Alamos Gold Inc. (
TSX:AGI;
NYSE:AGI) (“Alamos” or the “Company”) today reported
fourth quarter and annual 2021 production. The Company also
provided three-year production and operating guidance.
“With stronger production in the fourth quarter, we met our
revised full year 2021 guidance. This was driven by strong
performances through the year from both Young-Davidson and Island
Gold, with the former achieving record mining rates and free cash
flow. This offset a challenging year at Mulatos as we work through
a transitional phase with higher costs until La Yaqui Grande comes
online in the second half of 2022. This temporary increase in costs
at Mulatos and industry-wide inflation are the key drivers of
higher consolidated costs in 2022, though we expect a significant
improvement in costs in 2023 and beyond,” said John A. McCluskey,
President and Chief Executive Officer.
“We are pleased to be providing our inaugural three-year
guidance which outlines our strong outlook. Our key high-return
growth projects remain on track and are expected to support higher
production at substantially lower costs in the years ahead. The
completion of La Yaqui Grande will be the key near-term driver of
lower costs, and Island Gold will be the primary driver of
significantly lower costs over the longer term with the Phase III
expansion. These high-return reinvestments are fully funded and
form a key part of our sustainable business model that can support
growing returns to our stakeholders over the long term,” Mr.
McCluskey added.
Fourth Quarter and Full Year 2021 Operating
Highlights
- Met 2021 annual production guidance:
production of 457,200 ounces of gold in 2021 was in line with
revised production guidance and represented a 7% increase from
2020. This included fourth quarter production of 112,500 ounces, an
increase from the third quarter, with strong performances at Island
Gold and Young-Davidson offsetting lower production from
Mulatos
- Costs expected to meet 2021 guidance: total
cash costs and all-in sustaining costs for 2021 have not been
finalized but are expected to be consistent with revised full year
guidance of $790 to $810 per ounce and $1,120 to $1,140 per ounce,
respectively
- Record revenues: sold 112,966 ounces of gold
in the fourth quarter at an average realized price of $1,797 per
ounce for revenues of $203 million. Full year sales totaled 457,517
ounces of gold at an average realized price of $1,800 per ounce for
record revenues of $824 million
Three Year Guidance Overview1
– Operating Mines
- Stable production in 2022 with 4% growth expected in
2023: production is expected to be between 440,000 and
480,000 ounces in 2022, consistent with 2021, and increase
approximately 4% (based on the mid-point of guidance) to between
460,000 and 500,000 ounces in 2023 and 2024. The completion of the
Phase III expansion at Island Gold is expected to drive a further
increase in production in 2025 with additional growth potential
from Lynn Lake
- Total cash cost guidance of $875 to $925 per ounce in
2022, improving substantially to $650 to $750 per ounce in
2024: costs are expected to increase in 2022, reflecting
industry-wide cost inflation and temporarily higher costs at
Mulatos. Costs at Mulatos and on a consolidated basis are expected
to decrease starting in the second half of 2022 with the
commencement of low-cost production from La Yaqui Grande. Island
Gold is expected to contribute to lower costs in 2024, along with a
further reduction in costs following the expected completion of the
Phase III expansion in 2025
- All-in sustaining cost (“AISC”) guidance of $1,190 to
$1,240 per ounce in 2022, improving to $950 to $1,050 per ounce in
2024: consistent with total cash costs, AISC are expected
to decrease approximately 18% from 2022 to 2024 (based on the
mid-point of guidance), reflecting lower costs at Mulatos and
Island Gold. AISC are expected to decrease further in 2025 with the
completion of the Phase III expansion at Island Gold
- Total capital guidance, excluding capitalized
exploration, of $305 to $345 million in 2022: this
includes $290 to $330 million of capital at producing mines and is
down slightly from 2021 guidance with lower capital at La Yaqui
Grande and Young-Davidson more than offsetting the ramp up in
spending on the Phase III expansion at Island Gold. Capital
spending for producing mines is expected to decrease approximately
23% in 2023 to between $220 and $260 million, reflecting the
completion of construction of La Yaqui Grande, and remain at
similar levels in 2024. Total capital is expected to decline
further following the completion of the Phase III expansion at
Island Gold in 2025. The total capital budget for 2022 includes:
- Sustaining capital guidance of $90 to $105
million: down approximately 17% from 2021, reflecting
lower sustaining capital at Mulatos. Sustaining capital is expected
to remain at similar levels through 2024
- Growth capital guidance for producing mines of $200 to
$225 million: consistent with 2021 with the majority
related to the Phase III expansion at Island Gold and completing
construction at La Yaqui Grande
- Exploration budget of $40 million: with more
than half allocated to following up on ongoing exploration success
at Island Gold
- Fully funded growth: the Phase III expansion
at Island Gold and La Yaqui Grande are expected to be funded
through ongoing cash flow and existing cash. The Company expects to
generate positive free cash flow in the second half of the year as
costs and capital spending decrease with the start of production at
La Yaqui Grande
- Strong ongoing returns to shareholders:
including the existing $0.10 per share annualized dividend (paid
quarterly) and planned share repurchases under the Normal Course
Issuer Bid. In 2021, the Company returned approximately $51 million
to shareholders between dividends and share repurchases,
representing a combined yield of approximately 1.8% at current
share prices
1 Guidance statements in this release are forward-looking
information. See the Assumptions and Sensitives section of this
release along with the cautionary note at the end of this
release.
