Q4 2020 Alamos Gold Inc Earnings Call
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Good morning, I would like to turn the meeting over to Mr. Jamie Porter Chief Financial Officer. Please go ahead Mr border.
Thank you operator, and thank you to everyone for attending Alamos is fourth quarter and year end 2020 conference call. In addition to myself we have on the line today, John Mccluskey, President and CEO, Peter Macphail, COO and Scott RG Parsons Vice President of exploration to address any questions with respect to our reserve resource update we also have on the line.
Mr. Chris Bostwick, our vice president of tax.
We will be referring to a presentation. During the conference call are available through 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 managements discussion and analysis as well as the risk factors.
<unk> set out in our annual information form technical information. This presentation has been reviewed and approved by Chris Bostwick.
Beat Vice President Technical services and a qualified person also please bear in mind that all the dollar amounts mentioned in this call are in U S dollars unless otherwise noted.
Now I'll turn it over to John to provide you with an overview of the quarter and year.
Yeah.
Thank you Jamie.
20th was transformational for Alamos as we delivered on key catalysts.
And transition to strong free cash flow generation.
In July we completed the lower mine extension young Davidson.
Announced plans for the phase III expansion at island gold.
And commenced construction on the Liaqat Grande project.
These were all achieved while managing our operations through the COVID-19 pandemic.
Our health and safety protocols evolved through 2020 by the end of the year. We had performed over 13000, COVID-19 tests on Alamos employees contractors and visitors as part of our enhanced workplace screening.
The testing programs that we implemented have been instrumental in identifying and preventing the spread of the virus at our operations.
Our operations performed well in the fourth quarter, and we met full year production guidance for the sixth consecutive year.
Producing 427000 ounces of gold.
Total cash cost of $761 per ounce for the year were below our guidance range, while all in sustaining cost of $1046 per ounce met guidance.
In particular, our Canadian operations had a strong finish to the year.
Young Davidson is starting to hit its stride with mining rates ramping up to average a new record of 7650 tonnes per day in the fourth quarter exceeding your in guidance.
This drove record quarterly mine site free cash flow of $31 million.
Alan Gould had another record quarter with respect to production and another record year of mine site free cash flow generating $101 million or 57% increase from the previous record in 2019.
Yeah.
Our strong operating performance combined with a higher gold price drove another solid quarter financially, including operating cash flow of 127 million and free cash flow of $58 million.
For the full year, we set a number of new financial records, including record record operating cash flow of $383 million.
We had another successful year from an exploration perspective, despite our programs being limited due to COVID-19 reserves and resources at island Gold increased an impressive 1 billion ounces across all categories and now total $4 7 million ounces.
We acquired island gold in November 2017 reserves and resources have increased nearly 3 million ounces net of depletion.
The million ounces, we added in 2020.
And continued exploration success demonstrates the significant upside potential beyond what we detailed in the phase three expansion study last year.
Globally.
Reserves increased slightly to just under 10 million ounces with growth at island Young Davidson at Lynn Lake more than replacing mining depletion last year.
Looking at slide four.
As outlined in December we expect young Davidson to drive a 15% increase in global production to a range of 470000 to 510000 ounces.
And the three per cent decrease.
And total cash cost to between 710 and $760 per ounce from 2021.
All in sustaining cost are expected to remain in a similar range as 2020, reflecting higher sustaining capital at them a lot of us for the pre stripping of the El Salto a portion of the pit.
Our capital budget is expected to increase from 2020, reflecting a larger exploration program and the ramp up of spending are the high return La Yaqui Grande project and the phase III expansion at island gold.
Turning now to slide five.
The reinvestment into high return internal growth projects is a key component of our focus on operating a sustainable business model that can support growing returns over the long term.
As part of our balanced approach to capital allocation, we expect to fund this growth internally, while continuing to generate strong free cash flow, which will further strengthen our balance sheet and support higher dividends to shareholders.
This strong outlook, we were pleased to announce a further 25 per cent increase in our dividend to an annual rate.
10 cents per share.
This marks our second consecutive quarterly increase for a combined increase of 67 per cent.
I'll now turn over the call to our CFO, Jamie Porter to review our financial performance.
Jamie Thank you John.
Moving on to slide six we ended the year on a very strong node from a financial perspective, we sold 424000 ounces of gold for record revenues of $748 million in 2020.
As John mentioned Island Gold was the highlight once again generating a record $101 million in mine site free cash flow.
Young Davidson also demonstrated strong free cash flow growth in the second half of the year. Following the completion of the lower mine expansion, including generating a record $31 million of free cash flow in the fourth quarter.
