Alamos Gold Reports Third 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 Third Quarter 2021 Results
Toronto, Ontario (October 27, 2021) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter ended September 30, 2021.
“We had a challenging third quarter at our Mulatos mine which offset strong performances at our Canadian operations. The challenges at Mulatos are temporary with the operation transitioning to low-cost production from La Yaqui Grande in 2022; however, given the weaker quarter, we reduced 2021 guidance at the operation by 15,000 ounces. We have also increased our consolidated cost guidance for the year given the stronger than budgeted Canadian dollar and higher than planned costs at Mulatos,” said John A. McCluskey, President and Chief Executive Officer.
“We expect higher production in the fourth quarter with our Canadian operations continuing to perform well. This has been led by Young-Davidson which achieved a new record for underground mining rates in the third quarter. We are also making good progress on our growth initiatives including the Phase III expansion at Island Gold and construction of La Yaqui Grande. Both are key drivers of our strong outlook with production potential of 750,000 ounces per year by 2025 at significantly lower all-in sustaining costs of approximately $800 per ounce,” Mr. McCluskey added.
Third Quarter 2021
- Production of 104,700 ounces of gold, an 11% decrease from the third quarter of 2020, with lower than anticipated production from Mulatos more than offsetting a strong performance at Young-Davidson
- Gold production at Mulatos of 26,700 ounces was well below expectations due to an above average rainy season in Mexico which impacted stacking rates, and a longer than anticipated leach cycle for stockpiled ore stacked in the quarter. With Cerro Pelon winding down, stockpiled ore will represent a larger proportion of stacked ore at Mulatos until production from La Yaqui Grande ramps up in the second half of 2022
- Given the lower production at Mulatos in the quarter and longer than anticipated leach cycle for stockpiled ore, the Company has revised production guidance lower by 15,000 ounces at Mulatos. Production guidance for Young-Davidson and Island Gold remains unchanged with both operations continuing to perform well
- Young-Davidson achieved record mining rates of 8,017 tonnes per day ("tpd"), driving production of 50,000 ounces of gold and mine-site free cash flow1 of $28.9 million. With a further increase in production expected in the fourth quarter, Young-Davidson is expected to generate approximately $100 million in mine-site free cash flow in 2021
- Consolidated total cash costs1 of $788 per ounce, all-in sustaining costs ("AISC")1 of $1,152 per ounce and cost of sales of $1,172 per ounce were higher than annual guidance reflecting the stronger than budgeted Canadian dollar, and higher costs at Mulatos. The USD/CAD foreign exchange rate averaged $0.79:1 in the third quarter and $0.80:1 year-to-date relative to the budgeted rate of $0.75:1 which has increased total cash costs by $30 per ounce and AISC by $45 per ounce. In addition, Mulatos costs increased in the third quarter and are expected to increase further in the fourth quarter, reflecting higher reagent costs associated with processing stockpiled ore
- Given the stronger than budgeted Canadian dollar, and higher than planned costs at Mulatos, the Company has revised its 2021 total cash cost guidance to $790 to $810 per ounce and all-in sustaining costs to $1,120 to $1,140 per ounce
- Construction of La Yaqui Grande is progressing well and remains on track for commercial production in the third quarter of 2022. La Yaqui Grande is expected to significantly reduce the cost profile at Mulatos as production ramps up towards the end of 2022. Despite inflationary cost pressures and other challenges related to COVID-
19, capital spending for La Yaqui Grande remains on budget
- Sold 110,488 ounces of gold at an average realized price of $1,792 per ounce for revenues of $198.0 million, a 9% decrease compared to the third quarter of 2020
- Generated cash flow from operating activities of $82.4 million ($102.3 million, or $0.26 per share, before changes in working capital1), a decrease from the prior year period due to lower realized gold prices and less ounces sold
- Free cash flow1 was negative in the quarter, driven by higher capital spending mainly related to La Yaqui Grande and the Phase III expansion at Island Gold
- Realized adjusted net earnings1 of $37.6 million, or $0.10 per share1, which includes adjustments for unrealized foreign exchange loss of $12.8 million recorded within deferred taxes and foreign exchange, and other gains of $0.3 million
- Recorded net earnings of $25.1 million, or $0.06 per share
- Ended the quarter with cash and cash equivalents of $211.4 million, equity securities of $22.9 million, and no debt
- 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 through the first nine months of 2021 to $29.4 million
- Repurchased an additional 600,000 shares in the quarter at a cost of $4.5 million under the Company's Normal Course Issuer Bid ("NCIB") bringing the total amount repurchased year-to-date to $6.0 million
- Reported results from the underground exploration drill program at Young-Davidson which has successfully extended gold mineralization below existing Mineral Reserves and Resources and intersected higher grades in the hanging wall and footwall of the deposit
.(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.