Upcoming 2022 catalysts
- 2021 year-end Mineral Reserve and Resource
update: February 2022
- La Yaqui Grande commercial production: Q3
2022
- Island Gold Phase III expansion updated mine
plan: mid-2022. This will incorporate the significant
growth in high-grade Mineral Reserves and Resources since the
completion of the July 2020 study into an optimized mine plan which
is expected to enhance already attractive economics and the value
of the operation
- Lynn Lake completion of permitting and construction
decision: H2 2022
Fourth Quarter and Full Year 2021 Operating
Results
|
Q4 2021 |
Q4 2020 |
2021 |
2020(2) |
Revised
2021Guidance(1) |
Gold production (ounces) |
|
|
|
|
|
|
|
|
|
Young-Davidson |
51,900 |
|
48,000 |
|
195,000 |
|
136,200 |
|
190,000 – 205,000 |
Island Gold |
37,500 |
|
41,200 |
|
140,900 |
|
139,000 |
|
130,000 – 145,000 |
Mulatos |
23,100 |
|
31,200 |
|
121,300 |
|
150,800 |
|
135,000 – 145,000 |
Total gold production |
112,500 |
|
120,400 |
|
457,200 |
|
426,800 |
|
455,000 – 495,000 |
(1) 2021 production guidance for
Mulatos was revised lower on October 27, 2021. Production guidance
for Young-Davidson and Island Gold was unchanged from initial 2021
guidance.(2) 2020 total production included 800 ounces
from El Chanate.
2022 Guidance
2022 Guidance |
2021 RevisedGuidance
(5) |
|
|
|
|
|
|
|
|
Young-Davidson |
Island Gold |
Mulatos |
Other (2) |
Total |
Total |
Gold production (000 oz) |
185 - 200 |
125 - 135 |
130 - 145 |
|
440 – 480 |
457 (actual) |
Cost of sales, including
amortization ($
millions)(3) |
|
|
|
|
$610 |
|
Cost of sales, including
amortization ($/oz)(3) |
|
|
|
|
$1,325 |
|
Total cash costs ($/oz)(1)(5) |
$850 - 900 |
$550 - 600 |
$1,225 - 1,275 |
— |
$875 - 925 |
$790 - 810 |
All-in sustaining costs ($/oz)(1)(5) |
|
|
|
|
$1,190 - 1,240 |
$1,120 - 1,140 |
Mine-site all-in sustaining
costs($/oz)(1)(4)(5) |
$1,125 - 1,175 |
$850 - 900 |
$1,325 - 1,375 |
— |
|
|
Capital expenditures ($ millions) |
|
|
|
|
|
|
Sustaining capital(1) |
$50 - 55 |
$35 - 40 |
$5 - 10 |
— |
$90 - 105 |
$110 - 125 |
Growth capital(1) |
$5 - 10 |
$145 - 160 |
$50 - 55 |
$15 |
$215 - 240 |
$210 - 225 |
Total Sustaining and Growth
Capital(1) |
$55 – 65 |
$180 – 200 |
$55 – 65 |
$15 |
$305 - 345 |
$320 - 350 |
Capitalized exploration(1) |
$4 |
$20 |
— |
$3 |
$27 |
$34 |
Total capital expenditures and capitalized
exploration(1) |
$59 - 69 |
$200 - 220 |
$55 - 65 |
$18 |
$332 - 372 |
$354 - 384 |
(1) Refer to the "Non-GAAP Measures and Additional
GAAP" disclosure at the end of this press release for a description
of these measures.(2) Includes growth capital and
capitalized exploration at the Company's development projects (Lynn
Lake and Esperanza).(3) Cost of sales includes mining
and processing costs, royalties, and amortization expense, and is
calculated based on the mid-point of total cash cost
guidance.(4) 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.(5) 2021
production and cost guidance revised on October 27, 2021.
Gold production in 2022 is expected to remain at similar levels
as 2021 and weighted towards the second half of the year (55% of
total production) given the anticipated start of production at La
Yaqui Grande mid-year. Total cash costs and AISC are expected to
decrease through the year and be significantly lower in the second
half of 2022, reflecting the start of low-cost production from La
Yaqui Grande.
Full year AISC are expected to increase approximately $85 per
ounce, or 8% from 2021 (based on the mid-point of guidance). The
primary driver of the increase is approximately 5% cost inflation,
which is being experienced industry-wide, and a temporary increase
in costs at Mulatos as the operation transitions from mining of
higher-cost Mulatos and stockpiled ore, to the higher grade and
lower cost La Yaqui Grande mine. This temporary increase in costs
at Mulatos is partially offset by lower sustaining capital at the
operation with the stripping of the El Salto portion of the main
Mulatos pit largely completed in 2021.
Cost guidance continues to include COVID-19 testing and other
related health and safety costs across all three operating mines.
Full year production and cost guidance assumes no significant
operational interruptions due to COVID-19.
Capital spending is expected to be higher during the first half
of the 2022 and trend lower during the second half of the year
following the completion of construction of La Yaqui Grande.
Approximately 60% of the 2022 capital budget is expected to be
spent during the first half of the year.
