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 thank you everyone for attending Alamos’ third quarter 2021 conference call. In addition to myself, we have on the line today John McCluskey, President and CEO and Peter MacPhail, Chief Operating Officer. We will be referring to a presentation during the conference call that’s 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 bear in mind that all the dollar amounts mentioned in this conference call are in U.S. dollars unless otherwise noted.

Now, I will turn it over to John to provide you with an overview of the quarter..

Thank you, Jamie and good morning everyone. I’d like to start with Slide 3. Our third quarter was marked by strong ongoing performances at our Canadian operations offset by short-term challenges at Mulatos as it enters the transitional period.

Consolidated gold production of 104,700 ounces was lower than guided, while total cash costs and all-in sustaining costs were broadly in line with expectations. Both were above our initial full year guidance and reflecting the impact of stronger than budgeted Canadian dollar.

A key highlight in the quarter was Young-Davidson averaging record mining rates of 8,000 tons per day, producing 50,000 ounces of gold and generating $29 million in free cash flow. The mine is performing very well and we expect it to be a strong free cash flow generator for a very long time.

Mulatos had a challenging quarter with an above average rainy season and slower than anticipated recoveries from stockpiled ore affecting both production and costs.

With Cerro Pelon winding down, stockpiles will make up a larger proportion of production from Mulatos until La Yaqui Grande starts supplying low cost production in the third quarter of 2022. Given the higher cost associated with processing this stockpiled ore, we expect costs to increase in the fourth quarter and through the first half of next year.

Mulatos costs are expected to decrease in the second half of 2022 and will be significantly lower in 2023 as La Yaqui Grande ramps up. Looking to the fourth quarter, we expect production to increase at each of our operations reflecting higher grades at Young-Davidson and operational improvements at Mulatos.

Nevertheless, with the third quarter production shortfall of Mulatos, we are reducing our annual production guidance at the operations by 15,000 ounces, or 3% on a consolidated basis to a range of 455,000 to 495,000 ounces.

Production guidance for Young-Davidson and Island Gold remain unchanged, with both operations continuing to perform well and on track to achieve full year guidance.

Given the ongoing impact of the stronger Canadian dollar and higher than planned costs at Mulatos, we are also increasing our consolidated total cash cost guidance to a range of $790 to $810 per ounce and all-in sustaining costs to a range of $1,120 to $1,140 per ounce.

Excluding the impact of the stronger Canadian dollar, costs through the first three quarters of this year are consistent with our initial guidance. Moving to Slide 4, while we encountered some challenges in the third quarter, our strong long-term outlook remains intact.

At La Yaqui Grande, construction is advancing well and remains on budget and on schedule to achieve commercial production in the third quarter of 2022. At Island Gold, the Phase 3 expansion is progressing with the focus on permitting, detailed engineering and contract tendering.

We also continue to have success growing the deposit and adding value through the drill bit with another exploration update planned in the fourth quarter. Finally, at Lynn Lake, we continue to advance permitting and expect this to be completed by the middle of next year, which would enable us to make a construction decision thereafter.

Collectively, these high returned organic growth projects support our strong outlook with production potential of 750,000 ounces per year by 2025, a significantly lower all-in sustaining cost of around $800 per ounce.

Given our solid balance sheet and ongoing cash flow generation, we can fund all this growth internally, while supporting strong ongoing returns to shareholders through our dividend and share buybacks. I will now turn the call over to our CFO, Jamie Porter, to review our financial performance.

Jamie?.

Thank you, John. Moving on to Slide 5, we sold 110,500 ounces of gold at a realized price of $1,792 per ounce for revenues of $198 million in the quarter. Gold sales were approximately 5,800 ounces more than gold produced with some ounces produced in the second quarter being sold in the third quarter.

Third quarter costs were broadly in line with guidance provided in the second quarter and higher than initial annual guidance. Total cash costs of $788 per ounce and all-in sustaining cost of $1,152 per ounce continued to be impacted by the stronger than budgeted Canadian dollar as well as higher than expected cost at Mulatos.

Our previous 2021 guidance was based on the Canadian dollar foreign exchange rate of $0.75 compared to the actual rate of $0.79 in the third quarter and $0.80 year-to-date. This has increased total cash costs by $30 per ounce and all-in sustaining costs by $45 per ounce relative to our initial guidance.

