Good morning. I would now like to turn the meeting over to Mr. Jamie Porter, Chief Financial Officer. Please go ahead, Mr. Porter.
Thank you, operator, and thank you to everyone for attending Alamos' fourth quarter and year end twenty twenty conference call. In addition to myself, we have on the line today John McCluskey, President and CEO Peter McPhail, COO and Scott R. G. Parsons, Vice President of Exploration. To address any questions with respect to our reserve resource update, we also have on the line Mr.
Chris Boswick, our Vice President of Technical Services. We will be referring to a presentation during the conference call that's available through the webcast and on our website. I would also like to remind everyone that our presentation will be followed by a question and answer session. As we will be making forward looking statements during the call, please refer to the cautionary notes included in the presentation, news release and management's discussion and analysis 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, VIT's Vice President of Technical Services and a qualified person.
Also, bear in mind that all of the dollar amounts mentioned in this call are in U. S. Dollars unless otherwise noted. Now I'll turn it over to John to provide you with an overview of the quarter
Thank you, Jamie. 2020 was transformational for Alamos as we delivered on key catalysts and transitioned to strong free cash flow generation. In July, we completed the lower mine extension at Young Davidson, announced plans for the Phase three expansion at Island Gold and commenced construction on the La Yaqui Grande project. These were all achieved while managing our operations through the COVID-nineteen pandemic. Our health and safety protocols evolved through 2020.
And by the end of the year, we had performed over 13,000 COVID-nineteen tests on Alamos employees, contractors and visitors as part of our enhanced workplace screening. The testing programs that we implemented have been instrumental in identifying and preventing the spread of the virus at our operations. Our operations performed well in the fourth quarter, and we met full year production guidance for the sixth consecutive year, producing 427,000 ounces of gold. Total cash costs of $761 per ounce for the year were below our guidance range, while all in sustaining costs of $10.46 dollars per ounce met guidance. In particular, our Canadian operations had a strong finish to the year.
Young Davidson is starting to hit its stride with mining rates ramping up to average a new record of 7,650 tonnes per day in the fourth quarter, exceeding year end guidance. This drove record quarterly mine site free cash flow of $31,000,000 Island Gold had another record quarter with respect to production and another record year of mine site free cash flow, generating $101,000,000 a 57% increase from the previous record in 2019. Our strong operating performance, combined with a higher gold price, drove another solid quarter financially, including operating cash flow of $127,000,000 and free cash flow of 58,000,000 For the full year, we set a number of new financial records, including record operating cash flow of $383,000,000 We had another successful year from an exploration perspective, despite our programs being limited due to COVID-nineteen. Reserves and resources at Island Gold increased an impressive 1,000,000 ounces across all categories and now totaled 4,700,000 ounces. Since we acquired Island Gold in November 2017, reserves and resources have increased nearly 3,000,000 ounces net of depletion.
The million ounces we added in 2020 and continued exploration success demonstrate the significant upside potential beyond what we detailed in the Phase three expansion study last year. Globally, our reserves increased slightly to just under 10,000,000 ounces with growth at Island, Young Davidson and Lynn Lake more than replacing mining depletion last year. Looking at Slide four, as outlined in December, we expect Young Davidson to drive a 15% increase in global production to a range of 470,000 to 510,000 ounces and a 3% decrease in total cash costs to between $710 and $760 per ounce in 2021. All in sustaining costs are expected to remain in a similar range as 2020, reflecting higher sustaining capital at Mulatos for the pre stripping of the El Salto portion of the pit. Our capital budget is expected to increase from 2020, reflecting a larger exploration program and the ramp up of spending on the high return La Yaqui Grande project and the Phase three expansion at Island Gold.
Turning now to Slide five. The reinvestment into high return internal growth projects is a key component of our focus on operating a sustainable business model that can support growing returns over the long term. As part of our balanced approach to capital allocation, we expect to fund this growth internally while continuing to generate strong free cash flow, which will further strengthen our balance sheet and support higher dividends to shareholders. Reflecting this strong outlook, we are pleased to announce a further 25% increase in our dividend to an annual rate of $0.10 per share. This marks our second consecutive quarterly increase for a combined increase of 67%.
I'll now turn over the call to our CFO, Jamie Porter, to review our financial performance. Jamie?
Thank you, John. Moving on to Slide six. We ended the year on a very strong note from a financial perspective. We sold 424,000 ounces of gold for record revenues of $748,000,000 in 2020. As John mentioned, Island Gold was the highlight once again, generating a record $101,000,000 in mine site free cash flow.
