It is my pleasure to welcome Scott Parsons, Senior Vice President of Investor Relations from Alamos Gold, ticker AGI. We will have a total of 30 minutes, including Q&A, at the end of the presentation. We greatly appreciate your participation, so please submit your questions at the bottom of your screen. With that, I'll turn it over to you.
Thank you, Stefan, and thanks to everybody for joining. So, 2023 was a record year for Alamos, both operationally and financially. And given the near-record gold prices we are realizing today, our pipeline of organic growth projects, we are on track to establish new financial records this year and expect to do so over the next several years. We have been one of the best-performing gold equities over the past two and a half years. And over the next 20 minutes, I'm going to outline the drivers of that performance as well as why we expect that strong performance to continue. Some of the factors that have driven that outperformance have been our strong track record of execution, our growth, but also our value creation. And this photo on the cover of our presentation is a great example of this.
In the foreground, you can see the Island Gold Mine, which we already own. In the background, you can see the Magino Mine, which we are currently in the process of acquiring. By integrating these two assets together, we expect to generate over $500 million of synergies with significant upside from there. That's one of the many ways in which we are looking to create value, and which is supporting that growing valuation and our rising share price. I am going to be making forward-looking statements through this presentation, so please do review our cautionary notes. This is a good overview of Alamos Gold, where we currently stand and where we are going as a company. We're a diversified intermediate gold producer, but we're also good business and a growth company.
We are producing a little bit over 500,000 ounces of gold per year currently, but we have two growth projects in our pipeline that will allow us to take our rate of production up to 800,000 ounces per year. With that Magino acquisition, which is expected to close in July, that's going to take our near-term production up over 600,000 ounces per year, and it'll give us the capacity to grow our long-term production to over 900,000 ounces per year. That's an 80% increase in production from current levels, and all of this growth is fully funded internally. Another attractive part about this growth is its lower cost. We're already a low-cost producer. Our all-in sustaining costs this year are around $1,150 per ounce, which compares quite favorably to the industry average, which is sitting around $1,400 per ounce.
We're already well below average, or well below the industry average in terms of our costs. And as we bring on this low-cost production growth, we expect our costs to decrease even further down towards the $1,000 per ounce mark. Another key facet of our story is our low political risk profile. Nearly 90% of our asset base is concentrated in Canada, and that's supported by two really long-life operations, Island Gold and Young-Davidson, which are located six hours north of our office in Toronto here. These are long-life underground operations that carry average mine lives of 18 years between them, with significant expansion upside. That's really anchoring that concentration of assets in Canada, a concentration of our valuation in Canada, and giving us one of the lowest political risk profiles in the sector.
That acquisition of Magino, it's right next door to our Island Gold Mine in Northern Ontario, Canada. It complements our outlook perfectly, giving us more growth, maintaining that low-cost profile, and increasing our exposure to Canada. I mentioned at the outset we have been a significant outperformer since the start of 2022, and you can see it in the chart on the right. We're up approximately 100% over that time frame. We've significantly outpaced the price of gold, which is up around 25%, as well as the various gold ETFs and the S&P 500 itself, which are all up around 10% or so. We're often asked in meetings what's driving that outperformance, and is it sustainable? On the first part of that question, it's not any one thing that's driving that outperformance.
We've delivered on a number of catalysts over that time frame, but it's really a growing appreciation of what we're doing as a company and the type of long-life, high-quality assets we have, where those assets are located, giving us that low political risk profile. The fact that we've got growth in an industry facing flat to declining rates of production. We've got declining costs in industry facing rising costs and really our consistent execution. We've developed an excellent track record of hitting both our production and cost targets. And why this outperformance is sustainable is ongoing value creation, and that's the last item on that list, but arguably the most important.
We are underpinning our rising share price with a growing valuation, and that's coming through sustained operational success across our asset base, as well as expanding and optimizing these assets to make them bigger, more productive, and more productive, as well as smart and attractive M&A, like our acquisition of Magino. Even with our share price doubling over the last few years, we are still very much attractively valued. We're a growth company. You can see that on the chart on the left-hand side of your screen. From 10 years ago, our EBITDA was a little bit less than $50 million. Last year, it was close to $500 million. With the growth we have on top and paired with the higher gold prices that we're realizing, we expect our EBITDA to grow further still.
