Good afternoon, everyone, and thank you for joining the Alamos Gold presentation and fireside chat. I'm just going to go over a few slides with you briefly and then open the session to Q&A. I'd like to direct your attention to slide three, which is just past the opening page and the cautionary notes. Alamos Gold has grown significantly over the years into a diversified intermediate gold producer. To put that in context, in 2014, we produced 140,000 ounces of gold from the Mulatos mine. By 2019, we produced 500,000 ounces of gold from three North American mines. On top of that, we've built up a strong pipeline of growth projects in an industry that, by and large, is facing declining rates of production. At the same time, costs are decreasing, driven by expansions or improvements at our existing operations and low-cost production growth.
Combined with the rising gold price, we've had a record year financially in 2019. Something that has not changed over the years is that we've continued to have a strong balance sheet with CAD 215 million in cash and CAD 615 million of total liquidity. With our robust financial position and growing cash flow from operations, we can fund all of our growth initiatives internally. Last, but certainly not least, we're focused on creating value for all of our stakeholders, and this includes shareholders, but it also references employees, our host communities, and governments, and we have a good long-term track record for doing this on all fronts. Switching to slide four, I'm going to talk a little bit about sustainability and creating value for all stakeholders.
I won't go into a lot of detail on the slide, given the short duration of this presentation, but it's important to acknowledge that we are very focused on operating in the right way, and we're focused on benefiting all stakeholders that we engage with. That's been the case with Alamos since the company was founded in 2003. With respect to the environment, we are committed to minimizing our impact by continuously looking for avenues to reduce our footprint and reclaiming areas that we impact. Since we started the Mulatos mine, for example, we've been continuously reclaiming it. After the first year of operation, we'd already spent CAD 2 million on reclamation on areas that we'd disturbed during the construction phase and areas that we were no longer using after the start of the operation.
With our employees, that means reinforcing a culture of safety first and always striving to be better through our Home Safe Every Day program. With our host communities, sustainability means investing in ways that will provide lasting benefits well beyond the life of our operations. With respect to governance, we've built and continue to refine a framework to ensure accountability and that we operate the company the right way by all of the stakeholders and principally our shareholders. Moving to slide five, I'd like to talk for a minute about COVID-19, give you an update on our outlook. Our focus on safety continues to evolve and adapt to new challenges that we face, such as COVID-19.
We've been fortunate as a company to not have had any confirmed cases of COVID-19 at any of our operations or offices, but that hasn't stopped us from taking action to help prevent the potential spread of the virus. In March, we instituted a number of increasingly strict health and safety protocols across the company. These range from medical screening for all personnel prior to site entry, social distancing practices across all the operations. On March 25th, we voluntarily placed Island Gold on temporary care and maintenance, and in early April, we suspended operations at Mulatos following the mandated shutdown by the Mexican government. These temporary suspensions at Mulatos and Island Gold will have some impact on our second quarter results, but they do not take away from our strong second half outlook.
We began ramping up operations at Island Gold earlier this month, and we're well positioned to do the same at Mulatos when the government suspension is lifted. By the way, there was an announcement today that the suspension is effectively lifted on the 18th of May. We're also making good progress on the lower mine expansion at Young-Davidson, which will be a game changer for that operation. Moving to slide six now, we're going to talk a little bit about our first quarter and the impact it's going to have on our year. We just reported a very solid first quarter, and we expect to build on this with stronger results in the second half of 2020. Consolidated production of 111,000 ounces beat the top end of our first quarter production guidance, while costs were at the low end of our original annual guidance.
Combined with a stronger gold price, we generated near record operating cash flow of CAD 82 million, up 32% from the first quarter of 2019. We expect to build on this start by establishing new records in the second half of this year and beyond. We remain focused on returning capital to shareholders with a total of CAD 12 million returned through dividends and share buybacks during the quarter. When our share price was impacted by the broader turmoil in the equity markets. We bought back 1.1 million shares at much lower prices than where we are today. I think our average cost was just under $5 a share U.S. We also paid a quarterly dividend of CAD 6 million in March, representing a 50% increase from the previous quarter.