Fourth quarter revenues were a record $227 million from sales of 122000 ounces at an average realized price of $1860 per ounce total cash cost were 733 per ounce below the low end of full year guidance and all in sustaining cost of 1030 per ounce were at the low end of guidance.
For the full year total cash cost and all in sustaining cost matter where were better than guidance.
Operating cash flow before changes in noncash working capital improved 55% year over year to a near record 127 million or <unk> 32 per share in the fourth quarter.
For the full year operating cash flow before changes in noncash working capital was a record of 383 million or <unk> 98 per share a 31% increase from the prior record set in 2019.
Our reported net earnings of $77 million in the fourth quarter or <unk> 20 per share included unrealized foreign exchange gains of $16 million, which were recorded within deferred taxes and foreign exchange and other onetime gains of $2 million.
Excluding these items, our adjusted net earnings were $58 million or <unk> 15 per share our.
Our full year adjusted net earnings were $157 million or <unk> 40 per share representing an 87% increase from 2019.
Capital spending totaled $73 million in the fourth quarter, including $28 million of sustaining capital 42 million of growth capital and $4 million of capitalized exploration gross capital increase with the ramp up of construction activities at La Yaqui Grande and the phase III expansion at island gold for the full year.
Capital expenditures of 246 million were slightly above guidance, primarily due to higher capital young Davidson, reflecting the COVID-19 related delays in completing the lower mine expansion.
We returned $31 million to shareholders in 2020 through dividends and share buybacks double the amount returned in 2019.
With a further 25% increase from the dividend to an annual rate of <unk> 10 per share starting this quarter. We're on track to returned $40 million in dividends from 2021.
Yes.
As previously announced we repaid the $100 million drawn on our revolving credit facility in the fourth quarter and are once again debt free and we ended the year with $221 million in cash of $44 million of equity securities and $500 million of Undrawn credit capacity, we are well positioned to fund our internal growth projects, while continuing to grow our cash position and return.
To shareholders.
Now I'll turn the call over to our Chief operating officer, Peter Macphail to provide an overview of our operations.
Thank you Jamie.
Moving on to slide seven.
Young Davidson continues to perform well producing 48000 ounces generating record mine site free cash flow was $31 million in its first full quarter operating from the new lower mine infrastructure.
With the strong finish all your production totaled 136000 ounces in line with revised guidance.
Mining rates increased to average a record 70 650 tons per day in the quarter exceeding the year end target.
Mining rates to average about 7500 tonnes per day in the first half from 2021 and increased the design rate of 8000 tonnes per day in the second half of the year.
Total cash cost of $792 per ounce and mine site all in sustaining cost of $934 per ounce in the fourth quarter.
Both down significantly from earlier in the year.
Efficiencies of operating from the new law abiding infrastructure.
On a full year basis sportswear in line with revised guidance.
As previously guided we expect 2021 production of between 190, and 205000 ounces, a 45% improvement compared to 2020.
Total cash cost and mine site all in sustaining cost are expected to.
Decrease to between $790 and $840 per ounce and 1001 thousand $50 per ounce respectively.
We also expect capital spending to decrease significantly to approximately $75 million in 2021 and trend down to the long term rate of $50 million per year over the next few years now that the lower mine expansion is behind us.
With higher production lower cost and more capital, we expect record mine site free cash flow.
Third and $20 million in 2021.
Over to slide eight island gold set another quarterly production record producing 41000 ounces of gold in the fourth quarter net total cash cost of $481 per ounce and mine site all in sustaining cost of $676 per ounce.
With record production at strong margins the operation generated $32 million, a night mine site free cash flow in the quarter, bringing the full year to a new record of $101 million.
Full year production of 139000 ounces was in line with guidance with total cash cost of $451 per ounce and mine site all in sustaining cost of 660 per ounce cost well below guidance.
Work on the phase III expansion continued to ramp up in the fourth quarter with activities focused on permitting detailed engineering of the shaft and associated infrastructure.
German of long lead items.
Looking forward to 2021, we expect the island gold produced 130 to 145000 ounces at total cash cost of between 430 and $480 per ounce and mine site all in sustaining cost of between 750 and 800 per ounce.
Exploration results at island continues to impress.
Phase three expansion study released last July was based on the reserves and resources at the end of 2019.
A million ounces of high grade reserves and resources added in 2020 and ongoing exploration success clearly highlight the significant upsides to already attractive economics.
