Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or
the “Company”) today reported its financial results for the quarter
ended June 30, 2020.
“The second quarter of 2020 will be remembered
as one of the most challenging times in our history given the
COVID-19 pandemic. We started the quarter with two of our
operations being temporarily suspended, but we adapted well and by
June both Island Gold and Mulatos had safely returned to normal
operating levels,” said John A. McCluskey, President and Chief
Executive Officer.
At the same time we made good progress on
several catalysts that form key parts of what is a transformational
year for Alamos. These include the completion of the lower mine
expansion at Young-Davidson earlier this month, the announcement of
a Phase III expansion of Island Gold, and a construction decision
on the La Yaqui Grande project. These have greatly enhanced
the long-term outlook for each of our operating mines. We look
forward to creating additional value for our stakeholders in the
second half of 2020 with higher production and lower costs expected
to drive strong free cash flow growth,” Mr. McCluskey added.
Second Quarter 2020
- Produced 78,400 ounces of gold,
with production impacted by the previously guided downtime of the
Northgate shaft at Young-Davidson and temporary suspension of
operations at Island Gold and Mulatos due to COVID-19. Mulatos and
Island Gold resumed operations in May with both returning to normal
operating levels in June
- Mulatos produced 35,900 ounces of
gold and generated mine-site free cash flow1 of $19.3 million, with
the operation benefiting from the ongoing recovery of gold from the
leach pad during the temporary suspension
- Island Gold produced 19,400 ounces
of gold and generated mine-site free cash flow1 of $9.2 million.
Production was lower than previous quarters due to the temporary
suspension of operations which began the last week of March. After
a phased ramp up in May, mining and milling rates increased to
average more than 1,200 tpd for the month of June
- Advanced the tie-in of the upper
and lower mines at Young-Davidson, successfully commissioning the
Northgate shaft and new lower mine infrastructure in July.
Underground mining rates increased to 6,500 tpd by the end of July
and are expected to ramp up to 7,500 tpd by the end of 2020
- Sold 74,605 ounces of gold at an
average realized price of $1,692 per ounce for revenues of $126.2
million
- Generated cash flow from operating
activities of $49.6 million ($44.7 million, or $0.11 per share,
before changes in working capital1)
- Consolidated total cash costs1 of
$933 per ounce and all-in sustaining costs ("AISC")1 of $1,276 per
ounce were both temporarily higher, due to higher costs at
Young-Davidson during the lower mine tie-in. AISC were higher than
usual as a result of the impact of the 79% increase in the
Company’s share price on the revaluation of outstanding stock-based
awards. In addition, sustaining capital was allocated to lower
ounces of gold sold given the above noted temporary suspensions.
Total cash costs and AISC are expected to decrease significantly in
the second half of 2020
- Realized net earnings of $11.7
million, or $0.03 per share
- Reported adjusted net earnings1 of
$9.8 million, or $0.03 per share1, which includes adjustments for
unrealized foreign exchange gains of $10.3 million recorded within
deferred taxes, partially offset by COVID-19 costs of $6.5 million
related to the suspension of operations at Island Gold and Mulatos,
and other one-time losses of $1.9 million
- Ended the quarter with cash and
cash equivalents of $201.3 million and equity securities of $30.2
million
- Paid a quarterly dividend of $5.9
million and repurchased 527,100 common shares at a cost of $2.6
million, or $5.05 per share, under the Company's Normal Course
Issuer Bid ("NCIB"). To date in 2020, the Company has returned
$17.3 million to shareholders in the form of dividends and share
repurchases
Subsequent to the Second
Quarter:
- Reported results of the positive 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 at the operation
- Announced a construction decision on the high-return La Yaqui
Grande project, which generates a 58% after-tax internal rate of
return ("IRR") at a $1,750 gold price and is expected to
significantly reduce Mulatos District AISC starting in 2022
(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 June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Financial Results (in millions) |
|
|
|
|
Operating revenues |
$ |
126.2 |
|
$ |
168.1 |
|
$ |
303.1 |
|
$ |
324.2 |
|
Cost of sales (1) |
$ |
103.3 |
|
$ |
131.1 |
|
$ |
223.6 |
|
$ |
258.1 |
|
Earnings from operations |
$ |
12.1 |
|
$ |
28.2 |
|
$ |
58.3 |
|
$ |
46.9 |
|
Earnings before income taxes |
$ |
6.0 |
|
$ |
27.1 |
|
$ |
46.5 |
|
$ |
47.7 |
|
Net earnings (loss) |
$ |
11.7 |
|
$ |
23.6 |
|
($ |
0.6 |
) |
$ |
40.4 |
|
Adjusted net earnings (2) |
$ |
9.8 |
|
$ |
17.7 |
|
$ |
39.2 |
|
$ |
28.0 |
|
Earnings before interest, depreciation and amortization (2) |
$ |
40.9 |
|
$ |
69.1 |
|
$ |
117.6 |
|
$ |
129.6 |
|
Cash provided by operations before working capital and cash
taxes(2) |
$ |
44.7 |
|
$ |
68.6 |
|
$ |
126.4 |
|
$ |
131.2 |
|
Cash provided by operating activities |
$ |
49.6 |
|
$ |
72.3 |
|
$ |
106.2 |
|
$ |
114.7 |
|
Capital expenditures (sustaining) (2) |
$ |
14.4 |
|
$ |
19.6 |
|
$ |
31.9 |
|
$ |
35.7 |
|
Capital expenditures (growth) (2) (3) |
$ |
38.8 |
|
$ |
47.2 |
|
$ |
80.1 |
|
$ |
81.3 |
|
Capital expenditures (capitalized exploration) (4) |
$ |
1.4 |
|
$ |
4.3 |
|
$ |
5.9 |
|
$ |
7.4 |
|
Operating
Results |
|
|
|
|
Gold
production (ounces) |
|
78,400 |
|
|
125,200 |
|
|
189,300 |
|
|
250,500 |
|
Gold
sales (ounces) |
|
74,605 |
|
|
128,457 |
|
|
186,459 |
|
|
248,162 |
|
Per Ounce
Data |
|
|
|
|
Average realized gold price |
$ |
1,692 |
|
$ |
1,309 |
|
$ |
1,626 |
|
$ |
1,306 |
|
Average spot gold price (London PM Fix) |
$ |
1,711 |
|
$ |
1,309 |
|
$ |
1,647 |
|
$ |
1,307 |
|
Cost of sales per ounce of gold sold (includes amortization)
(1) |
$ |
1,385 |
|
$ |
1,021 |
|
$ |
1,199 |
|
$ |
1,040 |
|
Total cash costs per ounce of gold sold (2) |
$ |
933 |
|
$ |
699 |
|
$ |
829 |
|
$ |
715 |
|
All-in sustaining costs per ounce of gold sold (2) |
$ |
1,276 |
|
$ |
926 |
|
$ |
1,117 |
|
$ |
941 |
|
Share Data |
|
|
|
|
Earnings (loss) per
share, basic and diluted |
$ |
0.03 |
|
$ |
0.06 |
|
$ |
0.00 |
|
$ |
0.10 |
|
Adjusted earnings per
share, basic and diluted(2) |
$ |
0.03 |
|
$ |
0.05 |
|
$ |
0.10 |
|
$ |
0.07 |
|
Weighted average
common shares outstanding (basic) (000’s) |
|
391,076 |
|
|
389,218 |
|
|
391,208 |
|
|
389,475 |
|
Financial Position (in millions) |
|
|
|
|
Cash and cash
equivalents (5) |
|
|
$ |
201.3 |
|
$ |
182.8 |
|
Long-term debt
(5) |
|
|
$ |
100.0 |
|
$ |
— |
|
(1) Cost of sales includes mining and
processing costs, royalties, and amortization expense. For the
three months and six months ended June 30, 2020, cost of sales also
includes COVID-19 costs of $6.5 million(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 2020(4) Includes
capitalized exploration at Mulatos and Island
Gold(5) Comparative cash and cash equivalents and Long-term
debt balance as at December 31, 2019
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Gold production (ounces) |
|
|
|
|
Young-Davidson |
|
23,100 |
|
|
45,000 |
|
|
51,800 |
|
|
90,000 |
|
Mulatos |
|
35,900 |
|
|
36,300 |
|
|
78,500 |
|
|
75,200 |
|
Island Gold |
|
19,400 |
|
|
39,500 |
|
|
58,200 |
|
|
75,100 |
|
El Chanate (1) |
|
— |
|
|
4,400 |
|
|
800 |
|
|
10,200 |
|
Gold sales (ounces) |
|
|
|
|
Young-Davidson |
|
22,440 |
|
|
44,665 |
|
|
51,345 |
|
|
88,661 |
|
Mulatos |
|
33,605 |
|
|
40,116 |
|
|
77,427 |
|
|
76,205 |
|
Island Gold |
|
18,560 |
|
|
39,300 |
|
|
57,687 |
|
|
72,885 |
|
El Chanate (1) |
|
— |
|
|
4,376 |
|
|
— |
|
|
10,411 |
|
Cost of sales (in millions)(2) |
|
|
|
|
Young-Davidson |
$ |
46.2 |
|
$ |
57.1 |
|
$ |
90.0 |
|
$ |
114.0 |
|
Mulatos |
$ |
37.5 |
|
$ |
35.8 |
|
$ |
83.5 |
|
$ |
69.6 |
|
Island Gold |
$ |
19.6 |
|
$ |
32.4 |
|
$ |
50.1 |
|
$ |
61.0 |
|
El Chanate (1) |
$ |
— |
|
$ |
5.8 |
|
$ |
— |
|
$ |
13.5 |
|
Cost of
sales per ounce of gold sold (includes amortization) |
|
|
|
Young-Davidson |
$ |
2,059 |
|
$ |
1,278 |
|
$ |
1,753 |
|
$ |
1,286 |
|
Mulatos |
$ |
1,116 |
|
$ |
892 |
|
$ |
1,078 |
|
$ |
913 |
|
Island Gold |
$ |
1,056 |
|
$ |
824 |
|
$ |
868 |
|
$ |
837 |
|
El Chanate (1) |
$ |
— |
|
$ |
1,325 |
|
$ |
— |
|
$ |
1,297 |
|
Total cash costs per ounce of gold sold (3) |
|
|
|
|
Young-Davidson |
$ |
1,564 |
|
$ |
822 |
|
$ |
1,299 |
|
$ |
830 |
|
Mulatos |
$ |
750 |
|
$ |
725 |
|
$ |
785 |
|
$ |
734 |
|
Island Gold |
$ |
501 |
|
$ |
473 |
|
$ |
468 |
|
$ |
484 |
|
El Chanate (1) |
$ |
— |
|
$ |
1,234 |
|
$ |
— |
|
$ |
1,210 |
|
Mine-site
all-in sustaining costs per ounce of gold sold
(3),(4) |
|
|
|
Young-Davidson |
$ |
1,809 |
|
$ |
1,077 |
|
$ |
1,490 |
|
$ |
1,073 |
|
Mulatos |
$ |
890 |
|
$ |
815 |
|
$ |
929 |
|
$ |
812 |
|
Island Gold |
$ |
781 |
|
$ |
631 |
|
$ |
706 |
|
$ |
639 |
|
El Chanate (1) |
$ |
— |
|
$ |
1,257 |
|
$ |
— |
|
$ |
1,220 |
|
Capital
expenditures (sustaining, growth and capitalized exploration) (in
millions)(3) |
|
|
Young-Davidson |
$ |
29.6 |
|
$ |
26.7 |
|
$ |
56.6 |
|
$ |
49.0 |
|
Mulatos(5) |
$ |
5.1 |
|
$ |
19.2 |
|
$ |
12.5 |
|
$ |
31.8 |
|
Island Gold (6) |
$ |
15.9 |
|
$ |
18.0 |
|
$ |
38.0 |
|
$ |
30.4 |
|
Other |
$ |
4.0 |
|
$ |
7.2 |
|
$ |
10.8 |
|
$ |
13.2 |
|
(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 $0.2 million and $0.7 for the three and
six months ended June 30, 2020 (spending of $nil for the three and
six months ended June 30, 2019).(6) Includes capitalized
exploration at Island Gold of $1.2 million and $5.2 million for the
three and six months ended June 30, 2020 (for the three and six
months ended June 30, 2019 - $4.3 million and $7.4 million), and
excludes the royalty repurchase of $54.8 million.
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 to COVID-19 and has 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 practicable
- 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
Impact on Operations
In order to protect nearby communities and align
with government requirements, two of the Company's mines were
temporarily suspended, but resumed normal operations during the
second quarter.
