Alamos Gold Reports Fourth Quarter and Year-End 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 Fourth Quarter and Year-End 2021 Results
Toronto, Ontario (February 23, 2022) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter and year ended December 31, 2021.
“Our Canadian operations performed well in the fourth quarter driving a stronger finish to 2021 and meeting our revised full year production and cost guidance. Young-Davidson had a record year in terms of mining rates and free cash flow and Island Gold had another strong year operationally while advancing the Phase III expansion, offsetting the temporary challenges at Mulatos,” said John A. McCluskey, President and Chief Executive Officer.
“We look forward to delivering on our 2022 milestones, all of which support our longer-term objective of growing production at substantially lower costs. Our global reserves increased 4% over the past year driven by growth at all three mines, demonstrating increasing value within our operating base. La Yaqui Grande remains on track to achieve commercial production in the third quarter and will be key to driving near-term production higher and costs lower. The updated and optimized mine plan for Island Gold to be released mid-year, is expected to improve already impressive economics and highlight further low-cost growth. We are well positioned to fund these growth projects internally, which will in turn support growing returns to shareholders over the long term,” Mr. McCluskey added.
Fourth Quarter 2021
- Production of 112,500 ounces of gold, a 7% increase from the third quarter of 2021 with strong performances at Young-Davidson and Island Gold offsetting weaker production at Mulatos. Full year production was in-line with revised guidance
- Young-Davidson achieved record mining rates of 8,240 tonnes per day ("tpd"), driving production of 51,900 ounces of gold and mine-site free cash flow1 of $30.4 million
- Island Gold produced 37,500 ounces and generated mine-site free cash flow1 of $15.8 million
- Consolidated total cash costs1 of $843 per ounce, all-in sustaining costs ("AISC")1 of $1,237 per ounce and cost of sales of $1,225 per ounce, all increased from earlier in the year reflecting higher costs at Mulatos, as previously guided. Full year total cash costs and AISC were in-line with revised guidance
- La Yaqui Grande remains on track for commercial production in the third quarter of 2022, and is expected to significantly reduce the cost profile at Mulatos starting in the second half of 2022
- Sold 112,966 ounces of gold at an average realized price of $1,798 per ounce for revenues of $203.1 million
- Generated cash flow from operating activities of $88.1 million ($91.8 million, or $0.23 per share, before changes in working capital1)
- 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 $36.7 million, or $0.09 per share1, which includes adjustments for an unrealized foreign exchange loss of $3.3 million recorded within deferred taxes and foreign exchange and other losses of $3.9 million
- Recorded net earnings of $29.5 million, or $0.08 per share
- Ended the quarter with cash and cash equivalents of $172.5 million, equity securities of $23.9 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) and repurchased an additional 783,300 shares in the quarter at a cost of $5.7 million under the Company's Normal Course Issuer Bid ("NCIB"). The NCIB was renewed for another year on December 20, 2021
- Repurchased a Net Profits Interest ("NPI") royalty on Island Gold for $15.7 million which was applicable to certain claims that made up the majority of Mineral Reserves and Resources on the property
- Reported results from the ongoing exploration program at Island Gold including extending high-grade gold mineralization up to 300 metres (“m”) down-plunge from existing Inferred Mineral Resources in Island East as well as to a depth of more than 1,700 m in the deepest hole drilled to date
- Provided an exploration update for Lynn Lake, highlighting the potential for further Mineral Reserve and Resource growth around the existing deposits as well as a new greenfields discovery
- Achieved a top 15% ranking within Canadian corporate boards in the 2021 Globe and Mail Board Games in recognition of strong governance practices. This included ranking as the third highest company in the materials sector listed on the Toronto Stock Exchange
- Received a Medium ESG Risk Rating from Sustainalytics, positioning Alamos in the top 20th percentile of its industry; in addition, received a B- climate change score from the Carbon Disclosure Project ("CDP"), ahead of the industry average
Full Year 2021
