Document:

EX-4.2

 EXHIBIT 4.2 
  
 

 
  
  

2011 FINANCIAL REPORT 

December 31, 2011 and 2010 
 (Based
on International Financial Reporting Standards (“IFRS”) and stated in thousands of United States dollars) 
 INDEX

 Management’s responsibility for financial reporting 
 Independent Auditors’ report 
 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 Consolidated Financial Statements 

					
		 	

	 	2011 FINANCIAL REPORT

 MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING 
 The consolidated financial statements of Alamos Gold Inc. have been prepared by, and are the responsibility of the Company’s management. 
 The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and reflect management’s best estimates and judgments based on
information currently available. In the opinion of management, the accounting practices utilized are appropriate in the circumstances and the consolidated financial statements fairly reflect the financial position and results of operations of the
Company within reasonable limits of materiality. 
 Management has developed and maintains a system of internal controls to obtain reasonable
assurance that the Company’s assets are safeguarded, transactions are authorized, and financial information is reliable. All internal control systems have inherent limitations, including the possibility of circumvention and overriding of
controls, and therefore, can provide only reasonable assurance as to financial statement reliability and the safeguarding of assets. 
 The
Board of Directors is responsible for ensuring management fulfills its responsibilities. The Audit Committee meets with the Company’s management and external auditors to discuss the results of the audit and to review the consolidated financial
statements prior to the Audit Committee’s submission to the Board of Directors for approval. The Audit Committee also reviews the quarterly financial statements and recommends them for approval to the Board of Directors, reviews with management
the Company’s systems of internal control, and approves the scope of the external auditors’ audit and non-audit work. The Audit Committee is composed entirely of directors not involved in the daily operations of the Company who are thus
considered to be free from any relationship that could interfere with their exercise of independent judgment as a Committee member. 
 The
consolidated financial statements have been audited by Ernst & Young LLP, Chartered Accountants and their report outlines the scope of their examination and gives their opinion on the consolidated financial statements. 

February 21, 2012 
  

	
	 

  

	John A. McCluskey
	President and Chief Executive Officer

  

	
	 

  

	James R. Porter, CA
	Chief Financial Officer

  

					
	 	 	1  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 INDEPENDENT AUDITORS’ REPORT 
 To the Shareholders of 
 Alamos Gold Inc. 

We have audited the accompanying consolidated financial statements of Alamos Gold Inc., which comprise the consolidated statements of financial position
as at December 31, 2011 and 2010, and January 1, 2010, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2011 and 2010, and a summary of significant accounting
policies and other explanatory information. 
 Management’s responsibility for the consolidated financial statements 

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 

Auditors’ responsibility 
 Our
responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. 
 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. 
 We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit
opinion. 
 Opinion 
 In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Alamos Gold Inc. as at December 31, 2011 and 2010, and January 1, 2010, and its financial performance and its cash flows for
the years ended December 31, 2011 and 2010 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. 

 
 

 
 Chartered Accountants 
 Licensed Public Accountants 
 Toronto, Canada 

February 21, 2012 

  

					
	 	 	2  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

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

 

																			
	 	  	Note  
Ref.  	  	  December 31,  
2011	 	  	 	  	  December 31,  
2010	 	  	 	  	  January 1,  
2010	 
	 A S S E T S
	  		  				  		  				  		  			
	 Current Assets
	  		  				  		  				  		  			
	 Cash and cash equivalents
	  		  	 	$ 169,471  	  	  		  	 	$ 146,334  	  	  		  	 	$ 160,682  	  
	 Short-term investments
	  		  	 	53,088  	  	  		  	 	41,846  	  	  		  	 	26,200  	  
	 Amounts receivable
	  	6  	  	 	6,147  	  	  		  	 	5,749  	  	  		  	 	2,369  	  
	 Advances and prepaid expenses
	  		  	 	2,117  	  	  		  	 	3,136  	  	  		  	 	1,058  	  
	 Available-for-sale securities
	  	5  	  	 	10,355  	  	  		  	 	9,380  	  	  		  	 	-  	  
	 Other financial assets
	  	5  	  	 	244  	  	  		  	 	1,094  	  	  		  	 	-  	  
	 Inventory
	  	7  	  	 	33,220  	  	  		  	 	25,225  	  	  		  	 	20,026  	  
	 Total Current Assets
	  		  	 	274,642  	  	  		  	 	232,764  	  	  		  	 	210,335  	  
							
	 Non-Current Assets
	  		  				  		  				  		  			
	 Exploration and evaluation assets
	  	8  	  	 	108,454  	  	  		  	 	99,767  	  	  		  	 	521  	  
	 Mineral property, plant and equipment
	  	9  	  	 	216,128  	  	  		  	 	173,905  	  	  		  	 	144,822  	  
	 Total Assets
	  		  	 	$ 599,224  	  	  		  	 	$ 506,436  	  	  		  	 	$ 355,678  	  
							
	 L I A B I L I T I E S
	  		  				  		  				  		  			
	 Current Liabilities
	  		  				  		  				  		  			
	  
 Accounts payable and accrued
liabilities
	  		  	 	$ 17,024  	  	  		  	 	$ 14,393  	  	  		  	 	$ 11,179  	  
	  
 Income taxes payable
	  		  	 	6,125  	  	  		  	 	3,373  	  	  		  	 	1,988  	  
	 Current portion of other liabilities
	  	11 b)  	  	 	363  	  	  		  	 	428  	  	  		  	 	370  	  
	 Total Current Liabilities
	  		  	 	23,512  	  	  		  	 	18,194  	  	  		  	 	13,537  	  
							
	 Non-Current Liabilities
	  		  				  		  				  		  			
	 Deferred income taxes
	  	13  	  	 	35,008  	  	  		  	 	26,866  	  	  		  	 	22,598  	  
	  
 Decommissioning
liability
	  	11 c)  	  	 	6,680  	  	  		  	 	7,559  	  	  		  	 	5,115  	  
	 Other liabilities
	  	11a) b)  	  	 	474  	  	  		  	 	688  	  	  		  	 	834  	  
	  
  
 Total Liabilities
	  		  	 	65,674  	  	  		  	 	53,307  	  	  		  	 	42,084  	  
							
	 E Q U I T Y
	  		  				  		  				  		  			
	 Share capital
	  	12 a)  	  	 	$ 355,524  	  	  		  	 	$ 325,867  	  	  		  	 	$ 251,752  	  
	 Contributed surplus
	  		  	 	27,861  	  	  		  	 	23,316  	  	  		  	 	12,864  	  
	 Accumulated other comprehensive loss
	  		  	 	(1,080)  	  	  		  	 	(1,332)  	  	  		  	 	-  	  
	 Retained earnings
	  		  	 	151,245  	  	  		  	 	105,278  	  	  		  	 	48,978  	  
	  
 Total Equity
	  		  	 	533,550  	  	  		  	 	453,129  	  	  		  	 	313,594	  
	  
 Total Liabilities and
Equity
	  		  	 	$ 599,224  	  	  		  	 	$ 506,436  	  	  		  	 	$ 355,678	  
							
	 Commitments and Contingencies
	  	16  	  				  		  				  		  			

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

On behalf of the Board 
  

					
	

	 		 	 

  

	John A. McCluskey	 		 	Paul Murphy
	President and Chief Executive Officer	 		 	Director

  

					
	 	 	3  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 ALAMOS GOLD INC. 
 Consolidated Statements of Comprehensive Income 
 For the years ended December 31, 2011 and 2010

 (Stated in thousands of United States dollars, except per share amounts) 

 

													
	 	  	Note  
Ref.  	  	2011  	 	  	 	  	2010 	 
					
	 Operating Revenues
	  		  	 	$ 227,364  	  	  		  	 	 $ 189,272  	  
					
	 MINE OPERATING COSTS
	  		  				  		  			
	 Mining and processing
	  		  	 	53,868  	  	  		  	 	46,560  	  
	 Royalties
	  	16 b)  	  	 	11,157  	  	  		  	 	9,090  	  
	 Amortization
	  		  	 	23,423  	  	  		  	 	20,486  	  
		  		  	 	88,448  	  	  		  	 	76,136  	  
	 EARNINGS FROM MINE OPERATIONS
	  		  	 	138,916  	  	  		  	 	113,136  	  
					
	 EXPENSES
	  		  				  		  			
	 Exploration
	  		  	 	9,540  	  	  		  	 	7,594  	  
	 Corporate and administrative
	  		  	 	9,613  	  	  		  	 	9,187  	  
	 Share-based compensation
	  	12 b) c)  	  	 	13,525  	  	  		  	 	16,300  	  
		  		  	 	32,678  	  	  		  	 	33,081  	  
	 EARNINGS FROM OPERATIONS
	  		  	 	106,238  	  	  		  	 	80,055  	  
					
	 OTHER INCOME (EXPENSES)
	  		  				  		  			
	 Finance income
	  		  	 	1,717  	  	  		  	 	1,510  	  
	 Financing expense
	  	11 b),c)  	  	 	(598)  	  	  		  	 	(451)  	  
	 Foreign exchange loss
	  		  	 	(188)  	  	  		  	 	(39)  	  
	 Other (loss) income
	  	14  	  	 	(1,234)  	  	  		  	 	9,393  	  
					
	 EARNINGS BEFORE INCOME TAXES
	  		  	 	105,935  	  	  		  	 	90,468  	  
					
	 INCOME TAXES
	  	13  	  				  		  			
	 Current tax expense
	  		  	 	(34,194)  	  	  		  	 	(23,410)  	  
	 Deferred tax expense
	  		  	 	(11,660)  	  	  		  	 	(3,263)  	  
					
	 EARNINGS
	  		  	 	$60,081  	  	  		  	 	$63,795  	  
	 Other comprehensive income
	  		  				  		  			
	 - Unrealized loss on securities
	  		  	 	(1,089)  	  	  		  	 	(1,332)  	  
	- Reclassification of realized gains on available-for-sale securities included in earnings	  		  	 	(280)  	  	  		  	 	-  	  
	 - Impairment of available-for-sale securities
	  		  	 	1,621  	  	  		  	 	-  	  
	 COMPREHENSIVE INCOME
	  		  	 	$60,333  	  	  		  	 	$62,463  	  
					
	 EARNINGS PER SHARE
	  		  				  		  			
	 - basic
	  	12 d)  	  	 	$0.51  	  	  		  	 	$0.55  	  
	 - diluted
	  	12 d)  	  	 	$0.51  	  	  		  	 	$0.55  	  
					
	 Weighted average number of common shares outstanding
	  		  	 	 	 	  		  	 	 	 
	 - basic
	  		  	 	117,375,000  	  	  		  	 	115,183,000  	  
	 - diluted
	  		  	 	118,669,000  	  	  		  	 	116,907,000  	  

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

  

					
	 	 	4  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 ALAMOS GOLD INC. 
 Consolidated Statements of Changes In Equity 
 For the years ended December 31, 2011 and 2010

 (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 January 1, 2010
	 	 	109,850,108  	  	 	 	$251,752 	  	 	 	$12,864	  	 	 	$0	  	 	 	$48,978	  	 	 	$313,594	  
	 Share-based compensation
	 	 	-  	  	 	 	- 	  	 	 	16,300	  	 	 	-	  	 	 	-	  	 	 	16,300	  
	 Shares issued on exercise of Options
	 	 	2,489,900  	  	 	 	23,485 	  	 	 	(5,848)	  	 	 	-	  	 	 	-	  	 	 	17,637	  
	 Shares issued on acquisition (note 4)
	 	 	4,000,000  	  	 	 	50,630 	  	 	 	-	  	 	 	-	  	 	 	-	  	 	 	50,630	  
	 Dividends
	 	 	-  	  	 	 	- 	  	 	 	-	  	 	 	-	  	 	 	(7,495)	  	 	 	(7,495)	  
	 Earnings
	 	 	-  	  	 	 	- 	  	 	 	-	  	 	 	-	  	 	 	63,795	  	 	 	63,795	  
	 Other comprehensive income (tax impact; nil)
	 	 	-  	  	 	 	- 	  	 	 	-	  	 	 	(1,332)	  	 	 	-	  	 	 	(1,332)	  
	 Balance at December 31, 2010
	 	 	116,340,008  	  	 	 	$325,867 	  	 	 	$23,316	  	 	 	($1,332)	  	 	 	$105,278	  	 	 	$453,129	  
	  	 	Number of
Shares
outstanding	 	 	Share capital	 	 	Contributed
surplus	 	 	  

Accumulated
other
comprehensive
loss
	 	 	Retained 
earnings 	 	 	Total Equity 	 
	 Balance at January 1, 2011
	 	 	116,340,008  	  	 	 	$325,867 	  	 	 	$23,316	  	 	 	($1,332)	  	 	 	$105,278	  	 	 	$453,129	  
	 Share-based compensation
	 	 	-  	  	 	 	- 	  	 	 	11,935	  	 	 	-	  	 	 	-	  	 	 	11,935	  
	 Shares issued on exercise of Options
	 	 	2,043,000  	  	 	 	29,657 	  	 	 	(7,390)	  	 	 	-	  	 	 	-	  	 	 	22,267	  
	 Dividends
	 	 	-  	  	 	 	- 	  	 	 	-	  	 	 	-	  	 	 	(14,114)	  	 	 	(14,114)	  
	 Earnings
	 	 	-  	  	 	 	- 	  	 	 	-	  	 	 	-	  	 	 	60,081	  	 	 	60,081	  
	 Other comprehensive income (tax impact; nil)
	 	 	-  	  	 	 	- 	  	 	 	-	  	 	 	252	  	 	 	-	  	 	 	252	  
	 Balance at December 31, 2011
	 	 	118,383,008  	  	 	 	$355,524 	  	 	 	$27,861	  	 	 	($1,080)	  	 	 	$151,245	  	 	 	$533,550	  

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

  

					
	 	 	5  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 ALAMOS GOLD INC. 
 Consolidated Statements of Cash Flows 
 For the years ended December 31, 2011 and 2010 

(Stated in thousands of United States dollars) 
  

											
	 	  	  2011  	 	  	 	  	 2010   	 
	  CASH PROVIDED BY (USED IN):
	  				  		  			
	  OPERATING ACTIVITIES
	  				  		  			
	  Earnings
	  	 	$60,081  	  	  		  	 	$63,795  	  
	   Adjustments for items not involving cash:
	  				  		  			
	    Amortization
	  	 	23,423  	  	  		  	 	20,486  	  
	    Financing expense
	  	 	598  	  	  		  	 	451  	  
	    Unrealized foreign exchange (gain) loss
	  	 	(3,853)  	  	  		  	 	22  	  
	    Deferred tax expense
	  	 	11,660  	  	  		  	 	3,263  	  
	    Write-down and loss on disposal of assets
	  	 	-  	  	  		  	 	1,598  	  
	    Share-based compensation
	  	 	13,525  	  	  		  	 	16,300  	  
	    Gain on settlement
	  	 	-  	  	  		  	 	(11,565)  	  
	    Gain on sale of securities
	  	 	(783)  	  	  		  	 	-  	  
	    Impairment of securities
	  	 	1,621  	  	  		  	 	-  	  
	    Other
	  	 	954  	  	  		  	 	446  	  
	   Changes in non-cash working capital:
	  				  		  			
	    Fair value of forward contracts
	  	 	(715)  	  	  		  	 	715  	  
	    Amounts receivable
	  	 	(18,218)  	  	  		  	 	(16,635)  	  
	    Inventory
	  	 	(6,572)  	  	  		  	 	(4,630)  	  
	    Advances and prepaid expenses
	  	 	1,019  	  	  		  	 	(1,892)  	  
	    Accounts payable, taxes payable and accrued liabilities
	  	 	23,794  	  	  		  	 	17,294  	  
		  	 	106,534  	  	  		  	 	89,648  	  
	   INVESTING ACTIVITIES
	  				  		  			
	   Purchases of securities (net)
	  	 	(2,213)  	  	  		  	 	(124)  	  
	   Acquisition of Turkish properties
	  	 	-  	  	  		  	 	(40,180)  	  
	   Short-term investments (net)
	  	 	(11,242)  	  	  		  	 	(15,646)  	  
	   Proceeds on sale of equipment
	  	 	889  	  	  		  	 	1,412  	  
	   Decommissioning liability
	  	 	(145)  	  	  		  	 	-  	  
	   Exploration and evaluation assets
	  	 	(8,687)  	  	  		  	 	(7,912)  	  
	   Mineral property, plant and equipment
	  	 	(68,352)  	  	  		  	 	(53,018)  	  
		  	 	(89,750)  	  	  		  	 	(115,468)  	  
	   FINANCING ACTIVITIES
	  				  		  			
	   Common shares issued
	  	 	22,267  	  	  		  	 	17,637  	  
	   Dividends paid
	  	 	(14,114)  	  	  		  	 	(7,495)  	  
		  	 	8,153  	  	  		  	 	10,142  	  
	   Effect of exchange rates on cash and cash equivalents
	  	 	(1,800)  	  	  		  	 	1,330  	  
	   Net increase (decrease) in cash and cash equivalents
	  	 	23,137  	  	  		  	 	(14,348)  	  
	   Cash and cash equivalents - beginning of year
	  	 	146,334  	  	  		  	 	160,682  	  
	   CASH AND CASH EQUIVALENTS - END OF YEAR
	  	 	    $169,471  	  	  		  	 	  $146,334  	  
	   Supplemental information:
	  				  		  			
	   Interest paid
	  	 	$ -  	  	  		  	 	$ -  	  
	   Interest received
	  	 	$1,380  	  	  		  	 	$ 1,300  	  
	   Income taxes paid
	  	 	$12,825  	  	  		  	 	$8,300  	  

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

  

					
	 	 	6  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 Notes to Consolidated Financial Statements 

For the years ended December 31, 2011 and 2010 
 (Stated in United States dollars, unless otherwise stated) 
 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 and Kirazlı gold development projects in Turkey. 
 2. BASIS OF PREPARATION 
 Statement of compliance 

These consolidated financial statements, including comparative figures, have been prepared using accounting policies in compliance with International
Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). The disclosures
concerning the transition from Canadian Generally Accepted Accounting Principles (“GAAP”) to IFRS are included in Note 20. 
 The
consolidated financial statements were authorized for issue by the Board of Directors on February 21, 2012. 
 Use of estimates and
judgments 
 The preparation of these consolidated financial statements requires management to make judgments, estimates and assumptions that
affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the
estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods. Accounts which require management to make material estimates and significant
assumptions in determining amounts recorded include: impairment of tangible and intangible assets, recoverable reserves, inventory recoveries, share-based payments, decommissioning liabilities, units of production amortization, provisions and
contingencies, and recovery of deferred tax assets. 
 Judgments made by management in the application of IFRS that have a significant effect on
the financial statements and estimates with a significant risk of material adjustment in the current and following fiscal years include: determination of functional currency and amortization methods. 

i) Impairment: 
 The Company assesses its
mineral property, plant and equipment and exploration and evaluation assets annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is
considered to be the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential
and operating performance. 

