Alamos Gold Reports Fourth Quarter and Year-End 2023 Results
*Solid Fourth Quarter Drives Record Annual Production, Revenue and Operating Cash Flow*
All amounts are in United States dollars, unless otherwise stated.
TORONTO, Feb. 21, 2024 (GLOBE NEWSWIRE) -- *Alamos Gold Inc. (TSX:AGI; NYSE:AGI)* (“Alamos” or the “Company”) today reported its financial results for the quarter and year ended December 31, 2023.“With the strong finish to the year, we delivered a record operational and financial performance in 2023. Production increased 15% to a record 529,300 ounces, achieving the top end of our increased full year guidance. Costs were also in line with annual guidance and decreased 4% from 2022 reflecting strong performances across our operations. With the record production, lower costs, and higher gold price we set a number of financial records in 2023. Revenue increased 25% to a record $1 billion, and cash flow from operations increased 44% to a record $519 million. We also generated $124 million of free cash flow while reinvesting in growth that will support higher levels of free cash flow in the years ahead,” said John A. McCluskey, President and Chief Executive Officer.
“This reinvestment in high-return growth continues to create long-term value. Global Mineral Reserves increased for the fifth consecutive year with grades also increasing driven by another year of exploration success. This included higher-grade additions at Island Gold and PDA, supporting longer-life, and more valuable assets. The growth at PDA will be incorporated into a development plan to be completed later this quarter that we expect will outline a significant mine life extension at Mulatos. The Phase 3+ Expansion at Island Gold continues to advance having achieved a significant milestone with the start of shaft sinking in December. The expansion remains on track to deliver significant production growth at substantially lower costs in 2026 and beyond.”
*Fourth Quarter and Full Year 2023 Highlights*
*Operational and Financial Highlights*
· Produced a record 529,300 ounces of gold in 2023, achieving the top end of increased production guidance and representing a 15% increase from 2022. This included a strong finish to the year from all three operations with fourth quarter production of 129,500 ounces
· The Mulatos District exceeded guidance, producing 212,800 ounces in 2023, a 58% increase from the prior year, reflecting a strong performance from La Yaqui Grande in its first full year of production. The higher margin ounces from La Yaqui Grande drove a significant increase in mine-site free cash flow^1 to $142.1 million, including $27.4 million in the fourth quarter
· Young-Davidson produced 185,100 ounces in 2023, meeting guidance and generating record mine-site free cash flow^1 of $117.6 million. This marked the third consecutive year mine-site free cash flow has exceeded $100 million, demonstrating the strong ongoing performance and consistency of the operation, including $35.0 million in the fourth quarter
· Island Gold produced 131,400 ounces in 2023, meeting guidance and continuing to self fund the majority of $178.1 million of growth capital invested in the Phase 3+ Expansion during the year
· Total cash costs^1 of $850 per ounce, all-in sustaining costs ("AISC"^1) of $1,160 per ounce, and cost of sales of $1,212 per ounce for the full year were in line with guidance. Fourth quarter total cash costs of $900 per ounce, and AISC of $1,233 per ounce were consistent with quarterly guidance
· Record financial performance with full year gold sales totaling 526,258 ounces at an average realized price of $1,944 per ounce for record revenue of $1.0 billion, a 25% increase from 2022. This included fourth quarter sales of 129,005 ounces at an average realized price of $1,974 per ounce, generating $254.6 million in revenue. The average realized gold price was $3 per ounce above the London PM fix for both the quarter and the year
· Record annual cash flow from operating activities of $472.7 million (including $518.9 million, or $1.31 per share before changes in working capital^1), a 58% increase from 2022. Fourth quarter cash flow from operating activities was $124.1 million ($120.2 million, or $0.30 per share, before changes in working capital^1)
· Strong free cash flow^1 of $123.8 million in 2023 while funding the Phase 3+ Expansion at Island Gold
· Realized adjusted net earnings^1 of $208.4 million, or $0.53 per share^1 in 2023. Reported net earnings were $210.0 million, or $0.53 per share
· Realized adjusted net earnings^1 for the fourth quarter of $49.2 million, or $0.12 per share^1. Adjusted net earnings includes adjustments for net unrealized foreign exchange gains recorded within deferred taxes and foreign exchange of $12.6 million, offset by other adjustments, net of taxes totaling $14.7 million. Reported net earnings were $47.1 million, or $0.12 per share
· Cash and cash equivalents increased $95.0 million, or 73%, to $224.8 million at year end, with no debt and $13.0 million in equity securities
· Paid dividends of $39.4 million, or $0.10 per share for the full year
*Growth Projects, Mineral Reserves and Resources and Other Highlights*
· Issued three-year guidance on January 10, 2024, which included increased production guidance for 2024 of between 485,000 and 525,000 ounces. Production is expected to increase 7% by 2026, with AISC decreasing 11% reflecting low cost production growth from Island Gold with the completion of the Phase 3+ Expansion
