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 apologies to everyone on the line. We're a few minutes late getting started, given some issues with the operator there, but we're ready to go now. And thank you for attending Alamos' first quarter twenty twenty one conference call. In addition to myself, we have on the line today, well, John McCluskey, our President and CEO and Peter McPhail, our COO.
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 and A session. As we will be making forward looking statements during the call, please refer to cautionary notes included in the presentation, news release and MD and A as well as the risk factors set out in our annual information form. Technical information in this presentation has been reviewed and approved by Chris Boswick, our Vice President of Technical Services and a qualified person. Also, please keep in mind that all the dollar amounts mentioned in this conference call are in United States dollars unless otherwise noted.
And with that, I'll turn it over to John to provide you with an overview.
Thank you, Jamie. We've had a solid start to the year, producing 125,800 ounces of gold in the first quarter at total cash cost of $757 per ounce and all in sustaining costs of $10.30 dollars per ounce. Our costs were in line with guidance, while production exceeded the high end of our first quarter guidance. This was driven by particularly strong performances at Island Gold, which set another quarterly record for production, and Young Davidson, which exceeded its targeted underground mining rates, achieving a new record. We remain well positioned to meet our full year production and cost guidance.
This drove another good quarter financially. Operating cash flow of $120,000,000 increased 46% from a year ago, supporting strong ongoing free cash flow even with the ramp up of development activities at Liaki Grande and the Phase III expansion at Island Gold. Looking at Slide four. This past week, we announced we'll be filing a 1,000,000,000 investment treaty claim against The Republic Of Turkey for expropriation and unfair and unequitable treatment with respect to our Turkish development projects. It's been eighteen months since our mining license expired.
We'd received all permits required to build Kirazli. We were well into construction, and we've met all legal and regulatory requirements for the renewal of our licenses. We've attempted to work cooperatively with the Turkish government, yet we've not received a reason for the nonrenewal nor have we received a timeline for when our licenses will be renewed. We're optimistic that the arbitration process will bring about a positive resolution. Now looking at slide five, we continue to advance our strong pipeline of North American growth projects.
Development activities are ramping up on the Phase III expansion at Island Gold, where we recently announced a 1,000,000 ounce increase in high grade reserves and resources. This growth and ongoing exploration success highlight significant upside potential to the already attractive economics outlined in the Phase three expansion study published last year. Construction activities at Lyacchi Grande continue to ramp up with the project on track to begin low cost production in the third quarter of twenty twenty two. Permitting at Lynn Lake is advancing and expected to be completed around the middle of next year, putting us in a position to make a construction decision in the latter part of 2022. We've had a good we've had good exploration success over the past few years.
We've increased reserves by 27% to 2,100,000,000 ounces. We see excellent further potential around the existing deposit and regionally across an 80 kilometer long greenstone belt that we have consolidated. We're ramping up our exploration effort accordingly. These projects are all key components of our strong outlook, with 50% production growth potential for approximately 750,000 ounces per year by 2025 at significantly lower all in sustaining costs of around $800 per ounce. This will support substantial free cash flow growth over the long term.
In the meantime, we can more than fund this growth internally while continuing to generate strong ongoing free cash flow and support our recently increased dividend. I'll now turn the call over to our CFO, Jamie Porter, to review our financial performance.
Thank you, John. Moving on to Slide six. We sold 126,500 ounces of gold at a realized price of $1,798 per ounce for record revenues of $227,000,000 in the first quarter. Total cash cost of $757 per ounce and all in sustaining cost of $10.30 dollars per ounce were in line with guidance despite the impact of the stronger Canadian dollar and Mexican peso. Our 2021 guidance provided last December was based on a Canadian dollar foreign exchange rate of $0.75 At the current Canadian dollar foreign exchange rate of approximately $0.81 our total cash cost and all in sustaining cost would increase by approximately $30 per ounce, with a similar impact realized in the first quarter.
