Alamos Gold Reports Fourth Quarter and Year-End 2017 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 2017 Results
Toronto, Ontario (February 22, 2018) – Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter and year ended December 31, 2017 and reviewed its operating, exploration and development activities.
“We executed on a number of operational and strategic objectives in 2017, all of which continue to strengthen our outlook. We met guidance with a 10% increase in production to a new record of 429,400 ounces while delivering an 8% decrease in all-in sustaining costs. This drove strong free cash flow growth from our operations and our best financial performance in years,” said John A. McCluskey, President and Chief Executive Officer.
“With a solid operating base of 500,000 ounces of annual production we expect further growth in 2018 and remain focused on continuing to expand margins and cash flow over the next several years. We’re making good progress within our development pipeline with construction activities at Kirazlı ramping up, and we continue to expand the size and quality of our long life mineral reserve base. Combined with a peer-leading, debt free balance sheet, Alamos is well positioned to deliver sustainable, long-term shareholder value,” Mr. McCluskey added.
Fourth Quarter 2017 Highlights
- Completed the acquisition of Richmont Mines Inc. (“Richmont”) and its Island Gold mine, a high-grade, long life asset in Ontario, Canada
- Produced a record 120,300 ounces of gold at cost of sales of $1,077 per ounce, total cash costs1 of $753 per ounce and all-in sustaining costs ("AISC")1 of $902 per ounce. This included a record 56,500 ounces from Young-Davidson, 42,700 ounces from Mulatos, 12,100 ounces from El Chanate and 9,000 ounces from Island Gold (following completion of the Richmont acquisition on November 23, 2017)
- Sold 126,786 ounces of gold at an average realized price of $1,275 per ounce for record revenues of $161.7 million
- Reported a net loss of $4.7 million, or $0.01 per share, which was impacted by transaction costs related to the Richmont acquisition of $5.1 million ($0.02 per share), a fair value accounting adjustment on the Island Gold acquisition of $4.1 million net of tax ($0.01 per share) and unrealized foreign exchange losses of $5.1 million ($0.02 per share) recorded within both deferred taxes and foreign exchange
- Generated cash flow from operating activities of $48.6 million ($52.7 million before changes in working capital1), reflecting lower cash costs and stronger operating margins
- Generated $37.1 million in mine-site free cash flow1, including a record $16.4 million at Young-Davidson. Company-wide, approximately $19 million of free cash flow1 was generated excluding transaction costs of $10 million paid related to the Richmont acquisition
- Ended the quarter with no debt and $236.6 million in cash and cash equivalents and equity securities, up from $167.7 million as of September 30, 2017
- Reported a positive feasibility study for the Lynn Lake gold project located in Manitoba, Canada
- Achieved a significant safety milestone of five million hours without a lost-time incident ("LTI") at El Chanate
(1) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release for a description and calculation of these measures.
1 | Alamos Gold Inc
Full Year 2017 Highlights
- Produced a record 429,400 ounces of gold in 2017 marking a 10% increase from 2016, including approximately one month of production from Island Gold. Gold production was above the mid-point of 2017 production guidance and marked the third consecutive year production guidance has been achieved
- Achieved the top end of production guidance at Island Gold, Mulatos and El Chanate
- Sold 430,115 ounces of gold at an average realized price of $1,262 per ounce for record revenues of $542.8 million
- Cost of sales per ounce of gold sold of $1,062, and total cash costs of $770 both improved relative to 2016
- Significantly improved the Company's cost profile with all-in sustaining costs of $933 per ounce, an 8% reduction compared to 2016
- Realized net earnings of $27.4 million, or $0.09 per share
- Generated positive free cash flow at each of the Company's operations for total mine-site free cash flow of $77.5 million, including record free cash flow at Young-Davidson. Mine-site free cash flow more than doubled from $35.4 million in 2016, reflecting stronger production, lower costs and lower capital spending
