Our next presentation is going to come from Alamos Gold. They're a Canadian-based mid-tier gold producer that owns and operates the Young-Davidson Mine and Island Gold District in Canada, the Mulatos Mine in Mexico, and has a strong portfolio of development assets in Canada and the U.S. Here to give us an update today is John McCluskey, President, CEO, and Director. John's going to make some prepared remarks and then come and join me for a bit of a chat. In the meantime, please feel free to fire your comments or questions in via the app, or there will be opportunities to raise your hand, and we'll be able to ask as we go along. Please take it away, John.
Thank you, Brian, and thank you, BMO, for hosting us again. Great time to be CEO of Alamos Gold, I'll tell you that, and it hasn't always been the case. It's a tough business, the gold mining business, and we had this lame-brained idea a number of years ago to go from a single mine operator and turn ourselves into a legitimate mid-tier gold producer. And you've definitely got to take some risks in order to get there, and we did so by going on a series of acquisitions that we started in 2015 when we initially merged with AuRico to take on the Young-Davidson Mine, and then we subsequently picked up a project in Northern Manitoba, an exploration project called Lynn Lake, and we acquired a project called Island Gold. One thing led to another, and all our shareholders hated our assets.
We just seemed to go down in value with every subsequent acquisition, but how times have changed. Those assets now form the backbone of our company. 90% of our NAV is in Canada now. The average life of our assets is around 20 years, and we find ourselves. We've grown from when we started in 2014, we had 145,000 ounces of production that year. Now we're up to. We'll do 600,000 ounces of production in 2025, and we've got the internal growth capacity to take our production up to 900,000 ounces a year. That's just organically driven and fully funded by our existing cash flow stream. This is a chart that I think everybody would love to put up. This is showing Alamos Gold against a number of indices: S&P 500, the GDX, and the gold price itself.
You can see Alamos has had a hell of a run over the last few years, no other way of putting it. We've effectively outperformed just about everything. We've certainly outperformed the metal, and that really is important these days because, by and large, the great idea about being a gold producer right now is gold is finally doing very, very well in the market, and I don't think that's about to end anytime soon. And I know there's a fair amount of skepticism. You know, they say that a rising gold price climbs a wall of worry. Well, we're seeing it. You know, the valuations in the gold sector are still relatively low, and are we? You want to ask yourself, are we in a bull market? Well, I do think we are in a bull market, but we're at the very front end of it.
Alamos has had a long-term track record of value creation, and this is a slide that illustrates that very well. It's basically showing where we acquired assets, you know, what the value was relative to, you know, the value that we created, and you can see that, you know, we've created a total of $6.3 billion just over the last few years, and this, to me, is something that we've always sort of said we were doing when we were meeting with our investors. It's nice to look back over the last few years and be able to show you that we're delivering on those promises. In terms of the value we're creating through exploration, since 2018 or so, we've added 8 million ounces of gold, and that's net of depletion.
That has taken our total reserves up to around 14 million ounces, and we just announced that in our reserves and resources update at the end of last week. In terms of our global number and resources on top of reserves, we're up in the range of 28-30 million ounces now. A far cry from where we were when we started. We were down to about 1.8 million ounces just prior to doing the acquisition of the Young-Davidson Project. So it's been a very transformative exercise that we've been experiencing over the last 10 years, and the success we've had with drilling has just been extraordinary. I mean, most people are focused on what we're doing at Island Gold, but we've added millions of ounces at Young-Davidson. We've recently made a new discovery in Mexico at PDA where we added 1.2 million ounces.
Lynn Lake, when we acquired it, was 1.6 million ounces. It's close to 3. In other words, virtually everything that we're working on, we're allocating exploration dollars, and we're finding gold. Island Gold, our finding costs are $13 per ounce. Globally, our finding costs are $30 per ounce, and that's why we have a $72 million exploration budget this year. It was $60 last year. Pound for pound, you know, we've got one of the strongest exploration budgets in the sector, and it's proving to be the right thing to do because we're creating value through the drill bit. With respect to our 2024 performance, you can see we've more or less delivered on all the key metrics that the market's looking for. We had record production, record cash flow. It's, like I said, it's been a great time to be the CEO of Alamos Gold.
These are numbers that we felt very strong about. You know, we felt quite confident in providing our three-year guidance, and it's nice to look back on 2024 performance and see how well we've delivered. Just looking a little bit at the Alamos Gold expansion project, this is something that the market has been quite focused on. You can see the picture of the head frame where we're sinking a new shaft into that deposit. We're down just beyond the 1,000-meter level now. It's going to go down to a total depth of 1,370 meters, and we expect to get there by mid-year. We're on track to do that. Everything's on track. Our budget's on track. Virtually everything that we've set out to do, we're sort of meeting it. The interesting wrinkle was the acquisition of Argonaut, which brought in the Magino Mill, which is a 10,000-ton-per-day mill.
