Alamos Gold Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 1, 2024

There are 9 speakers on the call.

Operator

Good morning to all participants. I will now turn the call over to Mr. Scott Parsons, Alamos' Senior Vice President, Investor Relations. Please go ahead, Mr. Parsons.

Speaker 1

Thank you, Paul, and thanks to everybody for attending Alamos' Q2 2024 Conference Call. In addition to myself, we have on the line today John McCluskey, President and Chief Executive Officer Greg Fischer, Chief Financial Officer Luc Guillemin, Chief Operating Officer and Scott R. G. Parsons, Vice President of Exploration. We will be referring to a presentation during the conference call that is available through the webcast and on our website.

Speaker 1

I would also like to remind everyone that our presentation will be followed by the Q and A session. As we will be making forward looking statements during the call, please refer to the cautionary notes included in the presentation, news release and MD and A as well as the risk factors set out in our annual information form. Technical information in this presentation has been reviewed and approved by Chris Spodzik, our Senior VP of Technical Services and a qualified person. Also, please bear in mind that all of the dollar amounts mentioned in this conference call are in U. S.

Speaker 1

Dollars unless otherwise noted. Now John will provide you with an overview.

Speaker 2

Thank you, Scott. We recently announced the closing of the Argonaut acquisition, and I'll start off by welcoming all of the Magino employees to the Alamos family. The uniting of the Magino and Island Gold Mines to form the Island Gold District is a pivotal moment for the company. Together, we are building an even brighter future by creating one of the largest and lowest cost operations in Canada, led by an even stronger workforce. We delivered an outstanding second quarter marked by numerous records.

Speaker 2

This included record production 139,100 ounces, exceeding guidance for the quarter. Our costs also declined from the Q1 and combined with rising gold prices, we generated record revenue, cash flow from operations and free cash flow of 107,000,000 dollars With the solid first half of the year, we are well positioned to achieve full year production and cost guidance. Now turning to Slide 4. With the closing of the Argonaut acquisition 3 weeks ago, the integration of Magino and Island Gold is well underway. The combination of the two mines will create one of the largest operations in Canada with annual production of more than 400,000 ounces of gold at first quartile costs once the Phase 3 expansion is complete.

Speaker 2

The 2 deposits host over 11,000,000 ounces of gold. And given the exploration success we are seeing, we expect the reserve and resource base to continue to grow. Given the proximity of the two operations, the utilization of 1 centralized mill and tailings facility will result in a considerable amount of capital and operational synergies totaling $515,000,000 The combined operation also unlocks significant longer term upside opportunities through the further expansion of the Magino Mill to accommodate the large and growing reserve and resource base and other near mine opportunities such as the North Shear. With the inclusion of Bagino, we expect production to increase to a new record of between 145,000 and 155,000 ounces in the 3rd quarter. We will produce additional details in September on our second half outlook as part of our updated consolidated guidance incorporating Magino.

Speaker 2

Now turning to Slide 5. The addition of the Magino mine has increased company wide coal production to a rate of approximately 600,000 ounces per year. In 2026, the completion of the Phase 3 plus expansion at Island Gold is expected to drive annual production closer to 700,000 ounces per year and at lower costs. We expect the PDA project in the Mulatos district to take us to over 700,000 ounces per year. The Lynn Lake project provides additional growth as early as the second half of twenty twenty seven and will take us to a long term rate of around 900,000 ounces per year.

Speaker 2

All of this growth can be funded internally and all of this growth is lower cost. Beyond that, there is a considerable amount of upside, both on the exploration of fundas as through a potential longer term expansion of the Island Gold District. In addition to the planned expansion of the Magino Mill to 12,400 tons per day in 2026, we started evaluating a longer term expansion scenario to between 15,000 and 20,000 tons per day. Ultimately, this could increase our consolidated production to closer to 1,000,000 ounces per year. Now turning to Slide 6.

Speaker 2

We continued to add value in the Q2. In addition to the Argonaut acquisition, we also completed our acquisition of Orford Mines, through which we added the highly prospective Kikavit project in Quebec. We have our largest exploration budget ever planned in 2024 at more than $60,000,000 and we are seeing the benefits with exceptional results across our operations. In May, we announced the discovery of a new style of higher grade gold mineralization in the hanging well of Yonge Davidson. More recently, we outlined the broad based exploration success we're having across the Island Gold main structure and within the hanging well and footwall.