  

					
	 	 	7  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 ii) Recoverable reserves: 
 Ore reserves are estimates of the amount of ore that can be economically and legally extracted from the Company’s mining properties. The Company estimates its recoverable reserves based on
information compiled by appropriately qualified persons relating to the geological data on the size, depth, shape and grade of the ore body, and requires complex geological judgments to interpret the data. The estimation of recoverable reserves is
based upon factors such as estimates of commodity prices, production costs, future capital requirements, and foreign exchange rates, along with geological assumptions and judgments made in estimating the size and grade of the ore body. Changes in
the reserve or resource estimates may impact the carrying value of exploration and evaluation assets, mineral property, plant and equipment, decommissioning liabilities, and amortization expense. 

iii) Units-of-production (“UOP”) amortization: 
 Estimated recoverable reserves are used in determining the amortization of certain mineral property, plant and equipment. This results in an amortization charge proportional to the depletion of the
anticipated remaining mine life. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves and estimates of future capital expenditures. Numerous UOP amortization methods are available to choose
from; the Company has adopted a methodology based on estimated recoverable reserves over the life of mine. 
 iv) Inventory (note 7):

 The Company accounts for its in-process precious metals inventory using a process flow for applicable costs appropriate to the physical
transformation of ore through the mining, crushing, leaching and gold recovery process. The Company is required to estimate the ultimate recovery based on laboratory tests and ongoing analysis of leach pad kinetics in order to determine the
recoverable metals from the leach pad at the end of each accounting period. If the Company determines at any time that the ultimate recovery should be adjusted downward, then the Company will adjust the average carrying value of a unit of metal
content in the in-process inventory and adjust upward on a prospective basis the unit cost of subsequent production. Should an upward adjustment in the average carrying value of a unit of metal result in the carrying value exceeding the realizable
value of the metal, the Company would write down the carrying value to the realizable value. 
 v) Share based payments (note 12 b), c)):

 The Company follows accounting guidelines in determining the fair value of share-based compensation. The computed amount is not based on
historical cost, but is derived based on subjective assumptions input into an option pricing model. The model requires that management make forecasts as to future events, including estimates of: the average future hold period of issued stock options
or stock appreciation rights before exercise, expiry or cancellation; future volatility of the Company’s share price in the expected hold period (using historical volatility as a reference); and the appropriate risk-free rate of interest.
Share-based compensation incorporates an expected forfeiture rate. The expected forfeiture rate is estimated based on historical forfeiture rates and expectations of future forfeiture rates, and is adjusted if the actual forfeiture rate differs from
the expected rate. 
 The resulting value calculated is not necessarily the value that the holder of the instrument could receive in an
arm’s length transaction, given that there is no market for these instruments and they are not transferable. It is management’s view that the value derived is highly subjective and dependent upon the input assumptions made. 

vi) Decommissioning liabilities (note 11 c)): 

The Company is required to determine the expected value of the estimated costs of decommissioning liabilities and to recognize this value as a liability
when reasonably determinable. Key assumptions in determining the amount of the liability are: total undiscounted cash outflows, expected timing of payment of the cash outflows and 

  

					
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appropriate inflation and discount rates to apply to the timing of cash outflows. Because the liability is recorded on a discounted basis, it is increased due to the passage of time with an
offsetting charge to financing expense in the statement of comprehensive income. The Company calculated its estimated mine site closure costs based on a mine closure and reclamation plan prepared by management and reviewed by an independent third
party. The majority of the expenditures associated with reclamation and mine closure will be incurred at the end of the mine life, expected to be approximately 9 years based on expected proven and probable reserves and the current rate of
production. 
 vii) Provisions (note 11): 
 The Company records provisions which include various estimates, including the Company’s best estimate of the future costs associated with settlement of the obligation, and discount rates applied.
Such estimates are necessarily calculated with reference to external sources, all of which are subject to annual review and change. 
 viii)
Recovery of deferred tax assets (note 13): 
 Judgment is required in determining whether deferred tax assets are recognized on the statement of
financial position. Deferred tax assets require management to assess the likelihood that the Company will generate taxable income in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on
forecasted cash flows and the application of existing tax laws in each jurisdiction. 
 Functional and presentation currency 

These consolidated financial statements are presented in United States dollars (“USD”), which is the functional currency of the Company and all
its subsidiaries. 
 Basis of measurement 
 These consolidated financial statements have been prepared on a historical cost basis, except for certain derivative and available-for-sale financial instruments which are measured at fair value. The
Company prepares its consolidated financial statements, except for cash flow information, using the accrual basis of accounting. 

  

					
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 3. SIGNIFICANT ACCOUNTING POLICIES 
 Summarized below are those policies considered significant to the Company. All accounting policies have been applied consistently to all periods presented in these consolidated financial statements and in
preparing the opening IFRS statement of financial position at January 1, 2010 for the purposes of the transition to IFRS, unless otherwise indicated. References to the Company included herein are inclusive of the Canadian parent company and its
consolidated subsidiaries. 
 Basis of consolidation 
 The consolidated financial statements include the financial statements of the Company and the entities controlled by the Company (its subsidiaries). The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control commences until the date that control ceases. All inter-company balances and transactions have been eliminated. 
 The consolidated financial statements include the financial statements of the parent company, Alamos Gold Inc., and its subsidiaries as listed below: 

 

											
	 	  	Country
of            
Incorporation            	  	Equity Interest	 
	 	  	 	  	2011  	 	  	2010	 
	   Alamos Gold Inc.

 
	  	Canada            	  	 	-   	  	  	 	-   	  
	   Minas de Oro Nacional, S.A. de C.V.

 
	  	Mexico            	  	 	100%	  	  	 	100%	  
	   Servicios Administrativos y Operativos S.A. de C.V.

 
	  	Mexico            	  	 	100%	  	  	 	100%	  
	   Minera Bienvenidos S.A. de C.V.

 
	  	Mexico            	  	 	100%	  	  	 	100%	  
	   Kuzey Biga Madencilik Sanayi Ticaret AS

 
	  	Turkey            	  	 	100%	  	  	 	100%	  
	   Dogu Biga Madencilik Sanayi Ticaret AS

 
	  	Turkey            	  	 	100%	  	  	 	100%	  
	   Alamos Eurasia Madencilik AS

 
	  	Turkey            	  	 	100%	  	  	 	100%	  

 Foreign currency transactions 
 Transactions in foreign currencies are converted to the Company’s functional currency at exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities of the Company
which are denominated in foreign currencies are translated into the Company’s functional currency at the exchange rate prevailing at the Statement of Financial Position date. Non-monetary assets and liabilities are translated at historical
exchange rates prevailing at each transaction date. Non-monetary assets and liabilities that are stated at fair value are translated using the historical rate on the date that the fair value was determined. Revenues and expenses are translated at
exchange rates prevailing on the date of the transactions, with the exception of inventory transfers and amortization which are translated at historical exchange rates. All exchange gains and losses are included in the determination of earnings.

 Revenue recognition 
 Revenue
is earned from the sale of gold and is recognized when dore or refined metal is delivered to a purchaser pursuant to a purchase agreement that fixes the quantity and price of the metal for each delivery. Revenue is measured at the fair value of the
consideration received or receivable. 
 Costs incurred or premium income related to forward sales or option contracts are recognized in revenue
when the contract is settled. Changes in the fair value of outstanding forward sales or option contracts are recognized in earnings. 

  

					
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 Inventory 
 Inventory which includes gold-in-process, dore and parts and supplies, is stated at the lower of cost or net realizable value. 

 

	 	(i)	Dore represents a bar containing predominantly gold by value which is generally refined off-site to return saleable metals. Dore inventory is valued at the lower of
average cost to produce the dore and net realizable value. 

  

	 	(ii)	In-process inventory represents costs that are incurred in the process of converting mineralized ores into partially refined precious metals, or dore. Ore represents
material that, at the time of extraction, is expected to be processed into a saleable form. The recovery of gold from ore is achieved through the heap leaching process. Under this method, ore is crushed and placed on leach pads where it is treated
with a chemical solution, which dissolves the gold contained in the ore. The resulting “pregnant” solution is further processed in a plant where the gold is recovered. 

Cost of in-process inventory includes operating costs incurred to that stage of the process plus amortization of mineral property, plant
and equipment relating to that stage of the process. Costs capitalized to in-process inventory include direct and indirect materials and consumables; direct labour; repairs and maintenance; utilities; amortization of mineral property, plant and
equipment; and local mine administrative expenses. Costs are removed from in-process inventory and transferred to dore inventory as ounces are produced based on the average cost per recoverable ounce on the leach pad. Costs are recorded in mining
and processing costs in the statement of comprehensive income on the sale of refined gold, as well as the impact of inventory movement reflected through mining and processing costs in the statement of comprehensive income. Recoverable gold on the
leach pads is estimated based on the quantities of ore placed on the leach pads (based on measured tonnes added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery percentage (based on estimated
ultimate recovery assumptions). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels; as a result, estimates are refined based on actual results over time. The ultimate recovery of gold from leach
pads will not be known until the leaching process is concluded at the end of the mine life. 
  

	 	(iii)	Parts and supplies inventory is valued at the lower of average cost and net realizable value. Provisions are recorded to reflect present intentions for the use of slow
moving and obsolete parts and supplies inventory. 

 Mineral property, plant and equipment 

i) Mineral property acquisition and mine development costs: 
 The Company may hold interests in mineral property in various forms, including prospecting licenses, exploration and exploitation concessions, mineral leases and surface rights. The Company capitalizes
payments made in the process of acquiring legal title to these properties. 
 Property acquisition and mine development costs are recorded at
cost. Pre-production expenditures are capitalized until the commencement of production. Mine development costs incurred to expand operating capacity, develop new orebodies or develop mine areas in advance of current production are capitalized. Mine
development costs related to current period production are charged to operations as incurred. Interest on financing attributable to mine development is capitalized to mine development costs while construction and development activities at the
property are in progress. When the property is placed into production, those capitalized costs are included in the calculation of the amortization of mine development costs. Property acquisition and mine development costs are amortized by the
units-of-production method based on estimated recoverable reserves. 

  

					
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 ii) Exploration and evaluation expenditures: 
 Exploration expenditures on non-producing properties, including drilling and related costs, identified as having development potential, as evidenced by a positive economic analysis of the project, are
treated as mine development costs and capitalized. Expenditures incurred on deposits contiguous with a known deposit which has undergone a positive economic analysis are treated as mine development costs and capitalized. Exploration and evaluation
expenditures on properties prior to the establishment of a positive economic analysis are charged to operations as incurred. Drilling costs incurred during the production phase for operational ore control are charged to operations as incurred.

 iii) Mining plant and equipment: 

Plant and equipment is stated at cost less accumulated amortization and accumulated impairment losses. Cost includes all expenditures that are directly
attributable to the acquisition of the asset. Borrowing costs on qualifying assets are capitalized until the asset is capable of carrying out its intended use. Plant and equipment is amortized on a units-of-production basis over estimated
recoverable reserves, or on a straight-line basis over the estimated useful life of the asset, whichever period is lower. 
 Estimates of
residual values, useful lives and methods of amortization are reviewed each reporting period, and adjusted prospectively if appropriate. 
 iv)
Subsequent costs: 
 The cost of replacing part of an item within mineral property, plant and equipment is recognized when the cost is incurred
and it is probable that the future economic benefits will flow to the Company, and the costs can be measured reliably. The carrying amount of the part that has been replaced is expensed. Routine repairs and maintenance are expensed as incurred.

 v) Impairment: 
 The carrying values
of mineral property, plant and equipment are reviewed for indications of impairment at each reporting date. When impairment indicators exist, then the asset’s recoverable amount is estimated. 

If it is determined that the estimated recoverable amount is less than the carrying value of an asset, or its cash-generating unit (“CGU”),
then a write-down is made with a charge to operations. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows that are largely independent
of the cash inflows from other assets or groups of assets (the CGU). Impairment losses recognized in respect of CGU’s are allocated on a pro rata basis to the assets in the unit. 
 The recoverable amount of an asset or cash-generating unit is the greater of its value-in-use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows of a mine or
development property are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Estimated future cash flows include estimates of
recoverable ounces of gold based on proven and probable reserves. To the extent that economic value exists beyond the proven and probable reserves of a mine or development property, this value is included as part of the estimated future cash flows.
Estimated future cash flows also involve estimates regarding gold prices, production levels, capital, reclamation costs and income taxes. Cash flows are subject to risks and uncertainties and changes in the estimates of the cash flows could affect
the recoverability of long-lived assets. 
 (vi) Reversal of impairment: 
 An impairment loss is reversed if there is indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount that would have been determined, net of amortization, if no impairment loss had been recognized. 

  

					
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 Cash and cash equivalents 
 Cash and cash equivalents, which include cash and highly liquid investments with original maturities of three months or less at the date of acquisition, are recorded at cost, which approximates fair
value. 
 Short-term investments 

Short-term investments, which represent highly liquid investments with original maturities of greater than three months at acquisition, are recorded at
cost, which approximates fair value. 
 Income taxes 
 Income tax expense consists of current and deferred tax expense. Income tax expense is recognized in earnings except to the extent it relates to items recognized directly in equity or in other
comprehensive income. 
 Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years. 
 Deferred tax assets and
liabilities are recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences do not result in
deferred tax assets or liabilities: 
  

	 	•	 	 the initial recognition of assets or liabilities, not arising in a business combination, that does not affect accounting or taxable profit

  

	 	•	 	 goodwill 

  

	 	•	 	 taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be
controlled by the parent and it is probable that the temporary difference will not reverse in the foreseeable future. 

Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the
liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs except to the extent it relates to items recognized directly in equity or in other
comprehensive income. 
 A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available
against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced to its recoverable amount. 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when they
relate to the same taxable entity and income taxes levied by the same taxation authority and the Company intends to settle its tax assets and liabilities on a net basis. 
 Share-based payments 
 The Company grants stock options to buy common shares of the Company
through its stock option plan as described in note 12 b). The Company accounts for share-based payments using the fair value method. Under this method, compensation expense is measured at fair value on the date of grant using the Black-Scholes
option pricing model, and is recognized as an expense or capitalized, depending on the nature of the grant, with a corresponding increase in equity, over the period that the employees earn the options. The amount recognized is adjusted to reflect
the number of share options expected to vest. 

  

					
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 In addition, the Company grants stock appreciation rights (“SARs”) as described in note 12 c).
The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is determined using the Black-Scholes option pricing model, and is recognized as an expense with a corresponding increase in
liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured using the option pricing model at each reporting date, and at the intrinsic value on the settlement date. Any changes in the fair
value of the liability are recognized as an expense in the statement of comprehensive income. 
 Decommissioning liabilities 

The Company’s mining and exploration activities are subject to various government laws and regulations relating to the protection of the environment.
These laws and regulations are continually changing and are generally becoming more restrictive. The Company has made, and will continue to make expenditures to comply with such laws and regulations. The Company recognizes liabilities for statutory,
contractual, constructive or legal obligations associated with the retirement of property, plant and equipment when those obligations result from the acquisition, construction, development or normal operation of the assets. Decommissioning costs
expected to be incurred in the future are estimated by the Company’s management based on the information available to them. Actual decommissioning costs could be materially different from the current estimates. Any change in cost estimates,
discount rates, or other assumptions should additional information become available would be accounted for on a prospective basis. The Company’s estimates are reviewed annually for changes in planned operations, regulatory requirements,
discount rates, effects of inflation and changes in estimates. 
 The net present value of the future rehabilitation cost estimates arising from
decommissioning of property, plant and equipment is recognized in the period in which it is incurred with an offsetting amount being recognized as an increase in the carrying amount of the corresponding mining asset. This asset is amortized on a
unit-of-production basis over the estimated life of the mine while the corresponding liability accretes to its undiscounted value by the end of the mine’s life (note 11 c). 
 Provisions 
 Provisions are recorded when a present legal or constructive obligation exists
as a result of past events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The amount recognized as a
provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and risks specific to the liability. 
 Employee future benefits 
 The Company’s Mexican operations are subject to Mexican
statutory laws and regulations governing employee termination benefits. Employee future benefits include statutorily mandated accrued benefits payable to employees in the event of termination in certain circumstances. The net present value of
termination benefits are recognized as an expense and associated liability when the amount can be reasonably estimated at the discounted value of the expected future payments (note 11 a). 
 Financial instruments 
 The Company’s financial instruments consist primarily of
monetary assets and liabilities, the fair value of which approximate their carrying value due to the short-term nature of these instruments. 

The Company may enter into foreign exchange forward contracts to manage the Company’s exposure to fluctuations in the Canadian and United States
dollar and Mexican peso foreign 

  

					
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exchange rates. The Company may also enter into forward gold sale transactions. These forward contracts are marked-to-market and recognized in the consolidated financial statements at their fair
value. 
 Financial assets 

Financial assets are classified into one of four categories: 
  

	 	•	 	 fair value through profit or loss (“FVTPL”); 

 

	 	•	 	 held-to-maturity (“HTM”); 

  

	 	•	 	 available for sale (“AFS”); and, 

  

	 	•	 	 loans and receivables. 

The classification is determined at initial recognition and depends on the nature and purpose of the financial asset. 

(i) FVTPL financial assets: 
 Financial assets
are classified as FVTPL when the financial asset is held for trading or it is designated as FVTPL upon initial recognition. A financial asset is classified as held for trading if: 

 

	 	•	 	 it has been acquired principally for the purpose of selling in the near future; 

 

	 	•	 	 it is a part of an identified portfolio of financial instruments that the Company manages and has an actual pattern of short-term profit-taking; or

  

	 	•	 	 it is a derivative that is not designated and effective as a hedging instrument. 

Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in earnings. The Company has
classified its cash and cash equivalents, short-term investments and share purchase warrants held in third party companies as FVTPL financial assets, which are included in other financial assets on the statement of financial position. 

