Alamos Gold Reports Second Quarter 2023 Results Record production and strong margin expansion drive record financial performance including free cash flow of $62 million
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 2023 Results
Record production and strong margin expansion drive record financial performance including free cash flow of $62 million
Toronto, Ontario (July 26, 2023) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter ended June 30, 2023.
“We delivered a record performance in the second quarter on multiple fronts. Operationally, we produced a record 136,000 ounces, exceeding quarterly guidance, at costs consistent with annual guidance. This was driven by another excellent quarter from La Yaqui Grande which contributed to the highest production and free cash flow from the Mulatos District in more than 10 years. With the solid first half, we are well positioned to achieve our full year production and cost guidance,” said John A. McCluskey, President and Chief Executive Officer.
“The strong production growth and margin expansion led to a record quarter financially across a number of metrics including record revenue and operating cash flow. We also generated record free cash flow of $62 million while continuing to advance our growth initiatives that will in turn support further free cash flow growth. The Phase 3+ Expansion at Island Gold remains on track with construction of the shaft surface infrastructure well underway, a nd the updated Feasibility Study for the Lynn Lake project is in the final stages of completion. Both projects are key components of our strong outlook, with the capacity to nearly double our rate of production in Canada at significantly lower costs,” Mr. McCluskey added.
Second Quarter 2023
- Produced a record 136,000 ounces of gold, exceeding quarterly guidance of 120,000 to 130,000 ounces. This represented a 31% increase from the second quarter of 2022 and 6% increase from the first quarter of 2023 driven by strong production growth from the Mulatos District. The Company remains well positioned to achieve 2023 annual guidance
- Record free cash flow1 of $61.6 million reflecting strong operating results and margin expansion, as well as benefiting from the collection of sales tax receivables in Canada that had been temporarily delayed in the first quarter. The Company expects to continue generating strong free cash flow over the next several years while funding the Phase 3+ Expansion at Island Gold
- Generated record cash flow from operating activities of $141.8 million ($138.3 million, or $0.35 per share, before changes in working capital1)
- The Mulatos District produced 60,300 ounces, a 19% increase from the first quarter of 2023, and the highest level in 10 years, reflecting another solid quarter from La Yaqui Grande. The strong performance drove a 28% increase in mine-site free cash flow from the first quarter of 2023 to $47.0 million, bringing the first half total to $83.8 million
- Young-Davidson continues to perform well, producing 45,200 ounces, consistent with the first quarter of 2023, and generating record mine-site free cash flow1 of $35.4 million. Through the first half of the year, Young- Davidson generated $51.7 million of mine-site free cash flow and remains on track to generate over $100 million for the third consecutive year
- Island Gold produced 30,500 ounces and continues to self-finance the majority of the Phase 3+ Expansion. The Expansion is progressing well with the construction of the hoist house largely complete, the headframe well underway, and shaft sinking on track to start in the fourth quarter of 2023
- Sold 131,952 ounces of gold at an average realized price of $1,978 per ounce, for record quarterly revenues of $261.0 million. The average realized gold price was $2 per ounce above the London PM fix for the quarter
- Total cash costs1 of $847 per ounce were consistent with annual guidance, and all-in sustaining costs ("AISC"1) of $1,112 per ounce were below the low end of guidance and down 5% from the first quarter of 2023, reflecting low-cost production growth from La Yaqui Grande and lower sustaining capital
