Hello and welcome. I'm Lawson Winder, BofA Canadian Metals and Mining Analyst. Joining me today is John McCluskey, President and CEO of Alamos Gold. Now, John's been at the helm of Alamos since the very beginning, having co-founded the company with 2003 Mining Hall of Famer Chester Millar. Now, John, it's a pleasure to have you here today. Welcome. John, I think you're muted.
There we go. Thank you, Lawson. Thanks to Bank of America for hosting the conference again. If that's my introduction, I'll get right into it. I would draw your attention to the cautionary notes and encourage everyone to review them for their comfort. Switching to the next slide, I'll start with a brief overview of our strong outlook and our corporate strategy. Alamos is a growing, diversified intermediate gold producer. We're expecting to produce around 500,000 ounces of gold in 2021, up 15% from our 2020 production. The majority of that growth will be driven by the completion of the lower mine expansion at the Young-Davidson operation.
With the phase three expansion underway in our Island Gold operation and with the development of the Lynn Lake project in northern Manitoba, we expect another 50% in production growth between now and 2025, taking us to about 750,000 ounces of production a year. At the same time, our all-in sustaining costs are expected to decrease by 24% from around the current level of CAD 1,050 an ounce down to around CAD 800 an ounce. This is going to be driven by higher margins and increased profitability and strong free cash flow growth. Our strategy as a company is to minimize risk where we can and remain focused on creating long-term value. This includes focusing on operating in safe jurisdictions with 100% of our production coming from North America, and the majority of that coming from Canada. We run a conservative balance sheet with no debt.
We have CAD 240 million in cash. We build at a pace that we can afford. With our strong cash position and growing cash flow from operations, we can fund our organic growth initiatives internally. This reinvestment in growth is an important component of operating a sustainable business model that can support growing returns over the long term. We take a balanced approach to capital allocation, focused on generating strong, ongoing free cash flow while reinvesting in high-return organic growth and supporting higher returns to shareholders. On the latter, we continue to demonstrate our commitment to shareholder returns with a 70% increase in our dividends over the past couple of years. We'll go on to the next slide. ESG has become a much bigger focus of the market in recent years, but this is not something new to Alamos.
ESG has been part of our core culture since the founding of the company in 2003. We have a focus on continuous improvement, which I think is evident in our track record and many of the initiatives we have underway. With the environment, we are continuously looking for ways to minimize our impact and reduce our footprint while reclaiming and reforesting areas that we do impact. Our greenhouse gas emissions and water usage per ounce of gold produced are already among the lowest in the intermediate group, but we continue to make improvements. This includes initiatives underway at all three of our operations that will reduce our greenhouse gas emissions on an aggregate basis and on a per ton basis. Under the social umbrella, we're focused on a culture of safety first, and we're seeing results with a 59% reduction in lost time injury rate over the past two years.
This is an area where we are always trying to do better through our Home Safe Every Day program. Within our host communities, we invest in ways that will provide ongoing benefits well beyond the life of our operations, and we've been recognized for these efforts, particularly for our work with the communities around our operations in Mexico. With respect to governance, we're focused on maintaining a diverse and independent board, and we've built and continue to refine a framework to ensure accountability to all our stakeholders. Next slide, please. We reported on Q1 results towards the end of April, delivering a strong overall performance. We produced 126,000 ounces of gold, exceeding Q1 production guidance at costs that were in line with annual guidance. This was driven by production at our two Canadian operations, both of which set records in different respects.
Island achieved another record for production, and Young-Davidson achieved another record for mining rates, with the new lower mine infrastructure performing well. This drove another strong financial quarter with operating cash flows increasing nearly 50% from Q1 2020 to CAD 120 million, supporting strong ongoing free cash flow generation, even with the ramp-up of capital spending at La Yaqui Grande and the phase 3 expansion at Island Gold underway. We expect to continue to generate solid ongoing free cash flow from both these high return projects, and we expect to effectively self-finance our expansions from these operations. The reinvestment in growth is an important component of our focus on operating a sustainable business model that can support growing returns to shareholders over the long term.
