Alamos Reports Second Quarter 2019 Results Strong Margin Expansion Drives Record Cash Flow From Operations of $72 Million
Alamos Reports Second Quarter 2019 Results
Strong Margin Expansion Drives Record Cash Flow From Operations of $72 Million
TORONTO, July 31, 2019 -- Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial
results for the quarter ended June 30, 2019.
“Our operations performed well across the board in the second quarter. Gold production was in line with guidance while total
cash costs were down 16% year-over-year, driving stronger margins and record cash flow from operations. This was
highlighted by another record quarter of production from Island Gold where we continue to see excellent exploration results.
With solid first half performance, we are well positioned to meet full year production and cost guidance,” said John A.
McCluskey, President and Chief Executive Officer.
“The lower mine expansion at Young-Davidson is progressing well and construction activities at our Cerro Pelon and Kirazlı
projects continue. Each remain on track and we are now less than a year away from starting to see the benefit from these
projects through strong free cash flow growth,” Mr. McCluskey added.
Second Quarter 2019
• Produced 125,200 ounces of gold, in-line with guidance and the second quarter of 2018
• Record gold production of 39,500 ounces at Island Gold. This marks the third consecutive quarter of record production,
driving mine-site free cash flow of $11.7 million at Island Gold. Through the first half of 2019, Island Gold produced
75,100 ounces and generated $28.3 million of mine-site free cash flow1
• Achieved underground mining rates of 6,700 tonnes per day ("tpd") at Young-Davidson, and produced 45,000 ounces of
gold, consistent with annual guidance
• Record cash flow from operating activities of $72.3 million ($69.7 million, or $0.18 per share, before changes in working
capital1), reflecting higher operating margins driven by lower costs, and higher gold sales
• Consolidated total cash costs 1 of $699 per ounce were below the low end of guidance, and $133 per ounce, or 16%
lower than the second quarter of 2018, driven by low cost production at Island Gold and lower than budgeted costs at
Mulatos
• All-in sustaining costs ("AISC") 1 of $926 per ounce, and cost of sales of $1,021 per ounce were both at the low end of
annual guidance, and down 7% and 12%, respectively, from the second quarter of 2018
• Sold 128,457 ounces of gold at an average realized price of $1,309 per ounce, in-line with the average London PM Fix,
for revenues of $168.1 million
• Reported adjusted net earnings1 of $17.7 million, or $0.05 per share1, which includes adjustments for unrealized foreign
exchange gains recorded within both deferred taxes and foreign exchange of $7.1 million, partially offset by other one-
time losses totaling $1.2 million
• Realized net earnings of $23.6 million, or $0.06 per share
• Ended the quarter with cash and cash equivalents of $183.2 million and no debt
• Repurchased 0.2 million shares in the quarter, for a total of 2.7 million shares repurchased and canceled during the first
half of 2019 at a cost of $11.4 million, or $4.17 per share.
• Received permit approval for the Phase II expansion of Island Gold to 1,200 tpd
• Advanced construction activities at both the Kirazlı project in Turkey and the Cerro Pelon project in Mexico
• Received approval of the environmental impact assessment for La Yaqui Grande project in Mexico during the second
quarter and the Change in Land Use permit in July 2019
• Continued to demonstrate exploration success at Island Gold with results from surface exploration drilling further
extending high-grade gold mineralization between the Eastern and Main extensions
(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.
Highlight Summary
Three Months
Ended June 30,
Six Months Ended
June 30,
2019 2018 2019 2018
Financial Results (in millions)
Operating revenues $168.1 $168.9 $324.2 $342.0
Cost of sales (1) $131.1 $150.0 $258.1 $294.7
Earnings from operations $28.2 $9.6 $46.9 $28.1
Net earnings (loss) $23.6 ($8.9) $40.4 ($8.3)
Adjusted net earnings (2) $17.7 $4.9 $28.0 $17.2
Cash provided by operations before working
capital and cash taxes (2) $69.7 $54.7 $131.4 $117.3
Cash provided by operating activities $72.3 $62.5 $114.7 $121.3
Capital expenditures (sustaining) (2) $19.6 $12.1 $35.7 $22.8
Capital expenditures (growth) (2) $47.2 $35.7 $81.3 $72.3
Capital expenditures (capitalized exploration)
(3) $4.3
$5.6
$7.4
$9.8
Operating Results
Gold production (ounces) 125,200 126,500 250,500 255,400
Gold sales (ounces) 128,457 129,272 248,162 259,317
Per Ounce Data
Average realized gold price $1,309 $1,307 $1,306 $1,319
Average spot gold price (London PM Fix) $1,309 $1,306 $1,307 $1,318
Cost of sales per ounce of gold sold (includes
amortization) (1) $1,021 $1,160 $1,040 $1,136
Total cash costs per ounce of gold sold (2) $699 $832 $715 $811
All-in sustaining costs per ounce of gold sold
(2) $926 $996 $941 $966
Share Data
Earnings (loss) per share, basic and diluted $0.06 ($0.02) $0.10 ($0.02)
Adjusted earnings per share, basic and diluted
(2) $0.05 $0.01 $0.07 $0.04
Weighted average common shares outstanding
(basic) (000’s) 389,218 389,602 389,475 389,429
Financial Position (in millions)
Cash and cash equivalents (4) $183.2 $235.1
(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 at Mulatos and Island Gold.