- Realized adjusted net earnings1 of $59.3 million, or $0.15 per share. Adjusted net earnings includes adjustments for unrealized foreign exchange gains recorded within both deferred taxes and foreign exchange of $13.4 million, and other gains totaling $2.4 million. Reported net earnings were $75.1 million, or $0.19 per share
- Paid a quarterly dividend of $9.9 million, or $0.025 per share (annualized rate of $0.10 per share)
- Cash and cash equivalents increased to $188.6 million, up from $133.8 million at the end of the first quarter, reflecting strong free cash flow. The Company remains debt free
- Completed the acquisition of Manitou Gold on May 23, 2023, adding significant exploration potential across the Michipicoten Greenstone Belt by more than tripling the regional land package adjacent to and along strike from Island Gold
- Provided an exploration update at Mulatos, further extending high-grade mineralization beyond Mineral Reserves and Resources at Puerto Del Aire ("PDA") and intersected a wide interval of significant gold mineralization at the Capulin regional target
- Provided an exploration update at Island Gold, extending high-grade mineralization across the deposit including within recently defined hanging wall and footwall zones in proximity to existing underground infrastructure
- Completed an Impact Benefit Agreement and signing ceremony with Marcel Colomb First Nation for the Lynn Lake project in Manitoba, Canada
- Publication of Alamos’ inaugural Climate Change Report, outlining corporate governance around climate-related risks and opportunities
.(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, | ||
|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 |
Financial Results (in millions)
| Operating revenues | $261.0 | $191.2 | $512.5 | $375.7 |
| Cost of sales(1) | $157.8 | $151.9 | $313.0 | $287.4 |
| Earnings from operations | $88.6 | $25.7 | $163.6 | $20.0 |
| Earnings before income taxes | $92.1 | $30.2 | $164.3 | $15.9 |
| Net earnings (loss) | $75.1 | $6.4 | $123.5 | ($2.1) |
| Adjusted net earnings(2) | $59.3 | $29.3 | $104.7 | $47.3 |
| Earnings before interest, depreciation and amortization(2) | $138.9 | $92.0 | $258.8 | $154.9 |
Cash provided by operations before working capital and taxes $138.3 $85.3 $265.5 $156.2 paid(2)
| Cash provided by operating activities | $141.8 | $75.7 | $236.1 | $122.2 |
| Capital expenditures (sustaining)(2) | $23.4 | $20.1 | $50.3 | $42.7 |
| Capital expenditures (growth)(2) (3) | $49.8 | $43.3 | $101.8 $101.9 | |
| Capital expenditures (capitalized exploration)(4) | $7.0 | $5.6 | $11.9 | $11.7 |
| Free cash flow(2) | $61.6 | $6.7 | $72.1 | ($34.1) |
Operating Results
136,000 103,900 264,400 202,800 Gold production (ounces)
Gold sales (ounces) 131,952 102,164 264,620 200,630
Per Ounce Data
| Average realized gold price | $1,978 | $1,871 | $1,937 | $1,873 |
| Average spot gold price (London PM Fix) | $1,976 | $1,871 | $1,933 | $1,874 |
| Cost of sales per ounce of gold sold (includes amortization)(1) | $1,196 | $1,487 | $1,183 | $1,432 |
| Total cash costs per ounce of gold sold(2) | $847 | $895 | $834 | $943 |
| All-in sustaining costs per ounce of gold sold(2) | $1,112 | $1,170 | $1,144 | $1,264 |
Share Data
| Earnings (loss) per share, basic and diluted | $0.19 | $0.02 | $0.31 | ($0.01) |
| Adjusted earnings per share, basic and diluted(2) | $0.15 | $0.07 | $0.27 | $0.12 |
| Weighted average common shares outstanding (basic) (000’s) | 395,346 | 391,761 | 394,657 | 391,837 |
Financial Position (in millions)
Cash and cash equivalents(5) $188.6 $129.8
(1) Cost of sales includes mining and processing costs, royalties, and amortization expense.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
(3) Includes growth capital from operating sites.
(4) Includes capitalized exploration at Island Gold, Young-Davidson and Mulatos District.
(5) Comparative cash and cash equivalents balance as at December 31, 2022.
