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 thanks to everyone for attending Alamos' third quarter 2022 conference call. In addition to myself, we have on the line today John McCluskey, our President and Chief Executive Officer, and Luc Guimond, our Chief Operating Officer. We will be referring to a presentation during the conference call that's available through the webcast and on our website. I'd also like to remind everyone that our presentation will be followed by a question and answer 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 Senior 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 an overview of the quarter.

Thank you, Jamie. To start off the call, I want to introduce Luc Guimond, who was appointed Chief Operating Officer in September. Luc has a long history with Alamos, a deep knowledge of our operations, and an excellent track record leading the development and operation of a diverse range of gold mines. Luc has hit the ground running, as can be seen by his solid third quarter operational results, and we expect to continue with even stronger results as we approach the fourth quarter. I'd also like to recognize Peter McPhail for his leadership and invaluable contributions to the company as our former Chief Operating Officer. Peter oversaw our growth into an intermediate producer while driving significant improvements across our operations, such that our outlook has never been stronger. Peter retired in September, but will be staying with the company as a consultant to ensure a seamless transition. behalf of the entire alamos team i'd like to thank peter and i look forward to his ongoing contributions over the next year starting with site three we had a strong third quarter led by another solid performance from young davidson and the standout result from layaki grande in its first full quarter of operation production of 123 400 ounces of gold was near the top end of guidance and represented a 19% increase from the second quarter. Total cash costs of $868 per ounce and all-in sustaining costs of $1,178 per ounce were both below our annual guidance and down approximately 7% from the first half of the year. Young Davidson continues to be a steady performer, generating $23 million of mine site free cash flow in the quarter and on pace to generate $100 million for the second consecutive year. La Yaqui Grande is ramping up, having doubled production from the Mulatto District quarter over quarter, and is the key driver of our consolidated production growth and decrease in costs. Looking at slide four, we expect a strong performance to continue into the fourth quarter, with La Yaqui Grande driving another increase in our production to a range of 125,000 to 135,000 ounces. Despite industry-wide inflation, we also expect a further decrease in our costs in the fourth quarter, reflecting the ramp-up of low-cost production at Liaki Grande, higher grades at Island Gold, and the weaker Canadian dollar. Combined with our strong year-to-date performance, we're on track to achieve our full-year production and cost guidance. We're not immune to the inflationary cost pressures being felt across the industry, but do have several key things working in our favor, the first being the nature and location of our operations. Approximately 70% of our production is coming from underground mines in Ontario, which are less energy intensive, have smaller mobile fleets, and are connected to clean grid power, meaning we are less reliant on fossil fuels. Given the majority of our production is coming from Canada, we are also benefiting from the weaker Canadian dollar. Lastly, all of the production growth we are bringing on is lower cost. Looking at slide five, the Aki Grande will be a key driver of higher production and lower costs over the next few years. Island Gold is going to continue that trend over the long term through the phase three expansion. I was on site last week and saw the progress firsthand with the work in the shaft area really starting to take shape. The shaft has been collared precinct of the shaft is more than 90% complete and the concrete foundation work and the surface infrastructure is well underway. This expansion will be a game changer for the operation and the company. Following completion of the shaft in 2026, we expect our annual production to increase above 600,000 ounces per year with a further decrease in costs. Longer term, We have the capacity to increase our annual production to approximately 800,000 ounces per year with the development of Lynn Lake. We're taking a staged approach to developing our growth projects, and currently we're focused on Island Gold such that we can continue to fund this growth internally while generating solid free cash flow over the next several years. 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 122,780 ounces of gold at a realized price of $1,740 per ounce, $11 above the London PM fixed price for revenues of $214 million in the quarter. Total cash costs averaged $868 per ounce and all in sustaining costs were $1,178 per ounce. a significant improvement from the first half of the year, reflecting strong ongoing results from our Canadian operations and the benefit of a full quarter of production from La Iaquigrande, as well as a weaker Canadian dollar. We expect a further decrease in costs in the fourth quarter to the lowest levels of the year, driven by higher grades at Island Gold and additional low-cost production growth from La Iaquigrande. Operating cash flow before changes in non-cash working capital increased to $96 million or $0.25 per share in the third quarter. This marked the highest level in a year, despite the lower gold price. We reported a net loss of $1 million, which included a non-cash after-tax inventory adjustment of $8 million at Mulatto's, unrealized foreign exchange losses of $23 million recorded within deferred taxes and foreign exchange, partially offset by other gains of $2 million. As was the case in the second quarter, given the further decline in the price of gold during the third quarter, a review of the carrying value of Mulatto's leech pad inventory was undertaken, and this resulted in an $8 million inventory adjustment, which is a non-cash reduction. Excluding this and other non-cash items, our adjusted net earnings were $27 million, or $0.07 per share. Capital spending totaled $73 million in the third quarter, similar to the second quarter, with the wrap-up of spending on the Phase III Plus expansion offsetting the decrease in capital at Mulatto's, with construction of La Iacchi Grande now complete. We expect the rate of our capital spending to increase on the Phase III Plus expansion in the fourth quarter, though our full-year spending is likely to be lower than guidance at Island Gold, with some of the construction capital deferred into the next few years. Our balance sheet remains solid with no debt, $117 million in cash, and $500 million of undrawn credit capacity. Combined with growing cash flow from operations, we remain well positioned to fund our growth projects internally in any gold price environment while supporting ongoing returns to shareholders. This includes returning $38 million year-to-date through our dividend and share buyback. I'll now turn the call over to our COO, Luc Guimond, to provide an overview of our operations.

