Alamos Gold Inc

TSX:AGI

Earnings Call Transcript 2022-Q1

[Operator]

Good morning. I would like to turn the meeting over to Mr. Jamie Porter, Chief Financial Officer. Please go ahead.

[James Porter, executive]

Thank you operator and thank you to everyone for attending Alamos' first quarter 2022 conference call. In addition to myself, we have on the line today both John McCluskey, our President and CEO; and Peter MacPhail, Chief Operating Officer.

We will be referring to a presentation during the conference call that is available to 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 MD&A, as well as the risk factors set out in our annual information form. Technical information: this presentation has been reviewed and approved by Chris Bostwick, our Senior Vice President 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 US Dollars unless otherwise noted. Now I'll turn it over to John to provide you with an overview of the quarter.

[John McCluskey, executive]

Thank you very much Jamie, and very good morning to everyone. So we'll start with slide 3.

We produced 99,000 ounces of gold in the first quarter in line with guidance. Young-Davidson had another solid quarter with average mining rates exceeding the design rate, offsetting planned lower production from Mulatos. As with production, our costs were consistent with first quarter guidance and both are expected to improve through the year. We expect higher grades from Island Gold to contribute to stronger production in the second quarter and La Yaqui Grande to drive a more significant increase in production and decrease in cost in the second half of the year. We remain well positioned to meet our full-year guidance and with higher production, lower costs, and lower capital spending, we expect to transition to positive free cash flow in the second half of 2022.

Now turning to slide 4, we're advancing our growth initiatives and expect to deliver on several significant catalysts starting in the middle of 2022. At Island Gold, we achieved a key permitting milestone with the approval of the closure plan amendment in March allowing us to ramp up construction activities on the Phase III expansion. We held a groundbreaking ceremony earlier in April with key stakeholders, including the federal members of Parliament, the Provincial Minister of Northern Development of Mines, the Minister of Energy, indigenous partners, and municipal representatives. As we ramp up construction activities, we are also working on an optimized mine plan to be released mid-year. Given the 37% increase in mineral reserves and resources since the Phase III Expansion Study was completed in 2020, including higher-grade editions in proximity to the planned shaft, we expect the new mine plan to highlight a significantly more valuable operation. Within the Mulatos district, La Yaqui Grande construction is more than 90% completed, and we expect to start stacking and leaching more in June. With initial production expected in the third quarter, La Yaqui Grande will transform the Mulatos district, bringing higher product and significantly lower costs. Finally, at Lynn Lake, we continue to advance permitting and expect approval for the environmental impact statement in the second half of this year.

[Now] moving to slide 5, these catalysts are key components of our strong long-term outlook. We expect La Yaqui Grande and higher grades at Island Gold to drive our production closer to 500,000 ounces per year over the next few years, with all-in sustaining costs decreasing 18% to approximately $1,000 per ounce by 2024. Following the completion of the Phase III expansion at Island Gold and with the development of Lynn Lake, we have the capacity to increase our production by 65% to approximately 750,000 ounces of gold per year at 30% lower all-in sustaining costs of $800 per ounce. We also have additional upside opportunities through the updated Phase III Mine Plan at Island Gold, as well as with the development of the new higher grade PDA underground deposit at Mulatos, which we will be detailing later this year. We have a number of attractive growth opportunities, and we control the pace of development.

Island Gold is one of the highest grade and lowest cost mines in Canada and our most at growth asset. As our highest return and lowest risk investment, we will continue to prioritize allocating capital to the expansion at Island Gold. With our strong balance sheet and free cash flow generation returning to - in the second half of 2022, we can fund this growth internally while providing ongoing returns to shareholders through our dividend and share buybacks. I'll now turn the call over to our CFO, Jamie Porter to review our financial performance.

[James Porter, executive]

Thank you, John. Moving onto slide 6, we sold 98,500 ounces of gold at a realized price of $1,874 per ounce for revenues of $185 million in the quarter. As expected, total cash costs of $992 per ounce and all-in sustaining costs of $1,360 per ounce were higher than our full-year guidance. Driven by lower grades at Island Gold and the continued processing of stockpiled ore at Mulatos, we expect similar costs in the second quarter and again, as previously guided, significantly lower costs in the second half of the year with the start of production from La Yaqui Grande. We continue to see inflation across many of our input costs, including diesel cyanide, steel, and labor. We have actively mitigated this impact through various means, including hedging and long-term contracts. We took an active approach to hedging early in the year, hedging the majority of our Canadian dollar exposure for 2022, as well as our diesel exposure at our Canadian mines. We are also less exposed to input costs such as diesel given that our Canadian operations are underground mines that are connected to grid power.

