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 thanks to everyone for attending Alamos’ First Quarter 2022 Conference Call. In addition to myself, we have on the line today, John McCluskey, our President and CEO; Peter MacPhail, Chief Operating Officer. We will be referring to a presentation during the conference call that's available to the webcast and on our website.

I would also like to remind everyone that our presentation will be followed by a question-and-answer 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. This presentation has been reviewed and approved by Chris Bostwick, our Senior Vice President 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 US dollars unless otherwise noted.

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

Thanks very much Jamie and very good morning to everyone. So we'll start with slide 3. We produced 99,000 ounces of gold in the first quarter in line with guidance. Young-Davidson had another solid quarter with average mining rates exceeding the design rate, offsetting planned lower production from Mulatos.

As with production, our costs were consistent with first quarter guidance, and both are expected to improve through the year. We expect higher grades from Island gold to contribute to stronger production in the second quarter and by La Yaqui Grand to drive a more significant increase in production and decreasing cost in the second half of the year.

We remain well positioned to meet our full year guidance, and with higher production, lower costs and lower capital spending, we expect to transition to positive free cash flow in the second half of 2022.

Now turning to slide 4, we are advancing our growth initiatives, and expected to deliver on several significant catalysts starting in the middle of 2022. At Island Gold, we achieved a key permitting milestone with the approval of the closure plan amendments in March, allowing us to ramp up construction activities on the phase three expansion.

We held a groundbreaking ceremony earlier in April with key stakeholders, including the Federal Member of Parliament, the provincial Minister of Northern development of mines, the Minister of Energy, indigenous partners, and municipal representatives.

As we ramp up construction activities, we are also working on an optimized mined plan to be released mid-year, given the 37% increase in mineral reserves and resources since the phase three expansion study was completed in 2020, including higher grade additions in proximity to the plan shaft.

We expect the new mined plan to highlight a significantly more valuable operation. Within the Mulatos district, La Yaqui Grande construction is more than 90% completed and we expect to start stacking and leaching ore in June.

With initial production expected in the third quarter, La Yaqui Grande will transform the Mulatos district, bringing higher production and significantly lower costs. Finally at Lynn Lake, we continue to advance permitting and expect approval for the environmental impact statement in the second half of this year.

And moving to slide 5, these catalysts are key components of our strong long-term outlook. We expect La Yaqui Grande and higher grades in Island Gold to drive our production closer to 500,000 ounces per year over the next few years, with all-in sustaining costs, decreasing 18% to approximately $1,000 per ounce by 2024.

Following the completion of the phase three expansion at Island Gold, and with the development of Lynn Lake, we have the capacity to increase our production by 65% to approximately 750,000 ounces of gold per year at 30% lower all-in sustaining costs of $800 per ounce.

We also have additional upside opportunities through the updated phase three mined plan at Island Gold, as well as with the development of the new higher grade PDA underground deposit at Mulatos, which we will be detailing later this year. We have a number of attractive growth opportunities and we control the pace of development.

Island Gold is one of the highest grade and lowest cost mines in Canada and our most attractive growth asset as our highest return and lowest risk investment, we will continue to prioritize allocating capital to the expansion at Island Gold.

With our strong balance sheet and free cash flow generation returning in the second half of 2022, we can fund this growth internally while providing ongoing returns to shareholders through our dividend and share buybacks. I'll now turn the call over to our CFO, Jamie Porter to review our financial performance..

Thank you, John. Moving on to slide 6, we sold 98,500 ounces of gold at a realized price of $1,874 per ounce for revenues of $185 million in the quarter. As expected total cash costs of $992 per ounce and all-in sustaining costs of $1,360 per ounce were higher than our full year guidance.

Driven by lower grades at Island Gold and the continued processing of stockpiled ore at Mulatos. We expect similar costs in the second quarter, and again as previously guided significantly lower costs in the second half of the year with the start of production from La Yaqui Grande.

We continue to see inflation across many of our input costs including diesel, cyanide, steel and labor. We have actively mitigated this impact through various means including hedging, and long-term contracts.