And yet, we're trading at an attractive valuation with an EV/EBITDA multiple of around 8x, which is lower than virtually every sector in the S&P 500. It's below the broader index itself, which is trading at around 13x. It's also low relative to historical standards. All of this is underpinned by the fact that we're in a very supportive and attractive environment for gold, with growing debt levels, $34.5 trillion in the U.S. as we speak, ongoing deficits, which are approaching $2 trillion, growing debt service costs, which are up around $1 trillion. These are all supportive factors of gold. You pair that with the fact that we're getting close to an easing cycle. You've already seen Canada cut their rates, the European Central Bank cut rates, and the U.S. is moving closer to rate cuts, whether it's September or November.
Once you get into that easing cycle, gold tends to perform really well. If you look at how gold's performed during past easing cycles, over the past 40 years, it's been up approximately 34% over that time frame. There's a number of factors that point to the fact that we're in a very supportive environment for gold prices, and I do expect we are going to see higher gold prices towards the latter part of this year and into 2025. Value creation, I'm going to spend a lot of time talking about this through the presentation because it's really an important facet of our story. One of the ways we've been able to create a lot of value is through M&A.
And we've done this by staying disciplined and focusing on high-quality assets in good jurisdictions and waiting for the right opportunities to be able to acquire these assets at the right prices. This is probably one of my favorite stories. Many of you may have heard this before, but it really started with Mulatos 20 years ago. Mulatos was acquired for $10 million back in 2003. It was built for $70 million, and to date, it has generated more than $500 million in free cash flow out of all the capital that's been invested into that operation. And it carries a consensus value of over $600 million. So that's $1.2 billion of value created from an initial $10 million investment. And that's something that we've tried to replicate with all of our operations and really been our blueprint for success.
We've done that with Island Gold, and we're doing that with Magino, which represents our two most recent success stories. So Island Gold was acquired back in 2017 for $600 million. By the end of 2023, it carried a consensus value of $2.1 billion. With the integration of Magino, it now carries a consensus valuation of $3.4 billion. And that's a value we expect to continue to grow given the type of ongoing exploration potential we see at both the Island Gold and Magino deposit, as well as the longer-term expansion potential of that combined complex. So if you look across all three of the operating mines and you include our Lynn Lake project, that's close to $4 billion of value that we have created since their respective acquisitions. And that's come through a really strong track record of exploration success across all of these assets.
That's come through expanding and optimizing these assets to make them bigger and more productive and more profitable. This is a track record we're going to continue to look to build upon. So I'm going to spend a little bit more time talking about this Magino acquisition. We announced it in March, and it's expected to close in July. It's an excellent example of the type of ways we are looking to create value. It is located right beside our Island Gold Mine. Given their close proximity, we're going to be integrating the two operations to create a larger operation, which will be one of the largest, one of the lowest cost, and one of the most profitable gold mines in Canada. By integrating these two mines, we're going to realize synergies of more than $500 million. So it's a very attractive acquisition.
It's accretive on all operating and financial metrics. The other really attractive part about this is the longer-term upside potential. Through this larger consolidated operation, you've got a much bigger centralized mill, which is scalable, and that opens up additional opportunities down the road to expand both the Island Gold and Magino mines even further. The other appealing aspect about this transaction is it really complements the Alamos Gold story really well from every perspective. It's increasing our presence in Canada, and it's enhancing what is already one of the strongest growth profiles in the sector. So this is a great illustration of what's driving these synergies. I'll use my cursor to illustrate how close these two operations are together. So this is the Magino open pit. This is the Island Gold underground deposit. They're 300 meters apart.
We are currently operating the Island Gold Mill over to the upper right-hand portion of your screen. The Magino Mill is located 2 km apart. Similarly, we've got an Island Gold tailings facility. Magino's got a much larger permanent tailings facility, which can ultimately contain 150 million tonnes. So we don't need 2 mills, and we don't need tailings facilities. By integrating these two operations, we can shut down our Island Gold Mill instead of having to expand it, and we can also shut down our tailings facility. So that's going to save us about $140 million of capital. And by putting the Island Gold Mill or through this much larger, much more productive Magino Mill, we're also going to cut our processing costs in half. And combined with G&A savings, we expect that to save us about $25 million a year or $375 million over the life of mine.