Operating cash flow before change to the noncash working capital improved 46% year over year to $120,000,000 or $0.30 per share in the first quarter. Our reported net earnings for the first quarter were $51,000,000 Adjusted net earnings of $49,000,000 or $0.13 per share represented a 63% increase over the prior year period. Looking ahead to the second quarter, the decision to proceed with the bilateral investment treaty claim against Republic Of Turkey is an impairment trigger for accounting purposes. As such, we expect to incur an after tax impairment charge of approximately $215,000,000 in the second quarter, representing the full carrying value of our Turkish assets. This is a noncash charge that we expect to exclude from our adjusted earnings.
Capital spending totaled $73,000,000 in the first quarter, including $24,000,000 of sustaining capital, dollars 44,000,000 of growth capital and $6,000,000 of capitalized exploration. We also incurred $17,000,000 of capital advances related to work and equipment for La Yaqui Grande and the Phase three expansion of Island Gold. The aggregate increase spending in the quarter is consistent with full year capital guidance of between $354,000,000 and $384,000,000 and reflects the ramp up of development activities on our growth projects. Net of all capital spending and capital advances, we generated $10,000,000 of free cash flow. This was also net of $18,000,000 of cash tax payments in Mexico, the majority of which related to the twenty twenty year.
We paid a quarterly dividend of $10,000,000 in the first quarter, representing a 25% increase from the prior quarter, and we're active under our share buyback, repurchasing $1,500,000 worth of shares. In total, we returned more than $11,000,000 to shareholders in the first quarter and are on track to return more than $40,000,000 for the full year. We ended the quarter with $238,000,000 in cash, dollars 27,000,000 of equity securities and $500,000,000 of undrawn credit capacity. We remain well positioned to fund our internal growth projects while continuing to grow our cash position and returns to shareholders. With that, I'll turn the call over to our COO, Peter McPhail, to provide an overview of our operations.
Thank you, Jamie. Moving to Slide 7. We had another excellent quarter at Young Davidson, producing 48,000 ounces and generating mine site free cash flow of $22,000,000 This was the second full quarter operating for the new lower mine infrastructure. The operation continues to demonstrate its potential, with mining rates increasing to average a record 7,800 tonnes per day, exceeding our targeted rate of 7,500 tonnes a day. We continue to expect mining rates of 7,500 tonnes a day in the second quarter, with another mining horizon being added in the second half of twenty twenty one that will enable us to increase mining rates to sustain 8,000 tonnes a day.
Mill throughput also increased to average a record eight thousand one and fifty tonnes per day. This exceeded mine mining rates, reflecting the processing of additional ore that was mined and stockpiled in the fourth quarter of last year. We expect milling rates to match mining rates going forward. Total cash costs of $873 per ounce and mine site all in sustaining costs of $10.75 dollars per ounce were both down significantly from a year ago when the Northgate shaft was shut down to complete tie in at the lower mine. Costs were above annual guidance in the first quarter due to the stronger Canadian dollar as well as the planned mining of somewhat lower grades earlier in the year.
Grades mined are expected to increase through the year. And combined with higher mining rates, this is expected to drive production higher and costs lower in the second half of twenty twenty one. Higher production, lower costs and lower capital spending are all expected to contribute to record mine site free cash flow of more than $100,000,000 from Young Davidson in 2021. Over to Slide eight. Island Gold generated $26,000,000 mine site free cash flow from record production of 42,200 ounces, driven by higher grades mined.
As previously guided, grades mined and processed are expected to decrease through the year and average approximately 10 grams per tonne for the full year. Total cash cost of $466 per ounce and mine sites all in sustaining costs of $732 per ounce were both consistent with annual guidance despite the stronger Canadian dollar. Following up on a very successful 2020 exploration campaign, we ramped up our exploration efforts at Island Gold in the first quarter. The majority of the results remain pending given the longer turnaround times for assays being seen across the industry, but we are expecting that to improve in the second quarter. Work on the Phase three expansion is ramping up with the focus of advancing permitting and detailed engineering of the shaft and associated infrastructure and the procurement of long lead items.