We took an active approach to hedging early in the year, hedging the majority of our Canadian dollar exposure for 2022 as well as our diesel exposure at our Canadian mines. We are also less exposed to input costs such as diesel given that our Canadian operations are underground mines that are connected to grid power.

Operating cash flow before change to non-cash working capital was $71 million or $0.18 per share in the first quarter.

We reported a net loss of $9 million for the first quarter which included a non-cash after tax impairment charge of $27 million triggered by the sales of the non-core Esperanza project, unrealized foreign exchange gains of $6 million, which were recorded within deferred taxes and foreign exchange and other losses of $6 million.

Excluding these items, our adjusted net earnings were $18 million or $0.05 per share. In February, we announced the sale the Esperanza project to Zacatecas Silver Corp for total consideration about $60 million.

From an accounting perspective, the fair value of the consideration received was less than the carrying value of Esperanza, resulting in a non-cash impairment charge of $27 million after tax.

Capital spending totaled $87 million in the first quarter, including $23 million in sustaining capital, $59 million of growth capital and $6 million of capitalized exploration.

We expect capital spending to increase in the second quarter as spending on the phase three expansion at Island Gold ramps up and then to trend lower in the second half of the year following completion of construction of La Yaqui Grande.

Free cash flow in the quarter was negative $41 million primarily driven by capital spending in La Yaqui Grande and planned lower gold sales. We expect to return to positive free cash flow in the second half of 2022 with the start of low cost production from La Yaqui Grande and lower growth capital spending, with its construction complete.

We continue to return capital to shareholders through our quarterly dividend of $10 million or $0.10 per share on an annualized basis. And with recent weakness in the share price, we expect to be more aggressive with respect to our share buyback.

We remain debt free and ended the quarter with $124 million in cash, $22 million of equity securities and $500 million of undrawn credit capacity. We remain well positioned to fund our internal growth projects while supporting ongoing returns to shareholders.

I will now turn the call over to our Chief Operating Officer, Peter MacPhail to provide an overview of our operations..

Thank you, Jamie. Moving to slide 7, we had another excellent quarter at Young-Davidson producing 51,900 houses generally mine-site free cash flow of $23 million. Average mining rate of 8,200 tons per day exceeded design rates of 8,000 tons per day for the third consecutive quarter.

Mill throughput increased to average a record of 8,200 tons per day with grades mined and milled at the top end of guidance. Total cash costs of $840 per ounce, and mine-site all-in sustaining costs of $1,044 per ounce were both below guidance driven by higher grades and the strong operating performance.

With a solid start to the year, Young-Davidson remains well on track to meet its full year production and cost guidance. Over to slide 8, Island Gold produced 24,500 ounces of gold, and cash cost of $745 per ounce and mine-site all-in sustaining cost of $1,083 per ounce.

Production and costs were impacted by lower mill throughput and planned lower grades reflecting mine sequencing. The lower mill throughput of 11,120 tons per day was driven by colder than average conditions in January and February, which resulted in all four handling issues on the surface, primarily with freezing in the ore bins.

With planned higher grades through the rest of the year, we expect stronger production and lower costs and remain on track to achieve our full year guidance.

Over to slide 9, the approval of the closure plan amendment for Island Gold in March, with a key permitting milestone allowing for the ramp up of construction activities of the phase three expansion. Earlier this month, we officially broke ground on the expansion and look forward to starting on the pre-sink of shaft in July.

We're also working on an updated mined plan to be released mid-year, which will incorporate the 1.4 million ounce increase in high grade reserves and resources since the phase three expansion study was completed in 2020. This will also incorporate the higher grade additions in Island East sooner.

With a larger reserve and resource base and higher production earlier in the mine life we expect the value of Island Gold will continue to grow.

Moving to slide 10, Mulatos produced 22,500 ounces in the first quarter at total cash costs of mine-site all-in sustaining cost of $1,570 and $1,782 per ounce respectively, which was consistent with our first half guidance for the operation.