- Strengthened the balance sheet with the repurchase and retirement of $315 million senior secured notes in April
- Enhanced liquidity with an amendment to the undrawn revolving credit facility including an increase in the size of the facility to $400 million on peer-leading terms
- Returned $6.0 million in the form of dividends to shareholders
- Completed construction of La Yaqui Phase I on budget and ahead of schedule with the first gold pour in August
- Reported positive feasibility studies for the Kirazlı and Aği Daği projects in Turkey, and the Lynn Lake project in Manitoba Canada, outlining more than 400,000 ounces of combined annual production growth potential
2 | Alamos Gold Inc
Highlight Summary
| Three Months Ended December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 |
Financial Results (in millions)
| Operating revenues | $161.7 | $132.2 | $542.8 | $482.2 |
| Cost of sales(1) | $136.6 | $121.6 | $456.8 | $429.3 |
| Earnings from operations | $17.1 | $3.5 | $56.0 | $21.3 |
| Net (loss) earnings | ($4.7) | ($20.6) | $26.6 | ($17.9) |
Cash provided by operations before working capital and $52.7 $34.0 $183.3 $148.0 cash
| Cash provided by operating activities | $48.6 | $38.3 | $163.5 | $135.7 |
| Capital expenditures (sustaining)(2) | $11.5 | $12.3 | $42.7 | $49.2 |
| Capital expenditures (growth)(2),(3) | $27.7 | $25.2 | $119.8 | $97.3 |
Operating Results
Gold production (ounces) (4) 120,300 105,676 429,400 392,000 Gold sales (ounces) 126,786 107,505 430,115 389,151
Per Ounce Data
Average realized gold price $1,275 $1,230 $1,262 $1,239 Average spot gold price (London PM Fix) $1,275 $1,222 $1,257 $1,251 Cost of sales per ounce of gold sold $1,077 $1,131 $1,062 $1,103 (includes amortization) (1)
Total cash costs per ounce of gold sold (2) $753 $842 $770 $797 All-in sustaining costs per ounce of gold sold (2) $902 $1,033 $933 $1,010
Share Data
Earnings per share, basic and diluted ($0.01) ($0.08) $0.09 ($0.07) Weighted average common shares outstanding (basic)
337,178 267,067 305,521 265,234 (000’s)
Financial Position (in millions)
Cash and cash equivalents $200.8 $252.2 Total debt and financing obligations $7.5 $304.9
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release a description and calculation of these measures.
(3) Includes capitalized exploration and La Yaqui Phase I development.
(4) Gold production from Island Gold have been included in this table for the period subsequent to November 23, 2017 only. Gold production from Island Gold for the three and twelve months ended December 31, 2017 was 22,100 ounces (2016 - 24,086) and 98,600 ounces (2016 - 83,323), respectively.
3 | Alamos Gold Inc
| Three Months Ended December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2017 | 2016 (1) | 2017 | 2016 (1) |
Gold production (ounces)
Young-Davidson 56,500 44,662 200,000 170,000 Mulatos 42,700 44,900 160,000 154,000 Island Gold (1) 9,000 9,000
- —
El Chanate 12,100 16,114 60,400 68,000
Gold sales (ounces)
Young-Davidson 52,475 40,934 197,937 168,979 Mulatos 50,006 50,178 159,276 151,337 Island Gold (1) 11,720 11,720
- —
El Chanate 12,585 16,393 61,182 68,835
Cost of sales (in millions)(2)
Young-Davidson $58.1 $44.1 $213.4 $183.7 Mulatos $47.7 $56.8 $153.0 $164.6 Island Gold (1) $13.4 $13.4
- —
El Chanate $17.4 $20.7 $77.0 $81.0
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,107 $1,077 $1,078 $1,087 Mulatos $954 $1,132 $961 $1,088 Island Gold (1) $1,143 $1,143
- —
El Chanate $1,383 $1,263 $1,259 $1,177
Total cash costs per ounce of gold sold (3)
Young-Davidson $690 $667 $658 $657 Mulatos $762 $877 $775 $838 Island Gold (1) $401 $401
- —
El Chanate $1,311 $1,171 $1,188 $1,052
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
Young-Davidson $859 $926 $834 $897 Mulatos $798 $931 $835 $916 Island Gold (1) $546 $546
- —
El Chanate $1,335 $1,190 $1,218 $1,069 Capital expenditures (growth and sustaining) (in millions)(3)
Young-Davidson $17.0 $22.6 $80.3 $94.6 Mulatos(5) $9.0 $9.5 $43.9 $32.9
| Island Gold(1),(5) | $4.8 | $4.8 | ||
| El Chanate | $0.2 | $0.2 | $1.4 | $0.8 |
| Other | $8.2 | $5.2 | $32.1 | $18.2 |
- —
(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 twelve months ended December 31, 2017 was 22,100 ounces (2016 - 24,086) and 98,600 ounces (2016 - 83,323), 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 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.
