Bill Cara

Alamos Gold reports a solid 2nd quarter

Alamos Gold Inc. (AGI)(AGI.TO) is presently my largest Goldminer investment with a 6.97% portfolio-weighted position. Yesterday’s reported financial results for the quarter ended June 30, 2021 pleased me as they were solid.

“Our overall performance through the first half of 2021 has been solid, led by another strong quarter at YoungDavidson which continues to meet or exceed expectations operating from the new lower mine infrastructure. We expect mining rates at Young-Davidson to increase to design capacity in the third quarter driving our consolidated production and free cash flow higher in the second half of the year. Combined with a stronger performance from Mulatos, we remain well positioned to achieve full year guidance… We had a successful quarter on the exploration front at Young-Davidson and Island Gold with results from both operations highlighting the significant upside potential, in particular at Island Gold where we reported the best hole ever. Our other internal growth initiatives continue to advance, including work on the Phase III expansion at Island Gold, construction of La Yaqui Grande, and permitting at Lynn Lake. All support our strong long-term outlook with production potential of approximately 750,000 ounces per year at substantially lower costs by 2025,” said CEO John McCluskey.

Second Quarter 2021

  • Production of 114,200 ounces of gold, a 46% increase from the second quarter of 2020, primarily reflecting temporary downtime related to COVID-19 during the prior year period
  • Young-Davidson produced 45,100 ounces of gold and generated mine-site free cash flow of $18.7 million. Mining rates of 7,504 tonnes per day (“tpd”) were in line with the targeted mining rate of 7,500 tpd, and are expected to increase to the long-term run rate of 8,000 tpd in the third quarter
  • Sold 107,581 ounces of gold at an average realized price of $1,814 per ounce for revenues of $195.1 million, a 55% increase compared to the second quarter of 2020
  • Generated cash flow from operating activities of $86.7 million ($97.2 million, or $0.25 per share, before changes in working capital, a 75% increase from the prior year period
  • Free cash flow neutral in the quarter, net of $6.2 million in cash taxes paid in Mexico, higher capital spending mainly related to La Yaqui Grande, and the above noted deferred gold sales. The Company expects stronger free cash flow in the second half of 2021 reflecting higher gold production and sales
  • Consolidated total cash costs1 of $791 per ounce, all-in sustaining costs (“AISC”) of $1,136 per ounce and cost of sales of $1,180 per ounce were higher than annual guidance primarily due to the impact of the stronger than budgeted Canadian dollar
  • Realized adjusted net earnings of $38.7 million, or $0.10 per share, which includes adjustments for the noncash, after-tax impairment charge of the Turkish projects of $213.8 million, unrealized foreign exchange gains of $6.0 million recorded within deferred taxes and foreign exchange, and other losses of $3.4 million
  • Recorded a net loss of $172.5 million, or $0.44 per share, inclusive of the after-tax impairment charge of $213.8 million
  • Ended the quarter with cash and cash equivalents of $233.9 million and equity securities of $22.4 million. During the quarter, the Company generated $5.1 million in cash on the liquidation of certain equity securities and realized an after-tax gain of $2.7 million (recorded within equity)
  • Paid a quarterly dividend of $9.8 million, or US$0.025 per share (annualized rate of US$0.10 per share), bringing total dividends distributed through the first half of 2021 to $19.6 million
  • Announced the best hole drilled to-date at Island Gold, extending high-grade mineralization down-plunge from existing Mineral Resources
  • Subsequent to quarter-end, provided an exploration update at Young-Davidson extending gold mineralization below existing Mineral Reserves and Resources and intersecting higher grades in the hanging wall and footwall of the deposit.

In my view, Alamos Gold represents an attractive acquisition target for a major like Agnico-Eagle (AEM)(AEM.TO).