2022 – 2024 Guidance: Operating Mines
|
|
2022 |
2023 |
2024 |
Gold Production |
|
|
|
|
Young-Davidson |
000 oz |
185 – 200 |
185 – 200 |
185 – 200 |
Island Gold |
000 oz |
125 – 135 |
115 – 125 |
140 – 155 |
Mulatos |
000 oz |
130 – 145 |
160 – 175 |
135 – 145 |
Total gold production |
000 oz |
440 – 480 |
460 – 500 |
460 – 500 |
|
|
|
|
|
Total cash
costs(1) |
$/oz |
$875 – 925 |
$775 – 875 |
$650 – 750 |
All-in Sustaining
costs(1),(2) |
$/oz |
$1,190 – 1,240 |
$1,075 – 1,175 |
$950 – 1,050 |
Sustaining
capital(1),(3) |
$ millions |
$90 – 105 |
$95 – 110 |
$95 – 110 |
Growth
capital(1),(3) |
$ millions |
$200 – 225 |
$125 – 150 |
$135 – 160 |
Total sustaining & growth
capital(1),(3)(Operating
mines; ex. Exploration) |
$ millions |
$290 – 330 |
$220 – 260 |
$230 – 270 |
|
|
|
|
|
(1) Refer to the “Non-GAAP Measures and Additional
GAAP” disclosure at the end of this press release for a description
of these measures.(2) All-in sustaining cost guidance
for 2023 and 2024 includes the same assumptions for G&A and
stock based compensation as included in
2022.(3) Sustaining and growth capital guidance is for
producing mines and excludes capital for Lynn Lake and other
development projects, and capitalized
exploration.(4) 2023 and 2024 Cost of sales guidance has
not been provided given amortization charges are based on reserves
and resources at the end of each of these years and cannot be
reasonably estimated at this time.
Gold production is expected to increase approximately 4% in
2023, driven by higher production from the Mulatos District given a
full year of production from La Yaqui Grande, as well as ongoing
production from the main Mulatos operation. Company-wide gold
production is expected to remain at similar levels in 2024 with
higher production from Island Gold offsetting lower production from
Mulatos.
Total cash costs and AISC are expected to decrease 8% and 7%,
respectively, in 2023, reflecting significantly lower costs at
Mulatos with La Yaqui Grande ramped up and operating for the full
year. A more significant improvement in costs is expected in 2024
with a further decrease in costs at Mulatos, with La Yaqui Grande
providing the majority of production, and lower costs at Island
Gold, reflecting the mining and processing of higher grades. Total
cash cost and AISC are expected to decrease 22% and 18%,
respectively, between 2022 and 2024. Both are expected to decrease
further following the completion of the Phase III expansion at
Island Gold in 2025.
A chart accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/c1757217-445c-4cde-847c-8aecafe86687
Capital spending at existing operations (excluding Lynn Lake and
other development projects) is expected to decrease 23% in 2023,
primarily driven by lower capital at Mulatos following the
completion of construction at La Yaqui Grande in 2022. Capital
spending at existing operations is expected to remain at similar
levels in 2024 and decrease substantially following the completion
of the Phase III expansion at Island Gold in 2025. Sustaining
capital spending at existing operations is expected to remain
relatively stable over the next several years at approximately $90
to $110 million per year.
A chart accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/81e26392-a0b5-4f2c-bc6c-453074c60155
Young-Davidson
Young-Davidson |
|
Q3 YTD2021 |
Q4 2021 |
2021A |
2021 RevisedGuidance
(3) |
2022 Guidance |
Gold production |
000 oz |
143 |
52 |
195 |
190 – 205 |
185 – 200 |
|
|
|
|
|
|
|
Total cash
costs(1) |
$/oz |
$873 |
- |
- |
~$850 |
$850-900 |
Mine-site
AISC(1),(2) |
$/oz |
$1,093 |
- |
- |
~$1,060 |
$1,125-1,175 |
|
|
|
|
|
|
|
Tonnes of ore processed |
tpd |
7,912 |
7,861 |
7,899 |
7,500-8,000 |
8,000 |
Grade processed |
g/t Au |
2.25 |
2.47 |
2.31 |
2.20-2.65 |
2.15-2.35 |
Average recovery rate |
% |
92% |
91% |
91% |
90-92% |
90-92% |
|
|
|
|
|
|
|
Sustaining
capital(1) |
$ millions |
$31 |
- |
- |
$40-45 |
$50-55 |
Growth
capital(1) |
$ millions |
$29 |
- |
- |
$25-30 |
$5-10 |
Total sustaining & growth
capital(1)(ex.
exploration) |
$ millions |
$60 |
- |
- |
$65-75 |
$55-65 |
|
|
|
|
|
|
|
Capitalized
exploration(1) |
$ millions |
$4 |
- |
- |
$7 |
$4 |
(1) Refer to the "Non-GAAP Measures and Additional
GAAP" disclosure at the end of this press release and the Q3 2021
MD&A for a description and calculation of these
measures.(2) 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.(3) 2021
cost guidance was revised on October 27, 2021. Production guidance
was unchanged
Gold production at Young-Davidson in 2022 is expected to be
consistent with 2021, reflecting similar grades and mining and
processing rates. Following the completion of the lower mine
expansion in July 2020, underground mining rates increased to
average a record 7,889 tpd in 2021, including a record 8,128 tpd in
the second half of 2021. Mining and processing rates are expected
to average design rates of 8,000 tpd going forward.
Grades mined and processed are expected to range between 2.15
and 2.35 grams per tonne of gold (“g/t Au”) in 2022 and remain at
similar levels through 2024. Grades mined are expected to increase
thereafter, as YD West becomes more of a significant contributor to
production.
Total cash costs and mine-site AISC are expected to increase
from 2021, primarily reflecting industry-wide cost inflation,
partially offset by operational improvements. Costs are expected to
remain at similar levels over the next three years.
Capital spending in 2022 (excluding exploration) is expected to
range between $55 and $65 million, a decrease from 2021 with
construction of the new life of mine tailings facility (“TIA 1”)
completed in the fourth quarter of 2021. Capital spending is
expected to remain at similar levels in 2023 and decrease slightly
in 2024.