Following my remarks on the operations, Scott Parsons, Vice President exploration, who will provide a summary of the ongoing.
Exploration success.
Moving on to slide nine.
Please.
1000 ounces in the fourth quarter down from earlier in the year, reflecting planned lower grades.
The minute, while they have a glass of water.
Okay.
Full year production of 151000 ounces exceeded revised guidance.
Total cash cost increased to 986 per ounce in the quarter reflected the lower grades but were below guidance for the whole year, averaging 816 per ounce.
Mine site all in sustaining cost also increased for 226 per ounce in the quarter, reflecting the higher total cash cost and capitalized stripping at El Salto.
Well auto is expected to produce 150 to 160000 ounces in 2021, a total cash cost of 840 to 890 per ounce.
Mine site all in sustaining cost are expected to increase to.
And in 60 to a $110 per ounce.
It will be higher during the first half of 2021, reflecting $25 million to complete the pre stripping of the all sorts of bad area.
Over to slide 10, construction of La Yaqui Grande continues to ramp up with 8 million spent in the quarter in the quarter as we focused on clearing the project area early mining activities construction of the camp detailed engineering and procurement.
Restricting activities are ramping up as we speak with project contract for initial production in the second half of 2021 2022, sorry.
With my site all in sustaining cost is expected to average slide 80 per ounce La Yaqui Grande is expected to significantly reduce mulatto combined cost profile.
I'll now turn the call over to Scott Parsons to discuss the reserve and resource.
Right.
Thank you Peter on Slide 11, we had an excellent year with respect to exploration and even with smaller than planned programs due to COVID-19.
Global reserves increased to $9 9 million ounces from $9 7 million ounces the increases at island Gold Young Davidson and Lynn Lake more than offsetting depletion of 555000 ounces.
Global measured and indicated resources were down 3% to $6 9 million ounces, reflecting some conversion to reserves at young Davidson and Lynn Lake.
Most impressively inferred resources increased 16% to 7 million ounces driven by another exceptional year of growth at island gold.
Moving on to slide 12.
Gold once again was the main driver of a combined reserve and resource growth in 2020.
Despite only completing about 60 per cent of a planned drilling in 2020 due to COVID-19 reserve and resources increase by a combined 1 million ounces across all categories net of depletion.
Reserves increased 8% to $1 3 million ounces with additions of 239000 ounces in island main and east areas more than offsetting mining depletion of 144000 ounces.
On slide 13, the primary focus of island gold remains in defining new near mine resources and that is where we continue to see the bulk of our growth.
Inferred resources increased 910000 ounces, a 40% to $3 2 million ounces the largest annual increase to date.
He has also increased 9% to $14 four grams per ton with the average grade of the edition significantly higher at 18.6 grams per tonne.
Most of the additions were in island east, including a 95000 ounce increase in the middle portion of island East effectively closing the gap between island main and east.
The largest and highest grade increases in the lower portion of island East where inferred resources increased 590000 ounces.
Significantly larger than for resource block now contains a total of $1 3 million ounces grading $18 three grams per tonne in proximity to the plant shop with.
We saw excellent exploration results in this area in the later part of 2020, and what he or she would open laterally up and down plunge material or been a key focus in 2021.
On slide 14.
Combined reserves and resources at island Gold now total $4 7 million ounces, nearly 3 million ounce increase from the $1 8 million ounces at the time of acquisition in 2017.
Since acquiring island gold in 2017 inferred resources converted to reserves at a rate of more than 83% on top of that we have grown inferred resources by an additional $2 2 million ounces. There overall discovery cost averaging $8 per ounce over the past year and $11 per ounce over the past three years we.
We see excellent potential for this growth to continue with our largest exploration budget to day planned in 2021.
We've increased our global exploration budget of $50 million in 2021 double what we spent in 2020 half of the 'twenty 'twenty. One budget is allocated to island gold, where our focus will remain on adding new near mine resources as well as evaluating regional targets.
We've also increased our exploration budget mulatto to $9 million and 7 million in each of young Davidson a little late.
We are encouraged by early exploration success young Davidson, having intersected higher grade mineralization below the existing deposit.
Lake ore reserves have increased 9% given the success, we're having around the mcclelland deposit.
With that I'll turn the call back over to John.
Thank you very much Scott, but.
That concludes the formal presentation I'll now hand, the call back to the operator to open your call open the call to your questions.
Thank you.
We will now take questions from the telephone lines. If you have any question and you are using a speakerphone. Please lift the handset before making your selection.
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Please press star one at this time, if you have any question there will be a brief pause while the participants I guess two quick questions. Thank you for your patience.
