TSX- and NYSE-listed Alamos Gold on Wednesday reported a strong second quarter, with a 10% rise in gold production and an 18% drop in all-in sustaining costs (AISC), leading to record cash flow from operations and free cash flow of $85-million.

The performance was driven by improved results across all three of its operations and a favourable gold price environment.

“Production increased 10% from the first quarter, meeting our quarterly guidance, while AISC decreased 18%, reflecting stronger performances across all of our operations,” said president and CEO John McCluskey.

“This contributed to record cash flow from operations and a substantial increase in free cash flow to $85-million while continuing to reinvest in growth.”

The miner reported gold output of 137 200 oz, sales of 135 027 oz and an average realized price of $3 223/oz, generating record revenue of $438.2-million. The average realized price was impacted by the delivery of 12 346 oz into a prepayment facility at $2 524/oz, below the prevailing spot price.

Cash flow from operations rose 151% from the first quarter to $199.5-million, or $232.9-million before working capital and taxes. Adjusted net earnings came to $144.1-million, or $0.34 a share, while net earnings reached $159.4-million, or $0.38 a share.

Costs declined sharply, with total cash costs of $1 075/oz and AISC of $1 475/oz, down 10% and 18%, respectively, from the previous quarter. 

However, owing to higher-than-budgeted share-based compensation, royalty expenses, and a slow start at Magino and Young-Davidson, Alamos raised its full-year cost guidance. Total cash costs are now forecast at $975/oz to $1 025/oz, and AISC at $1 400/oz to $1 450/oz, a 12% increase from prior estimates. About 40% of the increase stems from external factors.

“We expect further production growth into the second half of the year driven by a combination of higher grades and milling rates, and remain on track to achieve full year production guidance,” McCluskey said. “This is not reflective of our long-term outlook with costs expected to continue to improve into the second half of the year, and a more substantial decrease expected over the next several years.”

A major factor in future improvements is the Island Gold district. The company completed the transition to processing Island Gold ore through the larger Magino mill in mid-July. A new base-case life-of-mine (LoM) plan outlines average production of 411 000 oz/y beginning in 2026, at mine-site AISC of $915/oz for the first 12 years.

“As outlined in the base case LoM plan issued last month, the Island Gold District will be a driver of our growing production and declining costs over the next several years. We also believe there is further upside to come,” McCluskey added. “Through a larger expansion of the district, we see excellent potential to grow our consolidated production to approximately one-million ounces per year, underpinning one of the strongest growth profiles in the sector.”

Alamos ended the quarter with cash and equivalents of $344.9-million, up 19% from the first quarter. It returned $21-million to shareholders, including $10.6-million in dividends and $10-million in share buybacks.

The company also donated C$1.25-million, along with two other mining companies, to support wildfire recovery in northern Manitoba. Further, it established a $250 000 Wildfire Support Fund to aid rebuilding in Lynn Lake.

Alamos expects strong ongoing free cash flow in the second half 2025 and significant growth in 2026 as production increases and costs decline. An expansion study for Island Gold is expected by year-end.