· Reported year-end 2023 Mineral Reserves of 10.7 million ounces of gold, a 2% increase from 2022, with grades also increasing 1%. This marked the fifth consecutive year Mineral Reserves have grown for a combined increase of 10% with grades also increasing 9% over that time frame. Additionally, Measured and Indicated Mineral Resources increased 12% to 4.4 million ounces, with grades increasing 9%, and Inferred Mineral Resources increased 3% to 7.3 million ounces, at 1% higher grades
· Advanced construction of the Phase 3+ Expansion with completion of key shaft site infrastructure in 2023 including the headframe and hoist house. Construction remains on schedule with shaft sinking commencing in December and engineering on the mill and paste plant well underway
· Received approval of the updated Closure Plan Amendment from the Ontario Government in December allowing for the start of construction on the larger mill expansion and paste plant as outlined in the Phase 3+ Expansion study
· Achieved a significant permitting milestone for the Lynn Lake project in March with a positive Decision Statement issued by the Department of Environment and Climate Change Canada based on the completed Federal Environmental Impact Statement, and Environment Act Licenses issued by the Province of Manitoba
· Completed an updated Feasibility Study on the Lynn Lake project in August 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
· Completed the acquisition of Manitou Gold in May, adding significant exploration potential across the Michipicoten Greenstone Belt by more than tripling the regional land package adjacent to and along strike from Island Gold
· Publication of Alamos’ inaugural Climate Change Report, outlining corporate governance around climate-related risks and opportunities, and issued the 2022 Environmental, Social and Governance ("ESG") Report, outlining the Company’s progress on its ESG performance
· Announced the acquisition of Orford Mining in January 2024, through which the Company will consolidate its existing ownership of Orford shares and add the highly prospective Qiqavik Gold Project, located in Quebec, Canada. The Company expects to issue approximately 0.9 million shares for total consideration of approximately $12 million with the transaction expected to close in April 2024^(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 December 31,* *Years Ended December 31,**
* *2023* *2022* *2023* *2022*
*Financial Results (in millions)*
Operating revenues $ 254.6 $ 231.9 $ 1,023.3 $ 821.2
Cost of sales ^(1) $ 166.7 $ 153.4 $ 637.7 $ 608.9
Earnings from operations $ 71.9 $ 61.6 $ 318.1 $ 111.5
Earnings before income taxes $ 51.2 $ 52.6 $ 293.7 $ 102.4
Net earnings $ 47.1 $ 40.6 $ 210.0 $ 37.1
Adjusted net earnings ^(2) $ 49.2 $ 33.7 $ 208.4 $ 107.9
Earnings before interest, taxes, depreciation and amortization ^(2) $ 101.6 $ 100.4 $ 486.4 $ 351.7
Cash provided by operations before working capital and taxes paid ^(2) $ 120.2 $ 109.3 $ 518.9 $ 361.6
Cash provided by operating activities $ 124.1 $ 102.3 $ 472.7 $ 298.5
Capital expenditures (sustaining)^ (2) $ 26.6 $ 26.5 $ 104.2 $ 95.2
Capital expenditures (growth) ^(2) (3) $ 73.0 $ 50.2 $ 216.7 $ 191.9
Capital expenditures (capitalized exploration) $ 10.1 $ 8.1 $ 28.0 $ 26.6
Free cash flow ^(2) $ 14.4 $ 17.5 $ 123.8 $ (15.2 )
*Operating Results *
Gold production (ounces) 129,500 134,200 529,300 460,400
Gold sales (ounces) 129,005 133,164 526,258 456,574
*Per Ounce Data*
Average realized gold price $ 1,974 $ 1,741 $ 1,944 $ 1,799
Average spot gold price (London PM Fix) $ 1,971 $ 1,726 $ 1,941 $ 1,800
Cost of sales per ounce of gold sold (includes amortization) ^(1) $ 1,292 $ 1,152 $ 1,212 $ 1,334
Total cash costs per ounce of gold sold ^(2) $ 900 $ 810 $ 850 $ 884
All-in sustaining costs per ounce of gold sold ^(2) $ 1,233 $ 1,138 $ 1,160 $ 1,204
*Share Data*
Earnings per share, basic and diluted $ 0.12 $ 0.10 $ 0.53 $ 0.09
Adjusted earnings per share, basic ^(2) $ 0.12 $ 0.09 $ 0.53 $ 0.28
Weighted average common shares outstanding (basic) (000’s) 396,577 393,034 395,509 392,172
*Financial Position (in millions)*
Cash and cash equivalents $ 224.8 $ 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. *Three Months Ended December 31,* *Years Ended December 31,* *2023* *2022* *2023* *2022*
*Gold production (ounces) *
Young-Davidson 49,800 44,600 185,100 192,200
Island Gold 31,600 40,500 131,400 133,700
Mulatos District ^(7) 48,100 49,100 212,800 134,500
*Gold sales (ounces)*
Young-Davidson 48,052 44,781 182,796 192,186
Island Gold 30,464 39,145 127,629 130,652
Mulatos District 50,489 49,238 215,833 133,736
*Cost of sales (in millions) *^(1)
Young-Davidson $ 64.6 $ 62.2 $ 248.2 $ 250.5
Island Gold $ 33.8 $ 35.2 $ 123.6 $ 120.4
Mulatos District $ 68.3 $ 56.0 $ 265.9 $ 238.0
*Cost of sales per ounce of gold sold (includes amortization) *^(1)
Young-Davidson $ 1,344 $ 1,389 $ 1,358 $ 1,303
Island Gold $ 1,110 $ 899 $ 968 $ 922
Mulatos District $ 1,353 $ 1,137 $ 1,232 $ 1,780
*Total cash costs per ounce of gold sold *^(2)
Young-Davidson $ 920 $ 942 $ 938 $ 878
Island Gold $ 775 $ 605 $ 669 $ 637
Mulatos District $ 957 $ 851 $ 883 $ 1,134
*Mine-site all-in sustaining costs per ounce of gold sold *^(2),(3)
Young-Davidson $ 1,211 $ 1,284 $ 1,208 $ 1,133
Island Gold $ 1,136 $ 863 $ 1,017 $ 918
Mulatos District $ 1,030 $ 922 $ 967 $ 1,241
*Capital expenditures (sustaining, growth, and capitalized exploration) (in millions)* ^(2)
Young-Davidson ^(4) $ 24.0 $ 20.6 $ 67.2 $ 71.5
Island Gold ^(5) $ 73.9 $ 53.9 $ 233.1 $ 157.3
Mulatos District ^(6) $ 8.4 $ 5.5 $ 30.4 $ 62.7
Other $ 3.4 $ 4.8 $ 18.2 $ 22.2
^(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 $1.3 million and $5.1 million for the three months and year ended December 31, 2023, respectively ($1.5 million and $5.0 million for the three months and year ended December 31, 2022, respectively).