3 | Alamos Gold Inc
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 |
Gold production (ounces)
| Young-Davidson | 45,200 | 46,400 | 90,200 | 98,300 |
| Island Gold | 30,500 | 37,300 | 63,400 | 61,800 |
| Mulatos District(7) | 60,300 | 20,200 | 110,800 | 42,700 |
Gold sales (ounces)
| Young-Davidson | 43,570 | 46,662 | 89,246 | 98,187 |
| Island Gold | 28,183 | 36,797 | 61,910 | 60,165 |
| Mulatos District | 60,199 | 18,705 | 113,464 | 42,278 |
Cost of sales (in millions)(1)
| Young-Davidson | $59.3 | $59.8 | $121.2 | $124.4 |
| Island Gold | $27.6 | $32.0 | $58.5 | $56.2 |
| Mulatos District | $70.9 | $60.1 | $133.3 | $106.8 |
Cost of sales per ounce of gold sold (includes amortization) (1)
| Young-Davidson | $1,361 | $1,282 | $1,358 | $1,267 |
| Island Gold | $979 | $870 | $945 | $934 |
| Mulatos District | $1,178 | $3,213 | $1,175 | $2,526 |
Total cash costs per ounce of gold sold (2)
| Young-Davidson | $955 | $866 | $948 | $852 |
| Island Gold | $678 | $590 | $651 | $650 |
| $847 | $1,566 | $843 | $1,568 |
Mulatos District
Mine-site all-in sustaining costs per ounce of gold sold (2),(3)
| Young-Davidson | $1,212 | $1,087 | $1,222 | $1,064 |
| Island Gold | $1,072 | $848 | $1,016 | $939 |
| Mulatos District | $894 | $1,636 | $903 | $1,717 |
Capital expenditures (sustaining, growth and capitalized exploration) (in millions)(2)
| Young-Davidson(4) | $13.5 | $13.1 | $30.9 | $35.8 |
| Island Gold(5) | $54.7 | $29.3 | $111.7 | $62.7 |
| Mulatos District(6) | $6.5 | $21.3 | $12.2 | $47.3 |
| Other | $5.5 | $5.3 | $9.2 | $10.5 |
(1) Cost of sales includes mining and processing costs, royalties, and amortization expense.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
(4) Includes capitalized exploration at Young-Davidson of $1.2 million and $2.6 million for the three and six months ended June 30, 2023 ($1.3 million and $2.3 million for the three and six months ended June 30, 2022).
(5) Includes capitalized exploration at Island Gold of $3.0 million and $5.4 million for the three and six months ended June 30, 2023 ($4.1 million and $9.2 million for the three and six months ended June 30, 2022).
(6) Includes capitalized exploration at Mulatos District of $2.8 million and $3.9 million for the three and six months ended June 30, 2023 ($0.2 million for the three and six months ended June 30, 2022).
(7) The Mulatos District includes both the Mulatos pit, as well as La Yaqui Grande.
4 | Alamos Gold Inc
Environment, Social and Governance Summary Performance
Health and Safety
- Total recordable injury frequency rate1 ("TRIFR") of 1.23 in the second quarter, down from 1.56 in the first quarter of 2023
- Lost time injury frequency rate1 ("LTIFR") of 0.09 in the second quarter, up from 0.00 in the first quarter of 2023
- Year-to-date TRIFR of 1.40 and LTIFR of 0.05
During the second quarter of 2023, the TRIFR decreased with 13 recordable injuries, four less than the prior quarter. One lost time injury was recorded in the quarter involving a hand injury to an exploration drilling contractor at Mulatos. 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 injuryfree. The Company’s overarching commitment is to have all employees and contractors return Home Safe Every Day
Environment
- Zero significant environmental incidents and zero reportable spills in the second quarter and year-to-date
- Detailed design works completed for the reclamation of the Cerro Pelon, El Victor and San Carlos open pits within the Mulatos District
- Completed site visits with Alamos’ Independent Tailings Review Board to Young-Davidson and Island Gold
The Company is committed to preserving the long-term health and viability of the natural environment that surrounds 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
- Completed an Impact Benefit Agreement and signing ceremony with Marcel Colomb First Nation for the Lynn Lake project, with the goal of providing long term socio-economic benefits to the community and collaboration on economic development, jobs, training and environmental stewardship of the project
- Held a ceremonial signing to celebrate the Definitive Agreement announced earlier in the year between Alamos and Batchewana First Nation for the Island Gold mine
In addition, ongoing donations, medical support and infrastructure investments were provided to local communities, including:
- Eye health, dental health, and sexual education campaigns with residents of Matarachi
- Various contributions within the Temiskaming and Algoma districts of Ontario, including donations to the Temiskaming Hospital Foundation, rejuvenation of the Elk Lake playground, funds to support the Matachewan community garden, and sponsorship of various local events
- Island Gold hosted its second 'Mining Showcase' event for high school students at École St. Joseph in Wawa
- Annual clean-up in Dubreuilville with participants from Island Gold, the township and local students
The Company 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
- Publication of Alamos’ inaugural Climate Change Report, outlining corporate governance around climaterelated risks and opportunities; the Company’s processes to identify, assess and manage climate-related risks; alignment to Task Force on Climate-related Financial Disclosure recommendations; and further details on Alamos’ 30% absolute greenhouse gas emission reduction target by 2030
- Publication of Alamos’ 2022 Report on conformance to the World Gold Council’s Responsible Gold Mining Principles and independent assurance report
- Publication of the annual report outlining payments to governments under Canada’s Extractive Sector Transparency Measures Act
5 | Alamos Gold Inc
The Company 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.
