Alamos Gold Inc. (AGI) Earnings Call Transcript & Summary

Hello. I'm David Mandy, President of O&M Partners. I want to welcome everyone to the Alamos Gold Town Hall Webinar. And as you can see on the screen, the stock on those gold trades on the TSX under AGI, and they have a listing on the New York Stock Exchange under the symbol AGI as well. For those of you who are new to these broadcasts, our mission is to bring the management of public companies and non-deal investors together in real time. The material presented today is already public. We're hoping to bring this information to your attention, provide context and help you make a better informed investment decision. We want this broadcast to answer all of your questions. Questions will be easily answered by going to the question portal or go to webinar or by e-mailing us. For any questions that remain unanswered, we'll follow up in a timely manner after the call. For those who dialed in with your phone, the only way you can hear the pre-recorded and introductory presentation is on your computer speakers. If that's not possible, you'll be able to hear the main presentation after 7 minutes. So please stay tuned. Before we turn to our host today, we're going to turn to our special guest, Ellis Martin, Founder of the Ellis Martin Report and Ellis Gold. Ellis began his career in radio and broadcast journalism in 1970. We've been at this for 50 years. He taught radio broadcasting at the Academy of Radio and Television Broadcasting in Huntington Beach, California. And in the year 2000, he created the Ellis Martin Report, a nationally syndicated radio program focusing on potentially undervalued companies. Today, the Ellis Martin Report provides mining, biotech and tech company interviews globally to 3.1 million subscribers on Bloomberg, Thomson Reuters, Dow Jones and Yahoo! Finance. So on that note, it's a pleasure to turn the call over to Ellis Martin.

Thank you, David, O&M Partners and, of course, Alamos Gold. Today, I'll be discussing the case for gold. For as long as I've been covering the gold sector as a journalist and commentator, over 22 years, it has been for the most part, a fear story. At first, in my world, the fear story began with the creation of the euro as a currency, an alternative to the dollar as the global trading test. And then years later, the collapse of the economy of Greece and it potentially leaving the European Union, followed by the collapse of the EU itself spun by economic hardship in Southern Europe. Of course, that never happened. Then the story shifted to, although it was there all along, the eventual collapse of the U.S. dollar due to hyperinflation, which, again, we never saw. And the hoarding of gold by countries such as Russia and China, which is real. We don't walk around bedazzled in gold in really any form. We've spent our money on things, things that notoriously devalue over time as they're supposed to so that you buy more replacement things. It drives our consumer-based economies or maybe just the Chinese economy. These fear stories came and went and, along with it, the market factors that saw peaks and valleys in the price of gold and the equities primarily affecting long-time believers in the asset. I'm going to call them gold bugs. Even though I was never a fan of the fear story, it always seemed to work as a message, as a driver for the market. Let's look at some gold facts. In 2001, the price of gold was near $250 per ounce. Today, at near $1,700 an ounce, that's a 500% gain in just under 20 years. In mid-2004, it was close to $450 an ounce after just 3 years, almost a double from 2001, almost a double in 3 years. Since August of 2018, gold has risen in value by approximately 35%. What other commodity has done that in the last 18 months? What other commodity has risen in value by 500% in about 20 years? What other commodity has risen in value while most consumables decline in value? You spend $800 to $1,000 on a phone, an iPhone. It's worthless in 2 years. You paid $35,000 to $100,000 for a car, even real estate hasn't gone up 500% in 20 years or 35% in the last 18 months. Now that would be insane inflation indeed. No one is calling the rise in gold over time insane inflation. Here's another interesting fact, a fact that hasn't changed much for as long as I can remember. 1/2 of 1% of the investment world, whether it's retail where institutional collectively is vested in gold, 1/2 of 1%. This means that 99.5% of everyone are not in gold. Most people are not holding gold, the physical metal, the ETFs or the equities, the stocks. Gold is finite, almost like real estate, only much, much less of it. It's not everywhere like dirt is. What do you think would happen if another, let's say, 1/2 of 1% of the investors get into gold, still leaving 99% out of it? And what -- somehow if that number creeped up to 5%? 5% of retail and institutional investors collectively investing in gold. That in and of itself is a 20 banger, 20x for the market. With the price of gold on the spot market, multiplied by 2,000% with 5% invested in basically a finite commodity such as gold, that's an insane number. And I won't even name it, the price per ounce. You can figure it out. But at 1%, it's still almost $3,500 an ounce. And guess what? Because of the recent rush to gold by the gold bugs and their friends, people in the supposed know is harder to buy that bullion. It's less available. And then for the last few months, production of gold has come to a halt due to COVID-19. The supply of gold has been suppressed and the demand has increased. It's the perfect storm formed by both fear and greed. Incredible. And it's not going to disintegrate. Gold won't fall apart. Gold will not devalue. Why would it? Especially now when we may be completely converting to a digital currency where cash is just not used anymore, will it be backed by gold? Oh, why did Russia and China began hoarding gold a long time ago? Why did Venezuela just paid for a shipment of needed gasoline from Iran with gold? And in this arena where gold is climbing in value as quickly as it has been, if I hand you 20 or 30 gold rounds or ounces, might you be inclined to hand me the keys to one of your cars that you might have for sale? What would either of us have to lose in that transaction? The value of that car would perhaps decline over time while your newly found gold would most likely go up in value. I believe I've established the case for owning the physical metal, gold. But where is the gold coming from to begin with? Like everything else we consume, purchase, collect, eat or hoard, it comes from the ground, the earth. Someone has to explore it, develop it and produce it. You just can't go into most fields and pick it. It doesn't grow like weeds, willy nilly, like wild flowers in the spring. Mining companies exist for this reason, and most are publicly traded. These mining companies have to raise money from the public in order to explore, develop, mine and produce gold. They choose shares, allowing investors to participate along with them in these processes. Today, 1 share in Apple's stock is worth about $314. For a company that produces items that devalue immediately after purchase, such as iPhones, and become worthless over a couple of years. Newmont Gold, the world's largest gold producer, is at $51 a share with 1/2 of 1% invested in the gold market. Alamos Gold is they're at $8 a share with, again, 1/2 of 1% of investors globally in the market. You've got to ask yourself as a generalist investor, perhaps someone who has never invested in gold before or gold stocks, why are you here? What brought you here today potentially for the first time? What are you beginning to see that you never considered before? What if you and perhaps 2 or 3 of your friends gets involved in gold, more involved, and/or gold stocks and this message continues to spread in a world where gold remains more or less finite and the demand grows? With $6 trillion plus, a phenomenal quantitative easing being plugged into the U.S. right now, money being printed backed by nothing, fueled by coronavirus, the fear. The fear seems to be real enough for me right now. Thanks again to O&M Partners and Alamos Gold for asking me to participate in this presentation.