^(5) Includes capitalized exploration at Island Gold of $3.3 million and $11.1 million for the three months and year ended December 31, 2023, respectively ($4.9 million and $18.8 million for the three months and year ended December 31, 2022, respectively).
^(6) Includes capitalized exploration at Mulatos District of $5.5 million and $11.8 million for the three months and year ended December 31, 2023, respectively ($1.7 million and $2.8 million for the three months and year ended December 31, 2022, respectively).
^(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 1.45 in the fourth quarter, a decrease from 1.84 in the third quarter of 2023
· Lost time injury frequency rate^1 ("LTIFR") of 0.10, an increase from 0.09 in the third quarter of 2023
· Full year TRIFR of 1.50 and LTIFR of 0.07, a reduction of 6% and an increase of 7%, respectively, from 2022
· Mulatos received the Silver Helmet Award from CAMIMEX for the second consecutive year. The Silver Helmet Award recognizes high safety standards & processes in the mining sector in Mexico
During the fourth quarter of 2023, TRIFR decreased with 15 recordable injuries, as compared to 21 in the prior quarter, and one lost time injury, contributing to a significant improvement in annual safety performance.
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 fourth quarter and full year
· Updated Closure Plan Amendment received for Island Gold, allowing for construction of the larger mill expansion and paste plant, as outlined in the Phase 3+ Expansion study
· Completed year one of Alamos’ Independent Tailings Review Board work
· Alamos’ climate change risk assessment was updated to evaluate the effects of material risks and opportunities on the Company’s strategy and financial position, using updated climate scenarios and industry practices. This exercise is expected to be completed in the first quarter of 2024 and will incorporate climate risk into Alamos’ financial performance, corporate strategy and mitigation plans in line with IFRS S2 and recommendations of the Taskforce on Climate-Related Financial Disclosure ("TCFD")
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:
· Various sponsorships to support local youth sports teams and community events, and donations to local charities and organizations around the Company's mines
· Scholarships awarded to local students in Matarachi, and students in Canada as part of the Young Mining Professionals Scholarship Program
· Health campaigns in Matarachi including full body health assessments for several hundred residents, and vaccination campaigns for influenza and COVID
· Ongoing support to our community beekeeping project involving both the Mulatos Mine and participants from Matarachi
· Community clean-up in Mulatos and Matarachi in preparation for the Day of the Dead and Mexican Revolution holidaysThe 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*
· Published Alamos’ 2022 ESG Report, outlining the Company’s progress on its ESG performance in accordance with the Sustainability Accounting Standards Board Metals & Mining Industry Standard, the recommendations of the TCFD, and the Global Reporting Initiative Standards for sustainability reporting “Core” requirements. It focuses on economic, environmental, social and governance topics and indicators that are of the greatest interest to Alamos’ stakeholders
· The Mulatos mine was awarded the Empresa Socialmente Responsible award by the Mexican Center for Philanthropy for the 15th consecutive year, and the Ethics and Values in Industry award from CONCAMIN for the fourth consecutive year
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*
*2024 Guidance* *Young-Davidson* *Island Gold* *Mulatos* *Lynn Lake* *Total*
*Gold production *(000's ounces) 180 - 195 145 - 160 160 - 170 *485 - 525*
*Cost of sales, including amortization* (in millions)^(3) *$**620*
*Cost of sales, including amortization * ($ per ounce)^(3) *$**1,225*
*Total cash costs *($ per ounce)^(1) $950 - $1,000 $550 - $600 $925 - $975 — *$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 $875 - $925 $1,000 - $1,050 —
*Capital expenditures * (in millions)
Sustaining capital^(1) $40 - $45 $50 - $55 $3 - $5 — *$93 - $105*
Growth capital^(1) $20 - $25 $210 - $230 $2 - $5 — *$232 - $260*
* Total Sustaining and Growth Capital *^*(1)** - producing mines* *$60 - $70* *$260 - $285* *$5 - $10* — *$325 - $365*
*Growth capital - development projects* $25 *$**25*
Capitalized exploration^(1) $10 $13 $9 $9 *$**41*
*Total capital expenditures and capitalized exploration*^*(1)* *$70 - $80* *$273 - $298* *$14 - $19* *$**34* *$391 - $431*
^(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.
*2023 Year in Review*
With the strong finish to the year, the Company delivered record operational and financial performance in 2023. This included record annual production of 529,300 ounces which drove record revenues of $1.0 billion and record operating cash flows of $472.7 million. Full year production was 15% higher than 2022 and achieved the high end of increased guidance. Costs were also in line with annual guidance. Reflecting the strong operational and financial performance, and balanced approach to growth, the Company generated consolidated free cash flow of $123.8 million in 2023 while investing in the Phase 3+ Expansion.