If you knew what you were looking at, you could see it in the background just behind the head frame itself. Having that 10,000-ton-per-day mill, it opens up all kinds of opportunities for us. Keep in mind, when we started the phase three expansion project, we had 3.7 million ounces of reserves. Today, we're sitting just under 7 million ounces. So the ore body is substantially bigger from when we first commenced this project. Bringing in the Magino Mill, which is a 10,000-ton-per-day capacity at the moment, we're going to be increasing it. But what it means is we're not constrained any longer by mill permits. You know, that mill is actually permitted to go to 35,000 tons a day. So that puts us in a fantastic position. They also had permitted tailings to go to tailings for 150 million tons of capacity.
That's more than Island and Magino would give off in tailings over the next 20 years, so we're sitting in a very enviable position, and that optionality, I think, is going to start to count more and more as we look forward to expanding the project, and this is really what's driving it. If you look to the lower right, I guess, or I guess it'd be your lower left of the slide, there's a big red block there where we've converted a portion of that 20-gram material that we found, what we call the lower east of the Island Gold deposit. That block, the block in blue, which is still inferred, it's 2 million ounces at just over 20 g. That was our thesis for acquiring this project in the first place.
We had strong conviction that the deeper you went on the deposit, the higher the grade would get. That's indeed what has happened. Along with the big increase in reserves in 2024 was an increasing grade, and that's all the more remarkable by virtue of the fact that we practically high-graded the mine last year. You know, it was a 10.3-gram deposit. Average grade last year was 12.5 g, and yet after that, reserves went up to 6.7 million ounces, and grade went up from 10.3 to 11.4 g. Inferred grade went up from roughly 14 g to 16.5 g. So just a dramatic improvement in the ore body over the course of 2024, and that just isn't stopping. The ore body remains open at depth, and we're going to continue to have success.
Another place where we had great success last year was at our Lynn Lake project, where we drilled off two deposits that had been roughly defined by as far back as when the project was in the hands of the previous operator. We put some effort into upgrading those reserves this year. We added roughly another million ounces. So we've taken Lynn Lake from where we acquired it at 1.6 million ounces. We've taken it now to just under 3 million ounces. We've extended the mine life, and we've basically allowed ourselves to increase the production from years 10 going forward, and now it goes beyond year 17 now to 2027.
I suspect what will happen over time is by the time this thing is approaching its 10th year of production, the management team at that time is going to look to increasing the throughput capacity, and you'll ultimately see Lynn Lake in its later phases go to over 200,000 ounces a year. But it's proved to be a very good project for us. It's now fully permitted. It's had the green light from the board, and we're starting construction. We have our ceremony with the First Nations at the end of March, and after that, we're off to the official start. We've been also successful in Mexico, as I mentioned earlier, with the definition of the Puerto del Aire deposit. That came together over the course of about two years of drilling. It's some of the highest grades we've ever found in Mexico. It's sulfide.
We're going to be building a mill. The big breakthrough was at the end of January. Mexico granted us the permit to go forward with that project. So that's very exciting. It's a good sign coming from the Mexican government. I think that bodes well, frankly, for everybody operating in Mexico. There's apparently something in the order of 2,000 permits of various kinds pending as far as the mining industry is concerned. So we were probably one of the first handful of projects permitted in Mexico, and that gives us the wherewithal effectively to transition from our open-pit mining operation at La Yaqui Grande, which will run until 2027. We're effectively going to smoothly transition into production coming from Puerto del Aire underground.
Looking forward, this is a pretty nice slide that every mining company would love to have to be able to demonstrate that over time you're going to see our production continue to grow, you're going to see our costs continue to come down, and our cash flows continue to expand. And this is really the sweet spot we enjoy being in. You know, the way I look at it is it took 20 years to build our production from a standing start to roughly 500,000 ounces a year, and now before the end of the 2020s, we want to take production from where we were last year at 500,000 ounces a year. We want to take it right up to a million ounces a year, and we can do that through this organic growth pipeline.
As I mentioned, it's fully funded, but it's interesting to look at, depending on your gold price assumption, it's interesting to look at what our cash flow generation capacity can ultimately turn out to be. And I think our most aggressive sort of bar there is $2,800 gold, and you can see in orange we can take free cash flow up to $500 million a year, and that is completely within our control. It's fully permitted. It's fully funded. We own those assets, and it's effectively being primarily driven by our phase three expansion project, the integration of Magino and the construction of Lynn Lake. It's a pretty straightforward plan. And so with that, I just want to conclude my remarks, and hopefully we get a few questions. Thank you.