Yeah.
The first question is from Tyler Langton from Jpmorgan. Please go ahead. Your line is now open.
Good morning, guys. Thanks for taking my questions I guess just to start it at young Davidson I guess kind of looking at Q4 results kind of annualized production what kind of gets you to the low end.
'twenty 'twenty, one guidance and then the cash cost for the quarter were kind of below you know.
The low end of your guidance for 'twenty 'twenty, one I guess does that give you maybe some confidence that you can kind of hit the higher end of production in 'twenty 'twenty, one and the sort of the low end of cash cost or was there anything I guess sort of unique about Q4.
Yes, it's Peter here, Thanks, Tyler I guess, I mean, Q4, we werent yet running at I mean.
Yes, we did.
We did 7400 towers, sorry, 7600 tonnes a day.
We expect 7500 tonnes a day in a in the first half of our 2021 and 8000 in the second half.
So I think.
I think you know Q4 is it.
Might be might be a decent proxy ah it it it could be a bit it could be a bit low given the fact that we aren't quite up to what kind of channel will be in the second half of the year.
Okay, and then just with.
The phase III expansion at island Gold and then at La Yaqui and a lot of just what those what those projects are you seeing any signs.
Cost inflation, just given kind of the recent run up in steel prices in oil and diesel or any any concerns there.
So I'll start with Les Yoki Grande in Mexico, I mean, most of that capital project I mean, a big chunk of it is pre stripping.
Those costs are pretty locked in.
It's just basically mining cost, which were havent hasnt escalated theres, not a lot of steel or or anything like that and called in from that project Theres. Some earthworks.
And so we haven't we haven't seen anything there yet.
We've made a lot of.
A lot of our orders of things like crusher parts of my daughter Alright.
Alrighty behind us so.
Now in Phase III, you know we're just.
You know I wouldn't expect anything significant paired theirs.
There'll be there'll be a normal sort of inflation over the course next three or four years as we as we bring that into interpret into.
Start spending more money on it but I think I think we're in good shape with our with our estimates there.
Okay perfect. Thanks, so much.
Thank you. The next question is from Kerry Smith from Haywood Securities. Please go ahead. Your line is now open.
Thanks, operator.
For for Y D.
You were suggesting 70 510, a day as an average for the first half of this year.
70, 650 tons a day in Q4.
Perhaps two mill shut downs and maybe you can just tell me how many days in that mill shut that you've got in that first half.
There'll be a minor change in the first half I think we're expecting it to happen in <unk>.
April but we do we do run that Nellix U.
Absorb goes.
It'd be like three or four day shutdown to absorb those shutdowns you run at a higher rate.
Our net and the data are operator, you can expect to be down for those three or four days it wouldn't impact our 7500 tonnes a day for the H one target.
Okay, but I guess my question is why why wouldn't it be a little bit higher he already out of the day.
750, I think I've said makes all kind of it seems pretty doable.
Yeah, we're we're hoping it's pretty doable.
We expect it to be pretty doable.
Okay. Okay.
Or maybe Scott can answer this question just on the island exploration budget of 25 million how much of that say as a percentage might be spent on the regional targets, which you haven't done much work on obviously now you've got the traveling down maybe just as a percentage could you give me a sense.
Yeah of the $25 million, we're budgeting about 6 million for the regional exploration program.
But it's focused on targets across the broader property that we've developed from.
Building out the geological model at island gold deposit in testing several several targets we've identified as a result of that.
Yes, I think you had said that it's probably not likely to be much tailwind because you just got that volume is what we got in there before you start drilling.
Yes, we're going to build the cash.
<unk> Foundation on the petroleum ground in 2021 and will be a more actively exploring drilling in 2022 and beyond.
Okay great.
Tim can you just remind me what your Mexican peso assumption was the day I know I shouldn't always thought I forget.
Share carry yes, I believe we budgeted 20 to one we've got we've got about 45% of our exposure hedged between 'twenty, one and 25, so we're pretty well.
Well protected in terms of both our operating cost and our capital spending at La Yaqui Grande.
Okay, Okay, great and Peter just one last question on young Davidson to $44 Canadian country of mining cost from Q4 would that be a pretty good number for for a go forward number from say 2021 and 2022.
Yeah, I mean, that's where we're heading to I think once we get to 8000 tons a day.
And three this year.
We're heading into that into that kind of range. I mean, we will take it takes a few quarters to.