Thank you, Jamie. This is my first quarterly call and I am looking forward to working with the team in this new role and supporting our continued growth as a company. Moving to slide seven, Young-Davidson produced 49,300 ounces in the quarter and generated mine site free cash flow of 23 million. Despite some operational challenges, gold production was 6% higher than the second quarter and the operation remains on track to achieve full year guidance. Mining rates averaged 7,000 tons per day and were impacted by downtime to replace the head ropes at the Northgate shaft, a scheduled change of our underground conveyor belt, and a higher than typical number of shutdowns during periods of peak electricity demand in Ontario as part of our energy management plan. Mining rates have increased and are expected to average 8,000 tons per day in the fourth quarter. This downtime was offset by the underground stockpiles we had built up on surface the last several quarters where mining rates had exceeded . This allowed us to run the mill at 7,800 tons per day and maintain strong production rates. Given the solid performance year to date, Young-Davidson remains on track to meet full year production and cost guidance. The operation is also on pace to generate 100 million of mine site free cash flow for the second consecutive year. Over to slide eight. Island Gold produced 31,400 ounces of gold down from the second quarter, reflecting slightly lower grades processed and lower than planned recoveries. No recoveries were below guidance due to calibration issues with the newly installed automated lime application system. The issue was rectified and recoveries returned to budgeted levels prior to the end of the quarter and in October. The new system is performing well and recoveries are expected to be at budgeted levels in the fourth quarter. With grades expected to improve in the fourth quarter and gold recoveries back to budgeted levels, we remain on track to achieve full year production guidance. Over to slide nine. Construction activities on the phase three plus expansion are ramping up following the start of the shaft precinct in August. The shaft is now down to a depth of 40 meters and nearing its final depth of 42 meters. Concrete foundation work on the shaft's surface infrastructure, including the hoist and hoist house, is also underway. Detailed engineering on the paste plant began in September, and lateral development to support higher mining rates with the Phase 3-plus expansion remains ongoing. We have made significant progress on the expansion to date and expect to start sinking the shaft next year. As noted previously, this is a lower-risk expansion, with the majority of the earthworks completed. The tailings facility already expanded and far less unknowns with this being an operating mine. Once the expansion is completed, Island Gold will be among the largest, lowest cost and most profitable gold mines in Canada. Moving to slide 10, production from the Mulatto District increased considerably to 42,700 ounces in the third quarter. This was double what we produced in the second quarter and at significantly lower costs driven by the full first full quarter of production from La Yaqui Grande. Mining and stacking rates had been impacted at both sites by heavy rainfall during the quarter, which temporarily limited the transportation of consumables to the site. This was more than offset by a strong quarter from La Yaqui Grande. Over to slide 11. La Yaqui Grande produced 25,300 ounces in the quarter at mine site, all in sustaining costs of $699 per ounce. In addition to the production growth, this reduced Mulatto's district cost to $1,137 per ounce, a 34% decrease from the first half of 2022. Stacking rates at Layaki Grande averaged 8,700 tons per day in the quarter, nearing the design rate of 10,000 tons per day. With the rainy season now over and mining and stacking rates at Layaki Grande continuing to ramp up, We expect a further increase in production from La Yaqui Grande in the fourth quarter at lower costs. Overall, the Mulattos District is on track to meet its full year production and cost guidance. With that, I will turn the call back to John. Thank you, Luke. That concludes our formal presentation.

