Alamos Reports Second Quarter 2017 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 2017 Results
Toronto, Ontario (August 3, 2017) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today
reported its financial results for the second quarter ended June 30 , 2017 and reviewed its operating, exploration
and development activities.
“We made significant gains in the second quarter with record production and lower costs driving the highest
combined free cash flow from our operations in years. We expect this trend to continue in the second half of the
year with stronger production and lower costs driving strong free cash flow growth from our operations ,” said John
A. McCluskey, President and Chief Executive Officer.
“We continue to advance one of the strongest portfolios of growth projects in our peer group. La Yaqui Phase I is on
track for initial production later this year and we are building out our team in Turkey in preparation for early stage
construction activities at Kirazlı . We also expect to deliver a feasibility study on Lynn Lake later this quarter,
marking our third feasibility study this year. With a strong cash position, no debt and growing cash flow from our
operations, we are well positioned to fund this growth,” Mr. McCluskey added.
Second Quarter 2017 Highlights
Produced a quarterly record 105,900 ounces at cost of sales of $1,053 per ounce, total cash costs 1 of $784
per ounce and all -in sustaining costs ("AISC") 1 of $942 per ounce. This included record gold production of
47,300 ounces at Young-Davidson, as well as continued strong performance at Mulatos with production of
41,000 ounces
Sold 104,023 ounces of gold at an average realized price of $1,262 per ounce, $5 above the London PM
fix, for revenues of $131.3 million
Reported net earnings of $2.4 million, or $0.01 per share, which included a one -time pre -tax charge of
$29.1 million (after -tax $21.8 million, or $0.07 per share) incurred on the retirement of the senior secured
notes (“Notes”), as well as unrealized foreign exchange gains of $10.9 million ($0.04 per share) recorded
within both deferred taxes and foreign exchange
Stronger operating margins drove cash flow from operating activities to $51.4 million, a 156% increase from
the first quarter of 2017
Generated $18 million in free cash flow from the mine sites, including $10.7 million at Mulatos (excluding
development capital for La Yaqui Phase I)
Construction of La Yaqui Phase I continued to advance on budget, with initial production on track for later
this year
Completed the repurchase of $315 million senior secured notes in April 2017. As at June 30, 2017, the
Company is debt-free, with approximately $150 million in cash and cash equivalents and equity s ecurities
Paid a semi-annual dividend of $0.01 per share, or $3.0 million in April 2017
Purchased and cancel led a 2.0% net smelter return (“NSR”) royalty on certain concessions at the
Company's Lynn Lake project for $6.7 million (CAD $9 million)
Subsequent to the Second Quarter 2017
Produced a monthly record of approximately 20,000 ounces of gold in July at Young -Davidson, driven by
underground grades averaging in excess of 3.0 grams per tonne of gold ("g/t Au")
(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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Completed a Canadian Development Expense ("CDE") flow -through financing for gross proceeds of C AD
$12.0 million and Canadian Exploration Expense ("CEE") flow -through financing for gross proceeds of CAD
$3.0 million
Highlight Summary
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
Financial Results (in millions)
Operating revenues $131.3 $120.1 $252.3 $224.4
Cost of sales (1) $109.5 $106.0 $219.6 $205.5
Earnings from operations $15.8 $2.9 $18.0 $0.6
Net earnings (loss) $2.4 ($11.8 ) $2.5 ($2.1 )
Cash provided by operations before working capital and cash
taxes(2) $45.1 $40.3 $79.3 $67.9
Cash provided by operating activities $51.4 $36.9 $71.5 $60.7
Capital expenditures (sustaining) (2) $11.1 $13.9 $20.4 $24.4
Capital expenditures (growth) (2),(3) $40.4 $24.6 $64.7 $47.4
Operating Results
Gold production (ounces) 105,900 92,464 202,100 187,095
Gold sales (ounces) 104,023 95,866 202,778 186,855
Per Ounce Data
Average realized gold price $1,262 $1,253 $1,244 $1,201
Average spot gold price (London PM Fix) $1,257 $1,260 $1,238 $1,217
Cost of sales per ounce of gold sold (includes amortization) (1) $1,053 $1,106 $1,083 $1,100
Total cash costs per ounce of gold sold (2) $784 $775 $805 $778
All-in sustaining costs per ounce of gold sold (2) $942 $1,037 $977 $1,012
Share Data
Earnings (loss) per share, basic and diluted $0.01 ($0.04 ) $0.01 ($0.01 )
Weighted average common shares outstanding (basic) (000’s) 299,189 264,464 292,008 263,431
Financial Position (in millions)
Cash and cash equivalents $133.7 $273.4
Total debt and equipment financing obligations $5.2 $316.9
(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 and associated MD&A for a description and
calculation of these measures.