Young-Davidson is expected to generate record mine-site free
cash flow of approximately $100 million in 2021, driven by higher
production, lower costs and lower capital with the completion of
the lower mine expansion. At a $1,750 per ounce gold price, the
operation is expected to generate similar mine-site free cash flow
in 2022 and over the long term.
Island Gold
Island Gold |
|
Q3 YTD2021 |
Q4 2021 |
2021A |
2021 RevisedGuidance
(3) |
2022 Guidance |
Gold production |
000 oz |
103 |
38 |
141 |
130 – 145 |
125 – 135 |
|
|
|
|
|
|
|
Total cash
costs(1) |
$/oz |
$512 |
- |
- |
~$525 |
$550-600 |
Mine-site
AISC(1),(2) |
$/oz |
$860 |
- |
- |
~$865 |
$850-900 |
|
|
|
|
|
|
|
Tonnes of ore processed |
tpd |
1,174 |
1,247 |
1,193 |
1,200 |
1,200 |
Grade processed |
g/t Au |
10.29 |
10.51 |
10.35 |
9.0-11.0 |
8.8-10.8 |
Average recovery rate |
% |
96% |
96% |
96% |
96-97% |
96-97% |
|
|
|
|
|
|
|
Sustaining
capital(1) |
$ millions |
$36 |
- |
- |
$40-45 |
$35-40 |
Growth
capital(1)
& capital advances |
$ millions |
$43 |
- |
- |
$80-85 |
$145-160 |
Total sustaining & growth
capital(1)
(ex. exploration) |
$ millions |
$79 |
- |
- |
$120-130 |
$180-200 |
|
|
|
|
|
|
|
Capitalized
exploration(1) |
$ millions |
$14 |
- |
- |
$20 |
$20 |
(1) Refer to the "Non-GAAP Measures and Additional
GAAP" disclosure at the end of this press release and the Q3 2021
MD&A for a description and calculation of these
measures.(2) 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.(3) 2021
cost guidance was revised on October 27, 2021. Production guidance
was unchanged
Gold production at Island Gold is expected to decrease slightly
in 2022, reflecting lower planned grades which is consistent with
the Mineral Reserve grade and the Phase III expansion study
released in 2020 (“Phase III Study”). Mining and processing rates
are expected to be consistent with 2021 and average 1,200 tpd. As
outlined in the Phase III Study, grades mined are expected to
decrease below the average Mineral Reserve grade in 2023 followed
by an increase above the average Mineral Reserve grade in 2024
driving production higher.
Total cash costs and mine-site AISC are expected to increase in
2022, reflecting slightly lower grades and industry-wide cost
inflation. Costs are also higher than outlined in the Phase III
Study, reflecting inflation and the stronger Canadian dollar. The
study assumed a USD/CAD foreign exchange rate of $0.75:1 compared
to a rate of $0.80:1 assumed in the 2022 budget. Costs are expected
to increase slightly in 2023, followed by a decrease in 2024,
reflecting higher grades. A more substantial decrease is expected
following the completion of the Phase III expansion in 2025.
Capital spending at Island Gold (excluding exploration) is
expected to be between $180 and $200 million in 2022. As outlined
in the study, construction activities and capital spending on the
Phase III expansion are expected to increase in 2022. Permitting
for the expansion is expected to be completed during the first half
of the year. Shaft site surface works, construction of the hoisting
plant and preparation of the shaft sink will be a major focus with
the pre-sink of the shaft expected to start mid-2022. Consistent
with the study, capital spending is expected to decrease slightly
in 2023 and 2024 before decreasing closer to sustaining levels
following the completion of the expansion in 2025.
Mulatos District
Mulatos |
|
Q3 YTD2021 |
Q4 2021 |
2021A |
2021 RevisedGuidance
(3) |
2022Guidance |
H1 2022 |
H2 2022 |
Gold production |
000 oz |
98 |
23 |
121 |
135 – 145 |
130 – 145 |
45 – 50 |
85 – 95 |
|
|
|
|
|
|
|
|
|
Total cash
costs(1) |
$/oz |
$913 |
- |
- |
~$1,000 |
$1,225-1,275 |
~$1,500 |
~$1,125 |
Mine-site
AISC(1),(2) |
$/oz |
$1,097 |
- |
- |
~$1,235 |
$1,325-1,375 |
~$1,675 |
~$1,175 |
|
|
|
|
|
|
|
|
|
Tonnes of ore stacked - Mulatos crusher |
tpd |
19,500 |
19,100 |
19,400 |
21,000 |
17,000 |
|
|
Tonnes of ore stacked - La Yaqui Grande |
tpd |
|
|
|
|
|
- |
10,000 |
Grades stacked |
g/t Au |
1.04 |
0.85 |
0.99 |
0.8-1.2 |
0.7-1.0 |
|
|
Combined recovery ratio |
% |
55% |
48% |
54% |
60% |
65-70% |
|
|
|
|
|
|
|
|
|
|
|
Sustaining
capital(1) |
$ millions |
$15 |
- |
- |
$30-35 |
$5-10 |
|
|
Growth
capital(1)
& capital advances |
$ millions |
$79 |
- |
- |
$95-100 |
$50-55 |
|
|
Total sustaining & growth
capital(1)
(ex. exploration) |
$ millions |
$93 |
- |
- |
$125-135 |
$55-65 |
|
|
|
|
|
|
|
|
|
|
|
Capitalized
exploration(1) |
$ millions |
$1 |
- |
- |
- |
- |
|
|
(1) Refer to the "Non-GAAP Measures and Additional
GAAP" disclosure at the end of this press release and the Q3 2021
MD&A for a description and calculation of these
measures.(2) 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.(3) 2021
guidance was revised on October 27, 2021.
