Alamos Reports Second Quarter 2018 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 Reports Second Quarter 2018 Results
Toronto, Ontario (August 1, 2018) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the second quarter ended June 30, 2018 and reviewed its operating, exploration and development activities.
“With near record production in the second quarter, we came in slightly ahead of expectations and remain well positioned to achieve full year guidance. This reflected another strong outperformance from Mulatos and Island Gold, with production guidance for both mines increased for the second consecutive quarter,” said John A. McCluskey, President and Chief Executive Officer.
“We’re also making excellent progress on the exploration and development fronts. At Island Gold, the mill expansion is nearing completion and ongoing exploration success continues to demonstrate further resource growth. We also achieved a major breakthrough at Kirazlı, securing the GSM permit allowing for the start of full scale construction. With a strong cash position, no debt, and growing cash flow from operations, we are well positioned to fund this growth and continue to deliver shareholder value.”
Second Quarter 2018 Highlights
- Produced 126,500 ounces of gold, ahead of guidance of 125,000 ounces and 19% higher than the second quarter of 2017
- Increased production guidance at Island Gold for the second time this year to a range of between 100,000 to 110,000 ounces, an 11% increase from original guidance (based on the mid-point of guidance)
- Increased production guidance at Mulatos for the second time this year to a range of between 170,000 to 180,000 ounces, a 13% increase from original guidance (based on the mid-point of guidance)
- Maintained 2018 Company-wide production guidance of 490,000 to 530,000 ounces of gold, with increased guidance at both Mulatos and Island Gold offset by decreased guidance at Young-Davidson. Companywide all-in sustaining cost guidance for the year has been maintained at $950 per ounce with lower costs anticipated in the second half of 2018
- Sold 129,272 ounces of gold at an average realized price of $1,307 per ounce for revenues of $168.9 million. Cost of sales of $1,160 per ounce, total cash costs1 of $832 per ounce and all-in sustaining costs ("AISC")1 of $996 per ounce were all higher than full year guidance as a result of lower production from Young-Davidson in the quarter
- Reported adjusted net earnings1 of $4.9 million or $0.01 per share1, reflecting adjustments for unrealized foreign exchange losses recorded within both deferred taxes and foreign exchange of $15.3 million, as well as other one-time items
Realized a net loss of $8.9 million, or $0.02 per share
- Generated cash flow from operating activities of $62.5 million ($54.7 million or $0.14 per share, before changes in working capital1), reflecting strong quarterly gold production. In addition, the Company generated $22.4 million in mine-site free cash flow1, and $9.1 million of company-wide free-cash flow1 in the quarter, both ahead of budget
- Increased cash and cash equivalents to $235.1 million up from $231.8 million as of March 31, 2018. The Company remains debt free
- Paid a semi-annual dividend of $0.01 per share, or $3.9 million, to shareholders on April 30, 2018
- As outlined in May, recent exploration results at Island Gold continue to exceed expectations with a significant increase in Mineral Resources anticipated. The Company will be providing an interim Mineral Reserve and Resource update for Island Gold in the third quarter
- Subsequent to quarter-end, announced the receipt of the GSM (Business Opening and Operation) permit and commencement of full construction activities at the Kirazlı project in Turkey
(1) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release for a description and calculation of these measures.
Highlight Summary
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 |
Financial Results (in millions)
| Operating revenues | $168.9 | $131.3 | $342.0 | $252.3 |
| Cost of sales(1) | $150.0 | $109.5 | $294.7 | $219.6 |
| Earnings from operations | $9.6 | $15.8 | $28.1 | $18.0 |
| Net (loss) earnings | ($8.9) | $2.4 | ($8.3) | $2.5 |
| Adjusted net earnings(2) | $4.9 | $9.8 | $17.2 | $4.7 |
Cash provided by operations before working capital and $54.7 $45.1 $117.3 $79.3 cash taxes(2)
| Cash provided by operating activities | $62.5 | $51.4 | $121.3 | $71.5 |
| Capital expenditures (sustaining)(2) | $12.1 | $11.1 | $22.8 | $20.4 |
| Capital expenditures (growth)(2) | $35.7 | $38.2 | $72.3 | $60.1 |
| Capital expenditures (capitalized exploration)(3) | $5.6 | $2.2 | $9.8 | $4.6 |
Operating Results
Gold production (ounces) (4) 126,500 105,900 255,400 202,100 Gold sales (ounces) 129,272 104,023 259,317 202,778
Per Ounce Data
Average realized gold price $1,307 $1,262 $1,319 $1,244 Average spot gold price (London PM Fix) $1,306 $1,257 $1,318 $1,238 Cost of sales per ounce of gold sold $1,160 $1,053 $1,136 $1,083 (includes amortization) (1)
Total cash costs per ounce of gold sold (2) $832 $784 $811 $805 All-in sustaining costs per ounce of gold sold (2) $996 $942 $966 $977
Share Data
Earnings per share, basic ($0.02) $0.01 ($0.02) $0.01 Adjusted earnings per share, basic (2) $0.01 $0.03 $0.04 $0.02 Weighted average common shares outstanding (basic)
389,602 299,189 389,429 292,008 (000’s)
Financial Position (in millions)
Cash and cash equivalents (5) $235.1 $200.8
(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 capitalized exploration and Mulatos and Island Gold.
