Alamos Gold Reports Third Quarter 2020 Results Record free cash flow of $76 million supports 33% increase in dividend
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 Gold Reports Third Quarter 2020 Results
Record free cash flow of $76 million supports 33% increase in dividend
Toronto, Ontario (October 28, 2020) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today
reported its financial results for the quarter ended September 30, 2020.
“We had an excellent third quarter financially and operationally with strong performances at all three operations driving
costs significantly lower. This included another record quarter at Island Gold , and Young-Davidson starting to
demonstrate its full potential following the completion of the lower mine expansion. We previously outlined our
expectation to transition to strong free cash flow generation in the second half of 2020, and we delivered with record free
cash flow of $76 million in the quarter,” said John A. McCluskey, President and Chief Executive Officer.
“We remain focused on operating a sustainable business model that can support growing returns to shareholders over
the long term. Given our strong free cash flow outlook, we are pleased to announce a 33% increase in our dividend,
which has now grown by 300% since 2018. We expect to continue to generate strong free cash flow while reinvesting in
high-return projects like La Yaqui Grande and the Phase III Expansion at Island Gold which will support further growth
and returns to shareholders,” Mr. McCluskey added.
Third Quarter 2020
• Generated record quarterly free cash flow1 of $76.0 million driven by higher margins at all operations
• Announced a 33% increase in the dividend to an annual rate of US$0.08 per share, starting with the dividend
payable in December 2020. The increase is supported by the record free cash flow in the quarter and strong
outlook. With the December dividend, the Company will have returned $31.0 million to shareholders in the form of
dividends and share repurchases under the Company's Normal Course Issuer Bid ("NCIB") in 2020
• Produced 117,100 ounces of gold, a 49% increase from the second quarter of 2020 with production returning to
budgeted levels following the temporary suspension of operations at Island Gold and Mulatos in the second quarter
due to COVID-19
• Year-to-date the Company has produced 306,400 ounces of gold and remains well positioned to achieve revised full
year guidance of 405,000 to 435,000 ounces of gold
• Island Gold produced a record 39,600 ounces of gold and generated record mine -site free cash flow 1 of $40.8
million, benefiting from higher grades mined in the quarter
• Mulatos produced 41,100 ounces of gold and generated mine-site free cash flow1 of $30.9 million, driven by lower
total cash costs
• Following the completion of the lower mine expansion at Young -Davidson in July, underground mining rates
increased to average 6,713 tonnes per day ("tpd") for the quarter and remain on track to achieve 7,500 tpd by the
end of 2020
• Sold 116,035 ounces of gold at an average realized price of $1,882 per ounce for revenues of $218.4 million
• Generated record cash flow from operating activities of $130.8 million ($130.0 million, or $0.33 per share, before
changes in working capital1), a 62% increase from the third quarter of 2019
• Consolidated total cash costs 1 of $681 per ounce and all -in sustaining costs ("AISC") 1 of $949 per ounce b oth
decreased significantly from the first half of the year and were lower than revised guidance. The Company remains
on track to achieve full year cost guidance
• Reported record adjusted net earnings 1 of $56.9 million, or $0.15 per share 1, which includes a djustments for
unrealized foreign exchange gains of $10.7 million recorded within deferred taxes and foreign exchange, and other
one-time gains of $0.3 million. Adjusted net earnings increased 143% compared to the third quarter of 2019
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2 | Alamos Gold Inc
• Realized record net earnings of $67.9 million, or $0.17 per share
• Ended the quarter with cash and cash equivalents of $274.1 million and equity securities of $40.0 million.
Subsequent to quarter-end, the Company repaid $100.0 million outstanding on its revolvi ng credit facility and is
currently debt-free
• Reported results of the Phase III Expansion Study conducted on Island Gold, which is expected to drive a 72%
increase in average annual production to 236,000 ounces and a 30% decrease in mine-site AISC to $534 per ounce
starting in 2025
• Announced a construction decision on the low-cost, high-return La Yaqui Grande project. The project has a 58%
after-tax internal rate of return ("IRR") at a $1,750 per ounce gold price and is expected to significantly reduce
Mulatos District costs with mine-site AISC expected to average $578 per ounce over the life of the project
.(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.
