Alamos Targets 600K oz Production in 2026 as Expansion Advances

Alamos Gold Inc. (TSX: AGI; NYSE: AGI) is targeting 600,000 oz of production in 2026 after weather and mill challenges weighed on output in late 2025, even as the company generated record free cash flow last year. Speaking with Kitco Mining at PDAC 2026 in Toronto, President and CEO John McCluskey said 2025 all-in sustaining costs averaged $1,524 per oz, with margins approaching 60% at prevailing gold prices. Fourth-quarter results were affected by issues at the Magino mill and what he described as “one of the worst Canadian winters we've probably seen in 40 years.”

“We're absolutely back on track, and we're looking towards 600,000 ounces of production in, in 2026,” McCluskey said. In February 2026, Alamos announced an integration plan combining Island Gold and Magino, targeting roughly 540,000 oz annually at about a $1,250 AISC. Combined reserves now total about 8Moz, supporting long-term production as the company works toward 1Moz annually by 2030. Exploration spending is also rising. “Last year, we spent $72 million on expiration. This year we're going to spend close to a hundred million dollars in expiration.”

McCluskey also discusses:
• Record 2025 free cash flow and capital discipline
• Island Gold–Magino integration and cost reductions
• $900M Lynn Lake development in Manitoba
• Dividend increase and shareholder returns
• Capital discipline across gold sector M&A

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00:20 - 2025 Results, Record Free Cash Flow and Production Dip
00:41 - Canadian Winter Challenges and 2026 Production Outlook
01:49 - Island Gold Expansion and Shaft Development Plan
04:10 - Island–Magino Integration Strategy and Synergies
05:24 - Reserves Growth to 8Moz and Long Mine Life
06:22 - Alamos Capital Allocation Strategy Explained
10:10 - Exploration Spending Rising to $100M
11:29 - Dividends, Share Buybacks and Shareholder Returns
13:23 - CEO Turnover Across the Mining Sector
15:30 - Talent Shortage and M&A Drivers in Mining
16:53 - Capital Discipline in Gold Sector M&A
20:11 - Alamos Path to 1Moz Production and Deal Outlook
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Transcript

SPEAKER_00 0:00

Kitco Mining's on-site coverage of PDAC is presented by Gold Mining. US Gold Mining, Uranium Energy Corp. and Uranium Royalty Corp.

SPEAKER_01 0:13

Hello and welcome to Kitco Mining with me, Paul Harris, the 2026 PDAC in Toronto and Canada. Today we're talking about gold and gold production, and our great pleasure to be joined by John McCluskey, President and CEO of Alamos Gold. John, welcome back to Kitco. Appreciate being here. Thanks. John, I want to start our conversation looking back a little bit at 2025 results, record-free cash flow, all in sustaining costs, and a very competitive uh$1,524 per ounce, all in sustaining costs, giving you a margin of around almost 60%. Although production was lower and planned, let's start there. What happened with the production last year?

SPEAKER_02 0:51

We just encountered some um some difficulties in our Canadian operations. Fortunately, nothing um nothing that you'd call consequential. You know, we had um some weather issues, weather-related issues, we had some issues with the um with the Magino mill. We had acquired the Magino project the the year before, and um we knew with our we knew going in, our eyes were wide open that there were going to be issues with that mill, but it just took us a little longer to get them sorted out than uh that we'd anticipated. And and the Canadian winter just had a bigger effect on how that mill would perform than we might have anticipated at the time. We we did end up with with one of the worst Canadian winters we've probably seen in 40 years for uh for the last quarter of 25. And um but we know we're through it now, and uh we're we're absolutely back on track, and we're looking towards uh 600,000 ounces of production in in 2026, and um Pride Kong will get there.

SPEAKER_01 1:56

Excellent. The the smile is coming back onto your face. Now you recently announced the Island Gold juristic an expansion there to 20,000 tons per day processing capacity, uh which will create one of Canada's largest and lowest cost gold mines. What what's the plan there?

SPEAKER_02 2:11

So it's a it's effectively an integration plan. If you can imagine, we were working on the phase three expansion at Island Gold, which uh involved sinking a shaft, building a big paste backfill plant, uh everything you would need to take that operation from 1250 tons a day to 2400 tons a day, and that would yield roughly 300,000 ounces of production a year. And while that work was underway, we um we acquired the Magino project by um by taking over our uh our neighbor, and those projects are about as close close together as you come physically, let alone geologically. I mean they're they're they're close cousins, let's put it this way, in terms of their geology, and they are um in close enough proximity that there's just obvious synergies to be gained um by owning both those projects under one roof and then integrating the the production profile. So where we're going now with um with this plan that we announced in February, we're actually going to increase underground production at Island Gold now to 3,000 tons a day. And the open pit operation that we uh acquired uh at Magino, we're going to increase that to about 140,000 ounces a year and um uh running it at 17,000 tons a day. So combined we should produce roughly 540,000 ounces of gold. Our cost should come down. We're gonna benefit from the economies of scale on both sides. So we're looking forward to about a twelve hundred and fifty dollar ASIC and um at$5,000 gold, those are incredibly attractive margins, and you're producing well over 500,000 ounces a year.

