Alamos Gold, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• The third quarter was the first with Magino under ownership, resulting in record production of 452,000 ounces of gold.
• Achieved record revenue and cash flow from operations before working capital of $193 million.
• On track to meet full-year production and cost guidance, with marginal decrease expected in Q4 costs.
• Integration of Magino and Island Gold mines is underway, expected to create a large, low-cost, profitable gold mine.
• Exploration successes at Island Gold with high-grade intercepts, and at Magino and Mulatos District with potential for resource expansion.
• PDA development plan outlined with attractive low-cost, high-return underground project extending mine life to 2035.

Segment Performance

• Young-Davidson: Produced 44,200 ounces in Q3. All-in sustaining costs above annual guidance range, but on track for record free cash flow over $100 million. Cash costs per ounce $984, all-in sustaining costs $1,425 per ounce.
• Island Gold: Produced 40,500 ounces in Q3. Grades increased to 14.6 grams per tonne. On track to achieve full-year production and cost guidance. Generated positive mine site free cash flow for second consecutive quarter.
• Magino: Produced 16,800 ounces in Q3. Mill throughput improved from 6,900 tons per day in Q3 to 8,900 tons per day in September. Integration with Island Gold underway. Milling rates expected to increase further in Q4.
• Mulatos District: Produced 50,500 ounces in Q3. Production guidance increased by 15% in September to 185,000-195,000 ounces. PDA project outlined with after-tax net present value near $500 million at $2,500 per ounce gold price.

Guidance

• Full-year production on track, with year-to-date production 421,000 ounces, on track to achieve increased full-year guidance (up 13% in September).
• On track to meet full-year cost guidance, with marginal decrease expected in Q4 costs.
• Phase 3 expansion at Island Gold expected to push annual production close to 700,000 ounces by 2026, reducing all-in sustaining costs to $1,150 per ounce.
• Lynn Lake expected to drive production to 900,000 ounces per year by longer term, reducing all-in sustaining costs below $1,100 per ounce.
• Potential to expand Magino mill to 15,000-20,000 tons per day to support further growth.

Risks

• Impact of gold price fluctuations on revenue and earnings.
• Integration risks associated with combining Magino and Island Gold operations.
• Execution risks related to exploration success and project development timelines and costs.

Q: Maybe my first question is on Magino. Good to hear the mill at Magino was successful in processing some of the lower-grade material coming from Island Gold. My question is, when will you start potentially testing out some of the high-grade material as well?

A: Hi, Cosmos. Luc here. Our intent is obviously we started with the lower-grade feed with the blending process just to validate our assumptions with regards to a blended feed and not impacting any recoveries, which we validated. In this quarter, in Q4, we are actually looking to introduce higher-grade material also. Again, we are not expecting any issues with regards to the blended process, but we are going to validate that from a plant perspective to validate what we have seen from a lab perspective with regards to overall recoveries for the blended ore streams.

Q: And on that as well, you kind of touched on it in terms of 2025. But could you remind us in terms of the timeline for the integration of a single milling operation? I think you talked about 2025 also, potentially early 2025. I am just trying to figure out when this integrated single milling operation is going to happen. And at that point in time, would you just shut down the Island Gold, the smaller Island Gold mill?

A: Yep. Our plans have not changed from what we communicated previously there, Cosmos. At the early 2025, we will be just running the Magino facility. So Island ore as well as Magino ore will feed into the one mill complex in early 2025. Once we start doing that, the intent would be to just actually shut down the Island Gold mill and just put it on care and maintenance basis.

Q: And then in terms of reporting wise, I think I asked this question in the past as well, but I just want to confirm. You are going to start reporting it as a single integrated operation from an accounting perspective and guidance perspective starting in 2025.

A: Yeah, that is correct. We will show it as one integrated operation. So production costs will all be shown as one integrated operation.

Q: Since I have you here as well, Greg, I guess today reported earnings, adjusted earnings were slightly below street consensus. I chalk that up to the fact that this is the quarter where you acquired Argonaut Gold. And you kind of talked about that as well. There were a number of one-time items, what I would consider accounting noise or one-time items. My question is, is this it? Q3, is that it? Or could we expect any other items that we should consider into Q4 that might be related to this transaction?

A: I mean, with respect to the Argonaut acquisition, to associated with that. I mean, you are always going to have the movement on share-based compensation, which we had a significant impact this quarter as the share price moves. But with respect to Argonaut, I think this is what your question focused on, yes, we have accrued the costs associated with that acquisition and do not expect anything moving forward.