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

Thank you operator and apologies to everyone on the line. We are a few minutes late getting started, given some issues with the operator there. But we are ready to go now. And thank you for attending Alamos's first quarter 2021 conference call.

In addition to myself, we have on the line today both, John McCluskey, our President and CEO and Peter MacPhail, our COO. We will be referring to a presentation during the conference call that is available through the webcast and on our website. I would also like to remind everyone that our presentation will be followed by a Q&A session.

As we will be making forward-looking statements during the call, please refer to the cautionary notes included in the presentation, news release and MD&A as well as the risk factors set out in our annual information form.

Technical information in this presentation has been reviewed and approved by Chris Bostwick, our Vice President of Technical Services and a qualified person. Also, please keep in mind that all of the dollar amounts mentioned in this call are in United States dollars, unless otherwise noted.

And with that, I will turn it over to John to provide you with an overview..

Thank you Jamie. We had a solid start to the year, producing 125,800 ounces of gold in the first quarter at total cash cost of $757 per ounce and all-in sustaining costs of $1,030 per ounce. Our costs were in line with guidance while production exceeded the high end of our first quarter guidance.

This was driven by particularly strong performances at Island Gold, which set another quarterly record for production and Young-Davidson which exceeded its targeted underground mining rates achieving a new record. We remain well positioned to meet our full year production and cost guidance. This drove another quarter financially.

Our operating cash flow of $120 million increased 46% from a year ago supporting strong ongoing free cash flow, even with the ramp-up of development activities at La Yaqui Grande and the Phase III expansion at Island Gold. Moving to slide four.

This past week, we announced we will be filing a $1 billion investment treaty claim against the Republic of Turkey for expropriation and unfair and inequitable treatment with respect to our Turkish development project.

In 18 months since our mining license expired, we had received all permits required to build Kirazli, we were well into construction and we have met all legal and regulatory requirements for the renewal of our licenses.

We have attempted to work cooperatively with the Turkish government yet we have not received a reason for the non-renewal nor have we received a timeline for when our licenses will be renewed. We are optimistic that the arbitration process will bring about a positive resolution. Now looking at slide five.

We continue to advance our strong pipeline of North American growth projects. Development activities are ramping up on the Phase III expansion at Island Gold where we recently announced a one million ounce increase in high-grade reserves and resources.

This growth and ongoing exploration success highlights the significant upside potential to the already attractive economics outlining the Phase III expansion study published last year. Construction activities at La Yaqui Grande continue to ramp-up with the project on track to get low-cost production in the third quarter of 2022.

Permitting at Lynn Lake is advancing and expected to be completed around the middle of next year, putting us in a position to make a construction decision in the latter part of 2022. We have had good exploration success over the past few years. We have increased reserves by 27% to 2.1 million ounces.

We see excellent further potential around the existing deposit and regionally across in 80 kilometer along greenstone belt that we consolidated. We are ramping up our exploration efforts accordingly.

These projects are all key components of our strong outlook with 50% production growth potential for approximately 750,000 ounces per year by 2025 at significantly lower all-in sustaining costs of around $800 per ounce. This will support substantial free cash flow growth over the long term.

In the meantime, we can more than fund this growth internally while continuing to generate strong ongoing free cash flow and support our recently increased dividend. I will now turn the call over to our CFO, Jamie Porter, to review our financial performance..

Thank you John. Moving on to slide six. We sold 126,500 ounces of gold at a realized price of $1,798 per ounce for record revenues of $227 million in the first quarter. Total cash cost of $757 per ounce and all-in sustaining costs of $1,030 per ounce were in line with guidance despite the impact of the stronger Canadian dollar and Mexican peso.

Our 2021 guidance provided last December was based on a Canadian dollar foreign exchange rate of $0.75. At the current Canadian dollar foreign exchange rate of approximately $0.81, our total cash costs and all-in sustaining costs would increase by approximately $30 per ounce with a similar impact realized in the first quarter.

Operating cash flow before changing to the non-cash working capital improved 46% year-over-year to $120 million or $0.30 per share in the first quarter. Our reported net earnings for the first quarter were $51 million. Adjusted net earnings of $49 million or $0.13 per share represented a 63% increase over the prior year period.

Looking ahead to the second quarter, the decision to proceed with the bilateral investment treaty claim against the Republic of Turkey is an impairment trigger for accounting purposes.

