the 2023 guidance, production is expected to be relatively balanced between the first and second half of 2023, with first quarter production expected to be between 120,000 and 125,000 ounces. AISC are expected to be slightly above the range of full year guidance during the first quarter and trend lower through the year. This reflects lower planned grades at Young-Davidson and higher sustaining capital at Mulatos during the first half of the year.
Total cash costs are expected to decrease 4% in 2023 to between $825 and $875 per ounce, and 21% by 2025 to between $650 and $750 per ounce, driven by low-cost production growth from La Yaqui Grande and Island Gold. A further improvement in costs is expected in 2026 following the completion of the Phase 3+ Expansion. Similarly, AISC are expected to decrease 4% in 2023 and 17% by 2025 to between $950 and $1,050 per ounce.
Capital spending is expected to be consistent with 2022, with approximately 55% of full year capital expected to be spent during the first half of the year. Capital spending and costs are expected to decline in the second half of the year, which is anticipated to drive stronger free cash flow.
Gold production from Young-Davidson in 2023 is expected to be consistent with 2022, reflecting similar grades and mining and processing rates. Total cash costs and mine-site AISC are expected to increase slightly from 2022 levels, primarily reflecting industry-wide cost inflation. Costs are expected to remain at similar levels over the next three years. Capital spending in 2023 (excluding exploration) is expected to range between $55 and $65 million, similar to 2022. For the second consecutive year, Young-Davidson generated over $100 million of mine-site free cash flow reflecting strong operational consistency. With a 15-year Mineral Reserve life, Young-Davidson is well positioned to generate similar free cash flow in 2023 and over the long-term.
Island Gold is expected to produce at similar levels in 2023 as in 2022 with similar grades and processing rates. As outlined in the Phase 3+ Expansion study released in June 2022, grades mined are expected to increase in 2024, driving production higher. A further increase in grades and increase in mining rates toward the latter part of 2025, is expected to drive another increase in production in 2025. Total cash costs and mine-site AISC at Island Gold are expected to increase slightly in 2023 compared to 2022, reflecting industry-wide cost inflation. Costs are expected to decrease slightly in 2024 and 2025, reflecting higher grades processed. Capital spending at Island Gold (excluding exploration) is expected to be between $210 and $235 million in 2023 as spending on the Phase 3+ Expansion ramps up, and is expected to remain at similar levels in 2024 and 2025 and then drop considerably in 2026 once the expansion is complete.
Combined gold production from the Mulatos District (including La Yaqui Grande) is expected to be between 175,000 and 185,000 ounces in 2023. This represents a 34% increase from 2022 driven by a full year of low-cost production from La Yaqui Grande. Gold production is expected to decrease to a range of 140,000 to 150,000 ounces in 2024 with La Yaqui Grande providing the majority of production and driving a further improvement in costs. Production guidance for 2025 of 110,000 to 120,000 ounces includes La Yaqui Grande only and excludes potential upside from the PDA higher-grade underground deposit. This upside is expected to be outlined in a new development plan for PDA to be completed in the second half of 2023. Total cash costs are expected to remain relatively stable through 2023 while mine-site AISC are expected to decrease in the second half of 2023 with the majority of sustaining capital to be spent during the first half of the year. Capital spending at the Mulatos District is expected to total $15 to $20 million in 2023, a considerable decrease from 2022, with La Yaqui Grande construction complete. Capital spending is expected to decrease further in 2024 and 2025 (excluding PDA development).
Capital spending on the Lynn Lake project, excluding exploration, is expected to total $12 million. The focus will be on advancing detailed engineering and permitting, as well as completing an updated Feasibility Study. The Environmental Impact Statement for Lynn Lake is expected to be approved during the first half of 2023 after which the Company expects to release an updated Feasibility Study. Additionally, $5 million has been budgeted for exploration at Lynn Lake for total spending of $17 million.
The global exploration budget for 2023 is $47 million, consistent with spending in 2022. The Mulatos District accounts for the largest portion with an increased budget at $17 million, followed by $14 million at Island Gold, $8 million at Young-Davidson and $5 million at Lynn Lake. The increased budget at Mulatos was partially offset by a lower exploration budget at Island Gold reflecting an expanded underground drilling program, which is lower cost than surface directional drilling. The exploration focus in 2023 will follow up on another successful program in 2022, with Mineral Reserves increasing for the fourth consecutive year to 10.5 million ounces of gold, and grades increasing 3%.
The Company's liquidity position remains strong, ending the quarter with $129.8 million of cash and cash equivalents, $18.6 million in equity securities, and no debt. Additionally, the Company has a $500 million undrawn credit facility, providing total liquidity of $629.8 million. As part of a balanced approach to growth and capital allocation, the current focus of growth capital is the Phase 3+ Expansion at Island Gold. With no significant capital
8 | Alamos Gold Inc
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 a further increase in free cash flow in 2026 with the completion of the Phase 3+ Expansion.