I'll now turn the call back to the operator. We'll open the call for your questions.

Certainly. 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 Cosmos Chu with CIBC. Please go ahead.

Thanks, John, Jamie, and congratulations, Luke. Maybe my first question is on the Canadian assets. You know, as you talked about Island Gold, some ore was transported to YD for processing about 10,000 tons in the quarter. Can you maybe touch on some of the additional costs? I don't think there's a lot. And then more importantly, longer term, You know, any kind of synergies that you can take advantage of, of the two operations that you can speak to or that you might be exploring at this point in time?

Yeah, I can take that, Cosmos. I mean, and thanks for the congratulations, by the way. Yeah, I mean, you know, the cost of running that ore over to – young Davidson is running about $1,000 an ounce so it's certainly still profitable in this gold market. As we've mentioned in the past, it's a stockpile that's been sitting there for a number of years so there's revenue sitting in the yard and this was an opportunity to unlock some of that revenue and generate it earlier. We still plan to process some of that material in Q4. It's all been trucked now over to the site as far as what we were planning to send over for this year but we will continue the milling process of that OR through the Q4 period and finish that up.

And then longer term, anything that you can speak to or?

Yeah, Cosmos, it's Jamie. I would say, you know, we've benefited from a number of synergies, just from having two mines, you know, a six-hour drive apart in northern Ontario, especially with respect to personnel. I mean, we've been able to take, you know, our certain key technical people, move them back and forth between the sites. A great example of that is we just took our mill superintendent from Young Davidson and transitioned him over to Island Gold. So we benefit from that. There's other, obviously, purchasing and operational synergies as well. But, yeah, from a workforce perspective, there's meaningful synergies there. Of course.

Maybe a question on the Yaqui Grande. You kind of mentioned it. You kind of touched on it. But as you said, you're targeting 10,000 tons per day. That's a design capacity. Are you going to get there in Q4? Can you comment on that?

Yeah. Our expectation is that we will be there in Q4, Cosmos, with regards to that stacking rate. Okay.

Sort of at the end of Q4, or could you actually average 10,000 tons per day?

We will average 10,000 tons per day through the quarter. Great.

And then also on Layaki Grande, as you mentioned, you're stacking 1.23 gram per ton, meeting expectations. But can you touch on, you know, the consistency of the grade at this point in time, what you're seeing as you, you know, open up the pit?

Yeah, I mean, you know, our expectation is to continue with that sort of stacking grade through the fourth quarter. I mean, we're in the early stages, but we had seen a little bit of overperformance in Q3 with regards to the model versus what we did stack. But, you know, moving forward, you know, we're certainly expecting at least reserve grade as far as stacking grades. Great.

And maybe one last question on the financial side. Jamie, as you mentioned, there's $500 million on your online credit. Could you remind us what's the interest rate on that on your online credit? And, you know, would you need to tap it to, you know, for your development projects? And if you do, you know, what sort of the timing on that?