We take a balanced approach to capital allocation with our free cash flow roughly split between strengthening our balance sheet, reinvesting in high return internal growth, and paying higher dividends to shareholders. This slide is a good representation of this. With completion of the lower mine expansion at Young-Davidson in July of 2020, we've now generated nearly CAD 150 million of free cash flow over the past three quarters. Over that same timeframe, we've used that strong free cash flow to strengthen our cash position to CAD 240 million while paying off CAD 100 million that was drawn on our revolver. We increased our dividends twice by nearly 7%. We doubled our exploration budget and started construction at La Yaqui Grande and the phase 3 expansion at Island Gold.
These are high return investments that will in turn support further free cash flow growth and higher returns to shareholders that are sustainable over the long term. This provides a good overview of what this reinvestment will provide. Higher production, sustainably lower costs, and significant free cash flow growth. Our current operating mines provide a solid long life production base of 500,000 ounces of gold per year, growing to 600,000 ounces of gold by 2025 with the completion of phase 3 at Island Gold. The improvements and expansions at each of the operations are also driving costs lower, such that we expect all-in sustaining costs to decrease by about 24% to CAD 800 an ounce by 2025. We also own a strong portfolio of high return projects, including our Lynn Lake project in Canada.
Lynn Lake has the capacity to take production to 750,000 ounces a year by 2025, and by that time, 600,000 ounces of that production will be coming from Canada. This represents a 50% growth from our current production in 2021. On top of that, we have additional value creation opportunities with other development projects, including our high return Turkish projects, for which we are getting no value in the market at present. I'll close the presentation with this last slide touching on valuation. There are always many great opportunities across the gold sector right now given the current valuations, and many reasons to believe that gold prices are going higher given the macro outlook. With Alamos trading at a discount to its consensus net asset value, we believe we stand apart as one of the most attractive of those investment opportunities.
Given our high quality long life assets, our growth, our low political risk profile, our clean balance sheet, and strong free cash flow outlook, Alamos possesses all the attributes needed for a premium valuation, and we expect our share price will ultimately reflect this. With that, I'll conclude the presentation and I'll turn it back to Lawson.
Excellent presentation, John. Thank you. I'd like to mention to the audience that if you have any questions, those can be submitted to the very fast panel, and please don't hesitate to do so. John, I'll start things off with a question that will address that exact last slide that you just spoke to. The question really is, what differentiates Alamos from its peer gold producers in particular, aside from valuation, which I think you make a case for pretty compellingly here.
Well, I think one of the key things that sets Alamos apart is its track record. Think about where we were as a company back in 2003. We had just completed the acquisition of our first project, the Mulatos project in Mexico. We had a valuation at that time of CAD 15 million. Within record time, we had acquired the permits, we built an operating group, we built the mine, put it into production, we poured our first gold by 2005. That was just a remarkable accomplishment for two and a half years of effort. We've steadily, against sort of all the odds, we've steadily grown as a company. We've always generated good profits. We've reinvested those profits well. We've got one of the best M&A track records in the sector. If you look at when we do M&A and how we do M&A, it's always countercyclical.
I think we should pride ourselves at never having received a reward for an M&A transaction. Looking back, one of the biggest feats that we held on Bay Street was for the acquisition of Red Back Mining, a CAD 7 billion acquisition that was done virtually at the top of the market. Well, if that's what it takes to get a reward, I'd rather pass. When we've typically done our M&A transactions, the market's been scratching their head, and generally our share price suffers because of it. Well, that's what you're going to get for doing countercyclical deals. That's how we've built value. We've gone from being a company with a CAD 50 million market cap. Today, we're sitting at about CAD 4.4 billion of market cap. We've gone from no production. This year, we're at 500,000 ounces of production. We've generated phenomenal profits.
We've actually paid back more in dividends than what we raised from the market to acquire and build the Mulatos project to begin with. There's not too many companies that can say that. Mulatos for which, again, we got no credit for when we acquired it. We paid CAD 10 million. We were told we had overpaid for it. It generated by now close to CAD 500 million of free cash flow for the company. It's produced close to 2.5 million ounces of gold. It's just a testimony to what you can do when you're willing to think for yourself, act countercyclically, and keep the focus on building shareholder value.
I wanted to also ask about the slide just prior to that, which is your growth outlook slide. You originally provided it in Q1 results, and it definitely caught my attention with Lynn Lake. Is there any risk that Lynn Lake gets pushed out, or are you guys quite confident that you can have that thing producing at full throughput levels by 2025?
