Alamos Gold Reports First Quarter 2022 Results
Alamos Gold Inc.
Brookfield Place, 181 Bay Street, Suite 3910, P.O. Box #823 Toronto, Ontario M5J 2T3 Telephone: (416) 368-9932 or 1 (866) 788-8801
All amounts are in United States dollars, unless otherwise stated.
Alamos Gold Reports First Quarter 2022 Results
Toronto, Ontario (April 27, 2022) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter ended March 31, 2022.
“Our first quarter production and costs were in line with guidance and with stronger results expected through the year, we remain well positioned to achieve our annual guidance. La Yaqui Grande remains on track for initial production in the third quarter and is expected to drive our production higher and costs significantly lower in the second half of the year,” said John A. McCluskey, President and Chief Executive Officer.
“We are also making good progress on our other growth initiatives, including at Island Gold where we achieved a key permitting milestone with approval of the Closure Plan Amendment. We officially broke ground on the Phase III expansion and are getting closer to completing an updated mine plan for the operation which we plan to release midyear. Given the significant growth in high-grade Mineral Reserves and Resources since the completion of the Phase III study and opportunities to optimize the operation, we expect the updated mine plan will showcase a significantly more valuable operation. Both of these high-return projects support our strong outlook with growing production, declining costs and increasing profitability,” Mr. McCluskey added.
First Quarter 2022
- Produced 98,900 ounces of gold, in line with guidance for the first quarter. Consistent with guidance, gold production is expected to increase through the rest of the year reflecting higher grades at Island Gold in the second quarter and with La Yaqui Grande on track for initial production in the third quarter
- Young-Davidson averaged over 8,000 tonnes per day mined in the quarter, driving production of 51,900 ounces and mine-site free cash flow1 of $23.2 million
- Sold 98,466 ounces of gold at an average realized price of $1,874 per ounce for revenues of $184.5 million
- As previously guided, total cash costs1 of $992 per ounce, AISC1 of $1,360 per ounce and cost of sales of $1,376 per ounce were all above annual cost guidance. Costs are expected to decrease through the year driven by higher grades at Island Gold, and the start of low-cost production from La Yaqui Grande
- Realized adjusted net earnings1 for the quarter of $18.0 million, or $0.05 per share1. Adjusted net earnings includes adjustments for the non-cash, after tax impairment charge of $26.7 million triggered by the sale of the Esperanza Project, unrealized foreign exchange gains recorded within both deferred taxes and foreign exchange of $5.8 million, and other losses totaling $5.6 million
- Reported a net loss of $8.5 million, or $0.02 per share
- Cash flow from operating activities was $46.5 million ($70.9 million, or $0.18 per share, before changes in working capital1)
- Free cash flow1 was negative in the quarter, primarily related to lower planned production from Mulatos as well as ongoing capital spending on the La Yaqui Grande project. The Company expects to transition to positive free cash flow in the second half of the year driven by lower capital spending and low-cost production from La Yaqui Grande
- Declared a quarterly dividend of $9.8 million, or $0.025 per share (annualized rate of $0.10)
- Ended the quarter with cash and cash equivalents of $124.2 million, equity securities of $21.6 million, and no debt
- Announced the sale of the non-core Esperanza Gold Project to Zacatecas Silver Corp. for total consideration of up to $60 million, with the transaction having closed in April 2022
- Reported year end 2021 Mineral Reserves of 10.3 million ounces of gold, a 4% increase from the end of 2020 with growth at all three operating mines more than offsetting mining depletion. This included a 5% increase in global Mineral Reserve Grades reflecting higher grade additions at Island Gold and Mulatos. Island Gold continues to grow with combined Mineral Reserves and Resources increasing 8% to 5.1 million ounces of gold, net of mining depletion, marking a key milestone for the operation and highlighting its significant upside potential
