Good morning. I would now like to turn the meeting over to Mr. Jamie Porter, Chief Financial Officer. Please go ahead.
Thank you, operator, and thanks to everyone for attending Alamos' fourth quarter 2019 conference call. In addition to myself, we have on the line today John McCluskey, President and Chief Executive Officer, Peter MacPhail, Vice President and Chief Operating Officer, and Scott R.G. Parsons , our Director of Exploration for Canada. To address any questions with respect to our reserve and resource update, we also have on the line today Chris Bostwick, our Vice President of Technical Services. We will be referring to a presentation during the conference call that is available through the webcast and on our website. I would also like to remind everyone that our presentation will be followed by a Q&A session.
As we will be making forward-looking statements during the call, please refer to the cautionary notes included in the presentation, news release, and MD&A, as well as the risk factors set out in our Annual Information Form. The technical information in this presentation has been reviewed and approved by Chris Bostwick, our Vice President of Technical Services and a qualified person. Also, please bear in mind that all the dollar amounts mentioned in this conference call are in United States dollars, unless otherwise noted. Now I'll turn it over to John to provide you with an overview.
Thank you, Jamie. We ended 2019 on a strong note in what was a successful year for Alamos. We delivered on our operational objectives, driving record financial performance, advanced the lower mine expansion at Young-Davidson, continued to grow reserves and resources at Island Gold. With another solid performance from our Canadian operations in the fourth quarter, we met full-year production guidance for the fifth consecutive year, producing 495,000 ounces of gold. We also met our full-year cost guidance with a 10% decrease in our total cash costs to $720 per ounce and a 4% decrease in all-in sustaining costs to $951 per ounce. Combined with a stronger gold price, this translated into record operating cash flow of $86 million in the fourth quarter and a record $297 million for the full year.
We are now in the final stages of the Lower Mine Expansion project at Young-Davidson. We are four months away from starting to see our full potential of the operation with the Lower Mine Expansion on track for completion in June. Island Gold had another record performance, exceeding guidance with production of 150,000 ounces, a 42% increase from 2018. Island Gold has now set a new production record for five consecutive years. The operation generated record free cash flow of $65 million in 2019. We had an excellent year on the exploration front with another significant increase in reserves and resources at Island Gold, totaling over 900,000 ounces across all categories. Since we acquired Island Gold in November 2017, combined reserves and resources have doubled to now total 3.7 million ounces net of depletion.
The majority of this reserve and resource growth will be incorporated into a phase three expansion study, which we expect to showcase early in June. We expect it will show that this will be a large, highly profitable, and long-life operation. The reserve growth, primarily at Island Gold, replaced mining depletion over the last year, with our global reserves holding steady at just under 10 million ounces in our year-end update. Within our growth projects, we completed construction of Cerro Pelon during the fourth quarter and achieved initial production ahead of schedule and under budget. In Turkey, construction activities in our Kirazli project remain on hold pending the renewal of our mining concessions. 2020 will be a transformational year for Alamos with a number of key near-term catalysts.
This includes the results of the phase three expansion study at Island Gold and the completion of the lower mine expansion at Young-Davidson, which are both expected in June, followed by the transition to strong company-wide free cash flow growth. This free cash flow growth is expected to continue into 2021, with production from our existing operations increasing to approximately 500,000 ounces at lower costs. Reflecting this strong outlook, we increased our dividend by 50% in December. We have tripled the dividend since 2018 and expect to provide further increases as we generate stronger free cash flow. I will now turn the call over to our CFO, Jamie Porter, to review our financial performance.
Thank you, John. Moving on to slide four, we had a strong quarter and year from a financial perspective. We sold 494,700 ounces of gold in 2019 and generated record revenues of $683 million. The performance at our Island Gold Mine was a highlight as the operation continues to impress with record free cash flow of $65 million in 2019. Since we acquired Island Gold at the end of 2017, the mine has generated $81 million in free cash flow, net of all capital spending and a $35 million investment in exploration. In the fourth quarter, revenues were $186 million from the sale of 127,000 ounces at an average realized price of $1,463 per ounce. Gold sales were 5,000 ounces higher than our production in the quarter, with deferred sales from earlier in the year benefiting the fourth quarter.
