Jamie Porter - Chief Financial Officer John McCluskey - President and Chief Executive Officer Peter Macphail - Vice President and Chief Operating Officer Aoife McGrath - Vice President of Exploration.

Rahul Paul - Canaccord Genuity Cosmos Chui - CIBC Don MacLean - Paradigm Capital Kerry Smith - Haywood Securities John Sputnik - Desjardins Capital Anita Soni - Credit Suisse.

Good morning. I would like to turn the meeting over to Mr. Jamie Porter, Chief Financial Officer. Please go ahead, Mr. Porter..

Thank you, operator and thanks to everyone for attending Alamos' Second Quarter 2016 Conference Call. In addition to myself we have on the line today John McCluskey, President and Chief Executive Officer; Peter Macphail, Vice President and Chief Operating Officer; and Aoife McGrath - Vice President of Exploration.

I would like to remind everyone that our presentation will be followed by a Q&A session. On this call we will be making forward-looking statements. Please refer to the disclaimer on forward-looking statements in our News Release and MD&A as well as the risk factors set out in our annual information form.

All forward looking statements on this call are qualified by these cautionary statements. There can be no assurance that our forward looking statements even though considered reasonable by management and based on information on hand will prove to be accurate. Future results and events could differ materially.

Technical information in this presentation has been reviewed and approved by Chris Bostwick, our VP of Technical Services, and a qualified person. Also please bear in mind that all of the dollar amounts mentioned in this conference call are in United States dollars unless otherwise noted. Now, John will provide you with an overview..

Thank you, Jamie and good morning everyone. All three of our operations generated positive free cash flow in the second quarter, including Young-Davidson. A significant milestone for this mine, as it continues to ramp up. We produced 92,464 ounces of gold at an all-in sustaining cost of $1,037 per ounce.

A stronger production and lower cost expected in the second of 2016, we remain on track to achieve full year production and cost guidance. The capital spending trending lower, we expect strong free cash flow growth in the second half of this year and into 2017.

But our current focus remains on completing the ramp up at Young-Davidson and developing and growing the La Yaqui and Cerro Pelon deposits at Mulatos. We made excellent progress on both fronts during the quarter, as we’ll highlight through this call.

At Young-Davidson, we completed the transition to owner development, achieved a new record underground mining rate and reached to a new milestone, generating positive free cash flow well ahead of our schedule. At Mulatos, we reconfigured the high-grade mills, produced a flotation concentrate, which is resulting in substantially better recoveries.

We’re also continuing to find and mine additional ore outside of our remaining underground reserves at San Carlos. We expect high-grade mill production well into 2017. We’re also enjoying tremendous exploration at La Yaqui and Cerro Pelon.

As we announced in April, we bumped up our exploration program with 60% increase to our budget and we now have a record 13 rigs and 250 employees and contractors working between the two deposits. We’re seeing the benefit of this commitment, most notably at La Yaqui, where step out drilling has materially expanded the zone’s mineralization.

We announced several new intercepts from La Yaqui this morning, many of which are some of the best that we’ve seen at Mulatos, including 2.3 grams over 67.5 meters, drilled 65, a step out of approximately 200 meters of the existing pit-constrained reserves.

Based on the ongoing exploration success and the erected number of rigs growing, we believe there’s good potential for significantly add to the reserves and resource based at La Yaqui. Development at La Yaqui remains on track with initial production expected in mid-2017.

At Cerro Pelon the exploration focus in the quarter is heading confidence to the new high-grade zone discovered with the 2015 program and we’re seeing good results. We also started drilling under the large sulphide capital [ph] north of the existing reserves.

Our operating costs and greater capital spending are both expected to trend lower in the next few years, as we complete the ramp up of Young-Davidson and bring on low cost production from La Yaqui and Cerro Pelon.

Warrant free cash flow will be utilized further develop pipeline, starting with Kirazli and Lynn Lake, two of our most attractive projects. We expect to complete the feasibility study for Lynn Lake in the third quarter of 2017. Alamos, remains one of the best positioned companies to deliver long-term sustainable shareholder value.

