Alamos Gold, Inc. Q3 FY2026 earnings call

• Production & Efficiency: Island Gold District set quarterly records for underground mining rates (avg. 1,790 tons/day) and Maginot Mill throughput (avg. 10,300 tons/day). Consolidated production met guidance at 119,000 ounces.
• Growth Projects Status: Construction at Lynn Lake is on schedule for first production in H1 2029. PDA underground development has been slower than planned due to contractor performance and ground conditions, impacting H2 2027 ramp-up but remaining within the $165 million budget.
• Island Gold Expansion Delays: Encountering a dike during excavation for ore/waste handling bins required additional ground support, delaying shaft commissioning by approximately one quarter to mid-2027. Total Phase III Plus capital costs are now expected to be 5% higher than the $835 million budget.
• Young-Davidson Recovery: Mining rates remain constrained post-June seismic event at ~5,135 tons/day. Operations are processing low-grade stockpiles (~0.3-0.4 g/t) to supplement mill feed. Gradual rate increases are targeted for 2027-2028.
• Financial Position: Strong net cash position of $397 million. Received $160 million anniversary payment from Turkish asset sale. Repurchased $22 million in dividends/buybacks this quarter and eliminated legacy Argonaut hedges.

The company reported total revenue of $510 million from the sale of 118,400 ounces of gold at an average realized price of $4,258 per ounce. Consolidated production was 119,000 ounces. The Island Gold District was the primary contributor with 68,700 ounces (approx. 58% of consolidated production), generating strong mine-site free cash flow of $72 million. Young-Davidson produced 22,700 ounces (approx. 19%), yielding $30 million in mine-site free cash flow despite lower rates following a seismic event. The Mulatos District contributed 27,600 ounces (approx. 23%), including 23,400 ounces from La Yaqui Grande, and generated $39 million in mine-site free cash flow while funding the PDA project construction. All sites generated positive free cash flow for a total of $76 million.

• Consolidated Production: Expects a 26% increase in Q4 production driven by Island Gold, putting the company on track to meet revised annual guidance.
• Cost Guidance: All-in sustaining costs (AISC) increased in Q3 due to lower production and timing of capital spending; however, management expects costs to decrease significantly in Q4 as Island Gold rates and grades improve, positioning the firm to achieve its four-year consolidated cost guidance.
• Capital Spending: Expects Q4 capital spending to increase in line with guidance to support ramp-up activities at Lynn Lake and PDA.
• Long-Term Outlook: On track to nearly double annual production to approx. 1 million ounces by 2030 at substantially lower costs, driven by Island Gold expansion (2027/2028) and Lynn Lake (2029).
• PDA Budget: Maintained initial capital estimate of $165 million despite delays, attributing confidence to the majority of costs being tied to processing plant construction rather than development.
• Island Gold CAPEX: Revised upward by 5% over the $835 million budget for Phase III Plus due to inflation and geotechnical work.

• Operational Delays: Geotechnical challenges at Island Gold (dike encounter) delayed shaft commissioning by one quarter and increased capital costs by 5%. Contractor performance issues at PDA have slowed underground development, impacting near-term production ramp-up.
• Seismic Impact: Ongoing rehabilitation and enhanced ground support at Young-Davidson continue to constrain mining rates below historical levels, increasing unit costs temporarily.
• Grade Variability: Higher-than-expected dilution in specific stopes at Island Gold resulted in mined grades slightly below plan in Q3; similar dilution issues affected Young-Davidson.
• Inflationary Pressures: Significant labor inflation is impacting both operations and capital projects, particularly on the Island Gold expansion.

Q: Jefferies analyst asked about the impact of the one-quarter delay in Island Gold’s shaft commissioning on next year's production guidance and potential capex inflation given 45% of growth capital already spent.

A: CFO Greg Fisher explained that the delay results in a shortfall of roughly 400 tons per day in mining rates for the first half of 2027 compared to original plans, though they aim to close this gap early in the year. Regarding costs, while material orders are on budget, significant inflationary pressures are emerging, primarily driven by labor costs which are more profound on capital projects than operations.

Q: Bank of America analyst inquired about Young-Davidson’s grade outlook for Q4 versus 2027, specifically regarding stockpile usage, inventory levels, and the gradual nature of the recovery.

A: COO Luc Guimond stated that Q4 underground mining will run at ~5,000 tons/day with grades of 1.7-1.8 g/t, supplemented by ~2,000 tons/day of low-grade stockpile (0.3-0.4 g/t) to reach a mill throughput of ~7,000 tons/day. Approximately 300,000 tons of stockpile remain, offering flexibility to supplement feed into 2027 as underground rates gradually ramp up through 2027-2028.

Q: CIBC analyst sought details on the specific ground conditions causing delays at PDA (fault systems vs. rock quality) and whether the dike encountered at Island Gold was a known structure or if it posed risks to other infrastructure.

A: Guimond clarified that PDA delays were caused by a known fault system between two portals, requiring additional ground support (mesh/shotcrete) and resulting in slower passage through the zone, though conditions have since improved. At Island Gold, the dike was a localized issue at the bin collar; it did not pose broader structural risks but forced a sequence change to prioritize safety and civil work, delaying commissioning by one quarter without affecting long-term stability.

Q: CIBC analyst also questioned the significance of higher-than-expected mining dilution at Island Gold’s high-grade stopes in Q3, asking if this was an anomaly.

A: Guimond noted that while dilution can occur periodically, Island Gold’s historical grade reconciliation has been very positive. The Q3 underperformance was isolated to a couple of specific stopes that fell short of the typical 9-11.5 g/t guidance range, but overall performance remains strong.