Thanks very much, Ellis. Great introduction. Now it's a pleasure to introduce our host, John McCluskey, who's the President, Chief Executive Officer. He's held this position since 2003 when he founded the company with mining hall of famer, Chester Millar. He's currently a Director of the World Gold Council. Mr. McCluskey was the recipient of the 2018 Murray Pezim Award for Perseverance and Success in Financing Mineral Exploration by the British Columbia Association for Mineral Exploration. This award recognized Mr. McCluskey's role in the acquisition, financing and encouragement of successive discoveries at their Mulatos project mine as well as his ongoing success as CEO of Alamos. He was also named Ontario's 2012 Ernst & Young Entrepreneur of the Year based on a judging panel's assessment of financial performance, vision, leadership, innovation, personal integrity, influence, social responsibility and entrepreneurial spirit. It's rare that you see that list of character qualities altogether. It's a great pleasure to turn the call over to John.

Thanks very much for that introduction, and it's a pleasure to be with you all this afternoon to talk about my favorite subject, Alamos Gold. I've been asked to give a little bit of a background on myself. I was very fortunate to grow up in the city of Vancouver. That's a beautiful city, some of you may have visited it. But Vancouver for many, many decades has been a hotbed of mining entrepreneurship. It's, call it, the Cupertino of Canada. It's a place where you found a lot of really smart geologists, engineers, financiers, lawyers, consultants, everything that you would need to eventually help a company come together and raise the capital and get out there and explore. And I started in the mining industry in the early '80s. I was very fortunate to be desperate enough for a job that I would even take one with a mining company. I didn't train in mining. I've studied history and English literature, as a matter of fact. But like most people who were crazy enough to study something like that, coming up and looking for a job in the midst of a recession, it was a challenge, let's put it that way. And I would say that it was my greatest fortune to bump it to Chester Millar who thought I was a smart young guy, and I should come to work for him. He was starting up a new venture. It was called Glamis Gold. It had about an CAD 8 million valuation at that time. I think that would make it maybe USD 5 million or USD 6 million. It was just getting going on a small project down in Southern California, Imperial County, California, Picacho Mine. And I joined just as that mine was being built. And what a fantastic opportunity that proved to be. Glamis was really pioneering. It was one of the first companies that was pioneering the beginning of the whole heap leach phase of gold production, something that had only been patented about 10 years before by the U.S. Bureau of Mines. There was only 2 significant operations anywhere in the world, and those were in Nevada. So it was an absolutely fortuitous moment for me to get into the mining business, to be with Chester Millar and go to work with a little company that was -- that had picked up projects that was perfect for employing this technology. So Glamis went on. As we turn out to develop many, many mines, it grew to become a $7 billion company from those humble beginnings, and it was eventually merged into Goldcorp, which is now subsequently merchant to Newmont. So I'd say it's one of the building blocks of what is now the biggest gold mining company in the world. So that was my start in the industry. After 5 or 6 years ago, I guess it was 6 years with Alamos Gold, I left to go out and do more entrepreneurial pursuits. There's lots of opportunities in Vancouver. And I got involved with mineral exploration. I helped start a number of companies. And then at one point, Chester Millar got in touch with me again and he said, "I think we should start something together." And that was a great honor for me to be invited to do that, and we ended up starting a little company called Alamos in about 1994, a little private company. We took it public in '96. And unfortunately, about 6 months after we took it public, the market, the whole sector crashed. Gold prices went down and everything more or less stayed flat on its back and remained there until roughly 2003. But in 2001, I thought the turnaround was going to be coming and that we ought to get ready for it. And on that basis, I decided to go after a project that was being sold by a major mining company, and that project was called the Mulatos Mine. It was up for sale. They were -- they poured about $50 million into it. They've already found several million ounces of gold. And since they were going to sell it at the bottom of the market, I thought we could make a good deal, and that's inevitably what we did. And our -- Mulatos became the foundation for the company. Just to give you an impression, we acquired it for $10 million plus the royalty. That royalty was capped at 2 million ounces of gold. And it went on to make well over $400 million of free cash flow. It's still in production. It's generated over 2 million ounces of production. We hit that threshold last year. So the royalty we were paying on it fell away. And Mulatos has just proven to be a phenomenal asset for us, and it's still making us lots of money. We started at the beginning with roughly about 7 years of production from the main pit, but we went on to find multiple pits and new mines among this 50,000 hectare property that we have, that's something like maybe 130,000 acres of land that we had down in the star state of Mexico. So it's been a very, very exciting project, and that was the foundation for the company. But we had greater visions for it. We decided we wanted to build Alamos into a mid-tier producer, and that meant going after new acquisitions. And we've been doing that, and we've been quite successful in doing that. And that will allow me to sort of segue into my presentation. So I'd like to draw your attention to Page 3, if you'll just push past the fine print that essentially gives all the appropriate warnings. Alamos, it has a strong platform to deliver long-term value. That's been the objective of the management team. The company has grown significantly. When I took over as CEO, after I acquired this project, I took over as CEO, the company had about a CAD 10 million market cap. Of course, today, the market cap is over CAD 4 billion. And by anybody's measure, that's a tremendous growth, tremendous amount of growth that we've been undergoing over those years. To put it in perspective, just what we've done over the last 5 years, in 2014, we were producing 140,000 ounces of gold from the Mulatos Mine. And through a series of mergers and acquisitions over the last 5 years and done at the bottom of the market, we're very contrarian. As those stories will demonstrate, Mulatos acquired when gold was trading at 200 -- what was it, $265 an ounce in November 2001. We did a big merger with a company with Canadian asset called Young-Davidson in 2015 when gold was $1,100 an ounce. And in 2017, we took over a project called Island Gold. We took over a company called Richmont Mines. And that was when gold was $1,200 an ounce. So we tend to be very astute at buying things at the bottom of the cycle. The market doesn't typically like that. It would see it like a contrarian behavior, but in reality, it doesn't because