Young Davidson also demonstrated strong free cash flow growth in the second half of the year following the completion of the lower mine expansion, including generating a record $31,000,000 of free cash flow in the fourth quarter. Fourth quarter revenues were a record $227,000,000 from sales of 122,000 ounces at an average realized price of $18.60 dollars per ounce. Total cash costs were $733 per ounce, below the low end of full year guidance, and all in sustaining costs of $10.30 dollars per ounce were at the low end of guidance. For the full year, total cash costs and all in sustaining costs met or were better than guidance. Operating cash flow before changes in non cash working capital improved 55% year over year to a near record $127,000,000 or
$0.32 per share in
the fourth quarter. For the
full year, operating cash flow before changes to non cash working capital was a record of $383,000,000 or $0.98 per share, a 31% increase from the prior record set in 2019. Our reported net earnings of $77,000,000 in the fourth quarter or $0.20 per share included unrealized foreign exchange gains of 16,000,000 which were recorded within deferred taxes and foreign exchange, and other onetime gains of $2,000,000 Excluding these items, our adjusted net earnings were $58,000,000 or zero one five dollars per share. Our full year adjusted net earnings were $157,000,000 or $0.40 share, representing an 87% increase from 2019. Capital spending totaled $73,000,000 in the fourth quarter, including $28,000,000 of sustaining capital, 42,000,000 of growth capital, and $4,000,000 of capitalized exploration. Growth capital increased with the ramp up of construction activities at La Yaqui Grande and the Phase III expansion at Island Gold.
For the full year, capital expenditures of $246,000,000 were slightly above guidance, primarily due to higher capital at Young Davidson, reflecting the COVID-nineteen related delays in completing the lower mine expansion. We returned $31,000,000 to shareholders in 2020 through dividends and share buybacks, double the amount returned in 2019, With a further 25 increase in the dividend to an annual rate of $0.10 per share starting this quarter, we are on track to return $40,000,000 in dividends in 2021. As previously announced, we repaid the $100,000,000 drawn on our revolving credit facility in the fourth quarter and are once again debt free. We ended the year with $221,000,000 in cash, dollars 44,000,000 of equity securities and $500,000,000 of undrawn credit capacity. We are well positioned to fund our internal growth projects while continuing to grow our cash position and returns to shareholders.
I will now turn the call over to our Chief Operating Officer, Peter McPhail, to provide an overview of our operations.
Thank you, Tammy. Moving on to Slide seven. Young Davidson continues to perform well, producing 48,000 ounces and generating record mine site free cash flow of $31,000,000 in its first full quarter operating from the new lower mine infrastructure. With a strong finish, full year production totaled 136,000 ounces, in line with revised guidance. Mining rates increased to average a record 7,650 tonnes per day in the quarter, exceeding the year end target.
We expect mining rates to average about 7,500 tonnes per day in the first half of twenty twenty one, an increase to the design rate of 8,000 tonnes per day in the second half of the year. Total cash cost of CAD792 per ounce of mine site all in sustaining cost of CAD934 per ounce in the fourth quarter were both down significantly from earlier in the year, reflecting efficiencies of operating from the new lower mine infrastructure. On a full year basis, both were in line with revised guidance. As previously guided, we expect 2021 production of between 395,000 ounces, a 45% improvement compared to 2020. Total cash costs and mine site all in sustaining costs are expected to decrease to between $790 and $840 per ounce and $1,000 and $10.50 dollars per ounce respectively.
We also expect capital spending to decrease significantly to approximately $75,000,000 in 2021 and trend down to a long term rate of $50,000,000 per year over the next few years now that the lower mine expansion is behind us. With higher production, lower costs and lower capital, we expect record mine site free cash flow of million in 2021. Over to Slide eight, Island Gold set another quarterly production record producing 41,000 ounces of gold in the fourth quarter at total cash cost of $481 per ounce and mine site all in sustaining cost of $676 per ounce. With record production and strong margins, the operation generated $32,000,000 of mine site free cash flow in the quarter, bringing the full year to a new record of $101,000,000 Full year production of 139,000 ounces was in line with guidance, with total cash cost of $451 per ounce and mine site all in sustaining cost of $660 per ounce, both well below guidance. Work on the Phase three expansion continued to ramp up in the fourth quarter with activities focused on permitting, detailed engineering of the shaft and associated infrastructure and procurement of long lead items.