4 | Alamos Gold Inc
Outlook and Strategy
| 2018 Guidance | ||||||
| Young- | Mulatos | El Chanate | Turkey | Other | Total | |
| Island Gold | El Chanate | |||||
| Davidson | Development (2) |
| Gold production(000’s ounces) | 200-210 | 150-160 | 90-100 | 40-50 | 480-520 |
|---|---|---|---|---|---|
| Cost of sales, including amortization | — | — | |||
| $220 | $147 | $112 | $57 | $536 |
- —
(in millions)(4)
Cost of sales, including amortization
$1,075 $950 $1,175 $1,270 $1,075
- —
($ per ounce)(4)
Total cash costs ($ per ounce)(1) $675 $800 $575 $1,200 $740
- —
All-in sustaining costs
- — $950
($ per ounce)(1)
Mine-site all-in sustaining costs
$850 $900 $825 $1,200
- — —
($ per ounce)(1),(3)
Capital expenditures (in millions)
Sustaining capital(1) $35-40 $8-10 $25-27 $68-77
- — —
Growth capital(1) $35-40 $18-20 $25-28 $100 $46 (2) $224-234 — Total capital expenditures(1) $70-80 $26-30 $50-55 $100 $46 $292-$311 —
(1) Refer to the "Non-GAAP Measures and Additional GAAP" disclosure at the end of this press release 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
The Company executed on several strategic priorities in 2017, all of which support its objective of increasing cash flow from its operations while advancing its portfolio of low-cost development projects. This included delivering record gold production of 429,400 ounces at an 8% decrease in all-in sustaining costs. This drove mine-site free cash flow to $78 million, up nearly 120% from 2016. Additionally, the Company strengthened its operating base through the acquisition of the Island Gold mine, adding a third core, low-cost, long life operation, which will be a strong driver of free cash flow growth in the years ahead. The Company also made significant progress advancing its development pipeline including the completion of three positive feasibility studies, construction of La Yaqui Phase I ahead of schedule and on budget, and initiating development of Kirazlı.
The strong operational performance is expected to continue into 2018 with gold production expected to increase to a range of 480,000 to 520,000 ounces, a 16% increase over 2017 (based on the mid-point of guidance). All-in sustaining costs are expected to average $950 per ounce, supporting strong ongoing operating margins and minesite free cash flow. Capital spending at the four operating mines is expected to total between $146 and $165 million. The Company expects stronger gold production, lower costs and a lower rate of capital spending in the second half of 2018, all of which is expected to contribute to higher mine-site free cash flow compared to the first half of the year. Young-Davidson is expected to produce between 200,000 and 210,000 ounces in 2018 at mine-site all-in sustaining costs of $850 per ounce. Capital spending at Young-Davidson in 2018 is expected to be between $70 and $80 million, including $35 to $40 million of sustaining capital. Capital spending will be focused on ongoing development and lower mine infrastructure. The tie in of the upper and lower mines is expected to be completed in the fourth quarter of 2019 which will temporarily limit underground throughput. Following completion of the tie in, underground mining rates are expected to increase above 7,500 tpd supporting higher production rates and free cash flow in 2020 and beyond. Island Gold is expected to produce 90,000 to 100,000 ounces in 2018 at mine-site all-in sustaining costs of $825 per ounce, both consistent with the Phase I expansion preliminary economic assessment (“PEA”) released in 2017. With the addition of a second mine in Ontario, the Company is evaluating opportunities to reduce costs through purchasing, tax and other synergies.
The Phase I expansion of the Island Gold mill to 1,100 tpd remains on track and is expected to be completed in the second half of 2018. This is expected to drive strong production growth and lower costs in the fourth quarter and into 2019. Combined with lower capital spending, the Company expects significant free cash flow growth in 2019. In parallel to the Phase I expansion, the Company will continue an aggressive exploration program at Island Gold which has been successful in driving nearly a 400% increase in Mineral Reserves and 60% increase in grade since 2014. Ongoing exploration success will be incorporated into an evaluation of the most effective and economic approach to a Phase II expansion of the operation beyond 1,100 tpd.
5 | Alamos Gold Inc
Total production from the Mulatos district (including La Yaqui Phase I) is expected to be between 150,000 to 160,000 ounces in 2018 at mine-site all-in sustaining costs of $900 per ounce. Capital spending is expected to total $26 to $30 million, including $8 to $10 million of sustaining capital.
Annual gold production at Mulatos is expected to remain in a similar range of 150,000 to 160,000 ounces per year between 2018 and 2020, at declining costs. The decline will be driven in part by the construction of a power line which will connect the mine to lower cost grid power, and the end of the 5% royalty at Mulatos in 2019. Approximately 200,000 ounces remain subject to the royalty after which costs will decrease by $65 per ounce (assuming spot gold prices of $1,300 per ounce).