Growth capital spending totaled $12,000,000 in the first quarter and is expected to increase through the rest of the year, consistent with annual growth capital guidance of CAD80 million to CAD85 million. Moving to Slide nine, Mulatos produced 35,600 ounces in the first quarter, a total cash cost of mine site all in sustaining costs of CAD915 and CAD1039 per ounce respectively. Mining activities in the first quarter were focused on Cerro Pelon, which along with existing surface stockpiles supplied the majority of ore stacked in the quarter. Mining activities within the main Mulatos pit were focused on pre stripping the El Selto portion of the pit. With the 18,000,000 of cash tax made payments mostly related to last year and the ramp up of spending at La Yaqui Grande, Mulatos' mine site free cash flow was negative 24,000,000.
Excluding the $30,000,000 of growth capital and capital advances related to La Yaqui Grande, La Yaqui Yaqui would have generated $6,000,000 of mine site free cash flow. Moving to Slide 10. As you can see in the photo, construction of La Yaqui Grande is well underway. Camp facilities are nearly complete, and we now have approximately 800 employees and contractors on rotation. Capital spending was focused on advancing earthworks for the waste rock dump, heap leach facility, and the water treatment plant, and prestripping of the open pit.
Over 3,000,000 tonnes of waste were mined during the quarter with the contract reaching mining rates of about 48,000 tonnes per day by the March. The project remains on track to achieve commercial production in the third quarter of twenty twenty two, With mine site all in sustaining costs expected to average $850 per $580 per ounce, Mayaki Grande is expected to significantly reduce the cost profile of the Montpelojo's operation. With that, I'll turn the call back to John.
Thanks very much, Peter. Now we're going to open the call to your questions. So I'll now turn the call over to the operator who will get that started.
Thank you. We will now take questions from the telephone lines. If you have a question, please press star one on your device's keypad. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question.
There will be a brief pause while the participants register. The first question is from Tyler Langton of JPMorgan. Please go ahead. Your line is now open.
Good morning, thanks for taking my question. I guess just to start with Corazia, I mean, sort of recognizing that the process can take some time to kind of run its full course. But I guess, are there any sort of near term milestones that we should be looking for?
Not particularly. You know, we're going into this with, you know, an expectation that it it may well just run the the full course or go go through a full arbitration, but there's always the possibility that sometime over the next year, we come up with some sort of negotiated settlement. That that's the way this arbitration process is designed. It's designed to bring the the parties together under the auspices of the the tribunal with the expectation, the intent at least to come to some sort of negotiated settlement. And if that's not achievable, then it goes to the next stage.
So we'll just have to follow the process.
Okay. And then, Ray, I guess you you called out sort of, I guess, the impacts that exchange rates are could have on cost this year. But are you seeing sort of I guess just any signs of inflationary pressures from labor or materials just sort of in the day to day operations? And then more I guess with the phase three expansion to Island Gold, I don't know if you can kind of remind us sort of how much CapEx is left to be spent? Are there any sort of potential sort of pressures there for that capital budget?
It's Peter here. I you know, on the, you know, inflationary pressures, certainly not labor. You know, labor rates have been, you know, are are relatively stable. You know, a few things, a few inputs, still a little bit higher, but it looks like it's it's a it's a temporary thing. So it really hasn't, you know, it really hasn't impacted our bottom line at this point.
And, you know, I guess, who knows, but we are not expecting it to materially impact us.
Got you. Okay. Thanks so much.
Thank you. The next question is from Fahad Tarek of Credit Suisse. Please go ahead. Your line is now open.
Hi, good morning. Thanks for taking my question. You had mentioned the cost impact or potential cost impact at different foreign exchange rates and the sensitivity, particularly on the Canadian U. S. Exchange rate.
Maybe talk about kind of the hedging strategy over the past year and also going forward. I know some peers, for example, tried to lock in a more favorable rate in 2020. Just want to get your thoughts on on hedging. Thanks.
