Alamos Gold Inc.

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

Thank you, operator, and apologies to everyone on the line. We're a few minutes late getting started, given some issues with the operator there, but we're ready to go now. Thank you for attending Alamo's first quarter 2021 conference call. In addition to myself, we have on the line today both John McCluskey, our President and CEO, and Peter McPhail, our COO. We will be referring to a presentation during the conference call that is available through the webcast and on our website. 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 keep in mind that all the dollar amounts mentioned in this conference call are in United States dollars unless otherwise noticed. And with that, I'll turn it over to John to provide you with an overview.

Thank you, Jamie. We've had a solid start to the year, producing 125,800 ounces of gold in the first quarter at total cash costs of $757 per ounce and all in sustained costs of $1,030 per ounce. Our costs were in line with guidance, while production exceeded the high end of our first quarter guidance. This was driven by particularly strong performances at Island Gold, which set another quarterly record for production, and Young-Davidson, which exceeded its targeted underground mining rates, achieving a new record. We remained well positioned to meet our full year production and cost guidance. This drove another good quarter financially. Operating cash flow of 120 million increased 46% from a year ago, supporting strong, ongoing free cash flow, even with the ramp-up of development activities at Liyaki Grande and the Phase 3 expansion at Island Gold. Looking at slide four, this past week we announced we'll be filing a $1 billion investment treaty claim against the Republic of Turkey for expropriation and unfair and inequitable treatment. with respect to our Turkish development projects. It's been 18 months since our mining license expired. We've received all permits required to build Karazli. We were well into construction, and we've met all legal and regulatory requirements for the renewal of our licenses. We've attempted to work cooperatively with the Turkish government, yet we've not received a reason for the non-renewal, nor have we received a timeline for when our licenses will be renewed. We're optimistic that the arbitration process will bring about a positive resolution. Now looking at slide five, we continue to advance our strong pipeline of North American growth projects. Development activities are ramping up on the phase three expansion at Island Gold, where we recently announced a one million ounce increase in high-grade reserves and resources. This growth and ongoing exploration success highlight significant upside potential to the already attractive economics outlined in the Phase 3 expansion study published last year. Construction activities at Liyaki Grande continue to ramp up with the project on track to begin low-cost production in the third quarter of 2022. Permitting at Lynn Lake is advancing and expected to be completed around the middle of next year, putting us in a position to make a construction decision in the latter part of 2022. We've had good exploration success over the past few years, we've increased reserves by 27% to 2.1 million ounces. We see excellent further potential around the existing deposit and regionally across an 80 kilometer long greenstone belt that we have consolidated. We're ramping up our exploration effort accordingly. These projects are all key components of our strong outlook with 50% production growth potential for approximately 750,000 ounces per year by 2025. at significantly lower all-in sustaining costs of around $800 per ounce. This will support substantial free cash flow growth over the long term. In the meantime, we can more than fund this growth internally while continuing to generate strong, ongoing free cash flow and support our recently increased dividend. I'll now turn the call over to our CFO, Jamie Porter, to review our financial performance.

