Record production, lower costs drive significant gains for Alamos

JOHANNESBURG (miningweekly.com) – TSX- and NYSE-listed midtier gold miner Alamos Gold made significant gains in the second quarter ended June 30, with record production and lower costs driving the highest combined free cash flow in years from the company’s operations.

Alamos produced a quarterly record 105 900 oz at cost of sales of $1 053/oz, which included record gold production of 47 300 oz from its Young-Davidson underground mine, in Northern Ontario, Canada, as well as continued strong performance at Mulatos mine, in Sonora, Mexico, which produced 41 000 oz in the quarter.

“We expect this trend to continue in the second half of the year, with stronger production and lower costs driving strong free cash flow growth from our operations," said Alamos president and CEO John A. McCluskey.

He added that the company would continue to advance one of the strongest portfolios of growth projects in its peer group. While Phase 1 of the La Yaqui satellite deposit, at Mulatos, is on track for initial production later this year, Alamos is building its Turkey-based team to prepare for early-stage construction activities at the Kirazli gold-silver project.

The company also expects to deliver a feasibility study on its Canada-based Lynn Lake project later this quarter, marking its third feasibility study this year.

“With a strong cash position, no debt and growing cash flow from our operations, we are well positioned to fund this growth," noted McCluskey.

During the quarter under review, Alamos’s all-in sustaining costs (AISC) decreased to $942/oz from $1 037/oz in the primary year period, driven by lower sustaining capital expenditures and a lower marked-to-market charge related to shared-based compensation as the company’s share price declined in the quarter.

Its consolidated cash costs were $784/oz in the quarter, compared with $775/oz in the prior year period, which the company attributed to higher operating costs at El Chanate compared with 2016.

Alamos sold 104 023 oz of gold for proceeds of $131.3-million – a 9% increase compared to the prior year period. This reflected higher ounces sold (a $10.3-million benefit), and a higher average realised price of $1 262/oz, compared with $1 253/oz in the prior year period (a $0.9-million benefit). The company's realised gold price in the second quarter was $5 above the average London PM fix of $1 257/oz.

The company reported net earnings of $2.4-million in the second quarter of 2017, compared with a net loss of $11.8-million in the same period of 2016. Higher net earnings in the current quarter reflected stronger earnings from operations and a deferred tax recovery resulting primarily from foreign exchange movement. This was offset by a charge of $29.1-million incurred on redemption of senior secured notes ($21.8-million, or $0.07, after tax).

Having produced 202 100 oz of gold in the first half of 2017, and stronger production expected in the second half of the year, Alamos is on track to meet full-year guidance of 400 000 oz to 430 000 oz. AISC is expected to decrease in the second half of the year, consistent with guidance.