At Island Gold, operations were suspended on
March 25, 2020 given the unique set up of the operation with a
large portion of the workforce operating on a fly-in, fly-out basis
and being housed within a camp located directly within the local
community. The Company restarted operations in a phased approach at
the beginning of May 2020 and ramped up to budgeted mining and
milling rates of 1,200 tpd in the month of June. The Company
incurred $4.5 million in COVID-19 costs at Island Gold in the
quarter, mainly related to labour costs for idle employees and
additional transportation and lodging costs.
Operations at Mulatos were suspended in early
April following a mandate by the Mexican government to suspend all
non-essential businesses in response to the COVID-19 crisis. The
suspension period was lifted in May and mining, crushing and
stacking ore on the leach pad was restarted. Although mining
activities were suspended for part of the quarter, the Company
continued to recover gold from the leach pad given the significant
amount of contained ounces stacked in the first quarter. The
Company incurred $2.0 million in COVID-19 costs at Mulatos in the
quarter mainly related to labour costs for idle employees and
additional transportation costs.
To date, operating activities at Young-Davidson
have not been significantly impacted with mining and processing
activities and construction and commissioning of the lower mine
ongoing throughout the quarter. Completion of the lower mine
expansion was delayed slightly but was completed on July 8,
2020.
Revised 2020 Guidance
|
Revised2020 Guidance |
Previous2020 Guidance |
Gold production (000's ounces) |
|
|
Young-Davidson |
135 - 145 |
145 - 160 |
Mulatos |
140 - 150 |
150 - 160 |
Island Gold |
130 - 140 |
130 - 145 |
Total gold production |
405 - 435 |
425 - 465 |
|
|
|
Cost of sales per ounce of gold sold (includes
amortization) (4) |
|
|
Young-Davidson |
$1,490 |
$1,360 |
Mulatos |
$1,135 |
$1,085 |
Island Gold |
$840 |
$840 |
Total |
$1,160 |
$1,103 |
|
|
|
Total cash cost per ounce of gold sold (1) |
|
|
Young-Davidson |
$990 - $1,030 |
$910 - $950 |
Mulatos |
$840 - $880 |
$840 - $880 |
Island Gold |
$480 - $520 |
$480 - $520 |
Consolidated total cash cost per ounce of gold
sold |
$780 - $820 |
$757 - $797 |
|
|
|
Mine-site all-in sustaining costs per ounce of gold sold
(1)(3) |
|
|
Young-Davidson |
$1,180 - $1,220 |
$1,110 - $1,150 |
Mulatos |
$940 - $980 |
$940 - $980 |
Island Gold |
$740 - $780 |
$740 - $780 |
Consolidated all-in sustaining costs per ounce of gold sold
(1) |
$1,030 - $1,070 |
$1,007 - $1,047 |
|
|
|
Capital expenditures (sustaining) (1) |
|
|
Young-Davidson |
$30 - $35 |
$30 - $35 |
Mulatos |
$15 - $20 |
$15 - $20 |
Island Gold |
$35 - $40 |
$35 - $40 |
Total Capital expenditures (sustaining) |
$80 - $95 |
$80 - $95 |
|
|
|
Capital expenditures (growth) (1) |
|
|
Young-Davidson |
$45 - $50 |
$45 - $50 |
Mulatos |
$15 - $20 |
$5 |
Island Gold |
$35 - $40 |
$15 - $20 |
Other (2) |
$10 |
$10 |
Total Capital expenditures (growth) |
$105 - $120 |
$75 - $85 |
|
|
|
Capital expenditures (capitalized exploration)
(1) |
|
|
Young-Davidson |
$1 |
$1 |
Island Gold |
$15 |
$19 |
Other (2) |
$4 |
$5 |
Total capital expenditures (capitalized
exploration) |
$20 |
$25 |
Total consolidated capital expenditures and capitalized
exploration (1) |
$205 - $235 |
$180 - $205 |
(1) Refer to the "Non-GAAP Measures and
Additional GAAP" disclosure at the end of this MD&A for a
description of these measures.(2) Includes growth capital and
capitalized exploration at the Company's development projects
(Turkey, Lynn 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.
The Company is providing revised 2020
production, cost, and capital guidance. Guidance was withdrawn in
April 2020 following the temporary suspension of operations at
Island Gold and Mulatos in response to COVID-19. 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 has been revised to 405,000 to 435,000 ounces.
This represents a 6% decrease from the mid-point of previous
guidance. Total cash cost guidance has also been revised to $780 to
$820 per ounce and all-in sustaining cost guidance to $1,030 to
$1,070 per ounce, a 3% and 2% increase, respectively. This reflects
higher costs at Young-Davidson in the second quarter due to the
COVID-19-related delay in the completion of the lower mine
expansion. With Island Gold and Mulatos both returning to normal
operating levels in June and the lower mine expansion completed at
Young-Davidson in July, the Company expects higher production at
significantly lower costs in the second half of 2020.
Consolidated 2020 capital guidance of $205 to
$235 million has increased by $25 to $30 million with all of the
increase related to the Phase III Expansion at Island Gold and the
La Yaqui Grande project following the recently announced
construction decisions, partially offset by lower exploration
spending.
At Young-Davidson, full year production guidance
has been revised to between 135,000 and 145,000 ounces and cost
guidance increased due to the previously announced COVID-19-related
delay in the completion of the lower mine expansion. Despite the
full year revisions, the second half outlook remains strong with
the lower mine expansion completed in July. Production is expected
to increase in the second half of 2020 at significantly lower
costs, with total cash costs expected to decrease to a range of
$800 to $840 per ounce and mine-site all-in sustaining costs to a
range of $990 to $1,030 per ounce.
Despite the operation being suspended for more
than one month, production guidance at Island Gold has narrowed
slightly to 130,000 to 140,000 ounces while total cash cost
guidance of $480 to $520 per ounce and mine-site all-in sustaining
cost guidance of $740 to $780 per ounce remain unchanged. Growth
capital guidance has increased $20 million, reflecting planned
spending associated with the Phase III Expansion in the second half
of 2020. Given the temporary suspension of exploration programs at
Island Gold, the full year exploration budget has been reduced from
$19 million to $15 million.
At Mulatos full year production guidance has
been reduced by 10,000 ounces to 140,000 to 150,000 ounces
reflecting the suspension of operations in April and May. Lower
stacked tonnes during the second quarter is expected to affect gold
production slightly in the second half of 2020. Total cash cost and
mine-site AISC guidance remains unchanged. Growth capital guidance
has increased by between $10 and $15 million to advance the La
Yaqui Grande project following the construction decision earlier
this week.
Outlook and Strategy
2020 Updated
Guidance |
|
Young-Davidson |
Island Gold |
Mulatos |
Other (2) |
Total |
Previous 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, Lynn
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 previous 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. Year-to-date, the Company
has made excellent progress with the completion of the lower mine
expansion at Young-Davidson, the announcement of a Phase III
expansion of Island Gold, and a construction decision on the La
Yaqui Grande project.
All are key parts of a transformational year for
Alamos and provide the foundation for the Company's strong outlook.
With mining rates ramping up at Young-Davidson, and Mulatos and
Island Gold returning to normal operating levels during the second
quarter, the Company expects to deliver strong company-wide free
cash flow growth in the second half of 2020.
Production of 78,400 ounces and total cash costs
of $933 per ounce in the second quarter of 2020 were impacted by
the planned downtime of the Northgate shaft at Young-Davidson
to complete the final step in the lower mine expansion, and
temporary suspensions at Mulatos and Island Gold due to the
COVID-19 pandemic. Production is expected to increase sharply in
the third quarter at significantly lower costs.
Young-Davidson's production and costs were
impacted by the previously guided downtime for the entire second
quarter to complete the tie-in of the upper and lower mines. During
this planned downtime, ore was trucked to surface from the upper
mine at a rate of 2,700 tpd. The lower mine expansion and
associated infrastructure was completed on July 8, 2020 with mining
rates ramping up to 6,500 tpd by the end of July. Mining rates are
expected to continue to increase to a rate of 7,500 tpd by the end
of 2020.
The completion of the lower mine marks the end
of a multi year expansion at Young-Davidson and is a step change
for the operation. The transition to the highly productive lower
mine infrastructure is expected to drive production higher and
costs lower in the second half of 2020, driving strong free cash
flow growth.
After temporarily suspending operations at
Island Gold on March 25, 2020 due to COVID-19, the Company began a
phased restart in early May. Mining rates increased through May and
returned to normal levels in June, averaging over 1,200 tpd for the
month. Mining rates are expected to remain at approximately 1,200
tpd for the remainder of 2020. Combined with higher grades, this is
expected to drive production significantly higher.
The Phase III expansion of Island Gold announced
earlier this month has outlined a bigger, more profitable,
long-life operation. The expansion is expected to take throughput
rates 67% higher 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 increase 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 were also
temporarily suspended in March with surface and underground diamond
drill programs resuming by early June. The 2020 program remains
focused on continuing to define new near mine Mineral Resources
across the two-kilometre long Island Gold Main Zone which remains
open laterally and down-plunge across multiple areas of focus.
Mulatos began ramping up full operations in the
latter part of May 2020 after mining was declared an essential
activity by the Mexican government. This followed the suspension of
mining activities in early April as mandated by the government due
to COVID-19. Given the significant leach pad inventory at the end
of the first quarter and ongoing leaching activities, production in
the second quarter of 2020 was not significantly impacted by the
suspension. Lower contained ounces stacked in the second quarter is
however expected to have a slight impact on production in the
second half of the year.
As announced earlier this week, 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 gold
price), La Yaqui Grande represents the next low-cost source of
production at Mulatos. Construction activities on La Yaqui Grande
are expected to ramp up during the second half of 2020 and take
approximately 24 months to complete with initial production in
2022. Given its lower costs, La Yaqui Grande is expected to drive
combined costs across the Mulatos District significantly lower.
In the second quarter, the Company submitted its
Environmental Impact Statement ("EIS") for the Lynn Lake project,
which begins an anticipated two-year permitting process. In Turkey,
the Company continues to pursue renewal of the mine concession for
the Kirazli project.
The Company's liquidity position remains strong,
ending the quarter with $201.3 million of cash and cash equivalents
and no debt other than $100.0 million drawn on its $500.0 million
revolving facility. The Company expects to transition to strong
free cash flow generation in the second half of 2020 and remains
well positioned to fund its internal growth initiatives.
Fourth Quarter 2020 Results
Young-Davidson Financial and Operational
Review
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Gold production
(ounces) |
|
23,100 |
|
|
45,000 |
|
|
51,800 |
|
|
90,000 |
|
Gold sales
(ounces) |
|
22,440 |
|
|
44,665 |
|
|
51,345 |
|
|
88,661 |
|
Financial Review (in
millions) |
|
|
|
|
Operating Revenues |
$ |
37.7 |
|
$ |
58.6 |
|
$ |
83.4 |
|
$ |
116.0 |
|
Cost of sales (1) |
$ |
46.2 |
|
$ |
57.1 |
|
$ |
90.0 |
|
$ |
114.0 |
|
Earnings from operations |
($8.5 |
) |
$ |
1.5 |
|
($6.6 |
) |
$ |
2.0 |
|
Cash provided by operating activities |
$ |
6.5 |
|
$ |
23.6 |
|
$ |
14.6 |
|
$ |
46.5 |
|
Capital expenditures (sustaining) (2) |
$ |
5.5 |
|
$ |
11.2 |
|
$ |
9.7 |
|
$ |
21.2 |
|
Capital expenditures (growth) (2) |
$ |
24.1 |
|
$ |
15.5 |
|
$ |
46.9 |
|
$ |
27.8 |
|
Mine-site free cash flow (2) |
($23.1 |
) |
($3.1 |
) |
($42.0 |
) |
($2.5 |
) |
Cost of sales, including amortization per ounce of gold sold
(1) |
$ |
2,059 |
|
$ |
1,278 |
|
$ |
1,753 |
|
$ |
1,286 |
|
Total cash costs per
ounce of gold sold (2) |
$ |
1,564 |
|
$ |
822 |
|
$ |
1,299 |
|
$ |
830 |
|
Mine-site all-in
sustaining costs per ounce of gold sold (2),(3) |
$ |
1,809 |
|
$ |
1,077 |
|
$ |
1,490 |
|
$ |
1,073 |
|
Underground Operations |
|
|
|
|
Tonnes of ore mined |
|
244,382 |
|
|
612,231 |
|
|
634,749 |
|
|
1,200,847 |
|
Tonnes of ore mined per day |
|
2,686 |
|
|
6,728 |
|
|
3,488 |
|
|
6,635 |
|
Average grade of gold (4) |
|
2.50 |
|
|
2.42 |
|
|
2.30 |
|
|
2.48 |
|
Metres developed |
|
2,894 |
|
|
2,877 |
|
|
6,095 |
|
|
5,777 |
|
Mill
Operations |
|
|
|
|
Tonnes of ore processed |
|
395,289 |
|
|
683,946 |
|
|
860,033 |
|
|
1,293,873 |
|
Tonnes of ore processed per day |
|
4,344 |
|
|
7,516 |
|
|
4,725 |
|
|
7,148 |
|
Average grade of gold (4) |
|
1.85 |
|
|
2.26 |
|
|
1.89 |
|
|
2.36 |
|
Contained ounces milled |
|
23,511 |
|
|
49,661 |
|
|
52,361 |
|
|
98,176 |
|
Average recovery rate |
|
93 |
% |
|
91 |
% |
|
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 23,100 ounces of gold in the second
quarter of 2020, a decrease from the same period in 2019 due to
lower tonnes mined and processed. This reflects the planned
downtime of the Northgate shaft starting in early February to
complete the tie-in of the lower mine. Ore was trucked to surface
from the upper mine during the downtime, which resulted in
lower tonnes mined during the quarter and the first half of the
year.