Thank you, John. Moving on to slide six, we sold 126,500 ounces of gold at a realized price of $1,798 per ounce for record revenues of $227 million in the first quarter. Total cash costs of $757 per ounce and all in sustaining costs of $1,030 per ounce were in line with guidance despite the impact of the stronger Canadian dollar and Mexican peso. Our 2021 guidance provided last December was based on a Canadian dollar foreign exchange rate of 75 cents. At the current Canadian dollar foreign exchange rate of approximately 81 cents, our total cash costs and all the sustaining costs would increase by approximately $30 per ounce with a similar impact realized in the first quarter. Operating cash flow before change to the non-cash working capital improved 46% year over year to 120 million or 30 cents per share in the first quarter. Our reported net earnings for the first quarter were $51 million. Adjusted net earnings of $49 million, or 13 cents per share, represented a 63% increase over the prior year period. Looking ahead to the second quarter, the decision to proceed with the bilateral investment treaty claim against the Republic of Turkey is an impairment trigger for accounting purposes. As such, we expect to incur an after-tax impairment charge of approximately $215 million in the second quarter, representing the full carrying value of our Turkish assets. This is a non-cash charge that we expect to exclude from our adjusted earnings. Capital spending totaled $73 million in the first quarter, including $24 million of sustaining capital, $44 million of growth capital, and $6 million of capitalized exploration. We also incurred $17 million of capital advances related to work and equipment for La Yaqui Grande and the Phase 3 expansion at Island Goals. The aggregate increase in spending in the quarter is consistent with full-year capital guidance of between 354 and 384 million, and reflects the ramp-up of development activities on our growth projects. Net of all capital spending and capital advances, we generated 10 million of free cash flow. This was also net of 18 million of cash tax payments in Mexico, the majority of which related to the 2020 year. We paid a quarterly dividend of 10 million in the first quarter, representing a 25% increase from the prior quarter, and we're active under our share buyback, repurchasing $1.5 million worth of shares. In total, we've returned more than $11 million to shareholders in the first quarter and are on track to return more than $40 million for the full year. We ended the quarter with $238 million in cash, $27 million of equity securities, and $500 million of undrawn credit capacity. We remain well positioned to fund our internal growth projects while continuing to grow our cash position and returns to shareholders. With that, I'll turn the call over to our COO, Peter McPhail, to provide an overview of our operations. Thank you, Jamie. Moving to slide seven, we had another excellent quarter at Young-Davidson, producing 48,000 ounces and generating mine site free cash flow of $22 million. This was the second full quarter operating for the new lower mine infrastructure. The operation continues to demonstrate its potential, with mining rates increasing to average a record 7,800 tons per day, exceeding our targeted rate of 7,500 tons a day. We continue to expect mining rates of 7,500 tons a day in the second quarter, with another mining horizon being added in the second half of 2021 that will enable us to increase mining rates to sustain 8,000 tons a day. Mill throughput also increased to average a record 8,150 tons per day. This exceeded mining rates, reflecting the processing of additional ore that was mined and stockpiled in the fourth quarter of last year. We expect milling rates to match mining rates going forward. Total cash costs of $873 per ounce in mine site haul and sustaining costs of $1,075 per ounce were both down significantly from a year ago when the Northgate shaft was shut down to complete tie-in of the lower mine. Costs were above annual guidance in the first quarter due to the stronger Canadian dollar as well as the planned mining of somewhat lower grades earlier in the year. Grades mined are expected to increase through the year, and combined with higher mining rates, this is expected to drive production higher and cost lower in the second half of 2021. Higher production, lower costs, and lower capital spending are all expected to contribute to record mine site free cash flow of more than $100 million from Young-Davidson in 2021. Over to slide eight, Island Gold generated $26 million mine site free cash flow from record production of 42,200 ounces, driven by higher grades mined. previously guided grades mined and processed are expected to decrease through the year and average approximately 10 grams per ton for the full year total cash costs of 466 dollars per ounce in mine sites all in sustaining costs of 732 dollars per ounce we're both consistent with annual guidance despite the stronger canadian dollar following up on a very successful 2020 exploration campaign we ramped up our exploration efforts at island gold in the first quarter The majority of the results remain pending given the longer turnaround times for assays being seen across the industry, but we are expecting that to improve in the second quarter. Work on the phase three expansion is ramping up with the focus of advancing permitting and detailed engineering of the shaft and associated infrastructure and the procurement of long lead items. Growth capital spending totaled $12 million in the first quarter. There's an expected increase to the rest of the year, consistent with annual growth capital guidance of $80 to $85 million. Moving to slide nine, mulatto was produced 35,600 ounces in the first quarter, the total cash costs of mine site all in sustaining costs of 915 and 1,039 ounce per ounce respectively. Mining activities in the first quarter were focused on Cerro Polon, which along with existing surface stockpiles supplied the majority of ore stacked in the quarter. Mining activities within the main mulatto's pit were focused on pre-stripping the El Salto portion of the pit. With the 18 million cash tax made payments mostly related to last year and the ramp-up of spending at Layaki Grande, Milatos' mine site free cash flow was negative $24 million. Excluding the $30 million of growth capital and capital advances related to Layaki Grande, Milatos would have generated $6 million of mine site free cash flow. Moving to slide 10, as you can see in the photo, construction of Layaki Grande is well underway. Camp facilities are nearly complete, and we now have approximately 800 employees and contractors on rotation. Capital spending was focused on advancing earthworks for the waste rock dump, heat bleach facility, and the water treatment plant, and pre-stripping of the open pit. Over 3 million tons of waste were mined during the quarter, with the contractor reaching mining rates of about 48,000 tons per day by the end of March. The project remains on track to achieve commercial production in the third quarter of 2022. With mine site all-in sustaining costs expected to average $580 per ounce, Layaki Grande is expected to significantly reduce the cost profile of the month-long operation. With that, I'll turn the call back to John.

