Alamos Reports Third Quarter 2019 Results Further margin expansion drives record cash flow from operations of $80 million
Alamos Reports Third Quarter 2019 Results
Further margin expansion drives record cash flow from operations of $80 million
TORONTO, Oct. 30, 2019 -- Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its
financial results for the quarter ended September 30, 2019.
“Our third quarter results were solid, driven by strong performances from Young-Davidson and Island Gold. Total cash costs
were down 11% from a year ago and combined with the higher gold price, we generated record operating cash flow, before
changes in working capital. With the strong year-to-date performance we remain well positioned to meet our full year
production and cost guidance,“ said John A. McCluskey, President and Chief Executive Officer.
“We are disappointed by the delay in the renewal of our mining concessions for Kirazlı but are confident we will see a positive
resolution. Our other internal growth initiatives at Mulatos and Young-Davidson are progressing well. Construction of Cerro
Pelon is tracking ahead of schedule and we expect first production by the end of this year. At Young-Davidson, the lower mine
expansion remains on schedule for completion in the first half of 2020 and will be a significant driver of free cash flow growth
from the operation starting in the second half of 2020,” Mr. McCluskey added.
Third Quarter 2019
• Produced 121,900 ounces of gold, bringing year-to-date production to 372,400 ounces. The Company remains well
positioned to meet full year guidance of 480,000 to 520,000 ounces
• Strong gold production of 36,700 ounces at Island Gold, driving record mine-site free cash flow1 of $26.8 million.
Through the first nine months of 2019, Island Gold produced 111,800 ounces and generated mine-site free cash flow1 of
$55.1 million, both new records for the operation
• Produced 50,000 ounces of gold at Young-Davidson and exceeded budgeted underground mining rates of 6,500 tonnes
per day ("tpd") for the third consecutive quarter while advancing construction of the lower mine expansion. The
completion of the lower mine expansion and tie-in of the upper and lower mines remains on track for completion in the
first half of 2020
• Cash flow from operating activities of $67.9 million (a record $79.8 million, or $0.20 per share, before changes in
working capital1), reflecting higher gold prices and operating margins
• Consolidated total cash costs 1 of $730 per ounce were in line with annual guidance and 11% lower than the third
quarter of 2018, driven by low cost production growth at Island Gold and improved costs at Young-Davidson
• All-in sustaining costs ("AISC") 1 decreased 9% from the third quarter of 2018 to $950 per ounce. Year-to-date AISC of
$944 per ounce remain within the annual guidance range
• Cost of sales of $1,066 per ounce were slightly below annual guidance and down 7% from the third quarter of 2018
• Sold 119,392 ounces of gold at an average realized price of $1,448 per ounce for revenues of $172.9 million
• Reported adjusted net earnings1 of $23.4 million, or $0.06 per share1, includes adjustments for unrealized foreign
exchange losses recorded within deferred taxes of $6.5 million, partially offset by other one-time gains totaling $0.8
million
• Realized net earnings of $17.7 million or $0.05 per share
• Cash and cash equivalents increased to $185.6 million, driven by positive free cash flow1 in the quarter. The Company
remains debt free
• 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. Based on exploration success to
date in 2019, the Company anticipates further growth in high-grade Mineral Resources
• Received the "Best Corporate Social Responsibility Practice 2019" award in the category of Connecting with the
