Alamos Gold Reports Third Quarter 2023 Results
Production guidance increased 5% following solid quarter and year-to-date performance; on pace for record year operationally and financially
TORONTO, Oct. 25, 2023 (GLOBE NEWSWIRE) -- *Alamos Gold Inc. (TSX:AGI; NYSE:AGI)* (“Alamos” or the “Company”) today reported its financial results for the quarter ended September 30, 2023.“With another strong quarterly performance, we are on pace for a record year both operationally and financially. Production of 135,400 ounces was above our quarterly guidance, putting us on track to set a new record for annual production. Given the strong year-to-date performance, we are raising our full year production guidance by 5% to a range of 515,000 to 530,000 ounces. With total cash costs and all-in sustaining costs below the mid-point of guidance in the quarter and year-to-date, we are also on track to achieve full year cost guidance,” said John A. McCluskey, President and Chief Executive Officer.
“This contributed to another solid quarter financially with $37 million of free cash flow, bringing the year-to-date total to $109 million. This represents a substantial increase from 2022 while investing in our high-return growth projects. At Island Gold, the Phase 3+ Expansion is progressing well with the headframe up and shaft sinking on schedule to begin later this year. The updated Feasibility Study on Lynn Lake outlined another long-life, low-cost project in Canada, with excellent exploration upside. The development plan for PDA is also advancing as the deposit continues to grow through ongoing exploration success. All three projects are key drivers of our ongoing value creation and strong long-term outlook, supporting growing production, declining costs, and increasing profitability,” Mr. McCluskey added.
*Third Quarter 2023*
· Produced 135,400 ounces of gold, exceeding quarterly guidance of 120,000 to 130,000 ounces, reflecting strong performances from the Mulatos District and Island Gold
· The Company is raising its annual production guidance to a range of 515,000 to 530,000 ounces, a 5% increase from original guidance (based on the mid-point), driven by the strong outperformance from the Mulatos District. With year-to-date production of 399,800 ounces, the Company is on pace for record annual production in 2023
· The Mulatos District produced 53,900 ounces in the third quarter and 164,700 ounces year-to-date, nearly double the prior year period reflecting another solid performance from La Yaqui Grande. The higher margin ounces from La Yaqui Grande drove mine-site free cash flow of $30.9 million, bringing the year-to-date total to $114.7 million
· Island Gold produced 36,400 ounces, a 19% increase compared to the second quarter of 2023, reflecting both higher grades and throughput. The Phase 3+ Expansion is progressing well with construction of the headframe largely complete and shaft sinking on track to begin by year end
· Sold 132,633 ounces of gold at an average realized price of $1,932 per ounce, for quarterly revenues of $256.2 million. The average realized gold price was $4 per ounce above the London PM fix
· Total cash costs^1 of $835 per ounce were at the low end of annual guidance and AISC^1 of $1,121 per ounce were below the low end of guidance, driven by La Yaqui Grande and Island Gold and timing of sustaining capital expenditures. The Company remains on track to achieve full year cost guidance with total cash costs and AISC both below the mid-point of guidance year-to-date
· Realized adjusted net earnings^1 of $54.5 million, or $0.14 per share. Adjusted net earnings includes adjustments for net unrealized foreign exchange losses recorded within both deferred taxes and foreign exchange of $11.9 million, and other losses totaling $3.2 million. Reported net earnings were $39.4 million, or $0.10 per share
· Free cash flow^1 of $37.3 million in the third quarter, and $109.4 million year-to-date, a substantial increase from 2022 reflecting the strong operating performance and margin expansion. The Company expects to continue generating significant ongoing free cash flow over the next several years while funding the Phase 3+ Expansion at Island Gold
· Generated cash flow from operating activities of $112.5 million ($133.2 million, or $0.34 per share, before changes in working capital^1)
· Paid a quarterly dividend of $9.9 million, or $0.025 per share (annualized rate of $0.10 per share)
· Cash and cash equivalents increased to $215.9 million, up 14% from the end of the second quarter, and 66% from the start of the year, reflecting strong free cash flow generation. The Company remains debt free
· Completed an updated Feasibility Study on the Lynn Lake project outlining a larger, longer-life, low-cost operation with attractive economics and significant exploration upside. Lynn Lake is expected to produce an average of 176,000 ounces of gold per year at mine-site AISC of $699 per ounce over its initial 10 years
· Provided an exploration update at Mulatos, further expanding high-grade mineralization beyond Mineral Reserves and Resources at Puerto Del Aire ("PDA") and intersecting additional wide intervals of significant gold mineralization at the Capulin regional target. A development plan incorporating the growth in Mineral Reserves at PDA is expected to be completed towards the end of 2023^(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 September 30,**
* *Nine Months Ended September 30,**
* *2023* *2022* *2023* *2022*
*Financial Results (in millions)*
Operating revenues $256.2 $213.6 $768.7 $589.3
Cost of sales ^(1) $158.0 $168.1 $471.0 $455.5
Earnings from operations $82.6 $29.9 $246.2 $49.9
Earnings before income taxes $78.2 $33.9 $242.5 $49.8
Net earnings (loss) $39.4 ($1.4 ) $162.9 ($3.5 )
Adjusted net earnings ^(2) $54.5 $26.9 $159.2 $74.2
Earnings before interest, taxes, depreciation and
amortization ^(2) $126.0 $96.4 $384.8 $251.3
Cash provided by operations before working capital and taxes paid ^(2) $133.2 $96.1 $398.7 $252.3
Cash provided by operating activities $112.5 $74.0 $348.6 $196.2
Capital expenditures (sustaining)^ (2) $27.3 $26.0 $77.6 $68.7
Capital expenditures (growth) ^(2) (3) $41.9 $39.8 $143.7 $141.7
Capital expenditures (capitalized exploration) $6.0 $6.8 $17.9 $18.5
Free cash flow ^(2) $37.3 $1.4 $109.4 ($32.7 )
*Operating Results *
Gold production (ounces) 135,400 123,400 399,800 326,200
Gold sales (ounces) 132,633 122,780 397,253 323,410
*Per Ounce Data*
Average realized gold price $1,932 $1,740 $1,935 $1,822
Average spot gold price (London PM Fix) $1,928 $1,729 $1,931 $1,824
Cost of sales per ounce of gold sold
(includes amortization) ^(1) $1,191 $1,369 $1,186 $1,408
Total cash costs per ounce of gold sold ^(2) $835 $868 $834 $914
All-in sustaining costs per ounce of gold sold ^(2) $1,121 $1,178 $1,136 $1,231
*Share Data*
Earnings (loss) per share, basic and diluted $0.10 $0.00 $0.41 ($0.01 )
Adjusted earnings per share, basic ^(2) $0.14 $0.07 $0.40 $0.19
Weighted average common shares outstanding (basic) (000’s) 396,117 391,794 395,149 391,882
*Financial Position (in millions)*
Cash and cash equivalents ^(4) $215.9 $129.8
^(1) Cost of sales includes mining and processing costs, royalties, and amortization expense.