As such, we expect to incur an after-tax impairment charge of approximately $215 million in the second quarter, representing the full carrying value of our Turkish assets. This is a non-cash charge that we expect to exclude from our adjusted earnings.

Capital spending totaled $73 million in the first quarter, including $24 million of sustaining capital, $44 million of growth capital and $6 million of capitalized exploration. We also incurred $17 million of capital advances related to work and equipment for La Yaqui Grande and the Phase III expansion of Island Gold.

The aggregate increase in spending in the quarter is consistent with full year capital guidance of between $354 million and $384 million and reflects the ramp-up of development activities on our growth projects. Net of all capital spending and capital advances, we generated $10 million of free cash flow.

This was also net of $18 million of cash tax payments in Mexico, a majority of which related to the 2020 year. We paid a quarterly dividend of $10 million in the first quarter, representing a 25% increase from the prior quarter and we are active under our share buyback, repurchasing $1.5 million worth of shares.

In total, we returned more than $11 million to shareholders in the first quarter and are on track to return more than $40 million for the full year. We ended the quarter with $238 million in cash, $27 million of equity securities and $500 million of undrawn credit capacity.

We remain well positioned to fund our internal growth projects while continuing to grow our cash position and returns to shareholders. With that, I will turn the call over to our COO, Peter MacPhail, to provide an overview of our operations..

Thank you Jamie. Moving to slide seven. We had another excellent quarter at Young-Davidson, producing 48,000 ounces and generating mine-site free cash flow of $22 million.

This was the second full quarter of operating to the new lower mine infrastructure and the operation continues to demonstrate its potential with mining rates increasing to average a record 7,800 tons per day, exceeding our targeted rate of 7,500 tons a day.

We continue expect mining rates of 7,500 tons a day in the second quarter with another mining horizon being added in second half of 2021 that will enable us to increase mining rates to sustain 8,000 tons a day. Mill throughput also increased to average a record 8,150 tons per day.

This exceeded mining rates, reflecting the processing of additional ore that was mined and stockpiled in the fourth quarter of last year. We expect milling rates to match mining rates going forward.

Total cash cost of $873 per ounce and mine-site all-in sustaining cost of $1,075 per ounce were both down significantly from a year ago when the Northgate shaft was shut down to complete tie-in of the lower mine.

Costs were above annual guidance in the first quarter due to the stronger Canadian dollar as well as the planned mining of somewhat lower grades earlier in the year. Grades and mines are expected to increase through the year and combined with higher mining rates, this is expected to drive production higher and costs lower in the second half of 2021.

Higher production, lower costs and lower capital spending are all expected to contribute to record mine-site free cash flow of more than $100 million from Young-Davidson in 2021. Over to slide eight. Island Gold generated $26 million of mine-site free cash flow from record production of 42,200 ounces, driven by higher grades mined.

As previously guided, grades mined and processed are expected to decrease through the year and average approximately 10 grams per ton for the full year. Total cash cost of $466 per ounce and mine-site all-in sustaining cost of $732 per ounce were both consistent with annual guidance despite the stronger Canadian dollar.

Following up on a very successful 2020 exploration campaign, we ramped up our exploration efforts at Island Gold in the first quarter. The majority of the results remain pending, given the longer turnaround times for assays we have seen across the industry. But we are expecting that to improve in the second quarter.

Work on the Phase III expansion is ramping up with the focus of advancing permitting and detailed engineering of the shaft and associated infrastructure and the procurement of long lead items.

Growth capital spending totaled $12 million in the first quarter and is expected to increase through the rest of the year, consistent with annual growth capital guidance of $80 million to $85 million. Moving to slide nine.

Mulatos produced 35,600 ounces in the first quarter with total cash costs and mine-site all-in sustaining cost of $915 and $1,039 per ounce respectively. Mining activities in the first quarter were focused on Cerro Pelon, which along with existing surface stockpile supplied the majority of ores stacked in the quarter.

Mining activities within the main Mulatos pit were focused on pre-stripping the El Salto portion of the pit. With the $18 million of cash tax and late payments mostly related to last year and the ramp-up of spending at La Yaqui Grande, Mulatos' mine-site free cash flow was negative $24 million.

Excluding the $30 million of growth capital and capital advances related to La Yaqui Grande, Mulatos would have generated $6 million of mine-site free cash flow. Moving to slide 10. As you can see in the photo, construction of La Yaqui Grande is well underway.