Community from the Mexican Center for Philanthropy, the Alliance for Corporate Social Responsibility in Mexico, and
Forum Empresa for the Company's voluntary relocation program of residents from Mulatos to Matarachi
Subsequent to quarter-end
• Announced the suspension of construction activities at the Kirazlı project in Turkey pending the renewal of the
Company's mining concessions which expired on October 13, 2019
• Completed commissioning of the Cerro Pelon crusher and conveyor system, and commenced stacking ore from the
deposit
(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 September
30,
Nine Months Ended
September 30,
2019 2018 2019 2018
Financial Results (in millions)
Operating revenues $172.9 $146.7 $497.1 $488.7
Cost of sales (1) $127.3 $137.6 $385.4 $432.3
Earnings from operations $37.5 $0.6 $84.4 $28.7
Net earnings (loss) $17.7 $7.2 $58.1 ($1.1)
Adjusted net earnings (2) $23.4 ($1.9) $51.4 $15.3
Earnings before interest, depreciation and
amortization (2) $78.4 $41.7 $208.0 $152.2
Cash provided by operations before working
capital and cash taxes (2) $79.8 $41.6 $211.2 $158.9
Cash provided by operating activities $67.9 $45.2 $182.6 $166.5
Capital expenditures (sustaining) (2) $17.8 $19.6 $53.5 $42.4
Capital expenditures (growth) (2) $44.2 $30.5 $125.5 $102.8
Capital expenditures (capitalized exploration)
(3) $4.3
$5.0
$11.7
$14.8
Operating Results
Gold production (ounces) 121,900 124,000 372,400 379,400
Gold sales (ounces) 119,392 119,401 367,554 378,718
Per Ounce Data
Average realized gold price $1,448 $1,229 $1,352 $1,290
Average spot gold price (London PM Fix) $1,472 $1,213 $1,362 $1,282
Cost of sales per ounce of gold sold (includes
amortization) (1) $1,066 $1,152 $1,049 $1,141
Total cash costs per ounce of gold sold (2) $730 $817 $720 $813
All-in sustaining costs per ounce of gold sold
(2) $950 $1,048 $944 $992
Share Data
Earnings per share, basic $0.05 $0.02 $0.15 $0.00
Adjusted earnings per share, basic(2) $0.06 $0.00 $0.13 $0.04
Weighted average common shares outstanding
(basic) (000’s) 390,593 389,854 389,852 389,572
Financial Position (in millions)
Cash and cash equivalents (4) $185.6 $206.0
(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
September 30,
Nine Months Ended
September 30,
2019 2018 2019 2018
Gold production (ounces)
Young-Davidson 50,000 49,000 140,000 129,100
Mulatos 32,700 43,300 107,900 139,900
Island Gold 36,700 22,000 111,800 76,800
El Chanate (1) 2,500 9,700 12,700 33,600
Gold sales (ounces)
Young-Davidson 48,430 46,853 137,091 133,649
Mulatos 31,164 42,300 107,369 136,285
Island Gold 37,209 20,561 110,094 75,321
El Chanate (1) 2,589 9,687 13,000 33,463
Cost of sales (in millions)(2)
Young-Davidson $57.7 $59.8 $171.7 $173.5
Mulatos $33.5 $41.9 $103.1 $134.7
Island Gold $32.0 $22.3 $93.0 $77.8
El Chanate $4.1 $13.6 $17.6 $46.3
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,191 $1,276 $1,252 $1,298
Mulatos $1,075 $991 $960 $988
Island Gold $860 $1,085 $845 $1,033
El Chanate $1,584 $1,404 $1,354 $1,384
Total cash costs per ounce of gold sold (3)
Young-Davidson $781 $824 $813 $845
Mulatos $866 $771 $772 $784
Island Gold $503 $671 $490 $597
El Chanate $1,429 $1,301 $1,254 $1,285
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
Young-Davidson $960 $1,029 $1,033 $1,034
Mulatos $979 $846 $861 $847
Island Gold $693 $1,051 $658 $759
El Chanate $1,506 $1,332 $1,277 $1,312
Capital expenditures (sustaining, growth and capitalized exploration) (in millions)(3)
Young-Davidson $23.9 $22.1 $72.9 $63.5
Mulatos(5) $12.9 $6.8 $44.7 $23.5
Island Gold (6) $13.8 $17.8 $44.2 $49.3
El Chanate $— $0.2 $— $0.5
Other $15.7 $8.2 $28.9 $23.2
(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 nine months ended September 30, 2019 ($0.3 million and $2.3 million for the three and nine months
ended September 30, 2018).