Yeah, so the rate just based on, obviously it varies depending on the financial ratios, but given the fact that we have no leverage right now, it's a little under 2% over LIBOR. We have no plans in the near term to draw on the facility. I think I mentioned through... my part of the script, that at current gold prices, we're well-funded to complete the Phase 3 Plus expansion at Island without needing to draw on the facility. So it remains there as a backup for us, but we're in great shape with our cash flow from our existing operations, financing the growth and production at Island.

Great. That's great to hear, and those are all the questions I have. Thanks a lot.

Thank you. The next question is from Kerry Smith with Haywood Securities. Please go ahead.

Thanks, operator. Jamie or Luke, could one of you just explain to me how the energy management program works at YD? And I assume, because you don't need much power at Island, that it doesn't get impacted, but is this something that we'll likely see on a go-forward basis where you will have periods of time where you won't be able to run the facility at the rate you'd like to run because of this program? I'm just trying to understand how it might impact your production going forward.

Yeah, hi, Kerry. It's Luke here. I can take that. I mean, this energy management plan that we talked about with regards to the peak periods, we've been in, Young-Davidson's been involved in that since 2016, and Island Gold is now part of that as well. What typically happens is the way that works is that usually you need to, you know, monitor the peak load in the province of Ontario when that occurs in a specific one-hour window. You know, we need to have the facility down for that one hour in order to get that cost benefit. So typically we need to shut our facility down for about four hours, and it's not the entire facility. It's the milling process, the hoist, and the pace plan in the YD case. And at Island, it's the mill. So you need four hours to be down in order to get that one-hour peak period. Typically, we need to shut down probably anywhere from 10 to 15 times in the period to be able to get those peaks. In this case, we had more shutdowns required in order to capture the peaks, and they were longer in duration, meaning the low profile in the province in that period was pretty flat line, so typically it's a four-hour window shutdown. We had a couple of them this year that were about six hours as a result of that in order to capture that peak. But, I mean, you know, that's something that we plan for and it's part of our business plan on an annualized basis. The bigger impact really in Q3 was the head ropes having to be changed out. You know, with that job, that's really what led to the mining rates being at 7,000 versus 8,000.

Yeah, the other point to make there, Kerry, is the benefit of shutting down during those peak periods is significant. I mean, we save millions of dollars every year in our power costs. You know, if we're able to capture the five peaks, and we have been successful most years in doing so. So this is nothing new. It's just we had to be shut down a bit more than what we budgeted this quarter. But it's still worth doing because we save, again, millions of dollars in power costs.

And are you seeing, you've been doing this since 2016, you said, right?

In YD's case, yes.

And so over that period of time, let's call it six years, have you seen, you know, the frequency of these energy management shutdowns increasing over time? Because obviously we've got GDP growth in Ontario, and I'm not sure what Hydro One is doing with the power infrastructure, but I can only assume that it's a disaster. I'm just wondering if there might be a situation where you're seeing a gradual trend higher in terms of the number of shutdowns that you have to implement, and if that might impact your milling throughput on a go-forward basis more than what you're already budgeting for.

Like I said, typically they've been 10 to 15 a year, and it's by choice. We manage that decision. If we don't see the cost-benefit there, then we would not necessarily shut down. But at this point, you know, based on market conditions, we see the benefit of taking that shutdown and, you know, realizing the benefit on our power bill.

Okay. I got you. Okay. Okay. That's helpful. And then just this was kind of the first full quarter out of YD, or pardon me, out of the Yaqui Grande. Are you kind of planning to use this reporting formatting that you've used in the Q3 on a go-forward basis where you split out Miyake Grande from the rest of the operation there.

Yeah, Kerry, I think we'll continue to do that for the next several quarters while we're still getting significant production from the Mulatto's leach pad. I think, you know, this time next year we'll reevaluate that. I mean, we do have the underground PDA deposit that will be coming online at some point, so we'll likely look to report that separately as well. But, yes, I think for the near term we'll keep the formatting and presentation similar to what we had this quarter.