Since 2018, we've tripled the dividend, and we expect further increases to come as we start generating higher levels of free cash flow in the second half of this year. Moving now to slide seven, I'll talk briefly about some of the catalysts that we have coming up. We've got a number of significant catalysts over the next several months, and these will be transformational for Alamos. Our Phase III expansion study at Island Gold will be completed by mid-year, and given the significant growth of the deposit over the past two years, we expect this study will showcase Island Gold as a bigger, more profitable, and longer life operation than where the market currently values this asset. At Young-Davidson, the lower mine expansion is in its final stages, having recently completed several critical path items.
These include the installation of the crushing circuit, connecting the ramp system from the upper and lower mines, and removing the rock pentice that separated the upper and lower portions of the Northgate shaft. In fact, in a report to management this morning from operations, we learned that most of the ropes connecting the shaft to the shaft bottom, so twice the length of what we were currently operating with, most of those ropes are now installed, and we're ahead of schedule in the shaft. The lower mine expansion is expected to be completed in July, this will be a driver of strong company-wide free cash flow growth in the second half of 2020. If I could move now to slide eight. The strong outlook is starting to be reflected in our share price, as we've been one of the top performing gold equities this year.
We also have a good long-term track record of outperformance, with an average annualized return of 15% per year since 2003, outpacing the gold price and the TSX Gold Index. Even with our recent outperformance, we're still attractively valued. Given the catalysts that we have coming up over the next several months, the quality of our assets, our growth, our strong balance sheet, I'm very convinced that we are well positioned to continue with outperformance and close the gap with the premium companies within our peer group. I would like to thank you very much for listening. That concludes the formal portion of the presentation, and now I'd like to invite Lawson Winder to open up the session for Q&A.
John, thank you very much for your presentation. I would note you're a very well-known CEO and certainly don't require an introduction, but I do apologize for the lack of one at the start of this call, just a little mix-up there. Where I'd like to start is, your dividend has been increased several times in the past several years, and you're also participating in a buyback as well. I'd like to pursue how you think about what the right dividend level is and how you balance that with a buyback. Just to set the context, I wanted to point out that in 2019, you invested CAD 15.6 million into the dividend, another CAD 11.4 million into the buyback, and the two accounted for about 9% of operating cash flow before working capital changes.
By comparison though, in 2013, you guys actually paid out an even higher amount, 25% of operating cash flow was paid out, but the majority of it was a dividend. Hopefully that helps. Thank you.
Yep. Well, certainly, my preference is for dividends over share buybacks. We're going to be opportunistic in a highly volatile market. I think if you notice, whenever we've stepped in and aggressively bought back shares, it's typically been when there is some sort of market fallout. When our shares are driven down to just ridiculously low levels, generally half or less than half of our net asset valuation. At that point, the fact is we have a very strong balance sheet, a very strong cash position, and it gives us the wherewithal to step into the market under our share buyback plan, and to buy. When the market rises and it's healthy, then we watch and we wait. Where the dividend is concerned, that is more driven by our cash flow.
In the past, when we were a one mine operator at Mulatos went through a period of about five years where it just, one year after the other, was ever increasing cash flows as we increased production and lowered our costs. With the rising gold price during those years, we became, step-by-step, a more profitable company, and ultimately generated over CAD 400 million in free cash flow from operations. Well, we used a significant portion of that cash to pay back in dividends. We ultimately paid back roughly CAD 130 million in dividends over that period. As we come out from this period where we've been aggressively making acquisitions, anybody looking back can see that between 2013 and 2017, we were very busy. We made six acquisitions. Two of them fairly substantial ones, the MOE with AuRico in 2015 and the acquisition of Richmont Mines in 2017.