(4) Gold production from Island Gold has been included in this table for the period subsequent to November 23, 2017 only. Gold production from Island Gold for the three and six months ended June 30, 2017 was 26,110 and 49,882 ounces respectively.
(5) Comparative Cash and cash equivalents balance as at December 31, 2017.
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| Three Months Ended June 30, | |||
|---|---|---|---|
| Three Months Ended June 30, | Six Months Ended June 30, | ||
| 2018 | 2017(1) | 2018 | 2017(1) |
Gold production (ounces)
Young-Davidson 39,100 47,300 80,100 87,700 Mulatos 50,600 41,000 96,600 81,000 Island Gold (1) 26,700 54,800
- —
El Chanate 10,100 17,600 23,900 33,400
Gold sales (ounces)
Young-Davidson 42,006 46,368 86,796 90,195 Mulatos 49,326 40,265 93,985 78,940 Island Gold (1) 27,257 54,760
- —
El Chanate 10,683 17,390 23,776 33,643
Cost of sales (in millions)(2)
Young-Davidson $56.7 $51.6 $113.7 $101.9 Mulatos $49.2 $36.3 $92.8 $76.3 Island Gold (1) $28.0 $55.5
- —
El Chanate $16.1 $21.6 $32.7 $41.4
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,350 $1,113 $1,310 $1,130 Mulatos $997 $902 $987 $967 Island Gold (1) $1,027 $1,014
- —
El Chanate $1,507 $1,242 $1,375 $1,231
Total cash costs per ounce of gold sold (3)
Young-Davidson $890 $677 $856 $693 Mulatos $795 $735 $791 $780 Island Gold (1) $587 $570
- —
El Chanate $1,404 $1,185 $1,279 $1,165
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
| Young-Davidson | $1,083 | $895 | $1,037 | $874 |
| Mulatos | $854 | $777 | $848 | $847 |
| Island Gold(1) | $668 | — | $650 | — |
| El Chanate | $1,442 | $1,208 | $1,304 | $1,198 |
Capital expenditures (sustaining, growth and capitalized exploration) (in millions)(3)
Young-Davidson $18.5 $22.7 $41.4 $41.3 Mulatos(5) $9.5 $14.6 $16.7 $26.0
| Island Gold(1),(6) | $17.6 | $31.5 | ||
| El Chanate | $0.2 | $0.3 | $0.3 | $0.9 |
| Other | $7.6 | $13.9 | $15.0 | $16.9 |
- —
(1) Operating and financial results from Island Gold are included in Alamos’ consolidated financial statements for the period subsequent to November 23, 2017. Gold production from Island Gold for the three and six months ended June 30, 2017 was 26,110 and 49,882 ounces respectively.
(2) Cost of sales includes mining and processing costs, royalties and amortization.
(3) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
(4) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
(5) Includes capitalized exploration at Mulatos of $0.9 million and $2.0 million for the three and six months ended June 30, 2018 ($2.2 million and $4.6 million for the three and six months ended June 30, 2017).
(6) Includes capitalized exploration at Island Gold of $4.7 million and $7.8 million for the three and six months ended June 30, 2018.
