Welcome to today's virtual Non-Deal Roadshow. My name is Noella Alexander- Young, Virtual Event Moderator here at Renmark Financial Communications. On behalf of our team, we'd like to thank everyone in Chicago and surrounding areas for joining us today for the presentation of Alamos Gold, trading on the Toronto Stock Exchange and the New York Stock Exchange under the ticker symbol AGI. Presenting today is Scott Parsons, Senior Vice President of Corporate Development and Investor Relations. The presentation will last approximately 25 minutes and will be followed by a Q&A session for which you can participate using the chat box in the top right-hand corner of your screen. With that being said, I will now hand the floor over to Scott.
Thank you, Noella, and it is a great time to be speaking to all of you about gold equities. There are lots of great investment opportunities across the gold sector, and we think Alamos Gold is one of them. Gold is on pace to average another record high this quarter, and as I am going to be outlining through this presentation, Alamos is on the cusp of delivering transformational growth over the next several years with a pathway to nearly doubling our rate of production to approximately 1 million oz of gold per year. I am going to be making some forward-looking statements through this presentation, so please do review our cautionary notes. I will start with an overview of Alamos and give you an outlook in terms of where Alamos is heading. We are a diversified intermediate gold producer, but above all, we are a really good business and we are a growth company.
We've got the financial track record to support that. We are a growth company. We started last year producing at a run rate of about 500,000 oz per year. We're now producing about 600,000 oz per year in 2025. Through the completion of our Phase 3+ expansion at Island Gold and development of our Lynn Lake project in Manitoba, we have the capacity to grow our production to up around 900,000 oz per year, and that's going to start in and around the latter half of 2028. Over and above that, we're working on an expansion study of our Island Gold District that we think ultimately takes us up to approximately 1 million oz per year. All of this growth is fully funded, and all of this growth is lower cost.
If you look at our cost profile today, we're expecting our cost to average in the neighborhood of $1,300 per ounce. We are already well below the industry average, which is currently sitting around $1,600 per ounce and climbing. As we bring on this lower cost growth over the next several years, you're going to see our cost decrease down towards $1,175 per ounce in 2027. With the startup of Lynn Lake in 2028, we expect our cost to start trending down towards $1,100 per ounce. We are already a low-cost producer, and we're expecting our cost to decrease even further. Another key element of the Alamos Gold story is we look to de-risk the business every way we can. One of the ways we do that is by focusing on operating in safe jurisdictions. I think you can see that from the location of our operations today.
Twenty years ago, we started out with 100% of our valuation supported by our Mulatos mine in Mexico. If you look at our growth since 2015, it's all been in Canada, such that now 90% of our net asset value is supported by our Canadian assets. That is really anchored by our Young- Davidson and Island Gold District operations, which between the two of them and combined with our Lynn Lake project in Manitoba have average mine lives of about 20 years between them. We think that's conservative given the type of ongoing exploration success we're having and potential we see within all three of these operations. The other ways we look to de-risk the business is by focusing on really high-quality assets and running a very clean balance sheet. That is something we have today. We've had next to no debt throughout most of our history.
We've got a small amount of debt today, but we're in a net cash position and we're generating free cash flow over and above our reinvestment in growth. Very strong balance sheet, really high-quality assets concentrated in safe jurisdictions. We've been a strong outperformer over the past three and a half years, up about 250% over that time frame, and we've significantly outpaced the price of gold, the various gold equity ETFs, as well as the S&P 500 itself. It's really been a sustained outperformance. It hasn't been any one catalyst or one specific period that's driven that outperformance. It's really been a sustained outperformance over that three and a half year period. That's underpinned by a collection of attributes that are really unique to Alamos Gold.
We are the only intermediate producer that can tick all of these boxes, having a portfolio of high-quality assets concentrated in Canada. Looks like we're flipping ahead here. Noella?
Yes, sorry, Scott. I think we might have a disconnect here with the slides.
Okay. Okay. We should be on the share price slide. Nope. Are you moving the slides, Noella?
Yes. You said it's the share price slide?
Yeah, number four. I can control the slides.
Okay. No, it's just I think when you press the slides, I'm not seeing the changes.
Okay.
Yes. So you said slide four?
Slide four. Apologies, everybody online. Hopefully, you're not experiencing the same technical difficulties. Yeah, we're just looking at our share price performance and what's driving that outperformance. It's really a collection of attributes that are unique to Alamos. It's those high-quality assets concentrated in Canada, giving us one of the lowest political risk profiles in the sector. It's having that high-return, fully funded organic growth in an industry that's lacking really good growth opportunities, a declining cost profile in an industry that's facing rising costs, consistent execution. We've got an excellent long-term track record of hitting our targets. Last, but certainly not least, it's ongoing value creation. This, along with these other attributes, I think is why this outperformance is sustainable. We're continuing to grow the value of our asset base through ongoing exploration success.