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Highlight Summary
| Three Months Ended September 30, | Nine Months Ended September 30, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Financial Results (in millions)
| Operating revenues | $198.0 | $218.4 | $620.5 | $521.5 |
| Cost of sales(1) | $129.5 | $122.6 | $395.7 | $346.2 |
| Earnings (Loss) from operations | $57.3 | $88.0 | ($34.9) | $146.3 |
| Earnings (Loss) before income taxes | $56.3 | $85.9 | ($41.3) | $132.4 |
| Net earnings (loss) | $25.1 | $67.9 | ($96.2) | $67.3 |
| Adjusted net earnings(2) | $37.6 | $56.9 | $125.4 | $96.2 |
| Earnings before interest, depreciation and amortization(2) | $100.0 | $130.5 | $314.0 | $248.1 |
Cash provided by operations before working capital and $102.3 $130.0 $319.1 $256.4 cash taxes (2)
Cash provided by operating activities $82.4 $130.8 $268.4 $237.0
| Capital expenditures (sustaining)(2) | $30.9 | $22.7 | $81.2 | $54.6 |
| Capital expenditures (growth)(2) (3) | $51.4 | $29.2 | $145.3 | $109.3 |
| Capital expenditures (capitalized exploration)(4) | $6.9 | $2.9 | $18.8 | $8.8 |
| Free cash flow(2) | ($8.1) | $76.0 | $1.6 | $64.3 |
Operating Results
Gold production (ounces)
104,700 117,100 344,700 306,400 Gold sales (ounces)
110,488 116,035 344,551 302,494
Per Ounce Data
Average realized gold price $1,792 $1,882 $1,801 $1,724 Average spot gold price (London PM Fix)
$1,790 $1,909 $1,800 $1,735 Cost of sales per ounce of gold sold (includes $1,172 $1,057 $1,148 $1,144 amortization) (1)
Total cash costs per ounce of gold sold (2) $788 $681 $778 $772 All-in sustaining costs per ounce of gold sold (2) $1,152 $949 $1,102 $1,052
Share Data
Earnings (Loss) per share, basic and diluted $0.06 $0.17 ($0.24) $0.17 Adjusted earnings per share, basic and diluted (2) $0.10 $0.15 $0.32 $0.25 Weighted average common shares outstanding (basic)
392,742 391,553 392,755 391,325 (000’s)
Financial Position (in millions)
$211.4 $220.5 Cash and cash equivalents (5)
(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.
