Alamos Gold Reports Fourth Quarter and Year-End 2017 Results
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1 | Alamos Gold Inc
Alamos Gold Inc.
Brookfield Place, 181 Bay Street, Suite 3910, P .O. Box #823
T oronto, Ontario M5J 2T3
T elephone: (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 2017 Results
Toronto, Ontario (February 22, 2018) – Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today
reported its financial results for the quarter and year ended December 31, 2017 and reviewed its operating,
exploration and development activities.
“We executed on a number of operational and strategic objectives in 2017, all of which continue to strengthen our
outlook. We met guidance with a 10% increase in production to a new record of 429,400 ounces while delivering an
8% decrease in all-in sustaining costs. This drove strong free cash flow growth from our operations and our best
financial performance in years,” said John A. McCluskey, President and Chief Executive Officer.
“With a solid operating base of 500,000 ounces of annual production we expect further growth in 2018 and remain
focused on continuing to expand margins and cash flow over the next several years. We’re making good progress
within our development pipeline with construction activities at Kirazlı ramping up, and we continue to expand the
size and quality of our long life mineral reserve base. Combined with a peer-leading, debt free balance sheet,
Alamos is well positioned to deliver sustainable, long-term shareholder value,” Mr. McCluskey added.
Fourth Quarter 2017 Highlights
• Completed the acquisition of Richmont Mines Inc. (“Richmont”) and its Island Gold mine, a high-grade, long
life asset in Ontario, Canada
• Produced a record 120,300 ounces of gold at cost of sales of $1,077 per ounce, total cash costs 1 of $753
per ounce and all -in sustaining costs ("AISC") 1 of $902 per ounce. This included a record 56,500 ounces
from Young-Davidson, 42,700 ounces from Mulatos, 12,100 ounces from El Chanate and 9,000 ounces from
Island Gold (following completion of the Richmont acquisition on November 23, 2017)
• Sold 126,786 ounces of gold at an average realized price of $1,275 per ounce for record revenues of $161.7
million
• Reported a net loss of $4.7 million, or $0.01 per share, which was impacted by transaction costs related to
the Richmont acquisition of $5.1 million ($0.02 per share), a fair value accounting adjustment on the Island
Gold acquisition of $4.1 million net of tax ($0.01 per share) and unrealized foreign exchange losses of $5.1
million ($0.02 per share) recorded within both deferred taxes and foreign exchange
• Generated cash flow from operating activities of $48.6 million ($52.7 million before changes in working
capital1), reflecting lower cash costs and stronger operating margins
• Generated $37.1 million in mine-site free cash flow 1, including a record $16.4 million at Young- Davidson.
Company-wide, approximately $19 million of free cash flow 1 was generated excluding transaction costs of
$10 million paid related to the Richmont acquisition
• Ended the quarter w ith no debt and $236.6 million in cash and cash equivalents and equity securities, up
from $167.7 million as of September 30, 2017
• Reported a positive feasibility study for the Lynn Lake gold project located in Manitoba, Canada
• Achieved a significant safety milestone of five million hours without a lost-time incident ("LTI") at El Chanate
(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.