(3) Includes capitalized exploration and La Yaqui Phase I development.
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Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
Gold production (ounces)
Young-Davidson 47,300 42,644 87,700 81,709
Mulatos 41,000 33,000 81,000 70,600
El Chanate 17,600 16,820 33,400 34,786
Gold sales (ounces)
Young-Davidson 46,368 44,024 90,195 83,758
Mulatos 40,265 34,865 78,940 67,597
El Chanate 17,390 16,977 33,643 35,500
Cost of sales (in millions)(1)
Young-Davidson $51.6 $52.0 $101.9 $93.9
Mulatos $36.3 $36.3 $76.3 $70.8
El Chanate $21.6 $17.7 $41.4 $40.8
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,113 $1,181 $1,130 $1,121
Mulatos $902 $1,041 $967 $1,047
El Chanate $1,242 $1,043 $1,231 $1,149
Total cash costs per ounce of gold sold (2)
Young-Davidson $677 $738 $693 $679
Mulatos $735 $757 $780 $784
El Chanate $1,185 $907 $1,165 $1,000
Mine-site all-in sustaining costs per ounce of gold sold (2),(3)
Young-Davidson $895 $965 $874 $907
Mulatos $777 $883 $847 $882
El Chanate $1,208 $931 $1,198 $1,017
Capital expenditures (growth and sustaining) (in millions)(2)
Young-Davidson $22.7 $25.2 $41.3 $49.2
Mulatos(4) $14.6 $9.2 $26.0 $13.6
El Chanate $0.3 $0.3 $0.9 $0.4
Other $13.9 $3.8 $16.9 $8.6
(1) Cost of sales includes mining and processing costs, royalties and amortization.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and
calculation of these measures.
(3) For the purposes of calculating mine -site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based
compensation expenses.
(4) Includes capitalized exploration and La Yaqui Phase I development.
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Outlook and Strategy
2017 Guidance
Young-
Davidson Mulatos El Chanate Development Total
Gold production (000’s ounces) 200-210 150-160 50-60 — 400-430
Cost of sales, including amortization (in millions)(4) $215 $157 $70 — $442
Cost of sales, including amortization ($ per ounce)(4) $1,050 $1,015 $1,265 — $1,065
Total cash costs ($ per ounce)(1) $625 $815 $1,200 — $765
All-in sustaining costs ($ per ounce)(1) — $940
Mine-site all-in sustaining costs ($ per ounce)(1),(3) $775 $890 $1,200 — —
Capital expenditures (in millions)
Sustaining capital(1) $30-35 $8-10 $2 — $40-47
Growth capital(1) (5) $40-45 $25-30 (2) — $35 $100-110
Total capital expenditures(1) $70-80 $33-40 $2 $35 $140-$157
(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) Excludes capitalized exploration.
(3) For the purposes of calculating mine -site all -in sustaining costs at individual m ine 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) Excludes revised capital budget for Turkish projects approved in April 2017.
The Company's objective is to maximize cash flow from its operations through increased production, margin
expansion, and capital discipline, while advancing its portfolio of low -cost development project s. Significant
progress was made on several fronts in the second quarter with record production of 105,900 ounces of gold,
generating $51.4 million in operating cash flow, and over $18 million of mine -site free cash flow driven by strong
performances from both Young-Davidson and Mulatos. This marked the highest level of quarterly mine -site free
cash flow since the merger of Alamos Gold and AuRico Gold in July 2015.