(6) Includes capitalized exploration at Island Gold of $4.3 million and $11.7 million for the three and nine months ended September 30, 2019 ($4.7 million and $12.5 million for
the three and nine months ended September 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 — $25 (7) $35 (2) $165-180
Total capital expenditures (1) $80-90 $50-55 $50-60 — $25 (7) $35 $240-265
(7)
(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 from guidance provided in January, 2019, reflecting the 2018 Mineral Reserves and Resource Statement released in
February 2019.
(7) Capital guidance at Kirazlı has been reduced to $25 million from the original budget of $75 million, thereby reducing overall capital guidance to $240 to $265 million.
In the third quarter of 2019, the Company continued to deliver on its objective of expanding margins and profitability from its
existing operations. The Company produced 121,900 ounces with total cash costs of $730 per ounce down 11% from the third
quarter of 2018. The decrease in total cash costs was driven by low cost production growth at Island Gold and stronger
operational performance at Young-Davidson.
Fourth quarter production and costs are expected to be in a similar range as the third quarter. Combined with year-to-date
production of 372,400 ounces at total cash costs of $720 per ounce, the Company is well positioned to meet its full year
production and cost guidance.
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 third quarter of 50,000 ounces was consistent with
guidance, while underground mining rates of 6,600 tpd were above guidance for the third consecutive quarter. With production
of 140,000 ounces through the first nine months of 2019, Young-Davidson is on track to meet full year production guidance of
180,000 to 190,000 ounces.
Significant progress has been made on the construction of the lower mine, with the tie-in of the upper and lower mines on
schedule for completion in the first half of 2020. Construction of the lower mine has been significantly de-risked with the rock
work now complete and construction of the new crusher, conveying system and loading pocket well underway. The downtime
of the Northgate shaft and the tie-in of the lower mine is expected to begin in March 2020 and be completed in June 2020.
Gold production from Young-Davidson is expected to decrease to approximately 150,000 ounces in 2020, as a result of the
previously guided temporary downtime of the Northgate shaft in the first half of the year. Following completion of the tie-in in
the first half of 2020, underground mining rates are expected to ramp up to 7,500 tpd by the end 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 had another solid quarter producing 36,700 ounces, bringing year-to-date production to a record 111,800 ounces.
The operation remains on track to meet or exceed full year production guidance of 135,000 to 145,000 ounces. Additionally,
Island Gold generated a record $26.8 million of mine-site free cash flow in the third quarter, bringing the year-to-date total to
$55.1 million, net of all capital and $12.5 million of exploration spending. Island Gold's capital spending year-to-date has been
below budget and is expected to increase in the fourth quarter, focused on surface infrastructure designed to support the
expanding operation and mine life. As a result, Island Gold's mine-site AISC is expected to increase in the fourth quarter of
2019 and into 2020.
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 have increased 15% year-to-date, and are expected to
ramp up 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. This growth and ongoing
exploration success is being incorporated into a Phase III expansion study of the operation beyond 1,200 tpd, which is
expected to be released in the first half of 2020.
Exploration remains a key focus at Island Gold. The exploration program continues to target three main areas within the
deposit which extends over two-kilometres along strike. Results from surface exploration drilling have extended high-grade gold
mineralization between the Eastern and Main extensions and the Company expects to add further high-grade Mineral
Resources with the 2019 year end update.
Production from the Mulatos District totaled 32,700 ounces in the third quarter, bringing the year-to-date total to 107,900
ounces. Mining and stacking rates were impacted by abnormally high rainfall in September over a short period of time which
temporarily restricted mining activities in the main Mulatos pit. While mining rates are expected to increase in the fourth
quarter, gold production is expected to be similar to the third quarter. Total cash costs and mine-site AISC in the first nine
months of the year have outperformed annual guidance, benefiting from higher grades mined and low-cost concentrate sales.