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2 | Alamos Gold Inc
Full Year 2017 Highlights
• Produced a record 429,400 ounces of gold in 2017 marking a 10% increase from 2016, including
approximately one month of production from Island Gold. Gold production was above the mid- point of 2017
production guidance and marked the third consecutive year production guidance has been achieved
• Achieved the top end of production guidance at Island Gold, Mulatos and El Chanate
• Sold 430,115 ounces of gold at an average realized price of $1,262 per ounce for record revenues of $542.8
million
• Cost of sales per ounce of gold sold of $1,062, and total cash costs of $770 both improved relative to 2016
• Significantly improved the Company's cost profile with all -in sustaining costs of $933 per ounce, an 8%
reduction compared to 2016
• Realized net earnings of $27.4 million, or $0.09 per share
• Generated positive free cash flow at each of the Company's operations for total mine- site free cash flow of
$77.5 million, including record free cash flow at Young-Davidson. Mine-site free cash flow more than doubled
from $35.4 million in 2016, reflecting stronger production, lower costs and lower capital spending
• Strengthened the balance sheet with the repurchase and retirement of $315 million senior secured notes in
April
• Enhanced liquidity with an amendment to the undrawn revolving credit facility including an increase in the
size of the facility to $400 million on peer-leading terms
• Returned $6.0 million in the form of dividends to shareholders
• Completed construction of La Yaqui Phase I on budget and ahead of schedule with the first gold pour in
August
• Reported positive feasibility studies for the Kirazlı and Aği Daği projects in Turkey, and the Lynn Lake project
in Manitoba Canada, outlining more than 400,000 ounces of combined annual production growth potenti al
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Highlight Summary
Three Months Ended December 31, Years Ended December 31,
2017 2016 2017 2016
Financial Results (in millions)
Operating revenues $161.7 $132.2 $542.8 $482.2
Cost of sales (1) $136.6 $121.6 $456.8 $429.3
Earnings from operations $17.1 $3.5 $56.0 $21.3
Net (loss) earnings ($4.7 ) ($20.6 ) $26.6 ($17.9 )
Cash provided by operations before working capital and
cash
$52.7 $34.0 $183.3 $148.0
Cash provided by operating activities $48.6 $38.3 $163.5 $135.7
Capital expenditures (sustaining) (2) $11.5 $12.3 $42.7 $49.2
Capital expenditures (growth) (2),(3) $27.7 $25.2 $119.8 $97.3
Operating Results
Gold production (ounces) (4) 120,300 105,676 429,400 392,000
Gold sales (ounces) 126,786 107,505 430,115 389,151
Per Ounce Data
Average realized gold price $1,275 $1,230 $1,262 $1,239
Average spot gold price (London PM Fix) $1,275 $1,222 $1,257 $1,251
Cost of sales per ounce of gold sold
(includes amortization) (1) $1,077 $1,131 $1,062 $1,103
Total cash costs per ounce of gold sold (2) $753 $842 $770 $797
All-in sustaining costs per ounce of gold sold (2) $902 $1,033 $933 $1,010
Share Data
Earnings per share, basic and diluted ($0.01 ) ($0.08 ) $0.09 ($0.07 )
Weighted average common shares outstanding (basic)
(000’s) 337,178 267,067 305,521 265,234
Financial Position (in millions)
Cash and cash equivalents $200.8 $252.2
Total debt and financing obligations $7.5 $304.9
(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 a description and calculation of these measures.
(3) Includes capitalized exploration and La Yaqui Phase I development.
(4) Gold production from Island Gold have been included in this table for the period subsequent to November 23, 2017 only. Gold production from Island Gold for the
three and twelve months ended December 31, 2017 was 22,100 ounces (2016 - 24,086) and 98,600 ounces (2016 - 83,323), respectively.
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Three Months Ended December 31, Years Ended December 31,
2017 2016 (1) 2017 2016 (1)
Gold production (ounces)
Young-Davidson 56,500 44,662 200,000 170,000
Mulatos 42,700 44,900 160,000 154,000
Island Gold (1) 9,000 — 9,000 —
El Chanate 12,100 16,114 60,400 68,000
Gold sales (ounces)
Young-Davidson 52,475 40,934 197,937 168,979
Mulatos 50,006 50,178 159,276 151,337
Island Gold (1) 11,720 — 11,720 —
El Chanate 12,585 16,393 61,182 68,835
Cost of sales (in millions)(2)
Young-Davidson $58.1 $44.1 $213.4 $183.7
Mulatos $47.7 $56.8 $153.0 $164.6
Island Gold (1) $13.4 — $13.4 —
El Chanate $17.4 $20.7 $77.0 $81.0
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,107 $1,077 $1,078 $1,087
Mulatos $954 $1,132 $961 $1,088
Island Gold (1) $1,143 — $1,143 —
El Chanate $1,383 $1,263 $1,259 $1,177
Total cash costs per ounce of gold sold (3)
Young-Davidson $690 $667 $658 $657
Mulatos $762 $877 $775 $838
Island Gold (1) $401 — $401 —
El Chanate $1,311 $1,171 $1,188 $1,052
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
Young-Davidson $859 $926 $834 $897
Mulatos $798 $931 $835 $916
Island Gold (1) $546 — $546 —
El Chanate $1,335 $1,190 $1,218 $1,069
Capital expenditures (growth and sustaining) (in millions)(3)
Young-Davidson $17.0 $22.6 $80.3 $94.6
Mulatos(5) $9.0 $9.5 $43.9 $32.9
Island Gold (1),(5) $4.8 — $4.8 —
El Chanate $0.2 $0.2 $1.4 $0.8
Other $8.2 $5.2 $32.1 $18.2
(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 twelve months ended December 31, 2017 was 22,100 ounces (2016 - 24,086) and 98,600 ounces (2016 - 83,323),
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 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.