Looking forward to 2021, we expect Island Gold to produce 130,000 to 145,000 ounces, a total cash cost of between $430 and $480 per ounce, and mine site all in sustaining costs of between $750 and $800 per ounce. Exploration results at Island continue to impress. The Phase three expansion study released last July was based on the reserves and resources at the end of twenty nineteen. The million ounces of high grade reserves and resources added in 2020 and ongoing exploration success clearly highlight the significant upside to already attractive economics. Following my remarks on the operations, Scott Parsons, Vice President, Exploration, will provide a summary of the ongoing exploration success.
Moving on to Slide nine. Mulatos produced 31,000 ounces in the fourth quarter, down from earlier in the year, reflecting planned lower grades. Full year production of 151,000 ounces exceeded revised guidance. Total cash costs increased to $986 per ounce in the quarter, reflecting the lower grades, but were below guidance for the full year, averaging CAD $8.16 per ounce. Mine site all in sustaining costs also increased to CAD $14.26 per ounce in the quarter, reflecting the higher total cash cost and capitalized stripping at El Selto.
Palatto is expected to produce 150,000 to 160,000 ounces in 2021, a total cash cost of $840 to $890 per ounce. Mine site all in sustaining costs are expected to increase to $10.60 dollars to $11.10 dollars per ounce and will be higher during the first half of twenty twenty one, reflecting $25,000,000 to complete the pre stripping of the El Selto pit area. Over to Slide 10, construction of La Yaqui Grande continues to ramp up with $8,000,000 spent on the quarter in the quarter as we focused on clearing the project area, early mining activities, construction of the camp, detailed engineering and procurement. Restricting activities are ramping up as we speak with the project on track for initial production in the second half of twenty twenty one twenty twenty two, sorry. With MiSight, all in sustaining costs expected to average $580 per ounce.
La Yaqui Grande is expected to significantly reduce Mulatos' combined cost profile. I'll now turn the call over to Scott Parsons to discuss the reserve and resource update.
Thank you, Peter. On Slide 11, we had an excellent year with respect to exploration even with smaller than planned programs due to COVID-nineteen. Global reserves increased to 9,900,000 ounces from 9,700,000 ounces. The increases at Island Gold, Young Davidson and Lynn Lake more than offsetting depletion of 555,000 ounces. Global measured and indicated resources were down 3% to 6,900,000 ounces, reflecting some conversion to reserves at Young Davidson and Lynn Lake.
Most impressively, preferred resources increased 16% to 7,000,000 ounces, driven by another exceptional year of growth at Island Gold. Moving on to Slide 12. Island Gold once again was the main driver of our combined reserve and resource growth in 2020. Despite only completing about 60% of our planned drilling in 2020 due to COVID-nineteen, reserve and resources increased by a combined 1,000,000 ounces across all categories net of depletion. Reserves increased 8% to 1,300,000 ounces with additions of 239,000 ounces in Island Main And East areas, more than offsetting mining depletion of 144,000 ounces.
On Slide 13, the primary focus of Island Gold remains in defining new near mine resources, and that is where we continue to see the bulk of our growth. Inferred resources increased 910,000 ounces or 40% to 3,200,000 ounces, the largest annual increase to date. Grades also increased 9% to 14.4 grams per tonne, with the average grade of addition significantly higher at 18.6 grams per ton. Most of the additions were in Island East, including a 95,000 ounce increase in the middle portion of Island East, effectively closing the gap between Island Main and East. The largest and highest grade increase was in the lower portion of Island East where inferred resources increased 590,000 ounces.
The significantly larger inferred resource block now contains a total of 1,300,000 ounces, creating 18.3 grams per ton in proximity to the planned shaft. We saw excellent exploration results in this area in the latter part of 2020. And with the ore chute open laterally up and down plunge, this area will remain a key focus in 2021. On Slide 14, combined reserves and resources at Island Gold now total 4,700,000 ounces, nearly 3,000,000 ounce increase from the 1,800,000 ounces at the time of acquisition in 2017. Since acquiring Island Gold in 2017, inferred resources have converted to reserves at a rate of more than 83.
