EX-4.4



 EXHIBIT 4.4 
  





 

	
	  
 

 Third Quarter 2012 Report
 September 30, 2012

(Based on International Financial Reporting Standards (“IFRS”) and stated in thousands of United States dollars, unless otherwise
indicated)
 INDEX

Unaudited Condensed Interim Consolidated Financial Statements

 

	•	 	 Consolidated Statements of Financial Position



 

	•	 	 Consolidated Statements of Comprehensive Income



 

	•	 	 Consolidated Statements of Changes in Equity



 

	•	 	 Consolidated Statements of Cash Flows



 

	•	 	 Notes to Condensed Interim Consolidated Financial Statements











					
		 	



	 	THIRD QUARTER REPORT 2012


 

 ALAMOS GOLD INC.
 Consolidated Statements of Financial Position
 (Unaudited –
stated in thousands of United States dollars)
  

									
	 	 	      September 30,      	 	 	        December 31,        	 
	 	 	2012	 	 	2011	 
		 	  
	  
	 
	 A S S E T S
	 				 			
	 Current Assets
	 				 			
	 Cash and cash equivalents
	 	 	$ 287,042  	 	 	 	$ 169,471  	 
	 Short-term investments
	 	 	29,869  	 	 	 	53,088  	 
	 Amounts receivable
	 	 	7,697  	 	 	 	6,147  	 
	 Advances and prepaid expenses
	 	 	2,533  	 	 	 	2,117  	 
	 Available-for-sale securities (note 4)
	 	 	4,346  	 	 	 	10,355  	 
	 Other financial assets (note 4)
	 	 	627  	 	 	 	244  	 
	 Inventory (note 5)
	 	 	46,343  	 	 	 	33,220  	 
		 	  
	  
	 
	 Total Current Assets
	 	 	378,457  	 	 	 	274,642  	 
			
	 Non-Current Assets
	 				 			
	 Exploration and evaluation assets (note 6)
	 	 	119,708  	 	 	 	108,454  	 
	 Mineral property, plant and equipment (note 7)
	 	 	208,571  	 	 	 	216,128  	 
		 	  
	  
	 
	 Total Assets
	 	 	$ 706,736  	 	 	 	$ 599,224  	 
		 	  
	  
	 
			
	 L I A B I L I T I E S
	 				 			
	 Current Liabilities
	 				 			
	 Accounts payable and accrued liabilities
	 	 	$ 21,267  	 	 	 	$ 17,024  	 
	 Dividends payable (note 8)
	 	 	12,062  	 	 	 	-  	  
	 Income taxes payable
	 	 	6,371  	 	 	 	6,125  	 
	 Current portion of other liabilities
	 	 	197  	 	 	 	363  	 
		 	  
	  
	 
	 Total Current Liabilities
	 	 	39,897  	 	 	 	23,512  	 
			
	 Non-Current Liabilities
	 				 			
	 Deferred income taxes
	 	 	43,593  	 	 	 	35,008  	 
	 Decommissioning liability (note 9)
	 	 	5,906  	 	 	 	6,680  	 
	 Other liabilities
	 	 	465  	 	 	 	474  	 
		 	  
	  
	 
	 Total Liabilities
	 	 	89,861  	 	 	 	65,674  	 
		 	  
	  
	 
			
	 E Q U I T Y
	 				 			
	 Share capital (note 10 a)
	 	 	$ 388,606  	 	 	 	$ 355,524  	 
	 Contributed surplus
	 	 	22,956  	 	 	 	27,861  	 
	 Accumulated other comprehensive loss
	 	 	(1,970)  	 	 	 	(1,080)  	 
	 Retained earnings
	 	 	207,283  	 	 	 	151,245  	 
		 	  
	  
	 
	 Total Equity
	 	 	616,875  	 	 	 	533,550  	 
		 	  
	  
	 
	 Total Liabilities and Equity
	 	 	$ 706,736  	 	 	 	$ 599,224  	 
		 	  
	  
	 
			
	Commitments and Contingencies (note 12)	 				 			


The accompanying notes form an integral part of these condensed interim consolidated 
financial statements.

  

					
	 	 	2  	 	    ALAMOS GOLD INC.    












					
		 	



	 	THIRD QUARTER REPORT 2012


 

 ALAMOS GOLD INC.
 Consolidated Statements of Comprehensive Income

(Unaudited – stated in thousands of United States dollars, except per share amounts)

 

																	
	 	 	    For the three-month periods    	 	 	For the nine-month periods    	 
	 	 	    ended September 30,  	 	 	 ended September 30,   	 
	 	 	    2012	 	 	  2011	 	 	2012   	 	 	 2011 	 
		 	  
	  
	 
	 OPERATING REVENUES
	 	 	  $ 71,281	 	 	 	  $ 44,991  	 	 	 	$ 222,426	 	 	 	$ 156,231  	 
		 	  
	  
	 
					
	 MINE OPERATING COSTS
	 				 				 				 			
	 Mining and processing
	 	 	15,519	  	 	 	10,474  	 	 	 	46,688	 	 	 	37,549  	 
	 Royalties (note 12)
	 	 	3,495	 	 	 	2,098  	 	 	 	11,156	 	 	 	7,584  	 
	 Amortization
	 	 	12,106	  	 	 	4,840  	 	 	 	32,563	 	 	 	16,543  	 
		 	  
	  
	 
		 	 	31,120	 	 	 	17,412  	 	 	 	90,407	 	 	 	61,676  	 
		 	  
	  
	 
	EARNINGS FROM MINE OPERATIONS EXPENSES	 	 	40,161	  	 	 	27,579  	 	 	 	132,019	 	 	 	94,555  	 
	 Exploration
	 	 	729	  	 	 	2,131  	 	 	 	5,040	 	 	 	6,304  	 
	 Corporate and administrative
	 	 	3,296	  	 	 	2,370  	 	 	 	9,419	 	 	 	7,471  	 
	 Share-based compensation (notes 10 b and 10 c)
	 	 	2,830	  	 	 	3,040  	 	 	 	6,758	 	 	 	10,265  	 
		 	  
	  
	 
		 	 	6,855	 	 	 	7,541  	 	 	 	21,217	 	 	 	24,040  	 
		 	  
	  
	 
