Alamos Reports First Quarter 2018 Results Record Quarter Drives Increase in Full Year Production Guidance
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 Reports First Quarter 2018 Results
Record Quarter Drives Increase in Full Year Production Guidance
Toronto, Ontario ( May 1, 2018 ) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI ) (“Alamos” or the “Company”) today
reported its financial results for the first quarter ended March 31, 2018 and reviewed its operating, exploration and
development activities.
“We delivered another record quarter of production and given the strong start t o the year, we’ve increased full year
production guidance to a range of 490,000 to 530,000 ounces. The increase was driven by stronger than expected
performances from our Mulatos and Island Gold mines, the latter establishing a n ew record in its first full quarter as
part of Alamos. Our financial performance continues to improve with strong free cash flow growth expected from our
operations into the second half of the year reflecting higher production and lower costs ,” said John A. McCluskey,
President and Chief Executive Officer.
First Quarter 2018 Highlights
• Produced a record 128,900 ounces of gold, above budget and 34% higher than the first quarter of 2017
driven by strong performances from Mulatos and Island Gold. This marks the fourth consecutive quarter of
record production
• Increased 2018 production guidance at both Mulatos and Island Gold, bringing Company -wide guidance to
a range of 490,000 to 530,000 ounces of gold
• Island Gold reported record quarterly gold production of 28,100 ounces, in its first full quarter as part of
Alamos. Mine-site all-in sustaining costs1 of $633 per ounce were well below guidance and the operation
generated $9.8 million in mine-site free cash flow1. As a result of this strong performance, production
guidance at Island Gold has been increased to between 95,000 and 105,000 ounces for 2018
• Sold 130,045 ounces of gold at an average realized price of $1,331 per ounce for record revenues of $173.1
million
• Cost of sales of $1,113 per ounce, total cash costs1 of $789 per ounce and all-in sustaining costs ("AISC")1
of $935 per ounce were all down from the first quarter of 2017, with total cash costs and AISC decreasing
5% and 8%, respectively
• Reported adjusted net earnings1 of $12.3 million or $0.03 per share1, reflecting adjustments for unrealized
foreign exchange losses recorded within both deferred taxes and foreign exchange of $10.8 million, as well
as other one-time items
• Reported net earnings of $0.6 million, or $0.00 per share
• Generated cash flow from operating activities of $58.8 million ($62.6 million or $0.16 per share, before
changes in working capital1), reflecting record production, lower cash costs and stronger operating margins
• Generated $24.3 million in mine-site free cash flow1, and $7.3 million of company-wide free-cash flow1 in
the first quarter, both ahead of budget, reflecting a higher realized gold price and stronger production at
Mulatos and Island Gold
• Ended the quarter with no debt and $231.8 million in cash and cash equivalents, up from $200.8 million as
of December 31, 2017
• Liquidated the Company's equity positions in AuRico Metals and Corex Gold, generating proceeds of $24.9
million and realizing a gain of $14.3 million recorded directly in retained earnings (deficit)
• Announced a semi-annual dividend of $0.01 per share, or $3.9 million, paid to shareholders on April 30, 2018
(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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Highlight Summary
Three Months Ended March 31,
2018 2017
Financial Results (in millions)
Operating revenues $173.1 $121.0
Cost of sales (1) $144.7 $110.1
Earnings from operations $18.5 $2.2
Net earnings $0.6 $0.1
Adjusted net earnings (loss) (2) $12.3 ($5.1 )
Cash provided by operations before working capital and cash taxes(2) $62.6 $34.2
Cash provided by operating activities $58.8 $20.1
Capital expenditures (sustaining) (2) $10.7 $9.3
Capital expenditures (growth) (2),(3) $40.8 $24.3
Operating Results
Gold production (ounces) (4) 128,900 96,200
Gold sales (ounces) 130,045 98,755
Per Ounce Data
Average realized gold price $1,331 $1,225
Average spot gold price (London PM Fix) $1,329 $1,219
Cost of sales per ounce of gold sold (includes amortization) (1) $1,113 $1,115
Total cash costs per ounce of gold sold (2) $789 $827
All-in sustaining costs per ounce of gold sold (2) $935 $1,014
Share Data
Earnings per share, basic $0.00 $0.00
Adjusted earnings per share, basic (2) $0.03 ($0.02 )
Weighted average common shares outstanding (basic) (000’s) 389,254 284,748
Financial Position (in millions)
Cash and cash equivalents (5) $231.8 $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 La Yaqui Phase I development.