Total cash costs of $722 per ounce were in line with guidance. All-in sustaining costs of $972 per ounce were modestly higher than guidance, with some catch-up of capital spending occurring in the fourth quarter. Our full-year total cash costs and all-in sustaining costs were both in line with guidance. Operating cash flow before change to the non-cash working capital was $86 million, marking the third consecutive quarterly record. On a per-share basis, operating cash flow has grown $0.02 per quarter in each of the last four quarters, from $0.14 in the fourth quarter of 2018 to $0.22 in the fourth quarter of 2019.
This was driven by an 18% increase in the realized gold price and a 6% decrease in total cash costs. The full year operating cash flow before change to the non-cash working capital was a record $297 million or $0.76 per share, a 40% increase from 2018. Our fourth quarter reported net earnings of $38 million or $0.10 per share included unrealized foreign exchange gains of $9 million, partially offset by other one-time losses totaling $3 million. Excluding these items, our adjusted net earnings were $32 million or $0.08 per share. Capital spending totaled $73 million in the fourth quarter. This included $23 million of sustaining capital, $44 million of growth capital, and $6 million of capitalized exploration. For the full year, capital spending totaled $264 million, which was in line with revised guidance.
We ended the quarter with no debt and approximately $206 million in cash and equity securities, up slightly from the previous quarter, reflecting positive free cash flow generation. We remain well positioned to fund our internal growth initiatives. In December, we announced a 50% increase in our quarterly dividend to an annual rate of $0.06 US per common share starting this quarter. This is a direct reflection of our strong free cash flow outlook as we complete the lower mine expansion at Young-Davidson. From a capital allocation perspective, we remain focused on returning capital to our shareholders, having tripled the dividend over the past year and repurchased 2.7 million shares at a cost of $11 million under our share buyback program. I will now turn the call over to our COO, Peter MacPhail, to provide an overview of our operations.
Thank you, Jamie. Moving to slide five, our Canadian operations continued to perform well in the quarter. Young-Davidson produced 48,000 ounces in the quarter and 188,000 ounces for the full year, near the top end of guidance. Mining rates increased to 7,000 tons per day in the quarter and averaged 6,700 tons per day for the full year, exceeding guidance and marking an 8% improvement from 2018. total cash costs of $766 per ounce in the fourth quarter were in line with guidance and virtually unchanged from a year ago. Mine site all-in sustaining costs of $1,083 per ounce were higher than guidance, reflecting higher sustaining capital spending in the quarter.
On slides six and seven, you can see the progress we're making on the lower mine expansion with the completion of several critical path items in the fourth quarter, including the ore passes from the upper mine to the lower mine coarse ore bin, the shaft bottom steel, the ore and waste bins at the Northgate shaft, and the 8940 level loading pocket. In addition, all three fine ore bins have been excavated, and two bins at the Northgate shaft are currently being commissioned. The installation and commissioning of the crusher will be completed this month, and the installation of the grizzlies and rock breaker will be completed in the second quarter. The Northgate shaft was shut down in mid-February, and removal of the ropes has commenced.
As previously guided, ore from the upper mine will be trucked to surface for processing at a reduced rate of approximately 2,500 tons per day while the Northgate shaft is down. During this time, the shaft steel at the mid-shaft location will be removed, the pentice between the upper and lower mines excavated, and the new head, tail, and guide ropes installed. We remain on track to start hoisting from the lower mine in June and expect mining rates to ramp up to 7,500 tons per day by the end of 2020. As previously guided, we expect production at Young-Davidson to range between 145,000 and 160,000 ounces in 2020, reflecting the downtime for the tie-in, and expect the higher mining rates to drive production in excess of 200,000 ounces in 2021 and beyond.
Over to slide eight, Island Gold produced 38,600 ounces in the fourth quarter, a 33% increase to the fourth quarter of 2018, primarily reflecting a 44% increase in mill grades. Mining rates increased from earlier in the year to average 1,116 tons per day, consistent with annual guidance. For the full year, Island Gold exceeded guidance with record production of 150,000 ounces of gold. Total cash costs of $507 per ounce were down 11% from a year ago, reflecting higher grades mined and processed. Mine site all-in sustaining costs of $653 per ounce were below annual guidance, reflecting lower sustaining capital in the quarter. In 2020, we expect Island Gold to produce between 130,000 and 145,000 ounces. We continue to see excellent exploration results at Island Gold, which has doubled the reserve and resource base over the past two years.