Construction of the higher grade, high return Cerro Pelon project is advancing on schedule, with ore stacking commencing in
October. Development activities during the third quarter were focused on stripping of the open pit, and commissioning of the
crushing and overland conveyor. Production from Cerro Pelon is expected toward the end of 2019, ahead of schedule.
In Turkey, the Company suspended all construction activities on the Kirazlı project, pending the renewal of its mining
concessions which expired on October 13, 2019. Although the mining concessions have not been revoked and can be
renewed following this expiration date, no further construction activities can be completed until the concessions have been
renewed. The Company is working with the Turkish Department of Energy and Natural Resources on securing the renewal of
the mining concessions which will allow for a resumption of construction activities. The renewal is required from the same
government department that granted the Operating Permit for Kirazlı in March 2019.
Given the uncertainty around the timing of the concession renewal, initial production from Kirazlı has been delayed from
previous guidance of late 2020. The Company will provide updated guidance on the construction schedule and budget for
Kirazlı following the receipt of the concession renewal and resumption of construction activities.
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 $186 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.
Third Quarter 2019 Results
Young-Davidson Financial and Operational Review
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019 2018 2019 2018
Gold production (ounces) 50,000 49,000 140,000 129,100
Gold sales (ounces) 48,430 46,853 137,091 133,649
Financial Review (in millions)
Operating Revenues $70.2 $57.3 $186.2 $171.9
Cost of sales (1) $57.7 $59.8 $171.7 $173.5
Earnings (loss) from operations $12.5 ($2.5) $14.5 ($1.6)
Cash provided by operating activities $27.3 $24.0 $73.8 $73.9
Capital expenditures (sustaining) (2) $8.6 $9.5 $29.8 $25.0
Capital expenditures (growth) (2) $15.3 $12.6 $43.1 $38.5
Mine-site free cash flow (2) $3.4 $1.9 $0.9 $10.4
Cost of sales, including amortization per ounce of gold sold (1) $1,191 $1,276 $1,252 $1,298
Total cash costs per ounce of gold sold (2) $781 $824 $813 $845
Mine-site all-in sustaining costs per ounce of gold sold (2),(3) $960 $1,029 $1,033 $1,034
Underground Operations
Tonnes of ore mined 607,766 552,500 1,808,613 1,691,443
Tonnes of ore mined per day ("tpd") 6,606 6,005 6,625 6,196
Average grade of gold (4) 2.62 2.59 2.53 2.44
Metres developed 2,817 2,811 8,594 9,034
Mill Operations
Tonnes of ore processed 655,443 670,912 1,949,316 1,938,395
Tonnes of ore processed per day 7,124 7,293 7,140 7,100
Average grade of gold (4) 2.48 2.43 2.40 2.28
Contained ounces milled 52,233 52,517 150,409 140,509
Average recovery rate 92% 93% 91% 92%
(1) Cost of sales includes mining and processing costs, royalties and amortization.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of
these measures.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based
compensation expenses.
(4) Grams per tonne of gold ("g/t Au").
Young-Davidson produced 50,000 ounces of gold in the third quarter of 2019, consistent with the same period in 2018 and an
11% increase from the second quarter of 2019, reflecting higher grades mined. With the strong third quarter, and year-to-date
production of 140,000 ounces, the operation remains on track to achieve full year production guidance.
Underground mining rates of 6,606 tpd were above 2019 guidance and a 10% improvement from the third quarter of 2018.
Mining rates have exceeded full year guidance of 6,500 tpd in every quarter this year, averaging 6,625 tpd year-to-date, a 7%
increase from the same period in 2018. Underground grades mined of 2.62 g/t Au were in line with annual guidance and an
improvement from the first half of the year. Grades mined are expected to remain at similar levels in the fourth quarter.