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Outlook and Strategy
| 2018 Guidance | Total | |||||||
| Young- | Mulatos | Island | El | Turkey (5) | Original | |||
| Davidson | Gold | Chanate | Other (2) | Revised | ||||
| Gold production (000’s ounces) | ||||||||
| Revised Guidance | 180-190 | 170-180 | 100-110 | 40-50 | — | — | 490-530 | |
| Original Guidance 200-210 150-160 90-100 40-50 — — 480-520 | ||||||||
| Cost of sales, including $208 $175 $108 $58 — — $536 amortization (in millions)(4),(6) | ||||||||
| $549 | ||||||||
| Cost of sales, including $1,125 $1,000 $1,025 $1,285 — — $1,075 amortization ($ per ounce)(4),(6) | ||||||||
| $1,075 | ||||||||
| Total cash costs ($ per ounce)(1),(6) $675 $800 $575 $1,200 — — $740 | $740 | |||||||
| All-in sustaining costs — — $950 ($ per ounce)(1),(6) | ||||||||
| $950 | ||||||||
| Mine-site all-in sustaining costs $850 $900 $825 $1,200 — — — ($ per ounce)(1),(3),(6) | ||||||||
| — | ||||||||
| Amortization costs $450 $200 $450 $85 — — $335 ($ per ounce)(1) | ||||||||
| $335 | ||||||||
| Capital expenditures (in millions) | ||||||||
| Sustaining capital(1) $35-40 $8-10 $25-27 — — — $68-77 | $68-77 | |||||||
| Growth capital(1) $35-40 $18-20 $25-28 — $50-60 $46 (2) $224-234 | $174-194 | |||||||
| Total capital expenditures(1) $70-80 $26-30 $50-55 — $50-60 $46 $292-$311 | $242-$271 |
(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 capitalized exploration at all operating sites and development projects.
(3) For the purposes of calculating mine-site all-in sustaining costs at individual mine sites, the Company does not include an allocation of corporate and administrative and share based compensation expenses to the mine sites.
(4) Cost of sales includes mining and processing costs, royalties, and amortization expense, and is calculated based on the mid-point of guidance.
(5) Capital guidance at Kirazlı reduced to $50-60 million from the original budget of $100 million.
(6) Company-wide total cash costs, and all-in sustaining costs guidance remains unchanged. The Company has not revised guidance for total cash costs, and minesite all-in sustaining costs at individual mine sites.
The Company continues to deliver on its strategic objectives of increasing cash flow from operations while advancing its portfolio of low-cost development projects. Gold production in the second quarter of 126,500 ounces exceeded guidance and increased 19% from the second quarter of 2017. Given the strong performance in the first half of the year, the Company is well positioned to achieve its previously increased full year production guidance of 490,000 to 530,000 ounces.
Company-wide production guidance has been maintained, with increased production guidance at both Island Gold and Mulatos offsetting a reduction at Young-Davidson. Global all-in sustaining cost guidance of $950 per ounce has been maintained with lower than guided costs at Island Gold and Mulatos expected to offset higher costs at Young- Davidson for the full year. Costs are expected to trend lower in the second half of 2018.
Gold production in the third quarter is expected to range between 120,000 and 125,000 ounces at lower all-in sustaining costs than in the second quarter. Fourth quarter gold production is expected to increase reflecting the completion of the mill expansion at Island Gold and higher production at Young-Davidson.
Young-Davidson produced 39,100 ounces in the second quarter. This result was below expectations reflecting eight days of downtime of the Northgate hoist and eleven days of downtime in the mill. As a result of the unplanned downtime for maintenance of both the Northgate hoist and the mill, as well as lower than budgeted throughput in the first half of the year, the Company is revising production guidance for Young-Davidson to a range of between 180,000 and 190,000 ounces. With the maintenance completed in late June, both the Northgate hoist and mill were fully operational in early July which is expected to drive stronger underground mining and milling rates in the second half of 2018. This, combined with higher underground grades, is expected to drive stronger production and lower costs in the second half of 2018.
Island Gold exceeded budget again in the second quarter, producing 26,700 ounces and bringing first half production to 54,800 ounces. Given the outperformance in both the first and second quarters, the Company is raising 2018 production guidance at Island Gold for the second time this year to a range of between 100,000 and 110,000 ounces, an 11% increase from original guidance (based on the mid-point). The Phase I expansion of the Island Gold mill to 1,100 tpd remains on track and is expected to be completed in September. This is anticipated to drive stronger
4 | Alamos Gold Inc
production and lower costs in 2019 and beyond. Accordingly, the Company expects significant free cash flow growth in 2019.
In parallel to the Phase I mill expansion, the Company is pursuing an aggressive exploration program at Island Gold which has been successful in driving nearly a 400% increase in Mineral Reserves and a 60% increase in the Mineral Reserve grade since 2014. As reported in May, the 2018 exploration program has continued to extend high-grade gold mineralization along-strike and down-plunge from existing Mineral Reserves and Resources across three main areas of focus.
Exploration results at Island Gold continue to exceed expectations with a significant increase in Mineral Resources anticipated. The Company will be providing an interim Mineral Reserve and Resource update for Island Gold in the third quarter. Ongoing exploration success will be incorporated into an evaluation of the most effective and economic approach to a Phase II expansion of the operation beyond 1,100 tpd.