Speaker 2

We expect this will drive another year, another increase in high grade reserves and resources at Island Gold for the 9th consecutive year. Last month, we released our 2023 ESG report outlining our progress on several key metrics. This included an 8% decrease in Scope 1 and Scope 2 greenhouse gas emissions and a 5% reduction in our total recordable injury frequency rate. We have a number of catalysts coming in the second half of the year. We expect to release our PDA development plan and provide updated consolidated guidance incorporating Magino in September.

Speaker 2

We also expect to provide additional exploration updates outlined in the success we are having at Mulatos and other operations. Towards the end of the year, we plan on releasing the results of a study incorporating burnt timber and Linwood into the Lynn Lake project, outlining another value driver as upside to the 2023 feasibility study. I'll now turn the call over to our CFO, Greg Fischer, to review our financial performance.

Speaker 3

Greg? Thank you, John. On the Slide 7, in the Q2, we sold 141,000 ounces of gold at an average realized price of $2,336 per ounce for record quarterly revenues of $333,000,000 Total cash costs of $8.30 per ounce and all in sustaining costs of $10.96 per ounce were down 9% 13%, respectively, from the Q1. We remain well positioned to achieve our full year production and cost guidance given the solid first half performance. Our reported net earnings of $70,000,000 in the Q1 or $0.18 per share included unrealized foreign exchange losses of $16,000,000 recorded within deferred taxes and foreign exchange and other adjustments net of taxes of 11,000,000 dollars Excluding these items, our adjusted net earnings were $97,000,000 or $0.24 per share.

Speaker 3

Operating cash flow before changes in noncash working capital increased to a record $191,000,000 or $0.48 per share. Free cash flow totaled a record 107,000,000 dollars a significant increase from the Q1. All three operations generated solid mine site free cash flow, including a record $40,000,000 from Young Davidson. The impressive free cash flow generation occurred while continuing to fund the Phase III plus expansion at Island Gold and is net of $15,000,000 in cash taxes paid in Mexico in the quarter. Capital spending totaled $88,000,000 in the quarter and included $21,000,000 of sustaining capital and $59,000,000 of growth capital, the majority of which was focused on the Phase 3 plus expansion.

Speaker 3

With the acquisition of Magino completed in July and the Island Gold Mill expansion no longer required, we are in the process of updating capital estimates, which will also include required upgrades to the Magino Mill as well as the impact of ongoing inflationary pressures. Our balance sheet continues to strengthen in the quarter with our cash balance growing over 30% to $314,000,000 At quarter end, we remained debt free. However, subsequent to quarter end, we withdrew $250,000,000 on our credit facility to pay off Argonaut's term loan and revolving credit facility that were inherited through the acquisition. With a strong cash position, more than $550,000,000 of total liquidity and solid ongoing cash flow generation, we remain well positioned to fund our organic growth initiatives, including the Phase 3 plus expansion, optimization of the Magino Mill and development of PDA and Lynn Lake. In July, we completed a gold sale prepayment agreement for the delivery of 49,400 ounces in 2025 based on forward curve prices of $2,520 per ounce.

Speaker 3

We used the proceeds to eliminate gold cord contracts inherited from Argonaut totaling 180,000 ounces that were hedged at an average gold price of $18.40 per ounce. Through this transaction, we have eliminated all of the hedges we inherited from Argonaut in 2024 2025 and significantly increased our exposure to rising gold prices on attractive terms. We continue to review opportunities to eliminate the remainder of the Argonaut hedge book, which is comprised of gold forwards totaling a combined 150,000 ounces in 20262027. I will now turn the call over to our COO, Luc Piment to provide an overview of our operations.

Speaker 4

Thank you, Greg. Moving to Slide 8. Young Davidson delivered a strong quarter with production of 44,000 ounces, a 10% increase over the Q1 on higher mining rates and grades processed. Costs also improved with total cash costs down 13% and mine site all in sustaining costs down 19% quarter over quarter. With grades expected to continue to increase in the second half of the year and milling rates expected to remain at 8,000 tonnes per day, the operation is on track to achieve full year guidance.

Speaker 4

In the Q2, the operation delivered record mine site free cash flow of $40,000,000 $55,000,000 for the first half of the year. Young Davidson is well positioned to generate over $100,000,000 in free cash flow for the 4th consecutive year as well over the long term given its 15 year mineral reserve life. Over to Slide 9. Island Gold delivered a solid quarter with production increasing 25% from the Q1 to 41,000 700 ounces and mine site all in sustaining costs decreasing 27% to $805 per ounce. This was driven by higher grades mined and processed.

