Alamos Gold Inc. (AGI) Q2 2026 Earnings Report, Transcript and Summary

Cash flow. Cash flow. Cash flow. That would allow us to increase the proportion of high grade ore to be processed with an expanded Magino mill and push production rates well above the 534 thousand ounce annual average outlined in the study. These target areas include Island Gold West Extension, Island Gold West Uplunge located in proximity to existing underground infrastructure, as well as the past producing Cline Pick and Edwards Mines located 7 kilometers from the Magino mill. Turning to Slide 19. 1 of the highlights of the release was the discovery of a new high grade zone located between 250 and 500 meters west of existing underground reserves and resources. This new zone is along strike to the Island Gold deposit, measures 200 by 300 meters, based on drilling completed to date, remains open down plunge and to the west. We also further expanded high grade mineralization closer to surface within Island Gold West uplunge area. The west uplunge area is accessible via the existing ramp offering a low cost, near term opportunity to further increase underground mining rates beyond the planned 3 thousand tonnes per day to be skipped via the shaft. Additional high grade underground ore would boost the district's future annual production by displacing lower grade Magino open pit feed in an expanded mill. Turning to Slide 20. Looking regionally, drilling in the past producing Cline Pick and Edwards Mines continues to extend high grade mineralization beyond the limits of previous mining. Earlier this year, we reported the best hole drilled to date at Cline Pick. Having intersected a 178 grams per tonne gold over 3.5 meters. Step out drilling from this hole continues to successfully intersect and extend additional higher grade mineralization. This included another highlight hole announced in June which intersected 68 grams per ton over 3.1 meters. Over to slide 21. Taking a step back, this 10-kilometer long section highlights the significant potential across the district The Island Gold main structure has grown in each and every year that we have owned it. Less than 2 million ounces of reserves and resources in 2017, to what is now approaching 7 million ounces. Net of the 1.7 million ounces produced. High grade mineralization at Island Gold has so far been defined to a depth of 1.6 kilometers and the deposit remains open laterally and at depth. Over to the east, deepest hole drilled to-date at Cline Pick to a vertical depth of 540 meters and the target remains open in multiple directions including at depth. By comparison, underground mines within the Canadian Shield are being mined beyond depths of 3 kilometers highlighting the significant potential for growth. Additionally, limited drilling has been completed within a 7 kilometer gap between Island Gold and Cline Pick, and further along strike to the Northeast across our broader 60 thousand-hectare land package. We have no shortage of high quality, higher grade targets, and believe we are only starting to scratch the surface of exploration across the district. As we further define these targets and additional sources of high grade ore, we see excellent potential for this to support further production growth by leveraging our existing and planned infrastructure. With that, I will turn the call back to John.

Thank you, Scott. I will turn the call over to the operator and open the call for your questions.

To ask a question, simply press 1 on your telephone keypad. Again, that is 1 to ask a question. And our first question comes from Sathish Kasinathan with Bank of America. Please go ahead.

Yeah. Hi. Good morning. Thanks for taking my questions. My first question is on the cost guidance for the year. Thanks for all the details that you provided. Can you provide a bit more color on the $90 per ounce increase in cost related to labor inflation? Most specifically, what assumptions were embedded in your original guidance at the start of the year? And what changed over the last 6 months and how much of this increase should we see as structural as you move into 2027?

Hi, Satish. it is Greg here. The $90 per ounce is a combination of contractors and labor, like our internal labor. So it is not all of our internal labor. But our assumption at the beginning of the year was about a 4% increase in labor rates and contractor rates. We have seen more profound increases on the contractor side, especially with respect to underground development. And as we have, as we are ramping up Island Gold, we are relying a little bit more heavily on contractors, and we have seen that cost pressure there. So it is a little bit on that side. it is also on the open pit side with our mechanics and on the contractors that help with the big open pit equipment. That we have seen a little bit of pressure as well, and also it is just a higher reliance on it this year. But as we move to put the truck shop in place by the end of this year, we will we will wind that reliance down. But then the last piece is just we implemented a what we call, retention program for our Canadian operations midyear, and that had a cost impact of about $30 per ounce at our Canadian operations. And it is something that is much more retention focused, so it will be payable in future years, but we need to accrue that cost over the next couple years. And that is just something that we had not budgeted, but we implemented midyear just in response to the competitive market environment that we are seeing in Canada.