We're taking that exploration success and growth in reserves and resources, and we're packaging that up into either new projects or bigger and more productive and more valuable operations, as well as smart and accretive acquisitions like what we did with Magino last year. Collectively, this is supporting a more valuable asset base, which is underpinning our rising valuation. We should be on slide five now. We're not only doing well as a gold company, but I think if you look at our financial track record, we stack up well relative to any business. We are a growth company. We've got the financial track record to support that. If you look at the chart on the left-hand side of the screen, going back to 2004, over the next 10 years, our EBITDA has increased by 15 times.
Over the next couple of years, we expect our EBITDA to double again. That is coming from production growth as well as higher gold prices. If you look at that financial track record and then you look at our valuation, there is certainly a disconnect. We are trading at an attractive valuation with a forward-looking EBITDA multiple of nine times, which is lower than virtually every sector in the S&P 500, including the average S&P 500 multiple of 14 times itself. That multiple is also well below where you would expect Alamos and other high-quality gold equities to be trading within this type of cycle where gold is hitting new highs. Historically, we have traded up towards 15-16 times EBITDA and close to one and a half to two times NEV versus nine times EBITDA currently and 1.2 times NEV. I think there is lots of room for upside.
I think there is also room for upside in terms of where gold prices are headed. Growth company with an attractive valuation and all of this is underpinned by a strong outlook for gold. If you look at all of the factors that propelled gold to record levels or near record levels where they are sitting today, they are still in place. You have got debt levels that are continuing to grow at an unsustainable pace fueled by ongoing deficits. You have got a challenging economic outlook undermined by uncertainty around tariffs, de-dollarization, which has been led by central banks in the East and more recently by global investors looking to reallocate some of their U.S. exposure into other investments, gold being one of them. Global central bank easing, we are in an easing cycle and gold performs well during easing cycles. Of course, elevated geopolitical risk.
I mean, these are all factors that we think will continue to contribute to a very strong outlook for gold. Really attractive outlook for gold. Alamos has put itself in a great position to capitalize on these higher gold prices by assembling a high-quality portfolio of assets during weaker points in the cycle. M&A has been a key driver of our growth as a company, but it has also been one of the many ways we have been able to create a lot of value. Our blueprint with respect to M&A has been simple. Again, focus on really high-quality assets with upside, pay a fair price for those acquisitions, and then invest in these assets and grow them. It started with Mulatos more than 20 years ago, an asset we acquired for $10 million.
If you look at the free cash flow and the current consensus value of Mulatos today, that's about $1.5 billion of value created from an initial $10 million investment. Similar story with Island Gold. Back in 2017, we acquired it for $600 million. By the end of 2023, that value had increased to over $2 billion. Through the acquisition of Magino and integration of the two assets, the combined operation now has a consensus value of $4.6 billion. Across all of our operating mines, and if you factor in our Lynn Lake project, we have generated $7 billion of value over and above what we paid for these acquisitions and all of the capital invested into these assets. Given the outlook at all four of these assets, we expect that value is going to continue to grow.
Expiration success, apologies, is rather another way we've been able to create value. That, again, comes back to that focus on operating high-quality assets. The gold has to be there. It has to be in the ground to begin with. You need good expiration teams to go out and find that gold. You also have to commit to actually spending the capital to find that gold. We're doing all three. You can see that in our track record over the past six years. We've seen our reserves grow for six consecutive years for an aggregate increase of 44% to now sit at 14 million oz. That growth is net of more than 3.5 million oz of gold that we have mined out of the ground. Collectively, over that time frame, we've discovered 8 million oz of resources.
What's more impressive than that discovery rate is the cost to discover those ounces, which has averaged $30 per ounce. If you're ever looking at the gold sector and wondering, should I buy the commodity or should I buy the equity, I think this really speaks to why there's much more torque in a high-quality gold equity. The fact that we can find ounces in the ground at a cost of $30 per ounce and then turn around and sell it at $3,300 per ounce, which is where gold prices are sitting today. This growth in reserves and resources is helping support the development of new projects, as is the case with our PDA project in Mexico, our Lynn Lake project in Manitoba. It's also helping us grow really high-margin assets like Island Gold.