Underground mining rates averaged 2,686 tpd in
the second quarter, slightly above budgeted rates of 2,500 tpd.
Similar to the first quarter, mining activities focused on remnant
stopes in the upper part of the mine to facilitate trucking up the
ramp. The average mined grade was 2.50 g/t Au in the quarter. With
the completion of the lower mine expansion in July, mining rates
are expected to ramp up to 7,500 tpd by the end of 2020.
Mill throughput was 4,344 tpd in the second
quarter, a decrease from the same period of 2019 due to the lower
mining rates. Mill throughput was supplemented by lower grade
stockpiles, which were exhausted at the end of the quarter. Mill
throughput is expected to equal underground mining rates moving
forward. Mill recoveries averaged 93% in the quarter, in line with
budget.
Lower Mine Construction and Tie-In
The lower mine expansion and associated
infrastructure was completed on July 8, 2020 with mining rates
ramping up to 6,500 tpd by the end of July. Mining rates are
expected to continue to increase to a rate of 7,500 tpd by the end
of 2020. With the completion of the lower mine, capital spending
for the second half of 2020 is expected to decrease substantially
from the $56.6 million spent in the first half of the year. The
transition to the highly productive lower mine infrastructure is
expected to drive production higher and costs lower in the second
half of 2020, driving strong company-wide free cash flow
growth.
Photos accompanying this announcement are available
at:
https://www.globenewswire.com/NewsRoom/AttachmentNg/66e3c217-4b0b-410d-86ef-c1d08b900b2f
https://www.globenewswire.com/NewsRoom/AttachmentNg/c40a137c-c10f-46aa-971b-e4c73f261531
Financial Review
Second quarter revenues of $37.7 million were
36% lower than the prior year quarter, reflecting a 50% decrease in
ounces sold, partially offset by a higher realized gold price.
Ounces sold decreased as a result of lower mining rates during the
temporary shutdown of the Northgate shaft to enable completion of
the lower mine tie-in. Revenues for the first half of 2020 were
also lower than the prior year period due to the shutdown, which
commenced in February.
Cost of sales (which includes mining and
processing costs, royalties, and amortization expense) of $46.2
million in the second quarter were lower than the comparative
quarter in 2019, due to lower mining and processing rates during
the tie-in of the upper and lower mine. This was partially offset
by a significant increase in underground mining cost per tonne,
reflecting hauling rather than skipping ore to surface and the
impact of fixed costs on lower mining rates. With the lower mine
construction completed in July 2020, underground mining cost per
tonne is expected to decrease substantially in the second half of
the year. Cost of sales for the first half of 2020 of $90.0 million
were lower than the prior year period for the same reasons.
Total cash costs of $1,564 per ounce in the
second quarter were higher than the comparative period in 2019 due
to higher underground mining costs and less tonnes mined. In
addition, lower grade stockpiled ore, which carries a higher cost
per ounce, made up a larger proportion of mill feed compared to the
prior year. Mine-site AISC of $1,809 per ounce in the second
quarter were higher than the comparative quarter in 2019,
reflecting the impact of higher total cash costs. Sustaining
capital spending in the quarter was lower than the prior year
period, with spending focused on growth projects including
completion of the lower mine expansion and the new TIA-1 tailings
facility. Capital expenditures in the quarter included $5.5 million
of sustaining capital and $24.1 million of growth capital.
As a result of the planned downtime and growth
capital associated with the lower mine expansion, mine-site free
cash flow at Young-Davidson was negative $23.1 million in the
second quarter, and negative $42.0 million for the first half of
2020. With the completion of the lower mine expansion in July,
Young-Davidson is expected to generate strong free cash flow in the
second half of the year as production increases, and operating
costs and capital spending decrease.
Island Gold Financial and Operational
Review
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Gold production (ounces) |
|
19,400 |
|
|
39,500 |
|
|
58,200 |
|
|
75,100 |
|
Gold sales (ounces) |
|
18,560 |
|
|
39,300 |
|
|
57,687 |
|
|
72,885 |
|
Financial Review (in millions) |
|
|
|
|
Operating Revenues |
$ |
31.4 |
|
$ |
51.3 |
|
$ |
93.3 |
|
$ |
95.1 |
|
Cost of sales (1) |
$ |
19.6 |
|
$ |
32.4 |
|
$ |
50.1 |
|
$ |
61.0 |
|
Earnings from operations |
$ |
11.6 |
|
$ |
18.7 |
|
$ |
42.8 |
|
$ |
33.7 |
|
Cash provided by operating activities |
$ |
25.1 |
|
$ |
29.7 |
|
$ |
66.8 |
|
$ |
58.7 |
|
Capital expenditures (sustaining) (2) |
$ |
5.2 |
|
$ |
6.2 |
|
$ |
13.7 |
|
$ |
11.3 |
|
Capital expenditures (growth) (2) |
$ |
9.5 |
|
$ |
7.5 |
|
$ |
19.1 |
|
$ |
11.7 |
|
Capital expenditures (capitalized exploration) (2) |
$ |
1.2 |
|
$ |
4.3 |
|
$ |
5.2 |
|
$ |
7.4 |
|
Mine-site free cash flow (2) |
$ |
9.2 |
|
$ |
11.7 |
|
$ |
28.8 |
|
$ |
28.3 |
|
Cost of sales, including amortization per ounce of gold sold
(1) |
$ |
1,056 |
|
$ |
824 |
|
$ |
868 |
|
$ |
837 |
|
Total cash costs per
ounce of gold sold (2) |
$ |
501 |
|
$ |
473 |
|
$ |
468 |
|
$ |
484 |
|
Mine-site all-in
sustaining costs per ounce of gold sold (2),(3) |
$ |
781 |
|
$ |
631 |
|
$ |
706 |
|
$ |
639 |
|
Underground Operations |
|
|
|
|
Tonnes of ore mined |
|
74,485 |
|
|
90,141 |
|
|
187,366 |
|
|
187,653 |
|
Tonnes of ore mined per day ("tpd") |
|
819 |
|
|
991 |
|
|
1,029 |
|
|
1,037 |
|
Average grade of gold (4) |
|
7.28 |
|
|
14.53 |
|
|
9.93 |
|
|
12.90 |
|
Metres developed |
|
931 |
|
|
1,568 |
|
|
2,883 |
|
|
2,989 |
|
Mill
Operations |
|
|
|
|
Tonnes of ore processed |
|
73,708 |
|
|
102,803 |
|
|
179,635 |
|
|
204,800 |
|
Tonnes of ore processed per day |
|
810 |
|
|
1,130 |
|
|
987 |
|
|
1,131 |
|
Average grade of gold (4) |
|
8.32 |
|
|
12.23 |
|
|
10.33 |
|
|
11.68 |
|
Contained ounces milled |
|
19,714 |
|
|
40,438 |
|
|
59,659 |
|
|
76,884 |
|
Average recovery rate |
|
96 |
% |
|
97 |
% |
|
97 |
% |
|
97 |
% |
(1) Cost of sales includes mining and
processing costs, royalties, COVID-19 costs 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").
Island Gold produced 19,400 ounces in the second
quarter, a 51% decrease from the comparative period in 2019,
reflecting lower mining rates and grades mined and processed.
Operations were temporarily suspended starting March 25th through
the end of April as a result of COVID-19. The Company began a
phased restart of operations at the beginning of May, with mining
and milling rates increasing to average above 1,200 tpd for the
month of June.
Underground mining rates averaged 819 tpd in the
quarter, a decrease from the prior year period reflecting the above
noted temporary downtime. Underground grades mined averaged 7.28
g/t Au in the quarter due to mine sequencing, as one of the higher
grade transverse stopes was deferred to the third quarter. Mined
grades are expected to increase in the second half of the year with
higher grade stopes that had been planned for the latter part of
the second quarter deferred to the third quarter.
Mill throughput of 810 tpd in the second quarter
was lower than the prior year period and consistent with tonnes
mined. Mill recoveries of 96% were in line with the prior year
quarter and budget.
Phase III Expansion Study
On July 14, the Company reported results of the
positive Phase III Expansion Study conducted on its Island Gold
mine. Based on the results of the study, the Company is proceeding
with an expansion of the operation to 2,000 tpd. This follows a
detailed evaluation of several scenarios which demonstrated the
Shaft Expansion as the best option, having the strongest economics,
being the most efficient and productive, and the best positioned to
capitalize on further growth in Mineral Reserves and Resources.
Highlights of the study include the following:
- Average annual gold production of
236,000 ounces per year starting in 2025 upon completion of
the shaft. This represents a 72% increase from the mid-point of
initial 2020 production guidance
- Industry low average total cash
costs of $403 per ounce of gold and mine-site all-in sustaining
costs of $534 per ounce starting in 2025, a 19% and 30%
decrease from the mid-point of 2020 guidance, respectively
- After-tax net present value (“NPV”)
of $1.02 billion at a 5% discount rate and an after-tax
internal rate of return (“IRR”) of 17%, using a base case gold
price assumption of $1,450 per ounce and a USD/CAD foreign exchange
rate of $0.75:1
- After-tax NPV of $1.45 billion and
an after-tax IRR of 22%, at a 5% discount rate using a gold price
assumption of $1,750 per ounce and a USD/CAD foreign exchange rate
of $0.75:1
- Mine life of 16 years, double the
current eight-year Mineral Reserve life. This is based on a
mineable Mineral Resource of 9.6 million tonnes grading 10.45 grams
per tonne of gold (“g/t Au”) containing 3.2 million ounces of
gold
- Lowest combined capital and
operating costs of all scenarios evaluated. Total life of mine
capital of $1.07 billion including sustaining capital. Higher
life-of-mine growth capital of $514 million with the Shaft
Expansion is more than offset by the lowest sustaining capital and
operating costs of all scenarios evaluated.
In the second half of 2020, the focus is on
progressing permitting and detailed engineering on the shaft and
associated infrastructure. This includes the power supply upgrade
and planning for the procurement of long lead time items. All of
the Shaft Expansion permitting requirements are expected to be
completed within an 18 to 24-month timeframe. To accommodate the
work being completed on Phase III in 2020, capital spending
guidance has increased by $20 million at Island Gold.
Financial Review
Island Gold generated revenues of $31.4 million
in the second quarter, a 39% decrease compared to the prior year
period, reflecting a 53% decrease in ounces sold, partially offset
by a higher realized gold price. For the first half of the year,
revenues were consistent with the comparative period as lower sales
driven by the temporary suspension in the month of April were
offset by a 25% increase in realized gold prices.
Cost of sales (includes mining and processing
costs, royalties, COVID-19 costs and amortization expense) of $19.6
million in the second quarter were 40% lower than the comparative
period in 2019. The decrease is driven by a 53% reduction in ounces
sold, partially offset by COVID-19 costs incurred during the
temporary shutdown of the mine in the month of April. On a per
ounce basis, cost of sales increased by 28%, driven by COVID-19
costs incurred and lower grades mined in the period. COVID-19 costs
mainly reflect labour costs for idle employees and additional
transportation and lodging costs. Cost of sales for the first half
of 2020 of $50.1 million were lower than the prior year for the
same reasons that impacted the second quarter.
Total cash costs were $501 per ounce in the
second quarter, a 6% increase from the comparative quarter in 2019,
driven by lower grades mined and lower tonnes mined and milled,
partially offset by a lower royalty charge per ounce. COVID-19
costs incurred at the mine have not been included in total cash
costs. Mine-site AISC of $781 per ounce in the second quarter were
higher than the prior year period due to lower production with
sustaining capital expenditures spread over a lower number of
ounces sold.