We are growing product development and production [ph] on a - across profiles and one of the best portfolio of growth projects, all supported by one of the strongest balance sheet from our peer group. With that I would like to turn the call over to CFO, Jamie Porter to comment on second quarter financial performance..

Thank you, John. We sold 95,856 ounces of gold in the second quarter at the average realized price of $1,253 per ounce, for record revenues of $120 million. This included record gold s sales from Young-Davidson of over 44,000 ounces.

Combined with lower cost and the declining rate of capital spending, Young-Davidson generated positive free cash flow in the quarter, a significant turning point for the operation and a trend we expect to continue in the coming quarters.

In fact all three of our operations were free cash flow positive, collectively generating more than 13 million in the quarter with stronger results expected in the second half of this year. Our consolidated total cash costs were $775 per ounce consistent with the first quarter of 2016 and below our full year guidance.

All-in sustaining costs were $1,037 per ounce, up from $986 in the first quarter and above full year guidance, in large part reflecting higher share based compensation charges, which amount to approximately $62 per ounce. These charges are non-cash and are related to the impact of our rising share price on previously issued share based compensation.

With stronger production and lower cost in capital spending in the second half of this year, we expect all-in sustaining cost to trend lower consistent with annual guidance of $975 per ounce.

We realized a quarterly net loss of 11.8 million or $0.04 per share, which included the higher non-cash share based compensation expense of 5.9 million and an unrealized foreign exchange loss of 3.3 million. These adjustments totaled $0.03 per share.

Our operating cash flow before changes in working capital was 40.3 million or $0.15 per share, up 46% from the first quarter of 2016, reflecting the higher gold price and sales. Capital spending in the second in the second quarter totaled 38.5 million, consisting of 13.9 million of sustaining and 24.6 million of growth capital.

Through the first six months in 2016, capital spending totaled 71.8 million consistent with our annual budget. Amortization expense was 31.7 million in the second quarter or $331 per ounce, up slightly from the first quarter.

Corporate G&A expense in the second quarter of $4.1 million was consistent with the first quarter and full year budget of 16 million. This remains among the lowest in our peer group.

Our 2016 budget was designed such that each of our operations would be free cash flow neutral at $1100 goal, with our debt service exploration and corporate G&A spending to be financed from our balance sheet.

Through lower costs and the increase in gold price, we generate positive free cash flow from all of our sites earlier than planned in the second quarter. We expect this to continue with strong free cash flow growth in the second half of this year.

At the end of June, we had cash and available for sales securities of 285 million, an increase of 2.3 million from the end of the first quarter.

Combined with growing free cash flow over the next two years driven by the ramp up at Young-Davidson and production growth from La Yaqui and Cerro Pelon, we remain well positioned to execute on our near and long-term growth plans. At this point, I'll turn the call over to Alamos's COO, Peter Macphail to provide an overview of operations..

Thank you, Jamie, and good afternoon everyone. We produced 42, 644 ounces at Young-Davidson in the second quarter, 9% higher than in the first quarter, driven by higher underground mining rates and nil recoveries partially offset by lower grades in mill throughput.

Total cash cost of $738 per ounce and all-in sustaining cost of $965 per ounce, were up from the first quarter reflecting slightly higher mining costs, but these are expected to trend lower in the second half of this year, as underground mining rates ramp up and capital spending declines.

Underground mining rates at Young-Davidson increased 5% from the first quarter to average a new record of 6,100 tons per day. This was despite a two day shutdown of the hoisting facility and rehabilitation work on the waste pass.

During the quarter we determined that rehabilitation work was needed on both the waste and the ore pass infrastructure at the 9590 level. While this work is underway, we maintained underground mining rates in excess of 6,000 tons per day.

The rehab work is going well and is expected to be completed later this month, after which we expect throughput rates to increase towards the year-end target of 7,000 tons per day. Underground mine rates were at 2.4 grams per ton as two stopes mined in the quarter underperformed relative to the block model.

Despite this we continue to experience a positive reconciliation relative to the block model across the 60 stopes mined to date. Further, underground mine rates improved significantly in July, to average approximately 3 grams per ton. We expect higher grades and underground mining rates to drive stronger production in the second of 2016.

