Actuals vs. estimates

Highlights & what matters

• Operating revenues of $510.4 million missed the $551.0 million estimate by 7.4%, and diluted EPS of $0.39 missed the $0.43 expected by 9.3%.
• The schedule moved, not the plan: Island Gold shaft commissioning slips about a quarter to mid-2027, the ramp to 2,400 tonnes per day moves to the second half of 2027, and Phase 3+ capital is now expected 5% above the $835 million budget.
• Operations set records where the growth is. Island Gold District produced 68,700 ounces with underground mining at a record 1,790 tonnes per day, up 15% sequentially, and the Magino mill at a record 10,300 tonnes per day, up 16%.
• Guidance for the fourth quarter calls for a 26% increase in consolidated production, with full-year production and cost guidance reaffirmed at the revised levels.
• The one thing that matters: the quarter was guided - production low, costs high - so the content is the shaft slip, which pushes roughly 400 tonnes per day of mining rate out of the first half of 2027 and takes Phase 3+ capital 5% above its $835 million budget without changing the 2030 destination.

Guidance & KPIs

Management commentary

• Guimond said a dike and localised overbreak at the top of the ore bin forced the civil work to be done ahead of bin slashing, changing the sequence and pushing commissioning of the shaft infrastructure by about a quarter.
• On 2027 Island Gold volumes, Guimond framed the gap as roughly 400 tonnes per day for the first half, with budgeting not yet final.
• Asked about contingency at PDA, Guimond said: 'We are still comfortable with the $165 million.'
• Labour is the largest inflation pressure on both operations and capital, more pronounced on capital projects, while placed orders are tracking budget.
• Young-Davidson will keep blending about 2,000 tonnes per day of low-grade stockpile at 0.3-0.4 grams into a 7,000 tonne per day mill against 5,000 tonnes per day from underground, with about 300,000 tonnes of stockpile remaining.

Quality of earnings

• Cash backs the quarter despite the earnings miss. Operating cash flow before working capital of $235 million ran well ahead of $166 million of reported net earnings, and every site generated positive free cash flow for a total of $76 million.
• Reported earnings are held back by hedge clean-up rather than flattered. $86 million of cash, $0.21 per share, went to repurchasing and eliminating 33,000 ounces of legacy Argonaut hedges, and adjusted net earnings of $184 million add back a $10 million after-tax commodity hedge loss plus $7 million of unrealised currency effects.
• Costs rose for the reasons management had already given. All-in sustaining costs of $1,956 per ounce reflect lower Young-Davidson production and sustaining capital timing, against $227 million of quarterly capital of which $164 million was growth and $50 million sustaining.

Gotchas & watch items

• The delay carries a bill, not just a date: Phase 3+ capital is now expected 5% above the $835 million budget, and substantially all of that capital is already spent or committed.
• PDA is slipping too while its budget is not: initial capital is held at $165 million even though underground development has run behind on ground conditions and contractor performance, with lower PDA production now expected in the second half of 2027.
• Island Gold grade came in under its own range: 8.69 grams per ton against a 9 to 11.5 gram band, on higher-than-expected dilution in a few high-grade stopes mined in August.
• The hedge drag is nearly gone - 96% of the legacy Argonaut gold hedges are bought back with 14,000 ounces left - and October added the $160 million Turkish anniversary payment on top of $397 million of quarter-end net cash, with $150 million more due in October 2027.

Last quarter's watch items: what happened

• No watch items on file from a prior quarter - this is the first tracked quarter for this company.

Next quarter: the 2-3 things that matter

• The guided 26% fourth quarter production step-up Baseline: 119,000 ounces in Q3 2026 with Island Gold exiting the year at 2,000 tonnes per day Confirms: Q4 production near 150,000 ounces with Island Gold mining rates at or above 2,000 tonnes per day Breaks: Q4 production below 135,000 ounces or mining rates still near 1,800 tonnes per day Check in: Q4 2026. Source: McCluskey remarks on fourth quarter production, slide 4
• Island Gold underground grade returning to its guided range Baseline: 8.69 grams per ton in Q3 2026 against a 9 to 11.5 gram guidance range Confirms: Q4 grade at or above 9 grams per ton, toward the top end as guided Breaks: A second consecutive quarter below 9 grams per ton on dilution Check in: Q4 2026. Source: Guimond remarks on grades mined, slide 7
• Whether PDA capital holds at $165 million while development lags Baseline: $165 million initial capital unchanged, $25 million spent in the quarter, mill completion targeted mid-2027 Confirms: Capital still $165 million with development rates improved and first production held to next year Breaks: PDA capital raised or first production pushed beyond mid-2027 Check in: Q4 2026. Source: Guimond PDA remarks and the Q&A on offsets and contingency