Summary

  • Alamos Gold is a Canadian-based gold producer
  • Alamos Gold was formed in 2003 through the merger of Alamos Minerals and National Gold.
  • The company currently operate three mines – two in Canada and one in Mexico
  • Alamos Gold has a strong portfolio of development stage projects in Canada, Mexico, Turkey and the United States

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Company Overview

Alamos Gold (NYSE:AGI, TSX:AGI) is a Canadian-based gold producer with a long-term track record of creating value for all stakeholders through solid financial performance, low-cost production growth, and a company-wide commitment to social responsibility and environmental stewardship.1

The company currently operate three mines – two in Canada and one in Mexico – and Alamos Gold has a strong portfolio of development stage projects in Canada, Mexico, Turkey and the United States.

The company's core values of safety, teamwork, environmental sustainability, integrity and commitment allow its more than 1,700 dedicated employees to thrive in their careers and to create a lasting legacy that benefits all Alamos stakeholders.

Alamos Gold was formed in 2003 through the merger of Alamos Minerals and National Gold. This timeline outlines the key milestones that have defined Alamos’ growth, diversity and success over the past 17 years.

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Operations

The company's three North American mines and global development projects provide a strong platform to create long-term value for all Alamos stakeholders.2

The company's diversified asset base delivers stable and long-life gold production, along with a portfolio of low-cost development projects that offer peer leading, multi-stage and fully funded growth opportunities.

Producing Mines

Young-Davidson Mine, Canada

The Young-Davidson gold mine is located near the town of Matachewan, approximately 60 kilometres west of Kirkland Lake in Northern Ontario, within the Abitibi Greenstone Belt. Young-Davidson is centrally located between Timmins, Kirkland Lake, North Bay and Sudbury, Ontario – a region well-known for servicing the global mining industry.

Young-Davidson is a large, low-cost, bulk tonnage underground mine located in Northern Ontario. The Young-Davidson property consists of contiguous mineral leases and claims totaling approximately 11,700 acres. With a large Mineral Reserve base, Young-Davidson is a long-life operation with significant Mineral Resources and exploration potential to support mine life extension.

A multi-year expansion of the operation was completed in July 2020. The completion of this lower mine expansion has been driving production higher and operating costs lower through a number of productivity improvements. Combined with declining capital spending, this is expected to drive strong free cash flow growth going forward.

Island Gold Mine, Canada

Island Gold mine is located just east of the town of Dubreuilville, 83 kilometres northeast of Wawa in Northern Ontario.

Island Gold is a high-grade, low-cost underground gold mine in Northern Ontario. It is a long-life operation with a large Mineral Reserve and Resource base that has grown significantly since 2015 through ongoing exploration success. A Phase I expansion of the operation was completed in 2018 taking underground mining and milling rates to 1,100 tpd. This helped drive production to a new record of 150,400 ounces of gold in 2019, the fifth consecutive year of record production. The Phase II expansion to 1,200 tpd was permitted in 2019 and a Phase III shaft expansion to 2,000 tpd was announced in July 2020. The property is currently comprised of 1,187 patented, leased and staked claims covering 15,053 hectares.

Mulatos Mine, Mexico

The Mulatos mine is located in the Sierra Madre Occidental mountain range in the east-central portion of the State of Sonora, Mexico. The mine is approximately 220 kilometres directly east of the City of Hermosillo.

The Mulatos mine is a conventional open-pit, heap-leach operation with gold recovered through a carbon-in-column circuit. Ore is sourced from a number of open pits within the Mulatos District providing stable low-cost gold production. The development of the high-return La Yaqui Grande project was announced in July 2020 with initial production expected in the third quarter of 2022. Given its higher grades and favourable metallurgy, La Yaqui Grande is expected to drive combined costs at Mulatos significantly lower.

The operation produced its one millionth ounce of gold in 2012 and achieved another significant milestone in 2019, producing its two millionth ounce. This also marked the end of the 5% NSR royalty that had been paid since 2005.

The Mulatos District is a large underexplored land package comprised of 28,773 hectares of mineral concessions with significant exploration potential. The operation has an eight year mine life based on current Mineral Reserves, similar to the start of production in 2005, demonstrating a strong track record of exploration success.

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Development Projects

Lynn Lake Project, Canada

The Lynn Lake project is located in northern Manitoba and consists of two primary sites, MacLellan and Gordon, which are just east of the Town of Lynn Lake.

The Lynn Lake gold project is a strategic, lower-risk opportunity in a past-producing gold camp. It consists of five near surface deposits and has significant existing infrastructure. Its two primary deposits are the MacLellan mine and the Gordon mine, which were the subject of a positive feasibility study published in December 2017. The study outlines average annual production of 143,000 ounces over a 10-year mine life at mine-site all-in sustaining costs of $745 per ounce. The Environmental Impact Study (EIS) was submitted in May 2020 to satisfy federal and provincial environmental assessment requirements. The permitting process is expected to take approximately two years followed by two years of construction.

