Alamos Gold Reports Second Quarter 2021 Results
Alamos Gold Inc.
Brookfield Place, 181 Bay Street, Suite 3910, P.O. Box #823 Toronto, Ontario M5J 2T3 Telephone: (416) 368-9932 or 1 (866) 788-8801
All amounts are in United States dollars, unless otherwise stated.
Alamos Gold Reports Second Quarter 2021 Results
Toronto, Ontario (July 28, 2021) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter ended June 30, 2021.
“Our overall performance through the first half of 2021 has been solid, led by another strong quarter at Young- Davidson which continues to meet or exceed expectations operating from the new lower mine infrastructure. We expect mining rates at Young-Davidson to increase to design capacity in the third quarter driving our consolidated production and free cash flow higher in the second half of the year. Combined with a stronger performance from Mulatos, we remain well positioned to achieve full year guidance,” said John A. McCluskey, President and Chief Executive Officer.
“We had a successful quarter on the exploration front at Young-Davidson and Island Gold with results from both operations highlighting the significant upside potential, in particular at Island Gold where we reported the best hole ever. Our other internal growth initiatives continue to advance, including work on the Phase III expansion at Island Gold, construction of La Yaqui Grande, and permitting at Lynn Lake. All support our strong long term outlook with production potential of approximately 750,000 ounces per year at substantially lower costs by 2025,” Mr. McCluskey added.
Second Quarter 2021
- Production of 114,200 ounces of gold, a 46% increase from the second quarter of 2020, primarily reflecting temporary downtime related to COVID-19 during the prior year period
- Young-Davidson produced 45,100 ounces of gold and generated mine-site free cash flow1 of $18.7 million. Mining rates of 7,504 tonnes per day ("tpd") were in-line with the targeted mining rate of 7,500 tpd, and are expected to increase to the long-term run rate of 8,000 tpd in the third quarter
- Island Gold produced 33,200 ounces of gold and generated mine-site free cash flow1 of $13.7 million, net of growth capital expenditures and capitalized exploration totaling $28.5 million
- Sold 107,581 ounces of gold at an average realized price of $1,814 per ounce for revenues of $195.1 million, a 55% increase compared to the second quarter of 2020. Ounces sold were lower than production due to the timing of shipments, with deferred ounces being sold in July
- Generated cash flow from operating activities of $86.7 million ($97.2 million, or $0.25 per share, before changes in working capital1), a 75% increase from the prior year period
- Free cash flow1 neutral in the quarter, net of $6.2 million in cash taxes paid in Mexico, higher capital spending mainly related to La Yaqui Grande, and the above noted deferred gold sales. The Company expects stronger free cash flow in the second half of 2021 reflecting higher gold production and sales
- Consolidated total cash costs1 of $791 per ounce, all-in sustaining costs ("AISC")1 of $1,136 per ounce and cost of sales of $1,180 per ounce were higher than annual guidance primarily due to the impact of the stronger than budgeted Canadian dollar, with USD/CAD foreign exchange rate averaging $0.81:1 relative to the budgeted rate of $0.75:1
- Filed an investment treaty claim against the Republic of Turkey for expropriation and unfair and inequitable treatment, among other things, with respect to its Turkish projects. As a result, the Company recorded a noncash, after-tax impairment charge of $213.8 million in the period, representing the entire carrying value of the Turkish assets