- Achieved a significant permitting milestone for the Phase III Expansion at Island Gold with the approval of the Closure Plan Amendment by the Ontario Government which allows for the commencement of construction activities. A groundbreaking ceremony was held on site on April 11, 2022, and was attended by Carol Hughes, Member of Parliament, Greg Rickford, Ontario Minister of Northern Development, Mines, Natural Resources and Forestry and Minister of Indigenous Affairs, Todd Smith, Ontario Minister of Energy, Michael Mantha, Member of Provincial Parliament, Beverly Nantel, Mayor of Dubreuilville, as well as other municipal government representatives, Indigenous partners, and other key stakeholders
(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 March 31, | |
|---|---|
| 2022 | 2021 |
Financial Results (in millions)
| Operating revenues | $184.5 | $227.4 |
| Cost of sales(1) | $135.5 | $139.3 |
| (Loss) earnings from operations | ($5.7) | $76.3 |
| (Loss) earnings before income taxes | ($14.3) | $75.1 |
| Net (loss) earnings | ($8.5) | $51.2 |
| Adjusted net earnings(2) | $18.0 | $49.1 |
| Earnings before interest, depreciation and amortization(2) | $62.9 | $119.6 |
| Cash provided by operations before working capital and cash taxes(2) | $70.9 | $119.6 |
| Cash provided by operating activities | $46.5 | $99.3 |
| Capital expenditures (sustaining)(2) | $22.5 | $23.6 |
| Capital expenditures (growth)(2) (3) (5) | $58.7 | $60.3 |
| Capital expenditures (capitalized exploration)(4) | $6.1 | $5.5 |
| Free cash flow(2) | ($40.8) | $9.9 |
Operating Results
98,900 125,800 Gold production (ounces)
98,466 126,482 Gold sales (ounces)
Per Ounce Data
| Average realized gold price | $1,874 | $1,798 |
| Average spot gold price (London PM Fix) | $1,877 | $1,794 |
| Cost of sales per ounce of gold sold (includes amortization)(1) | $1,376 | $1,101 |
| Total cash costs per ounce of gold sold(2) | $992 | $757 |
| All-in sustaining costs per ounce of gold sold(2) | $1,360 | $1,030 |
Share Data
| (Loss) earnings per share, basic and diluted | ($0.02) | $0.13 |
| Adjusted earnings per share, basic and diluted(2) | $0.05 | $0.13 |
| Weighted average common shares outstanding (basic) (000’s) | 391,913 | 392,776 |
Financial Position (in millions)
Cash and cash equivalents(6) $124.2 $172.5
(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) Includes growth capital from operating sites.
(4) Includes capitalized exploration at Island Gold, Young-Davidson and Mulatos.
(5) Includes capital advances of nil for the three months ended March 31, 2022 ($16.8 million for the three months ended March 31, 2021).
(6) Comparative cash and cash equivalents balance as at December 31, 2021.
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| Three Months Ended March 31, | |
|---|---|
| 2022 | 2021 |
Gold production (ounces)
Young-Davidson 51,900 48,000 Island Gold 24,500 42,200 22,500 35,600 Mulatos
Gold sales (ounces)
Young-Davidson 51,525 48,022 Island Gold 23,368 39,882 23,573 38,578 Mulatos
Cost of sales (in millions)(1)
Young-Davidson $64.6 $62.0 Island Gold $24.2 $29.1 $46.7 $48.2 Mulatos
Cost of sales per ounce of gold sold (includes amortization)
| Young-Davidson | $1,254 | $1,491 |
| Island Gold | $1,036 | $801 |
| Mulatos | $1,981 | $1,249 |
Total cash costs per ounce of gold sold (2)
Young-Davidson $840 $873 $745 $466 Island Gold Mulatos $1,570 $915
Mine-site all-in sustaining costs per ounce of gold sold (2),(3)
| Young-Davidson | $1,044 | $1,075 |
| Island Gold | $1,083 | $732 |
| Mulatos | $1,782 | $1,039 |
Capital expenditures (sustaining, growth, capitalized exploration and capital advances) (in millions)(2)
| Young-Davidson(4) | $22.7 | $21.9 |
| Island Gold(5) | $33.4 | $27.4 |
| Mulatos(6) | $26.0 | $18.8 |
| Other | $5.2 | $4.5 |
(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) Includes capitalized exploration at Young-Davidson $1.0 million for the three months ended March 31, 2022 ($1.0 million for the three months ended March 31, 2021).