(4) Comparative cash and cash equivalents balance as at December 31, 2018.
Three Months Ended June
30, Six Months Ended June 30,
2019 2018 2019 2018
Gold production (ounces)
Young-Davidson 45,000 39,100 90,000 80,100
Mulatos 36,300 50,600 75,200 96,600
Island Gold 39,500 26,700 75,100 54,800
El Chanate (1) 4,400 10,100 10,200 23,900
Gold sales (ounces)
Young-Davidson 44,665 42,006 88,661 86,796
Mulatos 40,116 49,326 76,205 93,985
Island Gold 39,300 27,257 72,885 54,760
El Chanate (1) 4,376 10,683 10,411 23,776
Cost of sales (in millions)(2)
Young-Davidson $57.1 $56.7 $114.0 $113.7
Mulatos $35.8 $49.2 $69.6 $92.8
Island Gold $32.4 $28.0 $61.0 $55.5
El Chanate $5.8 $16.1 $13.5 $32.7
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,278 $1,350 $1,286 $1,310
Mulatos $892 $997 $913 $987
Island Gold $824 $1,027 $837 $1,014
El Chanate $1,325 $1,507 $1,297 $1,375
Total cash costs per ounce of gold sold (3)
Young-Davidson $822 $890 $830 $856
Mulatos $725 $795 $734 $791
Island Gold $473 $587 $484 $570
El Chanate $1,234 $1,404 $1,210 $1,279
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
Young-Davidson $1,077 $1,083 $1,073 $1,037
Mulatos $815 $854 $812 $848
Island Gold $631 $668 $639 $650
El Chanate $1,257 $1,442 $1,220 $1,304
Capital expenditures (sustaining, growth and capitalized exploration) (in millions)(3)
Young-Davidson $26.7 $18.5 $49.0 $41.4
Mulatos(5) $19.2 $9.5 $31.8 $16.7
Island Gold (6) $18.0 $17.6 $30.4 $31.5
El Chanate $— $0.2 $— $0.3
Other $7.2 $7.6 $13.2 $15.0
(1) El Chanate ceased mining activities in October 2018 and transitioned to residual leaching.
(2) Cost of sales includes mining and processing costs, royalties and amortization.
(3) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and
associated MD&A for a description and calculation of these measures.
(4) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate
and administrative and share based compensation expenses.
(5) Includes capitalized exploration at Mulatos of $nil for the three and six months ended June 30, 2019 ($0.9 and $2.0 million
for the three and six months ended June 30, 2018).
(6) Includes capitalized exploration at Island Gold of $4.3 million and $7.4 million for the three and six months ended June 30,
2019 ($4.7 million and $7.8 million for the three and six months ended June 30, 2018).
Outlook and Strategy
2019 Guidance
Young-
Davidson Mulatos
Island
Gold El Chanate Turkey Other (2) Total
Gold production (000’s ounces) 180-190 150-160 135-145 15-25 480-520
Cost of sales, including
amortization (in millions)(4) $226 $165 $120 $26 — — $537
Cost of sales, including
amortization ($ per ounce)(4) $1,220 $1,065 $855 $1,300 — — $1,075
Total cash costs ($ per ounce)(1) $750-790 $820-860 $460-500 $1,200 — — $710-750
All-in sustaining costs
($ per ounce)(1) — — $920-960
Mine-site all-in sustaining
costs
($ per ounce)(1),(3)
$940-980 $860-900 $730-770 $1,200 — — —
Amortization costs
($ per ounce)(1) $450 $225 $375(6) $100 — — $345
Capital expenditures (in
millions)
Sustaining capital(1) $35-40 $5 $35-40 — — — $75-85
Growth capital(1) $45-50 $45-50 (5) $15-20 — $75 $35 (2) $215-230
Total capital expenditures (1) $80-90 $50-55 $50-60 — $75 $35 $290-315
(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 (excluding Turkey which is separately
disclosed).