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| Three Months Ended September 30, | Nine Months Ended September 30, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Gold production (ounces) (1)
Young-Davidson 50,000 36,400 143,100 88,200 Island Gold Mulatos 26,700 41,100 98,200 119,600
Gold sales (ounces)
Young-Davidson 48,625 35,548 141,931 86,893 Island Gold 28,331 39,322 101,845 97,009 Mulatos 33,532 41,165 100,775 118,592
Cost of sales (in millions) (2)
Young-Davidson $58.5 $50.5 $181.8 $140.5 Island Gold $24.5 $28.1 $79.2 $78.2 Mulatos $46.5 $44.0 $134.7 $127.5
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,203 $1,421 $1,281 $1,617 Island Gold $865 $715 $778 $806 Mulatos $1,387 $1,069 $1,337 $1,075
Total cash costs per ounce of gold sold (3)
Young-Davidson $810 $923 $873 $1,145 Island Gold $586 $394 $512 $438 Mulatos $927 $746 $913 $772
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
Young-Davidson $1,051 $1,196 $1,093 $1,370 Island Gold $1,077 $575 $860 $653 Mulatos $1,124 $928 $1,097 $928
Capital expenditures (sustaining, growth and capitalized exploration) (in millions) (3)
| Young-Davidson(5) | $22.3 | $25.6 | $63.8 | $82.2 |
| Island Gold(6) | $33.2 | $15.9 | $89.1 | $53.9 |
| Mulatos(7) | $28.4 | $9.1 | $76.1 | $21.6 |
| $5.3 | $4.2 | $16.3 | $15.0 |
Other
(1) Production for the three and nine months ended September 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 nine months ended September 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 $1.3 million and $3.8 million for the three and nine months ended September 30, 2021 ($nil for the three and nine months ended September 30, 2020).
(6) Includes capitalized exploration at Island Gold of $5.2 million and $13.6 million for the three and nine months ended September 30, 2021 ($2.9 million and $8.1 million for the three and nine months ended September 30, 2020); Capital expenditures exclude the Island Gold royalty repurchase for $54.8 million for the nine months ended September 30, 2020.
(7) Includes capitalized exploration at Mulatos of $0.4 million and $1.4 million for the three and nine months ended September 30, 2021 ($nil and $0.7 million for the three and nine months ended September 30, 2020).
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Environment, Social and Governance Summary Performance
Health and Safety
- Recordable injury frequency rate1 of 2.37 in the quarter and 2.35 year-to-date, a 7% increase from 2.20 in 2020
- Lost time injury frequency rate1 of 0.33 in the quarter and 0.20 year-to-date, consistent with 0.20 in 2020
- Performed over 65,000 COVID-19 tests to-date on employees, contractors and visitors as part of an enhanced screening program
During the third quarter of 2021, the recordable injury frequency rate decreased with 29 recordable injuries reported, down from 35 in the second quarter of 2021. Four lost time injuries were reported in the quarter, up from one in the second quarter of 2021, resulting in an overall increase 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. At Mulatos, where three lost time injuries occurred in the quarter, safety teams increased communications, meetings and safety huddles to reinforce site safety standards and procedures and underscore that all injuries are avoidable. 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 COVID-19 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 through the remainder of 2021.
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Environment
- Zero significant environmental incidents in the third quarter and year-to-date
- Completed independent reviews of cyanide management practices at all operations in accordance with the International Cyanide Management Code
- Completed independent reviews of energy and greenhouse gas management practices at all operations in accordance with the ISO 50001 Energy Management Systems Standard, to develop and/or improve site energy management plans
- 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
Seven minor spills occurred during the third quarter, including one at Young-Davidson, one at Island Gold and five 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 third quarter in collaboration with the Matarachi community, located near the Mulatos mine. These included ongoing COVID-19 vaccination clinics, nutrition health programs, improvements to local water network infrastructure, and installation planning for solarpowered street lighting
- In partnership with local educational organization Educatón, we introduced a program at Mulatos to support local youth and adults to finish their intermediate level studies
- Supported the construction of new military barracks and facilities in Yécora
- Partnered with Tech Manitoba and the Northern Manitoba Sector Council to deliver digital literacy classes in Lynn Lake. The DigitALL initiative targets Indigenous youth, low-income earners and seniors to improve their skills and confidence with computers and the internet through hands on training courses, creating opportunities for further education, employment and overall participation in the online world
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
- Received the Socially Responsible Company Award by CEMEFI, the Mexican Center for Philanthropy, for the 13th consecutive year at Mulatos
- Received the “Award for Corporate Ethics and Values in Industry” by CONCAMIN, the Industrial Chambers Confederation of Mexico, for the second consecutive year at Mulatos. The award is in recognition of strong progress and maturity in corporate social responsibility
- Received the “Award for Outstanding Practice in Action for Climate” by CONCAMIN, in recognition of strong practices supporting the UN Sustainable Development Goals at Mulatos. The award recognized strong
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performance in four categories: Good Health and Well-Being, Gender Equality, Decent Work and Economic Growth, and Climate Action.