(5) Includes capitalized exploration at Island Gold of $5.1 million for the three months ended March 31, 2022 ($4.5 million for the three months ended March 31, 2021).
(6) Includes capitalized exploration at Mulatos of $nil for the three months ended March 31, 2022 ($nil for the three months ended March 31, 2021).
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Environment, Social and Governance Summary Performance
Health and Safety
- Recordable injury frequency rate1,2 of 1.65 in the quarter, a 19% decrease from 2021
- Lost time injury frequency rate1 of 0.09 in the quarter, a 56% decrease from 2021
- Commenced phasing out mandatory COVID-19 testing across Alamos operations
During the first quarter of 2022, the recordable injury frequency rate decreased with 18 recordable injuries, down from 28 in the fourth quarter of 2021. One lost time injury was reported in the quarter, down from three in the fourth quarter of 2021, resulting in an overall decrease to the Company’s lost time injury frequency rate from the previous quarter. Alamos strives to maintain a safe, healthy working environment for all, with a strong safety culture where everyone is continually reminded of the importance of keeping themselves and their colleagues healthy and injury-free. The Company’s overarching commitment is to have all employees and contractors return Home Safe Every Day.
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. During the first quarter of 2022, in close collaboration with medical experts, Alamos began amending its COVID-19 measures to reflect the changing risk profile of the pandemic in each of its operating jurisdictions. Mandatory medical screening and testing is no longer required for full-time employees and contractors, though they remain available on a voluntary basis and for symptomatic personnel.
The following measures remain in place to prevent the potential spread of the COVID-19 virus:
- Testing of personnel on a voluntary basis
- Vaccinations offered to employees at Island Gold and Mulatos given their unique camp set-up
- Training on proper hand hygiene and social distancing
- Remote work options for eligible employees
- Rigid camp and site hygiene protocols
- In addition, since the COVID-19 pandemic began the Company has donated 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 have incurred additional costs related to testing of personnel, lodging and transportation.
Environment
- Zero significant environmental incidents in the first quarter of 2022
- Closure Plan Amendment for the Island Gold Mine approved by the Ontario Government, allowing for the ramp up of Phase III construction activities at Island Gold
- Advanced both federal and provincial permitting for the Lynn Lake Project
- Completed greenhouse gas and energy workshops and site visits at all Alamos operations as part of planning to develop emission reduction targets for the Company
- Continued Indigenous community engagement, including the signing of a Community Benefits Agreement with the Michipicoten First Nation for Island Gold subsequent to quarter end on April 4, 2022
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- Advanced the power line project at the Mulatos and La Yaqui Grande which will connect the operations to grid power and eliminate the need for site diesel power generation, reducing GHG emissions
Six minor spills occurred during the first quarter, including two at 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
- Recipient of the inaugural Reconciliation Award at the Manitoba Prospectors and Developers Association Gala in recognition of the positive collaboration and engagement between Alamos and Marcel Colomb First Nation with respect to the Lynn Lake Gold Project
- Met with Matarachi community representatives to plan the activities for 2022 following implementation of the Mi Matarachi community development program
- Continued to support local students in Sahuaripa, Matarachi and Hermosillo, Mexico with 180 students supported through the Company’s Scholarship Program
- Made various donations of school and health supplies to local communities in Matarachi, Sahuaripa and Arivechi
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 have continued through the COVID-19 pandemic, with appropriate health and safety protocols.