This growth is being incorporated into the phase three expansion study of the operation, with results expected to be released in the second quarter of 2020. Following my remarks on the operations, Scott R.G. Parsons , Director of Exploration Canada, will provide a summary of the ongoing success we are having at Island Gold. Slide nine, Mulatos produced 34,100 ounces in the fourth quarter at total cash costs of $820 per ounce and mine site all-in sustaining costs of $891 per ounce. Production and costs were impacted by the winding down of production from La Yaqui phase one, as well as abnormally high rainfall in September over a short period, which restricted mining activities in the main Mulatos pit during September and October. This impacted production in the second half of the year, resulting in full-year production of 142,000 ounces, coming in about 5% below guidance.
This was partially offset by the start-up of the Cerro Pelon, with construction completed and initial production achieved ahead of schedule in the fourth quarter. In 2020, production at Mulatos is expected to increase to 150,000 to 160,000 ounces, consistent with long-term guidance. At our fully permitted La Yaqui Grande project, we are finalizing project design and economics and expect to announce a construction decision in the second quarter of 2020. I'll now turn the call over to Scott R.G. Parsons to discuss the reserve and resource update at Island Gold.
Thank you, Peter. We had an exceptional year of exploration drilling at Island Gold, resulting in significant growth in mineral reserves and resources totaling 921,000 ounces across all categories.
As can be seen on slide 10, mineral reserves increased 21% in 2019 to 1.2 million ounces, primarily driven by the conversion of inferred mineral resources at Island Main and East. A total of 361,000 ounces were added, more than offsetting mining depletion of 153,000 ounces. Mineral reserve grades also increased slightly to 10.37 grams per tonne from 10.28 grams per tonne. Moving to slide 11, inferred mineral resources also increased 46%, or 725,000 ounces, to 2.3 million ounces, with a 13% increase in grade driven by higher grade additions in Island East. This included an initial inferred resource of 301,000 ounces grading 16.06 grams per tonne in last year's new area of focus. This area had not seen any drilling prior to 2019. We drilled 17 holes in this area during the year, with every hole intersecting the Island Main gold zone.
This area remains open up and down plunge, needless to say, we're very excited about the potential for further growth. With the 840 level exploration drift now over at the western extent of this area, we'll have access to start targeting it from underground this year. We also increased inferred resources by 443,000 ounces in the lower portion of Island East, which now contains 720,000 ounces at 18.74 grams per tonne. This ore shoot also remains open laterally and up and down plunge. Testing the continuity of high-grade mineralization between these areas from the upper and lower portion of Island East will be an ongoing exploration focus in 2020. These new inferred mineral resources represent further additions to a significant high-quality inferred resource base at Island, which has grown by 131% since the acquisition of Island Gold in 2017 to a total of 2.3 million ounces.
At the time of acquisition, the inferred mineral resources at Island Gold totaled 1 million ounces. Since then, we've converted 830,000 ounces from mineral resources to mineral reserves, representing an 83% conversion rate. In addition to the inferred resources that were converted to reserves, we continue to find new resources, having added 2.1 million ounces of high-grade inferred resources. We're confident that this rate of resource-to-reserve conversion will continue, given that the inferred resources are contained within the same Island Gold structure that hosts the 1.2 million ounces of mineral reserves and is the focus of both current and past production. The style of mineralization and control observed from drilling are consistent between these areas, and these inferred resources have been drilled out to 50-80-meter spacing with the continuity of high-grade mineralization between holes.
Moving on to slide 12, combined mineral reserves and resources now total 3.7 million ounces. This is more than double the 1.8 million ounces at the time of acquisition in November 2017, net 365,000 ounces of mining depletion. Our exploration team continues to be excited about the significant potential for further growth in mineral resources with the deposit open laterally and down plunge. We invested heavily in exploration at Island Gold over the last two years, spending $35 million. We continue to see excellent returns with a low discovery cost of $17 per ounce of inferred resource. We have budgeted a further $21 million for surface and underground exploration at Island Gold in 2020, a 24% increase from 2019. The focus of the 2020 program remains on defining new near mine mineral resources in Island Main, East, and West areas across the two-kilometer-long Island Gold zone.