Thank you very much, Peter. Now we're going to open the call to your questions. I'll now turn the call over to the operator who will get that started.

Thank you. We will now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making your selection. If you have a question, please press star 1 on your device's keypad. You may cancel your question at any time by pressing star 2. Please press star 1 at this time if you have a question. There will be a brief pause while the participants register. Thank you for your patience. The first question is from Tyler Langton of J.P. Morgan. Please go ahead. Your line is now open.

Good morning and thanks for taking my question. Just to start with Carozza, I mean, sort of recognizing that the process can take some time to kind of run its full course, but I guess, are there any sort of near-term milestones that we should be looking for?

Not particularly. You know, we're going into this with an expectation that it may well just run the full course, go through a full arbitration, but there's always the possibility that sometime over the next year we come up with some sort of negotiated settlement. That's the way this arbitration process is designed. It's designed to bring the parties together under the auspices of the tribunal with the expectation, the intent at least, to come to some sort of negotiated settlement. And if that's not achievable, then it goes to the next stage. So we'll just have to follow the process.

Okay. And then, Ray, I guess you called out sort of, I guess, the impacts that exchange rates could have on costs this year. But are you seeing sort of I guess just any signs of inflationary pressures from labor or materials just sort of in the day-to-day operations? And then more, I guess, with the Phase 3 expansion to island gold, I don't know, do you kind of remind us sort of how much CapEx is left to be spent? And are there any sort of potential sort of pressures there for that capital budget?

It's Peter here. You know, on the, you know, inflationary pressures, certainly not labor, you know, labor rates have been, you know, are relatively stable. You know, a few things, a few inputs steal a little bit higher, but it looks like it's a temporary thing. So it really hasn't, you know, it really hasn't impacted our bottom line at this point. And, you know, I guess who knows, but we'd are not expecting it to materially impact us.

Got you. Okay. Thanks so much.

Thank you. The next question is from Fahad Tariq of Credit Suisse. Please go ahead. Your line is now open.

Hi. Good morning. Thanks for taking my question. You had mentioned the cost impact or potential cost impact at different foreign exchange rates and the sensitivity particularly on the Canadian-US exchange rate. Maybe talk about kind of the hedging strategy over the past year and also going forward. I know some peers, for example, tried to lock in a more favorable rate in 2020. Just wanted to get your thoughts on hedging. Thanks.

Yeah, thanks. It's Jamie here. You know, we look for opportunities over the course of the past nine to 12 months to lock in more of our Canadian dollar exposure. But, you know, the way that the Canadian dollar has been strengthening and more or less, a straight line over that period, there wasn't much in the way of opportunities to do so. I think we have 8% of our remaining 2021 exposure hedged at well below $0.80. We'll look for opportunities to do more if there's weakness in the Canadian dollars, but as I said, we haven't seen that of late. Fortunately, we are very well covered in Mexico. We've got about 80% of our exposure hedged between 21 and 24, which those contracts are very favorable relative to current spots. So that's where we're at currently. We'll continue to look for opportunities to do more, but there's certainly none currently.

That's helpful. Thank you.

Thank you. The next question is from Lauren McConnell of Paradigm Capital. Please go ahead. Your line is now open.

Good morning, John, Jamie, and Peter. Congratulations on a good quarter. I just had a question at Island. I know there's a history of positive reconciliation, and I just wanted to know with that 13.2 grams per ton that you mined this quarter, was that in line with what you were expecting on the reserve model, or are you still seeing positive reconciliation at Island?

No, that is in line with what we were expecting. It reconciled quite well. Over the years that we've owned it, made changes to the reserve model, and we don't really see significant positive reconciliations for the last couple of years. It's behaving quite well.

Okay, great. Thank you. Thank you. The next question is from Cosmos Chu of CIBC. Please go ahead. Your line is now open.

Hi. Thanks, John, Jamie, Peter, and team. Maybe first off on young Davidson here. As you mentioned, you know, it's great to see that you were able to get to almost 7,800 tons per day when you were targeting 7,500 tons per day in terms of mining rates underground. You know, on that point, could you give us some key highlights in terms of how you were able to come to a throughput that was higher than what you targeted. And then the second part of my question is, it sounds like it's not yet repeatable yet. In Q2, you're still targeting 7,500 tons per day in Q2. And why is it not repeatable?

