Alamos Gold Inc.

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Your conference is ready to begin. Good morning. I will now turn the call over to Scott Parsons, Alamos Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator, and thanks to everybody for attending Alamos' fourth quarter 2023 conference call. In addition to myself, we have on the line today John McCluskey, President and Chief Executive Officer, Greg Fisher, Chief Financial Officer, Luke Guimond, Chief Operating Officer, and Scott R.G. Parsons, Vice President of Expiration. To address any questions with respect to our reserve and resource update earlier this week, we also have on the line today Chris Boswick, Senior Vice President, Technical Services. 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 Senior VP, 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 unless otherwise noted. Now John will provide you with an overview.

Thank you, Scott. I'd also like to welcome everybody to the call. I'd like to turn your attention to slide three. 2023 marked our 20th anniversary, and it was a record year on multiple fronts. With a solid fourth quarter performance, we produced a record 529,000 ounces of gold for the full year, achieving the top end of our increased production guidance, a 15% increase for 2022. Our costs, which are already well below the industry average, decreased 4% to $1,160 per ounce, meeting guidance once again. With the record production, lower costs, and stronger gold price, we set a number of financial records in 2023. Revenue increased 25% for the year to a record $1 billion, operating cash flow working capital increased 44% to a record $520 million. We also generated $124 million of free cash flow, a significant increase from 2022, while continuing to invest in high return growth. Now looking at slide four, earlier in the year, we announced our updated three-year guidance, which included a 3% increase in our 2024 production guidance. to approximately 505,000 ounces with costs expected to remain flat year over year. By 2026, we expect our production to increase 7% to approximately 540,000 ounces and all in sustaining costs to decrease 11% to approximately $1,000 per ounce with the completion of the phase three plus expansion at Island Gold. Our PDA underground deposit represents further upside that we plan on outlining in a development plan later this quarter. Beyond 2026, the Lynn Lake project represents further upside with initial production as early as the second half of 2027, and the capacity to increase our production to an annual rate of 800,000 ounces per year. At current gold prices, we expect to continue generating strong free cash flow, combined with $225 million in cash and no debt, we are well positioned to fund this growth internally. Now looking at slide five. In addition to record operational and financial performance, we delivered on a number of our growth initiatives in 2023. After receiving the key environmental permit for the Lynn Lake project in March, we completed an updated feasibility study outlining a larger, longer-life, low-cost operations. The project has a track of economics that we expect will continue to improve as we capitalize on its considerable exploration upside. We have doubled our budget at Wood Lake to $25 million for this year, with the focus on upgrading site infrastructure and de-risking the project ahead of the expected construction decision in 2025. At Island Gold, we made significant progress on the Phase III expansion with completion of key shaft infrastructure including the headframe and hoist house. This allowed for the start of shaft sinking in December, which is a significant milestone for the project, putting it on track for completion in the first half of 2026. We also released our year-end 2023 reserve and resource update earlier this week, which outlined growth in all categories. Reserves increased for the fifth consecutive year to 10.7 million ounces and slightly higher grades, reflecting another year of high-grade additions at Island Gold and PDA. Over the past five years, reserves have grown 10% net of depletion, with grades also increasing 9% as we continue to improve on the quality of our overall reserve base. We continue to create value through exploration and investing in high-return growth projects. We expect that trend to continue in 2024 with a number of upcoming catalysts, starting with our PDA development plan later this quarter. ongoing exploration updates with our largest budget ever, continued progress with the expansion at Island Gold, and a study incorporating the burnt timber and liquid satellite deposits into the Lynn Lake project towards the end of the year. I'll now turn the call over to our CFO, Greg Fisher, to review our financial performance.