- Produced 457,200 ounces of gold, meeting revised production guidance. Young-Davidson and Island Gold performed well with both meeting full year initial guidance, offsetting temporary weaker production at Mulatos
- Young-Davidson produced 195,000 ounces, driving record mine-site free cash flow1 of $100.3 million
- Island Gold produced 140,900 ounces, generating $53.1 million of mine-site free cash flow1 net of $23.5 million of exploration expenditures and $101.2 million of capital spending, primarily related to the Phase III expansion
- Sold 457,517 ounces of gold at an average realized price of $1,800 per ounce for record revenues of $823.6 million
- Total cash costs1 of $794 per ounce, AISC1 of $1,135 per ounce and Cost of sales of $1,167 per ounce were in line with revised guidance
- Realized adjusted net earnings1 for the year of $162.1 million, or $0.41 per share1. Adjusted net earnings include adjustments for the non-cash, after tax impairment charge of $213.8 million on the Company's Turkish projects incurred in the second quarter, unrealized foreign exchange losses recorded within both deferred taxes and foreign exchange of $7.8 million, and other losses totaling $7.2 million
- Reported a net loss of $66.7 million, or $0.17 per share, reflecting the impairment charge on the Turkish projects
- Cash flow from operating activities of $356.5 million (including a record $410.9 million, or $1.05 per share, before changes in working capital1), a 7% increase from 2020
- Declared $39.1 million in dividends, a 53% increase compared to 2020. Combined with 1.6 million shares repurchased at a cost of $11.7 million, the Company returned $50.8 million to shareholders in 2021
- During the year, the Company generated $25.8 million in cash on the liquidation of certain equity securities and realized an after-tax gain of $12.0 million (recorded within equity)
- In the second quarter of 2021, filed an investment treaty claim against the Republic of Turkey for expropriation and unfair and inequitable treatment with respect to its Turkey projects.
- Reported inaugural three-year guidance in January 2022, outlining a strong outlook with growing production at significantly lower costs over the next three years. This includes AISC decreasing to a range of $950 to $1,050 per ounce in 2024, an 18% improvement from 2022 (based on the mid-point of guidance)
- 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
.(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 December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Financial Results (in millions)
| Operating revenues | $203.1 | $226.6 | $823.6 | $748.1 |
| Cost of sales(1) | $138.4 | $135.8 | $534.1 | $482.0 |
| Earnings (Loss) from operations | $49.8 | $81.3 | $14.9 | $227.6 |
| Earnings (Loss) before income taxes | $43.6 | $85.8 | $2.3 | $218.2 |
| Net earnings (loss) | $29.5 | $76.9 | ($66.7) | $144.2 |
| Adjusted net earnings(2) | $36.7 | $58.2 | $162.1 | $156.5 |
| Earnings before interest, depreciation and amortization(2) | $88.0 | $133.6 | $402.0 | $381.7 |
Cash provided by operations before working capital and $91.8 $126.5 $410.9 $382.9 cash taxes(2)
| Cash provided by operating activities | $88.1 | $131.4 | $356.5 | $368.4 |
| Capital expenditures (sustaining)(2) | $32.2 | $27.5 | $113.4 | $82.1 |
| Capital expenditures (growth)(2) (3) (5) | $51.2 | $41.9 | $218.0 | $151.2 |
| Capital expenditures (capitalized exploration)(4) | $8.2 | $4.0 | $27.0 | $12.8 |
| Free cash flow(2) | ($3.5) | $58.0 | ($1.9) | $122.3 |
Operating Results
Gold production (ounces) 112,500 120,400 457,200 426,800 Gold sales (ounces) 112,966 121,831 457,517 424,325
Per Ounce Data
Average realized gold price $1,798 $1,860 $1,800 $1,763 Average spot gold price (London PM Fix) $1,795 $1,874 $1,799 $1,770 Cost of sales per ounce of gold sold (includes $1,225 $1,115 $1,167 $1,136 amortization) (1)
Total cash costs per ounce of gold sold (2) $843 $733 $794 $761 All-in sustaining costs per ounce of gold sold (2) $1,237 $1,030 $1,135 $1,046
Share Data
Earnings (Loss) per share, basic and diluted $0.08 $0.20 ($0.17) $0.37 Adjusted earnings per share, basic and diluted(2) $0.09 $0.15 $0.41 $0.40 Weighted average common shares outstanding (basic)
392,333 392,720 392,649 391,675 (000’s)
Financial Position (in millions)
Cash and cash equivalents(5) $172.5 $220.5
(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. Growth capital excludes an Island Gold Net Profits Interest royalty repurchased in December 2021 for $15.7 million, a Net Smelter Return royalty repurchased in March 2020 for $54.8 million, and the acquisition of Trillium Mining Corp for $19.5 million in December 2020.