^(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
^(3) Includes growth capital from operating sites.
^(4) Comparative cash and cash equivalents balance as at December 31, 2022.
*Three Months Ended September 30,**
* *Nine Months Ended September 30,**
* *2023* *2022* *2023* *2022*
*Gold production (ounces) *
Young-Davidson 45,100 49,300 135,300 147,600
Island Gold 36,400 31,400 99,800 93,200
Mulatos District ^(7) 53,900 42,700 164,700 85,400
*Gold sales (ounces)*
Young-Davidson 45,498 49,218 134,744 147,405
Island Gold 35,255 31,342 97,165 91,507
Mulatos District 51,880 42,220 165,344 84,498
*Cost of sales (in millions) *^*(1)*
Young-Davidson $62.4 $63.9 $183.6 $188.3
Island Gold $31.3 $29.0 $89.8 $85.2
Mulatos District $64.3 $75.2 $197.6 $182.0
*Cost of sales per ounce of gold sold (includes amortization) *^*(1)*
Young-Davidson $1,371 $1,298 $1,363 $1,277
Island Gold $888 $925 $924 $931
Mulatos District $1,239 $1,781 $1,195 $2,154
*Total cash costs per ounce of gold sold *^*(2)*
Young-Davidson $939 $870 $945 $858
Island Gold $610 $651 $636 $650
Mulatos District $898 $1,028 $861 $1,298
*Mine-site all-in sustaining costs per ounce of gold sold *^*(2),(3)*
Young-Davidson $1,178 $1,134 $1,207 $1,087
Island Gold $916 $944 $980 $941
Mulatos District $1,045 $1,137 $948 $1,426
*Capital expenditures (sustaining, growth, and capitalized exploration) (in millions)*^*(2)*
Young-Davidson ^(4) $12.3 $15.1 $43.2 $50.9
Island Gold ^(5) $47.5 $40.7 $159.2 $103.4
Mulatos District ^(6) $9.8 $9.9 $22.0 $57.2
Other $5.6 $6.9 $14.8 $17.4
^(1) Cost of sales includes mining and processing costs, royalties, and amortization expense.
^(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
^(3) For the purposes of calculating mine-site all-in sustaining costs, the Company does not include an allocation of corporate and administrative and share based compensation expenses.
^(4) Includes capitalized exploration at Young-Davidson of $1.2 million and $3.8 million for the three and nine months ended September 30, 2023 ($1.2 million and $3.5 million for the three and nine months ended September 30, 2022).
^(5) Includes capitalized exploration at Island Gold of $2.4 million and $7.8 million for the three and nine months ended September 30, 2023 ($4.7 million and $13.9 million for the three and nine months ended September 30, 2022).
^(6) Includes capitalized exploration at Mulatos District of $2.4 million and $6.3 million for the three and nine months ended September 30, 2023 ($0.9 million and $1.1 million for the three and nine months ended September 30, 2022).
^(7) The Mulatos District includes both the Mulatos pit, as well as La Yaqui Grande.
*Environment, Social and Governance Summary Performance *
*Health and Safety*
· Total recordable injury frequency rate^1 ("TRIFR") of 1.84 in the third quarter, an increase from 1.23 in the second quarter of 2023
· Lost time injury frequency rate^1 ("LTIFR") of 0.09, consistent with the second quarter of 2023
· Year-to-date TRIFR of 1.40 and LTIFR of 0.06, a reduction of 19% and nil, respectively, from 2022During the third quarter of 2023, the TRIFR increased with 21 recordable injuries, as compared to 13 in the prior quarter. Unfortunately, a second lost time injury occurred at the Mulatos operation involving the same exploration drilling contractor as the prior quarter. Additional training has been provided to the contractor.
Alamos strives to maintain a safe, healthy working environment for all, with a strong safety culture where everyone is continually reminded of the importance of keeping themselves and their colleagues healthy and injury-free. The Company’s overarching commitment is to have all employees and contractors return Home Safe Every Day.
*Environment*
· Zero significant environmental incidents and zero reportable spills in the third quarter and year-to-date
· Completed site visits at all three operating sites to assess compliance with internal Environmental Standards. Positive improvements were noted at all sites with action plans currently being implemented to meet remaining requirements
The Company is committed to preserving the long-term health and viability of the natural environment that surrounds its operations and projects. This includes investing in new initiatives to reduce our environmental footprint with the goal of minimizing the environmental impacts of our activities and offsetting any impacts that cannot be fully mitigated or rehabilitated.
*Community*
Ongoing donations, medical support and infrastructure investments were provided to local communities, including:
· Construction of a north access road in the Matarachi village, near the Mulatos Mine, to improve vehicle and pedestrian access around the community during the rainy season
· A shared Company-community effort to introduce beekeeping, or apiculture, in Matarachi as a rural development opportunity. This initiative included the provision of training, hives, tools, and protective equipment for all participants. In total 12 apiaries consisting of 60 hives were introduced and involved the participation of nine families, one school and both the Mulatos and La Yaqui Grande mines
· Visual health clinics for Matarachi residents, the third campaign in the last five years, benefiting nearly 300 people with prescription eyewear
· Construction of a columbarium for the township of Dubreuilville
· Supporting various community events in the Algoma district such as the annual Wawa Music Festival, annual Wawa Salmon Derby, the Lady Dunn Health Center Foundation’s High Tea, and several charity golf tournaments
· Contributions to the Young Mining Professionals Scholarship Fund to support students enrolled in mining-related programs at Canadian post-secondary institutions
· Fundraising and participation in the Great Cycle Challenge to support SickKids Hospital by raising funds and awareness towards fighting kids’ cancerThe Company also participated in several local job fairs across Northern Ontario including Kirkland Lake, Wawa, and Thunder Bay to showcase the many employment opportunities available at Island Gold and Young-Davidson. In Wawa, the Island Gold mine organized a mining showcase for local students to highlight the many different careers and jobs available in mining.
The Company believes that excellence in sustainability provides a net benefit to all stakeholders. The Company continues to engage with local communities to understand local challenges and priorities. Ongoing investments in local infrastructure, health care, education, cultural and community programs remain a focus of the Company.