Production and costs are expected to remain at similar levels for the second quarter before reduction ramps up and cost decrease in the second half of the year as La Yaqui Grande comes online. As previously guided, we expect approximately 65% of Mulatos full year production to come in the second half of the year at substantially lower costs.

Moving to slide 11, construction of La Yaqui Grande is now 90% complete and the operation remains on schedule to achieve commercial production in third quarter of this year. In the first quarter, the primary Crusher was commissioned. The secondary tertiary crushers are being commissioned as we speak.

The agglomeration system and pond construction are complete and heap leach pad carbon columns and ADR plant are over 90% complete. To date, 16,000 ounces of gold have been mined. We expect to be stacking and leaching ore starting in June, with production ramping up through the second half of this year.

La Yaqui Grande is expected to significantly improve the production cost profiles in Mulatos and drive strong free cash flow from the operation starting in the third quarter. With that, I'll turn the call back to John..

Thank you, Peter. That concludes our formal presentation. And I'll now turn the call back to the operator and open it up for your calls to questions..

[Operator Instructions] And the first question is from Trevor Turnbull from Scotia Bank..

Yes, thanks. I guess the first question, probably for Peter. I was just curious with the really high performance of throughput at Young-Davidson.

Are you bumping up against any permitting restrictions? Or you have plenty of room to go beyond 8,000 tons a day?.

Yes, we've got lots of room there, Trevor, we've, in fact, I think we're permitted to go well beyond there, at least 10,000 tons a day. But we don't have necessarily infrastructure to do that. But the permitting is not going to be an issue there..

Okay, yes, I just wasn't expecting you guys to be so much above 8,000. But sounds like things are going really well..

But we need to be above 8,000 for the times that we're below 8,000 will average it, Trevor..

No, I understand. And then maybe another question for you just with La Yaqui Grande getting set to start stacking.

Can you remind us a bit about the timing of the leach cycle? Is it relatively fast such that the stacked ounces are going to correspond fairly well with what you recover in the same period?.

Yes, Yaqui Grandes is much like Lynn Lake which is high recovery, fast bleaching fuggy silica oxide of ore so it's the best stuff that we've ever seen in the Mulatos district. So yes, it's going to be good..

Okay. And then the last question I had, just with respect to Turkey and the investment treaty claim that's out.

Outstanding, I was just wondering, does that preclude you from looking at any other options for the property such as sale or partnership? Or you're kind of locked in now to the Investment Treaty claim?.

This is John, Trevor. No, that doesn't preclude us in any way..

And is there any update you can give us just on Turkey kind of where things are at?.

There's nothing really to report just going through the process..

The next question is from Cosmos Chiu from CIBC..

Hi, thanks, John, Jamie and Peter. Maybe my first question is on inflation. Jamie, it's good to hear that you've hedged a lot of the input cost. But I guess one input cost you cannot really hedge is labor.

Could you maybe talk about the labor situation and inflation in cost of labor in Canada?.

Sure, Cosmos. Yes, no, so we set our budget for 2022, I think our average salary increase in Mexico was between 5% and 6%. And in Canada, for our Northern Ontario operations was about 3.5%. So that's pretty consistent with market. So we are seeing upward pressure.

And I wouldn't be surprised if we see labor rates going beyond that, when we go to set our 2023 budget..

Yes.

And that leads well into my next question, Jamie, can you remind us what kind of inflation assumption overall did you factor into 2022 cost guidance? And is that still what consistent with what we've seen so far in Q1?.

Yes. So we assumed a 5% across the board inflation in increase that's what's inherent in our cost guidance. And as we indicated in our MD&A, and press release, we don't see that the need at this point to revise our cost guidance upwards.

We're fortunate that we hedged the majority of our Canadian dollar exposure, we've hedged our Canadian diesel exposure at rates 45% below current spot. So that's benefiting us for 2022 and I think we're in pretty good shape, we will see inflationary impacts, again, as we look into 2023 and beyond..