Mill recoveries continued to improve averaging 92% in the quarter versus 88% in Q2 of 2015, reflecting process changes implemented earlier this year. With these changes we did not expect to see the same seasonal fluctuations we’ve had in past years.

Mill throughput was a bit lower than what we’ve seen in past few quarters at 7,000 tons per day, but we’ve been focusing on recoveries and granite circuit optimization. The higher recoveries achieved out way the incremental benefit of processing more of the low grade stockpiled ore.

El Chanate had another good quarter with production of 16,820 ounces at all-in sustaining costs of $931 per ounce, well below the annual guidance of $1,100 per ounce, reflecting a lower waste-to-ore ratio. Combined with the higher grade gold price, the operation generated 3.4 million of free cash flow in the quarter.

Mulatos produced 33,000 ounces in second quarter with total cash costs of $757 per ounce and all-in sustaining cost of $883 per ounce, both well below full-year guidance. This reflected lower operating costs and the benefit of a new diesel credit program in Mexico, which is expected to result in savings of approximately $25 per ounce this year.

Total crusher throughput averaged 18,600 tons per day in line with expectations. Grades stacked on the leach pad of 0.71 grams per ton were down slightly from the first quarter as we mined additional ore from the Escondida pit bottom, which is not previously included in the mine plan.

This has now been mined out and we expect to stack higher grades in the second half of 2016. This money returns to the previously planned areas of the pit. During the quarter, we reconfigured the high grade mills to produce the flotation concentrate for sale to the third-party.

This will allow us to achieve substantially higher recoveries, which will drive stronger hybrid mill production and cash flows in the second half of this year. The new mill configuration is performing well and is currently operating at a rate of approximately 400 tons per day.

The first shipment of concentrated in June with regular shipments expected to be continued through the remainder of this year. With underground mining rigs exceeding mill throughput rates, the high grade stockpile increased to 60,000 tons at the end of June.

This stockpile will continue to supplement underground ore production from San Carlos with all remaining mill production to be sold in a concentrated form. We generated $9 million in free cash flow of Mulatos in second quarter of 2016, net of nearly 5 million in exploration spending.

We expect strong production and free cash flow in the second half of 2016, reflecting higher mill grades - reflecting higher grades stacked on the leach pad and increased concentrate production from the mill. Development of La Yaqui remains on track with initial production expected in mid-2017.

The EIA approval for road construction was received during the quarter and the project EIA was submitted in April and approximate six months turnaround expected. Of greater significance, we are continuing to see excellent exploration results come out of La Yaqui and Cerro Pelon.

I'll now turn the call over to Aoife McGrath, our VP Exploration to provide an overview of these results..

Thanks, Peter. As John noticed, after enhancing the 60% increase in our exploration bunches in April, we significantly wrapped up our exploration activities at Mulatos.

This is most evident at La Yaqui where we completed 17,500 meters of drilling in 89 holes in the four months from April to the end of July compared to 5,100 meters in 24 holes in the first quarter.

The exploration focus at La Yaqui in the second quarter was one kilometer long, northwest trending ridge where we delineated 232,000 ounces of inferred pit constraint resources at year-end 2015.

These two newly designed zones of mineralization sits at the northeast of existing pit reserves, both infill and exploration drilling were undertaken during the quarter. The program continues to yield excellent reserves with step out drilling significantly expanding both zones of mineralization.

Results include several intercepts well above the current mineral reserve in resource grades. Some of the most notable reserves include 3.79 grams per ton of gold or 47.3 meters and 2.83 grams per ton of gold or 67.5 meters, both of which are more than 180 meters from the current existing head constraint resource.

The northern zone remains open along strike and down dip [ph] and the southern zone is open along strike to the north. La Yaqui is our highest priority exploration target and we currently have eight rigs drilling. Drill programs will continue throughout the year focusing on both infill and exploration drilling on all known zones of mineralization.

Additional scout drilling will also be undertaken over the remainder of the large one kilometer by 0.9 kilometer alteration. Based on ongoing exploration success, we believe there is potential for a substantial increase in mineral reserves and resources at La Yaqui. Drilling results were carried out at Cerro Pelon in the second quarter.