Mill throughput of 7,124 tpd was consistent with the third quarter of 2018 as milling rates continued to benefit from low-grade
surface stockpiles which supplemented underground ore. Mill throughput in the fourth quarter is expected to decrease to
match underground tonnes mined as the low-grade surface stockpiles have effectively been depleted. Mill recoveries of 92% in
the quarter were in line with the prior year quarter and guidance.
Lower Mine Construction and Tie-In
The Company continued to make significant progress on construction of the lower mine during the third quarter which included
the following highlights:
• Ore passes from the upper mine feeding the coarse ore bin at the crusher are over 60% complete, with completion
expected by the end of the fourth quarter
• The crusher room excavation is complete, with chutes, steel, and the crane installed
• Installation of the vibratory feeder is under way, and the physical installation of the crusher unit is expected in
December
• Shaft bottom steel, ore and waste bins at the Northgate shaft, and the loading pocket have been completed
• Installation of the hangers and trays for the main conveyor from the crusher loadout level to the top of the shaft bins has
commenced.
As the lower mine expansion nears completion, approximately three months of downtime of the Northgate shaft will be
required to facilitate the tie-in of the upper and lower mines. With the excavation work complete and mechanical installations
underway, the Company remains on schedule to shut down the Northgate shaft in March 2020, with the tie-in completed in
June 2020.
Lower mine loading pocket
https://www.globenewswire.com/NewsRoom/AttachmentNg/e98cbd2d-16ad-4f6f-bbaf-1e15ae68666b
Lower mine crusher
https://www.globenewswire.com/NewsRoom/AttachmentNg/9beb2f71-6262-4fa9-a8fc-4180d31260e4
Financial Review
Third quarter revenues of $70.2 million were 23% above the prior year quarter, reflecting higher realized gold prices. For the first
nine months of 2019, revenues of $186.2 million were $14.3 million higher than the prior year period, attributable to both more
ounces sold and higher realized prices.
Cost of sales (which includes mining and processing costs, royalties, and amortization expense) of $57.7 million were
consistent with the comparative quarter of 2018, as were underground mining costs of CAD$51 per tonne. Cost of sales for the
first nine months of 2019 were $171.7 million, consistent with the prior year period.
Total cash costs of $781 per ounce in the third quarter were 5% below the comparative period and in line with annual
guidance. Total cash costs improved significantly in the third quarter compared to the first half of the year, resulting from
higher grades mined, and lower mining and milling costs. For the first nine months of 2019, total cash costs of $813 per ounce
were 4% lower than the prior year period. Total cash costs in the fourth quarter are expected to be in line with the third quarter
reflecting similar mining rates and grades.
Mine-site AISC of $960 per ounce in the third quarter were lower than the comparative quarter of 2018 and in line with annual
guidance, reflecting the timing of sustaining capital expenditures. Mine-site AISC for the nine month period were $1,033 per
ounce, consistent with the prior year.
Capital expenditures were $23.9 million in the third quarter. This included $8.6 million of sustaining capital and $15.3 million of
growth capital. Growth capital spending was focused on construction of the new TIA1 tailings facility and continued lower mine
construction. For the nine month period, capital expenditures of $72.9 million were focused on lower mine construction, lateral
development in the upper and lower mines, and construction of the new TIA1 tailings facility.
Young-Davidson generated $3.4 million of mine-site free cash flow in the third quarter, higher than the same period of 2018 due
to more ounces sold, a higher gold price, improved operating costs and lower capital spending. On a year-to-date basis, mine-
site free cash flow was $0.9 million. Since 2016, Young-Davidson has generated sufficient cash flow from operations to finance
all of its capital spending, including the lower mine expansion.