Governance and Disclosure
- Finalized three sustainability standards during the quarter and 25 to date as part of Alamos’ Sustainability Performance Management Framework that addresses governance, health & safety, security, environment and community relations management
- Received independent assurance over the Company’s 2021 Responsible Gold Mining Principles (RGMP) Progress Report
- Advanced development of the Company’s 2021 Environmental, Social and Corporate Governance (ESG) Report, to be published in Q2 2022
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.
(2) The classification of medical treatment injuries was updated retroactive to 1 January 2020 to align with OSHA standards, resulting in changes to previously reported recordable injury rates.
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Outlook and Strategy
| 2022 Guidance | |||||
| Young- | Island Gold | ||||
| Davidson | Mulatos | Other (2) | Total |
Gold production (000’s ounces) 185 - 200 125 - 135 130 - 145 440 - 480 Cost of sales, including amortization (in millions)(4) $610 Cost of sales, including amortization ($ per ounce)(4) $1,325 Total cash costs ($ per ounce)(1) $850 - $900 $550 - $600 $1,225 - $1,275 — $875- $925 All-in sustaining costs ($ per ounce)(1) $1,190 - $1,240 Mine-site all-in sustaining costs ($ per ounce)(1)(3) — $1,125 - $1,175 $850 - $900 $1,325 - $1,375
Capital expenditures (in millions)
| Sustaining capital(1) | $50 - $55 | $35 - $40 | $5 - $10 | — | $90 - $105 |
| Growth capital(1) | $5 - $10 | $145 - $160 | $50 - $55 | $15 | $215 - $240 |
| Total Sustaining and Growth Capital(1) | $55 - $65 | $180 - $200 | $55 - $65 | $15 | $305 - $345 |
| Capitalized exploration(1) | $4 | $20 | — | $3 | $27 |
| Total capital expenditures and capitalized exploration(1) | $59 - $69 | $200 - $220 | $55 - $65 | $18 | $332 - $372 |
(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 and calculation of these measures.
(2) Includes growth capital and capitalized exploration at the Company's development projects (Lynn Lake and Esperanza).
(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 total cash cost guidance.
The Company’s objective is to operate a sustainable business model that can support growing returns to all stakeholders over the long-term through growing production, expanding margins, and increasing profitability. This includes a balanced approach to capital allocation focused on generating strong ongoing free cash flow while reinvesting in high-return internal growth opportunities and supporting higher returns to shareholders.
The Company continues to deliver on its key long-term objectives including significant progress on its high-return growth projects which are expected to provide important catalysts over the next several months. Construction of La Yaqui Grande is nearing completion with the project on track to achieve initial production in the third quarter of 2022. Given its higher grades and lower cost profile, La Yaqui Grande is expected drive costs significantly lower in the second half of the year.
At Island Gold, the Company achieved a significant permitting milestone with the approval of the Closure Plan Amendment, allowing for ramp up of construction activities on the Phase III expansion. Through ongoing exploration success, Island Gold's Mineral Reserves and Resources have grown to more than five million ounces of high-grade gold. This includes a 37% increase in Mineral Reserves and Resources since the completion of the Phase III expansion study ("Phase III Study") in 2020. This growth and higher-grade additions in proximity to the planned shaft are being incorporated into an optimized mine plan to be released mid-2022 which is expected to highlight a significantly more valuable operation.
The Company provided inaugural three-year production and operating guidance in January 2022, which outlined growing production at significantly lower costs over the 2022 to 2024 period. Refer to the Company’s January 17, 2022 guidance press release for a summary of the key assumptions and related risks associated with the comprehensive 2022 guidance and three-year production, cost and capital outlook. Production is expected to be between 440,000 and 480,000 ounces of gold in 2022, consistent with 2021, and increase approximately 4% (based on the mid-point of guidance) to between 460,000 and 500,000 ounces in 2023 and 2024. La Yaqui Grade is expected to drive Mulatos and consolidated costs lower in the second half of 2022 and will be a key contributor to an expected 18% decrease in AISC between 2022 and 2024. The Company expects a further increase in production and reduction in costs following the completion of the Phase III expansion at Island Gold in 2025.