Thank you, John. Moving to slide six, we sold 129,000 ounces of gold in the fourth quarter at an average realized price of $1,974 per ounce, $3 per ounce above the London PM fix for revenues of $255 million. For the full year, we sold 526,000 ounces at a realized price of $1,944 per ounce for record revenues of just over $1 billion, up 25% from 2022. Fourth quarter total cash costs of $900 per ounce and all in sustaining costs of $1,233 per ounce were consistent with quarterly guidance. For the year, total cash costs were $850 per ounce and all in sustaining costs were $1,160 per ounce, both in line with annual guidance and down 4% from 2022. Operating cash flow before changes in non-cash working capital was $120 million in the fourth quarter, worth $0.30 per share. For the full year, operating cash flow increased 44% to a record $519 million, or $1.31 per share. Our reported net earnings were $47 million in the fourth quarter, or $0.12 per share. This included unrealized foreign exchange gains of $13 million recorded within deferred taxes in foreign exchange, offset by other losses of $15 million. Excluding these items, our adjusted net earnings were $49 million, or $0.12 per share. Our full-year adjusted net earnings were $208 million, or $0.53 per share. Capital spending in the quarter totaled $110 million and included $27 million of sustaining capital, $73 million of growth capital, and $10 million of capitalized exploration. For the full year, capital expenditures totaled $349 million, including growth capital of $217 million. This was in line with guidance and up from 2022 with the ramp-up of construction activities on the Phase 3 expansion at Island Goal Free cash flow in the quarter was $14 million and totaled $124 million for the full year, a significant increase from 2022, while continuing to reinvest in the Phase 3 Plus expansion. This reflected the strong operational performance of Young-Davidson, generating more than $100 million of free cash flow for the third consecutive year, and the Mulattos District generating an impressive $142 million. Given the increased profitability of Mulattos through 2023, This includes a 2023 year-end tax payment of approximately $40 million due in the first quarter of 2024. With a strong free cash flow generation, our cash balance grew nearly $100 million to end the year at $225 million while remaining debt-free. We expect to continue generating strong free cash flow at current gold prices and remain well-positioned to fund our growth initiatives. I'll now turn the call over to our COO, Luc Dumont, to provide an overview of our operations.

Thank you, Greg. Moving to slide 7, Young-Davidson ended the year on a strong note with production of just under 50,000 ounces, taking full-year production to just over 185,000 ounces, in line with guidance. Cash costs and all-in sustaining costs were also in line with guidance, both for the quarter and the year. Young-Davidson continues to demonstrate strong operational and financial consistency with mine site free cash flow of $35 million in the fourth quarter, and a record $118 million for 2023. This marked the third consecutive year the operation has generated more than $100 million of mine site free cash flow. We are expecting production and all in sustaining costs to be in a similar range in 2024, supporting another year of strong free cash flow. With Young-Davidson's 15-year reserve life maintained in the year-end update earlier this week, we expect similar levels of free cash flow over the long run. Over to slide 8, Island Gold produced 31,600 ounces in the fourth quarter, a decrease over the previous quarter due to lower grades mined and processed as planned. Costs in the quarter were above annual guidance reflecting the lower planned grades, as well as one-time costs associated with the transition from contractor to owner development and production drilling which was completed in the quarter. Full year production of 131,000 ounces was in line with the midpoint of guidance and cost came in slightly above guidance. The operation used $34 million of cash in the quarter and $68 million for the year, reflecting the ramp up of capital spending on the Phase III Plus expansion as well as a significant ongoing exploration program. At current gold prices, Island Gold is expected to continue to fund the majority of the Phase 3 Plus expansion growth capital. Production is expected to increase 16% in 2024 to approximately 153,000 ounces at 12% lower all-in sustaining costs driven by higher grades. We expect further production growth in 2025 with another increase in grades followed by another significant increase in production and decrease in costs into 2026 with the completion of the Phase 3 Plus expansion. Over to slide 9, the Phase 3 Plus expansion continues to advance well with the majority of the shaft site infrastructure completed last year, including the hoist house and head frame. The project achieved a significant milestone in December with the start of shaft sinking, which is ramping up towards an ultimate rate of over 3 meters per day. The focus in 2024 will be on shaft sinking down to a depth of 1,000 meters by year end. We also expect to start construction activities on the mill expansion in the second quarter, followed by the paste plant in the second half of the year. Over to slide 10. We remain on track to complete the expansion during the first half of 2026. At year end, approximately 51% of the total initial capital of $756 million had been spent and committed on the project. Our capital spending is tracking well for the work completed to date. However, we are seeing some pressures from ongoing labor inflation in Canada. Growth capital spending on the Phase 3 Plus expansion is expected to range between $210 and $230 million in 2024. A similar rate of spending is expected in 2025, before decreasing considerably in 2026, following the completion of the expansion. Over to slide 11. The Milagos District produced 48,100 ounces in the fourth quarter and 212,800 ounces for the full year, well above the top end of guidance range driven by the outperformance from the Yaqui Grande. Production from Leyake Grande totalled 33,700 ounces in the fourth quarter and 153,400 ounces for the year, well ahead of expectations reflecting higher than planned mining rates and positive grade reconciliation. All in sustaining costs were slightly above annual guidance in the fourth quarter, but well within the range of guidance on a full year basis. Reflecting the exceptional performance from the Yaqui Grande, mine site free cash flow totaled $27 million in the quarter and $142 million for the full year. As outlined earlier in the year, production guidance for the Mulatto's district was increased 14% to between 160,000 and 170,000 ounces. As previously guided, this is down year over year, reflecting the end of mining in the main Mulatto's pit and stacking of stockpile ore. The increase in production guidance was driven by higher expected production through residual leaching of the main mulattoes leach pad. The additional allowances recovered through residual leaching carry higher reported costs, however, are very profitable from a cash flow perspective with the majority of these costs previously incurred. I will now turn the call over to our VP of Exploration, Scott R.G. Parsons.