So that's $515 million of pre-tax synergies we expect to realize by combining these two operations and integrating the milling complex. On top of this, we're also inheriting about $1 billion of tax pools from Magino, which is going to help shelter us from paying any significant cash taxes in Canada until 2028. So a very attractive transaction from multiple perspectives. And longer term, there's even more upside with this larger milling complex, which is scalable. We're going to evaluate opportunities to expand both the Island Gold operation and Magino operation even further. And this is our production and cost profile and a good illustration of how Magino really complements our strong outlook with growing production and declining costs. We're currently producing at a rate of 500,000 ounces per year. Magino is going to increase that to a run rate of about 600,000 ounces per year.
By 2026, we'll have completed the phase III expansion at our Island Gold Mine, which is going to take our annual production up closer to 700,000 ounces per year. It's also going to help drive down our all-in sustaining costs closer to $1,000 per ounce. The PDA Project in Mexico is another high-grade underground deposit we'll be bringing on over that time frame. That's going to take us up over 700,000 ounces per year. With the development of our Lynn Lake Project in Canada, that can take our rate of production up to 900,000 ounces per year. We expect to get up there in around the latter part of 2027 or into 2028. So that's nearly 80% growth from current levels, giving us one of the best growth profiles in the sector. The majority of this growth is coming in Canada. It's all fully funded.
It's lower cost, and it's going to drive significant free cash flow growth in the years ahead. So I'm going to go into a bit more detail on the phase III expansion, given how much of a value driver this is going to be for Alamos over the coming years. This is a ramp access operation. It's a high-grade underground mine that's currently operating at 1,200 tonnes per day. We're in the process of sinking a shaft, which is going to double that throughput rate to 2,400 tonnes per day. But it's also going to make this operation much more productive and decrease our cost by about 30%. So once this shaft expansion is completed in 2026, it's going to expand the output from Island Gold to nearly 300,000 ounces of gold per year.
It's going to drop its all-in sustaining cost from in the 900s currently down to closer to $600 per ounce, making it one of the lowest cost operations not only in Canada, but globally. Combining that with Magino, that's going to take that rate of production up over 400,000 ounces per year. This expansion of Island Gold's well underway. We're currently in the process of sinking that shaft. That work started in December of last year. By the end of this year, we expect that shaft to be down to a depth of 1,000 meters or 1 km, and it'll reach its ultimate depth of 1.4 km into the middle of 2025. That expansion is on track. It's expected to be completed during the first half of 2026.
Once we bring that shaft online, it's really going to be a game changer for this operation as well as the company. This is a great illustration of why we're expanding Island Gold and why we're sinking a shaft. If you look at the chart on the left-hand side of your screen, you can see the pace of reserve and resource growth. When we acquired Island Gold back in 2017, it contained 1.8 million ounces of reserves and resources. Since then, it has grown in each and every year that we've owned it to now contain 6.1 million ounces of high-grade reserves and resources. This included a 1 million-ounce addition of reserves and resources last year. That pace of growth is continuing at quite a clip.
So this is not only one of the fastest-growing gold deposits in the world, it's also one of the highest grades at over 10 grams per tonne. One of the most appealing aspects of this reserve and resource growth is the fact that we're adding ounces at a cost of $13 per ounce. That really speaks to the effectiveness of our overall exploration program. We're adding ounces at $13 per ounce, and we're selling these ounces at $2,300 per ounce. Another really good example of the type of high-return investment that we are seeing internally and driving that overall company-wide value creation. This growth, as well as the phase III expansion, has been a big value driver for Island Gold. You can see that on the chart on your right-hand side of your screen.
When we acquired Island Gold back in 2017, it carried a value of $600 million, which was approximately what we paid for it. That's grown in each and every year to sit at $2.1 billion at the end of 2023. With the integration of Magino, it now carries a consensus value of $3.4 billion. And with that deposit opened laterally at depth, and we're seeing continued ongoing exploration success, as well as opportunities to expand this operation further with this larger Magino milling complex, we expect that value is going to continue to grow in the years ahead. So Island Gold's been our most high-profile exploration success stories, but that should not overshadow the type of exploration success we're having down in Mexico within our Mulatos operation, particularly within a high-grade underground deposit called PDA. PDA is located just off the side of the Mulatos pit.