nowhere did crowds of investors come flocking to our doorstep because we acquired gold projects at the bottom. But that's how you grow a company. You've got to be thinking in a concerted manner. You've got to be willing to buy things when they're cheap. And after you buy them, build them up according to your vision and then start reaping the rewards. And that's effectively what the Alamos story has been. We bought Mulatos at the very bottom of the market. By 2005, we had it in production. By 2009, the company crossed the $1 billion market cap threshold, and we were producing over 160,000 ounces a year. By 2013, we had our peak production at that project at about 190,000 ounces a year. So it was just tremendous growth -- or from cost, very low cost. And that provided the company with a phenomenal treasury. We didn't blow our brains off buying beans at the top of the market. We were very careful with our money. And we waited until a big market correction occurred. And by the time that happened, we were sitting with over $450 million in our treasury, and we used that to leverage our way into buying some excellent, excellent assets. I mentioned the 2 biggest ones, but we did a total of 6 M&A transactions during the downturn between 2014 and 2017. Since then, we've been investing heavily in those projects. And now we're at a stage where we can effectively look towards a period of free cash flow growth as these projects transition from the point in time when we're putting capital in to the point in time where we're finished doing that and now capital is going to come out. If you move to your next slide, I'll talk a little bit about sustainability. And I know this is something that is very near and dear to investors' hearts. And companies haven't spent enough time talking about this issue over the years. And by and large, it's because, typically, investors didn't want to hear about it. But companies have always been very actively involved in the environmental and social side of mine development, particularly a company like Alamos that had only gotten started in the early 2000s. I mean by that time, these values were very, very much woven into the fabric of the mining business. And you could see that. I mean if you compare it to when I started even in the early 1980s where the main concern of the early 1980s was the environment. But by the early 2000s, it had very much shifted. It's not like the environment was any less of a concern. But the additional concern of social license had really much -- really become a part of the discussion and social engagement. And the idea of going into a relatively impoverished region in most mines tend to be located in areas of the world, in parts of these countries where there's very few people living, there's very little industry and the people that are there living in relatively poor towns and villages. And you just can't go in and build a $500 million mine project in the midst of poverty and ignore what's going on around you. I don't think anybody with a heart would be capable of doing that. And certainly, nobody I know in the mining business does it and neither did we. So with respect to the environment, we're committed to minimizing our impact. We're continuously looking for avenues to reduce our footprint and we're adopting new technologies all the time. And we don't wait until the end of a mining project to do reclamation. We're essentially -- we're claiming right from the start a big component of our 2005 budget, for example, the first year we went into production, was to reclaim all the areas that we no longer needed, that were effectively disturbed during the construction phase, but weren't actually needed during the operational phase. So this is very much how are mining companies think. With our host communities, we invest in ways that will provide lasting benefits well beyond the life of our operations. And that means improving infrastructure, improving education. In the towns near Mulatos, we built 2 schools. We've built over 25 homes. We've built a town hall. We've built a medical clinic where we provide -- we also provide a doctor and we provide medicines. We brought the Internet into this remote area of the Sierra Madre where it never came before. And that just -- it just transformed the lives of those children at school. Suddenly, they were a part of the great wide world. And suffice to say, in the 15 years that we've been in operation at Mulatos and even well before that when we first started to go in and do our feasibility and exploration work, during that time, we've really transformed the region and greatly improved people's lives. With respect to governance, we have built and we continue to refine a framework to ensure accountability and that we operate as a company in the right way and for the benefit of all stakeholders. I'll now draw your attention to the next slide. We have a map of the world here, and it shows where we operate. Unlike where we were up until 2015 with 1 mine operation and a number of development projects, today, we produce from 3 mines, 2 of which are underground mines in Ontario, Canada. We're still producing from the Mulatos Mine. And there, we're currently producing from 3 separate open pits. And 2 of those were discovered in the last 6 years and ultimately permitted and brought into production. And we have recently found another that we founded about 3 years ago. And we've just finished permitting that, and we're looking forward to building that new project starting later this year and looking forward to first production by 2022, and that will give us another 6 years of additional mine life at Mulatos. So the mining at Mulatos continues, and it's just been a tremendous outgrowth. We love to just doing the same thing at the new things that we acquire. For example, Island Gold, when we acquired it, there was only 700,000 ounces of reserves and maybe 1.8 million ounces in the entire mineralized envelope. We saw a huge upside potential there. And only 2.5 years later, reserves stand at about 1.2 million ounces and the mineralized envelope has over 3.7 million ounces. And based on the work we're doing this year, we already see it growing through the 4 million ounce barrier, and we see great potential to take this project over 5 million ounces. We've also increased production through a series of small steps that were relatively easy to permit. We've increased production there from around 100,000 ounces a year, we're currently producing around 150,000 ounces a year. So that was a great acquisition in that everything that we envisioned it could be. We've managed to realize on that position very, very quickly. And that's more or less a philosophy behind everything we do in terms of M&A. It's not enough just to get bigger, the company has to get better. Shareholders have to get richer on per-share metrics. And that's not just an Alamos philosophy. You're hearing about that more and more throughout the mining industry. Companies are not just growing for the sake of getting bigger. And I think that's an important thing to emphasize here because as you can see, we have projects in various places, including a project in Oregon in the United States. And we have 3 projects in Turkey, which have now gone through a series of permitting. We -- one of the projects, Kirazli, is fully permitted now, and we've started construction there. It's not an easy environment in which to work. But those projects have some of the highest internal rates of