(4) Includes capitalized exploration at Island Gold, Young-Davidson and Mulatos.
(5) Includes capital advances of $nil and $9.8 million for the three and twelve months ended December 31, 2021 ($nil for the three and twelve months ended December 31, 2020).
3 | Alamos Gold Inc
| Three Months Ended December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Gold production (ounces) (1)
| Young-Davidson | 51,900 | 48,000 | 195,000 | 136,200 |
| Island Gold | 37,500 | 41,200 | 140,900 | 139,000 |
| 23,100 | 31,200 | 121,300 | 150,800 |
Mulatos
Gold sales (ounces)
| Young-Davidson | 53,006 | 48,094 | 194,937 | 134,987 |
| Island Gold | 38,101 | 42,605 | 139,946 | 139,614 |
| 21,859 | 31,132 | 122,634 | 149,724 |
Mulatos
Cost of sales (in millions)(2)
| Young-Davidson | $62.6 | $60.8 | $244.4 | $201.3 |
| Island Gold | $33.1 | $33.7 | $112.3 | $111.9 |
| $42.7 | $41.3 | $177.4 | $168.8 |
Mulatos
Cost of sales per ounce of gold sold (includes amortization)
| Young-Davidson | $1,181 | $1,264 | $1,254 | $1,491 |
| Island Gold | $869 | $791 | $802 | $801 |
| Mulatos | $1,953 | $1,327 | $1,447 | $1,127 |
Total cash costs per ounce of gold sold (3)
Young-Davidson $775 $792 $846 $1,019 $575 $481 $529 $451 Island Gold Mulatos $1,473 $986 $1,013 $816
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
| Young-Davidson | $1,017 | $934 | $1,072 | $1,214 |
| Island Gold | $871 | $676 | $863 | $660 |
| Mulatos | $1,899 | $1,426 | $1,240 | $1,032 |
Capital expenditures (sustaining, growth, capitalized exploration and capital advances) (in millions)(3)
| Young-Davidson(5) | $24.8 | $19.5 | $88.6 | $101.7 |
| Island Gold(6) | $27.4 | $26.9 | $120.0 | $80.8 |
| Mulatos(7) | $34.2 | $20.5 | $128.3 | $42.1 |
| Other | $5.2 | $6.5 | $21.5 | $21.5 |
(1) Production for the three and twelve months ended December 31, 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 twelve months ended December 31, 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 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 Young-Davidson of $1.3 million and $3.8 million for the three and twelve months ended December 31, 2021 ($nil for the three and twelve months ended December 31, 2020).
(6) Includes capitalized exploration at Island Gold of $5.2 million and $18.8 million for the three and twelve months ended December 31, 2021 ($3.8 million and $11.9 million for the three and twelve months ended December 31, 2020); Island Gold capital expenditures exclude the NPI royalty repurchased in December 2021 for $15.7 million, a Net Smelter Return royalty repurchased in March 2020 for $54.8 million and the acquisition of Trillium Mining Corp for $19.5 million in December 2020.
(7) Includes capitalized exploration at Mulatos of $0.3 million and $1.7 million for the three and twelve months ended December 31, 2021 ($0.2 million and $0.9 million for the three and twelve months ended December 31, 2020).