Operating cash flow before change to non-cash working capital with $71 million or $0.18 per share in the first quarter. We reported a net loss of $9 million for the first quarter, which included a non-cash after tax impairment charge of $27 million triggered by the sales of the non-core Esperanza project, unrealized foreign exchange gains of $6 million, which were recorded within deferred taxes and foreign exchange, and other losses of $6 million. Excluding these items, our adjusted net earnings were $18 million or $0.05 per share. In February, we announced the sale of the Esperanza project to Zacatecas Silver Corp. for total consideration of up to $60 million. From an accounting perspective, the fair value of the consideration received was less than the carrying value of Esperanza, resulting in a non-cash impairment charge of $27 million after tax. Capital spending totaled $87 million in the first quarter, including $23 million of sustaining capital, $59 million of growth capital, and $6 million of capitalized exploration. We expect capital spending to increase in the second quarter as spending on the Phase III Expansion at Island Gold ramps up, and then to trend lower in the second half of the year, following completion of construction of La Yaqui Grande. Free cash flow in the quarter was negative $41 million, primarily driven by capital spending on La Yaqui Grande and planned lower gold sales. We expect to return to positive free cash flow in the second half of 2022 with the start of low cost production from La Yaqui Grande and lower growth capital spending with its construction complete.

We continue to return capital to shareholders through our quarterly dividend of $10 million or $0.10 per share on an annualized basis. And with recent weakness in the share price, we expect to be more aggressive with respect to our share buyback. We remain debt free and ended the quarter with $124 million in cash, $22 million of equity securities, and $500 million of undrawn credit capacity. We remain well positioned to fund our internal growth projects while supporting ongoing returns to shareholders. I will now turn the call over to our Chief Operating Officer Peter MacPhail to provide an overview of our operations.

[Peter MacPhail, executive]

Thank you, Jamie. Moving to slide 7, we had another excellent quarter at Young-Davidson producing 51,900 ounces, generating mine site pre-cash flow of $23 million. Average mining rates of 8,200 tons per day exceeded design rates of 8,000 tons per day for the third consecutive quarter. Mill throughput increased to average a record of 8,200 tons per day with grades mined and milled at the top end of guidance. Total cash costs of $840 per ounce and mine site all-in sustaining costs of $1,044 per ounce were both below guidance driven by higher grades and a strong operating performance. With a solid start to the year, Young-Davidson remains well on track to meet its full year production and cost guidance.

Over to slide 8, Island Gold produced 24,500 ounces of gold, a cash cost of $745 per ounce, and mine site all-in sustaining costs of $1,083 per ounce. Production and costs were impacted by lower mill throughput and planned lower grades reflecting mine sequencing. The lower mill throughput of 1,120 tons per day was driven by colder than average conditions in January and February, which resulted in core handling issues on the surface, primarily with freezing in the [ore bins]. With planned higher grades through the rest of the year, we expect stronger production and lower costs and remain on track to achieve our full-year guidance.

Over to slide 9, the approval of the closure plan amendment for Island Gold in March was a key permitting milestone allowing for the ramp up of construction activities for the Phase III Expansion. Earlier this month, we officially broke ground on the expansion and look forward to starting on the [pre-sink] of the shaft in July. We're also working on an updated mine plan to be released mid-year, which will incorporate the 1.4 million ounce increase in high-grade reserves and resources since the Phase III Expansion Study was completed in 2020. This will also incorporate the higher-grade additions in Island East sooner. With the larger reserve and resource base and higher production earlier in the mine life, we expect the value of Island Gold will continue to grow.

Moving to slide ten, Mulatos produced 22,500 ounces in the first quarter, a total cash cost of mine site all-in sustaining costs of $1,570 and $1,782 per ounce, respectively, which was consistent with our first half guidance for the operation. Production and costs are expected to remain at similar levels for the second quarter before production ramps up and costs decrease in the second half of the year as La Yaqui comes online. As previously guided, we expect approximately 65% of Mulatos' full-year production to come in the second half of the year at substantially lower costs.

