Alamos Gold Inc.

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

Thank you, operator, and thanks to everyone for attending Alamos' third quarter 2020 conference call. In addition to myself, we have on the line today John McCluskey, President and CEO, and Peter McPhail, Chief Operating Officer. We will be referring to a presentation during the conference call that is available through the webcast and on our websites. I would also like to remind everyone that our presentation will be followed by a Q&A 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 MD&A, 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, our Vice President of Technical Services, and a qualified person. Also, please bear in mind that all of the dollar amounts mentioned in this conference call are in U.S. dollars and less otherwise noted. With that, I'll turn it over to John to provide you with an overview of the quarter.

Thank you very much, Jamie, and welcome everyone to our conference call. We've had an excellent third quarter, operationally and financially, and we've delivered on several key catalysts which have solidified our strong outlook. These include the completion of the lower mine expansion at Young-Davidson, the announcement of the Phase III expansion at Ivan Gold, and the Liyaki-Grande construction decision. We produced 117,000 ounces of gold at significantly lower costs, with each of our operations performing very well in the third quarter. Consolidated total cash costs of $681 per ounce and all-in sustaining costs of $949 per ounce decreased sharply from the first half of the year, and both were below revised guidance. This reflected a strong quarter at Mulatto's another record quarter at Island Gold, and Young Davidson starting to demonstrate its full potential with underground mining rates increasing as planned. With strong operational performance and higher gold prices drove a number of financial records in the quarter, most notably record free cash flow of $76 million. We expect strong free cash flow to continue in the fourth quarter and remain on track to achieve our revised full-year production guidance and cost guidance. Moving to slide four, our health and safety protocols continue to evolve as we look for the best ways to protect our employees, their families, and our communities from COVID-19. In addition to the strict protocols already in place, we are now testing employees for COVID-19 before they start rotations within the camps at our Island Gold and Mulatto clients. The picture on the left shows the laboratory at Island Gold, where we're now conducting more than 1,300 tests per month. We're performing a similar number of tests at Mulatto's. These programs are extremely important to ensure we have the ability to identify and prevent the spread of the virus. Additionally, we continue to support our local communities in area of need, ranging from sponsoring meal services for our communities around the Isle of Gold operation to supplying medical and safety equipment and supplies to the communities near Mulatto's. Slide 5 outlines our focus on operating a sustainable business model that can support growing returns to shareholders over the long term. The completion of the lower mine expansion at Young Davidson marked the transition from a reinvestment phase to a period of strong free cash flow generation. We will take a balanced approach to deploying this free cash flow, paying higher dividends, strengthening our balance sheet, and reinvesting in high-return organic growth projects. like the Island Gold Phase III expansion and Riyaki Grande. At current gold prices, Island Gold and Mulatto can more than self-finance their respective projects, allowing us to continue generating strong free cash flow and support higher dividends. These projects will in turn drive additional free cash flow growth and further return to shareholders that are sustainable over the long term. Given our strong cash position and outlook, We repaid the $100 million drawn on our revolving credit facility in October and are once again debt-free. Aligned with our commitment to returning capital to shareholders, we are also pleased to announce a 33% increase in our dividend to an annual rate of $0.08 a share starting in December 2020. We have now increased the dividend by 300% since 2018 and believe there is room for further dividend increases to come. I will now turn the call over to our CFO, Jamie Porter, to review our financial process. Jamie.