El Chanate is expected to produce 40,000 to 50,000 ounces in 2018, down from 2017 reflecting lower mining rates with mining activities expected to cease mid-2018. Given the long leach cycle at El Chanate, the Company expects to benefit from ongoing gold production beyond 2018 through residual leaching. This will be lower cost and higher margin production with mining activities completed and is expected to drive higher mine-site free cash flow from the operation.
The Company expects combined annual gold production of at least 500,000 ounces from its existing operations in 2019 and 2020 with low cost production growth from Island Gold offsetting 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 end of the 5% royalty at Mulatos, with a further decrease expected in 2020 reflecting higher underground mining rates at Young-Davidson. Similarly, capital spending at existing operations is expected to trend lower in 2019 and 2020 reflecting the completion of the Phase I expansion at Island Gold and lower mine infrastructure at Young-Davidson. Combined with declining operating costs, the Company expects strong free cash flow growth from its operations over the next three years.
Capital spending on development projects, including capitalized exploration, is expected to total $146 million in 2018, of which $100 million relates to construction on the Kirazlı project. The remainder of the spending is comprised of capitalized exploration at Island Gold, Mulatos and Lynn Lake and advancing permitting and development of Cerro Pelon, La Yaqui Grande and Lynn Lake. The Company has also increased its global exploration budget to $36 million, up 50% from 2017 with nearly 80% of the spending to be focused on Island Gold and Mulatos.
Approximately 80% of the 2018 budget for Kirazlı is contingent upon, and will be spent following receipt of the GSM (Business Opening and Operation) permit. Pending receipt of final permits, Kirazlı is expected to produce more than 100,000 ounces in 2020, its first full year of production, at mine-site all-in sustaining costs of less than $400 per ounce. This is expected to drive company-wide production above 600,000 ounces in 2020, representing more than 20% growth from 2018, while further lowering the Company’s cost profile.
The Company is well positioned to fund this growth having significantly de-risked its balance sheet over the past year with the repayment of the $315 million senior secured notes in April 2017. The Company is debt free with growing cash flow from its operations and over $635 million of cash and available liquidity under the Company's credit facility.
6 | Alamos Gold Inc
Fourth Quarter and Full Year 2017 Results Young-Davidson Financial and Operational Review
| Three Months Ended December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 |
Gold production (ounces) 56,500 44,662 200,000 170,000 Gold sales (ounces) 52,475 40,934 197,937 168,979
Financial Review (in millions)
| Operating Revenues | $66.8 | $51.2 | $249.7 | $211.9 |
| Cost of sales(1) | $58.1 | $44.1 | $213.4 | $183.7 |
| Earnings from operations | $8.7 | $7.1 | $36.3 | $28.2 |
| Cash provided by operating activities | $33.4 | $26.0 | $114.5 | $98.4 |
| Capital expenditures (sustaining)(2) | $8.7 | $10.5 | $34.1 | $40.0 |
| Capital expenditures (growth)(2) | $8.3 | $12.1 | $46.2 | $54.6 |
| Mine-site free cash flow(2) | $16.4 | $3.4 | $34.2 | $3.8 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,107 | $1,077 | $1,078 | $1,087 |
| Total cash costs per ounce of gold sold(2) | $690 | $667 | $658 | $657 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $859 | $926 | $834 | $897 |
Underground Operations
| Tonnes of ore mined | 664,847 | 614,101 | 2,423,289 | 2,199,857 |
| Tonnes of ore mined per day ("tpd") | 7,227 | 6,675 | 6,639 | 6,011 |
| Average grade of gold(4) | 2.70 | 2.40 | 2.69 | 2.54 |
| Metres developed | 2,776 | 3,044 | 12,787 | 12,379 |
| Unit mining costs per tonne | $34 | $32 | $34 | $33 |
| Unit mining costs per tonne (CAD) | $44 | $42 | $44 | $43 |
Mill Operations
| Tonnes of ore processed | 716,273 | 694,753 | 2,735,267 | 2,629,032 |
| Tonnes of ore processed per day | 7,786 | 7,552 | 7,494 | 7,183 |
| Average grade of gold(4) | 2.59 | 2.18 | 2.47 | 2.19 |
| Contained ounces milled | 59,561 | 48,755 | 217,184 | 184,928 |
| Average recovery rate | 92% | 90% | 92% | 91% |
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release for a description and calculation of these measures. Total cash costs and minesite 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 a record 56,500 ounces of gold in the fourth quarter of 2017, 27% higher than the same period of 2016 and exceeding the previous record set in the third quarter of 2017. The increase in production reflects record underground mining rates and an increase in mill throughput during the quarter.
