Alamos Gold Reports First Quarter 2022 Results
Press Release
TORONTO, April 27, 2022 — Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter ended March 31, 2022.
“Our first quarter production and costs were in line with guidance and with stronger results expected through the year, we remain well positioned to achieve our annual guidance. La Yaqui Grande remains on track for initial production in the third quarter and is expected to drive our production higher and costs significantly lower in the second half of the year,” said John A. McCluskey, President and Chief Executive Officer.
“We are also making good progress on our other growth initiatives, including at Island Gold where we achieved a key permitting milestone with approval of the Closure Plan Amendment. We officially broke ground on the Phase III expansion and are getting closer to completing an updated mine plan for the operation which we plan to release mid-year. 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, we expect the updated mine plan will showcase a significantly more valuable operation. Both of these high-return projects support our strong outlook with growing production, declining costs and increasing profitability,” Mr. McCluskey added.
First Quarter 2022
- 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 flow1 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 costs1 of $992 per ounce, AISC1 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 earnings1 for the quarter of $18.0 million, or $0.05 per share1. 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 capital1)
- Free cash flow1 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
(1) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
Highlight Summary
| Three Months Ended March 31, | |||||
| 2022 | 2021 | ||||
| Financial Results (in millions) | |||||
| Operating revenues | $184.5 | $227.4 | |||
| Cost of sales (1) | $135.5 | $139.3 | |||
| (Loss) earnings from operations | ($5.7 | ) | $76.3 | ||
| (Loss) earnings before income taxes | ($14.3 | ) | $75.1 | ||
| Net (loss) earnings | ($8.5 | ) | $51.2 | ||
| Adjusted net earnings (2) | $18.0 | $49.1 | |||
| Earnings before interest, depreciation and amortization (2) | $62.9 | $119.6 | |||
| Cash provided by operations before working capital and cash taxes(2) | $70.9 | $119.6 | |||
| Cash provided by operating activities | $46.5 | $99.3 | |||
| Capital expenditures (sustaining) (2) | $22.5 | $23.6 | |||
| Capital expenditures (growth) (2) (3) (5) | $58.7 | $60.3 | |||
| Capital expenditures (capitalized exploration) (4) | $6.1 | $5.5 | |||
| Free cash flow (2) | ($40.8 | ) | $9.9 | ||
| Operating Results | |||||
| Gold production (ounces) | 98,900 | 125,800 | |||
| Gold sales (ounces) | 98,466 | 126,482 | |||
| Per Ounce Data | |||||
| Average realized gold price | $1,874 | $1,798 | |||
| Average spot gold price (London PM Fix) | $1,877 | $1,794 | |||
| Cost of sales per ounce of gold sold (includes amortization) (1) | $1,376 | $1,101 | |||
| Total cash costs per ounce of gold sold (2) | $992 | $757 | |||
| All-in sustaining costs per ounce of gold sold (2) | $1,360 | $1,030 | |||
| Share Data | |||||
| (Loss) earnings per share, basic and diluted | ($0.02 | ) | $0.13 | ||
| Adjusted earnings per share, basic and diluted(2) | $0.05 | $0.13 | |||
| Weighted average common shares outstanding (basic) (000’s) | 391,913 | 392,776 | |||
| Financial Position (in millions) | |||||
| Cash and cash equivalents(6) | $124.2 | $172.5 | |||
(1) Cost of sales includes mining and processing costs, royalties, and amortization expense.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
(3) Includes growth capital from operating sites.
(4) Includes capitalized exploration at Island Gold, Young-Davidson and Mulatos.
(5) Includes capital advances of nil for the three months ended March 31, 2022 ($16.8 million for the three months ended March 31, 2021).
(6) Comparative cash and cash equivalents balance as at December 31, 2021.
| Three Months Ended March 31, | ||||
| 2022 | 2021 | |||
| Gold production (ounces) | ||||
| Young-Davidson | 51,900 | 48,000 | ||
| Island Gold | 24,500 | 42,200 | ||
| Mulatos | 22,500 | 35,600 | ||
| Gold sales (ounces) | ||||
| Young-Davidson | 51,525 | 48,022 | ||
| Island Gold | 23,368 | 39,882 | ||
| Mulatos | 23,573 | 38,578 | ||
| Cost of sales (in millions) ( 1) | ||||
| Young-Davidson | $64.6 | $62.0 | ||
| Island Gold | $24.2 | $29.1 | ||
| Mulatos | $46.7 | $48.2 | ||
| Cost of sales per ounce of gold sold (includes amortization) | ||||
| Young-Davidson | $1,254 | $1,491 | ||
| Island Gold | $1,036 | $801 | ||
| Mulatos | $1,981 | $1,249 | ||
| Total cash costs per ounce of gold sold (2) | ||||
| Young-Davidson | $840 | $873 | ||
| Island Gold | $745 | $466 | ||
| Mulatos | $1,570 | $915 | ||
| Mine-site all-in sustaining costs per ounce of gold sold (2 ),( 3) | ||||
| Young-Davidson | $1,044 | $1,075 | ||
| Island Gold | $1,083 | $732 | ||
| Mulatos | $1,782 | $1,039 | ||
| Capital expenditures (sustaining, growth, capitalized exploration and capital advances) (in millions) ( 2) | ||||
| Young-Davidson(4) | $22.7 | $21.9 | ||
| Island Gold (5) | $33.4 | $27.4 | ||
| Mulatos(6) | $26.0 | $18.8 | ||
| Other | $5.2 | $4.5 | ||
(1) Cost of sales includes mining and processing costs, royalties, and amortization.
