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Despite improved output, higher costs drive Alamos Q1 earnings down

Mulatos mine, Mexico.

Mulatos mine, Mexico.

Photo by Alamos Gold

7th May 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Canadian miner Alamos Gold reported lower net earnings for the three months ended March 31, as higher cash operating costs had offset higher gold sales.

The TSX- and NYSE-listed company that owns and operates the Mulatos mine, in Sonora, Mexico, and has exploration and development activities in Mexico, Turkey and the US, said on Thursday that its earnings in the first quarter were $2.2-million, or $0.02 a share, lower compared with earnings of $2.7-million in the same period last year.

Adjusted to remove special items, net income came in at $0.02 a share, on par with analyst expectations.

Revenues improved 8% year-over-year to $44.73-million, boosted by 14% more gold ounces sold at 36 556 oz.

In the first quarter, the Mulatos mine produced 38 000 oz of gold, up 1 000 oz compared with 37 000 oz a year earlier.

Grades stacked on the leach pad in the quarter were 15% above the full-year budget of 0.8 g/t gold, as the company continued to benefit from positive grade reconciliation in the Mulatos pit.

Alamos's total cash costs of $805/oz were below the full-year guidance.

Cash operating costs of $728/oz of gold sold in the period were below the company’s guidance range of $800/oz, but 33% higher than $546/oz reported in the first quarter of 2014. The increase relative to the prior year was mainly attributable to lower grades stacked on the leach pad and a higher cost a tonne of ore mined.

All-in sustaining costs (AISC) for the quarter rose 23% to $1 115/oz.

Alamos expected to produce between 150 000 oz and 170 000 oz of gold this year, at cash operating costs of about $800/oz of gold sold, excluding royalties. Including royalties of 5% and 0.5%, and assuming a $1 200/oz gold price, total cash costs were expected to be about $865/oz of gold sold and AISC about $1 100/oz of gold sold.

TURKISH DEVELOPMENTS
Alamos had last week reported that the injunction granted in January against the Turkish Environment Ministry’s August 2014 approval of the environmental-impact assessment (EIA) for its Agi Dagi gold project had been dismissed by the Canakkale Administrative Court.

With this ruling, the Ministry's EIA approval had been returned to good standing, paving the way for Alamos to pursue the operating/mine permits for the project.

Meanwhile, Alamos still expected to provide an update on the Kirazli EIA this quarter. The EIA approval was currently being reviewed in the Turkish High Administrative Court after it was appealed through a different process in the Canakkale Administrative Court.

Assuming the Turkish assets were constructed, they could, from late 2017, add as much as 250 000 oz/y of gold to Alamos’s current full-year guidance of between 150 000 oz and 170 000 oz of gold.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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