(3) For the purposes of calculating mine-site all-in sustaining costs at individual mine sites, the Company does not include an
allocation of corporate and administrative and share based compensation expenses to the mine sites.
(4) Cost of sales includes mining and processing costs, royalties, and amortization expense, and is calculated based on the
mid-point of guidance.(5) Includes capital spending at Cerro Pelon and La Yaqui Grande of approximately $33 million
(6) Amortization per ounce was updated for Island Gold, reflecting the 2018 Mineral Reserves and Resource Statement
released in February 2019.
In the second quarter of 2019, the Company delivered on its strategic objectives through expanding margins and profitability
from its existing operations, while advancing its portfolio of low cost development projects. Consolidated production of 125,200
ounces was in line with guidance while total cash costs of $699 per ounce were below the low end of annual guidance and a
substantial improvement from the second quarter of 2018. The decrease in total cash costs in the quarter was driven by low
cost production growth at Island Gold and higher grades mined at Mulatos. With year-to-date production of 250,500 ounces at
total cash costs of $715 per ounce, the Company is well positioned to meet its full year production and cost guidance.
Looking forward, the Company expects third quarter production to be in a similar range as the second quarter. Total cash
costs are expected to increase to within the range of annual guidance and all-in sustaining costs are expected to increase to
the higher-end of the annual guidance range reflecting higher sustaining capital at Island Gold.
The near-term focus at Young-Davidson remains on maximizing efficiency from the upper mine infrastructure, while completing
development and construction of the lower mine. Gold production in the second quarter of 45,000 ounces was consistent with
guidance, while underground mining rates increased to over 6,700 tpd, above guidance of 6,500 tpd and the highest level since
2017. With production of 90,000 ounces through the first half of the year, Young-Davidson is on track to meet full year
production guidance of 180,000 to 190,000 ounces.
As the lower mine expansion nears completion, approximately three months of downtime of the Northgate shaft is required to
facilitate the tie-in of the upper and lower mines. Accordingly, and as previously guided, gold production from Young-Davidson
is expected to be lower in the first half of 2020. Following completion of the tie-in in the first half of 2020, underground mining
rates are expected to ramp up above 7,500 tpd in the second half of 2020. This is expected to drive annual gold production
above 200,000 ounces per year in 2021 and beyond. This production increase, combined with declining costs and capital
spending, is expected to result in strong free cash flow growth from Young-Davidson starting in the second half of 2020.
Island Gold produced a record 39,500 ounces of gold in the second quarter for its third consecutive quarter of record
production. Year-to-date, Island Gold has produced 75,100 ounces, putting it on track to meet or exceed full year production
guidance of 135,000 to 145,000 ounces. Additionally, Island Gold generated $11.7 million of mine-site free cash flow in the
second quarter, bringing the first half total to $28.3 million, net of all capital and exploration spending. Island Gold's sustaining
capital spending and mine-site AISC are expected to increase in the second half of 2019, bringing mine-site AISC in-line with
annual guidance.
The Phase I expansion at Island Gold was completed in 2018, expanding the mill to a design capacity of approximately 1,200
tpd. During the second quarter, the Company was granted amendments to its existing operating permits allowing for an
increase in throughput rates from 1,100 tpd to 1,200 tpd. Underground mining rates are expected to increase to 1,200 tpd in
2020. In parallel, the Company is continuing with a large ongoing exploration program at Island Gold which has been
successful in driving significant growth in Mineral Reserves and Resources over the last several years. This growth and
ongoing exploration success is being incorporated into a Phase III expansion study of the operation beyond 1,200 tpd.
Production from the Mulatos District totaled 36,300 ounces in the second quarter, bringing the first half total to 75,200 ounces.
The operation remains on track to meet annual guidance of 150,000 to 160,000 ounces. Total cash costs and mine-site AISC
in the first half of the year have outperformed annual guidance, benefiting from higher grades mined and low-cost concentrate
sales. Both costs are expected to return to guided levels in the second half of the year as mining at La Yaqui Phase I winds
down.