Camp facilities are nearly complete and we now have approximately 800 employees and contractors on rotation. Capital spending was focused on advancing earthworks for the waste rock dump, heap leach facility and the water treatment plant and pre-stripping of the open pit.

Over three million tons of waste were mined during the quarter, with the contractor reaching mining rates of about 48,000 tons per day by the end of March. The project remains on track to achieve commercial production in the third quarter of 2022.

With mine-site all-in sustaining cost expected to average $580 per ounce, La Yaqui Grande is expected to significantly reduce the cost profile of the Mulatos operation. With that, I will turn the call back to John..

Thank you very much, Peter. Now we are going to open the call to your questions. So I will now turn the call over to the operator, who will get that started..

[Operator Instructions]. The first question is from Tyler Langton of JPMorgan. Please go ahead. Your line is now open..

Yes. Good morning. And thanks for taking my question. I guess just to start with Kirazli, I mean recognizing that the process can take some time to kind of run its full course.

But I guess, are there any sort of near term milestones that we should be looking for?.

Not particularly. We are going into this with an expectation that it may well just run the full course, go through a full arbitration. But there is always the possibility that sometime over the next year, we come up with some sort of negotiated settlements. And that's the way this arbitration process is designed.

It's designed to bring the parties together under the auspices of the tribunal with the expectation, the intent at least, to come to some sort of negotiated settlement. And if that's not achievable, then it goes to the next stage. So we will just have to follow the process..

Okay. And then I guess you called sort of the impacts that exchange rates could have on cost this year.

But are you seeing sort of, any signs of inflationary pressures from labor or materials in the day-to-day operations? And then more, I guess, with the Phase III expansion at Island Gold, can you remind us sort of how much CapEx is left to be spent and are there any sort of potential pressures there for that capital budget?.

Peter here. On the inflationary pressure, certainly not labor. Labor rates have been relatively stable. A few things, a few inputs, steel a little bit higher but it looks like it's a temporary thing. So it really hasn't impacted our bottomline at this point. And I guess, who knows, but we are not expecting it to materially impact us..

Got you. Okay. Thanks so much..

Thank you. The next question is from Fahad Tariq of Credit Suisse. Please go ahead. Your line is now open..

Hi. Good morning. Thanks for taking my question. You had mentioned the cost impact or potential cost impact are different, foreign exchange rates and the sensitivity, particularly on the Canadian/U.S. exchange rate.

Maybe talk about the hedging strategy over the past year and also going forward? I know some peers, for example, [indiscernible] [0:15:38.2] more favorable rate in 2020. Just want to get your thoughts on hedging. Thanks..

Yes. Fahad, it's Jamie here. We look for opportunities over the course of the past nine to 12 months to lock in more of our Canadian dollar exposure. But the way that the Canadian dollar has been strengthening in more or less a straight line, over that period, there wasn't much in the way of opportunities to do so.

So I think we have 8% of our remaining 2021 exposure hedged at well below $0.80. We will look for opportunities to do more if there is weakness side in the Canadian dollar. But as I said, we haven't seen that of late. Fortunately, we are very well covered in Mexico.

We got about 80% of our exposure hedged between 21 and 24, which those contracts were very favorable relative to current spot. So that's where we are at currently. We will continue to look for opportunities to do more. But there is certainly none currently..

That's helpful. Thank you..

Thank you. The next question is from Lauren McConnell of Paradigm Capital. Please go ahead. Your line is now open..

Good morning, John, Jamie and Peter. Congratulations on the good quarter. I just had a question on Island. I know there is a history of positive reconciliation.

I just wanted to know with that 13.2 grams per ton that you mined this quarter, was that in line with what you were expecting on the reserve model? Or are you still seeing positive reconciliation at Island?.

No, that is in line with what we are expecting. It reconciled quite well. Over the years that we have owned it, we made changes to the reserve model. And we don't really see significant positive reconciliations for the last couple of years. It's behaving quite well..

Okay. Great. Thank you..

Thank you. The next question is from Cosmos Chiu of CIBC. Please go ahead. Your line is now open..

Hi. Thanks John, Jamie, Peter and team. Maybe first off on the Young-Davidson here. As you mentioned, it's great to see that to you were able to get to almost 7,800 tons per day when would you were targeting 7,500 tons per day in terms of mining rates underground.