Speaker 4

Mine grades averaged 14 grams per tonne in the quarter, above the annual guidance range, reflecting the planned mining of higher grade stopes as well as positive grade reconciliation. This more than offset lower mining rates earlier in the quarter as we focused on maximizing the extraction of significantly higher grade ore within the 10/25 minuteing horizon. In addition, we experienced lower haul truck availability from older units in the fleet that are being phased out. Mining rates improved in the latter part of the quarter following the receipt of the 2 new haul trucks. Mining rates are expected to average similar levels in the Q3, reflecting planned downtime in the latter part of July to upgrade the underground ventilation infrastructure.

Speaker 4

The ventilation upgrade was successfully completed earlier this week with mining rates expected to increase to average 1200 tonnes per day in August and through the rest of the year. The upgrade to ventilation capacity was completed as part of the Phase 3 plus expansion and will support increased development rates in the near term and higher underground mining rates over the longer term following the completion of the expansion. With the strong operational performance, Island Gold generated $15,000,000 of mine site free cash flow, while continuing to fund the Phase 3 plus expansion. Given the strong performance in the first half of the year, the operation is well positioned to achieve annual guidance. Over to Slide 10.

Speaker 4

While the Magino mine was not under our control in the Q2, the operation continued to show improvements. Production increased 36% quarter over quarter to 22,700 ounces. Average mining rates increased to 50 3,200 tons per day in the quarter, including 16,300

Speaker 3

tons per

Speaker 4

day of ore, up 24% from the Q1. Mill throughput also increased 33 percent to 8,400 tonnes per day relative to the Q1 and recoveries improved to 94%. We expect similar production in the Q3 reflecting downtime to implement various improvements to the Grizzly, crushing and conveying ore flow and mill liner design. These improvements are expected to positively impact the Q4 and ongoing production and costs. As John noted, we will be providing more detailed guidance on Magino as part of our updated consolidated guidance to be released in September.

Speaker 4

Moving to Slide 11. The Phase 3 plus expansion continues to move along with the shaft sink advancing to a depth of 403 meters as of June 30 and tracking towards the 1,000 meter level by year end. During the Q2, we made considerable progress, including completion of the buried services of the shaft area, commissioning of the upgraded voltage regulation facility, and we commenced construction on the bin house. Detailed engineering for the paste plant is now 90% complete and earthworks are currently underway with construction activities expected to ramp up in the second half of the year. Over to Slide 12.

Speaker 4

As of June 30, approximately 60 percent of the total initial capital of $756,000,000 had been spent and committed on the project. With the acquisition of Magino now complete, we no longer need to expand the Island Gold Mill or tailings facility. The expansion remains on track for completion during the first half of twenty twenty six. And will be a significant driver of our expected production growth and declining costs over the next several years. Over to Slide 13.

Speaker 4

The Mulatos district had another solid quarter with stronger than expected production of 53,400 ounces at costs below full year guidance. This was once again driven by La Yaqui Grande, which benefited from both grades and stacking rates coming in at or above the top end of guidance. With the onset of the rainy season, stacking rates are expected to decrease to average 10,000 tonnes per day in the second half of the year. Grades stacked are also expected to decrease slightly through the remainder of the year, leading to declining production and costs increasing to be consistent with guidance. Given the very strong first half of the year, the Mulatos district is well positioned to achieve annual guidance.

Speaker 4

Mine site free cash flow increased to $70,000,000 in the second quarter, net of $15,000,000 of cash tax payments. For the first half of the year, Mulatos generated $120,000,000 of mine site free cash flow, an impressive performance considering this was net of $60,000,000 of tax payments. Work on our development plan for the Puerto del Air deposit is advancing and we plan to release that in September. We expect this will outline another attractive project and significantly extend the mine life of the Mulatos district. I will now turn the call over to our VP of Exploration, Scott RG Parsons, to review our exploration success to the first half of the year.

Speaker 3

Thank you, Luke. Moving to Slide 14. In May, we announced the discovery of a new style of higher grade gold mineralization within the hanging wall of Young Davidson. This mineralization is hosted in conglomerates, whereas the majority of the current reserves and resources at Young Davidson are hosted within cyanide. The zones are located 10 to 200 meters south of existing infrastructure with grades intersected well above the current reserve grade.