In the aggregate, it was close to CAD 2 billion in acquisitions that we made. The net result is we transformed our company from a single mining operator into a very solidly positioned mid-tier. That took some capital, it took some shares, and it took some investment. Now we're coming out of that, and we're going from this heavy investment phase into a cash flow harvesting phase. As we do that, you're going to watch our dividend continue to rise. We started to increase the dividend, in absolute terms, ahead of that free cash flow coming on, just to give a positive indication to the market that we were confident in the plan. It starts in the second half of this year, and you're going to see us continue to increase our dividends in conjunction with that rising free cash flow.
With the idea that as we get into 2021, where cash flows are going to soar beyond where they were in this year, we look to a philosophy where about a third of our free cash flow is going to be used for building up our balance sheet. A third of it is going to be invested in growth among our operations. We've got several interesting mines that we can build, including La Yaqui Grande. We've got Lynn Lake, resembling still. Finally, a third will go to dividends. That's more or less how we look at it.
With that context, one could imagine the dividend certainly increasing quite a bit from here. That's interesting commentary. Go ahead.
Fully expecting the dividend to double by 2020. Something precipitous would have to happen to the gold price. Frankly, I'm not a natural gold bull. I spent too much of my career in a bearish gold market, literally from 1983 through 2003. Arguably, that was a bear market in gold. I've learned to be cautious where gold is concerned, but we acquired very aggressively between 2013 and 2017 because we thought that was the bottom of the market. If you look at the shape of the curve, I think we were proved right. We made those acquisitions when gold was basically trading between CAD 1,100 and CAD 1,200 an ounce. Now we find ourselves at CAD 1,700 an ounce, and I'm looking forward to much higher gold prices in the future. Not going to be surprised at all to see gold break CAD 2,000 an ounce.
Our firm's actually calling for it to hit CAD 3,000 in 18 months.
I know. I've seen that. I hope he's right. By any measure, with these gold prices, we're a highly profitable company, and we're generating great cash flows with our production profile going forward. You start ramping the gold price up through CAD 2,000 an ounce, we become extraordinarily profitable.
Can I just clarify a point there? You said you expect the dividend to double by the end of 2020?
No, I said going into 2021, as we see this very strong free cash flow coming up into 2021, I can see our dividend doubling from where it is in 2020.
Wow, that's a statement. There's actually a question from the call, I think it might have been prompted from several of the comments that you made with regard to M&A. Obviously, you have made several acquisitions, though, in lower gold price environments. The question is, now in the current environment, especially with other intermediate and mid-tier producers merging to create newer and larger companies, what is Alamos' M&A strategy in this environment?
Well, what you'll find is that when the market's at the bottom and times are really tough, you won't find people doing deals. There was very little done during those years. Now that the market is perking up, as usual, people will start getting busy trying to catch up. They're not going to make the same kind of deals that we made. Can you recall, it wasn't that long ago, we paid just over CAD 600 million for Island Gold. People were saying we'd grossly overpaid, bad deal, our share price tanked. Well, the thing is, Island Gold's worth twice what we paid, and that's just two years ago. It's doubled in size. Production's climbed from under 100,000 ounces a year to 150,000 ounces a year. Yeah, we were pretty stupid, weren't we?
It's really funny how critical the market can be when it doesn't understand something, and it just jumps to the conclusion that clearly the Alamos management and board has finally lost its mind. I haven't received a single phone call to say, "Wow, I think we got that wrong." That's just the way it goes. When you do a top of the market deal, you'll find yourself at the front page and feted by the market. When you do a bottom of the market deal, you'll find yourself usually heavily criticized. That's just the way it is, and I totally accept that. I am never complain about it. I'm just pointing it out. I've basically been involved in companies that always have done this. I started with Glamis Gold in the early '80s, and they were a serial acquirer at the bottom of the market.
