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

And welcome, everyone, to our Annual General Meeting. I'm going to go through a slide presentation. I'm going to go through it a little more quickly than I otherwise would because we're going to have this followed by a video presentation that we have put together in recognition of our 20th anniversary as a company. So now to look at the company 2022 year-end review, I draw your attention, first of all, to our cautionary notes. Now moving to Slide 3. We've had a very strong year in 2022 on a number of fronts. We continue to execute in our operations, and we were one of the few companies to have met cost guidance in 2022. We also delivered on a number of key catalysts, which solidified our position as a strong mid-tier company with a very positive outlook. We completed construction on La Yaqui Grande ahead of schedule, which helped drive a very strong second half of the year. Furthermore, we released the Island Gold Phase 3+ study, outlining a larger and more valuable operation at Island Gold. Turning to Slide 4. I'll just make a few comments on ESG. From an ESG perspective, we continue to make progress and build upon our strengths. We're already an industry leader with regard to our GHG emissions and water usage per ounce of gold produced. We're well below our peer and senior producer average, and we are working on improving things further. It's an objective of ours to announce -- to reach a 30% reduction in GHG emissions by 2030, and that is 30% below what is already one of the lowest GHG readings across our peer group. We have initiatives underway at all 3 operations highlighted by our Phase 3 expansion at Island Gold, which is expected to drive a 35% reduction in GHG emissions over the life of the mine. Looking at Slide 5. As you can appreciate, safety remains and will remain a core value of this company. We instill a safety-first mindset across our organizations and through our Home Safe Every Day program. And we're seeing results with a 63% reduction in our lost time injury rate since 2019. However, that is still something that we will continue to improve upon. From a social perspective, wherever we operate, our focus is on creating a net benefit within our communities that will last well beyond the life of our mines. And we continue to be recognized for our efforts, particularly at our Mulatos mine, where we've been operating for 18 years. For the last 15 consecutive years, we've been recognized by Mexico for what they call the -- the English translation would be an environmentally and socially responsible company. And it's a very high bar they set to achieve that, and we have achieved it essentially for 15 consecutive years. Turning to Slide 6. We've also been recognized for our good governance practices and our broader ESG performance. And this is something that's tracked by a number of organizations and media outlets. And we're very proud of our record, and we continue to make changes that will ultimately build upon our success. Moving to Slide 7. Looking at operations, we had a strong 2022, an exceptional Q4 with record quarterly production, record quarterly revenue and costs at the lowest level of the year. All 3 operations had a strong year, meeting their respective production guidance. Costs also were met and we're below the midpoint of our guidance range, which was a solid performance given the industry-wide inflationary pressures. Looking specifically on Young-Davidson, it was a great year. Production and costs were well in line with guidance, and we generated a record $101 million of free cash flow. With a 15-year reserve life, we expect a similar rate of free cash flow over the long term. At Island Gold, we announced the Phase 3+ expansion, outlining a larger and more profitable and greener operation. Construction of the Phase 3 expansion is progressing well. And once completed, in 2026, this is going to be a game changer for the operation and for the company. It's going to more than double Island Gold's rate of production. There will be a decrease in all-in sustaining costs to industry low levels below $600 per ounce, creating one of the most profitable and valuable operations in Canada. It's going to be -- it's going to significantly reduce our greenhouse gas emissions as we shift from bringing ore up through our ramp system to using a shaft, which has essentially powered off the Ontario power grid. Looking at La Yaqui Grande, La Yaqui Grande is within our Mulatos district. We completed construction of the mine, and achieved initial production in June, which was a key driver of our strong second half performance of Mulatos. The successful ramp-up of operations, La Yaqui Grande contributed 68,000 ounces in the second half of the year, below $600 in all-in sustaining costs, which helped drive our production higher and our costs lower. We have a very strong outlook as we look into 2023. We expect a very strong performance from all 3 of our operations, and continued profitability, which has obviously been very well helped by higher gold prices so far this year. Going to Slide 12. We're off to a very good start with Q1 production above our guidance for the quarter and costs once again in line. The strong performance was driven by solid performances at all 3 operations, especially at La Yaqui Grande, which is in its third full quarter of operating. With growing production and declining costs, we are on track for a record year on many metrics, including revenue, cash flow. And we expect to be -- to see a substantial increase in free cash flow. Looking at Slide 13. The Phase 3 expansion is a key driver of our long-term production growth and cost improvement. As you can see from the photos here, the expansion is well underway. Construction of the hoist house, building steel and external cladding is complete. The installation of the hoist and head frame are on track, to start this quarter after which the shaft sink is expected to start in the fourth quarter. Once the expansion is completed in 2026, Island Gold is going to be among the largest and lowest-cost mines in Canada, and it's certainly going to be the most profitable mine for Alamos Gold. Turning to the next slide. We have a number of low-cost growth initiatives, not least of which is the exploration underway at the PDA zone at our Mulatos project in Mexico. We've had some excellent success there over the last 18 months. It's a deposit that's grading roughly 5 grams. We announced a 70% increase in reserves and resources to 1 million ounces this past February. As outlined in our exploration update earlier this month, we expect that growth is going to continue, given our ongoing exploration success with a number of high-grade intercepts recently announced. In fact, I'm in Mexico now, and I'm just back from the mine site, where I was reviewing the exploration results. And I must say there is tremendous atmosphere of enthusiasm. And I think that's bolstered by the fact that the results are coming in so well. There is clearly a feeling among our exploration staff that we're going to see a lot of growth over the course of this year. Our Lynn Lake project in Manitoba is another key part of our longer-term growth strategy. We achieved a significant permitting milestone with the approval of its environmental impact statement in large, and this was approved by the federal and provincial governments. We're working now on updating a feasibility study, which we expect will be completed by midyear, outlining another long-life and low-cost operation. Turning to the next slide. All of these projects are key components of our strong outlook with growing production and declining costs. This includes a 9% growth in production this year and a 5% reduction in all-in sustaining costs. Those costs are going to decline a further 17% to $1,000 an ounce by 2025. Long term, we expect the completion of the Phase 3 expansion to drive our annual production to closer to 600,000 ounces a year, with further cost reduction. Once the development of the Lynn Lake project is factored in, we can see production growing to as much as 800,000 ounces of gold a year. Our growth profile is one of the best in the sector. And all our growth is coming within Canada, which is one of the best jurisdictions in the world. Lastly, but certainly not the least, our broad-based success over the year has been reflected in one of the best price performance for our shares. This has been a reflection of a number of things. The development of long-life, high-quality assets. We have one of the lowest political risk profiles in the sector. We have high-return, fully funded growth and declining costs driving increased profitability, and a long-term track record of creating value and operational execution. Many companies tick some of these boxes. We're one of the only intermediates that tick all of them. We are a unique company. We have everything we need to be successful and all the attributes needed to continue that strong performance. That concludes our formal presentation. I'll now turn the call over to Scott Parsons, our Senior Vice President of Investor Relations, for any of the questions that might have come through the webcast. Scott?

Thank you, John. There are no questions on the webcast at this time. So I'll return the meeting back to yourself.

Thank you. Finally, for today, I'm proud to say that 2023 is a special year for Alamos Gold as it is our 20th anniversary. We've had the opportunity to celebrate this occasion with employees across the company. As I mentioned, I'm in Mexico now where we had such an event with our employees over the last couple of days. So it's with great pleasure that I now introduce a video, which we produced, that highlights our growth story, our culture and the values that we live by every day across Alamos Gold. [Presentation]

So thank you, everyone, for staying online and watching that presentation. That concludes our 2023 Annual General Meeting of Shareholders. We appreciate you all attending. See you again next year.