Construction of the higher grade, high return Cerro Pelon project is advancing on schedule. Development activities during the
quarter were focused on construction of the haulage roads, crusher installation, and initial pre-stripping activities. Initial low
cost production remains on track for early 2020.
Mining activities ceased at El Chanate in the fourth quarter of 2018 and the operation has transitioned to residual leaching
which is anticipated to result in a declining rate of production throughout 2019. El Chanate has generated $2.2 million in free
cash flow year-to-date.
Construction at the Kirazlı project in Turkey ramped up during the second quarter. This included advancing construction on the
water reservoir and power line, completing clearing and grubbing of the project site and initiating earthworks, with the civil
works contractor having mobilized to site in June. Spending at Kirazlı represents the majority of the Company's development
capital budget in 2019. The remaining development capital spending will be comprised of capitalized exploration at Island Gold
and exploration, permitting and development activities at Lynn Lake.
The 2019 global exploration budget is $33 million, with $19 million allocated for exploration at Island Gold. Mulatos and Lynn
Lake remain the other two areas of focus with $6 million budgeted for each. The Company has spent $12.8 million on
exploration activities to date in 2019 and expects to ramp up drilling activities in the second half of the year.
The Company’s long-term strategic objective is to generate increasing free cash flow through low-cost production growth from
its existing operations and portfolio of development projects. With $183 million of cash and cash equivalents, no debt, and
growing cash flow from its operations, the Company is well positioned to fund its internal growth initiatives.
Second Quarter 2019 Results
Young-Davidson Financial and Operational Review
Three Months Ended
June 30,
Six Months Ended June
30,
2019 2018 2019 2018
Gold production (ounces) 45,000 39,100 90,000 80,100
Gold sales (ounces) 44,665 42,006 88,661 86,796
Financial Review (in millions)
Operating Revenues $58.6 $55.1 $116.0 $114.6
Cost of sales (1) $57.1 $56.7 $114.0 $113.7
Earnings from operations $1.5 ($1.6) $2.0 $0.9
Cash provided by operating activities $23.6 $22.5 $46.5 $49.9
Capital expenditures (sustaining) (2) $11.2 $7.9 $21.2 $15.5
Capital expenditures (growth) (2) $15.5 $10.6 $27.8 $25.9
Mine-site free cash flow (2) ($3.1) $4.0 ($2.5) $8.5
Cost of sales, including amortization per ounce of gold sold (1) $1,278 $1,350 $1,286 $1,310
Total cash costs per ounce of gold sold (2) $822 $890 $830 $856
Mine-site all-in sustaining costs per ounce of gold sold (2),(3) $1,077 $1,083 $1,073 $1,037
Underground Operations
Tonnes of ore mined 612,213 553,883 1,200,847 1,138,943
Tonnes of ore mined per day ("tpd") 6,728 6,087 6,635 6,293
Average grade of gold (4) 2.42 2.35 2.48 2.36
Metres developed 2,877 3,079 5,777 6,223
Mill Operations
Tonnes of ore processed 683,946 598,196 1,293,873 1,267,483
Tonnes of ore processed per day 7,516 6,574 7,148 7,003
Average grade of gold (4) 2.26 2.17 2.36 2.20
Contained ounces milled 49,661 41,798 98,176 87,992
Average recovery rate 91% 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.
(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 45,000 ounces of gold in the second quarter of 2019, 15% higher than the comparative quarter of
2018, reflecting higher tonnes and grades mined. The operation remains on track to achieve 2019 guidance with production of
90,000 ounces in the first half of the year.
Underground mining rates of 6,728 tpd were above 2019 guidance, and an 11% improvement from the second quarter of 2018.
Mining rates are expected to remain at guided levels of 6,500 tpd until the lower-mine tie-in is completed in the first half of
2020. Underground grades mined of 2.42 g/t Au were lower than annual guidance due to mine sequencing, but improved 3%
relative to the second quarter of 2018. Grades mined are expected to increase in the second half of the year, in line with
annual guidance.
Mill throughput of 7,516 tpd was higher than the second quarter of 2018, with the prior year impacted by unplanned
maintenance which resulted in mill downtime. Milling rates also increased from the first quarter as the operation resumed
supplementing underground throughput with low-grade surface stockpiles. Mill throughput in the third quarter will continue to
benefit from surface stockpiles until the end of the quarter when the stockpiles are expected to be depleted. Mill throughput
will then decline to match underground mining rates. Mill recoveries of 91% in the quarter were in line with guidance.