Given the ongoing success we're seeing across all these assets, we've increased our exploration budget again into 2025 to record levels of $72 million. We are a growth company, but I think more important than being a growth company is ensuring you are growing the right way. We've never been focused on growing for the sake of getting bigger. If we're growing as a company, it's because we think we can create value along the way. That's something we can demonstrate with the value we're creating on a per-share basis. If you look at our rate of production, our reserves, and our cash flow over the past six years, all have increased significantly on an absolute basis. Of greater importance, you look at the charts on the bottom of the screen, we're producing more gold per share, about 30%.
We have 35% more reserves per share, and our cash flow per share has roughly doubled over that time frame. This is a really important track record to us. It's a really important track record to our shareholders. We are demonstrating growth on a per-share value, and that's something we expect to continue to do as we execute on our growth plans over the next several years. We reported our Q1 results at the end of April. It was a bit of a slower start to the year. Production came in at the low end of guidance at 125,000 oz. Our costs were also higher than planned. This was really a function of slower starts at both our Young- Davidson operation and within the Magino operation. I'm happy to say both have improved into the second quarter. We're expecting higher mining rates from Young- Davidson.
We're expecting higher mining rates from Magino. We're also expecting higher grades from La Yaqui Grande. All three of those are going to contribute to stronger production in the second quarter as well as lower costs. We expect that improvement to continue into the second half of this year with a further increase in production. That's, again, going to be driven by rising grades at La Yaqui Grande, higher grades at Island Gold, as well as higher mining rates at Island Gold towards the back end of this year. We're on track to hit our full year guidance with the growth we expect into the second quarter and with that growth expected to continue into the second half of the year. This growth is expected to continue into 2026 and over the next several years.
If you take a look back to the beginning of 2024, we started at a run rate of 500,000 oz per year. Today, we're now producing at a rate of about 600,000 oz per year. By 2027, we expect our production rate to increase by 24% to approximately 700,000 oz per year. All of this growth is lower cost, and you can see that in that cost profile. We are expecting our cost to decrease from roughly $1,300 per ounce this year to sub $1,200 per ounce by 2027. We expect that production growth to continue into 2028 with the startup of our Lynn Lake operation around the middle of the year. That is expected to take our longer-term production rate up to 900,000 oz per year while further driving our costs lower down towards that $1,100 per ounce range.
Longer term, we see excellent upside potential through a further expansion of the Island Gold District, which we think ultimately takes our consolidated production up to a million ounces per year. We will have more news on that towards the end of this year. If you look at where we started back in 2004 to where we expect to be at the end of this decade, that is doubling our rate of production in the span of roughly five or so years. All of this growth is fully funded. In fact, we expect to generate meaningful free cash flow over and above this reinvestment in growth. At current gold prices, we expect to continue generating positive free cash flow. We have got a range of free cash flow sensitivities on this slide.
At $3,000 gold, we'd expect to be generating approximately $200 million of free cash flow this year. Into 2026, that's going to grow into the latter half of the year on the back of the completion of the Phase 3+ expansion at Island Gold. We expect that to step up even further still into 2027 to somewhere in the neighborhood of $600 million. That is going to be full year production from Island Gold post-completion of the Phase 3+ expansion, the completion of the PDA project in Mexico, and then further growth still into 2028 once we complete development of Lynn Lake, which is going to both take our production higher. You're going to see our costs coming down over that same time frame. That capital spending is going to be coming off with these growth projects completed.
Into 2029 and beyond, at current gold prices, you're looking at free cash flow approaching $1 billion per year. Tremendous growth ahead of us. We've got three key growth projects that underpin our strong long-term outlook. We're on slide 12 in case there's any issues with the slides. Three key growth projects, they all share similar characteristics, high-quality projects, each with strong returns, and they're all located in good jurisdictions. The other thing you'll notice with these slides is these projects have been sequenced in a way such that we have the technical and financial capacity to build these projects the right way and at a pace that we can afford that allows us to generate free cash flow over and above this reinvestment in growth.
Starting with the first of the projects at the top of the screen, you've got the Phase 3+ expansion, which is tracking well for completion mid-2026. As that expansion is winding down, as that capital spending is winding down, that's when we expect to be ramping up heavier construction activities at Lynn Lake. Moving to the middle of the screen, PDA is a smaller expansion or smaller project located within the Mulatos District. Initial capital of about $165 million. It's a very manageable project that our team in Mexico will oversee. This is a team that's got an excellent track record of developing projects on time and on budget, going back to La Yaqui Phase I , Cerro Pelon , and La Yaqui Grande. We've got every expectation they're going to do the same thing with PDA, with construction starting later this year and initial production towards the middle of 2027.
