Island expansion brings almost 1M oz output into focus for Alamos Gold

Alamos Gold’s (TSX, NYSE: AGI) organic growth plans are poised to boost the production profile to the near‐million-ounce club by the end of the decade, CEO John McCluskey tells The Northern Miner.

Driven by record production at its Island Gold mine in Ontario and the integration and ramp-up of its neighbouring Magino mine, the company late on Wednesday reported a record 567,000 oz. gold for 2024 – a 7% increase over 2023 – and free cash flow of $272 million. In 2024, the all-in sustaining costs (AISC) stood at $1,281 per ounce.

“We’ve been able to strengthen our position with disciplined, organic growth, not only expanding reserves but also driving down costs through synergies and leveraging our high‑grade assets,” McCluskey said in a phone interview. “The integration of Magino has been a game changer – it’s not just about boosting production; it’s about unlocking cost efficiencies that are driving our record free cash flow.”

The company’s strong performance in 2024 comes from its low-cost, high-grade assets. In a sector where consolidation and efficiency matter, its reserve replacement and asset integration make it stand out. This approach is different from peers focused on quick cash flow in the record gold price environment, according to the executive.

Since November 2016, McCluskey has drawn on over 30 years of mining experience to steer Alamos Gold. His leadership facilitated the Argonaut takeover that secured the Magino mine and maintained a steady focus on reserve replacement at Island Gold. This focused approach to exploration and integration has led to record production and cash flow. It has made the company a low-cost operator in stable areas.

BMO Capital Markets mining analyst Brian Quast highlighted in a note Thursday that despite mixed Q4 cost metrics, Alamos’ performance was “in-line” with expectations – boosted by a strong balance sheet, with $327 million in cash and $827 million of total liquidity.

He noted that a 31% reserve increase to 14 million oz. underlines the company’s long-term growth potential and pointed to upcoming catalysts – including a life-of-mine plan for the Island Gold complex by midyear and an expansion study by year-end – as key drivers for sustained higher production averages.

Alamos shares hit a fresh 12-month high at C$34.42 on early Thursday bids in Toronto, coming off a low of $15.28 in the period. By midday, shares traded at C$33.56, giving it a market capitalization of about C$14.1 billion.

Magino integration

Central to the growth story is the integration of the Magino mine, acquired through the Argonaut takeover last year. Magino made major upgrades. It replaced its primary and secondary crushers to increase throughput. The upgraded facility is now vital to the plan. It will process high-grade ore from Magino and Island Gold using one efficient mill.

Alamos is fast-tracking its stage three expansion program at Island Gold to further drive growth. The expansion’s cost rose by about 5.3%, or $40 million, due to inflation and changes in scope. Now, the total capex is $796 million. This investment aims to increase capacity and reduce costs.

An aerial view of the Phase 3+ Island Gold expansion and Magino mine, both part of the Island Gold district in Ontario. Credit: Alamos Gold

When the mill switch is done by midyear, the new operation will halve production costs and increase output, McCluskey said.

The guidance calls for production between 580,000 and 630,000 oz. gold this year, with a 24% increase expected by 2027 – reaching 680,000 to 730,000 ounces. This year, the company expects AISC to range between $1,250 and $1,300 per oz., with an anticipated further reduction of about 8% by 2027.

Top assets

McCluskey praised the company’s strong operations, which are mostly in Canada and Mexico. The Mulatos District in Mexico saw great results. Improved tonnage and grade at La Yaqui Grande boosted cash flow to record levels. Island Gold also delivered exceptional outcomes and keeps redefining its potential, McCluskey said.

“Island Gold is an asset that just keeps on giving,” he said, highlighting how higher grades and aggressive reserve replacement continue to propel the operation.

Much of the ore at Island Gold comes from a high-grade part of the deposit, and over the past year the mine achieved an average grade increase of 10%, now sitting at 11.4 grams gold per tonne for proven and probable reserves.

According to McCluskey, this growth in grade and tonnage is key for the mine. Drilling keeps uncovering even higher-grade finds. Throughput keeps improving. Island Gold is now processing more, partly due to expansion efforts aimed at reaching 12,500 tonnes per day at full capacity.

Meanwhile, the Young-Davidson mine, also in Ontario, delivered 174,000 oz. last year and generated record free cash flow of $140.9 million, further reinforcing Alamos’ low-cost operating profile.

Record exploration budget

Alamos also continues to invest heavily in exploration. With its largest budget ever – $72 million – the firm is focused on further delineating high-grade zones across its Canadian and Mexican operations. Strong free cash flow and favorable currency dynamics have underpinned these investments, even as record gold prices above $1,900 per oz. buoy the market.

The company’s reserve update released on Tuesday adds further heft to its growth story. Global reserves rose by 31%, reaching 14 million oz. of gold. Island Gold’s reserves and resources account for roughly 6.7 million oz, – about half of the company’s global reserves. This comes as 13 drills explore deeper into richer zones, McCluskey said.

“If you look at the in-situ value of 14 million ounces, that’s about $41 billion, and we know exactly where we’re heading for the next 15 to 20 years,” McCluskey said. “We’re not buffeted by volatility; with first-quartile costs well below the majors, we’ve built a strong moat that sets us apart.”

Alamos Gold’s flagship Young-Davidson mine in northern Ontario. Credit: Alamos Gold

Island Gold has replaced all mined ounces for nine consecutive years and still grows, McCluskey pointed out.

A reserve update shows that the asset’s proven and probable reserves rose from about 10.3 grams gold per tonne to 11.4 grams. Also, its resource grades increased by nearly 2 grams to almost 14.5 grams gold per tonne. Mill throughput in the three months ended Dec. 31 averaged 1,197 tonnes per day, underlining the strong performance of its high-grade zones.

At the Lynn Lake gold project in Manitoba, the Burnt Timber and Linkwood deposits have been upgraded to reserve status. This will extend the mine’s life and reduce sustaining costs, McCluskey said.

Tariff fillip

While recent U.S. tariff talks have stirred uncertainty globally, McCluskey dismissed any direct impact. “We don’t export into the U.S.,” he noted, adding that the company’s diversified production base in Canada and Mexico insulates it from potential trade disruptions.

With production refined in Canada and Europe, Alamos’ revenue is protected from such measures. He noted that inflation from trade barriers could boost gold prices, enhancing the metal’s appeal as a safe haven.

“Our strategy is simple – we’re combining record operational performance with aggressive organic reserve growth and strategic capital investments,” McCluskey said. “We’re not merely producing gold; we’re building a legacy for generations to come.”