It's gone from effectively nothing four years ago to 1.2 million ounces of higher-grade reserves and resources as of the end of last year. And this deposit, like Island Gold, is open in multiple directions. We're still drilling it. We're spending $19 million on exploration in Mulatos this year, and we expect that reserve base is going to continue to grow. In the meantime, we are incorporating that 1 million-ounce reserve base into a development plan. We expect to release that over the next month. And we expect that's going to outline another attractive growth project within the Mulatos district and a significant mine life extension for Mulatos. We currently see it as a 2,000-tonne-per-day operation. There's already a small mill on site that we can leverage. We're going to need to expand it and build new components to it. But we can leverage a lot of the existing components.
We can leverage the existing crushing circuit. Net-net, it's going to help keep the development capital low on this project such that we expect Mulatos to be able to self-finance this PDA development project. The other exciting aspect of the story is by putting in a 2,000-tonne-per-day sulphide mill, it's going to open up a number of new opportunities in the Mulatos district where we've previously intersected higher-grade sulphide mineralization that was underground, but we didn't have the processing capacity. Now that we are going to have that processing capacity, we're going back and revisiting these exploration targets with the goal of finding additional high-grade mineralization, which will serve as an additional source of mill feed within this PDA Mill. Moving over to Lynn Lake, another key part of our growth plans. This is a long-life, low-cost project located in Manitoba, Canada.
We completed an updated feasibility study on Lynn Lake last year, so these numbers are relatively current. That updated feasibility study incorporated the exploration success we'd seen over the past several years there. The reserve base had grown 44% since we last did a feasibility study on it. That was incorporated into this new feasibility study, which supported a bigger, longer-life, and lower-cost overall project. Over the first 10 years, we're expecting Lynn Lake to produce about 180,000 ounces per year with very attractive and low all-in sustaining costs of about $700 per ounce. So this is all supporting very attractive economics with an after-tax IRR of close to 25% at a conservative $2,000 per ounce gold price and an NPV of about $700 million. So this is another great example of our strategy of buy low, grow the asset, and look to create value.
To put that in perspective, we acquired Lynn Lake back in 2016 for $22 million, and it's now worth $700 million. And with good exploration upside across several deposits in proximity to where we're going to be locating the mill at Lynn Lake, we expect that value is going to continue to grow. So I'm going to close the presentation out there and really just to give a quick recap. We have been a strong outperformer over the last several years. And as I hope I've outlined through this presentation, we have everything we need to continue that success well into the future. We're growing. All of our operations are performing well. We've got a number of catalysts coming up this year, which we expect will be ongoing value drivers.
And yet, we remain attractively valued both by historical standards and relative to virtually every other sector in the S&P 500. And in case that's not enough, that's all underpinned by what we see as a very bullish environment for gold. If you look at where gold prices are today, they're sitting at $2,300 per ounce and averaging something similar for the quarter, which will be up more than $200 per ounce from the first quarter and set a new quarterly record in terms of average gold prices. So that's going to translate into a significant jump in margins across the sector in Q2. That's going to translate into a significant increase in profitability. And I think that's going to be one of the catalysts that starts to bring that broader investor interest back to the overall gold sector and start to push valuations back to normalized levels.
And I expect Alamos is going to be one of the key beneficiaries of that renewed interest in the sector, given the type of assets we have, our low political risk profile, our growth, and our strong outlook. So I'll thank you all for your attention. I'll turn it back to Stefan for any questions he has or any of you may have.
Thank you. Thank you, Scott, for that great overview. We do have a few questions. I guess first question is, you have distinguished yourself. Your company has distinguished itself as a top-performing gold producer over the past three years. Do you believe this momentum is sustainable? And what strategies do you have in place to maintain this positive trajectory?
I do think it's sustainable. And I think as we continue to execute on our growth plans, you're going to see our valuation continue to grow. As we continue to execute on the different strategies we have within our assets, which ultimately are going to surface additional value, I think that's going to support that outperformance. It's a combination of things, which I touched on through the presentation. We've got a record exploration program this year. We're spending $62 million. That's spread across our three operations. We're also spending money at Lynn Lake. Again, Island Gold, we're finding ounces at, or we have been finding ounces at $13 per ounce. We're continuing to have exploration success. We expect that deposit's going to continue to grow. Young-Davidson, we just put out an exploration release a couple of weeks ago, which outlined the discovery of a new zone of high-grade mineralization near our existing underground infrastructure.