return in the entire mining business, very low cost to build, highly profitable to mine. So while Turkey is a challenging environment, there are many companies -- there's a dozen companies operating gold mines there and doing very well, and we ultimately think that we can do well there as well. Switching to the next slide. I'll talk a little bit about our start to 2020. It was a very strong start. Consolidated gold production in the first quarter was 111,000 ounces, which beat the top end of our first quarter production guidance. We were also at the lower end of our cost guidance. Combined with the stronger gold price, our adjusted earnings nearly tripled from a year ago and operating cash flow increased 32% to a near record of $82 million. We expect to build on this start with an even -- with even stronger results in the second half of the year. We remain focused on returning capital to shareholders with a total of $12 million returned through dividends and share buybacks during the first quarter when our share price was impacted by broader turmoil in the equity markets. We bought back 1.1 million shares at prices under $5 per share, and we're very happy today that we did that. We also paid a quarterly dividend of $6 million in March, representing a 50% increase in the previous quarter. And since 2018, we've tripled the dividend, and we expect to further increase it as the company starts to generate stronger free cash flows going into 2021. I should talk a little bit about COVID-19. I don't think anybody can ignore this subject. We've put an awful lot of effort into protecting the health and safety of our workforce. I'm very happy to report to you that not a single employee, not in any office or at any of our mining operations came down with COVID-19. We got on it very quickly. It was my good fortune to know one of the top physicians at one of Canada's leading hospitals here in Toronto. I happen to have lunch with him in early March. He said to me at that time, "The world just isn't responding to this threat very wisely because this is going to get very seriously -- very serious, very fast." He said, "You want to get out in front of it." And I did. Myself and Scott Parsons, our VP of IR, were scheduled to go down to New York the following Monday, which would have been just prior to March 10, and we canceled that trip. Not only did we cancel that trip, we canceled all travels. We stopped people from going back and forth to the mines. We started social isolation right away. And by the 12th of March, we actually closed down the head office in Toronto, and everybody has been working from home since that time. And as you could probably tell, I haven't had a haircut since the end of February and I stopped shaving as well. Up until fairly recently, I never even knew I could grow a beard, let alone the Santa Claus beard I seemed to have produced over the last few weeks. Anyway, we've taken COVID-19 very seriously. We closed down the Island Gold operation on the 25th of March because we saw a special situation there where we had half the workforce coming from outside this relatively remote community. We saw there was the potential for bringing the virus into the community if anybody we brought in happen to be infected. That didn't happen to be the case. Turns out, everything was fine and there have been no reported cases anywhere in that region. That's like a 300 square kilometer region, and there's been no diagnosed cases there. So we started the operations back up again, started it up about 3 weeks ago, and we're almost back to full production at Island Gold. Similarly, when they mandated the closure of the Mulatos Mine in Mexico, we closed it down right away in early April. But again, no cases of the virus, not among our workforce, not among any of the communities. And so this was designated a green zone within Mexico. And as of the 18th of May, they essentially allowed all operations in green zones to go back into production again. So we've started up Mulatos and we're practically back to full strength there again. So while it's been fairly trying and we've had to curtail some of our operations in this quarter and we also pulled our guidance for the year as a result of the impact of the COVID-19 and not knowing exactly how it was going to affect our full year, I think we're through the worst of it now and our operations are getting back up to full strength. The Young-Davidson mine never did stop. We've continued -- it's -- primarily the activity there has been construction over the last quarter because we've closed down our shaft. We've been pouring hundreds of millions of dollars into Young-Davidson since we acquired it. And what the objective was to build out the lower mine. So more than half the production, more than 3/4 of the mine life actually is below the 750-meter level. And we were set up and operating from the 750-meter level. Well, now, we've set up and we'll be operating from the 1,500-meter level. So just to give you that in feet, that's about 6,000 feet under the earth. We've put the shaft, 2 shafts down to that level now. We've got all our infrastructure build down there, and we're going to be ready to start that up in early July. And from then on, that mine is going to turn into a cash flow machine. We've been pouring roughly $90 million in capital into it since we acquired it, and more than half that capital is going to come off in the latter half of this year and into 2021. And that's going to go right into free cash flow. So looking forward to 2021, you're going to see that Young-Davidson operation transform into a mine that at current prices will generate well over $100 million of free cash flow a year. That's going to be very exciting free cash flow growth for the company. If I could draw your attention to Slide 9. This is the long section of the mine. And it will sort of help to illustrate the operation. The mine, as we currently know it, is 1,500 meters deep, but we think it will even grow deeper than that. The image also helps to illustrate how completing the lower mine expansion is really going to be a step change for the operation. For the last 6 years, we've been operating from the upper level and that was designed for 6,000 tonnes a day while the lower level has been designed to operate at 8,000 tonnes a day. So right away, we're going to benefit from the economies of scale. We're achieving this through -- we've increased the size of the skips. The skips are 40% larger than what we've been using until now. We're going to be mining from stopes that are 50% larger than the stopes were in the upper mine. Again, that allows you to benefit from the economies of scale. We're also going to be fully automated at that, where we've been really relying on mobile equipment in the upper reaches of the mine to reach our production levels. We're going from [indiscernible], for example, to the waste passes, which is what delivers our ore to the crushers and ultimately do the skips and taking it to surface. Well, this is all going to be done by conveying now. It's remarkable what can be done there. We would effectively taken a mine that was operating more like a typical mine of the late 20th century, and we've turned it into a state-of-the-art mine that is really a great example of what we can do with 21st century technology with full automation, computer monitoring. And just to give you an example, between shifts, what we -- we typically do the blasting, so we don't have manpower down