With gold production of 202,100 ounces in the first half of 2017 and stronger production exp ected in the second half
of the year, the Company is on track to meet full year guidance of 400,000 to 430,000 ounces. All -in sustaining
costs are expected to decrease in the second half of the year, consistent with guidance.
At Young-Davidson, production increased to a record 47,300 ounces of gold in the second quarter, and is expected
to range between 200,000 and 210,000 ounces for the year, driven by stronger underground mining rates and
higher underground grade s in the second half of the year. The third quarter has started strongly, with higher grade
stopes mined in the month of July averaging over 3.0 g/t Au, driving production to approximately 20,000 ounces, a
monthly record. In addition, the MCM waste pass system is nearing completion which will suppo rt higher
underground throughput rates in the second half of 2017. Finally, the installation of a pebble crusher to the mill
circuit is expected to be complete by the end of the third quarter driving increased mill throughput. All of these are
expected to contribute higher production, lower costs, and stronger free cash flow in the second half of the year.
Capital spending at Young-Davidson totaled $22.7 million in the second quarter and $41.3 million for the first half of
the year. The Company expects a lower rate of capital spending in the second half of the year, and is tracking to full
year 2017 guidance of $70 to $80 million.
Mulatos had another strong quarter, producing 41,000 ounces of gold. With production in the first half totaling
81,000 ounces, Mulatos is well positioned to meet full year guidance of 150,000 to 160,000 ounces. Mine -site all-in
sustaining costs decreased to $777 per ounce in the second quarter, down more than $100 per ounce from a year
ago, benefiting from higher grades stacked on the leach pad and lower sustaining capital spending. These
improved margins contributed to Mulatos generating $10.7 million of mine -site free cash flow, net of capital and
exploration spending (excluding La Yaqui Phase I development).
Development of La Yaqui Phase I is on budget, and is on schedule for initial production later this year. Development
activities in the second quarter were focused on construction of the independent heap leach pad, pre -stripping
activities, and stockpiling ore from the open pit.
In parallel to the development of La Yaqui Phase I, the Company continued its exploration program at La Yaqui
Grande and surrounding deposits in the Mulatos district. The Company remains focused on expanding its footprint
at Mulatos, with up to $17 million budgeted for exploration in 2017.
El Chanate produced 17,600 ounces of gold and generated $2.9 million of mine -site free cash flow in the second
quarter. The operation is on track to meet its production guidance of 50,000 to 60,000 ounces of gold in 20 17 at
mine-site all-in sustaining costs of $1,200 per ounce. As a mature, higher cost operation, the Company has hedged
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El Chanate’s 2017 gold production through gold collar contracts which ensure a minimum gold price of $1,242 per
ounce and participation up to a price of $1,409 per ounce. The Company expects the operation to generate
significant free cash flow through residual leaching at the conclusion of its mine life.
Development spending in 2017 remains focused on the Company's highest priority target s. The Company received
the Forestry Permits for Kirazlı in the first quarter, and is pursuing the GSM (Business Opening and Operation)
permit. In April, the Company's Board of Directors approved an increase to the 2017 capital budget of up to $30
million for Kirazlı in order to complete detailed engineering and commence construction activities on longer lead
time items, such as the water reservoir.
The Company is also in the process of completing a feasibility study for its Lynn Lake project, which is sch eduled to
be completed in the third quarter of 2017. During the second quarter, the Company purchased and canceled a
2.0% royalty interest on certain of the Lynn Lake concessions for consideration of $6.7 million (CAD $9 million).
This removes certain royalty obligations on the Lynn Lake project, which will improve project economics.
With the completion of the bought deal equity financing in February and subsequent repayment of the $315
million Notes in April, the Company is now debt free and has significa ntly de -risked its balance sheet. With a
substantial cash position, additional liquidity available under its revolving credit facility, and growing cash flow from
its operations, the Company is well positioned to fund its strong pipeline of growth projects .