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Outlook and Strategy
2018 Guidance
Young-
Davidson Mulatos Island Gold El Chanate Turkey
Other
Development (2) Total
Gold production (000’s ounces) 200-210 150-160 90-100 40-50 — — 480-520
Cost of sales, including amortization
(in millions)(4)
$220 $147 $112 $57 — — $536
Cost of sales, including amortization
($ per ounce)(4)
$1,075 $950 $1,175 $1,270 — — $1,075
Total cash costs ($ per ounce)(1) $675 $800 $575 $1,200 — — $740
All-in sustaining costs
($ per ounce)(1) — — $950
Mine-site all-in sustaining costs
($ per ounce)(1),(3)
$850 $900 $825 $1,200 — — —
Capital expenditures (in millions)
Sustaining capital(1) $35-40 $8-10 $25-27 — — — $68-77
Growth capital(1) $35-40 $18-20 $25-28 — $100 $46 (2) $224-234
Total capital expenditures(1) $70-80 $26-30 $50-55 — $100 $46 $292-$311
(1) Refer to the "Non-GAAP Measures and Additional GAAP" disclosure at the end of this press release 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
The Company executed on several strategic priorities in 2017, all of which support its objective of increasing cash
flow from its operations while advancing its portfolio of low-cost development projects. This included delivering record
gold production of 429,400 ounces at an 8% decrease in all -in sustaining costs. This drove mine-site free cash flow
to $78 million, up nearly 120% from 2016. Additionally, the Company strengthened its operating base through the
acquisition of the Island Gold mine, adding a third core, low -cost, long life operation, which will be a strong driver of
free cash flow growth in the years ahead. The Company also made significant progr ess advancing its development
pipeline including the completion of three positive feasibility studies, construction of La Yaqui Phase I ahead of
schedule and on budget, and initiating development of Kirazlı.
The strong operational performance is expected t o continue into 2018 with gold production expected to increase to
a range of 480,000 to 520,000 ounces, a 16% increase over 2017 (based on the mid- point of guidance). All -in
sustaining costs are expected to average $950 per ounce, supporting strong ongoing operating margins and mine-
site free cash flow. Capital spending at the four operating mines is expected to total between $146 and $165 million.
The Company expects stronger gold production, lower costs and a lower rate of capital spending in the second h alf
of 2018, all of which is expected to contribute to higher mine-site free cash flow compared to the first half of the year.
Young-Davidson is expected to produce between 200,000 and 210,000 ounces in 2018 at mine-site all-in sustaining
costs of $850 per ounce. Capital spending at Young-Davidson in 2018 is expected to be between $70 and $80 million,
including $35 to $40 million of sustaining capital. Capital spending will be focused on ongoing development and lower
mine infrastructure. The tie in of the upper and lower mines is expected to be completed in the fourth quarter of 2019
which will temporarily limit underground throughput. Following completion of the tie in, underground mining rates are
expected to increase above 7,500 tpd supporting higher production rates and free cash flow in 2020 and beyond.
Island Gold is expected to produce 90,000 to 100,000 ounces in 2018 at mine-site all-in sustaining costs of $825 per
ounce, both consistent with the Phase I expansion preliminary economic assessment (“PEA”) released in 2017. With
the addition of a second mine in Ontario, the Company is evaluating opportunities to reduce costs through purchasing,
tax and other synergies.
The Phase I expansion of the Island Gold mill to 1,100 tpd remains on track and is expected to be completed in the
second half of 2018. This is expected to drive strong production growth and lower costs in the fourth quarter and into
2019. Combined with lower capital spending, the Company expects significant free cash flow growth in 2019. In
parallel to the Phase I expansion, the Company will continue an aggressive exploration program at Island Gold which
has been successful in driving nearly a 400% increase in Mineral Reserves and 60% increase in grade since 2014.