Maybe as John makes his way down here, if you have a question, please raise your hand so our microphone can be brought up to you. Or maybe I'll just get the ball rolling here. John, it was a little bit under a year ago that you closed the Argonaut transaction, I think. Give us an impression of some of the good, bad, indifferent surprises that you've had with integrating that operation, and maybe some of the lesser-known opportunities that exist with integrating that in the Island Gold expansion.
So, why don't I start with the bad side? Get that out of the way. The mill complex itself was not well built and designed, and the primary problem was with the primary and secondary crusher, and Argonaut was struggling with those and struggling to get throughputs up. We took it on. Same thing. In other words, we went into it with our eyes wide open. We knew what we were facing, and ultimately we pulled out the secondary crusher in the third quarter, and we pulled out the primary in the fourth quarter, and we've replaced them both now. And so that was. We haven't met any surprises. You know, the difficulties that we run into, I characterize them as relatively minor, straightforward to fix. It's just a question of time. We're getting that done.
On the positive side, the recoveries are better than we expected. So we were anticipating something like 92% recoveries in the mill, and they're running more like 94%, 95% consistently. That is, you know, like I can deal with mechanical issues. Anybody looking at that knows that there's a good fix there. It's metallurgy that normally screws you up or the block model. As you know, they had a much more aggressive interpretation of the block model, but we had looked at it in 2018, and we had a very good idea of what was there, and it's exactly what we thought. It's not a 1.2-gram ore body. It's a 0.95-gram ore body, and that's why you've got to if you're going to make an acquisition of an asset like that, you've got to take a long-term view on it.
You've got to know going in the first few quarters are going to be bumpy as you get the mill sorted out and everything else, but the longer-term goal with an asset like that is to get the throughput up to something like 20,000 tons a day. At that low grade, you're going to need that kind of capacity. You want to generate roughly 200,000 ounces of gold a year. We've got the wherewithal to build it. It's permitted to go to 35,000 tons a day, and this is the advantage of having that kind of capacity.
So the study that we're working on right now, which will come out with I guess we're coming out with this by the fourth quarter of this year, it's going to show how that all integrates, and it's going to show a combined expansion of both the underground at Island and an expansion of the open-pit mining at Magino. And where you want to get it to is on a combined basis, you're going to be doing close to 600,000 ounces of annualized production, of which about 400,000 would be coming out of underground and about 200,000 ounces out of the open pit.
There was a period in time where both Argonaut and yourselves were ramping up projects, and staffing was quite challenging. Now that it's all under one umbrella, has that pressure on labor in particular eased a bit? Have there been more opportunities there? Has it changed your mind on terms of the costs for building all these things?
Look, it's just a much more how should I put it? It's a much more manageable project for us with both of those deposits under one roof. I mean, that just stands to reason. There was a little bit of leakage, you know, as certain employees would be offered a tiny bit more to turn right instead of left when they got to the end of the road, and we did see a bit of that, but not enough to really, really, really make it terribly inconvenient. But in dealing with the town and in dealing with the province and just all the synergies involved through that integrated operation, it's just a much better situation.
You note that the company is built on M&A. You've got a target of 900,000 ounces or maybe even getting towards a million per annum. There's a transaction announced last night where the obvious stated goal was to get above a million ounces. Is there a bar that you plan to hit that is over a million ounces, and do you think that would give you a re-rating, or are you just content with what you've got and push forward from here?
Well, you know, I don't really look at the thing the same way. We've always been focused on the quality of the assets and on the margins, and what we want to be. We don't want to be the biggest gold mining company in the world. There's companies that aspire to that, and they're already decades ahead of us. What we want to be is we want to be one of the most efficiently run mining companies in the world. We want to make more money on every ounce of gold that we produce, and we're quite good at that. We're very good at acquiring assets well.
We're very good at exploration and building those assets out far beyond what anybody would have ever dreamed they could evolve into, and then we invest the capital at the right moment in time in order to expand those mines to, you know, get to maximize their efficiency. You know, there was no point in running Island Gold, for example, at 1,200 tons a day when you'd have 40 years' worth of reserves, and we know that that doesn't maximize your returns. So we're doing the logical thing, but as quickly as we've sort of conceived that, permitted it, and headed down the road getting it built, exploration has just pushed the ounces even far beyond what made that look reasonable.