It's early days, but this is something that ultimately has the potential to materialize into a source of higher-grade mill feed, which could influence our rate of production higher and push our costs even lower at that operation. At Lynn Lake, we're spending money on some satellite deposits. We're infill drilling them as we speak with the goal of bringing them into the Lynn Lake mine plan towards the end of this year. So a number of different things that we're working on that we expect will continue to surface value within the company.
Thank you. I guess the second question I have is, the market has responded positively to your acquisition of Argonaut, including Alamos being up 6% on the day of announcement. What do you believe has contributed to this reaction?
The synergies are a big part of it. This is one of those rare instances where we, the acquiring company, were up on the day of announcement. And it's the synergies. These assets are right next to each other. It's a really attractive acquisition from a financial perspective. It's accretive across all metrics. And it's something the industry has been asking for. The industry has been looking for consolidation, but consolidation that makes sense. These were two operations that were operating side by side from each other and being run by two different companies. You put them together, you shut down one of the mills, you shut down one of the tailings facilities. It just makes a lot of financial sense. And that's the big driver of why we're going to realize these synergies.
So attractive acquisition from a purchase price perspective, attractive acquisition from a synergy perspective, and attractive acquisition in terms of that longer-term upside by putting these two assets together, creating a centralized milling complex, which is scalable, which opens up longer-term opportunities to expand these operations further.
Thank you. Cost inflation has been a persistent issue in recent years, driving industry costs steadily higher. You have bucked the trend by not only consistently meeting its cost guidance, but delivering lower costs. How have you been able to achieve this?
It's a couple of things. Execution is a big part of it. We've done a really good job of hitting our targets both from a production and a cost perspective. The nature of our assets and where they're located also contributes to that performance.
The bulk of our production is coming from our two mines in Northern Ontario, Young-Davidson and Island Gold. These are underground operations, so they're less energy intensive to begin with. They've got smaller mobile fleets, which are consuming diesel. They're both connected to the electric grid. 95% of electricity in Ontario comes from hydroelectricity or nuclear power. So we're less exposed to fossil fuels. We're less exposed to diesel than a lot of our peers in the industry average. Diesel represents about 5% of our overall cost structure. If you look across the industry, it's probably closer to the mid-teens. So that's certainly helped in terms of mitigating the exposure to the cost pressures that everybody has faced. To be clear, we're not immune to those cost pressures. We're just less exposed to some of those cost pressures.
The other biggest factor that's been helping drive down our costs is really the lower-cost growth that we're bringing on. You can see that in this production profile. We're bringing on additional high-grade production from Island Gold, which is lower cost to begin with. By putting in a shaft and doubling that output from that operation, we're also benefiting from the economies of scale of a larger operation, as well as the productivity improvements of putting in a shaft and transitioning from ramp access mining. To put that in perspective, Island Gold's operating at 1,200 tonnes per day currently and requires about 8-10 haul trucks to haul ore and waste up to surface. If you move down to the 1,500-meter level, you'd need closer to 15-18 trucks to sustain that run rate.
By putting in a shaft, we can double that output to 2,400 tonnes per day and reduce the number of haul trucks we need to 5 instead of 18. So that gives you some perspective on why we're going to see such a cost improvement with the completion of this shaft expansion.
I think we have time for one more question, but can you maybe touch on your long-term capital allocation plans?
Absolutely. I mean, if you look at our capital allocation over a 10-year basis, I mean, our strategy is to put a third of our cash flow or free cash flow into reinvesting into the business, a third of our free cash flow into returns to shareholders via dividends and share buybacks, and a third into growing and continuing to strengthen our balance sheet. Right now, more of that cash flow is going into reinvesting and growth.
As you start to see that growth come online in that 2026-2027 timeframe, you're going to see our free cash flow generation grow, which is going to give us additional capacity to look to return more to shareholders via dividends and share buybacks if appropriate.
Well, we've run out of time. Thank you so much, Scott, for participating. Thank you, audience, for watching. I hope this was very informative. Take care.
Thank you.
Have a great day.