Moving to slide 11, construction of La Yaqui Grande is now 90% complete, and the operation remains on schedule to achieve commercial production in third quarter of this year. In the first quarter, the primary crusher was commissioned; the secondary tertiary crushers are being commissioned as we speak; the agglomeration system and pond construction are complete; and the heap leach pad, carbon columns, and ADR plant are over 90% complete. To date, 16,000 ounces of gold have been mined. We expect to be stacking and leaching ore starting in June, with production ramping up through the second half of this year. La Yaqui Grande is expected to significantly improve the production cost profile of Mulatos and drive strong free cash flow from the operation starting in the third quarter. With that, I'll turn the call back to John.

[John McCluskey, executive]

Thank you, Peter. That concludes our formal presentation, and I'll now turn the call back to the operator and open it for your calls and questions.

[Operator]

[Operator Instructions] And your first question is from Trevor Turnbull from Scotiabank.

[Trevor Turnbull, analyst]

I guess the first question is probably for Peter. I was just curious with the really high performance of throughput at Young-Davidson, are you bumping up against any permitting restrictions, or do you have plenty of room to go beyond 8,000 tons a day?

[Peter MacPhail, executive]

Yes, we've got lots of room there Trevor. We've, in fact, I think we're proven to go well beyond there, at least 10,000 tons a day, but we don't have necessarily the infrastructure to do that, but the permitting is not going to be an issue there.

[Trevor Turnbull, analyst]

Okay. Yes. I just wasn't expecting you guys to be so much above 8,000 but sounds like things are going really well.

[Peter MacPhail, executive]

Well, we need to be above 8,000 for the times that we're below 8,000. We'll average 8,000.

[Trevor Turnbull, analyst]

No, I understand. And then maybe another question for you just with La Yaqui Grande getting set to start stacking. Can you remind us a bit about the timing of the leach cycle? Is it relatively fast such that the stacked ounces are going to correspond fairly well with what you recover in the same period?

[Peter MacPhail, executive]

Yes. La Yaqui Grande is much like La Yaqui, which is high recovery, fast leaching [buggy saw] oxide ore, so it's the best stuff that we've ever seen in the Mulatos district. So yes, it's going to be good.

[Trevor Turnbull, analyst]

Okay. And then the last question I had just with respect to Turkey and the investment treaty claim that's out - outstanding. I was just wondering, does that preclude you from looking at any other options for the property, such as sale or partnership, or are you kind of locked in now to the investment treaty claim?

[John McCluskey, executive]

This is John, Trevor. No, that doesn't, preclude us in any way.

[Trevor Turnbull, analyst]

And is there any update you can give us just on Turkey? Kind of where things are at?

[John McCluskey, executive]

There's nothing really to report, just going through the process.

[Operator]

The next question is from Cosmos Chiu from CIBC.

[Cosmos Chiu, analyst]

Maybe my first question is on inflation. Jamie, it's good to hear that you've hedged a lot of the input cost, but I guess one input cost you cannot really hedge is labor. Could you maybe talk about the labor situation and inflation in cost of labor in Canada?

[James Porter, executive]

Sure, Cosmos. Yes. So, when we set our budget for 2022, I think our average salary increase in Mexico was between 5% and 6%. And in Canada for our Northern Ontario operations was about 3.5%, so that's pretty consistent with market. Though we are seeing upward pressure, and I wouldn't be surprised if we see labor rates going beyond that when we go to set our 2023 budget.

[Cosmos Chiu, analyst]

Yes. And that leads well into my next question. Jamie, can you remind us what kind of inflation assumption overall did you factor into 2022 cost guidance? And is that still what consistent with what you've seen so far in Q1?

[James Porter, executive]

Yes, so we assumed a 5% across the board inflation increase, that's what's inherent in our cost guidance. And as we indicated in our MD&A and press release, we don't see the need at this point to revise our cost guidance upward. We're fortunate that we hedged the majority of our Canadian dollar exposure. We've hedged our Canadian diesel exposure at rates 45% below current spot. So that's benefiting us for 2022. And I think we're in pretty good shape. We will see inflationary impact again as we look into 2023 and beyond.

[Cosmos Chiu, analyst]

Of course. Maybe switching gears a little bit on Lynn Lake. Good to hear that you're moving ahead with it, and hopefully you get the permitting, the EIA approval, EIS approval later on this year. But I see that the last feasibility study was done in 2017. So could you maybe talk about that? You get your EIS, and then the next step is sort of approval of the, for construction, internal approval, but would you need to update your feasibility study first? Are you planning to, before you make that final step in terms of approving it for construction?