Combined gold production from the Mulatos District (including La
Yaqui Grande) is expected to be between 130,000 and 145,000 ounces
in 2022. This represents a 13% increase from 2021 (based on the
mid-point of guidance) as the second half of 2021 was impacted by
longer than anticipated recovery times from stockpiled ore stacked
in the latter part of the year. With the Cerro Pelon deposit
depleted during the fourth quarter of 2021, stockpiled ore will be
a more significant contributor to gold production during the first
half of 2022.
Given the longer leach cycle and additional reagents required to
process this ore, as well as lower grades from the El Salto portion
of the Mulatos pit early in the year, gold production is expected
to be lower during the first half of 2022 at significantly higher
costs. With the start of production from La Yaqui Grande in the
third quarter and increasing grades from El Salto, approximately
65% of 2022 production is expected in the second half of the year
at substantially lower costs.
Grades stacked are expected to range between 0.7 and 1.0 g/t Au
and trend higher through the year, reflecting the contribution of
higher grade La Yaqui Grande ore in the second half of the
year.
Total cash costs and mine-site AISC are expected to be well
above annual guidance during the first half of 2022 and trend
significantly lower during the second half of the year, driven by
low-cost production growth from La Yaqui Grande.
Gold production is expected to increase to a range of 160,000 to
175,000 ounces in 2023 with costs decreasing significantly from
2022, driven by a full year of production from La Yaqui Grande. La
Yaqui Grande is expected to be the primary source of production in
2024 with combined production in the range of 135,000 to 145,000
ounces and resulting in a further improvement in costs.
Capital spending is expected to total $55 to $65 million in 2022
with the majority being growth capital to complete construction of
La Yaqui Grande. Development of La Yaqui Grande remains on track to
achieve commercial production in the third quarter of 2022. Capital
spending is expected to decrease closer to sustaining capital
levels in 2023 and 2024.
2022 Global Operating and Development Capital
Budget
|
2022 Guidance |
2021 Guidance |
|
Sustaining
Capital(1) |
Growth
Capital(1) |
Total |
Total |
Operating Mines ($ millions) |
|
|
|
|
Young-Davidson |
$50-55 |
$5-10 |
$55-65 |
$65-75 |
Island Gold |
$35-40 |
$145-160 |
$180-200 |
$120-130 |
Mulatos |
$5-10 |
$50-55 |
$55-65 |
$125-135 |
Total – Operating Mines |
$90-105 |
$200-225 |
$290-330 |
$310-340 |
Development Projects ($ millions) |
|
|
|
|
Lynn Lake |
- |
$11 |
$11 |
$6 |
Other |
- |
$4 |
$4 |
$4 |
Total – Development Projects |
- |
$15 |
$15 |
$10 |
Capitalized
Exploration(1) ($
millions) |
|
|
|
|
Young-Davidson |
- |
$4 |
$4 |
$7 |
Island Gold |
- |
$20 |
$20 |
$20 |
Mulatos |
- |
|
|
|
Lynn Lake |
- |
$3 |
$3 |
$7 |
Total – Capitalized
Exploration(1) |
- |
$27 |
$27 |
$34 |
Total Consolidated Budget |
$90-105 |
$242-267 |
$332-372 |
$354-384 |
(1) Refer to the "Non-GAAP Measures and Additional
GAAP" disclosure at the end of this press release for a description
and calculation of these measures.
2022 Capital Budget for Development
ProjectsCapital spending on the Company’s development
projects, excluding exploration, is expected to total $15 million.
This includes $11 million for Lynn Lake focused on advanced stage
engineering and completing the permitting process. The majority of
the remainder is focused on community engagement and permitting
activities at Esperanza. An additional $27 million has been
budgeted for capitalized exploration including $20 million for
Island Gold and the remainder split between Young-Davidson, Mulatos
and Lynn Lake.
Lynn Lake Development BudgetThe total capital budget for Lynn
Lake in 2022 is $14 million, including $11 million for development
activities and $3 million for exploration. Development activities
will be focused on environmental work in support of permitting,
detailed engineering and other site access upgrades. The approval
of the Environmental Impact Statement (“EIS”) for the project is
expected in the second half of 2022 following which the Company
expects to make a construction decision. Assuming a positive
construction decision, development of Lynn Lake is expected to take
approximately two years.
Other ProjectsTotal capital of $4 million has been budgeted
across the Company’s other development projects with the majority
at Esperanza. Additionally, holding costs for the Turkish assets
and legal fees associated with the investment treaty claim, are
expected to total approximately $3 million which will be expensed
as incurred.
2022 Exploration BudgetThe global exploration
budget for 2022 is $40 million. Island Gold continues to account
for the largest portion of the budget at $22 million, followed by
$7 million at Mulatos, $5 million at Young-Davidson and $3 million
at Lynn Lake. Approximately 70% of the 2022 budget will be
capitalized.
Island GoldA total of $22 million has been budgeted for surface
and underground exploration at Island Gold in 2022, down slightly
from 2021. The exploration focus remains on defining additional
near mine Mineral Resources across the two-kilometre long Island
Gold Main Zone (Island Main, West, and East), as well as advancing
and evaluating several regional targets.