Three projects on the go, but it's a very manageable construction schedule that's going to support new production in each of 2026, 2027, and 2028. I'm going to do a bit of a deeper dive on the Phase 3+ expansion at Island Gold. It's well underway, and it's going to be one of our biggest value drivers. You can see from the photos on the screen, the head frame has been erected. Hoist house is up. If you were to look below that head frame into the photo on the lower right-hand side of your screen, you'd see where the shaft has been deepened to. It's currently down to a depth of about 1,250 m. The ultimate planned depth is about 1,400 m. That photo is from March. That's down to the 1,050-level shaft station.
You can see the galloway, which is the equipment that we are using to facilitate the shaft sinking. That ultimate shaft sink is expected to be completed into the third quarter of this year. The overall expansion is expected to be completed into the middle of 2026. We are making excellent progress on this expansion. Once it is completed into 2026, it is going to be a game changer for the operation. What it is going to do is take this operation from a really high-grade underground mine that is being operated at 1,200 tons per day with a fleet of haul trucks that is driving an hour down a ramp, an hour back up the ramp to bring that ore to surface, to a shaft operation that will allow us to double the size of the operation to 2,400 tons per day.
Instead of driving for an hour up a ramp system, we'll be hauling it to surface in a matter of minutes. More in the way of production at significantly lower cost, given the productivity improvements we'll benefit from with the startup of this shaft. Combined with Magino, the Island Gold District will be producing at a run rate of close to 400,000 oz per year at all-in sustaining cost of around $1,000 per ounce. This will be one of Canada's largest and lowest-cost operations. We think there's further upside from there. This is a great illustration of why we are sinking a shaft at Island Gold. The chart on the left-hand side of your screen really illustrates the pace of reserve and resource growth that we've realized since the acquisition of Island Gold back in 2017.
At the time of acquisition, it contained 1.8 million oz with reserve grades of around 9.2 grams per ton. It has grown in each and every year that we've owned it to now contain 6.7 million oz of combined reserves and resources. We've also seen reserve grades increase over that time frame from 9 grams per ton to 11.4 grams per ton. We've seen our inferred resource grades increase from about 11 grams per ton to 16.5 grams per ton. It is not only growing in terms of size, but we're also seeing an increase in grades as we drill deeper into this deposit. This growth in reserves and resources has supported multiple expansions of the operation. When we started or when we acquired this operation, it was operating at 900 tons per day. We took that to 1,100 tons per day.
We've since taken it to 1,200 tons per day, which is currently where it's operating. We're now working on doubling that further still to 2,400 tons per day as part of this shaft expansion. Given this ongoing reserve and resource growth, we're also evaluating a further expansion of mining rates at Island Gold to something beyond 2,400 tons per day. We'll have more information on that as part of the Island Gold District expansion study that we're looking to release into the fourth quarter of this year. If you package up that reserve and resource growth and the expansions that we've outlined for Island Gold, and you shift to the chart on the right-hand side of your screen, you see the impact of that.
The value of this asset has increased in each and every year that we've owned it from $600 million back when we acquired it in 2017 to now sitting at approximately $4.6 billion based on consensus analyst estimates. We see excellent upside to that value based on the expansion study that we're working on, as well as factoring in higher gold prices. If you look at consensus long-term gold prices, they're still sitting around $2,400 per ounce. You look at spot prices today, they're sitting at $3,300 per ounce. I think over time, you're going to see consensus long-term gold prices continue to creep up towards spot prices. That's going to support even higher valuations for assets like Island Gold, as well as the rest of the assets within our portfolio. This exploration story is far from done. The deposit is open laterally at depth.
We're having success across multiple horizons within the ore body. If you take a cross-section view of the deposit, we're also having success finding new high-grade ounces into the hanging wall and footwall of the deposit. Incredible pace of success in terms of growth to date. We expect that growth to continue as we drill deeper and we drill laterally across the extent of the Island Gold ore body. The acquisition of Magino and its much larger mill and tailings facility is going to allow us to unlock the potential of Island Gold a lot faster and further than what we would have been able to do with our Island Gold mill. This has been an attractive acquisition from a number of perspectives. First and foremost, financially, it was very attractive. The acquisition was accretive across all metrics.