Well, again, I point to our track record and the fact that we've always achieved our timelines, and in many cases, there was a fair amount of skepticism in the market. I mean, when we said back in 2017 that we intended to have the lower mine infrastructure at the Young-Davidson Mine completed, we would have an expansion to 8,000 tons a day through the new infrastructure we would build and the lower mine development completed. We're there. We made it right on time and on budget, and we're hitting those forecasted grades. I can point back for years and years prior, for effectively two decades we've been delivering on our commitments, and I believe that what we have forecasted is very achievable. There's obviously a lot of volatility in the market, and we can't really see that clearly over the horizon.
I guess if we could all predict where the gold price would be five years from now, we probably wouldn't be sitting working at these jobs that we do. We'd be sitting on a hilltop somewhere handing out all the answers to the world's problems. Just given where we see the gold price today, given the fact that Lynn Lake has a CAD 1,450 gold price, it has about a 30% internal rate of return, and that's not including an additional 500,000 ounces that we've added to that Lynn Lake project since we completed our 2017 feasibility study. It's a strong project. It'll be a low-cost project. At CAD 745 an ounce all-in sustaining costs, it'll be one of the lowest cost projects that we operate.
I'm very high on Lynn Lake, and I think our whole management team thinks very well of it, and from that point of view, I believe we have an excellent chance of completing our permitting on time. We're strongly supported by the Manitoba government. The federal government seems very keen to see development in northern Manitoba. I think that's a project that's really going to come together and ultimately is going to be a great producer for us.
Great. A question came in while you were speaking, John. It was actually something along the lines that I wanted to ask about. Mark Bristow talked about it in his presentation. Others have talked about it as well. That is, on the M&A front, what do you think about the concept of no-premium mergers with other relatively similar-sized producers? Do you think that type of thing can be accretive? What are the disadvantages? What are the advantages? What are your thoughts? Thanks.
Well, I think I can speak with a little authority on this question because essentially, myself and Scott Perry were the first two CEOs to ever do a transaction like that in the gold space. In 2015, we put AuRico and Alamos Gold together on a non-premium basis, and that's how we brought together the Mulatos Mine and the Young-Davidson operation. That ultimately was a fantastic transaction. Young-Davidson was a transformational asset for Alamos in that it had a 15-year mine life out in front of it. That was predicated on the lower mine development being completed. When we actually completed the transaction, it was about seven years of production in front of us, and it was going to take about CAD 350 million to complete that shaft and build out, well, complete two shafts actually, and build out all the lower mine infrastructure. We had the cash.
Alamos had a fabulous balance sheet. We had CAD 400 million cash, and it made a lot of sense to put those two companies together. In the end, Young-Davidson ended up generating sufficient cash flow to pay for all its own development, but you couldn't tell in 2015 when the gold price was just around CAD 1,100 an ounce. You couldn't tell where it was going to go at that point. I think it was the least risky and practically the way to build on the synergies that both companies created by coming together and ultimately create a tremendous amount of shareholder value. I think mergers along those lines can be very productive and build value, especially and particularly when there are good synergies involved. I think in some cases, we're seeing some deals come together simply for scale.
I'm not convinced that is a sufficient amount of justification for a transaction like that. I think that you really have to be focused on value creation and synergies, cost reductions, ways you can directly and practically demonstrate to the market that you're creating value.
Thank you for that commentary, and thank you for the question. Another question we got also was just on Turkey. I also wanted to ask something along the lines of Turkey. I guess basically the question is asking, why are you moving ahead with the legal action against Turkey? Was it absolutely necessary? Ultimately, how do you expect this to resolve, and how long do you expect it to take?
Well, clearly, I took the action because I thought it was absolutely necessary. I think if you don't think that's the case, you do something else. Look, we waited for 18 months for a signature, essentially, for our licenses to be renewed. It would've just taken a signature. Under their own laws, they were obliged to do just that. They kept on asking us to wait. We asked them for how long. They had in mind they would never give us any indication. The better question is, at what point do you keep waiting, and how do you justify continually waiting, when there's no good reason for them not to renew our licenses? That really is the issue. We felt that, in good Canadian fashion, we demonstrated a great deal of patience. It was fairly costly for us to wait on Turkey like that.
