Alamos Gold (TSX, NYSE: AGI) says it expects production to decline in the second quarter after a series of disruptions at its Young-Davidson mine in northern Ontario.
In an update Thursday, the Canadian Gold Miner said the mine operation experienced two seismic events last week, one of which occurred “on an active mining front.” He noted that although no casualties were reported, the mine’s infrastructure was damaged, limiting access to two higher-grade plants that were scheduled to be mined during the second quarter.
Additionally, Alamos noted, the mine also experienced a three-day power outage due to storm damage to the regional power line in late May, which is expected to impact mining and production rates.
“We are disappointed with the operational challenges at Young-Davidson, and are working diligently to review and improve mining sequencing to support higher mining rates in the future. The first half was difficult, but we expect stronger production in the second half of this year,” CEO John McCloskey said in the press release.
Alamos Gold shares closed the trading session down 2.5%, with a market cap of C$21.6 billion.
Production decreased by 12%
Given these disruptions, the company now expects Young-Davidson’s production to be lower than expected in the second quarter, and in line with the first quarter. Its quarterly production was revised to 130,000-135,000 ounces, down 12% from the middle of the previous guidance range, while costs are also expected to rise.
Alamos also said its consolidated gold production will fall below its full-year guidance, and costs will exceed expectations. Revised guidance is expected in July, when the company publishes second-quarter results.
Located about 60 km west of Kirkland Lake, Young Davidson is one of two major gold mines operated by Alamos in northern Ontario. The underground mine has a rich production history dating back to the 1930s. Modern mining began in 2013 under the ownership of AuRico, which later merged with Alamos.
Gold Island improvements
For the remainder of the year, Alamos expects production to be focused on its other Canadian operation – the Island Gold District – where it continues to perform well and is expected to remain a key driver of production growth this year.
The underground mine, one of the highest in Canada, is set to see its mining rate increase from 1,500 tons per day to 2,000 tons by the end of this year, the company said. At the Maginot open pit, mill ramp-up is also progressing as planned, and is expected to average 10,000 tonnes per day by the third quarter, she added.
Last year, the island’s gold district contributed nearly half of Alamos’ gold production, equivalent to the production of Young Davidson’s and Mulatos’ operations in Mexico combined.
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