First quarter production of 98,900 ounces was in line with guidance and with production expected to increase through the year, the Company remains on track to achieve full year guidance. Production is expected to increase to between
7 | Alamos Gold Inc
100,000 and 110,000 ounces in the second quarter at similar costs to the first quarter. Production is expected to further increase and costs decrease in the second half of the year with the start of low-cost production from La Yaqui Grande. The Company is managing the impact of industry-wide inflation on input costs such as diesel, cyanide, steel, and labour.
Young-Davidson continues to perform well operating from the new lower mine infrastructure. Mining rates of 8,181 tpd exceeded targeted rates driving strong first quarter production of 51,900 ounces and mine-site free cash flow of $23.2 million. With the solid first quarter performance, Young-Davidson is on track to achieve full year production and cost guidance. Capital spending in 2022 (excluding exploration) is expected to range between $55 and $65 million, a 27% decrease from 2021 with construction of the new life of mine tailings facility (“TIA 1”) completed in the fourth quarter of 2021. The operation generated record mine-site free cash flow of $100 million in 2021, and with a 15 year Mineral Reserve life, Young-Davidson is expected to generate similar mine-site free cash flow in 2022 and over the long term.
Island Gold produced 24,500 ounces in the first quarter with total cash costs and mine-site AISC above annual guidance reflecting lower grades mined due to mine sequencing. Consistent with annual guidance, grades mined are expected to increase through the remainder of year driving production higher and costs lower. Capital spending at Island Gold (excluding exploration) is expected to increase to between $180 and $200 million in 2022, reflecting the ramp up of construction activities on the Phase III expansion following the approval of the Closure Plan Amendment in March.
The exploration budget for Island Gold in 2022 of $22 million will follow up on the successful drilling campaign in 2021 that drove an 8% increase in high-grade Mineral Reserves and Resources to 5.1 million ounces of gold. Since the completion of the Phase III Study, Mineral Reserves and Resources have increased 37%, or 1.4 million ounces demonstrating the significant growth in size and value of operation. This ongoing growth will be incorporated into an optimized mine plan to be released mid-2022.
Combined production from the Mulatos District totaled 22,500 ounces in the first quarter, in line with first half guidance. With the start of production from La Yaqui Grande in the third quarter and increasing grades from the El Salto portion of the Mulatos pit, approximately 65% of 2022 production is expected in the second half of the year at substantially lower costs. As previously disclosed, total cash costs and mine-site AISC are expected to be well above annual guidance during the first half of 2022 and trend significantly lower during the second half of the year, driven by lowcost production from La Yaqui Grande. Capital spending is expected to total $55 to $65 million in 2022 with the majority being growth capital to complete construction of La Yaqui Grande, which remains on track to achieve initial production in the third quarter of 2022.
The total capital budget for Lynn Lake in 2022 is $14 million, including $11 million for development activities and $3 million for exploration. Development activities in 2022 remain focused on environmental work in support of permitting, detailed engineering and other site access upgrades. The approval of the Environmental Impact Statement (“EIS”) for the project is expected in the second half of 2022 following which the Company expects to make a construction decision.
A total of $40 million has been budgeted for exploration in 2022 with Island Gold continuing to account for the largest portion of the budget at $22 million, followed by $7 million at Mulatos, $5 million at Young-Davidson and $3 million at Lynn Lake. This follows a successful 2021 program with Mineral Reserves more than replaced at all three operations. This drove a 4% increase in Mineral Reserves to 10.3 million ounces of gold with grades also increasing 5% reflecting higher grade increases at Island Gold and Mulatos.
The Company's liquidity position remains strong, ending the first quarter with $124.2 million of cash and cash equivalents, $21.6 million in equity securities, and no debt. Additionally, the Company has a $500 million undrawn credit facility, providing total liquidity of $624.2 million. Combined with strong ongoing cash flow generation, the Company's high-return internal growth initiatives are fully funded, with the capacity to increase production by more than 60% and reduce AISC by over 30% by 2025.