There's significant synergies, and I think this picture speaks a thousand words in terms of the types of synergies we can realize, given how close these operations are together. I'll try and illustrate with my pointer, which does not appear to be working at the moment. Okay. Yeah. Sorry about that. If you look in the foreground, you can see where we're building the Island Gold shaft infrastructure. If you look in the background on the left-hand side of your screen, you've got the Magino open pit. In the center of your screen, you've got the Magino mill, and to the right, you've got the Island Gold mill. You basically have two operations that deposits are within 300 m of each other if you look at a long section underground.
You've got two mills and two tailings facilities that are operating in vicinity of each other. We don't need to operate two mills, and we don't need to operate two tailings facilities. We're going to shut down the Island Gold mill. We're going to shut down the Island Gold tailings facility. We're going to start processing Island Gold ore through the Magino mill at significantly lower processing costs. That's a big driver of the synergies that we're going to be realizing over the life of mine. I think the part that we are most excited about, about this acquisition and the integration of these two assets, is the ability to leverage that bigger Magino mill to support a larger expansion of both Island Gold and Magino.
Base case at 12,400 tons per day, we expect Island Gold to support 400,000 oz per year or the Island Gold District to support 400,000 oz per year. Through a larger expansion of the Magino mill, and we're evaluating scenarios up to 20,000 tons per day, we think the district can ultimately support something north of 500,000 oz per year. We'll have details on that towards the end of this year. This is an asset that will be one of the largest and lowest-cost gold mines in Canada, and we expect it to only get better. In terms of our other growth projects, I mentioned earlier we are going to be starting construction on our PDA project in Mexico towards the middle of this year. We achieved a significant permitting milestone back in January, having received the approval of the permits to start construction on this project.
This is another project that may appear small on surface, given the price tag. It's only $165 million to build it, but it's very valuable in terms of the impact it's going to have on the Mulatos operation as well as our consolidated results. This is a low-capital, low-cost, but very high-return project with an after-tax IRR, which is north of 70% at very conservative gold prices of $2,200 per ounce. It's going to produce at a run rate of about 130,000 oz per year over its initial years. We see excellent exploration upside, which is going to allow us to sustain that over the longer term. It's an underground deposit, higher-grade sulfides located just off the side of the main Mulatos pit. We're going to be ramping off the side of that Mulatos pit right into ore.
We're going to be building a 2,000-ton-per-day mill to process those higher-grade sulfides. That is going to open up a number of new upside opportunities for us across the district. If you look at the history of Mulatos, it's predominantly been an open-pit heap leaching operation. Because of that, we've been targeting near-surface oxide mineralization, which is amenable to open-pit heap leaching. Along the way, we've hit higher-grade sulfides, but didn't follow up on it because we didn't have the processing capacity. We are now going to have that processing capacity with this mill we're building for PDA. We're following up on these areas like Cerro Pelon, where we have high-grade intercepts. We know there's higher-grade mineralization below the previously mined pits.
We're going to look to define additional deposits that can feed this mill and really support a much longer-term outlook for within the Mulatos District. Stay tuned in terms of exploration results. We see lots of upside within the Mulatos District. Last, but certainly not least, is Lynn Lake, which is another key part of our growth plans. In January, we announced the start of construction on Lynn Lake, which will put the project on track for initial production into 2028. Really attractive, high-return project over its first 10 years. It's going to produce on average about 180,000 oz over its initial few years. It's going to see production up over 200,000 oz per year. This is another low-cost operation. We expect it to have first quartile costs, which is going to help drive down our consolidated cost profile towards that $1,100 per ounce range.
On a standalone basis, this is a very attractive deposit, but we see lots of opportunities, much like within the Mulatos District, for a number of regional deposits to be brought into the overall mine plan. We're building infrastructure to support the Lynn Lake project and the processing of ore from MacLellan and Gordon. Ultimately, we're going to leverage that existing infrastructure to process ore from other deposits like Burnt Timber and Linkwood, which will end up being very, very high-return projects given the minimal capital required to develop these deposits with that ore to be trucked and processed through the mill we're going to be building for the Lynn Lake project. This is a big land package. We've tied up 80 km of strike. We believe we're only scratching the surface in terms of the type of regional potential across the Lynn Lake district.
We see this as it's already a very long-life project with 27 years. We expect this to be operating a lot longer than that. Financially, I touched on this at the beginning, but we've got more than enough capacity to fund all of this growth internally. We've got $300 million in cash, $250 million in debt. It's debt that we inherited through the acquisition of Magino. We'll look to pay that debt off over the coming years and get ourselves back into a position where we're completely debt-free with a very strong cash position. We're in great shape financially. We have all the cash. Through ongoing cash flow generation, we expect to be able to fund all of our growth commitments over the next several years and generate meaningful free cash flow over and above that spend.