*Governance and Disclosure*
· Completed the Company’s annual response to the CDP (formerly Carbon Disclosure Project) Climate Change Questionnaire
· Published the fourth edition of the Company's annual Women in Mining Newsletter, featuring interviews and stories from women across the Company that have contributed to Alamos’ success
· Advanced preparation of the Company’s 2022 Environmental, Social and Governance (ESG) Report, to be published in Q4 2023
· Hosted Alamos’ second Sustainability Summit in Toronto for health & safety, environmental and community leaders across all operations and projects. The annual Summit is designed to facilitate collaboration, share ideas, and make plans to improve the Company’s Sustainability Performance Management Framework and adoption of the Responsible Gold Mining Principles
The Company maintains the highest standards of corporate governance to ensure that corporate decision-making reflects its values, including the Company’s commitment to sustainable development. During the quarter, the Company continued to advance its implementation of the Responsible Gold Mining Principles, developed by the World Gold Council as a framework that sets clear expectations as to what constitutes responsible gold mining.
^(1) Frequency rate is calculated as incidents per 200,000 hours worked.
*Outlook and Strategy*
*2023 Guidance* *Young-
Davidson* *Island Gold* *Mulatos* *Lynn Lake* *Total*
*Gold production *(000’s ounces)
*Revised guidance* *515 - 530*
*Original guidance* 185 - 200 120 - 135 175 - 185 *480 - 520*
*Cost of sales, including amortization* (in millions)^(3) *$**625*
*Cost of sales, including amortization * ($ per ounce)^(3) *$**1,250*
*Total cash costs *($ per ounce)^(1) $900 - $950 $600 - $650 $900 - $950 — *$825- $875*
*All-in sustaining costs* ($ per ounce)^(1) *$1,125 - $1,175*
*Mine-site all-in sustaining costs *($ per ounce)^(1)(2) $1,175 - $1,225 $950 - $1,000 $950 - $1,000 —
*Capital expenditures * (in millions)
Sustaining capital^(1) $50 - $55 $45 - $50 $10 — *$105 - $115*
Growth capital^(1) $5 - $10 $165 - $185 $5 - $10 $12 *$187 - $217*
* Total Sustaining and Growth Capital*^*(1)* *$55 - $65* *$210 - $235* *$15 - $20* *$**12* *$292 - $332*
Capitalized exploration^(1) $5 $11 $4 $5 *$**25*
*Total capital expenditures and capitalized exploration*^*(1)* *$60 - $70* *$221 - $246* *$19 - $24* *$**17* *$317 - $357*
^(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) 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) 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.
The Company’s objective is to operate a sustainable business model that supports growing returns to all stakeholders over the long-term, through growing production, expanding margins, and increasing profitability. This includes a balanced approach to capital allocation focused on generating strong ongoing free cash flow while re-investing in high-return internal growth opportunities and supporting higher returns to shareholders.
With another strong quarterly performance, the Company continues to successfully execute on this strategy on all fronts. Production of 135,400 ounces exceeded third quarter guidance, while costs remained near the low end of annual guidance. This was driven by a solid quarter from Island Gold and another exceptional quarter from La Yaqui Grande.
Given the strong year-to-date performance, full year production guidance has been increased to a range of 515,000 to 530,000 ounces. This marks a 5% increase from original 2023 guidance (based on the mid-point) driven by the solid outperformance from the Mulatos District. This also represents a 13% increase from 2022, with the Company on pace to establish a new record for annual production. The Company also remains well positioned to achieve full year cost guidance with total cash costs and AISC both below the mid-point of annual guidance year-to-date.
Fourth quarter production is expected to be between 115,000 and 130,000 ounces with AISC expected to be slightly above the top end of annual guidance, reflecting higher sustaining capital and lower grades mined at La Yaqui Grande. Full year costs and capital are expected to be in line with guidance.
Financially, it was another solid quarter with free cash flow of $37.3 million bringing the year-to-date total to $109.4 million. As part of a balanced approach to growth, the Company continues to generate solid free cash flow while advancing its growth initiatives including the Phase 3+ Expansion at Island Gold, and the Lynn Lake and PDA projects. These are key elements of the Company's strong long-term outlook, which are expected to support growing production, declining costs, and further free cash flow growth in the years ahead.
The Phase 3+ Expansion at Island Gold is progressing well with construction of the hoist house complete, and the headframe nearing completion, putting the start of shaft sinking on track to begin towards the end of this year. In August, an updated Feasibility Study was released on the Lynn Lake project, outlining a larger, longer-life, low-cost operation located in Canada, with excellent exploration upside. This followed the receipt of a positive Decision Statement for the Federal Environmental Impact Statement (“EIS”) earlier this year, a significant permitting milestone for the project.
At PDA, step-out drilling continues to extend high-grade mineralization beyond Mineral Reserves and Resources supporting the expected ongoing growth of the deposit. This growth will be incorporated into a development plan which is expected to be completed towards the end of this year and will outline a significant mine life extension at the Mulatos District.
Young-Davidson continues to be a consistent performer with mining rates in-line with target rates and the operation generating $30.9 million of mine-site free cash flow in the quarter and $82.6 million year-to-date. With higher grades expected in the fourth quarter, the operation is on track to meet full year production guidance and generate more than $100 million of mine-site free cash flow for the third consecutive year.
Island Gold performed well in the third quarter with higher mining rates and grades driving a 19% increase in production from the second quarter. With year-to-date production of 99,800 ounces, the operation is well positioned to meet full year production guidance. As outlined in the Phase 3+ Expansion study released in June 2022, grades mined are expected to increase in 2024, driving production higher. A further increase in grades and an increase in mining rates toward the latter part of 2025 is expected to drive an additional increase in production and a reduction in costs. As demonstrated through the year, Island Gold continues to generate strong cash flow from operations allowing the operation to fund the majority of capital spending on the Phase 3+ Expansion.
Combined gold production from the Mulatos District totaled 53,900 ounces in the quarter reflecting another strong performance from La Yaqui Grande. Year-to-date, the combined operation produced 164,700 ounces, nearly double the prior year period and putting it on pace to exceed full year guidance. Reflecting the strong operational performance, Mulatos generated $30.9 million of mine-site free cash flow in the quarter bringing the year-to-date total to $114.7 million. As previously guided, production is expected to decrease into the fourth quarter reflecting the end of mining within the main Mulatos pit in July as well as the return to guided grades at La Yaqui Grande.
Capital spending, including capitalized exploration, totaled $75.2 million in the third quarter and $239.2 million year-to-date. Capital spending is expected to increase in the fourth quarter, reflecting the continued ramp up in spending on Phase 3+ Expansion, and higher sustaining capital. Full year capital spending is expected to be consistent with guidance of $317 million to $357 million.
The global exploration budget for 2023 is consistent with spending in 2022. The Mulatos District accounts for the largest portion of the budget at $25 million, up from an initial budget of $17 million reflecting ongoing exploration success. This is followed by a $14 million budget at Island Gold, $8 million at Young-Davidson and $5 million at Lynn Lake. The exploration focus in 2023 continues to follow up on a successful year in 2022, with Mineral Reserves increasing for the fourth consecutive year to 10.7 million ounces of gold.