The Company mined a record 664,847 tonnes of ore from underground in the fourth quarter of 2017, or 7,227 tpd, a 10% increase from the previous quarter and 8% higher than the prior year period. The Company expects underground mining rates to average more than 7,000 tpd in 2018, up from an average of 6,639 tpd in 2017, driving stronger gold production and free-cash flow. Underground grades in the fourth quarter were 2.70 g/t Au, and averaged 2.69 g/t Au for the full year, consistent with the mineral reserve grade, and higher than the prior year period.
During the fourth quarter, 716,273 tonnes, or 7,786 tpd, were processed through the mill with grades averaging 2.59 g/t Au. Grades were higher than the prior year period reflecting a higher contribution of underground tonnes as well as higher underground grades mined. Mill throughput increased compared to the third quarter of 2017 reflecting the commissioning of the pebble crusher in the fourth quarter. Mill recoveries of 92% were consistent with expectations and higher than the prior year period.
Financial Review For the three months ended December 31, 2017, revenues of $66.8 million were $15.6 million higher than the prioryear period, reflecting more ounces sold and a higher realized gold price. For 2017, revenues of $249.7 million were $37.8 million higher than the prior year period, attributable to both to a higher realized gold and a higher number of ounces sold.
7 | Alamos Gold Inc
In the fourth quarter of 2017, cost of sales of $58.1 million were higher than the prior year period reflecting higher gross costs from additional tonnes mined and milled, as well as a stronger Canadian dollar. Cost of sales reflects mining and processing costs, royalties, and amortization expense. For 2017, cost of sales of $213.4 million were $29.7 million higher than the prior-year period, reflecting more tonnes mined and milled and a stronger Canadian dollar.
Total cash costs in the fourth quarter were $690 per ounce, representing a 3% increase from the fourth quarter of 2016. The increase was attributable to a stronger Canadian dollar and a higher proportion of operating development which is reflected in cash costs rather than capital. Underground unit mining costs were $34 per tonne in the fourth quarter, slightly higher than the prior year period as the benefit of higher underground mining rates was offset by a stronger Canadian dollar. Further strengthening in the Canadian dollar is not expected to adversely impact costs against guidance in the first half of 2018 as the Company has hedged the majority of its Canadian dollar operating and capital costs at budgeted rates. Mine-site AISC were $859 per ounce, 7% lower than the prior year period reflecting a lower level of sustaining capital across a higher number of ounces sold. For the full 2017 year, total cash costs were $658 per ounce and mine-site AISC were $834 per ounce, compared to $657 and $897 per ounce, respectively, in the prior year. The decrease in mine-site AISC was attributable to lower sustaining capital expenditures and a higher number of ounces sold.
Capital expenditures totaled $17.0 million in the fourth quarter, 25% lower than the same period of 2016. For 2017, capital expenditures of $80.3 million were 16% lower than 2016 and consistent with guidance. Capital spending in the fourth quarter was focused primarily on lateral development in the upper and lower mines, and lower mine infrastructure. Total capital expenditures in the fourth quarter included $8.7 million of sustaining capital and $8.3 million of growth capital.
Young-Davidson generated record mine-site free cash flow of $16.4 million in the fourth quarter driven by stronger production and lower capital spending. For 2017, Young-Davidson generated $34.2 million of mine-site free cash flow, a significant increase compared to $3.8 million in the prior year period, driven by higher production, lower costs and capital spending and higher gold prices.