SPEAKER_01 4:06

Okay. Now you mentioned, John, that uh you bought Magino in 2024. Uh this really is that sort of perhaps that final integration step. Uh has has has this shaped up to the uh as you believed it would in terms of how Magino and Island Gold are coming together?

SPEAKER_02 4:21

Well, there's there's a couple of things that uh that really matter when you when you talk about integrating the two. You know, how how do they fit from a metallurgical perspective? In other words, can the mill handle the high grade from Island Gold? Um can you blend it with lower grade from uh from Magino? And the answer is the ores are virtually identical. Um when you process them independently, we're getting roughly 96-97% recovery consistently. And when we blended the high grade island gold in with the lower grade, recoveries did not drop even one smidge. Um they stayed the same. So that shows us that we can integrate the ores and process them at the same time through the uh through the same milling facility. That was a that was a we we we kind of expected it. We knew the geology well enough to expect that would be the result, but to actually achieve it uh over uh quite a number of months now of blending ores, you know, that was a that was a very good result for us. The second thing that um that we were um quite interested in was just how might the um the Maginal open pit grow. They they were sitting with under two million ounces of reserves when we acquired it. Now it's over three million ounces of reserves. So over the last year we drilled off an additional million ounces. So, I mean that was a great result for us. On a you're you're probably aware, we also spent a lot of time converting resources to reserve on the island side as well. And we basically increased reserves to just over five million ounces now. So on a combined basis, we've got eight million ounces that we can all process through the same facility. So at at even five hundred thousand ounces a year, we're gonna be producing gold at uh island for a very long time.

SPEAKER_01 6:27

That's uh yeah, at least sixteen years uh on a very rudimentary math basis. Um, John, with the sort of record free cash flow last year, and obviously gold prices continuing to be very high, sort of$5,000 per ounce, give or take, um as I mentioned, you're one of the most you have one of the most competitive all-in-sustaining cost bases. So the margin, the the your ability to put money onto the balance sheet is uh incredible. How is your capital allocation evolving to deal with that, to manage that?

SPEAKER_02 6:59

Well, if there's one thing we've been noted for, um, and and I don't think you'd get any argument on this if you talk to every analyst covering us, if you talk directly to our investors, we've been very, very good at at capital allocation. And we on a broader perspective, if you want to look at it from a high level for a second, we we sort of envision three buckets. One is uh investing in the company, improving the assets. The second one is improving the balance sheet so that we're in a good position if if we see opportunities to continue to expand the company, and finally returns to shareholders. And uh we think those buckets should be relatively equal over time. And um you can imagine back in uh between 2015 and 17 when we were really focused on MA, we did three back-to-back acquisitions. So that was very much a a time where you know our our capital, if you will, was going into bringing new in new assets. And having brought them in, we had to invest the money, first of all, in exploration, to round out the resources uh to a scale we we felt that they could uh grow into. And of course, you saw that happen at at Lynn Lake, you saw it happen at Island Gold and at Young Davidson. We've been successful on all fronts. In fact, it was also true of Mexico. We started off with six years of reserves there. We're uh that was back in 2005, and we're still operating there to this day. So that's very much a key part of our our philosophy, if you will, to of acquisition. You want to acquire things that you think will grow a lot bigger. Then finally you need to invest the capital in order to optimize the level at which those assets ought to be producing. So in the case of Island Gold, when we took it over, it was a hundred thousand ounces a year producer. By the time we finished investing the capital, it would be producing 534,000 ounces a year. Well, you couldn't very well justify uh putting in all that infrastructure until you build the reserve up big enough to know you have a long horizon of production out in front of you. And in in the case of Island, we needed to sink a shaft and all the infrastructure that goes along with that, that was going to be that was an$800 million investment. You can't make an$800 million investment off the back of a two million ounce reserve. You know, you needed it to be substantially bigger. So there's a real logic to the way we're doing it, and we're in that part of the cycle now where we're still heavily investing in capital. We'll be building a new mill in Mexico for the underground uh deposit that we identified there. We'll be building the Lind Lake project in Manitoba. It's about a$900 million uh capital budget, and we'll finish this big expansion at Island Gold, which is about a$540 million uh project. So still quite a lot of money going into expanding the company as we build it towards a million ounces of annual production. But it's it's a matter of getting it to a million ounces of annual production and bringing costs down into the very bottom of the first quartile will be roughly twelve hundred and fifty dollars. So then we're generating substantial free cash flow, and that gives you the ability to really increase those returns to shareholders, filling that last bucket.