You'll see it get dialed in I think it all it does bounce around a little bit depending on how much capital development, we do versus operating development. So theres. Some always some noise in it because of that but it's you know, it's it's definitely trending to there.
Okay.
As a reminder, we're budgeted for low <unk> for the first half of the year dropping to kind of the mid <unk>. So where we were in the second half of 2020, we think we'll get back there for the second half of 2021.
Okay perfect. Thanks, very much that's all my questions.
Thank you. The next question is from Cosmos <unk> from CIBC. Please go ahead. Your line is now open.
Thanks, John Jamie Peter and Scott.
Conference call here, great to see you know the increase in our reserves and resources and also the increase in the dividend.
Maybe my first question is on the island gold.
Increase in inferred resources. It seems like it's a lot of as you mentioned coming from island East.
Could you remind me you know how tight is the spacing in terms of drilling right now to get into inferred and you know what kind of drill spacing do you need it to be to get it into.
MNI and later on our reserves.
Scott do you want to take that at least the start of it yeah I can take the startup typically for inferred resources were anywhere between 30 and 75 meters, depending on where we're drilling on average I would say it's around two.
Between 50 and 75 meters.
And again you know these inferred resources are defined in the geologically.
<unk> structure. So you know there it's predictable and strong.
Understanding of the controls on mineralization of the island and we have high confidence in in that classifying those as inferred resources at that spacing.
As you think a realistic for sure.
Mhm.
And you know as a follow up you know its great to see the island East Youre looking at $18 five nine gram per tonne.
Certainly higher than gold reserve grade at this point in time of island.
But.
Again, you know inferred I would imagine mining dilution wasn't factored in.
You know maybe still early stage at this point in time, but could you remind me you know what kind of mining dilution assumption you put into your reserves.
And you know can that be potentially even at this early stage be applied if I want to compare apples to apples here.
Yeah.
Maybe I'm just curious yeah.
Yes, Hi, Craig we've got a variable.
Dilution factors.
[laughter] scoping types day area and.
Past experience and it ranges anywhere between 25 and 50 per cent it but I think overall a good average to use would be about 35 per cent.
Hmm mm.
And based on your knowledge right now that still seems kind of you know reasonable if I were to apply that to island east again.
Early early stage, but yes.
Yes, that's reasonable.
Okay sounds good and.
And then you know bigger picture here John as you mentioned you know some of these exploration results at island gold could potentially add to the value of the of the new shaft I would imagine right. Now you know the mine plans are fairly flexible for you to kind of change things around potentially to maybe you know get to some of the higher grade.
First again very early stage right now, but is that is that a possibility it's certainly a possibility.
There's a lot of flexibility in the way we're approaching this this project.
And we still have really another two years of exploration that we can get under our belt before.
We start to.
You know make make decisions that that limit our options. So we still have a fair amount of flexibility for the next.
The next 24 months anyway, so that.
That puts us in a very comfortable position.
But an interesting thing about the overall global resource that Ah I think isn't always.
Zeroed in on very quickly is the fact that we've been over the last couple of years you know we've been depleting.
Tire cost.
Lower recovery ounces.
In our open pit operations, and we're effectively replacing them with.
With high grade low cost ounces in our in our Canadian operation, particularly.
Particular too.
Two island gold so well the you see an incremental increase in the overall.
Reserve picture the reality is that we're replacing them with with far better ounces.
You'd rather have ounces with a 95% recovery as opposed to announce with a 70% recovery.
And and ounces from Canada.
In our opinion our.
Are a lot of a.
A lot more favorable than anywhere else.
So from the overall quality of the reserve I think we've made a rollout.
Real improvement.
Yeah, that's that's great to hear.
Again, the on island Gold you know as you I think you or Scott had mentioned our Trillium mining previously how does that you know you know you just made the acquisition here. So again fairly early but how does that sort of fit into the whole picture herein and I haven't looked at I haven't seen a roxio trillium mining yet.
So is it you know what.
To the East of island. So is this potentially on trend with hit all island East is it the same type of rocks.
How should we look at it at this early stage.
No I can't tell you can take that one yeah, yeah I can take that one so its a trillium is essentially a.
Two main strategic reasons for the acquisition one of the most important as you know.
As we've been drilling off island east to the eastern down plunge, we we.
Obviously been interpreting the strike and dip of the deposit isn't been going and it does appear that eventually you will crowd or come closer crossover the the property boundaries. So what the acquisition did for US is remove any sort of land tenure risk that we'd be worried about from an exploration perspective in the long term. So it's a long term long term strategy. It really opens up the depart.