Reflecting the ongoing strength in the Canadian dollar and higher costs in Mulatos, we have increased our 2021 total cash costs and all-in sustaining cost guidance. This also reflects some of the inflationary pressures being felt across the sector and globally.

We have managed these wells through the first three quarters of the year, but do expect more of an impact in the fourth quarter and into 2022.

Operating cash flow before change to the non-cash working capital decreased 21% year-over-year to $102 million or $0.26 per share in the third quarter, reflecting lower production in the lower realized gold price. Net earnings were $25 million or $0.06 per share.

Excluding the unrealized foreign exchange loss of $13 million, adjusted net earnings were $38 million or $0.10 per share. Capital spending totaled $89 million in the third quarter, including $31 million of sustaining capital, $51 million of growth capital, and $7 million of capitalized exploration.

Capital spending is expected to increase in the fourth quarter reflecting the ramp up of capital spending on the Phase 3 expansion at Island gold and at La Yaqui Grande. With significant capital expenditures scheduled for late in the year, we do see the potential for some fourth quarter capital to be deferred to early 2022.

Free cash flow in the third quarter was negative $8 million reflecting higher capital spending at La Yaqui Grande and Island Gold as well as lower than anticipated production. In addition to our quarterly dividends of $10 million, we also repurchased 600,000 shares at a cost of $4.5 million or $750 per share in the third quarter.

Year-to-date, we have returned more than $35 million to shareholders in the form of dividends and share buybacks. We are on track to return more than $45 million for the full year. We remain debt free and ended the quarter with $211 million in cash, $23 million of equity securities, and $500 million of undrawn credit capacity.

Combined with strong ongoing cash flow generation, we remain very well positioned to fund our growth projects internally. I will now turn the call over to our Chief Operating Officer, Peter MacPhail to provide an overview of operations for the quarter..

Thank you, Jamie. Moving to Slide 6, since the completion of the lower mine expansion at Young-Davidson mid last year, underground mining rates have consistently met or exceeded the target rates. This trend continued in the third quarter, with underground mining rates increasing to average a record 8,000 tons per day.

This drove gold production higher to 50,000 ounces and costs lower, contributing to $29 million of mine site free cash flow in the quarter. Total cash costs of $810 per ounce in mine site all-in sustaining cost of $1,051 per ounce, decreased 14% and 9% respectively from the second quarter reflecting increased operating efficiencies.

Young-Davidson is well-positioned to meet its full year production guidance with consistent mining rates of 8,000 tons per day and higher grades expected to drive another strong result in the fourth quarter.

Given the impact of the stronger Canadian dollar, we have increased full year total cash cost guidance to approximately $850 per ounce and all-in sustaining cost to around $1,060 per ounce. Excluding this impact, costs were in line with initial guidance through the first three quarters of this year.

With $70 million of mine site free cash flow year-to-date and higher production expected in the fourth quarter, Young-Davidson remains on track to generate mine site free cash flow of approximately $100 million in 2021.

Over to Slide 7, Island Gold produced 28,000 ounces of gold in the quarter, 16% lower than the second quarter, reflecting lower tons processed. This was due to 8 days of downtime for unplanned maintenance in the mill early in the quarter.

These one-time maintenance issues were resolved in July with the mill operating at full capacity in August and September. Additional maintenance protocols have been put in place along with an increase in spares – critical spares to mitigate future unplanned downtime.

As previously guided, grades mined and processed were similar to those in the second quarter. Grades are expected to increase slightly in the fourth quarter to average reserve grade of approximately 10 grams per ton for the full year.

Total cash costs and mine site all-in sustaining costs were both higher than initial guidance, reflecting the stronger Canadian dollar and unplanned mill downtime. Given the strong performance year-to-date, Island Gold remains on track to meet full year production guidance.

As with Young-Davidson, we have increased full year total cash cost guidance to approximately $525 per ounce and mine site all-in sustaining cost to about $865 per ounce reflecting the stronger Canadian dollar. Work continues to ramp up on the Phase 3 expansion with the precinct of the shaft expected to begin in mid-2022.