Speaker 3

Drilling is ongoing and is focused on testing the extent of the conglomerates and to evaluate the controls and continuity of this higher grade mineralization. Additionally, we are re logging a sampling core that was historically drilled through the hanging wall zones from surface, which had limited sampling for gold outside of the cyanide. Given the proximity to existing infrastructure and higher grades, these zones could potentially provide meaningful production upside. Moving to Slide 15. Last week, we provided a comprehensive exploration update at Island Gold, where we highlighted the broad based exploration success we're experiencing across the district.

Speaker 3

This included an extensive list of exceptional intercepts, which have extended high grade mineralization across the main deposit and with multiple hanging wall and footwall structures.

Speaker 5

Some of the highlights in

Speaker 3

the main island gold structure include 37 grams per tonne over 7 meters in Island West and 17 grams per tonne over 10 meters to the East, both beyond existing reserves and resources. Within the Aingwall and Footwall, we continue to define new zones of higher grade mineralization and expand upon recently defined zones across the Main Island Gold deposit. This included multiple intercepts from recently defined zones grading above 70 grams per tonne over 2 meters. These zones represent significant opportunities to continue to grow near mine reserves and resources, which are low cost to develop and produce given their proximity to existing infrastructure. In the 2023 reserve and resource update, we added 1,000,000 ounces before depletion with the additions in the Hayne Walton Football Zones accounting for approximately 70% of this growth.

Speaker 3

Given our ongoing success, we expect these zones to be a significant factor in Island Gold's continued growth. Within our delineation drilling program, which is focused on resource conversion in Island East, we've defined a significantly wider and higher grade zone than typically seen within the deposit over 80 by 100 meter 130 meter area. Highlights from this zone include 102 grams per tonne over 17 meters, 135 grams per tonne over 8 meters. Collectively, these exploration results are expected to drive further growth in high grade reserves and resources with the year end update for what continues to be one of the highest grade and fastest growing deposits in the world. With Island Gold main structure open laterally and down plunge and an increasing number of high grade zones being defined in the hanging wall and footwall, we see excellent potential for this growth to continue well into the future.

Speaker 3

Moving to Slide 16. We are also starting to find longer term upside opportunities through the integration of Island Gold and Magino. One of those opportunities is the expansion of the Magino open pit. Gold mineralization has been intersected east of the Magino open pit reserve, supporting the potential for extension of the Magino deposit to the east beyond the previous property boundary. The North Shear is another near mine opportunity as potential source of additional mill feed for an expanded Magino milling complex.

Speaker 3

The Norris Shear corridor is located in the northern limb of Ananti Form within and along the northern portion of the Web Lake Stock. The North Shear Corridor is 20 to 30 meters wide near surface, appears to widen the depth to 60 meters and has been interpreted to be over 1,000 meters in strike and has been drilled to a depth of 600 meters and remains open at depth. Higher grade mineralization has been intersected within the North Shear, both this year as well as historically, and we plan on following up with additional drilling and modeling to continue to evaluate the potential for underground pulp mining. Given the larger capacity of the Magino Mill with further expansion potential, the North Shear will be one of the many opportunities we'll continually evaluating as sources of higher grade feed for the centralized mill. With that, I'll turn the call back to John.

Speaker 2

Thank you, Scott. So that concludes the formal presentation. I'll now turn the call over to the operator, who will take your questions.

Operator

Thank you. The first question is from Ovais Habib from Scotiabank. Please go ahead. Your line is open.

Speaker 6

Thanks, operator. Hi, John and Alamos team and congrats to you and your team on a really a great quarter in the first half. John, a couple of questions from me. At Island Gold, it was great to see grades improve over 30% quarter over quarter. What was the average grade you were expecting in Q2?

Speaker 6

I mean, I'm trying to figure out what was expected and how much was actually positive grade utilization? And the second part of that is also are these higher grades expected to persist in the second half?

Speaker 4

Yes. Hi, Oui, it's Luke here. I can take the first part of the question. I think I missed the second part, so I'll get you to repeat that. But as far as the forecasted grades for Island in Q2, we were looking to be about 12 grams to 12.5 grams in the quarter.

Speaker 4

I didn't catch your second question. Maybe if you can repeat that for me, please.

Speaker 6

Sure. Hi, Luke. So yes, so I just wanted to understand, are these grades expected to persist going into the second half?

Speaker 4

Our grades in the second half of the year are going to be more in line with our reserve grade. So about 11 grams is what our expectation is in the second half of the year.