- Realized adjusted net earnings1 of $38.7 million, or $0.10 per share1, which includes adjustments for the noncash, after-tax impairment charge of the Turkish projects of $213.8 million, unrealized foreign exchange gains of $6.0 million recorded within deferred taxes and foreign exchange, and other losses of $3.4 million
- Recorded a net loss of $172.5 million, or $0.44 per share, inclusive of the after-tax impairment charge of $213.8 million
- Ended the quarter with cash and cash equivalents of $233.9 million and equity securities of $22.4 million. During the quarter, the Company generated $5.1 million in cash on the liquidation of certain equity securities and realized an after-tax gain of $2.7 million (recorded within equity)
- Paid a quarterly dividend of $9.8 million, or US$0.025 per share (annualized rate of US$0.10 per share), bringing total dividends distributed through the first half of 2021 to $19.6 million
- Announced the best hole drilled to-date at Island Gold, extending high-grade mineralization down-plunge from existing Mineral Resources
- Subsequent to quarter-end, provided an exploration update at Young-Davidson extending gold mineralization below existing Mineral Reserves and Resources and intersecting higher grades in the hanging wall and footwall of the deposit
- Development activities continued to ramp up at La Yaqui Grande, with pre-stripping reaching budgeted rates of over 55,000 tpd. La Yaqui Grande remains on track to achieve commercial production in the third quarter of 2022
- Published the Company’s 2020 Environmental, Social and Corporate Governance (ESG) Report
.(1) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
2 | Alamos Gold Inc
Highlight Summary
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Financial Results (in millions)
| Operating revenues | $195.1 | $126.2 | $422.5 | $303.1 |
| Cost of sales(1) | $126.9 | $103.3 | $266.2 | $223.6 |
| (Loss) Earnings from operations | ($168.5) | $12.1 | ($92.2) | $58.3 |
| (Loss) Earnings before income taxes | ($172.7) | $6.0 | ($97.6) | $46.5 |
| Net (loss) earnings | ($172.5) | $11.7 | ($121.3) | ($0.6) |
| Adjusted net earnings(2) | $9.8 | $87.8 |
$38.7 $39.2 $94.4 $117.6 Earnings before interest, depreciation and amortization (2) $40.9 $214.0 Cash provided by operations before working capital and $97.2 $44.7 $216.8 $126.4 cash taxes(2)
| Cash provided by operating activities | $86.7 | $106.2 | ||
| Capital expenditures (sustaining)(2) | $26.7 | $14.4 | $50.3 | $31.9 |
| Capital expenditures (growth)(2) (3) | $50.4 | $38.8 | $93.9 | $80.1 |
| Capital expenditures (capitalized exploration)(4) | $6.4 | $1.4 | $11.9 | $5.9 |
| Free cash flow(2) | ($0.2) | ($5.0) | $9.7 | ($11.7) |
$49.6 $186.0
Operating Results
Gold production (ounces) 114,200 78,400 240,000 189,300 Gold sales (ounces) 107,581 74,605 234,063 186,459
Per Ounce Data
Average realized gold price $1,814 $1,626 $1,692 $1,805 Average spot gold price (London PM Fix) $1,816 $1,711 $1,805 $1,647 Cost of sales per ounce of gold sold (includes $1,180 $1,385 $1,137 $1,199 amortization) (1)
Total cash costs per ounce of gold sold (2) $791 $933 $773 $829 All-in sustaining costs per ounce of gold sold (2) $1,136 $1,276 $1,079 $1,117
Share Data
(Loss) Earnings per share, basic and diluted ($0.44) $0.03 ($0.31) $0.00 Adjusted earnings per share, basic and diluted(2) $0.10 $0.03 $0.22 $0.10 Weighted average common shares outstanding (basic)
392,759 391,076 392,762 391,208 (000’s)
Financial Position (in millions)
Cash and cash equivalents(5) $220.5 $233.9
(1) Cost of sales includes mining and processing costs, royalties, COVID-19 costs 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 growth capital from operating sites. 2020 growth capital excludes the Island Gold royalty repurchase completed in March 2020 for $54.8 million.
(4) Includes capitalized exploration at Island Gold, Young-Davidson and Mulatos.
(5) Comparative cash and cash equivalents balance as at December 31, 2020.