La Yaqui Grande continued to outperform, contributing to a 58% increase in production from the Mulatos District, at 22% lower costs. This exceeded annual production guidance, driving a substantial increase in mine-site free cash flow from Mulatos to $142.1 million. Young-Davidson delivered its third consecutive year of mine-site free cash flow in excess of $100 million and is well positioned to deliver similar levels of free cash flow over the long-term. Island Gold continued to perform well while self-funding the majority of the Phase 3+ Expansion capital. The expansion remains on track for completion in 2026 with significant progress made through 2023. All the major components of the shaft site infrastructure have now been completed, including the headframe and hoist house, which enabled the start of shaft sinking in December 2023.
Additionally, the Company delivered on a number of key catalysts, supporting ongoing value creation within its pipeline of growth projects. This included achieving a significant permitting milestone and completing an updated Feasibility Study on the Lynn Lake project, which outlined a larger, longer-life, low-cost operation with attractive economics and significant exploration upside. The Company also demonstrated another year of exploration success, most notably at Island Gold and Puerto Del Aire ("PDA") driving a further increase in high-grade Mineral Reserves and Resources. The increase in high-grade Mineral Reserves at PDA is being incorporated into a development plan to be completed during the first quarter of 2024 which is expected to outline a significant mine life extension at Mulatos.
As announced earlier this week, Global Mineral Reserves increased to 10.7 million ounces of gold (202 mt grading 1.65 g/t Au), a 2% increase from 2022, with a further 1% increase in grades. This marks the fifth consecutive year of growth in Mineral Reserves for a combined increase of 10% over that time frame. Grades have also increased 9% over that period as Mineral Reserves continue to grow both in size and quality. The increase in 2023 driven by higher-grade additions at Island Gold and PDA, as well as growth at Lynn Lake.
Island Gold's tremendous pace of growth continued in 2023 with an 18% increase in Mineral Reserves to 1.7 million ounces, and 16% increase in combined Mineral Reserves and Resources to 6.1 million ounces. PDA's Mineral Reserves increased 33% to 1.0 million ounces with grades increasing a further 16%. Both deposits remain open in multiple directions, highlighting the significant potential for this growth to continue. Reflecting the continued exploration success and growth potential, the Company has increased its 2024 exploration budget to the largest in its history.
*2024 Outlook*
The Company provided three-year production and operating guidance in January 2024, which outlined growing production at declining costs over the next three years. Refer to the Company’s January 10, 2024 guidance press release for a summary of the key assumptions and related risks associated with the comprehensive 2024 guidance and three-year production, cost and capital outlook. Gold production in 2024 is expected to range between 485,000 and 525,000 ounces, a 3% increase from the previous three-year guidance provided in January 2023 (based on the mid-point). Total cash costs and AISC are expected to be consistent with 2023.
The increased production guidance was driven by higher expected production from the Mulatos District through residual leaching of the Mulatos leach pad. La Yaqui Grande is expected to supply approximately 75% of Mulatos District production at a similar low-cost structure as 2023. The remaining production is expected to come from residual leaching of the main Mulatos leach pad which carries higher reported AISC, though with the majority of these costs previously incurred, the recovery of these ounces is expected to be very profitable from a cash flow perspective.
Production is expected to be slightly higher during the first half of 2024, with the recovery of ounces through residual leaching at Mulatos expected to decline through the year. First quarter production is expected to be between 123,000 and 133,000 ounces with total cash costs and AISC above the top end of annual guidance reflecting a larger proportion of production coming through residual leaching at Mulatos and slightly lower planned grades at Young-Davidson. Consistent with annual guidance, costs are expected to trend lower through the year reflecting declining rates of production from residual leaching at Mulatos.
Production is expected to increase 7% by 2026 to between 520,000 and 560,000 ounces, with AISC decreasing 11% to between $975 and $1,075 per ounce reflecting low-cost production growth from Island Gold with the completion of the Phase 3+ Expansion. The three year guidance excludes the higher grade PDA project which represents potential production upside at Mulatos as early as 2026. This upside is expected to be outlined in a development plan for PDA to be released during the first quarter of 2024. Looking beyond 2026, the Lynn Lake project is expected to support further potential growth as early as the second half of 2027.
Capital spending is expected to increase from 2023 reflecting inflation, higher capital at Island Gold and Lynn Lake, and an increased capitalized exploration budget. Capital spending on the Lynn Lake project is expected to more than double the amount spent in 2023. Spending at Lynn Lake will be focused on upgrades to site access and infrastructure, including early work on the power line upgrade, in advance of a construction decision anticipated in 2025. Additionally, a portion of the 2024 exploration program will be focused on converting Mineral Resources at the Burnt Timber and Linkwood satellite deposits into a smaller, higher quality Mineral Reserve. A study incorporating these deposits into the Lynn Lake project is expected to be completed in the fourth quarter of 2024, and represents potential production and economic upside to the 2023 Feasibility Study.
Given the strong profitability of the Mulatos operation in 2023, the Company expects to pay significantly higher cash tax payments in Mexico in 2024, which includes the 2023 year-end tax payment due in the first quarter of approximately $40 million. Combined with an expected decrease in costs through the year, the Company expects stronger free cash flow starting in the second quarter of 2024.
The global exploration budget for 2024 is $62 million, a 19% increase from $52 million spent in 2023. The increase reflects expanded budgets across all key assets following up on broad-based exploration success in 2023. Island Gold and the Mulatos District account for approximately 60% of the total budget with $19 million planned for each asset. This is followed by $12 million at Young-Davidson, $9 million at Lynn Lake and $2 million at Golden Arrow.
