Conference Transcript - AGI 2026-02-23

Brian Quost, Analyst — BMO

Good afternoon again, ladies and gentlemen. My name is Brian Quost. I'm one of the research analysts here at BMO. Our next company to present is Alamos Gold. Alamos Gold is a Canadian-based mid-tier gold producer that owns and operates the Young Davidson Mine and Island Gold District in Canada. The Milados Mine in Mexico has a strong portfolio of development assets, particularly in Canada. Here to give us an update today is John McClussey, President, CEO and Director. He will We'll be making some formal remarks, and then we'll come down and have a bit of a fireside chat. But if you guys would like to put in some questions in the app, I'm happy to read those out, and there will be opportunities to ask questions from the floor as well. So with no further ado, please take it away, John.

John McCluskey, CEO

Thank you, Brian. Thanks again to BMO for having us here. And I must admit, when I first came to BMO back in 2004 was my first conference. I could never imagine the day we'd be here at a $5,200 gold price and the way that's affected the whole market it's just been it's been spectacular I have a few more remarks I'm going to make today simply go through a set of slides at a very high level and then Brian and I'll sit down and do some Q&A these are our cautionary notes. Please pay attention to those. So Alamos is a company started in 2001, a really small exploration company at the time. We obtained an option to purchase the Mulatto's project in Mexico. That was our foundation asset. That mine's gone on to produce close to 4 million ounces of gold. It's generated $900 million in free cash flow. It's just been a fantastic asset It still has more than a decade of production in front of it based on what we know. But every five years, we've made a new discovery there. And we took what was originally a six-year mine life. And we've extended it to 20 years. And we've got lots of additional production to come. We took the decision back in 2015 to diversify and essentially produce gold for more assets. And we focused on Canada. and that's where we picked up initially our Young Davidson deposit. We picked up Lynn Lake in northern Manitoba and then we picked up the Island Gold Project in 2017. We did all those acquisitions between 2015 and 2017 right near the bottom of the cycle at that time. Of course, everybody was asking, how do you know that's the bottom of the cycle? And that's a very good question. We happened to be right on that one, though. It turned right after that. and, you know, look at the run we've been on. This gives us a great suite of assets. We will produce just over 600,000 ounces of gold this year from our producing mines. We're on our way to a million ounces of production. We're going to get there by expanding our Island Gold District and ultimately building Lynn Lake, which we'll bring on by 2029, and that'll take us over a million ounces of annualized production. Over that time frame, our costs will decline as we put more capital into Island Gold and develop the shaft that we've been working on now for a couple of years. It'll be finished later this year. We're practically at shaft bottom now. But that's going to bring our costs down from this $1,500 range down to the $1,200 range. And you can imagine if we have a $5,000 gold price, what amazing margins that will be. Lynn Lake will add additional low cost because it will have all-in sustaining costs of roughly $1,000 an ounce. So at the moment, even though we started in Mexico, initially 100% of our asset value was in Mexico. Now 90% of our asset value is in Canada, and Mulattos represents about 10% of our nav we've had a tremendous run it this is just showing back to about 2001 or so we've been a great out performer of of the gold price and of of the index and you know it's been it's been predicated on a number of things going very very well for us we've done extraordinarily well on exploration we've done very well at expanding our our assets and that's that growth is going to continue and growth is I have to say come in and out of fashion in the market and at the time we took a decision to grow and invest very heavily in our in our future it was not a very popular thing to do in the market. And it's worth mentioning because it shows that Alamos isn't a company that basically just pursues the flavor of the month. We have a very specific and well-executed business strategy. It means acquiring things cheaply, investing heavily in exploration to expand on them, and then investing the capital in order to capitalize on the on the good results. And this shows some of the value that we've created in M&A. I guess the most striking one is perhaps Mulatto's because we acquired it so cheaply. It was about eight million Canadian dollars at the time and given what it's generated in terms of free cash flow and the valuation the market currently has on it, that's quite a dramatic amount of value we've created. Island Gold is probably the one that people know the most about because we acquired it at a very low price in initially, and even adding the Magino acquisition, what it was versus what it is, it shows a huge amount of value creation for our shareholders. So this is a track record that we've demonstrated over the course of the last 25 years. It's a disciplined strategy. It's worked very well, and it's created amazing returns for our shareholders. This sort of shows it in a bar chart fashion. It's interesting, if you go back to 2015, when we only owned Mulatto's, we had about 1.8 million ounces or so of reserves remaining at Mulatto's, and that's at the point in time we decided to go on this very aggressive acquisition strategy and drilling off resources from our new acquisitions. And you can see what we've done in terms of growth in reserves under 2 million