(4) Gold production from Island Gold has been included in this table for the period subsequent to November 23, 2017 only. Gold pr oduction from Island Gold for the
three months ended March 31, 2017 was 23,772 ounces.
(5) Comparative Cash and cash equivalents balance as at December 31, 2017.
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Three Months Ended March 31,
2018 2017(1)
Gold production (ounces)
Young-Davidson 41,000 40,400
Mulatos 46,000 40,000
Island Gold (1) 28,100 —
El Chanate 13,800 15,800
Gold sales (ounces)
Young-Davidson 44,790 43,827
Mulatos 44,659 38,675
Island Gold (1) 27,503 —
El Chanate 13,093 16,253
Cost of sales (in millions)(2)
Young-Davidson $57.0 $50.3
Mulatos $43.6 $40.0
Island Gold (1) $27.5 —
El Chanate $16.6 $19.8
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,273 $1,148
Mulatos $976 $1,034
Island Gold (1) $1,000 —
El Chanate $1,268 $1,218
Total cash costs per ounce of gold sold (3)
Young-Davidson $824 $710
Mulatos $786 $827
Island Gold (1) $553 —
El Chanate $1,176 $1,144
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
Young-Davidson $994 $851
Mulatos $842 $920
Island Gold (1) $633 —
El Chanate $1,191 $1,187
Capital expenditures (growth and sustaining) (in millions)(3)
Young-Davidson $22.9 $18.6
Mulatos(5) $7.2 $11.4
Island Gold (1),(5) $13.9 —
El Chanate $0.1 $0.6
Other $7.4 $3.0
(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 months ended March 31, 2017 was 23,772.
(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
Total
Young-
Davidson Mulatos
Island
Gold
El
Chanate Turkey (5) Other (2) Original Revised
Gold production (000’s ounces)
Revised Guidance 200-210 155-165 95-105 40-50 — — 490-530
Original Guidance 200-210 150-160 90-100 40-50 — — 480-520
Cost of sales, including
amortization (in millions)(4)
$233 $160 $102 $58 — — $536 $550
Cost of sales, including
amortization ($ per ounce)(4)
$1,125 $1,000 $1,025 $1,285 — — $1,075 $1,080
Total cash costs ($ per ounce)(1) $675 $800 $575 $1,200 — — $740 $740
All-in sustaining costs
($ per ounce)(1) — — $950 $950
Mine-site all-in sustaining costs
($ per ounce)(1),(3)
$850 $900 $825 $1,200 — — — —
Amortization costs
($ per ounce)(1)
$450 $200 $450 $85 — — $335 $340
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 — $25 $46 (2) $224-234
$149-159
Total capital expenditures(1) $70-80 $26-30 $50-55 — $25 $46 $292-$311
$217-$236
(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.
(5) Capital guidance at Kirazlı reduced to $25 million from the original budget of $100 million.
The Company continues to deliver on its strategic priorities of increasing cash flow from its operations while advancing
its portfolio of low -cost development projects. In 2017, this included reporting record gold production and an 8%
reduction in all-in sustaining costs.
This strong operational performance continued into the first quarter of 2018 with production of 128,900 ounces of
gold, exceeding budget and setting a new quarterly record. This marks the fourth consecutive quarter of record
production. Reflecting the strong start to the year, the Company has increased its 2018 production guidance at both
Island Gold and Mulatos by 5,000 ounces, bringing the revised production guidance to a range of 490,000 to 530,000
ounces, representing a 19% increase over 2017 (based on the mid- point of guidance). All -in sustaining costs are
expected to average $950 per ounce, supporting increasing operating margins and mine- site free cash flow. Capital
spending at the four operating mines is expected to total between $146 and $165 million for the year.
Consistent with budget, production in the second quarter of 2018 is expected t o be approximately 125,000 ounces,
at slightly higher all-in sustaining costs than the first quarter as a result of additional sustaining capital. The Company
expects stronger production from Young- Davidson to offset slightly lower production from Island G old and Mulatos.
In the second half of 2018, the Company anticipates stronger gold production, lower total cash costs and a lower rate
of capital spending, all of which is expected to contribute to higher mine-site free cash flow compared to the first half
of the year.
Young-Davidson produced 41,000 ounces in the first quarter and is expected to produce between 200,000 and
210,000 ounces for the full year at mine-site all-in sustaining costs of $850 per ounce. Similar to 2017, the Company
expects stronger gold production in the second quarter and more notably in the second half of 2018 driven by higher
underground grades and mining rates. Combined with lower total cash costs and a reduced rate of capital spending,
this will drive stronger mine-site free cash flow in the second half of 2018.
