Alamos free cash flow on the rise as it lifts 2017 guidance 6%

VANCOUVER (miningweekly.com) – Mid-tier miner Alamos Gold has reported 2016 production that came in at 392 000 oz, above the mid-point of guidance.

The fourth quarter saw record production at 105 676 oz, with 107 500 oz sold.

The company saw a substantial rise in mine site free cash flow in 2016, reflecting higher output combined with significant cost and capital reductions, the company said Friday.

This trend is expected to continue into 2017, with further production growth and cost reductions, driven by the ramp up of Young-Davidson, in Ontario, and development of La Yaqui Phase I, located near the cornerstone Mulatos mine, in Mexico.

Gold output is forecast to rise 6% over 2016 to a range of 400 000 oz to 430 000 oz in 2017, up 6%  (based on the mid-point of guidance). All-in sustaining costs are expected to decrease to $940/oz of gold sold, reflecting further cost reductions at both Young-Davidson and Mulatos, according to the company.

Excluding higher-cost production from El Chanate, all-in sustaining costs are expected to decrease to $890/oz this year.

Total capital spending for the company's operating assets is expected to decrease to between $105-million and $122-million, a reduction from 2016 even after factoring in $12-million of development spending for La Yaqui Phase I.

Alamos said its 2017 budget is designed to increase the profitability and cash flow generation from each operation. “With stronger production, a further improvement in operating costs and lower capital spending, the company expects strong free cash flow growth from its operations,” it said in an announcement.

For 2017, guidance calls for Young-Davidson to produce between 200 000 oz and 210 000 oz at total cash costs of $625/oz; Mulatos to produce 150 000 oz to 160 000 oz (roughly flat year-over-year) at $815/oz; and El Chanate to produce between 50 000 oz and 60 000 oz at cash costs of $1 200/oz. To ensure El Chanate produces free cash flow, Alamos has hedged about 75% of the planned 2017 output at a floor of $1 225 oz to $1 450/oz.

Total capex spending will be $140-million to $157-million, about $20-million lower year-over-year at Young-Davidson and $35-million of spending on projects.

The company has also hedged 80% of its peso exposure at 18.5 to 21.3 and 75% of its Canadian dollar exposure at 0.72 to 0.78.

The company increased exploration spending, with a 2017 global exploration budget of $24-million, of which about $17-million will be spent at Mulatos. This represents a nearly 70% increase over the initial 2016 budget of $14-million, which was subsequently increased to $20-million. The majority of the 2017 Mulatos exploration budget will be focused on the La Yaqui and Cerro Pelon deposits and scout drilling the Los Bajios and El Refugio deposits within the Mulatos district.