The Company's liquidity position continues to strengthen with cash and cash equivalents increasing to $215.9 million at the end of the third quarter, up from $129.8 million at the start of the year, while remaining debt free. Additionally, the Company has a $500 million undrawn credit facility, providing total liquidity of $715.9 million. As part of a balanced approach to growth and capital allocation, the current focus of growth capital is the Phase 3+ Expansion at Island Gold. With no significant capital expected to be spent on developing Lynn Lake until the Phase 3+ Expansion is well advanced, the Company remains well positioned to fund this growth internally while generating strong free cash flow over the next several years. The Company expects a further increase in free cash flow in 2026 with the completion of the Phase 3+ Expansion.
*Third Quarter 2023 results*
*Young-Davidson Financial and Operational Review*
*Three Months Ended September 30,**
* *Nine Months Ended September 30,**
* *2023* *2022* *2023* *2022*
Gold production (ounces) 45,100 49,300 135,300 147,600
Gold sales (ounces) 45,498 49,218 134,744 147,405
*Financial Review (in millions)*
Operating Revenues $87.9 $85.6 $260.5 $269.7
Cost of sales^ (1) $62.4 $63.9 $183.6 $188.3
Earnings from operations $24.5 $20.9 $74.4 $77.4
Cash provided by operating activities $43.2 $38.4 $125.8 $128.2
Capital expenditures (sustaining) ^(2) $10.8 $13.0 $35.1 $33.6
Capital expenditures (growth) ^(2) $0.3 $0.9 $4.3 $13.8
Capital expenditures (capitalized exploration) ^(2) $1.2 $1.2 $3.8 $3.5
Mine-site free cash flow ^(2) $30.9 $23.3 $82.6 $77.3
Cost of sales, including amortization per ounce of gold sold ^(1) $1,371 $1,298 $1,363 $1,277
Total cash costs per ounce of gold sold^ (2) $939 $870 $945 $858
Mine-site all-in sustaining costs per ounce of gold sold^ (2),(3) $1,178 $1,134 $1,207 $1,087
*Underground Operations*
Tonnes of ore mined 733,413 644,000 2,190,418 2,122,820
Tonnes of ore mined per day 7,972 7,000 8,024 7,776
Average grade of gold ^(4) 2.06 2.28 2.14 2.29
Metres developed 2,108 2,589 7,041 8,933
*Mill Operations*
Tonnes of ore processed 754,705 719,050 2,153,377 2,161,792
Tonnes of ore processed per day 8,203 7,816 7,888 7,919
Average grade of gold ^(4) 2.08 2.31 2.14 2.31
Contained ounces milled 50,393 53,290 148,380 160,734
Average recovery rate 90 % 92 % 90 % 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").
Operational review
Young-Davidson produced 45,100 ounces of gold in the third quarter, an 9% decrease compared to the prior year period, due to 10% lower grades processed. Grades were impacted by sequencing with higher grade stopes planned to be mined during the quarter deferred into the fourth quarter. With grades mined expected to increase in the fourth quarter, Young-Davidson remains on track to meet full year production guidance.
Milling rates increased to average 8,203 tpd in the third quarter, a new record for the operation. Milling rates exceeded mining rates with surface stockpiles supplementing mill feed. Grades processed averaged 2.08 g/t Au in the quarter and 2.14 g/t Au year-to-date, the latter consistent with the low end of annual guidance. Mill recoveries averaged 90% in the quarter, in line with guidance.
Financial Review
Third quarter revenues of $87.9 million were 3% higher than the prior year period, resulting from a higher realized gold price, partially offset by less ounces sold. Year-to-date revenues of $260.5 million were 3% lower than the prior year, primarily driven by less ounces sold.
Cost of sales of $62.4 million in the third quarter were 2% lower than the prior year period with higher tonnes processed being offset by lower unit operating costs. Underground mining costs were CAD $46 per tonne in the quarter, an 8% improvement from the prior year period due to economies of scale driven by higher mining rates. Cost of sales of $183.6 million for the first nine months of the year were in line with the comparable period.
Total cash costs were $939 per ounce in the third quarter and $945 per ounce for the first nine months of the year. Mine-site AISC were $1,178 per ounce in the quarter and $1,207 per ounce for the first nine months of the year. Total cash costs and mine-site AISC were consistent with annual guidance in the quarter and year-to-date; however, above the prior year periods reflecting inflationary pressures as well as the lower grades processed. Both total cash costs and AISC are expected to be in line with guidance for the full year.
Capital expenditures in the quarter included $10.8 million of sustaining capital and $0.3 million of growth capital. Additionally, $1.2 million was invested in capitalized exploration in the quarter. Capital expenditures, inclusive of capitalized exploration, totaled $43.2 million for the first nine months of 2023, a 15% decrease from the prior year. Sustaining capital expenditures are expected to increase in the fourth quarter bringing full year capital in line with annual guidance.
Young-Davidson continues to demonstrate strong operational and financial consistency with mine-site free cash flow of $30.9 million in the third quarter, and $82.6 million in the first nine months of 2023. The operation is on track to surpass $100 million in mine-site free cash flow for the third consecutive year, and is well positioned to generate similar levels over the long-term, given its 15 year Mineral Reserve life.
*Island Gold Financial and Operational Review*
*Three Months Ended September 30,**
* *Nine Months Ended September 30,**
* *2023* *2022* *2023* *2022*
Gold production (ounces) 36,400 31,400 99,800 93,200
Gold sales (ounces) 35,255 31,342 97,165 91,507
*Financial Review (in millions)*
Operating Revenues $68.1 $54.8 $187.8 $167.3
Cost of sales^ (1) $31.3 $29.0 $89.8 $85.2
Earnings from operations $35.6 $24.4 $95.2 $78.1
Cash provided by operating activities $38.3 $32.1 $125.0 $109.0
Capital expenditures (sustaining) ^(2) $10.6 $9.1 $33.0 $26.4
Capital expenditures (growth) ^(2) $34.5 $26.9 $118.4 $63.1
Capital expenditures (capitalized exploration) ^(2) $2.4 $4.7 $7.8 $13.9
Mine-site free cash flow ^(2) ($9.2 ) ($8.6 ) ($34.2 ) $5.6
Cost of sales, including amortization per ounce of gold sold ^(1) $888 $925 $924 $931
Total cash costs per ounce of gold sold^ (2) $610 $651 $636 $650
Mine-site all-in sustaining costs per ounce of gold sold^ (2),(3) $916 $944 $980 $941
*Underground Operations*
Tonnes of ore mined 113,682 104,565 322,646 319,757
Tonnes of ore mined per day ("tpd") 1,236 1,137 1,182 1,171
Average grade of gold ^(4) 9.94 9.67 9.59 9.37
Metres developed 2,063 1,664 6,301 5,005
*Mill Operations*
Tonnes of ore processed 113,061 121,571 322,568 336,668
Tonnes of ore processed per day 1,229 1,321 1,182 1,233
Average grade of gold ^(4) 10.11 9.38 9.74 9.25
Contained ounces milled 36,767 36,661 101,029 100,119
Average recovery rate 97 % 93 % 97 % 95 %
^(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").