Of course, maybe switching gears a little bit on Lynn Lake. Good to hear that you're moving ahead with it, and hopefully you get the permitting the EIA approval later on this year. But I see that the last feasibility study was done in 2017. So could you maybe talk about that you get your EIA.

And then the next step is sort of approval of the full construction, internal approval.

But would you need to update your feasibility study first? Are you planning to, before you make that final step in terms of approving it for construction?.

Yes, that's absolutely the plan, Cosmo. So we're hoping that the permitting will come in later this year, at which point we'll be releasing an updated technical report feasibility study that will provide detailed capital and operating cost estimates in today's dollars.

But as John mentioned in his comments, our priority from a capital allocation perspective is Island Gold. So that's where our first capital will go. There's no doubt that the Lynn Lake capital costs will be higher than what it was in December 2017.

That said, we have expanded this deposit quite significantly, and we think it's still going to be a very good project. But Island phase three and beyond is really the priority..

Of course. And then to follow up on that, I don't know how much you can tell me. But if I look at the 2017 feasibility study, it returned a 21.5% IRR.

Is that still sort of feasible in today's environment? Is that still what you're looking for? Is that what you have in mind?.

Yes, so we're targeting a north of 15% IRR. And again, that 2017 feasibility study was based on a mined plan that had 1.6 million ounces, we're up to 2.1 million ounces in reserves currently, and we see the potential for conversion of at least another 300,000 - 400,000 ounces. So that deposit is expanded considerably.

And that will support the higher capital and higher operating costs..

Great. And maybe one last question on this.

Jamie, if I work through the timeline here and understanding appreciating, as you've said, capital allocation goes to Island Gold first, but there might be a possibility that if things kind of line up you might need to construct Lynn Lake and Island Gold at the same time, is that something that's a possibility? Is that something that you're considering, although, as you said for sure, Island Gold sort of comes first?.

Cosmos, the likely, this is John. The likelihood of that scenario is very, very slim, just based on the process that we're going through right now in Manitoba. We don't really foresee that at all. And keep in mind that we're not an oil tanker, we're more of a speedboat, and we can control our rate of spend and our rate of development, as we see fit.

And if we were to proceed, there being too much stress, in an attempt to try to construct two projects at once, we just wouldn't do that. And we clearly have the option of staggering those projects to some extent maybe get a couple of years of development at Island Gold finish before say we would start at Lynn Lake, that's pretty much an option.

But keep in mind this company has built as many as three projects at once. And we were doing the big expansion at Young-Davidson, and an expansion at Island Gold, and building at Sarah Palin all at the same time.

Just worked out very quietly, nobody seemed to have any concerns about it, spent the capital and brought everything on time and on budget, and continued on. So if there was any concern about the company having say the management capacity to handle two projects at the same time, I would say that's not something we're really concerned with.

It would be more a question of capital allocation and how we want to approach it that way given the market environment at the time..

Thanks, John. I don't know if you still got that hair and that beard. Now I have this picture in my head of you on a speedboat. So I'm just putting it out there for the audience as well. So thanks again, John..

The next question is from Fahad Tariq from Credit Suisse..

Hi, thanks for taking my question. Just on the Island Gold phase three extension study. Is the right way to think about this, obviously, it'll include higher grade reserves that were not previously factored in? But at the same time, it probably will assume higher assumptions for some of the cost elements.

I'm just trying to understand, like, do those things kind of offset each other? Any thoughts there would be helpful..

I would just say this one thing that I know, there's a lot of focus on inflation right now. It's very, very topical. But with a project like Island Gold and the way it's evolved, I would -- it absolutely required us to look at it and update it. We announced phase three two years ago.

And it's surprising, how much has changed over the course of about two years, but the biggest thing that has changed is the significant increase in reserves. And those reserves are higher grade reserves. And naturally, you're going to look at revising the mined plan to bring that high grade reserve forward.