Turkish Development Projects

Kirazlı is located in the Çanakkale Province in the Biga Peninsula of northwestern Turkey, approximately 800 kilometres west of Ankara, Turkey’s capital. The company maintain an administrative office in Ankara and exploration offices in the towns of Etili and Sogutalan in the Biga District. These offices support its activities at Kirazlı, as well as its Ağı Dağı and Camyurt projects which are located approximately 25 kilometres away.

The Kirazlı property consists of 1,541 hectares of mineral tenure in two contiguous licenses. Mineral rights for all concessions comprising the Turkish assets are controlled by Doğu Biga, a Turkish subsidiary of the Company. As all projects are located in a forestry reserve, surface rights are controlled by the State government of Çanakkale.

Kirazlı is a low-cost, high-return, fully funded growth project. Positive feasibility studies were completed on Ağı Dağı and Kirazlı in 2017 with both projects contemplated as stand-alone open-pit, heap-leach operations. Alamos expects to first develop Kirazlı and then utilize its cash flows to fund the development of Ağı Dağı. As outlined in the feasibility study, Kirazlı is expected to produce an average of 104,000 oz of gold at mine-site all-in sustaining costs1 of $373 per ounce over a five year mine life.

In conjunction with the Ministry of Forestry and Water Affairs – State Hydraulic Works (DSI), a water reservoir was constructed by Alamos and completed in 2019. In addition to supplying the process water requirements of the Kirazlı mine, the water reservoir will supply clean drinking water and irrigation to several nearby communities – a key element of Alamos Gold’s commitment to its host communities and its sustainability and social responsibility objectives. In addition, power will be supplied from the commercial electricity grid with a new dedicated 30-kilometre-long overhead line connecting the Çanakkale utility substation to the Kirazlı mine substation.

Quartz Mountain Project, Usa

Quartz Mountain is located in south-central Oregon, approximately 50 kilometres west-northwest of the city of Lakeview on the northern extension of the prolific Basin and Range Province of Nevada.

Quartz Mountain is a later stage exploration project located in south-central Oregon. Over the years, approximately 80,000 metres of drilling has been conducted, with the majority of work focused on the Crone Hill and Quartz Butte deposits, which host the current Inferred Mineral Resource. Combined with the Angel’s Camp Property, the project covers a large land package with significant exploration potential.

Alamos has an option agreement with Seabridge Gold Inc. that requires a CAD$3 million payment upon completion of a compliant feasibility study and a positive production decision. An additional payment of CAD$15 million, or a 2% net smelter return royalty, is payable on successful permitting of the project.

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Financial Highlights

First Quarter 2022 Results

April 27, 2022; Alamos Gold Inc reported its financial results for the quarter ended March 31, 2022.3

“The company's first quarter production and costs were in line with guidance and with stronger results expected through the year, the company remain well positioned to achieve its annual guidance. La Yaqui Grande remains on track for initial production in the third quarter and is expected to drive its production higher and costs significantly lower in the second half of the year,” said John A. McCluskey, President and Chief Executive Officer.

“Alamos Gold is also making good progress on its other growth initiatives, including at Island Gold where the company achieved a key permitting milestone with approval of the Closure Plan Amendment. The company officially broke ground on the Phase III expansion and are getting closer to completing an updated mine plan for the operation which the company plan to release midyear. Given the significant growth in high-grade Mineral Reserves and Resources since the completion of the Phase III study and opportunities to optimize the operation, the company expect the updated mine plan will showcase a significantly more valuable operation. Both of these high-return projects support its strong outlook with growing production, declining costs and increasing profitability,” Mr. McCluskey added.