Operational review
Island Gold produced 36,400 ounces in the third quarter of 2023, a 16% increase from the prior year period, reflecting higher grades mined and processed, partially offset by lower tonnes milled. For the first nine months of 2023, Island Gold produced 99,800 ounces, a 7% increase from the prior year period. With the solid year-to-date performance, Island Gold remains on track to achieve full year production guidance.
Underground mining rates averaged 1,236 tpd in the third quarter, exceeding annual guidance and an increase of 12% from the second quarter. Grades mined averaged 9.94 g/t Au in the quarter, and 9.59 g/t Au through the first nine months of the year, both consistent with annual guidance.
Mill throughput averaged 1,229 tpd for the quarter. Milling throughput was lower than the prior year period, as the third quarter of 2022 included processing of approximately 10,000 tonnes of Island Gold stockpiled ore at the Young-Davidson mill. Mill recoveries averaged 97% in the quarter, consistent with annual guidance, and a 4% increase compared to the prior year period.
Financial Review
Revenues of $68.1 million in the third quarter and $187.8 million for the first nine months of the year were 24% and 12% higher than the prior year periods, respectively, due to more ounces sold and a higher realized gold price.
Cost of sales of $31.3 million in the third quarter and $89.8 million for the first nine months of the year were 8% and 5% higher than the prior year period, respectively, driven by the increased mining rates and inflationary pressures on mining and processing costs.
Total cash costs of $610 per ounce in the third quarter and $636 per ounce year-to-date were in line with annual guidance. Mine-site AISC of $916 per ounce in the third quarter was below annual guidance due to timing of sustaining capital expenditures. Sustaining capital expenditures are expected to increase in the fourth quarter, consistent with annual guidance. With mine-site AISC of $980 per ounce through the first nine months, the operation remains on track to meet full year cost guidance.
Total capital expenditures were $47.5 million in the third quarter, including $34.5 million of growth capital and $2.4 million of capitalized exploration. Growth capital spending remains focused on the shaft site infrastructure, including the headframe, electrical substation and warehouse to support the Phase 3+ Expansion. The construction of the headframe is now substantially complete and pre-commissioning tests on the e-house electrical systems have commenced. Shaft sinking is on track to commence by year end. Additionally, capital spending was focused on lateral development and other surface infrastructure. For the first nine months of 2023, capital spending totaled $159.2 million, inclusive of capitalized exploration of $7.8 million, with the majority related to construction activities on the Phase 3+ Expansion.
Mine-site free cash flow was negative $9.2 million in the third quarter and negative $34.2 million for the first nine months of the year given the significant capital investment related to the Phase 3+ Expansion. At current gold prices, Island Gold is expected to fund the majority of the Phase 3+ Expansion capital over the next three years. The operation is expected to generate significant free cash flow from 2026 onward with the completion of the expansion.
*Mulatos District Financial and Operational Review*
*Three Months Ended September 30,**
* *Nine Months Ended September 30,**
* *2023* *2022* *2023* *2022*
Gold production (ounces) 53,900 42,700 164,700 85,400
Gold sales (ounces) 51,880 42,220 165,344 84,498
*Financial Review *(in millions)
Operating Revenues $100.2 $73.2 $320.4 $152.3
Cost of sales^ (1) $64.3 $75.2 $197.6 $182.0
Earnings (loss) from operations $31.1 ($4.1 ) $113.4 ($36.2 )
Cash provided (used) by operating activities $40.7 $11.7 $136.7 ($8.4 )
Capital expenditures (sustaining)^ (2) $5.9 $3.9 $9.5 $8.7
Capital expenditures (growth)^ (2) $1.5 $5.1 $6.2 $47.4
Capital expenditures (capitalized exploration) ^(2) $2.4 $0.9 $6.3 $1.1
Mine-site free cash flow ^(2) $30.9 $1.8 $114.7 ($65.6 )
Cost of sales, including amortization per ounce of gold sold ^(1) $1,239 $1,781 $1,195 $2,154
Total cash costs per ounce of gold sold ^(2) $898 $1,028 $861 $1,298
Mine site all-in sustaining costs per ounce of gold sold ^(2),(3) $1,045 $1,137 $948 $1,426
*La Yaqui Grande Mine*
*Open Pit Operations*
Tonnes of ore mined - open pit^ (4) 918,053 739,594 2,947,113 1,236,413
Total waste mined - open pit ^(6) 5,715,419 5,327,341 17,150,171 17,469,454
Total tonnes mined - open pit 6,633,472 6,066,935 20,097,284 18,705,867
Waste-to-ore ratio (operating) 5.00 5.00 5.00 5.00
*Crushing and Heap Leach Operations*
Tonnes of ore stacked 948,451 794,127 2,982,018 1,127,108
Average grade of gold processed ^(5) 1.50 1.23 1.52 1.33
Contained ounces stacked 45,722 31,362 146,196 48,133
Average recovery rate 84 % 81 % 82 % 63 %
Ore crushed per day (tonnes) 10,300 8,700 10,900 6,159
*Mulatos Mine*
*Open Pit Operations*
Tonnes of ore mined - open pit^ (4) 80,868 795,339 2,250,380 2,600,777
Total waste mined - open pit ^(6) 130,519 1,573,334 1,309,034 5,237,360
Total tonnes mined - open pit 211,387 2,332,673 3,559,415 7,838,137
Waste-to-ore ratio (operating) 1.61 2.07 0.58 1.63
*Crushing and Heap Leach Operations*
Tonnes of ore stacked 1,083,017 1,274,662 3,729,738 4,542,916
Average grade of gold processed ^(5) 1.55 0.75 1.17 0.72
Contained ounces stacked 53,923 30,916 140,375 104,965
Average recovery rate 29 % 56 % 32 % 52 %
Ore crushed per day (tonnes) 11,800 14,000 13,700 16,600
^(1) Cost of sales includes mining and processing costs, royalties, and amortization expense.
^(2) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.
^(3) 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 District Operational ReviewThe Mulatos District produced 53,900 ounces in the third quarter, 26% higher than the prior year period, reflecting higher mining rates and grades from La Yaqui Grande. As guided, production decreased from the second quarter with mining and stacking rates at La Yaqui Grande returning to design rates of approximately 10,000 tpd, as well as the end of mining within the main Mulatos open pit in July. Production is expected to decrease in the fourth quarter reflecting the depletion of the Mulatos pit and a decrease in grades at La Yaqui Grande.