And at the same time, you really should look and we are looking at a change in scope rather than refurbishing the old mill what would it look like, for example, if we build a brand new mill say 2,400 tons a day? Well, effectively, what happens is the economies of scale, they come into play, and they're so significant in terms of their enriching the profitability of the project that they more than offset the inflation component.

So from that point of view, Island Gold is one of those very unique businesses that you see from time to time in the mining industry that can really just by virtue of the fact that it's very high grade, and it's really relatively straightforward to mine and mill, and putting all those things together that project is going to be the last one you would worry about, it's more than likely that when we come up with the economics, the increased scope for that project that we're looking at right now, and it's going to have to more than offset any inflationary costs, and I think it will..

That's really helpful. Thank you. And then just switching gears to Mulatos. I know Q3 is what everyone's kind of waiting for but before then is there any opportunity to improve the production in Q2 earnings or not really it's kind of -- it kind of set as a flat profile..

Yes, so it’s Peter here, Fahad. It's a long leach cycle in a big heap leach facility at Mulatos.

So it's, we're currently stacking or we did stack through Q1, a fair bit of this sulfidic ore which is slower leaching, we are currently transitioning to more fresh ore from the Mulatos pit that will continue over the course of Q2 and through the rest of the year and for and well into next year.

So we'll start to see that but it's like -- it's almost like a quarter behind in terms of when you see that gold coming off the pads. So it really won't impact us too much in Q2, but so two things that happen for the rest of the year.

One is that we bring on La Yaqui Grande which is much higher grade, hot fast leaching, we'll see immediate production from that, it'll be small leach pad right on plastic.

So we'll start to see that quickly as well as we'll see the effect of the fresh ore coming out of the Mulatos pit itself rather than the stockpile of sulphide ore that we've been living on for the last nine months or so..

The next question is from Kerry Smith from Haywood Securities..

Thanks operator. Good morning, everybody. Peter, first thing on the power line at Mulatos.

When do you think that would be energized and can give me a rough idea as to what the impact might be on a cost per ounce basis?.

So it's still some time away, Kerry, maybe by the end of this year is what we're now working towards.

So delays with frankly with COVID has been hurting us there getting it finished with the contractors as well as the government changed a bunch of regulations on now what you have to put in place for power monitoring and control at the substation and so there's some supply chain challenges with that so it's got pushed out a bit.

It's still a tremendous project, we'll drop our cost by -- on the order of $40 per ounce when we get it online [Multiple Speakers].

And just on the La Yaqui Grande, it looks like the grade that you've stockpiled in that 16,000 ounces that you've mined already today is pretty high. It looks like it is north of two grams. Is that correct? Because that's the average grade there is about a gram and a quarter so it's significant --..

We're not sure where you would see that, Kerry. Did we report something? No..

I saw that 200,000 ounces and 16,000 ounce contained.

Okay, I honestly don't know what the grade is. I haven't followed it that close enough more like, 1.2, is what I'm hearing. So maybe our numbers are a bit rounded or something on terms of the ton an ounces? Not sure..

Okay, perfect..

But it's performing, if anything better than at this point. It is early stages, but it's performing well..

Okay.

And how many tons do you expect to put on the pad this year at La Yaqui Grande once you start putting that ore on the pad and gather up?.

Kerry, just the more precise answer to that is that 16,000 ounces was cumulative, and the 200,000 tons was what was mined in that quarter..

Got, okay. It wasn't clear to me in the press release. Okay. Thanks for the clarification.

And can you give me a rough idea as to the ton that you think you would stack on the pads this year there, Peter?.

Yes, we are, I mean, it's designed for 10,000 tons a day. I am not sure if the mined plan quite fills this once we get it going or not.

But I think it does, so it will be in that range?.

For six months roughly then, okay, got you. Okay.

And in the gold, just on the Lynn Lake feasibility study, when you put the updated one out later this year, what's your gold price might you use for the economics that you report?.

