Alamos Gold Reports Fourth Quarter and Year-End 2020 Results

Feb 24, 2021

TORONTO, Feb. 24, 2021 (GLOBE NEWSWIRE) -- Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported its financial results for the quarter and year ended December 31, 2020.

“We closed 2020 on a strong note, meeting full year guidance with our highest production for the year in the fourth quarter. This was driven by another record quarter at Island Gold and significantly higher production at Young-Davidson following the completion of the lower mine expansion. With ongoing strong margins we had another solid quarter financially, generating $58 million of free cash flow,” said John A. McCluskey, President and Chief Executive Officer.

“We are expecting production to grow 15% in 2021, supporting strong ongoing free cash flow generation while we reinvest in high-return organic growth projects. This includes the Phase III Expansion at Island Gold where we just added another million ounces of combined high-grade Mineral Reserves and Resources as the value of the operation continues to grow. Reflecting the strong quarter and outlook, we are pleased to announce a further 25% increase in our dividend marking our second consecutive quarterly increase,” Mr. McCluskey added.

Fourth Quarter 2020

Generated quarterly free cash flow1of $58.0 million, the second consecutive quarter with strong free cash flow, driven by higher margins at all operations
Announced a 25% increase in the dividend to US$0.025 per share to be paid in the first quarter of 2021, bringing the annual dividend to US$0.10 per share and marking the second consecutive quarterly increase
Production increased to 120,400 ounces of gold, the highest quarterly total in 2020, driven by strong performances at Young-Davidson and Island Gold
Young-Davidson produced 48,000 ounces of gold and generated record mine-site free cash flow1 of $30.8 million, driven by record mining rates of 7,651 tonnes per day ("tpd") from the new lower mine infrastructure, exceeding year end targets
Island Gold produced a record 41,200 ounces of gold and generated mine-site free cash flow1 of $31.8 million
Sold 121,831 ounces of gold at an average realized price of $1,860 per ounce for record revenues of $226.6 million
Generated record cash flow from operating activities of $131.4 million ($126.5 million, or $0.32 per share, before changes in working capital1), a 69% increase from the fourth quarter of 2019
Consolidated total cash costs1 of $733 per ounce and all-in sustaining costs ("AISC")1of $1,030 per ounce were below and at the low end of revised full year guidance, respectively. As well, cost of sales per ounce of $1,115 were below guidance
Record adjusted net earnings1 of $58.2 million, or $0.15 per share1, which includes adjustments for unrealized foreign exchange gains of $16.4 million recorded within deferred taxes and foreign exchange, and other one-time gains of $2.3 million. Adjusted net earnings increased 81% compared to the fourth quarter of 2019
Realized record net earnings of $76.9 million, or $0.20 per share
Ended the quarter with cash and cash equivalents of $220.5 million and equity securities of $43.7 million. In October 2020, the Company repaid $100.0 million drawn earlier in the year on its credit facility and is debt free
Acquired Trillium Mining Corp. (“Trillium”) for cash consideration of $19.5 million, increasing its land package adjacent to, and along strike from the Island Gold deposit, by approximately 60%