On that point, could you give us some key highlights in terms of how you are able to come to a throughput that was higher than what you targeted? And then the second part of my question is, it sounds like it's not yet repeatable yet in Q2. You are still targeting 7,500 tons per day in Q2.

And why is it not repeatable?.

We are always striving to do better than our plan. A few things when aligned up in Q1 that helped beat it. We had a good quarter. We actually repeated in Q4, if I am not mistaken as well of beat the 7,500 tons a day. But we are planning for 7,500 tons a day for Q2 and ramping up to 8,000 tons a day for the rest of the year.

And to facilitate that, we are bringing on another mining horizon which will help us do that. Can we do better? Who knows? I wouldn't expect 8,000. I am still expecting 7,500..

Yes. I get what you mean.

But I guess, Peter, how did you beat in Q1 then? Could you tell us one or two key highlights where it kind of surprised you? Or what happened?.

It's just the ore being there and it continues to be there. So it's just being able to move it. Getting familiar with the new infrastructure takes a while to trust it and figure it all out. So the difference between 7,800 tons a day and 7,500 tons a day is not that huge a difference, frankly. So I wouldn't say we knocked it out of the park.

It's nice to be on the higher side of that. We might be -- maybe will be a quarter at a couple hundred tons a day below our target. It's always going to vary up and down within a little bit at least..

Got you. Thanks Peter. And then maybe as you touched on it, the new mining horizon here.

Can you talk a little bit more about maybe the location? Where is this new mining horizon? And then could you remind us how many areas are you mining at this point in time?.

Yes. So we have a couple of mining horizons in the upper part of the mine that we are continuing to mine. And this one actually is another one that would be at the upper part of the mine, more on the westerly flank. We have a couple of mining horizon in the lower part of the mine.

So it varies from time to time between three, four, five mining horizons we would cycle through as many as 100 stopes in a year and have at any given time 30 stopes online. So that's the kind of mix..

Yes. Great. Got it. And then Peter, as you talked about, are you still trying to understand, not understand, getting familiar with the lower mine infrastructure, as you mentioned. At this point in time, any areas that you think might be limiting factors? Is it ore bin to conveyor? Or everything is running fairly as you would have expected so far..

This is so much so much better than what we had at the mid-mine that was frankly built for 6,000 tons a day and also frankly put in as a sort of an interim measure to get to the lower mine. I think we have something like 10 times more bin capacity. We have additional skipping capacity.

We have conveying instead of trucking, all of those things help us make our numbers. We are in good shape..

Great. Maybe switching gears a little bit. The La Yaqui Grande, I think there is already some discussions in terms of inflationary factor and potential or maybe no issues in terms of the impact on costs.

Could you comment on La Yaqui Grande? Any kind inflationary factors that we should be aware of that we should be concerned about in terms of CapEx?.

We haven't seen any. We are well into construction. Most of the CapEx associated with La Yaqui Grande is earth moving, really pre-stripping, building leach pads, putting liner down. The order of the lack of the liners on site came in on budget and our mining contract is at fixed rate per ton.

So sort of diesel moving around a lot, we don't really see much opportunity for inflationary pressures..

That's is good. And that leads me to my second question here, I guess.

Can you remind me, I guess, when is a rainy season in Mexico? I think it's coming up? And are there any key things that you want to wrap up and then finish ahead of the rainy season? Or is the rainy season not really an impact, not an issue in the northern part of Mexico?.

No, we do have a rainy season and it is kind of August, September. It can start in July a little bit. And you try not to do certain things. You try not to be doing clay liner on your Leach pad during the rainy season. That's about the only thing that on the liner.

That's the only thing we try not to do and we are well ahead of that and it's not going to an issue..

Sounds good. And maybe one last question, just to wrap things up. I guess your CapEx budget for the year is $320 million to $350 million. You did about $73 million in Q1.

Could you maybe give us a bit more granularity in terms of the remainder and how that's going to be distributed throughout the remainder of 2021?.

Cosmos, it's Jamie here. Yes, I can take that..

Hi Jamie..

Yes. It should be pretty evenly distributed. You will note, we had $16.8 million of what we classify as capital advances in the first quarter as well. So that's deposits for long lead items for the contractor. So if you factor that in, the actual cash spending was a bit higher in Q1. But overall I would expect that capital to be incurred pretty evenly..

Great. Thanks a lot guys. Those are all the questions I have. Thank you..