Oh down plunge and along strike to the east and the <unk>.
Second part of that as you know the midst per carton greenstone belt, which is where the island gold deposits. Located you know has seen 100 years I kind of off and on exploration I'm going back to kind of the same showings that have been defined over the years and we feel you know with the approach we're taking in terms of a systematic exploration approach across the broader belt.
That there are significant opportunities that can be a lock so from a regional exploration perspective, but it fits well with our strategy of consolidating around our operations and Keith Island gold and applying a systematic approach to understanding of the controls of mineralization and targeting and exploring from there.
Mhm share of course.
Maybe a financial question here.
You know as you talked about in the MD&A, you know, you're making a deposit of $20 million in terms of taxes payable in Q1.
That's how it is I know given the timing of these tax payments, but I guess my question is with all the money you're spending on La Yaqui Grande in 'twenty and 'twenty one.
What that capex be able to offset some of your you know profit at more laterals in 'twenty 'twenty, one and you know what should we make as an assumption here.
Yes, absolutely cosmos.
We have seen that we generated $68 million in free cash flow models in 2020. So that's.
The reason behind the big $20 million plus tax installment that's due.
This quarter, we can absolutely deduct the majority of that those stripping cost another construction cost of La Yaqui Grande against our 2021.
Cash flow, so we'd expect a substantially lower taxes.
Tax installment in Q1 of 2022.
Great and then one last question on foreign exchange here, you know where the Canadian dollar has strengthened quite a bit.
Year to date.
You know if I go back to your MD&A I think right now you're assuming <unk> 75 to one in terms of.
The C dollar U S. Dollar exchange rate every five cents changes of $30 million difference in free cash flow I think only a small portion of it is hedged at this point in time, Jamie could you remind me what your hedging strategy is and how you look at it given the.
Current strengthening of the Canadian dollar.
Sure, Yes, I mean, we've been looking for opportunities obviously to increase.
Our hedge position over I'd say, probably the last six months.
<unk> seen some pretty significant strength. So we haven't been able to do as much as we'd like I think we've got about 10% of our of our 2021 exposure cover between.
76% and 72, so it is a small portion of it if we do see a pretty dramatic weakening in the Canadian dollar than we'd be aggressive.
In terms of hedging otherwise will be will be price takers for the time being and it does have an impact.
Currently at.
At <unk> relative to our budget, that's a 30 million dollar impact on our free cash flow for the year.
Great. Thanks, a lot everyone knows all the questions I have and I look forward to the remainder of 2021.
Thank you.
Next question is from Fahad Tariq from Credit Suisse. Please go ahead. Your line is now open.
Hi, Thanks for taking my question I apologize if I missed this but did you think about.
Capital allocation, maybe in the medium term.
If you were to get the permit approval or the renewal at Crosby is is it fair to think that Lynn Lake competes for capital with Crosby is there a preference from one project over the other.
Any color there would be helpful. Thanks.
Yeah, I I can feel that.
I would suggest that Lynn Lake is still a 18 to 24 months off before we start spending any significant capital and and getting it going because we've just got to go through the northern normal permitting process, whereas crossly is.
It's fully permitted at this point so theoretically.
If we were to get our our licenses.
Renewed we would we'd be able to get back to back to work there fairly quickly but it's.
Approach that we're taking right now is.
Is one one of them.
Talking to Turkish.
Mining companies.
We've been approached by.
By several and were talking to surface mining companies about coming in alongside of.
All of US and are partnering on that project. So.
You know since we're sort of talking theoretically anyway.
Theoretically I would envision us.
We take the next significant step going forward in Turkey, we're likely to do that with a partner which would.
Significantly offset our capital commitment there.
Okay.
Okay, Great and maybe just as a follow up then so theoretically if you were to get a partner at gradually then is.
Is it the idea that the partner would help with maybe some of the permitting issues or is it more of that it would free up capital to then do Lynn Lake as well.
For both.
Probably both of them clearly are one of the.
One of the reasons to bring on our partners that Theyre going to help you in some way shape or form and since we have all the technical technical expertise we require and.
And we have all the all the money that we require in order to build that project are you know, where we're going to need them from the most help is it just sort of navigating that.
Turkish politics, not forgetting that side of it.
So.
Hopefully that.
If we were smart enough to bring on a partner that can legitimate Atlanta hand on that front.
So.
Certainly any any capital that they would put up in terms of.
Purchasing an interest in the project that would go some way to.
Giving us additional capital that we could redeploy in Canada.
Got it. Thank you that's very clear thank you.