Thank you, John. Moving on to slide six, we had the best quarter in the company's history from a financial perspective with record operating cash flow, free cash flow, and adjusted earnings in the third quarter. Higher margins at each of Young-Davidson, Island Gold, and Mulatto's contributed to record free cash flow of $76 million in the quarter. Island Gold and Mulatto's both performed extremely well, generating mine site free cash flow of $41 million and $31 million, respectively. The $41 million of free cash flow at Island Gold set another quarterly record. In fact, in the first three quarters of 2020, Island Gold generated $70 million in mine site free cash flow, already exceeding the previous annual record of $65 million generated in 2019. Mulatto's has been equally impressive, generating $64 million of mine site free cash flow year-to-date. A significant portion of this has been driven by Sarah Pallone, a project we built and brought into production late last year for $25 million in capital. This highlights the high returns and quick paybacks from these types of projects, something we can look forward to with Layaki Grande. On a consolidated basis, we sold 116,000 ounces of gold at a realized price of $1,882 per ounce for revenues of $218 million in the quarter. Total cash cost is $681 per ounce and all in sustaining costs of $949 per ounce decreased 18% and 15%, respectively, from the first half of the year, and were both below full-year guidance. Lower costs reflected the completion of the lower mine expansion at Young-Davidson, as well as the resumption of normal operating levels at Island Gold and Mulattoes following the COVID-19-related temporary suspension from the second quarter. We remained very well positioned to achieve our revised full-year cost guidance. We continue to enhance our health and safety protocols with respect to COVID-19, including adding testing and mulattoes and island gold during the third quarter. Looking forward, we expect COVID-19 testing and related costs at approximately $25 per ounce to our cost structure in the fourth quarter and into 2021. Operating cash flow before changes in non-cash working capital improved 63% year over year to a record $130 million or $0.33 per share in the third quarter. Our reported net earnings of $68 million, or $0.17 per share, included unrealized foreign exchange gains of $11 million recorded within deferred taxes and foreign exchange. Excluding these items, our adjusted net earnings were $57 million, or $0.15 per share. Capital spending totaled $55 million in the third quarter, including $23 million of sustaining capital, $29 million of growth capital, and $3 million of capitalized exploration. As with the second quarter, growth capital spending was focused on completing the lower mine expansion at Yonge-Davidson, work on the tailings facilities at both Yonge-Davidson and Island Gold, and other infrastructure projects primarily at Island Gold. We expect full-year capital spending to be in line with guidance of between $205 and $235 million. Our next quarterly difference of eight will be paid in December, a 33% increase from the previous quarter. This will bring our returns to shareholders to $31 million in 2020 through dividends and share buyback, double the amount returned in 2019. We ended the quarter with $274 million in cash, up from $201 million at the end of June, and $40 million of equity securities. Given our strong free cash flow outlook, we repaid the $100 million drawn on our revolving credit facility in mid-October, giving us $500 million of additional liquidity and no debt. We remain very well positioned to fund our internal growth projects while continuing to grow our cash position and grow returns to shareholders. I will now turn the call over to our COO, Peter McPhail, to provide an overview of our operations. Thank you, Jamie. Moving to slide seven, Young Davidson generated mine site free cash flow of $11 million each third quarter from the production of 36,400 ounces at total cash costs of $923 per ounce. Mines laid all in sustaining costs of $1,196 per ounce. All were significant improvements from the first half of the year, reflecting a partial quarter operating from the new lower mine infrastructure. Following the completion of the lower mine expansion in July, underground mining rates increased in the quarter to average 6,700 tons per day. Mining rates are expected to continue to improve, along with grades mined and milled, driving production higher in the fourth quarter. Young-Davidson remains on track to achieve its revised annual production and cost guidance. Over to slide 8, we are already benefiting from the efficiency of the new lower-mine infrastructure, with higher underground mining rates than the mine has ever achieved, and at lower costs. Mining rates increased throughout the quarter and averaged 8,000 tons per day in September, with the operation benefiting from the significant inventory of broken ore built up during the tie-in. This demonstrates the expanded capacity of the lower mining infrastructure with its increased skipping capacity and ore storage capacity, as well as increased automation. In addition to supporting higher mining rates, increased automation, productivity and economies of scale are driving costs lower. We expect mining rates to increase to a sustainable rate of 7,500 tons a day by the end of 2020, which will continue to drive production higher and cost lower. Combined with lower capital spending, we expect this to drive significant free cash flow growth into the fourth quarter and into 2021. Over to slide 9, Island Gold set a number of new records in the quarter, including record mine site free cash flow of $41 million from record production of 39,600 ounces. Total cash costs of $394 per ounce and mine site all-in-sustain costs of $575 per ounce were down 22% and 17%, respectively, compared to the same period last year. The lower costs reflect the higher grade mine and process during the quarter, as well as lower royalties following the repurchase of the 3% NSR royalty in March of this year. In the fourth quarter, we expect grades to return to approximately reserve grade. Island Gold remains well-positioned to achieve its annual production and cost guidance Work on the phase three expansion is ramping up with higher capital spending expected in the fourth quarter. The current focus remains on advancing permitting, site clearing, and detailed engineering of the shaft and associated infrastructure. Moving to slide 10, in September we reported the best surface exploration hole to date at Island Gold, the drill hole MH2504 intersecting 27 grams per ton cut over nearly 22 meters to width. Another strong result was from drill hole MH2503, intersecting 14 grams per ton cut over 15 meters. These holes were 100 meters and 40 meters respectively down plunged from the high-grade inferred node resource block and up true widths three to four times greater than the average width of this resource block. These drill results continue to demonstrate the potential for further reserve and resource additions and also support our decision to sink a shaft as part of the Phase III expansion. Moving on to slide 11, the Latos had another strong quarter, producing 41,100 ounces. The total cash cost is $746 per ounce, and mine site all in sustaining costs of $928 per ounce. Year over year, production was up 26%, and the total cash costs were down 14%, reflecting the contribution of higher grade ore from Cerro Colon. While we expect grades and production to decrease somewhat in the fourth quarter, Milatos is on track to achieve its full year production and cost guidance, given its strong year-to-date performance. Over to slide 12. As you can see in the photo, development of Light Acque Grande is well underway, with activities in the third quarter focused on initial camp construction and clearing of the pit area. Construction activities are expected to ramp up in the fourth quarter, with a focus on haul roads construction and the start of stripping activities. The bulk of La Iacchi Grande's initial capital budget of $137 million is expected to be spent in 2021, with initial production starting in the second half of 2022. La Iacchi Grande is another low-cost, high-return project. We expect a quick payback on this investment, much like we're seeing this year with Sarah Pallone. With that, I'll turn the call back to John.