That's just the way they did things. That's how Glamis grew from, when I joined it, a CAD 8 million company into a CAD 7 billion company. That's how I've grown Alamos from a CAD 1 million company to a CAD 4 billion company. It's through that type of M&A strategy. I'm not at all surprised to see M&A really starting to pick up. We're certainly under no pressure to do M&A, certainly not the type of M&A that you would require to do in order to fill up your project pipeline. Would we be open to some sort of strategic merger with an equally strong company or even a stronger company? The answer would be yes, on the right terms. We would certainly be open to that. We're always going to be very carefully looking at the rationale for doing such a deal.
We're not believers in getting big for the sake of getting bigger. A transport truck is big, I'd rather be driving a Porsche. It's all about quality. Frankly, Alamos has got first-class assets. We're going to be able to generate tremendous cash flow from our operations. It's going to be very difficult for somebody to present terms to us that are effectively accretive for the Alamos shareholders. It could come down to a much larger company coming along and presenting us with a substantial premium, that we'd definitely be paying attention to. If we could just normalize our valuation in line with our peer group, that takes us to CAD 15 a share. Just getting a normalized NAV. We're working on getting us there. We know we're just a quarter or two away from it. That valuation will be strictly driven by the numbers.
It's just going to be driven by the production and the rising cash flow. When we get there, we'll have much better currency to work with, both cash and stock. In the meantime, our attitude is just stick to the plan, get the YD tie-in finished, get the Island Gold Phase 3 study out. It's not that far off now. We've got some really interesting things to build. We've got La Yaqui Grande fully permitted and ready to go down in Mexico. We've got Kirazli in Turkey, which is still fully permitted and ready to go. We're just awaiting the renewal of our licenses. That's a bit of a gong show, but no fault of our own. We're sort of caught up in Turkish politics there, one way or the other, we're going to get that sorted.
On that front, it's kind of ironic that that suite of assets, three projects there, as far as I'm told, carry zero valuation in the market. Well, I could see that under some circumstances, but I don't quite understand it in our case, because when it comes down to it, if a management team has been able to build a company from, say, under CAD 1 million to CAD 4 billion, they've certainly demonstrated to the market that they have the ability to surface value from the market, from assets. You'd have to be incredibly pessimistic to believe that somehow or other we have no way of surfacing any value from those Turkish assets. I think clearly we do. There's lots of different ways we can approach it, and you've got to know that we have a whole variety of options at our disposal, and we'd consider all of them.
Maybe just pursuing that a little further. It is a rather frothy M&A environment, or at least the beginnings of potentially a frothy M&A environment. Would you ever consider monetizing those Turkish assets?
Well, that's what I'm talking about when I'm talking about a variety of options at our disposal. There is interest in those assets. Unquestionably, there is interest in those assets. There's a variety of ways that we can pursue that.
That's very interesting.
There's no question in my mind, anyway, based on just discussions I've had just this year, that situation in Turkey is ultimately going to get resolved. There's no question that those mines go into production. They absolutely will go into production. Whether they do so under the current circumstances with Alamos 100% in ownership of those assets and operating those assets, or whether there's some other arrangement that we make on commercial terms, that remains to be seen. We're determined to get it going forward one way or the other.
That's a great color. Thank you so much for that, John. Maybe just turning to Mexico. Since I've been following the stock, the company has had a fairly dramatic reorientation of the asset base away from Mexico and toward Canada. Does additional exposure to Canada fit with the long-term view of Alamos?
It certainly does. We were quite aggressive pursuing opportunities in Canada, going back to as far as 2011 is concerned. Around the time that Northgate was put in play, we had actually made a bid for Northgate, for the Young-Davidson mine, before the AuRico people did. We were just unwilling to pay the premium that they were willing to go. I think at that time we might have put a 30% premium on the table. They put a 60% premium on the table and won the day. It paid its weight, because I think they paid about CAD 1.6 billion to acquire Northgate, and when we merged the two companies together, they were both valued at CAD 750 million. That was at virtually the bottom of the market in 2015. Young-Davidson is a tremendous asset and it's the kind of thing we were looking for. It's in the Canadian Shield.