8 | Alamos Gold Inc
Mulatos Financial and Operational Review
| Three Months Ended December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 |
Gold production (ounces) 42,700 44,900 160,000 154,000 Gold sales (ounces) 50,006 50,178 159,276 151,337
| Operating Revenues | $64.0 | $60.8 | $201.4 | $187.3 |
| Cost of sales(1) | $47.7 | $56.8 | $153.0 | $164.6 |
| Earnings from operations | $14.5 | $3.3 | $41.7 | $20.7 |
| Cash provided by operating activities | $22.3 | $19.6 | $64.3 | $59.7 |
| Capital expenditures (sustaining)(2) | $0.9 | $1.6 | $5.5 | $8.4 |
| Capital expenditures (Mulatos growth)(2),(6) | $8.1 | $7.9 | $25.9 | $24.5 |
| La Yaqui Phase I construction cost(2) | — | — | $12.5 | — |
Mine-site free cash flow, excluding La Yaqui construction $13.3 $10.1 $32.9 $26.8 capital (2)
| Cost of sales, including amortization per ounce of gold sold(1) | $954 | $1,132 | $961 | $1,088 |
| Total cash costs per ounce of gold sold(2) | $762 | $877 | $775 | $838 |
| Mine site all-in sustaining costs per ounce of gold sold(2),(3) | $798 | $931 | $835 | $916 |
Open Pit & Underground Operations
| Tonnes of ore mined - open pit(4) | 2,575,306 | 1,795,562 | 8,485,933 | 7,034,978 |
| Total waste mined - open pit | 1,719,986 | 2,614,810 | 6,443,971 | 9,184,468 |
| Total tonnes mined - open pit | 4,515,673 | 4,410,372 | 15,566,165 | 16,396,080 |
| Waste-to-ore ratio (operating) | 0.67 | 1.46 | 0.76 | 1.31 |
| Tonnes of ore mined - underground | 23,238 | 25,139 | 100,701 | 122,516 |
Crushing and Heap Leach Operations
| Tonnes of ore stacked | 1,745,513 | 1,709,346 | 6,796,155 | 6,552,742 |
| Average grade of gold processed(5) | 0.91 | 0.81 | 0.92 | 0.81 |
| Contained ounces stacked | 51,242 | 44,609 | 201,222 | 170,600 |
Mill Operations
| Tonnes of high grade ore milled | 31,449 | 33,867 | 133,328 | 133,720 |
| Average grade of gold processed(5) | 8.15 | 9.76 | 9.42 | 11.23 |
| Contained ounces milled | 8,238 | 10,623 | 40,378 | 48,284 |
| Total contained ounces stacked and milled | 59,480 | 55,232 | 241,600 | 218,884 |
Recovery ratio (ratio of ounces produced to contained ounces 72% 81% 66% 70% stacked and milled)
Ore crushed per day (tonnes) - combined 19,300 18,900 19,000 18,300
(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 for a description and calculation of these measures. Total cash costs and minesite 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").
(6) Includes capitalized exploration, of $1.0 million and $6.9 million for the three and twelve months ended December 31, 2017.
Mulatos produced 42,700 ounces of gold in the fourth quarter of 2017, including approximately 7,000 ounces from La Yaqui Phase I. Production in the quarter was slightly lower than the prior year period due to lower production from the mill circuit. For the full year, Mulatos produced 160,000 ounces of gold, achieving the top end of production guidance for 2017.
Total crusher throughput averaged 19,300 tpd, above the same period of 2016 reflecting the startup of La Yaqui Phase I. A total of 1,745,513 tonnes were stacked in the fourth quarter, at a grade of 0.91 g/t Au, both higher than the same period of 2016 due to a combination of mine sequencing, positive grade reconciliation and the addition of higher grade tonnes from La Yaqui Phase I. The waste-to-ore ratio of 0.67:1 was lower than the prior year period and 2017 guidance due to mine sequencing and the addition of La Yaqui Phase I, which has a minimal waste-to-ore ratio.
La Yaqui Phase I construction was completed in the third quarter, ahead of schedule and on budget. For the full year 2017, La Yaqui produced 10,000 ounces of gold.
9 | Alamos Gold Inc
Underground tonnes mined from San Carlos during the quarter were lower than the same period of 2016 but higher than the third quarter of 2017. For the fourth quarter, 31,449 tonnes were milled at an average grade of 8.15 g/t Au. The underground San Carlos deposit and high grade surface stockpiles are expected to be depleted during the first half of 2018. At the end of 2017, the Company had approximately 28,000 tonnes remaining in high grade stockpiles which will continue to supplement mill feed during that period.
The ratio of ounces produced to contained ounces stacked and milled (or recovery ratio) was 72% in the quarter compared to 81% in the prior year period. For the full year, the recovery ratio was 66%, slightly lower than plan reflecting a temporary increase in ounces on the leach pad which will be recovered in 2018.
Financial Review For the three months ended December 31, 2017, revenues of $64.0 million were $3.2 million higher than the prioryear period reflecting a higher realized gold price during the quarter. For 2017, revenues of $201.4 million were $14.1 million higher than the prior year, attributable to both more ounces sold and a higher realized gold price.