Thank you, Peter. Much appreciated. I'll now... That concludes the formal... part of our presentation. I'll now do the call back to the operator and open the line for your questions.

Thank you. We will now take questions from the telephone lines. If you have a question and you are using a speakerphone, please lift the handset before making your selection. If you have a question, please press star 1 on your telephone keypad. If at any time you wish to cancel the question, please press the pound sign. Please press star one at this time if you have a question. There will be a brief pause while the participant register for questions. Thank you for your patience. The first question is from Fahad Tarik from Credit Suisse. Please go ahead. Your line is now open.

Hi, good morning. Thanks for taking my two questions. The first, on capital allocation, you mentioned that you'd like to allocate a third of the free cash flow towards strengthening the balance sheet. But right now, there's no debt. The cash balance is just shy of $300 million. What is the goal for the cash balance before you maybe consider redirecting the free cash flow to the other two buckets?

Thanks. Yeah, thanks for the question. It's Jamie here. You know, Alamos has always been, I'd say, more conservative than many of our peers from a balance sheet perspective, and I think it's served us well. It's positioned us to be active in terms of M&A when other market participants can't. So we'd be targeting a cash balance of upwards of $400 million to $500 million. Once we hit that target, we'd start certainly increasing the allocation to the other buckets. If you look at those priorities, you know, a third going to growth and exploration spending, a third to dividends and other shareholder returns, and a third to the balance sheet, those are kind of long-term targets that we anticipate realizing over the next 10 years. So if you look at the current allocation, the next three to four years, the majority of our free cash flow is going to our high return growth projects, to the phase three expansion at Island Gold, to building La Yaqui Grande and then eventually to construction of Lynn Lake. I think beyond that, beyond 2025, is when you see the free cash flow generation really start to increase. And at that time, you'd see a real significant potential increase in the dividends.

Got it. That's very clear. Okay, and then the only other question I had was on Young Davidson, can you give some color why the Q3 milling throughput was lagging the mining rates? I know you said that it's going to pick up in Q4 and kind of match the mining rate, but just curious why it lagged in the quarter.

Yeah, thanks for the questions. Peter here. The skipping from the mining Q3 was back-up loaded to a certain extent, so we really... The mine was really able to put a lot of tons up the shaft during the latter part of August and into September. It ended up being the mill created a bit of stockpile in front of the mill. The mill has no problem milling at 8,000 ton a day rate. For instance, in October, we're well above that. That's why it lag the mine in the quarter.

Okay, great. That's it for me. Thanks.