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3 | Alamos Gold Inc
Highlight Summary
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Financial Results (in millions)
Operating revenues $218.4 $172.9 $521.5 $497.1
Cost of sales (1) $122.6 $127.3 $346.2 $385.4
Earnings from operations $88.0 $37.5 $146.3 $84.4
Earnings before income taxes $85.9 $37.4 $132.4 $85.1
Net earnings $67.9 $17.7 $67.3 $58.1
Adjusted net earnings (2) $56.9 $23.4 $96.2 $51.4
Earnings before interest, depreciation and amortization(2) $130.5 $78.4 $248.1 $208.0
Cash provided by operations before working capital and
cash taxes(2) $130.0 $80.2 $256.4 $211.4
Cash provided by operating activities $130.8 $67.9 $237.0 $182.6
Capital expenditures (sustaining) (2) $22.7 $17.8 $54.6 $53.5
Capital expenditures (growth) (2) (3) $29.2 $44.2 $109.3 $125.5
Capital expenditures (capitalized exploration) (4) $2.9 $4.3 $8.8 $11.7
Operating Results
Gold production (ounces) 117,100 121,900 306,400 372,400
Gold sales (ounces) 116,035 119,392 302,494 367,554
Per Ounce Data
Average realized gold price $1,882 $1,448 $1,724 $1,352
Average spot gold price (London PM Fix) $1,909 $1,472 $1,735 $1,362
Cost of sales per ounce of gold sold (includes
amortization) (1) $1,057 $1,066 $1,144 $1,049
Total cash costs per ounce of gold sold (2) $681 $730 $772 $720
All-in sustaining costs per ounce of gold sold (2) $949 $950 $1,052 $944
Share Data
Earnings per share, basic and diluted $0.17 $0.05 $0.17 $0.15
Adjusted earnings per share, basic and diluted(2) $0.15 $0.06 $0.25 $0.13
Weighted average common shares outstanding (basic)
(000’s) 391,553 390,593 391,325 389,852
Financial Position (in millions)
Cash and cash equivalents (5) $274.1 $182.8
Debt and financing obligations (5) $100.0 $—
(1) Cost of sales includes mining and processing costs, royalties, and amortization expense. For the three months and nine months ended September 30, 2020, cost of
sales also includes COVID-19 costs of $nil and $6.5 million, respectively.
(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 growth capital from operating sites and excludes the Island Gold royalty repurchase of $54.8 million in March 20 20.
(4) Includes capitalized exploration at Mulatos and Island Gold .
(5) Comparative cash and cash equivalents and debt and financing obligations balance as at December 31, 2019. The Company repaid the $100 million debt balance
in October 2020.
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4 | Alamos Gold Inc
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Gold production (ounces)
Young-Davidson 36,400 50,000 88,200 140,000
Mulatos 41,100 32,700 119,600 107,900
Island Gold 39,600 36,700 97,800 111,800
El Chanate (1) — 2,500 800 12,700
Gold sales (ounces)
Young-Davidson 35,548 48,430 86,893 137,091
Mulatos 41,165 31,164 118,592 107,369
Island Gold 39,322 37,209 97,009 110,094
El Chanate (1) — 2,589 — 13,000
Cost of sales (in millions)(2)
Young-Davidson $50.5 $57.7 $140.5 $171.7
Mulatos $44.0 $33.5 $127.5 $103.1
Island Gold $28.1 $32.0 $78.2 $93.0
El Chanate (1) $— $4.1 $— $17.6
Cost of sales per ounce of gold sold (includes amortization)
Young-Davidson $1,421 $1,191 $1,617 $1,252
Mulatos $1,069 $1,075 $1,075 $960
Island Gold $715 $860 $806 $845
El Chanate (1) $— $1,584 $— $1,354
Total cash costs per ounce of gold sold (3)
Young-Davidson $923 $781 $1,145 $813
Mulatos $746 $866 $772 $772
Island Gold $394 $503 $438 $490
El Chanate (1) $— $1,429 $— $1,254
Mine-site all-in sustaining costs per ounce of gold sold (3),(4)
Young-Davidson $1,196 $960 $1,370 $1,033
Mulatos $928 $979 $928 $861
Island Gold $575 $693 $653 $658
El Chanate (1) $— $1,506 $— $1,277
Capital expenditures (sustaining, growth and capitalized exploration) (in millions)(3)
Young-Davidson $25.6 $23.9 $82.2 $72.9
Mulatos(5) $9.1 $12.9 $21.6 $44.7
Island Gold (6) $15.9 $13.8 $53.9 $44.2
Other $4.2 $15.7 $15.0 $28.9
(1) El Chanate transitioned to the reclamation phase of the mine life in the fourth quarter of 2019. Incremental production is a result of rinsing the leach pad. Gold sales
from El Chanate in 2020 are not included in revenue and cost of sales.