If you look at what we did last year while building out the Phase 3+ expansion at Island Gold, we generated $270 million of free cash flow. At current gold prices, we're going to generate something similar this year. You are going to see that growth continue into 2026, 2027, and 2028. I will close out the presentation there. Just quickly to summarize, Alamos's outlook as a company has never been better. We have got growth. We have got the financial capacity to fund that growth. All of that growth is lower cost. All of that growth is in top-tier jurisdictions, namely Canada. We have got everything we need to be successful. We have got the capacity to nearly double our rate of production over the next several years. That happens to coincide with a period of time where we are realizing record gold prices.
The future is bright for Alamos. We've got a number of meaningful catalysts coming up this year. Stay tuned for what we expect will be positive exploration updates supported by our largest exploration budget ever, as well as that expansion study that we expect to be releasing in the fourth quarter of this year, which we think is going to outline a path towards a million ounces per year. If that's not enough, this is all underpinned by a very strong outlook for gold. Thank you. I'll turn the call back to you, Noella, for any questions you may have on the line.
Thank you very much, Scott, for the presentation. We'll now begin the Q&A. Your first question is, free cash flow turned negative in Q1. How soon do you expect a return to consistent positive free cash flow?
We expect that to happen in the second quarter. Free cash flow was negative for a number of reasons in the first quarter. It was a combination of the slower start to the year, higher costs. We had a big year-end tax payment in Mexico. Looking ahead to the second quarter, we expect higher production, lower costs, much lower in the way of tax payments. All of that is going to contribute to stronger free cash flow in the second quarter and through the remainder of the year. On an annual basis, we expect to be generating north of $200 million of free cash flow.
Thank you for clarifying that. The next question is, is the Island Gold Phase 3+ expansion progressing as planned? Are you still on track and on budget for H1 2026 completion?
Yeah, we are on track.
We expect to complete that expansion towards the middle of the year. Yes, in terms of the budget, we updated our budget last September, and we're tracking well with respect to that budget. All in all, the expansion's going very well. I touched on the progress on the shaft sink. It's down to the 1,250-meter level currently. We're expecting it to be down to the 1,400-meter level later this year. The focus over the next year will be on building out that shaft bottom infrastructure, completing construction of the pace plant, and start skipping ore towards the middle of next year. That's going to help support higher throughput rates, higher production, and lower costs.
Thank you, Scott. Next, when will the higher-grade inferred resources at Island Gold be mined?
They will be if you're referring to the higher-grade resources down at the lower extent of the mine. Some of those will start to be mined out towards the end of the decade into 2028, 2029, 2030, and 2031. It is all about getting access to some of those high-grade ounces through the completion of the shaft. We will be operating this mine at 2,400 tons per day. This is a really high-grade ore body. You're looking at average reserve grades of 11.4 g per ton. The average stope within Island Gold is not 11 g per ton. It is anywhere from 5 g per ton to 25-30 g per ton. In any given quarter, we are going to be mining a mix of higher and relatively lower-grade stopes, which average out to in and around 11 g per ton.
There will be periods of time where we are concentrated more so into higher-grade areas of the deposit. That is when you can expect those grades to increase into that 12-13 g per ton and support higher rates of production. Thank you for clarifying that. The next question is, can you talk about the issues you encountered with Magino's ore flow sheet, the changes made, and if those are now fully resolved? Absolutely. The issues that we encountered with the flow sheet in Q1 were related to the transfer chutes. This is a new mill. It was not built by Alamos Gold. It was built by the company that we acquired. We have gone in and we have rectified what we have seen as deficiencies within the current circuit going back to the second half of last year. We replaced the primary crusher. We replaced the secondary crusher.
What we are doing in terms of approaching these changes is we are looking at this from a long-term perspective. The secondary and primary crusher were showing signs of premature wear. They were not the type of units that we would like to utilize or we do utilize across the rest of our operations. We could have done a quick repair to get these units back up and running. Instead, we ripped out those units. We put in more robust units that we utilize and trust across the rest of our operations. That is giving us the performance and confidence to support the higher throughput rates that we are looking for from the Magino mill. A bit of background on the mill design and construction. The overall bones of the mill are good, but there are some design elements of the circuit that we are fixing along the way.
What we encountered in the first quarter was undersized transfer chutes. It was our first winter with this asset. We encountered issues with broken ore that was mined out of the pit that, as it was sitting ahead of the crusher, snow was falling on it, colder than normal winter. That broken ore froze into oversized blocks. Once you start to put that into the crusher circuit, those bigger blocks were getting hung up in undersized transfer chutes. The resolution to that was take down the crushing circuit, open up the size of the transfer chutes such that we'll never experience an issue like that again. To long-winded answer to answer your question, yes, the problem has been rectified. We did see better performance from the mill within the first quarter.