Yes. Thanks. It's Jamie here. You know, we we look for opportunities over the course of the past nine to twelve months to to to lock in more of our Canadian dollar exposure. But, you know, the way that the the Canadian dollar has been strengthening and and more or less, you know, a straight line over that period, there wasn't much in in the way of opportunities to do so.
So I think we have 8% of our remaining 2021 exposure hedged at, you know, well well below 80¢. We'll look for opportunities to to do more if if there's weakness in the Canadian dollars. But as I said, we haven't seen that, you know, of of late. Fortunately, we are very well covered in in Mexico. We've got about 80% of our exposure hedged between '21 and '24, which, you know, those those contracts are very favorable relative to to to current spots.
So so that's where we're at currently. We'll we'll continue to look for opportunities to do more, but there's there's there's certainly none currently.
That's helpful. Thank you.
Thank you. The next question is from Lauren McConnell of Paradigm Capital. Please go ahead. Your line is now open.
Good morning, John, Jamie and Peter. Congratulations on a good quarter. I just had a question at Island. I know there's a history of positive reconciliation. And I just wanted to know with that 13.2 grams per ton that you mined this quarter, was that in line with what you were expecting on the reserve model, or are you still seeing positive reconciliation at Island?
No. That that is in line with what we were expecting. It it reconciled quite well. We've you know, over the years, that we've owned it, made changes to the to the reserve model, and, you know, we don't really see, you know, significant positive reconciliations, for the last couple of years. It's it's behaving quite well.
Okay. Great. Thank you. Thank you. The next question is from Cosmos Chiu of CIBC.
Please go ahead. Your line is now open.
Hi. Thanks, John, Jamie, Peter, and team. Maybe first off on the Young Davidson here. As you mentioned, you know, it's great to see that you were able to get to almost 7,800 tons per day when we you were targeting 7,500 tons per day in terms of mining rates underground. You know, on that point, could you give us some key highlights in terms of how you were able to, you know, come to a a throughput that was higher than what you targeted?
And then the second part of my question is, it sounds like it's not yet repeatable yet in q two. You're still targeting 7,500 tonnes per day, in q two. And why is it not repeatable?
We're always striving to do better than our plan. Few things would have lined up in Q1 that helped us beat it. We had a good quarter. We actually beat it in q four, if I'm not mistaken as well, beat the 7,500 tons a day. Look.
We we plan we're planning for 7,500 tons a day, for q, q two and ramping up to to 8,000 tons a day for the rest of the year. And what we're you know, to to facilitate that, we're bringing on another mining horizon, which will which will help us do that. Can we do better? Who knows? I wouldn't expect 8,000.
I'm I'm still expecting 7,500.
Yeah. I I I I I get what you mean. But I guess, Peter, you know, how did you beat it in q one then? Could you tell us, you know, one or two key highlights where, you know, it kinda surprised you? Or or, you know, what what happened?
Look. You know, it's it's it's just, you know, the ore being there, and and it continues to be there. So it's just being able to move it, getting getting familiar with the new infrastructure. It takes a while to to trust it and and figure it all out. So the difference between 7,800 tonnes a day and 7,500 tonnes a day in you know, is is not that huge a difference, frankly.
So I wouldn't I wouldn't say we've knocked it out of the park. It's it's nice to be on the higher side of that. We might be you know, maybe we'll be a quarter at a couple 100 tons a day below our our target. It's it's it it's always gonna vary up and down within, you know, a
little bit at at least.
Got you. Thanks, Peter. And then maybe as you touched on it, the new mining horizon here, can you talk a little bit more about maybe the location, where is this new mining horizon? And then can you remind us how many areas are you mining in the at this point in time?