Financial Review
Second quarter revenues of $58.6 million were 6% above the prior year quarter, reflecting a 6% increase in ounces sold. For
the first half of 2019, revenues of $116.0 million were $1.4 million higher than the prior year, attributable to more ounces sold.
Cost of sales (which includes mining and processing costs, royalties, and amortization expense) of $57.1 million were
consistent with the comparative quarter of 2018, as were underground mining costs of approximately CAD$53 per tonne.
Amortization of $457 per ounce was also consistent with the prior year period and annual guidance. Cost of sales for the first
half of 2019 were $114.0 million and consistent with the prior year period.
Total cash costs of $822 per ounce in the second quarter were 7% below the comparative period, but slightly above annual
guidance as a result of lower grades mined in the quarter and higher maintenance costs. For the first half of 2019, total cash
costs of $830 per ounce were 3% lower than the prior year period. Total cash costs are expected to decrease in the second
half of the year reflecting higher underground grades mined.
Mine-site AISC of $1,077 per ounce were in line with the second quarter of 2018 and above 2019 guidance, reflecting the
timing of sustaining capital expenditures on the new tailings facility and equipment rebuilds. In the first half of 2019, sustaining
capital totaled $21.2 million, or 60% of the full year budget. Mine-site AISC for the six-month period were $1,073 per ounce, or
4% higher than the prior year period due to similar factors. Full year total cash costs and mine-site AISC are both expected to
be within 2019 guidance as underground grades mined increase and sustaining capital spending decreases in the second half
of the year.
Capital expenditures were $26.7 million in the second quarter. This included $11.2 million of sustaining capital and $15.5
million of growth capital. For the six-month period, capital expenditures of $49.0 million were focused on lower mine
construction, lateral development in the upper and lower mines, and construction of the new tailings facility.
Mine-site free cash flow at Young-Davidson was negative $3.1 million in the second quarter, lower than the same period of
2018 due to higher capital spending. On a year-to-date basis mine-site free cash flow was negative $2.5 million. Since 2016,
Young-Davidson has generated sufficient cash flow from operations to finance all of its capital spending, including the lower
mine expansion. The lower mine expansion remains on track for completion in the first half of 2020.
Island Gold Financial and Operational Review
Three Months Ended
June 30,
Six Months Ended June
30,
2019 2018 2019 2018
Gold production (ounces) 39,500 26,700 75,100 54,800
Gold sales (ounces) 39,300 27,257 72,885 54,760
Financial Review (in millions)
Operating Revenues $51.3 $35.7 $95.1 $72.3
Cost of sales (1) $32.4 $28.0 $61.0 $55.5
Earnings from operations $18.7 $7.7 $33.7 $16.7
Cash provided by operating activities $29.7 $22.0 $58.7 $45.7
Capital expenditures (sustaining) (2) $6.2 $2.2 $11.3 $4.4
Capital expenditures (growth) (2) $7.5 $10.7 $11.7 $19.3
Capital expenditures (capitalized exploration) (2) $4.3 $4.7 $7.4 $7.8
Mine-site free cash flow (2) $11.7 $4.4 $28.3 $14.2
Cost of sales, including amortization per ounce of gold sold (1) $824 $1,027 $837 $1,014
Total cash costs per ounce of gold sold (2) $473 $587 $484 $570
Mine-site all-in sustaining costs per ounce of gold sold (2),(3) $631 $668 $639 $650
Underground Operations
Tonnes of ore mined 90,141 82,097 187,653 166,752
Tonnes of ore mined per day ("tpd") 991 902 1,037 921
Average grade of gold (4) 14.53 7.34 12.90 9.23
Metres developed 1,568 1,771 2,989 3,327
Mill Operations
Tonnes of ore processed 102,803 88,776 204,800 170,881
Tonnes of ore processed per day 1,130 976 1,131 944
Average grade of gold (4) 12.23 8.71 11.68 9.84
Contained ounces milled 40,438 24,861 76,884 54,085
Average recovery rate 97% 97% 97% 96%
(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").
Island Gold produced a record 39,500 ounces in the second quarter, the third consecutive quarter of record production. This
marked a 48% increase from the second quarter of 2018 driven by higher mining and milling rates and grades mined. The
operation realized another strong quarter of mine-site free cash flow, generating $11.7 million in the quarter and bringing the
year-to-date total to $28.3 million.