[James Porter, executive]

Yes. That's absolutely the plan Cosmos. So, we're hoping that the permitting will come in later this year, at which point we'll be releasing an updated technical report feasibility study that will provide detailed capital and operating cost estimates in today's dollars. But as John mentioned in his comments, our priority from a capital allocation perspective is Island Gold. So that's where our first capital will go. There's no doubt that the Lynn Lake capital costs will be higher than what it was in December 2017. That said, we have expanded the deposit quite significantly, and we think it's going to be a very good project, but Island Phase III and beyond is really the priority.

[Cosmos Chiu, analyst]

Of course. And then to follow up on that, I don't know how much you can tell me, but if I look at the 2017 feasibility study, it returned a 21.5% IRR. Is that still sort of feasible in today's environment? Is that still what you're looking for? is that what you have in mind?

[James Porter, executive]

Yes, so we're targeting a north of 15% IRR. And then again, that 2017 feasibility study was based on a mine plan that had 1.6 million ounces. We're up to 2.1 million ounces in reserves currently, and we see the potential for conversion of at least another 300,000, 400,000 ounces. So that deposit has expanded considerably, and that will support the higher capital and higher operating costs.

[Cosmos Chiu, analyst]

Great. And, and I, maybe one last question on this. Jamie, if I work through the timeline here and understanding, appreciating that, as you've said, capital allocation goes to Island Gold first. But there might be a possibility that if things kind of line up, you might need to construct Lynn Lake and Island Gold at the same time. Is that something that's a possibility? Is that something that you're considering? Although, as you said, for sure Island Gold sort of comes first.

[John McCluskey, executive]

Cosmos, the likelihood - this is John - the likelihood of that scenario is very, very slim just based on the process that we're going through right now in Manitoba. We don't really foresee that at all. And keep in mind that we're not an oil tanker, we're more of a speedboat, and we can control our rate of spend and our rate of development as we see fit. And if we were to perceive there being too much stress in an attempt to try to construct 2 projects at once, we just wouldn't do that. We clearly have the option of staggering those projects to some extent, maybe get a couple of years of development at Island Gold finished before say we'd start at Lynn Lake. That's very much an option.

But keep in mind, this company has built as many as 3 projects at once. And we were doing the big expansion at Young-Davidson, and an expansion at Island Gold, and building [Sierra Palone] all at the same time - just worked at it very quietly, nobody seemed to have any concerns about it, spent the capital, and brought everything on time and on budget and continued on. So if there was any concern about the company having the, say the, the management capacity to handle 2 projects at the same time, I would say that's not something we're really concerned with. It would be more a question of capital allocation and how we want to approach it that way in - given the market environment at the time.

[Operator]

The next question is from Fahad Tariq from Credit Suisse.

[Fahad Tariq, analyst]

Just on the Island Gold Phase III Expansion Study, is the right way to think about this - obviously, it'll include higher-grade reserves that were not previously factored in -- but at the same time, it probably will [seem] higher assumptions for some of the cost elements. I'm just trying to understand, like, do those things kind of offset each other? Any thoughts there would be helpful.

[John McCluskey, executive]

I would just say this one thing that there, I know there's a lot of focus on inflation right now. It's very, very topical. But with a project like Island Gold, and the way it's evolved, I would -- it absolutely required us to look at it and update it. Just -- we announced Phase III 2 years ago, and it's surprising how much has changed over the course of about 2 years, but the biggest thing that has changed is the significant increase in reserves, and those reserves are higher-grade reserves. And naturally, you're going to look at revising the mine plan to bring that high-grade reserve forward. And at the same time, you really should look, and we are looking at, a change in scope rather than refurbishing the old mill.

What would it look like, for example, if we built a brand new mill, say 2,400 tons a day. Well effectively what happens is the economies of scale, they come into play and they're so significant in terms of their enriching the profitability of the project, that they more than offset the inflation component. So from that point of view, Island Gold is one of those very unique businesses that you see from time to time in the mining industry that can really, just by virtue of the fact that it's very high grade and it's relatively straightforward to mine and mill and putting all those things together, that project is going to be the last one you would worry about. It's more than likely that when we come up with the economics, the increased scope for that project that we're looking at right now, it's going to have to more than offset any inflationary costs. And I think it will.

[Fahad Tariq, analyst]

That's really helpful. And then just switching gears to Mulatos, I know Q3 is what everyone's kind of waiting for, but before then is there any opportunity to improve the production in Q2 or not really? It's kind of set as a flat profile?