Yeah. I mean, you know, so, you know, we have a couple of mining horizons in the in the upper part of the mine that we're continuing to mine, and this one actually is another one that would be at the upper part of the mine more to the on on the west westerly flank. We've got a couple of mining horizons in the lower part of the mine. So, you know, it it varies from time to time between three, four, five mining horizons. We would would cycle through as many of a as a 100 stopes in a year and Mhmm.
And have, at any given time, 30 stopes online. So that's that's kind of the mix.
K. Great. Got it. And and then, Peter, as you talked about, you know, you're still trying to trying to understand not understand. You're getting familiar with the lower mine infrastructure as you as you mentioned.
You know, at this point in time, any areas that you think might be limiting factors? Is it, you know, orbins, the conveyor, or, you know, everything's running fairly as you would have expected so far?
This is so much so much better than what we had at the mid mine that was frankly built for 6,000 tons a day and and and also frankly put in as a sort of an interim measure to get to the lower mine. You know, you know, I think we have something like 10 times more bin capacity. We have additional skipping capacity. We have conveying instead of trucking. All of those things help help us make our numbers.
You know? We're in good shape.
Mhmm. Great. Maybe switching gears a little bit. The at La Yaqui Grande, you know, I think, you know, there's already been some discussions in terms of, you know, inflationary factor and, you know, potential or maybe, you know, no no issues in terms of, the impact on costs. Could you comment on La Yaqui Grande?
You know, any kind of inflationary factors that we should be aware of that, we should be concerned about in terms of CapEx?
We we haven't we haven't seen any. We're well into construction. I mean, most of the CapEx associated with La Yaqui Grande is earthmoving, really. Pre stripping, building leach pads, putting liner down. We've ordered the liner liners on-site, came in on budget.
And, you know, our mining contract is a fixed rate per ton. So, you know, sort of diesel moving around a lot, don't really see much opportunity for inflationary pressures.
Mhmm. And that's that's good. And and that leads me to my second question here, I guess. You know, as you can you remind me, I guess, you know, when is the rainy season in Mexico? I think it's coming up.
And, you know, are there any key things that you wanna wrap up and then finish ahead of the rainy season, or is the rainy season not really an impact, not an issue in the Northern part of Mexico?
No. We do have a rainy season, and it's kind of August, September. It can start in July a little bit. And, you know, you try not to do certain things. You try not to be doing clay liner, on your leach pad during the rainy season.
That's about the only thing that you you the underliner. That's the only thing we try not to do, and we're well ahead of that, and it's not gonna not gonna be an issue.
Mhmm. Sounds good. And may maybe one last question here just to wrap things up. I guess, you know, your CapEx budget for the year is 320,000,000 to 350,000,000. You did about $73,000,000 in q one.
Could you maybe give us a bit more granularity in terms of, you know, the remainder and how that's gonna be distributed throughout the remainder of 2021?
Cosmos, it's Jamie here. Yeah. I I can take that. Hey. Hey.
It should be pretty evenly distributed. Know, you you will know we had, I think, $16,800,000 of of what we classify as capital advances in the first quarter as well. So that's, you know, deposits on long lead items, other contractor advances. So if you factor that in, the the the actual cash spending was a bit higher in q one. But, overall, I I I'd expect that capital bit the capital to be incurred pretty evenly.
Great. Thanks a lot, guys. Those are the questions I have. Thank you.
Thank you. The next question is from Mike Parkin of National Bank. Please go ahead. Your line is now open.
Hi, guys. Thanks for taking my questions and congrats on certainly a solid start to the year. Following up on Cosmos questions on Young Davidson, just with respect to the stopes, I know they've always kind of been massive, but is there any movement to using larger stopes in the underground now, or is it pretty much, you know, similar sizes to what you've been extracting for the last year or so?
Yeah, Mike. I guess it's
it's Peter here. In the upper mine, our stope height was 30 meters, and in the lower mine, we've gone to 35 meters. And the lower mine tends to have wider zones as well, so thickness into the page if you like. I think we would have can't remember the numbers exactly, but we might have been averaging, you know, 20 meters in the upper mine and more like 30 meters in in in the lower mine thickness. So the the stopes tend to be or or are on average bigger and so more tons per per stope on average.