Thank you once again, please press star one on your telephone keypad. If you have any question.
We have a question from Mike Parkin from National Bank. Please go ahead. Your line is now open.
Hi, guys. Thanks for taking my questions and congrats on the good quarter.
Most of my questions were answered.
But could you speak to why D that the lower mine has been running now for several months are kind of effectively two quarters to date can.
Can you give us some commentary in terms of how it's performing is it you know on a daily rate are you seeing.
Basically.
Exceeding expectations and can you just remind me on the permit there do you have a daily operating cost or is it a an annual average.
Thanks, Mike.
John.
Yeah I mean.
The ability to ability to operate.
At Y D with that with that Laura Martin infrastructures is it's kind of night and day from what we had in the aftermarket.
It is performing very well.
You know you can tell.
They'll buy our tonnages that were exceeding numbers, we don't think we've ever exceeded R.
Or or very rarely exceeded our expectations in the past and we're exceeding our.
You know have been exceeding our expectations. So it continues to perform well and running since I guess mid mid July we've.
We've had daily rates to average 8000 tons a day you need to have you know because you have to be down.
For maintenance.
These times you have to be you have to be skipping waste also I mean that that channel needs to.
But at 10000 tons a day.
And we do that right some or some days or at least some days just or you are average 7500 tonnes a day, so we see that.
No longer being an impediment to getting to our 8000 ton a day target, it's operating very well.
Have to develop all the stopes in front of it might be in good shape otherwise could have.
Everything feeding it properly.
We were there.
Uh huh.
I think the second part of your question was.
Great.
So you know what it boils down to a milling permit and it is a it is a per day number and it's it's quite high it's well above what we would we.
We we over permitted there I think we're permitted to 10000 tonnes per day.
We don't have any plans to operate it at that level. So we are not in a situation where the day mill will slow us down.
And we will take the bill could do the milk can't even do 10000 times, a day, but where it currently I mean, yes sure you could do something to get it there.
But it has no problem do on average 8000 tonnes a day.
Alright Super and then maybe a question for the Scott persons in the exploration side of things with why I D.
You you made the smart decision to kind of halt.
Further drilling at depth at Y D until you kind of got down lower are you kind of established and set up to resume that drilling to continue exploring deeper in to the Y D West extension.
Yeah, absolutely so with the lower mine infrastructure in place we did start drilling in our 2020 with a limited program and really starting to test opportunities down plunge of the deposit both a y D. Western in the main part of young Davidson, but also I can't emphasize enough the exploration potential you know in the hanging.
Walt football, but a positive releasing limited testing, we're sitting along the Cadillac water like a fault system.
You know there there's significant opportunities there.
Alluded to in the AR at the end of by exploration update we did intersect some high grade mineralization at both the hanging wall and footwall and Oh. This is going to require obviously a lot more work to define.
Define the geometry of the structures and any potential continuity of mineralization, but it just points to the upside so not only do I see upside in expanding the existing reserve and resources within the syenite, but also other opportunities are different.
<unk> settings geological setting.
And then we will be ramping up as I mentioned to a to a second drill underground.
Underground drill within the next few months and start evaluating some of those opportunities.
Thanks, very much that's it from me guys.
Thanks, Mike.
Thank you.
Next question is from Lawson Winder from Bank of America. Please.
Please go ahead. Your line is now open.
Okay.
Yeah.
Mr. Winder. Your line is open. Please proceed with your question.
Yeah. Thank you very much operator, and hi, guys. Thank you for taking my questions here today, Hello to you all.
I wanted to ask about the the stockpile at a at both island N Y D and particularly at island. The underground has been running a little bit ahead of the mill.
Are you able to provide where that stockpile sits today.
Yeah, we've got a boat.
But.
30000 tons at around five grams.
Okay, great. Thanks, and then and then it why D.
Uh huh.
Not a significant stockpile, it's it's maybe coming into the year we had.
Again, maybe in the 30000 tons.
At typical kind of reserve grade, but it doesn't last so long it why did the milling rates we have there.
Okay, that's great and then just.
And we have the Motors, Inc. We have some very low grade stockpile, that's on the books as well, but didn't mean that's for.
Some time weighted future.
Yeah No of course.
No Peter just in a similar vein at at Island did he now for Q4 I had expected you guys would be a lot closer to the 200 tonnes per day and I'm just curious.
Is the reason that you were and I apologize if you already touched on this I. Unfortunately, it was on the call a little bit late but.
Is the reason that you were a little below that 1200 tonnes.