in the mine during shift changes. We can actually operate the mine entirely from surface during those 2 hours of shift change. And effectively, we have these young guys who sit at video terminals. It's just like they're sitting in front of a video game. But instead what they're doing is they're mining in the face, and they're putting that ore into ore trucks, which are taking it and dumping it into the ore pockets. And from then on, the whole situation is fully automated. Ore passes, take it into a fully automated crushing facility, puts it on to conveyors, takes it over to the ore bins where it's stored as the way it's being skipped to the surface. So effectively, the ore is never touched again after it's dumped into the ore pocket. It's quite remarkable. And this is the way we're going to reduce what is already a fairly low-cost operation. We're going to turn it into a first quartile, low-cost operation, and it's going to be able to operate for a long, long time. I'd like to turn your attention now to Slide 10, gold slide. This has been a great success for us. I've talked about it a little bit already. It's a good example of how our countercyclical approach to M&A actually works. When we acquired the mine in 2017, gold was under $1,200 an ounce, hovering just below that. Since then, this asset, it's exceeded our expectations in every way, the way we've had so much success with the drill bit, increasing reserves, increasing measured indicated resources and increasing our inferred resources. In other words, we didn't just convert 1 category to the other, it's actually been growing right across the board. We've also increased production. We've increased load capacity. And frankly, we're looking to do that again. The mine is growing so rapidly. It really doesn't make sense to operate it at current rate, which is 1,200 tonnes a day. If we were going to do that, we could run it for the next 25 years. I think it makes a lot more sense if the mine is going to continue to grow to size it in an appropriate way that always gives us somewhere between 12 and 15 years of production horizon out in front of us, which, for a gold mine, that would be among the longest of what a typical mine would have in reserves. So this is really a terrific operation. It's very low cost. To give you an example, we made $65 million in free cash flow from this mine last year, and we've been still -- we've been pouring money into it, upgrading the surface infrastructure, camp facilities. We're effectively investing in this mine to turn it into something that can run for 15 to 20 years at a very low-cost rate. But it's amazing that while we're doing that, the mine continues to make a lot of money. And that's the whole objective here. We're not a company -- you're probably getting this through my delivery. We're not a company that's just keeping our fingers crossed and waiting for higher gold prices. That's not our philosophy at all. Our objective is to make money right now and to pay that money out through dividends. And we've -- that's been our history. I think by now, we've paid back something like $170 million, $180 million in dividends to our shareholders. In fact, we built our first mine, Mulatos, we built it for $100 million -- pardon me, we built it for $70 million. And by 2014, we'd already paid $100 million back in dividends. So we paid our shareholders back more than what we originally raised to build the mine in the first place. And I think that's a great track record. I'd like to turn your attention to see Slide 11. And there's a couple of interesting things I'd like to point out here. What's driving the expansion is the rapid growth of the deposit over the past several years, both in terms of the size and grade, as illustrated in the chart on the left. When we acquired it in 2017, the deposit had already grown to about 1.8 million ounces of resources with a reserve grade of about 9.2 grams. Since then, we've discovered more than 2 million ounces. And we've taken the overall mineralized envelope to 3.7 million ounces. We've also increased grade from that 9.2-gram level, we're currently at 10.4 grams. And the latest material that we're finding at depth, and if you look at the diagram on the upper right-hand side of the slide, you can see those big blue blocks and the one to the lower right, you'll see that we're finding there some of the highest grade gold that's never been found in the deposits. The average grade there, if I'm able to pick it up on the slide, it's 18.7 grams per tonne. And it's indicative that the ore body is improving in grade as we go to depth. The upper reaches of the mine, those areas were mined between 2005 and 2011. It was averaging about 5, 6 grams a tonne by the -- just prior to us taking over it -- over the project. It increased to 9 grams per tonne as they've got to mid-levels. By going a little deeper, we've already gone into 10-gram material. And lower again, we're finding 19-gram material. So this is really extraordinary, but not atypical of what you'll find in the Canadian Shield, very often as [indiscernible] depth, they've improved in grade. And that's going to effectively drive profitability as we look forward to a Phase 3 expansion of this project. So suffice to say, with Island Gold and the Young-Davidson mine in Ontario, we've got 2 first-class Canadian underground gold deposits. Between them, we can see ourselves mining there for the next 15 to 20 years. They provide a really solid base for this company. You can't get a safer jurisdiction. Ontario, Canada really understands mining. The interior of this province effectively employs most of its people in the mining industry. So it's incredibly important to the economy of the interior of Ontario. And the interior relevantly knows that. The federal Canadian government knows it as well. And so they do what they can to protect our industry and to allow it to thrive. So turning to Mulatos now. I've talked a little bit about this in my introduction, it's such an important asset to us. Mulatos, it's the founding asset. It's the founding story. It's been producing for 15 years now. It's produced over 2 million ounces of gold. It's generated $430 million of free cash flow. It still has 6 years of mining in front of it. And every 2 to 3 years, we seem to have found something new. So we don't think we've exhausted the last area of exploration on that project by any means. We still think it has room to grow. The mine is very low cost, and it's going to get lower yet. And this year, we've been driving costs lower through, of course, the royalty fell away. That was a 5% royalty. That saves us roughly $65 an ounce. We're bringing a power line in for the first time for the project. It's -- that's going to cost -- that's going to save us roughly $20 per ounce by switching from diesel-generated power to grid power. And we're also bringing on a new deposit. I mentioned earlier, it's called La Yaqui Grande. It's one of the highest grade deposits that we've ever found in this district. This is high grade for heap leach. To put it in perspective, we're mining about 0.9 grams right now out of the main Mulatos pits. And the La Yaqui Grande pit will be about 1/4 -- 1.4 grams. So that kind of grade allows us to mine very profitably. Also, it's not so bad that the gold price is $1,700 an ounce these days. Taking back when we first started the Mulatos pit, gold was sub-$400 an ounce. So it was a lot tougher proposition to make money. To draw your attention to