Total capital expenditures were $15.9 million in
the second quarter, including capitalized exploration. Spending was
focused on lateral development, camp improvements, tailings
construction, and the Phase III study. This included $5.2 million
of sustaining capital and $10.7 million of growth capital,
inclusive of capitalized exploration. Exploration spending was
lower as activities were curtailed for most of the quarter due to
COVID-19. For the first half of the year, capital spending
was $38.0 million inclusive of capitalized exploration, higher than
the prior year period.
Earlier in 2020, the Company acquired and
canceled a 3% NSR royalty payable on a majority of production from
the Island Gold mine for cash consideration of $54.8 million. The
royalty was applicable to all future gold production from the
Goudreau Lake claims, which comprise the majority of the Island
Gold deposit. As of December 31, 2019, these claims
contained 0.9 million ounces of Mineral Reserves, representing
71% of Island Gold’s total Mineral Reserves, and 1.1 million ounces
of Inferred Mineral Resources. The acquisition of the royalty has
reduced total cash costs by $45 per ounce, and has reduced the
effective NSR royalty rate on Island Gold’s Mineral Reserves to
2.2% from 4.4%.
Island Gold generated mine-site free cash flow
of $9.2 million during the second quarter and $28.8 million for the
first half of the year despite over one month of downtime due to
COVID-19, driven by strong operating margins. The Company expects
an increase in cash flow in the second half of the year as a result
of higher mining rates and grades mined.
Mulatos Financial and Operational
Review
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Gold production
(ounces) |
|
35,900 |
|
|
36,300 |
|
|
78,500 |
|
|
75,200 |
|
Gold sales
(ounces) |
|
33,605 |
|
|
40,116 |
|
|
77,427 |
|
|
76,205 |
|
Financial
Review (in millions) |
|
|
|
|
Operating Revenues |
$ |
57.1 |
|
$ |
52.5 |
|
$ |
126.4 |
|
$ |
99.6 |
|
Cost of sales (1) |
$ |
37.5 |
|
$ |
35.8 |
|
$ |
83.5 |
|
$ |
69.6 |
|
Earnings from operations |
$ |
19.2 |
|
$ |
15.9 |
|
$ |
41.2 |
|
$ |
28.3 |
|
Cash provided by operating activities |
$ |
24.4 |
|
$ |
23.2 |
|
$ |
45.9 |
|
$ |
23.8 |
|
Capital expenditures (sustaining) (2) |
$ |
3.7 |
|
$ |
2.2 |
|
$ |
8.5 |
|
$ |
3.2 |
|
Capital expenditures (growth) (2) |
$ |
1.2 |
|
$ |
17.0 |
|
$ |
3.3 |
|
$ |
28.6 |
|
Capital expenditures
(capitalized exploration) (2) |
$ |
0.2 |
|
$ |
— |
|
$ |
0.7 |
|
$ |
— |
|
Mine-site free cash flow
(2) |
$ |
19.3 |
|
$ |
4.0 |
|
$ |
33.4 |
|
|
($8.0 |
) |
Cost of sales, including amortization per ounce of gold sold
(1) |
$ |
1,116 |
|
$ |
892 |
|
$ |
1,078 |
|
$ |
913 |
|
Total
cash costs per ounce of gold sold (2) |
$ |
750 |
|
$ |
725 |
|
$ |
785 |
|
$ |
734 |
|
Mine
site all-in sustaining costs per ounce of gold sold (2),(3) |
$ |
890 |
|
$ |
815 |
|
$ |
929 |
|
$ |
812 |
|
Open Pit
Operations |
|
|
|
|
Tonnes of ore mined - open pit (4) |
|
1,132,423 |
|
|
2,107,590 |
|
|
3,050,887 |
|
|
3,943,323 |
|
Total waste mined - open pit (6) |
|
1,151,851 |
|
|
1,697,419 |
|
|
3,490,768 |
|
|
3,675,258 |
|
Total tonnes mined - open pit |
|
2,284,275 |
|
|
3,805,009 |
|
|
6,541,655 |
|
|
7,618,581 |
|
Waste-to-ore ratio (operating) |
|
0.81 |
|
|
0.81 |
|
|
0.67 |
|
|
0.67 |
|
Crushing and Heap
Leach Operations |
|
|
|
|
Tonnes of ore stacked |
|
1,410,888 |
|
|
1,962,436 |
|
|
3,444,000 |
|
|
3,837,992 |
|
Average grade of gold processed (5) |
|
1.41 |
|
|
0.94 |
|
|
1.32 |
|
|
0.96 |
|
Contained ounces stacked |
|
64,111 |
|
|
59,609 |
|
|
146,044 |
|
|
118,783 |
|
Average recovery
rate |
|
56 |
% |
|
61 |
% |
|
54 |
% |
|
63 |
% |
Ore crushed per day
(tonnes) - combined |
|
15,500 |
|
|
21,600 |
|
|
18,923 |
|
|
21,200 |
|
(1) Cost of sales includes mining and
processing costs, royalties, COVID-19 costs 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 ore stockpiled during the
quarter.(5) Grams per tonne of gold ("g/t Au").(6) Total
waste mined includes operating waste and capitalized stripping.
Mulatos produced 35,900 ounces in the second
quarter, consistent with the second quarter of 2019. Given ongoing
leaching activities, production in the quarter was not
significantly impacted by the government mandated temporary
suspension in April and May.
Total tonnes mined decreased compared to the
second quarter of 2019 due to the temporary shutdown which
curtailed mining activities until May 18, 2020, impacting results
for the quarter and the first half of the year. Following the
restart of operations, mining and stripping activities at Mulatos
and Cerro Pelon ramped up in May and were operating at budgeted
levels in June. At Cerro Pelon, the excess tonnes of waste mined
above the life-of-mine waste-to-ore ratio were capitalized in the
period and are not included in the operating waste-to-ore ratio of
0.81:1.
Total crusher throughput in the second quarter
averaged 15,500 tpd for a total of 1,410,888 tonnes stacked at a
grade of 1.41 g/t Au. Tonnes stacked in the quarter exceeded tonnes
mined due to the processing of stockpiles. Grades stacked were 50%
higher than the comparative period of 2019, reflecting the
contribution of higher-grade ore from Cerro Pelon. The recovery
rate of 56% in the second quarter was primarily impacted by the
stacking of higher-grade ore later in the quarter and will be
recovered in the second half of the year.
Financial Review
Second quarter revenues of $57.1 million were 9%
higher than the prior year quarter as a result of higher realized
gold prices, partially offset by 16% less ounces sold. For the
first half of 2020, revenues of $126.4 million were 27% higher than
the prior year.
Cost of sales (includes mining and processing
costs, royalties, COVID-19 costs and amortization expense) of $37.5
million in the second quarter were consistent with the prior year
period. Mulatos mined and processed a lower number of tonnes due to
the temporary suspension of operations, reducing cost of sales in
the period. This was partially offset by $2.0 million of COVID-19
costs reflecting incremental costs incurred while mining operations
were suspended. These incremental costs have been excluded from
total cash costs and mine-site AISC. On a per ounce basis, cost of
sales increased in the second quarter of 2020 due to higher unit
mining costs and higher depreciation, partially offset by higher
grades processed. Cost of sales for the first half of 2020 of $83.5
million were 20% higher than the prior year.
Total cash costs were higher than the prior year
period, as a result of higher unit mining and processing costs.
Total capital spending for the quarter was $5.1 million, of which
$3.7 million of sustaining capital primarily relates to capitalized
stripping in the Cerro Pelon pit, which will benefit future
periods. The higher sustaining capital spending in the quarter
contributed to an increase in mine-site AISC to $890 per ounce
compared to the prior year period of $815 per ounce. Capital
spending was lower in the first half of 2020 compared with 2019 as
prior year capital included construction of Cerro Pelon.
Mulatos generated mine-site free cash-flow of
$19.3 million in the second quarter, a significant improvement from
the prior year period. The increase in cash flow was driven by
increased operating margins and lower capital spending. For the
first half of 2020, Mulatos generated $33.4 million in free cash
flow.
Second Quarter 2020 Development Activities
Mulatos District (Sonora,
Mexico)
La Yaqui Grande
On July 28, 2020, the Company reported results
of an internal study completed on its fully permitted La Yaqui
Grande project located in the Mulatos District in Sonora, Mexico.
La Yaqui Grande is located approximately 7 kilometres (straight
line) from the existing Mulatos operation and adjacent to the past
producing La Yaqui Phase I operation. Given the project’s strong
economics and its proximity to the existing Mulatos operation, the
Company is proceeding with construction of the project starting in
the second half of 2020.
La Yaqui Grande Project Highlights:
- Average annual gold production of
123,000 ounces per year starting in the third quarter of 2022. This
will replace higher cost production from the main Mulatos pit,
keeping combined production at approximately 150,000 ounces per
year
- Mine-site all-in sustaining costs
of $578 per ounce, significantly reducing Mulatos District all-in
sustaining costs from the mid-point of previous 2020 guidance of
$960 per ounce
- After-tax net present value (“NPV”)
of $165 million at a 5% discount rate and an after-tax internal
rate of return (“IRR”) of 41%, using a base case gold price
assumption of $1,450 per ounce and a MXN/USD foreign exchange rate
of 21:1
- After-tax NPV of $260 million and
an after-tax IRR of 58% at a 5% discount rate using a gold price
assumption of $1,750 per ounce and a MXN/USD foreign exchange rate
of 21:1
- Mine life of five years, extending
production from the Mulatos District to 2027, based on current
Mineral Reserves
- Initial capital of $137 million to
be spent over a two year period starting in the second half of
2020. At a $1,750 per ounce gold price, Mulatos is expected to self
finance the development of La Yaqui Grande following which the
operation is expected to generate strong free cash flow
La Yaqui Grande is fully permitted for
construction having received approval of the environmental impact
assessment (“MIA”) in the second quarter of 2019 and the Change of
Land Use permit in the third quarter of 2019. As with La Yaqui
Phase I, La Yaqui Grande will be developed with an independent heap
leach pad and crushing circuit. The project will be developed over
the next 24 months with initial production expected in the second
half of 2022.
During the second quarter, the Company incurred
$0.7 million ($1.9 million for the first half of 2020) focused on
detailed engineering, project design and costing, and exploration
activities. With construction commencing, the Company expects to
spend between $15 and $20 million in the second half of the
year.
Kirazlı (Çanakkale, Turkey)
On October 14, 2019, the Company suspended all
construction activities on its Kirazlı project pending the renewal
of its Turkish mining concessions which expired on October 13,
2019. Although the mining concessions have not been revoked and can
be renewed following this expiration date, no further construction
activities can be completed until the concessions have been
renewed.
The Company has met all the regulatory
requirements and conditions for the concessions to be renewed and
reasonably expected the renewal by the expiration date. The
communities local to the Kirazlı project remain supportive. As
such, the Company is working with the Turkish Department of Energy
and Natural Resources on securing the renewal of the mining
concessions which will allow for a resumption of construction
activities. The renewal is required from the same government
department that granted the Operating Permit for Kirazlı in March
2019. The Company will provide updated guidance on the construction
schedule and budget for Kirazlı following the receipt of the
concession renewal and resumption of construction activities.
During the second quarter of 2020, the Company
spent $0.6 million at Kirazlı and $3.6 million for the first half
of 2020, which includes $1.4 million of working capital payments
from prior periods.
Lynn Lake (Manitoba,
Canada)
The Company released a positive Feasibility
Study on the Lynn Lake project in December 2017 outlining average
annual production of 143,000 ounces over a 10 year mine life at
average mine-site all-in sustaining costs of $745 per ounce.
The project economics detailed in the 2017
Feasibility Study outlined a 12.5% IRR at a $1,250 per ounce gold
price (21.5% IRR and NPV of $290 million at a $1,500 per ounce gold
price). Since the release of the 2017 Feasibility Study, the
Company has undertaken several initiatives designed to improve the
project economics. These include a detailed review of construction
capital, the evaluation of various production scenarios and the
inclusion of the results of more detailed engineering.
During the second quarter, the Company filed the
EIS with the federal government. The permitting process is expected
to take approximately two years.
Development spending (excluding exploration) in
the second quarter of 2020 was $1.3 million and $2.8 million for
the first half of 2020, primarily related to baseline work and
preparation of the EIS submission.