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.
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Total production from the Mulatos district (including La Yaqui Phase I) is expected to be between 150,000 to 160,000
ounces in 2018 at mine- site all-in sustaining costs of $900 per ounce. Capital spending is expected to total $26 to
$30 million, including $8 to $10 million of sustaining capital.
Annual gold production at Mulatos is expected to remain in a similar range of 150,000 to 160,000 ounces per year
between 2018 and 2020, at declining costs. The decline will be driven in part by the construction of a power line
which will connect the mine to lower cost grid power, and the end of the 5% royalty at Mulatos in 2019. Approximately
200,000 ounces remain subject to the royalty after which costs will decrease by $65 per ounce (assuming spot gold
prices of $1,300 per ounce).
El Chanate is expected to produce 40,000 to 50,000 ounces in 2018, down from 2017 reflecting lo wer mining rates
with mining activities expected to cease mid- 2018. 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 offsetting higher cost 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 end of the 5% royalty at Mulatos, with a further decrease expected in 2020 reflecting
higher underground mining rates at Young-Davidson. Similarly, capital spending at existing operations is expected to
trend lower in 2019 and 2020 reflecting the completion of the Phase I expansion at I sland Gold and lower mine
infrastructure at Young-Davidson. Combined with declining operating costs, the Company expects strong free cash
flow growth from its operations over the next three years.
Capital spending on development projects, including capitalized exploration, is expected to total $146 million in 2018,
of which $100 million relates to construction on the Kirazlı project. The remainder of the spending is comprised of
capitalized exploration at Island Gold, Mulatos and Lynn Lake and advancing per mitting and development of Cerro
Pelon, La Yaqui Grande and Lynn Lake. The Company has also increased its global exploration budget to $36 million,
up 50% from 2017 with nearly 80% of the spending to be focused on Island Gold and Mulatos.
Approximately 80% of the 2018 budget for Kirazlı is contingent upon, and will be spent following receipt of the
GSM (Business Opening and Operation) permit. Pending receipt of final permits, Kirazlı is expected to produce more
than 100,000 ounces in 2020, its first full year of production, at mine-site all-in sustaining costs of less than $400 per
ounce. This is expected to drive company -wide production above 600,000 ounces in 2020, representing more than
20% growth from 2018, while further lowering the Company’s cost profile.
The Company is well positioned to fund this growth having significantly de-risked its balance sheet over the past year
with the repayment of the $315 million senior secured notes in April 2017. The Company is debt free with growing
cash flow from its operations and over $635 million of cash and available liquidity under the Company's credit facility.
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Fourth Quarter and Full Year 2017 Results
Young-Davidson Financial and Operational Review
Three Months Ended December 31, Years Ended December 31,
2017 2016 2017 2016
Gold production (ounces) 56,500 44,662 200,000 170,000
Gold sales (ounces) 52,475 40,934 197,937 168,979
Financial Review (in millions)
Operating Revenues $66.8 $51.2 $249.7 $211.9
Cost of sales (1) $58.1 $44.1 $213.4 $183.7
Earnings from operations $8.7 $7.1 $36.3 $28.2
Cash provided by operating activities $33.4 $26.0 $114.5 $98.4
Capital expenditures (sustaining) (2) $8.7 $10.5 $34.1 $40.0
Capital expenditures (growth) (2) $8.3 $12.1 $46.2 $54.6
Mine-site free cash flow (2) $16.4 $3.4 $34.2 $3.8
Cost of sales, including amortization per ounce of gold sold (1) $1,107 $1,077 $1,078 $1,087
Total cash costs per ounce of gold sold (2) $690 $667 $658 $657
Mine-site all-in sustaining costs per ounce of gold sold (2),(3) $859 $926 $834 $897
Underground Operations
Tonnes of ore mined 664,847 614,101 2,423,289 2,199,857
Tonnes of ore mined per day ("tpd") 7,227 6,675 6,639 6,011
Average grade of gold (4) 2.70 2.40 2.69 2.54
Metres developed 2,776 3,044 12,787 12,379
Unit mining costs per tonne $34 $32 $34 $33
Unit mining costs per tonne (CAD) $44 $42 $44 $43
Mill Operations
Tonnes of ore processed 716,273 694,753 2,735,267 2,629,032
Tonnes of ore processed per day 7,786 7,552 7,494 7,183
Average grade of gold (4) 2.59 2.18 2.47 2.19
Contained ounces milled 59,561 48,755 217,184 184,928
Average recovery rate 92 % 90 % 92 % 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 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 a record 56,500 ounces of gold in the fourth quarter of 2017, 27% higher than the same
period of 2016 and exceeding the previous record set in the third quarter of 2017. The increase in production reflects
record underground mining rates and an increase in mill throughput during the quarter.