Island Gold Financial and Operational Review
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019 2018 2019 2018
Gold production (ounces) 36,700 22,000 111,800 76,800
Gold sales (ounces) 37,209 20,561 110,094 75,321
Financial Review (in millions)
Operating Revenues $54.0 $25.3 $149.1 $97.6
Cost of sales (1) $32.0 $22.3 $93.0 $77.8
Earnings from operations $21.6 $2.7 $55.3 $19.4
Cash provided by operating activities $40.6 $13.9 $99.3 $59.6
Capital expenditures (sustaining) (2) $7.1 $7.8 $18.4 $12.2
Capital expenditures (growth) (2) $2.4 $5.3 $14.1 $24.6
Capital expenditures (capitalized exploration) (2) $4.3 $4.7 $11.7 $12.5
Mine-site free cash flow (2) $26.8 ($3.9) $55.1 $10.3
Cost of sales, including amortization per ounce of gold sold (1) $860 $1,085 $845 $1,033
Total cash costs per ounce of gold sold (2) $503 $671 $490 $597
Mine-site all-in sustaining costs per ounce of gold sold (2),(3) $693 $1,051 $658 $759
Underground Operations
Tonnes of ore mined 89,959 74,892 277,614 241,644
Tonnes of ore mined per day ("tpd") 978 814 1,017 885
Average grade of gold (4) 10.81 8.96 12.22 9.12
Metres developed 1,211 1,591 4,200 4,917
Mill Operations
Tonnes of ore processed 102,564 93,454 307,364 264,335
Tonnes of ore processed per day 1,115 1,016 1,126 968
Average grade of gold (4) 11.12 8.22 11.49 9.27
Contained ounces milled 36,675 24,708 113,560 78,793
Average recovery rate 97% 96% 97% 97%
(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 36,700 ounces in the third quarter, marking a 67% increase from the third quarter of 2018 driven by
higher mining and milling rates, as well as higher grades mined. For the first nine months of 2019, Island Gold produced a
record 111,800 ounces, positioning the operation to meet the high end of annual guidance of 135,000 to 145,000 ounces. The
operation generated record mine-site free cash flow of $26.8 million in the quarter, bringing the year-to-date total to $55.1
million.
Underground mining rates were 978 tpd in the third quarter, a 20% improvement from the third quarter of 2018, but lower than
annual guidance. Underground mining rates in the quarter were impacted by a transition to a new underground development
contractor, which temporarily impacted mining rates. Underground grades mined averaged 10.81 g/t Au in the third quarter, in
line with annual guidance and 20% higher than the third quarter of 2018. Year-to-date grades mined of 12.22 g/t Au are above
guided levels due to a combination of positive grade reconciliations and mine sequencing.
Mill throughput increased to 1,115 tpd in the third quarter, a 10% 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 high-grade surface stockpiles. Mill recoveries were 97% in the third quarter, in line with the
prior year quarter and guidance.
Financial Review
Island Gold generated record revenues of $54.0 million in the third quarter, an increase of 113% compared to the prior year
period, reflecting significantly more ounces sold and a higher realized gold price. For the first nine months of 2019, revenues of
$149.1 million were $51.5 million higher than the prior year period, primarily attributable to more ounces sold.
Cost of sales (includes mining and processing costs, royalties, and amortization expense) of $32.0 million in the third quarter
were 43% higher than the comparative period, reflecting more ounces sold and higher unit mining costs. Cost of sales
decreased 21% on a per ounce basis, driven by higher grades mined and lower amortization. Cost of sales for the first nine
months of 2019 of $93.0 million increased 20% from the prior year period due to higher gold sales.
Total cash costs were $503 per ounce in the third quarter, a 25% improvement from the comparative quarter, driven by higher
grades mined partially offset by higher mining costs. Unit mining costs increased to CAD$171 per tonne in the quarter due to
higher contractor and maintenance costs. Total cash costs were consistent with guidance in the quarter. For the first nine
months of 2019, total cash costs of $490 per ounce were 18% lower than the prior year period due to higher grades mined.