On top of that, we have grown inferred resources by an additional 2,200,000 ounces, with our overall discovery costs averaging $8 per ounce over the past year and $11 per ounce over the past three years. We see excellent potential for this growth to continue with our largest exploration budget to date planned in 2021. We've increased our global exploration budget to CAD50 million in 2021, double what we spent in 2020. Half of the 2021 budget is allocated to Island Gold, where our focus will remain on adding new near mine resources as well as evaluating regional targets. We've also increased our exploration budgets at Mulatos to $9,000,000 and $7,000,000 at each of Young Davidson and Lynn Lake.
We are encouraged by our early exploration success at Young Davidson having intersected higher grade mineralization below the existing deposits and at Lynn Lake where reserves have increased 9% given the success we're having around the McClellan deposit. With that, I'll turn the call back over to John.
Thank you very much, Scott. That concludes the formal presentation. I'll now hand the call back to the operator to open the call to your questions.
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. Session.
The first question is from Tyler Langton from JPMorgan. Please go ahead. Your line is now open.
Good morning. Thanks for taking my questions. I guess just to start at Young Davidson, guess kind of looking at Q4 results kind of annualized production would kind of get you to the low end of 2021 guidance and then the cash costs for the quarter were kind of below the low end of your guidance for 2021. I guess does that give you maybe some confidence that you could kind of hit the higher end of production in 2021 and the sort of the low end of cash costs? Or was there anything, I guess sort of unique about Q4?
Yes. It's Peter here. Thanks, Tyler. I guess, I mean, Q4, we weren't yet running at I mean, yes, we did 7,400 sorry, 7,600 tonnes a day. We expect 7,500 tonnes a day in the first half of twenty twenty one and 8,000 in the second half.
So I think Q4 might be a decent proxy. It could be a bit low given the fact that we aren't quite at the full tonnage yet. We will be in
the second half of the year.
Okay. And then just with, I guess, the Phase III expansion at Island Gold and then Liaki and Mulatos. Just with those projects, are you seeing any signs of cost inflation just given kind of the recent run up in steel prices and oil and diesel? Is there any concerns there?
So I'll start with La Yaqui Grande in Mexico. I mean, most of that capital project I mean, big chunk of it is pre stripping, and those costs are pretty locked in. It's just basically mining costs, which we're haven't escalated. There's not a lot of steel or anything like that involved in that project. There's some earthworks.
And so we seen anything there yet. And we've made a lot of our orders of things like crusher parts and whatnot are already behind us. And on Phase III, we're just I wouldn't expect anything significant there. There's there'll be normal sort of inflation over the course of the next three or four years as we bring that into, you know, start spending a bit more money on it. I think we're in good shape with our estimates there.
Okay, perfect. Thanks so much.
Thank you. The next question is from Kerry Smith from Haywood Securities. Please go ahead. Your line is now open.
Thanks, operator. Peter, just for YD, you were suggesting 7,500 tonne a day as an average for the first half of this year. You did 7,650 tonnes a day in Q4. Is there perhaps two mill shutdowns? Or maybe you can just tell me how many days of mill shutdowns you've got in that first half.
There'll be a liner change in the first half. I think we're expecting it to happen in in in, you know, April. But, you know, we do we do run that mill to, you know, absorb those. You know, that would be like a three or four day shutdown. To absorb those shutdowns, you you run at a higher rate on this and the days are operating and expect to be down for those three or four days.
It wouldn't impact our, you know, 7,500 ton a day for the h one target.
Okay. But I guess my question is why wouldn't it be a little bit higher? You're already out of the gate at seven thousand six fifty. I would have thought 7,500 seems pretty doable.
Yes, we're hoping it's pretty doable. We expect it to be pretty doable.
Okay. Okay. And for maybe Scott can answer his question. Just on the island exploration budget of $25,000,000 how much of that, say, as a percentage might be spent on the regional targets, which you haven't done much work on? Obviously, now you've got the trailing ground.
Maybe just as a percentage, could you give me a sense?
Yes. Of the $25,000,000 we're budgeting about $6,000,000 for the Regional Exploration Program. That's focused on targets across the broader property that we've developed from building out the geologic model of Diamond Gold Deposit and testing several targets we've identified as a result of that.
Right. And I think you've said that it's probably not likely to be much spent at Trillion because you just got that ground and there's work to be done there before you start drilling, I think.
Yes. We're going to build the exploration foundation on the petroleum ground in 2021, and we'll be more actively exploring that drilling in 2022 and beyond.
Okay. Great. And, Jim, can you just remind me what your Mexican peso assumption was today? I know I should notice, but I forget.
