AGI - Alamos Gold Reports Third Quarter 2023 Results | Benzinga

TORONTO, Oct. 25, 2023 (GLOBE NEWSWIRE) -- Alamos Gold Inc. (TSX:AGI, NYSE:AGI) ("Alamos" or the "Company") today reported its financial results for the quarter ended September 30, 2023.

"With another strong quarterly performance, we are on pace for a record year both operationally and financially. Production of 135,400 ounces was above our quarterly guidance, putting us on track to set a new record for annual production. Given the strong year-to-date performance, we are raising our full year production guidance by 5% to a range of 515,000 to 530,000 ounces. With total cash costs and all-in sustaining costs below the mid-point of guidance in the quarter and year-to-date, we are also on track to achieve full year cost guidance," said John A. McCluskey, President and Chief Executive Officer.

"This contributed to another solid quarter financially with $37 million of free cash flow, bringing the year-to-date total to $109 million. This represents a substantial increase from 2022 while investing in our high-return growth projects. At Island Gold, the Phase 3+ Expansion is progressing well with the headframe up and shaft sinking on schedule to begin later this year. The updated Feasibility Study on Lynn Lake outlined another long-life, low-cost project in Canada, with excellent exploration upside. The development plan for PDA is also advancing as the deposit continues to grow through ongoing exploration success. All three projects are key drivers of our ongoing value creation and strong long-term outlook, supporting growing production, declining costs, and increasing profitability," Mr. McCluskey added.

Third Quarter 2023

• Produced 135,400 ounces of gold, exceeding quarterly guidance of 120,000 to 130,000 ounces, reflecting strong performances from the Mulatos District and Island Gold
• The Company is raising its annual production guidance to a range of 515,000 to 530,000 ounces, a 5% increase from original guidance (based on the mid-point), driven by the strong outperformance from the Mulatos District. With year-to-date production of 399,800 ounces, the Company is on pace for record annual production in 2023
• The Mulatos District produced 53,900 ounces in the third quarter and 164,700 ounces year-to-date, nearly double the prior year period reflecting another solid performance from La Yaqui Grande. The higher margin ounces from La Yaqui Grande drove mine-site free cash flow of $30.9 million, bringing the year-to-date total to $114.7 million
• Island Gold produced 36,400 ounces, a 19% increase compared to the second quarter of 2023, reflecting both higher grades and throughput. The Phase 3+ Expansion is progressing well with construction of the headframe largely complete and shaft sinking on track to begin by year end
• Sold 132,633 ounces of gold at an average realized price of $1,932 per ounce, for quarterly revenues of $256.2 million. The average realized gold price was $4 per ounce above the London PM fix
• Total cash costs¹ of $835 per ounce were at the low end of annual guidance and AISC¹ of $1,121 per ounce were below the low end of guidance, driven by La Yaqui Grande and Island Gold and timing of sustaining capital expenditures. The Company remains on track to achieve full year cost guidance with total cash costs and AISC both below the mid-point of guidance year-to-date
• Realized adjusted net earnings¹ of $54.5 million, or $0.14 per share. Adjusted net earnings includes adjustments for net unrealized foreign exchange losses recorded within both deferred taxes and foreign exchange of $11.9 million, and other losses totaling $3.2 million. Reported net earnings were $39.4 million, or $0.10 per share
• Free cash flow¹ of $37.3 million in the third quarter, and $109.4 million year-to-date, a substantial increase from 2022 reflecting the strong operating performance and margin expansion. The Company expects to continue generating significant ongoing free cash flow over the next several years while funding the Phase 3+ Expansion at Island Gold
• Generated cash flow from operating activities of $112.5 million ($133.2 million, or $0.34 per share, before changes in working capital¹)
• Paid a quarterly dividend of $9.9 million, or $0.025 per share (annualized rate of $0.10 per share)
• Cash and cash equivalents increased to $215.9 million, up 14% from the end of the second quarter, and 66% from the start of the year, reflecting strong free cash flow generation. The Company remains debt free
• Completed an updated Feasibility Study on the Lynn Lake project outlining a larger, longer-life, low-cost operation with attractive economics and significant exploration upside. Lynn Lake is expected to produce an average of 176,000 ounces of gold per year at mine-site AISC of $699 per ounce over its initial 10 years
• Provided an exploration update at Mulatos, further expanding high-grade mineralization beyond Mineral Reserves and Resources at Puerto Del Aire ("PDA") and intersecting additional wide intervals of significant gold mineralization at the Capulin regional target. A development plan incorporating the growth in Mineral Reserves at PDA is expected to be completed towards the end of 2023
  