For the first nine months of 2023, the Mulatos District produced 164,700 ounces. This included 119,700 ounces from La Yaqui Grande with the operation exceeding expectations both in terms of mining rates and grades. Given the year-to-date outperformance, the Mulatos District is expected to exceed original production guidance of 175,000 to 185,000 ounces.
La Yaqui Grande Operational Review
La Yaqui Grande produced 38,300 ounces in the third quarter, up 51% from the prior year period reflecting higher grades and stacking rates. As previously guided, stacking rates of 10,300 tpd decreased from the second quarter with the onset of the rainy season. Stacking rates are expected to remain around design rates of 10,000 tpd in the fourth quarter and beyond. Grades stacked on the leach pad averaged 1.50 g/t Au, above annual guidance of 1.15 to 1.45 g/t Au due to positive grade reconciliations. The recovery rate was 84% in the quarter and 82% through the first nine months of the year, both in line with annual guidance.
Mulatos Operational Review
Mulatos produced 15,600 ounces in the third quarter, 10% lower than the second quarter of 2023, reflecting completion of mining from the El Salto portion of the pit in July. Total crusher throughput averaged 11,800 tpd, with a total of 1,083,017 tonnes stacked, with grades averaging 1.55 g/t Au. The majority of tonnes stacked in the quarter were from stockpiled ore which will continue to be stacked at declining rates until the stockpiles are depleted in the fourth quarter. The operation is expected to benefit from ongoing gold production at decreasing rates into 2024 through residual leaching of the leach pad.
Financial Review (Mulatos District)
Revenues of $100.2 million in the third quarter were 37% higher than the prior year period reflecting more ounces sold at La Yaqui Grande, and a higher realized gold price. Similarly, revenues of $320.4 million for the first nine months of 2023, were higher than the prior year period as a result of more ounces sold and a higher realized gold price.
Cost of sales of $64.3 million in the third quarter were 14% lower than in the comparative period, due to lower mining rates within the main Mulatos pit. In addition, the comparative period included an adjustment related to the Mulatos leach pad inventory. For the first nine months of 2023, cost of sales of $197.6 million were 9% higher than the comparable period, due to higher mining and stacking rates at the operation.
Total cash costs for the Mulatos District of $898 per ounce in the third quarter and $861 per ounce year-to-date were below annual guidance, driven by higher grades at La Yaqui Grande and higher stacking rates through the first half of the year. Mine-site AISC of $1,045 per ounce in the third quarter was higher than annual guidance due to the timing of sustaining capital expenditures. Costs are expected to be above the top end of annual guidance in the fourth quarter reflecting lower production at La Yaqui Grande and Mulatos. However, given the strong year-to-date performance with mine-site AISC of $948 per ounce, costs are expected to be in-line with guidance for the full year.
Capital expenditures totaled $9.8 million in the third quarter, including sustaining capital of $5.9 million, and $2.4 million of capitalized exploration focused on drilling at PDA. For the first nine months of 2023, capital spending totaled $22.0 million, including $6.3 million of capitalized exploration. Full year capital expenditures, excluding capitalized exploration, are expected to be in line with annual guidance.
The Mulatos District generated mine-site free cash flow of $30.9 million in the third quarter, and $114.7 million through the first nine months of the year, driven by the low-cost, high margin production from La Yaqui Grande. Mulatos paid $2.7 million of cash taxes in the third quarter, with a similar payment expected in the fourth quarter. Given the strong profitability of the operation in 2023, with $114.7 million in free cash flow generated year to date, the Company expects to make significantly higher cash tax payments in Mexico in 2024.
*Third** Quarter **2023** Development Activities*
*Island Gold (Ontario, Canada)*
Phase 3+ Expansion
On June 28, 2022, the Company reported results of the Phase 3+ Expansion Study (“P3+ Expansion Study”) conducted on its Island Gold mine, located in Ontario, Canada.
The Phase 3+ Expansion to 2,400 tpd from the current rate of 1,200 tpd will involve various infrastructure investments. These include the installation of a shaft, paste plant, expansion of the mill as well as accelerated development to support the higher mining rates. Following the completion of the expansion in 2026, the operation will transition from trucking ore and waste up the ramp to skipping ore and waste to surface through the new shaft infrastructure, driving production higher and costs significantly lower.
Construction continued through the third quarter of 2023, with shaft site surface infrastructure nearing completion in advance of shaft sinking, which is expected to commence by the end of the year. Further details on progress to the end of the third quarter are summarized below:
· Construction of the shaft area substation substantially complete and connected to the Island Gold substation
· Headframe construction substantially complete
· Galloway outfitting over 50% complete
· Pre-commissioning tests on the e-house electrical systems commenced
· Earthworks for propane storage facility completed
· Warehouse building construction underway
· Paste plant detailed engineering 70% complete and expected to be substantially complete by year end; issuance of long lead time equipment procurement packages is ongoing
· Mill expansion basic engineering 77% complete and expected to be completed by year end, with overall engineering being 30% complete; issuance of long lead time equipment procurement packages is ongoing
· Lateral development to support higher mining rates with the Phase 3+ Expansion ongoingDuring the third quarter of 2023, the Company spent $34.5 million on the Phase 3+ Expansion and capital development. As of September 30, 2023, 45% of the total initial growth capital of $756 million has been spent and committed on the project. This includes progress as follows:
(in US$M)
Growth capital (including indirects and contingency) *P3+ 2400 *
*Study*^*1* *Spent to date*^*2* *Committed to
date* *% of Spent &
Committed*
Shaft & Shaft Surface Complex 229 118 83 88 %
Mill Expansion 76 3 1 5 %
Paste Plant 52 1 1 4 %
Power Upgrade 24 4 6 42 %
Effluent Treatment Plant 16 — — —
General Indirect Costs 64 27 6 52 %
Contingency^3 55 —
Total Growth Capital $516 $153 $97 48 %
Underground Equipment & Infrastructure 79 26 — 33 %
Accelerated Capital Development 162 64 — 40 %
Total Growth Capital (including Accelerated Spend) $756 $243 $97 45 %
^1. Phase 3+ 2400 Study is as of January 2022. Phase 3+ capital estimate based on USD/CAD exchange $0.78:1. Spent to date based on average USD/CAD of $0.76:1 since the start of 2022. Committed to date based on the spot USD/CAD rate as at September 30, 2023 of $0.74:1.
^2. Amount spent to date accounted for on an accrual basis, including working capital movements.
^3. Contingency has been allocated to the various areas.
Growth capital spending at Island Gold on the Phase 3+ Expansion is expected to be between $165 and $185 million in 2023. Capital spending is expected to remain at similar levels in 2024 and 2025 and then drop considerably in 2026 once the expansion is complete.