The 2020 budget includes 46,000 meters of surface directional drilling, 30,000 meters of underground exploration drilling, and 900 meters of underground exploration development. These underground exploration platforms provide access for both continued exploration and for subsequent follow-up infill drilling focused on upgrading mineral resources to mineral reserves. With that, I'll turn the call back to John.
Thank you, Scott. That concludes our formal presentation. I will now turn the call over to the operator, who will open the lines for your questions.
Our first question comes from Fahad Tariq from Credit Suisse. Please go ahead.
Hi, good morning. Thanks for taking my question. Just a quick one on Kirazli. Any update on what's happening there? Can you remind us of the carrying cost? I recall it being $5 million. I don't know if it was higher in Q4. Just the latest on Kirazli and the carrying cost while it's not being constructed. Thanks.
Yeah, Tariq, this is John McCluskey speaking. We had slightly higher carrying costs in the fourth quarter because of some of the underlying permitting fees that came due that quarter. Typically, we're spending roughly $3 million a quarter to just maintain the status quo in Turkey. That's not just Kirazli, that's across everything that we're doing, and that incorporates permitting fees and so forth as well. As far as a change in status, there is nothing significant to report. Had there been, rest assured, I would have mentioned it in my commentary right up front. We're working diligently behind the scenes to move the project forward. As you know, we're not trying to overcome something specific. There was nothing specific to the project that delayed us. It had everything to do with a whole slew of false allegations that were leveled against the project.
Again, I don't think they had anything to do with the company as such. It had everything to do with the opposition party trying to attack the ruling party. We got caught in the crossfire there, the situation, the problem is more political than anything else, and it's going to require a political solution. From what we're experiencing, political solutions take time, but we're working on getting that done. We're getting some good assistance from the Canadian government, I might add, who strongly support us. There's a new Canadian ambassador in Turkey as of November. He's a tremendous asset to our country, and he's doing a great job for us in Turkey.
Just as a quick follow-up, are you seeing continued support from the local community there in terms of maybe them reaching out to their government representatives? Because my understanding was the local community is supportive, but there's other protesters outside of that community that are opposing the project.
The local community has remained very supportive of the project. They have a great deal to gain by the project going forward. The level of protesters are very few. There's no protest going on as such. There's a couple of diehards that remain camped about a kilometer or two away from the mine site in proximity to the village of Kirazli, where they can keep warm and get fed and so forth over the course of the colder period in Turkey here. I would say that we can rely on continued support from the local community, although the layoffs that we announced in the fourth quarter certainly didn't help those communities very much. They were inevitable, but one of the reasons why we're working diligently to get things back on track is so that we can bring those people back to work again and get the project moving forward.
Okay. Thank you.
Thank you. Our next question is from Michael Parkin from National Bank. Please go ahead.
Hi, guys. Thanks for taking my question. Congrats on the really impressive update here on the resources for Island. This seems to definitely be leaning towards it's getting quite interesting at depth. The Phase Three decision next quarter, I would think leans towards adding a shaft. Could you just in terms of walking through what the permit process and timeline would eventually be if it were to be a shaft that you decide to move ahead with there?
Thanks, Michael Parkin. You've hit it right on. Just back up a bit, over the course of the last two years, we've upped the gold reserve and resource base from about 1.8 million, doubled it to 3.7 million now. It doesn't show signs of abating either. At the same time, the grade has increased, reserve grade increased, and resource grade increased. We're up to 13.26 resource grade and 10.37 reserve grade currently. We mentioned the fact that these resources are extremely high-quality resources. There's lots of resources out there and lots of projects that are resources for a reason, because either they need a higher price or they need something. These resources just need further drilling, and they will convert. They've been converting at greater than 80% over the course of this existing operation's life. That will continue almost for sure.