Total production from the Mulatos district (including La Yaqui Phase I) increased to 50,600 ounces in the second quarter, again exceeding budget and bringing first half production to 96,600 ounces. As a result of continued strong performance from the heap leach pad and extended production from underground at San Carlos, Mulatos is now expected to produce between 170,000 to 180,000 ounces in 2018, a 13% increase from the mid-point of original guidance. With mill production winding down in the third quarter of 2018, the Company expects 2019 production to return to the previously guided range of 150,000 to 160,000 ounces per year, reflecting the end of production from San Carlos.
El Chanate produced 10,100 ounces in the second quarter and is expected to produce 40,000 to 50,000 ounces for the full year. This is down from 2017 reflecting lower mining rates with mining activities expected to cease early in the fourth quarter. Given the long leach cycle at El Chanate, the Company expects to benefit from ongoing gold production beyond 2018 through residual leaching. This will be lower cost and higher margin production, with mining activities completed, and is expected to drive higher mine-site free cash flow from the operation.
The Company expects combined annual gold production of at least 500,000 ounces from its existing operations in 2019 and 2020 with low cost production growth from Island Gold replacing production from El Chanate. Consolidated all-in sustaining costs are expected to decrease in 2019 reflecting the completion of the Phase I expansion at Island Gold and the end of the 5% royalty at Mulatos, with a further decline expected in 2020 reflecting higher underground mining rates at Young-Davidson. Increased production combined with declining operating costs is expected to result in strong free cash flow growth over the next three years.
On July 25, 2018, the Company was granted the GSM (Business Opening and Operation) permit required for the construction of its Kirazlı project. To date, construction has been focused on the surrounding infrastructure projects; however, with receipt of the GSM, full-scale construction activities will commence over the next two months. The Company has estimated spending for the remainder of the year of between $40 to $50 million, bringing total 2018 capital spending to between $50 and $60 million. The remainder of the $152 million initial capital budget for Kirazlı is expected to be spent in 2019 and the first half of 2020, with first production expected in the second half of 2020. In addition to capital spending in Turkey, a total of $46 million is budgeted for development at Cerro Pelon, La Yaqui Grande and Lynn Lake as well as capitalized exploration at all sites. The total exploration budget of $36 million is primarily focused on following up on the ongoing success at Island Gold.
The Company is well positioned to fund this growth having significantly de-risked its balance sheet in 2017. The Company is debt free with growing cash flow from its operations and over $640 million of cash and available liquidity under the Company's credit facility.
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Second Quarter 2018 Results
Young-Davidson Operational and Financial Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 |
Gold production (ounces) 39,100 47,300 80,100 87,700 Gold sales (ounces) 42,006 46,368 86,796 90,195
Financial Review (in millions)
| Operating Revenues | $55.1 | $58.5 | $114.6 | $112.1 |
| Cost of sales(1) | $56.7 | $51.6 | $113.7 | $101.9 |
| (Loss) earnings from operations | ($1.6 ) | $6.9 | $0.9 | $10.2 |
| Cash provided by operating activities | $22.5 | $27.3 | $49.9 | $45.8 |
| Capital expenditures (sustaining)(2) | $7.9 | $9.9 | $15.5 | $16.0 |
| Capital expenditures (growth)(2) | $10.6 | $12.8 | $25.9 | $25.3 |
| Mine-site free cash flow(2) | $4.0 | $4.6 | $8.5 | $4.5 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,350 | $1,113 | $1,310 | $1,130 |
| Total cash costs per ounce of gold sold(2) | $890 | $677 | $856 | $693 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,083 | $895 | $1,037 | $874 |
Underground Operations
| Tonnes of ore mined | 553,883 | 580,351 | 1,138,943 | 1,156,370 |
| Tonnes of ore mined per day ("tpd") | 6,087 | 6,377 | 6,293 | 6,389 |
| Average grade of gold(4) | 2.35 | 2.60 | 2.36 | 2.58 |
| Metres developed | 3,079 | 3,425 | 6,223 | 6,667 |
Mill Operations
| Tonnes of ore processed | 598,196 | 629,470 | 1,267,483 | 1,324,094 |
| Tonnes of ore processed per day | 6,574 | 6,917 | 7,003 | 7,315 |
| Average grade of gold(4) | 2.17 | 2.45 | 2.20 | 2.31 |
| Contained ounces milled | 41,798 | 49,619 | 87,992 | 98,393 |
| Average recovery rate | 92 % | 92% | 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. Total cash costs and mine-site AISC are exclusive of net-realizable value adjustments.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
(4) Grams per tonne of gold ("g/t Au").
Young-Davidson produced 39,100 ounces of gold in the second quarter of 2018, lower than the comparative quarter of 2017 due to unscheduled downtime of both the Northgate hoist and the mill, and lower grades mined.