ounces to now in excess of 16 million ounces. And that's net of depletion. And this is during a period of time where our industry has really had a problem replacing reserves. And, in fact, most of the majors are having some real difficulty with that. So, you know, we think this is a really strong differentiator. We think it's a way that we'll continue to increase value for our shareholders. We don't only look on an aggregate basis. We also look at it on per-share metrics, and you can see from these various bar charts that in terms of gold per ounce, in terms of cash flow per ounce, and so forth, if you look at it on a per-share basis, all of the transactions that we've done have effectively been accretive, and they've added shareholder value. And the striking ones on this chart are cash flow per share and the gold reserves per share. We've just done extraordinarily well on that front. This is an overview of the Island Gold District. This is a great example of how we go about executing on this strategy when we acquired it for around $600 million. dollars. Frankly, at the time, the market thought this was a pretty high price to pay for the asset as it was, but we've taken it from under a million ounces of reserves to, on a combined basis, having consolidated the district, we're sitting on over 8 million ounces of reserves and another 3 million ounces in resources. Over that time, we've increased production from about 100,000 ounces. We're currently doing about 160,000 ounces but you're going to see this continue to grow as we complete the shaft and expand production to 2,400 tons per day from underground. We also have just produced a study that shows on an integrated basis we're effectively going to move the whole district to a 20,000 ton per day throughput rate generating about a 130,000 ounces or so from the open pit and roughly 400,000 ounces from underground. So we're taking the whole the whole district up over 500,000 ounces a year, 530,000 ounces a year and at the same time bringing costs down to about $1,200 an ounce. Based on our exploration success you can see we can sustain this production for the long term. This is sort of looking ahead and we can sustain that in excess of 500,000 ounces of production for the next 10 years, and you can rest assured that before we get to the end of that 10-year period, we'll have pushed that out for another 10 years. We've been thinking about this expansion to 20,000 tons a day for some time, and even though the discussion with the market was still on the phase three expansion of island gold, which envisioned us going to 12,400 tons a day, While we were doing the construction work last year, we were building it as if it was going to be a 20,000 ton per day operation. And this sort of shows the facility that we've built to house the mill, all the tanks. We would have needed about three to run it at 12,400 tons a day. We've put in all the tanks we're going to need to run it at 20,000 tons a day. So it's a good indication of the fact that we're not just planning to go to 20,000 sun today at some point. We're fully permitted to go there, and all the construction work that we've been doing over the last year has essentially been servicing that wider outlook. We've invested very heavily in exploration in Island Gold since we acquired it. We have a $100 million exploration budget this year of which half is going to go to Island Gold. and you can see the success we've had. It was a relatively small reserve and a small operation when we started it and by now it hosts basically half the minimal inventory of the company and it's still growing fast. In addition to all the gold we're finding in close proximity to where we're mining, we've been exploring a long strike and we've just been having some fantastic results. Probably the best worth noting is one we just announced recently from from drilling that was done towards the end of the year where we hit 178 grams over about four meters. That was a spectacular result. That was in the Klein-Pick Edwards area about 10k away from from where we currently operate and it's a good indicator of the future potential of the district. So we have a very strong outlook looking forward. I've made reference to the fact that we want to build the production towards this million ounce a year threshold and do do so doing so at lower cost. This basically lays out how we're going to get there between our three operating mines and then finally adding Lynn Lake. Depending on your gold price assumptions, you pick your bar off this chart. You can see our ability to generate cash flow is really significant. And so when we talk about growth, we're talking about fully funded growth, fully permitted growth. The expansion work is underway right now and that's effectively going to take us to this million ounce threshold over the next few years. So we see ourselves as being uniquely positioned with a leading costs, leading growth profile, low risk given 90% of our NAV is in Canada, 10% in Mexico. That's a That's a very low-risk profile in a world that I think doesn't even bear mentioning. It seems to be becoming an ever-dangerous place. We are effectively, if you look at it across our peers, we've got one of the fastest growth profiles. We're going to have one of the lowest-cost profiles, one of the longest-life reserve profiles. And I think that's a great differentiator. And this is essentially where I'll conclude my talk. I'll leave this slide up there. It's an exercise that we didn't invent last week. We've been working on this kind of strategy for close to 25 years now. And it's sort of built into our DNA. And we're very accustomed to delivering. And you can rest assured we're going to be doing everything we can to make sure we get to where we're going over the next few years. With that, I'll just conclude it. Thank you.