(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 and $0.7 million for the three and nine months ended September 30, 2020 (spending of $nil for the three and nine
months ended September 30, 2019).
(6) Includes capitalized exploration at Island Gold of $2.9 million and $8.1 million for the three and nine months ended September 30, 2020 (for the three and nine months
ended September 30, 2019 - $4.3 million and $11.7 million), and excludes the royalty repurchase of $54.8 million.
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5 | Alamos Gold Inc
Management's Response to the COVID-19 Pandemic
The World Health Organization declared COVID-19 a pandemic on March 11, 2020. The Company responded rapidly
and proactively and implemented several initiatives to help protect the health and safety of our employees, their families
and the communities in which we operate.
Specifically, each of our operating mine sites has activated established crisis management plans and developed site-
specific plans that enable them to meet and respond to changing conditions associated with COVID-19. The Company
is adopting the advice of public health authorities and adhering to government regulations with respect to COVID-19 in
the jurisdictions in which it operates.
The following measures have been instituted across the Company to prevent the potential spread of the virus:
• Medical screening for all personnel prior to entry to site for symptoms of COVID-19
• Testing of personnel at Mulatos and Island Gold prior to starting their rotation at the camp
• Training on proper hand hygiene and social distancing
• Remote work options have been implemented for eligible employees
• Social distancing practices have been implemented for all meetings, huddles and transportation
• Mandatory use of personal protective equipment for employees where social distancing is not pra cticable
• Rigid camp and site hygiene protocols have been instituted and are being followed
• Elimination of all non-essential business travel
• Required 14-day quarantine for any employees returning from out of country travel
• In addition, since the COVID-19 pandemic began the Company’s teams in Canada, Mexico, and Turkey have
donated their time, medical supplies, food supplies and funds to help combat the effects and spread of the virus
Impact on Operations
In order to protect nearby communities and align with government requirements, two of the Company's mines were
temporarily suspended earlier in the year, but resumed normal operations during the second quarter. During the
temporary suspensions, indirect production costs that exceeded normal operating capacit y were expensed as
incurred and not included in the inventory valuation. The Company identified indirect production costs of $5.4 million
that were directly expensed as COVID-19 costs as incurred in the second quarter of 2020 and not included in
inventory. All operating costs incurred subsequent to the mine sites, returning to planned operating levels have
been included in mining and processing costs. As a result, there were no amounts classified as COVID -19 costs for
the three months ended September 30, 2020.
In July 2020, the Company provided updated production and cost guidance resulting from the impact of COVID -19
on the operations. With operations at Mulatos and Island Gold having both been suspended for more than a month
and the completion of the lower mine expansion at Young-Davidson delayed into July due to COVID-19,
consolidated 2020 production guidance was revised to 405,000 to 435,000 ounces.
In the third quarter of 2020, both Island Gold and Mulatos continued to incur additional costs related to t esting of
personnel, lodging and transportation, which have been included in mining and processing costs rather than COVID-19
costs. These incremental costs have increased total cash costs at these operations by approximately $25 per ounce.
These additional costs are expected to be incurred throughout the fourth quarter and into 2021.
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6 | Alamos Gold Inc
Outlook and Strategy
2020 Updated Guidance
Young-
Davidson Island Gold Mulatos Other (2) Total
Pre
COVID-19
Guidance
Gold production (000’s ounces) 135 - 145 130 - 140 140 - 150 405 - 435 425 - 465
Cost of sales, including amortization (in millions)(4) $209 $113 $165 — $487 $491
Cost of sales, including
amortization ($ per ounce)(4) $1,490 $840 $1,135 — $1,160 $1,103
Total cash costs ($ per ounce)(1)(5) $990 - $1,030 $480 - $520 $840 - $880 — $780 - $820 $757 - $797
All-in sustaining costs ($ per ounce)(1)(5) $1,030 - $1,070 $1,007 -
$1,047
Mine-site all-in sustaining costs ($ per ounce)(1)(3)(5) $1,180 - $1,220 $740 - $780 $940 - $980 —
Amortization costs ($ per ounce)(1) $480 $340 $275 — $365 $340
Capital expenditures (in millions)
Sustaining capital(1) $30 - $35 $35 - $40 $15 - $20 $— $80 - $95 $80 - $95
Growth capital(1) $45 - $50 $35 - $40 $15 - $20 $10 $105 - $120 $75 - $85
Capitalized exploration(1) $1 $15 $— $4 $20 $25
Total capital expenditures and capitalized
exploration(1) $76 - 86 $85 - 95 $30 - 40 $14 $205 - $235 $180 - $205
(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 growth capital and capitalized exploration at the Company's development projects (Turkey, Lyn n Lake, Esperanza and Quartz Mountain).