The current focus remains on permitting detailed engineering of the shaft and associated infrastructure as well as the pace plant. Contract tendering is ongoing with key contracts now in place for the shaft sinking, head works, shaft site surface works. Gross capital spending totaled $14 million in third quarter.

While spending is expected to increase in the fourth quarter, some of the planned 2021 capital could be deferred into early 2022. Moving to Slide 8, Mulatos produced 26,700 ounces in the third quarter at total cash costs and mine site of all-in sustaining cost of $927 and $1,124 per ounce respectively.

The third quarter was impacted by the above average rainy seasons and slower than anticipated recoveries from stockpiled ore stacked in the quarter. The heavier rainfall in wet ore limited stacking rates to 1,700 tons per day, which is about 20% below our guidance.

With Cerro Pelon winding down, we are also stacking a higher proportion of previously mined and stockpiled ore until La Yaqui Grande comes online in the second half of 2022. The lease cycle for this stockpiled ore has been longer than anticipated and processing costs higher than expected giving the additional reagents required.

We are expecting higher production from Mulatos in the fourth quarter. However, given the weaker third quarter we are reducing full year production guidance by 15,000 ounces.

Given the higher processing cost associated with the stockpiled ore, we are expecting total cash cost and all-in sustaining cost to increase in the fourth quarter and have revised our 2021 guidance accordingly.

We expect higher cost to persist through the first half of 2022 before decreasing in the second half of 2022 as La Yaqui Grande ramps up production. Mine site free cash flow was negative $20 million in the quarter, reflecting $23 million of growth capital and capital advances related to La Yaqui Grande.

Moving to Slide 9, construction of La Yaqui Grande remains on track as can be seen in the photos. The project is really coming along nicely. Pre-stripping of the open pit continues to ramp up with over 6 million tons of waste mined in the quarter.

The hall roads are now completed, solution ponds are lined, and the crushing circuit in ADR plant, are advancing well. The project remains on schedule for commercial production in the third quarter of 2022 and on budget with $70 million of growth capital spent in $18 million advanced contractors towards the initial $137 million capital estimate.

We expect cost to decrease at Mulatos in the second half of 2022 and more significantly into 2023 with La Yaqui Grande representing the majority of production from the Mulatos district. With that, I will turn the call back to John..

Thank you, Peter. We will now open the lines for Q&A session. And I will turn the call to the operator to get that going. Thank you..

Thank you, Mr. McCluskey. [Operator Instructions] And the first question is from Cosmos Chiu from CIBC. Please go ahead..

Good morning. Thanks, John, Jamie and Peter. Maybe my first question is on Mulatos, if I look at your MD&A, I see that as you mentioned the MD&A recovery was 49% in Q3, year-to-date, it was 55%. So, it’s come down. Last year, it was over 70%.

I think in part due to this stockpile work, if I remember correctly, the stockpile ore, if it is the stockpile material from day one since 2005, I seem to remember that the recovery of the material is lower. I guess my question is going around this is ultimately, I know the leach cycle is longer.

But ultimately, what kind of recovery should we be expecting from this new mix that has more of the stockpile of material on the leach pad these days?.

Yes. Hey, Cosmos, it’s Peter..

Hi, Peter..

The recovery if you look at this to the ounces on versus off, recovery in the quarter of 49%. So, part of that is because of just the delay, really put two things there, the rainy season dilutes things on us. It was a particularly wet rainy season. And so those ounces are coming out in the fourth quarter.

And longer leach curve associated with that stockpile ore. What we carry for that stockpiled ore in our recovery model is something in the order of 50%. However, it tends to be higher grade, so then – and it’s already been mined. So, it’s a work because we – the costs of mining have already been incurred.

So, yes, that would be my answer to those questions..

Okay. And then maybe, as a follow-up, Peter. How much of this stockpile material do you have? And I am just trying to get a clear picture in terms of how the mix of the different ore types is going to be as we transition to La Yaqui Grande. In the meantime, there is also El Salto.

I believe that’s been now stripped, maybe, and that should be coming in as well.

So, how should we look at it in terms of the mix of ore that’s being stacked on the leach pad?.

