Alamos Gold Inc. (
TSX:AGI;
NYSE:AGI) (“Alamos” or the “Company”) today reported
fourth quarter and annual 2018 production. The Company also
provided 2019 production and operating guidance.
“Alamos produced a record 505,000 ounces of gold in 2018,
meeting production guidance and marking an 18% increase from 2017.
This was driven by strong performances from Mulatos and Island
Gold, the latter setting a new record for production and continuing
to demonstrate strong potential for growth in mineral reserves and
resources,” said John A. McCluskey, President and Chief Executive
Officer.
“We expect a similar rate of production in 2019 with lower costs
driving stronger margins. Lower costs are expected to result from
improvements at Young-Davidson and low-cost production growth at
Island Gold. Looking forward to the second half of 2020, we expect
Alamos to transition from reinvesting in growth to generating
strong free cash flow. With long-life production from our existing
operations at declining costs, a leading portfolio of high return
growth projects, and a strong, debt-free balance sheet, Alamos is
well positioned to deliver on this growth,” Mr. McCluskey
added.
Fourth Quarter and Full Year 2018 Operating
Highlights
- Record annual production: Met guidance with
record production of 505,000 ounces of gold in 2018, up 18% from
the previous record in 2017, reflecting the inclusion of Island
Gold for the full year
- Strong fourth quarter: Produced 125,600 ounces
of gold in the fourth quarter, an increase from the third quarter
reflecting a stronger performance from Young-Davidson and record
production from Island Gold
- Costs expected to meet guidance: Total cash
costs and all-in sustaining costs for 2018 have not been finalized
but are expected to be consistent with revised full year guidance
of $810 and $990 per ounce, respectively. Costs in the fourth
quarter are expected to be lower than in the first nine months of
2018
- Record sales: Sold a record 131,164 ounces of
gold in the fourth quarter at an average realized price of $1,244
per ounce, $17 per ounce above the average London PM Fix, for
revenues of approximately $163 million
- Received Schedule 2 Amendment for new tailings facility
at Young-Davidson: Schedule 2 Amendment received from the
Federal government in December 2018, securing tailings capacity for
all existing Mineral Reserves and Resources at Young-Davidson
- Successful permitting at Cerro Pelon: Received
Environmental Impact Assessment (“MIA”) and Change of Land Use
(“CUS”) approval in the fourth quarter of 2018 and commenced full
scale construction of the high return Cerro Pelon project
2019 Guidance Overview
- Stable production: Production guidance of
480,000 to 520,000 ounces of gold, consistent with 2018
production
- Lower costs to drive stronger margins:
Consolidated total cash cost guidance of $710 to $750 per ounce,
down 10% from revised 2018 guidance of $810 per ounce. All-in
sustaining cost guidance of $920 to $960 per ounce, down 5% from
revised 2018 guidance of $990 per ounce. Excluding El Chanate,
all-in sustaining costs are expected to be $925 per ounce in 2019
(based on mid-point of guidance)
- Growth capital focused on new production:
Total capital budget of $290 to $315 million, up from revised
2018 guidance of $217 to $236 million reflecting the construction
of two new mines, Kirazlı in Turkey, and Cerro Pelon in Mexico. The
capital budgets for Young-Davidson and Island Gold are consistent
with 2018. The Company expects a reduced rate of capital
spending following the completion of the lower mine expansion at
Young-Davidson and construction of Kirazlı in 2020
- Peer-leading, debt-free balance sheet and stronger cash
flow to fund growth: The Company expects to fund the
expansion of its existing operations through cash flow from
operations with development of Kirazlı to be funded from the
balance sheet. With approximately $206 million of cash and no
debt at the end of 2018, Alamos is well positioned to fund this
growth
- Strong exploration budget: Global exploration
budget of $33 million, consistent with 2018, including $19 million
budgeted at Island Gold to follow up on ongoing exploration
success
- Corporate G&A among lowest in peer group:
Corporate and administrative expenses are expected to total $20
million (excluding share-based compensation), or $40 per ounce
(based on the mid-point of guidance), among the lowest within the