Sure, Carrie. Yeah. I I believe we budgeted 20 to one. We've got we've got about 45% of our exposure hedged between '21 and '25. So we're we're pretty well well protected in in terms of, you know, both our operating costs and our our capital spending at La Yaqui Grande.
Okay. Okay. Great. And Peter, just one last question on Young Davidson. The $44 Canadian a tonne for your mining costs in q four, would that be a pretty good number for for a go forward number for, say, 2021 and 2022?
Yes. I mean, that's where we're heading to. I think once we get to 8,000 tonnes a day you know, through this year, you know, we're we're heading into that into that kind of range. I mean, we'll take takes a few quarters to see it get dialed in. I think it does bounce around a little bit depending on how much capital development we do versus operating development.
So there's some always some noise in it because of that. But it's definitely trending to there. Okay.
Carrie, we're just as a we're we're budgeted for low fifties for the first half of the year, dropping to kind of the the the mid forties, so where we were in the second half of twenty twenty. We think we'll get back there for the second half of twenty twenty one.
The
next question is from Cosmos Chiu from CIBC.
Thanks, John, Jamie, Peter and Scott for the conference call here. Great to see the increase in reserves and resources and also the increase in the dividend. Maybe my first question is on the Island Gold increase in inferred resources. Seems like it's a lot of it, as you mentioned, coming from Island Yeast. Could you remind me how tight is the spacing in terms of drilling right now to get into inferred?
And what kind of drill spacing do you need it to be to get it into M and I and later on reserves?
Scott, do you want to take that, at least the start of it?
Yes, I can take the start of it. So typically for inferred resources, we're anywhere between thirty and seventy five meters depending on where we're drilling at. Average, I would say, is around, say, between fifty and seventy five meters. And again, you know, these inferred resources are defined in the geologically constrained structure. So, you know, they're it's predictable and, you know, a strong understanding of the controls on mineralization of island.
And we have high confidence in that classifying those as inferred resources at that spacing, which is, you know, I think realistic for sure.
And as a follow-up, it's great to see the Island yeast, you're looking at 18.59 gram per tonne, certainly higher than your reserve grade at this point in time at Island. But again, inferred, I would imagine mining dilution wasn't factored in. Maybe still early stage at this point in time, but could you remind me what kind of mining dilution assumption you've put into your reserves? And can that be potentially, even at this early stage, applied if I want to compare apples to apples here?
Maybe Chris will answer that. Chris. We've got a variable
dilution factor depending on the the scoping type, the area, and, you know, past experience, and it ranges anywhere between 2550%. But I think overall, a good average use would be about 35%.
Mhmm. And, you know, based on your knowledge right now, that's still it seems kinda, you know, reasonable if I were to apply that to Island yeast. Again, you know, fairly early stage. But
Yeah. That's reasonable.
Okay. Sounds good. And then bigger picture here, John, as you mentioned, some of these exploration results at Island could potentially add to the value of the new shaft. I would imagine right now, the mine plan is fairly flexible for you to kind of change things around potentially to maybe get to some of the higher grades first. Again, very early stage right now, but is that
a possibility? It's certainly a possibility. There's a lot of flexibility in the way we're approaching this this project. And we still have really another two years of exploration that we can get under our belt before, you know, we start to, you know, make decisions that limit our options. So we still have a fair amount of flexibility for the next twenty four months anyway.
So that puts us in a very comfortable position. An interesting thing about the overall global resource that I think isn't always zeroed in on very quickly. It's the fact that we've been, over the last couple of years, we've been depleting higher cost, lower recovery ounces in our open pit operations. And we're effectively replacing them with high grade, low cost ounces in our Canadian operation, to Island Gold. So while you see an incremental increase in the overall reserve picture, the reality is that we're replacing them with far better ounces.
Rather have ounces with a 95% recovery as opposed to an ounce with a 70% recovery. And ounces in Canada, in our opinion, are a lot more favorable than ounces anywhere else. So from the overall quality of the reserve, think we've made a real improvement.
Yes, that's great to hear. Again, on Island Gold, as you I think you or Scott have mentioned, Trillium Mining previously. How does that you just made the acquisition here, so again, fairly early, but how does that sort of fit into the whole picture here? And I haven't looked at I haven't seen the rocks here at Trillium mining yet. So is it it's to the East of Island.
So is this potentially on trend with Island yeast? Is it the same type of rocks? How should we look at it at this early stage?
I can take that one.