With a record second quarter performance, the Company continues to successfully execute on this strategy on all fronts. Production increased to a new record of 136,000 ounces, exceeding second quarter guidance, while AISC decreased below the low end of full year guidance. This was driven by another strong quarter from the Mulatos District with La Yaqui Grande contributing to the highest production and mine-site free cash flow from the operation in more than 10 years. With the strong start to the year, the Company remains on track to achieve annual production and cost guidance.
Financially it was a record quarter on a number of fronts reflecting the strong operational performance and higher gold prices. The Company generated record quarterly revenues, cash flow from operations and free cash flow. The significant increase in free cash flow to $61.6 million was achieved while continuing to advance a variety of growth initiatives that are expected to support growing production, declining costs, and further free cash flow growth in the years ahead. This included substantial progress on the Phase 3+ Expansion at Island Gold. Construction of the hoist house is largely complete, the erection of the headframe is well underway, and shaft sinking is on track to begin in the fourth quarter of 2023.
After achieving a significant permitting milestone earlier this year at the Lynn Lake project with the receipt of a positive Decision Statement for the Federal Environmental Impact Statement (“EIS”), work on the updated Feasibility Study is nearing completion. The Company expects this to outline another attractive, low-cost, long-life growth project in Canada with significant exploration upside.
The Company continues to have broad based success adding value through its exploration programs. This includes extending high-grade mineralization beyond Mineral Reserves and Resources at Island Gold and PDA, demonstrating ongoing growth potential at both assets. This will be incorporated into a new development plan for PDA to be completed in the fourth quarter of 2023 which is expected to outline a significant mine life extension at the Mulatos District.
As outlined in the three-year production and operating guidance provided in January 2023, the Company expects 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 range between 480,000 and 520,000 ounces in 2023, a 9% increase from 2022, and remain at similar levels in 2024 and 2025. Company-wide AISC is expected to decrease 4% in 2023 and 17% by 2025 to between $950 and $1,050 per ounce.
7 | Alamos Gold Inc
The Company is well positioned to achieve 2023 guidance with production through the first half of the year totaling 264,400 ounces and total cash costs and AISC both in-line with guidance. In the third quarter, production is expected to be between 120,000 and 130,000 ounces, at AISC near the upper end of the annual guidance range. Third quarter guidance reflects lower planned production from the Mulatos District with the end of mining in the main Mulatos pit and the return to guided grades and stacking rates at La Yaqui Grande.
Young-Davidson had another strong quarter with mining rates exceeding targeted rates, averaging 8,089 tpd in the second quarter and 8,050 tpd through the first half of the year. This contributed to first half production of 90,200 ounces and mine-site free cash flow of $51.7 million. With higher grades expected to drive stronger production in the second half of the year, Young-Davidson is on track to achieve full year production guidance and generate more than $100 million of mine-site free cash flow for the third consecutive year.