Thank you, Luke. Moving over to slide 12. We had another successful year on the exploration front across all of our assets, with reserves increasing 2% to 10.7 million ounces of gold and grades also increasing 1%. The increase in reserve reflects higher grade additions at Island Gold and PDA and growth at Lynn Lake. This marks the fifth consecutive year the reserves have grown for a combined increase of 10%. Over that time frame, we've discovered more than 4 million ounces of reserves before mining depletion of 3 million ounces. The majority of these additions have been higher grade, driving a 9% increase in grades over that time frame, as the reserves continue to grow in both size and quality. Global measured and indicated resources also increased by 12% to 4.4 million ounces, with grades increasing 9%, reflecting higher grade additions at Island Gold and Growth at Young Davidson. Similarly, inferred resources increased 3% to 7.3 million ounces. Moving to slide 13. Island Gold's significant pace of growth continued, with reserves growing 18% to 1.7 million ounces, and reserves and resources across all categories increasing 16% to 6.1 million ounces. These additions have had a very attractive discovery cost of $7 per ounce over the past year and $13 per ounce over the past five years. Including mining depletion to date, 7.5 million ounces have been discovered at Island Gold, as it continues to establish itself as one of the highest-grade and fastest-growing deposits in the world. Over to slide 14. The growth in reserves and resources was driven by an expanded underground exploration drill program targeting high-grade additions in proximity to existing underground infrastructure. This included zones within the main island gold structure, which hosts the majority of the mineral reserves and resources, as well as emerging opportunities outside of the main structure in the hanging wall and the footwall. The program was successful on both fronts, with nearly 1 million ounces of high-grade gold discovered within the main structure and in the hanging wall and footwall. As outlined in the long section, ongoing growth within the main structure occurred in Island East and Island West, our two primary areas of focus. These additions are all near our existing infrastructure, will be low-cost to develop, and continue to increase Island Gold's ounce-per-vertical-meter profile. Furthermore, gold mineralization within the main structure remains open, both long strike and down plunge, highlighting the excellent potential for this growth to continue. Over to slide 15. The expanded underground drill program also provided better access and more optimal drill orientations to target and expand the growing number of mineralized zones within the hanging wall and footwall of the deposit. The program has been extremely successful with initial reserves and resources declared and expanded on in a number of these recently defined zones, which have now become significant contributors to the overall growth of the deposit. In fact, more than 600,000 ounces of high-grade reserves and resources were added in these recently defined hanging wall and footwall zones, representing approximately 70% of the total increase in 2023. A few of the highlights of the growth in these zones include the NTH zones, where 146,000 ounces were added, including reserves of 53,000 ounces, grading 12 grams per ton. The E1D zone has more than doubled to contain 332,000 ounces of inferred resources, grading 16 grams per ton. It remains open in multiple directions. This zone is located on average 30 meters from the main structure, highlighting both the near-mine opportunity and the lower-dissolvent costs. These zones and other targets within the hanging wall and footwall represent significant opportunities for further growth. There are nearly 2,000 intersections above 3 grams per tonne gold outside of existing reserves and resources in the hanging wall and footwall. highlighting the opportunity for further near-mine high-grade additions as ongoing drilling further tests these areas. The photo of the core on the bottom of this slide is one of those opportunities. At nearly 1,400 grams per tonne, over three metres, this is one of the best intercepts drilled to date at Island Gold. It is located 12 metres away from existing infrastructure and is currently classified as an unknown zone, highlighting one of the many near-mine opportunities that we're following up on. Over to slide 16. The PDA deposit represents the future of the Mulatto District and continues to grow, reflecting another year of exploration success. Mineral reserves of PDA increased 33% to 1 million ounces at 16% higher grades of 5.6 grams per ton. Mineral reserves and resources now total 1.2 million ounces of PDA, a 26% increase for 2022, and a 116% increase over the past two years. With the deposit open in multiple directions and another significant exploration program planned at PDA in 2024, there's excellent potential for this growth to continue. This larger reserve base is being incorporated into a development plan for PDA to be completed later this quarter that we expect will outline another significant mine life extension at the Mulatto District. Following up on this broad-based exploration success and reflecting the potential we see across our assets, We've increased our global exploration budget to $62 million in 2024, the largest in the company's history. With that, I'll turn the call back over to John.

