Dividend Increased 50% Reflecting Strong Free Cash Flow Growth in the Second Half of 2020
TORONTO, Dec. 11, 2019 (GLOBE NEWSWIRE) -- Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today provided 2020 production and operating guidance.
“Alamos remains on track to achieve 2019 production and cost guidance driven by a strong year from both of our Canadian operations. Young-Davidson is having a solid year operationally while making excellent progress on the construction of the lower mine expansion. Island Gold has already established another record for annual production and free cash flow, and with the ongoing exploration success we expect a further increase in both mineral reserves and resources with our year end update,” said John A. McCluskey, President and Chief Executive Officer.
“The lower mine expansion at Young-Davidson remains on track to be completed in June 2020 after which we expect to transition to a period of strong free cash flow growth. We intend to complete the Phase III expansion study at Island Gold during the first half of 2020 which will showcase a highly profitable long-life operation. Both initiatives support an improving operating and financial outlook for the Company which will in turn support growing returns to our shareholders. Given this strong outlook, we are pleased to announce a 50% increase in our dividend starting in the first quarter of 2020,” Mr. McCluskey added.
2019 Operational Update
On track to meet full year 2019 production and cost guidance: gold production is on track to be within the guidance range of 480,000 to 520,000 ounces. Similarly, total cash costs and all-in sustaining costs are expected to be consistent with guidance
2020 Guidance Overview
Production guidance of 425,000 to 465,000 ounces of gold: down from 2019 reflecting the previously guided lower production from Young-Davidson during the first half of 2020 while completing the tie-in of the upper and lower mines, as well as the end of production from El Chanate
Total cash cost guidance of $770 to $810 per ounce and all-in sustaining cost (“AISC”) guidance of $1,020 to $1,060 per ounce: up from 2019 guidance largely reflecting higher costs at Young-Davidson during the first half of 2020
Total capital budget of $180 to $205 million: down from 2019 guidance of $240 to $265 million with the majority of the capital focused on growth initiatives at existing operations. This includes completing the lower mine expansion at Young-Davidson and upgrading Island Gold’s surface infrastructure to support the growing operation and mine life
Expanding exploration budget to $36 million: up from a 2019 exploration budget of $33 million reflecting increased spending at Island Gold and Mulatos, as well as a new underground exploration program at Young-Davidson for the first time since the start of operations
Growing free cash flow starting in H2 2020: at the current gold price, the Company expects to transition to positive free cash flow in the second half of 2020 with the completion of the lower mine expansion at Young-Davidson
50% increase in dividend starting in the first quarter of 2020: reflecting the strong free cash flow outlook, the Company is increasing its quarterly dividend by 50% to an annual rate of US$0.06 per common share
Phase III expansion study and construction decision for La Yaqui Grande expected in the second quarter of 2020
Production increasing to approximately 500,000 ounces per year from existing operating mines: reflecting higher production from Young-Davidson driven by increased mining rates
Declining cost profile: costs are expected to decrease in 2021 driven by lower costs at Young-Davidson
Strong free cash flow growth to drive increasing returns to shareholders: the Company expects to further increase returns to shareholders as it generates higher levels of free cash flow
2020 Guidance 2019
Young-Davidson Mulatos Island Gold Other (2) Total Total
Gold production (000’s ounces) 145-160 150-160 130-145 425-465 480-520
Cost of sales, including amortization (in millions) (4) $207 $168 $120 — $ 495 $ 537
Cost of sales, including amortization ($ per ounce) (4) $1,360 $1,085 $880 — $ 1,130 $ 1,075
Total cash costs ($ per ounce) (1) $910-950 $840-880 $520-560 — $770-810 $710-750
All-in sustaining costs ($ per ounce) (1) — $1,020-1,060 $920-960
Mine-site all-in sustaining costs ($ per ounce) (1),(3) $1,110-1,150 $940-980 $780-820 —
Amortization costs ($ per ounce) (1) $430 $225 $340 — $ 340 $ 345
Corporate & Administrative (in millions) $ 20 $ 20
Capital expenditures (in millions)
Sustaining capital(1) $30-35 $15-20 $35-40 — $80-95 $75-85
Growth capital(1) $45-50 $5 $15-20 $35 (2) $100-110 $165-180
Total capital expenditures(1) $75-85 $20-25 $50-60 $35 $180-205 $240-265
(1) Refer to the "Non-GAAP Measures and Additional GAAP" disclosure at the end of this press release for a description of these measures.
(2) Includes capitalized exploration at all operating sites of $20 million and development projects.
(3) For the purposes of calculating mine-site all-in sustaining costs at individual mine sites, the Company does not include an allocation of corporate and administrative and share based compensation expenses to the mine sites.
(4) Cost of sales includes mining and processing costs, royalties, and amortization expense, and is calculated based on the mid-point of total cash cost guidance.
Production rates are expected to be similar in the first and second half of the year, while costs at Young-Davidson and company-wide capital spending are expected to decline through the year driving stronger mine-site free cash flow in the second half of the year.
The 2020 production forecast and operating cost estimates are based on the following currency assumptions:
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