Island Gold produced 63,400 ounces in the first half of the year, and with higher mining and processing rates expected in the second half of the year, the operation is on track to meet full year guidance. 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 an increase in mining rates toward the latter part of 2025 is expected to drive an increase in production and a reduction in costs. As demonstrated in the quarter and through the first half of the year, Island Gold continues to generate strong cash flow from operations allowing the operation to self-finance the majority of capital spending on the Phase 3+ Expansion.
Combined gold production from the Mulatos District (including La Yaqui Grande) increased to the highest level in more than 10 years in the second quarter to 60,300 ounces at total cash costs and mine-site AISC below annual guidance. Through the first half of the year, the operation produced 110,800 ounces, more than double the prior year, and generated $83.8 million of mine-site free cash flow driven by low-cost production growth from La Yaqui Grande. As previously guided, production is expected to decrease in the second half of the year reflecting the end of mining within the main Mulatos pit as well as the return to guided stacking rates and grades at La Yaqui Grande. Given the excellent start to the year, the Mulatos District remains well positioned to meet full year guidance.
Capital spending, including capitalized exploration, totaled $80.2 million in the second quarter and $164.0 million though the first half of the year, consistent with annual guidance of $317 million to $357 million. The majority of this spending in 2023 is expected at Island Gold with the ramp up of construction on the Phase 3+ Expansion. Capital spending at Island Gold is expected to remain at similar levels in 2024 and 2025 and then drop considerably in 2026 once the expansion is complete.
The global exploration budget for 2023 is consistent with spending in 2022. The Mulatos District accounts for the largest portion with an increased budget of $21 million, followed by $14 million at Island Gold, $8 million at Young- Davidson and $5 million at Lynn Lake. The exploration focus in 2023 continues to follow up on a successful year 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 continues to strengthen with cash and cash equivalents increasing to $188.6 million at the end of the second quarter, while remaining debt free. Additionally, the Company has a $500 million undrawn credit facility, providing total liquidity of $688.6 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 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.
8 | Alamos Gold Inc
Second Quarter 2023 results
Young-Davidson Financial and Operational Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 |
Gold production (ounces) 45,200 46,400 90,200 98,300 Gold sales (ounces) 43,570 46,662 89,246 98,187
Financial Review (in millions)
| Operating Revenues | $86.3 | $87.3 | $172.6 | $184.1 |
| Cost of sales(1) | $59.3 | $59.8 | $121.2 | $124.4 |
| Earnings from operations | $25.9 | $25.9 | $49.9 | $56.5 |
| Cash provided by operating activities | $48.9 | $43.9 | $82.6 | $89.8 |
| Capital expenditures (sustaining)(2) | $11.1 | $10.2 | $24.3 | $20.6 |
| Capital expenditures (growth)(2) | $1.2 | $1.6 | $4.0 | $12.9 |
| Capital expenditures (capitalized exploration)(2) | $1.2 | $1.3 | $2.6 | $2.3 |
| Mine-site free cash flow(2) | $35.4 | $30.8 | $51.7 | $54.0 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,361 | $1,282 | $1,358 | $1,267 |
| Total cash costs per ounce of gold sold(2) | $955 | $866 | $948 | $852 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,212 | $1,087 | $1,222 | $1,064 |
Underground Operations
| Tonnes of ore mined | 736,078 | 742,516 | 1,457,005 | 1,478,820 |
| Tonnes of ore mined per day | 8,089 | 8,160 | 8,050 | 8,170 |
| Average grade of gold(4) | 2.14 | 2.24 | 2.18 | 2.30 |
| Metres developed | 2,238 | 3,097 | 4,933 | 6,344 |
Mill Operations
| Tonnes of ore processed | 696,718 | 705,014 | 1,398,672 | 1,442,742 |
| Tonnes of ore processed per day | 7,656 | 7,747 | 7,727 | 7,971 |
| Average grade of gold(4) | 2.13 | 2.25 | 2.18 | 2.32 |
| Contained ounces milled | 47,774 | 50,975 | 97,987 | 107,445 |
| 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").