The Company's liquidity position remains strong, ending the year with $224.8 million of cash and cash equivalents, $13.0 million in investments in equity securities, and no debt, an increase from $129.8 million at the end of 2022 reflecting strong free cash flow generation throughout the year. Additionally, the Company has a $500 million undrawn credit facility, providing total liquidity of $737.8 million.
*Fourth Quarter and Year-End 2023 results*
*Young-Davidson Financial and Operational Review*
*Three Months Ended December 31,**
* *Years Ended December 31,**
* *2023* *2022* *2023* *2022*
Gold production (ounces) 49,800 44,600 185,100 192,200
Gold sales (ounces) 48,052 44,781 182,796 192,186
*Financial Review (in millions)*
Operating Revenues $ 94.8 $ 78.1 $ 355.3 $ 347.8
Cost of sales^ (1) $ 64.6 $ 62.2 $ 248.2 $ 250.5
Earnings from operations $ 29.8 $ 15.6 $ 104.2 $ 93.0
Cash provided by operating activities $ 59.0 $ 44.6 $ 184.8 $ 172.8
Capital expenditures (sustaining) ^(2) $ 13.9 $ 15.2 $ 49.0 $ 48.8
Capital expenditures (growth) ^(2) $ 8.8 $ 3.9 $ 13.1 $ 17.7
Capital expenditures (capitalized exploration) ^(2) $ 1.3 $ 1.5 $ 5.1 $ 5.0
Mine-site free cash flow ^(2) $ 35.0 $ 24.0 $ 117.6 $ 101.3
Cost of sales, including amortization per ounce of gold sold ^(1) $ 1,344 $ 1,389 $ 1,358 $ 1,303
Total cash costs per ounce of gold sold^ (2) $ 920 $ 942 $ 938 $ 878
Mine-site all-in sustaining costs per ounce of gold sold^ (2),(3) $ 1,211 $ 1,284 $ 1,208 $ 1,133
*Underground Operations*
Tonnes of ore mined 687,738 661,012 2,878,155 2,783,831
Tonnes of ore mined per day 7,475 7,185 7,885 7,627
Average grade of gold ^(4) 2.39 2.32 2.20 2.30
Metres developed 2,045 2,731 9,085 11,664
*Mill Operations*
Tonnes of ore processed 724,670 697,816 2,878,047 2,859,608
Tonnes of ore processed per day 7,877 7,585 7,885 7,835
Average grade of gold ^(4) 2.38 2.31 2.20 2.31
Contained ounces milled 55,412 51,814 203,791 212,548
Average recovery rate 91 % 91 % 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 49,800 ounces of gold in the fourth quarter, a 12% increase compared to the prior year period, reflecting higher grades mined. With the strong finish to the year, Young-Davidson produced 185,100 ounces in 2023, achieving the low end of annual guidance.
Underground mining rates averaged 7,475 tpd in the fourth quarter, higher than the prior year period but below annual guidance due to maintenance on the headframe ore bin apron feeder. For the full year, mining rates averaged 7,885 tpd, consistent with guidance. Grades mined averaged 2.39 g/t Au in the fourth quarter, a 16% increase from the third quarter and a 3% increase compared to the prior year period. Grades increased as planned, reflecting the mining of higher grade stopes that had been deferred from the third quarter. Grades averaged 2.20 g/t Au for the year, in line with guidance.
Milling rates averaged 7,877 tpd in the fourth quarter, exceeding the prior year period as well as mining rates, with surface stockpiles supplementing mill feed. Milling rates averaged 7,885 tpd for the full year, consistent with the prior year and annual guidance. Mill recoveries averaged 91% in the quarter and 90% for the full year, both in line with guidance.
Financial Review
Fourth quarter revenues of $94.8 million were 21% higher than the prior year period, resulting from a higher realized gold price and a 7% increase in ounces sold. Full year revenues of $355.3 million were 2% higher than the prior year, due to the higher realized gold price, offset by less ounces sold.
Cost of sales of $64.6 million in the fourth quarter were 4% higher than the prior year period, resulting from higher unit costs and higher tonnage processed. Underground mining costs were CAD $55 per tonne in the quarter, an increase from earlier in the year reflecting fewer tonnes mined, as well as inflationary pressures, primarily labour. Cost of sales of $248.2 million for the full year were in line with the comparable period.
Total cash costs were $920 per ounce in the fourth quarter and $938 per ounce for the full year. Mine-site AISC were $1,211 per ounce in the quarter and $1,208 per ounce for the full year. Both metrics were consistent with annual guidance in the fourth quarter and full year. Full year costs were higher than the comparative periods due to inflationary pressures and slightly lower grades processed.
Capital expenditures in the fourth quarter included $13.9 million of sustaining capital and $8.8 million of growth capital. Additionally, $1.3 million was invested in capitalized exploration in the quarter. Capital expenditures, inclusive of capitalized exploration, totaled $67.2 million for the full year, a 6% decrease from the prior year and in line with annual guidance.
Young-Davidson continues to demonstrate strong operational and financial consistency with mine-site free cash flow of $35.0 million in the fourth quarter, and a record $117.6 million for 2023. This marked the third consecutive year the operation has generated more than $100 million of mine-site free cash flow. With a 15-year Mineral Reserve life, Young-Davidson is well positioned to generate similar levels of free cash flow over the long-term.