During the quarter, the underground operations were impacted by an eight day shutdown of the Northgate hoist. The Company had previously scheduled a four day shutdown to change the head ropes on the Northgate hoist in July; however, this was moved to June to correspond with an unplanned shutdown required to replace a bearing on the hoist drum which failed prematurely. During the shutdown, the Company was unable to hoist ore for a period of eight days, which impacted throughput and production levels for the quarter. The maintenance was completed at the end of June and mining operations are expected to return to budgeted levels in the third quarter.
Underground grades mined of 2.35 g/t Au for the second quarter were in-line with the first quarter, but lower than the prior year quarter primarily as a result of mine sequencing. As previously guided, the Company is expecting stronger production in the second half of the year with grades and underground mining rates expected to increase through the remainder of the year.
During the second quarter, 598,196 tonnes or 6,574 tpd, were processed through the mill with grades averaging 2.17 g/t Au. Tonnes milled were lower than budget as a result of the eleven-day shutdown of the mill to replace liners and for repairs to the soleplate anchor bolts. The liner change was planned for July, but was moved up to coincide with the other maintenance required to the mill, and to correspond with the timing of the Northgate hoist downtime. During this period, the Company built up underground stockpiles of approximately 40,000 tonnes, which will be processed during the second half of 2018.
Mill recoveries of 92% were in line with expectations and the prior year period.
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As a result of unplanned the downtime in the second quarter and lower than budgeted throughput in the first half of the year, the Company is amending production guidance at Young-Davidson to between 180,000 and 190,000 ounces. The Company expects stronger throughput and production in the second half of the year.
Financial Review
For the quarter ended June 30, 2018, revenues of $55.1 million were $3.4 million lower than the comparative quarter of 2017, due to less ounces sold, partially offset by a higher realized gold price. For the first half of 2018, revenues of $114.6 million were $2.5 million higher than the prior year, attributable to a higher realized gold price, offset by lower ounces sold.
Cost of sales, which reflects mining and processing costs, royalties, and amortization expense, of $56.7 million were higher than the comparative quarter due to higher mining and processing costs. Cost of sales for the first half of 2018 were $113.7 million, an increase of $11.8 million due to higher mining and processing costs and amortization. Total cash costs in the second quarter were $890 per ounce, an increase of 31% from the second quarter of 2017 due to lower grades processed and a higher mining cost per tonne, reflecting the impact of lower throughput on fixed costs. Total cash costs of $856 per ounce for the six-month period were 24% higher than the prior year period. Second quarter mine-site AISC were $1,083 per ounce, 21% higher than the prior year quarter reflecting higher total cash costs, partially offset by lower sustaining capital. Mine-site AISC for the six-month period were $1,037 or 19% higher than the prior year period due to similar factors.
Capital expenditures were in-line with budget at $18.5 million in the second quarter, including $7.9 million for sustaining capital and $10.6 million for growth capital. Total capital expenditures were 19% lower than the same quarter of 2017. Capital spending for the second quarter was focused primarily on lateral development in the upper and lower mines, and lower mine infrastructure. For the six-month period, capital expenditures of $41.4 million were consistent with the prior year period.
Young-Davidson generated mine-site free cash flow of $4.0 million in the second quarter, consistent with the prior year quarter and the first quarter of 2018, as lower capital expenditures were offset by lower operating cash flows. Year-to-date free cash flow of $8.5 million was higher than the prior year, primarily reflecting a higher gold price. The Company expects mine-site free cash flow to grow in subsequent quarters driven by stronger production and operating margins.