Brian Quost, Analyst — BMO

So as John makes his way down to the chair here, I think you need this. Oh, you've got a lapel mic. So I do have some prepared questions here. Once again, if you do need any other questions answered, please feel free to raise your hand or fire them in via the app. But maybe I'll start with one of the questions I have here that sort of relates to one of the conversations we were having just before you started your talk there. How are you thinking today about mine planning, short, medium, long-term, given that we're sitting here and we're well over $5,000 an ounce, and if we were talking last year, we were under $3,000 an ounce. So the world has changed for gold miners. Is Alamos changing with it, or is there a different game in place?

John McCluskey, CEO

Well, I think we're changing in all the right ways. We're certainly not changing our strategy. That's a strategy. I didn't even invent that strategy. That was a Glamis strategy. And those guys were growing in that fashion back in the 1980s and 1990s. So I certainly can't claim ownership of it. But I did learn the lessons well. And I've been very disciplined about the way I've run the company over the last 25 years. But I will say that you will see, as an industry, we'll do what we've typically done in order to maximize reserve life, especially on assets that are depleting their reserves quickly. They're going to take advantage of higher gold prices to essentially factor that in in order to extend their mine lives. That's not really what we need to do for young Davidson Island Gold. There's very discrete lines between what we mine and what effectively is waste, what we leave behind. So it's not really sensitive to the gold price. But the only thing that we mine that is would be Magino. And to just give you some insight into that, I think with all the reserve calculation we did to arrive at that 16 million ounce figure, about 200 000 ounces was brought into that pit by virtue of the gold price so it's it's not really being driven by that we're still using fairly conservative gold price assumptions we've got certain physical limitations in terms of how we want to develop that pit anyway and so it's pretty much fixed so no we're not really um you're not using the gold price in order to to gussy up your reserves it's not going that way and maybe uh worth noting and you mentioned it in your remarks there that you're in a fairly enviable position with having organic growth in a time when the

Brian Quost, Analyst — BMO

gold price is moving higher so a couple of things to go through on on some of those growth projects you mentioned that you've gotten to the bottom of the shaft for for island gold what should investors be looking for in terms of press releases going forwards to you know given that industry has a fairly poor track record of being on time and on budget what should we be looking forward to be comfortable that you meet the the timelines for island gold expansion i i sketch you you know the industry is guilty of a lot of sins i would say that uh we've done our best uh over the tenure that i've had um to to not commit those sins you know we we don't buy at the top of the cycle.

John McCluskey, CEO

We buy at the bottom. We operate in a very disciplined way. We're quite consistent in terms of meeting our guidance. Having said that, you know, last year was the exception that proved the rule. After 14 straight quarters of either meeting or ceding guidance, we ran into some operational difficulties at our Canadian operations over the course of the winner and you know that did cause us to miss guidance for the first time in five years we take that very personally you know we that we don't we don't like to put numbers out and miss them we certainly won't do that going forward we've been much more conservative in our guidance as far as putting in a wider guidance range we were so confident in what we were doing having so consistently hit our guidance for such a long time that we had a relatively narrow band to capture the low end and the high end of what we might do the danger of doing that is you know the so-called you know what hits you out of nowhere and uh that's the kind of thing we ran into over the course of last year sort of one-offs that you know had a an effect on the quarters we were in and sort of second and third quarter we ran into a couple of difficulties albeit temporary but they were enough to essentially make us miss our production and ultimately fall short of what we intended to produce back in over the course of 2025. What we've done this year is we've set a wider band and we've set it lower at the low end to capture you know the the unknown and you know people ask me you know we have lots of loyal shareholders and they say well how do you know for sure you're going to get you never know what you're going to get hit with but I think we've we've taken into account you know the the how bad could it possibly get factor and and put that into our guidance going forward so if there was a lesson learned for us that was it but as we go on we're making our operations safer anyway I mean one of the things that dogged us in the island district was the Magino mill right now runs off of compressed natural gas that relies on deliveries which meant when they close the road we couldn't get compressed natural gas into site that that shut us down we're going to grid will be on grid power by the end of the year at the front end of that whole setup no offense Brian but it was designed by an Australian my engineering company that I think this would have worked beautifully in Australia, but making big stockpiles at the front end of your line doesn't work in northern Canada because those stockpiles freeze, and the difficulty we had was with the ore flow. And we have a workaround for it right now, but ultimately we're going to a big gyratory crusher feeding the two lines that will ultimately produce the 20,000 tons of material that that will process over the course of any given any given day and that gyratory crusher that requires a complete redesign of the front end and will sort of mitigate the issue that that that the missed design that we're that we're dealing with right now I'll admit we did underestimate it it took a the coldest winter Canada's seen in 50 years in order to really bring out just how problematic that could be, but you know, this is mining, and you can never, if you're a Canadian miner, you can never complain, well geez, I wasn't prepared for the weather. That's the most absurd thing. We're very prepared for the weather. We've been operating in this climate for a very long time, and we were less prepared for the, you know, the engineering problems that we were having to deal with. But we've sort of got it on track now.