*Island Gold Financial and Operational Review*
*Three Months Ended December 31,**
* *Years Ended December 31,**
* *2023* *2022* *2023* *2022*
Gold production (ounces) 31,600 40,500 131,400 133,700
Gold sales (ounces) 30,464 39,145 127,629 130,652
*Financial Review (in millions)*
Operating Revenues $ 60.0 $ 68.0 $ 247.8 $ 235.3
Cost of sales^ (1) $ 33.8 $ 35.2 $ 123.6 $ 120.4
Earnings from operations $ 25.3 $ 32.1 $ 120.5 $ 110.2
Cash provided by operating activities $ 39.9 $ 39.1 $ 164.9 $ 148.1
Capital expenditures (sustaining) ^(2) $ 10.9 $ 10.1 $ 43.9 $ 36.5
Capital expenditures (growth) ^(2) $ 59.7 $ 38.9 $ 178.1 $ 102.0
Capital expenditures (capitalized exploration) ^(2) $ 3.3 $ 4.9 $ 11.1 $ 18.8
Mine-site free cash flow ^(2) $ (34.0 ) $ (14.8 ) $ (68.2 ) $ (9.2 )
Cost of sales, including amortization per ounce of gold sold ^(1) $ 1,110 $ 899 $ 968 $ 922
Total cash costs per ounce of gold sold^ (2) $ 775 $ 605 $ 669 $ 637
Mine-site all-in sustaining costs per ounce of gold sold^ (2),(3) $ 1,136 $ 863 $ 1,017 $ 918
*Underground Operations*
Tonnes of ore mined 114,895 101,045 437,541 420,801
Tonnes of ore mined per day ("tpd") 1,249 1,098 1,199 1,153
Average grade of gold ^(4) 8.96 12.13 9.43 10.03
Metres developed 1,730 2,109 8,031 7,114
*Mill Operations*
Tonnes of ore processed 116,440 119,924 439,008 456,592
Tonnes of ore processed per day 1,266 1,304 1,203 1,251
Average grade of gold ^(4) 8.76 10.70 9.48 9.64
Contained ounces milled 32,797 41,274 133,826 141,530
Average recovery rate 98 % 97 % 97 % 96 %
^(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 31,600 ounces in the fourth quarter of 2023, a 22% decrease from the prior year period, resulting from lower grades mined and processed, as planned. For the full year, Island Gold produced 131,400 ounces, achieving the mid-point of full year production guidance.
Underground mining rates averaged 1,249 tpd in the fourth quarter, exceeding annual guidance, and a 14% increase from the prior year period. Mining rates for the full year were in line with guidance. Grades mined averaged 8.96 g/t Au in the quarter, and 9.43 g/t Au for the full year, both consistent with annual guidance.
Mill throughput also exceeded guidance, averaging 1,266 tpd for the quarter. Mill throughput was lower than the prior year period, as the fourth quarter of 2022 included processing of approximately 5,800 tonnes of Island Gold stockpiled ore at the Young-Davidson mill. Mill recoveries averaged 98% in the fourth quarter and 97% for the full year, consistent with guidance.
Financial Review
Revenues of $60.0 million in the fourth quarter were 12% lower than the prior year period reflecting lower ounces sold, partly offset by higher realized gold prices. Revenues of $247.8 million for the full year were 5% higher than the prior year period primarily due to the higher realized gold prices.
Cost of sales of $33.8 million in the fourth quarter was 4% lower than the prior year period, resulting from the lower production in the quarter. For the full year, cost of sales were $123.6 million, 3% higher than the prior year period, driven by inflationary pressures on mining and processing costs.
Total cash costs of $775 per ounce and mine-site AISC of $1,136 per ounce in the fourth quarter were both higher than the prior year period reflecting lower production with the lower grades mined, ongoing inflationary pressures, primarily labour, as well as non-recurring costs associated with the transition from contractor to owner development and production drilling, which was completed in the quarter. Total cash costs of $669 per ounce and mine-site AISC of $1,017 per ounce for the full year were higher than the comparable period, and slightly above annual guidance.
Total capital expenditures were $73.9 million in the fourth quarter, including $59.7 million of growth capital and $3.3 million of capitalized exploration. Growth capital spending remained focused on the Phase 3+ Expansion shaft site infrastructure. This included the commissioning of the shaft sinking plant, completion of buried services and grid power tie-in for the shaft site and upgraded voltage regulation facility. The Phase 3+ Expansion achieved a significant milestone during the quarter with the start of shaft sinking in December. Additionally, capital spending was focused on lateral development and other surface infrastructure. For the full year, capital spending totaled $233.1 million, inclusive of capitalized exploration of $11.1 million, with the majority related to construction activities on the Phase 3+ Expansion. Capital spending for the year was in line with annual guidance.