Second Quarter 2017 Results
Young-Davidson Operational and Financial Review
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
Gold production (ounces) 47,300 42,644 87,700 81,709
Gold sales (ounces) 46,368 44,024 90,195 83,758
Financial Review (in millions)
Operating Revenues $58.5 $55.5 $112.1 $101.5
Cost of sales (1) $51.6 $52.0 $101.9 $93.9
Earnings from operations $6.9 $3.5 $10.2 $7.6
Cash provided by operating activities $27.3 $26.2 $45.8 $48.0
Capital expenditures (sustaining) (2) $9.9 $9.8 $16.0 $18.8
Capital expenditures (growth) (2) $12.8 $15.4 $25.3 $30.4
Mine-site free cash flow, before changes in working capital (2) $4.5 ($0.3 ) $8.4 ($2.3 )
Mine-site free cash flow (2) $4.6 $1.0 $4.5 ($1.2 )
Cost of sales, including amortization per ounce of gold sold (1) $1,113 $1,181 $1,130 $1,121
Total cash costs per ounce of gold sold (2) $677 $738 $693 $679
Mine-site all-in sustaining costs per ounce of gold sold (2),(3) $895 $965 $874 $907
Underground Operations
Tonnes of ore mined 580,351 557,206 1,156,370 1,082,803
Tonnes of ore mined per day ("tpd") 6,377 6,123 6,389 5,949
Average grade of gold (4) 2.60 2.40 2.58 2.48
Metres developed 3,425 3,168 6,667 6,658
Unit mining costs per tonne $33 $34 $34 $33
Unit mining costs per tonne (CAD$) $44 $44 $46 $43
Mill Operations
Tonnes of ore processed 629,470 637,503 1,324,094 1,305,639
Tonnes of ore processed per day 6,917 7,006 7,315 7,174
Average grade of gold (4) 2.45 2.12 2.31 2.10
Contained ounces milled 49,619 43,524 98,393 88,284
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").
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Young-Davidson produced a record 47,300 ounces of gold in the second quarter of 2017, 11% higher than the
same period of 2016 and 17% higher than the first quarter of 2017. The increase reflects higher underground
grades mined, improved mill recoveries a nd a drawdown of approximately 1,500 ounces of gold in inventory within
the mill circuit that built up in the first quarter. Strong production has continued into July, with higher underground
grades driving gold production to a new monthly record of approximately 20,000 ounces.
The Company mined 580,351 tonnes of ore from underground in the second quarter of 2017, or 6,377 tpd,
consistent with the first quarter of 2017 and a 4% increase from the prior year period. Underground mining rates are
expected to increase in the second half of 2017 after the MCM waste pass is completed in August. Increased
mining rates, combined with higher underground grades are expected to drive second half gold production higher
and total cash costs and mine-site AISC lower.
Underground grades in the second quarter were 2.60 g/t Au, slightly higher than the first quarter of 2017. Higher
grade stopes are now being mined in the third quarter with underground grades averaging over 3.0 g/t Au in the
month of July. The Company anti cipates mining higher grades throughout the second half of the year and expects
to average the reserve grade of approximately 2.7 g/t Au for the full year.
During the second quarter, 629,470 tonnes, or 6,917 tpd were processed through the mill with grades averaging
2.45 g/t Au. Mill throughput was lower than what was achieved in the first quarter of 2017 but higher than the same
period of 2016. In the second quarter, mill scats were recirculated instead of supplementing mill feed with lower
grade surface stockpiles. This drove processed grades 12% higher, more than offsetting the 10% decrease in mill
throughput, resulting in lower costs and stronger mine-site free cash flow.
The Company expects to continue operating the mill in this manner until the pebbl e crusher is installed and
commissioned late in the third quarter of 2017, at which point mill throughput is expected to reach steady state
levels of 8,000 tpd. Mill recoveries were consistent with expectations at 92%.