(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) On March 16, 2020, the Company updated total cash cost and AISC guidance to reflect the repurchase and cancellation of a royalty at Island Gold .
The Company’s long-term strategic objective is to generate increasing returns for its shareholders through low -cost
production and free cash flow growth from its portfolio of operating mines and development projects. During the third
quarter, the Company d elivered on several catalysts that form key parts of a transformational year for Alamos and
provide the foundation for the Company's strong outlook. These include the announcement of a Phase III expansion at
Island Gold, a construction decision on the La Yaqui Grande project, and the completion of the lower mine expansion at
Young-Davidson. The latter marked the transition to strong free cash flow growth with all three operations contributing to
record free cash flow generation of $76.0 million during the quarter.
The Company expects this strong free cash flow to continue supporting higher dividends while also reinvesting in high
return internal growth projects, such as those at Island Gold and Mulatos. These projects will in turn drive free cash flow
higher and support growing, sustainable returns to shareholders over the long-term.
The record financial performance in the third quarter reflected higher gold prices and a very strong operational
performance with production increasing 49% from the second quarter to 117,100 ounces at significantly lower total cash
costs of $681 per ounce. With fourth quarter production expected to be at similar levels, the Company is well positioned
to meet 2020 production and cost guidance which had been revised in July given the impact of COVID-19 on the second
quarter.
Following the temporary operational suspensions during the second quarter, all of the Company's mines are operating at
normal capacity, albeit under strict health and safety protocols. These include regular testing for COVID-19 at a cost of
approximately $25 per ounce. These costs are expected to continue through the fourth quarter and into 2021 with the
Company's foremost priority being to protect the health and safety of its workforce, their families and communi ties.
Production increased significantly at Young-Davidson compared to the second quarter following the completion of the
lower mine expansion and tie -in of the Northgate shaft. This marked the end of a multi year expansion at Young -
Davidson and a step change for the operation. The lower mine infrastructure has been operating as designed since
completion in July, with mining rates steadily increasing each month to average over 6,700 tpd for the quarter. The
transition to the lower mine infrastructure drove production higher and costs lower, resulting in the operation generating
mine-site free cash flow of $10.8 million in the quarter. Mining rates are expected to increase to a rate of 7,500 tpd by
the end of 2020, driving strong free cash flow growth from the operation in the fourth quarter and into 2021.
After temporarily suspending operations at Island Gold on March 25, 2020 due to COVID -19, the Company began a
phased restart in early May and returned to normal operating levels in June. Strong mining rates continued in the third
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7 | Alamos Gold Inc
quarter, averaging 1,200 tpd. Combined with higher grades mined, Island Gold generated record mine-site free cash
flow of $40.8 million in the quarter.
The Phase III expansion of Island Gold announced in July has outlined a bigger, more profitable, long-life operation. The
expansion is expected to increase throughput rates 67% to 2,000 tpd, driving production significantly higher, at industry
low costs over a mine life that has doubled to 16 years. This has driven a substantial incre ase in value with the
expanded operation having an estimated after-tax NPV of $1.02 billion at a 5% discount rate and base case gold price
of $1,450 per ounce. At a gold price of $1,750 per ounce, the after -tax NPV is $1.45 billion, more than double the
acquisition cost.
Exploration programs at Island Gold resumed in June following the temporary suspension, with the focus on continuing
to expand mineralization and adding new near mine Mineral Resources. In the third quarter, Island Gold reported the
best surface exploration hole to date, with high -grade mineralization intersected across significantly greater widths
down-plunge from existing Mineral Resources in Island East (28.97 g/t Au (26.89 g/t cut) over 21.76 m (MH25-04)). The
recent results continue to demonstrate the significant potential for additional growth in Mineral Reserves and Resources
at the operation.
Mulatos began ramping up to full operations in the latter part of May 2020 after the suspension of mining activities in
early April as mandated by the government due to COVID-19. Following the restart, operations ramped up quickly with
mining and stacking rates reaching budgeted levels throughout the third quarter. In addition, the impact of the rainy
season was minimal, as Mulatos produced 41,100 ounces in the third quarter at significantly lower costs than guidance,
generating mine-site free cash flow of $30.9 million.