Okay, and then just one last question. I think I know the answer, but when you truck your from island over to YD, I'm assuming that those tons and those grades are captured in the island reporting table, and then you capture in the extra cost to truck it over as well. Is that correct, Janie?

Yes, everything gets attributed back to island, absolutely. So those are stripped out of the YD results and included in the island results where they belong.

Right.

Okay, perfect. Thank you. Thank you. The next question is from Trevor Turnball with Scotiabank. Please go ahead.

Yeah, thank you, Luke. You mentioned that at Island those stockpiles have been sitting there for a long time and that you just took advantage of that capacity window at YD. I was just wondering if you expected those stockpiles to grow again or if you could maybe remind me what the mining rate is at Island. and also when that permitted capacity increase at Island is expected?

Yeah. So, I mean, the typical mining rates at Island currently are 1,200 tons per day. And that stockpile has been sitting there really since we acquired the property back in 2017. Yeah. So, sorry, I missed the other part of that question.

Well, it's kind of moot. I was kind of wondering if you expected those stockpiles to kind of grow again. And my follow-up to that was when you expect that permitted increase in capacity for the island plant. But it doesn't sound like those stockpiles are really going to be an issue before Phase 3 is ready.

No, correct. Correct. I mean, we'll... I mean, through the permitting process, we're working through that, obviously, to ramp up for, you know, 2026 when the shaft comes online and then gets a full production at 2,400 tons per day in early 2027. But, I mean, we typically will always have a bit of a stockpile sitting in the yard at Island Gold, similar to what we do at YD. You know, in the case of this quarter where we just had YD, where we did have, you know, some downtime with regards to the head rope replacement, we're able to continue to run the mill at full capacity. So we would have that same benefit with Island Gold.

Yeah, no, that makes sense and obviously the metallurgy works out that you can use either facility. Then just my only other question was about Lynn Lake. The EIS approval expected here fairly soon, next couple of months, and you said there would be a feasibility study coming out following that. I'm just wondering if the feasibility really comes out very quickly after the EIS or if there's a bit of work that you guys need to do so that we might have to wait a bit longer to see those numbers.

Trevor, yeah, I think the feasibility study would follow pretty closely after the receipt of the provincial and federal permits, like within a quarter certainly. And yeah, that would likely be after, I mean, the feasibility study would be after the release of our updated reserves and resources. So, you know, the end of 2022 numbers that we can incorporate

uh the exploration work that we've done this year okay great thanks jamie that's all i had thank you once again please press star 1 on your device's keypad if you have a question the next question is from mike parkin with national bank please go ahead hi guys congrats on the quarter and congrats to peter in his retirement and luke welcome to the team um one quick question

back down to the legacy stockpiles. Is that something that's kind of temporarily on hold in terms of aggressively putting that back or putting that back into stacking in terms of like consumable prices being elevated? Would you look to be opportunistic and look to capture a greater margin assuming consumable prices soften in the near term or just keep going at the rate you're going?

Yeah, Mike, it's Jamie. Yes, absolutely. I mean, our business plan for the rest of this year and into 2023 is focused on mining the El Salto, the bottom parts of the Mulatto's pit. And that's the basis for our production guidance. The stockpile, we will continue to evaluate that and look for opportunities when it makes sense based on the gold price and consumables prices to process it. But there's optionality associated with that that's not entirely factored into our existing near-term outlook.

And is it something that you can blend easily with the oxide, or do you tend to try to separately stack that on a pad and be more... It consumes more consumables, so is it something that makes sense to try to isolate versus mix with the oxide it develops also?

Yeah, we tend to, I mean, when we're processing for the stockpile, we certainly can blend it. We tend to, you know, stack the stockpile material separately. It's an almost batch process, but we can blend it as well.

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

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 368-9932