Operational review
Young-Davidson produced 45,200 ounces of gold in the second quarter, consistent with the first quarter of 2023 and the prior year period. With production totaling 90,200 ounces through the first half of the year, and higher grades and throughput rates expected to drive stronger production in the second half of the year, Young-Davidson remains on track to achieve full year guidance.
Underground mining rates exceeded full year guidance, averaging 8,089 tpd in the second quarter. Grades mined averaged 2.14 g/t Au in the quarter, similar to the first quarter of 2023 and consistent with the low end of annual guidance. As previously guided, grades mined are expected to increase through the second half of the year.
Mill throughput averaged 7,656 tpd in the second quarter with grades processed averaging 2.13 g/t Au. Tonnes milled were lower than mined reflecting a scheduled liner change as well as unplanned downtime due to weather related power outages in the region. The mill has returned to targeted operating rates in July and is expected to average 8,000 tpd through the rest of the year. Mill recoveries averaged 91% in the quarter, in line with guidance and the prior year period.
9 | Alamos Gold Inc
Second quarter revenues of $86.3 million were 1% lower than the prior year period, reflecting less ounces sold, partially offset by a higher realized gold price. For the first half of the year, revenues of $172.6 million were 6% lower than the prior year, primarily driven by less ounces sold.
Cost of sales of $59.3 million in the second quarter were consistent with the prior year period. Underground unit mining costs were CAD $49 per tonne in the quarter, a 6% improvement from the first quarter of 2023, and consistent with the prior year period. Cost of sales of $121.2 million for the first half of the year were lower than the comparable period, primarily due to less ounces sold.
Total cash costs were $955 per ounce in the second quarter and $948 per ounce for the first half of the year. Minesite AISC were $1,212 per ounce in the quarter and $1,222 per ounce for the first half of the year, both in-line with annual guidance. Total cash costs and mine-site AISC were above the prior year periods reflecting inflationary pressures as well as lower grades processed. Costs are expected to decrease in the second half of 2023 driven by higher grades mined and processed.
Capital expenditures in the quarter included $11.1 million of sustaining capital and $1.2 million of growth capital. In addition, $1.2 million was invested in capitalized exploration in the quarter. Capital expenditures, inclusive of capitalized exploration totaled $30.9 million for the first half of 2023, a 14% decrease from the prior year. Capital expenditures are expected to be higher in the second half of the year, and in line with annual guidance.
Young-Davidson continues to consistently generate strong free cash flow, including record mine-site free cash flow of $35.4 million in the second quarter, and $51.7 million in the first half of 2023. Mine-site free cash flow in the quarter benefited from the collection of a temporary build up of $8 million of sales tax receivables for Young- Davidson which were collected in April. Young-Davidson has generated over $100 million in mine-site free cash flow in each of the past two years. With the strong start to the year, the operation is on pace to generate similar free cash flow in 2023 and over the long-term, given its 15 year Mineral Reserve life.
10 | Alamos Gold Inc
Island Gold Financial and Operational Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 |
Gold production (ounces) 30,500 37,300 63,400 61,800 Gold sales (ounces) 28,183 36,797 61,910 60,165
Financial Review (in millions)
| Operating Revenues | $55.8 | $68.8 | $119.7 | $112.5 |
| Cost of sales(1) | $27.6 | $32.0 | $58.5 | $56.2 |
| Earnings from operations | $27.0 | $34.8 | $59.6 | $53.7 |
| Cash provided by operating activities | $50.2 | $49.5 | $86.7 | $76.9 |
| Capital expenditures (sustaining)(2) | $11.0 | $9.5 | $22.4 | $17.3 |
| Capital expenditures (growth)(2) | $40.7 | $15.7 | $83.9 | $36.2 |
| Capital expenditures (capitalized exploration)(2) | $3.0 | $4.1 | $5.4 | $9.2 |
| Mine-site free cash flow(2) | ($4.5) | $20.2 | ($25.0) | $14.2 |
| Cost of sales, including amortization per ounce of gold sold(1) | $979 | $870 | $945 | $934 |
| Total cash costs per ounce of gold sold(2) | $678 | $590 | $651 | $650 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,072 | $848 | $1,016 | $939 |
Underground Operations
| Tonnes of ore mined | 100,568 | 112,203 | 208,964 | 215,192 |
| Tonnes of ore mined per day ("tpd") | 1,105 | 1,233 | 1,154 | 1,189 |
| Average grade of gold(4) | 9.23 | 10.02 | 9.40 | 9.22 |
| Metres developed | 2,134 | 1,902 | 4,237 | 3,341 |
Mill Operations
| Tonnes of ore processed | 102,000 | 114,448 | 209,508 | 215,097 |
| Tonnes of ore processed per day | 1,121 | 1,258 | 1,158 | 1,118 |
| Average grade of gold(4) | 9.51 | 10.09 | 9.54 | 9.18 |
| Contained ounces milled | 31,180 | 37,132 | 64,262 | 63,459 |
| Average recovery rate | 97% | 96% | 97% | 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.