Thank you. The next question is from Mike Parkin from National Bank Financial. Please go ahead. Your line is now open.

Hey, guys. Congrats on a good quarter. A couple questions from me. The power line at Molossos, will you be carrying that over to Liliaki, and when would that connection, like, will that be over there in time for first production?

Yeah, absolutely, Mike. It's, you know, production doesn't start there until, you know, 2021. We'll have plenty of time to, and it's planned to bring that over, you know, early on. Okay.

In time for that production. Is the capex budget factor that in, or would that be incremental to that?

No, that's factored in. Okay. It's not that far. It's about five kilometers power line to bring it over. Okay.

And then the cost estimates you've provided then, I guess, already assume that power line connection?

Correct.

Okay. And then you've always had kind of a strong discipline of buy when prices are are low with respect to gold. What about the thought of, you know, in this environment, selling any assets? Is there anything within the portfolio that you maybe would look to release? Or, you know, is that something that you guys are considering?

This is John McCloskey. I'll answer that, Mike. There are a couple of projects in our portfolio that are clearly far beyond smaller for us now than when they were initially acquired. They're decent projects. We continue to work on them and move them along. In this market environment, as you can well imagine, we have inbound interest coming on those projects. We're in discussion. It wouldn't be inconceivable if we if we sold some of those non-core assets.

Okay, super. That's it for me. Thanks, Gus, and congrats again.

Thanks, Mike. Thank you. The next question is from Cosmos Chu from CIBC. Please go ahead. Your line is now open.

Thank you, John, Jamie, and Peter. And congrats on a very strong third quarter here. Maybe my first question is on Young-Davidson. You know, you talk about the underground throughput at 8,000 tons per day, but then you also talk about getting to a sustainable rate of 7,500 tons per day by year-end 2020. Can you help me bridge that sort of gap? Like, what do you need to do still to kind of get to that consistent rate? Because it sounds like you're already kind of there.

Yeah, thanks, Cosmos. Clearly, the underground infrastructure, the ore and waste movement infrastructure is well capable of 8,000 tons a day, and we've demonstrated that now. Our stope sequencing and opening up of areas, we budgeted to get to 7,500 tons a day by the end of this year with that ramp up. And while we were down through the tie-in period, that we've set ourselves up to do that. And we will continue to ramp that up to 8,000 tons a day by mid-ish next year. So we were able to demonstrate the 8,000 tons a day in September by drawing down on a bit of inventory that we would have built up through the tie-in. So that's the bridge.

For sure. And then, I guess, again, on YD, you know, as you talked about, the throughput at the mill was, you know, slightly lower in Q3 due to there's no more stockpiles. I know you've talked about, you know, matching milling and mining rates, you know, into the future. But as kind of mining rates go up and if it exceeds your expectations, is there any chance that you might want to build up a kind of stockpile once again? Or is that not in the cards?

I would suggest that it's rare that you see a stockpile in front of a mill in an underground mining situation. It can happen. We had one at the end of Q3. The mill has demonstrated in the past 8,000 tons a day. It has no problem doing 8,000 tons a day. I think we're sitting at close to 9,000 tons a day through the first three weeks of mining. of October. So there's no problem with the mill if anybody is concerned about that. It demonstrated 8,000 tons a day before we put in a pebble crusher. So we now have a pebble crusher in there. It's not going to have any challenge doing those kinds of tons. But this mine is an 8,000 ton a day or maybe better yet to think about it as a 200,000 ounce a year plus

producer and and and that's what it'll do going forward okay and then maybe the last question on why D here you know certainly the the last several years was focused on on the you know tying up or the the underground infrastructure you know the operations and more recently tying up the lower mine but now that everything's sort of in place and and I know in the past in a recent past exploration has not really been a focus area at least for YD. Is that going to change now?

John here. I would say, you know, we're clearly interested in seeing what the further extension potential is at depth to YD. We don't have anywhere near the same sort of needs, let's say, to build reserves at YD as we do, say, at Island or Mulatto's, where reserve growth is driven by very specific production requirements. YD has 13 years of reserves the way it sits right now. You're only adding marginal value when you're adding reserves that go out beyond 15 years. But having said that, We have started drilling at YD again into the second half of this year. We do have drilling taking place, exploration drilling taking place there right now. And we're going to allocate a reasonably good budget for it for 2021. So I would say going into 2021, based on success, you'll probably see additional reserve growth at Young-Davidson based on that drilling.