SPEAKER_01 10:18

I want to talk about that in just a moment before we get there. Uh your point about not wanting to expand things and invest in expansions until you've got you've shown you've got the resources to justify that. Um in this high margin environment, how how are your exploration budgets evolving to continue to discover a new mineral, to continue to replenish those increasingly depleted resources?

SPEAKER_02 10:41

Well, here's the interesting thing. Um while um most people were were keeping the purse strings uh pretty tightly closed, we were spending aggressively on expiration. And we were noted for that. And in in some cases, um investors were scratching their head because the focus five years ago even was on free cash flow. What's your free cash flow? What do you generate? And if you're spending$30,$40 million on expiration, that's$30,$40 million that isn't going to free cash flow. Uh we did that anyway, and we've continued to increase those budgets, but not driven by the rising gold price, it's been driven by the success we're having with the drill bit. So, for example, last year we spent$72 million on expiration. This year we're going to spend close to$100 million on expiration, about half of which will go into island gold. Again, driven by the success that we're having.

SPEAKER_01 11:39

Okay, well, let's go back onto the topic of shareholder returns. You returned about$350 million to your shareholders last year, which was uh about 22% of your free cash flow. You announced a big jump in your dividend to 16 cents per share. Um, going forward, gold prices are still very high. How are you how much are you targeting to return to shareholders going forward for this year?

SPEAKER_02 12:03

Well, our our dividend is still rather modest. I mean, we're not trying to represent ourselves as a big dividend paying stock quite yet. But I think we wanted to give our shareholders a taste of where things are going. And um, and clearly with the gold prices where they are, we could afford to cover all these uh capital projects. We're paying for all this expansion out of our out of our free cash, out of our cash flow, and we still had uh money, we still had uh a buildup of cash on our balance sheet by the end of 2025. Um it just made sense uh since we could reasonably and frankly could quite comfortably afford to do it to have an increase in the dividend. I never heard a shareholder complain about an increase in the dividend. So uh it was well received, but it's uh I would look at it more as a taste of things to come rather than uh you know us having sort of uh re reached the top of what we think we could do.

SPEAKER_01 13:02

Okay, I I just need to correct myself because uh I gave the wrong figure there. I think you returned about 78 million to shareholders last year. Your free cash flow is about 350 million.

SPEAKER_02 13:11

Well, if I think back, what we did, we paid we paid forty-five million or so US in uh in dividends last year, and we bought roughly fifty-five million dollars worth of stock. So combine those two numbers, that's about a hundred million dollars.

SPEAKER_01 13:30

Okay. Thank you for the the correction there. Um, John, you and I we've had some good conversations over the years about different aspects of the gold space, uh shortage of talent being one of those. I want to sort of give that a little bit of a tweak because uh over recent months we've seen various CEOs changing or swapping out at their respective companies voluntarily and involuntarily. Given how CEOs are compensated, it does seem very plausible that a number of people are you know using this where we are in the current cycle to go out at the top, cash in their stock options, uh, and capitalise themselves on the record. Uh, gold prices. What's your view of the CEO changes we're seeing?

SPEAKER_02 14:09

I think CEOs retire for different reasons. And in some cases, um, especially with long-serving CEOs, we we we have CEOs in the mining space, I'm I'm included among them, that have been in the seat for over 20 years. Uh that's a very long time to be in that job. It's it's the equivalent of like a hockey player being 48 years of age and out there lacing up the skates. Uh it's it's uh only a few people can actually do that. I I think the average tenure of a of a CEO, CEO across the business space is about six years. So somebody who's been in the job for uh 15 or 20 years, uh they're they're already they're already there for an exceptional period of time. Um is there are there are there CEOs out there who are looking at you know a$5,000 gold price and thinking, well, I've done this job long enough, uh, I think I'm gonna retire. I would not doubt that for a second. Um but one thing I do say is that boards today are very, very exercised, certainly my board is, about succession planning. And I'm sure every one of these CEOs that are getting ready to retire have been working for the last couple of years, grooming their successor. And I think we're very fortunate in seeing um a lot of good new CEOs coming into the space. And I have high expectations for them to do good things.

SPEAKER_01 15:40

Okay. We we've we've spoken a bit, we've chatted about MA often being driven by synergies and value creation, like uh you did when you acquired uh Magino. Do you think going forward access to human resources will become a driver for MA?