9 | Alamos Gold Inc
Fourth Quarter and Year-End 2022 results
Young-Davidson Financial and Operational Review
| Three Months Ended December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 |
Gold production (ounces) 44,600 51,900 192,200 195,000 Gold sales (ounces) 44,781 53,006 192,186 194,937
Financial Review (in millions)
| Operating Revenues | $78.1 | $95.2 | $347.8 | $350.5 |
| Cost of sales(1) | $62.2 | $62.6 | $250.5 | $244.4 |
| Earnings from operations | $15.6 | $31.9 | $93.0 | $105.4 |
| Cash provided by operating activities | $44.6 | $55.2 | $172.8 | $188.9 |
| Capital expenditures (sustaining)(2) | $15.2 | $12.8 | $48.8 | $43.8 |
| Capital expenditures (growth)(2) | $3.9 | $9.3 | $17.7 | $38.3 |
| Capital expenditures (capitalized exploration)(2) | $1.5 | $2.7 | $5.0 | $6.5 |
| Mine-site free cash flow(2) | $24.0 | $30.4 | $101.3 | $100.3 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,389 | $1,181 | $1,303 | $1,254 |
| Total cash costs per ounce of gold sold(2) | $942 | $775 | $878 | $846 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,284 | $1,017 | $1,133 | $1,072 |
Underground Operations
| Tonnes of ore mined | 661,012 | 758,089 | 2,783,831 | 2,879,662 |
| Tonnes of ore mined per day | 7,185 | 8,240 | 7,627 | 7,889 |
| Average grade of gold(4) | 2.32 | 2.47 | 2.30 | 2.31 |
| Metres developed | 2,731 | 3,116 | 11,664 | 12,367 |
Mill Operations
| Tonnes of ore processed | 697,816 | 723,247 | 2,859,608 | 2,883,241 |
| Tonnes of ore processed per day | 7,585 | 7,861 | 7,835 | 7,899 |
| Average grade of gold(4) | 2.31 | 2.47 | 2.31 | 2.31 |
| Contained ounces milled | 51,814 | 57,459 | 212,548 | 213,769 |
| Average recovery rate | 91% | 91% | 91% | 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 44,600 ounces of gold in the fourth quarter, lower than the prior year period reflecting both lower tonnes and grades processed. For the year, Young-Davidson produced 192,200 ounces achieving the mid-point of annual production guidance.
Underground mining rates were lower than the prior year period and target, averaging 7,185 tpd in the fourth quarter and 7,627 tpd for the full year. Mining rates in the quarter were impacted by unscheduled downtime for maintenance on the underground conveyor in the fourth quarter. In addition, mining activity in the quarter was paused for a number of days to investigate the tragic accident on the ramp system which resulted in a fatality in November. Underground mining rates have returned to normal levels in January, averaging more than 8,000 tpd, and are expected to remain at similar levels through the rest of the first quarter of 2023. Grades mined averaged 2.32 g/t Au in the fourth quarter and 2.30 g/t Au for the full year, both consistent with annual guidance of between 2.15 and 2.35 g/t Au.
Mill throughput averaged 7,585 tpd in the fourth quarter with grades processed averaging 2.31 g/t Au. Milling rates decreased from the first three quarters of 2022 reflecting additional time to complete a planned mill liner change in the fourth quarter. For the full year, milling rates averaged 7,835 tpd, consistent with the prior year. Milling rates exceeded mining rates during the quarter with underground ore mined and stockpiled in previous quarters supplementing mill feed. Mill recoveries averaged 91% in the quarter and for the year, in line with guidance and the prior year periods.
10 | Alamos Gold Inc
Financial Review
Fourth quarter revenues of $78.1 million were 18% lower than the prior year period reflecting less ounces sold. For the full year revenues of $347.8 million were 1% lower than the prior year, primarily driven by less ounces sold.
Cost of sales (which includes mining and processing costs, royalties, and amortization expense) of $62.2 million in the fourth quarter were consistent with the prior year period, due to less ounces sold offset by higher unit mining costs. Underground unit mining costs were CAD $51 per tonne in the quarter, higher than the prior year and previous quarters, primarily due to the lower mining rates experienced in the quarter, as well as inflationary cost pressures. Cost of sales of $250.5 million for the year were higher than the comparable period given higher input costs, offset by less ounces sold and a weaker Canadian dollar.
Total cash costs of $942 per ounce in the fourth quarter were 22% higher than the prior year period driven by the higher unit mining costs in the quarter and lower grades processed, partially offset by the weaker Canadian dollar. Mine-site AISC of $1,284 per ounce in the fourth quarter were 26% higher than the prior year period, consistent with the increase in total cash costs. Total cash costs of $878 and mine-site AISC of $1,133 for the full year were both higher than the comparable period but in line with annual guidance.