[John McCluskey, executive]

Yes, it's Peter here. It's a long leach cycle and a big heap leach facility at Mulatos. So it's - we're currently stacking, or we did stack through Q1, a fair bit of this [sulfitic] ore, which is slower leaching. We are currently transitioning to more fresh ore from the Mulatos pit. That will continue over the course of Q2 and through the rest of the year and for the -- and well into next year. So we'll start to see that, but it's like a, it's almost like a quarter behind in terms of when you see that gold coming off the pad. So it won't really impact us too much in Q2. But, so, 2 things that happen for the rest of the year - one is that, we bring on La Yaqui Grande, which is much higher grade, fast leaching. We'll see immediate production from that. It'll be small leach pad right on plastic, so we'll start to see that quickly. As well as, we'll see the effect of the fresher ore coming out of the Mulatos pit itself rather than the stockpile of [sulfite] ore that we've been living on for the last 9 months or so.

[Operator]

The next question is from Kerry Smith from Haywood Securities.

[Kerry Smith, analyst]

Peter, first thing on the power line at Mulatos. When do you think that will be energized? And can you give me a rough [estimate] as to what the impact might be on a cost per ounce basis?

[Peter MacPhail, executive]

So it's still some time away, Kerry. Maybe by the end of this year is what we're now working towards. So delays with -- frankly with COVID it's been hurting us there, getting it finished with the contractors, as well as the government changed a bunch of regulations on now what you have to put in place for power monitoring and control at the substation end. So there's some supply chain challenges with that so it's got pushed out a bit. It's still a tremendous project. We'll drop our cost by -- on the order of $40 per ounce when we get it online.

[Kerry Smith, analyst]

Okay. And just on La Yaqui Grande, it looks like the grade that you've stockpiled in that 16,000 ounces that you mined already today is pretty high. It looks like it's north of 2 grams. Is that correct? Because the average grade there is about a gram-and-a-quarter, so it's significant.

[Peter MacPhail, executive]

Not sure where you would see that, Kerry. I -- did we report something? No.

[Kerry Smith, analyst]

Well I saw the 200,000 pounds and 16,000 ounces contained --

[Peter MacPhail, executive]

Okay. I honestly don't know what the grade is. I haven't followed it that close enough.

[Unknown Executive]

More like 1.2, 1.3.

[Peter MacPhail, executive]

1.2, 1.3 is what I'm hearing. So maybe our numbers are a bit rounded or something on terms of the tons of ounces, not sure.

[Kerry Smith, analyst]

Okay, perfect.

[Peter MacPhail, executive]

But it's performing, if anything, better than - at this point, it's early stages, but it's performing well.

[Kerry Smith, analyst]

Okay. And how many [tons] do you expect to put on the pad this year at La Yaqui Grande? Once you start putting that ore on the pad and --

[Peter MacPhail, executive]

Yes, Kerry just the more precise answer to that is the 16,000 ounces was cumulative, and the 200,000 ounce - 200,000 tons was what was mine in that quarter.

[Kerry Smith, analyst]

Ah, there you go. Got it. It wasn't clear to me in the press release. Okay. Thanks for the clarification. And can you give me a rough idea as to the tons that you think you would stack on the pad this year there? Peter?

[Peter MacPhail, executive]

Yes. We're, I mean, it's designed for 10,000 tons a day at the, not sure if the mine plan quite fills this once we get it going or not, but I think it does, so it'll be in that range.

[Kerry Smith, analyst]

For 6 months roughly then. Okay. Okay. Got you. Okay. And the gold just on the Lynn Lake feasibility study when you put the updated one out later this year, what sort of gold price might you use for the economics that you [look for]?

[Peter MacPhail, executive]

Kerry, we present sensitivity, like we typically do with those reports. So we'd use a more conservative gold price, something that's a proxy for kind of long-term consensus in around $1,650, and we'd show what the economics look like at a higher gold price as well. So probably $1,500, $1,700, and $1,900 would be the range of prices that we present.

[Kerry Smith, analyst]

Okay. Okay. Perfect. And then just one last question on Mulatos. Will you -- you will still be putting some tons onto the pad that come from the stockpile in the second half, I presume. Would that be a large amount to manage in the second half, Peter?

[Peter MacPhail, executive]

No, it's going to be maybe like somewhere around 10% or so. 10% to 20% in that range.