By the end of the first quarter, the mill was operating up closer to 9,000 tons per day. We saw that performance continue into April, and we're expecting better performance to continue into the second quarter. It is continuing to improve, and it is getting up to where we would like it to be.
Thank you, Scott, for your response. The next question for you is, regarding Qiqavik and West Raglan, could you update us on Alamos's intentions for the critical mineral reserves? There are similar large claims to the east. Is Alamos's view in line with national interests?
Our focus right now is on Qiqavik. We have a $7 million exploration budget there this year. We have a summer exploration program that will be starting up over the near term. That is our primary focus with respect to the other properties that we acquired from Orford with critical minerals.
That's something we're continuing to evaluate. Our focus, first and foremost, is on Qiqavik, which is a gold property. We'll evaluate the other properties and see what the best course of action is with those properties in time.
Thank you for shedding some light on that. Next, a viewer asked, what is the current range of analyst target prices?
There's a wide range of target prices on a Canadian dollar basis, the low CAD 40s to north of CAD 50 per share. I would say the key difference between the target prices, if you look across our analyst coverage, all have buy ratings on Alamos Gold. They're very constructive on our outlook. The differentials in those targets largely have to do with gold price assumptions.
You have got a range of long-term gold price assumptions as low as $2,200-$2,300 per ounce from some of the brokers out there to as high as current spot prices for those analysts that are using the forward curve. I would say that is the main differential between those target prices. All are very constructive on our outlook and all have buy ratings.
Thank you, Scott. Next question, when does Alamos expect to increase its dividend?
As we are generating more in the way of free cash flow, if you go back to that free cash flow profile slide that we showed earlier in the presentation, we are expecting to generate north of $200 million of free cash flow this year. We are also reinvesting heavily in growth over the next couple of years.
As that growth starts to come online and as you start to see that free cash flow generation increase into the latter part of 2026 and into 2027, we'll have more in the way of capacity to increase that dividend. I think that's where you should be looking at in terms of when you could expect an increased dividend. Our philosophy with respect to capital allocation is we take a very long-term view. Over a 10-year stretch, approximately a third of our free cash flow would go into reinvesting in high-return growth. A third goes into building up our cash balance and strengthening our balance sheet. A third goes into returning capital to shareholders via share buybacks and/or dividends. Right now, more of that bucket is going into that reinvestment and growth.
But that reinvestment and growth, in turn, is going to provide more in the way of free cash flow generation, which will ultimately support higher dividends as well as potentially higher share buybacks.
Thank you for the response. Next, you sold Quartz Mountain for $21 million. Any other sale of non-core assets expected?
Nothing imminently. I mean, Quartz Mountain, I would say, was the largest of our non-core assets. We have some smaller properties that we're still evaluating, whether they're core or non-core to Alamos Gold. But I wouldn't expect anything the size of Quartz Mountain to be sold in the near term.
Thank you for clarifying that. The next question, Lynn Lake continues to be a promising growth project. Can you provide a timeline for the next major milestones and how it's tracking versus expectations?
So this year, we have a budget of a little over $100 million.
It is really early-stage construction works to get ourselves in a position to ramp up heavier construction activities into 2026. I touched on that earlier. I mean, it coincides nicely with the wind down of the Phase 3+ Expansion at Island Gold. We want to be ramping up heavier construction activities on Lynn Lake as that big project at Island Gold is winding down to ensure that we have the appropriate technical and financial capacity to focus the right energy on both at the same time. Milestones to look for towards the end of this year are completion of earthworks, completion of a permanent camp, which will house our construction workforce, and then starting on early works on some of the permanent infrastructure that we will need to support the operation. We will have updates on a quarterly basis in terms of where Lynn Lake is tracking.
But it's still very early days.
Thank you for elaborating on that. We're coming up on your last three questions for today. The first one is, are there any issues relating to the forest fires in Canada for your operations?
There are. With respect to Lynn Lake, there's an evacuation order in place for the town of Lynn Lake, which includes our project team. So the town's been evacuated. Our personnel have been evacuated from Lynn Lake. That has impacted the project. Again, we're in very early stages of ramping up construction activity. At this point, we're not expecting it to have a significant impact on our overall construction schedule. Hopefully, ourselves and the people of Lynn Lake can start moving back into the town over the next few weeks. The weather has been helping over the last several days. A bit of rain.