- Completed the Carbon Disclosure Project’s 2021 Climate Change Questionnaire
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 | ||||||
| Island Gold | Other (2) | |||||
| Young- | Revised | Previous | ||||
| Davidson | Mulatos | Guidance | Guidance |
| Gold production(000’s ounces) | 190 - 205 | 130 - 145 | 135 - 145 | 455 - 495 | 470 - 510 |
|---|---|---|---|---|---|
| Total cash costs($ per ounce)(1)(5) | ~ $850 | ~ $525 | ~ $1,000 | — $790 - $810 | $710 - $760 |
| All-in sustaining costs($ per ounce)(1) | $1,120 - $1,140 | $1,025 - $1,075 |
~ $1,060 ~ $865 ~ $1,235 — Mine-site all-in sustaining costs ($ per ounce)(1)(3)(6)
Capital expenditures (in millions)
Sustaining capital(1) $40 - $45 $40 - $45 $30 - $35 — $110 - $125 $110 - $125 Growth capital(1) $25 - $30 $80 - $85 $95 - $100 $10 $210 - $225 $210 - $225
Total Sustaining and Growth $65 - $75 $120 - $130 $125 - $135 $10 $320 - $350 $320 - $350 Capital(1)
Capitalized exploration(1) $7 $20 — $7 $34 $34
Total capital expenditures and $72 - $82 $140 - $150 $125 - $135 $17 $354 - $384 $354 - $384 capitalized 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) Includes growth capital and capitalized exploration at the Company's development projects (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.
(5) Total cash cost guidance for Young-Davidson has been revised from between $790 - $840 per ounce to approximately $850 per ounce; for Island Gold, revised from between $430 - $480 per ounce to approximately $525 per ounce; and for Mulatos, revised from between $840 - $890 per ounce to approximately $1,000 per ounce
(6) Mine-site AISC guidance for Young-Davidson has been revised from between $1,000 - $1,050 per ounce to approximately $1,060 per ounce; for Island Gold, revised from between $750 - $800 per ounce to approximately $865 per ounce; and for Mulatos, revised from between $1,060 - $1,110 per ounce to approximately $1,235 per ounce
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 long-term objectives while managing temporary challenges at Mulatos as the operation transitions to the higher grade, low-cost La Yaqui Grande deposit. The Company expects stronger production in the fourth quarter at all three operations; however, given the challenging third quarter at Mulatos, the Company has reduced full year production guidance at Mulatos. Production guidance at the Canadian operations remains unchanged with both operations continuing to perform well and on track to achieve full year guidance. This included another strong quarter from Young-Davidson with mining rates increasing to average 8,017 tpd for the quarter, a new record for the operation.
Total cash costs and all-in sustaining costs ("AISC") in the third quarter and through the first nine months of the year were above initial 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 the actual USD/CAD rate of $0.79:1 in the third quarter and $0.80:1 average year-to-date. This has increased Company-wide total cash costs by $30 per ounce, and AISC by $45 per ounce relative to initial guidance. Excluding this impact, total cash costs and AISC through the first three quarters of 2021 are consistent with initial annual guidance. Given the ongoing impact of the stronger Canadian dollar and higher than planned costs at Mulatos, the Company is increasing full year consolidated total cash cost guidance to a range of $790 to $810 per ounce and AISC guidance to a range of $1,120 to $1,140 per ounce. Although the Company has managed inflationary pressures on operating costs through the first nine-months of the year, price increases for certain consumables are expected to start having more of an impact on costs in the fourth quarter and into 2022.