⁽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

Environment, Social and Governance Summary Performance

Health and Safety

• Total recordable injury frequency rate¹ ("TRIFR") of 1.84 in the third quarter, an increase from 1.23 in the second quarter of 2023
• Lost time injury frequency rate¹ ("LTIFR") of 0.09, consistent with the second quarter of 2023
• Year-to-date TRIFR of 1.40 and LTIFR of 0.06, a reduction of 19% and nil, respectively, from 2022
  

During the third quarter of 2023, the TRIFR increased with 21 recordable injuries, as compared to 13 in the prior quarter. Unfortunately, a second lost time injury occurred at the Mulatos operation involving the same exploration drilling contractor as the prior quarter. Additional training has been provided to the contractor.

Alamos strives to maintain a safe, healthy working environment for all, with a strong safety culture where everyone is continually reminded of the importance of keeping themselves and their colleagues healthy and injury-free. The Company's overarching commitment is to have all employees and contractors return Home Safe Every Day.

Environment

• Zero significant environmental incidents and zero reportable spills in the third quarter and year-to-date
• Completed site visits at all three operating sites to assess compliance with internal Environmental Standards. Positive improvements were noted at all sites with action plans currently being implemented to meet remaining requirements

The Company is committed to preserving the long-term health and viability of the natural environment that surrounds its operations and projects. This includes investing in new initiatives to reduce our environmental footprint with the goal of minimizing the environmental impacts of our activities and offsetting any impacts that cannot be fully mitigated or rehabilitated.

Community

Ongoing donations, medical support and infrastructure investments were provided to local communities, including:

• Construction of a north access road in the Matarachi village, near the Mulatos Mine, to improve vehicle and pedestrian access around the community during the rainy season
• A shared Company-community effort to introduce beekeeping, or apiculture, in Matarachi as a rural development opportunity. This initiative included the provision of training, hives, tools, and protective equipment for all participants. In total 12 apiaries consisting of 60 hives were introduced and involved the participation of nine families, one school and both the Mulatos and La Yaqui Grande mines
• Visual health clinics for Matarachi residents, the third campaign in the last five years, benefiting nearly 300 people with prescription eyewear
• Construction of a columbarium for the township of Dubreuilville
• Supporting various community events in the Algoma district such as the annual Wawa Music Festival, annual Wawa Salmon Derby, the Lady Dunn Health Center Foundation's High Tea, and several charity golf tournaments
• Contributions to the Young Mining Professionals Scholarship Fund to support students enrolled in mining-related programs at Canadian post-secondary institutions
• Fundraising and participation in the Great Cycle Challenge to support SickKids Hospital by raising funds and awareness towards fighting kids' cancer
  

The Company also participated in several local job fairs across Northern Ontario including Kirkland Lake, Wawa, and Thunder Bay to showcase the many employment opportunities available at Island Gold and Young-Davidson. In Wawa, the Island Gold mine organized a mining showcase for local students to highlight the many different careers and jobs available in mining.

The Company believes that excellence in sustainability provides a net benefit to all stakeholders. The Company continues to engage with local communities to understand local challenges and priorities. Ongoing investments in local infrastructure, health care, education, cultural and community programs remain a focus of the Company.

Governance and Disclosure

• Completed the Company's annual response to the CDP (formerly Carbon Disclosure Project) Climate Change Questionnaire
• Published the fourth edition of the Company's annual Women in Mining Newsletter, featuring interviews and stories from women across the Company that have contributed to Alamos' success
• Advanced preparation of the Company's 2022 Environmental, Social and Governance (ESG) Report, to be published in Q4 2023
• Hosted Alamos' second Sustainability Summit in Toronto for health & safety, environmental and community leaders across all operations and projects. The annual Summit is designed to facilitate collaboration, share ideas, and make plans to improve the Company's Sustainability Performance Management Framework and adoption of the Responsible Gold Mining Principles

The Company maintains the highest standards of corporate governance to ensure that corporate decision-making reflects its values, including the Company's commitment to sustainable development. During the quarter, the Company continued to advance its implementation of the Responsible Gold Mining Principles, developed by the World Gold Council as a framework that sets clear expectations as to what constitutes responsible gold mining.

