John A. McCluskey, President and CEO, Alamos Gold
John A. McCluskey is the President and Chief Executive Officer of Alamos Gold (NYSE: AGI) and has held this position since 2003, when he co-founded the company with mining hall of famer Chester Millar.
He is also a Director of the World Gold Council.
In 2023, Mr. McCluskey received the Viola R. MacMillan Award, given by the Prospectors & Developers Association of Canada for showing leadership and a willingness to take risks in the acquisition and development of the Island Gold mine in Northern Ontario.
In 2018, he received the Murray Pezim Award for Perseverance and Success in Financing Mineral Exploration by the British Columbia Association for Mineral Exploration, in recognition of his role in the acquisition, financing, and encouragement of successive discoveries at Mulatos, as well as his ongoing success as CEO of Alamos.
Mr. McCluskey had only the strength of his convictions to start his current mega gold producer.
“We had been looking at grassroots exploration in Mexico when we realized that making progress in market conditions like that was very tough going, so we more or less shelved the company.
We continued to pay its fees and so forth but were waiting for a turn in the market.
By 2001, I went to my partner at the time and said, “You know, this has to be the bottom. The gold price has been down for five years now. We should see if we can make an acquisition.”
We then pursued the Mulatos project in Mexico, which we bought off of a major mining company.
There were two little junior companies involved in the district at that point, and we signed an options purchase agreement and then merged with the other little junior.
That was in February 2003 and is also when I took over as CEO.
At that point, we had a $15 million market cap.
Since that time, the company has grown from a little exploration and development company to a mid-tier producer that this year will do just under 600,000 ounces of gold production.
We now have a market capitalization of roughly US$15 billion…
All good things start in a bear market, not in a bull market.
Generally, if you jump on the bandwagon, it’s going to be very difficult to create value.
But for these very cyclical commodity-driven markets, you’ll find the cost of entry is very, very low.
There’s very little competition.
It’s very difficult to raise money.
It’s a much tougher thing to do.
But it’s also where the best opportunities lie.
I think about the Chinese character for the word “crisis,” which combines two other characters.
It’s the one for danger and the one for opportunity.
That really applies here.
The market was in a crisis with gold prices.
The day we signed the option agreement, the gold price was about $264 an ounce.
All the major producers were hedging, just trying to stay in business.
They were selling off assets, like the Mulatos mine, and they were selling them off quite cheaply.
We were able to buy Mulatos for about US$8 million, plus a royalty.
They had spent $50 million developing the project.
But that’s what happens in a bad market.
There was probably about 2 million ounces of gold to find.
When we looked at that resource, we realized there’s probably about a million ounces of it that even at very, very low gold price assumptions, you could still profitably mine.
But it was a completely different project.
If you assumed that the gold price would eventually recover, that would become a very, very valuable project.
And that’s in effect what happened.”
The efficient management of growth in a gold mining company has a lot to do with the generation of future cash flows.
“Back in 2003, our first project had no permitting and no water rights.
Those are essential to developing a mining project.
I mean, there was virtually nothing completed.
We were at a standing start with everything required.
Also, back then I think we had four employees in the company.
But by June of 2005, the project had been fully permitted.
We completed a feasibility study, raised all the capital, hired all the people, built the mine, and poured our first bar in July 2005.
So, we pulled the whole thing together in two years.
I don’t know too many stories that could equal that one.
And as it would happen, the gold price when we started was under $300 an ounce.
But by 2005, the gold price was trading around $500 an ounce, and it continued to rise.
We signed the option when gold looked like it would never recover again but by the time we were in production, it had almost doubled.
By 2011 the gold price was peaking at $1,900 an ounce.
So our timing was really unbelievable, because from the production — we were producing about 150,000 ounces a year from the Mulatos Mine and we had just amazing costs — we were generating incredible cash flows.
By 2015 the market had pulled back again, to $1,100 an ounce, which was an ideal opportunity to start making acquisitions again.
We had nearly $400 million in retained earnings on our balance sheet, capital we used to go out and make acquisitions.
Through the merger with AuRico Gold in 2015, we acquired the Young-Davidson mine.
We completed a multi-year expansion in 2020, and it’s been generating over $100 million a year in free cash flow since then.
It’ll do almost $200 million a year in free cash flow this year.
In 2016, we took over a little junior company called Carlisle Goldfields.
I think we bought them out for about $25 million.
Today, based on the drilling that we’ve done on that deposit called Lynn Lake, it’s sitting with 3 million ounces of gold.
The project now has all of its permits, and we’re in construction.
We acquired it for next to nothing back when that gold price was $1,100.
Then in 2017, we did probably what many would argue is the best transaction that we’ve ever done, we acquired Richmont Mines in Ontario, which had a project that we really liked called Island Gold.
It was quite small when we took it over, but we invested very heavily in exploration and development.
Today, the Island Gold Mine has nearly 7 million ounces in reserves and resources and continues to grow.
We’re producing around 150,000 ounces of gold a year, and our costs are just a little more than $1,000 per ounce.
So we’re making tremendous cash flow from that mine.
Last year, we had the opportunity to acquire the company right next door to Island Gold called Argonaut Gold, which included its Magino open pit deposit.
Island Gold is a high-grade underground deposit and runs 11 grams per tonne.
There are about 5 million ounces of resources at the Magino deposit that grades about one gram per tonne.
It’s quite a contrast to Island Gold.
They are very, very different types of deposits, but we are now operating them basically together.
The open pit mine material is getting crushed and fed into a 10,000 tonne per day mill.
As part of integrating these two projects, we plan to double the mill’s capacity from 10,000 tonnes, to up to 20,000 tonnes a day.
Between now and 2029 through increasing our underground mining and our open pit mining rates, we intend to turn the mine into one that can produce over 500,000 ounces of gold a year.”
Read the entire interview with John A. McCluskey, the President and Chief Executive Officer of Alamos Gold, exclusively in the Wall Street Transcript.
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