Thanks, Scott. That concludes our formal presentation. I will now turn the call back to the operator to open the call for questions.

Thank you. We will now take questions from the telephone lines. 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 participants register for questions. We thank you for your patience. Our first question is from Cosmos 2 from CIBC. Please go ahead.

Thank you, John, Greg, Luke, Scott, and Scott. Maybe my first question is on inflation. I think, Greg, you kind of touched on it. What was it, Luke, that talked about labor costs? But could you maybe make a general comment in terms of inflation? Are you still seeing inflationary pressures? Are they getting better? As you mentioned, the MD&A, I think, added about $40 an ounce in terms of cost based on inflation, $20 an ounce in terms of cost due to a stronger peso. So, again, just a general comment. Is it getting better? Are you seeing it... you know, worse in Canada versus Mexico? Just maybe some comments on that.

Yeah, Cosmos, that's right here. I can give a high-level comment. I mean, overall, we're seeing some relief in some areas, but, you know, labor continues to be the biggest headwind with respect to inflationary pressures, and that gets us to about a 4% to 5% overall inflationary impact year over year, and we've built that into our budget. But ultimately, I mean, labor pressures are going to continue to... be active. I mean, there's a lot of competition in the area, so we need to make sure that we're staying in line with that competition and paying our people appropriately.

Right. And maybe my next question is on Lynn Lake. I see that in your MD&A, you now talk about production as early as second half of 2027. Is that timeline new? I don't seem to recall that timeline from past conversations.

Yeah, we outlined that in the guidance release in January, Cosmos. But, yeah, I mean, it's not new. We've talked about the fact that this could come online as early as 2027. And we're looking at, you know, doing some early works in 2024 to basically set ourselves up that when we make that construction decision as early as 2025, it puts us in a position to be in production by, call it the second half of 2027. Great.

And then as a follow-up, I see that there's a study on burnt timber and link wood, satellite deposits to Lind Lake that should be released in Q4 of this year. I guess my question is, number one, to confirm, I don't believe burnt timber and link wood is in the current 2023 study. And then do you need it? Or is the current Lind Lake already big enough to kind of justify...

Yeah, I can start there and then I'll hand it over to Luke. Ultimately, the project stands on its own. It doesn't need burnt timber or liquid. It's just between McClellan and Gordon. It's a 20% plus IRR project. It doesn't require that. We're just looking at ways to maximize the production after year 10. Because if you look at the production profile for Lynn Lake, it has a very strong production profile from years 1 to 10 as we're mining the better grades at McClellan and Gordon. But then we move into stockpiles, which are lower grade. What we're looking to do with burnt timber and linkwood is to sequence that in at higher grades than what those stockpiles are to kind of maintain that 170,000-ish ounce profile for a longer term than the first 10 years.