  • Produced 98,900 ounces of gold, in line with guidance for the first quarter. Consistent with guidance, gold production is expected to increase through the rest of the year reflecting higher grades at Island Gold in the second quarter and with La Yaqui Grande on track for initial production in the third quarter
  • Young-Davidson averaged over 8,000 tonnes per day mined in the quarter, driving production of 51,900 ounces and mine-site free cash flow of $23.2 million
  • Sold 98,466 ounces of gold at an average realized price of $1,874 per ounce for revenues of $184.5 million
  • As previously guided, total cash costs of $992 per ounce, AISC of $1,360 per ounce and cost of sales of $1,376 per ounce were all above annual cost guidance. Costs are expected to decrease through the year driven by higher grades at Island Gold, and the start of low-cost production from La Yaqui Grande
  • Realized adjusted net earnings for the quarter of $18.0 million, or $0.05 per share. Adjusted net earnings includes adjustments for the non-cash, after tax impairment charge of $26.7 million triggered by the sale of the Esperanza Project, unrealized foreign exchange gains recorded within both deferred taxes and foreign exchange of $5.8 million, and other losses totaling $5.6 million
  • Reported a net loss of $8.5 million, or $0.02 per share
  • Cash flow from operating activities was $46.5 million ($70.9 million, or $0.18 per share, before changes in working capital)
  • Free cash flow was negative in the quarter, primarily related to lower planned production from Mulatos as well as ongoing capital spending on the La Yaqui Grande project. The Company expects to transition to positive free cash flow in the second half of the year driven by lower capital spending and low-cost production from La Yaqui Grande
  • Declared a quarterly dividend of $9.8 million, or $0.025 per share (annualized rate of $0.10)
  • Ended the quarter with cash and cash equivalents of $124.2 million, equity securities of $21.6 million, and no debt
  • Announced the sale of the non-core Esperanza Gold Project to Zacatecas Silver Corp. for total consideration of up to $60 million, with the transaction having closed in April 2022.
  • Reported year end 2021 Mineral Reserves of 10.3 million ounces of gold, a 4% increase from the end of 2020 with growth at all three operating mines more than offsetting mining depletion. This included a 5% increase in global Mineral Reserve Grades reflecting higher grade additions at Island Gold and Mulatos. Island Gold continues to grow with combined Mineral Reserves and Resources increasing 8% to 5.1 million ounces of gold, net of mining depletion, marking a key milestone for the operation and highlighting its significant upside potential
  • Achieved a significant permitting milestone for the Phase III Expansion at Island Gold with the approval of the Closure Plan Amendment by the Ontario Government which allows for the commencement of construction activities. A groundbreaking ceremony was held on site on April 11, 2022, and was attended by Carol Hughes, Member of Parliament, Greg Rickford, Ontario Minister of Northern Development, Mines, Natural Resources and Forestry and Minister of Indigenous Affairs, Todd Smith, Ontario Minister of Energy, Michael Mantha, Member of Provincial Parliament, Beverly Nantel, Mayor of Dubreuilville, as well as other municipal government representatives, Indigenous partners, and other key stakeholders

During the first quarter of 2022, the Company sold 98,466 ounces of gold for revenues of $184.5 million, a 19% decrease from the prior year period driven by less ounces sold, partially offset by higher realized gold prices.

The average realized gold price in the first quarter was $1,874 per ounce, a 4% increase compared to $1,798 per ounce realized in the prior year period. The average realized gold price was slightly below the London PM Fix price for the quarter of $1,877 per ounce.

Cost of sales were $135.5 million in the first quarter, 3% lower than the prior year period.

Mining and processing costs were $95.4 million, 3% higher than the prior year period. The increase was primarily related to higher processing costs at Mulatos related to stockpiled ore.

Consolidated total cash costs of $992 per ounce and AISC of $1,360 per ounce in the quarter were both higher compared to the prior year period due to lower grades mined at Island Gold and higher processing costs for stockpiled ore at Mulatos, partially offset by lower unit mining costs and higher grades at Young-Davidson.

Royalty expense was $2.3 million in the quarter, lower than the prior year period of $3.1 million due to lower ounces sold in the period.

Amortization of $37.8 million in the quarter was lower than the prior year period due to less ounces sold. Amortization of $384 per ounce was lower than guidance, but is expected to increase in future quarters as production from El Salto and La Yaqui Grande increase, which carry a higher amortization per ounce charge.

The Company reported a net loss of $8.5 million in the quarter, compared to net earnings of $51.2 million in the prior year period. The decrease in net earnings from the prior year period is mainly driven by the non-cash impairment charge related to the sale of Esperanza. On an adjusted basis, earnings in the first quarter of 2022 were $18.0 million, or $0.05 per share.

On February 28, 2022, the Company entered into a binding agreement to sell its non-core Esperanza Gold Project (“Esperanza”) located in Morelos State, Mexico to Zacatecas Silver Corp. (“Zacatecas Silver”) for total consideration of up to $60 million

The Transaction closed on April 12, 2022. Upon closing of the transaction, Alamos owned 14.7% of Zacatecas Silver common shares outstanding.

References

  1. ^ https://www.alamosgold.com/about/default.aspx
  2. ^ https://www.alamosgold.com/operations/default.aspx
  3. ^ https://s24.q4cdn.com/779615370/files/doc_financials/2022/q1/20220427-Alamos-Gold-Q1-2022-Earnings-Release-_Final.pdf
Tags: US:AGI CA:AGI
Created by Asif Farooqui on 2022/05/30 13:06
     

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