Over 6,700 meters were drilled in 39 holes in the fourth months from April to the end of July. This program consisted of a mixture of infill, extension and scout drilling with the initial focus on infilling the high-grade measured in the indication resource identified during the 2015 exploration campaign.

This drill program was successful as was the extension drilling carried out just north of current pit reserves. Results are pending for this scout drilling that commenced at the end of quarter.

In addition to drilling, geophysical surveys comprising of ground magnetics and induced polarization were completed over the larger La Yaqui and Cerro Pelon areas. Our primary exploration focus remains on La Yaqui and Cerro Pelon. However, drill mapping and sampling, we are continuing to work up other prospects in the larger Mulatos district.

High priority targets added to the 2016 exploration plan, include Los Bajios, Las Carboneras, El Jaspe, and El Carricito. We aimed to have a number of these drill-ready for 2017. And with that, I will turn the call back to John..

Thank you, Aoife. That concludes our formal presentation. I will now turn the call back to, Don, our operator to open the call for your questions..

Thank you. [Operator Instructions] And the first question is from Rahul Paul from Canaccord Genuity. Please go ahead..

Hi, everyone.

Just wondering, could you quantify the effect of increase in recoveries at the Mulatos mill based on the changes you’ve made and if 400 tons a day steady state in terms of throughput?.

Hi, Rahul, it’s Peter. Yeah, 400 tons per day is a good number to go with. That's what we've been averaging lately and that's sustainable and recoveries - the recoveries we're seeing now are, I mean, overall a number you could use to be 80% recovery, most of that slopes rate is due to the flotation concentrate.

We get a bit more on - from the tales on the leach pad..

Okay. And then the San Carlos underground mine throughput seems to be quite a bit ahead of most throughput.

What underground mining rates are we seeing right now and what do you think you can achieve on a sustainable basis?.

Yeah, currently we're seeing around 450 tons per day, so we said we are ahead of the mill and we see mining continuing there through the end of the year and into the first half of next year at similar rates or maybe slightly below. After that, it's really a question of what more will we find..

Okay. That’s great.

And then just quickly moving on to La Yaqui, some good exploration results, with 2016 drilling do you expect to have enough drill density to incorporate most of that into M&I or is a lot of that going to be an inferred?.

Hi, Rahul, it’s Aoife here. We’ve been focusing on infilling one of the two zones and focusing on extending the other. So, we expect the next resource update to include M&I and inferred..

Okay. Thanks. That’s all that I had..

Thank you. The next question is from Cosmos Chui from CIBC. Please go ahead..

Hi, thanks, John, Jamie, and Peter and team.

A few questions from me here, maybe again on Mulatos with the production of concentrate, what are some of the additional costs, potential offsite costs that we need to consider when we look at our motto here?.

It's actually cheaper to produce flotation concentrate outside than what we were doing in the past and the costs were much offsite. So I don't think it’s significant. There is a bit of trucking cost to get it to port and then the marketing costs associated with that concentrate..

Yeah, we’re having an end [ph] marketing costs, but, yeah, like Peter said, I mean the costs are below we’re producing at Mulatos anyways and the net of the higher recoveries is obviously more production, so our model shows that the net benefit of that changeover is $5 million in incremental cash flow to the end of this year and probably another $5 million first half of next year..

Yeah, okay. And then maybe on to Mulatos heap leach here, certainly you are talking about higher grades stacked in the second half. If I go back and look at your guidance for 2016, you had been expecting above 0.89 gram per ton for the full-year in terms of the grade. You’ve done above the 0.8 gram per ton so far in the first half.

Is that - are those numbers still good if I want to try to figure out what the second half grade could be? But again considering that we talked about some of the bottom part of the Escondida pit and whatnot, are those numbers still good to use?.

Yeah, so I mean we did - and the good news is we [indiscernible] ore in the bottom of the Escondida pit which we mined because we had to or sterilize and never minded. So, that’s the good news. We got more ounces that weren’t even expected in the mine plans.