You know, we're always striving to do better than our plan. You know, a few things would have lined up in Q1 that helped us beat it. You know, we had a good quarter. We actually beat it in Q4, if I'm not mistaken, as well. Beat the 7,500 tons a day. Look, we plan... We're planning for 7,500 tons a day for Q2 and ramping up to 8,000 tons a day for the rest of the year. To facilitate that, we're bringing on another mining horizon, which will help us do that. Can we do better? Who knows? I wouldn't expect 8,000. I'm still expecting 7,500.

Yeah, I get what you mean. But I guess, Peter, you know, how did you beat it in Q1 then? Could you tell us, you know, one or two key highlights where, you know, it kind of surprised you or what happened?

You know, it's just, you know, the ore being there and it continues to be there. So it's just being able to move it, getting familiar with the new infrastructure. It takes a while to to trust it and, and figure it all out. So the difference between 7,800 tons a day and 7,500 tons a day in, you know, is not that huge a difference, frankly. So I wouldn't, I wouldn't say we knocked it out of the park. It's a, it's nice to be on the higher side of that. We might be, you know, maybe we'll be a quarter at a couple hundred tons a day below our, our target. It's, it's, it's always going to vary up and down within, you know, a little bit at least.

Got you. Thanks, Peter. And then maybe as you touched on it, the new mining horizon here, can you talk a little bit more about, you know, maybe the location, you know, where's this new mining horizon? And then can you remind us, you know, how many areas are you mining at this point in time?

Yeah, I mean, so we have a couple of mining horizons in the upper part of the mine that we're continuing to mine, and this one actually is another one that would be at the upper part of the mine, more on the westerly flank. We've got a couple of mining horizons in the lower part of the mine. So, you know, it varies from time to time between three, four, five mining horizons. We would cycle through as many as 100 stopes in a year, and have at any given time 30 stoves online. So that's kind of the mix.

Okay, great. Got it. And then, Peter, as you talked about, you know, you're still trying to understand, not understand, you're getting familiar with the lower mine infrastructure, as you mentioned. You know, at this point in time, any areas that you think might be limiting factors. Is it, you know, ore bin to conveyor or, you know, everything's running fairly as you would have expected so far?

This is so much better than what we had at the mid-mine that was frankly built for 6,000 tons a day and also frankly put in as a sort of an interim measure to get to the lower mine. You know, I think we have something like 10 times more bin capacity. We have additional skipping capacity. We have conveying instead of trucking, all of those things help us make our numbers. We're in good shape.

Great. Maybe squishing gears a little bit, at Layaki Grande, I think there's already been some discussions in terms of inflationary factor and potential or maybe no issues in terms of the impact on costs. Could you comment on Layaki Grande, you know, any kind of inflationary factors that we should be aware of, that we should be concerned about in terms of capex?

We haven't seen any. We're well into construction. I mean, most of the capex associated with Layaki Grande is earthmoving, really. Pre-stripping, building leach pads, putting liner down. We ordered the liner. The liner's on site, came in on budget. And, you know, our mining contract is a fixed rate per ton, so... you know, sort of diesel moving around a lot, don't really see much opportunity for inflationary pressures.

And that's good. And that leads me to my second question here, I guess. You know, can you remind me, I guess, you know, when is the rainy season in Mexico? I think it's coming up. And, you know, are there any key things that you want to wrap up and then finish?

ahead of the rainy season or is the rainy season not really an impact not an issue in the northern part of mexico no we do have a rainy season and it's kind of uh august september can start in july a little bit uh um and you know you try not to do certain things you try not to be doing quay liner uh on your leech pad during the rainy season that's about the only thing that you you know the underliner that's the only thing you try not to do and we're well ahead of that and It's not going to be an issue.

Sounds good. Maybe one last question here just to wrap things up. I guess, you know, your Catholic's budget for the year is $320 million to $350 million. You did about $73 million in Q1. Could you maybe give us a bit more granularity in terms of, you know, the remainder and how that's going to be distributed throughout the remainder of 2021?

Cosmos, it's Jamie here. Yeah, I can take that. Hey, it should be pretty evenly distributed. You will note we had, I think, $16.8 million of what we classify as capital advances in the first quarter as well. So that's deposits on long lead items, other contractor advances. So if you factor that in, the actual cash spending was a bit higher in Q1. But overall, I'd expect that capital to be incurred pretty evenly.

Great. Thanks a lot, guys. Those are all the questions I have. Thank you.

