John A. McCluskey is the President and Chief Executive Officer and a Director of Alamos Gold Inc. and has held this position since 2003, when he co-founded the company with mining hall-of-famer Chester Millar. Mr. McCluskey is currently a director of the World Gold Council.
He was the recipient of the 2018 Murray Pezim Award for Perseverance and Success in Financing Mineral Exploration by the British Columbia Association for Mineral Exploration. This award recognized Mr. McCluskey’s role in the acquisition, financing and encouragement of successive discoveries at Mulatos, as well as his ongoing success as CEO of Alamos.
In this 3,534 word interview, Mr. McCluskey details his company’s prospects for investors.
“Alamos Gold is a diversified, North American, midtier gold producer. Going back about 17 years ago, we were in the permitting and construction phase of our founding operation, which is the Mulatos mine in Mexico.
That’s gone on to do very well; it’s produced nearly 2.5 million ounces of gold to date, it’s made close to $480 million in free cash flow for the company and its shareholders, and it really was the underpinning, the platform, for growth for the company.
We essentially built up a very strong treasury through our earlier operating years at Mulatos — 2008 through 2013 — and by 2014 the market had gone into a deep correction. We saw that as the opportunity to start pursuing the next leg of our growth, and we were quite focused on Canada.”
The current plan is to further extend existing operations:
“…We have a phase three expansion underway at Island Gold. We’ve expanded it from a 900-ton-per-day operation since we acquired it. Step one was to take it to 1,100 tons a day and step two to 1,200 tons a day, which is pretty much the maximum we can mine under the current permit. With all the success we’ve been having in exploration, it’s pretty clear we have to think about developing that mine and sizing it in a way that can maximize the profitability of the operation going forward. With that in mind, we’re going to expand it to a 2,000-ton-per-day operation.
Right now, it operates from a ramp. There’s a big advantage to changing it to a shaft operation because a lot of the material that we’re finding is quite a bit deeper. It gets ever more expensive to try to access that through a ramp system; it’s far more efficient and far safer to mine the deeper levels of the deposit with a shaft operation. So that’s a pretty big undertaking for us.
It’s about a $500 million investment between now and 2025. While this is approximately $300 million more in growth capital than continuing with the existing ramp system, this will be more than offset by savings of more than $500 million through lower ongoing capital and operating costs over the mine life. So effectively, we’re well ahead by sinking the shaft as opposed to just continuing with a ramp operation.
On top of that, like I said, it’s a safer way to go; it’s a greener way to go because, rather than rely on more diesel trucks, we’ll be operating with a shaft, which is run from power off the grid, and it also gives us a lot of optionality because as time goes on we’re finding more and more gold to depth, and a shaft operation will allow us to more directly access the new resources that we’re finding.”
The COVID 19 global pandemic affected operations but the company kept it from a long term impact:
“At our Island Gold operation in Canada, we were in a situation where we bring in about 150 people from around the provinces of Ontario and Quebec into a relatively small community where our camp facilities are located. There was some risk of spreading the virus inadvertently by bringing people in from outside, and we wanted to avoid any chance of that.
Of course in March, nobody really knew the full extent of how the virus was spreading. So out of an abundance of caution, we flew out the shift that was already in place at the time when it ended on the 25th of March and we didn’t bring in the new one.
We kept the mine closed effectively from the last part of March right through the end of April. We got it back up and running again in May.
So we didn’t see production coming from two of our best operations, and that certainly impacted our guidance for 2020. We revised guidance and we kept those mines shut down until we were absolutely certain that we could bring them back online again in a very safe manner that was not only safe for our workers but also safe for the communities — and that’s in effect what happened.
The Island Gold mine, we’ve been very fortunate there in that to date we haven’t had a single case of the COVID virus among our workforce, nor among the community.
In Mexico, we have had quite a number of cases. We’ve detected about 100 cases, but we’ve been doing testing in Mexico since we brought our operations back online, and we’ve been managing to catch people testing positive before they go out to the mine site, which is about a seven-hour drive from the city of Hermosillo.
By catching it before people go to the mine, we’ve been able to keep the virus out of the operation altogether. And by the way, of the 100 or so people that have tested positive, they’ve all effectively recovered by now and they’re back to work. So that’s more or less the approach that we’ve been taking.
We’re doing this at Island Gold as well, where we’re testing people for the virus before they start their period of time at the mine.”
Get the complete picture for Alamos Gold and its prospects for 2021 and beyond by reading the entire 3,534 word interview, exclusively in the Wall Street Transcript.
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