3 | Alamos Gold Inc
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Gold production (ounces) (1)
| Young-Davidson | 45,100 | 23,100 | 93,100 | 51,800 |
| Island Gold | 33,200 | 19,400 | 75,400 | 58,200 |
| 35,900 | 35,900 | 71,500 | 78,500 |
Mulatos
Gold sales (ounces)
| Young-Davidson | 45,284 | 22,440 | 93,306 | 51,345 |
| Island Gold | 33,632 | 18,560 | 73,514 | 57,687 |
| 28,665 | 33,605 | 67,243 | 77,427 |
Mulatos
Cost of sales (in millions)(2)
| Young-Davidson | $61.3 | $46.2 | $123.3 | $90.0 |
| Island Gold | $25.6 | $19.6 | $54.7 | $50.1 |
| $40.0 | $37.5 | $88.2 | $83.5 |
Mulatos
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,354 $2,059 $1,321 $1,753 Island Gold $761 $868 $1,056 $744 Mulatos $1,395 $1,078 $1,116 $1,312
Total cash costs per ounce of gold sold (3)
Young-Davidson $941 $1,299 $1,564 $906 $502 $501 $483 $468 Island Gold Mulatos $893 $785 $750 $906
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
Young-Davidson $1,157 $1,809 $1,115 $1,490 Island Gold $830 $706 $781 $777 Mulatos $1,144 $890 $1,084 $929
Capital expenditures (sustaining, growth and capitalized exploration) (in millions)(3)
| Young-Davidson(5) | $19.6 | $29.6 | $41.5 | $56.6 |
| Island Gold(6) | $28.5 | $15.9 | $55.9 | $38.0 |
| Mulatos(7) | $28.9 | $5.1 | $47.7 | $12.5 |
| Other | $6.5 | $4.0 | $11.0 | $10.8 |
(1) Production for the three and six months ended June 30, 2020 included nil and 800 ounces, respectively, from El Chanate which transitioned to the reclamation phase of the mine life in 2019. There was no production from El Chanate for the three and six months ended June 30, 2021.
(2) Cost of sales includes mining and processing costs, royalties, COVID-19 costs, 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
(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
(5) Includes capitalized exploration at Young-Davidson of $1.5 million and $2.5 million for the three and six months ended June 30, 2021 ($nil for the three and six months ended June 30, 2020).
(6) Includes capitalized exploration at Island Gold of $3.9 million and $8.4 million for the three and six months ended June 30, 2021 ($1.2 million and $5.2 million for the three and six months ended June 30, 2020); Capital expenditures exclude the Island Gold royalty repurchase for $54.8 million for the six months ended June 30, 2020.
(7) Includes capitalized exploration at Mulatos of $1.0 million for the three and six months ended June 30, 2021 ($0.2 million and $0.7 million for the three and six months ended June 30, 2020).
4 | Alamos Gold Inc
Environment, Social and Governance Summary Performance
Health and Safety
- Recordable injury frequency rate1 of 2.80 in the quarter and 2.38 year-to-date, a 6% increase from 2.25 in the first half of 2020
- Lost time injury frequency rate1 of 0.08 in the quarter and 0.17 year-to-date, a 21% increase from 0.14 in the first half of 2020
- Performed over 50,000 COVID-19 tests to-date on employees, contractors and visitors as part of an enhanced screening program
During the second quarter of 2021, the recordable injury frequency rate increased with 35 recordable injuries reported up from 21 in the first quarter of 2021. One lost time injury was reported in the quarter, down from three in the first quarter of 2021, resulting in an overall improvement to the Company’s lost time injury frequency rate. 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. Throughout the quarter, the Company continued to advance implementation of its Sustainability Performance Management Framework, which includes standards specific to safety leadership and managing higher-risk activities. The Company’s overarching commitment is to have all employees and contractors return Home Safe Every Day.
The World Health Organization declared COVID-19 a pandemic on March 11, 2020. The Company responded rapidly and proactively and implemented several initiatives to help protect the health and safety of our employees, their families and the communities in which we operate.
Specifically, each mine site activated established crisis management plans and developed site-specific plans that have enabled them to meet and respond to changing conditions associated with COVID-19. The Company has adopted the advice of public health authorities and is adhering to government regulations with respect to COVID-19 in the jurisdictions in which it operates.
The following measures have been instituted at sites to prevent the potential spread of the virus:
- Medical screening for all personnel prior to entry to site for symptoms of COVID-19
- Testing of personnel at all operating sites prior to starting their work rotation
- Vaccinations offered at Island Gold for employees
- Training on proper hand hygiene and social distancing
- Remote work options have been implemented for eligible employees
- Social distancing practices have been implemented for all meetings, huddles and transportation
- Mandatory use of personal protective equipment for employees where social distancing is not practicable
- Rigid camp and site hygiene protocols have been instituted and are being followed
- Elimination of all non-essential business travel
- In addition, since the COVID-19 pandemic began the Company’s teams in Canada, Mexico, and Turkey have donated their time, medical supplies, and funds to help combat the effects and spread of the virus
COVID 19 - Impact on Operations
Given the significant precautionary measures taken by the Company, and thanks to the dedication of its employees, contractors and stakeholders, operations remain relatively unaffected by COVID-19. All the Company's operations continue to incur additional costs related to testing of personnel, lodging and transportation, which have been included in mining and processing costs. These incremental costs have increased total cash costs globally by approximately $25 per ounce and are expected to be incurred throughout 2021.