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First Quarter 2022 Results
Young-Davidson Financial and Operational Review
| Three Months Ended March 31, | |
|---|---|
| 2022 | 2021 |
Gold production (ounces) 51,900 48,000 Gold sales (ounces) 51,525 48,022
Financial Review (in millions)
| Operating Revenues | $96.8 | $86.1 |
| Cost of sales(1) | $64.6 | $62.0 |
| Earnings from operations | $105.4 | $38.1 |
| Cash provided by operating activities | $45.9 | $44.2 |
| Capital expenditures (sustaining)(2) | $10.4 | $9.5 |
| Capital expenditures (growth)(2) | $11.3 | $11.4 |
| Capital expenditures (capitalized exploration)(2) | $1.0 | $1.0 |
| Mine-site free cash flow(2) | $23.2 | ($0.4) |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,254 | $1,491 |
| Total cash costs per ounce of gold sold(2) | $840 | $873 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,044 | $1,075 |
Underground Operations
| Tonnes of ore mined | 736,304 | 701,162 |
| Tonnes of ore mined per day | 8,181 | 7,791 |
| Average grade of gold(4) | 2.37 | 2.25 |
| Metres developed | 3,246 | 3,352 |
Mill Operations
| Tonnes of ore processed | 737,728 | 733,221 |
| Tonnes of ore processed per day | 8,197 | 8,147 |
| Average grade of gold(4) | 2.38 | 2.23 |
| Contained ounces milled | 56,470 | 52,536 |
| Average recovery rate | 90% | 91% |
(1) Cost of sales includes mining and processing costs, royalties and amortization.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
(4) Grams per tonne of gold ("g/t Au").
Young-Davidson produced 51,900 ounces of gold in the first quarter of 2022, an 8% increase from the prior year period reflecting higher tonnes and grades mined and processed.
Underground mining rates continued to perform extremely well, averaging 8,181 tpd in the quarter, leading to the third consecutive quarter in which mining rates have exceeded the targeted rate of 8,000 tpd. Grades mined averaged 2.37 g/t Au, slightly above annual guidance of between 2.15 and 2.35 g/t Au. Grades mined are expected to be consistent with annual guidance through the remainder of the year.
Mill throughput averaged 8,197 tpd in the first quarter at an average grade of 2.38 g/t Au, consistent with tonnes and grades mined. Mill recoveries averaged 90% in the quarter, in line with guidance and the prior year period.
Financial Review
First quarter revenues of $96.8 million were 12% higher than the prior year period driven by more ounces sold and a higher realized gold price.
Cost of sales (which includes mining and processing costs, royalties, and amortization expense) of $64.6 million in the first quarter were higher than the prior year period, due to increased underground mining rates, partially offset by lower unit mining costs. Underground unit mining costs were CAD $46 per tonne in the quarter, an improvement from the prior year driven by economies of scale from higher mining rates.
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Total cash costs of $840 per ounce in the first quarter were 4% lower than the prior year period driven by higher grades processed and lower mining costs per tonne. Mine-site AISC of $1,044 per ounce in the first quarter were 3% lower than the prior year period, consistent with the lower total cash costs.
Capital expenditures in the quarter included $10.4 million of sustaining capital and $11.3 million of growth capital, including $8.2 million of payments related to growth capital projects from 2021. In addition, $1.0 million was invested in capitalized exploration in the quarter.
Young-Davidson has consistently met or exceeded expectations since transitioning to the lower mine infrastructure in mid-2020, driving production higher, and achieving significant free cash flow growth. This included mine-site free cash flow of $23.2 million in the first quarter, net of a significant reduction in working capital.