Winds have been blowing in favorable directions, which has been pushing wildfires in the opposite direction of the town. Really hopeful that that continues because it's been a tragic situation, not just in Manitoba, but across Saskatchewan, northern Ontario. There are wildfires in BC as well, too. Hoping the weather improves and allows all of these wildfires to be better contained. With respect to our operations in northern Ontario, not a significant impact to date. There is nothing in proximity of our mine sites. As we've seen in past years, there can be some impact depending on the proximity of the fires and where smoke is blowing. As underground mines, there is always the potential for smoke to get pulled into our underground ventilation. As part of our safety protocols, if there is any smoke in the region, we shut down underground mining activities.
That's always a potential and something we've seen during past summer seasons. We haven't seen any significant impact thus far this year.
Thank you for addressing that, Scott. The next question is, what factors allow you to produce below industry average all-in sustaining costs?
It's high-quality operations and investing in those operations to make them more productive. First and foremost, it's focusing on the best quality operations. If it's not a good asset, it's never going to be a low-cost operation despite your best efforts. It really starts with our due diligence on these assets and focusing on only working with what we see as the higher quality and the best assets. From there, it's investing in these assets to make them bigger and better. A good example of that is the lower mine expansion at Young- Davidson.
At the time of acquisition of Young- Davidson back in 2015, this was an operation that was designed to operate at 6,000 tons per day. We followed through on an expansion, the lower mine expansion, which took this operation to 8,000 tons per day. As part of that expansion, we also built in a much higher degree of automation within that lower mine infrastructure such that instead of rehandling ore multiple times and then bringing it up skips at 6,000 tons per day, we designed the infrastructure so that you pick up the ore, you drop it into an ore pass. That ore pass feeds directly into a crusher. It's crushed. It's conveyed a kilometer across the extent of the ore body into a skip, up to surface, into the mill.
Virtually no rehandling versus what we were doing in the upper mine, which was rehandling it multiple times. It is improvements like that, which help us drive down our unit cost and support lower overall cost operations. I went into a bit of detail on Young Davidson to help illustrate what we are now doing at Island Gold. We are going to see the same benefit at Island Gold by taking a ramp access operation that is operating at 1,200 tons per day with a fleet of haul trucks that take an hour to get down to the current working faces, another hour to get back to surface, and replacing that with a shaft that can skip ore to surface in a matter of minutes at double the capacity.
It helps speak to the production growth as well as the productivity improvements and cost benefits we will see from these types of investments in our operations. The other thing that really helps is producing more of that higher grade, lower cost production. By doubling that output from Island Gold, which is an 11-gram ore body, we are bringing up more of those higher grade, low-cost ounces, which is helping drive down our consolidated cost profile.
Thank you, Scott. The last question for you today is, are you looking for other M&A opportunities?
Actually, if I could share my screen again, I think our slide 10 really speaks to that. This is our priority right now, executing on this growth plan. We are producing 600,000 oz a year.
Currently, with the plan in place we have with the Phase 3+ expansion and development of Lynn Lake, we can take our rate of production up to 900,000 oz per year. With that expansion study for the Island Gold District, we expect to release towards the end of this year, we think we ultimately have the capacity to increase our rate of production up to 1 million oz per year. Our priority is executing on this organic growth plans. Frankly, we do not need to look externally because there is very little available externally that stacks up as well as what we have internally. That being said, we are always in the business of looking. We are always keeping an eye on opportunities like Magino. If something really attractive comes along, we will take a very close, hard look at it.
The threshold and the bar for us to do anything meaningful is pretty high given the type of organic growth we already have within our pipeline.
Excellent. Thank you very much, Scott, for your insight today. Thank you to everyone who submitted questions. If you did not get a chance to submit your question, you can reach out to the appropriate account manager here at Renmark. That concludes our presentation for today. Before we go, I will turn back the floor to you, Scott, for final remarks.
Thanks, Noella. Thanks to everybody who joined us today. I look forward to speaking to you again soon and looking forward to additional positive developments through the year to be speaking about. Please do reach out to myself or any members of the team if you do have any questions in the meantime.
Thank you, Scott.
Once again, this was Alamos Gold trading on both the Toronto Stock Exchange and the New York Stock Exchange under the ticker symbol AGI. Thank you to everyone in Chicago and surrounding areas for joining us today. The playback for this virtual non-deal roadshow will be available on our website 24-48 hours after this presentation under the VNDR Library tab. Please stay tuned for other presentations in your area and see you next time.