5 | Alamos Gold Inc
Environment
- Zero significant environmental incidents in the second quarter and year-to-date
- Advanced permitting of the Lynn Lake Project and the Phase III expansion of Island Gold – a project that will significantly increase automation and reduce fleet diesel usage resulting in 35% lower life-of-mine greenhouse gas ("GHG") emissions
- Nearing the completion of the power line which will connect the Mulatos Mine to grid power and eliminate the need for site diesel power generation, reducing GHG emissions by 12% annually
Six minor hydrocarbon spills occurred during the second quarter, including one at each of Young-Davidson and Island Gold and four at Mulatos. All spills were immediately cleaned and remediated with no anticipated long-term effects. The Company is committed to preserving the long-term health and viability of the natural environment that surround its operations and projects. This includes investing in new initiatives to reduce our environmental footprint with the goal of minimizing the environmental impacts of our activities, and offsetting any impacts that cannot be fully mitigated or rehabilitated.
Community
- Donated time, medical supplies, food supplies and funds across select operations and projects to help combat the effects and spread of COVID-19 in local communities
- Organized several community health initiatives during the second quarter in collaboration with the Matarachi community, located near the Mulatos mine. These included a COVID-19 vaccination clinic, nutrition program, visual health program, first aid training, and a cancer screening campaign
Alamos believes that excellence in sustainability provides a net benefit to all stakeholders. The Company continues to engage with local communities to understand local challenges and priorities, and to offer support during the COVID- 19 pandemic. Ongoing investments in local infrastructure, health care, education, cultural and community programs has continued through the COVID-19 pandemic, with appropriate health and safety protocols.
Governance and Disclosure
- Published the Company’s 2020 Environmental, Social and Corporate Governance (ESG) Report which is available on the Company's website: www.alamosgold.com
- Issued the Company’s 2020 Extractive Sector Transparency Measures Act (ESTMA) Report, outlining payments made to governments in Canada and abroad
- Published the Company’s 2020 ESG Summary Tables in July 2021
- Compiled data for the Carbon Disclosure Project’s 2021 Climate Change Questionnaire, which will be submitted in the third quarter of 2021
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.
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Outlook and Strategy
| 2021 Guidance | |||||
| Young- | Island Gold | ||||
| Mulatos | Other (2) | Total | |||
| Davidson |
| Gold production(000’s ounces) | 190 - 205 | 130 - 145 | 150 - 160 | 470 - 510 | |
|---|---|---|---|---|---|
| Cost of sales, including amortization (in millions)(4) | $255 | $108 | $177 | — | $540 |
| Cost of sales, including amortization ($ per ounce)(4) | $1,290 | $785 | $1,145 | — | $1,105 |
| Total cash costs($ per ounce)(1) | $790 - $840 | $430 - $480 | $840 - $890 | — | $710 - $760 |
All-in sustaining costs ($ per ounce)(1) $1,025 - $1,075 Mine-site all-in sustaining costs ($ per ounce)(1)(3) — $1,000 - $1,050 $750 - $800 $1,060 - $1,110 Amortization costs ($ per ounce)(1) $475 $330 $280 — $370
Capital expenditures (in millions)
| Sustaining capital(1) | $40 - $45 | $40 - $45 | $30 - $35 | — | $110 - $125 |
| Growth capital(1) | $25 - $30 | $80 - $85 | $95 - $100 | $10 | $210 - $225 |
| Total Sustaining and Growth Capital(1) | $65 - $75 | $120 - $130 | $125 - $135 | $10 | $320 - $350 |
Capitalized exploration(1) — $7 $20 $7 $34
Total capital expenditures and capitalized exploration(1) $72 - $82 $140 - $150 $125 - $135 $17 $354 - $384
(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 growth capital and capitalized exploration at the Company's development projects (Turkey, Lynn Lake, Esperanza and Quartz Mountain).