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Island Gold Financial and Operational Review
| Three Months Ended March 31, | |
|---|---|
| 2022 | 2021 |
Gold production (ounces) 24,500 42,200 Gold sales (ounces) 23,368 39,882
Financial Review (in millions)
| Operating Revenues | $43.7 | $71.5 |
| Cost of sales(1) | $24.2 | $29.1 |
| Earnings from operations | $18.9 | $41.8 |
| Cash provided by operating activities | $27.4 | $55.5 |
| Capital expenditures (sustaining)(2) | $7.8 | $10.6 |
| Capital expenditures (growth)(2) (5) | $20.5 | $12.3 |
| Capital expenditures (capitalized exploration)(2) | $5.1 | $4.5 |
| Mine-site free cash flow(2) | ($6.0) | $101.4 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,036 | $801 |
| Total cash costs per ounce of gold sold(2) | $745 | $466 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,083 | $732 |
Underground Operations
| Tonnes of ore mined | 102,989 | 103,276 |
| Tonnes of ore mined per day ("tpd") | 1,144 | 1,148 |
| Average grade of gold(4) | 8.35 | 13.29 |
| Metres developed | 1,439 | 1,951 |
Mill Operations
| Tonnes of ore processed | 100,649 | 109,285 |
| Tonnes of ore processed per day | 1,118 | 1,214 |
| Average grade of gold(4) | 8.14 | 13.03 |
| Contained ounces milled | 26,327 | 45,784 |
| Average recovery rate | 96% | 96% |
(1) Cost of sales includes mining and processing costs, royalties, and amortization.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
(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").
(5) Includes capital advances of $1.4 million for the three months ended March 31, 2022 ($2.1 million for the three months ended March 31, 2021).
Island Gold produced 24,500 ounces in the first quarter of 2022, a decrease from the prior year period reflecting lower grades mined and processed, and lower mill throughput. Consistent with full year guidance, grades are expected to increase driving production higher through the remainder of the year.
Underground mining rates averaged 1,144 tpd in the first quarter, with grades averaging 8.35 g/t Au. Grades mined were lower than annual guidance due to planned mine sequencing and are expected to increase in the second quarter and through the remainder of the year, consistent with full year guidance.
Mill throughput averaged 1,118 tpd, 7% below annual guidance of 1,200 tpd and the prior year period, reflecting temporary ore handling challenges at surface due to freezing in the ore bins during January and February. Milling rates improved in March and are expected to average 1,200 tpd for the year. Mill recoveries averaged 96% in the quarter, consistent with annual guidance and the prior year period.
Financial Review
Island Gold generated revenues of $43.7 million in the first quarter, a 39% decrease compared to the prior year period, reflecting 41% less ounces sold, partially offset by higher realized gold prices.
Cost of sales (includes mining and processing costs, royalties and amortization expense) of $24.2 million in the first quarter were 17% lower than the prior year period, reflecting lower tonnes processed and lower amortization charges.
11 | Alamos Gold Inc
Amortization expense on a per ounce basis has decreased compared to the prior year given the increase in Mineral Reserve and Resource inventory at Island Gold.
Total cash costs of $745 per ounce in the first quarter were significantly higher than the prior year period, due to lower grades processed, and higher mining costs. Mine-site AISC of $1,083 per ounce in the first quarter were 48% higher than in the prior year reflecting higher total cash costs, and the impact of lower sales on sustaining capital spending. Both total cash costs and mine-site AISC are expected to decrease through the rest of the year reflecting higher grades mined.
Total capital expenditures were $33.4 million in the first quarter, including $5.1 million of capitalized exploration. Spending was focused on lateral development, engineering and early procurement for the Phase III expansion project, and surface infrastructure. Capital spending is expected to increase starting in the second quarter reflecting the ramp up of construction activities following the approval of the Closure Plan Amendment in March.
Island Gold generated negative mine-site free cash flow of $6.0 million in the first quarter, inclusive of all capital spending on the Phase III expansion and exploration. At current gold prices, Island Gold is expected to largely self finance the Phase III expansion capital spending in 2022.
12 | Alamos Gold Inc