[Operator]

The next question is from Mike Parkin from National Bank.

[Michael Parkin, analyst]

Just going back to Lynn Lake, when could we expect you to start the big spend on that?

[John McCluskey, executive]

It's difficult to say because we're effectively in that, at that point where we're negotiating impact benefit agreements with First Nations, and that's really not an easy timeline to predict, and it's very unlikely that we will see permitting from the federal side completed until after the IBA agreements are in place. I mean, that's just, that's very typical for Canada. So I'm loathe to throw out a date. I mean, we're -- managements are often getting questions about things that lie out of -- outside of their control, but if I were to take a guess at it, I'm, I would guess that sometime by the -- before the end of the first quarter of 2023 we should have the federal permit, something like that. I mean, that would be sort of a, that would be my outside date, but it really will depend on the pace of progress that we make with our impact benefit agreements.

[Michael Parkin, analyst]

Okay. So just to be clear, you could potentially be shovel-ready for spring, like kind of this time next year, but you could potentially sequence Lynn Lake to follow, or maybe you don't have Island quite fully complete with the Phase III, but you'd have it more largely complete before you would commit to the big capital at Lynn Lake. Is that?

[John McCluskey, executive]

That's fairly accurate. I mean, it's certainly - what we like to have is the flexibility. I mean, if the, I mean, what would, if gold prices were to run to $3,000 an ounce or something like that, for example, and we're generating tremendous cash flows from operations, it wouldn't be too much of a stretch to say, well let's take advantage of these good gold prices and accelerate the development of Lynn Lake, something like that. If gold went the other way, and we saw that the cash flow from operations comfortably support Island Gold but would be difficult say to piggyback Lynn Lake over and above that, we would just hold off on Lynn Lake until we could reasonably finance it. The idea is to be able to maintain the strong balance sheet that we're known for and develop really good quality projects at the same time.

I mean, ultimately our business is to develop mines, produce gold, and make money, so at some point we've got to get there. But we look back at our, this group of individuals around the table. We've been together for 18 years, and we've never made a false step. We've always maintained a strong balance sheet. We've always developed good operations. And we've always made money for our shareholders. And we're just going to continue to do that. I would hate for people to think that we're going to sort of lose our minds all of a sudden and try to do too much at once and put the company in some sort of jeopardy. We would just never do that.

[Michael Parkin, analyst]

No, that makes a lot of sense. Also, just on Lynn Lake, can you remind me, you've got the MacLellan and Gordon Deposits, but then your latest expiration update indicated some interesting results kind of in between the 2 at [Tooloon]. Where is the mill on the 2017 study? It's sitting closer to Gordon or MacLellan?

[John McCluskey, executive]

That's MacLellan, which is the higher tonnage deposit.

[Michael Parkin, analyst]

But could you?

[John McCluskey, executive]

Yes, we both said it wrong - MacLellan.

[Michael Parkin, analyst]

Okay. My Scottish isn't too good. But if you're having tremendous success at that new target, could we potentially see the geographic kind of center of this shift to the east?

[John McCluskey, executive]

It's early days and on that deposit, and there would be a whole new round of permitting and what not. So I - sure, depending on success there, it could change thinking, but we're nowhere near that.

[Operator]

The next question is from David Holperin from Stifel Nicolaus.

[David Holperin;Stifel;Analyst, analyst]

I may have overlooked it in your release, but did you buy back any shares in the first quarter?

[John McCluskey, executive]

No, we didn't buy back any stock in Q1. We bought back about 11 million shares - $11 million worth last year, but we're blacked out for the majority of the first quarter given our year-end results. So we, as I mentioned in my comments, we are looking to get more aggressive on the share buyback, especially given where our share price is currently.

[David Holperin;Stifel;Analyst, analyst]

And in the back half of the year, correct?

[John McCluskey, executive]

That's right.

[David Holperin;Stifel;Analyst, analyst]

Okay. And I don't know if you can disclose this or not, but have you been approached by any potential acquirer for part of your resources or all of them?

[John McCluskey, executive]

We wouldn't talk about that on a call like this. That would get us into a lot of trouble, so --

[David Holperin;Stifel;Analyst, analyst]

Okay. I only ask because the Rite Aid Company just had a conference call 2 weeks ago and didn't say anything, and then it turns out they had gotten an offer during the quarter, but they didn't release it. So --

[John McCluskey, executive]

Anything that we were sitting on of a material nature, we would release to the market.