*Shaft site area - October 2023*
*
*
*Lynn Lake (Manitoba, Canada) *
In March 2023, the Company achieved a significant permitting milestone for the Lynn Lake project with a positive Decision Statement issued by the Ministry of Environment and Climate Change Canada based on the completed Federal Environmental Impact Statement ("EIS"), and Environment Act Licenses issued by the Province of Manitoba. Additionally, during the second quarter, the Company finalized an Impact Benefit Agreement and participated in a signing ceremony with Marcel Colomb First Nation, the most proximate First Nation to the project. As previously disclosed, the Mathias Colomb Cree Nation has brought an application for judicial review of the Decision Statement issued by the Ministry of Environment and Climate Change and an internal appeal of the Environment Act Licenses issued by the Province of Manitoba. At this time, the application and appeal are not expected to impact overall Lynn Lake project timelines. The Company continues to actively engage with the Mathias Colomb Cree Nation during this period.
On August 2, 2023, the Company reported the results of an updated Feasibility Study ("2023 Study") conducted on the project which replaces the previous Feasibility Study completed in 2017 ("2017 Study"). The 2023 Study incorporates a 44% larger Mineral Reserve and 14% increase in milling rates to 8,000 tpd supporting a larger, longer-life, low-cost operation. The 2023 Study has been updated to reflect the current costing environment, as well as a significant amount of additional engineering, on-site geotechnical investigation work, and requirements outlined during the permitting process with the EIS granted in March.
*2023 Study Highlights: *
Higher production: average annual gold production of 207,000 ounces over the first five years and 176,000 ounces over the initial 10 years
· The 10-year average represents a 23% increase over the annual average of 143,000 ounces in the 2017 StudyLow-cost profile: average mine-site all-in sustaining costs of $699 per ounce over the first 10-years and $814 per ounce over the life of mine
· Average mine-site all-in sustaining costs decreased 6% from the 2017 Study over the initial 10-years with economies of scale provided by the larger operation, and higher average grades, more than offsetting cost inflationLarger, longer-life operation supported by 44% larger Mineral Reserve with further upside potential
· 44% larger Mineral Reserve totaling 2.3 million ounces grading 1.52 g/t Au (47.6 million tonnes ("mt"))
· 17-year mine life, up from 10 years in the 2017 Study
· Life of mine production of 2.2 million ounces, a 46% increase from 1.5 million ounces reported in 2017Modest increase in capital intensity with larger operation and 46% increase in life of mine production partly offsetting inflation
· Initial capital of $632 million, and life of mine capital including sustaining capital and reclamation of $832 million, increased from the 2017 Study reflecting inflation and scope changes with the larger operation and Mineral Reserve
· Total life of mine capital of $381 per ounce increased 17% from $325 per ounce in the 2017 Study with the larger Mineral Reserve and economies of scale partly offsetting the significant industry-wide capital inflation experienced since 2017
Project de-risked given advanced level of engineering, additional geotechnical work, and EIS approval
· Detailed engineering 55% complete; basic engineering 100% complete as of August 2023
· EIS approval and Provincial licenses received in March 2023 with requirements outlined through the permitting process incorporated into the 2023 Study
· Extensive geotechnical drilling, test pits, and ground penetrating radar employed across the project area including the mill, open pits and tailings locations providing higher degree of confidence around required earthworks, tailings design and mine planAttractive economics with significant long-term exploration upside potential
· After-tax net present value (“NPV”) (5%) of $428 million (base case gold price assumption of $1,675 per ounce and USD/CAD foreign exchange rate of $0.75:1)
· After-tax internal rate of return (“IRR”) of 17%
· After-tax NPV (5%) of $670 million, and an after-tax IRR of 22%, at current gold prices of approximately $1,950 per ounce
· Payback of less than four years at the base case gold price of $1,675 per ounce and less than three years at a $1,950 per ounce gold prices
Significant near-mine and regional exploration upside potential
· The Lynn Lake project encompasses most of the east-trending, 125 km long, Lynn Lake Greenstone Belt in northwestern Manitoba, with a total of 58,000 hectares of mineral tenure, representing significant exploration potential, including:
· Gordon deposit: higher-grade gold mineralization extended outside of Mineral Reserves and Resources in the northeastern extent of the planned Gordon pit, in an area modeled as waste in the 2023 Study
· Burnt Timber and Linkwood: potential for smaller, higher-grade Mineral Resource that could be trucked and processed at the planned MacLellan mill later in the mine life
· Regional targets: extensive pipeline of highly prospective exploration targets at various stages of exploration across the Lynn Lake greenstone belt. This includes the Maynard and Tulune targets where ongoing drilling continues to intersect gold mineralization. Both targets are within trucking distance of the MacLellan mill
Low Greenhouse Gas (“GHG”) emission intensity
· 18% decrease in GHG emissions per ounce from the 2017 Study reflecting the incorporation of electric shovels and drills at MacLellan, and productivity improvements with the larger operation
· 58% lower emissions per ounce produced than the industry average. The project will be connected to Manitoba’s electric grid, of which nearly all electricity is produced from clean, renewable power, supporting the company-wide target of a 30% reduction in absolute GHG emissions by 2030
Fully funded growth
· As outlined previously, the Company does not anticipate spending any significant capital on developing the Lynn Lake project until the Phase 3+ Expansion at Island Gold is well advanced
· With $215.9 million of cash as of September 30, 2023, no debt, strong ongoing free cash flow generation, and significant free cash flow growth expected from Island Gold in 2026 and beyond, the Company is well positioned to fund development of Lynn Lake internally
Development spending (excluding exploration) was $3.6 million in the third quarter of 2023 on engineering to support the updated Feasibility Study. For the first nine months of 2023, development spending (excluding exploration) was $8.6 million.
*Kirazlı (Çanakkale, Türkiye) *
On October 14, 2019, the Company suspended all construction activities on its Kirazlı project following the Turkish government's failure to grant a routine renewal of the Company’s mining licenses, despite the Company having met all legal and regulatory requirements for their renewal. In October 2020, the Turkish government refused the renewal of the Company’s Forestry Permit. The Company had been granted approval of all permits required to construct Kirazlı including the Environmental Impact Assessment approval, Forestry Permit, and GSM (Business Opening and Operation) permit, and certain key permits for the nearby Ağı Dağı and Çamyurt Gold Mines. These permits were granted by the Turkish government after the project earned the support of the local communities and passed an extensive multi-year environmental review and community consultation process.
On April 20, 2021, the Company announced that its Netherlands wholly-owned subsidiaries Alamos Gold Holdings Coöperatief U.A, and Alamos Gold Holdings B.V. (the “Subsidiaries”) would be filing an investment treaty claim against the Republic of Türkiye for expropriation and unfair and inequitable treatment. The claim was filed under the Netherlands-Türkiye Bilateral Investment Treaty (the “Treaty”). Alamos Gold Holdings Coöperatief U.A. and Alamos Gold Holdings B.V. had its claim against the Republic of Türkiye registered on June 7, 2021 with the International Centre for Settlement of Investment Disputes (World Bank Group).