Mine-site AISC of $693 per ounce in the third 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 nine months of 2019 of $658 per ounce were 13%
lower than the prior year period and below guidance as $18.4 million of sustaining capital, or only 50% of the full year budget,
had been incurred through the first nine months of the year. As a result, Island Gold's mine-site AISC is expected to increase
in the fourth quarter of 2019 and into 2020.
Total capital expenditures were $13.8 million in the third quarter, with spending focused on lateral development, mining
equipment, and capitalized exploration. This included $7.1 million of sustaining capital and $6.7 million of growth capital
(inclusive of $4.3 million of capitalized exploration). For the nine month period, total capital expenditures and capitalized
exploration was $44.2 million, consistent with the prior year period. Capital spending is expected to be at the highest level of
the year in the fourth quarter.
Island Gold generated record mine-site free cash flow of $26.8 million during the third quarter driven by strong gold production,
high operating margins, and lower capital spending. Through the first nine months of 2019, Island Gold has generated $55.1
million of mine-site free cash flow, net of all capital and ongoing investment in exploration.
Mulatos Financial and Operational Review
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019 2018 2019 2018
Gold production (ounces) 32,700 43,300 107,900 139,900
Gold sales (ounces) 31,164 42,300 107,369 136,285
Financial Review (in millions)
Operating Revenues $45.1 $51.5 $144.7 $175.2
Cost of sales (1) $33.5 $41.9 $103.1 $134.7
Earnings from operations $10.6 $8.0 $38.9 $33.9
Cash provided by operating activities $7.2 $16.1 $31.0 $56.3
Capital expenditures (sustaining) (2) $2.1 $2.1 $5.3 $4.7
Capital expenditures (growth) (2) $10.8 $4.4 $39.4 $16.5
Capital expenditures (capitalized exploration) (2) $— $0.3 $— $2.3
Mine-site free cash flow, before changes in working capital ($5.7) $9.3 ($13.7) $32.8
Cost of sales, including amortization per ounce of gold sold (1) $1,075 $991 $960 $988
Total cash costs per ounce of gold sold (2) $866 $771 $772 $784
Mine site all-in sustaining costs per ounce of gold sold (2),(3) $979 $846 $861 $847
Open Pit & Underground Operations
Tonnes of ore mined - open pit (4) 1,664,898 1,904,534 5,608,221 6,360,911
Total waste mined - open pit 1,361,660 1,108,953 5,036,918 4,958,609
Total tonnes mined - open pit 3,026,558 3,490,021 10,645,139 13,000,643
Waste-to-ore ratio (operating) 0.63 0.58 0.66 0.78
Tonnes of ore mined - underground — 9,280 — 45,258
Crushing and Heap Leach Operations
Tonnes of ore stacked 1,628,401 1,465,876 5,466,393 5,018,456
Average grade of gold processed (5) 0.81 0.96 0.92 0.89
Contained ounces stacked 42,667 45,043 161,450 143,310
Mill Operations
Tonnes of high-grade ore milled — 29,806 — 91,680
Average grade of gold processed (5) — 6.07 — 6.70
Contained ounces milled — 5,815 — 19,744
Total contained ounces stacked and milled 42,667 50,858 161,450 163,054
Average recovery rate 77% 85% 67% 86%
Ore crushed per day (tonnes) - combined 17,700 16,300 20,000 18,700
(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 32,700 ounces in the third quarter of 2019, bringing year-to-date production to 107,900 ounces. Third quarter
production decreased compared to the prior year period as a result of lower contained ounces stacked in the period, as well as
the cessation of mining from the San Carlos underground deposit in the third quarter of 2018.
The Company is currently mining from the Mulatos, Victor, and San Carlos open pits, and recently completed mining of La
Yaqui Phase I. Mining and stacking rates were impacted by abnormally high rainfall in September over a short period of time
which temporarily restricted mining activities in the main Mulatos pit, as well as the wind-down of mining activities at La Yaqui
Phase I.