	 EARNINGS FROM OPERATIONS
	 	 	33,306	 	 	 	20,038  	 	 	 	110,802	 	 	 	70,515  	 
					
	 OTHER INCOME (EXPENSES)
	 				 				 				 			
	 Finance income
	 	 	731	 	 	 	430  	 	 	 	2,444	 	 	 	1,228  	 
	 Financing expense
	 	 	(121)	  	 	 	(150)  	 	 	 	(388)	 	 	 	(447)  	 
	 Foreign exchange gain (loss)
	 	 	2,263	  	 	 	(5,642)  	 	 	 	847	 	 	 	(4,868)  	 
	 Other income (loss)
	 	 	636	 	 	 	660  	 	 	 	1,277	 	 	 	(776)  	 
		 	  
	  
	 
	EARNINGS BEFORE INCOME TAXES FOR THE PERIOD	 	 	36,815	 	 	 	15,336  	 	 	 	114,982	 	 	 	65,652  	 
					
	 INCOME TAXES
	 				 				 				 			
	 Current tax expense
	 	 	(11,035)	  	 	 	(6,760)  	 	 	 	(26,347)	 	 	 	(21,960)  	 
	 Deferred tax recovery (expense)
	 	 	115	  	 	 	(3,140)  	 	 	 	(8,585)	 	 	 	(4,905)  	 
		 	  
	  
	 
		 	 	$ 25,895	  	 	 	$ 5,436  	 	 	 	$ 80,050	 	 	 	$ 38,787  	 
	 EARNINGS FOR THE PERIOD
	 				 				 				 			
	 Other comprehensive (loss)
	 				 				 				 			
	 - Unrealized (loss) gain on securities
	 	 	(798)	  	 	 	928  	 	 	 	(1,285)	 	 	 	(2,042)  	 
	- Reclassification of realized losses on available-for-sale securities included in earnings	 	 	488	 	 	 	1,885  	 	 	 	395	 	 	 	1,885  	 
		 	  
	  
	 
	 COMPREHENSIVE INCOME FOR THE PERIOD
	 	 	$ 25,585	 	 	 	$ 8,249  	 	 	 	$ 79,160	 	 	 	$ 38,630  	 
		 	  
	  
	 
					
	 EARNINGS PER SHARE
	 				 				 				 			
	 – basic (note 10 d)
	 	 	$ 0.22	 	 	 	$ 0.05  	 	 	 	$ 0.67	 	 	 	$ 0.33  	 
	 – diluted (note 10 d)
	 	 	$ 0.21	 	 	 	$ 0.05  	 	 	 	$ 0.66	 	 	 	$ 0.33  	 
		 	  
	  
	 
	Weighted average number of common shares outstanding	 				 				 				 			
	 - basic
	 	 	120,062,000	 	 	 	117,792,000  	 	 	 	119,548,000	 	 	 	117,060,000  	 
	 - diluted
	 	 	120,915,000	 	 	 	119,344,000  	 	 	 	120,627,000	 	 	 	118,437,000  	 
		 	  
	  
	 


The accompanying notes form an integral part of these condensed interim consolidated 
financial statements.

  

					
	 	 	3  	 	    ALAMOS GOLD INC.    












					
		 	



	 	THIRD QUARTER REPORT 2012


 

 ALAMOS GOLD INC.
 Consolidated Statements of Changes in Equity

For the nine-month periods ended September 30, 2012 and 2011

(Unaudited – stated in thousands of United States dollars)

 

																											
	  	 	  	 	Number of
shares
outstanding	 	 	Share
capital	 	 	 Contributed

surplus
	 	 	Accumulated
other
comprehensive
loss	 	 	Retained
earnings	 	 	Total Equity 	 
		 	Balance at December 31, 2010	 	 	116,340,008	 	 	 	$   325,867	 	 	 	$    23,316	 	 	 	$      (1,332)  	 	 	 	$   105,278	 	 	 	$   453,129 	 
		 	 Share-based compensation
	 	 	-	  	 	 	-	  	 	 	9,875	 	 	 	-  	  	 	 	-	  	 	 	9,875 	 
		 	 Shares issued on exercise of options
	 	 	1,940,900	 	 	 	28,011	 	 	 	(6,960)	 	 	 	-  	  	 	 	-	  	 	 	21,051 	 
		 	 Dividends
	 	 	-	  	 	 	-	  	 	 	-	  	 	 	-  	  	 	 	(14,114)	 	 	 	(14,114) 	 
		 	 Earnings
	 	 	-	  	 	 	-	  	 	 	-	  	 	 	-  	  	 	 	38,787	 	 	 	38,787 	 
	 	 	 Other comprehensive loss (tax impact; nil)
	 	 	-	  	 	 	-	  	 	 	-	  	 	 	(157)  	 	 	 	-	  	 	 	(157) 	 
	 	 	Balance at September 30, 2011	 	 	118,280,908	 	 	 	$   353,878	 	 	 	$    26,231	 	 	 	$      (1,489)  	 	 	 	$   129,951	 	 	 	$   508,571 	 
								
	  	 	  	 	Number of
shares
outstanding	 	 	Share
capital	 	 	Contributed
surplus	 	 	Accumulated
other
comprehensive
loss	 	 	 Retained

earnings
	 	 	Total Equity 	 
		 	Balance at December 31, 2011	 	 	118,383,008	 	 	 	$   355,524	 	 	 	$    27,861	 	 	 	$      (1,080)  	 	 	 	$   151,245	 	 	 	$   533,550 	 
		 	 Share-based compensation
	 	 	-	  	 	 	-	  	 	 	3,745	 	 	 	-  	  	 	 	-	  	 	 	3,745 	 
		 	 Shares issued on exercise of options
	 	 	2,232,200	 	 	 	33,082	 	 	 	(8,650)	 	 	 	-  	  	 	 	-	  	 	 	24,432 	 
		 	 Dividends
	 	 	-	  	 	 	-	  	 	 	-	  	 	 	-  	  	 	 	(24,012)	 	 	 	(24,012) 	 
		 	 Earnings
	 	 	-	  	 	 	-	  	 	 	-	  	 	 	-  	  	 	 	80,050	 	 	 	80,050 	 
	 	 	 Other comprehensive loss (tax impact; nil)
	 	 	-	  	 	 	-	  	 	 	-	  	 	 	(890)  	 	 	 	-	  	 	 	(890) 	 
	 	 	Balance at September 30, 2012	 	 	120,615,208	 	 	 	$   388,606	 	 	 	$    22,956	 	 	 	$      (1,970)  	 	 	 	$   207,283	 	 	 	$   616,875 	  

 The accompanying notes form an integral part of these condensed interim consolidated financial statements.