Underground mining rates were 991 tpd in the second quarter, a 10% improvement from the second quarter of 2018.
Underground mining rates averaged 1,037 tpd for the first half of the year, and are expected to increase in the second half,
consistent with full year guidance of 1,100 tpd. Underground grades mined averaged 14.53 g/t Au in the second quarter, above
annual guidance reflecting sequencing as mining was active in the high grade transverse stopes, which performed well.
Mill throughput increased to 1,130 tpd in the second quarter, a 16% increase compared to the prior year quarter, reflecting the
completion of the Phase I expansion of the mill in 2018. Milling rates exceeded mining rates, as tonnes mined in the quarter
were supplemented with existing surface stockpiles. Mill recoveries were 97% in the second quarter, in line with the prior year
and guidance.
Financial Review
Island Gold generated revenues of $51.3 million in the second quarter, increasing 44% compared to the prior year period
reflecting record ounces sold. For the first half of 2019, revenues of $95.1 million were $22.8 million higher than the prior year,
primarily attributable to more ounces sold.
Cost of sales (includes mining and processing costs, royalties, and amortization expense) of $32.4 million, were 16% higher
than the comparative period, reflecting more ounces sold. Cost of sales decreased 20% on a per ounce basis, driven by higher
grades mined and lower amortization. Cost of sales for the first half of 2019 of $61.0 million increased 10% from the prior year
period due to higher gold sales.
Total cash costs were $473 per ounce in the second quarter, a 19% improvement from the comparative quarter, driven by
higher grades mined. Unit mining costs were CAD$158 per tonne, consistent with the prior year. Total cash costs were
consistent with guidance in the quarter. For the first half of 2019, total cash costs of $484 per ounce were 15% lower than the
prior year period due to higher mining rates and grade mined.
Mine-site AISC of $631 per ounce in the second quarter were below the full year guidance range of $730 to $770 per ounce,
reflecting lower sustaining capital spending. Mine-site AISC for the first half of 2019 of $639 per ounce were 2% lower than the
prior year period. Year-to-date, the Company has incurred $11.3 million of sustaining capital, or 30% of full year guidance
(based on the mid-point). Sustaining capital will increase in subsequent quarters of 2019, which is expected to result in higher
mine-site AISC in the second half of the year.
Total capital expenditures were $18.0 million in the second quarter, with spending focused on lateral development, mining
equipment, and capitalized exploration. This included $6.2 million of sustaining capital and $11.8 million of growth capital
(inclusive of capitalized exploration). For the six-month period, capital expenditures of $30.4 million were consistent with the
prior year period.
Island Gold generated mine-site free cash flow of $11.7 million during the second quarter driven by record gold production,
strong operating margins, and lower capital spending. Through the first half of 2019, Island Gold has generated $28.3 million of
mine-site free cash flow. This strong performance is net of a significant ongoing investment in exploration focused on further
expanding Mineral Reserves and Resources with $19 million budgeted for 2019.
Mulatos Financial and Operational Review
Three Months Ended
June 30,
Six Months Ended June
30,
2019 2018 2019 2018
Gold production (ounces) 36,300 50,600 75,200 96,600
Gold sales (ounces) 40,116 49,326 76,205 93,985
Financial Review (in millions)
Operating Revenues $52.5 $64.1 $99.6 $123.7
Cost of sales (1) $35.8 $49.2 $69.6 $92.8
Earnings from operations $15.9 $13.2 $28.3 $25.9
Cash provided by operating activities $23.2 $24.1 $23.8 $40.2
Capital expenditures (sustaining) (2) $2.2 $1.8 $3.2 $2.6
Capital expenditures (growth) (2) $17.0 $6.8 $28.6 $12.1
Capital expenditures (capitalized exploration) (2) $— $0.9 $— $2.0
Mine-site free cash flow, before changes in working capital $4.0 $14.6 ($8.0) $23.5
Cost of sales, including amortization per ounce of gold sold (1) $892 $997 $913 $987
Total cash costs per ounce of gold sold (2) $725 $795 $734 $791
Mine site all-in sustaining costs per ounce of gold sold (2),(3) $815 $854 $812 $848
Open Pit & Underground Operations
Tonnes of ore mined - open pit (4) 2,107,590 2,266,642 3,943,323 4,456,376
Total waste mined - open pit 1,697,419 1,851,050 3,675,258 3,849,656
Total tonnes mined - open pit 3,805,009 4,640,240 7,618,581 9,510,622
Waste-to-ore ratio (operating) 0.81 0.82 0.67 0.86
Tonnes of ore mined - underground — 21,284 — 38,907
Crushing and Heap Leach Operations
Tonnes of ore stacked 1,962,436 1,802,109 3,837,992 3,552,580
Average grade of gold processed (5) 0.94 0.88 0.96 0.86
Contained ounces stacked 59,609 50,909 118,783 98,267
Mill Operations
Tonnes of high grade ore milled — 31,485 — 61,874
Average grade of gold processed (5) — 5.94 — 7.00
Contained ounces milled — 6,012 — 13,929
Total contained ounces stacked and milled 59,609 56,921 118,783 112,196
Average recovery rate 61% 89% 63% 86%
Ore crushed per day (tonnes) - combined 21,600 20,100 21,200 20,000
(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 ore stockpiled during the quarter.