intermediate gold producer peer group
Outlook to 2021
- Production growth to over 600,000 ounces per year in
2021: Combined annual gold production is expected to be
approximately 500,000 ounces per year in 2019 and 2020, increasing
to over 600,000 ounces in 2021 reflecting a full year of production
from Kirazlı
- Declining cost profile: Consolidated total
cash costs and all-in sustaining costs are expected to decrease
substantially in 2021 driven by lower costs at each of Island Gold,
Mulatos and Young-Davidson, the latter reflecting the completion of
the lower mine expansion, as well as new low-cost production from
Kirazlı
- Capital spending to trend lower resulting in strong
free cash flow growth starting in H2 2020: Capital
spending is expected to trend lower in 2020 and 2021 reflecting the
completion of both the lower mine at Young-Davidson and
construction of Kirazlı, resulting in strong free cash flow growth
starting in the second half of 2020
- Increasing returns to shareholders: The
Company expects to return increasing value to shareholders as it
generates higher levels of free cash flow in the second half of
2020 and beyond
Fourth Quarter and Full Year 2018 Operating
Results
|
Three months ended |
Twelve months ended |
|
December 31, 2018 |
December 31, 2017 |
December 31, 2018 |
December 31, 2017 |
Gold production (ounces) |
|
|
|
|
Young-Davidson |
50,900 |
56,500 |
180,000 |
200,000 |
Island Gold (1) |
29,000 |
9,000 |
105,800 |
9,000 |
Mulatos |
35,600 |
42,700 |
175,500 |
160,000 |
El Chanate |
10,100 |
12,100 |
43,700 |
60,400 |
Total gold production |
125,600 |
120,300 |
505,000 |
429,400 |
(1) Operating results from Island
Gold have been included from November 23, 2017 following completion
of the Richmont Mines acquisition. Including results prior to the
completion of the acquisition, Island Gold produced 22,100 ounces
of gold in the fourth quarter of 2017 and 98,600 ounces for the
full year.
2019 Guidance
The Company expects a similar rate of production as 2018 with
lower costs driven by operational improvements at Young-Davidson
and low-cost production growth at Island Gold reflecting higher
throughput rates and grades. Production rates are expected to be
similar in the first and second half of the year, while costs and
capital are expected to decline through the year driving stronger
mine-site free cash flow in the second half of the year.
|
|
|
|
2019 Guidance
|
2018
RevisedGuidance |
|
Young-Davidson |
Mulatos |
Island
Gold |
El Chanate |
Turkey |
Other (2) |
Total |
Total |
Gold
production (000’s ounces) |
180-190 |
150-160 |
135-145 |
15-25 |
|
|
480-520 |
505 (actual) |
Cost of sales, including
amortization (in millions)(4) |
$226 |
$165 |
$123 |
$26 |
— |
— |
$540 |
$549 |
Cost of sales, including amortization ($
per ounce)(4) |
$1,220 |
$1,065 |
$880 |
$1,300 |
— |
— |
$1,080 |
$1,145 |
Total cash
costs ($ per ounce)(1) |
$750-790 |
$820-860 |
$460-500 |
$1,200 |
— |
— |
$710-750 |
$810 |
All-in sustaining costs ($ per
ounce)(1) |
|
|
|
|
— |
— |
$920-960 |
$990 |
Mine-site
all-in sustaining costs ($ per
ounce)(1),(3) |
$940-980 |
$860-900 |
$730-770 |
$1,200 |
— |
— |
|
— |
Amortization costs ($ per ounce)(1) |
$450 |
$225 |
$400 |
$100 |
— |
— |
$350 |
$335 |
Corporate & Administrative (in millions) |
|
|
|
|
|
|
$20 |
$18 |
Capital
expenditures (in millions) |
|
|
|
|
|
|
|
|
Sustaining capital(1) |
$35-40 |
$5 |
$35-40 |
— |
— |
— |
$75-85 |
$68-77 |
Growth capital(1) |
$45-50 |
$45-50 (5) |
$15-20 |
— |
$75 |
$35 (2) |
$215-230 |
$149-159 |
Total capital expenditures(1) |
$80-90 |
$50-55 |
$50-60 |
— |
$75 |
$35 |
$290-315 |
$217-$236 |
(1) Refer to the "Non-GAAP Measures and Additional
GAAP" disclosure at the end of this press release 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
The 2019 production forecast and operating cost estimates are
based on the following currency assumptions:
Foreign Exchange Rate |
2019 |
Operating Sites Foreign Currency Exposure |
Change |
Free Cash Flow Sensitivity |
USD/CAD |
$0.75:1 |
>95% |
$0.05 |
~$27 million |
MXN/USD |
20.0:1 |
35-40% |
1.00 |
~$4 million |
The Company has entered into foreign exchange
transactions representing approximately 70% of its Canadian
dollar-denominated operating and capital costs for 2019, ensuring a
maximum USD/CAD foreign exchange rate of $0.77:1 and allowing the
Company to participate in weakness in the USD/CAD up to a rate of
$0.74:1.