Island Gold produced 28,100 ounces of gold in the first quarter, exceeding its budget and setting a new quarterly
record. Given the outperformance in the first quarter, the operation is now expected to produce between 95,000 and
105,000 ounces in 2018, a 5% increase from previously guided levels, at mine-site all-in sustaining costs of $825 per
ounce. The Phase I expansion of the Island Gold mill to 1,100 tpd remains on track and is expected to be completed
by the end of the third quarter. This is anticipated to drive production growth at lower costs in 2019 and beyond.
Accordingly, the Company expects significant free cash flow growth in 2019.
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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.
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 46,000 ounces in the first quarter,
also exceeding budget. As a result, Mulatos is now expected to produce between 155,000 to 165,000 ounces in 2018,
a 3% increase from previously guided levels, at mine-site all-in sustaining costs of $900 per ounce.
El Chanate produced 13,800 ounces in the first 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 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 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 end of the 5% royalty at Mulatos, with a further decline 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 Island Gold and lower mine infrastructure 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.
Capital spending on development projects, including capitalized exploration, is dependent on timing of receipt of the
GSM (Business Opening and Operation) permit for the Kirazlı project, located in Turkey. On April 18, 2018, a snap
election was called in Turkey with early parliamentary and presidential elections scheduled to be held on June 24,
2018. The Company does not anticipate receiving the GSM permit until after the election, which will delay construction
activities planned for this year. As a result, the Company is revising its 2018 capital budget for Kirazlı to $25 million,
down from $100 million, with spending focused on specific infrastructure projects, notably road, powerline, and water
reservoir construction. The Company will update its 2018 capital budget once the GSM permit has been received
allowing for the ramp up of full scale construction activities.
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. Total exploration spending of $36 million will be
focused on Island Gold and Mulatos for the remainder of the year.
The Company is well positioned to fund this growth having significantly de-risked its balance sheet over the past year.
The Company is debt free with growing cash flow from its operations and over $630 million of cash and available
liquidity under the Company's credit facility.
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First Quarter 2018 Results
Young-Davidson Operational and Financial Review
Three Months Ended March 31,
2018 2017
Gold production (ounces) 41,000 40,400
Gold sales (ounces) 44,790 43,827
Financial Review (in millions)
Operating Revenues $59.5 $53.6
Cost of sales (1) $57.0 $50.3
Earnings from operations $2.5 $3.3
Cash provided by operating activities $27.4 $18.5
Capital expenditures (sustaining) (2) $7.6 $6.1
Capital expenditures (growth) (2) $15.3 $12.5
Mine-site free cash flow (2) $4.5 ($0.1 )
Cost of sales, including amortization per ounce of gold sold (1) $1,273 $1,148
Total cash costs per ounce of gold sold (2) $824 $710
Mine-site all-in sustaining costs per ounce of gold sold (2),(3) $994 $851
Underground Operations
Tonnes of ore mined 585,060 576,019
Tonnes of ore mined per day ("tpd") 6,501 6,400
Average grade of gold (4) 2.35 2.56
Metres developed 3,144 3,242
Mill Operations
Tonnes of ore processed 669,287 694,624
Tonnes of ore processed per day 7,437 7,718
Average grade of gold (4) 2.22 2.18
Contained ounces milled 46,193 48,774
Average recovery rate 90 % 89 %
(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 41,000 ounces of gold in the first quarter of 2018, higher than the same period of 2017
but lower than the fourth quarter of 2017 due to lower underground mining rates and mined grades. The Company
mined 585,060 tonnes of ore from underground in the first quarter, or 6,501 tpd, representing an increase over the
prior year period. Underground mining rates were lower in the first quarter than in the fourth quarter of 2017, as a
result of temporary constraints related to the paste fill sequence.
In addition, underground grades in the first quarter of 2.35 g/t Au were lower than the previous quarter and the same
period of 2017 primarily as a result of mine sequencing. As previously guided, gold production is expected to increase
in the s econd quarter and second half of 2018, with grades and underground mining rates expected to increase
through the year.
During the first quarter, 669,287 tonnes, or 7,437 tpd, were processed through the mill with grades averaging 2.22 g/t
Au, slightly higher from the prior year period. Mill throughput decreased compared to the fourth quarter of 2017 due
to a scheduled liner change in January. Mill recoveries of 90% were in line with expectations and marginally higher
than the prior year period.
Financial Review
For the three months ended March 31, 2018, revenues of $59.5 million were $5.9 million higher than the prior -year
period, reflecting more ounces sold and a higher realized gold price.