4 | Alamos Gold Inc
Environment, Social and Governance Summary Performance
Health and Safety
- Recordable injury frequency rate1 of 2.77 in the quarter and 2.46 for the year, an increase from 2.25 in 2020
- Lost time injury frequency rate1 of 0.25 in the quarter and 0.21 for the year, an increase from 0.14 in 2020
- Performed over 100,000 COVID-19 tests in 2021 on employees, contractors and visitors as part of enhanced screening practices
During the fourth quarter of 2021, the recordable injury frequency rate increased with 33 recordable injuries, up from 29 in the third quarter of 2021. Three lost time injuries were reported in the quarter, down from four in the third 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. During the quarter, the Company finalized and introduced three new safety standards to its sites, part of the Company’s ongoing development of its Sustainability Performance Management Framework which includes standards specific to safety leadership and managing higher-risk activities. The Company’s flagship Home Safe Every Day safety leadership program was also restarted at both the Young-Davidson and Mulatos mines following their temporary suspension for safety reasons due to COVID-19. 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 to employees at Island Gold and Mulatos given their unique camp set-up
- 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
- 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.
5 | Alamos Gold Inc
Environment
- Zero significant environmental incidents in the fourth quarter and for the year
- 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
- 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
Sixteen minor spills occurred during the fourth quarter, including one at Young-Davidson, ten 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
- Young-Davidson employees participated in the Great Cycle Challenge in support of the Sick Kids Foundation, raising money through sponsorship and participation with the Company matching all contributions
- Continued partnership with Tech Manitoba and the Northern Manitoba Sector Council to deliver digital literacy classes in Lynn Lake, and continued to support the Mining Matters charitable organization in providing the Lynn Lake high school with educational resources and curriculum related to Earth sciences, the minerals industry and their roles in society
- Together with community representatives, completed an annual evaluation of the Mi Matarachi Program to review our progress and shape community development efforts for 2022 and beyond
- Continued to support local students in Sahuaripa, Matarachi and Hermosillo, Mexico with 180 students supported through the Company’s Scholarship Program
- In addition to ongoing COVID-19 and influenza vaccination clinics, and community nutrition programs, several new health initiatives were introduced during the quarter in collaboration with the Matarachi community. These included a breast cancer awareness campaign, healthy eating campaign, and training to the Matarachi Community Health Committee on using a defibrillator that we donated to the Matarachi Health Clinic
- Made various donations to local communities including medicine, cleaning and hygiene equipment, fans, toys, and school supplies for teachers and students returning to classrooms
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 12 sustainability standards during the quarter and 22 to date as part of Alamos’ Sustainability Performance Management Framework that addresses governance, health & safety, security, environment and community relations management
- Achieved a top 15% ranking within Canadian corporate boards in the 2021 Globe and Mail Board Games in recognition of strong governance practices. This included ranking as the third highest company in the materials sector listed on the Toronto Stock Exchange
- Received a B- climate change score from the Carbon Disclosure Project in response to the Company's 2021 CDP Report, ahead of the industry C average
6 | Alamos Gold Inc
- Received a Medium ESG Risk Rating from Sustainalytics, positioning Alamos in the top 20th percentile of its industry
- Received a BBB ESG rating within Alamos’ most recent MSCI ESG Ratings Report
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.
7 | Alamos Gold Inc
Outlook and Strategy
| 2022 Guidance | |||||
| Young- | Island Gold | ||||
| Mulatos | Other (2) | Total | |||
| Davidson |
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 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, with strong performances at its Canadian operations and significant progress made on its high-return growth projects. Young-Davidson and Island Gold both met full year production guidance and revised cost guidance. This included a record performance from Young- Davidson with the operation achieving record mining rates and mine-site free cash flow. Mulatos had a challenging year as the operation works through a transitional phase with higher costs while making excellent progress on the development of the higher-grade, low-cost La Yaqui Grande project. La Yaqui Grande remains on track achieve commercial production in the third quarter of 2022 and is expected drive costs significantly lower in the second half of the year. Finally, the Phase III expansion at Island Gold continues to advance while ongoing exploration success drove another substantial increase in Mineral Reserves and Resources to more than five million ounces. This represents another key milestone for the operation and highlights the significant upside potential to the Phase III expansion study ("Phase III Study") with Mineral Reserves and Resources having increased 37% since the completion of the study in 2020.
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. Total cash costs and AISC are expected to increase in 2022 compared to 2021, reflecting industry-wide cost inflation and a temporary increase in costs at Mulatos. 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 reduction of costs following the completion of the Phase III expansion at Island Gold in 2025, and over the longer term.