Per day related to Covid at all and and then looking forward into 'twenty and 'twenty one.
Is it fair to expect.
100 tonnes.
Per day to be achieved.
Yes, like a full year basis, yeah. So the mining the mining was at 1200 tonnes per day, I think you're referring to the milling rate, which was just a bit below that did.
We did have some unscheduled crusher challenges in in the fourth quarter, which had us down for <unk>.
Four or five days and.
Caused our cost our tonnage to be a bit off for the quarter. We were you know island has the benefit of.
Being able to juggle the high grade medium grade and low grade stockpiles. So we could still make our our ounces for the quarter.
But yeah. We you you should expect 1200 tonnes a day for 2021.
Great Super helpful and then.
Just a question on capital allocation and capital return you guys.
So last couple of quarters have clearly indicated a preference for the dividend, but just going forward.
Can we expect that to continue to be the case that these are the by that.
Yes, Lawson, it's Jamie I can take that I think our preference has always been to return the majority of what we're going to return to shareholders through the dividend rather than the buyback.
Use the buyback opportunistically, when we see a pretty significant dislocation in the share price, but there's limitations associated with normal course issuer bid. We're blacked out about 50 per cent of the time, so it's often hard for us too.
To act on it when when when we'd like to so.
I think.
We like the discipline.
Net.
The discipline associated with the dividend and I think we're comfortable with the level of that currently.
40 million U S annualized Inc.
That's a decent return and something that we can well afford at.
At the same time as investing in our other growth projects.
Okay.
I mean, it's actually below the payout percentage, where it's been historically, so I don't disagree with you on that.
And then just maybe one final conceptual question.
On Mexico and going forward.
Basically the history of Alamos since Ive been following it has been a transition away from Mexico and toward Canada, and I mean would it be fair to think that you know the investment Youre doing now in La Yaqui is potentially the last big investment either in Mexico, or you know looking the other way do you see additional potential exploration upside.
In the molecular area or in that anywhere in the jurisdiction and how do you think about Esperanza and just how how do you think about alamos and being in Mexico as a jurisdiction going forward.
Well, it's John I can take that we still are we still believe Mexico is.
An attractive jurisdiction I think theres going to be lots of opportunity in the years ahead in Mexico.
They're going through a difficult time right now.
The country has been hit very hard by Covid.
As everyone is aware there is a ongoing issues with with narcotrafficking in that country and.
It started to directly affect the mining industry.
Over the last couple of years is.
Is.
Net criminal element turned it's.
Turned it's.
It's interest towards the mining industry and started to.
Started to Rob gold mining operations, including ours last April.
So those were certainly significant cost as a cause for concern for for us.
But as things have been unfolding in Mexico.
Alamos has has benefited tremendously from.
Continuing to explore in the mulatto district.
And as we as we made new discoveries we've extended.
Mine life from what we had originally which would've seen us.
Stop production back in 2012.
Here, we are still moving in 2021 and and we we have a good sightlines are through.
2027.
It's it's.
Unfortunately for us that every couple of years, we've made a really good discovery.
In that modest district, and that's kept us going but.
It's just the fact that.
Earlier on it was easier because we knew.
We were going after the most obvious things most of the things we ended up developing they had pretty.
Good surface expression that we were able to follow up on but going forward now the challenge is to be able to.
He's geophysics and are there other geological exploration techniques to effectively locked down, but he's cover and try to find.
The more the more hidden deposits that are that may be it existing in that district, we've still only covered.
Maybe 20% of our.
The bilaterals.
<unk> district of the holdings that we have under claims so theres still a substantial amount of exploration upside there.
Oh no. We're under the current circumstances, you know, we're not particularly aggressive about about making further acquisitions in Mexico, and we do have a very strong preference for Canada for obvious reasons.
You know the.
The reality is Alamos has always been very opportunistic and and also very patient.
So when we see.
Opportunities evolve.
If we see the country.
You need to evolve and.
Turn it attention to attracting and encouraging.
Investment there again.
You know, we'll respond but.
But for the time being I think are better opportunities lie in Canada, and that's why we've been heavily investing there and in the meantime.
We will continue keeping things going in our.
A lot US district, where you know by any measure it's been a tremendous success project that we acquired for $10 million. Originally we've made well over $400 million from that project and yeah.
So we wouldn't be where we are today without it. So we're we're very grateful for mulatto Sun for the startup gave us.
That's great color John much appreciate it take care guys. That's all from me.
Yes.
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.
4163689932 extension 5439416.
368993 to excel.
Extension 5439.
As you for your participation.
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