(ii) HTM investments: 
 If the Company has the
positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. HTM investments are recognized on a trade-date basis and are initially measured at fair value, including transaction
costs. The Company does not currently have any assets classified as HTM investments. 
 (iii) AFS financial assets: 

Non-derivative financial assets, including investments in securities, are classified as AFS and are stated at fair value. Subsequent to initial
recognition, they are measured at fair value and changes therein, other than impairment losses and foreign exchange differences are recognized in other comprehensive income and presented within equity in accumulated other comprehensive income
(loss). As a result, the assets’ carrying values approximate their fair values. 
 Impairment losses, interest calculated using the
effective interest method and foreign exchange gains and losses on monetary assets, are recognized directly in earnings rather than equity. When an investment is derecognized or is determined to be impaired, the cumulative gain or loss previously
recognized in accumulated other comprehensive income (loss) is included in earnings for the period. 
 The fair value of AFS monetary assets
denominated in a foreign currency is translated at the spot foreign exchange rate at the statement of financial position date. The change in fair value attributable to translation differences on the amortized cost of the asset is recognized in
earnings, while other changes are recognized in equity. 

  

					
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 (iv) Loans and receivables: 
 Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are initially recognized at the
transaction value plus any directly attributable transaction costs. Subsequently, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. The impairment loss of receivables is based on a
review of all outstanding amounts at period end. Bad debts are written off during the year in which they are identified. 
 (v) Impairment:

 A financial asset, other than those classified as FVTPL, is assessed at each reporting period date for indicators of impairment. A financial
asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated
reliably. 
 Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor,
restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment
in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. 
 Impairment
losses on available-for-sale investment securities are recognized by transferring the cumulative loss that has been recognized in accumulated other comprehensive income (loss), and presented in unrealized gains/losses on available-for-sale financial
assets in equity, to earnings. The cumulative loss that is removed from accumulated other comprehensive income (loss) and recognized in earnings is the difference between the acquisition cost, net of any principal repayment and amortization, and the
current fair value, less any impairment loss previously recognized in earnings. 
 If, in a subsequent period, the fair value of an impaired
available-for-sale security increases and the increase can be related objectively to an event occurring after the impairment loss was recognized in earnings, then the impairment loss is reversed, with the amount of the reversal recognized in
earnings. However, any subsequent recovery in the fair value of an impaired available-for-sale security is recognized in other comprehensive income. 
 (vi) Determination of fair value: 
 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 Company classifies fair value measurements using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements of the fair value of financial assets and liabilities. 
  

	 	•	 	 Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities; 

 

	 	•	 	 Level 2. Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and 

  

	 	•	 	 Level 3. Inputs for the asset or liability that are not based on observable market data (unobservable inputs). 

The Company has determined that available-for-sale instruments and other financial assets fall within level 1 of the fair value hierarchy, and all other
financial instruments outstanding as at the date of the statement of financial position fall within level 2 of the fair value hierarchy. 

  

					
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 Financial liabilities 
 (i) Other financial liabilities: 
 Other financial liabilities are initially measured at fair
value, net of transaction costs, and are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The Company has classified accounts payable and accrued liabilities,
dividends payable, and property acquisition liabilities as other financial liabilities. 
 Earnings per share 

Basic earnings per share is calculated by dividing the net earnings available to common shareholders divided by the weighted average number of common
shares outstanding during the year. The diluted earnings per share is calculated based on the weighted average number of common shares outstanding during the year, plus the effects of the dilutive common share equivalents. This method requires that
the dilutive effect of outstanding options and warrants issued be calculated using the treasury stock method. This method assumes that all common share equivalents have been exercised at the beginning of the year (or at the time of issuance, if
later), and that the funds obtained thereby were used to purchase common shares of the Company at the average trading price of common shares during the year. 
 Comprehensive income (loss) 
 Comprehensive income (loss) is the change in the
Company’s net assets that results from transactions, events and circumstances from sources other than the Company’s shareholders and includes items that are not included in net profit such as unrealized gains or losses on
available-for-sale investments and gains or losses on certain derivative instruments. The Company’s comprehensive income (loss), components of other comprehensive income, and cumulative translation adjustments are presented, net of tax, in the
consolidated statements of comprehensive income (loss) and the consolidated statements of changes in equity. 
 Future accounting policy
changes 
 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
was issued by the IASB on November 12, 2009 and will replace IAS 39. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple classification options available in
IAS 39. The approach in IFRS 9 is based on how an entity manages its financial impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2013. The impact of IFRS 9 on the Company’s financial
instruments has not 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. The impact of adoption of
IFRS 10 on the consolidated financial statements has not been determined. 
 (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 

  

					
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	 	2011 FINANCIAL REPORT

  

 
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.

 (vi) 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 sets out the criteria for the capitalization of production stripping costs to non-current assets, and states that the stripping activity is recognized
as a component of the larger asset to which it relates. 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 intends to adopt the amendments in its financial statements for the annual period beginning on January 1, 2013. The impact of adoption of IFRIC 20 has not yet been determined. 

  

					
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 4. ACQUISITION OF TURKISH PROPERTIES 
 On January 6, 2010, the Company completed the acquisition of the Ağı Dağı and Kirazlı gold projects (the “projects”) through the purchase of certain Turkish
subsidiaries held by Fronteer Development Group Inc. (“Fronteer”) and Teck Resources Limited (“Teck”). 
 The transaction
did not meet the definition of a business combination. Consequently, the transaction was recorded as an acquisition of an asset. 
 The Company
paid a total of USD$40 million cash and issued an aggregate of 4 million common shares to Teck (as to 60%) and Fronteer (as to 40%) in total consideration for the projects. In addition, a third party has a 2% Net Smelter Return Royalty on
production from the Ağı Dağı project. The total purchase price was $91,334,000, including transaction costs of $704,000. 

The purchase price was allocated to the assets acquired and the liabilities assumed based on the fair value of the total consideration on the closing
date of acquisition. All financial assets acquired and financial liabilities assumed were recorded at fair value. The fair value of the net assets acquired was in excess of the consideration paid and was therefore allocated to mineral property,
plant and equipment on a pro rata basis. 
  

					
	   Assets acquired and liabilities assumed
	  	 	($000)	  
	  
   Current
assets
	  	 	260	  
	  
   Mineral property, plant
and equipment
	  	 	91,074	  
		  	  
	  
	 
		  	  
  
	  
 $91,334
	  
   

		  	  
	  
	 

  

					
	   Consideration paid
	  	 	($000)	  
	  
   Cash
	  	 	40,000	  
	  
   Issuance of
shares
	  	 	50,630	  
	  
   Transaction
costs
	  	 	704	  
		  	  
	  
	 
		  	  
  
	  
 $91,334
	  
   

		  	  
	  
	 

 5. 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: 
  

													
	 	  	December 31
2011	 	  	December 31,  
2010  	 	  	January 1,   
2010   	 
	 	  	($000)	 	  	             ($000)	 	  	($000)	 
	  
 Fair value through profit or loss
(“FVTPL”) (1)
	  	 	222,559	  	  	 	188,180	  	  	 	186,882	  
	  
 Derivative instruments designated as
FVTPL (2)
	  	 	244	  	  	 	1,094	  	  	 	-	  
	  
 Available-for-sale securities
(3)
	  	 	10,355	  	  	 	9,380	  	  	 	-	  
	  
 Loans and receivables (Note
6)
	  	 	6,147	  	  	 	5,749	  	  	 	2,369	  
	  
 Derivative contracts designated as
FVTPL (4)
	  	 	-	  	  	 	(715)	  	  	 	-	  
	  
 Other financial liabilities (5)
	  	 	(23,650)	  	  	 	(17,831)	  	  	 	(14,113)	  

  

	(1) 	 Includes cash of $44.8 million (December 31, 2010 - $80.6 million, January 1, 2010 - $101 million), cash equivalents of $124.7 million (December 31,
2010 - $65.7 million, January 1, 2010 - $59.7 million) and short-term investments of $53.1 million (December 31, 2010 - $41.8 million, January 1, 2010 - $26.2 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 the Company’s foreign currency forward and option contracts and gold option contracts which, for accounting purposes, are not designated as
effective hedges. These are classified within accounts payable and accrued liabilities as at December 31, 2010 in the consolidated balance sheets. 

	(5) 	 Includes all other accounts payable and accrued liabilities, income taxes payable, and property acquisition obligations. 

  

					
	 	 	19  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

	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. At December 31, 2011 and 2010, and January 1, 2010, the Company had no outstanding gold
forward contracts. 
 At December 31, 2011, 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 March 2012, with CAD:USD rates ranging of 1.03:1 to 1:02-1. The mark-to-market gain associated with these contracts as at December 31, 2011 was nominal (December 31, 2010 - loss of
$0.7 million, January 1, 2010 - nil). 
  

	c)	Risk Management 

 The Company’s
activities expose it to a variety of financial risks: market risk (including commodity price, foreign exchange and interest rate risk), credit risk and liquidity risk. The Company’s risk management program focuses on the unpredictability of
financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. The Company may use derivative financial instruments to hedge certain risk exposures. The Company does not purchase derivative financial
instruments for speculative investment purposes. 
 Risk management is the responsibility of the corporate finance function. The Company’s
corporate finance function identifies, evaluates and, where appropriate, hedges financial risks. Material risks are monitored and are regularly discussed with the Audit Committee of the Board of Directors. 

 

	i.	Commodity Price Risk 

 The Company is
exposed to commodity price risk associated with the volatility in the market price of gold. Gold prices are affected by factors beyond the Company’s control, including investment and physical demand, central bank purchases and sales, producer
hedging activities, the relative exchange rate of the United States dollar with other major currencies and political and economic conditions. Worldwide gold production levels also affect gold prices, and the price of gold can be subject to high
levels of short-term volatility due to speculative activities. The Company may enter into derivative financial instruments to manage the Company’s exposure to commodity price risk. However, at this time, the Company has elected not to actively
manage its long-term exposure to commodity price risk through the use of derivative financial instruments. 
  

	ii.	Foreign Exchange Risk 

 Certain of the
Company’s financial assets and liabilities are denominated in Canadian dollars, Mexican pesos or Turkish Lira. In addition, the Company incurs certain operating costs denominated in Canadian dollars, Mexican pesos or Turkish Lira. Accordingly,
the Company is exposed to financial gain or loss as a result of foreign exchange movements against the United States dollar, and the Company’s operating costs are affected by changes in foreign exchange rates in those currencies. 

The Company has elected to hedge a portion of its exposure to fluctuations in the Canadian dollar by buying $10 million CAD fixed rate forward contracts.
At December 31, 2011, the Company had Canadian-dollar denominated assets of approximately $22 million. At this level of exposure to fluctuations in the value of the Canadian dollar, a 10% increase (decrease) in the value of the Canadian dollar
compared to the United States dollar could result in a foreign exchange gain/(loss) of approximately $1.2 million. 
 In addition, corporate and
administrative costs associated with the Company’s head office in Toronto are mainly denominated in Canadian dollars. A 10% increase/(decrease) in the value of the Canadian dollar compared to the United States dollar could increase/(decrease)
the Company’s reported corporate and administrative costs by approximately $0.9 million annually. 

  

					
	 	 	20  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 The Company also has exposure to monetary assets and liabilities denominated in Mexican pesos.
Significant cash balances, outstanding amounts receivable, accounts payable or tax liabilities denominated in Mexican pesos could expose the Company to a foreign exchange gain or loss. The Company partially offsets its balance sheet exposure to
changes in the Mexican peso/United States dollar exchange rate by maintaining cash balances in Mexican pesos to offset a portion of its future tax liabilities and taxes payable balances that are denominated in Mexican pesos. As at December 31,
2011, the Company had net Mexican peso-denominated liabilities of approximately $36 million. A 10% increase (decrease) in the value of the Mexican peso compared to the United States dollar could result in a foreign exchange loss/(gain) of
approximately $3.6 million. 
 In addition, transactional foreign exchange gains and losses may result from the Company’s inability to
predict the exact timing of peso cash receipts and cash outflows. Due to the recent volatility in the value of the Mexican peso, transactional foreign exchange gains and losses can be significant. If the Mexican peso strengthens against the United
States dollar, the Company’s operating costs (as reported in equivalent United States dollars) increase. A 10% decrease (increase) in the value of the Mexican peso compared to the United States dollar could decrease (increase) the
Company’s reported mining and processing costs and increase (decrease) reported earnings before income taxes by approximately $4.5 million annually. 
 Finally, the Company has exposure to monetary assets and liabilities denominated in Turkish Lira. Cash balances, outstanding amounts receivable, accounts payable or tax liabilities denominated in Turkish
Lira could expose the Company to a foreign exchange gain or loss. At December 31, 2011, the Company had net Turkish Lira-denominated assets of approximately $5 million. A 10% increase (decrease) in the value of the Turkish Lira compared to the
United States dollar could result in a foreign exchange gain (loss) of approximately $0.5 million. 
  

	iii.	Interest Rate Risk 

 The Company’s
interest rate risk related to interest-bearing debt obligations is not material as the Company has no outstanding debt. As a result of the Company’s minimal exposure to fluctuations in market interest rates, the Company has elected not to enter
into interest rate swaps or other active interest rate management programs at this time. 
  

	iv.	Credit Risk 

 Credit risk arises from cash
and cash equivalents and short-term investments held with banks and financial institutions, derivative financial instruments (including forward gold sales contracts) and amounts receivable. The maximum exposure to credit risk is equal to the
carrying value of the related financial assets. 
 The objective of managing counter-party credit risk is to prevent losses in financial assets.
The Company assesses the quality of its counter-parties, taking into account their creditworthiness and reputation, past experience and other factors. The Company only enters into forward gold sales contracts with large reputable financial
institutions. 
 The carrying value of amounts receivable are reduced through the use of an allowance account (when applicable) and the amount
of any allowance is recognized as a loss and included in operating expenses. When a receivable balance is considered uncollectible, it is written off against the allowance for amounts receivable. The majority of the Company’s receivable
balances consist of Mexican and Turkish value-added tax recoverable claims. The Company is exposed to credit risk in the case that the subject country is unable to reimburse the recoverable taxes owed. As at December 31, 2011, the Company was
owed $3.7 million and $2.3 million from the Mexican and Turkish governments respectively. 
  

	v.	Liquidity Risk 

 Liquidity risk arises
through the excess of financial obligations due over available financial assets at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available cash reserves and credit in order to meet its
liquidity requirements 

  

					
	 	 	21  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 
at any point in time. At December 31, 2011, the Company had cash and cash equivalents, short-term investments of $222.6 million, accounts payable and accrued liabilities of $17.0 million and
no debt. The Company expects that planned construction and development projects at its current operations will be financed from existing cash balances and future operating cash flows. The total cost and planned timing of acquisitions and/or other
development or construction projects is not currently determinable and it is not currently known whether the Company will require external financing in future periods. 
 6. AMOUNTS RECEIVABLE 
  

													
	 	  	December 31,  
2011 	 	  	December 31,  
2010   	 	  	January 1,    
2010     	 
	 	  	($000)	 	  	($000)	 	  	($000)	 
	  
 Accounts receivable
	  	 	215	  	  	 	1,864	  	  	 	248	  
	 Mexican value-added
tax(1)
	  	 	3,662	  	  	 	2,460	  	  	 	2,121	  
	 Turkish value-added tax
	  	 	2,270	  	  	 	1,425	  	  	 	-	  
		  	 	$6,147	  	  	 	$5,749	  	  	 	$2,369	  

  

	(1) 	 As permitted by Mexican tax law, the Company offset $16.9 million of Mexican value-added tax receivables against its current taxes payable liability in 2011
(December 31, 2010 - $14.2 million, January 1, 2010 - $10.0 million) which is not reflected in the Consolidated Statements of Cash Flows. 

 7. INVENTORY 
  

													
	 	  	December 31,  
2011 	 	  	December 31,  
2010   	 	  	January 1,    
2010     	 
	 	  	($000)	 	  	($000)	 	  	($000)	 
	  
 Precious metals dore and refined
precious metals
	  	 	5,484	  	  	 	5,201	  	  	 	3,565	  
	 In-process precious metals
	  	 	11,894	  	  	 	10,469	  	  	 	7,191	  
	 Parts and supplies
	  	 	15,842	  	  	 	9,555	  	  	 	9,270	  
		  	 	$33,220	  	  	 	$25,225	  	  	 	$20,026	  

 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 year ended December 31, 2011 was $55.8 million (December 31, 2010 - $46.5 million). The amount of inventory charged to operations as amortization in the year ended December 31, 2011 was $19.1
million (December 31, 2010 - $16.2 million). 
 8. EXPLORATION AND EVALUATION ASSETS 

On January 6, 2010, the Company acquired 100% of the Aği Daği and Kirazlı Projects through the purchase of three Turkish companies for
consideration of $91.3 million including transaction costs, consisting of USD$40 million cash and issuance of 4 million common shares. In addition, a third party has a 2% Net Smelter Return Royalty on production from the Aği Daği
project. Exploration and evaluation assets are not subject to amortization. 

  

					
	 	 	22  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 The following is a continuity of the Company’s exploration and evaluation assets for the years
ended December 31, 2011 and 2010. 
  

					
	 	  	
    Total          

 
	 
	 	  	($000)	 
	  
 Cost as at January 1,
2010
	  	  
  
	  
 521
	  
   

	  
 Additions
	  	 	99,246	  
	  
 Cost as at December 31,
2010
	  	 	99,767	  
	  
 Additions
	  	 	8,687	  
	  
 Cost as at December 31,
2011
	  	 	  $108,454	  

 Exploration and evaluation immediately expensed are included in exploration expense in the statements of comprehensive
income and totaled $9.5 million for the year ended December 31, 2011 (December 31, 2010 - $7.6 million). 
 9. MINERAL PROPERTY, PLANT
AND EQUIPMENT 
 In 2003, the Company acquired a 100% interest in the Salamandra group of concessions, in consideration for the payment of
CAD$11.2 million. Certain concessions within the acquired properties are subject to a sliding scale net smelter royalty payable at a rate of 5% of the value of gold and silver production (note 16 b). Included within the Salamandra group of
concessions is the Mulatos mine which began operations in 2005. With the achievement of commercial production on April 1, 2006, production, to a maximum of two million ounces of gold from certain concessions, became subject to royalty.

 The majority of the Company’s property, plant and equipment in operations is amortized on a units-of-production basis over an estimated
ten year mine life. Certain mining and office equipment is amortized on a straight line basis over periods ranging from two to five years. 