Overall for the year, I haven’t seen the number - but the grades are coming up in the second half. I haven’t seen what our year-end number would be. It’s going to be approaching that 0.89, maybe not point all the way there..

Yeah, okay.

And maybe switching gears a little bit going to Young Davidson here, maybe a question for Peter, could you give us a bit more color in terms of some of the rehab work that I guess you realized in Q2 you had to do around the waste and the ore pass at the 9590 level and I know eventually when you try to get up to 8000 tons per day, what are the keys here as well as to get the MCM waste passed in place? Is this related or does it help in any way?.

Yeah.

So, the first part of your question, the rehab work around the 9590 and I know the number of you guys that are on the call probably will look into why it is [ph], so that level is where you see the trucks dumping into the Grizzly or both the waste and the ore side there, but below the Grizzly on the ore side is a bin, what we call a bin, which is a just a big [indiscernible] underground before the crusher, same on the waste side.

So there’s been - over the three, four years that we've been operating there, there has been some deterioration or swelling [ph] on the inside of those bins, both of them, kind of an east-west direction with the fabric of the work we get there.

So, we just had to bite the bullet and go in and capable and short treat with ware resistant fiber treat [ph] those bins. We've done the work on the waste side, completed that successfully and now we're doing the work on the ore side and we're about halfway through. We started in kind of mid-July and expect it to be done by the end of August.

So, that's the color there. The good news is we've managed to continue to produce that 6,000 tons a day while we're doing that work. And really what we have to do there is while we are doing the ore side, for instance, right now, we have to put ore through the waste side and so that limits our ability to move waste.

So, that's the work that's being done. It's going very well. We’ll be back to normal here pretty soon. On the MCM side, the development is right on track from the bottom of the MCM shaft. We remain on schedule to put in place that waste pass up to the upper part of the mine and really unrelated to what we're doing with that work..

Okay. And then maybe one last question on Young Davidson as well.

Peter, could you give us a bit more color in terms of the two underperforming stopes in Q2? Certainly, it doesn't sound like it's a big issue given that over 60 stopes in the past have had positive grade reconciliation, but these two underperforming stopes, where were they within the deposit and was it under performance mostly of grade or grade and tons and what happened here?.

Every stope has a design grade and tons and then we reconcile after it's all done and see how it performs and on average we do better. That’s slightly better on grade, then model, but they're all - none of them are exactly what you expect.

They're all going to be plus or minus maybe 10% or 15% and over the course of a quarter you get the better ones outweighing - the better ones balancing the poor ones. In Q2 we had a couple of stopes that underperformed probably like to 50% of what we were expecting and so they dragged it down a bit.

But we had stopes over performed to 50% and often we'll have that. So, I guess it's just the luck of the draw. The important point here is that year-to-date when we include July and you haven't seen the July numbers yet, and I appreciate that.

When you include July, we're at 2.59 grams per ton year-to-date versus our guidance, which is 2.68, so we're very close to guidance grade. I'm not concerned..

Okay. Great. That's all I have. Thanks a lot..

Thank you. The next question is from Don MacLean from Paradigm Capital. Please go ahead..

Well, good morning, guys. And I had a few questions here for Aoife on La Yaqui. You talk about the northern of the two resources, the footprint having grown to 250/450 from 80/250.

How many ounces were in that northern resource in the first place?.

Hi, Don. Offsite, 232, it’s about 140 in that..

In that northern resource?.

Yeah..

Okay, okay. So, that helps put that into context. Great.

And so, you report a 45 holes, can you put those into context within the 113? Are those representative of the sort of holes that you'd be putting into a resource calculation or into the pit shell calculation? Are they kind of the best of the 113?.

Don, we’re still waiting for quite a number of - for the results from a quite a number of holes, so that’s brought to the table with somewhat reduced from the actual number drilled. Thus we would expect to put all the holes we drilled into the next resource calculation..

Okay.

So, from that should I take that those are kind of representative of what you have seen or that that's everything that you've actually got complete passes for?.

That’s pretty much most of what was got back, but they are the highlights..

Great, okay. And then back to that southern resource, five of the six walls in figure one are essentially within the pit shell or just at the very edges of the pits.

So, was there any significant drilling downhill to the northeast?.