Financial Review
For the three months ended June 30, 2017, revenue of $58.5 million was $3.0 million, or 5% higher than the prior -
year period reflecting a higher number of ounces sold. For the first half of 2017, revenue of $112.1 million was
$10.6 million higher than the prior year, attributable to both higher ounces sold and realized gold price.
In the second quarter of 2017, cost of sales of $51.6 million were consistent with the prior year period. Cost of sales
reflects mining and processing costs, royalties, and amortization expense. For the first half of 2017, cost of sales of
$101.9 million were $8.0 million higher than the prior-year period as a result of a higher number of ounces sold.
Total cash costs in the second quarter were $677 per ounce, representing an 8% decrease from the seco nd quarter
of 2016. The decrease was attributable to higher underground grades mined in the second quarter of 2017.
Underground unit mining costs were $33 per tonne in the second quarter, 3% lower than the prior year period as a
result of increased mining rates. Mine-site all-in sustaining costs were $895 per ounce, 7% lower than the prior year
period reflecting the above noted lower costs and a similar level of sustaining capital spread across higher gold
production and sales in 2017. Both total cash cos ts and mine-site all-in sustaining costs are expected to trend lower
in the second half of 2017 as gold production increases reflecting a combination of higher underground mining rates
and higher-grade ore being mined.
Capital expenditures totaled $22.7 m illion in the quarter, a decrease of $2.5 million relative to the same period of
2016. For the first six months of 2017, capital expenditures of $41.3 million, were $7.9 million lower than in the
same period in 2016. Capital spending in the second quarter was focused primarily on lateral development, pebble
crusher installation, and completion of the excavation of the Northgate shaft to a depth of 1,500 metres. Total capital
expenditures in the second quarter included $9.9 million of sustaining capital and $12.8 million of growth capital.
Capital spending at Young -Davidson is expected to total between $70 and $80 million in 2017, a significant
reduction from 2016 levels.
Young-Davidson generated positive operating cash flow of $27.3 million and mine -site free cash flow of $4.6 million.
For the six months ended June 30, 2017, positive operating cash flow of $45.8 million was generated, $2.2 million
lower than the prior -year period. Higher underground mining rates and grades are expected to drive stronger
production and free cash flow growth through the remainder of 2017.
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Mulatos Operational and Financial Review
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
Gold production (ounces) 41,000 33,000 81,000 70,600
Gold sales (ounces) 40,265 34,865 78,940 67,597
Financial Review (in millions)
Operating Revenues $50.9 $43.9 $98.5 $81.8
Cost of sales (1) $36.3 $36.3 $76.3 $70.8
Earnings from operations $12.9 $7.3 $19.6 $10.4
Cash provided by operating activities $19.8 $18.2 $28.9 $25.2
Capital expenditures (sustaining) (2) $0.9 $3.8 $3.5 $5.2
Capital expenditures (Mulatos growth) (2),(6) $8.2 $5.4 $11.7 $8.4
Capital expenditures (La Yaqui Phase I growth) (2) $5.5 — $10.8 —
Mine-site free cash flow, before changes in working capital and
excluding La Yaqui capital expenditures (2) $10.6 $10.9 $19.4 $9.6
Mine-site free cash flow, excluding La Yaqui capital
expenditures (2) $10.7 $9.0 $13.7 $11.6
Cost of sales, including amortization per ounce of gold sold (1) $902 $1,041 $967 $1,047
Total cash costs per ounce of gold sold (2) $735 $757 $780 $784
Mine site all-in sustaining costs per ounce of gold sold (2),(3) $777 $883 $847 $882
Open Pit & Underground Operations
Tonnes of ore mined - open pit (4) 1,759,168 1,678,596 3,569,810 3,186,632
Total waste mined - open pit 1,372,143 2,272,266 3,262,887 4,529,651
Total tonnes mined - open pit 3,131,311 4,127,496 6,832,697 7,892,917
Waste-to-ore ratio (operating) 0.78 1.35 0.91 1.42
Tonnes of ore mined - underground 29,414 32,961 57,769 69,419
Crushing and Heap Leach Operations
Tonnes of ore crushed and placed on the heap leach pad 1,649,330 1,671,844 3,302,314 3,269,124
Average grade of gold processed (5) 0.97 0.79 0.91 0.80
Contained ounces stacked on the heap leach pad 51,564 42,243 96,290 84,468
Mill Operations
Tonnes of high grade ore milled 35,346 22,667 71,110 61,566
Average grade of gold processed (5) 10.56 9.49 9.71 12.93
Contained ounces milled 11,998 6,912 22,202 25,599
Total contained ounces stacked and milled 63,562 49,156 118,492 110,067
Recovery ratio (ratio of ounces produced to contained ounces
stacked and milled) 65 % 67 % 68 % 64 %
Ore crushed per day (tonnes) - combined 18,300 18,600 18,500 18,300
(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").