Kerry, we present sensitivity like we typically do with those reports. So we'd use a more conservative gold price, something that's a proxy for kind of long-term consensus and around $1,650, and we show what the economics look like at a higher gold price as well. So probably $1,500, $1,700 and $1,900 would be the range of prices that we present..

Okay, perfect. And then just one last question on Mulatos. Will you still be putting some tons onto the pad that come from the stockpile in the second half, I presume.

Would that be a large amount of an inch in the second half, Peter?.

No, it's going to be maybe like somewhere around 10% or so. 10% to 20% in that range..

The next question is from Michael Parkin from National Bank..

Hi, guys, thanks for taking my question.

Just going back to Lynn Lake, when can we expect you to start the big spend on that?.

It's difficult to say because we're effectively in that -- at that point where we're negotiating impact benefit agreements with First Nations. And that's really not an easy timeline to predict. And it's very unlikely that we will see permitting from the federal side completed until after the IBA agreements are in place.

And that's just -- that's very typical for Canada. So I'm loath to throw out a date. I mean, managements are often getting questions about things that lie out of -- outside of their control.

But if I were to take a guess at it, I would guess, sometime by the, before the end of the first quarter of 2023, we should have the federal permit, something like that. That would be sort of a, it would be my outside date, but it really will depend on the pace of progress that we make and with our impact benefit Agreements..

Okay, so just to be clear, you could potentially be shovel ready for spring, like kind of this time next year, but you could potentially sequence Lynn Lake to follow, or maybe you don't have Island quite fully complete with the phase three, but you'd have it more largely complete before you would commit to the big capital, then like, is that accurate?.

That's fairly accurate. I mean, it's certainly what we'd like to have is the flexibility. I mean, it's, I mean, what if gold prices were to run to $3,000 an ounce or something like that, for example, and we're generating tremendous cash flows from operations.

It wouldn't be too much of a stretch to say, well, let's take advantage of these good gold prices and accelerate the development of Lynn Lake something like that if gold went the other way.

And we saw that cash flow from operations, comfortably support Island Gold but it'd be difficulty to piggyback on like, over and above that, we would just hold off on Lynn Lake until we could reasonably finance it.

The idea is to be able to maintain the strong balance sheets that we're known for, and develop really good quality projects at the same time. I mean, ultimately, our business is to develop mines, produce gold and make money. So at some point, we've got to get there.

But if you look back at this group of individuals around the table that we've been together for 18 years. And we've never made a false step, we've always maintained a strong balance sheet. We've always developed good operations. And we've always made money for our shareholders. And we're just going to continue to do that.

I would hate for people to think that we're going to sort of lose our mind all of a sudden, and try to do too much at once and put the company in some sort of jeopardy, we would just never do that..

Okay, no, that makes a lot of sense. Also, just on Lynn Lake, can you remind me, you've got the MacLellan and Gordon deposit, but then your latest expiration update indicated some interesting results kind of in between the two at [Indiscernible]. Where's the mill on the 2017 study? It's sitting closer to Gordon or MacLellan that I think --..

It’s at MacLellan, which is the higher tonnage deposit..

But could you see --.

Okay, I am falling short in [Indiscernible], yes, we both said it wrong. It’s MacLellan deposit..

Okay, my Scottish isn't too good.

But if you're having tremendous success at that new target, could we potentially see the geo graphic kind of center of this shift to the east?.

It's early days and all that deposit and there would be a whole new round of permitting and what not. So sure, depending on success there it could change thinking but we're nowhere near that..

The next question is from David Holperin from Stifel..

I may have overlooked it in your release.

But did you buyback any shares in the first quarter?.

No, we didn't buyback any stock in q1, we bought back about 11 million shares, $11 million worth last year. But we're blacked out for the majority of the first quarter given our year end results. So we, as I mentioned in my comments, we are looking to get more aggressive on the share buyback, especially given where our share prices currently..

And in the back half of the year, correct?.

That's right..

Okay. And I don't know if you can disclose this or not. But if you've been approached by any potential acquirer for part of your resources, or all of them..

We wouldn't talk about that on a call like this, that we -- that get us into a lot of trouble so..