We’re still drilling in that area and we are seeing some excellent geology come out of it that we’re waiting for results. There are a lot of [indiscernible] they locked within the code shell. Some of them are oxides [ph] of the actual mineralized envelope that we had used for the year in 2015..

Okay, that’s helpful. Thank you. And then that area in figure one to the northwest that has the dash circle around it, that was not included in the 2015 resource.

Have you put any more holes in that?.

We are drilling - so zone 2 is the area, what we’re calling zone 2 is just to the southeast of that dash, zone. So, we are drilling between those two zones and we are drilling down a bit of both of those zones at the moment..

Great, okay and maybe this isn't the right euphemism, but the elephant in the room here is the term substantial increase, it's a pretty broad term and if I’m sure you're going to look at John to get a nod on this.

When you use the word substantial, are you talking more than 100%? Are we talking multiples? Are we talking maybe more up to 100%? And I'm referencing the 300,000 ounce reserve in resource when I say that..

Don, we know it’s going to get - but that's fine, it’s too fine. We can just see from the dimensions in the grades that the resource is clearly growing and it's not going to be a small increase. It's going to be, what can you say, it’s going to be a substantial increase.

But I think if we try to quantify it too accurately, we’re about to make mistakes or under estimating or over estimating and at this stage of the game we put it the way we did, because that’s what we were capable of doing, if you get a qualified and more precisely we would have..

Okay. Fair enough.

And then last question on that, the grade being so much higher, have you done any mud test to get a sense of whether or not the recovery would also be higher on this mineralization?.

Everything that we've drilled; it has been upsized Don and we’ve run our initial mud testing on every sample and the drills have excellent recovery..

Okay.

So it makes sense for it to be higher than the 70% we kind of - or more even around the rest of the Mulatos resource I presume?.

That’s a safe bet, the 70% is a safe bet..

Okay. I will talk about it. I’ll let somebody else ask questions. Thanks very much..

Thanks, Don..

Thank you. The next question is from Kerry Smith from Heywood Securities. Please go ahead..

Thanks. Peter, the mill recovery at Young Davidson was 92% in the quarter.

Is that a sustainable number now with some changes that you’ve made in the plans?.

Yeah, Kerry, we’re still - I think our guidance is 90% for the year and I’ll still use that. We’ll see, as time goes on, whether we would increase that for next year's guidance..

Okay, okay.

And when you rephrased - or when you add this cover crusher [ph] into the mills, is there any sort of shutdown associated with that?.

No, there wouldn’t be..

Okay. And just on the - so I'm clear on the pay factor that you talked about for the Mulatos. You suggested 80% recovery.

Is that an 80% pay ability that effectively we could use to incorporate all of the offsite costs?.

The offsite costs will be part of the costs. The 80% recovery is the gold that we ship..

It’s the gold that you ship. Okay, so you’ll incorporate the rest of the costs, okay. Okay, okay, okay.

And then just last thing on the hedging plans, Jamie, post the end of this year, is there any thought today that you might try and do hedging into 2017? Or is the current plan to let the hedging that you have run out, you've got about half the production through the back half of the year hedged and I guess in those callers between whatever it was, 12.12 and 13.85?.

Yeah, Kerry, there is no further plans for additional hedging in 2017. We put the hedges around El Chanate in place for a very specific reason. We're now in a different gold price environment where El Chanate is generating $3 million to $5 million a quarter of free cash flow. So, that’s not in the plans for the future..

Okay, but the hedging that you have for the back half of the year is actually more than you would produce at El Chanate if I read this table correctly?.

Yeah, no - that's right. I mean we've hedged almost a 100% of Chanate’s production. We have another approximately 35,000 ounces now outstanding with the colors, with the floor of 12,15 and a ceiling of around 14, 30, so we are $80 away from being called away on any of that..

Right and so, if you’ve done any hedging subsequent to the end of the quarter here or subsequent to what you’ve disclosed then?.

No, we have not..

No, so it’s 91,000 ounces that you've got or 90,750?.

That we had at the end of June, we would be down to closer to 75 ton..

I got you, because it’s just a monthly delivery’s pro rata as it were..