The Company continues to advance its high-return organic growth initiatives. Construction of the higher grade La Yaqui Grande project remains on budget and on schedule to begin supplying low-cost production in the third quarter of 2022. Development activities on the Phase III expansion at Island Gold are also advancing while ongoing
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exploration success continues to highlight the significant potential for further high-grade Mineral Reserve and Resource growth and additional operational upside to what was outlined in the July 2020 study. Both projects are key contributors to the Company's strong outlook with consolidated production potential of approximately 750,000 ounces per year by 2025 at substantially lower AISC of approximately $800 per ounce.
Young-Davidson continues to perform well having consistently met or exceeded expectations following the completion of the lower mine expansion in July 2020. Mining rates increased to average a record 8,017 tpd in the third quarter driving production higher, costs lower, and strong mine-site free cash flow. The operation remains on track to achieve full year production guidance and generate mine-site free cash flow of approximately $100 million in 2021.
Production at Island Gold decreased slightly in the third quarter reflecting unplanned maintenance in the mill. This was completed early in the third quarter with additional critical spares now on site to mitigate future unplanned downtime. Given the strong production through the first three quarters of the year and with higher production expected in the fourth quarter reflecting higher milling rates, the operation remains on track to achieve full year guidance. Exploration success continued in the third quarter following up on the best hole drilled to date at Island Gold as announced in the second quarter at 71.21 g/t Au (39.24 g/t cut) over 21.33 m (MH25-08), down-plunge from Mineral Resources in Island East. Drilling activities were limited by drilling contractor availability constraints; however, this improved later in the quarter with another exploration update expected in the fourth quarter.
Production from the Mulatos District was impacted by higher than average rainfall during the rainy season and longer than anticipated recovery times for stockpiled ore stacked during the quarter. The above average rainfall and wet ore impacted stacking rates during the quarter which were approximately 20% below annual guidance. Additionally, with the higher grade Cerro Pelon deposit nearly depleted, an increasing proportion of previously mined and stockpiled ore is now being stacked. The leach cycle for this ore has been longer than anticipated and is requiring the application of additional reagents resulting in significantly higher processing costs. Production is expected to increase in the fourth quarter; however, given the lower production during the third quarter, full year production guidance has been reduced by 15,000 ounces to a range of 135,000 to 145,000 ounces. Given the higher reagent costs associated with processing this stockpiled ore, total cash costs and mine-site AISC at Mulatos are expected to increase significantly in the fourth quarter and through the first half of 2022. Costs are expected to decrease into the second half of 2022 as production from the high grade La Yaqui Grande project ramps up. Mulatos District costs are expected to be sharply lower in 2023 with La Yaqui Grande supplying the majority of production.
The Company continues to advance permitting of the Lynn Lake project, with approval of its Environmental Impact Statement ("EIS") expected mid-2022. The Company expects to make a construction decision following the conclusion of the EIS permitting process.
In April 2021, 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 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 third quarter with $211.4 million of cash and cash equivalents, $22.9 million in equity securities, and no debt. Additionally, the Company has a $500 million undrawn credit facility, providing total liquidity of $711.4 million. Combined with strong ongoing cash flow generation, the Company's high-return internal growth initiatives are fully funded, which have the capacity to increase production by 50%, and reduce AISC by over 20% by 2025.