(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.
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 continues to deliver on its key objectives and remains well positioned to meet full year guidance with production totaling 240,000 ounces of gold through the first half of 2021. The strong performance was led by Young- Davidson with underground mining rates continuing to meet or exceed expectations. Total cash costs and all-in sustaining costs (“AISC”) in the second quarter and first half of the year were above annual guidance reflecting the impact of the stronger than budgeted Canadian dollar. Full year cost guidance was based on a USD/CAD foreign exchange rate of $0.75:1 compared to actual USD/CAD rate of $0.81:1 in the second quarter. For the first half of 2021, the stronger Canadian dollar increased company-wide total cash costs by $30 per ounce, and AISC by $45 per ounce relative to budget. Assuming the Canadian dollar remains at $0.80:1 for the remainder of the year, the Company expects total cash costs and AISC to be impacted by similar amounts.
Additionally, the Company continues to advance its high-return organic growth initiatives. Construction of the higher grade La Yaqui Grande project remains on track for commercial production in the third quarter of 2022, while development activities on the Phase III expansion at Island Gold continue to ramp up. In parallel, larger exploration programs at Island Gold and Young-Davidson are successfully extending gold mineralization, highlighting the strong potential for Mineral Reserve and Resource growth at both operations. This included the best hole ever drilled at Island Gold with high-grade mineralization extended down-plunge from existing Mineral Resources in Island East over significantly greater widths. The Company expects to continue to generate solid free cash flow while reinvesting in these high return growth initiatives and supporting its higher dividend, which has increased nearly 70% over the past year.
Gold production in the third quarter is expected to increase to between 115,000 and 125,000 ounces, driven by higher mining rates and grades at Young-Davidson, and increased production at Mulatos. Total cash costs and AISC are expected to remain at similar levels to the second quarter, before decreasing in the fourth quarter.
7 | Alamos Gold Inc
Production at Young-Davidson is expected to increase by 45% in 2021 (based on the mid-point of guidance), driven by significantly higher mining rates following the completion of the lower mine expansion in July 2020. The new lower mine infrastructure continues to perform well with underground mining rates averaging 7,647 tpd for the first half of 2021, exceeding guidance of 7,500 tpd. Mining rates are expected to increase to the long-term rate of 8,000 tpd in the third quarter. With first half production of 93,100 ounces, and higher mining rates and grades expected to drive production higher and costs lower in the second half of 2021, Young-Davidson remains on track to meet full year guidance. Combined with lower capital spending, this is expected to drive record mine-site free cash flow in 2021.
Island Gold remains well positioned to achieve full year guidance with first half production of 75,400 ounces. As previously guided, grades decreased in the second quarter, and are expected to remain at similar levels in the third quarter. Full year grades are expected to be approximately 10 g/t Au. A total of $25 million has been budgeted for exploration at Island Gold in 2021, a significant increase from $12.9 million spent in 2020. Ongoing exploration success continues to demonstrate the significant potential for further growth in Mineral Reserves and Resources. This included the best hole drilled to date at Island Gold as released in the second quarter with 71.21 g/t Au (39.24 g/t cut) over 21.33 m (MH25-08), further extending high-grade gold mineralization down-plunge from Mineral Resources in Island East.
The Mulatos District produced 71,500 ounces in the first half of the year. With stronger production expected in the second half of 2021, the operation remains on track to meet full year guidance of between 150,000 to 160,000 ounces. Cerro Pelon, the Mulatos pits, and surface stockpiles will supply all production in 2021. In parallel, the Company continues to advance construction of the high grade La Yaqui Grande project, which remains on track for commercial production in third quarter of 2022. La Yaqui Grande is expected to keep production in the Mulatos District at approximately 150,000 ounces per year at significantly lower costs.
The Company continues to advance permitting of the Lynn Lake project, with approval of its Environmental Impact Statement ("EIS") expected mid-2022. The 2021 capital budget for Lynn Lake is $13 million, including $6 million for development activities to support the permitting process and $7 million for exploration. The Company expects to make a construction decision following the conclusion of the EIS permitting process.