Thank you. The next question is from Mike Parkin of National Bank. Please go ahead. Your line is now open..

Hi guys. Thanks for taking my questions and congrats on certainly a solid start to the year. Following up on Cosmos' questions on Young-Davidson. Just with respect to the stopes, I know they have always kind of been massive.

But is there any movement to using larger stopes in the underground now? Or is that pretty much similar sizes to what you have been extracting for the last year or so?.

Yes. Mike, it's Peter here. In the upper mine, our stope height was the 30 meters and in the lower mine, we have gone to 35 meters. And the lower mine tends to have wider zones as well. So thickness into the page, if you like.

I think we would, I don't remember the numbers exactly, but we might have been averaging 20 meters in the upper mine and more like 30 meters in the lower mine thickness. So the stopes tend to be or are on average bigger and so more tons per stope on average..

Generally, you are set up well to have that as a tailwind for you as you open up the lower mine then, in terms of productivity..

Yes..

Okay. That's great. Most of my questions are answered. Just one more. On Island, I know you guys were planning to do a bit of regional exploration last year that got delayed due to COVID. Plans are to do it this year. What could our timeframe in terms of news flow around that be? Obviously, you are having great success at the actual Island mine.

Just wondering if you stumble upon something else that's interesting, when could we maybe see initial results?.

Yes. I guess as the year progresses, we do have one drill, let's say, that's going to be poking around more regional targets. But continue to have 2.5 or three on surface and a couple underground as well drilling. So yes, we a got lots of exciting things to look at in the regional setting. And I can't give you a time frame on when you will see results.

currently waiting for assays on some of those also. There you go..

All right. Well, that's it for me. Thanks so much..

Thank you. The next question is from John Tumazos of John Tumazos Very Independent Research. Please go ahead. Your line is now open..

Thank you for taking my question.

With the emphasis of the Turkish projects, how will you reallocate management time and resources? Does this mean a little more attention for Lynn Lake? Does this mean a little more exploration budget or potentially a property acquisition? Separately, I just want to commend you for your adherence to the Foreign Corrupt Practices Act, not caving into troubles in the third world.

And if you need to commemorate several thousand genocides in addition to the Armenian genocide, my family can help you with that content and history. Thank you. I am kidding here a little bit, but I commend what you are doing..

This is John McCluskey. I will take your question. Just to see that, we were not sacrificing budget or management time on the back of what we were involved with in Turkey, essentially everything going on at the company was being well managed in relation to Turkey.

So I would say that given the fact that we weren't doing any work in Turkey over the last year, the bulk of the responsibility for what was going on was really being handled by the Turkish team. We have about 16 people employed in Turkey. We will be reducing that team, of course, going forward.

But given the fact that they were the ones responsible for what was going on for the vast majority of the work, there is going to be really no big change to the way we manage things..

Good for sticking up for your rights. Thank you..

Thank you..

Thank you. The last question is from Kerry Smith of Haywood Securities. Please go ahead. Your line is now open..

Thanks operator.

John, what if the claim for Turkey actually get filed? Like, how long does it take to file that claim?.

Just generally within a couple of weeks when you announce that you are going to be filing a claim, you would actually file the actual claim. So it starts out with effectively something like this, with a news release and a notice. And then you report. So it's something that you do a fair amount of preparation on.

And so we were sort of well prepared going into the announcement. So it won't be too long..

Okay. Great. Thanks.

And then Peter, in Q2, are there any large maintenance or no maintenance shutdowns planned at YD?.

I mean we have maintenance shutdowns every quarter, but nothing that would impact the numbers..

Right.

So nothing extraordinary basically?.

No..

Okay. Got you.

And when does the pre-strip also actually finish? And will the ore that's left in that pit actually run you through to the startup of La Yaqui Grande then?.

Sorry, when does the pre-strip at El Salto finishes, was that your question?.

Yes..

Towards the end of this year. And yes, we have enough ore between and in excess, between pit Mulatos and the stockpiles in Cerro Pelon, all are drill sources to well take us to the start of La Yaqui Grande..

Got you. Okay.

And then just a last question on the new hedges that you added post the end of the quarter, Jamie, the 46,000 ounces through to the end of this year, would that kind of be evenly spread over the course of the next nine months then? Is that the way to model it?.

Yes. That's right, Kerry..

Okay. That's great. Thanks very much guys..

Thank you. There are no further questions at this time. This concludes this morning's 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..