Additionally, the Company has entered into
foreign exchange transactions representing approximately 70% of its
Mexican peso-denominated operating and capital costs in 2019,
ensuring a minimum MXN/USD foreign exchange rate of 19.5:1 and
allowing the Company to participate in weakness in the MXN/USD up
to a rate of 22.1:1.
Young-Davidson
Young-Davidson |
|
Q3 YTD 2018 |
Q4 2018 |
2018A |
2019 guidance |
Change |
Gold Production |
oz |
129,100 |
50,900 |
180,000 |
180,000 - 190,000 |
3% |
|
|
|
|
|
|
|
Cost of Sales(1) |
US$/oz |
$1,298 |
- |
- |
$1,220 |
(6%) |
Total Cash Costs(2) |
US$/oz |
$845 |
- |
- |
$750-790 |
(9%) |
Mine-site AISC(2) |
US$/oz |
$1,034 |
- |
- |
$940-980 |
(7%) |
|
|
|
|
|
|
|
Underground ore mined |
tpd |
6,196 |
6,402 |
6,248 |
6,500 |
|
Underground grade mined |
g/t Au |
2.44 |
2.71 |
2.51 |
2.65 +/- 5% |
|
Tonnes of ore processed |
tpd |
7,100 |
8,104 |
7,353 |
6,500-7,800 |
|
Grade processed |
g/t Au |
2.28 |
2.39 |
2.31 |
2.35-2.65 |
|
Average recovery rate |
% |
92% |
92% |
92% |
90-92% |
|
(1) Cost of sales includes mining and processing
costs, royalties, and amortization expense, and is calculated based
on the mid-point of guidance.(2) Refer to the "Non-GAAP
Measures and Additional GAAP" disclosure at the end of this press
release and the Q3 2018 MD&A for a description and calculation
of these measures.
Gold production at Young-Davidson is expected to increase
slightly in 2019, at substantially lower costs driven by higher
underground mining rates and mined grades. Total cash costs and
mine-site all-in sustaining costs are expected to decrease 9% and
7%, respectively, from actual costs through the first three
quarters of 2018. Young-Davidson’s 2019 guidance for
production, mining rates, operating costs and capital are all
consistent with its average performance over the past two
years.
Mill throughput is expected to average 7,800 tonnes per day
(“tpd”) during the first half of 2019 and decrease in the second
half of the year following the depletion of lower grade surface
stockpiles. Milled grades are expected to increase as the lower
grade surface stockpiles are depleted reflecting a higher
proportion of underground ore.
Capital spending at Young-Davidson is expected to total $80 to
$90 million, similar to 2018. Spending will be focused on
completing development and infrastructure of the lower mine as well
as starting construction of a newly permitted tailings facility
(“TIA 1”). The Company successfully completed permitting of TIA 1
during the fourth quarter with receipt of the Schedule 2 Amendment
from the Federal government. TIA 1 will provide sufficient
capacity for the remaining Mineral Reserves and Resources at
Young-Davidson at substantially lower costs than the current
facility.
Gold production is expected to decrease in 2020 reflecting
approximately three months of downtime of the Northgate shaft to
complete the tie-in of the upper and lower mines. This will
temporarily limit underground throughput and impact one quarter of
production during the first half of 2020. Following
completion of the tie-in, underground mining rates are expected to
ramp up above 7,500 tpd in the second half of 2020 and towards the
long-term target of 8,000 tpd in 2021. This is expected to drive
annual gold production above 200,000 ounces per year in 2021 and
beyond. Combined with declining costs and capital spending, the
Company expects strong free cash flow growth from Young-Davidson
starting in the second half of 2020.
Island Gold
Island Gold |
|
Q3 YTD 2018 |
Q4 2018 |
2018A |
2019 guidance |
Change |
Gold Production |
oz |
76,800 |
29,000 |
105,800 |
135,000 - 145,000 |
32% |
|
|
|
|
|
|
|
Cost of Sales(1) |
US$/oz |
$1,033 |
- |
- |
$880 |
(15%) |
Total Cash Costs(2) |
US$/oz |
$597 |
- |
- |
$460-500 |
(20%) |
Mine-site AISC(2) |
US$/oz |
$759 |
- |
- |
$730-770 |
(1%) |
|
|
|
|
|
|
|
Tonnes of ore processed |
tpd |
968 |
1,146 |
1,013 |
1,100 |
|
Grade processed |
g/t Au |
9.27 |
9.03 |
9.20 |
10.50-11.50 |
|
Average recovery rate |
% |
97% |
96% |
96% |
96-97% |
|
(1) Cost of sales includes mining and processing
costs, royalties, and amortization expense, and is calculated based
on the mid-point of guidance.(2) Refer to the "Non-GAAP
Measures and Additional GAAP" disclosure at the end of this press
release and the Q3 2018 MD&A for a description and calculation
of these measures.