Brian Quost, Analyst — BMO

Maybe returning to the guidance conversation we were having before, once again in light of the gold price where it is now, how do you stay confident on costs in the guidance?

John McCluskey, CEO

Well, it's a great question. And we're facing the same kind of inflationary pressures as every other mining company. And why we're confident that we're going to be bringing costs down is we're going to realize those gains primarily through economies of scale. You know, we're taking the island district, as I've mentioned, to a 20,000 ton per day throughput rate. But in order to get from the 1,200 tons a day we're doing from underground to 3,000 tons a day, we're going to be utilizing a shaft. So that shaft right now, we're 29 meters from shaft bottom, so we're about 1,350 meters deep. We're actually working on the shaft bottom infrastructure right now. And as soon as that's completed, they do the last 29 meters after that, and that'll be good to go. And that'll be finished by year end. That just allows you to operate much more efficiently, lower cost over time. if you're running on a ramp the deeper you go the more expensive it gets. So right now it takes a truck for example to go from surface down to the 1100 meter level, it was the lowest point we're mining right now, it takes a truck an hour. The shop will be able to do it in a few minutes. So there is where you know increasing your scale, increasing your efficiency, that's where your costs are going to come down. Going from CNG to grid power, for example, we're talking about like a 60% cost savings just from that alone. That's what gives us confidence. Lynn Lake was just designed to be a very low cost project. It's open pit feeding a mill, but the mill is running on the cheapest power in the world. You know, northern Manitoba, I think costs around four and a half cents per kilowatt hour it's about as cheap as it gets so you know we we know that's going to be a very low-cost operation we see a lot of potential in that district as well we're starting it off at roughly 200,000 ounces a year but I won't be surprised to see reserves of production in that district row over time and maybe sticking with the topic of Canadian weather because I guess complaining about the weather is a Canadian national pastime but the you You also had some wildfires up in Manitoba that delayed some of the Lynn Lake progress I know you had a large investor day a couple of weeks ago.

Brian Quost, Analyst — BMO

Is there anything that investors should be looking forward to in terms of the milestones that you're working forward to getting to that up towards 1 million ounces of production per year as well?

John McCluskey, CEO

Well, to get to that final 200,000 ounces, we need Lynn Lake up and running. It was originally scheduled for 2028, but given the unprecedented fires in Manitoba last year, basically they evacuated Lynn Lake, and no one was going in and out of Lynn Lake until September rolled around. Everybody went back home to pick up the pieces and clean up the mess, and we've certainly been a big help in that regard as far as the community is concerned. But it just doesn't make sense to start a project of that size, a $900 million project, and you're going to kick it off in September. That makes zero sense given the climate in Canada. So we decided to postpone it until the spring of 26. And that's given us some additional time to think about things and also factor in another year of drilling, which has boosted reserves to over 3 million ounces now. It extended mine life there at the rate we would go to 27 years, which, as you know, makes very little sense. So without really any modifications to the permits required, we've decided to take it to 9,000 tons a day as opposed to 8,000 tons a day. And that was something we were able to think about and work on over the course of this winter. and in other words we're trying to take advantage of the fact that we were faced with a delay but you know the what can you say you know northern manitoba is it's it's a it's a very it's it's a challenging part of the world and you've never seen a prairie a fire till you've seen a prairie fire you know the i'm from bc and the type of fires we're used to are the ones you get in the mountains of those great big trees and so forth and they're kind of slow burning and they're kind of confined to certain areas but a prairie fire the winds were blowing at 80 kilometers an hour in those gusts and that that just spread the fire so fast as there's not as much to burn but everything in sight kind of gets burned up and it can cover a big area in a very short time so that was that that was a sort of a stark welcome for us in Manitoba we'll get past that and the community still very very much behind the project it means lots of employment and economic opportunities that that don't currently exist there so the community the province of Manitoba their their The premier is probably the best premier I've ever met for a Canadian province. They've got great leadership there. They understand the importance of economic development. So there's going to be a lot of confidence in Manitoba going forward.

Brian Quost, Analyst — BMO

And that does take us completely to the end of time. Thank you very much, John, for joining us.

John McCluskey, CEO

Thank you, Brian. Thank you very much.