As announced in July, 2020, the Company is proceeding with development of the high-return La Yaqui Grande project
located within the Mulatos District. With an after-tax IRR of 41% and after-tax NPV of $165 million (assuming a $1,450
per ounce gold price), La Yaqui Grande represents the next low -cost source of production at Mulatos. Construction
activities on La Yaqui Grande commenced in the third quarter and are expected to ramp up during the fourth quarter of
2020. Construction is expected to take approximately 24 months to complete with initial production in the second half of
2022. Given its lower costs, La Yaqui Grande is expected to drive combined costs across the Mulatos District lower.
The Company submitted its Environmental Impact Statement ("EIS") for the Lynn Lake project in the second quarter and
continues along the anticipated two-year permitting process. In Turkey, the Company is pursuing renewal of the mine
concession for the Kirazli project.
The Company's liquidity position remains strong, ending the quarter with $274.1 million of cash and cash equivalents
and $100.0 million drawn on its $500.0 million revolving facility. Given the strong free cash flow outlook, the Company
repaid the $100.0 million drawn on its revolving facility in October 2020 and is currently debt-free. The Company expects
strong ongoing free cash flow generation in the fourth quarter and into 2021, a nd remains well positioned to fund its
internal growth initiatives.
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8 | Alamos Gold Inc
Third Quarter 2020 Results
Young-Davidson Financial and Operational Review
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Gold production (ounces) 36,400 50,000 88,200 140,000
Gold sales (ounces) 35,548 48,430 86,893 137,091
Financial Review (in millions)
Operating Revenues $66.7 $70.2 $150.1 $186.2
Cost of sales (1) $50.5 $57.7 $140.5 $171.7
Earnings from operations $16.2 $12.5 $9.6 $14.5
Cash provided by operating activities $36.4 $27.3 $51.0 $73.8
Capital expenditures (sustaining) (2) $9.6 $8.6 $19.3 $29.8
Capital expenditures (growth) (2) $16.0 $15.3 $62.9 $43.1
Mine-site free cash flow (2) $10.8 $3.4 ($31.2 ) $0.9
Cost of sales, including amortization per ounce of gold sold (1) $1,421 $1,191 $1,617 $1,252
Total cash costs per ounce of gold sold (2) $923 $781 $1,145 $813
Mine-site all-in sustaining costs per ounce of gold sold (2),(3) $1,196 $960 $1,370 $1,033
Underground Operations
Tonnes of ore mined 617,551 607,766 1,252,300 1,808,613
Tonnes of ore mined per day 6,713 6,606 4,570 6,625
Average grade of gold (4) 2.24 2.62 2.27 2.53
Metres developed 3,231 2,817 9,326 8,594
Mill Operations
Tonnes of ore processed 591,544 655,443 1,451,577 1,949,316
Tonnes of ore processed per day 6,430 7,124 5,298 7,140
Average grade of gold (4) 2.19 2.48 2.01 2.40
Contained ounces milled 41,598 52,233 93,959 150,409
Average recovery rate 93 % 92 % 92 % 91 %
(1) Cost of sales includes mining and processing costs, royalties and amortization.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release 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 36,400 ounces of gold in the third quarter of 2020, a decrease from the same period in 2019
due to lower grades mined and lower tonnes processed. This reflects the planned downtime of the Northgate shaft in
July to complete the tie-in of the lower mine.
Following completion of the lower mine expansion in July, underground mining rates increased through the quarter to
average 6,713 tpd. In September, underground mining rates increased to average 8,000 tpd, with the operation
benefiting from significant broken ore inventory built up during the shutdown. This strong performance demonstrates the
expanded capacity of the lower-mine infrastructure. Underground mining rates are expected to increase to sustainable
rates of 7,500 tpd by the end of 2020. The average mined grade was 2.24 g/t Au in the quarter, lower than full year
guidance due to mine sequencing. Grades mined and processed are expected to increase in the fourth quarter.
Mill throughput was 6,430 tpd in the third quarter, a decrease from the same period of 2019 with low grade surface
stockpiles having been depleted in the second quarter of 2020. Mining rates temporarily exceeded milling rates in the
third quarter during which time excess underground ore was stockpiled. These stockpiles will be processed in the fourth
quarter. Mill throughput is expected to equal underground mining rates moving forward. Mill recoveries averaged 93% in
the quarter, slightly above the prior year period.
Young-Davidson is on track to meet production guidance of between 135,000 and 145,000 ounces, with higher mining
rates and grades mined expected to drive a further increase in production in the fourth quarter. Combined with lower
mining costs and capital spending, Young-Davidson is expected to generate substantially higher free cash flow in the
fourth quarter of 2020.