8 | Alamos Gold Inc
As outlined in the Company's 2022 guidance, first quarter gold production is expected to be the lowest of the year at approximately 100,000 ounces, with costs well above annual guidance. Production is expected to increase and costs decrease through the year, particularly in the second half of the year with the start of low-cost production from La Yaqui Grande.
Capital spending at producing mines (excluding Lynn Lake and other development projects) is expected to decrease from between $290 to $330 million in 2022 to between $220 and $260 million in 2023. This represents a 23% decrease reflecting the completion of construction of La Yaqui Grande. Total capital is expected to decrease further following the completion of the Phase III expansion at Island Gold in 2025. La Yaqui Grande and the Phase III expansion are expected to be fully funded through ongoing cash flow and existing cash.
Young-Davidson is expected to produce between 185,000 and 200,000 ounces in 2022, consistent with 2021, reflecting similar grades, mining and processing rates. Total cash costs and mine-site AISC are expected to increase from 2021 primarily reflecting industry-wide cost inflation, partially offset by operational improvements. Production and costs are expected to remain at similar levels over the next three years. 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. Capital spending is expected to remain at similar levels in 2023 and decrease slightly in 2024. Young-Davidson generated record mine-site free cash flow of $100 million in 2021. With the lower mine expansion complete and 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 is expected to produce between 125,000 and 135,000 ounces in 2022, consistent with the Phase III Study. Total cash costs and mine-site AISC are expected to increase relative to the Phase III Study reflecting industry-wide cost inflation and the stronger Canadian dollar. 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 as outlined in the Phase III Study. Consistent with the study, capital spending is expected to decrease slightly in 2023 and 2024 before decreasing closer to sustaining levels following the completion of the expansion in 2025.
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.
9 | Alamos Gold Inc
Combined gold production from the Mulatos District (including La Yaqui Grande) is expected to be between 130,000 and 145,000 ounces in 2022. 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. 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 growth from La Yaqui Grande. Costs are expected to improve further in 2023 and 2024 with La Yaqui Grande representing the majority of Mulatos production. 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 commercial production in the third quarter of 2022. Capital spending is expected to trend lower in the second half of 2022 and down closer to sustaining capital levels in 2023 and 2024.
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 will be 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 widely 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 year with $172.5 million of cash and cash equivalents, $23.9 million in equity securities, and no debt. Additionally, the Company has a $500 million undrawn credit facility, providing total liquidity of $672.5 million. Combined with strong ongoing cash flow generation, the Company's highreturn internal growth initiatives are fully funded, with the capacity to increase production by more than 60% and reduce AISC by over 30% by 2025.
10 | Alamos Gold Inc
Fourth Quarter and Year-End 2021 results
Young-Davidson Financial and Operational Review
| Three Months Ended December 31, | Years Ended December 31, | ||
|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 |
Gold production (ounces) 51,900 48,000 195,000 136,200 Gold sales (ounces) 53,006 48,094 194,937 134,987
Financial Review (in millions)
| Operating Revenues | $95.2 | $89.3 | $350.5 | $239.4 |
| Cost of sales(1) | $62.6 | $60.8 | $244.4 | $201.3 |
| Earnings from operations | $31.9 | $28.5 | $105.4 | $38.1 |
| Cash provided by operating activities | $55.2 | $50.3 | $188.9 | $101.3 |
| Capital expenditures (sustaining)(2) | $12.8 | $6.8 | $43.8 | $26.1 |
| Capital expenditures (growth)(2) | $9.3 | $12.7 | $38.3 | $75.6 |
| Capital expenditures (capitalized exploration)(2) | $2.7 | $— | $6.5 | $— |
| Mine-site free cash flow(2) | $30.4 | $30.8 | $100.3 | ($0.4) |
| Cost of sales, including amortization per ounce of gold sold(1) | $1,181 | $1,264 | $1,254 | $1,491 |
| Total cash costs per ounce of gold sold(2) | $775 | $792 | $846 | $1,019 |
| Mine-site all-in sustaining costs per ounce of gold sold(2),(3) | $1,017 | $934 | $1,072 | $1,214 |
Underground Operations
| Tonnes of ore mined | 758,089 | 703,898 | 2,879,662 | 1,956,198 |
| Tonnes of ore mined per day | 8,240 | 7,651 | 7,889 | 5,345 |
| Average grade of gold(4) | 2.47 | 2.20 | 2.31 | 2.24 |
| Metres developed | 3,116 | 3,223 | 12,367 | 12,549 |
Mill Operations
| Tonnes of ore processed | 723,247 | 729,747 | 2,883,241 | 2,181,324 |
| Tonnes of ore processed per day | 7,861 | 7,932 | 7,899 | 5,960 |
| Average grade of gold(4) | 2.47 | 2.21 | 2.31 | 2.08 |
| Contained ounces milled | 57,459 | 51,774 | 213,769 | 145,733 |
| Average recovery rate | 91% | 91% | 91% | 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 finished the year strongly with production of 51,900 ounces of gold in the fourth quarter of 2021, an 8% increase from the prior year period due to higher grades mined. This brought full year production to 195,000 ounces for the year, in line with guidance and a 43% increase from the prior year.