Included in mineral property and mine development are the Escondida development, Mulatos relocation and construction-in-progress costs totaling $90.6
million at December 31, 2011 (December 31, 2010 - $46.5 million, January 1, 2010 - $17.4 million) which are not subject to amortization until such time as the related assets are used in operations. 

For the year ended December 31, 2011, approximately $4.6 million was offset against deferred development costs, representing the net operating
income generated from Escondida during the pre-production phase. In accordance with IFRS, the Company has credited the operating income earned on the sale of ore extracted and processed from the Escondida zone against the capitalized development
costs. 

  

					
	 	 	23  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 The following is a continuity of the Company’s mineral property, plant and equipment for the year
ended December 31, 2011. 
  

																									
	  	  	       Mining plant
       and
 
      equipment
       ($000)	 	  	  Office and
  computer
  equipment
  ($000)	 	  	    Construction
    in progress
    ($000)	 	  	
    Subtotal     
     ($000)     
	 	  	   Mineral
   property and
   deferred
   
development
    ($000)	 	  	Total  
($000)  	 
	 Cost as at January 1, 2011
	  	 	152,606  	  	  	 	1,733 	  	  	 	6,236 	  	  	 	160,575 	  	  	 	97,697 	  	  	 	258,272	  
	 Additions
	  	 	3,696  	  	  	 	642 	  	  	 	34,984 	  	  	 	39,322 	  	  	 	28,963 	  	  	 	68,285	  
	 Disposals
	  	 	(231)  	  	  	 	- 	  	  	 	- 	  	  	 	(231) 	  	  	 	- 	  	  	 	(231)	  
	 Transfers from construction in progress
	  	 	17,322  	  	  	 	- 	  	  	 	(17,322) 	  	  	 	- 	  	  	 	- 	  	  	 	-	  
	 Cost as at December 31, 2011
	  	 	$173,393  	  	  	 	$2,375 	  	  	 	$23,898 	  	  	 	$199,666 	  	  	 	$126,660 	  	  	 	$326,326	  
		  				  				  				  				  				  			
	 Accumulated amortization and impairment as at January 1, 2011
	  	 	57,943  	  	  	 	859 	  	  	 	- 	  	  	 	58,802 	  	  	 	25,565 	  	  	 	84,367	  
	 Amortization expense
	  	 	18,838  	  	  	 	415 	  	  	 	- 	  	  	 	19,253 	  	  	 	6,780 	  	  	 	26,033	  
	 Disposals
	  	 	(202)  	  	  	 	- 	  	  	 	- 	  	  	 	(202) 	  	  	 	- 	  	  	 	(202)	  
	 Accumulated amortization and impairment as at December 31, 2011
	  	 	$76,579  	  	  	 	$1,274 	  	  	 	$- 	  	  	 	$77,853 	  	  	 	$32,345 	  	  	 	$110,198	  
	 Net book value as at December 31, 2011
	  	 	$96,814  	  	  	 	$1,101 	  	  	 	$23,898 	  	  	 	$121,813 	  	  	 	$94,315 	  	  	 	$216,128	  

  

					
	 	 	24  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 The following is a continuity of the Company’s mineral property, plant and equipment for the year
ended December 31, 2010. 
  

																									
	  	  	 Mining plant
 and
 equipment
 ($000)	 	  	 Office and
 computer
 equipment
 ($000)	 	  	 Construction
 in progress
 ($000)	 	    	 Subtotal    
 ($000)    	 	  	 Mineral
 property and
 deferred
 development
 ($000)	 	  	Total 
($000) 	 
	 Cost as at January 1, 2010
	  	 	132,200  	  	  	 	1,212 	  	  	 	2,528  	  	    	 	135,940	  	  	 	74,742  	  	  	 	 210,682	  
	 Additions
	  	 	3,352  	  	  	 	541 	  	  	 	46,556  	  	    	 	50,449	  	  	 	1,368  	  	  	 	51,817	  
	 Change in decommissioning liability
	  	 	-  	  	  	 	- 	  	  	 	-  	  	    	 	-	  	  	 	2,036  	  	  	 	2,036	  
	 Disposals
	  	 	(6,243)  	  	  	 	(20) 	  	  	 	-  	  	    	 	(6,263)	  	  	 	-  	  	  	 	(6,263)	  
	 Transfers from construction in progress
	  	 	23,297  	  	  	 	- 	  	  	 	(42,848)  	  	    	 	(19,551)	  	  	 	19,551  	  	  	 	-	  
	 Cost as at December 31, 2010
	  	 	$152,606  	  	  	 	$1,733 	  	  	 	$6,236  	  	    	 	$160,575	  	  	 	$97,697  	  	  	 	$258,272	  
		  				  				  				    				  				  			
	 Accumulated amortization and impairment as at January 1, 2010
	  	 	45,512  	  	  	 	615 	  	  	 	-  	  	    	 	46,127	  	  	 	19,733  	  	  	 	65,860	  
	 Amortization expense
	  	 	14,864  	  	  	 	245 	  	  	 	-  	  	    	 	15,109	  	  	 	5,832  	  	  	 	20,941	  
	  

Disposals
  
	  	   
	(2,433)  
 
	    
	  	   
	(1)   
	    
	  	   
	-    
	    
	    	   
	(2,434)  
	  
 
	  	   
	-    
	  
 
	  	   
	(2,434)  
	  
 

	 Accumulated amortization and impairment as at December 31, 2010
	  	 	$57,943  	  	  	 	$859 	  	  	 	$-  	  	    	 	$58,802	  	  	 	$25,565  	  	  	 	$84,367	  
	 Net book value as at December 31, 2010
	  	 	$94,663  	  	  	 	$874 	  	  	 	$6,236  	  	    	 	$101,773	  	  	 	$72,132  	  	  	 	$173,905	  
	 Net book value as at January 1, 2010
	  	 	$86,688  	  	  	 	$597 	  	  	 	$2,528  	  	    	 	$89,813	  	  	 	$55,009  	  	  	 	  $144,822	  

 10. DIVIDENDS 
  

									
	 	  	Year ended  
December 31,  
2011  	 	  	Year ended   
December 31,   
2010   	 
	 	  	($000)	 	  	($000)  	 
	  
 Declared and paid during the
period
	  	 	14,114	  	  	 	7,495  	  
		  	 	$14,114	  	  	 	$7,495  	  
	  
 Dividend per share
	  	 	$0.12	  	  	 	$0.065  	  

 11. PROVISIONS 
  

	a)	Employee future benefits 

 The Company
accrues employee future benefits for all contract workers paid through its subsidiary employment services company. These benefits consist of a one-time payment equivalent to twelve days’ wages for each year of service (at the employee’s
most recent salary, but not to exceed twice the legal minimum wage), payable to all employees with fifteen or more years of service, as well as to certain employees terminated involuntarily prior

  

					
	 	 	25  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 
to the vesting of their seniority premium benefit. Under Mexican Labour Law, the Company also provides statutorily mandated severance benefits to its employees terminated under certain
circumstances. Such benefits consist of a one-time payment of three months’ wages upon involuntary termination without just cause. 
 The
liability associated with the seniority and termination benefits is calculated as the present value of expected future payments. In determining the expected future payments, assumptions regarding employee turnover rates, inflation, minimum wage
increases and expected salary levels are required and are subject to review and change. 
 A continuity of the employee future benefits
provision is as follows: 
  

									
	 	  	Year ended
December 31, 2011	 	  	Year ended
December 31, 2010	 
	 	  	($000)	 	  	($000)	 
	  
   Obligations at
beginning of period
	  	 	336	  	  	 	258	  
	   Current service cost
	  	 	97	  	  	 	151	  
	   Payments made against the liability
	  	 	(53)	  	  	 	(83)	  
	   Impact of foreign exchange
	  	 	(44)	  	  	 	10	  
	  
   Obligations at end of
period
	  	 	$336	  	  	 	$336	  

  

	b)	Property acquisition obligations 

 The
Company is in the process of acquiring property adjacent to its present and prospective mining operations, including property comprising the town of Mulatos. Property owners and possessors are being offered a comprehensive benefits package including
compensation for their property and/or relocation benefits. In certain cases, relocation benefits include deferred monthly payments over periods varying from three to five years. Obligations are recognized when a legal contract is signed by both
parties and are measured at the discounted value of expected future payments. The discounted value accretes to the estimated future value over the period of the payment obligation. At December 31, 2011 and December 31, 2010, the Company
applied a discount rate of 4.50% to expected future payments. 
 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. 

A continuity of property acquisition obligations is as follows: 
  

									
	 	  	Year ended 
December 31,  
2011 	 	  	Year ended 
December 31, 
2010 	 
	 	  	($000)	 	  	($000)	 
	  
   Obligations at
beginning of period
	  	 	780	  	  	 	946	  
	   Payments made and revisions in estimated cash flows and changes in assumptions
	  	 	(311)	  	  	 	(209)	  
	   Accretion of discounted cash flows
	  	 	32	  	  	 	43	  
	  
   Obligations at end of
period
	  	 	$501	  	  	 	$780	  
	  

  Comprising:
	  				  			
	   Current obligation
	  	 	$363	  	  	 	$428	  
	   Non-current obligations
	  	 	138	  	  	 	352	  
		  	  
  
	  

$501
	  

  
	  	  
  
	  

$780
	  

  

  

					
	 	 	26  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

	c)	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. 
 A continuity of the decommissioning liability is as follows: 
  

									
	 	  	Year ended
December 31, 2011 	 	  	Year ended
December 31, 2010	 
	 	  	($000)	 	  	($000)	 
	  
   Obligations at
beginning of period
	  	 	7,559	  	  	 	5,115	  
	   Revisions in estimated cash flows and changes in assumptions
	  	 	(1,300)	  	  	 	2,036	  
	   Payments made against the liability
	  	 	(145)	  	  	 	-	  
	   Accretion of discounted cash flows
	  	 	566	  	  	 	408	  
	  
   Obligations at end of
period
	  	 	$6,680	  	  	 	$7,559	  

 Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis
upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for the necessary
decommissioning works required which will reflect market conditions at the relevant time. 
 The assumptions used in the determination of the
decommissioning liability are as follows as at: 
  

													
	 	  	December 31, 
2011 	 	  	December 31, 
2010 	 	  	January 1,    
2010    	 
	 Estimated cost ($000)
	  	 	13,431	  	  	 	15,682	  	  	 	11,042	  
	 End of mine life
	  	 	2020	  	  	 	2020	  	  	 	2019	  
	 Discount rate
	  	 	7.8%	  	  	 	7.5%	  	  	 	8%	  

 12. 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 January 1, 2010
	  	 	109,850,108	  	  	 	251,752	  
	 Acquisition of Turkish properties (note 4)
	  	 	4,000,000	  	  	 	50,630	  
	 Exercise of stock options
	  	 	2,489,900	  	  	 	17,637	  
	 Transfer from contributed surplus to share capital for stock options exercised
	  	 	-	  	  	 	5,848	  
	 Outstanding at December 31, 2010
	  	 	116,340,008	  	  	 	325,867	  
	 Exercise of stock options
	  	 	2,043,000	  	  	 	22,267	  
	 Transfer from contributed surplus to share capital for stock options exercised
	  	 	-	  	  	 	7,390	  
	  
 Outstanding at December 31,
2011
	  	 	    118,383,008	  	  	 	$355,524	  

  

					
	 	 	27  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 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, and June 2, 2010, which allows the Company to grant incentive stock options to its directors, officers, employees and consultants. Under the Plan, the number of shares reserved for issuance
cannot exceed 10% 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. 

Stock options granted to directors, officers and certain consultants under the Plan are exercisable for a five-year period, and options granted to
employees are generally exercisable for a three-year period. Incentive stock options granted vest 20% on the date of grant, and 20% at each six-month interval following the date of grant. 
 The Plan is subject to shareholder approval and ratification every three years. The Plan was last approved by shareholders of the Company on May 15, 2008. The Company elected to withdraw its proposal
to shareholders to ratify the existing Plan at its Annual and Special meeting held on June 2, 2011. As a result, the Plan expired on May 15, 2011. Accordingly, stock options outstanding at May 15, 2011 remain outstanding and
exercisable subject to their initial terms and vesting conditions. New stock options cannot be granted until such time as the Company receives shareholder approval. 
 The following is a continuity of the changes in the number of stock options outstanding for the years ended December 31, 2011 and 2010: 

 

									
	 	  	 Number

 
  
	 	  	 Weighted
average
exercise price
($CAD)
	 
	 Outstanding at January 1, 2010
	  	 	5,511,800	  	  	 	$7.82	  
	 Granted
	  	 	4,021,000	  	  	 	14.72	  
	 Exercised
	  	 	(2,489,900)	  	  	 	7.26	  
	 Forfeited
	  	 	(128,200)	  	  	 	10.63	  
	  
 Outstanding at December 31,
2010
	  	 	6,914,700	  	  	 	$11.98	  
	 Granted
	  	 	2,115,000	  	  	 	14.30	  
	 Exercised
	  	 	(2,043,000)	  	  	 	10.64	  
	 Forfeited
	  	 	(581,000)	  	  	 	14.43	  
	  
 Outstanding at December 31,
2011
	  	 	6,405,700	  	  	 	$12.95	  

 The weighted average share price at the date of exercise for stock options exercised in 2011 was CAD $17.34 (2010 -
$15.60). 
 For the year ended December 31, 2011, the Company granted 2,115,000 incentive stock options to purchase common shares in the
capital of the Company at exercise prices ranging from CAD $14.24 per share to CAD $16.39 per share. For the year ended December 31, 2010, the Company granted 4,021,000 incentive stock options at an exercise prices ranging from CAD $13.04 to
CAD $17.28 per share. 

  

					
	 	 	28  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 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 year ended	  	December 31,
2011  	 	  	December 31,  
2010      	 
	  
 Weighted average share price at
grant date
	  	 	$14.30	  	  	 	$14.72  	  
	 Risk-free rate
	  	 	1.7%-2.3%	  	  	 	1.2%-2.6%  	  
	 Expected dividend yield
	  	 	0.43% - 0.58%	  	  	 	Nil – 0.43%  	  
	 Expected stock price volatility (based on historical volatility)
	  	 	42%-58%	  	  	 	42%-67%  	  
	 Expected option life, based on terms of the grants (months)
	  	 	20-60	  	  	 	20-60  	  
	  
 Weighted average per share fair
value of options granted
	  	 	$4.96	  	  	 	$5.80  	  

 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 December 31, 2011, 4,685,300 stock options were exercisable. The remaining 1,720,400
outstanding stock options vest over the following two years. 
 Stock options outstanding and exercisable as at December 31, 2011:

  

																									
	 	 	 	  	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
	 		  	 	843,100	  	  	 	7.22	  	  	 	0.41 	  	 		  	 	843,100	  	  	 	7.22  	  
	  $8.01 - $10.00
	 		  	 	893,000	  	  	 	9.72	  	  	 	2.22 	  	 		  	 	893,000	  	  	 	9.72  	  
	 $10.01 - $14.00
	 		  	 	140,000	  	  	 	12.95	  	  	 	2.52 	  	 		  	 	70,000	  	  	 	12.70  	  
	 $14.01 - $15.00
	 		  	 	4,444,600	  	  	 	14.61	  	  	 	3.40 	  	 		  	 	2,830,200	  	  	 	14.70  	  
	 $15.01 - $17.28
	 		  	 	85,000	  	  	 	16.71	  	  	 	1.92 	  	 		  	 	49,000	  	  	 	16.87  	  
		 		  	  
  
	  

6,405,700
	  

  
	  	  
  
	  

$12.95
	  

  
	  	  
  
	  

2.80 
	  

  
	 		  	  
  
	  

4,685,300
	  

  
	  	  
  
	  

$12.40  
	  

  

 c) Stock Appreciation Rights (“SARs”) 
 In 2011, the Company’s Board approved a 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 and certain consultants under the SARs Plan are exercisable for a five-year period, and
SARs granted to employees are generally exercisable for a three-year period. SARs granted vest 20% on the date of grant, and 20% at each six-month interval following the date of grant. 
 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 December 31, 2011, the SARs liability was $1,550,000 (2010 - nil) recorded in accounts payable and accrued liabilities in the Consolidated Statements of Financial Position.