(6) Includes capitalized exploration, of $2.2 million and $4.6 million for the three and six months ended June 30, 2017.
Mulatos produced 41,000 ounces of gold in the second quarter of 2017, a 24% increase from the prior year period,
driven by higher production from both the heap leach operation and the mill.
The open pit operations continued to perform well during the second quarter. Total crusher throughput averaged
18,300 tpd, slightly lower than the same period of 2016. A total of 1,649,330 tonnes were stacked at a grade of
0.97 g/t Au in the second quarter. The waste -to-ore ratio of 0.78:1 was consistent with guidance and down sharply
from a year ago.
Underground tonnes mined from San Carlos during the quarter were slightly lower than the same period of 2016
with the deposit expected to r each the end of its current mineral reserve life in the third quarter of 2017. The
Company is continuing its underground exploration program to the east of San Carlos, with the objective of
delineating additional mineral reserves.
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In the second quarter, 3 5,346 tonnes were milled at an average grade of 10.56 g/t Au. Both tonnes and grades
milled increased from a year ago driving stronger mill production in the second quarter of 2017. Tonnes processed
through the mill exceeded tonnes mined from underground as high grade stockpiles were drawn down to
supplement the mill feed. The Company had approximately 35,000 tonnes remaining in high grade stockpiles at the
end of June to supplement underground mining rates. Based on currently known mineral reserves and st ockpiles,
mill production is scheduled to cease in the fourth quarter of 2017.
The ratio of ounces produced to contained ounces stacked and milled (or recovery ratio) was 65% in the quarter
compared to 67% in the prior year period, as higher recoveries fro m the mill circuit were offset by a lower recovery
ratio from the heap leach pad. The Company stacked the highest grades late in the quarter, which resulted in a
lower recovery ratio.
Financial Review
For the three months ended June 30, 2017, revenue of $5 0.9 million was $7.0 million, or 16% higher than the prior -
year period with the increase reflecting higher ounces sold. For the first half of 2017, revenue of $98.5 million was
$16.7 million higher than the prior year, attributable to both higher ounces sold and a higher realized gold price.
Cost of sales in the second quarter were $36.3 million and unchanged from the prior -year period as increased sales
were offset by a lower cost of sales per ounce. Cost of sales reflects mining and processing costs, roya lties, and
amortization expense. For the first half of 2017, cost of sales of $76.3 million were $5.5 million higher than the prior -
year period as a result of higher ounces sold and longer haulage distances, partially offset by a lower depreciation
per ounce in 2017.
Total cash costs of $735 per ounce in the second quarter were lower than $757 per ounce in the prior year period,
reflecting higher grades and a lower waste-to-ore ratio. Mine-site all-in sustaining costs in the quarter were $777 per
ounce, $106 or 12% lower than the prior year period as a result of lower sustaining capital.
Mulatos had another strong quarter, generating $10.7 million in mine -site free cash flow, excluding $5.5 million of
construction and development spending at La Yaqui Phase I ($10.8 million year -to-date). Mulatos' free cash flow
reflects higher gold sales and lower sustaining capital. The Company expects free cash flow growth in the second
half of 2017 with initial production from La Yaqui Phase I.