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Island Gold Operational and Financial Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2018 | 2017 (1) | 2018 | 2017 (1) |
Gold production (ounces) (1) 26,700 — 54,800 — Gold sales (ounces) (1) 27,257 — 54,760 —
| Operating Revenues | $35.7 | $— | $72.3 | $— |
| Cost of sales(2) | $28.0 | $— | $55.5 | $— |
| Earnings from operations | $7.7 | $— | $16.7 | $— |
| Cash provided by operating activities | $22.0 | $— | $45.7 | $— |
| Capital expenditures (sustaining)(3) | $2.2 | $— | $4.4 | $— |
| Capital expenditures (growth)(3) | $10.7 | $— | $19.3 | $— |
| Capital expenditures (capitalized exploration)(3) | $4.7 | $— | $7.8 | $— |
| Mine-site free cash flow(3) | $4.4 | $— | $14.2 | $— |
| Cost of sales, including amortization per ounce of gold sold(2) | $1,027 | $— | $1,014 | $— |
| Total cash costs per ounce of gold sold(3) | $587 | $— | $570 | $— |
| Mine-site all-in sustaining costs per ounce of gold sold(3),(4) | $668 | $— | $650 | $— |
Underground Operations
| Tonnes of ore mined | 82,097 | 104,439 | 166,752 | 196,149 |
| Tonnes of ore mined per day ("tpd") | 902 | 1,148 | 921 | 1,084 |
| Average grade of gold(5) | 7.34 | 10.28 | 9.23 | 9.51 |
| Metres developed | 1,771 | 1,773 | 3,327 | 3,856 |
Mill Operations
| Tonnes of ore processed | 88,776 | 85,578 | 170,881 | 168,943 |
| Tonnes of ore processed per day | 976 | 940 | 944 | 933 |
| Average grade of gold(5) | 8.71 | 9.73 | 9.84 | 9.46 |
| Contained ounces milled | 24,861 | 26,760 | 54,085 | 51,354 |
| Average recovery rate | 97 % | 98% | 96% | 97% |
(1) Financial results from Island Gold are included in Alamos’ consolidated financial statements for the period subsequent to November 23, 2017. Gold production from Island Gold for the three and six months ended June 30, 2017 was 26,110 and 49,882 ounces.
(2) Cost of sales includes mining and processing costs, royalties and amortization.
(3) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures. Total cash costs and mine-site AISC are exclusive of net-realizable value adjustments.
(4) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
(5) Grams per tonne of gold ("g/t Au").
Second quarter gold production of 26,700 ounces was above budget, and consistent with the prior year quarter. With year-to-date production of 54,800 ounces well ahead of budget, the Company is increasing Island Gold's 2018 production guidance for the second time this year to a range of 100,000 to 110,000 ounces, an 11% increase from original guidance.
The Company mined 82,097 tonnes of ore from underground in the second quarter of 2018, or 902 tpd, lower than the prior year quarter, though consistent with the first quarter of 2018. Underground mining rates are expected to ramp up in the latter part of 2018 concurrent with the completion of the mill expansion to 1,100 tpd. As guided, underground grades mined of 7.34 g/t Au in the second quarter were lower than the first quarter due to mine sequencing.
Mill throughput for the second quarter was 88,776 tonnes, or 976 tpd, an increase from 940 tpd in the prior year quarter. Milled grades averaged 8.71 g/t Au, consistent with full year guidance of 8.3 to 8.9 g/t Au. Milled grades were higher than grades mined with existing high-grade stockpiles supplementing mill feed. Mill throughput is expected to remain in a similar range in the third quarter and ramp up during the fourth quarter following the completion of the mill expansion to 1,100 tpd in September.
Financial Review With the Company acquiring Island Gold on November 23, 2017, financial information prior to the acquisition date has not been included in the comparative table above.
Island Gold generated revenues of $35.7 million in the second quarter, lower than the first quarter of 2018, reflecting lower realized gold prices. Revenues for the six-month period were $72.3 million on sales of 54,760 ounces of gold.
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Cost of sales in the second quarter and year-to-date were $28.0 million and $55.5 million, respectively. Cost of sales includes ongoing amortization charges related to the purchase price of the asset, which increases amortization to approximately $450 per ounce based on current mineral reserves and resources.
Total cash costs of $587 per ounce were in-line with full-year guidance of $575 per ounce, however, higher than the prior quarter, reflecting lower grades mined. In addition, mine-site AISC of $668 per ounce were well below guidance of $825 driven primarily by timing of sustaining capital spending. Mine-site AISC are expected to be higher for the remainder of 2018 as sustaining capital increases in the second half of the year.
Capital expenditures totaled $17.6 million in the second quarter, with spending focused primarily on capitalized exploration, lateral development, mining equipment and the mill expansion. Total capital expenditures in the second quarter included $2.2 million of sustaining capital and $15.4 million of growth capital. Year-to-date capital expenditures totaled $31.5 million.
Island Gold generated mine-site free cash flow of $4.4 million during the second quarter and $14.2 million for the sixmonth period driven by stronger than budgeted production and operating margins. The Company expects Island Gold to generate sufficient cash flow to fully fund its enhanced exploration program and the mill expansion to 1,100 tpd.