Yes. So, I mean as always at Mulatos, we have a number of ore sources. There is still some Victor ores. There is still some San Carlos open pit ore. Those are – those are going to wind down towards – in the coming months.

Cerro Pelon is winding down, Salto is going to be ramping up starting early next year, and it will come online more as the year progresses and the stockpiled ore. So, between now and I would say mid next year when La Yaqui Grande is on stream, about 50% of our ounces would be coming from the stockpiled ore..

And can you just let me – would you be able to tell me how much of the stockpiled ore do you still have…?.

It’s in the range of 5 million tons or 6 million tons. I think we had 9 million tons at the beginning of this year. And we have been processing it through the year. And I have to give the exact number Cosmos. But we still have quite a quite a stack of it..

Okay, for sure. And then maybe switching gears to cost here, as you mentioned, the lead time now needs, as we will experience an increase in cost due to higher reagent usage and cost.

Maybe breaking it down, how much more reagent does the stockpile ore need? And how much cost increase are you anticipating for this reagent, which one is a larger portion of that cost increase?.

So, I mean, it requires more lime and cyanide to be specific that those are the – and caustic as well. So, we just put everything we put on there is increased for this stockpiled ore. And it’s different zones of the stockpiled ore has different requirements.

But if I were – and we are going through our planning process for next year now, so I mean we will come out with guidance in due course.

But what we are seeing is those ounces are probably coming in at somewhere in the range of an all-in sustaining cost of maybe in the 1500 ounce range for that, 50% of our product production for the next six months or eight months. And – but part of that cost is non-cash because of the associated cost of building that stockpile.

So, I think there is a couple $100 of thereabouts, that’s non-cash. So, I mean, they still make good money. But there you go..

Perfect. And maybe in terms of a broader question here, following up on that, Jamie as you mentioned, you have managed costs really well in the first three quarters, but there are inflationary pressures on operating costs in the industry. And so we should be expecting some increases, some impact in Q4 and into 2022.

We have just talked about Mulatos and some of the reagent costs.

But where are you seeing some of the inflationary pressures? Is it in Mexico? Is it in Canada? Is it in the reagent costs? Is it in labor, or is it is it just everything?.

Yes. Cosmos, it’s Jamie. We have just gone through our budgeting process. And I think it is really across the board. I mean, across all of our operations, we are seeing slightly higher expected labor increases than what we would have had in the past year.

Obviously, the diesel prices has increased and certain consumable costs, grinding media and anything to do with steel has gone up in some cases significantly. So, a lot of our input costs have been subject to multiyear purchase contracts that are expiring. And so we are seeing an uptick.

I think across the industry, from an operating cost perspective, it’s in the 5% to 7% range. And I would say our experience has been consistent with that..

Great. Thanks a lot. Those other questions I have. Thanks again for the call..

Thank you. The next question is from Mike Parkin from National Bank Financial. Please go ahead..

Hi, guys. Thanks for taking my questions.

One, going back to Mexico, Cerro Pelon, you are indicating that will be depleted in the fourth quarter, is it expected to kind of be a full quarter of tonnage or kind of a half quarter?.

Yes. We are – it will be at some time in November that we wind up mining there. But the ounces will continue to come off the pad through the quarter..

Right. Okay.

And then just kind of revisiting inflationary kind of comments, as you are kind of ramping up the Phase 3 expansion, can you just remind us in terms of like what additional manpower you have to bring on through contractors and so? And how you are finding that availability? We are hearing that of labor, market tightness in Canada? And are you seeing any signs of the higher diesel price is starting to kind of revive demanded as oil patch or people and increasing competition for staff there?.

Yes. On the contractor side, I mean yes, I would say we are, as everyone is, the labor market is tightening up. It hasn’t hurt our Canadian operations. It hasn’t heard any of our operations, frankly. Our turnover rate hasn’t gone up appreciably kind of year-over-year for the last number of years.

As we need to bring on contractors for various things, I mean thinking a shaft is not a lot of people, there is a lot of time. And so we have now awarded that contract to Redpath. I think we can say that, I don’t think that’s confidential.