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Third Quarter 2021 Results
Young-Davidson Financial and Operational Review
| Three Months Ended September 30, | Nine Months Ended September 30, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Gold production (ounces) 50,000 36,400 143,100 88,200 Gold sales (ounces) 48,625 35,548 141,931 86,893
Financial Review (in millions)
Operating Revenues $87.1 $66.7 $255.3 $150.1 Cost of sales (1) $58.5 $50.5 $181.8 $140.5 Earnings from operations $28.6 $16.2 $73.5 $9.6 Cash provided by operating activities $51.2 $36.4 $133.7 $51.0
| Capital expenditures (sustaining)(2) | $11.7 | $9.6 | $31.0 | $19.3 |
| Capital expenditures (growth)(2) | $9.3 | $16.0 | $29.0 | $62.9 |
| Capital expenditures (capitalized exploration)(2) | $1.3 | $— | $3.8 | $— |
| Mine-site free cash flow(2) | $28.9 | $10.8 | $69.9 | ($31.2) |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,203 | $1,421 | $1,281 | $1,617 |
| Total cash costs per ounce of gold sold(2) | $810 | $923 | $873 | $1,145 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,051 | $1,196 | $1,093 | $1,370 |
Underground Operations
Tonnes of ore mined 737,554 617,551 2,121,573 1,252,300 Tonnes of ore mined per day 8,017 6,713 7,771 4,570 Average grade of gold (4) 2.30 2.24 2.26 2.27 Metres developed 3,031 3,231 9,251 9,326
Mill Operations
| Tonnes of ore processed | 738,646 | 591,544 | 2,159,994 | 1,451,577 |
| Tonnes of ore processed per day | 8,029 | 6,430 | 7,912 | 5,298 |
| Average grade of gold(4) | 2.30 | 2.19 | 2.25 | 2.01 |
| Contained ounces milled | 54,640 | 41,598 | 156,310 | 93,959 |
| 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 50,000 ounces of gold in the third quarter of 2021, a 37% increase from the prior year period which had been impacted by downtime to complete the lower mine expansion in July 2020. With production of 143,100 ounces through the first nine months and strong production expected in the fourth quarter, Young-Davidson remains on track to meet full year production guidance of between 190,000 and 205,000 ounces.
Underground mining rates continued to perform extremely well, increasing to average a record 8,017 tpd in the quarter. Since the completion of the lower mine expansion in the third quarter of 2020, mining rates have met or exceeded targeted rates. The Company expects similar mining rates in the fourth quarter with the new lower mine infrastructure now operating at its design rate of 8,000 tpd.
Grades mined increased slightly in the third quarter to average 2.30 g/t Au. Grades mined are expected to increase further in the fourth quarter. Mill throughput averaged 8,029 tpd in the third quarter, consistent with tonnes mined. Mill recoveries averaged 92% in the quarter, in line with guidance and the prior year.
Financial Review
Third quarter revenues of $87.1 million and year-to-date revenues of $255.3 million were 31% and 70% higher than the prior year periods, respectively. This reflected higher gold production with the prior year impacted by the temporary
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shutdown of the Northgate shaft to complete the lower mine expansion. Revenues in third quarter of 2021 were the second highest in the history of the operation.
Cost of sales (which includes mining and processing costs, royalties, and amortization expense) of $58.5 million in the third quarter were higher than the prior year period, due to significantly higher mining and processing rates compared to the prior year. Similarly, cost of sales for the first nine months of 2021 were higher than the prior year given lower mining rates during the shutdown period. Underground unit mining costs were CAD $44 per tonne in the quarter, a significant improvement from the prior year and the lowest quarterly unit mining costs of the year driven by economies of scale with mining rates increasing to average a record 8,000 tpd.
Total cash costs of $810 per ounce and mine-site AISC of $1,051 per ounce in the third quarter were both 12% lower than the comparative period in 2020, and the lowest result in 2021 driven by higher throughput and lower mining and processing costs per tonne. The stronger than budgeted Canadian dollar has increased total cash costs by approximately $50 per ounce and mine-site AISC by $65 per ounce year-to-date. Excluding the impact of the stronger than budgeted Canadian dollar, year-to-date costs are in-line with initial annual guidance. With higher grades expected in the fourth quarter, total cash costs and mine-site AISC are expected to decrease further to the lowest levels of the year.
Capital expenditures in the quarter included $11.7 million of sustaining capital and $9.3 million of growth capital. In addition, $1.3 million was invested in capitalized exploration as part of the first significant exploration program at the operation since 2011. Capital expenditures totaled $63.8 million in the first nine months of 2021, a 22% decrease from the prior year reflecting the completion of the lower mine expansion in July 2020. Capital expenditures in 2021 are expected to be slightly higher than guidance due to the impact of the stronger Canadian dollar.