Speaker 6

And would you be in the same zones that you're currently mining in? And I'm trying to, again, figure out if there would be any sort of potential positive reconciliation going into the second half as well?

Speaker 4

Similar mining areas, yes. I mean, there's a high grade complex at 1025 that we're mining in. We'll continue to mine there in the second half of the year. But I mean, the positive reconciliation we have seen has been not just specific to that high grade zone, but some of the other areas that we're mining with some of the other mining fronts as

Speaker 6

well. Okay, got it. Thanks, Luke, for that. And just second question from me. Again, very early days regarding Magino.

Speaker 6

Have there been any surprises so far either from an operating or financial standpoint?

Speaker 4

No. From an operating standpoint, based on our due diligence, no surprises. I think as we mentioned on the call, through Q3, we're looking to make some continual improvements certainly through the mining operations as well as milling operations and then looking to obviously pick up production as we move into the latter half of the year and then as we move forward into 2025.

Speaker 6

Sounds good. Again, that's it for me guys. Thanks for taking my questions and look forward to the PDA study.

Operator

Thank you. The next question is from Kerry Smith from Haywood Securities. Please go ahead. Your line is open.

Speaker 7

Thanks, operator. John, I may have missed it in the release, but you had mentioned that the Phase III plus expansion was still on schedule. Is it still on budget as well with the CapEx, the $756,000,000 knowing that that's going to be adjusted once you incorporate the Magino Mill and no tailings?

Speaker 3

Hi, Carey. It's Greg here. I'll grab that question. Yes, obviously, there's savings that we expect as a result of not needing to expand the Island Mill. We do have costs that we will need to incur to expand the Magino Mill to hit that 12,400 tonnes per day by mid-twenty 26 when we complete the Phase 3 expansion.

Speaker 3

But we've also seen inflationary pressures, especially around labor over the last couple of years and we expect that to persist. So overall, we're looking at the updated estimates, but I suspect that if anything, we'll have a modest increase compared to the $750,000,000 that we had released a couple of years ago.

Speaker 7

Okay. And that modest increase, that would not reflect the $140,000,000 savings obviously for mill mill expansion in the tailings, right? Just on an apples to apples basis, it will be modestly higher.

Speaker 3

No, no, no. On an overall basis, including the savings that we have on the mill, but also including the additional capital that we need to spend on the Magino mill, we'll come in somewhere around the original budget of $750,000,000 potentially a modest increase.

Speaker 7

Okay, got you. Okay, perfect. That's helpful. Thanks. And then you had kind of guided earlier in the year that first production would be second half weighted with the better first half than I guess you were expecting and you were guiding, are you still expecting second half production to actually be higher than first half production?

Speaker 3

The biggest driver of this the higher production in the first half was in Mexico. But with the onset of the rainy season in Q3 as well as we're expecting some lower grades in the second half of La Yaqu Grande, We're going to see a potential decrease in Mexico. So overall, we're comfortable with the guidance that we have. That said, we're releasing an updated 3 year guidance in September and we'll continue to monitor that.

Speaker 7

Okay. Okay. That's helpful. And just so I'm clear, the let's call it $756,000,000 CapEx, it might be slightly higher than that. Will that number when you update it, will it include the cost to expand the Magino mill to the 15,000 to 20,000 tonne per day rate?

Speaker 7

I assume not, but just to be

Speaker 3

sure. No, it will not. It will include the cost to expand to 12,400 tonnes per day, which is inclusive of bringing the island ore into the Magino Mill.

Speaker 8

Got you.

Speaker 7

Okay, perfect. And then while I got you, Greg, what is the rough interest rate that you just remind me the interest rate on the debt on your facility that you drew down?

Speaker 3

It's based on sulfur, but right now we're paying just over 7% interest rate on the credit facility.

Speaker 7

Okay, okay. Perfect. And then just one first, Scott, RJ, how many holes at YJ do you have in that Hanging Well Conglomerate so far?

Speaker 3

We've drilled from 2 drill bays where we're about 5,000 meters of drilling in approximately 15 holes and it's ongoing. And the first objective is to find the extent of the conglomerates, which we're making good progress on. And then those holes will be continue to be targeting the continuity and the plunge of the mineralization within the conglomerate. So it's looking positive. It's still early days and we're continuing to evaluate about 15 holes in 5,000 meters.

Speaker 7

Okay. That's perfect. Thank you very much and congratulations on a great quarter.