The Company mined a record 664,847 tonnes of ore from underground in the fourth quarter of 2017, or 7,227 tpd, a
10% increase from the previous quarter and 8% higher than the prior year period. The Company expects underground
mining rates to average more than 7,000 tpd in 2018, up from an average of 6,639 tpd in 2017, driving stronger gold
production and free-cash flow. Underground grades in the fourth quarter were 2.70 g/t Au, and averaged 2.69 g/t Au
for the full year, consistent with the mineral reserve grade, and higher than the prior year period.
During the fourth quarter, 716,273 tonnes, or 7,786 tpd, were processed through the mill with grades averaging 2.59
g/t Au. Grades were higher than the prior year period reflecting a higher contribution of underground tonnes as well
as higher underground grades mined. Mill throughput increased compared to the third quarter of 2017 reflecting the
commissioning of the pebble crus her in the fourth quarter. Mill recoveries of 92% were consistent with expectations
and higher than the prior year period.
Financial Review
For the three months ended December 31, 2017, revenues of $66.8 million were $15.6 million higher than the prior -
year period, reflecting more ounces sold and a higher realized gold price. For 2017, revenues of $249.7 million were
$37.8 million higher than the prior year period, attributable to both to a higher realized gold and a higher number of
ounces sold.
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In the fourth quarter of 2017, cost of sales of $58.1 million were higher than the prior year period reflecting higher
gross costs from additional tonnes mined and milled, as well as a stronger Canadian dollar. Cost of sales reflects
mining and processing c osts, royalties, and amortization expense. For 2017, cost of sales of $213.4 million were
$29.7 million higher than the prior -year period, reflecting more tonnes mined and milled and a stronger Canadian
dollar.
Total cash costs in the fourth quarter were $690 per ounce, representing a 3% increase from the fourth quarter of
2016. The increase was attributable to a stronger Canadian dollar and a higher proportion of operating development
which is reflected in cash costs rather than capital. Underground unit mining costs were $34 per tonne in the fourth
quarter, slightly higher than the prior year period as the benefit of higher underground mining rates was offset by a
stronger Canadian dollar. Further strengthening in the Canadian dollar is not expected to ad versely impact costs
against guidance in the first half of 2018 as the Company has hedged the majority of its Canadian dollar operating
and capital costs at budgeted rates. Mine- site AISC were $859 per ounce, 7% lower than the prior year period
reflecting a lower level of sustaining capital across a higher number of ounces sold. For the full 2017 year, total cash
costs were $658 per ounce and mine- site AISC were $834 per ounce, compared to $657 and $897 per ounce,
respectively, in the prior year. The decrease in mine- site AISC was attributable to lower sustaining capital
expenditures and a higher number of ounces sold.
Capital expenditures totaled $17.0 million in the fourth quarter, 25% lower than the same period of 2016. For 2017,
capital expenditures of $80.3 million were 16% lower than 2016 and consistent with guidance. Capital spending in
the fourth quarter was focused primarily on lateral development in the upper and lower mines, and lower mine
infrastructure. Total capital expenditures in the fourth quarter included $8.7 million of sustaining capital and $8.3
million of growth capital.
Young-Davidson generated record mine- site free cash flow of $16.4 million in the fourth quarter driven by stronger
production and lower capital spending. For 2017, Young -Davidson generated $34.2 million of mine- site free cash
flow, a significant increase compared to $3.8 million in the prior year period, driven by higher production, lower costs
and capital spending and higher gold prices.