Correct..

Okay. I got you. Perfect. Okay. Great, thanks very much..

Thank you. The next question is from John Sputnik - Desjardins Capital. Please go ahead..

Thank very much, operator. I just got a quick question, wondering how the rainy season is progressing down at Mulatos, do you have a different color on that..

It's what was as [ph] last few years which have been higher than average. So, we've started off pretty wet. But it's not really impacting us too badly..

Okay, perfect. My other question was asked already. Thanks..

Thank you. The next question is from Anita Soni from Credit Suisse. Please go ahead..

Hi, most of my questions have been answered.

I was just wondering at Young Davidson, the process cost of those increases is a result of the lower throughput this quarter?.

Yes, it is a bit higher than the forecast and it’s just units related..

Okay. And then you guys mentioned that some of the pebbles I guess that are oversized is being rejected by the mill and you're going to be putting in a public crusher in 2017 and have that operational.

So, is that why I think I've been having a little bit of trouble reconciling some of the grades over the last I guess few quarters and it's because some of the underground materials actually not making it through to the process side?.

Yeah, I think that's probably the case. It's a very small amount, but it does - I mean the underground tons and the underground grades we report are the underground tons and the underground grades that aren’t. There is a small amount of those ounces that's probably in the two or a couple of percent ranges that end up in a stockpile on the surface..

Yeah, that’s always going to have - it’s around 2% or 3% and then is there any distribution on like grade with that pebble? I mean is it just the average grade like basically if you mine 2.4, there's about 2% to 3% reject and it’s about 2.4 gram per ton as well or is there?.

The details would be that we might reject kind of 5% of the tons, but half the grade is generally always lower grade than what the [ph] grade is..

Okay, lower grade and throughput..

About half the grade typically..

Okay. And then just the last question with Young Davidson is that I think you guys said it was 92% recovery rate and just help me understand why the milled - contained ounces is more like 43,000 ounces and then the actual recovery ounce is about 42 and to my calculation about a 98% recovery rate, not 92%..

Yeah, Anita, the difference there is it is what we count as production, we call gold production when we [indiscernible] whereas what’s recovered through the circuit wouldn’t include change in inventory..

All right. Thank you..

Thank you. [Operator Instructions] And the next question is from Don McLean from Paradigm Capital. Please go ahead..

Just a follow-up question for you, Jamie, that share-based compensation charge, that's a pretty big number.

Going forward if the share price stays flat, because none of us can predict where it's going, but if it stays flat, does that charge stay flat the number it was before or does it drop back substantially?.

It would drop back relative to what it was in the second quarter. So, I think there's a different accounting treatment for the various forms of share-based compensation, but there are certain instruments that are mark-to-market.

So, if you do see a big swing in our share price either up or down, you’ll see a corresponding swing in the share-based compensation expense. We've had a period in the past where it's actually been negative, because the share price has declined. So, it's hard to predict.

But like I said, Don, if the share price stays flat, you probably get back to closer to $2 million for quarter number..

Right. Okay and then just putting it into context where you are, I mean that's been a fairly large jump in the all-in sustaining costs. The guidance is 975, to get to the guidance you're going to have to be something in the order of 940 in the second half.

So, just confirming that when you talk about the guidance of 975 that you'll achieve that that's taking into account the fact that there is this unexpected share-based compensation charge..

Don, I think I mean you've seen the $62 per ounce impact of the higher share-based compensation in the second quarter. That should normalize or equal [ph] if the share price is staying flat. That would be closer to $20 for each Q3 and Q4.

If you look at El Chanate, we’re beating by over $100 an ounce relative to guidance at Mulatos by $75 an ounce with the higher production coming from [indiscernible] we expect all-in sustaining costs to operationally come down. So, we're confident we're still going to hit 975 for the year or below..

Yeah, the operating costs have done very well. Okay, thanks, Jamie..

Thank you. There are no further questions at this time. This does conclude today's conference call. If you have any further questions that have not been answered, please feel free to contact Mr. Scott Parsons at 416-368-9932, extension 5439. Please disconnect your lines at this time. And we thank you for your participation..