In April, the Company announced that its Netherlands wholly-owned subsidiaries would proceed with an investment treaty claim against the Republic of Turkey for expropriation and unfair and inequitable treatment, among other things, with respect to the Kirazlı, Ağı Dağı and Çamyurt gold development projects in Turkey. The claim was registered with the International Centre for Settlement of Investment Disputes (World Bank Group) under the Netherlands-Turkey Bilateral Investment Treaty on June 7, 2021, and is expected to exceed $1 billion. In its effort to secure the renewal of its mining licenses, the Company has attempted to work cooperatively with the Turkish government, has raised with the Turkish government its obligations under the Treaty, has sought to resolve the dispute by good faith negotiations, and has made considerable effort to build support among stakeholders and host communities. The Turkish government has failed to provide the Company with a reason for the non-renewal or a timeline for renewal of its licenses. As a result, Alamos and the Subsidiaries incurred an after-tax impairment charge of $213.8 million in the second quarter of 2021. The non-cash impairment charge reflects the Company’s net carrying value of the Turkish Projects.
The Company's liquidity position remains strong, ending the second quarter with $233.9 million of cash and cash equivalents, $22.4 million in equity securities, and no debt. Additionally, the Company has a $500.0 million undrawn credit facility, providing $756.3 million of liquidity. The Company expects to generate ongoing free cash flow in 2021 while continuing to fund its high-return internal growth initiatives.
8 | Alamos Gold Inc
Second Quarter 2021 Results
Young-Davidson Financial and Operational Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Gold production (ounces) 45,100 23,100 93,100 51,800 Gold sales (ounces) 45,284 22,440 93,306 51,345
Financial Review (in millions)
Operating Revenues $82.1 $83.4 $37.7 $168.2 $61.3 $90.0 Cost of sales (1) $46.2 $123.3
| Earnings (loss) from operations | $20.8 | ($6.6) | ||
| Cash provided by operating activities | $38.3 | $6.5 | $82.5 | $14.6 |
| Capital expenditures (sustaining)(2) | $9.8 | $5.5 | $19.3 | $9.7 |
| Capital expenditures (growth)(2) | $8.3 | $24.1 | $19.7 | $46.9 |
| Capital expenditures (capitalized exploration)(2) | $1.5 | $— | $2.5 | $— |
| Mine-site free cash flow(2) | $18.7 | ($23.1) | $41.0 | ($42.0) |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,354 | $2,059 | $1,321 | $1,753 |
| Total cash costs per ounce of gold sold(2) | $941 | $1,564 | $906 | $1,299 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,157 | $1,809 | $1,115 | $1,490 |
($8.5) $44.9
Underground Operations
Tonnes of ore mined 682,857 244,382 1,384,019 634,749 Tonnes of ore mined per day 7,504 2,686 7,647 3,488 2.22 2.50 2.23 2.30 Average grade of gold (4)
Metres developed 2,868 2,894 6,220 6,095
Mill Operations
| Tonnes of ore processed | 688,127 | 395,289 | 1,421,348 | 860,033 |
| Tonnes of ore processed per day | 7,562 | 4,344 | 7,853 | 4,725 |
| Average grade of gold(4) | 2.22 | 1.85 | 2.22 | 1.89 |
| Contained ounces milled | 49,134 | 23,511 | 101,670 | 52,361 |
| Average recovery rate | 92% | 93 % | 92 % | 92% |
(1) Cost of sales includes mining and processing costs, royalties and amortization.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
(4) Grams per tonne of gold ("g/t Au").
Young-Davidson produced 45,100 ounces of gold in the second quarter of 2021, a significant increase from the prior year period due to the shutdown of the Northgate shaft to complete the lower mine expansion in the second quarter of 2020. First half production of 93,100 ounces was also significantly higher than the comparable period in the prior year for similar reasons.
Underground mining rates have met or exceeded targeted rates since the completion of the lower mine expansion in July 2020. Mining rates averaged 7,504 tpd in the second quarter and 7,647 tpd for the first half of 2021, meeting and exceeding the first half target of 7,500 tpd, respectively. With an additional mining horizon being added, underground mining rates are expected to increase to the long-term rate of 8,000 tpd during the third quarter.