⁽¹⁾ Frequency rate is calculated as incidents per 200,000 hours worked.

Outlook and Strategy

The Company's objective is to operate a sustainable business model that supports growing returns to all stakeholders over the long-term, through growing production, expanding margins, and increasing profitability. This includes a balanced approach to capital allocation focused on generating strong ongoing free cash flow while re-investing in high-return internal growth opportunities and supporting higher returns to shareholders.

With another strong quarterly performance, the Company continues to successfully execute on this strategy on all fronts. Production of 135,400 ounces exceeded third quarter guidance, while costs remained near the low end of annual guidance. This was driven by a solid quarter from Island Gold and another exceptional quarter from La Yaqui Grande.

Given the strong year-to-date performance, full year production guidance has been increased to a range of 515,000 to 530,000 ounces. This marks a 5% increase from original 2023 guidance (based on the mid-point) driven by the solid outperformance from the Mulatos District. This also represents a 13% increase from 2022, with the Company on pace to establish a new record for annual production. The Company also remains well positioned to achieve full year cost guidance with total cash costs and AISC both below the mid-point of annual guidance year-to-date.

Fourth quarter production is expected to be between 115,000 and 130,000 ounces with AISC expected to be slightly above the top end of annual guidance, reflecting higher sustaining capital and lower grades mined at La Yaqui Grande. Full year costs and capital are expected to be in line with guidance.

Financially, it was another solid quarter with free cash flow of $37.3 million bringing the year-to-date total to $109.4 million. As part of a balanced approach to growth, the Company continues to generate solid free cash flow while advancing its growth initiatives including the Phase 3+ Expansion at Island Gold, and the Lynn Lake and PDA projects. These are key elements of the Company's strong long-term outlook, which are expected to support growing production, declining costs, and further free cash flow growth in the years ahead.

The Phase 3+ Expansion at Island Gold is progressing well with construction of the hoist house complete, and the headframe nearing completion, putting the start of shaft sinking on track to begin towards the end of this year. In August, an updated Feasibility Study was released on the Lynn Lake project, outlining a larger, longer-life, low-cost operation located in Canada, with excellent exploration upside. This followed the receipt of a positive Decision Statement for the Federal Environmental Impact Statement ("EIS") earlier this year, a significant permitting milestone for the project.

At PDA, step-out drilling continues to extend high-grade mineralization beyond Mineral Reserves and Resources supporting the expected ongoing growth of the deposit. This growth will be incorporated into a development plan which is expected to be completed towards the end of this year and will outline a significant mine life extension at the Mulatos District.

Young-Davidson continues to be a consistent performer with mining rates in-line with target rates and the operation generating $30.9 million of mine-site free cash flow in the quarter and $82.6 million year-to-date. With higher grades expected in the fourth quarter, the operation is on track to meet full year production guidance and generate more than $100 million of mine-site free cash flow for the third consecutive year.

Island Gold performed well in the third quarter with higher mining rates and grades driving a 19% increase in production from the second quarter. With year-to-date production of 99,800 ounces, the operation is well positioned to meet full year production guidance. As outlined in the Phase 3+ Expansion study released in June 2022, grades mined are expected to increase in 2024, driving production higher. A further increase in grades and an increase in mining rates toward the latter part of 2025 is expected to drive an additional increase in production and a reduction in costs. As demonstrated through the year, Island Gold continues to generate strong cash flow from operations allowing the operation to fund the majority of capital spending on the Phase 3+ Expansion.

Combined gold production from the Mulatos District totaled 53,900 ounces in the quarter reflecting another strong performance from La Yaqui Grande. Year-to-date, the combined operation produced 164,700 ounces, nearly double the prior year period and putting it on pace to exceed full year guidance. Reflecting the strong operational performance, Mulatos generated $30.9 million of mine-site free cash flow in the quarter bringing the year-to-date total to $114.7 million. As previously guided, production is expected to decrease into the fourth quarter reflecting the end of mining within the main Mulatos pit in July as well as the return to guided grades at La Yaqui Grande.