And so that's why we're doing this current study, and where I see Island Gold ultimately going, we're going to be mining probably at much higher rates from underground, and that ultimately will take us up and above that million ounces. But I would rather be defining ounces within an area where we already operate. It's fully permitted. We're actually permitted to expand, and look what we could do. I mean, just within the last three years of drilling, we've defined, you know, 2 million ounces at 20 g at depth. How much would it cost to go out and buy a deposit like that, fully permitted, in operation and so forth? It's just unbelievable what that would have cost, I think, in this market.
The time to buy was when we were buying back in 2015, 2016, and 2017, when gold was trading between $1,100 and $1,300 an ounce. It's getting a lot more competitive out there now, and as you saw with the sale of the Newmont assets, I mean, they went for top dollar. There's no question about it. I think the companies that bought them, I think they did the right thing. You know, all those companies needed those assets, and I think they make them better companies. But in our own case, we couldn't justify buying any of those assets, and you know, I think that if we get to that point where we're operating, say, six mines, we're generating a million ounces or so of production, very low cost, that's a great business.
Maybe just keeping one eye on the future here, Lynn Lake has definitely had a change in perception, partly driven by the gold price, partly driven by your de-risking and exploration success there. You know, what are some of the things that you're really looking forward to as it goes into production here, and maybe give us a bit of a compare and contrast with, you know, buying something like an Argonaut versus taking it completely from grassroots yourself?
It's always had a number of natural advantages that perhaps weren't that appreciated. First of all, being in Northern Manitoba, it has access to the cheapest power costs in the world, and power matters. There isn't a CEO of a gold mining company that doesn't worry about power, that isn't worried about water. We have plenty of water and plenty of power. We control a greenstone belt that is in excess of 80 km all along the strike of that belt, and we've been focusing in more or less on the area around the two deposits that we first acquired, but now we've added two more. There's two more behind that that are in an earlier stage of exploration, but we're getting great results.
So I think over time what you're going to see is we're going to develop more and more deposits, and we'll take a sort of a hub-and-spoke approach to how we develop the resources that we're going to delineate up there. Manitoba is a great jurisdiction in which to operate. We've got strong support from the provincial government. As I said, that low-cost power is tremendously valuable. The fact that, you know, if you're operating in Nunavut, for example, where Agnico operates, one of the challenges they have is there's no power up there, and so effectively everything is diesel generated. Lynn Lake, there's a road. You can drive it by road from Toronto if you want all the way to Lynn Lake. It's a big drive. You know, we actually looked at it on Google Earth.
It would take you the same amount of time to drive down to Hermosillo, Mexico, that's Sonora State where we operate our Mulatos Mine, as it would to go to Northern Manitoba. I mean, when somebody first told me that, I couldn't believe it. I actually looked on Google Earth myself to see it, and you know, Canada is a big country, but having that type of infrastructure, road, power, that makes all the difference in the world.
Maybe just one final one from me. Congratulations on the PDA permitting success there. What are we going to be looking for in terms of resource expansion possibilities there? Are we still open? Is there an upside to the size of the deposit, to the size of the mill that you could put in, so on and so forth?
I think starting out at 2,000 tons a day is the right way to go. It was, I think, everything we gave to the Mexican government to permit made it a really easy project for them to permit. We're backfilling the tailings into the open pit. It's going to be dry stack tailings. We're going to be producing a concentrate. We're not using cyanide. I mean, there's a lot of things about this that made it a pretty straightforward project for them to permit, and you know, for us, it extends mine life into the mid-2030s. I think it will go beyond that. I think I've told you this over and over again. Mulatos is a story. Every five years we make a new discovery, and away it goes. We certainly haven't drilled off PDA. It remains open along strike and at depth, of course.
We're sitting at roughly 1.2 million ounces. The game plan, though, was to move quickly to develop that asset because we knew we were running out of mineralization to mine at La Yaqui Grande in 2027, so we didn't want a drop-off in production to zero before the next thing came along. So rather than just, you know, do what we normally would have done, which would have been drill PDA for several more years, after we delineated over a million ounces, we thought that's a good enough start that gets us going. You know, that gives us, what, eight or nine years of production ahead starting in 2027, but you know, the drilling that we're doing now, it already shows that it will get bigger, and furthermore, under the old Cerro Pelon deposit that we mined roughly 300,000 ounces of oxides out of Cerro Pelon.
We're delineating high grade underneath that deposit as well. Right now, I think we've announced a resource on it of 100,000 ounces or so of roughly 6 gram material, and I think we're going to find more. There's many, many places within the Mulatos District that we can go looking for more high-grade sulfide, and I have no doubt we're going to be successful in finding it.
That does take us completely to the end of time. Please join me in thanking John for his time.
Thank you.