Okay, I only asked because the Rite Aid Company just had a conference call two weeks ago and didn't say anything. And then it turns out they had gotten an offer during the quarter, but they didn't release it. So –.

Anything that we were sitting on about material nature, we would release to the market..

The next question is from Terence Watson from TSO Research..

Good morning. Thank you for taking my question. On the exploration you mentioned you had $22 million budgeted for Island. But you also have the 15,000 hectares outside of it. $22 million is only in the mine-site area or is it -- does it include the original exploration as well..

We've been financing both. So we've been doing both regional and near mine-site, near deposit site exploration. We have sort of parallel programs running..

But the $22 million you mentioned in the press release. That includes both, I just saw –.

Yes, it would. That does include both, yes..

And what is your program for 2022 to get a probably covered in the year end --.

The regional exploration budget for, at Island for this year is $6 million of that $22 million..

Okay. And the rest of the exploration program for the other property, Young-Davidson and onwards for the year..

So we have a budget of about $6 million for Young-Davidson and another $10 million at our Mulatos operations in Mulatos district..

Okay. Just a question I have with respect to the situation in Turkey, the recent cases have in the past, just in fact, no one Rick or Dick where [Indiscernible] made a deal with a whole bunch of partnerships in the country.

Is it possible to make a deal like that within the country itself, because they have some private interests that think you operate. And I remember the Normandy mine years ago, they got taken out and they left and somebody else comes to upgrading it.

And who else was that? I can't remember now, but there's all kinds of examples, that local interests may be interested in that and operate it, is that possibility to do something and be creative?.

Anything's possible, Terry..

Okay, but I guess somebody initiate that, right. I guess they have to..

Yes. We're not going to initiate anything like that..

And the next question is from Dalton Baretto from Canaccord Genuity..

Thanks operator. Good morning, everybody. Most of my questions have been answered. But there are a couple of aspects of the Island Gold expansion that I'd like to explore, if I may. I thought I heard in response to one of the other caller’s questions that one of the scenarios that's being looked at as part of a new study is a potential expansion.

I thought I heard 2,400 tons per day.

Correct me if I'm wrong, but the shaft is sized for 2,000 tons per day, right? And so are you also contemplating an expansion in the shaft?.

No, the shaft is not sized for 2,000 tons a day, it is sized for 3,500 tons per day of ore and waste as that goes, yes. And I throw out the number 2,400 tons a day because that happens to refer to the number we're permitted to, so and that's fairly commonly known. So, I mean, we'll determine that number. That's why we're doing this study.

And we'll have that study completed towards the end of June. So it'll be as a matter of fact, very shortly. But that's what we're working toward for permitting to 2,400 ton..

Perfect, that clarifies that. And then John, I also thought I heard you say when you were talking about capital allocation, and Island Gold versus Lynn Lake. I thought I heard you say Island Gold phase 3 and beyond.

And I'm just wondering, what were you contemplating beyond phase 3?.

Yes, that was that was Jimmy who actually made that statement and beyond and I guess what he's referring to there is Island Gold phase 3 has been published, what ‘18, almost two years ago now. And we're updating it and that would be his reference to beyond, we will come up with an updated plan one way or the other, towards the end of June.

And that may or may not reflect the change in scope, depending on what the results of that study turned out to be..

Got it, but as you just said if the shaft size for 3,500 tons per day, and given the exploration optionality of the property isn't it inconceivable that we could see further expansions?.

It's highly unlikely that we would change this shaft in terms of its capacity, we were more than likely to deepen the shaft that is something that we're looking at.

But given the grades that we're mining, just, for example, if we were to push it to 2,400 tons a day that would take us closer to 300,000 ounces of gold a year from that current 236,000 ounce rate that we're contemplating. So that's already a very significant bump in production.

Consider 300,000 ounces of gold a year at the bottom end of the first quartile and costs that's becomes one of the most profitable mines in the world at that point..

Thank you. There are no further questions registered 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..