Operator

Thank you. The next question is from Cosmos Chiu from CIBC. Please go ahead. Your line is open.

Speaker 8

Thanks, John, Greg, Luke, Scott and Scott. Again, congrats on a very strong quarter and congrats on closing the Bicino deal. Maybe my first question is on guidance again. Just to confirm, I guess I heard it. So in September coming up, you're going to be putting out 3 year guidance.

Speaker 8

Is that on production costs and CapEx?

Speaker 3

That is correct, Cosmos. I mean, the main triggers being the fact that we've obviously acquired Magino and need to incorporate that over the next little bit as well as the PDA study that we plan to put out in September. So those two items are the main triggers putting out that updated 3 year guidance.

Speaker 8

Perfect. And then I guess, on a broader share, you need to get comfort on ahead of the guidance? Is it the mill? Is it just cost?

Speaker 3

Carlos, sorry, your phone is breaking up.

Speaker 8

Can you hear me now?

Speaker 2

Yes. We missed the question.

Speaker 3

Yes, we missed the question. Apologies.

Speaker 8

Yes, sorry. I'm just wondering which you'll need to get comfort on ahead of the September update. Is it the cost? Is it the grade? Is it milling, mining?

Speaker 8

Like which key areas to the extent make this true?

Speaker 4

Yes. We're Fluke here, Cosmos. I think I got your question there. It's a little bit difficult to hear you. But with regards to Magino, certainly to the second half of the year, the continuous improvement with regards to mining operations.

Speaker 4

I mean, there was increased performance from Q1 to Q2. We expect that as we continue to move through Q3 and Q4 to get to our ultimate mining rate by the end of the year at about 64,000 tonnes per day, which is ore and waste combined. On the milling side, as we mentioned in the call, there's some improvements that we're going to continue to make through the course of Q3. So we look at that from a processing and gold production point of view to be pretty flat line relative to Q2 results, but then looking to increase that as those improvements are completed in Q3 to see better performance in Q4 towards the end of the year. And our ultimate objective, as we've talked about since we announced this deal, was to we think with these improvements that we're going to make with the Grizzly arrangement, the crushing conveying arrangement and some configuration changes to the mill liner design with pulp lifters and operating parameters of that mill itself.

Speaker 4

We'll get it to 11,000 200 tons per day by the end of the year or early into 2025 at the latest.

Speaker 8

And maybe just talking about the reporting here, how are you going to be presenting guidance in terms of for MaginoIsland Gold? Is it going to be as an integrated basis? Is it going to be one number? Or are you going to be giving us separate numbers for the different operations in terms of Island Gold and Amagino separate?

Speaker 3

Yes. I mean, we're still working through that. I think the thought process is for 2024, it would be separate because they're running under separate mills. As we move into 2025 and it's operating out of an integrated mill, we'll look at it as one operation.

Speaker 8

Great. And maybe quickly on Island Gold, just to follow-up, I saw that, I guess, the throughput was lower in Q2 as part of the equipment refresh. I think 2 haul trucks had to be renewed or replaced. So Luke, maybe if you can talk a little bit more about your refreshment cycle here in terms of machinery and equipment on-site at Island Gold. Is there anything else planned for Q3 and Q4?

Speaker 8

And how has that plan changed now with Magino?

Speaker 4

Well, in relation to Magino, no change. Our fleet replacement is really based on operating hours of those equipment of that equipment.

Speaker 3

So as those haul trucks

Speaker 4

reach their maximum operating hours over their life cycle, then we actually change them out and replace them as part of our fleet replacement strategy with new units. So the 2 new units that we were expecting earlier in the quarter ended up arriving later in the quarter, which is what affected the overall mining rates in the quarter. But we did receive those in early June. We do have 2 more trucks that are scheduled to arrive this year in the second half of the year, which was also part of our fleet replacement strategy. And that would be the full replacement as far as our requirements for 2024.

Speaker 4

But obviously, as we move forward in '25, 'twenty six, as these older units age out based on operating hours, then we would have new units coming into the mix to replace those older units as part of our fleet replacement strategy. So it's always an ongoing thing, Cosmo, year over year depending on the operating hours of the equipment.

Speaker 8

And then maybe one last question at YD. I see that you started using some hybrid production scoops. Is that a transition you think? You're going to bring on more hybrid scoops? And it seems like they're working out pretty well so far.

Speaker 8

Is that what I'm reading? And would it be a full transition later on, do you think?