  

					
	 	 	4  	 	    ALAMOS GOLD INC.    












					
		 	



	 	THIRD QUARTER REPORT 2012


 

 ALAMOS GOLD INC.
 Consolidated Statements of Cash Flows
 (Unaudited – stated in thousands of United States
dollars)
  

																	
	 	  	For the three-month	 	  	For the nine-month	 
	 	  	periods ended	 	  	periods ended	 
	 	  	September 30,	 	  	September 30,	 
	 	  	2012	 	  	2011	 	  	2012	 	  	2011	 
		  	  
	  
	 
	 CASH PROVIDED BY (USED IN):
	  				  				  				  			
	 OPERATING ACTIVITIES
	  				  				  				  			
	 Earnings for the period
	  	 	$  25,895	  	  	 	$    5,436	  	  	 	$  80,050	 	  	 	$  38,787  	  
	 Adjustments for items not involving cash:
	  				  				  				  			
	 Amortization
	  	 	12,106	  	  	 	4,840	 	  	 	32,563	 	  	 	16,543  	 
	 Financing expense
	  	 	121	 	  	 	150	 	  	 	388	 	  	 	447  	 
	 Unrealized foreign exchange (gain) loss
	  	 	(1,878)	  	  	 	3,037	  	  	 	(2,074)	 	  	 	2,761  	  
	 Deferred tax (recovery) expense
	  	 	(115)	  	  	 	3,140	  	  	 	8,585	 	  	 	4,905  	  
	 Share-based compensation
	  	 	2,830	  	  	 	3,040	  	  	 	6,758	 	  	 	10,265  	  
	 (Gain) loss on sale of securities
	  	 	(426)	  	  	 	968	  	  	 	(930)	 	  	 	968  	  
	 Other
	  	 	(311)	  	  	 	61	 	  	 	(329)	 	  	 	749  	 
	 Changes in non-cash working capital:
	  				  				  				  			
	 Fair value of forward contracts
	  	 	150	  	  	 	(1,658)	  	  	 	150	 	  	 	(1,182)  	  
	 Amounts receivable
	  	 	(4,915)	  	  	 	(5,185)	  	  	 	(14,723)	 	  	 	(12,568)  	  
	 Inventory
	  	 	(5,492)	  	  	 	(5,567)	  	  	 	(9,020)	 	  	 	(5,415)  	  
	 Advances and prepaid expenses
	  	 	610	  	  	 	(882)	  	  	 	(417)	 	  	 	(374)  	  
	 Accounts payable, taxes payable and accrued liabilities
	  	 	6,710	 	  	 	4,746	 	  	 	14,424	 	  	 	13,373  	 
		  	  
	  
	 
		  	 	35,285	  	  	 	12,126	  	  	 	115,425	 	  	 	69,259  	  
		  	  
	  
	 
	 INVESTING ACTIVITIES
	  				  				  				  			
	 Sale (purchases) of securities
	  	 	2,947	  	  	 	(1,626)	  	  	 	6,285	 	  	 	(6,460)  	  
	 Contractor advances
	  	 	-	  	  	 	(6,607)	  	  	 	-	  	  	 	(16,200)  	  
	 Short-term investments (net)
	  	 	15,436	  	  	 	4,432	  	  	 	23,219	 	  	 	(12,210)  	  
	 Proceeds on sale of equipment
	  	 	-	  	  	 	-	  	  	 	-	  	  	 	889  	 
	 Decommissioning liability
	  	 	(384)	  	  	 	-	  	  	 	(1,146)	 	  	 	(136)  	 
	 Exploration and evaluation assets
	  	 	(5,939)	  	  	 	(3,046)	  	  	 	(11,254)	 	  	 	(6,916)  	  
	 Mineral property, plant and equipment
	  	 	(8,156)	  	  	 	(12,156)	  	  	 	(29,304)	 	  	 	(34,626)  	  
		  	  
	  
	 
		  	 	3,904	  	  	 	(19,003)	 	  	 	(12,200)	 	  	 	(75,659)  	 
		  	  
	  
	 
	 FINANCING ACTIVITIES
	  				  				  				  			
	 Common shares issued
	  	 	9,931	  	  	 	13,655	  	  	 	24,432	 	  	 	21,051  	  
	 Dividends paid
	  	 	-	  	  	 	-	  	  	 	(11,950)	 	  	 	(5,834)  	  
		  	  
	  
	 
		  	 	9,931	  	  	 	13,655	  	  	 	12,482	 	  	 	15,217  	  
		  	  
	  
	 
					
	 Effect of exchange rates on cash and cash equivalents
	  	 	1,724	  	  	 	(2,435)	 	  	 	1,864	 	  	 	(1,600)  	 
		  	  
	  
	 
	 Net increase in cash and cash equivalents
	  	 	50,844	  	  	 	4,343	  	  	 	117,571	 	  	 	7,217  	  
	 Cash and cash equivalents - beginning of period
	  	 	236,198	  	  	 	149,208	  	  	 	169,471	 	  	 	146,334  	 
		  	  
	  
	 
	 CASH AND CASH EQUIVALENTS - END OF PERIOD
	  	 	    $ 287,042	  	  	 	$ 153,551	 	  	 	$ 287,042	 	  	 	$ 153,551  	 
		  	  
	  
	 
	 Supplemental information:
	  				  				  				  			
	 Interest paid
	  	 	$          -	  	  	 	$          -	  	  	 	$           -	 	  	 	$           -  	  
	 Interest received
	  	 	$     989	  	  	 	$     418	 	  	 	$   2,461	 	  	 	$   1,037  	 
	 Income taxes paid
	  	 	$  5,618	  	  	 	$     865	 	  	 	$ 13,530	 	  	 	$   8,850  	 

 The accompanying notes form an integral part of these condensed interim consolidated financial statements.