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Mulatos Operational and Financial Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 |
Gold production (ounces) 50,600 41,000 96,600 81,000 Gold sales (ounces) 49,326 40,265 93,985 78,940
| Operating Revenues | $64.1 | $50.9 | $123.7 | $98.5 |
| Cost of sales(1) | $49.2 | $36.3 | $92.8 | $76.3 |
| Earnings from operations | $13.2 | $12.9 | $25.9 | $19.6 |
| Cash provided by operating activities | $24.1 | $19.8 | $40.2 | $28.9 |
| Capital expenditures (sustaining)(2) | $1.8 | $0.9 | $2.6 | $3.5 |
| Capital expenditures (growth)(2) | $6.8 | $6.0 | $12.1 | $7.1 |
| Capital expenditures (capitalized exploration)(2) | $0.9 | $2.2 | $2.0 | $4.6 |
| La Yaqui Phase I construction cost(2) | $— | $5.5 | $— | $10.8 |
Mine-site free cash flow, excluding La Yaqui construction $14.6 $10.7 $23.5 $13.7 costs (2)
| Cost of sales, including amortization per ounce of gold sold(1) | $997 | $902 | $987 | $967 |
| Total cash costs per ounce of gold sold(2) | $795 | $735 | $791 | $780 |
| Mine site all-in sustaining costs per ounce of gold sold(2),(3) | $854 | $777 | $848 | $847 |
Open Pit & Underground Operations
| Tonnes of ore mined - open pit(4) | 2,266,642 | 1,759,168 | 4,456,376 | 3,569,810 |
| Total waste mined - open pit | 1,851,050 | 1,372,143 | 3,849,656 | 3,262,887 |
| Total tonnes mined - open pit | 4,640,240 | 3,131,311 | 9,510,622 | 6,832,697 |
| Waste-to-ore ratio (operating) | 0.82 | 0.78 | 0.86 | 0.91 |
| Tonnes of ore mined - underground | 21,284 | 29,414 | 38,907 | 57,769 |
Crushing and Heap Leach Operations
| Tonnes of ore stacked | 1,802,109 | 1,649,330 | 3,552,580 | 3,302,314 |
| Average grade of gold processed(5) | 0.88 | 0.97 | 0.86 | 0.91 |
| Contained ounces stacked | 50,909 | 51,564 | 98,267 | 96,290 |
Mill Operations
| Tonnes of high grade ore milled | 31,485 | 35,346 | 61,874 | 71,110 |
| Average grade of gold processed(5) | 5.94 | 10.56 | 7.00 | 9.71 |
| Contained ounces milled | 6,012 | 11,998 | 13,929 | 22,202 |
| Total contained ounces stacked and milled | 56,921 | 63,562 | 112,196 | 118,492 |
Recovery ratio (ratio of ounces produced to contained ounces 89 % 65% 86% 68% stacked and milled)
Ore crushed per day (tonnes) - combined 20,100 18,300 20,000 18,500
(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. Total cash costs and mine-site AISC are exclusive of net-realizable value adjustments.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
(4) Includes ore stockpiled during the quarter.
(5) Grams per tonne of gold ("g/t Au").
Mulatos reported another strong performance with gold production of 50,600 ounces in the second quarter, well above budget and higher than both the first quarter and prior year quarter. The stronger than expected production was driven by higher heap leach recoveries as well as continued mill production from San Carlos.
Given the strong first half performance, with production of 96,600 ounces, the Company is increasing full year production guidance at Mulatos for the second time this year to a range of 170,000 to 180,000 ounces, a 13% increase from the original 2018 guidance.
Total crusher throughput averaged a record 20,100 tpd, reflecting the addition of La Yaqui Phase I. A total of 1,802,109 tonnes were stacked in the second quarter at a grade of 0.88 g/t Au, consistent with annual guidance. The waste-toore ratio of 0.82:1 was consistent with the prior year quarter and in line with guidance.
In the second quarter, 31,485 tonnes of ore from the San Carlos underground mine were milled at an average grade of 5.94 g/t Au. This was not included in the original budget as mill production was expected to have been completed
10 | Alamos Gold Inc
by the end of the first quarter. Based on revised estimates, San Carlos is now expected to be completed in the third quarter with mill throughput expected to be slightly lower than the second quarter as mining activities wind down. The recovery ratio of ounces produced to contained ounces stacked and milled was 89% in the quarter compared to 65% in the prior year period and guidance of 75%. The higher recoveries are the result of the recovery of deferred ounces from the leach pad, and stronger than budgeted recoveries at La Yaqui Phase I.
Financial Review
For the three months ended June 30, 2018, revenues of $64.1 million were 26% higher than the prior year quarter, reflecting a 23% increase in ounces sold and higher realized gold prices. Revenues for the six-month period were $123.7 million, 26% higher than the prior year period due to higher ounces sold and realized gold prices.