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

Hi, guys. Thanks for taking my questions, and congrats on certainly a solid start to the year. Following up on Cosmo's questions on Young Davidson, just with respect to the stopes, I know they've always kind of been massive, but is there any movement to using larger stopes in the underground now, or is it Pretty much similar sizes to what you've been extracting for the last year or so.

Yeah, Mike, I guess it's Peter here. In the upper mine, our stope height was 30 meters. And in the lower mine, we've gone to 35 meters. And the lower mine tends to have wider zones as well. So thickness into the page, if you like, I think we would have, I can't remember the numbers exactly, but we might have been averaging 20 meters in the upper mine and more like 30 meters in the lower mine thickness. So the stoves tend to be or are on average bigger and so more tons per stope on average.

So generally you're set up well to have that as a tailwind for you as you open up the lower mine then? Yep. In terms of productivity. Okay, that's great. Most of my questions were answered. Just one more. On island, I know you guys were planning to do a bit of regional exploration last year. I got delayed due to COVID. Plans are to do it this year. What could our time frame in terms of news flow around that be? Obviously, you're having great success at the actual island mine. Just wondering if we stumble upon something else that's interesting, when could we maybe see initial results?

yeah, I guess as the year progresses, I mean, we've, you know, we, we, we do have, uh, one drill, let's say that's going to be, um, poking around, uh, more regional targets, but, you know, continue to have two and a half or three on surface and, and, and a couple underground as well, uh, drilling. So, um, yeah, we got lots of exciting things to look at, uh, in the regional setting and, uh, I can't give you a timeframe on when you'll see results. We're currently waiting for assays on some of those holes, so there you go.

All right. Well, that's it for me, guys. Thanks very much.

Thank you. The next question is from John Tomazos of John Tomazos Very Independent Research. Please go ahead. Your line is now open.

Thank you for taking my question. With the de-emphasis of the Turkish projects, how will you reallocate management time and resources? Does this mean a little more attention for Lynn Lake? Does this mean a little more exploration budget or potentially a property acquisition? Separately, I just want to commend you for your adherence to the Foreign Corrupt Practices Act. not caving in to troubles in the third world. And if you need to commemorate several thousand genocides in addition to the Armenian genocide, my family can help you with that content and history. Thank you. I'm kidding you a little bit, but I commend what you're doing.

This is John McCluskey. I'll take your question. Just to say that we were not... We were not sacrificing budget or management time on the back of what we were involved with in Turkey. Essentially everything going on in the company was being well managed in addition to Turkey. So I would say that given the fact that we weren't doing any work in Turkey, Over the last year, the bulk of the responsibility for what was going on was really being handled by the Turkish team. We have about 16 people employed in Turkey. We'll be reducing that team, of course, going forward, but given the fact that they were the ones responsible for what was going on for the vast majority of the work, there's going to be really no big change to the way we manage things.

Good for sticking up for your rights. Thank you.

Thank you.

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

Thanks, Operator. John, when does the claim for Turkey actually get filed? How long does it take to file that claim?

Generally, Within a couple of weeks of when you announce that you're going to be filing a claim, you would actually file the actual claim. So it starts out with effectively something like this, with a news release and a notice, and then you move it forward. So it's something that you do a fair amount of preparation on, And so we were sort of well prepared going into the announcement, so it won't be too long.

Okay, great. Thanks. And Peter, in Q2, are there any large maintenance, no maintenance shutdowns planned at YD?

I mean, we have maintenance shutdowns every quarter, but nothing, you know, nothing that would impact the numbers.

Right, so nothing extraordinary, basically?

No.

No, okay, gotcha. And when does the pre-strip at El Salto actually finish? And will the ore that's left in that pit actually run you through to the startup of La Jolla Grande then?

Sorry, when does the pre-strip at El Salto finish? Was that the question? Yes. Towards the end of this year. and yes we haven't obviously you know we have enough ore between and you know in excess uh between you know pit you know mulatto's uh and the sas stockpiles in sarah polong uh all the three of those sources to to well take us to the start of uh lyaki grande gotcha okay and then just the last question on the the new hedges that you added post the end of the quarter jamie 46 000 ounces

through to the end of this year, would that kind of be evenly spread over the course of the next nine months then? Is that the way to model it?

Yes. That's right, Kerry.

Okay. Okay. That's great. Thanks very much, guys.

Thank you. There are no further questions at this time. This concludes this morning's call. If you have any further questions that have not been answered, please feel free to contact Mr. Scott Parsons at 416-368 Please disconnect your lines at this time, and we thank you for your participation.