And they have a good supply of, contractors, a lot of them Canadian based I’d like to work in their home country and close to home. So, I think that will be fine. Building a pace plant or expanding a mill, those will also be contractors, and we will be contracting with outfits that will supply those folks.

So, we haven’t – if it’s tougher to get people, the cost associated with that may go up a little bit. So, we are not quite there in our contract letting it. But we have secured the shaft thinking portion of this and we are not seeing any concerns of that..

Alright. Thanks very much.

And then just one more down in Mexico, what should we be kind of modeling for the handle cost of the stockpiles there on a dollar per ton basis?.

Yes. It’s around $1 a ton..

Thanks. And can you – it’s been a while since I have visited, but diesel prices used to be kind of independent of spot market in Mexico.

Is that still the case where the government still dictates how prices kind of change year-to-year?.

Do you want to take that Jamie?.

Yes. No, I think you are right. I mean, we pay to Pemex, the state monopoly. But I think the current rate we are paying is more consistent with market prices..

Okay, alright. That’s it for me guys. Thanks so much..

[Operator Instructions] The next question is from Kerry Smith from Haywood Securities. Please go ahead..

Thanks, operator.

The first question I had maybe for Peter is with this slower leach cycle and the higher reagent costs for that stockpiled or Mulatos? Is there any concern that that maybe the ultimate recovery on that material won’t get to what you are targeting? And maybe the reagent cost will actually be higher on average over the course of time, or are you thinking it’s still going to be similar recovery to what you sort of expected just going to take longer?.

Yes. There is – so a couple of things going for us. I mean, yes, so the reagent costs are higher on that stuff, as it’s been sitting there longer, sulfidic ore. We need to put more lime on it, more cyanide on it to reach the gold. It is also higher grade. So, that’s going for us. Recoveries are also maybe not as bad as when we put it down there.

So, there is a lot of things that play there of that whatever we have 6 million tons or 7 million tons left of stockpiles. Are there – is there a portion of that it’s too low grade or low recovery or a high reagent costs to process. There is a chance for that, but we will work through that and we won’t put it on the path if it doesn’t make sense..

Okay.

So, yes, you are not really that concerned about it? It is a bit slower, but you are not worried that you are going to…?.

Yes, it’s forward because it’s sulfide. It’s lower recovery, because it’s sulfide. It’s higher cost, because it’s sulfide. Yes, I mean, it’s just – it’s going to be – it’s going to cause us a lumpy couple of quarters. But then we will be lumpy in the other direction with La Yaqui Grande. It’s going to be booming, so..

Great. Okay. That’s helpful. Thanks Peter.

And then maybe for Jamie, just on the $137 million of CapEx, La Yaqui Grande, can you remind me how much of that was the pre-strip? And how much of that pre-strip is actually done as of today? I think you gave a full close of how many times you have moved, I just wanted percentage wise, how much of that pre-strip is actually done?.

So yes, about 75% of the total capital cost of La Yaqui Grande was pre-stripped. And in terms of our percentage completion on that, I don’t have that number in front of me, Kerry. But we are on track and on schedule. As Peter said, once La Yaqui Grande comes online, we will be – production is going to increase pretty dramatically.

And our costs are going to be cut in half. And we remain on schedule. And even better, we remain on budget, like we are consistent with our capital budget there. We are not seeing any cost overruns..

Okay. That’s awesome. Thank you.

And then, Peter can you elaborate a bit more on what the issue was with the mill?.

Yes. So, I mean a couple of power bumps and fried motors and sanding out CIL tanks that have taken days to un-sand by hosing them out, followed by getting it back up and running, burning out pumps and waiting for new pumps to show up. It was just was unfortunate.

And we are now – we have like many spare pumps on site to deal with any similar thing in the future. So, it is a – I mean that build was built in 1985. And it’s been expanded a few times, and we are going to expand it again. But we are – we will expand it really good, good stuff..

Okay. Thanks very much. I appreciate it..

Kerry, if I have anything to say about it, we are not going to expand it again. We are just because we are going to make that clear. We are debating that right now. And we are waiting for the numbers to come in by the end of this quarter. And I would like to think it’s going to go a lot better than that..

Thanks. Okay, great. Thank you, John. Appreciate it..

Operator, are there any further questions?.

My apologies, 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..