  

					
	 	 	5  	 	    ALAMOS GOLD INC.    










 ALAMOS GOLD INC.
 Notes to Condensed Interim Consolidated Financial Statements 
 September 30, 2012 and
2011
 (Unaudited – stated in United States dollars, unless otherwise indicated)

 

	1.	NATURE OF OPERATIONS

  

Alamos Gold Inc., a resident Canadian company, and its wholly-owned subsidiaries (collectively the “Company”) are engaged in the acquisition,
exploration, development and extraction of precious metals in Mexico and Turkey. The Company owns and operates the Mulatos mine and holds the mineral rights to the Salamandra group of concessions in the State of Sonora, Mexico, which includes
several known satellite gold occurrences. In addition, the Company owns the Ağı Dağı, Kirazlı and Çamyurt gold development projects in Turkey.

 

	2.	BASIS OF PREPARATION AND ADOPTION OF NEW ACCOUNTING POLICY


 
 Statement of Compliance

These condensed interim consolidated financial statements have been prepared in accordance with IFRS applicable to the preparation of interim financial
statements, including IAS 34, Interim Financial Reporting (“IAS 34”).
 The policies applied in these condensed interim consolidated
financial statements are consistent with the policies disclosed in Notes 2 and 3 of the consolidated financial statements for the year ended December 31, 2011. These condensed interim consolidated financial statements should be read in
conjunction with the Company’s consolidated financial statements for the year ended December 31, 2011.
 The condensed interim
consolidated financial statements were authorized for issue by the Board of Directors on October 23, 2012.
 Adoption of Accounting
Policy Effective January 1, 2012
 International Financial Reporting Interpretations Committee (“IFRIC”) Interpretation 20:
Stripping Costs in the Production Phase of a Surface Mine was issued in October 2011, and is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. IFRIC 20 provides guidance on the accounting
for the costs of stripping activity in the production phase of surface mining when benefits accrue to the entity from the stripping activity. In addition, IFRIC 20 requires companies to ensure that capitalized costs are amortized over the useful
life of the component of the ore body to which access has been improved due to the stripping activity. The Company adopted the amendments in its financial statements for the annual period beginning on January 1, 2012. The Company capitalized $7.2
million of production stripping costs to Mineral property, plant and equipment for the nine-month period ended September 30, 2012.
  

	3.	FUTURE ACCOUNTING POLICY CHANGES ISSUED BUT NOT YET IN EFFECT


 
 The following are new pronouncements approved by
the IASB. The following new standards and interpretations are not yet effective and have not been applied in preparing these financial statements, however, they may impact future periods. 
 (i) IFRS 9 Financial Instruments (Revised) was issued by the IASB in October 2010. It incorporates revised requirements for the classification and measurement of financial liabilities, and carrying over
the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement. The revised financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements
apply where an entity chooses to measure a liability at fair value through profit or loss – in 

  

					
	 	 	6  	 	    ALAMOS GOLD INC.    










 
these cases, the portion of the change in fair value related to changes in the entity’s own credit risk is presented in other comprehensive income rather than within profit or loss. IFRS 9
(2010) is effective for annual periods beginning on or after January 1, 2015. The impact of IFRS 9 on the Company’s financial instruments has not yet been determined. 
 (ii) IFRS 10 Consolidated Financial Statements is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. IFRS 10 replaces the guidance in IAS 27
Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities (“SPE’s”). IFRS 10 provides a single model to be applied in the control analysis for all investees, including entities that
currently are SPEs in the scope of SIC-12. In addition, the consolidation procedures are carried forward substantially unmodified from IAS 27. Given the nature of the Company’s operations, the Company does not expect the amendments to have a
material impact on the financial statements. 
 (iii) IFRS 12 Disclosure of Interests in Other Entities was released in May 2011 and is
effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. If an entity applies this standard earlier, it does not need to apply IFRS 10, IFRS 11, IAS 27 (2011) and IAS 28 (2011) at the same time.
IFRS 12 contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or unconsolidated structured entities. Interests are widely defined as
contractual and non-contractual involvement that exposes an entity to variability of returns from the performance of the other entity. The required disclosures aim to provide information in order to enable users to evaluate the nature of, and the
risks associated with, an entity’s interest in other entities, and the effects of those interests on the entity’s financial position, financial performance and cash flows. The Company intends to adopt IFRS 12 in its financial
statements for the annual period beginning on January 1, 2013. Given the nature of the Company’s interests in other entities, the Company does not expect the amendments to have a material impact on the financial statements. 

(iv) IFRS 13 Fair Value Measurement was issued in May 2011 and is effective prospectively for annual periods beginning on or after January 1,
2013. The disclosure requirements of IFRS 13 need not be applied in comparative information for periods before initial application. IFRS 13 replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value
measurement guidance. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also establishes a framework
for measuring fair value and sets out disclosure requirements for fair value measurements to provide information that enables financial statement users to assess the methods and inputs used to develop fair value measurements and, for recurring fair
value measurements that use significant unobservable inputs (Level 3), the effect of the measurements on earnings or other comprehensive income. IFRS 13 explains ‘how’ to measure fair value when it is required or permitted by other IFRSs.
IFRS 13 does not introduce new requirements to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurements that currently exist in certain standards. The Company intends to adopt IFRS
13 prospectively in its financial statements for the annual period beginning on January 1, 2013. The impact of adoption of IFRS 13 has not yet been determined.
 (v) Amendments to IAS 1 Presentation of Financial Statements was issued in June 2011 and is effective for annual periods beginning on or after July 1, 2012. IAS 1 should be applied retrospectively, but
early adoption is permitted. The amendments require that an entity present separately the items of OCI that may be reclassified to earnings in the future from those that would never be reclassified to earnings. Consequently an entity that presents
items of OCI before related tax effects will also have to allocate the aggregated tax amount between these categories. The existing option to present the earnings and other comprehensive income in two statements has remained unchanged. The Company
intends to adopt the amendments in its financial statements for the annual period beginning on January 1, 2013. The impact of adoption of the amendments has not yet been determined.