(5) Grams per tonne of gold ("g/t Au").
Mulatos produced 36,300 ounces in the second quarter of 2019, bringing year-to-date production to 75,200 ounces, consistent
with annual guidance. Second quarter production was down from the prior year period with mining from the San Carlos
underground deposit having ceased in the third quarter of 2018.
The Company is currently mining from the Mulatos, Victor, La Yaqui Phase I and San Carlos open pits, having completed pre-
stripping of the San Carlos pit at the end of the first quarter. Total ore tonnes mined and the waste-to-ore ratio in the second
quarter were consistent with the prior year quarter. In the second half of the year, mining activities at La Yaqui Phase I will
wind down. Offsetting this, the Company expects to begin stacking ore from Cerro Pelon later this year.
Total crusher throughput averaged 21,600 tpd for a total of 1,962,436 tonnes stacked in the second quarter at a grade of 0.94
g/t Au. Grades stacked were near the upper end of guidance as the Company resequenced mining activities, with an
increased contribution from the San Carlos open pit in the second quarter.
The recovery ratio of ounces produced to contained ounces stacked was 61% in the quarter, lower than guidance, due to
stacking higher grade ore at the end of the second quarter.
Financial Review
Second quarter revenues of $52.5 million were $11.6 million lower than the prior year quarter, primarily due to lower
concentrate ounces sold with the completion of mining at the San Carlos underground deposit in September 2018. For the first
half of 2019, revenues of $99.6 million were $24.1 million lower than the prior year.
Cost of sales (includes mining and processing costs, royalties, and amortization expense) were $35.8 million in the second
quarter, lower than the prior year period due to a lower number of tonnes mined and ounces sold. Amortization expense of
$167 per ounce was below the prior year period. Cost of sales for the first half of 2019 of $69.6 million were 25% lower due to
lower tonnes mined and ounces sold.
Total cash costs of $725 per ounce in the second quarter were lower than the prior year quarter, as the 5% royalty payable to
a third party ended in the first quarter of 2019 after Mulatos produced its two millionth ounce of gold. This reduced costs by
$65 per ounce compared to the prior year period. In addition, total cash costs were below guided levels, driven by higher
grades stacked in the quarter and the final settlement of low-cost ounces sold from concentrate. For the first half of 2019, total
cash costs of $734 per ounce were 7% lower than the prior year period. The Company expects second half total cash costs to
normalize to guided levels as low cost production from La Yaqui Phase I winds down.
Mine-site AISC of $815 per ounce in the second quarter were lower than the prior year quarter, consistent with the
improvement in total cash costs. Mine-site AISC for the first half of 2019 of $812 per ounce were 4% lower than the prior year
period due to similar factors. The Company expects second half mine-site AISC to be in line with full year guidance.
Capital spending in the quarter was focused on expansion projects at Mulatos, including Cerro Pelon and the leach pad
expansion. Total capital spending for the quarter was $19.2 million, of which $2.2 million was sustaining capital. For the six-
month period, capital expenditures of $31.8 million were $15.1 million higher than the prior year period due primarily to the
construction of the Cerro Pelon mine.
Mulatos reported positive mine-site free cash-flow of $4.0 million in the second quarter, as stronger operating margins were
partially offset by higher growth capital spending. Mine-site free-cash flow is expected to be neutral for the remainder of the
year as construction of Cerro Pelon is completed.
El Chanate Financial and Operational Review
Three Months Ended June
30,
Six Months Ended June
30,
2019 2018 2019 2018