Average mined grades of 2.22 g/t Au in the quarter were at the lower end of the range for full year guidance due to mine sequencing. Grades mined are expected to increase through the remainder of the year with the highest grades being in the fourth quarter. Full year grades are expected to average close to Young-Davidson's Mineral Reserve grade. Mill throughput averaged 7,562 tpd in the second quarter, consistent with tonnes mined. Mill recoveries averaged 92% in the quarter, in line with guidance.
Young-Davidson remains well positioned to achieve full year guidance with higher mining rates and grades expected to drive production higher and costs lower in the second half of 2021. This is expected to contribute stronger minesite free cash flow for the remainder of 2021 assuming an $1,800 per ounce gold price.
9 | Alamos Gold Inc
Financial Review
Second quarter revenues of $82.1 million were consistent with the first quarter of 2021, and 118% higher than the prior year period, reflecting the temporary shutdown of the Northgate shaft to complete the lower mine expansion in 2020. This also drove higher revenues for the first half of 2021 compared to 2020.
Cost of sales (which includes mining and processing costs, royalties, and amortization expense) of $61.3 million in the second quarter were consistent with the first quarter, though higher than the prior year period, due to lower mining rates during the temporary shutdown of the Northgate shaft in the prior year. Similarly, cost of sales for the first half of 2021 were higher than the prior year given lower mining rates during the shutdown period. Underground unit mining costs were CAD $49 per tonne in the quarter, consistent with the first quarter of 2021 but significantly lower than the comparative period of 2020, driven by productivity improvements following the transition to the lower mine infrastructure in July 2020. Underground mining costs are expected to trend lower in the second half of the year towards a longer term rate of approximately CAD $45 per tonne as mining rates increase to 8,000 tpd.
Total cash costs of $941 per ounce and mine-site AISC of $1,157 per ounce in the second quarter were 40% and 36% lower, respectively, than the comparative period in 2020, driven by higher throughput, lower mining and processing costs per tonne, and higher grades processed. Total cash costs in the quarter were above annual guidance reflecting the impact of the stronger Canadian dollar compared with budget, as well as the sequencing of grades mined which were planned to be lower in the first half of 2021. Total cash costs and mine-site AISC are expected to decrease in the second half of the year due to higher mining rates and grades mined.
Capital expenditures in the quarter included $9.8 million of sustaining capital and $8.3 million of growth capital. In addition, $1.5 million was invested in capitalized exploration as part of the first significant exploration program at the operation since 2011. Capital expenditures totaled $41.5 million in the first half of 2021, a 27% decrease from the prior year reflecting the completion of the lower mine expansion.
Young-Davidson has consistently met or exceeded expectations since transitioning to the new lower mine infrastructure, driving strong free cash flow growth. This included mine-site free cash flow of $18.7 million in the second quarter of 2021, and $41.0 million in the first half of 2021. Higher mining rates and grades mined are expected to drive production higher and costs lower in the second half of the year, supporting strong ongoing free cash flow generation for the remainder of 2021 and beyond.