Bilateral investment treaties are agreements between countries to assist with the protection of investments. The Treaty establishes legal protections for investment between Türkiye and the Netherlands. The Subsidiaries directly own and control the Company’s Turkish assets. The Subsidiaries invoking their rights pursuant to the Treaty does not mean that they relinquish their rights to the Turkish project, or otherwise cease the Turkish operations. The Company will continue to work towards a constructive resolution with the Republic of Türkiye.
The Company incurred $0.6 million in the third quarter related to ongoing holding costs and legal costs to progress the Treaty claim, which was expensed. For the first nine months of 2023, the Company incurred $1.6 million.
*Third Quarter 2023 Exploration Activities*
*Island Gold (Ontario, Canada)*
A total of $14 million has been budgeted at Island Gold in 2023, primarily for underground exploration. For the past several years, the exploration focus has been on adding high-grade Mineral Resources at depth in advance of the Phase 3+ Expansion Study, primarily through surface directional drilling. This exploration strategy has been successful in nearly tripling the Mineral Reserve and Resource base since 2017 to over five million ounces of gold. With an 18-year mine life, and with work on the expansion ramping up, the focus has shifted to a more cost-effective expanded underground drilling program that will leverage existing underground infrastructure. This drilling program is at a much lower cost on a per metre basis, is less technically challenging, and requires significantly fewer metres per exploration target.
The underground exploration drilling program was expanded from 27,500 metres ("m") in 2022 to 45,000 m in 2023. The program is focused on defining new Mineral Reserves and Resources in proximity to existing production horizons and infrastructure including along strike, and in the hanging-wall and footwall. These potential high-grade Mineral Reserve and Resource additions would be low cost to develop and could be incorporated into the mine plan and mined within the next several years, further increasing the value of the operation. To support the underground exploration drilling program, 444 m of underground exploration drift development is planned to extend drill platforms on the 490, 790, 945, and 980-levels. In addition to the exploration budget, 36,000 m of underground delineation drilling has been planned and included in sustaining capital for Island Gold.
A regional exploration program including 7,500 m of drilling is also budgeted in 2023. The focus of the program is on evaluating and advancing exploration targets outside the Island Gold Deposit on the 55,300 ha Island Gold property. A total of 4,802 m of surface regional drilling in 16 holes was completed in the third quarter. Regional drilling has focused on the Pine-Breccia and Cline Edwards Plowman targets. Regional surface drilling completed year-to-date totaled 8,432 m in 42 holes.
A total of 6,323 m of underground exploration drilling in 32 holes was also completed in the third quarter. The objective of the underground drilling is to identify new Mineral Resources close to existing Mineral Resource or Reserve blocks. In addition to underground exploration drilling, a total of 14,328 m of underground delineation drilling was completed in 76 holes, focused on infill drilling to convert Mineral Resources to Mineral Reserves. Year-to-date, 127 holes totaling 29,732 m have been completed as part of the underground exploration program, and 121 holes totaling 22,155 m as part of the underground delineation drilling program. A total of 99 m of underground exploration drift development was also completed during the third quarter.
Total exploration expenditures during the third quarter were $3.6 million, of which $2.4 million was capitalized. In the first nine months of 2023, exploration expenditures totaled $10.6 million, of which $7.8 million was capitalized.
*Young-Davidson (Ontario, Canada) *
A total of $8 million has been budgeted for exploration at Young-Davidson in 2023, up from $5 million in 2022. The 2023 program includes 21,600 m of underground exploration drilling, and 400 m of underground exploration development to extend drill platforms on the 9220, 9270, and 9590-levels.
The focus of the underground exploration drilling program is to expand Mineral Reserves and Resources in five target areas in proximity to existing underground infrastructure. This includes targeting additional gold mineralization within the syenite which hosts the majority of Mineral Reserves and Resources, as well as within the hanging wall and footwall of the deposit where higher grades have been previously intersected.
During the third quarter of 2023, two underground exploration drills completed 6,184 m in 17 holes from the 9220 West exploration drift and the 9025 East Footwall. Drilling is targeting syenite-hosted mineralization as well as continuing to test mineralization in the footwall sediments and in the hanging wall mafic-ultramafic stratigraphy. During the first nine months of 2023, a total of 17,880 m was completed in 44 holes.
In addition, 5,000 m of surface drilling was budgeted to test near-surface targets across the 5,720 ha Young-Davidson property. A total of 4,366 m of surface drilling in nine holes was completed in the third quarter. Year-to-date, 7,052 m has been completed in 21 holes focused on the MCM-target area, immediately east and adjacent to the Young-Davidson deposit.
Total exploration expenditures during the third quarter were $2.2 million of which $1.2 million was capitalized. For the first nine months of 2023, exploration spending totaled $6.3 million of which $3.8 million was capitalized.
*Mulatos District (Sonora, Mexico)*
During the third quarter of 2023, exploration activities continued at PDA and the near-mine area with 3,271 m of drilling completed in 42 holes. Additionally, an eight hole, 2,230 m geotechnical drilling program was completed to support development of PDA. Exploration drilling at PDA has been successful with Mineral Reserves increasing 70% in 2022 to 728,000 ounces (4.7mt grading 4.84 g/t Au) with grades also increasing 4%. Ongoing exploration success and results from the geotechnical drilling program will be incorporated into an updated development plan which is expected to be completed towards the end of 2023.
The regional program totaled 10,049 m of drilling completed in 31 holes in the third quarter. This included 6,319 m completed in 17 holes at the Capulin target, and 3,840 m completed in 13 drill holes at Cerro Pelon West.
As announced in the September 13, 2023 press release, drilling continues to extend high-grade gold mineralization outside of Mineral Reserves and Resources at PDA. PDA is a higher-grade underground deposit adjacent to the Mulatos pit. Additionally, step-out drilling at the Capulin regional target continues to intersect wide intervals of significant gold mineralization. Capulin is located four kilometres (“km”) east of the Mulatos open pit. Previously reported highlights are as follows:
PDA
· Additional high-grade gold mineralization extended beyond Mineral Reserves and Resources at PDA. This is expected to support further growth in the size of the deposit following a 71% increase in combined Mineral Reserves and Resources in 2022 to a total of 1.0 million ounces. An expanded drill program is ongoing with the deposit open in multiple directions. All reported composite widths are estimated true width of the mineralized zones.
· 41.46 g/t Au (18.87 g/t cut) over 7.05 m (23MUL122)
· 18.32 g/t Au (15.13 g/t cut) over 9.50 m (23MUL120)
· 13.62 g/t Au (13.62 g/t cut) over 9.45 m (23M