Okay. Thank you for the color. Maybe my second question is on the underground mining rates at Island Gold. Second quarter saw a solid improvement to 1.55 thousand tons per day. As you think about reaching 2,000 tons per day by year end, can you walk us through the key operational milestone required over the next 6 months? What are the prime gating factors today?

Yes, Satish. it is Luc here. So it is a continuation of our ramp up Certainly, it is been tracking quite well in the first half of the year. As we continue to advance with our development rates in the second half of the year to support additional mining fronts. We will continue to be able to meet the second half expectation with regards to the ramp up. So it will be a gradual ramp up over the next 6 months, but our plan is to exit at the end of the year at 2,000 tons per day.

Okay. My final question is on the capital allocation side. With $1.2 billion in liquidity, strong free cash flow, and a portfolio of organic projects stood already underway, how are you thinking about M&A today? Has the recent disruption at Young Davidson changed your appetite for acquisitions as a way to diversify your portfolio?

We are not really that focused on M&A right now. We have a watching brief across the market, as you can appreciate all mining companies do. But I think we outlined for you in the presentation on the call so far that we have got we have got plenty of things to focus on over the next 6 months in terms of getting our young Davidson operation back on track. Completing the all the development work we need to achieve over the course of the balance of this year and into next year to get to higher mining rates at Island Gold. We have moved underground now at Mulatos. We have got 2 drifts going underground. We have got a mill under construction there, and we have got a full blown construction project at Lynn Lake that is basically a $920 million project building a brand new mine. So we have got we have got plenty of organic growth underway as we speak and there are plenty of things to focus on. And I think for Alamos at the moment, well, we see the market as being fairly attractive, especially with gold prices having pulled back so strongly over the last number of months. it is just not a focus for us right now.

Your next question comes from the line of Fahad Tariq with Jefferies. Please go ahead.

Hi. Thanks for taking my questions. Sorry if I missed this, but on La Yaqui Grande, the longer leach cycles, is that expected to like, can you just provide a bit more detail as to what is causing it? I saw that it was related to the height of the pad. Is there any way to kind of resolve that, and does it impact, I guess, 2027?

Yeah. it is Luc here. it is 2 things. it is just the ore characteristic itself that is being stacked. As well as the height of the leach pad, which is resulting in the longer leach cycle. But overall recoveries are still expected to be 85% it is just taking a bit longer to come through over the course of the plan that we expected for 2026. So no loss of ounces. The ounces will just end up being deferred into the 2027 plan, and we will provide further clarity on that as well once we certainly update our 3-year guidance at the end of the year. With regards to our mine plans moving forward for Mexico. Including TDA.

And I think it is important to note that the mine is right at the very end of its life. I mean, we will continue stacking ore into Q1 of next year, but by that time, it is pretty much done. And after that, it is residual leaching. So, it is not like, this is some sort of an ongoing issue for us over many years to come or something. We are talking about a number of months, additional months to get out the balance of the gold that we stacked on the leach pad.

Yeah. The other thing I would add there is, you know, just given our experience with the Mulatos operation. As well, we stopped mining our couple of years ago, and we have been still residual leaching. But from a point of view of the number of ounces that we stack at the Mulatos district over the life of that mine, It would take that amount of time to be able to get all the ounces out. We have been actually getting all the ounces, and we expect to recover all the ounces that we had in inventory. So we do not see anything different with regards to Yaqui Grande. Obviously, it is not similar scale to what we did at Mulatos from a point of view of the height of the leach pad and the amount of tons that we stacked. But at the end of the day, we still expect to get all of the ounces in a shorter time frame over the course of 2027.

Okay. that is helpful. And then maybe just switching gears to Island Gold. Know, obviously, a prolific kind of exploration upside there. Really high grade. Lots of other additional deposits that are being explored Can you just remind us theoretically, if we think about the underground rates, I recall that not constrained, but that 3 thousand tons per day could be kind of the upper limit or to the upper limit? Can you just remind us how that could theoretically change if there is additional high grade ounces that are discovered underground and that can be mined? Sorry. Could you just repeat that question? I am just trying to get a sense of what Island Gold Underground, what could be the theoretical kind of upside to the 3 thousand tons per day? Because there seems to be a lot of underground ounces that are high grade that are discovered, additional deposits, more upside. I am just trying to understand, like, how much higher than 3 thousand tons per day could be mined underground at Island Gold?