Speaker 4

Yes. I mean, it's the new phase, obviously, with the technology coming in with that equipment. We did get 2 new units this year. They've been actually performing very well. Availability has been very high on them, plus 80%, which is what we would expect as far as availability on those units.

Speaker 4

They've been very productive for us. So as we continue to move forward again with our fleet replacement strategy for our production scoops at Young Davidson, we would start to probably lean more towards these hybrid units moving forward.

Speaker 8

And does that help on cost as well? I guess it does because the efficiency, if it's going up, that could help with cost as well.

Speaker 4

Correct, Cosmos. I mean, obviously, as these older units start to get aged out from an hours point of view of operating hours, is more cost to maintain these units. There's less availability on these units, which obviously affect the overall productivity of the operation. So by replacing them with new units with higher availability and lower maintenance costs, it improves

Speaker 3

the overall cost profile of the business.

Speaker 8

Great. Thanks once again, John and team. Those are all the questions I have. Thank

Operator

you. Thank you. Thank you. The next question is from Mark sorry, from Mike Parkin from National Bank. Please go ahead.

Operator

Your line is open.

Speaker 5

Hi, guys. Thanks for taking my question and congrats on the big quarter. Starting at YD, can you just revisit what made you look for that conglomerate zone? Was that a fluke, extending a hole and you hit it? Or was there something from like a mag survey or something like that that kind of indicated something might be there?

Speaker 5

Like what prompted that initial discovery hole?

Speaker 3

Hi, Mike. It's Scott. What initially prompted, I mean, obviously, the search for higher grade in around Young Davidson is a key objective for exploration group. So we basically compiled all historic exploration results and recognized opportunities from limited sampling that occurred in 2,008 surface drilling to the south deposit and the hangwall. And there was high grade mineralization intersected not followed up on.

Speaker 3

So we had drill bays available from underground to initially follow-up on that intersection in the hanging wall and sampled from top to bottom of the hole and sure enough, started getting high grade mineralization in conglomerate. It wasn't obvious associated with pyrite, not quartz vein like you typically see, but certainly high grade. So that's initially what led us into targeting in the Hainville.

Speaker 5

Okay. And is that kind of taking precedence over like the YD West? I remember that was kind of a bit of a higher grade zone, but obviously, down near the bottom of the reserve. Is this given the grades and the proximity to infrastructure, it would seem like you would allocate more resources there versus chasing something at depth just given the Yes.

Speaker 3

That's the correct assumption. I think we're taking a balanced approach to continued expansion of the resource. But obviously, given the grades and the proximity of this gold mineralization in the conglomerates to our existing infrastructure, it has now shifted to more of an area of focus for us for the balance of the year.

Speaker 5

Okay. And then one last question, maybe a little too early for this one, but obviously, it's just a recent discovery, but any thoughts towards metallurgy? Would there be mill modifications required to bring that material into the mine plan? Or is the way the mill is set up actually good for that different style of mineralization?

Speaker 4

Hi, Mike. It's Luke here. No, I mean, certainly early stages. But I mean, based on the early results that we've seen, no, we don't expect any real challenges from a metallurgical point of view to be able to treat that new zone from within the existing plant that we have at YD currently.

Speaker 3

What we're seeing is free gold associated with that pyrite. So it's pyrite is a major spec conglomerate with gold around the margin. So I don't anticipate it being issue from a metallurgical perspective.

Speaker 5

Okay. And just one last question there. Your current TSF permit and design comp, is that in excess of your current reserves? Just kind of getting at, could you either make it bigger or would you have if this additional zone proved to be a size, would you have to look for potentially another TSF site to store the added potential reserve upside here? Good problem to have obviously, but just kind of wondering longer dated future, what things might look like?

Speaker 4

Yes. Hi, it's Mike. You're still referencing YD, I assume, right?

Speaker 5

Yes.

Speaker 4

Yes. So with regards to these new finds, I mean, we would certainly have capacity under the existing footprint that we have for the new construction facility that we built a couple of years ago. It certainly handles all of our reserve and resource base and we have some upside to that as well. So capacity wise, we would be okay.

Speaker 3

Okay, great.

Speaker 5

Okay, that's it for me. I don't know, but I forgot what I was going to ask. So I'll jump back in the queue if I remember.

Operator

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 416-368-9932 extension 5,439.

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Earnings Conference Call
Alamos Gold Q2 2024
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