Capital expenditures in the quarter included $15.2 million of sustaining capital and $3.9 million of growth capital. In addition, $1.5 million was invested in capitalized exploration in the quarter. Capital expenditures, inclusive of capitalized exploration totaled $71.5 million in 2022, a 19% decrease from the prior year and in line with annual guidance.
Young-Davidson has consistently generated strong free cash flow since completion of the lower mine expansion in 2020, including mine-site free cash flow of $24.0 million in the fourth quarter of 2022 and $101.3 million for the year. This marks the second consecutive year in which the operation has generated in excess of $100 million of mine-site free cash flow. With a 15 year Mineral Reserve life, Young-Davidson is well positioned to generate similar free cash flow in 2023 and over the long-term.
11 | Alamos Gold Inc
Island Gold Financial and Operational Review
| Three Months Ended December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 |
Gold production (ounces) 40,500 37,500 133,700 140,900 Gold sales (ounces) 39,145 38,101 130,652 139,946
Financial Review (in millions)
| Operating Revenues | $68.0 | $68.6 | $235.3 | $252.0 |
| Cost of sales(1) | $35.2 | $33.1 | $120.4 | $112.3 |
| Earnings from operations | $32.1 | $34.0 | $110.2 | $135.0 |
| Cash provided by operating activities | $39.1 | $43.2 | $148.1 | $173.1 |
| Capital expenditures (sustaining)(2) | $10.1 | $11.2 | $36.5 | $46.7 |
| Capital expenditures (growth)(2) (5) | $38.9 | $11.0 | $102.0 | $54.5 |
| Capital expenditures (capitalized exploration)(2) | $4.9 | $5.2 | $18.8 | $18.8 |
| Mine-site free cash flow(2) | ($14.8) | $15.8 | ($9.2) | $53.1 |
| Cost of sales, including amortization per ounce of gold sold(1) | $899 | $869 | $922 | $802 |
| Total cash costs per ounce of gold sold(2) | $605 | $575 | $637 | $529 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $863 | $871 | $918 | $863 |
Underground Operations
| Tonnes of ore mined | 101,045 | 109,541 | 420,801 | 438,731 |
| Tonnes of ore mined per day ("tpd") | 1,098 | 1,191 | 1,153 | 1,202 |
| Average grade of gold(4) | 12.13 | 10.98 | 10.03 | 10.27 |
| Metres developed | 2,109 | 1,906 | 7,114 | 7,472 |
Mill Operations
| Tonnes of ore processed | 119,924 | 114,689 | 456,592 | 435,297 |
| Tonnes of ore processed per day | 1,304 | 1,247 | 1,251 | 1,193 |
| Average grade of gold(4) | 10.70 | 10.51 | 9.64 | 10.35 |
| Contained ounces milled | 41,274 | 38,742 | 141,530 | 144,804 |
| Average recovery rate | 97% | 96% | 96% | 96% |
(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.
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 twelve months ended December 31, 2022 (nil and $1.4 million for the three and twelve months ended December 31, 2021).
Island Gold produced 40,500 ounces in the fourth quarter of 2022, an 8% improvement from the prior year period reflecting higher grades mined and higher tonnes processed. For the full year, Island Gold produced 133,700 ounces, at the high end of the production guidance range.
Underground mining rates averaged 1,098 tpd in the fourth quarter, lower than planned due to reduced equipment availability. Mining rates have returned to planned levels, averaging 1,200 tpd in January 2023. Full year underground mining rates averaged 1,153 tpd, slightly below annual guidance. Grades mined averaged 12.13 g/t Au in the fourth quarter and 10.03 g/t Au for the full year, the latter towards the upper end of full year guidance.
Mill throughput averaged 1,304 tpd, 9% above annual guidance of 1,200 tpd, reflecting the processing of 5,800 tonnes of Island Gold stockpiled ore at the Young-Davidson mill. Given current permit limits at Island Gold, excess stockpiles were trucked to Young-Davidson during the second and third quarters and processed as capacity was available at the Young-Davidson mill, boosting production and cash flow. No further stockpiles were trucked to Young-Davidson during the fourth quarter with the excess stockpiles at Island Gold having now been processed by the end of the year. Mill recoveries averaged 97% in the quarter and 96% for the full year, both in line with guidance and the prior year periods.
Financial Review
Island Gold generated revenues of $68.0 million in the fourth quarter, consistent with the prior year period, driven by more ounces sold, offset by a lower realized gold price. For the year, revenues were $235.3 million, lower than the prior year as a result of less ounces sold.
12 | Alamos Gold Inc