Yes, I can take that one. So Trillium, essentially, two main strategic reasons for the acquisition. One and the most important is as we've been drilling off Island East to the East and down plunge, we've we've, you know, obviously been interpreting the the strike and dip of the deposit as we've been going. And it does appear that eventually, it will, or come closer across over the the the property boundaries. So what the acquisition did for us is remove any sort of land tenure risk that we'd be worried about from an exploration perspective in the long term.
So it's a long term long term strategy. It really opens up the deposit down plunge and and the long strike to the east. And the second part of that is, you know, the Mitch McContaine Greenstone Belt, which is where the island gold deposit's located. You know, it seems, you know, a hundred years of kind of off and on exploration, going back to kind of the same showings that have been defined over the years. And and we feel, you know, with the approach we're taking in terms of a systematic exploration approach across the broader belt that, there are significant opportunities that can be unlocked.
So from a regional exploration perspective, it fits well with our strategy of consolidating around our operations, in this case, Island Gold, and applying a systematic approach, understanding the controls of mineralization and targeting and exploring from there.
Of course. Maybe a financial question here. As you talked about in the MD and A, you're making a deposit of $20,000,000 in terms of taxes payable in Q1. That's how it is, I know, given the timing of these tax payments. But I guess my question is with all the money you're spending on La Yaqui Grande in 2021, would that CapEx be able to offset some of your profits at Mulatos in 2021?
And what should we make as an assumption here?
Yes, absolutely, Cosmos. I mean, you would have seen that we generated $68,000,000 in free cash flow at Mulatos 2020. So that's the reason behind the big $20,000,000 plus tax installment that's due here this quarter. We can absolutely deduct the majority of of those stripping costs and other construction costs at La Yaqui Grande against our 2021 cash flow. So we'd expect a substantially lower tax installment in Q1 of twenty twenty two.
Great. And then one last question on foreign exchange here. The Canadian dollar strengthened quite a bit year to date. If I go back to your MD and A, I think right now you're assuming 0.75 to one in terms of the C dollar, U. S.
Dollar exchange rate, every zero five change is a $30,000,000 difference in free cash flow. I think only a small portion of it is hedged at this point in time. Jamie, could you remind me what your hedging strategy is and how you look at it given the current strengthening of the Canadian dollar?
Sure. Yes. I mean, we've been looking for opportunities, obviously, to increase our hedge position over, I'd say, probably the last six months. Canadian dollar has seen some pretty significant strength, so we have been able to do as as as much as we'd like. I think we've got about 10% of our of our 2021 exposure covered between, you know, 76 and 72¢.
So it it it is a small portion. If if we do see pretty dramatic weakening in the Canadian dollar, then we'd be aggressive terms of hedging. Otherwise, we'll be price takers for the time being. And it does have an impact, know, currently at $0.8 relative to our budget, that's a $30,000,000 impact on our free cash flow for the year.
Great. Thanks a lot, everyone. Those are all the questions I have, and I look forward to the remainder of 2021.
The next question is from Fahad Tariq from Credit Suisse.
I apologize if I missed this. But as you think about capital allocation maybe in the medium term, if
you
were to get the permit approval or the renewal at Karazli, is it fair to think that Lin Lake competes for capital with Karazli? Is there a preference for one project over the other? Any color there would be helpful.
Yes. I can feel that. I would suggest that Lynn Lake is still eighteen to twenty four months off before we start spending any significant capital in getting it going because we've just got to go through the normal permitting process. Whereas Kirazli is fully permitted at this point. So theoretically, if we were to get our licenses renewed, we would we'd be able to get back to back to work there fairly quickly.
But it's the approach that we're taking right now is is of talking to Turkish mining companies. We've been approached by several, and we're talking to Turkish mining companies about coming in alongside of us and partnering on that project. So since we're sort of talking theoretically anyway, theoretically, I would envision as we take the next significant step going forward in Turkey, we're likely to do that with a partner, which would significantly offset our capital commitment there.
Okay. Great. And maybe just as a follow-up then. So theoretically, if you were to get a partner at Kirazli, then is it is the idea that the partner would help with maybe some of the permitting issues, or is it more that it would free up capital to then do Lin Lake as well or both?
Probably both. Clearly, one of the of one of the reasons to bring on a partner is that they're going to help you in some way, shape, or form. And and since we have all the tech technical expertise we require and and we have all the all the money that we require in order to build that project. You know, where we're gonna need the most help is is just sort of navigating, you know, the Turkish politics, navigating that side of it. So, you know, hopefully, you know, we're smart enough to bring on a partner that can legitimately lend a hand on that front.