Mine-site free cash flow was negative $34.0 million in the fourth quarter and negative $68.2 million for the full year given the significant capital investment related to the Phase 3+ Expansion. At current gold prices, Island Gold is expected to continue funding the majority of the Phase 3+ Expansion capital. 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 December 31,**
* *Years Ended December 31,**
* *2023* *2022* *2023* *2022*
Gold production (ounces) 48,100 49,100 212,800 134,500
Gold sales (ounces) 50,489 49,238 215,833 133,736
*Financial Review *(in millions)
Operating Revenues $ 99.8 $ 85.8 $ 420.2 $ 238.1
Cost of sales^ (1) $ 68.3 $ 56.0 $ 265.9 $ 238.0
Earnings (loss) from operations $ 31.0 $ 28.8 $ 144.4 $ (7.4 )
Cash provided by operating activities $ 35.8 $ 34.3 $ 172.5 $ 25.9
Capital expenditures (sustaining)^ (2) $ 1.8 $ 1.2 $ 11.3 $ 9.9
Capital expenditures (growth)^ (2) $ 1.1 $ 2.6 $ 7.3 $ 50.0
Capital expenditures (capitalized exploration) ^(2) $ 5.5 $ 1.7 $ 11.8 $ 2.8
Mine-site free cash flow ^(2) $ 27.4 $ 28.8 $ 142.1 $ (36.8 )
Cost of sales, including amortization per ounce of gold sold ^(1) $ 1,353 $ 1,137 $ 1,232 $ 1,780
Total cash costs per ounce of gold sold ^(2) $ 957 $ 851 $ 883 $ 1,134
Mine site all-in sustaining costs per ounce of gold sold ^(2),(3) $ 1,030 $ 922 $ 967 $ 1,241
*La Yaqui Grande Mine*
*Open Pit Operations*
Tonnes of ore mined - open pit^ (4) 920,058 1,034,974 3,867,172 2,271,387
Total waste mined - open pit ^(6) 4,918,849 6,133,308 22,069,019 23,602,762
Total tonnes mined - open pit 5,838,907 7,168,282 25,936,191 25,874,149
Waste-to-ore ratio (operating) 4.97 5.00 4.99 5.00
*Crushing and Heap Leach Operations*
Tonnes of ore stacked 954,127 1,020,449 3,936,145 2,147,558
Average grade of gold processed ^(5) 1.64 1.43 1.55 1.38
Contained ounces stacked 50,422 46,931 196,619 95,064
Average recovery rate 67 % 79 % 78 % 71 %
Ore crushed per day (tonnes) 10,400 11,100 10,800 7,809
*Mulatos Mine*
*Open Pit Operations*
Tonnes of ore mined - open pit^ (4) — 1,065,739 2,250,380 3,666,515
Total waste mined - open pit ^(6) — 756,749 1,309,034 5,994,109
Total tonnes mined - open pit — 1,822,487 3,559,415 9,660,624
Waste-to-ore ratio (operating) — 0.71 0.58 1.36
*Crushing and Heap Leach Operations*
Tonnes of ore stacked 758,627 1,477,642 4,488,365 6,020,558
Average grade of gold processed ^(5) 2.17 0.78 1.34 0.73
Contained ounces stacked 52,924 37,262 193,299 142,227
Average recovery rate 27 % 32 % 31 % 47 %
Ore crushed per day (tonnes) 8,200 16,100 12,300 16,500
^(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 Review
The Mulatos District produced 48,100 ounces in the fourth quarter, 2% lower than the prior year period, reflecting lower stacking rates with the end of mining in the main Mulatos open pit during the third quarter of 2023. Production for the full year totaled 212,800 ounces, exceeding the top end of annual guidance by 15%, driven by the strong performance from La Yaqui Grande.
La Yaqui Grande Operational Review
La Yaqui Grande produced 33,700 ounces in the fourth quarter, and 153,400 ounces for the full year, exceeding expectations, reflecting higher than planned mining rates and grades mined. Grades stacked averaged 1.64 g/t Au in the fourth quarter, and 1.55 g/t Au for the full year, both above annual guidance of 1.15 to 1.45 g/t Au, reflecting positive grade reconciliation. Stacking rates of 10,400 tpd in the fourth quarter were consistent with the third quarter and slightly above annual guidance. The recovery rate was 67% in the fourth quarter, lower than annual guidance, reflecting the timing of recoveries, with the highest grade ore stacked in December, which will be recovered in 2024. The full year recovery rate of 78% was slightly below guidance reflecting the above noted timing of higher grades stacked late in the year.
Mulatos Operational Review
Mulatos produced 14,400 ounces in the fourth quarter and 59,400 ounces for the full year. Production was lower than the prior year periods reflecting completion of mining from the El Salto portion of the pit in July. Stacking of remaining stockpiles was completed in the fourth quarter and residual leaching commenced in December 2023. The operation is expected to benefit from ongoing gold production at decreasing rates in 2024 through residual leaching of the leach pad.
Financial Review (Mulatos District)
Revenues of $99.8 million in the fourth quarter were 16% higher than the prior year period, reflecting higher realized gold prices. Revenues of $420.2 million for the full year, were 76% higher than the prior year, driven by significantly higher gold production and sales and the higher realized gold price.
Cost of sales of $68.3 million in the fourth quarter were 22% higher than in the prior year period due to a higher proportion of production from the main Mulatos operation, the stronger Mexican Peso, and ongoing inflationary pressures. For the full year, cost of sales of $265.9 million were 12% higher than the comparable period, due to the significant increase in production. On a per ounce basis, cost of sales were 31% lower than the prior year reflecting the greater contribution of low-cost ounces at La Yaqui Grande.
Total cash costs of $957 per ounce and mine-site AISC of $1,030 per ounce in the fourth quarter were higher than the prior year period due to a higher proportion of production from the main Mulatos operation, the stronger Mexican Peso, and ongoing inflationary pressures. Total cash costs for the full year were $883 per ounce, below annual guidance, driven by the outperformance of La Yaqui Grande with higher grades and stacking rates. Mine-site AISC of $967 per ounce for the full year were in line with annual guidance.
Total cash costs and mine-site AISC for the Mulatos District are expected to increase slightly in 2024 reflecting additional production from residual leaching of the main Mulatos leach pad, which also drove the increase in production guidance from a year ago. The ounces recovered through residual leaching carry higher reported mine-site AISC of approximately $1,850 per ounce. The majority of these costs were previously incurred and recorded in inventory. The cash component to recover these ounces in 2024 is expected to be approximately $800 per ounce providing stronger free cash flow than implied by the higher reportable costs.
