Alamos Gold, Inc. (NYSE:AGI) Q3 2018 Earnings Conference Call Transcript

Nov 02, 2018 • 11:00 am ET


Alamos Gold, Inc. (NYSE:AGI) Q3 2018 Earnings Conference Call Transcript


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Good morning. I would like to turn the meeting over to Mr. Jamie Porter, CFO. Please go ahead.

Jamie Porter

Thank you, operator, and thanks to everyone for attending Alamos' third quarter 2018 conference call. In addition to myself, we have on the line today John McCluskey, President and CEO; and Peter MacPhail, VP and COO. I'd like to remind everyone that our presentation will be followed by Q&A session.

(Forward-Looking Cautionary Statements)

Technical information in this presentation has been reviewed and approved by Chris Bostwick, our VP of Technical Services and a qualified person. Also, please bear in mind that all the dollar amounts mentioned in this conference call are in US dollars, unless otherwise noted.

Now, I'll turn it over to John to provide you with an overview.

John McCluskey

Thank you, Jamie, and good morning, everyone. We made good progress in the third quarter on a number of our near and long-term strategic objectives. We produced 124,000 ounces of gold in the quarter, near the top end of our quarterly guidance. Through the first three quarters, we produced a record 379,400 ounces, marking 23% increase from last year and we are on track to exceed 500,000 ounces of gold for the year.

Consolidated total cash costs and all-in sustaining costs were higher than planned in the quarter and year-to-date. This has been driven by higher than budgeted costs at El Chanate and Young-Davidson, with the latter impacted by lower mining rates. We do expect improvement in the fourth quarter and into 2019. However, given the high costs through the first three quarters, we're anticipating total cash costs of $810 per ounce and all-in sustaining costs of $990 down million dollars per ounce for the year.

Longer-term, we're making solid progress on various growth initiatives and nearing the turning point where this translates into significant and sustained free cash flow. At Island Gold, we completed the Phase I expansion of the operation to 1,100 tonnes per day. Combined with higher grades, we expect this to drive a 30% increase in production and significant free cash flow into 2019 and beyond.

In less than a year, under our stewardship, Island Gold has exceeded expectations on all fronts. Mineral reserves increased by 28% to just under 1 million ounces, with reserve grades also increasing 17% to 10.7 grams. Beyond reserves, mineral resources have increased across all categories to now allow a combined 1.4 million ounces. We see excellent potential for this growth to continue, which we'll be detailing in other exploration update next week.

This ongoing success will be incorporated into further expansion of the operation. At Young-Davidson, work on the lower mine expansion continues, while the operation had a difficult year with mining rates impacted by unscheduled maintenance and constraints of the upper mine. We only have a limited time remaining operating from this infrastructure. In the first half of 2020, we'll be transitioning to the lower mine infrastructure, which will unlock the full capacity of the operation for the long-term. The infrastructure will