Full Year 2020

Produced 426,800 ounces of gold, meeting revised production guidance. The Company met or exceeded production guidance at all three of its operations
Implemented extensive health and safety measures in response to COVID-19, including testing of all employees and contractors at its three operations
Island Gold produced 139,000 ounces, driving record mine-site free cash flow1 of $101.4 million
Successfully completed the lower mine expansion at Young-Davidson with the commissioning of the Northgate shaft and new lower mine infrastructure in July
Generated free cash flow1 of $122.3 million, reflecting a strong second half performance following the completion of the lower mine expansion at Young-Davidson, and the restart of operations at Island Gold and Mulatos which were impacted by COVID-19 in the second quarter
Sold 424,325 ounces of gold at an average realized price of $1,763 per ounce for record revenues of $748.1 million
Total cash costs1 of $761 per ounce were 2% below the low-end of revised cost guidance for the year, reflecting lower costs at both Island Gold and Mulatos. AISC1 of $1,046 per ounce were in line with revised guidance. Cost of sales of $1,136 per ounce were 2% below guidance reflecting lower total cash costs
Realized adjusted net earnings1 of $156.5 million, or $0.40 per share1, an 87% increase compared to 2019. Adjusted net earnings include adjustments for unrealized foreign exchange losses recorded within both deferred taxes and foreign exchange of $4.5 million and COVID costs of $6.5 million, partially offset by other items totaling $1.3 million
Reported net earnings of $144.2 million, or $0.37 per share
Record cash flow from operating activities of $368.4 million ($382.9 million, or $0.98 per share, before changes in working capital1), a 41% increase from 2019
Paid $25.6 million in dividends, a 64% increase compared to 2019. In addition, the Company repurchased 1.1 million shares at a cost of $5.5 million, or $4.89 per share, under its Normal Course Issuer Bid ("NCIB").
Reported year end 2020 Mineral Reserves of 9.9 million ounces, up from 9.7 million ounces at the end of 2019 with additions at Island Gold, Young-Davidson and Lynn Lake more than offsetting mining depletion. This included an 8% increase in Mineral Reserves and 40% increase in Inferred Mineral Resources at Island Gold, for a combined increase of 1.0 million ounces
Repurchased a 3% net smelter return ("NSR") royalty payable on the majority of Mineral Reserves and Resources at Island Gold for cash consideration of $54.8 million. This reduced the effective royalty rate from 4.4% to 2.2% on Mineral Reserves
Reported results of the Island Gold Phase III Expansion Study, which is expected to drive a 70% increase in average annual production to 236,000 ounces and a significant decrease in mine-site AISC to $534 per ounce starting in 2025
Commenced construction of the low-cost, high-return La Yaqui Grande project in Mexico
Equity securities value increased to $43.7 million at year end; During the year, sold $9.7 million of equity securities for a realized gain of $6.6 million, recorded in retained earnings

( 1) Refer to the “Non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release and associated MD&A for a description and calculation of these measures.

Environment, Social and Governance Summary Performance

Health and Safety

Annual recordable injury frequency rate1 of 2.25, a 28% improvement compared to 2019
Annual lost time injury frequency rate1 of 0.14, a 17% improvement compared to 2019
Performed over 13,000 COVID-19 tests on Alamos employees, contractors and visitors as part of enhanced workplace safety screening measures

In 2020, the Company improved its health and safety performance and finished the year with five lost time injuries (seven in 2019) and 81 recordable injuries (131 in 2019). Alamos strives to maintain a safe, healthy working environment for all, with a strong safety culture where everyone is continually reminded of the importance of keeping themselves and their colleagues healthy and injury-free. The Company’s overarching commitment is to have all employees and contractors return Home Safe Every Day.

The World Health Organization declared COVID-19 a pandemic on March 11, 2020. The Company responded rapidly and proactively and implemented several initiatives to help protect the health and safety of our employees, their families and the communities in which we operate.

Specifically, each mine site activated established crisis management plans and developed site-specific plans that have enabled them to meet and respond to changing conditions associated with COVID-19. The Company has adopted the advice of public health authorities and is adhering to government regulations with respect to COVID-19 in the jurisdictions in which it operates.

The following measures have been instituted across the Company to prevent the potential spread of the virus:

Medical screening for all personnel prior to entry to site for symptoms of COVID-19
Testing of personnel at all operating sites prior to starting their work rotation
Training on proper hand hygiene and social distancing
Remote work options have been implemented for eligible employees
Social distancing practices have been implemented for all meetings, huddles and transportation
Mandatory use of personal protective equipment for employees where social distancing is not practicable
Rigid camp and site hygiene protocols have been instituted and are being followed
Elimination of all non-essential business travel
Required 14-day quarantine for any employees returning from out of country travel
In addition, since the COVID-19 pandemic began the Company’s teams in Canada, Mexico, and Turkey have donated their time, medical supplies, and funds to help combat the effects and spread of the virus

COVID 19 - Impact on Operations

In order to protect nearby communities and align with government requirements, two of the Company's mines were temporarily suspended earlier in 2020, but resumed normal operations during the second quarter. During the temporary suspensions, indirect production costs that exceeded normal operating capacity were expensed as incurred and not included in the inventory valuation. The Company identified indirect production costs of $5.4 million that were directly expensed as COVID-19 costs as incurred in the second quarter of 2020 and not included in inventory. All operating costs incurred subsequent to the mine sites returning to planned operating levels have been included in mining and processing costs. As a result, there were no amounts classified as COVID-19 costs after June 30, 2020.

Since the pandemic began, operations have continued to incur additional costs related to testing of personnel, lodging and transportation, which have been included in mining and processing costs rather than COVID-19 costs after June 30, 2020. These incremental costs have increased total cash costs globally by approximately $25 per ounce and are expected to be incurred throughout 2021.