That's great to hear. Those are all the questions I have. Thanks, John and team, and congrats again on a very strong Q3, and stay safe, everyone.

Thank you. The next question is from Kerry Smith from Haywood Securities. Please go ahead. Your line is now open.

Thanks, Operator. Peter, just on YDA, if I can just kind of maybe ask the question a different way. You averaged 8,000 tons a day in September. What was the best week you had, let's say, on an average? I'm just curious how much this mill can do.

The mill? I mean, you know, we put out 9,000 ton days all the time.

Oh, you do?

Yeah, yeah.

Okay. Okay. Okay. Okay. Okay. So that's great. So you've got all kinds of capacity there and probably just assume it's going to do 8,000 ton a day.

No problem. Okay. The miners get one chance to bury the mill and they took advantage of it with some tremendous performance in the latter part of the quarter. You'll never see it again. Yeah.

Okay. And then John, just on the The portfolio optimization on the non-core stuff, I'm assuming that maybe S Brands and some of those projects fall into that bucket. Would you consider today that Turkey is a core asset then? I mean, just given the delays you've had there, are you kind of thinking that maybe that's something that you maybe would optimize out of the portfolio?

It's certainly not core. For example, we acquired it, remember, in 2010 when they were exploration projects. We are very successful in that exploration. We built up a fairly substantial reserve there, roughly 3 million ounces. That made it quite interesting. And then when we completed the economic studies, they demonstrated very, very strong economics. And so they were very attractive projects. But between the time that we fleshed out those economics and where we are today, You know, we've since acquired Young Davidson. We've acquired Island Gold. We've built our production up over a run rate of 500,000 ounces a year, normalized. And so from that perspective, you know, Turkey clearly isn't as core as it once was. And questions have come up over the course of the last few quarters on these calls and at conferences and in investor meetings and so forth And we've been very candid about the fact that we're disappointed with the delays that we've experienced. And I don't see things getting any easier in Turkey. We may very well benefit from taking on a Turkish partner. It's no secret that we get all kinds of inbound interest. on these assets, and particularly from Turkish mining entities. And so from that point of view, you know, we're going to look as best we can to surface values for those assets. And it's not satisfying at all to us to just be in a sit-and-wait mode when we've got a project that's effectively fully permitted and construction was was underway. We were four months into construction when we stopped. So the current situation is certainly not acceptable. We're going to do something about it one way or the other, and one of the alternatives we're looking at is taking on a party who would come in at the project level to partner with us.

I got you. Okay. Okay, that's great. I appreciate that. Thank you.

Thank you. Once again, please press star 1 on your telephone keypad if you have a question or comment. The next question is from Dalton Barreto from Canaccord. Please go ahead. Your line is now open.

Thank you. John, I'd like to continue on the segue Carrie made into Turkey there. Has anything... changed on the ground regionally in Çanakkale, either for better or worse?

Well, things are continually changing in Turkey. You know, from the, I mean, probably the most, you know, stark change over the last year is the lira has gone from approximately 5.9 to the dollar to 8.2 to the dollar. the economy of the Chinakali region is in really desperate shape. It's a region that relies very heavily on tourism, particularly the capital of Chinakali itself relies very heavily on tourism, and tourism was down drastically this year. So, yeah, the economy is taking a real hit. The economy of this region is taking a real hit. So, you know, there's quite a... how should I put it, a very vocal discussion going on there between those that would like to see the project develop and who would benefit from the jobs and supplying a substantial business of that kind in the region and those who effectively oppose it. The people that support it, by and large, are those people that are are located closest to it and those that oppose it are those from outside and it's an old story and we've seen similar things in Canada as we're seeing here in Turkey. So we're having to navigate a very tricky waters here and we're doing everything we can to put ourselves in the best position to take advantage of the change in sentiment that I think we're starting to observe. When I refer to that, I mean there's becoming a lot more interest in seeing this kind of economic activity in a badly hit region. We're hoping that that is ultimately going to lead the government to... reinstating our mining licenses and allowing us to get back to work. But right now the best thing that we can do is be patient. That's what the government has been asking us to do. I guess there's a certain point in time coming when we will no longer be patient and at that point we're going to have to look at what our alternatives are. It's not a good position to be in. They're great projects but unfortunately we found ourselves just over a year ago put into a pretty tough position where we effectively can't do any work and it's not something we anticipated and it's not something we're happy with, but I think we're going to see a change one way or the other coming up over the next six months.