  

					
	 	 	7  	 	    ALAMOS GOLD INC.    











	4.	FINANCIAL INSTRUMENTS AND RISK MANAGEMENT


 
  

	a)	Financial Assets and Liabilities

 The
carrying value of the Company’s financial instruments is classified into the following categories:
  

									
	 	 	September 30,        	 	 	December 31,        	 
	 	 	2012        	 	 	2011        	 
	 	 	($000)        	 	 	($000)        	 
			
	 Fair value through profit or loss (“FVTPL”) (1)
	 	 	316,911	 	 	 	222,559	 
	 Derivative instruments designated as FVTPL (2)
	 	 	627	  	 	 	244	 
	 Available-for-sale securities (3)
	 	 	4,346	  	 	 	10,355	 
	 Loans and receivables
(4)
	 	 	7,697	  	 	 	6,147	 
	 Derivative contracts designated as FVTPL (5)
	 	 	(150)	  	 	 	-	  
	 Other financial liabilities (6)
	 	 	(39,871)	  	 	 	(23,650)	 

  

	(1) 	 Includes cash of $130.0 million (December 31, 2011 – $44.8 million), cash equivalents of $157.0 million (December 31, 2011 – $124.7 million) and
short-term investments of $29.9 million (December 31, 2011 – $53.1 million). 



	(2) 	 Includes the Company’s investment in the warrants of a publicly traded company. 



	(3) 	 Includes the Company’s investment in the common shares of publicly traded entities.



	(4) 	 Includes amounts receivable. As permitted by Mexican tax law, the Company offset $13.2 million of Mexican value-added tax receivables against its current taxes
payable liability for the nine-months ended September 30, 2012 ($16.9 million for year ended December 31, 2011).



	(5) 	 Includes the Company’s foreign currency forward and option contracts and gold option contracts which, for accounting purposes, are not considered to be
effective hedges. These are classified within accounts payable and accrued liabilities in the consolidated balance sheet.



	(6) 	 Includes all other accounts payable and accrued liabilities, dividends payable, income taxes payable, and certain other liabilities.



The Company has determined the estimated fair values of its financial instruments based on appropriate valuation methodologies; however, considerable
judgment is required to develop these estimates. The fair values of the Company’s financial instruments are not materially different from their carrying values. 
  

	b)	Derivative Financial Instruments 

 The
Company may utilize financial instruments to manage the risks associated with fluctuations in the market price of gold and foreign exchange rates. As at September 30, 2012, the Company had outstanding contracts to deliver up to 2,000 ounces of
gold at fixed prices. The mark-to-market loss associated with these contracts as at September 30, 2012 was $0.2 million. As at December 31, 2011 the Company had no outstanding gold foward contracts. 

At September 30, 2012, the Company had outstanding contracts to deliver $10 million Canadian dollars (“CAD”) in exchange for a fixed amount of
USD at future dates up to December of 2012, with CAD:USD rates ranging from of 0.98:1 to 0.99:1. The mark-to-market gain associated with these contracts as at September 30, 2012 was nominal (December 31, 2011 – nil). 

  

					
	 	 	8  	 	    ALAMOS GOLD INC.    











	5.	INVENTORY

  

 

									
	 	 	September 30,        	 	 	December 31,        	 
	 	 	2012        	 	 	2011        	 
	 	 	($000)        	 	 	($000)        	 
			
	 Precious metals dore and refined precious metals
	 	 	5,480	 	 	 	5,484 	 
	 In-process precious metals
	 	 	20,462	  	 	 	11,894 	 
	 Parts and supplies
	 	 	20,401	  	 	 	15,842 	 
		 	 	$46,343	 	 	 	$33,220 	 

 The carrying value of inventory is calculated using weighted average cost. The amount of inventory charged to operations
as mining and processing costs during the three and nine-month period ended September 30, 2012 was $16.0 million and $49.3 million (September 30, 2011 – $11.3 million and $40.5 million). The amount of inventory charged to operations as
amortization in the three and nine-month periods ended September 30, 2012 was $10.4 million and $27.4 million (September 30, 2011 – $3.9 million and $13.6 million). 

 

	6.	EXPLORATION AND EVALUATION ASSETS 


 
 The Company classifies the Aği Daği,
Kirazlı, and Çamyurt Projects in Turkey as exploration and evaluation assets. Exploration and evaluation assets are not subject to amortization. 
 The following is a continuity of the Company’s exploration and evaluation assets for the nine-month period ended September 30, 2012. 

 

					
	 	  	Total	 
		  	  
	  
	 
	 	  	($000)	 
		
	 Cost as at December 31, 2011
	  	 	                        108,454  
	 
	 Additions
	  	 	11,254  	 
		  	  
	  
	 
	 Cost as at September 30, 2012
	  	 	119,708  	 
		  	  
	  
	 

  

	7.	MINERAL PROPERTY, PLANT AND EQUIPMENT 


 
 The Company owns 100% of the Salamandra group of
concessions in Mexico. Included within the Salamandra group of concessions is the Mulatos mine which began operations in 2005. 
 The majority
of the Company’s property, plant and equipment in operations is amortized on a units-of-production basis over an estimated nine year mine life. Certain mining and office equipment is amortized on a straight line basis over periods ranging from
two to five years. 

  

					
	 	 	9  	 	    ALAMOS GOLD INC.    










 The following is a continuity of the Company’s mineral property, plant and equipment for the nine-month
period ended September 30, 2012.
  

																									
	  	 	Mining
plant and
equipment	 	 	Office and
computer
equipment	 	 	Construction
in progress	 	  	Subtotal	 	  	Mineral
property and
deferred
development	 	  	Total	 
	 	 	($000)	 	 	($000)	 	 	($000)	 	  	($000)	 	  	($000)	 	  	($000)	 
	Cost as at December 31, 2011	 	 	$ 173,393	 	 	 	$ 2,375	 	 	 	$ 23,898 	 	  	 	$ 199,666	 	  	 	$ 126,660	 	  	 	$ 326,326  	 
	 Additions
	 	 	4, 276	 	 	 	564	 	 	 	10,754 	 	  	 	15,594	 	  	 	13,710	 	  	 	29,304  	 
	Transfers from construction in progress	 	 	28,792	  	 	 	-	  	 	 	(28,792) 	 	  	 	-	  	  	 	-	  	  	 	-  	  
	Cost as at September 30, 2012	 	 	$ 206,461	 	 	 	$ 2,939	 	 	 	$ 5,860 	 	  	 	$ 215,260	 	  	 	$ 140,370	 	  	 	$ 355,630  	 
		 				 				 				  				  				  			