Second Quarter 2020 Exploration Activities
Island Gold (Ontario, Canada)
The 2020 exploration drilling program is focused
on continuing to expand the down-plunge and lateral extensions of
the Island Gold deposit with the objective of adding new near mine
Mineral Resources across the two-kilometre long Island Gold Main
Zone. The exploration drilling program in the quarter was designed
to follow up on the exploration success in 2019, where high grade
gold mineralization was extended across all three areas of focus,
most notably in the Main and Eastern Extensions. This resulted in a
21% increase in Mineral Reserves to 1.2 million ounces (3.6 mt
grading 10.37 g/t Au), net of mining depletion, and a 46% increase
in Inferred Mineral Resources to 2.3 million ounces (5.4 mt grading
13.26 g/t Au) as outlined in the 2019 Mineral Reserve and Resource
statement issued on February 18, 2020.
Exploration drilling programs at Island Gold
were temporarily suspended on March 25, 2020 given the COVID-19
pandemic. The underground diamond drilling program restarted in May
with four underground diamond drill rigs currently operating
including two focused on underground directional drilling. The
surface directional diamond drilling program resumed in early June
with three drill rigs currently drilling.
A regional exploration program which includes
10,000 m of drilling is also planned in 2020 and is focused on
evaluating and advancing exploration targets outside the main
Island Gold Mine area on the 9,750-hectare Island Gold
Property.
Surface exploration drilling
A total of 2,167 m was completed in 5 holes
during the second quarter as part of the surface directional
drilling program. Directional drilling targeted areas peripheral to
the Inferred Mineral Resource blocks below the 1,000 m level, with
drill hole spacing ranging from 75 m to 100 m. The area that was
targeted by the surface directional drill program extends
approximately 2,000 m in strike length between the 1,000 m and
1,500 m elevation below surface.
Previously reported highlights from the surface
and underground drilling program in Island Lower East (E1E-Zone)
include:
- 29.05 g/t Au (26.67 g/t cut) over 4.86 m (620-MH2-01);
- 44.30 g/t Au (44.30 g/t cut) over 2.25 m (MH21-04); and
- 10.98 g/t Au (10.98 g/t cut) over 2.09 m (MH23-01).
Previously reported highlights from the surface
drilling program in Island West (C-Zone) include:
- 25.41 g/t Au (23.07 g/t cut) over 5.58 m (MH22-04).
Underground exploration drilling
During the second quarter of 2020, a total of
2,601 m of underground exploration drilling was completed in 9
holes from the 620 and 840 levels. The objective of the underground
drilling is to identify new Mineral Resources close to existing
Mineral Resource or Reserve blocks. A total of 69 m of underground
exploration drift development was completed on the 340 and 840
levels during the second quarter of 2020.
Previously reported highlights from the
underground exploration drilling program in Island East Upper (E1E
Zone) include:
- 18.72 g/t Au (16.44 g/t cut) over 3.64 m (620-616-07);
- 8.41 g/t Au (8.41 g/t cut) over 6.30 m (620-610-26);
- 21.30 g/t Au (15.52 g/t cut) over 2.24 m (620-616-02); and
- 8.15 g/t Au (8.15 g/t cut) over 3.83 m (620-616-04).
Previously reported highlights from the
underground exploration drilling program in Island Main (E1E Zone)
include:
- 52.10 g/t Au (22.54 g/t cut) over 10.31 m (840-566-01);
- 21.01 g/t Au (21.01 g/t cut) over 4.26 m
(840-566-06);
- 31.19 g/t Au (31.19 g/t cut) over 2.22 m (840-572-02); and
- 13.53 g/t Au (13.53 g/t cut) over 2.36 m (840-566-02).
Total exploration expenditures during the second
quarter were $1.4 million, of which $1.2 million was capitalized.
For the first half of 2020, $5.6 million was spent, of which $5.2
million was capitalized. Given the down time in the second quarter,
the Company has revised its exploration budget at Island Gold from
$21 million to $17 million, of which $15 million is expected to be
capitalized.
Mulatos District (Sonora,
Mexico)
The Company has a large exploration package
covering 28,972 hectares with the majority of past exploration
efforts focused around the Mulatos mine. Over the last three years,
exploration has moved beyond the main Mulatos pit area and is
focused on earlier stage prospects throughout the wider
district.
At the beginning of the second quarter,
exploration activities were suspended in response to COVID-19, with
exploration activities expected to resume in the second half of
2020. During the second quarter, the Company incurred $0.6 million,
mainly related to administrative costs. For the first half of 2020,
$2.4 million was spent, of which $0.7 million was capitalized
mainly related to La Yaqui Grande project.
Lynn Lake (Manitoba,
Canada)
Exploration activities at the Lynn Lake Project
were suspended late in the first quarter due to COVID-19. As
a result, no drilling was completed during the second quarter. The
focus throughout the second quarter was interpretation and
targeting for the continuation of the drill program at Gordon and
MacLellan, and developing and finalizing exploration programs to
evaluate and further advance a pipeline of prospective regional
exploration targets. Exploration spending in the second quarter
totaled $0.7 million and $2.2 million for the first half 2020.
Review of Second Quarter Financial Results
During the second quarter of 2020, the Company
sold 74,605 ounces of gold for revenue of $126.2 million, a 25%
decrease from the prior year period driven by lower ounces sold,
partially offset by an increase in realized gold prices. The
decrease in ounces sold is primarily a result of the temporary
shutdown of the Northgate shaft at Young-Davidson to facilitate the
tie in of the lower mine infrastructure, as well as temporary
suspensions of both Island Gold and Mulatos due to the COVID-19
pandemic. El Chanate concluded residual leaching during the fourth
quarter of 2019, further reducing gold sales compared to the prior
year.
The average realized gold price in the quarter
was $1,692 per ounce, a 29% increase compared to $1,309 per ounce
realized in the prior year period. The average realized gold price
was slightly below the average London PM Fix price of $1,711 per
ounce due to the impact of gold hedges.
Cost of sales were $103.3 million in the
quarter, a 21% decrease compared to the prior year period, driven
by lower production at all operating sites. For the three months
ended June 30, 2020, cost of sales includes $6.5 million of
COVID-19 costs.
Mining and processing costs were significantly
lower than the comparative period at $67.9 million resulting from
reduced underground mining and processing rates at Young-Davidson
during the lower mine tie-in, as well as lower tonnes mined and
processed at Island Gold and Mulatos due to the impact of COVID-19
on operations.
Consolidated total cash costs for the quarter
were $933 per ounce, a 33% increase compared to $699 per ounce in
the prior year period, driven by higher unit costs at all operating
sites. The most significant impact was at Young-Davidson, which
increased to $1,564 per ounce in the quarter driven by both a
reduction in mining rates and processing of lower grade stockpiles.
Total cash costs are expected to decrease significantly in the
second half of the year.
AISC were $1,276 per ounce in the quarter, a 38%
increase to the comparative period in 2019 driven by higher total
cash costs, and higher sustaining capital per ounce given lower
gold sales.
Royalty expense was $1.7 million in the quarter,
substantially lower than the prior year period of $3.4 million due
to lower gold sales, and a reduced royalty obligation at Island
Gold following the repurchase of a royalty earlier this year which
reduced the effective royalty rate on Mineral Reserves from 4.4% to
2.2% at Island Gold.
Amortization of $27.2 million in the quarter was
lower than the prior year period due to less ounces produced and
sold. Amortization of $365 per ounce was $44 per ounce higher than
the prior year, due to the impact of straight-line amortization on
a lower number of ounces sold. The Company expects amortization
expense to be approximately $360 per ounce in the second half of
the year.
The Company recognized earnings from operations
of $12.1 million in the quarter, lower than the prior year period
due to less ounces sold and COVID-19 costs, partially offset by
higher realized gold prices.
The Company reported net earnings of $11.7
million in the quarter, compared to net earnings of $23.6 million
in the comparative period. Net earnings benefited from the
strengthening Canadian dollar and Mexican Peso, which resulted in a
$0.2 million foreign exchange gain, as well as a $10.1 million
foreign exchange gain recorded within deferred tax expense. On an
adjusted basis, earnings of $9.8 million or $0.03 per share
decreased compared to the prior year primarily driven by less
ounces sold. Adjusted earnings reflect adjustments for one-time
gains and losses, including COVID-19 costs, as well as foreign
exchange movements.
Associated Documents
This press release should be read in conjunction
with the Company’s interim consolidated financial statements for
the three-month period ended June 30, 2020 and associated
Management’s Discussion and Analysis (“MD&A”), which are
available from the Company's website, www.alamosgold.com, in the
"Investors" section under "Reports and Financials", and on SEDAR
(www.sedar.com) and EDGAR (www.sec.gov).
Reminder of Second Quarter 2020 Results
Conference Call
The Company's senior management will host a
conference call on Thursday, July 30, 2020 at 11:00 am ET to
discuss the second quarter 2020 results.
Participants may join the conference call by
dialling (416) 340-2216 or (800) 273-9672 for calls within Canada
and the United States, or via webcast
at www.alamosgold.com.
A playback will be available until August 30,
2020 by dialling (905) 694-9451 or (800) 408-3053 within Canada and
the United States. The pass code is 9827430#. The webcast will be
archived at www.alamosgold.com.
Qualified Persons
Chris Bostwick, FAusIMM, Alamos’ Vice President,
Technical Services, who is a qualified person within the meaning of
National Instrument 43-101 ("Qualified Person"), 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 three operating mines in
North America. This includes the Young-Davidson and Island Gold
mines in northern Ontario, Canada and the Mulatos mine 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 press release contains statements which
are, or may be deemed to be, forward-looking information as defined
under applicable Canadian and U.S. securities laws
("forward-looking statement(s)"). All statements in this
press release, other than statements of historical fact, which
address events, results, outcomes or developments that the Company
expects to occur are, or may be deemed to be forward-looking
statements. Forward-looking statements are generally, but not
always, identified by the use of forward-looking terminology such
as "expect", "believe", ”outlook”, “objective”, "anticipate”,
“intend", “target”, "estimate", "forecast", "budget",
“potential’, “continues”, “plan”, “schedule” or variations of such
words and phrases and similar expressions or statements that
certain actions, events or results “may", "could", "would",
“should”, "might" or "will" be taken, occur or be achieved.
Forward-looking statements in this press release
include information as to strategy, plans or future financial or
operating performance, such as the Company’s expansion plans,
project timelines, production plans and expected sustainable
productivity increases, expected increases in mining activities and
corresponding cost efficiencies, expected drilling targets,
expected sustaining costs, expected improvements in cash flows and
margins, expectations of changes in capital expenditures,
forecasted cash shortfalls and the Company’s ability to fund them,
cost estimates, projected exploration results, reserve and resource
estimates, expected production rates and use of the stockpile
inventory, expected recoveries, sufficiency of working capital for
future commitments, the Phase III expansion of Island Gold,
the La Yaqui Grande project, resumption of the construction
activities at the Kirazlı project, the Company’s response to
COVID-19 including preventative measures and other statements that
express management’s expectations or estimates of future
performance.
Alamos cautions that forward-looking statements
are necessarily based upon several factors and assumptions that,
while considered reasonable by the Company at the time of making
such statements, are inherently subject to significant business,
economic, legal, 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 in this press release include, but are
not limited to: operations may be exposed to new diseases,
epidemics and pandemics, including the effects and potential
effects of the global COVID-19 widespread pandemic; the impact of
the COVID-19 pandemic on the broader market and the trading price
of the Company's shares; provincial and federal orders or mandates
(including with respect to mining operations generally or auxiliary
businesses or services required for our operations) in Canada,
Mexico, the United States and Turkey; the duration of regulatory
responses to the COVID-19 pandemic; governments and the Company’s
attempts to reduce the spread of COVID-19 which may affect many
aspects of the Company's operations including the ability to
transport personnel to and from site, contractor and supply
availability and the ability to sell or deliver gold dore bars;
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 being able to secure the same on
favourable terms) and other operating or technical difficulties);
fluctuations in the price of gold or certain other commodities such
as, diesel fuel, natural gas, and electricity; changes in foreign
exchange rates (particularly the Canadian dollar, Mexican peso,
U.S. dollar and Turkish lira); the impact of inflation; employee
and community relations (including maintaining social license to
operate in Turkey); litigation and administrative proceedings;
disruptions affecting operations; availability of and increased
costs associated with mining inputs and labour; development delays
at the Kirazlı project or Young-Davidson mine; inherent risks
associated with mining and mineral processing; the risk that
the Company’s 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 and maintaining
necessary licenses, permits and authorizations for the
Company’s development and operating assets including the
renewal of the Company’s mining concessions in Turkey; timely
resumption of construction and development at the Kirazlı project;
contests over title to properties; expropriation or nationalization
of property; inherent risks and hazards associated with mining
including environmental hazards, industrial accidents, unusual or
unexpected formations, pressures and cave-ins; changes in national
and local government legislation (including tax legislation),
controls or regulations 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 and details with respect
to risk factors affecting the Company are set out in the Company’s
latest 40F/Annual Information Form and MD&A, each under the
heading “Risk Factors”, available on the SEDAR website at
www.sedar.com or on EDGAR at www.sec.gov. The foregoing should be
reviewed in conjunction with the information found in this press
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
Concerning Measured, Indicated and Inferred Resources
Unless otherwise indicated, all Mineral Resource
and Mineral Reserve estimates included in this press release have
been prepared in accordance with National Instrument 43-101 -
Standards of Disclosure for Mineral Projects (“NI
43-101”) and the Canadian Institute of Mining, Metallurgy
and Petroleum (the “CIM”) - CIM Definition
Standards on Mineral Resources and Mineral Reserves, adopted by the
CIM Council, as amended (the “CIM Standards”).