  

					
	 	 	29  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 The following is a continuity of the changes in the number of units outstanding for the year ended
December 31, 2011: 
  

									
	 	  	 Number

 
  
	 	  	Weighted
average
exercise price
($CAD)	 
	 Outstanding at January 1, 2011
	  	 	-	  	  	 	$-	  
	 Granted
	  	 	770,000	  	  	 	16.36	  
	 Exercised
	  	 	-	  	  	 	-	  
	 Forfeited
	  	 	-	  	  	 	-	  
	  
 Outstanding at December 31,
2011
	  	 	        770,000	  	  	 	$16.36	  

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

			
	For SARs granted in the year ended	 	      December 31,    
2011
	  
 Weighted average share price at
grant date
	 	$16.36  
	 Risk-free rate
	 	1.1%-1.5%  
	 Expected dividend yield
	 	0.70%-0.80%  
	 Expected stock price volatility (based on historical volatility)
	 	41%-66%  
	 Expected life, based on terms of the grants (months)
	 	20-60  
	  
 Weighted average per share fair
value of SARs granted
	 	$5.45  

 Stock appreciation rights outstanding and exercisable as at December 31, 2011: 

 

															
	 	  	 	  	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)

 

	 $15.01 - $17.00
	  		  	370,000  	  	15.66    	  	2.90  	  		  	74,000    	  	15.66  
	 $17.01 - $18.00
	  		  	400,000  	  	17.01    	  	4.86  	  		  	80,000    	  	17.01  
		  		  	770,000  	  	$16.36    	  	3.92  	  		  	154,000    	  	$16.36  

 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 

  

					
	 	 	30  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

									
	 	  	For the year ended	 
	 	  	December 31,  
2011  	 	  	December 31,
2010	 
	  
   Earnings
(000)
	  	 	$60,081	  	  	 	$63,795	  
	   Weighted average number of common shares outstanding (000)
	  	 	117,375	  	  	 	115,183	  
	   Basic earnings per share
	  	 	$0.51	  	  	 	$0.55	  
	  
   Dilutive effect of
stock options outstanding (000)
	  	 	1,294	  	  	 	1,724	  
	   Diluted weighted average number of common shares outstanding (000)
	  	 	118,669	  	  	 	116,907	  
	   Diluted earnings per share
	  	 	$0.51	  	  	 	$0.55	  

 13. INCOME TAXES 
  

	a)	Recent tax changes 

 In 2009, the Mexican
government approved tax reform that includes a 2% increase in the income tax rate in Mexico from 28% to 30% for a three-year period starting in 2010. 
 Effective January 1, 2008, the Company became subject to a Single Rate Tax Law enacted by the Mexican government on September 28, 2007. Under the Single Rate Tax Law, the Company’s Mexican
operating subsidiaries are subject to a tax equivalent to 17.5% of the Company’s revenues less certain allowable deductions (as determined on a cash basis). The single rate tax is payable each year to the extent that it exceeds income tax
otherwise payable pursuant to the pre-existing Mexican income tax laws. Any excess single rate tax paid cannot be credited against income taxes payable in future periods. For the years ended December 31, 2011 and 2010, the application of the
new single rate tax did not impact the Company’s tax expense. 
  

	b)	Rate Reconciliation 

 The reconciliation
of the expected tax expense at a combined statutory rate in Canada of 28.25% (2010 - 31%) and provision for income tax expense is: 
  

									
	   December 31
  
	  	 2011

 
	 	  	 2010

 
	 
	 	  	($000)	 	  	($000)	 
	  
   Earnings before income
taxes
	  	 	105,935	  	  	 	90,468	  
	  
   Expected tax expense at
statutory income tax rate
	  	 	29,924	  	  	 	28,043	  
	   (Decrease)/increase resulting from:
	  				  			
	   Difference in foreign tax rates
	  	 	2,000	  	  	 	(1,250)	  
	   Non-deductible stock-based compensation expense
	  	 	3,820	  	  	 	5,050	  
	   Non-taxable loss (gain)
	  	 	3,620	  	  	 	(3,010)	  
	   Change in foreign exchange rates
	  	 	7,270	  	  	 	(1,280)	  
	   Inflation net (deductible losses) taxable gains
	  	 	(1,350)	  	  	 	(830)	  
	   Increase (decrease) in Mexican deferred income tax rates
	  	 	570	  	  	 	(50)	  
	  
   Income tax
expense
	  	 	45,854	  	  	 	26,673	  

  

					
	 	 	31  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

	c)	Deferred tax reconciliation 

 The
following information summarizes the principal temporary differences and the related deferred tax effect: 
  

									
	 December 31, 2011	  	Canada	  	Mexico	  	Turkey	  	Total  
	 	  	($000)	  	($000)	  	($000)	  	($000)  
	  Deferred tax assets
	  		  		  		  	
	  Asset retirement obligations
	  	-	  	1,950	  	-	  	1,950  
	  Other short-term
	  	-	  	120	  	-	  	120  
		  	-	  	2,070	  	-	  	2,070  
	  
  Deferred tax
liabilities
	  		  		  		  	
	  Inventory
	  	-	  	(1,220)	  	-	  	(1,220)  
	  Mineral property, plant and equipment
	  	-	  	(35,408)	  	(450)	  	(35,858)  
		  	-	  	(36,628)	  	(450)	  	(37,078)  
	  
  Net Deferred tax
liabilities
	  	-	  	(34,558)	  	(450)	  	(35,008)  
	 December 31, 2010	  	  
  

Canada
	  	  
  

Mexico
	  	  
  

Turkey
	  	  
  

Total  

	 	  	($000)	  	($000)	  	($000)	  	($000)  
	  Deferred tax assets
	  		  		  		  	
	  Asset retirement obligations
	  	-	  	2,150	  	-	  	2,150  
	  Other short-term
	  	-	  	120	  	-	  	120  
		  	-	  	2,270	  	-	  	2,270  
	  
  Deferred tax
liabilities
	  		  		  		  	
	  Inventory
	  	-	  	(1,160)	  	-	  	(1,160)  
	  Mineral property, plant and equipment
	  	-	  	(27,976)	  	-	  	(27,976)  
		  	-	  	(29,136)	  	-	  	(29,136)  
	  
  Net deferred tax
liabilities
	  	-	  	(26,866)	  	-	  	(26,866)  
	 January 1, 2010	  	  
  

Canada
	  	  
  

Mexico
	  	  
  

Turkey
	  	  
  

Total  

	 	  	($000)	  	($000)	  	($000)	  	($000)  
	  Deferred tax assets
	  		  		  		  	
	  Asset retirement obligations
	  	-	  	1,476	  	-	  	1,476  
	  Other short-term
	  	-	  	78	  	-	  	78  
		  	-	  	1,554	  	-	  	1,554  
	  
  Deferred tax
liabilities
	  		  		  		  	
	  Inventory
	  	-	  	(630)	  	-	  	(630)  
	  Mineral property, plant and equipment
	  	-	  	(23,522)	  	-	  	(23,522)  
		  	-	  	(24,152)	  	-	  	(24,152)  
	  
  Net deferred tax
liabilities
	  	-	  	(22,598)	  	-	  	(22,598)  

  

	d)	Loss Carry-forwards and other tax attributes 

 Deferred tax assets are recognized for the carry-forward of unused tax losses and tax credits to the extent that it is probable that taxable profits will be available against which the unused tax

  

					
	 	 	32  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 
losses / credits can be utilized. The Company has not recognized the benefit of tax loss carry-forwards and other tax attributes in Canada or Turkey as at December 31, 2011 and
December 31, 2010. 
 Non-capital losses available in Canada to be utilized in subsequent years are approximately $24 million expiring
between 2014 and 2031. Net capital losses available in Canada to be utilized in subsequent years are approximately $14 million which carryforward indefinitely. In addition, the Company has financing costs of $2 million in Canada which will be
deducted in future years. 
 Non-capital losses available in Turkey to be utilized in subsequent years are approximately $3 million expiring
between 2013 and 2016. 
  

	e)	Unrecognized deferred tax liabilities 

The temporary differences associated with investments in subsidiaries, for which a deferred tax liability has not been recognized, aggregate $320 million
as at December 31, 2011 (December 31, 2010 - $255.5 million, January 1, 2010 - $228.0 million). 
 14. OTHER (LOSS) INCOME

  

									
	  Year ended	  	December 31,  
2011  	 	  	December 31,
2010	 
	 	  	($000)	 	  	($000)	 
	  
   Fair value adjustment
on financial assets
	  	 	(857)	  	  	 	20	  
	   Fair value adjustment on derivative liabilities
	  	 	715	  	  	 	(715)	  
	   Gain on sale of securities
	  	 	783	  	  	 	-	  
	   Impairment of securities
	  	 	(1,621)	  	  	 	-	  
	   Gain on settlement (1)
	  	 	-	  	  	 	12,527	  
	   Loss on disposal of assets
	  	 	-	  	  	 	(1,598)	  
	   Other
	  	 	(254)	  	  	 	(841)	  
		  	  
  
	  

(1,234)
	  

  
	  	  
  
	  

9,393
	  

  

  

	(1)	On June 28, 2010, the Company entered into a preliminary settlement agreement with Primero Mining Corp. (“Primero”), formerly Mala Noche Resources,
relating to Primero’s proposed acquisition of the San Dimas mine. The settlement agreement released all parties from any claims. The settlement was finalized on August 6, 2010 upon completion of the acquisition of the San Dimas mine by
Primero. In consideration for relinquishing all claims, the Company received Canadian dollars (“CAD”) $1.0 million cash and 2 million units of Primero (with each unit consisting of one post-consolidation common share and 0.4 of one
purchase warrant) relating to the financing which Primero completed on July 20, 2010. The total consideration, consisting of cash, common shares and warrants, had a fair value of $12.5 million on August 6, 2010, which was recorded in Other
gain within the Consolidated Statement of Comprehensive Income. 

  

					
	 	 	33  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 15. 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. 

 

													
	 	  	Non-current    
assets    	 	  	Assets      	 	  	Liabilities   	 
	 	  	($000)    	 	  	($000)      	 	  	($000)   	 
	 As at December 31, 2011
	  				  				  			
	  
 Mexico
	  	 	215,111	  	  	 	395,313	  	  	 	61,874	  
	  
 Turkey
	  	 	109,007	  	  	 	117,520	  	  	 	1,666	  
	  
 Canada
	  	 	464	  	  	 	86,391	  	  	 	2,134	  
	  
 Total
	  	 	$ 324,582	  	  	 	$ 599,224	  	  	 	$ 65,674	  
	  
 As at December 31,
2010
	  				  				  			
	  
 Mexico
	  	 	173,361	  	  	 	319,242	  	  	 	50,694	  
	  
 Turkey
	  	 	100,201	  	  	 	107,832	  	  	 	1,306	  
	  
 Canada
	  	 	110	  	  	 	79,362	  	  	 	1,307	  
	  
 Total
	  	 	$ 273,672	  	  	 	$ 506,436	  	  	 	$ 53,307	  
	  
 As at January 1,
2010
	  				  				  			
	  
 Mexico
	  	 	145,163	  	  	 	266,933	  	  	 	41,267	  
	  
 Turkey
	  	 	-	  	  	 	521	  	  	 	-	  
	  
 Canada
	  	 	180	  	  	 	88,224	  	  	 	817	  
	  
 Total
	  	 	$ 145,343	  	  	 	$ 355,678	  	  	 	$ 42,084	  

  

																																	
	Year ended	  	December 31, 2011	 	  	December 31, 2010	 
	 	  	Mexico	 	  	Turkey	 	  	Canada	 	  	Total	 	  	Mexico	 	  	Turkey	 	  	Canada	 	  	Total    	 
	 	  	($000)	 	  	($000)	 	  	($000)	 	  	($000)	 	  	($000)	 	  	($000)	 	  	($000)	 	  	($000)	 
	  
 Revenues
	  	 	227,364	  	  	 	-	  	  	 	-	  	  	 	227,364	  	  	 	189,272	  	  	 	-	  	  	 	-	  	  	 	189,272	  
	 Earnings (loss)
	  	 	89,890	  	  	 	(6,135)	  	  	 	(23,674)	  	  	 	60,081	  	  	 	77,250	  	  	 	(1,089)	  	  	 	(12,366)	  	  	 	63,795	  
		  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 

 16. COMMITMENTS AND CONTINGENCIES 
  

	a)	Escondida Development 

 During the third
quarter of 2009, the Company signed a contract with an international mining contractor to develop the Escondida zone of the Mulatos Pit. Development began in the third quarter of 2009 and is expected to be completed over approximately a two and a
half year period, following which the Company will begin mining the underlying deposit. The total contract value is approximately $61.2 million, and is subject to the contractor achieving certain preset performance conditions. As at
December 31, 2011, the Company has incurred approximately $59.7 million in project to date expenditures relating to this contract. 

  

					
	 	 	34  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

	b)	Royalty 

 Production from certain
concessions within the Salamandra district, including the Mine, is subject to a sliding scale production royalty. At current gold prices above $400 per ounce, the royalty is calculated 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. With the achievement of commercial production on April 1,
2006, production to a maximum of two million ounces of gold is subject to royalty. As at December 31, 2011, the royalty was paid or accrued on approximately 806,000 ounces of applicable gold production. Royalty expense for the year ended
December 31, 2011 was $11.2 million (December 31, 2010: $9.1 million). 
 In addition, a third party has a 2% Net Smelter Return Royalty on
production from the Company’s Agi Dagi project. The Company has not recorded an accrual for this royalty at December 31, 2011 as the project is not in production. 

 

	c)	Mulatos Town Relocation 

 The Company
commenced the planned relocation of the town of Mulatos in 2007. Relocation contracts have been signed with in excess of half of the families residing in Mulatos at the start of the relocation program. Property owners and possessors are being
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 relocation effort in 2007, the Company has invested approximately $7.0 million in property acquisition, relocation benefits, legal and related costs. In addition, the Company has recognized a liability of $0.5 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 December 31, 2011. The discounted value of the liability was capitalized to mineral
property, plant and equipment. 
 During the second quarter of 2008, the Company 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 is payable once the land has been vacated and is transferred to the Company, which has not been accrued as at December 31, 2011. The probability and timing of this additional payment is currently unknown to the Company. 

During the third quarter of 2010, the Company received notice that the Mulatos Ejido had filed a complaint with the Unitary Agrarian Court to nullify the
2008 land purchase agreement. The Company has received a legal opinion that the action is without merit. Preliminary hearings have commenced, and the matter remains unresolved by the Court at this time. The land purchase agreement does not affect
current mining operations of the Company. 
 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. 

  

					
	 	 	35  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

	d)	Operating lease commitments 

 The Company
has entered into operating lease commitments relating to the Corporate office lease. Future minimum lease payments under non-cancellable operating leases as at December 31, 2011 are as follows: 

 

			
	 	  	As at
  December 31,    
2011
	 	  	($000)  
	  
 2012
	  	221  
	 2013
	  	238  
	 2014
	  	238  
	 2015
	  	238  
	 2016 and beyond
	  	20  
	  
 Total
	  	$955  

 17. RELATED PARTY TRANSACTIONS 
 Remuneration of key management (includes the Corporation’s directors and executive team) 
  

									
	 Expense by nature:
	  	 	2011    	  	  	 	2010    	  
	 	  	($000)	 	  	($000)	 
			
	 Management salaries and benefits
	  	 	3,418	  	  	 	3,282	  
	 Directors fees
	  	 	230	  	  	 	254	  
	 Share based payments1 – Management
	  	 	5,983	  	  	 	10,730	  
	 Share based payments1 – Directors
	  	 	3,536	  	  	 	3,724	  
			
	 	  	 	$13,167	  	  	 	$17,990	  

  

	(1) 	 Represents grant date fair value of stock options and SARs granted during the year 

 These transactions are in the normal course of operations and all of the transactions are measured at the exchange amount of consideration established and agreed to by the parties. 

18. MANAGEMENT OF CAPITAL 
 The Company
defines capital that it manages as its shareholders equity. The Company’s objectives when managing capital are to safeguard the entity’s ability to continue as a going concern so that it can continue to provide returns for shareholders and
benefits for other stakeholders. At December 31, 2011, total managed capital was $533.6 million (December 31, 2010 - $453.1 million, January 1, 2010 - $313.6 million). 
 The Company’s capital structure reflects the requirements of a company focused on sustaining strong cash flows from its current mining operations and financing both internal and external growth
opportunities and development projects. The Company faces lengthy development lead times as well as risks associated with increasing capital costs and project completion timing due to the availability of resources, permits and other factors beyond
the Company’s control. The Company’s operations are also significantly affected by the volatility of the market price of gold. 
 The
Company continually assesses its capital structure and makes adjustments to it with reference to changes in economic conditions and risk characteristics associated with its underlying assets. In order to maintain or adjust the capital structure, the
Company may issue new shares, pay dividends, sell assets or enter into new debt arrangements. 

  

					
	 	 	36  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 The Company manages its capital structure by performing the following: 

 

	 	•	 	 Maintaining a liquidity cushion in order to address any potential operational disruptions or industry downturns 

 

	 	•	 	 Preparing detailed budgets and cash flow forecasts for each of mining operations, exploration, development projects and corporate activities that are
approved by the Board of Directors 

  

	 	•	 	 Regular internal reporting and Board of Directors’ meetings to review actual versus budgeted spending and cash flows 

 

	 	•	 	 Detailed project financial analysis to assess or determine new funding requirements 

There were no changes in the Company’s approach to managing capital during the year. 
 19. RECLASSIFICATION 
 The comparative financial statements have been reclassified to
conform to the presentation of the current period financial statements. 

  

					
	 	 	37  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 20. IFRS TRANSITION FROM PREVIOUS GAAP 
 The Company’s consolidated financial statements for the year ended December 31, 2011 is the first annual financial statements that comply with IFRS. The Company has prepared its opening IFRS
balance sheet by applying existing IFRS standards in effect at the release of these financial statements. 
 In preparing its opening IFRS
statement of financial position, the Company has adjusted amounts reported previously in consolidated financial statements prepared in accordance with previous Canadian generally accepted accounting principles (“GAAP”). An explanation of
how the transition from previous Canadian GAAP to IFRS has affected the Company’s financial position, financial performance, and cash flows is set out below. 
 IFRS 1 First-time Adoption of International Financial Reporting Standards sets forth guidance for the initial adoption of IFRS. Under IFRS 1, the standards are applied retrospectively at the
transitional statement of financial position date with all adjustments to assets and liabilities charged or credited to retained earnings unless certain exemptions are applied. The Company has applied the following exemptions to its opening
statement of financial position dated January 1, 2010: 
  

	(a)	Business Combinations 

IFRS 1 indicates that a first-time adopter may elect not to apply IFRS 3 Business Combinations retrospectively to business
combinations that occurred before the date of transition to IFRS. The Company has utilized this election and has therefore applied IFRS 3 only to business combinations that occurred on or after January 1, 2010. 

 

	(b)	Share-based payment transactions 

 IFRS 1 encourages, but does not require, first-time adopters to apply IFRS 2 Share-based Payment to equity instruments that were granted on or before November 7, 2002, or equity instruments
that were granted subsequent to November 7, 2002 and vested before the latter of the date of transition to IFRS and January 1, 2005. The Company has elected not to apply IFRS 2 to awards that vested prior to January 1, 2010, which
have been accounted for in accordance with Canadian GAAP. The effect of applying IFRS 2 to unvested options at the transition date was to reduce retained earnings by $2.8 million as at January 1, 2010, with an offsetting adjustment to
contributed surplus. 
  

	(c)	Compound financial instruments 

 IAS 32 Financial Instruments: Presentation requires an entity to split a compound financial instrument at inception into separate liability and equity components. If the liability component is no
longer outstanding, retrospective application of IAS 32 involves separating two portions of equity, the first portion is in retained earnings and represents the cumulative interest accreted on the liability components, while the other portion
represents the original equity component. The Company has utilized this IFRS 1 exemption to not require separation of these two portions if the liability component is no longer outstanding at the transition date. 

 

	(d)	Decommissioning liabilities 

 Under IFRS 1, an entity can elect not to retrospectively calculate the effect of each change in estimate that occurred prior to the transition date on the decommissioning asset and related amortization.
Instead, it can elect to measure the liability at the transition date using a short-cut method. The Company has elected to use the IFRS 1 exemption and has measured the decommissioning asset and liability using the short cut method available. The
effect was to reduce mineral property, plant and equipment and decommissioning liability by $0.3 million as at January 1, 2010. 
  