I would just add to that as well as Greg mentioned. We see that as a pretty prolific district for us. Certainly, burnt timber and linkwood are the early targets on our radar, but we've got an extensive land package there of about 90 kilometers of strike length. We see this as one processing plant with a number of deposits being able to be mined within our land package. centralized to that one mill complex and extending it well beyond what we've certainly communicated with regards to our feasibility study with regards to Lynn Lake at this point. So we expect to be in this district for a long, long time.

Great. And so what can we expect from that study that's coming out for burnt timber and linkwood? Is it really just a kind of conversion into... you know, reserves or, you know, better drill spacing, you know, some kind of infrastructure study or what can we expect?

Yeah, I mean, the intent with that program is to get it into a more confident category from a, you know, resource to a reserve position and then look to build that, incorporate that into our overall study and mine plan for the longer term. And as Greg mentioned, really it's It extends the district for us for the longer term, and it really backfills beyond 10 years with regards to the production profile. As we mentioned, the first 10 years are pretty solid at 175,000 ounces per year, and then it drops off. But the intent would be to bring bird timber and linkwood into the mix and sustain that for the long term.

And just the comment on it. the infrastructure is in place and the tailings are in place there. So it's really looking at satellite deposits, no different than what we've done in Mexico, where we have a kind of central processing area and we've had satellite deposits over a 20-plus year period.

Cosmos, it's John here. I think another point worth mentioning is in year 10 and beyond, we're going to be processing stockpiles, which means we've got a fleet that's ready to go. So the incremental cost of developing burnt timber and limquid is going to be very, very low.

Great. Thank you, John, Greg, Luke, for answering all my questions. That's all I have. Thank you.

Thank you. Once again, please press star 1 at this time for any questions or comments. Our first question is from Ovez Abib from Scotiabank. Please go ahead.

Hi, John and Alamos team. Congrats on achieving the top end of increased production guidance. Just two questions for me. Number one, John, you're obviously looking to release a new mine plan at PDA by the end of Q1. Is the study still contemplating 2,000 tons per day processing plant? And what I'm getting to is, is there potential to bring in additional sulfides in the area beyond PDA? So is there a potential to increase the size of the plant or do an expansion of the size of the plant going forward?

Both questions are yes and yes. There is plenty of potential beyond what we're currently drilling to increase sulfide reserves in the district. And we've already indicated where some of those particular zones are, even running parallel to PDA itself. There's another zone that goes through the gap in El Victor. There's a parallel trend where we've already started delineating sulfide mineralization over and above that. We've got some high-grade sulfides underneath the old Sarah Pallone pit that we drilled previously and just left in place because we had no means of processing them. So I would say that potential is very, very high. As far as... expandability of the mill that's certainly going to be one of the components that that we will build into it we're going to essentially keep that in mind but in the future we might increase the scale of production okay thanks for the color on that John and then you know again we continue here a lot of noise in Mexico you know regarding permits especially open pit

Any color you can provide on any potential impact to your operations at Monato or even PGA or expansion possibilities there?

Yeah, I don't really see it impacting us at all. Right now is sort of a pre-election period in Mexico. A lot of the comments are coming from the outgoing president. The chances of that, I think, at this point are very, very slim, and I don't think that's a controversial thing to say. But over and above that... We're transitioning right now from open-pit operations to underground processing sulfide through mills, and that looks like the way forward at Mulatto's in any case. I hate to ruin the idea altogether of finding near-surface oxides. That's certainly not the case. There is potential, but right now our focus is very much on building reserves for mill feed. Politics in Mexico are always a relatively noisy affair, and there is a huge component of that country that recognizes that mining and resource development is absolutely key to their economy. Between oil and gas and minerals, that employs most of the people that are working outside of cities. So I would say there's a very slim possibility of that ever happening.

Okay, thanks for the color on that as well, John, and that's it for me. Thanks for taking my questions.

Thank you. There are no further questions registered at this time, so 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 416-368-9932, extension 5439. Again, the phone number is 416-368-9932, extension 5439. You may now disconnect your line. We thank you for your presence.