The 2021 exploration program was successful in extending
high-grade mineralization across the Island Gold Main Zone,
particularly in Island East. This included the best hole drilled to
date at Island Gold (71.21 g/t Au (39.24 g/t cut) over 21.33 m true
width), extending high-grade mineralization down-plunge from
existing Mineral Resources. High-grade mineralization was also
intersected in a 300 m step out hole, the deepest drilled to date,
confirming that high-grade mineralization extends well beyond
Mineral Resources to a depth of more than 1,700 m. These results
highlight the significant potential for further growth in Mineral
Reserves and Resources.
The 2022 surface and underground exploration drilling program
will continue to test the lateral and down-plunge extensions of
Island East as well as an increased focus on Island Main and West.
This includes 30,000 metres (“m”) of surface directional drilling,
30,000 m of underground exploration drilling, and 480 m of
underground exploration drift development to extend drill platforms
on the 620, 840, and 980-levels.
A regional exploration program including 6,500 m of drilling is
also budgeted in 2022. The focus will be on evaluating and
advancing exploration targets outside the Island Gold Deposit on
the 14,929-hectare Island Gold property.
MulatosA total of $7 million has been budgeted at Mulatos for
exploration in 2022. This includes 17,000 m of drilling focused on
regional targets including Carricito, and Halcon, Halcon West, and
Refugio.
Further work including drilling and mapping is planned at Los
Venados to follow up on low sulphidation mineralization identified
in 2021.
Several regional exploration targets have been identified from a
property-wide VTEM geophysical survey that was completed in late
2018. A focus of the 2021 regional exploration program will be to
further evaluate these targets through systematic mapping,
sampling, and ground geophysics with the objective of defining
drill targets.
Young-DavidsonA total $5 million has been budgeted for
exploration at Young-Davidson in 2022. The focus will be following
up on the success in 2020 and 2021 programs which extended gold
mineralization below existing Mineral Reserves and Resources and
intersected higher grades in the hanging wall and footwall of the
deposit. The drilling completed in 2021 was the first significant
exploration program at Young-Davidson since 2011 and highlights the
significant potential below the existing deposit which remains open
at depth and to the west.
The 2022 program includes 21,600 m of underground exploration
drilling, and 500 m of underground exploration development to
extend drill platforms on the 9220, 9095, and 9025-levels. The
focus of the underground exploration drilling program will be to
expand Mineral Resources in six target areas that have been
identified within proximity to existing underground
infrastructure.
In addition, 3,500 m of surface drilling is planned to test
near-surface targets across the 5,600 hectare Young-Davidson
Property.
Lynn LakeA total of $3 million has been budgeted
for exploration at the Lynn Lake project in 2022. This includes
5,000 m of drilling focused on continuing to test exploration
targets in proximity to the Gordon and MacLellan deposits with the
goal of adding to Mineral Resources. The exploration program will
also further evaluate the Burnt Timber and Linkwood deposits,
including defining and testing exploration targets with the
objective of expanding Mineral Resources at both deposits. The
Burnt Timber and Linkwood deposits contained Inferred Mineral
Resources totaling 1.6 million ounces grading 1.1 g/t Au (44
million tonnes) as of December 31, 2020 and represent potential
upside to the 2017 Feasibility Study.
The other key area of focus for 2022 is the continued evaluation
and advancement of the new greenfields discovery, Tulune (see Press
Release December 16, 2021), and a pipeline of prospective
exploration targets within the 58,000-hectare Lynn Lake
Property.
Assumptions and Sensitivities
Assumptions & Expenses |
|
2022 |
Gold price |
$/oz |
$1,750 |
Canadian dollar |
USD/CAD |
$0.80:1 |
Mexican peso |
MXN/USD |
20.0:1 |
Amortization |
$/oz |
$425 |
General & Administrative(1) |
$ millions |
$25 |
(1) Excludes stock-based compensation.
The 2022 to 2024 production forecast, operating cost and capital
estimates are based on a gold price assumption of $1,750 per ounce,
a USD/CAD foreign exchange rate of $0.80:1 and MXN/USD foreign
exchange rate of 20.0:1. The three year forecast assumes no
significant operational interruptions due to COVID-19. Cost
assumptions for 2023 and 2024 are based on 2022 input costs and
have not been increased to reflect potential inflation in those
years. These estimates may be updated in the future to reflect
inflation beyond what is currently forecast for 2022. Capital
expenditures forecasts for 2023 and 2024 are exclusive of
construction capital for the Lynn Lake project, as that project
remains subject to permitting and a construction decision.
Amortization expense in 2022 is expected to total approximately
$425 per ounce, an increase from 2021, reflecting higher
amortization charges at Mulatos. General and administrative
expenses in 2022 are expected to total $25 million (excluding
stock-based compensation), consistent with 2021 spending and an
increase from initial 2021 guidance, in part reflecting the
stronger Canadian dollar.
Sensitivities |
2022 |
Operating Sites ForeignCurrency Exposure |
Change |
Free Cash FlowSensitivity
(1) |
Gold price |
$1,750 |
- |
$100 |
~$37-47 million |
USD/CAD |
$0.80:1 |
95% |
$0.05 |
~$10-25 million |
MXN/USD |
20.0:1 |
40% |
1.00 |
~$1-4 million |
(1) Free cash flow sensitivities include the impact
of foreign exchange and short term gold hedging arrangements noted
below.
Current foreign exchange and gold hedging
commitmentsThe Company has entered into the following
foreign exchange and short-term hedging arrangements to date:
- Canadian
dollar: approximately 65% of Canadian dollar-denominated
operating and capital costs for 2022 have been hedged, ensuring a
maximum USD/CAD foreign exchange rate of $0.80:1 and allowing the
Company to participate in weakness in the USD/CAD up to a rate of
$0.77:1.