[Operator]

The next question is from [Terrence Orson] from TSO Research.

[Unknown Analyst]

On the exploration, you mentioned you had $22 million budgeted for Island, but you also had the 15,000 hectares outside of it. $22 million is only in the mine site area, or is it -- does it include the original exploration as well?

[John McCluskey, executive]

We've been financing both. We've been doing both regional and near mine site, near deposit site exploration. We have sort of parallel programs running.

[Unknown Analyst]

But the $22 million you mentioned in the press release, that includes both or just --

[John McCluskey, executive]

The, yes, it would. That does include both. Yes.

[Unknown Analyst]

What is your program for 2022 altogether? You probably covered in the year-end conference.

[John McCluskey, executive]

The regional exploration budget for at Island for this year is $6 million of that $22 million.

[Unknown Analyst]

Okay. And the rest of the exploration program for the other property, Young-Davidson onwards for the year?

[John McCluskey, executive]

So we have a budget of about $6 million for Young-Davidson and another $10 million at our Mulatos operations in the Mulatos district.

[Unknown Analyst]

Yes. Okay. Just one question I have with respect to the situation in Turkey. The recent cases in the past, just in fact, no one [ricodic] whereby Barrick made a deal with a whole bunch of partnerships in the country. Is it possible to make a deal like that within the country itself? Because they have some private interests that I think you operate. And I remember the Normandy mine years ago. They got taken out, and they left, and somebody else [started] operating it. And who else was it? I can't remember now, but [there's all kind] of examples. Local interests may be interested in that and operate it. Is there -- is that possible to do something and be creative?

[John McCluskey, executive]

Anything is possible, Terry.

[Unknown Analyst]

Okay. Okay. But I guess somebody initiates that, right. I guess they have to.

[John McCluskey, executive]

Yes. We're not going to initiate anything like that.

[Operator]

[Operator Instructions] And the next question is from Dalton Baretto from Canaccord Genuity.

[Dalton Baretto, analyst]

Most of my questions have been answered, but there are a couple of aspects of the Island Gold expansion that I'd like to explore, if I may. I thought I heard in response to one of the other caller's questions that one of the scenarios that's being looked at as part of the new study is a potential expansion - I thought I heard 2,400 tons per day. Correct me if I'm wrong, but the shaft is sized for 2,000 tons per day, right? And so are you also contemplating an expansion to the shaft?

[John McCluskey, executive]

No. The shaft is not sized for 2,000 tons a day; it's sized for 3,500 tons per day, of ore and waste as that goes. Yes. And I throw out the number 2,400 tons a day because that happens to refer to the number we're permitted to, so, and that's fairly commonly known. So I mean we'll determine that number, that's why we're doing this study, and we'll have that study completed towards the end of June. So it'll be a matter of fact very shortly, but that's what we're working towards.

[Unknown Executive]

for permitting to 2,400. We're not -- okay.

[Dalton Baretto, analyst]

Perfect. That clarifies that. And then John, I also thought I heard you say when you were talking about capital allocation and Island Gold versus Lynn Lake, I thought you -- I thought I heard you say Island Gold Phase III and beyond, and I'm just wondering what you're contemplating beyond Phase III.

[John McCluskey, executive]

Yes, that was Jamie who actually made that statement "and beyond," and I guess what he's referring to there is Island Gold Phase III has been published what, 18th, almost 2 years ago now. And we're updating it. And that would be his reference to "beyond." We'll come up with an updated plan one way or the other towards the end of June, and it may or may not reflect a change in scope depending on what the results of that study turn out to be.

[Dalton Baretto, analyst]

Got it. But as you just said, if the shaft size is for 3,500 tons per day, and given the expiration optionality of the property, is it inconceivable that we could see further expansions?

[John McCluskey, executive]

It's highly unlikely that we would change the shaft in terms of its capacity. We're more than likely to deepen the shaft - that is something that we're looking at. But given the grades that we're mining, if, just for example, if we were to push it to 2,400 tons a day, that would take us closer to 300,000 ounces of gold a year from the current 236,000 ounce rate that we're contemplating. So that's already a, it's already a very significant bump in production. Consider 300,000 ounces of gold a year at the bottom end of the first [quartile] and cost - it becomes one of the most profitable mines in the world at that point.

[Operator]

This concludes this morning's call. If you have any further questions that have not been asked, 9932, extension 5439. Please disconnect your lines.