Capital spending, including capitalized exploration, totaled $75.2 million in the third quarter and $239.2 million year-to-date. Capital spending is expected to increase in the fourth quarter, reflecting the continued ramp up in spending on Phase 3+ Expansion, and higher sustaining capital. Full year capital spending is expected to be consistent with guidance of $317 million to $357 million.

The global exploration budget for 2023 is consistent with spending in 2022. The Mulatos District accounts for the largest portion of the budget at $25 million, up from an initial budget of $17 million reflecting ongoing exploration success. This is followed by a $14 million budget at Island Gold, $8 million at Young-Davidson and $5 million at Lynn Lake. The exploration focus in 2023 continues to follow up on a successful year in 2022, with Mineral Reserves increasing for the fourth consecutive year to 10.7 million ounces of gold.

The Company's liquidity position continues to strengthen with cash and cash equivalents increasing to $215.9 million at the end of the third quarter, up from $129.8 million at the start of the year, while remaining debt free. Additionally, the Company has a $500 million undrawn credit facility, providing total liquidity of $715.9 million. As part of a balanced approach to growth and capital allocation, the current focus of growth capital is the Phase 3+ Expansion at Island Gold. With no significant capital expected to be spent on developing Lynn Lake until the Phase 3+ Expansion is well advanced, the Company remains well positioned to fund this growth internally while generating strong free cash flow over the next several years. The Company expects a further increase in free cash flow in 2026 with the completion of the Phase 3+ Expansion.

Third Quarter 2023 results

Young-Davidson Financial and Operational Review

Operational review

Young-Davidson produced 45,100 ounces of gold in the third quarter, an 9% decrease compared to the prior year period, due to 10% lower grades processed. Grades were impacted by sequencing with higher grade stopes planned to be mined during the quarter deferred into the fourth quarter. With grades mined expected to increase in the fourth quarter, Young-Davidson remains on track to meet full year production guidance.

Milling rates increased to average 8,203 tpd in the third quarter, a new record for the operation. Milling rates exceeded mining rates with surface stockpiles supplementing mill feed. Grades processed averaged 2.08 g/t Au in the quarter and 2.14 g/t Au year-to-date, the latter consistent with the low end of annual guidance. Mill recoveries averaged 90% in the quarter, in line with guidance.

Financial Review

Third quarter revenues of $87.9 million were 3% higher than the prior year period, resulting from a higher realized gold price, partially offset by less ounces sold. Year-to-date revenues of $260.5 million were 3% lower than the prior year, primarily driven by less ounces sold.

Cost of sales of $62.4 million in the third quarter were 2% lower than the prior year period with higher tonnes processed being offset by lower unit operating costs. Underground mining costs were CAD $46 per tonne in the quarter, an 8% improvement from the prior year period due to economies of scale driven by higher mining rates. Cost of sales of $183.6 million for the first nine months of the year were in line with the comparable period.

Total cash costs were $939 per ounce in the third quarter and $945 per ounce for the first nine months of the year. Mine-site AISC were $1,178 per ounce in the quarter and $1,207 per ounce for the first nine months of the year. Total cash costs and mine-site AISC were consistent with annual guidance in the quarter and year-to-date; however, above the prior year periods reflecting inflationary pressures as well as the lower grades processed. Both total cash costs and AISC are expected to be in line with guidance for the full year.

Capital expenditures in the quarter included $10.8 million of sustaining capital and $0.3 million of growth capital. Additionally, $1.2 million was invested in capitalized exploration in the quarter. Capital expenditures, inclusive of capitalized exploration, totaled $43.2 million for the first nine months of 2023, a 15% decrease from the prior year. Sustaining capital expenditures are expected to increase in the fourth quarter bringing full year capital in line with annual guidance.

Young-Davidson continues to demonstrate strong operational and financial consistency with mine-site free cash flow of $30.9 million in the third quarter, and $82.6 million in the first nine months of 2023. The operation is on track to surpass $100 million in mine-site free cash flow for the third consecutive year, and is well positioned to generate similar levels over the long-term, given its 15 year Mineral Reserve life.

Island Gold Financial and Operational Review

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