Slide 13. We've got a peer-leading, multi-phased expansion that we can realize through this tremendous growth pipeline that we've acquired. Our operating mines, yes, they give a very solid 500,000 ounces a year of annualized production at very good costs. But our pipeline, it gives us growth. And this is something that's sadly lacking in our industry. In fact, now what you're finding is heightened M&A activity in the gold space, and that's largely driven by companies looking forward and realizing they only have 5 or 6 years of production left in their best assets and really nothing to back that up. We never wanted to be in that position. And as a result, we were quite active during the downturn, acquiring projects and acquiring them, again, at really rock-bottom prices. At Lynn Lake, just to give you an example, we acquired it for $22 million. And we're sitting with just under 2 million ounces of gold there. We're in the process of completing environmental impact study at Lynn Lake, and we're marching that project forward very rapidly. We look forward to being able to make construction decisions in about 2 years. But having that kind of project, having that kind of depth is something that gives us really a lot of confidence. Our 3 Turkish projects, I mentioned, we have these projects in Turkey. The internal rates of return, you'll see on this slide, roughly 40% for the 2 main projects across [ Yanada ] 250% from Çamyurt if that -- because it's -- it more or less piggy backs on to Agi Dagi. So very little capital will go in. That's just going to be heavily profitable to open up that pit and process all that ore through Agi Dagi. At spot gold, the internal rates of return across [ Yanada ] exceed 100%. So the attractiveness of those economics really make it worthwhile for us to continue to pursue those projects in Turkey. And that's why I'm very confident in us essentially getting them up and running. I think that you're going to hear more and more about this whole subject of where is the growth coming from for the gold mining industry, and a lot of companies are going to struggle with that issue. But based on this pipeline of projects, we have the wherewithal to take this company to upwards of 800,000 and 900,000 ounces of annualized production, just depending on the rate of sequence we bring these projects on there. But assuming we bring them on a fairly normalized plan, we could easily build our way to -- from where we are now roughly at 500,000 ounces of annualized production into that 800,000, 900,000 ounces of annualized production range. I'd like to turn your attention now to Slide 14. This company has always believed in having a strong balance sheet, and that's not different today. We have $215 million of cash. We have $615 million of total liquidity. And we have growing cash flow from our operations. We're well positioned to fund our growth initiatives. We don't need to go outside and raise any money outside. We drew $100 million down from our credit facility. In face of the COVID crisis, we just thought it was a prudent thing to do. We really didn't have any use for that money in the short term here. But other than that money that we drew down, we can easily get right back with the company's debt-free. We have a long-term track record of returning capital to shareholders. And we've paid a dividend for 11 consecutive years now, returning $107 million thus far through dividends and share buybacks. Over that time frame, we've typically paid higher dividends when we've been generating higher levels of free cash flow, and that's more or less the operating philosophy. And as our free cash flow grows, and it's going to grow quite significantly over the next couple of years, you're going to see us essentially take an approach to this 1/3, 1/3, 1/3. 1/3 essentially of our free cash flow will go into the dividends and share buybacks, 1/3 into capital projects and growth and 1/3 to strengthen the balance sheet. So given our confidence in our outlook, we've tripled our dividend since 2018 and I'm very confident we're going to be increasing our dividend going into 2021 as you see our free cash flow growth start to take off. And I'll now turn your attention to Slide 15. We have a strong track record for adding value. And I talked earlier about adding value through per-share metrics. This is the key. Since 2014, Alamos has been one of the fastest-growing gold producers that we've gone from being a single-asset producer of 140,000 ounces of gold and less than 2 million ounces of reserves. Today, we're sitting at 500,000 ounces of gold and 10 million ounces of reserves. I mean that's dramatic growth. But we're producing 15% more gold per share. We've increased our reserves on a per-share basis by more than 80%. And we are more profitable as a company, generating cash flow up to 90% higher on a per-share basis. So this is the kind of thing that I think truly resonates with investors. I know it resonates with me. I'll be very upfront about this. I've been increasing my own share ownership of the company over the last couple of years. And I have tremendous confidence in what we're doing and I continue to buy those shares. Finally, I'd like to talk to you about a long-term track record of delivering shareholder value. We have a great track record. But any team that can take a company from effectively $10 million of value and build it over $4 billion of value in a cycle where we've only really enjoyed about 5 good years of strong growth in the gold price, essentially from about 2008 to 2013, we had really, really good gold prices. They subsequently came off. And they've only really started to come back over the last 8 months or so. But I think we're at the forefront of another whole marketing goal. I think what that does for a company like us is it takes us from being a really good business, generating really decent returns for shareholders. It kind of turbocharges that story. It turns us into a great business, one that's generating phenomenal profits that we're going to share with our shareholders. And that's essentially I think the reason why you ought to know the Alamos Gold story, and it's why I'm a large investor in this company, and I'm very comfortable with -- I am just -- I own more shares today than when I started the company. And in my -- on our last slide here, I'd just like to talk about the company in summary. Given all the catalysts that we have coming up over the next several months and, frankly, over the next several years, I think this is really a company to watch. We have the quality assets. We have growth. We have a strong balance sheet. We're well positioned to close the gap with our peers. And the gap exists by virtue of the fact that for the time being, and it's largely been driven by the fact that we've been investing so much money in our projects, we haven't really been generating that free cash flow, that's driven valuations. We've basically been sitting with a discounted valuation relative to our peer group. And I'm well aware of it. And I'm also well aware of the fact that that's the best reason and the best time which to buy the stock because that's all about to change as we shift from this point in time where we've been heavily investing to this point in time where -- when we're going to be harvesting profits and distributing those profits. So with that, I'd like to thank you very much for your time and attention, and I'd be very happy to take any of your questions. Thank you.