So certainly any capital that they would put up in terms of purchasing an interest in the project, that would go some way to giving us additional capital that we could redeploy in Canada.
Got it. That's very clear. Thank you.
Thank you. We have a question from Mike Parkin from National Bank. Please go ahead. Your line is now open.
Hi, guys. Thanks for taking my questions and congrats on the good quarter. Most of my questions were answered. But could you speak to YD, the lower mine has been running now for several months, kind of effectively two quarters to date. Can you give us some commentary in terms of how it's performing?
Is it on a daily rate, you seeing basically exceeding expectations? And can you just remind me on the permit there, do you have a daily operating cap? Or is it an annual average?
Thanks, Mike. Yeah. I mean, the ability to ability to operate at YD with that with that lower mine infrastructure is is is kinda night and day from what we had in in the upper mine. It is performing very well. Can tell by our tonnages that we're exceeding numbers.
I don't think we've ever exceeded our or very rarely exceeded our expectations in the past, and we're exceeding our you know, have been exceeding our expectations. So it continues to perform well and running since, I guess, mid mid July. We've had, you know, daily rates. I mean, to to average 8,000 tonnes a day, you need to have you know, because you have to be down for maintenance, you know, various times. You have to be, you know, you have to be skipping waste also.
I mean, that that that shaft needs to put out 10,000 tons a day. And we do that. Right? Some ore some days, ore and waste, some days, just ore. We averaged 7,500 tons a day.
So we see that no longer being an impediment to getting to our 8,000 ton a day target. It's operating very well. You know, you have to develop all the stopes in front of it and be in good shape otherwise and have everything feeding it properly, we're there. I think the second part of your question was Yeah. The operating permit.
Yeah. So, you know, it it boils down to a milling permit, and it is a it is a per day number, and it's it's quite high. It's it's well above what we would we we over permitted there. I think we're permitted to 10,000 tonnes per day. We are we won't we don't have any plans to operate it at that level.
So we we are not in a situation where the the mill will slow us down.
Okay.
I don't even think the
mill could do the mill can't even do 10,000 tons a day, but we're it currently I mean, yeah. Sure. You could do something to to get it there. But it it has no problem doing on average 8,000 tons a day.
Alright. Super. And then, maybe a question for the Scott Parsons and the expiration side of things. With YD, you know, you you made the smart decision to kind of halt, further drilling at depth at YD until you kind of got down lower. Are you kind of established and set up to resume that, you know, drilling to continue exploring deeper into the YD West extension?
Yes, absolutely. So with the lower mine infrastructure in place, we did start drilling in 2020 with a limited program and really starting to test opportunities down plunge of the deposit, both of Wydney West and then the main part of Young Davidson. But also, I can't emphasize enough the exploration potential, you know, in the hanging wall of the wall of the deposit. It's really seen limited testing. We're sitting along the Cadillac Water Lake fault system.
You know, there's significant opportunities there. And as I alluded to in the end of my exploration update, we did intersect some higher grade mineralization in both the hanging wall And, and this is gonna require, obviously, a lot more work to define, you know, the geometry of these structures and and any potential continuity of mineralization, but it just points to the upside. So, you know, not only do I see upside in expanding the existing reserve and resource within the cyanide, but also other opportunities in different different settings, geological setting. Then we will be ramping up, as I mentioned, to a to a second drill, underground drill within the next few months and start evaluating some of those opportunities.
The next question is from Lawson Winder from Bank of America. Please go ahead. Your line is now open. Mr. Winder, your line is open.
Please proceed with your question.
Yes. Thank you very much, operator. Hi, guys. Thank you for taking my questions here today. Hello to you all.
Just I wanted to ask about the stockpile at both Island and Waihi. And particularly at Island, it seems the underground has been running a little bit ahead of the mill. Are you able to provide where that stockpile sits today?
Yeah. We've got about 30,000 tonnes at around five grams.
Okay. Great. Thanks. And then and then at YD?
Not a significant stockpile. It's maybe coming into the year, we had, again, maybe in the 30,000 tonnes at typical kind of reserve grade. But it doesn't last so long at YD at the milling rates we have there.
Okay. That's great. And then just
We a similar have some very low grade stockpile that's on the books as well, but I mean that's for some time way in the future.