- Mexican
peso: approximately 65% of Mexican peso-denominated
operating and capital costs in 2022 have been hedged, ensuring a
minimum MXN/USD foreign exchange rate of 20.9:1 and allowing the
Company to participate in weakness in the MXN/USD up to a rate of
23.7:1.
- Gold collar
contracts: The Company also periodically enters into short
term gold hedging arrangements. Currently, the Company has hedged
110,700 ounces in 2022, ensuring an average minimum gold price of
$1,762 per ounce and participation up to an average gold price of
$2,039 per ounce. This represents approximately 24% of 2022
production (based on mid-point of guidance), slightly higher than
in previous years as additional hedges were added to ensure the
profitability of Mulatos production during a temporary higher cost
period until the operation transitions to lower cost production
from La Yaqui Grande.
Qualified PersonsChris Bostwick, Alamos’ Senior
Vice President, Technical Services, who is a qualified person
within the meaning of National Instrument 43-101 Standards of
Disclosure for Mineral Projects, has reviewed and approved the
scientific and technical information contained in this press
release.
About AlamosAlamos 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 NoteThis news
release contains or incorporates by reference “forward-looking
statements” and “forward-looking information” as defined under
applicable Canadian and U.S. securities laws. All statements, 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 and are generally,
but not always, identified by the use of forward-looking
terminology such as "expect", “is expected”, “assume”, “inferred”,
“potential”, “outlook”, “on track”, “continue”, “ongoing”, "will",
“believe”, “anticipate”, "intend", "estimate", "forecast",
"budget", “target”, “plan” or variations of such words and phrases
and similar expressions or statements that certain actions, events
or results “may", “could”, “would”, "might" or "will" be taken,
occur or be achieved or the negative connotation of such terms.
Forward-looking statements contained in this news release are based
on expectations, estimates and projections as of the date of this
news release.
Forward-looking statements in this news release
include, but may not be limited to, information as to strategy,
plans, expectations or future financial or operating performance,
such as expectations and guidance regarding: costs; budgets;
increases and decreases in capital spending; production growth;
returns to stakeholders; timing of completion of the La Yaqui
Grande project and commencement of production and the effects on
aggregate production and costs; the effects of the Phase III
expansion at Island Gold and timing of its progress and completion;
timing of completion of permitting approvals and construction
decisions at Lynn Lake and potential growth in production resulting
from the Lynn Lake development project; potential contribution to
production from Young Davidson West; anticipated growth in high
grade Mineral Reserves and Resources; mining processing and rates;
mined and processed gold grades and weights; holding costs for
Turkish assets and legal fees associated with the investment treaty
claim (described below); as well as any other statements related to
the Company's production forecasts and plans, expected sustaining
costs, expected improvements in cash flows and margins,
expectations of changes in capital expenditures, expansion plans,
project timelines, and expected sustainable productivity increases,
expected increases in mining activities and corresponding cost
efficiencies, expected drilling targets, forecasted cash shortfalls
and the Company's ability to fund them, cost estimates, projected
exploration results, projected development and permitting
timelines, expected production rates and use of the stockpile
inventory, expected recoveries, sufficiency of working capital for
future commitments, Mineral Reserve and Mineral Resource estimates,
and other statements that express management's expectations or
estimates of future performance.
The Company cautions that forward-looking
statements are necessarily based upon a number of factors and
assumptions that, while considered reasonable by management at the
time of making such statements, are inherently subject to
significant business, economic, technical, 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, and undue reliance
should not be placed on such statements and information.
Such factors and assumptions underlying the
forward-looking statements in this news release, include, but are
not limited to: changes to current estimates of Mineral Reserves
and Resources; changes to production estimates (which assume
accuracy of projected ore grade, mining rates, recovery timing and
recovery rate estimates and may be impacted by unscheduled
maintenance, weather issues, labour and contractor availability and
other operating or technical difficulties); operations may be
exposed to new diseases, epidemics and pandemics, including the
effects and potential effects of the global COVID-19 widespread
pandemic and its impact on the broader market and the trading price
of the Company’s shares; provincial, state and federal orders or
mandates (including with respect to mining operations generally or
auxiliary businesses or services required for the Company’s
operations) in Canada, Mexico, the United States and Turkey; the
duration of regulatory responses to the COVID-19 pandemic;
government 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 doré bars; 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, U.S. dollar, Mexican peso and Turkish Lira); the
impact of inflation; changes in the Company’s credit rating; any
decision to declare a dividend; employee and community relations;
labour and contractor availability (and being able to secure the
same on favourable terms); litigation and administrative
proceedings (including but not limited to the investment treaty
claim announced on April 20, 2021 against the Republic of Turkey by
the Company’s wholly-owned Netherlands subsidiaries, Alamos Gold
Holdings Coöperatief U.A. and Alamos Gold Holdings B.V.);
disruptions affecting operations; availability of and increased
costs associated with mining inputs and labour; expansion delays
with the Phase III expansion project at the Island Gold mine;
construction delays at the La Yaqui Grande project; delays in
permitting, construction decisions and any development of the Lynn
Lake development project; inherent risks and hazards associated
with mining and mineral processing including environmental hazards,
industrial accidents, unusual or unexpected formations, pressures
and cave-ins; 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, contests over title to
properties; expropriation or nationalization of property; political
or economic developments in Canada, Mexico, the United States,
Turkey and other jurisdictions in which the Company may carry on
business in the future; increased costs and risks related to the
potential impact of climate change; changes in national and local
government legislation, controls or regulations (including tax and
employment legislation) in jurisdictions in which the Company
does or may carry on business in the future; the costs and timing
of construction and development of new deposits; risk of loss due
to sabotage, protests and other civil disturbances; disruptions in
the maintenance or provision of required infrastructure and
information technology systems, 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. The litigation against the Republic of
Turkey, described above, results from the actions of the Turkish
government in respect of the Company’s projects in the Republic of
Turkey. Such litigation is a mitigation effort and may not be
effective or successful. If unsuccessful, the Company’s projects in
Turkey may be subject to resource nationalism and further
expropriation; the Company may lose any remaining value of its
assets and gold mining projects in Turkey and its ability to
operate in Turkey. Even if successful, there is no certainty as to
the quantum of any damages award or recovery of all, or any, legal
costs. Any resumption of activities in Turkey, or even retaining
control of its assets and gold mining projects in Turkey can only
result from agreement with the Turkish government. The investment
treaty claim described above may have an impact on foreign direct
investment in the Republic of Turkey which may result in changes to
the Turkish economy, including but not limited to high rates of
inflation and fluctuation in the Turkish Lira which may also affect
the Company’s relationship with the Turkish government, the
Company’s ability to effectively operate in Turkey, and which may
have a negative effect on overall anticipated project values.