Environment

Zero significant environmental incidents, consistent with 2019
Announced the Phase III expansion of Island Gold which is anticipated to reduce life of mine greenhouse gas (GHG) emissions by 35% relative to the current operation
Advanced construction of the powerline which will connect the Mulatos mine to grid power, which will eliminate the need for site diesel power generation and reduce annual mine GHG emissions by 12%
Submitted the Environmental Impact Statement for Lynn Lake and advanced project permitting

In 2020, the Company’s mine sites operated in compliance with applicable environmental regulations, with the exception of two minor spills that triggered reporting to external agencies. Both incidents were addressed as per internal response procedures with no residual impacts. In addition to existing management measures to minimize and mitigate its environmental impacts, Alamos took steps in 2020 to improve its understanding of the transition and physical risks presented by climate change that could potentially affect operating sites and projects. This analysis will play an important role in the Company’s strategic planning, decision making and enterprise risk management.

Community

Donated time, medical supplies, food supplies and funds across all operations and projects to help combat the effects and spread of COVID-19 in local communities
Awarded the prestigious Ethics and Values in Industry Award by the Industrial Chambers Confederation of Mexico (CONCAMIN), recognizing exceptional performance in corporate social responsibility by Alamos Gold’s subsidiary Minas de Oro Nacional
Received recognition for Mulatos and El Chanate as Socially Responsible Mining Companies by CEMEFI, the Mexican Center for Philanthropy and the Alliance for Corporate Responsibility; the 12th consecutive year Alamos has been recognized with this award
Published Economic Benefits Assessment reports for Young-Davidson and Island Gold mines, providing an overview of each mine’s economic value and community benefits in the regions they impact. Copies are available on the Company’s website (www.alamosgold.com)
The Company in partnership with Marcel Colomb First Nation (MCFN) launched a Youth Development Project, with support from the Manitoba Mineral Development Fund

Alamos believes that excellence in sustainability provides a net benefit to all stakeholders. Throughout 2020 the Company continued to engage with local communities and offer support during the COVID-19 pandemic. The team at the Mulatos mine worked with local stakeholders to develop a COVID-19 Community Action Plan aimed at the prevention, response, management and monitoring of COVID-19 within the local community. The team at the Kirazlı project worked with village Mukhtars to donate medical supplies to local clinics, and provided digital tablets to local students to ensure they were able to continue their education virtually and undisrupted while required to stay home. Alamos engaged in ongoing dialogue with host communities to understand local challenges, priorities and expectations of the Company.

Governance and Disclosure

Published a Sustainability Policy, Human Rights Policy and Supply Chain Policy; and updated the Company’s Anti-Bribery, Anti-Corruption and Anti-Competition Policy
Received independent assurance over the Company’s inaugural Responsible Gold Mining Principles ("RGMP") Progress Report
Advanced steps to adopt the recommendations of the Task Force on Climate-related Financial Disclosures ("TCFD")
Top quartile ranking in 2020 Globe and Mail Board Games

Alamos maintains the highest standards of corporate governance to ensure that corporate decision-making reflects its values, including the Company’s commitment to sustainable development. In 2020 the Company finalized new corporate policies to strengthen its governance and approach to managing business activities responsibly. The Company also advanced its implementation of the Responsible Gold Mining Principles, developed by the World Gold Council as a framework that sets clear expectations as to what constitutes responsible gold mining. In addition to the Company’s inaugural RGMP Progress Report, in 2020 Alamos published expanded environmental, social and governance ("ESG") disclosures within its annual ESG Report, Conflict-Free Gold Report, and response to the Investor Mining & Tailings Safety Initiative. Copies are available on the Sustainability section of the Company’s website (www.alamosgold.com).

(1) Frequency rate is calculated as incidents per 200,000 hours worked.

About Alamos

Alamos is a Canadian-based intermediate gold producer with diversified production from three operating mines in North America. This includes the Young-Davidson and Island Gold mines in northern Ontario, Canada and the Mulatos mine in Sonora State, Mexico. Additionally, the Company has a significant portfolio of development stage projects in Canada, Mexico, Turkey, and the United States. Alamos employs more than 1,700 people and is committed to the highest standards of sustainable development. The Company’s shares are traded on the TSX and NYSE under the symbol “AGI”.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Scott K. Parsons

Vice-President, Investor Relations

(416) 368-9932 x 5439

Source: https://www.alamosgold.com/news-and-events/default.aspx#news--widget

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Alamos Gold Reports Fourth Quarter and Year-End 2020 Results