Cost of sales in the fourth quarter of $47.7 million were lower than the prior-year period as gross costs decreased reflecting a lower waste-to-ore ratio, lower amortization per ounce charges, and the inclusion of lower cost La Yaqui Phase I production. Cost of sales reflects mining and processing costs, royalties, and amortization expense. For 2017, cost of sales of $153.0 million were $11.6 million lower than the prior-year period, driven by a lower waste-to-ore ratio and lower mining and processing costs.
Total cash costs of $762 per ounce in the fourth quarter were 13% lower than $877 per ounce in the prior year period, reflecting higher grades stacked, a lower waste-to-ore ratio, and the addition of lower cost La Yaqui Phase I production. Mine-site AISC in the quarter were $798 per ounce, $133 or 14% lower than the prior year period reflecting lower total cash costs and lower sustaining capital. For 2017, total cash costs were $775 per ounce and mine-site AISC were $835 per ounce, a significant improvement from 2016 reflecting higher grades stacked, a lower waste-toore ratio and lower cost La Yaqui Phase I production.
The improvement of the cost profile at Mulatos resulted in another strong quarter from a cash flow perspective, generating $13.3 million in mine-site free cash flow. For the full year, Mulatos generated $32.9 million in mine-site free cash flow, reflecting strong earnings from operations, an increase in Value Added Tax ("VAT") refunds and lower sustaining capital.
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Island Gold Financial and Operational Review
| Three Months Ended December 31, | Years Ended December 31, | ||
| 2017 (1) | 2016 (1) | 2017 (1) | 2016 (1) |
Gold production (ounces) (1) 9,000 — 9,000 — Gold sales (ounces) (1) 11,720 — 11,720 —
| Operating Revenues | $14.9 | $— | $14.9 | $— |
| Cost of sales(2) | $13.4 | $— | $13.4 | $— |
| Earnings from operations | $1.5 | $— | $1.5 | $— |
| Cash provided by operating activities | $11.8 | $— | $11.8 | $— |
| Capital expenditures (sustaining)(3) | $1.7 | $— | $1.7 | $— |
| Capital expenditures (growth)(3) | $3.1 | $— | $3.1 | $— |
| Mine-site free cash flow(3) | $7.0 | $— | $7.0 | $— |
| Cost of sales, including amortization per ounce of gold sold(2) | $1,143 | $— | $1,143 | $— |
| Total cash costs per ounce of gold sold(3) | $401 | $— | $401 | $— |
| Mine-site all-in sustaining costs per ounce of gold sold(3),(4) | $546 | $— | $546 | $— |
Underground Operations
| Tonnes of ore mined | 94,407 | 89,881 | 374,962 | 318,045 |
| Tonnes of ore mined per day ("tpd") | 1,026 | 977 | 1,027 | 869 |
| Average grade of gold(5) | 9.44 | 8.83 | 9.42 | 8.67 |
| Metres developed | 1,667 | 1,464 | 6,906 | 5,218 |
| Unit mining costs per tonne | $100 | $87 | $95 | $103 |
| Unit mining costs per tonne (CAD) | $127 | $116 | $124 | $136 |
Mill Operations
| Tonnes of ore processed | 84,559 | 83,091 | 338,603 | 297,757 | |
| Tonnes of ore processed per day | 919 | 903 | 928 | 814 | |
| Average grade of gold(5) | 8.46 | 9.31 | 9.36 | 9.02 | |
| Contained ounces milled | 23,005 | 24,857 | 101,842 | 86,345 | |
| 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 twelve months ended December 31, 2017 was 22,100 ounces (2016 - 24,086) and 98,600 ounces (2016 - 83,323), 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 for a description and calculation of these measures. Total cash costs and minesite 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 22,100 ounces of gold in the fourth quarter of 2017 (9,000 ounces of which is attributable to the Company for the period subsequent to November 23, 2017) down slightly from the prior year period reflecting lower grades milled. Full year production of 98,600 ounces exceeded full year guidance of 87,000 to 93,000 ounces. This also represented an 18% increase from 2016 reflecting higher mining and milling rates as well as grades processed. The Company mined 94,407 tonnes of ore from underground in the fourth quarter of 2017, or 1,026 tpd, slightly higher than the prior year period. Underground mining rates are expected to average about 1,000 tpd in 2018, consistent with the rates achieved in 2017. Underground grades in the fourth quarter were 9.44 g/t Au, higher than the prior year period due to mine sequencing.