Young-Davidson has consistently met or exceeded expectations since transitioning to the new lower mine infrastructure in mid-2020, driving production higher, costs lower, and strong free cash flow growth. This included mine-site free cash flow of $28.9 million in the third quarter, and $69.9 million in the first nine months of 2021. With a strong fourth quarter, Young-Davidson is expected to generate mine-site free cash flow of approximately $100 million for the full year.
11 | Alamos Gold Inc
Island Gold Financial and Operational Review
| Three Months Ended September 30, | Nine Months Ended September 30, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Gold production (ounces)
Gold sales (ounces)
28,331 39,322 101,845 97,009
Financial Review (in millions)
Operating Revenues $50.8 $74.1 $183.4 $167.4
| Cost of sales(1) | $24.5 | $28.1 | $79.2 | $78.2 |
| Earnings from operations | $25.5 | $45.9 | $101.0 | $88.7 |
| Cash provided by operating activities | $31.5 | $56.7 | $129.9 | $123.5 |
| Capital expenditures (sustaining)(2) | $13.9 | $7.0 | $35.5 | $20.7 |
| Capital expenditures (growth)(2) | $14.1 | $6.0 | $40.0 | $25.1 |
| Capital expenditures (capitalized exploration)(2) | $5.2 | $2.9 | $13.6 | $8.1 |
| Capital advances | $0.6 | $— | $3.4 | $— |
| Mine-site free cash flow(2) | ($2.3) | $40.8 | $37.4 | $69.6 |
| Cost of sales, including amortization per ounce of gold sold(1) | $865 | $715 | $778 | $806 |
| Total cash costs per ounce of gold sold(2) | $586 | $394 | $512 | $438 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,077 | $575 | $860 | $653 |
Underground Operations
Tonnes of ore mined 108,241 111,263 329,190 298,629
| Tonnes of ore mined per day ("tpd") | 1,177 | 1,209 | 1,206 | 1,090 |
| Average grade of gold(4) | 8.59 | 13.68 | 10.04 | 11.33 |
| Metres developed | 1,708 | 1,430 | 5,566 | 4,313 |
Mill Operations
| Tonnes of ore processed | 99,425 | 101,447 | 320,608 | 281,082 |
| Tonnes of ore processed per day | 1,081 | 1,103 | 1,174 | 1,026 |
| Average grade of gold(4) | 8.90 | 13.62 | 10.29 | 11.52 |
| 28,443 | 44,414 | 106,062 | 104,072 |
Contained ounces milled Average recovery rate 95 % 97 % 96 % 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 28,000 ounces in the third quarter of 2021, a decrease from the comparative period reflecting lower planned grades mined. Through the first nine months of 2021, Island Gold produced 103,400 ounces, and remains well positioned to meet full year production guidance.
Underground mining rates averaged 1,177 tpd in the third quarter, a 3% decrease from the prior year period. Mining rates through the first nine months of the year averaged 1,206 tpd, consistent with annual guidance of 1,200 tpd. As previously guided, underground grades remained at similar levels to the second quarter, averaging 8.59 g/t Au. Grades mined are expected to slightly increase in the fourth quarter, and average approximately 10 g/t Au for the year, in line with the Mineral Reserve grade.
Mill throughput averaged 1,081 tpd in the third quarter, a decrease from the first half of the year and below annual guidance of 1,200 tpd due to approximately eight days of downtime for unplanned maintenance in July. The mill operated at full capacity in August and September. To mitigate future unplanned downtime, additional maintenance protocols have been put in place as well as an increase in critical spare inventory. Excess ore mined during the quarter was stockpiled for future processing. Mill recoveries averaged 95% in the quarter and 96% year-to-date, consistent with annual guidance.
12 | Alamos Gold Inc