SPEAKER_02 15:54

I believe that's already happened. I mean, who can deny uh uh Thor John Thornton's interest in uh having Mark Bristow run Barrack when they merged Barrack and Rangold in 2017? That that's not a new thing. Um I do think though that as uh you know that the talent pool tightens, um I think one of the uh key assets that will be identified by acquirers, in addition to the the your bodies themselves, the mining operations themselves, it will be the talent pool that comes along with that with that company. And you know, we we see that in in the IT game as well. You know, if you look at those uh those companies in Silicon Valley that get acquired, you know, very often they they want that that talent pool to be become part of the new company and and help grow whatever that business is within the new company. It's uh it's very true of the mining space.

SPEAKER_01 16:55

Okay. I think maybe retroactively John Thordon might have a different opinion about uh why the merger happened, uh, but let's not go there. Now, uh many gold companies of more than one billion US dollars sitting in cash on their balance sheets. How long do you think it will be before the sort of capital discipline that the sector's exhibited in recent years goes by the wayside and that sort of market exuberance perhaps takes over again?

SPEAKER_02 17:18

You know, I I liken that question to uh, you know, talking about uh a reformed alcoholic that hasn't touched a drop for 20 years, and you asking me, how long do you think it's gonna be before he finally falls off the wagon? Uh I don't think it's gonna happen. I really don't. I think there's a very high bar set by investors. Uh it's quite clear if you look at the MA activity over the last couple of years, it's been very disciplined. And the companies that have pursued assets, they they seem to have pursued the right assets, they've they've paid a good price, they haven't overpaid, in other words. Um the asset they brought in, they seem to be, there seems to be a really good fit uh between the the asset being acquired and the the talent of the management group uh behind the acquisition. Um I I think it's actually remarkable the amount of shareholder value that's been created over the last two or three years by mid-tier money companies trying to grow. They are truly creating value. I I think the um the message was very clearly delivered between say 2013 and and 2020 uh that investors are are are pretty tired of uh of value destruction in the mining space. I I will also say that a lot of the MA was driven by investor demand. You know, investors were were telling those CEOs with the rising gold price between 2009 and 2011, you know, gold broke a thousand dollars for the first time, it went up to$1,900 an ounce. They thought it was going to$3,000 back then. And they were demanding growth. And that drove a lot of that what we now look back on as uh overpriced MA activity. It's um that that same pressure isn't coming from investors, and so the combination of a more sort of reasonable expectations coming from investors themselves, and then the capital discipline that is being demonstrated by management teams and boards. I I think the mining place is a safe place to invest right now.

SPEAKER_01 19:36

Is there potentially a wrinkle there, John, given what we were talking about just a moment ago about the the long-standing CEOs retiring? They're the ones who got the brunt and got the earful about capital discipline, and now they're leaving, new people are coming up, they may not have got the memo.

SPEAKER_02 19:50

Well, I think I think part of grooming your successor is explaining, you know, what happened in the past. And probably the CEO that's handing over the keys today, he might have been the same CEO that was appointed 10 years ago, you know, that went when when his successor was was removed, you know. So I I I don't think um it would be fair for anyone not to pass that message along. So I I I don't think that will be the case.

SPEAKER_01 20:20

Okay, fair comment. What about at Alamos Gold with the Island Gold expansion to 20,000 tons per day taking shape? When do you think the company will need to to dip into the market again and perhaps add to its pipeline?

SPEAKER_02 20:34

I don't think that'll be any time soon. Uh you know, if we add something, it won't be out of need, it will be uh uh it'll be opportunistic. Um as we were talking about just before the interview, we have a path to one million ounces of production. In other words, between 2025 and 2030, we'll effectively double our production. And we'll do that out of our existing asset base, expanding Island Gold, building Lynn Lake. We'll effectively take production to a million ounces a year. We can we can do that. We can fund our own way, um, we could do that out of our own cash flows. Um we've got the the the personnel to run it. Um really all it's all permitted. Um we there's there there's just nothing to impede us from this uh this plan we have in place. And so it's not my uh it's not my expectation, you know, that we're going to make uh you know any new deals, but let's put it, our MA team would have a watching brief, and clearly if something falls in our lap, sim similar to the way uh Argonaut Gold rather, you know, more or less fell into our lap in uh in 2024, uh we'll we'll be ready to catch it.

SPEAKER_01 21:54

Excellent. Well, Argonaut sorry, Adamos Gold continues to be one of the most exciting names in the gold space. To finding out more as you execute on this plan to one million ounces per year. John McCluskey, thank you very much for joining me again today. Thank you, Paul. And we have a lot more to come from the 2026 PDAC in Toronto and Canada, so stay tuned and hit that subscribe button.

SPEAKER_00 22:14

I'm Paul Harris, and this is Kitco Mining. Kitco Mining's on-site coverage of PDAC is presented by Gold Mining, US Gold Mining, Uranium Energy Corp, and Uranium Royalty Corp.