For a more detailed discussion of such risks and
other factors that may affect the Company's ability to achieve the
expectations set forth in the forward-looking statements contained
in this news release, see the Company’s latest 40-F/Annual
Information Form and Management’s Discussion and Analysis, each
under the heading “Risk Factors” available on the SEDAR website at
www.sedar.com or on EDGAR at www.sec.gov. The foregoing should be
reviewed in conjunction with the information and risk factors and
assumptions found in this news release.
The Company disclaims any intention or
obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise,
except as required by applicable law.
Cautionary Note to U.S.
InvestorsAll resource and reserve estimates included in
this news release or documents referenced in it have been prepared
in accordance with Canadian 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.
Investors are cautioned not to assume that all
or any part of mineral deposits in these categories will ever be
converted into 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
Inferred Mineral Resources exist or is economically or legally
mineable. Disclosure of “contained ounces” in a resource is
permitted disclosure under Canadian regulations.
Cautionary non-GAAP Measures and
Additional GAAP MeasuresNote that for purposes of this
section, GAAP refers to IFRS. The Company believes that investors
use certain non-GAAP and additional GAAP measures as indicators to
assess gold mining companies. They are intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared with GAAP.
“Cash flow from operating activities before
changes in non-cash working capital” is a non-GAAP performance
measure that could provide an indication of the Company’s ability
to generate cash flows from operations, and is calculated by adding
back the change in non-cash working capital to “Cash provided by
(used in) operating activities” as presented on the Company’s
consolidated statements of cash flows. “Free cash flow” is a
non-GAAP performance measure that is calculated as cash flows from
operations net of cash flows invested in mineral property, plant
and equipment and exploration and evaluation assets as presented on
the Company’s consolidated statements of cash flows and that would
provide an indication of the Company’s ability to generate cash
flows from its mineral projects. “Mine site free cash flow” is a
non-GAAP measure which includes cash flow from operating activities
at, less capital expenditures at each mine site. Return on Equity
is defined as Earnings from Continuing Operations divided by the
average Total Equity for the current and previous year. “Mining
cost per tonne of ore” and “Cost per tonne of ore” are non-GAAP
performance measures that could provide an indication of the mining
and processing efficiency and effectiveness of the mine. These
measures are calculated by dividing the relevant mining and
processing costs and total costs by the tonnes of ore processed in
the period. “Cost per tonne of ore” is usually affected by
operating efficiencies and waste-to-ore ratios in the period.
“Total cash costs per ounce”, “all-in sustaining costs per ounce”,
and “mine-site all-in sustaining costs” as used in this analysis
are non-GAAP terms typically used by gold mining companies to
assess the level of gross margin available to the Company by
subtracting these costs from the unit price realized during the
period. These non-GAAP terms are also used to assess the ability of
a mining company to generate cash flow from operations. There may
be some variation in the method of computation of these metrics as
determined by the Company compared with other mining companies. In
this context, “total cash costs” reflects mining and processing
costs allocated from in-process and doré inventory associated and
associated royalties with ounces of gold sold in the period. Total
cash costs per ounce are exclusive of exploration costs. “All-in
sustaining costs per ounce” include total cash costs, exploration,
corporate and administrative, share based compensation and
sustaining capital costs. “Mine-site all-in sustaining costs”
include total cash costs, exploration, and sustaining capital costs
for the mine-site, but exclude an allocation of corporate and
administrative and share based compensation.
Additional GAAP measures that are presented on
the face of the Company’s consolidated statements of comprehensive
income and are not meant to be a substitute for other subtotals or
totals presented in accordance with IFRS, but rather should be
evaluated in conjunction with such IFRS measures. This includes
“Earnings from operations”, which is intended to provide an
indication of the Company’s operating performance, and represents
the amount of earnings before net finance income/expense, foreign
exchange gain/loss, other income/loss, and income tax expense.
Non-GAAP and additional GAAP measures do not have a standardized
meaning prescribed under IFRS and therefore may not be comparable
to similar measures presented by other companies. A reconciliation
of historical non-GAAP and additional GAAP measures are available
in the Company’s latest Management’s Discussion and Analysis
available online on the SEDAR website at www.sedar.com or on EDGAR
at www.sec.gov and at www.alamosgold.com.
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