Ultimately, they would just give us no indication that that waiting was ever going to come to an end. We concluded that this was a de facto expropriation. We could see other projects in Turkey, in fact, in our region, that had received permits and license renewals. Why were they getting their renewals and why weren't we? We considered that fair and equitable treatment, and we felt that the best course for us to take was to bring it outside of Turkey where obviously the Turkish government holds all the cards. Now we're bringing them to a tribunal in The Hague where they're going to have to answer to judges that are well outside of Turkey and are going to have a very objective look at this case.
We think once that happens, we're going to have a very strong case to present, and we're going to win it. At least now I know what the timeline is. It can't be pushed out beyond five years, and there's a very good chance we could settle it well before that.
Perfect. I also wanted to ask about Mulatos, your founding asset. You spoke to how quickly you built it, and there has been a lot of exploration success at that asset, although in the past few years, there seems to be a bit of a lull in exploration news from that asset. What's happened to the momentum there, and how do you see that asset playing out in terms of additional exploration upside over the longer term?
Well, it's interesting when you're working on something like the Mulatos District, how it seems to go in fits and starts. I mean, we started the operation in 2005 with a seven-year production outlook, so we would've been finished by 2012. If you recall, at the time, Glamis brought a gold mine into production that year in Mexico with a similar sort of time horizon, and it was out of production by 2012. Whereas at Mulatos, we were able to continue to find more gold, first by expanding the existing pits that we started with and then adding pits pretty much adjacent to the main Mulatos pit. We eventually developed San Carlos and some other pits within that zone. Probably at Escondida high grade was the best of them, grading about 11 g per ton. Open pitable, that was pretty profitable for us for about two years.
Then we started to find satellite pits. We developed La Yaqui, the small La Yaqui, then we developed Cerro Pelon. Now we're developing La Yaqui Grande. All these have pushed Mulatos forward so that here we are in 2021, and we still have seven years of production now in front of us. We benefited from a lot of the work that Placer Dome and Kennecott had done, and we more or less stood on their shoulders for quite a number of years. What they had done is they basically looked at all the, within this high sulfidation system, you get all this vuggy silica outcrop, and pretty much everywhere where we explored in the vuggy silica outcrops, we ended up finding ore bodies. By now, though, we've picked all the low-hanging fruit.
The exploration that we've been doing over the last couple of years, it really took a step back to look at this thing regionally. We flew much better airborne than what we had been working with up till that point. Airborne that provides about 20x the resolution than airborne that had been conducted in the 1990, the early 2000s. We did a lot more geochemical analysis, a lot more, call it basic geology, in order to really get a clearer idea of what was going on within the district. Underneath the cover, in some places the cover isn't much more than 15 or 20 meters deep. There's more vuggy silica targets. They're just not sticking up out of the ground. The only deposit that we ever found that was completely hidden, we named it Escondida, which means hidden.
That one we literally found somewhat by fluke. We were drilling a ventilation hole and happened to go right through visible gold, and it came right up into the cutting box. Yeah, that particular hole rated 29 g. It was a pretty spectacular hit. Now we're specifically looking at targets that are undercover, and we've been working on that for the last couple of years. We have drilled off one high-grade zone, actually fairly close to the main Mulatos pit, but deeper. We have to ramp down to it. We've probably delineated about 300,000 ounces or so in there. Not quite big enough yet to get really excited, but it's grading around 7 g . I mean, we are having some exploration success, but we really haven't achieved the big breakthrough that we're looking for. Another La Yaqui Grande, for example.
This year we're going to be drilling at El Carricito. We've taken a couple of abbreviated drill campaigns there in the past. It's a big area. It's about 18 sq km, and we're going back in and drilling there again this year. It's very prospective. It's got all the right geological markers that make us believe we've got a good chance for discovery there.
Awesome answer. That was a lot of great detail and a lot of great specifics, so thank you for that. Unfortunately, we are just about out of time, so I think I might have to cut it off there, John. Thank you very much for being very generous with your time here. I'd also like to thank the audience. Thank you for the questions, for the interest, and take care, everybody.
All right. Thank you very much, Lawson. Take care.