	(e)	Mineral property, plant and equipment – deemed cost 

 IFRS 1 includes an election to use fair value or revaluation as deemed cost for mineral property, plant and equipment, and is available on an asset-by-asset basis. The IFRS 1 election is separate from the
policy choice available to measure long-lived assets at cost or under the revaluation model. The Company has elected to apply the IFRS 1 exemption to certain mobile equipment, which has resulted in a reduction of mineral property, plant and
equipment of $1.5 million as at January 1, 2010, with an after-tax adjustment to retained earnings of $1.0 million. 

  

					
	 	 	38  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

	(f)	IAS 23 – Borrowing Costs 

 In accordance with IFRS 1, the Company has elected to prospectively apply IAS 23 effective January 1, 2011. 
 IFRS 1 also outlines specific guidelines that a first-time adopter must adhere to under certain circumstances. The Company has applied the following guidelines to its opening statement of financial
position dated January 1, 2010: 
  

	(g)	Estimates 

 In accordance
with IFRS 1, an entity’s estimates under IFRS at the date of transition to IFRS must be consistent with estimates made for the same date under the previous GAAP applied, unless there is objective evidence that those estimates were in error. The
Company’s IFRS estimates as of January 1, 2010 are consistent with its Canadian GAAP estimates for the same date. 
  

	(h)	Mineral property, plant and equipment 

 IFRS 6 requires that an entity classify each asset in the exploration for and evaluation of mineral resources as tangible or intangible according to the nature of the assets acquired and to apply the
classification consistently. As a result, the Company has reclassified certain assets previously classified as mineral property, plant and equipment to exploration and evaluation assets. 
 IFRS employs a conceptual framework that is similar to Canadian GAAP. However, significant differences exist in certain matters of recognition, measurement and disclosure. While adoption of IFRS has not
changed the Company’s actual cash flows, it has resulted in changes to the Company’s reported financial position and results of operations. In order to allow the users of the financial statements to better understand these changes, the
Company’s Canadian GAAP Statement of Operations and Comprehensive Income, Statement of Financial Position and Statement of Cash Flows for the year ended December 31, 2010 have been reconciled to IFRS, with the resulting differences
explained. 
  

	(i)	Mineral property, plant and equipment 

Due to the adjustments to the provision for decommissioning liabilities and the adjustment for deemed cost election discussed in (d) and
(e) above respectively, the cost of property plant and equipment is different in accordance with IFRS than in accordance with Canadian GAAP. As a result, even though amortization is calculated in the same manner, the amount of amortization
differs by $0.3 million for the year ended December 31, 2010. 
  

	(j)	Share-based payments 

 IFRS

  

	•	 	 Each tranche of an award with different vesting dates is considered a separate grant for the calculation of fair value, and the resulting fair value is
amortized over the vesting period of the respective tranches. 

  

	•	 	 Forfeiture estimates are recognized in the period they are estimated, and are revised for actual forfeitures in subsequent periods.

 Canadian GAAP 
  

	•	 	 The fair value of Share-based awards with graded vesting are calculated as one grant and the resulting fair value is recognized on a straight-line
basis over the vesting period. 

  

	•	 	 Forfeitures of awards are recognized as they occur. 

 The effect of applying IFRS 2 was an increase to Share based compensation expense by $3.0 million for the year ended December 31, 2010, with an offsetting adjustment to contributed surplus.

  

					
	 	 	39  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

	(k)	Provision for decommissioning liabilities 

IFRS 
  

	•	 	 The provision for decommissioning liabilities must be adjusted for changes in key assumptions, including the discount rate.

 Canadian GAAP 
  

	•	 	 The provision for decommissioning liabilities is not adjusted for changes in key assumptions, including the discount rate.

 The effect was an increase in financing expense by a nominal amount for the year ended December 31, 2010, with an
offsetting adjustment to decommissioning liability. 
  

	(l)	Provision for property acquisition obligations 

 IFRS 
  

	•	 	 The provision for property acquisition obligations must be discounted using a discount rate applicable to settling the liability.

 Canadian GAAP 
  

	•	 	 The provision for property acquisition obligations must be discounted using a credited adjusted risk-free discount rate. 

The effect was a decrease in financing expense by a nominal amount for the year ended December 31, 2010, with an offsetting adjustment to the
property acquisition obligation. 
  

	(m)	Deferred tax liability 

 IFRS

 A deferred tax liability is recognized for a temporary difference, except to the extent the deferred tax liability arises from:

  

	 	•	 	 the initial recognition of goodwill; or 

  

	 	•	 	 the initial recognition of an asset or liability in a transaction that: 

 

	 	•	 	 is not a business combination; and 

  

	 	•	 	 at the time of the transaction, affects neither accounting profit nor taxable profit. 

Canadian GAAP 
 A deferred tax liability
is recognized for all taxable temporary differences unless they arise from the initial recognition of goodwill. There is no exemption for the initial recognition of an asset or liability in a transaction that is not a business combination, and at
the time of the transaction affects neither accounting profit nor taxable profit. Under Canadian GAAP, the carrying value of an asset acquired other than in a business combination is adjusted for the amount of the deferred tax recognized.

 The effect was a reduction of the deferred income tax liability balance of $2.7 million as at January 1, 2010, with an offsetting
adjustment to mineral property, plant and equipment of $2.9 million and opening retained earnings of $0.2 million. In addition, in 2010, mineral property, plant and equipment and deferred income taxes were reduced by $17.7 million related to the
Turkish operations, as well as foreign exchange loss and deferred income tax expense increased by a total of $1.9 million for the year ended December 31, 2010, with an offsetting adjustment to increase deferred income tax liability. 

 

	(n)	Deferred tax asset / liability 

 IFRS

 For non-monetary assets, temporary differences that arise when changes in exchange rates lead to changes in the tax basis rather than the
carrying amounts of those assets measured in the functional currency are recognized as a deferred tax asset / liability. 
 Canadian GAAP

 For non-monetary assets, temporary differences that arise when changes in exchange rates lead to changes in the tax basis rather than the
carrying amounts of those assets measured in the functional currency are not recognized. 

  

					
	 	 	40  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 The effect was an increase in deferred income tax liability by $5.4 million as at January 1, 2010,
with an offsetting adjustment to opening retained earnings. In addition, the effect was a decrease in deferred income tax expense by $2.5 million for the year ended December 31, 2010, with an offsetting adjustment to deferred income tax
liability. 
  

	(o)	Available for Sale financial assets 

IFRS 
 For available for sale financial
assets, foreign exchange amounts arising from translation of the assets are recorded in net income. 
 Canadian GAAP 

For available for sale financial assets, foreign exchange amounts arising from translation of the assets are recorded in other comprehensive income.

  

	(p)	Presentation 

 The presentation in
accordance with IFRS differs from the presentation in accordance with Canadian GAAP. 

  

					
	 	 	41  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 Reconciliation of the Statements of Financial Position: 

The January 1, 2010 Canadian GAAP statement of financial position has been reconciled to IFRS as follows: 

 

																					
	A S S E T S	  	Ref.	 	 	  	CDN GAAP	 	  	 	  	IFRS
Adjustments	 	  	 	  	      IFRS      	 
								
	 Current Assets
	  		 		  				  		  				  		  			
	 Cash and cash equivalents
	  		 		  	 	$160,682	  	  		  	 	$ -	  	  		  	 	$160,682	  
	 Short-term investments
	  		 		  	 	26,200	  	  		  	 	-	  	  		  	 	26,200	  
	  
 Amounts receivable
	  		 		  	 	2,369	  	  		  	 	-	  	  		  	 	2,369	  
	  
 Advances and prepaid
expenses
	  		 		  	 	1,058	  	  		  	 	-	  	  		  	 	1,058	  
	  
 Inventory
	  		 		  	 	20,026	  	  		  	 	-	  	  		  	 	20,026	  
	 Total Current Assets
	  		 		  	  
  
	  
 210,335
	  
   
	  		  	 	-	  	  		  	 	210,335	  
	  
 Non-Current
Assets
	  		 		  				  		  				  		  			
	  
 Exploration and evaluation
assets
	  	(h)	 		  	 	-	  	  		  	 	521	  	  		  	 	521	  
	 Mineral property, plant and equipment
	  	(d),(e)
 (h),(m)
	 		  	   
	149,947  
	    
	  		  	   
	(5,125)  
	    
	  		  	   
	144,822  
	    

	 Total Assets
	  		 		  	  
  

 
	  
 $360,282

 
	  
   

 
	  		  	   
	$(4,604)  
	    
	  		  	   
	$355,678  
	    

	  

L I A B I L I T I E S
	  		 		  				  		  				  		  			
	 Current Liabilities
	  		 		  				  		  				  		  			
	  
 Accounts payable and accrued
liabilities
	  		 		  	 	$11,179	  	  		  	 	$ -	  	  		  	 	$11,179	  
	  
 Income taxes payable
	  		 		  	 	1,988	  	  		  	 	-	  	  		  	 	1,988	  
	 Current portion of other liabilities
	  		 		  	   
	370  
	    
	  		  	   
	-  
	    
	  		  	   
	370  
	    

	 Total Current Liabilities
	  		 		  	  
  
	  
 13,537
	  
   
	  		  	 	-	  	  		  	 	13,537	  
	  
 Non-Current
Liabilities
	  		 		  				  		  				  		  			
	 Deferred income taxes
	  	(d),(e)
 (m),(n)
	 		  	 	20,354	  	  		  	 	2,244	  	  		  	 	22,598	  
	 Decommissioning liability
	  	(d)	 		  	 	5,432	  	  		  	 	(317)	  	  		  	 	5,115	  
	 Other liabilities
	  	(l)	 		  	   
	759  
	    
	  		  	   
	75  
	    
	  		  	   
	834  
	    

	 Total Liabilities
	  		 		  	  
  

 
	  
 40,082

 
	  
   

 
	  		  	   
	2,002  
	    
	  		  	   
	42,084  
	    

	  
 E Q U I T Y
	  		 		  				  		  				  		  			
								
	 Share capital
	  		 		  	 	251,752	  	  		  	 	-	  	  		  	 	251,752	  
	 Contributed surplus
	  	(b)	 		  	 	10,114	  	  		  	 	2,750	  	  		  	 	12,864	  
	 Retained earnings
	  	(b),(d),(e)
(m),(n),(l)	 		  	   
	58,334  
	    
	  		  	   
	(9,356)  
	    
	  		  	   
	48,978  
	    

	 Total Equity
	  		 		  	  
  

 
	  
 320,200

 
	  
   

 
	  		  	   
	(6,606)  
	    
	  		  	   
	313,594  
	    

	 Total Liabilities and Equity
	  		 		  	  
  

 
	  
 $360,282

 
	  
   

 
	  		  	   
	($4,604)  
	    
	  		  	   
	$355,678  
	    

  

					
	 	 	42  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 The December 31, 2010 Canadian GAAP statement of financial position has been reconciled to IFRS as
follows: 
  

																			
	A S S E T S	  	Ref.  	  	CDN GAAP  	 	  	 	 	  IFRS
  Adjustments  	 	  	 	  	  IFRS     	 
	  
 Current
Assets
	  		  				  		 				  		  			
	 Cash and cash equivalents
	  		  	 	$146,334 	  	  		 	 	$- 	  	  		  	 	$146,334 	  
	 Short-term investments
	  		  	 	41,846 	  	  		 	 	- 	  	  		  	 	41,846 	  
	 Amounts receivable
	  		  	 	5,749 	  	  		 	 	- 	  	  		  	 	5,749 	  
	 Advances and prepaid expenses
	  		  	 	3,136 	  	  		 	 	- 	  	  		  	 	3,136 	  
	  
 Available-for-sale
securities
	  		  	 	9,380 	  	  		 	 	- 	  	  		  	 	9,380 	  
	  
 FVTPL securities
	  		  	 	1,094 	  	  		 	 	- 	  	  		  	 	1,094 	  
	  
 Inventory
	  		  	 	25,225 	  	  		 	 	- 	  	  		  	 	25,225 	  
	  
 Total Current
Assets
	  		  	 	232,764 	  	  		 	 	- 	  	  		  	 	232,764 	  
	  
 Non-Current
Assets
	  		  				  		 				  		  			
	  
 Exploration and evaluation
assets
	  	(h)  	  	 	- 	  	  		 	 	99,767 	  	  		  	 	99,767 	  
	  
 Mineral property, plant and
equipment
	  	(d),(e),  
(h),(i),(m)  	  	 	295,619 	  	  		 	 	(121,714) 	  	  		  	 	173,905 	  
	  
 Total Assets
	  		  	   
	$528,383   
	    
	  		 	   
	$(21,947)   
	    
	  		  	   
	$506,436   
	    

	  
 L I A B I L I T I E S
	  		  				  		 				  		  			
	  
 Current
Liabilities
	  		  				  		 				  		  			
	  
 Accounts payable and accrued
liabilities
	  		  	 	$14,393 	  	  		 	 	$- 	  	  		  	 	$14,393 	  
	  
 Income taxes payable
	  		  	 	3,373 	  	  		 	 	- 	  	  		  	 	3,373 	  
	 Current portion of other liabilities
	  		  	 	428 	  	  		 	 	- 	  	  		  	 	428 	  
		  		  	 	18,194 	  	  		 	 	- 	  	  		  	 	18,194 	  
	 Non-Current Liabilities
	  		  				  		 				  		  			
	  
 Deferred income
taxes
	  	(d),(e)  
(m),(n)  	  	 	42,784 	  	  		 	 	(15,918) 	  	  		  	 	26,866 	  
	  
 Decommissioning
liability
	  	(d),(k)  	  	 	7,731 	  	  		 	 	(172) 	  	  		  	 	7,559 	  
	 Other liabilities
	  	(l)  	  	 	677 	  	  		 	 	11 	  	  		  	 	688 	  
	  
 Total
Liabilities
	  		  	   
	69,386   
	    
	  		 	   
	(16,079)   
	    
	  		  	   
	53,307   
	    

	  
 E Q U I T Y
	  		  				  		 				  		  			
	  
 Share capital
	  	(b)  	  	 	326,119 	  	  		 	 	(252) 	  	  		  	 	325,867 	  
	 Contributed surplus
	  	(b),(j)  	  	 	17,314 	  	  		 	 	6,002 	  	  		  	 	23,316 	  
	 Accumulated other comprehensive income
	  	(o)  	  	 	(960) 	  	  		 	 	(372) 	  	  		  	 	(1,332) 	  
	  
 Retained earnings

 
	  	(b),(d),(e)  
(m),(n),(l)  	  	 	116,524 	  	  		 	 	(11,246) 	  	  		  	 	105,278 	  
	 Total Equity
	  		  	 
	458,997 
	  
	  		 	 
	(5,868) 
	  
	  		  	 
	453,129 
	  

	  
 Total Liabilities and
Equity
	  		  	   
	$528,383   
	    
	  		 	   
	($21,947)   
	    
	  		  	   
	$506,436   
	    

  

					
	 	 	43  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 Reconciliation of the Statement of Comprehensive Income: 

The Canadian GAAP statement of comprehensive income for the year ended December 31, 2010 has been reconciled to IFRS as follows: 

 

																			
	 	  	Ref.  	  	  CDN GAAP  	 	  	 	 	  IFRS
  Adjustments  	 	  	 	  	  IFRS     	 
	 OPERATING REVENUES
	  		  				  		 				  		  			
	  
 Revenue
	  		  	  
  
	  

$189,272 
	  

  
	  		 	  
  
	  

$ - 
	  

  
	  		  	  
  
	  

$189,272 
	  

  

	  
 MINE OPERATING
COSTS
	  		  				  		 				  		  			
	  
 Mining and
processing
	  		  	 	46,560 	  	  		 	 	- 	  	  		  	 	46,560 	  
	  
 Royalties
	  		  	 	9,090 	  	  		 	 	- 	  	  		  	 	9,090 	  
	  
 Amortization
	  	(i),(k)  	  	 	20,753 	  	  		 	 	(267) 	  	  		  	 	20,486 	  
		  		  	  
  
	  

76,403 
	  

  
	  		 	  
  
	  

(267) 
	  

  
	  		  	  
  
	  

76,136 
	  

  

	 EARNINGS FROM MINE OPERATIONS
	  		  	  
  
	  
 112,869 
	  
   
	  		 	  
  
	  
 (267) 
	  
   
	  		  	  
  
	  
 113,136 
	  
   

	  
 EXPENSES
	  		  				  		 				  		  			
	  
 Exploration
	  		  	 	7,594 	  	  		 	 	- 	  	  		  	 	7,594 	  
	  
 Corporate and
administrative
	  		  	 	9,187 	  	  		 	 	- 	  	  		  	 	9,187 	  
	  
 Share-based
compensation
	  	(j)  	  	 	13,300 	  	  		 	 	3,000 	  	  		  	 	16,300 	  
	  
 Accretion
	  	(p)  	  	 	460 	  	  		 	 	(460) 	  	  		  	 	- 	  
		  		  	  
  
	  

30,541 
	  

  
	  		 	  
  
	  

2,540 
	  

  
	  		  	  
  
	  

33,081 
	  

  

	  
 EARNINGS FROM
OPERATIONS
	  		  	  
  
	  
 82,328 
	  
   
	  		 	  
  
	  
 (2,273) 
	  
   
	  		  	  
  
	  
 80,055 
	  
   

	  
 OTHER INCOME
(EXPENSES)
	  		  				  		 				  		  			
	  
 Finance income
	  		  	 	1,510 	  	  		 	 	- 	  	  		  	 	1,510 	  
	  
 Financing expense
	  	(k),(l),(p)  	  	 	- 	  	  		 	 	(451) 	  	  		  	 	(451) 	  
	  
 Foreign exchange gain
(loss)
	  	(m),(o)  	  	 	294 	  	  		 	 	(333) 	  	  		  	 	(39) 	  
	  
 Other income (loss)
	  		  	   
	9,393   
	    
	  		 	   
	-   
	    
	  		  	   
	9,393   
	    

	EARNINGS BEFORE INCOME TAXES 	  		  	  
  
	  
 93,525 
	  
   
	  		 	  
  
	  
 (3,057) 
	  
   
	  		  	  
  
	  
 90,468 
	  
   

	  
 INCOME TAXES
	  		  				  		 				  		  			
	  
 Current expense
	  		  	 	(23,410) 	  	  		 	 	- 	  	  		  	 	(23,410) 	  
	 Deferred tax recovery (expense)
	  	(d),(e)  
(m),(n)  	  	   
	(4,430)   
	    
	  		 	   
	1,167   
	    
	  		  	   
	(3,263)   
	    

	  
 EARNINGS
	  		  	  
  
	  
 $65,685 
	  
   
	  		 	  
  
	  
 ($1,890) 
	  
   
	  		  	  
  
	  
 $63,795 
	  
   

	  
 Other comprehensive
income:
	  		  				  		 				  		  			
	  
 Unrealized gain (loss) on
securities
	  	(o)  	  	 	(960) 	  	  		 	 	(372) 	  	  		  	 	(1,332) 	  
	  
 COMPREHENSIVE
INCOME
	  		  	  
  
	  

$64,725 
	  

  
	  		 	  
  
	  

($2,262) 
	  

  
	  		  	  
  
	  

$62,463 
	  

  

	  
 EARNINGS PER
SHARE
	  		  	 	 	 	  		 	 	 	 	  		  	 	 	 
	  
 - basic
	  		  	  
  
	  
 $0.57 
	  
   
	  		 	  
  
	  
 ($0.02) 
	  
   
	  		  	  
  
	  
 $0.55 
	  
   

	 - diluted
	  		  	 	$0.56 	  	  		 	 	($0.01) 	  	  		  	 	$0.55 	  

  

					
	 	 	44  	 	ALAMOS GOLD INC.    

					
		 	

	 	2011 FINANCIAL REPORT

  

 Reconcilation of the Statements of Equity: 

The Canadian GAAP Statement of Equity as at January 1, 2010 and December 31, 2010 have been reconciled to IFRS as follows: 

 

											
	As at	  	Ref.  	  	  December 31, 
2010	 	  	  January 1,  
2010  	 
	  
 Total Equity - Canadian
GAAP
	  		  	 	458,997	  	  	 	320,200	  
	 Share-based compensation
	  	(b),(j)  	  	 	-	  	  	 	-	  
	 Decommissioning liabilities
	  	(d),(k)  	  	 	77	  	  	 	36	  
	 Mineral property, plant and equipment-deemed cost
	  	(e)  	  	 	(1,244)	  	  	 	(1,460)	  
	 Property acquisition obligation
	  	(i)  	  	 	19	  	  	 	-	  
	 Deferred taxes
	  	(m),(n)  	  	 	(3,821)	  	  	 	(4,988)	  
	 Available for Sale securities
	  	(o)  	  	 	-	  	  	 	-	  
	 Foreign exchange impact all the above differences
	  	(m)    
	  	   
	(899)  
	    
	  	   
	(194)  
	    

	 Total Equity - IFRS
	  		  	 	453,129	  	  	 	313,594	  

 Reconciliation of the Statement of Cash Flows: 
 The restatement from Canadian GAAP to IFRS did not have a significant impact on the Company’s consolidated statement of cash flows for the year ended December 31, 2010. As a result, no
quantitative reconciliation was performed. 