Gold production at Island Gold in 2019 is expected to increase
32% relative to previous record production, while total cash costs
are expected to decrease approximately 20% from actual costs
through the first three quarters of 2018. Higher grades and higher
throughput, resulting from the completion of the Phase I expansion
last year, will result in strong free cash flow growth in 2019.
Mine-site all-in sustaining costs are expected to be consistent
with actual mine-site all-in sustaining costs through the first
three quarters of 2018.
Capital spending at Island Gold is expected to total $50 to $60
million in 2019, similar to 2018 guidance. This includes sustaining
capital of $35 to $40 million, higher than outlined in the April
2017 Preliminary Economic Assessment (“PEA”) given the significant
growth in Mineral Reserves and Resources outside of the PEA
expansion area.
The Company is accelerating underground development to bring
these new Mineral Reserves and Resources into the mine plan as well
as support mining rates above 1,100 tpd. Lateral exploration
development has also been increased to support the expanded
exploration program. Given the Mineral Reserve and Resource growth
to date and ongoing exploration success, the Company believes the
mine life will be more than double the PEA. As a result, the
Company is investing in surface infrastructure (camp, kitchen,
offices and warehouse) in 2019 to support the growing mine
life.
Phase II & Phase III Expansions
The Phase I expansion was completed in September 2018, expanding
the mill to a design capacity of approximately 1,200 tpd. The
current mine infrastructure can support similar mining rates;
however, the operation is currently permitted to operate at an
average annual rate of 1,100 tpd. With a mine and mill that
can support higher throughput rates, the Company is in the process
of permitting an amendment to 1,200 tpd which is expected to be
received by the end of 2019 as part of a Phase II expansion. In
parallel, the Company has started an evaluation of a potential
Phase III expansion of the operation.
Mulatos District
Mulatos District |
|
Q3 YTD 2018 |
Q4 2018 |
2018A |
2019 guidance |
Change |
Gold Production |
oz |
139,900 |
35,600 |
175,500 |
150,000 - 160,000 |
(12%) |
|
|
|
|
|
|
|
Cost of Sales(1) |
US$/oz |
$988 |
- |
- |
$1,065 |
8% |
Total Cash Costs(2) |
US$/oz |
$784 |
- |
- |
$820-860 |
7% |
Mine-site AISC(2) |
US$/oz |
$847 |
- |
- |
$860-900 |
4% |
|
|
|
|
|
|
|
Tonnes of ore stacked |
tpd |
18,400 |
19,300 |
18,600 |
20,500 |
|
Grades stacked |
g/t Au |
0.89 |
0.92 |
0.89 |
0.8-1.0 |
|
Tonnes milled |
tpd |
335 |
- |
250 |
- |
|
Grades milled |
g/t Au |
6.70 |
- |
6.70 |
- |
|
Combined Recovery Ratio |
% |
86% |
68% |
81% |
70% |
|
Waste-to-ore ratio (operating) |
|
0.78 |
0.51 |
0.71 |
1.0-1.2 |
|
(1) Cost of sales includes mining and processing
costs, royalties, and amortization expense, and is calculated based
on the mid-point of guidance.(2) Refer to the "Non-GAAP
Measures and Additional GAAP" disclosure at the end of this press
release and the Q3 2018 MD&A for a description and calculation
of these measures.
Total production from the Mulatos District (including La Yaqui
Phase I) is expected to be between 150,000 to 160,000 ounces of
gold in 2019, consistent with long term guidance. Mulatos
significantly outperformed this range in 2018 reflecting higher
than expected recoveries at La Yaqui and Mulatos, and extended
production from the high-grade San Carlos underground deposit which
reached the end of its mine life in the third quarter of 2018.
Mine-site all-in sustaining costs are expected to decrease relative
to 2018 guidance of $900 per ounce reflecting the end of the 5% NSR
royalty early in 2019. Mine-site all-in sustaining costs are
expected to be up slightly from 2018 with the operation having
outperformed in 2018 given the above noted factors.