What we have here is a deposit that's now looking like 3.5 million ounces going to 5 million ounces and going to last for a very long time. How do we want to best tackle that? If probably at a higher rate than 1,200 tons a day, we're mining at 1,200 tons a day now. We are permitted to mine at 1,200 tons a day. We will need to go through a permitting exercise to increase that. That permitting exercise will probably take a couple of years because everything takes a couple of years in Canada to permit. It's a well-known process, and there's very little chance that it won't happen.
We'll probably take a higher-end look at what we want to permit that because we only want to do it once, and we'll then gradually ramp up this operation to something significantly larger than it is now. What is that? We're in the process of determining that. It's more than 1,200 tons a day. We've talked about 1,500 tons a day. We'll see. I don't want to prejudge this exercise that we're working on, but that's where we are. It'll take a couple of years to permit, probably because it'll be an increase in throughput. Maybe it's quicker than that, but maybe it's 18 months. Then if there's a shaft, it takes a while to build a shaft. This will be something that unfolds over the course of the next several years. It's not going to be a big capital hit anytime soon.
If we decide to put a shaft in, it'll take us two years to put the shaft in, and it won't start until a year and a half or two years from now if that's where it takes us. A ramp option is still viable to a certain point, but if you go beyond that, you probably are looking at a shaft.
Okay. Just going back to slide 11 in the presentation, you've outlined a pretty massive mineralized envelope. You've got a good chunk of that in resource. Can you just remind us where you're building off new drill platforms for 2020 and 2021, where on that slide 11 you're focusing?
Yeah.
After those three main corridors that you're open down plunge, is that where the focus of the drilling is?
Yeah. We're working on the 840 level exploration drive now. I don't know if you can see that one just above those blue inferred resource blocks. We're pushing that to the east, and as we get there, we get to then drill those from much tighter proximity and convert that from an inferred resource into a reserve once we get out there, and we're getting out there. We'll need a further one further down ultimately, but we got to ramp further down to get there. This is the kind of mine that will always have some significant amount of inferred resource in front of it that we'll convert as we get there. I would expect that you're always going to have at least half, if not more, of what you've got in your mine plan in inferred resource.
Our mine plan now goes out 15 years at 1,200 tons a day.
That's not unusual for underground mines anyway.
It's not unusual for narrower vein, high-grade underground mines that need space drilling to convert into a reserve.
No, makes sense. Yeah, I think that's it for me. Thanks for taking my question.
Okay, bye.
Thank you. Once again, please press star one on your telephone if you have a question. Our next question comes from Kerry Smith from Haywood Securities. Please go ahead.
Thanks, operator. Jamie, could you give me a rough idea what the sustaining and growth CapEx might be like at YD in 2021 once you get the lower mine infrastructure all tied in?
In 2021, Kerry, we'll be finishing up the TIA1, so the tailings infrastructure that we're working on now that will support the existing remaining life at YD. There should be a bit of growth capital related to that, maybe $10 million-$15 million. Apart from that, we'd be looking at our sustaining capital, call it $45 million. $60 million for the full year capital.
Okay. That money you're spending on the tailings would be the last amount to be spent for the current reserve then. Is that right?
That'd be the main part of it, where ultimately you do have to do raises every few years, maybe every three or four years, you top it up a little bit, but it's a much smaller exercise. We're bringing on a new area right now, Kerry, the TIA 1, we got the Schedule 2 amendment for.
Okay, got you. Then just on La Yaqui Grande, what would the build cycle be for that project? I know you're going to come out with a decision here in Q2, I guess. Just how long would it take to build that project?
It would be in around a two-year construction period. A lot of that is pre-stripping. There's a fair pre-strip on that one. It would also have its own leach pad and associated infrastructure.
Okay, the spend, I guess, would be kind of evenly over that two years, I suppose.
Yeah, assuming we go forward, it would be from mid this year on. Yeah, starting middle of this year, Kerry, we could probably spend as much as $30 million, $35 million in capital. Then you'd be looking at a higher capital spend certainly in 2021, closer to $60 million to $70 million.
Okay. That's great. Thanks very much.
Thank you. There are no further questions registered at this time. This concludes this morning's call. If you have any further questions that have not been answered, please feel free to contact Mr. Scott R.G. Parsons at 416-368-9932, extension 5439.