It's long life. It's 15 years that we know of, and it's probably going well beyond that. It took a bit of capital to get it all set up to go. We've completed that now, and that's very often the case with these large bulk tonnage underground operations. It takes a lot of capital to set it up. Once you've done it, the way it goes, it's a largely automated mine. We were sort of doing the ratio this morning. If you compare Young-Davidson to Macassa, which is the closest gold mine nearby, it's a high grade but very labor-intensive mine. We're a lower grade, sort of bulk tonnage operation. It takes one man to move one ton at Macassa. It takes one man to move 12 tons at Mulatos. That's the ratio.
For each person we employ, they move 12 tons of rock versus for each person employed at Macassa, they move about one ton of rock. It just gives you an idea of the difference in those two operations. What it means when you have a bulk tonnage underground operation, you're relying on large equipment and you're relying more on automation. We think Canadian assets ought to be commanding a premium in the market. I don't necessarily think that's true right across the board. We actually compared valuations on a number of things, inside and outside of Canada, over the course of the last week, and we really don't see that Canadian assets are commanding the premium that they deserve. It will come, and what will drive it is just ongoing political unrest in the world, growing political uncertainty, let's call it that.
Speaking of Canadian assets, you have Island Phase III with a study coming shortly, which you alluded to. La Yaqui Grande as well, which you spoke about on the Q1 call, and then there's Lynn Lake. With those two potentially very accretive projects with Lynn Lake, where does it now fall in the pecking order of potential projects?
Lynn Lake is clearly in the pipeline. It's a question of just getting the work done that needs to be done in order to advance the project. We're still in the process of doing the environmental studies, and as you know, not long after we first acquired it, we completed a feasibility study that at $1,250 gold showed a pretty skinny IRR. It was about 13%, but that was at a $1,250 gold price assumption. If you use a higher gold price assumption, call it $1,450, $1,500, suddenly the IRR shoots up into the mid-20s. It's spot, it's about 30. The economics of Lynn Lake look far better than they did when we first acquired it. Recall when we acquired it, gold was very low at the time. We did that deal back at the end of 2015.
Gold price was down below $1,100 an ounce, I think. We acquired it for CAD 20 million. It was 2 million ounces of gold at over 2 g, open pitable. It was a great time to buy that asset. It's hard to get around the capital that you need to put into Canadian mining projects, especially those located in the north. Lynn Lake has the advantage of pretty decent infrastructure for being in northern Manitoba. It's got a road right into Lynn Lake. There's power from the Churchill Dam going right into Lynn Lake, so we actually get very low-cost power. The operating cost of that mine will be pretty reasonable. The capital cost, though, is the capital cost, and it's pretty tough to get that down, and that's what impacts the IRR. We're working on that.
We continue to tweak the feasibility and we continue to work towards completing the environmental permit. We're continuing to advance it. It's probably, I'm guessing, 18-24 months before we've got it all ready to go, but at that point in time, I think we're going to have a project that we can make a production decision on. We think pretty highly of that asset. What is seldom talked about when Lynn Lake comes up is the fact that we've got something like 60 km of ground staked. We've staked the entire belt. It's incredibly prospective ground. It's seen little to no exploration. We've just started flying a very sophisticated airborne. We're using the HeliTEM system, and it gives you about 20 times the view that you used to be able to get from airborne when this region was last flown, probably about 25 years ago.
We're bringing modern exploration to northern Manitoba, and we think there's a lot of potential up there.
That's fascinating. You paint an exciting picture for Lynn Lake. Thank you for that. John, unfortunately, we have reached the end of the scheduled presentation time. I'd like to thank you very much for your participation today. I'd also like to thank the audience for your interest and your questions, and all the best to everybody.
All right. Thank you. Thank you, everyone.