Capital spending across all of the Mulatos District deposits is
expected to total $50 to $55 million in 2019 including $5 million
of sustaining capital. This is up from 2018 guidance of $39 to $43
million with $25 million budgeted in 2019 for development of the
Cerro Pelon project. During the fourth quarter of 2018, the Company
received approval of the MIA and CUS permits for Cerro Pelon and
commenced full scale construction. As a higher grade, high return
project, Cerro Pelon is expected to start contributing low cost
production in 2020, driving down combined Mulatos District
costs.
Other capital projects include $5 million for a heap leach pad
expansion, $5 million to complete the power line to connect to
lower cost grid power, $4 million for pre-stripping activities, and
$8 million for permitting and engineering of La Yaqui Grande. The
MIA for La Yaqui Grande was submitted late in 2018 with approval
expected in the second half of 2019.
Beyond 2019, total production from the Mulatos district
(including all deposits) is expected to remain in a similar range
of 150,000 to 160,000 ounces of gold per year over its current
seven-year life, at declining costs driven by lower cost production
from the higher-grade Cerro Pelon and La Yaqui Grande deposits.
El Chanate
El Chanate |
|
Q3 YTD 2018 |
Q4 2018 |
2018A |
2019 guidance |
Change |
Gold Production |
oz |
33,600 |
10,100 |
43,700 |
15,000 - 25,000 |
(54%) |
|
|
|
|
|
|
|
|
Cost of Sales(1) |
US$/oz |
$1,384 |
- |
- |
$1,300 |
(6%) |
|
Total Cash Costs(2) |
US$/oz |
$1,285 |
- |
- |
$1,200 |
(7%) |
|
Mine-site AISC(2) |
US$/oz |
$1,312 |
- |
- |
$1,200 |
(9%) |
|
|
|
|
|
|
|
|
Tonnes of ore stacked |
tpd |
9,100 |
6,200 |
8,400 |
- |
|
Grades stacked |
g/t Au |
0.55 |
0.52 |
0.55 |
- |
|
(1) Cost of sales includes mining and processing
costs, royalties, and amortization expense, and is calculated based
on the mid-point of guidance.(2) Refer to the "Non-GAAP
Measures and Additional GAAP" disclosure at the end of this press
release and the Q3 2018 MD&A for a description and calculation
of these measures.
Mining activities ceased at El Chanate in the fourth quarter of
2018 and the operation has transitioned to residual leaching which
will result in a declining rate of production through
2019.
Mine-site all-in sustaining costs are expected to average $1,200
per ounce in 2019, with approximately 25% of those costs having
been previously spent and incurred. As a result, the Company
expects a stronger impact on cash flow.
Given the long leach cycle at El Chanate, residual leaching
could continue beyond 2019; however, the Company will monitor costs
to identify when it does not become economically viable to continue
recovering gold. Accounting rules require that a Company assess the
recovery of inventory at each period end; based on the costs
included in inventory as at December 31, 2018 and the planned
spending in 2019, the Company does not expect to be able to
profitably recover all of the remaining ounces in inventory on the
leach pad. As a result, the Company expects to write down a portion
of this inventory with its fourth quarter 2018 earnings.
2019 Global Operating and Development Capital
Budget
|
2019 Guidance |
Revised 2018Guidance |
|
Sustaining Capital |
|
Growth Capital |
Total |
Total |
Operating Mines (in millions) |
|
|
|
|
|
Young-Davidson |
$35-40 |
|
$45-50 |
$80-90 |
$70-80 |
Island Gold |
$35-40 |
|
$15-20 |
$50-60 |
$50-55 |
Mulatos |
$5 |
|
$45-50(1) |
$50-55 |
$39-43 |
El Chanate |
- |
|
- |
- |
- |
Total – Operating Mines |
$75-85 |
|
$105-120 |
$180-205 |
$159-178 |
Development Projects (in
millions) |
|
|
|
|
|
Turkey |
- |
|
$75 |
$75 |
$25 |
Lynn Lake |
- |
|
$5 |
$5 |
$8 |
Other |
- |
|
$3 |
$3 |
$2 |
Total – Development Projects |
- |
|
$83 |
$83 |
$35 |
Capitalized Exploration (in
millions) |
|
|
|
|
|
Island Gold |
- |
|
$18 |
$18 |
$12 |
Mulatos |
- |
|
$3 |
$3 |
$7 |
Lynn Lake |
- |
|
$6 |
$6 |
$4 |
Total – Capitalized Exploration |
- |
|
$27 |
$27 |
$23 |
Total Consolidated Budget |
$75-85 |
|
$215-230 |
$290-315 |
$217-236 |
(1) Includes capital spending at Cerro Pelon and La
Yaqui Grande of approximately $33 million
2019 Capital Budget for Development
Projects
Capital spending on the Company’s development projects,
including capitalized exploration, is expected to total $110
million in 2019. The majority of this spending will be focused on
construction of the Kirazlı project, with the bulk of the remainder
comprised of capitalized exploration at Island Gold and
exploration, permitting and development activities at Lynn
Lake.