Underground mining rates continued to perform extremely well, increasing to average a record 8,240 tpd in the quarter, and 7,889 tpd for the full year. Mining rates are expected to average design rates of 8,000 tpd going forward.
As anticipated, grades mined increased in the fourth quarter to average 2.47 g/t Au. Full year grades mined were slightly below budget and reserve grade primarily due to mine sequencing. Mill throughput averaged 7,861 tpd in the fourth quarter, lower than tonnes mined due to planned mill maintenance. The resulting stockpile will be processed through the first half of 2022. Mill recoveries averaged 91% in the quarter, consistent with guidance and the prior year.
Financial Review
Fourth quarter revenues of $95.2 million were 7% higher than the prior year period driven by more ounces sold. For the full year, Young-Davidson sold 194,937 ounces for record revenues of $350.5 million, a 46% increase from 2020 due to higher realized gold prices and an increase in ounces sold.
Cost of sales (which includes mining and processing costs, royalties, and amortization expense) of $62.6 million in the fourth quarter were higher than the prior year period, due to increased underground mining rates, partially offset by lower unit mining costs. Similarly, cost of sales for the full year were higher than the prior year given lower mining rates during the temporary shutdown which occurred in 2020. Underground unit mining costs were CAD $42 per tonne
11 | Alamos Gold Inc
in the quarter, an improvement from the prior year and the lowest quarterly unit mining costs of the year driven by economies of scale from averaging a record 8,240 tpd mined.
Total cash costs of $775 per ounce in the fourth quarter were 2% lower than the prior year period driven by higher throughput and lower mining and processing costs per tonne, partially offset by a stronger Canadian dollar. Mine-site AISC of $1,017 per ounce in the fourth quarter were 9% higher than the prior year period primarily reflecting higher sustaining capital, partially offset by lower total cash costs. Full year total cash costs of $846 per ounce and mine-site AISC of $1,072 per ounce were consistent with revised annual guidance, and well below the prior year driven by higher mining rates and lower unit mining costs, partially offset by the stronger Canadian dollar in 2021. The stronger Canadian dollar increased total cash costs by approximately $45 per ounce and mine-site AISC by approximately $60 per ounce, relative to both prior year and initial guidance.
Capital expenditures in the quarter included $12.8 million of sustaining capital and $9.3 million of growth capital. In addition, $2.7 million was invested in capitalized exploration as part of the first significant exploration program at the operation since 2011. Capital expenditures totaled $88.6 million for the full year, including $6.5 million of capitalized exploration. This represented a 13% decrease from the prior year reflecting the completion of the lower mine expansion in July 2020. Capital expenditures were slightly above annual guidance due to the impact of the stronger than budgeted Canadian dollar on capital costs.
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 significant free cash flow growth. This included mine-site free cash flow of $30.4 million in the fourth quarter, and a record $100.3 million for the full year. At current gold prices, Young-Davidson is positioned to generate similar mine-site free cash flow in 2022 and over the long term.
12 | Alamos Gold Inc