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Island Gold Financial and Operational Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Gold production (ounces) 33,200 19,400 75,400 58,200 Gold sales (ounces) 33,632 18,560 73,514 57,687
Financial Review (in millions)
| Operating Revenues | $61.1 | $93.3 | ||
| Cost of sales(1) | $25.6 | $19.6 | $54.7 | $50.1 |
| Earnings from operations | $33.7 | $11.6 | $75.5 | $42.8 |
| Cash provided by operating activities | $42.9 | $25.1 | $98.4 | $66.8 |
| Capital expenditures (sustaining)(2) | $11.0 | $5.2 | $21.6 | $13.7 |
| Capital expenditures (growth)(2) | $13.6 | $9.5 | $25.9 | $19.1 |
| Capital expenditures (capitalized exploration)(2) | $3.9 | $1.2 | $8.4 | $5.2 |
| Capital advances | $0.7 | $— | $2.8 | $— |
| Mine-site free cash flow(2) | $13.7 | $9.2 | $39.7 | $28.8 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,056 | $744 |
$31.4 $132.6
$761 $868 $502 $468 Total cash costs per ounce of gold sold (2) $501 $483 $830 $706 Mine-site all-in sustaining costs per ounce of gold sold (2),(3) $781 $777
Underground Operations
Tonnes of ore mined 117,673 74,485 220,950 187,366 Tonnes of ore mined per day ("tpd") 1,293 819 1,221 1,029 8.52 7.28 10.75 9.93 Average grade of gold (4)
Metres developed 1,907 931 3,858 2,883
Mill Operations
| Tonnes of ore processed | 111,898 | 73,708 | 221,183 179,635 |
| Tonnes of ore processed per day | 1,230 | 810 | 1,222 987 |
| Average grade of gold(4) | 8.32 | 10.91 |
8.85 10.33 Contained ounces milled 31,835 59,659 19,714 77,619 Average recovery rate 97 % 96 % 97 % 97 %
(1) Cost of sales includes mining and processing costs, royalties, COVID-19 costs 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
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based
(4) Grams per tonne of gold ("g/t Au").
Island Gold produced 33,200 ounces in the second quarter of 2021, a 71% increase from the comparative period, with operations temporarily shutdown during the second quarter of 2020 due to COVID-19. Through the first half of 2021, Island Gold produced 75,400 ounces, and remains well positioned to meet full year production guidance.
Underground mining rates averaged a record 1,293 tpd in the second quarter, a 58% increase from the prior year period and a 13% increase from the first quarter of 2021. Mining rates through the first half of the year averaged 1,221 tpd, consistent with the 1,200 tpd average expected in the second half of 2021. As previously guided, underground grades decreased in the second quarter and averaged 8.52 g/t Au. Grades mined are expected to remain at similar levels in the third quarter, before increasing slightly in the fourth quarter. Full year grades are expected to average approximately 10 g/t Au, consistent with Island Gold's Mineral Reserve grade.
Mill throughput averaged a record 1,230 tpd in the second quarter, and 1,222 tpd during first half of the year, both in line with full year guidance and current permitted levels. Excess ore mined during the period was stockpiled for future processing. Mill recoveries averaged 97% in the quarter, in line with annual guidance and the prior year period.
Financial Review
Island Gold generated revenues of $61.1 million in the second quarter, a 95% increase compared to the prior year period, reflecting the temporary suspension of operations due to COVID-19 in 2020. For the first half of the year,
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revenues were $132.6 million, a 42% increase from prior year, primarily due to the higher realized gold price and more ounces sold in the current year.
Cost of sales (includes mining and processing costs, royalties and amortization expense) of $25.6 million in the second quarter and $54.7 million during the first half of 2021 were higher than the prior year comparative periods due to the temporary COVID-19 related suspension of operations in 2020. Cost of sales in the second quarter were lower than the first quarter of 2021 due to less ounces sold in the period.
Total cash costs of $502 per ounce in the second quarter were consistent with the prior year period, though higher than the first quarter of 2021, due to lower grades mined and the impact of the stronger Canadian dollar on mining and milling costs. Mine-site AISC of $830 per ounce were 6% higher than in the prior year given higher sustaining capital spending. On a year to date basis, total cash costs and mine-site AISC are in line with 2021 guidance, despite the impact of the stronger than budgeted Canadian dollar on costs.
Total capital expenditures were $28.5 million in the second quarter, including $3.9 million of capitalized exploration. Spending was focused on lateral development, engineering for the Phase III project, and surface infrastructure including completion of the tailings facility expansion. For the first half of the year, capital spending was $55.9 million inclusive of capitalized exploration of $8.4 million, an increase from prior year. In addition, Island Gold advanced $2.8 million for long lead time items supporting the Phase III expansion in the first half of 2021. Capital spending is expected to increase in the second half of the year as spending on the Phase III expansion ramps up.
Island Gold generated mine-site free cash flow of $13.7 million in the second quarter and $39.7 million in the first half of 2021, driven by strong ongoing operating margins. With capital spending expected to ramp up in the second half of the year, mine-site free cash flow is expected to be neutral for the remainder of the year.
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