Kirazlı Development Budget
The Company has been granted the three major permits required
for the start of construction of Kirazlı including the
Environmental Impact Assessment, Forestry Permits and GSM (Business
Opening and Operation) permit.
There are several additional permits required prior to the start
of gold production at Kirazlı, which the Company expects to receive
in due course. As disclosed in December 2018, the next permit
required to meet the construction schedule is an Operating License
which allows for the start of earthworks on the future open pit.
The Company expects to receive the Operating Licence during the
first quarter of 2019. Following receipt of the Operating License,
the Company expects to ramp up major construction and earthworks
activities, putting initial production from Kirazlı on track for
the second half of 2020.
The Company spent approximately $17 million of Kirazlı’s initial
capital of $152 million in 2018 with road construction complete and
the water reservoir and power line 50% and 85% complete,
respectively. The 2019 budget of $75 million will be focused
on completing work on the water reservoir and ramping up major
construction activities and earthworks. The remaining construction
capital of approximately $60 million will be spent during the first
three quarters of 2020.
Kirazlı is expected to produce more than 100,000 ounces of gold
in its first full year of production at mine-site all-in sustaining
costs of less than $400 per ounce. This is expected to drive
company-wide production above 600,000 ounces per year in 2021,
while significantly lowering the Company’s cost profile.
Lynn Lake Development Budget
The 2019 capital budget for Lynn Lake is $11 million, including
$5 million for development activities and $6 million for
exploration. Development spending will be focused on completing
value engineering initiatives and baseline work in support of the
Environmental Impact Study (“EIS”) for the project that will be
submitted to satisfy federal and provincial environmental
assessment requirements. The permitting process is expected to take
approximately two years followed by two years of construction.
Over the past year, the Company has been evaluating value
engineering initiatives to enhance the project’s economics,
including modifications to the overall site layout, structures and
foundations for the process plant, and review of the camp location.
This work along with exploration success that was not included in
the 2017 Feasibility Study will be incorporated into an
optimization study which is expected to be completed in the second
quarter of 2019.
2019 Exploration Budget
The 2019 global exploration budget is $33 million, down slightly
from the 2018 budget reflecting lower exploration spending at
Mulatos. Island Gold continues to be the main focus of exploration
with $19 million budgeted, up from the 2018 initial budget of $15
million. Mulatos and Lynn Lake remain the other two areas of focus
with $6 million budgeted for each. Approximately 80% of the
2019 budget will be capitalized.
Island Gold
A total of $19 million has been budgeted in 2019 for surface and
underground exploration at Island Gold as part of an ongoing
exploration program focused on continuing to define new near mine
Mineral Resources across the two-kilometre long Island Gold Main
Zone. This represents an increase of $4 million compared with the
initial 2018 exploration budget. The 2019 exploration budget
includes 48,000 metres (“m”) of surface directional drilling,
30,000 m of underground exploration drilling, and 900 m of
underground exploration development to establish drill platforms on
the 340, 620, 790, and 840-levels.
Drilling completed in 2018 was successful in expanding high
grade gold mineralization laterally and down-plunge of the Island
Gold Deposit across all three areas of focus including the Main,
Western, and Eastern Extensions. These will continue to be the
primary areas of focus in 2019.
Regional data compilation and field mapping programs are also
planned in 2019 to develop a pipeline of exploration targets
outside the main Island Gold Mine area on the 9000-hectare Island
Gold Property.
Mulatos
A total of $6 million and 10,000 m has been budgeted at Mulatos
for exploration in 2019 with the main areas of focus being the near
mine area.
A property-wide VTEM geophysical survey completed during the
last few weeks of 2018 and ongoing mapping will form the basis for
developing regional targets in 2019.
Interpretation from the 2018 exploration program at El Carricito
and other prospects is ongoing and is expected to produce targets
for future drill testing.