During the fourth quarter, 84,559 tonnes or 919 tpd were processed through the mill with grades averaging 8.46 g/t Au, lower than the prior year period. Mill throughput is expected to average 980 tpd in 2018 with mill grades ranging between 8.3 and 8.9 g/t Au. Expected tonnes mined, milled and grades processed for 2018 are all consistent with the Phase I expansion PEA released in 2017.
The operation is currently undergoing a mill expansion to 1,100 tpd. The mill expansion is expected to be completed during the second half of 2018. Higher mill throughput will drive strong production growth and lower costs into 2019. This, combined with lower capital spending, will generate significant free cash flow growth in 2019.
Financial Review For the period of Alamos' ownership of the asset (subsequent to November 23, 2017), the Company sold 11,720 ounces and generated revenues of $14.9 million. Cost of sales were $13.4 million and includes mining and processing
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costs, royalties, and amortization expense. Cost of sales includes a one-time charge of $5.9 million within amortization expense related to the fair value adjustment of Island Gold. Total cash costs were $401 per ounce and mine-site AISC were $546 per ounce relating to the ounces sold by Alamos, and not indicative of full year results given the shortperiod of time under ownership.
El Chanate Financial and Operational Review
| Three Months Ended December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 |
Gold production (ounces) 12,100 16,114 60,400 68,000 Gold sales (ounces) 12,585 16,393 61,182 68,835 Financial Review (in millions)
| Operating Revenues | $16.0 | $20.2 | $76.8 | $83.0 |
| Cost of sales(1) | $17.4 | $20.7 | $77.0 | $81.0 |
| (Loss) earnings from operations | ($1.4) | ($0.5) | ($0.2) | $2.0 |
| Cash provided by operating activities | $0.6 | $0.2 | $4.8 | $5.6 |
| Capital expenditures | $0.2 | $0.2 | $1.4 | $0.8 |
| Mine-site free cash flow(2) | $0.4 | $— | $3.4 | $4.8 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,383 | $1,263 | $1,259 | $1,177 |
| Total cash costs per ounce of gold sold(2) | $1,311 | $1,171 | $1,188 | $1,052 |
| Mine site all-in sustaining costs per ounce of gold sold(2),(3) | $1,335 | $1,190 | $1,218 | $1,069 |
Open Pit Operations
| Tonnes of ore mined | 895,545 | 1,641,448 | 4,475,004 | 6,306,469 | ||||
| Total tonnes mined | 4,156,001 | 8,604,171 | 22,646,606 | 31,288,807 | ||||
| Waste-to-ore ratio (operating) | 3.64 | 4.24 | 4.06 | 3.96 | ||||
| Average grade of gold(4) | 0.48 | 0.61 | 0.47 | 0.60 |
Crushing and Heap Leach Operations
| Total tonnes of ore stacked | 988,640 | 1,699,327 | 4,536,847 | 6,320,627 |
| Average grade of gold(4) | 0.48 | 0.61 | 0.50 | 0.60 |
| Total contained ounces stacked | 15,257 | 33,327 | 72,932 | 121,928 |
Ore crushed and run-of-mine ore stacked per day (tonnes) - 10,700 18,500 12,400 17,300 combined Recovery ratio (ratio of ounces produced to contained 79% 48% 83% 56% ounces stacked)
(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 for a description and calculation of these measures. Total cash costs and minesite 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 12,100 ounces of gold in the fourth quarter compared to 16,114 ounces in the prior year period. Quarterly production decreased in the fourth quarter reflecting lower stacking rates during 2017. For the full year, El Chanate produced 60,400 ounces of gold, achieving the top end of production guidance. Full year production benefited from the recovery of ounces stacked in previous year, resulting in a drawdown of leach pad inventory. El Chanate is expected to continue to produce at lower than historical rates in 2018 as the mine reaches the end of mining activities by mid-year. Given the long leach cycle at El Chanate, the Company expects to benefit from ongoing gold production beyond 2018 through residual leaching of the pad. This is expected to drive higher mine-site free cash flow from the operation in the second half of the year.
In 2017 El Chanate continued with industry leading safety performance achieving milestones of 1,100 days and 4.8 million hours without a Lost Time Injury ("LTI") by year end. The site continues its strong commitment to ensuring all of our employees go home safe every day. The site achieved 5 million hours on February 1, 2018.
Financial Review For the three months ended December 31, 2017, revenue of $16.0 million was $4.2 million lower than the prior year period, reflecting less ounces sold, partially offset by higher realized gold prices. For 2017, revenue of $76.8 million was $6.2 million lower.
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