(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").
Operational review
Island Gold produced 30,500 ounces in the second quarter of 2023, an 18% decrease from the prior year period reflecting lower tonnes and grades processed. For the first six months of 2023, Island Gold produced 63,400 ounces, a 3% increase from the prior year period driven by higher grades mined and processed. With stronger mining and milling rates expected in the second half of the year, the operation remains on track to meet full year production guidance.
Underground mining rates averaged 1,105 tpd in the second quarter, lower than both annual guidance and the prior year period reflecting unplanned downtime due to smoke from wildfires in Northern Ontario as well as weather related power outages. Mining rates have returned to normal levels in July and are expected to average 1,200 tpd through the second half of the year. Grades mined averaged 9.23 g/t Au in the quarter, and 9.40 g/t Au through the first half of the year, both consistent with annual guidance.
Mill throughput averaged 1,121 tpd, lower than annual guidance and the prior year period, due to lower mining rates, downtime for maintenance on the fine ore bin, and the above noted weather related power outages. Milling rates have returned to guided rates through July and are expected to average 1,200 tpd through the second half of the year. Mill recoveries averaged 97% in the quarter, slightly above the prior year period.
11 | Alamos Gold Inc
Island Gold generated revenues of $55.8 million in the second quarter, 19% lower than the prior year period, due to less ounces sold offset by a higher realized gold price. For the first six months of the year, revenues were $119.7 million, higher than the prior year as a result of more ounces sold and a higher realized gold price.
Cost of sales of $27.6 million in the second quarter were 14% lower than the prior year period, reflecting less tonnes processed. Cost of sales of $58.5 million for the first half of 2023 were higher than the comparable period, reflecting inflationary pressures on mining and processing costs.
Total cash costs of $678 per ounce and mine-site AISC of $1,072 per ounce in the second quarter were above the top end of annual guidance, primarily due to higher unit mining and processing costs resulting from lower tonnes processed. Through the first half of 2023, total cash costs of $651 per ounce were in-line with annual guidance while mine-site AISC of $1,016 per ounce were slightly above annual guidance. The Company expects mine-site AISC to decrease in the second half as throughput returns to guided levels.
Total capital expenditures were $54.7 million in the second quarter, including $3.0 million of capitalized exploration. Spending on the Phase 3+ Expansion continued through the second quarter with activities focused on shaft site infrastructure, including the hoist house and headframe. The construction of the hoist house is now substantially complete and shaft sinking scheduled to commence in the fourth quarter of 2023. Additionally, capital spending was focused on lateral development and other surface infrastructure. For the first six months of 2023, capital spending of $111.7 million, inclusive of capitalized exploration of $5.4 million, reflects the ramp up of construction activities on the Phase 3+ Expansion.
Mine-site free cash flow was negative $4.5 million in the second quarter and negative $25.0 million through the first half of the year given higher capital spending related to the Phase 3+ Expansion. At current gold prices, Island Gold is expected to self-finance the majority of the Phase 3+ Expansion capital over the next three years. The operation is expected to generate significant free cash flow from 2026 onward with the completion of the expansion.
12 | Alamos Gold Inc