NI 43-101 is a rule developed by the Canadian
Securities Administrators, which established standards for all
public disclosure an issuer makes of scientific and technical
information concerning mineral projects. The terms “Mineral
Reserve”, “Proven Mineral Reserve” and “Probable Mineral Reserve”
are Canadian mining terms as defined in accordance with NI 43-101
and the CIM Standards. These definitions differ materially from the
definitions in SEC Industry Guide 7 (“SEC Industry Guide
7”) under the United States Securities Exchange Act of
1934, as amended. Under SEC (defined below) Industry Guide 7
standards, a “final” or “bankable” feasibility study is required to
report Mineral Reserves, the three-year historical average price is
used in any reserve or cash flow analysis to designate reserves and
the primary environmental analysis or report must be filed with the
appropriate governmental authority. In addition, the terms “Mineral
Resource”, “Measured Mineral Resource”, “Indicated Mineral
Resource” and “Inferred Mineral Resource” are defined in and
required to be disclosed by NI 43-101 and the CIM Standards;
however, these terms are not defined terms under SEC Industry Guide
7 and are normally not permitted to be used in reports and
registration statements filed with the U.S. Securities and Exchange
Commission (the “SEC”). Investors are cautioned
not to assume that all or any part of mineral deposits in these
categories will ever be converted into Mineral Reserves. “Inferred
Mineral Resources” have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an
Inferred Mineral Resource will ever be upgraded to a higher
category. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of feasibility or pre-feasibility
studies, except in very limited circumstances.
Investors are cautioned not to assume that all
or any part of an Inferred Mineral Resource exists or is
economically or legally mineable. Disclosure of “contained ounces”
in a Mineral Resource is permitted disclosure under Canadian
regulations; however, the SEC normally only permits issuers to
report mineralization that does not constitute “Mineral Reserves”
by SEC standards as in place tonnage and grade without reference to
unit measures. The SEC has adopted final rules, effective February
25, 2019, to replace SEC Industry Guide 7 with new mining
disclosure rules under sub-part 1300 of Regulation S-K of the U.S.
Securities Act (the “SEC Modernization Rules”).
The SEC Modernization Rules replace the historical property
disclosure requirements included in SEC Industry Guide 7. As a
result of the adoption of the SEC Modernization Rules, the SEC now
recognizes estimates of “Measured Mineral Resources”, “Indicated
Mineral Resources” and “Inferred Mineral Resources”. In addition,
the SEC has amended its definitions of “Proven Mineral Reserves”
and “Probable Mineral Reserves” to be substantially similar to
international standards. The SEC Modernization Rules will become
mandatory for U.S. reporting companies beginning with the first
fiscal year commencing on or after January 1, 2021.
Non-GAAP Measures and Additional GAAP
Measures
The Company has included certain non-GAAP
financial measures to supplement its Consolidated Financial
Statements, which are presented in accordance with IFRS, including
the following:
- adjusted net earnings and adjusted earnings per share;
- cash flow from operating activities before changes in working
capital and taxes received;
- company-wide free cash flow;
- total mine-site free cash flow;
- mine-site free cash flow;
- net cash;
- total cash cost per ounce of gold sold;
- all-in sustaining cost ("AISC") per ounce of gold sold;
- mine-site all-in sustaining cost ("Mine-site AISC") per ounce
of gold sold;
- sustaining and non-sustaining capital expenditures; and
- earnings before interest, taxes, depreciation, and
amortization
The Company believes that these measures,
together with measures determined in accordance with IFRS, provide
investors with an improved ability to evaluate the underlying
performance of the Company. Non-GAAP financial measures do not have
any standardized meaning prescribed under IFRS, and therefore they
may not be comparable to similar measures employed by other
companies. The data is intended to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS.
Management's determination of the components of non-GAAP and
additional measures are evaluated on a periodic basis influenced by
new items and transactions, a review of investor uses and new
regulations as applicable. Any changes to the measures are dully
noted and retrospectively applied as applicable.
Adjusted Net Earnings and Adjusted
Earnings per Share
“Adjusted net earnings” and “adjusted earnings
per share” are non-GAAP financial measures with no standard meaning
under IFRS which exclude the following from net earnings:
- Foreign exchange gain (loss)
- Items included in other gain (loss)
- Certain non-reoccurring items
- Foreign exchange gain (loss) recorded in deferred tax
expense
Net earnings have been adjusted, including the
associated tax impact, for the group of costs in “Other loss” on
the consolidated statement of comprehensive income. Transactions
within this grouping are: the fair value changes on non-hedged
derivatives; the renunciation of flow-through exploration
expenditures; and loss on disposal of assets. The adjusted entries
are also impacted for tax to the extent that the underlying entries
are impacted for tax in the unadjusted net earnings.
The Company uses adjusted net earnings for its
own internal purposes. Management’s internal budgets and forecasts
and public guidance do not reflect the items which have been
excluded from the determination of adjusted net earnings.
Consequently, the presentation of adjusted net earnings enables
shareholders to better understand the underlying operating
performance of the core mining business through the eyes of
management. Management periodically evaluates the components of
adjusted net earnings based on an internal assessment of
performance measures that are useful for evaluating the operating
performance of our business and a review of the non-GAAP measures
used by mining industry analysts and other mining companies.
Adjusted net earnings is intended to provide
additional information only and does not have any standardized
meaning under IFRS and may not be comparable to similar measures
presented by other companies. It should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. The measure is not necessarily indicative
of operating profit or cash flows from operations as determined
under IFRS. The following table reconciles this non-GAAP measure to
the most directly comparable IFRS measure.
(in millions) |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net earnings (loss) |
$ |
11.7 |
|
$ |
23.6 |
|
($0.6 |
) |
$ |
40.4 |
|
Adjustments: |
|
|
|
|
COVID-19 costs |
|
6.5 |
|
|
— |
|
|
6.5 |
|
|
— |
|
Foreign exchange (gain) loss |
|
(0.2 |
) |
|
(0.1 |
) |
|
4.9 |
|
|
(0.3 |
) |
Other loss (gain) |
|
5.1 |
|
|
0.5 |
|
|
4.9 |
|
|
(1.7 |
) |
Unrealized foreign exchange loss (gain) recorded in deferred tax
expense |
|
(10.1 |
) |
|
(7.0 |
) |
|
26.7 |
|
|
(11.1 |
) |
Other income tax and mining tax adjustments |
|
(3.2 |
) |
|
0.7 |
|
|
(3.2 |
) |
|
0.7 |
|
Adjusted net earnings |
$ |
9.8 |
|
$ |
17.7 |
|
|
$ 39.2 |
|
$ |
28.0 |
|
Adjusted earnings per
share - basic and diluted |
$ |
0.03 |
|
$ |
0.05 |
|
|
$ 0.10 |
|
$ |
0.07 |
|
Cash Flow from Operating Activities
before Changes in Working Capital and Cash Taxes
“Cash flow from operating activities before
changes in working capital and cash taxes” 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 working capital and taxes
received to “Cash provided by (used in) operating activities” as
presented on the Company’s consolidated statements of cash flows.
“Cash flow from operating activities before changes in working
capital” is a non-GAAP financial measure with no standard meaning
under IFRS.
The following table reconciles the non-GAAP
measure to the consolidated statements of cash flows.
(in millions) |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Cash flow from operating
activities |
$ |
49.6 |
|
$ |
72.3 |
|
$ |
106.2 |
|
$ |
114.7 |
|
Add (less): Changes in working capital and cash taxes |
|
(4.9 |
) |
|
(3.7 |
) |
|
20.2 |
|
|
16.5 |
|
Cash flow from operating activities before changes in
working capital and cash taxes |
$ |
44.7 |
|
$ |
68.6 |
|
$ |
126.4 |
|
$ |
131.2 |
|
Company-wide Free Cash Flow
“Company-wide free cash flow" is a non-GAAP
performance measure calculated from the consolidated operating cash
flow, less consolidated mineral property, plant and equipment
expenditures. The Company believes this to be a useful indicator of
our ability to operate without reliance on additional borrowing or
usage of existing cash company-wide. Company-wide free cash flow is
intended to provide additional information only and does not have
any standardized meaning under IFRS and may not be comparable to
similar measures of performance presented by other mining
companies. Company-wide free cash flow should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS.
(in millions) |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Cash flow from operating
activities |
$ |
49.6 |
|
$ |
72.3 |
|
$ |
106.2 |
|
$ |
114.7 |
|
Less: mineral property, plant and equipment expenditures |
|
(54.6 |
) |
|
(71.1 |
) |
|
(117.9 |
) |
|
(124.4 |
) |
Company-wide free cash flow |
|
($5.0 |
) |
$ |
1.2 |
|
|
($11.7 |
) |
|
($9.7 |
) |
Mine-site Free Cash Flow
"Mine-site free cash flow" is a non-GAAP
financial performance measure calculated as cash flow from
mine-site operating activities, less mineral property, plant and
equipment expenditures. The Company believes this to be a useful
indicator of our ability to operate without reliance on additional
borrowing or usage of existing cash. Mine-site free cash flow is
intended to provide additional information only and does not have
any standardized meaning under IFRS and may not be comparable to
similar measures of performance presented by other mining
companies. Mine-site free cash flow should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS.
Total Mine-Site Free
Cash Flow |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
(in millions) |
|
|
|
|
Cash flow from operating activities |
$ |
49.6 |
|
$ |
72.3 |
|
$ |
106.2 |
|
$ |
114.7 |
|
Add: operating cash flow used by non-mine site activity |
|
6.4 |
|
|
5.2 |
|
|
21.1 |
|
|
16.5 |
|
Cash flow from operating mine-sites |
$ |
56.0 |
|
$ |
77.5 |
|
$ |
127.3 |
|
$ |
131.2 |
|
|
|
|
|
|
Mineral property, plant and equipment expenditure 1 |
$ |
54.6 |
|
$ |
71.1 |
|
$ |
117.9 |
|
$ |
124.4 |
|
Less: capital expenditures from development projects, and
corporate |
|
(4.0 |
) |
|
(7.2 |
) |
|
(10.8 |
) |
|
(13.2 |
) |
Capital expenditure from mine-sites |
$ |
50.6 |
|
$ |
63.9 |
|
$ |
107.1 |
|
$ |
111.2 |
|
|
|
|
|
|
Total
mine-site free cash flow |
$ |
5.4 |
|
$ |
13.6 |
|
$ |
20.2 |
|
$ |
20.0 |
|
(1) Excludes royalty repurchase of $54.8 million at Island
Gold in the first quarter of 2020
Young-Davidson
Mine-Site Free Cash Flow |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
(in millions) |
|
|
|
|
Cash flow from operating activities |
|
$
6.5 |
|
|
$
23.6 |
|
|
$
14.6 |
|
|
$
46.5 |
|
Mineral property, plant and equipment expenditure |
|
(29.6 |
) |
|
(26.7 |
) |
|
(56.6 |
) |
|
(49.0 |
) |
Mine-site free cash flow |
|
($23.1 |
) |
|
($3.1 |
) |
|
($42.0 |
) |
|
($2.5 |
) |
Mulatos Mine-Site Free
Cash Flow |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
(in millions) |
|
|
|
|
Cash flow from operating activities |
$ |
24.4 |
|
$ |
23.2 |
|
$ |
45.9 |
|
|
$
23.8 |
|
Mineral property, plant and equipment expenditure |
|
(5.1 |
) |
|
(19.2 |
) |
|
(12.5 |
) |
|
(31.8 |
) |
Mine-site free cash flow |
$ |
19.3 |
|
$ |
4.0 |
|
$ |
33.4 |
|
|
($8.0 |
) |
Island Gold Mine-Site
Free Cash Flow |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
(in millions) |
|
|
|
|
Cash flow from operating activities |
$ |
25.1 |
|
$ |
29.7 |
|
$ |
66.8 |
|
$ |
58.7 |
|
Mineral property, plant and equipment expenditure 1 |
|
(15.9 |
) |
|
(18.0 |
) |
|
(38.0 |
) |
|
(30.4 |
) |
Mine-site free cash flow |
$ |
9.2 |
|
$ |
11.7 |
|
$ |
28.8 |
|
$ |
28.3 |
|
(1) Excludes royalty repurchase of $54.8 million at
Island Gold that occurred in March 2020
Net Cash
The Company defines net cash as cash and cash equivalents less
long-term debt, as this metric reflects the financial position at
the end of the period and the ability to fund its future
development.