Thank you, that's helpful. John, when you talk to investors, does this situation Or do you feel that the situation impairs you at all from an ESG perspective?

You know, I would say no. Anyone who has looked at what happened there closely understands that effectively we were somewhat railroaded. It was a social media campaign based on a whole slew of false allegations. And that is very well understood by our investors and certainly by everyone inside of Turkey. Even the people who did it know very well what they did. And that's probably why it just doesn't have the power to stick as it otherwise would if we were actually guilty of something in terms of violating... our permits or doing something that would be harmful to the environment. I mean, the primary criticism that the project development received was the cutting down of trees in this region. And, of course, all those trees were cut down by the Ministry of Forests. They weren't cut down by the company at all. No company has a right to cut down trees. The government themselves cut those trees. They harvested those trees, they sold the trees, they kept all the revenue for those trees. We had nothing to do with that. This is an actively forested region and our particular site represented less than 2% of the area of Chinookalee that was forested that year. It's really a political situation that we're in the middle of there. It's the way of the opposition to attack the government through attacking their environmental policies. And they've tried to make much more out of this than it actually was. And they've managed to initially gain a tremendous amount of support, but all based on false allegations. Because this is so well understood, I would say that we are not facing a great deal of difficulty from the perspective. If you don't look at the situation carefully, if you were to just go online and take your ESG policy-making or decision-making from what you're reading on Twitter or something like that, maybe you're going to be misled. But if anyone who looks into the details of what happened wouldn't make a mistake.

David Lamont Wilson That's great context. Thank you. And maybe I can just switch gears for one more question. Lynn Lake, I understand sanctions are still a couple of years away and you're going through permitting. But could you give us a sense for what you would want to see from this project in order to sanction it? And, you know, when we, as analysts, will see an update on the project?

David Lamont Wilson Do you want to take that, Peter?

Yeah, maybe I'd put it over to Jamie, actually.

Okay. Yeah, no, I think we're, I mean, you'll recall the feasibility study that we put out back in December of 2017, and the project had about a 12.5% IRR at a $12.50 gold price. We've been working away at it from an exploration perspective, finding additional ounces to put into that resource, and I think we've had some success. Our goal ultimately is to get it to about a 15% IRR at a $1,300 gold price, and I think we're pretty close to there. We do have, you know, we're spending six, seven million a year on exploration. We have a massive land package there. We've had some very encouraging results. So we do anticipate being able to expand resources there and make the project better. But, you know, even at a $1,500 gold price right now, it's at a 22% after-tax IRR. And it's anywhere close to the spot. It's closer to, you know, 32%, 33%. So... We like the project. It gives us the potential to get to 600,000 ounces of Canadian production in 2025 when you add Lynn Lake to what we'll be producing at Island Gold and the 200,000 ounces a year we'll get from Young-Davidson. So we do like it. We'd be in a position to make a construction decision in the middle of 2022 once permitting is complete. And obviously we'd evaluate the gold price, the Canadian dollar FX rates, and all the other factors at that time before moving forward.

Thanks. Do you anticipate putting out a study ahead of that?

We may update the study. The capital that's in our 2017 feasibility study is fully baked. There hasn't been a lot in the way of changes to that, but we've continued with engineering and further studying those costs. I don't think there's been a material change on the CapEx side. if we're able to add materially to the resource, and by materially, I'm talking like two to 300,000 ounces, and then we consider updating the study, certainly. Great. Thanks, guys. That's all for me.

Thank you. Next question is from Steven Grodko from Pershing's Global Financial Solutions. Please go ahead. Your line is now open. Mr. Grodko, your line is open. Please proceed with your question. If you are on mute, unmute your line, please.

I think you might have lost him, operator. Why don't we proceed to the next caller?

So we have no further question registered at this time. So this concludes today's morning 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. So the conference has now ended. Please disconnect at this time, and we thank you for your participation.