	Accumulated amortization and impairment as at December 31, 2011	 	 	$ 76,579	 	 	 	$ 1,274	 	 	 	$- 	 	  	 	$ 77,853	 	  	 	$ 32,345	 	  	 	$ 110,198  	 
	Amortization expense	 	 	21,053	 	 	 	390	 	 	 	 	 	  	 	21,443	 	  	 	15,418	 	  	 	36,861  	 
	Accumulated amortization and impairment as at September 30, 2012	 	 	$ 97,632	 	 	 	$ 1,664	 	 	 	$- 	 	  	 	$ 99,296	 	  	 	$ 47,763	 	  	 	$ 147,059  	 
	Net book value as at September 30, 2012	 	 	$108,829	 	 	 	$ 1,275	 	 	 	$5,860 	 	  	 	$ 115,964	 	  	 	$ 92,607	 	  	 	$ 208,571  	 

  

	8.	DIVIDENDS

  

 

					
	 	  	      Nine-months ended  	 
	 	  	September 30, 2012  	 
		  	  
	  
	 
	 	  	($000)	 
		
	   Paid during the period
	  	 	11,950  	 
	   Declared and payable
	  	 	12,062  	 
		  	  
	  
	 
		  	 	$ 24,012  	  
		
	   Weighted average number of common shares outstanding
	  	 	119,548,000  	 
	   Dividend per share
	  	 	$ 0.20  	  
		  	  
	  
	 

  

	9.	PROVISIONS

  

Decommissioning Liability
 The fair
value of a decommissioning liability is recognized in the period in which it is incurred, on a discounted cash flow basis, if a reasonable estimate can be made. The liability accretes to its full value over time through charges to earnings. In
addition, the fair value is added to the carrying amount of the Company’s mineral property, plant and equipment, and is amortized on a units-of-production basis over the life of the Mine.

  

					
	 	 	10  	 	    ALAMOS GOLD INC.    










 A continuity of the decommissioning liability is as follows:

 

					
	 	  	    Nine-months ended    	 
	 	  	    September 30, 2012    	 
		  	  
	  
	 
	 	  	    ($000)    	 
		
	  Obligations at December 31, 2011
	  	 	6,680  	  
	  Revisions in estimated cash flows and changes in assumptions
	  	 	-  	  
	  Payments made against the liability
	  	 	(1,146)  	  
	  Accretion of discounted cash flows
	  	 	372  	  
		  	  
	  
	 
	  Obligations at September 30, 2012
	  	 	$5,906  	  
		  	  
	  
	 

  

	10.	SHARE CAPITAL

  

 

	a)	Authorized share capital of the Company consists of an unlimited number of fully paid common shares without par value. 


 

									
	 	 	      Number of Shares    	 	  	Amount            	 
		 	  
	  
	 
	 	 	 	 	  	($000)            	 
	 Outstanding at December 31, 2011
	 	 	118,383,008	 	  	 	355,524  	 
	 Exercise of stock options
	 	 	2,232,200	  	  	 	24,432  	  
	 Transfer from contributed surplus to share capital for stock options exercised
	 	 	-	  	  	 	8,650  	 
		 	  
	  
	 
	 Outstanding at September 30, 2012
	 	 	120,615,208	  	  	 	$ 388,606  	  
		 	  
	  
	 

  

	b)	Stock options

 The Company has a stock option
plan (the “Plan”), originally approved by the Board of Directors (the “Board”) on April 17, 2003, and amended and ratified on May 25, 2007, May 15, 2008, April 7, 2009, June 2, 2010 and May 30, 2012, which allows the Company to
grant incentive stock options to officers of the Company. Under the Plan, the number of shares reserved for issuance cannot exceed 7% of the total number of shares which are outstanding on the date of grant. The exercise price, term (not to
exceed ten years) and vesting provisions are authorized by the Board at the time of the grant. The plan is subject to shareholder approval and ratification every three years.
 Stock options granted under the Plan are exercisable for a five-year period. Incentive stock options granted vest 1/3 on the first anniversary date, 1/3 on the second anniversary and 1/3 on the third
anniversary date. 
 The following is a continuity of the changes in the number of stock options outstanding for the nine-month period ended
September 30, 2012: 
  

									
	  	  	Number            	 	 	Weighted average    
exercise price ($CAD)    
	 
	 Outstanding at December 31, 2011
	  	 	6,405,700	  	 	 	$12.95  	  
	 Granted
	  	 	840,000	  	 	 	16.30  	  
	 Exercised
	  	 	(2,232,200)	  	 	 	10.92  	  
	 Forfeited
	  	 	(77,000)	  	 	 	14.23  	  
	 Outstanding at September 30, 2012
	  	 	4,936,500	  	 	 	$14.42  	  

 The weighted average share price at the date of exercise for stock options exercised in the nine-month period ended
September 30, 2012 was CAD$18.93 (for the nine-month period ended September 30, 2011 – CAD$17.35). 
 For the nine-month period ended
September 30, 2012, the Company granted 840,000 incentive stock options at exercise price at CAD$16.30, compared to 2,115,000 stock options granted at an exercise prices ranging from CAD$14.24 per share to CAD$16.39 per share in the nine-month
period ended September 30, 2011. 