In the first quarter of 2018, cost of sales of $57.0 million were higher than the prior year period reflecting higher tonnes
mined and input costs. Cost of sales reflects mining and processing costs, royalties, and amortization expense.
Total cash costs in the first quarter were $824 per ounce, representing a 16% increase from the first quarter of 2017.
The increase was attributable to higher gross costs driven by an increase in paste fill, maintenance and labour costs.
Underground mining costs were higher than the prior year period due to a combination of increased paste fill activities
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and a higher allocation of development costs to operating expense, which impacts cost per tonne. The stronger
Canadian dollar had a nominal impact on total cash costs compared to the prior year as the Company has hedged
the majority of its Canadian dollar operating and capital costs at budgeted foreign exchange rates for the first half of
2018. Mine-site AISC were $994 per ounce, 17% higher than the prior year period reflecting higher total cash costs
and sustaining capital expenditures.
Capital expenditures totaled $22.9 million in the first quarter, 23% higher than the same period of 2017, reflecting the
higher proportion of capital expected in the first half of 2018 as outlined in the Company's guidance. Capital spending
in the first quar ter was focused primarily on lateral development in the upper and lower mines, and lower mine
infrastructure. Total capital expenditures in the first quarter included $7.6 million of sustaining capital and $15.3 million
of growth capital.
Young-Davidson generated mine- site free cash flow of $4.5 million in the first quarter, lower than in recent quarters
as a result of lower production and higher costs. The Company expects mine-site free cash flow to grow in subsequent
quarters as production and operating margins increase and capital spending declines.
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Island Gold Operational and Financial Review
Three Months Ended March 31,
2018 2017 (1)
Gold production (ounces) (1) 28,100 —
Gold sales (ounces) (1) 27,503 —
Financial Review (in millions)
Operating Revenues $36.6 —
Cost of sales (2) $27.5 —
Earnings from operations $9.0 —
Cash provided by operating activities $23.7 —
Capital expenditures (sustaining) (3) $2.2 —
Capital expenditures (growth) (3),(6) $11.7 —
Mine-site free cash flow (3) $9.8 —
Cost of sales, including amortization per ounce of gold sold (2) $1,000 —
Total cash costs per ounce of gold sold (3) $553 —
Mine-site all-in sustaining costs per ounce of gold sold (3),(4) $633 —
Underground Operations
Tonnes of ore mined 84,655 91,710
Tonnes of ore mined per day ("tpd") 941 1,019
Average grade of gold (5) 11.06 8.64
Metres developed 1,555 2,083
Mill Operations
Tonnes of ore processed 82,105 83,365
Tonnes of ore processed per day 912 926
Average grade of gold (5) 11.07 9.18
Contained ounces milled 29,224 24,594
Average recovery rate 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
months ended March 31, 2017 was 23,772.
(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").
(6) Includes capitalized exploration of $3.1 million for the three months ended March 31, 2018.
The first quarter of 2018 was the first full quarter that the Company owned and operated Island Gold. Operating and
financial results exceeded budget with record production of 28,100 ounces of gold, an increase of 18% from the prior
year period reflecting higher grades mined and milled. Given the strong first quarter performance, the Company is
increasing 2018 production guidance to a range of 95,000 to 105,000 ounces.
The Company mined 84,655 tonnes of ore from underground in the first quarter of 2018, or 941 tpd, lower than the
prior year period. The Company expects to ramp up mining rates in the second half of 2018 concurrent with the
completion of the mill expansion to 1,100 tpd. Underground mining rates are expected to average 1,000 tpd in 2018,
consistent with the rates achieved in 2017. Underground grades in the first quarter of 11.06 g/t Au were above budget
and higher than the prior year period due to a combination of mine sequencing and a positive grade reconciliation.
Grades are expected to be lower throughout the remainder of 2018.
During the first quarter, 82,105 tonnes or 912 tpd were processed through the mill, in line with the prior year period.
Milled grades averaged 11. 07 g/t Au, higher than the prior year period and previous quarter. Mill throughput is
expected to average 980 tpd for the full year with milled grades expected to return to budgeted grades of between
8.3 and 8.9 g/t Au for the remainder of the year. Reflecting the return to budgeted grades, gold production is expected
to decrease in the second and third quarters and ramp up in the fourth quarter following completion of the mill
expansion.
Financial Review
With the Company acquiring Island Gold in November 2017, financial information prior to the acquisition date has not
been included in the comparative table above.
For the three months ended March 31, 2018, Island Gold generated revenues of $36.6 million, on record production
and higher realized gold prices . Cost of sales of $27.5 million reflect an ongoing amortization charge related to the