Yeah. Well, there is certainly opportunities with regards to the infrastructure that we have in place. And ultimately, with the shaft infrastructure we are putting in place, we will have capacity to be able to handle 5.5 thousand tonnes a day of ore and waste. through that infrastructure. Certainly, our we are embarked on the first step is getting us to 2.4 thousand tons a day when we move into 2027 and ultimately 3 thousand tons a day. Once we move into 2029. Regionally, there is our there are a number of targets within that district that provide opportunities for additional mill feed at higher grade. Displacing some of the lower grade that we get out of out of Magino. Certainly, in the Upper West area where we are starting to have some success there with regards to expiration. As well as within the region itself with Cline, Pick and Edwards. Those are other, you know, independent access points for infrastructure requirements would provide additional mill feed to be able to support higher grade over the long term for that district. And, really, that is 1 of the big visions that we have for that camp. And, you know, which was really the driver for overall looking at that overall mill expansion as well to 20 thousand tonnes per day.

In the time frame, Luke's referring to, you know, 3 thousand tons a day is that is a pretty good rate for that shaft to handle, and you have got to realize it is as much a function of having enough faces open across the mine in order to supply that 1 thousand tons a day. Where the where the opportunity lies is utilizing the ramp. Where we are having success in the 700-meter level. And we would envision, you know, with the operation shifting from ramp to shaft, we would open up the possibility to bring us as much as 1 thousand tons a day up from the upper west zone utilizing the ramp. So that is where I think the immediate opportunity lies for us to increase mining rates from underground to island.

that is really clear. Thank you so much.

Your next question comes from Ovais Habib with Scotiabank. Please go ahead.

Hi. Good morning, John and team. Just a couple of questions from me. Just starting off with Island Gold, in terms of mining rates seem to be improving at Island Gold. Milling rates and mining rates seem to be improving at Magino as well. I was just wondering in terms of you brought the upper end of the guidance down a little bit on the Island Road district. Any color on that front? And what is the plan kind of going into 2027? Is that what we should be expecting going into 2027? Or this is just the ramp up period that we should be kind of considering?

Ovi, it is Greg here. I mean, we have kept the original guidance. I mean, all ultimately, low end previously was 290 thousand ounces, that stays the same. So we have strong confidence that we are going to hit our guidance as a starting point. As you pointed out, the mining rates are ramping up exactly as we expected. Q1 was over 1.4 thousand tons per day. Q2 was 1.55 thousand. Starting to see that improve even into July as we expected. So mining rates are going very well on the Magino side. Q1 was a slower start, but since then, we have seen a significant improvement with June being at 9.8 thousand tons per day, and into July, we are at 10 thousand tons per day. So the mine is performing very well as expected. I think where we just viewed it as we were in a position we were revising our guidance overall given the seismic events at Island. I am sorry, the seismic events at Young Davidson. We just took the opportunity to tighten the range. Ultimately, it was a 40 thousand-ounce range. Given the first half has already been completed, we just felt that 40 thousand ounces was a big range for the second half. So we just tightened that down to 20 thousand ounces, but it is not indicative of our view on this asset meeting its production guidance for 2026 and no impact on 2027 onwards.

Got it. Thanks for that, Greg. And then just follow-up to Fahad's question in terms of increasing mining rates and taking more from island to displace some of the ore from Magino. I mean, John, you talked about the West Side and that is been showcased fairly well in terms of what Scott is doing on the exploration side. You know, when would you be in some sort of, you know, position to start talking about or start including that into your mine plan and just how should we look at is it more of a 2027 situation? Or do you think it is more longer term?

Just a second. I will go get my crystal ball. that is we are in the exploration phase there right now. it is going very, very well. You know, we started the year with roughly 300 thousand ounces of inferred. I would like to see it grow into that half-a-million-ounce range. Because that is when it makes sense to start putting a mine plan around the zone and really focus on the, the effort that it is going to take to develop it as, as a, call it, a theoretical 1 thousand-ton-per-day ramp operation. And obviously, it is a real focus for us. it is such an immediate it is very low CapEx and very, very quick payback. Utilizes an existing infrastructure, all falls within our permits. I mean, there is very little that we would have to do and very little capital required in order to get that all rolling. So you can imagine it is a real high priority for us, but precisely when we I would love to see it come in by 2029. That would be a big win if we get any earlier than that. It would be it would be a massive win. But, you know, we are throwing everything at it right now, and that started with a big portion of our exploration budget. Thankfully, the numbers are coming in very, very nicely. And, you know, I think we are going to start putting some shapes around those resources at the end of the year and see if we can expand on the reserve. And then from there, we would be working on mine plans and so forth.