Lynn Lake
A total of $6 million and 19,000 m of drilling has been budgeted
for exploration at the Lynn Lake project in 2019. The key
focus of the 2019 exploration program will be to test exploration
targets within and in proximity to the Gordon and MacLellan
deposits with the goal of adding to Mineral Resources.
Another area of focus for 2019 is to establish a pipeline of
prospective exploration targets within the 58,000-hectare Lynn Lake
Property.
Qualified Persons
Chris Bostwick, Alamos’ Vice President, Technical Services, who
is a qualified person within the meaning of National Instrument
43-101 Standards of Disclosure for Mineral Projects, has reviewed
and approved the scientific and technical information contained in
this press release.
About Alamos
Alamos is a Canadian-based intermediate gold producer with
diversified production from four operating mines in North America.
This includes the Young-Davidson and Island Gold mines in northern
Ontario, Canada and the Mulatos and El Chanate mines in Sonora
State, Mexico. Additionally, the Company has a significant
portfolio of development stage projects in Canada, Mexico, Turkey,
and the United States. Alamos employs more than 1,700 people and is
committed to the highest standards of sustainable development. The
Company’s shares are traded on the TSX and NYSE under the symbol
“AGI”.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Scott K.
Parsons |
|
Vice President,
Investor Relations |
|
|
|
(416) 368-9932 x
5439 |
|
All amounts are in United States dollars, unless otherwise
stated.
The TSX and NYSE have not reviewed and do not accept
responsibility for the adequacy or accuracy of this release.
Cautionary Note
This news release contains forward-looking statements and
forward-looking information as defined under Canadian and U.S.
securities laws. All statements, other than statements of
historical fact, are, or may be deemed to be, forward-looking
statements. Words such as "expect", "believe", "anticipate",
"will", "intend", "estimate", "forecast", "budget" and similar
expressions identify forward-looking statements.
Forward-looking statements include information as to strategy,
plans or future financial or operating performance, such as the
Company's production forecasts and plans, expected sustaining
costs, expected improvements in cash flows and margins,
expectations of changes in capital expenditures, expansion plans,
project timelines, and expected sustainable productivity increases,
expected increases in mining activities and corresponding cost
efficiencies, expected drilling targets, forecasted cash shortfalls
and the Company's ability to fund them, cost estimates, projected
exploration results, projected development and permitting
timelines, expected production rates and use of the stockpile
inventory, expected recoveries, sufficiency of working capital for
future commitments, Mineral Reserve and Mineral Resource estimates,
and other statements that express management's expectations or
estimates of future performance.
Forward-looking statements are necessarily based upon a number
of factors and assumptions that, while considered reasonable by
management at the time of making such statements, are inherently
subject to significant business, economic, technical, political and
competitive uncertainties and contingencies. Known and unknown
factors could cause actual results to differ materially from those
projected in the forward-looking statements.
Such factors and assumptions underlying the forward-looking
statements or forward-looking information in this document include,
but are not limited to: changes to current estimates of Mineral
Reserves and Resources; changes to production estimates (which
assume accuracy of projected ore grade, mining rates, recovery
timing and recovery rate estimates and may be impacted by
unscheduled maintenance, labour and contractor availability and
other operating or technical difficulties); fluctuations in the
price of gold; changes in foreign exchange rates (particularly the
Canadian dollar, Mexican peso, Turkish Lira and U.S. dollar); the
impact of inflation; any decision to declare a dividend; employee
relations; litigation; disruptions affecting operations;
availability of and increased costs associated with mining inputs
and labour; development delays at
the Young-Davidson mine; inherent risks associated with
mining and mineral processing; the risk that
the Young-Davidson, Island Gold, Mulatos and El Chanate mines
may not perform as planned; uncertainty with the Company's ability
to secure additional capital to execute its business plans; the
speculative nature of mineral exploration and development,
including the risks of obtaining necessary licenses and permits,
including the necessary licenses, permits, authorizations and/or
approvals from the appropriate regulatory authorities for the
Company's development stage assets, contests over title to
properties; changes in national and local government legislation
(including tax legislation
in Canada, Mexico, Turkey, the United
States and other jurisdictions in which the Company does or
may carry on business in the future; risk of loss due to sabotage
and civil disturbances; the impact of global liquidity and credit
availability and the values of assets and liabilities based on
projected future cash flows; risks arising from holding derivative
instruments; and business opportunities that may be pursued by the
Company.