Cost of sales of $49.2 million in the second quarter and $92.8 million for the six-month period, were higher than the prior year periods reflecting higher total tonnes moved and increased amortization related to La Yaqui Phase I. Further, heap leach costs were impacted by higher processing costs due to a greater area under leach as compared to the prior year quarter. Cost of sales reflects mining and processing costs, royalties, and amortization expense. Total cash costs of $795 per ounce in the second quarter were 8% higher than $735 per ounce in the prior year quarter, with the prior year benefiting from higher open pit and underground grades mined. Total cash costs for the six-month period of $791 per ounce were slightly higher than $780 per ounce reported in the prior year period. Minesite AISC in the quarter were $854 per ounce, 10% higher than the prior year quarter reflecting higher total cash costs and higher sustaining capital. Mine-site AISC for the six-month period of $848 per ounce were consistent with the prior year period as higher cash costs were offset by lower sustaining capital per ounce.
Mulatos generated mine-site free cash flow of $14.6 million for the quarter and $23.5 million for the six-month period, both well ahead of budget, driven by substantial production and sales growth combined with higher gold prices. Mulatos is expected to generate strong cash flow in 2018, which will be used to advance the La Yaqui Grande and Cerro Pelon deposits through permitting, as well as funding ongoing exploration activities.
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El Chanate Operational and Financial Review
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 |
Gold production (ounces) 10,100 17,600 23,900 33,400 Gold sales (ounces) 10,683 17,390 23,776 33,643
| Operating Revenues | $14.0 | $21.9 | $31.4 | $41.7 |
| Cost of sales(1) | $16.1 | $21.6 | $32.7 | $41.4 |
| Earnings from operations | ($2.1 ) | $0.3 | ($1.3) | $0.3 |
| Cash provided by (used by) operating activities | ($0.4 ) | $3.2 | $0.8 | $2.2 |
| Capital expenditures | $0.2 | $0.3 | $0.3 | $0.9 |
| Mine-site free cash flow(2) | ($0.6 ) | $2.9 | $0.5 | $1.3 |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,507 | $1,242 | $1,375 | $1,231 |
| Total cash costs per ounce of gold sold(2) | $1,404 | $1,185 | $1,279 | $1,165 |
| Mine site all-in sustaining costs per ounce of gold sold(2),(3) | $1,442 | $1,208 | $1,304 | $1,198 |
Open Pit Operations
| Tonnes of ore mined | 245,706 | 1,048,435 | 1,252,077 | 1,954,350 | ||||
| Total tonnes mined | 2,298,354 | 5,739,576 | 5,263,634 | 13,298,901 | ||||
| Waste-to-ore ratio (operating) | 8.35 | 4.47 | 3.20 | 5.80 | ||||
| Average grade of gold(4) | 0.54 | 0.41 | 0.58 | 0.47 |
Crushing and Heap Leach Operations
| Total tonnes of ore stacked | 250,742 | 1,091,089 | 1,259,920 | 2,010,333 |
| Average grade of gold(4) | 0.53 | 0.49 | 0.58 | 0.51 |
| Total contained ounces stacked | 4,273 | 17,189 | 23,494 | 32,963 |
Ore crushed and run-of-mine ore stacked per day (tonnes) - 2,800 12,000 7,000 11,100 combined
(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. Total cash costs and mine-site AISC are exclusive of net-realizable value adjustments.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
(4) Grams per tonne of gold ("g/t Au").
El Chanate produced 10,100 ounces of gold in the second quarter of 2018, down from 17,600 ounces in the prior year quarter, reflecting lower stacking rates in the first half of the year while completing the final push back of the pit. Mining rates were slightly lower than budget in the first half of the year, and as a result, mining activities are now expected to cease early in the fourth quarter. The Company expects to benefit from ongoing gold production at decreasing rates into the fourth quarter of 2018 and beyond through residual leaching which is expected to drive higher mine-site free cash flow.
Financial Review
Second quarter revenues of $14.0 million were lower than the comparative quarter of 2017 due to fewer ounces sold. Revenues for the six-month period were $31.4 million compared to $41.7 million in the prior year period, reflecting lower production as mining activities wind down.
Total cash costs per ounce of $1,404 for the second quarter and $1,279 for the six-month period were higher than the respective prior year periods, reflecting lower ounces stacked in the quarter while completing the final push back. Mine-site all-in sustaining costs per ounce were $1,442 for the quarter and $1,304 for the six-month period, higher than the respective prior year periods.
Mine-site free cash flow was slightly negative at $0.6 million in the quarter and positive $0.5 million year-to-date. El Chanate is expected to realize higher cash flows from residual leaching starting in the fourth quarter of 2018. Given El Chanate's higher cost structure, the Company has hedged all of El Chanate’s remaining 2018 gold production through gold collar contracts, ensuring a minimum gold price of $1,289 and participation up to a price of $1,473 per ounce.
12 | Alamos Gold Inc