  

					
	 	 	45  	 	ALAMOS GOLD INC.EX-4.3

 EXHIBIT 4.3 
  

 
  
  

MANAGEMENT’S DISCUSSION AND ANALYSIS 
 (All amounts are expressed in United States dollars, unless otherwise stated) 

This management’s discussion and analysis (“MD&A”) of the operating results and financial position of Alamos Gold Inc.
and its subsidiaries (the “Company”) is for the year ended December 31, 2011 compared with the year ended December 31, 2010. Together with the consolidated financial statements and related notes, the MD&A provides a detailed
account and analysis of the Company’s financial and operating performance for the year. The Company’s functional and reporting currency is the United States dollar. This MD&A is current to February 21, 2011 and should be read in
conjunction with the Company’s Annual Information Form and other corporate filings available at www.sedar.com (“SEDAR”). Management is responsible for the consolidated financial statements referred to in this MD&A, and provides
officers disclosure certifications filed with securities commissions on SEDAR. The Audit Committee reviews the consolidated financial statements and MD&A, and recommends approval to the Company’s Board of Directors. 

The MD&A should be read in conjunction with the consolidated financial statements of the Company and related notes, which have been
prepared in accordance with International Financial Reporting Standards (“IFRS”). Refer to Note 3 of the December 31, 2011 consolidated financial statements for disclosure of the Company’s significant accounting policies and a
discussion of future accounting policy changes. 
 Note to U.S. Investors 

All references to mineral reserves and resources contained in this MD&A are determined in accordance with National Instrument 43-101,
Standards of Disclosure for Mineral Projects (“NI 43-101”) of the Canadian Securities Administrators (“CSA”) and Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) standards. While the terms “mineral
resource,” “measured mineral resource,” “indicated mineral resource,” and “inferred mineral resource” are recognized and required by Canadian regulations, they are not defined terms under the Securities and
Exchange Commission (“SEC”) standards in the United States (“U.S.”). As such, information contained in this MD&A concerning descriptions of mineralization and resources under Canadian standards may not be comparable to
similar information made public by U.S. companies subject to the reporting and disclosure requirements of the SEC. “Indicated mineral resource” and “inferred mineral resource” have a great amount of uncertainty as to their
existence and economic and legal feasibility. It cannot be assumed that all or any part of an “indicated mineral resource” or “inferred mineral resource” will ever be upgraded to a higher category of resource. Investors are
cautioned not to assume that all or any part of the mineral deposits in these categories will ever be converted into proven and probable reserves. 

 2011 RESULTS 

 
 Overview 

Alamos Gold Inc. is a publicly-traded company on the Toronto Stock Exchange (TSX: AGI). The Company owns and operates the Mulatos mine
(“Mulatos” or the “Mine”) within the Salamandra group of concessions located in the state of Sonora in northwest Mexico. In addition, the Company owns the Ağı Dağı and Kirazlı advanced-stage gold
development projects, located in the Biga Peninsula of northwestern Turkey. 
 Mexico 

The Salamandra group of concessions comprises 30,536 hectares, and contains the producing Mine as well as several advanced and grassroots
exploration projects. The Mine achieved commercial production in 2006 and produces gold in dore form for shipment to a refinery. Exploration potential includes both mineralized extensions and satellite deposits in close proximity to the existing
mining operations. Proven and probable reserves as at December 31, 2010 were 58.5 million tonnes grading 1.27 grams of gold per tonne of ore (“g/t Au”) for approximately 2.4 million contained ounces of gold, providing a mine
life of approximately 9 years at current production levels. The Company expects to release an updated reserve and resource estimate as at December 31, 2011 in March 2012. 
 Turkey 
 In early 2010, the Company acquired the 7,657 hectare Ağı
Dağı and Kirazlı gold development projects, which contain established mineral resources and several highly prospective exploration targets. In March 2010, the Company published a preliminary economic assessment technical report (the
“Scoping Study”) evaluating the economic potential of developing Ağı Dağı and Kirazlı into gold mines. The findings of the Scoping Study were positive and the Company has advanced the projects to the preliminary
feasibility stage. In addition, the Company owns the Çamyurt exploration project located approximately three kilometres southeast of Ağı Dağı. As a result of exploration work completed in 2011, the Company believes that
Çamyurt has the potential to develop into a stand-alone gold development project. 
 Measured and indicated mineral
resources at Ağı Dağı and Kirazlı (reported at a 0.2 g/t Au cut-off) at March 31, 2011 total 93.4 million tonnes grading 0.65 g/t Au and 5.13 g/t silver (“Ag”) for approximately 2 million ounces of
gold and 15.4 million ounces of silver. Inferred mineral resources total 26.4 million tonnes grading 0.54 g/t Au and 4.03 g/t Ag, for approximately 0.5 million contained ounces of gold and 3.4 million contained ounces of silver.

 Fourth Quarter 2011 Highlights 
 In the fourth quarter of 2011, the Company: 
  

	 	•	 	 Produced 46,500 ounces of gold at a cash operating cost of $387 per ounce of gold sold (total cash costs inclusive of royalties were $471 per ounce of
gold sold). 

  

	 	•	 	 Recognized record quarterly earnings of $21.3 million ($0.18 per basic share). 

 

	 	•	 	 Generated record quarterly cash from operating activities of $37.3 million ($0.32 per basic share). 

 

	 	•	 	 Sold 45,224 ounces of gold for $76.3 million, generating operating revenues of $71.1 million and pre-production revenues from the Escondida zone of
$5.2 million. 

  

	 	•	 	 Achieved record crusher throughput for the quarter, averaging 16,000 tonnes of ore stacked per day (“tpd”). 

  
  

2 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 Full Year 2011 Highlights 
 In the year ended December 31, 2011, the Company: 
  

	 	•	 	 Sold 151,000 ounces of gold for $234.7 million, generating operating revenues of $227.4 million and pre-production revenues from the Escondida zone of
$7.4 million. 

  

	 	•	 	 Produced 153,000 ounces of gold at a cash operating cost of $368 per ounce of gold sold (total cash cost inclusive of royalties of $444 per ounce of
gold sold). 

  

	 	•	 	 Recognized earnings of $60.1 million ($0.51 per share) compared to earnings of $63.8 million ($0.55 per share) in 2010. 

 

	 	•	 	 Generated record annual cash from operating activities of $106.5 million ($0.91 per basic share) compared to $89.6 million ($0.78 per basic share) in
2010. 

  

	 	•	 	 Reported a 19% increase in measured and indicated resources at Ağı Dağı and Kirazlı compared to the 2010 year-end reserve and
resource statement. 

  

	 	•	 	 Announced the discovery of the Çamyurt zone and the potential to develop Çamyurt into a stand alone mining project.

  

	 	•	 	 Doubled the semi-annual dividend from $0.035 to $0.07 per share and paid $14.1 million in dividends during the year. 

Subsequent to quarter-end, the Company: 
  

	 	•	 	 Announced 2012 production guidance of 200,000 to 220,000 ounces, a significant increase from 2011, while maintaining cash cost guidance at $365-$390
per ounce (exclusive of the 5% royalty). 

  

	 	•	 	 Completed construction of the mill to process high-grade ore from the Escondida zone. Commissioning is ongoing with high-grade gold production expected
by the end of the first quarter of 2012. 

  

	 	•	 	 Reported encouraging drill results at El Victor North with the potential to expand reserves along the northern boundary of the Gap to El Victor trend.
Drill highlights included 4.72 g/t Au over 45.7 meters, 2.58 g/t Au over 59.5 meters and 2.40 g/t Au over 59.5 meters. 

  

	 	•	 	 Increased its semi-annual dividend 43% from $0.07 per share to $0.10 per share, representing a 233% increase since the first semi-annual dividend was
declared in the first quarter of 2010. 

 Results of Operations 

Gold production of 153,000 ounces in 2011 decreased 2% compared to gold production of 156,000 ounces in 2010. The table below outlines key
production indicators in 2011 and 2010: 
  

																									
	  Production summary	  	Q1 2011	 	  	Q2 2011	 	  	Q3 2011	 	  	Q4 2011	 	  	YTD 2011	 	  	YTD 2010	 
							
	   Ounces produced (1)
	  	 	37,500	  	  	 	36,000	  	  	 	33,000	  	  	 	46,500	  	  	 	153,000	  	  	 	156,000	  
							
	   Ore crushed (tonnes)
	  	 	1,069,000	  	  	 	1,373,000	  	  	 	1,255,000	  	  	 	1,467,000	  	  	 	5,164,000	  	  	 	4,729,000	  
	   Grade (g/t Au)
	  	 	1.26	  	  	 	1.27	  	  	 	1.35	  	  	 	1.33	  	  	 	1.31	  	  	 	1.60	  
	   Contained ounces stacked
	  	 	43,270	  	  	 	56,100	  	  	 	54,500	  	  	 	62,970	  	  	 	217,030	  	  	 	243,100	  
							
	 Ratio of ounces produced to contained ounces stacked
	  	 	87%	  	  	 	64%	  	  	 	61%	  	  	 	74%	  	  	 	71%	  	  	 	64%	  
							
	   Ore mined (tonnes)
	  	 	1,174,000	  	  	 	1,320,000	  	  	 	1,360,000	  	  	 	1,473,000	  	  	 	5,327,000	  	  	 	4,670,000	  
	   Waste mined (tonnes)
	  	 	640,000	  	  	 	850,000	  	  	 	1,385,000	  	  	 	611,000	  	  	 	3,486,000	  	  	 	3,651,000	  
	   Total mined (tonnes)
	  	 	1,814,000	  	  	 	2,170,000	  	  	 	2,745,000	  	  	 	2,084,000	  	  	 	8,813,000	  	  	 	8,321,000	  
							
	   Waste-to-ore ratio
	  	 	0.55	  	  	 	0.64	  	  	 	1.02	  	  	 	0.41	  	  	 	0.65	  	  	 	0.78	  
							
	   Ore crushed per day (tonnes)
	  	 	11,900	  	  	 	15,000	  	  	 	13,500	  	  	 	16,000	  	  	 	14,100	  	  	 	13,000	  

  

	(1)	 Reported gold production for YTD 2010
has been adjusted to reflect final refinery settlement. Reported gold production for Q4 2011 and YTD 2011 is subject to final refinery settlement and may be adjusted. 

  
 3 

 2011 RESULTS 

 
 Fourth Quarter 2011 

Gold production in the fourth quarter of 2011 of 46,500 ounces was 41% higher than production of 33,000 ounces in the third quarter of
2011 and 2% higher than production of 45,800 ounces in the fourth quarter of 2010. 
 The significant
increase in production in the fourth quarter compared to the third quarter of 2011 was attributable to an increase in the ratio of ounces produced to contained ounces stacked or “recovery ratio1”, in addition to a 17% increase in the number of tonnes of ore
crushed. Due to flooding at a suppliers’ processing facility, the Company experienced a cyanide supply shortage from May to September 2011 that resulted in the deferral of gold production from the third to the fourth quarter when cyanide levels
were returned to optimal levels. As a result of this, the recovery ratio increased from 61% in the third quarter to 74% in the fourth quarter of 2011. In addition, increased crusher throughput resulting from operational improvements and improved
weather conditions contributed to higher gold production in the fourth quarter compared to the third quarter rainy season. Gold production in the fourth quarter of 2011 was consistent with the fourth quarter of 2010. 

Full Year 2011 
 In 2011, gold production of 153,000 ounces was within the Company’s revised production guidance range of 145,000 to 160,000 ounces and was marginally below 156,000 ounces produced in 2010.

 The decrease in 2011 gold production from 2010 was attributable to an 11% increase in the recovery ratio and a 9% increase in
crusher throughput being offset by a budgeted 18% decrease in grade. 
 The recovery ratio in 2011 was 71%, an 11% increase over
the comparable period of 2010, and consistent with the Company’s budgeted recovery ratio for the year of 70%. The recovery ratio was lower than budgeted in the second and third quarters of the year due to low concentrations of cyanide in
solution as a result of a reduction in cyanide shipments from our primary supplier. Once normal cyanide shipments were resumed in the third quarter, deferred gold production was realized, increasing the fourth quarter recovery ratio to 74%.

  

	1 	 “recovery ratio” is defined as the ratio of gold ounces produced divided by the number of contained ounces stacked over a specific period.

  
  

4 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 Crusher throughput in 2011 averaged 14,100 tpd, 9% higher than 13,000 tpd in the same period of last year.
Crusher throughput increased sharply in the last quarter of 2011, averaging 16,000 tpd. Higher crusher throughput resulted from generally improved operating and maintenance practices and has been achieved without sacrificing size quality. The size
of crushed ore stacked on the leach pad was 90% passing 3/8th’s of an inch in 2011. 
 The grade of ore crushed in 2011 of
1.31 g/t Au was higher than the budgeted grade of 1.24 g/t Au, but below the grade in 2010 of 1.60 g/t Au. Applying higher gold price assumptions to the mine model has resulted in material previously classified as waste becoming economic to mine and
therefore classified as low grade ore. This has the effect of lowering the average grade mined. The reconciliation of mined blocks to the block model for the year ended December 31, 2011 was -7%, +18% and 11% for tonnes, grade and ounces
respectively. Since the start of mining activities in 2005, the project-to-date reconciliation is -2%, +10%, +8% for tonnes, grade and ounces, respectively. Positive reconciliation variances indicate that the Company is mining more gold than what
was indicated in the reserve model. 
 The following table compares costs per tonne for the periods ended 2011 and 2010:

  

																											
	  Costs per tonne summary	  	Q1
2011	 	  	Q2
2011	 	  	Q3
2011	 	  	Q4
2011	 	  	2011	 	  	2010	 	  	 
	  Mining cost per tonne of material (ore and waste)	  	 	$2.00	  	  	 	$2.13	  	  	 	$1.83	  	  	 	$1.65	  	  	 	$1.90	  	  	 	$2.09	  	  	
								
	  Waste-to-ore ratio	  	 	0.55	  	  	 	0.64	  	  	 	1.02	  	  	 	0.41	  	  	 	0.65	  	  	 	0.78	  	  	
								
	  Mining cost per tonne of ore	  	 	$3.09	  	  	 	$3.51	  	  	 	$3.70	  	  	 	$2.34	  	  	 	$3.14	  	  	 	$3.73	  	  	
	  Crushing/conveying cost per tonne of ore	  	 	$2.52	  	  	 	$2.43	  	  	 	$2.56	  	  	 	$2.24	  	  	 	$2.42	  	  	 	$2.11	  	  	
	  Processing cost per tonne of ore	  	 	$3.19	  	  	 	$2.13	  	  	 	$3.36	  	  	 	$3.44	  	  	 	$3.02	  	  	 	$2.87	  	  	
	  Mine administration cost per tonne of ore	  	 	$2.24	  	  	 	$1.88	  	  	 	$1.85	  	  	 	$1.74	  	  	 	$1.91	  	  	 	$2.01	  	  	
								
	  Total cost per tonne of ore	  	 	$11.04	  	  	 	$9.95	  	  	 	$11.47	  	  	 	$9.76	  	  	 	$10.49	  	  	 	$10.72	  	  	

 Total cost per tonne of ore in 2011 of $10.49 decreased 2% compared to 2010. The lower cost per tonne of
ore in 2011 compared to 2010 is primarily attributable to increases in the tonnes of ore mined and crushed which result in fixed costs such as salaries and administration being lower on a per tonne basis. In addition, higher by-product credits
resulting from the sale of silver at substantially higher prices offset increased cyanide and power costs and costs associated with the strengthening in the average value of the Mexican peso compared to the United States dollar. 

Mining cost per tonne of material was $1.90 in 2011, 9% lower than $2.09 in 2010 as a result of lower drilling costs in 2011 compared to
2010 and a 6% increase in the number of total tonnes mined. The higher tonnes of ore mined in 2011 helped to offset increases in key input costs such as diesel and maintenance. 