  

					
	 	 	11  	 	    ALAMOS GOLD INC.    










 The fair value of stock options granted were estimated using the Black-Scholes option pricing model with the
following assumptions: 
  

									
	For options granted in the nine-month period ended:	  	September 30,      
2012      	 	  	September 30,        
2011       
 	 
	 Weighted average share price at grant date
	  	 	$16.30	 	  	 	$14.30  	 
	 Risk-free rate
	  	 	1.0%-1.2%	 	  	 	1.7%-2.3%  	 
	 Expected dividend yield
	  	 	1.04%	 	  	 	0.43%-0.58%  	 
	 Expected stock price volatility (based on historical volatility)
	  	 	40%-51%	  	  	 	42%-58%  	  
	 Expected life, based on terms of the grants (months)
	  	 	30-60	  	  	 	20-60  	  
	 Weighted average per share fair value of stock options granted
	  	 	$5.48	 	  	 	$4.96  	 

 Option pricing models require the input of highly subjective assumptions, particularly as to the expected price
volatility of the stock. Changes in these assumptions can materially affect the fair value estimate, and therefore it is management’s view that the existing models may not provide a single reliable measure of the fair value of the
Company’s stock option grants.
 As at September 30, 2012, 3,500,500 stock options were exercisable. The remaining 1,436,000 outstanding
stock options vest over the following three years. 
 Stock options outstanding and exercisable as at September 30, 2012:

 

																					
	 	 	Outstanding	 	 	Exercisable	 
	
      Range of exercise      

prices ($CAD)
	 	    Number of
    options	 	 	Weighted 
average 
exercise 
price ($CAD) 	 	 	  
  
 Weighted    
average    
remaining    
contractual    
life (years)    

 
	 	 	    Number of  
    options  	 	 	Weighted   
average   
exercise   
price ($CAD)   	 
	  
	 	  
	  
	 
	 $6.00 - $8.00
	 	 	30,000	 	 	 	6.76	 	 	 	0.67  	 	 	 	30,000	 	 	 	6.76  	 
	 $8.01 - $10.00
	 	 	450,000	 	 	 	9.80	 	 	 	1.69  	 	 	 	450,000	 	 	 	9.80  	 
	 $10.01 - $14.00
	 	 	100,000	 	 	 	13.04	 	 	 	2.39  	 	 	 	100,000	 	 	 	13.04  	 
	 $14.01 - $15.00
	 	 	3,431,500	 	 	 	14.61	 	 	 	2.80  	 	 	 	2,845,500	 	 	 	14.69  	 
	 $15.01 - $17.50
	 	 	925,000	 	 	 	16.34	 	 	 	4.50  	 	 	 	75,000	 	 	 	16.75  	 
	  
	 	  
	  
	 	 	  
	  
	 
		 	 	4,936,500	 	 	 	$ 14.42	 	 	 	2.99  	 	 	 	3,500,500	 	 	 	$ 13.99  	 
		 	  
	  
	 	 	  
	  
	 

  

	c)	Stock Appreciation Rights (“SARs”)

 In
2011, the Company’s Board approved a cash-settled stock appreciation rights plan (“SARs Plan”) to grant incentive SARs to its directors, officers, employees and consultants. Under the SARs Plan, the number of units reserved for
issuance cannot exceed 8% of the total number of common shares which are outstanding on the date of grant. The exercise price, term (not to exceed ten years) and vesting provisions are authorized by the Board at the time of the grant.

SARs granted to directors, officers, employees and certain consultants under the SARs Plan are exercisable for a five-year period. SARs granted prior to
May 31, 2012 vest 20% on the date of grant, and 20% at each six-month interval following the date of grant. Vesting provisions in the SARs Plan were amended effective May 31, 2012. All grants subsequent to this amendment are subject to vesting of
1/3 on the first anniversary date, 1/3 on the second anniversary and 1/3 on the third anniversary date. 
 SARs are cash-settled liabilities,
which are remeasured at each reporting date and at the settlement date. Any changes in the fair value of the liability are recognized as an expense to share-based compensation in the Statements of Comprehensive Income. As at September 30, 2012, the
SARs liability was $4.3 million (December 31, 2011 – $1.6 million) recorded in accounts payable and accrued liabilities in the Consolidated Statements of Financial Position.

  

					
	 	 	12  	 	    ALAMOS GOLD INC.    










 The following is a continuity of the changes in the number of SARs outstanding for the nine-month period
ended September 30, 2012: 
  

									
	 	  	Number          	 	  	Weighted average        
exercise price    
    
($CAD)        	 
	 Outstanding at December 31, 2011
	  	 	770,000	 	  	 	$16.36  	 
	 Granted
	  	 	830,000	  	  	 	18.48  	  
	 Exercised
	  	 	(45,340)	  	  	 	15.49  	  
	 Forfeited
	  	 	(17,140)	  	  	 	15.49  	  
	 Outstanding at September 30, 2012
	  	 	1,537,520	  	  	 	$ 17.54  	  

 The fair value of SARs granted were estimated using the Black-Scholes option pricing model with the following
assumptions: 
  

					
	For SARS granted in the nine-month period ended:	  	        September 30,        
      
  2012        	 
		  	  
	  
	 
	 Weighted average share price at grant date
	  	 	$18.48  	  
	 Risk-free rate
	  	 	1.0% - 1.6%  	  
	 Expected dividend yield
	  	 	0.65%-1.04%  	  
	 Expected stock price volatility (based on historical volatility)
	  	 	41%-64%  	  
	 Expected life, based on terms of the grants (months)
	  	 	20-60  	 
	 Weighted average per share fair value of SARs granted
	  	 	$6.65  	 
		  	  
	  
	 

 Stock appreciation rights outstanding and exercisable as at September 30, 2012:

 

																					
	 	 	Outstanding	 	 	Exercisable	 
						
	      Range of exercise      
prices ($CAD)	 	     Number of  

    SARs  
	 	 	 Weighted  
 average  
 exercise  

price ($CAD)  
	 	 	  

Weighted    

average    

remaining    

contractual    
life (years)    

 
	 	 	     Number of    

    SARs    
	 	 	 Weighted    

average    

exercise    

price ($CAD)    
	 
	  
	 	  
	  
	 
	$15.00 - $17.00	 	 	457,520	 	 	 	15.89	 	 	 	3.03  	 	 	 	101,300	 	 	 	15.73  	 
	$17.01 - $19.00	 	 	605,000	 	 	 	17.56	 	 	 	4.11  	 	 	 	195,000	 	 	 	17.27  	 
	$19.01 - $20.00	 	 	475,000	 	 	 	19.11	 	 	 	5.00  	 	 	 	-	  	 	 	-  	  
		 	  
	  
	 	 	  
	  
	 
		 	 	1,537,520	 	 	 	$ 17.54	 	 	 	4.06  	 	 	 	296,300	 	 	 	$ 16.74  	 
		 	  
	  
	 	 	  
	  
	 

  

	d)	Earnings per share 

 Basic earnings per share
amounts are calculated by dividing earnings for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of common shares outstanding
during the period, plus the effects of the dilutive common share equivalents. 