Additional risk factors affecting Alamos are set
out in the Company’s latest Annual Information Form and
Management’s Discussion and Analysis, each under the heading “Risk
Factors” available on the SEDAR website at www.sedar.com or on
EDGAR at www.sec.gov, and should be reviewed in conjunction with
this news release. The Company disclaims any intention or
obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise,
except as required by applicable law.
Cautionary Note to U.S. Investors
Alamos prepares its disclosure in accordance
with the requirements of securities laws in effect in Canada, which
differ from the requirements of U.S. securities laws. Terms
relating to Mineral Resources in this presentation are defined in
accordance with National Instrument 43-101 – Standards of
Disclosure for Mineral Projects under the guidelines set out in the
Canadian Institute of Mining, Metallurgy, and Petroleum Standards
on Mineral Resources and Mineral Reserves. The United States
Securities and Exchange Commission (the “SEC”) permits mining
companies, in their filings with the SEC, to disclose only those
mineral deposits that a company can economically and legally
extract or produce. Alamos may use certain terms, such as “Measured
Mineral Resources”, “Indicated Mineral Resources”, “Inferred
Mineral Resources” and “Probable Mineral Reserves” that the SEC
does not recognize (these terms may be used in this presentation
and are included in the public filings of Alamos, which have been
filed with the SEC and the securities commissions or similar
authorities in Canada).
Cautionary non-GAAP Measures and Additional GAAP
Measures
Note that for purposes of this section, GAAP refers to IFRS. The
Company believes that investors use certain non-GAAP and additional
GAAP measures as indicators to assess gold mining companies. They
are intended to provide additional information and should not be
considered in isolation or as a substitute for measures of
performance prepared with GAAP.
“Cash flow from operating activities before changes in non-cash
working capital” is a non-GAAP performance measure that could
provide an indication of the Company’s ability to generate cash
flows from operations, and is calculated by adding back the change
in non-cash working capital to “Cash provided by (used in)
operating activities” as presented on the Company’s consolidated
statements of cash flows. “Free cash flow” is a non-GAAP
performance measure that is calculated as cash flows from
operations net of cash flows invested in mineral property, plant
and equipment and exploration and evaluation assets as presented on
the Company’s consolidated statements of cash flows and that would
provide an indication of the Company’s ability to generate cash
flows from its mineral projects. “Mine site free cash flow” is a
non-GAAP measure which includes cash flow from operating activities
at, less capital expenditures at each mine site. Return on
Equity is defined as Earnings from Continuing Operations divided by
the average Total Equity for the current and previous year.
“Mining cost per tonne of ore” and “Cost per tonne of ore” are
non-GAAP performance measures that could provide an indication of
the mining and processing efficiency and effectiveness of the mine.
These measures are calculated by dividing the relevant mining and
processing costs and total costs by the tonnes of ore processed in
the period. “Cost per tonne of ore” is usually affected by
operating efficiencies and waste-to-ore ratios in the period.
“Total cash costs per ounce”, “all-in sustaining costs per ounce”,
and “mine-site all-in sustaining costs” as used in this analysis
are non-GAAP terms typically used by gold mining companies to
assess the level of gross margin available to the Company by
subtracting these costs from the unit price realized during the
period. These non-GAAP terms are also used to assess the ability of
a mining company to generate cash flow from operations. There may
be some variation in the method of computation of these metrics as
determined by the Company compared with other mining companies. In
this context, “total cash costs” reflects mining and processing
costs allocated from in-process and dore inventory associated and
associated royalties with ounces of gold sold in the period.
Total cash costs per ounce are exclusive of exploration costs.
“All-in sustaining costs per ounce” include total cash costs,
exploration, corporate and administrative, share based compensation
and sustaining capital costs. “Mine-site all-in sustaining costs”
include total cash costs, exploration, and sustaining capital costs
for the mine-site, but exclude an allocation of corporate and
administrative and share based compensation.
Additional GAAP measures that are presented on the face of the
Company’s consolidated statements of comprehensive income and are
not meant to be a substitute for other subtotals or totals
presented in accordance with IFRS, but rather should be evaluated
in conjunction with such IFRS measures. This includes
“Earnings from operations”, which is intended to provide an
indication of the Company’s operating performance, and represents
the amount of earnings before net finance income/expense, foreign
exchange gain/loss, other income/loss, and income tax
expense. Non-GAAP and additional GAAP measures do not have a
standardized meaning prescribed under IFRS and therefore may not be
comparable to similar measures presented by other companies.
A reconciliation of historical non-GAAP and additional GAAP
measures are available at www.alamosgold.com.
Alamos Gold (NYSE:AGI)
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