So, generally, you're you're set up well to have that as a a tailwind for you as you open up the the lower mine then Yep. In terms of productivity. Okay. That's great. Most of my questions were answered.
Just one more. On Island, I know you guys were planning to do a bit of regional exploration last year. That got delayed due to COVID. Plans are to do it this year. What could our, you know, time frame in terms of news flow around that be?
Obviously, you're having great success at the the actual island mine. Just wondering, you know, if we stumble upon something else that's interesting, when could we maybe see initial results?
Yeah. I guess as the year progresses, I mean, we've you know, we we we do have, one drill, let's say, that's gonna be, poking around, more regional targets, but, you know, continue to have two and a half or three on surface and and and a couple underground as well drilling. So, yeah, we got lots of exciting things to look at in the regional setting. And, yeah, I can't I can't give you a time frame on when you'll see results. We're just currently waiting for assays on some
of those holes. So there you go. Alright. Well, that's it for me guys. Thanks so much.
Thank you. The next question is from John Tumazos of John Tumazos Very Independent Research. Please go ahead. Your line is now open.
Thank you for taking my question. With the deemphasis of the Turkish projects, how will you reallocate management to potentially a property acquisition? Separately, I just wanna commend you for your adherence to the Foreign Corrupt Practices Act. Can help you with that content and history. Thank you.
I'm kidding you a little bit,
but I commend what you're doing.
This is John McCluskey. I'll take your question. I I just to say that, you know, we were not we were not sacrificing budget or or management time on on the back of what what we were involved with in Turkey. Essentially, everything everything going on in the company was was being well managed in addition to Turkey. So I would say that given the fact that we weren't doing any work in Turkey over the last year, the bulk the bulk of the of the responsibility for what was going on was re really being handled by the Turkish team.
We have about 16 people employed in Turkey. We'll be reducing that team, of course, going forward. But given the fact that they were they were the ones responsible for what was going on for the for the vast majority of the work, there's gonna be really no no big change to the way we manage things.
Good for sticking up for your rights. Thank you.
Thank you.
Thank you. The last question is from Kerry Smith of Haywood Securities. Please go ahead. Your line is now open.
Hey, operator. John, when does the claim for Turkey actually get filed? Like, how long does it take to file that claim?
It's Generally, within a couple of weeks of when you announce that you're going to be filing a claim, you you would actually file the actual claim. So you you it it starts out with effectively something like this with a with a news release and a and a notice, and then you and then you move it forward. So it's it's something that, you know, you do a fair amount of preparation on. You know? And and so we were sort of well prepared going into the announcements, so it it it won't be too long.
Okay. Great. Thanks. And, Peter, in q two, are are there any large maintenance no maintenance shutdowns planned at YD?
I mean, we have maintenance shutdowns every quarter, but nothing nothing, you know, nothing that would impact the numbers.
Right. So nothing extraordinary, basically? No. No. Okay.
Gotcha. And and when does the prescript at And will will the ore that's left in that could actually run you through to the start up of La Aguirre Grande then?
Sorry. When does the when does the prescript at Al So to finish? Is that
what was that what
you guys have?
Yes. Towards
the end of this year. And, yes, we haven't obvious you know, we have enough ore between and and, you know,
in
excess between, you know, pit you know, Mulatos and the SAS stockpiles in Cerro Pelon, all of three of those sources to to well take us to the start of La Yaqui Grande.
Gotcha. Okay. And then just a last question on the the new hedges that you added post the end of the quarter, Jamie, the 46,000 ounces through to the end of this year. Would that kinda be evenly spread over the course of the next nine months then? Is that that the way to model it?
Yes. That that's right, Carrie.
Okay. Okay. That's great. Thanks very much, guys.
Thank you. There are no further questions 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 Parsons at (416) 368-9932 5439.
Please disconnect your lines at this time, and we thank you for your participation.