Okay. Got it. Thanks. Thanks for the color on that. And that is it for me. Thanks for taking my questions.

Your next question comes from the line of Cosmos Chiu with CIBC. Please go ahead.

Hi. Thanks, John and team. Maybe my first question is on CapEx. Especially growth CapEx. I see that in Q2 for Island Gold District, for example, growth CapEx decreased from Q1 And Lynn Lake, on the other hand, increased But if I were to look at those 2 assets, if I took a look at the first half spent, still below 50% of your full year guidance. So I guess my question is, you know, the Q2 spending was it as planned? And if that is the case, you know, what is the plans in terms of increasing that velocity of spend in the second half to get to your guidance?

Hi, Cosmos. it is Greg here. Hi, Greg. So the time it is timing related. And with Lynn Lake, it is it is obviously a ramp up. So as we continue on with the project, we are going to be spending a little bit more. So Q2 was a little bit lower, but as we get moving into Q3 and Q4, we are going to see that continue to step up, and that is going to continue to step up even further into 2027. As part of that ramp up. On Island Gold, it was just simply timing. Ultimately, we still plan to spend what we what we had put in our guidance for the year. And that is gonna put us on track for the shaft being completed in the first quarter, and it is setting ourselves up well for the Magino Mill expansion to be completed in the first quarter of 28.

Right. Maybe, you know, talking about guidance here. As you mentioned, you increased your cost guidance for all 3 assets. And I understand, you know, Young Davidson, the reasons behind it, Mulatos, the reason behind it. Island Gold, you talked about inflation as well. But as you mentioned, Greg, production really did not change Production guidance did not really change for Island Gold. And so even though that cost guidance went up by about 17%. So, again, is that really pure in inflation in terms of Island Gold? That cost increase. And would you say, Q2 wise, Did you see a lot of the inflationary pressure come through in Q2? Versus Q1? Was there any kind of impact on Q1 Did they all come through in Q2? And if that is the case, what have you factored in terms of further inflationary pressures as you formulated your full year guidance for cost? Like, are you seeing another straight line in terms of, you factor in even more inflation into Q3 and Q4? To come up with your new guidance for Island Gold in terms of cost for the year?

Hi, Cosmos. Yeah. So breaking down that, I mean, you are you are right. Production has not changed, so it is not a production driver. It is what I would call inflation and a little bit of scope change on contractors, and I touched on this earlier in the call. Yep. We are relying given the fact that we are going from, you know, 8 thousand meters of development to 10 thousand meters of development this year, to know, we are we are ultimately getting up to 15 thousand meters of development over the longer run at Island Gold. We are hiring, but at the same time, we need to bring contractors in to support that extra development. Those contractors are costing more money than what we had anticipated. We have seen that more profoundly in Q2 than in Q1. And we expect that to continue through the rest of the year. The other piece is in, as I mentioned, midyear, we put in a new structure, really a retention program for all of our Canadian operations. That was implemented in June. So that is having an impact on the second half of the year, and it will that will continue into 2027, as something that is impacting the cost structure at Island Gold, but it is also critically important to making sure that we hit our ramp up to achieve what we want to achieve this year and moving into higher even higher mining rates in 2027.

Okay. And maybe 1 last question, you know, earlier this month, we are all kind of suffocating from those forest fires or the remnants of the forest fires in Northern Ontario, even in Toronto, any kind of impact on your Northern Ontario operations, the both of them? In terms of the forest fires up north.

Hi, Cosmos. it is Luke here. No. Nothing significant. Young Davidson had no interruptions at all. To any sort of forest fires in the region. Actually, it is been pretty quiet. In that region. The Island District had more-- it was not necessarily fires, in close proximity to the to the mining operation. It was more related to smoke. We did have some-- a couple of minor interruptions with a couple of ships, but nothing significant. And really had no effect on our performance through the second quarter. At Lynn Lake, we were evacuated for 1 week. It was a fire evacuation that was provided notice to the community as well as our project. But we were only out of the project for a week and remobilized within about a week after that. So probably about a 2-week effect overall from the notice of evacuating to getting back to full scale construction activities. Other than that, nothing it is been uneventful for the year.