Capital expenditures totaled $8.4 million in the fourth quarter, including sustaining capital of $1.8 million, and $5.5 million of capitalized exploration focused on drilling at PDA. For the full year, capital spending totaled $30.4 million, including $11.8 million of capitalized exploration. Total sustaining and growth capital spending was in line with guidance for the full year. Capitalized exploration was higher than initially budgeted, reflecting increased spending following up on continued exploration success at PDA.
The Mulatos District generated mine-site free cash flow of $27.4 million in the fourth quarter, and $142.1 million for the full year, driven by the high-margin production growth from La Yaqui Grande. Mulatos paid cash taxes of $8.4 million during 2023. Given the increased profitability of the operation, the Company expects to make significantly higher cash tax payments in Mexico in 2024. This includes the 2023 year end tax payment due in the first quarter, which is expected to be approximately $40 million.
*Fourth 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 fourth quarter of 2023, including the start of shaft sinking in December, which was a significant milestone for the project. Further details on progress to the end of the year are summarized below:
· Completed the grid power tie-in for the shaft site and upgraded voltage regulation facility
· Commissioned the shaft sinking plant
· Mechanical and electrical outfitting for hoist house and headframe substantially complete
· Completed structural steel, roofing, interior and exterior cladding for the warehouse
· Completed buried services required for shaft sink, with first blast occurring in December
· Paste plant detailed engineering 75% complete; issuance of long lead time equipment procurement packages is ongoing with construction activities expected to begin in the second half of 2024
· Mill expansion basic engineering completed, and detailed engineering commenced in December with overall engineering being 40% complete. Issuance of long lead time equipment procurement packages is ongoing with construction activities on the mill expansion expected to commence in the second quarter of 2024
· Advanced lateral development to support higher mining rates with the Phase 3+ Expansion
The Phase 3+ Expansion remains on schedule to be completed during the first half of 2026. During the fourth quarter of 2023, the Company spent $59.7 million on the Phase 3+ Expansion and capital development. As of December 31, 2023, 51% of the total initial growth capital of $756 million has been spent and committed on the project. Capital spending is tracking well for work completed to date; however, continuing labour cost pressures may impact future project costs. Progress on the Expansion is detailed as follows:
(in US$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 229 143 63 90 %
Mill Expansion 76 5 15 26 %
Paste Plant 52 1 2 6 %
Power Upgrade 24 8 6 58 %
Effluent Treatment Plant 16 — — —
General Indirect Costs 64 33 5 59 %
Contingency^3 55 —
Total Growth Capital $ 516 $ 190 $ 91 54 %
Underground Equipment & Infrastructure 79 32 — 41 %
Accelerated Capital Development 162 71 — 44 %
Total Growth Capital (including Accelerated Spend) $ 756 $ 293 $ 91 51 %
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 December 31, 2023 of $0.76:1.
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 $210 million and $230 million in 2024. Capital spending is expected to remain at similar levels in 2025 and then drop considerably in 2026 once the expansion is completed during the first half of 2026.
*Shaft site area - February 2024*
*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 Department 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 Department 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 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 75% complete; basic engineering 100% complete as of December 2023
· EIS approval and Provincial licenses received in March 2023 with requirements outlined through the permitting process incorporated into the 2023 Study
Attractive 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 pricesSignificant 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
Development spending (excluding exploration) was $3.0 million in the fourth quarter of 2023 on engineering to support the updated Feasibility Study. For the full year, development spending (excluding exploration) was $11.6 million.
Capital spending on the Lynn Lake project, excluding exploration, is expected to total $25 million in 2024. This is up from 2023 reflecting planned upgrades to the site access and infrastructure. With approval of the EIS received in March 2023, and the positive Feasibility Study completed in August 2023, the focus in 2024 will be on further de-risking and advancing the project ahead of an anticipated construction decision in 2025. This includes finishing detailed engineering, which is 75% complete, upgrading road access, and early work on the power line upgrade. The majority of the $25 million capital budget in 2024 is spending included as initial capital in the 2023 Feasibility Study.
With $224.8 million of cash as of December 31, 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.
*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 their 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 $1.3 million in the fourth quarter related to ongoing care and maintenance and arbitration costs to progress the Treaty claim, which was expensed. For the full year, the Company incurred $2.9 million.
*Fourth Quarter 2023 Exploration Activities*
*Island Gold (Ontario, Canada)*
Total exploration expenditures during the fourth quarter were $4.2 million, of which $3.3 million was capitalized. For 2023, exploration expenditures totaled $14.8 million, of which $11.1 million was capitalized, consistent with the annual budget. The focus of the 2023 exploration program was on defining new Mineral Reserves and Resources in proximity to existing production horizons and infrastructure through a more cost-effective expanded underground drilling program that will leverage existing underground infrastructure.
As announced earlier this week, the program was successful with high-grade Mineral Reserves and Resources added across all categories to now total 6.1 million ounces, a 16% increase from the end of 2022. This included an 18% increase in Mineral Reserves to 1.7 million ounces (5.2 mt grading 10.30 g/t Au), a 146% increase in Measured and Indicated Mineral Resources to 0.7 million ounces (2.6 mt grading 8.73 g/t Au) and a 4% increase in Inferred Mineral Resources to 3.7 million ounces (7.9 mt grading 14.58 g/t Au).
The majority of these high-grade Mineral Reserve and Resource additions were in proximity to existing production horizons and infrastructure