Total Cash Costs per ounce
Total cash costs per ounce is a non-GAAP term
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. This non-GAAP term
is also used to assess the ability of a mining company to generate
cash flow from operations. Total cash costs per ounce includes
mining and processing costs plus applicable royalties, and net of
by-product revenue and net realizable value adjustments. This
metric excludes COVID-19 costs incurred in the period. Total cash
costs per ounce is exclusive of exploration costs.
Total cash costs per ounce is intended to
provide additional information only and does not have any
standardized meaning under IFRS and may not be comparable to
similar measures presented by other mining companies. It should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. The measure is not
necessarily indicative of cash flow from operations under IFRS or
operating costs presented under IFRS.
All-in Sustaining Costs per ounce and
Mine-site All-in Sustaining Costs
The Company adopted an “all-in sustaining costs
per ounce” non-GAAP performance measure in accordance with the
World Gold Council published in June 2013. The Company believes the
measure more fully defines the total costs associated with
producing gold; however, this performance measure has no
standardized meaning. Accordingly, there may be some
variation in the method of computation of “all-in sustaining costs
per ounce” as determined by the Company compared with other mining
companies. In this context, “all-in sustaining costs per ounce” for
the consolidated Company reflects total mining and processing
costs, corporate and administrative costs, share-based
compensation, exploration costs, sustaining capital, and other
operating costs.
For the purposes of calculating "mine-site
all-in sustaining costs" at the individual mine-sites, the Company
does not include an allocation of corporate and administrative
costs and share-based compensation, as detailed in the
reconciliations below.
Sustaining capital expenditures are expenditures
that do not increase annual gold ounce production at a mine site
and excludes all expenditures at the Company’s development projects
as well as certain expenditures at the Company’s operating sites
that are deemed expansionary in nature. For each mine-site
reconciliation, corporate and administrative costs, and non-site
specific costs are not included in the all-in sustaining cost per
ounce calculation.
All-in
sustaining costs per gold ounce is
intended to provide additional information only and does not
have any standardized
meaning under IFRS and may not be comparable to similar measures presented by other mining companies. It should not be
considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
The measure is not necessarily indicative of cash flow from operations under IFRS or operating costs presented under IFRS.
Total Cash Costs and All-in Sustaining
Costs per Ounce Reconciliation Tables
The following tables reconciles these non-GAAP
measures to the most directly comparable IFRS measures on a
Company-wide and individual mine-site basis.
Total Cash
Costs and AISC Reconciliation - Company-wide |
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
(in millions, except ounces and per ounce figures) |
|
|
|
|
Mining and processing |
$ |
67.9 |
|
$ |
86.4 |
|
$ |
150.4 |
|
$ |
168.6 |
|
Royalties |
|
1.7 |
|
|
3.4 |
|
|
4.1 |
|
|
8.8 |
|
Total cash costs |
$ |
69.6 |
|
$ |
89.8 |
|
$ |
154.5 |
|
$ |
177.4 |
|
Gold ounces sold |
|
74,605 |
|
|
128,457 |
|
|
186,459 |
|
|
248,162 |
|
Total cash costs per ounce |
$ |
933 |
|
$ |
699 |
|
$ |
829 |
|
$ |
715 |
|
|
|
|
|
|
Total cash costs |
$ |
69.6 |
|
$ |
89.8 |
|
$ |
154.5 |
|
$ |
177.4 |
|
Corporate and administrative(1) |
|
4.1 |
|
|
4.6 |
|
|
10.3 |
|
|
10.1 |
|
Sustaining capital expenditures(2) |
|
14.4 |
|
|
19.6 |
|
|
31.9 |
|
|
35.7 |
|
Share-based compensation |
|
5.6 |
|
|
2.7 |
|
|
7.8 |
|
|
6.0 |
|
Sustaining exploration |
|
1.0 |
|
|
1.4 |
|
|
2.5 |
|
|
2.8 |
|
Accretion of decommissioning liabilities |
|
0.5 |
|
|
0.8 |
|
|
1.2 |
|
|
1.4 |
|
Total all-in sustaining
costs |
$ |
95.2 |
|
$ |
118.9 |
|
$ |
208.2 |
|
$ |
233.4 |
|
Gold ounces sold |
|
74,605 |
|
|
128,457 |
|
|
186,459 |
|
|
248,162 |
|
All-in sustaining costs per ounce |
$ |
1,276 |
|
$ |
926 |
|
$ |
1,117 |
|
$ |
941 |
|
(1) Corporate and administrative expenses exclude expenses
incurred at development properties.(2) Sustaining capital
expenditures are defined as those expenditures which do not
increase annual gold ounce production at a mine site and exclude
all expenditures at growth projects and certain expenditures at
operating sites which are deemed expansionary in nature. Total
sustaining capital for the period is as follows:
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
(in millions) |
|
|
|
|
Capital expenditures per cash
flow statement |
$ |
54.6 |
|
$ |
71.1 |
|
$ |
117.9 |
|
$ |
124.4 |
|
Less: non-sustaining capital
expenditures at: |
|
|
|
|
Young-Davidson |
|
(24.1 |
) |
|
(15.5 |
) |
|
(46.9 |
) |
|
(27.8 |
) |
Mulatos |
|
(1.4 |
) |
|
(17.0 |
) |
|
(4.0 |
) |
|
(28.6 |
) |
Island Gold |
|
(10.7 |
) |
|
(11.8 |
) |
|
(24.3 |
) |
|
(19.1 |
) |
Corporate and other |
|
(4.0 |
) |
|
(7.2 |
) |
|
(10.8 |
) |
|
(13.2 |
) |
Sustaining capital expenditures |
$ |
14.4 |
|
$ |
19.6 |
|
$ |
31.9 |
|
$ |
35.7 |
|
|
|
|
Young-Davidson Total Cash Costs and Mine-site AISC
Reconciliation |
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
(in millions, except ounces and per ounce figures) |
|
|
|
|
Mining and processing |
$ |
34.4 |
|
$ |
36.0 |
|
$ |
65.2 |
|
$ |
71.9 |
|
Royalties |
|
0.7 |
|
|
0.7 |
|
|
1.5 |
|
|
1.7 |
|
Total cash costs |
$ |
35.1 |
|
$ |
36.7 |
|
$ |
66.7 |
|
$ |
73.6 |
|
Gold ounces sold |
|
22,440 |
|
|
44,665 |
|
|
51,345 |
|
|
88,661 |
|
Total cash costs per ounce |
$ |
1,564 |
|
$ |
822 |
|
$ |
1,299 |
|
$ |
830 |
|
|
|
|
|
|
Total cash costs |
$ |
35.1 |
|
$ |
36.7 |
|
$ |
66.7 |
|
$ |
73.6 |
|
Sustaining capital expenditures |
|
5.5 |
|
|
11.2 |
|
|
9.7 |
|
|
21.2 |
|
Sustaining exploration |
|
— |
|
|
0.1 |
|
|
— |
|
|
0.2 |
|
Accretion of decommissioning liabilities |
|
— |
|
|
0.1 |
|
|
0.1 |
|
|
0.1 |
|
Total all-in sustaining
costs |
$ |
40.6 |
|
$ |
48.1 |
|
$ |
76.5 |
|
$ |
95.1 |
|
Gold ounces sold |
|
22,440 |
|
|
44,665 |
|
|
51,345 |
|
|
88,661 |
|
Mine-site all-in sustaining costs per ounce |
$ |
1,809 |
|
$ |
1,077 |
|
$ |
1,490 |
|
$ |
1,073 |
|
Mulatos
Total Cash Costs and Mine-site AISC Reconciliation |
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
(in millions, except ounces and per ounce figures) |
|
|
|
|
Mining and processing |
$ |
24.9 |
|
$ |
28.8 |
|
$ |
60.2 |
|
$ |
53.3 |
|
Royalties |
|
0.3 |
|
|
0.3 |
|
|
0.6 |
|
|
2.6 |
|
Total cash costs |
$ |
25.2 |
|
$ |
29.1 |
|
$ |
60.8 |
|
$ |
55.9 |
|
Gold ounces sold |
|
33,605 |
|
|
40,116 |
|
|
77,427 |
|
|
76,205 |
|
Total cash costs per ounce |
$ |
750 |
|
$ |
725 |
|
$ |
785 |
|
$ |
734 |
|
|
|
|
|
|
Total cash costs |
$ |
25.2 |
|
$ |
29.1 |
|
$ |
60.8 |
|
$ |
55.9 |
|
Sustaining capital expenditures |
|
3.7 |
|
|
2.2 |
|
|
8.5 |
|
|
3.2 |
|
Sustaining exploration |
|
0.5 |
|
|
0.8 |
|
|
1.5 |
|
|
1.6 |
|
Accretion of decommissioning liabilities |
|
0.5 |
|
|
0.6 |
|
|
1.1 |
|
|
1.2 |
|
Total all-in sustaining
costs |
$ |
29.9 |
|
$ |
32.7 |
|
$ |
71.9 |
|
$ |
61.9 |
|
Gold ounces sold |
|
33,605 |
|
|
40,116 |
|
|
77,427 |
|
|
76,205 |
|
Mine-site all-in sustaining costs per ounce |
$ |
890 |
|
$ |
815 |
|
$ |
929 |
|
$ |
812 |
|
Island
Gold Total Cash Costs and Mine-site AISC
Reconciliation |
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
(in millions, except ounces and per ounce figures) |
|
|
|
|
Mining and processing |
$ |
8.6 |
|
$ |
16.2 |
|
$ |
25.0 |
|
$ |
30.8 |
|
Royalties |
|
0.7 |
|
|
2.4 |
|
|
2.0 |
|
|
4.5 |
|
Total cash costs |
$ |
9.3 |
|
$ |
18.6 |
|
$ |
27.0 |
|
$ |
35.3 |
|
Gold ounces sold |
|
18,560 |
|
|
39,300 |
|
|
57,687 |
|
|
72,885 |
|
Total cash costs per ounce |
$ |
501 |
|
$ |
473 |
|
$ |
468 |
|
$ |
484 |
|
|
|
|
|
|
Total cash costs |
$ |
9.3 |
|
$ |
18.6 |
|
$ |
27.0 |
|
$ |
35.3 |
|
Sustaining capital expenditures |
|
5.2 |
|
|
6.2 |
|
|
13.7 |
|
|
11.3 |
|
Total all-in sustaining
costs |
$ |
14.5 |
|
$ |
24.8 |
|
$ |
40.7 |
|
$ |
46.6 |
|
Gold ounces sold |
|
18,560 |
|
|
39,300 |
|
|
57,687 |
|
|
72,885 |
|
Mine-site all-in sustaining costs per ounce |
$ |
781 |
|
$ |
631 |
|
$ |
706 |
|
$ |
639 |
|
Earnings Before Interest, Taxes, Depreciation, and
Amortization (“EBITDA”)EBITDA represents net earnings
before interest, taxes, depreciation, and amortization. EBITDA is
an indicator of the Company’s ability to generate liquidity by
producing operating cash flow to fund working capital needs,
service debt obligations, and fund capital expenditures.
EBITDA does not have any standardized meaning
under IFRS and may not be comparable to similar measures presented
by other mining companies. It should not be considered in isolation
or as a substitute for measures of performance prepared in
accordance with IFRS.
The following is a reconciliation of EBITDA to
the consolidated financial statements:
(in millions) |
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net earnings (loss) |
$ |
11.7 |
|
$ |
23.6 |
|
|
($0.6 |
) |
$ |
40.4 |
|
Add back: |
|
|
|
|
COVID-19 costs |
|
6.5 |
|
|
— |
|
|
6.5 |
|
|
— |
|
Finance expense |
|
1.2 |
|
|
0.7 |
|
|
2.0 |
|
|
1.2 |
|
Amortization |
|
27.2 |
|
|
41.3 |
|
|
62.6 |
|
|
80.7 |
|
Deferred income tax (recovery) expense |
|
(14.8 |
) |
|
(3.7 |
) |
|
38.3 |
|
|
(7.4 |
) |
Current income tax expense |
|
9.1 |
|
|
7.2 |
|
|
8.8 |
|
|
14.7 |
|
EBITDA |
$ |
40.9 |
|
$ |
69.1 |
|
|
$ 117.6 |
|
$ |
129.6 |
|
Additional GAAP Measures
Additional GAAP measures are presented on the
face of the Company’s consolidated statements of comprehensive
income (loss) 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.