Greg. Thanks, everyone. Those are all the questions I have. Thanks again.

And your next question is from the line of Don DeMarco with National Bank. Please go ahead.

Thank you, operator, and good morning, John and team. Thanks for all the color on this call this morning. Luke, I will my first question is for you. So you mentioned that in H 2 at Young Davidson, the rehabilitation work in the 9.41 thousand level to be completed. And you expect to get back into the stope and continue mining. With this, do you expect a just a step change right back up to 25 hundred tons per day Or will it be more of a progressive ramp up in running rates?

Yeah, I mean, our focus is certainly to look at providing additional enhanced ground support in 9.41 thousand but also a couple of other levels within that western mining front area. And to your point, it was providing about 2.5 thousand tons per day of a mining rate through that district. Once we get the rehabilitation completed through the second half of the year, we will look and our expectation is to get above 7 thousand tonnes a day moving forward. But a part of this is also just reviewing the overall extraction sequence of the orebody at depth below 9.41 thousand. that is part of the work that is ongoing right now. We will be looking to provide further clarity to that by the end of the year as part of our 3-year guidance. But our full expectation is to ramp up certainly as we move forward into 2027 and for the longer term. And with the expectation of being above 7 thousand tons per day.

Okay. Just continue with Young David's then, you mentioned that maybe some of the other levels might require some additional support. Like, is the higher level ground support, is it mine wide, or is it just the 9.41 thousand level? Or in the vicinity of that area? And how much of the increase in costs are just onetime versus those that might be structural? Like, do you foresee requiring an indefinite level of higher ground support in some areas?

Yeah. it is it is primarily in the in the lower levels below 9.41 thousand Don, that we are talking about with regards to the enhanced ground support. So the areas that we have already developed, certainly, we will look to apply that enhanced ground support. Which as I mentioned on the call, you know, refers to a little longer embedded dynamic support, some cable bolting requirements, as well as the gauge of the mesh that we are using. As part of that enhanced ground support. So that will occur, as I said, over the rest of the year. The other advantage we have is just you know, to be aware of is there is a lot of the development's not actually in place in the lower mine. So, you know, those are areas that we just had not brought into the mine plan yet, but over the course of the next number of years, we would be bringing into the mine plan. So that will be brand new development. As part of that brand new development, it will have the enhanced ground support that we are implementing currently with what we are upgrading in the areas that we have already developed.

So, I mean, just adding that, it will be the standard going forward in the lower mine. So we will have added costs associated with that, but it might be $10 to $15 million a year. That is added to sustaining capital. it is not a bigger number than that.

Okay. And maybe just to as a final question and sticking with Young Davidson, can you provide some color on the frequency and magnitude of seismic events over Young Davidson's operating life? Just trying to get a sense of you know, the probability of something like this reoccurring. I mean, you mentioned seismicity is a normal part of mining. Have you noticed trends at Young Davidson Are the events occurring at a higher frequency as the mine deepens? If you could just provide a little bit more color on the history and looking forward on these type of events. Thanks.

Yeah, I think we have touched on this before, it is a normal part of mining activity. Once you are underground mining, you are going to create seismic activity. it is just the normal course of business once we started tracking the ore body. But as far as the frequency or, you know, the magnitude of the events, it is not that we are seeing more events overall or higher events overall. it is just a function of, obviously, the extraction sequence and what we are doing from an underground perspective. And as part of this review that I am talking about with regards to the overall extraction sequence in the lower mine, and the development plan that we are putting in place with regards to the enhanced ground support in the existing development as well as where we will be in the new sections that we have not developed yet. You know, we fully expect with what we are going to put in place from a ground support point of view, and from a point of view of reviewing the mining sequence that, you know, we will be able to effectively manage seismicity and manage the seismicity and extract the ore body from, responsibly as we continue to do all along.

And, you know, be more reliant on a consistent mining plan to deliver on.

Okay. Thanks a lot, Luke. that is all for me. Good luck for the rest.

There are no further questions at this time. This concludes the morning's call. If you have any further questions that have not been answered, please feel free to contact mister Scott Parsons at (416) 368-9.93 thousand Extension 5.44 thousand.