Yes, I know, of course. Now Peter, just in that similar vein at Island, the for Q4, I had expected you guys would be a lot closer to the 1,200 tonnes per day. I'm just curious, is the reason that you were and I apologize if you already touched on this. I unfortunately was on the call a little bit late. But is the reason that you were a little below that 1,200 tonnes per day related to COVID at all?
Then looking forward into 2021, is it fair to expect 1,200 tonnes per day to be achieved on sort of like a full year basis?
Yes. So the mining was at 1,200 tonnes a day. I think you're referring to the milling rate, was just a bit below that. We did have some unscheduled crusher challenges in the fourth quarter, had us down for four or five days and caused our tonnage to be a bit off for the quarter. We were Island has the benefit of being able to juggle high grade, medium grade and low grade stockpiles, so we could still make our ounces for the quarter.
But yes, we you should expect 1,200 tonnes a day for 2021.
Great. Super helpful. And then just a question on capital allocation and capital return. You guys, for the last couple of quarters, have clearly indicated a preference for the dividend. But just going forward, can we expect that to continue to be the case vis a vis the buyback?
Lawson, it's Jamie. I can take that. I think our preference has always return the majority of what we're going to return to shareholders through the dividend rather than the buyback. We use the buyback opportunistically when we see a pretty significant dislocation in the share price, but there's limitations associated with normal course issuer bid that we're blackout about 50% of the time. So it's often hard for us to act on it when we'd like to.
So I think we like the discipline discipline and associated with the dividend. And I think we're comfortable with the level of that currently of about US40 million annually. Think that's a decent return. It's something that we can well afford at the same time as investing our other growth projects.
Okay. Mean, it's actually below payout percentage where it's been historically. So I don't disagree with you on that. And then just maybe one final conceptual question. On Mexico and going forward.
Basically, history of Alamos, since I've been following it, has been a transition away from Mexico and toward Canada. And I mean, would it be fair to think that the investment you're doing now in La Yaqui is potentially the last big investment you do in Mexico? Or looking the other way, do you see additional potential exploration upside in the Molassos area or in the anywhere in the jurisdiction? How do you think about Esperanza? And just how do you think about Alamos and being in Mexico as a jurisdiction going forward?
It's John. I can take that. We still believe Mexico is an attractive jurisdiction. I think there's going to be lots of opportunity in the years ahead in Mexico. They're going through a difficult time right now.
The country has been hit very hard by COVID. As everyone is aware, there is ongoing issues with narco trafficking in that country. And it started to directly affect the mining industry over the last couple of years as that criminal element turned its interest towards the mining industry and started to rob gold mining operations, including ours last April. So those were certainly causes cause for concern for us. But as things have been unfolding in Mexico, you know, Alamos benefited tremendously from continuing to explore in the Mulatos District.
And as we made new discoveries, we've extended mine life from what we had originally, which would have seen us stop production back in 2012. Here we are still mining in 2021 and we have good sight lines through 2027. It's, you know, been fortunate for us that every couple of years we've we've made a really good discovery in that Miladas District and and that's kept us going. But it's it's it's just a fact that earlier on it was easier because we, you know, we were going after the most obvious things. Most of the things we ended up developing, they had pretty good surface expression that we were able to follow-up on.
But going forward now, the challenge is to be able to use geophysics and other geological exploration techniques to effectively look down beneath cover and try to find the more hidden deposits that may be existing in that district. We've still only covered maybe 20% of Mulatos District, you know, the holdings that we have under claims. So there's still a substantial amount of exploration upside there. You know, we're under the current circumstances, you know, we're not particularly aggressive about making further acquisitions in Mexico. And we do have a very strong preference for Canada for obvious reasons.
You know, reality is, you know, Alamos has always been very opportunistic and also very patient. So when we see opportunities evolve and if we see the country continue to evolve and turn its attention to attracting and encouraging investment there again, you know, we'll respond. But for the time being, I think our better opportunities lie in Canada. And that's why we've been heavily investing there. And in the meantime, you know, we'll continue keeping things going in our Miladas District where, you know, by any measure it's been a tremendous success.
You know, a project that we acquired for $10,000,000 originally, We've made well over $400,000,000 from that project. And yes, we wouldn't be where we are today without it. So we're very grateful for Mulatos and for the start it gave us.
That's great color, John. Much appreciated. Take care, guys. That's all for me.
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 extension 5439.
(416) 368-9932 extension 5439. Thank you for your participation.