  

					
	 	 	13  	 	    ALAMOS GOLD INC.    











									
	 	  	For the nine-months ended	 
	 	  	September 30,      	 	  	September 30,      	 
	 	  	2012      	 	  	2011      	 
	 Earnings ($000)
	  	 	$80,050	 	  	 	$38,787	 
	 Weighted average number of common shares outstanding
	  	 	119,548,000	  	  	 	117,060,000	  
	 Basic earnings per share
	  	 	$0.67	 	  	 	$0.33	  
			
	 Dilutive effect of stock options outstanding
	  	 	1,079,000	  	  	 	1,377,000	  
	 Diluted weighted average number of common shares outstanding
	  	 
	120,627,000
	 
	  	 
	118,437,000
	 

	 Diluted earnings per share
	  	 	$0.66	 	  	 	$0.33	 

  

	11.	SEGMENTED REPORTING 

  

The Company operates in one business segment (the exploration, mine development and extraction of precious metals, primarily gold) in three geographic
areas: Canada, Mexico and Turkey. 
  

																																	
	As at	  	September 30, 2012	 	  	December 31, 2011	 
	 	  	Mexico	 	  	Turkey	 	 	Canada 	 	 	Total	 	  	Mexico	 	  	Turkey	 	 	Canada 	 	 	Total	 
	 	  	($000)	 	  	($000)	 	 	($000)	 	 	($000)	 	  	($000)	 	  	($000)	 	 	($000)	 	 	($000)	 
	 Non-current assets
	  	 	207,290	 	  	 	120,457	 	 	 	532	 	 	 	328,279	 	  	 	215,111	 	  	 	109,007	 	 	 	464	 	 	 	324,582	 
	 Assets
	  	 	354,905	 	  	 	131,470	 	 	 	220,361	 	 	 	706,736	 	  	 	395,313	 	  	 	117,520	 	 	 	86,391	 	 	 	599,224	 
	 Liabilities
	  	 	71,227	 	  	 	463	 	 	 	18,171	 	 	 	89,861	 	  	 	61,874	 	  	 	1,666	 	 	 	2,134	 	 	 	65,674	 
			
	 	  	 Nine-months ended

September 30, 2012
	 	  	 Nine-months ended

September 30, 2011
	 
	 	  	Mexico	 	  	Turkey	 	 	Canada 	 	 	Total	 	  	Mexico	 	  	Turkey	 	 	Canada 	 	 	Total	 
	 	  	($000)	 	  	($000)	 	 	($000)	 	 	($000)	 	  	($000)	 	  	($000)	 	 	($000)	 	 	($000)	 
						 			
	 Revenues
	  	 	222,426	 	  	 	-	  	 	 	-	  	 	 	222,426	  	  	 	156,231	 	  	 	-	  	 	 	-	  	 	 	156,231	 
	 Earnings (loss)
	  	 	94,776	 	  	 	(3,466	)	 	 	(11,260	) 	 	 	80,050	  	  	 	58,801	 	  	 	(3,325	)	 	 	(16,689	)	 	 	38,787	 

  

	12.	COMMITMENTS AND CONTINGENCIES 

  

a) Royalty
 Production from certain
concessions within the Salamandra district, including the Mine, is subject to a production royalty payable at a rate of 5% of the value of gold and silver production, less certain deductible refining and transportation costs. The royalty is
calculated based on the daily average London PM Fix gold market prices, not actual prices realized by the Company. Production to a maximum of two million ounces of gold is subject to royalty. As at September 30, 2012, the royalty was paid or accrued
on approximately 943,000 ounces of applicable gold production. Royalty expense for the three and nine-month period ended September 30, 2012 was $3.5 million and $11.2 million (three and nine-month periods ended September 30, 2011: $2.1 million
and $7.6 million). 
 In addition, a third party has a 2% Net Smelter Return Royalty on production from the Company’s Ağı
Dağı project. The Company has not recorded an accrual for this royalty at September 30, 2012 as the project is not in production. The Company is also subject to 2% state royality on production in Turkey, subject to certain deductions.


  

					
	 	 	14  	 	    ALAMOS GOLD INC.    










 b) Mulatos Town Relocation 
 The Company commenced the planned relocation of the town of Mulatos in 2007 and relocation contracts were signed with over half of the families residing in Mulatos at that time. Property owners and
possessors were offered a comprehensive benefits package including compensation for their property at a premium to independent third-party valuations and/or relocation benefits. In certain cases, relocation benefits include deferred monthly
payments. Since the start of the Mulatos relocation effort in 2007, the Company has invested approximately $7.3 million in property acquisition, relocation benefits, legal, and related costs. In addition, the Company has recognized a liability of
$0.3 million representing the discounted value of expected future payments for relocation benefits to property owners and possessors that had signed contracts with the Company as at September 30, 2012. The discounted value of the liability was
capitalized to mineral property, plant and equipment. 
 During 2008, the Company, through its wholly-owned subsidiaries, entered into a land
purchase agreement with the Mulatos Ejido, the local landowners. Pursuant to the land purchase agreement, the Company made a payment of $1.3 million in order to secure temporary occupation rights to specified land. An additional payment of
approximately $1.0 million (based on current exchange rates) which has not been accrued as at September 30, 2012, is payable once the land has been vacated and transferred to the Company. The probability and timing of this additional payment is
currently uncertain. 
 In 2010, the Mulatos Ejido filed a complaint with the Unitary Agrarian Court to nullify the 2008 land purchase
agreement. In June 2012, the Agarian Unitary Court issued a judgement in which it ruled that the Company’s wholly-owned subsidiary has been completely discharged of all claims made against it in this lawsuit. The Court also confirmed the
validity of the 2008 land purchase agreement. 
 Additional future property acquisition, relocation benefits, legal and related costs may be
material. The Company cannot currently determine the expected timing, outcome of negotiations or costs associated with the relocation of the remaining property owners and possessors and potential land acquisitions. 

 

	13.	RECLASSIFICATION

 The comparative
financial statements have been reclassified to conform to the presentation of the current period financial statements. 

  

					
	 	 	15  	 	    ALAMOS GOLD INC.