(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
(4) Includes capitalized exploration at Young-Davidson $1.0 million for the three months ended March 31, 2022 ($1.0 million for the three months ended March 31, 2021).
(5) Includes capitalized exploration at Island Gold of $5.1 million for the three months ended March 31, 2022 ($4.5 million for the three months ended March 31, 2021).
(6) Includes capitalized exploration at Mulatos of $nil for the three months ended March 31, 2022 ($nil for the three months ended March 31, 2021).
Environment, Social and Governance Summary Performance
Health and Safety
- Recordable injury frequency rate1,2 of 1.65 in the quarter, a 19% decrease from 2021
- Lost time injury frequency rate1 of 0.09 in the quarter, a 56% decrease from 2021
- Commenced phasing out mandatory COVID-19 testing across Alamos operations
During the first quarter of 2022, the recordable injury frequency rate decreased with 18 recordable injuries, down from 28 in the fourth quarter of 2021. One lost time injury was reported in the quarter, down from three in the fourth quarter of 2021, resulting in an overall decrease to the Company’s lost time injury frequency rate from the previous quarter. 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.
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 mine site activated established crisis management plans and developed site-specific plans that have enabled them to meet and respond to changing conditions associated with COVID-19. The Company has adopted the advice of public health authorities and is adhering to government regulations with respect to COVID-19 in the jurisdictions in which it operates. During the first quarter of 2022, in close collaboration with medical experts, Alamos began amending its COVID-19 measures to reflect the changing risk profile of the pandemic in each of its operating jurisdictions. Mandatory medical screening and testing is no longer required for full-time employees and contractors, though they remain available on a voluntary basis and for symptomatic personnel.
The following measures remain in place to prevent the potential spread of the COVID-19 virus:
- Testing of personnel on a voluntary basis
- Vaccinations offered to employees at Island Gold and Mulatos given their unique camp set-up
- Training on proper hand hygiene and social distancing
- Remote work options for eligible employees
- Rigid camp and site hygiene protocols
- In addition, since the COVID-19 pandemic began the Company has donated medical supplies and funds to help combat the effects and spread of the virus
COVID 19 – Impact on Operations
Given the significant precautionary measures taken by the Company, and thanks to the dedication of its employees, contractors and stakeholders, operations remain relatively unaffected by COVID-19. All the Company’s operations have incurred additional costs related to testing of personnel, lodging and transportation.
Environment
- Zero significant environmental incidents in the first quarter of 2022
- Closure Plan Amendment for the Island Gold Mine approved by the Ontario Government, allowing for the ramp up of Phase III construction activities at Island Gold
- Advanced both federal and provincial permitting for the Lynn Lake Project
- Completed greenhouse gas and energy workshops and site visits at all Alamos operations as part of planning to develop emission reduction targets for the Company
- Continued Indigenous community engagement, including the signing of a Community Benefits Agreement with the Michipicoten First Nation for Island Gold subsequent to quarter end on April 4, 2022
- Advanced the power line project at the Mulatos and La Yaqui Grande which will connect the operations to grid power and eliminate the need for site diesel power generation, reducing GHG emissions
Six minor spills occurred during the first quarter, including two at Island Gold and four at Mulatos. All spills were immediately cleaned and remediated with no anticipated long-term effects. The Company is committed to preserving the long-term health and viability of the natural environment that surround 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
- Recipient of the inaugural Reconciliation Award at the Manitoba Prospectors and Developers Association Gala in recognition of the positive collaboration and engagement between Alamos and Marcel Colomb First Nation with respect to the Lynn Lake Gold Project
- Met with Matarachi community representatives to plan the activities for 2022 following implementation of the Mi Matarachi community development program
- Continued to support local students in Sahuaripa, Matarachi and Hermosillo, Mexico with 180 students supported through the Company’s Scholarship Program
- Made various donations of school and health supplies to local communities in Matarachi, Sahuaripa and Arivechi
Alamos 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, and to offer support during the COVID-19 pandemic. Ongoing investments in local infrastructure, health care, education, cultural and community programs have continued through the COVID-19 pandemic, with appropriate health and safety protocols.
Governance and Disclosure
- Finalized three sustainability standards during the quarter and 25 to date as part of Alamos’ Sustainability Performance Management Framework that addresses governance, health & safety, security, environment and community relations management
- Received independent assurance over the Company’s 2021 Responsible Gold Mining Principles (RGMP) Progress Report
- Advanced development of the Company’s 2021 Environmental, Social and Corporate Governance (ESG) Report, to be published in Q2 2022
Alamos 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.
(2) The classification of medical treatment injuries was updated retroactive to 1 January 2020 to align with OSHA standards, resulting in changes to previously reported recordable injury rates.
ILR4
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