The following additional GAAP measures are used and are intended to
provide an indication of the Company’s mine and operating
performance:
- Earnings from operations -
represents the amount of earnings before net finance
income/expense, foreign exchange gain/loss, other income/loss, loss
on redemption of senior secured notes and income tax expense
Unaudited Consolidated Statements of
Financial Position, ComprehensiveIncome, and Cash
Flow
ALAMOS GOLD
INC.Consolidated Statements of Financial
Position(Unaudited - stated in millions of United States
dollars)
|
June 30, 2020 |
|
|
December 31, 2019 |
|
A S S E T
S |
|
|
|
Current
Assets |
|
|
|
Cash and cash equivalents |
$ |
201.3 |
|
|
$ |
182.8 |
|
Equity securities |
|
30.2 |
|
|
|
22.8 |
|
Amounts receivable |
|
36.8 |
|
|
|
37.4 |
|
Income taxes receivable |
|
— |
|
|
|
4.6 |
|
Inventory |
|
126.2 |
|
|
|
126.9 |
|
Other current assets |
|
14.2 |
|
|
|
19.8 |
|
Total Current
Assets |
|
408.7 |
|
|
|
394.3 |
|
|
|
|
|
Non-Current
Assets |
|
|
|
Long-term inventory |
|
24.3 |
|
|
|
25.7 |
|
Mineral property, plant and
equipment |
|
3,028.9 |
|
|
|
2,933.4 |
|
Other non-current assets |
|
42.8 |
|
|
|
43.1 |
|
Total Assets |
$ |
3,504.7 |
|
|
$ |
3,396.5 |
|
|
|
|
|
L I A B I L I T I E
S |
|
|
|
Current
Liabilities |
|
|
|
Accounts payable and accrued
liabilities |
$ |
105.1 |
|
|
$ |
127.3 |
|
Income taxes payable |
|
2.2 |
|
|
|
— |
|
Total Current
Liabilities |
|
107.3 |
|
|
|
127.3 |
|
|
|
|
|
Non-Current
Liabilities |
|
|
|
Deferred income taxes |
|
550.4 |
|
|
|
513.7 |
|
Decommissioning
liabilities |
|
57.8 |
|
|
|
57.1 |
|
Debt and financing
obligations |
|
100.0 |
|
|
|
— |
|
Other non-current
liabilities |
|
3.0 |
|
|
|
3.1 |
|
Total Liabilities |
|
818.5 |
|
|
|
701.2 |
|
|
|
|
|
E Q U I T
Y |
|
|
|
Share capital |
$ |
3,691.9 |
|
|
$ |
3,693.3 |
|
Contributed surplus |
|
89.6 |
|
|
|
90.7 |
|
Accumulated other
comprehensive loss |
|
0.4 |
|
|
|
(0.2 |
) |
Deficit |
|
(1,095.7 |
) |
|
|
(1,088.5 |
) |
Total Equity |
|
2,686.2 |
|
|
|
2,695.3 |
|
Total Liabilities and Equity |
$ |
3,504.7 |
|
|
$ |
3,396.5 |
|
|
ALAMOS GOLD INC.Consolidated Statements
of Comprehensive (Loss) Income(Unaudited - stated in
millions of United States dollars, except share and per share
amounts)
|
For three months ended |
|
For six months ended |
|
June 30, |
|
June 30, |
|
June 30, |
|
June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
OPERATING
REVENUES |
$ |
126.2 |
|
|
$ |
168.1 |
|
|
$ |
303.1 |
|
|
$ |
324.2 |
|
|
|
|
|
|
|
|
|
COST OF
SALES |
|
|
|
|
|
|
|
Mining and processing |
|
67.9 |
|
|
|
86.4 |
|
|
|
150.4 |
|
|
|
168.6 |
|
Royalties |
|
1.7 |
|
|
|
3.4 |
|
|
|
4.1 |
|
|
|
8.8 |
|
COVID-19 costs |
|
6.5 |
|
|
|
— |
|
|
|
6.5 |
|
|
|
— |
|
Amortization |
|
27.2 |
|
|
|
41.3 |
|
|
|
62.6 |
|
|
|
80.7 |
|
|
|
103.3 |
|
|
|
131.1 |
|
|
|
223.6 |
|
|
|
258.1 |
|
EXPENSES |
|
|
|
|
|
|
|
Exploration |
|
1.1 |
|
|
|
1.5 |
|
|
|
3.1 |
|
|
|
3.1 |
|
Corporate and
administrative |
|
4.1 |
|
|
|
4.6 |
|
|
|
10.3 |
|
|
|
10.1 |
|
Share-based compensation |
|
5.6 |
|
|
|
2.7 |
|
|
|
7.8 |
|
|
|
6.0 |
|
|
|
114.1 |
|
|
|
139.9 |
|
|
|
244.8 |
|
|
|
277.3 |
|
EARNINGS FROM
OPERATIONS |
|
12.1 |
|
|
|
28.2 |
|
|
|
58.3 |
|
|
|
46.9 |
|
|
|
|
|
|
|
|
|
OTHER
EXPENSES |
|
|
|
|
|
|
|
Finance expense |
|
(1.2 |
) |
|
|
(0.7 |
) |
|
|
(2.0 |
) |
|
|
(1.2 |
) |
Foreign exchange gain
(loss) |
|
0.2 |
|
|
|
0.1 |
|
|
|
(4.9 |
) |
|
|
0.3 |
|
Other (loss) gain |
|
(5.1 |
) |
|
|
(0.5 |
) |
|
|
(4.9 |
) |
|
|
1.7 |
|
EARNINGS BEFORE INCOME
TAXES |
$ |
6.0 |
|
|
$ |
27.1 |
|
|
$ |
46.5 |
|
|
$ |
47.7 |
|
|
|
|
|
|
|
|
|
INCOME
TAXES |
|
|
|
|
|
|
|
Current income tax
expense |
|
(9.1 |
) |
|
|
(7.2 |
) |
|
|
(8.8 |
) |
|
|
(14.7 |
) |
Deferred income tax recovery
(expense) |
|
14.8 |
|
|
|
3.7 |
|
|
|
(38.3 |
) |
|
|
7.4 |
|
NET EARNINGS
(LOSS) |
$ |
11.7 |
|
|
$ |
23.6 |
|
|
($ |
0.6 |
) |
|
$ |
40.4 |
|
|
|
|
|
|
|
|
|
Items that may be subsequently
reclassified to net earnings: |
|
|
|
|
|
|
|
Unrealized gain (loss) on currency hedging instruments, net of
taxes |
|
6.3 |
|
|
|
1.7 |
|
|
|
(5.1 |
) |
|
|
5.0 |
|
Unrealized gain (loss) on fuel hedging instruments, net of
taxes |
|
0.3 |
|
|
|
(0.1 |
) |
|
|
(0.5 |
) |
|
|
0.5 |
|
Items that will not be
reclassified to net earnings: |
|
|
|
|
|
|
|
Unrealized gain (loss) on equity securities, net of taxes |
|
12.2 |
|
|
|
(3.6 |
) |
|
|
6.2 |
|
|
|
(1.3 |
) |
Total other
comprehensive income (loss) |
$ |
18.8 |
|
|
($ |
2.0 |
) |
|
$ |
0.6 |
|
|
$ |
4.2 |
|
COMPREHENSIVE INCOME
(LOSS) |
$ |
30.5 |
|
|
$ |
21.6 |
|
|
$ |
0.0 |
|
|
$ |
44.6 |
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE
(LOSS) |
|
|
|
|
|
|
|
– basic |
$ |
0.03 |
|
|
$ |
0.06 |
|
|
$ |
0.00 |
|
|
$ |
0.10 |
|
–
diluted |
$ |
0.03 |
|
|
$ |
0.06 |
|
|
$ |
0.00 |
|
|
$ |
0.10 |
|
Weighted average number of
common shares outstanding (000's) |
|
|
|
|
|
|
|
– basic |
|
391,076 |
|
|
|
389,218 |
|
|
|
391,208 |
|
|
|
389,475 |
|
– diluted |
|
394,897 |
|
|
|
392,974 |
|
|
|
391,208 |
|
|
|
393,203 |
|
|
ALAMOS GOLD INC.Consolidated Statements
of Cash Flows(Unaudited - stated in millions of United
States dollars)
|
For three months ended |
|
For six months ended |
|
June 30, |
|
June 30, |
|
June 30, |
|
June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
CASH PROVIDED BY (USED
IN): |
|
|
|
|
|
|
|
OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
Net earnings (loss) for the
period |
$ |
11.7 |
|
|
$ |
23.6 |
|
|
($ |
0.6 |
) |
|
$ |
40.4 |
|
Adjustments for items not
involving cash: |
|
|
|
|
|
|
|
Amortization |
|
28.3 |
|
|
|
41.3 |
|
|
|
63.7 |
|
|
|
80.7 |
|
Foreign exchange (gain) loss |
|
(0.2 |
) |
|
|
(0.1 |
) |
|
|
4.9 |
|
|
|
(0.3 |
) |
Current income tax expense |
|
9.1 |
|
|
|
7.2 |
|
|
|
8.8 |
|
|
|
14.7 |
|
Deferred income tax (recovery) expense |
|
(14.8 |
) |
|
|
(3.7 |
) |
|
|
38.3 |
|
|
|
(7.4 |
) |
Share-based compensation |
|
5.6 |
|
|
|
2.7 |
|
|
|
7.8 |
|
|
|
6.0 |
|
Finance expense |
|
1.2 |
|
|
|
0.7 |
|
|
|
2.0 |
|
|
|
1.2 |
|
Other items |
|
3.8 |
|
|
|
(3.1 |
) |
|
|
1.5 |
|
|
|
(4.1 |
) |
Changes in working capital and
cash taxes |
|
4.9 |
|
|
|
3.7 |
|
|
|
(20.2 |
) |
|
|
(16.5 |
) |
|
|
49.6 |
|
|
|
72.3 |
|
|
|
106.2 |
|
|
|
114.7 |
|
INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
Mineral property, plant and
equipment |
|
(54.6 |
) |
|
|
(71.1 |
) |
|
|
(117.9 |
) |
|
|
(124.4 |
) |
Repurchase of Island Gold
royalty |
|
— |
|
|
|
— |
|
|
|
(54.8 |
) |
|
|
— |
|
Other |
|
(2.3 |
) |
|
|
(1.1 |
) |
|
|
(2.3 |
) |
|
|
(1.1 |
) |
|
|
(56.9 |
) |
|
|
(72.2 |
) |
|
|
(175.0 |
) |
|
|
(125.5 |
) |
FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
Proceeds from draw down of
credit facility |
|
— |
|
|
|
— |
|
|
|
100.0 |
|
|
|
— |
|
Repayment of equipment
financing obligations |
|
(0.1 |
) |
|
|
(0.7 |
) |
|
|
(0.3 |
) |
|
|
(1.8 |
) |
Interest paid |
|
(0.8 |
) |
|
|
— |
|
|
|
(0.8 |
) |
|
|
— |
|
Repurchase and cancellation of
common shares |
|
(2.6 |
) |
|
|
(0.8 |
) |
|
|
(5.5 |
) |
|
|
(11.4 |
) |
Proceeds from the exercise of
options |
|
2.4 |
|
|
|
— |
|
|
|
6.3 |
|
|
|
0.6 |
|
Dividends paid |
|
(5.5 |
) |
|
|
(3.9 |
) |
|
|
(11.1 |
) |
|
|
(7.8 |
) |
Proceeds from issuance of
flow-through shares |
|
— |
|
|
|
7.5 |
|
|
|
— |
|
|
|
7.5 |
|
|
|
(6.6 |
) |
|
|
2.1 |
|
|
|
88.6 |
|
|
|
(12.9 |
) |
Effect of exchange rates on
cash and cash equivalents |
|
0.5 |
|
|
|
0.4 |
|
|
|
(1.3 |
) |
|
|
0.9 |
|
Net (decrease) increase in
cash and cash equivalents |
|
(13.4 |
) |
|
|
2.6 |
|
|
|
18.5 |
|
|
|
(22.8 |
) |
Cash and cash equivalents -
beginning of period |
|
214.7 |
|
|
|
180.6 |
|
|
|
182.8 |
|
|
|
206.0 |
|
CASH AND CASH
EQUIVALENTS - END OF PERIOD |
$ |
201.3 |
|
|
$ |
183.2 |
|
|
$ |
201.3 |
|
|
$ |
183.2 |
|
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