Thank you, John, for a very thorough and well-told presentation. There's a lot of moving parts. So we're going to start with that. I have to say, first of all, we're on a tight time line, so we'll only be able to take one question per investor. But we certainly encourage you to write in your questions, and we'll get back to you with the answer. So we're going to start with [ Adam Graph ]. [ Adam ], nice to have you on the call today. [ Adam's ] probably muted. [ Adam ], are you there with us? Okay. We'll come back to you, [ Adam ]. Let's turn to Dr. [ Wood ], please? [ Scott ], are you on the line with me?

Yes. I am. [ James Wood ] is self-muted. [ James ], can you unmute yourself?

Am I unmuted?

There you go.

Yes. You are.

Thank you.

Excellent presentation. I was told ahead of time by my broker that Alamos is something I really need to dive into and learn more about. And I'm so pleased that I was able to attend this lecture. Would you speak just a bit, I really have no questions because the presentation was so thorough, but about the crime in Mexico and experiences that people have had with crime and thievery and robberies and things like that?

Well, you probably are well aware of the fact that the country has been experiencing a drug war now as practically as long as we've been there. And over time, it's managed to get worse and not better. And this has been a really sad thing for me to observe in Mexico. I started going down to Mexico looking at opportunities from about 1994. And I felt safe enough to take my family down there on vacation [ during our anniversary ].

Sorry?

Yes. We went to Mexico virtually every Christmas...

I don't know how to get him. I'm texting him right now.

I'll continue answering the question. There is a lot of time -- there is a lot of crime in Mexico. The cartels are having a harder and harder time with the drug business. And as that happened, they've turned their attention to other things, including the avocado business. I think you probably all heard about the avocado wars. And lately, one of the cartels has turned its attention to gold producers. And by now, virtually every gold mine in [ Cenart ] state has been robbed over the last year. And that's a really sad testimony. And we were robbed ourselves just before Easter. Fortunately, at the point at which the gold was stolen, the gold had gone from -- in terms of the chain of custody, from our possession to the possession of Brinks. Brinks takes the gold from our refinery to our airstrip where it's ultimately flown by airplane and transport it for delivery to a much bigger plane where it's taken to the refinery. We've been operating in Mexico since we've been producing gold since 2005, and we've never had a robbery. We've never had a problem of any kind. And suddenly, just before Easter, we were robbed. Our -- the Brinks people will be covered by insurance. So there will be no loss to us. There won't even be an insurance claim made by us. But that's not a good news story. Effectively, we always maintain unarmed security guards there. That was taking with the highest recommendation of top security companies and insurance companies in the world telling us that's the way to go. We did that. It was always good that we did, but we've had to change that now. So the cost of security at gold mines, it's going to go up. So we would typically have 8 unarmed security guards. Now we have 16 well-armed security cards. So the word has to get out that the gold mines are effectively going to defend themselves. Just like a Brinks' truck picking up money from a bank will have a man with a shotgun sitting in the back. We can't be delivering gold from our refinery to our airstrip any longer without armed guards. And so we've switched to that. And you're seeing heightened security throughout the gold mining industry in Mexico. Everybody knows that this is a new threat. And effectively, we're adjusting that but with higher security.

Thank you, John. Sorry, there was an interruption there. We're trying to get someone to unmute. Let's turn to [ Michael Potter, ] please. [ Michael ], a question to you?

Thanks very much for your fascinating talk. Would you like to say something more about Çamyurt? Because anything which has a $10 million preproduction CapEx can produce over 90,000 out of the year sounds something exceptional.

Yes, it really is. Çamyurt, it's about 4,000 meters away from where we're building the facilities for Agi Dagi. And we were actually completing the feasibility on Agi Dagi when we found Çamyurt. So we found it a bit later. Man, if we had known it was there, that's often the way exploration goes. So it's quite high grade. It's -- Agi Dagi is running about 0.6 grams, Çamyurt is running about 8.5, 9 grams, right in that range. So it's quite a bit higher grade. The -- it's highly oxidized work. It's sitting right on surface. We've done all kinds of leach tests on all of this ore. The gold comes out so fast that campus capacity had to recalibrate their equipment in order to capture how fast it was coming out. So it's a very fast-leaching ore. It's a very thorough leaching ore. It's essentially -- we're in a high sulfidation epithermal system here, and this is just highly, highly oxidized material and virtually all the gold that's in the bag is silicon. So there's nothing holding the gold back. We only have to coarse crush it. We'll transport it by conveyor from the pit over to the facilities. And we're actually going to truck it part of the way and convey it part of the way. And look, all effectively, we have to do is open up the pits, there's no pre-strip, and put in a primary stage crusher and the conveyor system to take it across major road and ultimately, right to the facilities that we'll have already built out of place having put the cost back on capital on that product. So that's why it has such a very exceptional rate of return. This is to me a very, very profitable pit to mine.

We'll turn to [ Heins Toma ]. [ Heins ]?

Excellent presentation. Could you give me an idea who your major shareholders are?

It would look like a very typical shareholder list. If you look at the top 10 shareholders of virtually every company in our space, it's the same names, just holding the stock to various degrees. The #1 investor would be Van Eck, and that's driven mostly by the ETF, but they hold roughly 15% of the company. That's followed by BlackRock. I think they're around 11%. And then we have Franklin Templeton, Tocqueville, RBC here in Canada, a whole raft of institutions that would own in that range of anywhere from 1% to 4% of the company. The company is about 60% to 65% owned institutionally. And -- but the 2 largest shareholders, by far, would be BlackRock and Van Eck, followed fairly closely by Franklin Templeton.

Thanks, John. Do we have time for one more question?

They've all been in this side for a very long time as well.

Thanks, John. Let us turn to [ Andrea Chong ]. [ Andrea ], do you have a question today to panelists?

[ Andrea ] is actually with the company, maybe Ellis Martin?

Oh, exactly my mistake. Let's go to Ellis Martin who did our introduction today. Sorry about that.

Hi. First of all, John, thank you for a great presentation. I want to applaud you for your attention to both sustainability and diversity in the organization. It's clear with your presentation also on your website. And you almost stand alone in that outreach. I've been to the Sierra Madres. It's an amazing place, very peaceful, gorgeous area. The food is wonderful, and sustainability is very important. You've answered almost all of my prepared questions. So I'll go -- with a great presentation. I'll go to this one here. Do you see more implementation of AI or automation in your company to reduce costs and provide a greater level of production in the years to come? And if so, how will this affect your current labor force?

First of all, the Young-Davidson mine is quite a unique operation in terms of underground gold mines in Canada. If you were to compare it to a mine close by, Macassa, it's only about 45 kilometers away, and it's right in Kirkland Lake. Macassa is about a 20-gram deposit, but it's in very narrow great veins. So they tend to have high labor and low automation. So just to put it in perspective, it takes -- so one man in -- look, we have a factor of 12. If one man at Macassa is moving a tonne of rock, one man at Mulatos is moving a part -- Young-Davidson is moving 12 tonnes of rock. And the reason for that is we're using -- we -- first of all, we have very, very large stopes to compare. The size of the stope at Macassa would be the size of a big boardroom in an office building. The size of a stope at Young-Davidson, well, it would be the height of about a 13-story building and about the dimensions of the 13-story building. It's just on a completely different scale. And because it's large like that, we use big scoops, big trucks. And from the time we dump trucks into the loading pockets, it goes through big crushers into conveyors and then it gets to surface. So there's very little manpower, relatively speaking, at Young-Davidson. And that whole concept of building out the lower mine the way we did, it was all driven by artificial intelligence. It was all driven by economies of scale. It was all driven by automation, monitoring, self adjustments. It's really -- this kind of mine you couldn't have built it 20 years ago. The technology just didn't exist. You could have built something that looked like it, but it wouldn't have functioned like it. And we're thinking about the same things elsewhere. For example, in Mexico and Turkey -- for example, in Mexico, I would be inclined to start investing in solar power because they've got a great program down there where you can build a solar panel field and feed that power into the grid. And what they would then do is as you take grid power out for your mining operation, they would net your -- like the cost of -- the low cost of the power you're putting in against the cost of the power you're bringing out. So about the only thing I -- the only reason why I hesitate to do that at the moment is because rather than having 20 years of mine life out in front of me as I would have -- as I had back in 2005, I have about 6 years of mine life out in front of me. But there are opportunities like that, and we're going to continue to pursue them. And it's -- effectively, it's all driven by being sensitive to the environment, but also approaching the operation in terms of keeping costs low, keeping the company competitive. At the same time, we have a very, very productive workforce. We have roughly 2,000 employees in the company. And these are all really good paying jobs in regions where it's really tough to find a good paying job, as you would know, if you know the Sierra Madre. But that's also true of the interior of a province like Ontario. So I think we provide great opportunities for the people that we employ, but the way we are designing mining operations, they're just not going to be reliant on big labor forces anymore. That's just not the way of mining for the future.

Thank you, John. Great answer. We have many more questions, but limited time. So again, we encourage everyone to write in your questions, and we'll be right back to you with the answers in a timely manner. And so on that note, John, I'm going to turn the call over to you for any closing remarks. Let's proceed to close.

Well, I would love to thank O&M for organizing this on our behalf. We've been very well-known in the U.S. But among the big institutions, the institutions you find in New York and New Jersey and San Francisco and Los Angeles and so on and so on, I visited those cities many, many times and I know the big institutional investors there. And I think we have a great opportunity to tell our story to the retail audience in the United States. We've been listed on the New York Stock Exchange since 2013. We trade -- we have very, very good liquidity on that exchange until most of it comes from people that are trading in and out on a very short-term basis. But nevertheless, it does give the kind of liquidity that allows for an investor to get in and buy the shares at a fair price. And right now, I think with our valuation, the price is imminently attractive. We're trading at roughly 1x or a little discount to 1x our NAV. I think we're about 0.9x our net asset valuation. Most of us are trading at a premium to NAV. And why are -- why does anything trade at a premium to NAV? Well, let's face it, we are now in a rising gold price and net asset valuations are going to change. And they're largely driven by rising gold prices. In our case, our NAV isn't only changing because the gold price is going up. It's changing because we're having such success in building out our production and finding new reserves and resources. Our -- you look at our track record over the last 5 years in terms of reserve growth, our reserves have gone up 5x while most of the companies in the industry have found their reserves in decline. And that's really a tough thing to achieve. And we've been -- we've managed to do it through really good M&A and through excellent explorations. That's what makes us I think a very valuable company and why I'm very confident we're going to continue to grow into the future. So thank you again for tuning in and listening to the Alamos Gold story. And I hope it's not too long again before we can come back and give you an update on all the progress that we're making. Thank you.

Thanks very much, John. I want to thank everyone for your attendance today. And please know we'll be following up with you not only for your feedback, but also for your questions. Have a pleasant evening. Thanks again, everyone.