  
 5 

 2011 RESULTS 

 
 Crushing and conveying cost per tonne of ore of $2.42 was 15%
higher in 2011 than in 2010. In 2010, the Company made a number of improvements to the crushing circuit including closing the circuit and adding a scalping screen plant to improve crusher throughput. Higher costs in 2011 were the result of the
inclusion of incremental power and maintenance costs associated with these improvements for the full year. 
 Processing costs
per tonne of ore in 2011 were $3.02 compared to $2.87 in 2010, a 5% increase. Higher processing costs were attributable to higher cyanide costs in the latter half of 2011, given the supply shortage that was experienced. The increased cyanide costs
were offset by higher by-product credits arising from the sale of silver in higher quantities and at higher realized prices than in 2010. 
 Mine administration costs per tonne of ore in 2011 decreased 5% relative to 2010. Increased overall spending associated with headcount additions, camp and security contractors and road maintenance have
been more than offset on a per-tonne basis by the increase in tonnes mined and stacked. 
 Cash operating costs of $368 per ounce
of gold sold in 2011 were at the low end of the Company’s revised guidance, but were 22% higher than $302 in 2010. This increase is primarily attributable to an 18% decrease in the grade of ore mined. Cash operating costs include total costs
incurred in the period, in addition to inventory adjustments that recognize the allocation of costs to and from the Company’s in-process leach pad gold inventory in the period. The Company utilizes a gold process flow inventory model that
allocates total costs incurred to the recoverable ounces stacked on the leach pad in that period, and charges each ounce of gold produced on an average cost basis. Accordingly, cash operating costs reflect not only the cash spent in a period, but
also an adjustment to reflect the increase or decrease in the leach pad inventory. A reconciliation of total costs to cash operating costs is presented below: 
  

									
	  Cash operating cost reconciliation	    	2011  	 	    	2010  	 
			
	  Total cost per tonne of ore	    	 	$10.49	  	    	 	$10.72	  
	  Ore crushed (tonnes)	    	 	5,164,000	  	    	 	4,729,000	  
	  Total cost	    	 	$54,170,000	  	    	 	$50,695,000	  
	 Inventory adjustments to reflect additional ounces produced from (allocated to) leach pad inventory and other period costs
	    	 	($302,000)	  	    	 	($4,135,000)	  
	   Mining and processing costs allocated to ounces sold as reported on income statement
	    	 	$53,868,000	  	    	 	$46,560,000	  
	  Ounces sold	    	 	146,390
(1)	  	    	 	154,343	  
	  Cash operating cost per ounce sold	    	 	$368	  	    	 	$302	  

  

	(1)	 Total ounces sold in 2011 were
151,000, of which 4,610 ounces were estimated to have been derived from ore processed in developing the Escondida zone and have been accounted for as pre-production ounces with the associated revenues and operating costs offset against capitalized
development costs. 

 In 2011, the Company increased the number of ounces on the leach pad inventory as the
number of ounces produced was lower than the number of recoverable ounces stacked. Leach pad inventory, which incorporates both cash operating costs and amortization, has increased to $11.9 million at December 31, 2011 from $10.5 million at
December 31, 2010, reflecting an increase in ounces on the pad in addition to higher cash operating costs and amortization per ounce. 

  
  

6 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 Investments in Mineral Property, Plant and Equipment and Acquisitions 

A summary of the cash invested in operating capital and development activities for the period ended December 31, 2011 is presented
below: 
  

							
	 	  	2011	 	  	 
	 	  	($000)	 	  	 
	  Operating and expansion capital – Mexico	  				  	
	  Water Treatment Plant	  	 	6,473	  	  	
	  Crushing system	  	 	6,044	  	  	
	  Component changes	  	 	2,365	  	  	
	  Leach pad – inter-lift liners	  	 	1,554	  	  	
	  Pumping system	  	 	1,201	  	  	
	  Other	  	 	3,069	  	  	
		  	 	          20,706	  	  	
	  Development – Mexico	  				  	
	  Escondida development	  	 	31,206	  	  	
	  Pre-production operating cash flow	  	 	(5,321)	  	  	
	  Escondida gravity mill	  	 	17,348	  	  	
	  Capitalized exploration	  	 	3,118	  	  	
	  Mulatos relocation	  	 	522	  	  	
		  	 	46,873	  	  	
	  Development – Turkey	  				  	
	  Development and capitalized exploration	  	 	8,687	  	  	
	  Equipment	  	 	296	  	  	
		  	 	8,983	  	  	
	  Head office – Toronto	  				  	
	  Leasehold improvements and furniture	  	 	477	  	  	
		  	 	477	  	  	
	 Cash invested in mineral property, plant and equipment and exploration and evaluation assets
	  	 	77,039	  	  	

 Operating and Expansion Capital - Mexico 

Operating capital spending in Mexico in 2011 was focused primarily on completing construction of the water treatment plant and
improvements to the crushing circuit. The water treatment plant processes and treats waste water prior to discharge or re-use in operations, and was operational in the fourth quarter of 2011. Crusher spending included replacing a tertiary crusher in
addition to commencing an overhaul of the primary and secondary crushers. Other major capital spending in 2011 included leach pad inter-lift liners and upgrading the pumping system at the mine, both designed to improve mine operating performance in
adverse weather conditions. Other significant investments in 2011 included $2.4 million for component changes and $3.1 million of other sustaining capital. 
 Forecast operating capital spending for 2012 includes $7.9 million in sustaining capital, $5.4 million for crusher improvements and $3 million for construction activities. 

  
 7 

 2011 RESULTS 

 
 Development - Mexico 

Development activities in Mexico in 2011 were focused on completing development of the Escondida zone of the Mulatos pit and construction
of the gravity mill to process high-grade ore from Escondida and potentially from San Carlos and other high-grade zones at Mulatos. Total capital spending related to Escondida was $48.6 million, of which $31.2 million was related to pre-stripping
development activities and $17.4 million was capitalized related to construction of the gravity mill. Development activities remain on schedule and high-grade ore is currently available to be processed. The gravity mill arrived on site in November
and was assembled and constructed in January 2011. Commissioning and operator training are underway and production from the high-grade zone is expected by the end of the first quarter of 2012. 

While developing the Escondida zone throughout the latter half of 2011, the Company encountered ore-grade material that had been
classified as waste in the block model. This low grade Escondida ore averaged 1.31 g/t Au and was stacked on the heap leach pads for processing. The Company estimates that it sold approximately 4,610 ounces of gold from the Escondida zone in the
second half of 2011 for revenues of $7.4 million and net operating cash flow of $5.3 million. This operating cash flow is considered to have been generated in the pre-production phase and is incidental to overall planned cash flows from the
Escondida zone. Accordingly, the operating cash flows of $5.3 million are offset against capitalized Escondida development costs. The sale of additional ounces of gold from the Escondida zone will continue to be offset against capitalized costs
until such time as the gravity mill is operating. 
 Gold production for 2012 is forecast to increase to between 200,000 and
220,000 ounces of gold. The gravity mill is expected to add a minimum of 67,000 ounces of production in 2012 at a grade of 13.4 g/t Au. Based on bulk sample testing conducted in 2007, the Company believes that there is the potential for higher
production from the gravity mill as a result of realizing positive grade reconciliation to the reserve grade. 
 Metallurgical
testing completed in 2011 demonstrated that higher grade ore at San Carlos is amenable to gravity processing, potentially doubling the amount of feed available for the gravity plant. As a result, the Company anticipates that it will be able to
extend the processing life of the gravity mill beyond the current three year reserve life of Escondida. Further optimization and metallurgical studies are underway in order to continue to increase the amount of high grade ore that can be processed
through the gravity mill. 
 Development – Turkey 

On January 6, 2010, the Company acquired the Ağı Dağı and Kirazlı advanced-stage gold projects located on
the Biga Peninsula of northwestern Turkey. Ağı Dağı is located approximately 50 kilometres southeast of Çanakkale and Kirazlı is located approximately 25 kilometres northwest of Ağı Dağı.
Çanakkale is the largest centre on the Biga Peninsula with a population of approximately 97,000. Infrastructure in close proximity to the project is excellent and well-serviced with paved roads, transmission lines, and electricity generating
facilities. 
 Shortly after acquiring Ağı Dağı and Kirazlı, the Company released a Scoping Study in
March 2010. The Scoping Study outlined measured and indicated resources of 0.9 million ounces of gold, and inferred resources of 0.4 million ounces of gold. These results supported the decision to advance the project to the preliminary
feasibility stage given the robust economics of the projects, including average production of 135,000 ounces per annum over a minimum 

  
  

8 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 
8-year mine life. Following this decision, the Company released its 2010 year-end resource and reserve statement, showing an increase in indicated resources to 1.65 million ounces of gold, and
inferred resources of 0.4 million ounces of gold. 
 In addition to continued exploration success at Ağı Dağı
and Kirazlı in 2011, the Company also discovered the Çamyurt deposit and determined that it has the potential to be a stand-alone mining project. In September 2011, the Company released an updated resource estimate for Ağı
Dağı and Kirazlı. Measured and indicated in-pit resources (oxide only) increased 19% to 1.96 million ounces, while inferred resources increased 10% to 0.5 million ounces. 

Due to the significant increase in measured and indicated resources, the Company has resized the scale and scope of the projects,
requiring additional geotechnical drilling and engineering which extended the completion deadline of the preliminary feasibility study to the second quarter of 2012. The Company expects that increased throughput and processing rates could result in
higher annual production rates than initially reported in the Scoping Study of 135,000 ounces per annum. 
 In addition to
completing the preliminary feasibility study, the Company is in the process of completing final Environmental Impact Assessment (“EIA”) reports for each of the Ağı Dağı, Kirazlı and Çamyurt projects. The
Company currently intends to submit the final EIA for Ağı Dağı and Çamyurt late in the second quarter of 2012, with the Kirazlı EIA submitted thereafter. A response from the Turkish government is expected in the third
quarter of 2012. Permitting and construction activities are expected to take up to eighteen months once the final EIA is approved. 
 In 2011, total expenditures in Turkey were $13.2 million, of which $9 million was capitalized. Investments were focused on exploration, engineering and permitting work to support the preliminary
feasibility study. The Company had six drill rigs operating in 2011, focused on condemnation, geotechnical and exploration drilling at a cost of $8.3 million. In addition, consultant and metallurgical testing costs related to the pre-feasibility
study totalled $1.9 million, while capital purchases, salaries and other costs comprised $3 million. 
 Exploration Summary

 Total exploration expenditures in 2011 were $16.7 million. In Mexico, total exploration spending in 2011 was $8.4 million,
of which $5.3 million related to drilling El Carricito and administration costs were expensed, while $3.1 million of drilling costs at El Victor and San Carlos were capitalized. Total exploration spending in Turkey was $8.3 million, of which $4.2
million primarily related to drilling at Çamyurt was expensed, while $4.1 million related to work at Ağı Dağı and Kirazlı was capitalized. 
 Exploration - Mexico 
 The Company had up to five drills operating
throughout 2011 drilling a total of 52,300 m in 321 holes, with exploration activities focused on the following areas: 
  

					
	Zone	  	Location	  	Stage
	El Victor North	  	Contiguous with Mulatos Pit	  	Resource expansion
	San Carlos	  	Northeast of El Victor	  	Resource expansion
	El Carricito	  	 20 kilometres southwest of the

Mulatos Pit
	  	Exploration

  
 9 

 2011 RESULTS 

 
 El Victor North 

In the latter half of 2011, exploration activities in the Mulatos district focused on the El Victor North area with up to four drill rigs
active. Access to El Victor North was granted in July 2011 after a twelve-year hiatus. The El Victor North area contains silica alteration identical to the El Victor deposit and is a northwestern extension of El Victor reserve mineralization. El
Victor North has the potential to expand reserves along the northern boundary of the Gap to El Victor trend. All holes drilled to-date have encountered significant intervals of favourable silicic or advanced argillic alteration, and should extend
the El Victor pit north and west of the current pit design outline. 
 A total of 16,200 metres in 124 holes were drilled in the
El Victor area in 2011. Drill results are encouraging and the results received to-date have confirmed the continuity and extension of the El Victor mineralized body with results typical of those reported in the past. New intercepts from recent
drilling include: 
  

	 	•	 	 2.40 g/t Au over 59.5 metres (11EV119)

  

	 	•	 	 4.72 g/t Au over 45.7 meters (11EV120)

  

	 	•	 	 1.78 g/t over 29.0 metres (11EV124)

  

	 	•	 	 1.53 g/t Au over 53.4 metres (11EV126)

  

	 	•	 	 2.58 g/t over 59.5 metres (11EV132)

  

	 	•	 	 4.27 g/t over 16.8 metres (11EV134)

 Total exploration spending at El Victor North in 2011 was $2.1 million. An updated reserve and resource estimate at El Victor will be completed as part of the year-end global reserve and resource
statement to be published in the first quarter of 2012. 
 San Carlos 

In March 2011, the Company reported initial pit-contained mineral reserves at San Carlos of 2.6 million tonnes grading 1.89 g/t Au
for approximately 160,000 ounces. As a result of establishing reserves at San Carlos and in accordance with the Company’s accounting policy for exploration costs, $1 million of spending at San Carlos was capitalized in 2011. 

Exploration activities in San Carlos in 2011 focused on testing extensions of the existing mineral resource area. In-fill and step-out
drilling in the second quarter confirmed the continuity of high-grade mineralization towards the northeast. In addition, the Company has identified at least two additional sub-parallel structures, located up to 600 m from the resource area, with
surface mapping indicating the potential for additional parallel zones to the northeast. The new zones are located at the same elevation as existing mineralization, but under significant overburden. As a result, the Company is evaluating the
potential to mine a portion of the San Carlos deposit through underground mining methods. 
 In addition, the Company obtained
positive results from metallurgical testing conducted on the high-grade ore at San Carlos. The results indicated that the high-grade ore is amenable to gravity separation, capable of providing an additional source of feed for the gravity plant that
the Company is constructing to process the high-grade ore at Escondida. Ultimate recovery rates (gravity separation followed by leaching the tailings with cyanide) were 78% and 70% for the two large samples processed. The potential exists to further
improve these levels of recovery and this will be evaluated in the next phase of testing. These results could potentially double the amount of feed for the high-grade gravity mill. San Carlos drilling was inactive in the fourth quarter as all drill
rigs were allocated to the El Victor drilling program. 

  
  

10 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 El Carricito 
 El Carricito is the largest area of favourable silicic and advanced argillic alteration in the Mulatos District. The zone of alteration is approximately 5.5 kilometres long, up to 2.7 kilometres wide, and
is up to 300 metres thick in outcrop. 
 Exploration drilling at El Carricito began in late 2010 and continued throughout the
majority of 2011. Drilling intersected broad zones of favourable alteration containing low-grade gold mineralization, with the best intercept at El Carricito being 85 m grading 0.53 g/t Au in hole 11CR77. Exploration drilling at El Carricito during
the fourth quarter was focused on infill and step-out drilling of the Lower Cerro Carricito zone, where the most consistent and potentially economic gold concentrations occur. A significant area of low-grade gold mineralization with local ore-grade
intercepts has been delineated. Reverse circulation drilling has been completed on 50 m centers sufficient for resource estimation, and core twins of select intercepts are in progress. 

A total of 20,642 meters in 113 reverse circulation holes were drilled at Carricito during 2011, both as resource definition and
exploration target evaluation holes. In addition, six core holes (588 m) have been completed to-date. The total cost of the Phase I program at El Carricito was $3 million. 
 Exploration - Turkey 
 Exploration expenditures in Turkey in 2011 totalled
$8.3 million. A total of six drill rigs were active throughout the year drilling a total of 155 holes (28,600 m). Since the Company acquired its Turkish projects, a total of 51,200 m of drilling has been completed. Drilling in 2011 focused on
in-fill and extension drilling of known zones of mineralization at Ağı Dağı, Kirazlı, and Çamyurt. The Company provided an updated mineral resource estimate for the Ağı Dağı and Kirazlı
deposits during the third quarter of 2011 which demonstrated significant growth in measured and indicated resources to 1.96 million ounces of gold and 15.4 million ounces of silver in oxides. 

Çamyurt 
 The Çamyurt project is located approximately three kilometres (“km”) southeast of the Company’s development-stage Ağı Dağı project. To-date in 2011, the Company
has drilled 9,600 m of a planned 10,000 m drill program. In the fourth quarter of 2011, the Company continued to report encouraging drill results from Çamyurt which validate its potential to develop into a stand-alone mining project. Notable
assay results include: 
  

	 	•	 	 1.30 g/t Au over 41.6 metres (11-CYD-043) 

  

	 	•	 	 1.34 g/t Au over 120.8 metres (11-CYD-044) 

  

	 	•	 	 1.39 g/t Au over 41.2 metres (11-CYD-046) 

  

	 	•	 	 1.53 g/t Au over 53.7 metres (11-CYD-047). 

 Drilling at Çamyurt has defined a mineralized zone that is continuous for at least 1,100 m along strike with additional potential to extend mineralization to the northeast. The steeply dipping
oxidized body starts at surface, has been vertically defined to a minimum of 150 

  
 11 

 2011 RESULTS 

 
 
metres, remains open at depth, and can reach up to 150 metres in thickness. An initial resource estimate at Çamyurt is planned to be included as part of the Company’s year-end global
reserve and resource statement in the first quarter of 2012. 
 Financial Highlights 

A summary of the Company’s financial results for the three-month periods and years ended December 31, 2011 and 2010 is presented
below: 
  

																					
	 	 	 Q4
 2011
	 	 	 Q4
 2010
	 	 	2011	 	 	2010	 	 	2009(3)	 
	   Cash provided by operating activities

  before changes in non-cash

  working capital (000)(1)
	 	 	$31,801	  	 	 	$34,972	  	 	 	$107,226	  	 	 	$94,796	  	 	 	$88,541	  
	 Changes in non-cash working capital (000)
	 	 	$5,474	  	 	 	($970)	  	 	 	($692)	  	 	 	($5,148)	  	 	 	$7,066	  
	 Cash provided by operating activities (000)
	 	 	$37,275	  	 	 	$34,002	  	 	 	$106,534	  	 	 	$89,648	  	 	 	$95,607	  
						
	   Earnings before income taxes (000)
	 	 	$37,138	  	 	 	$27,270	  	 	 	$105,935	  	 	 	$90,468	  	 	 	$78,245	  
	   Earnings (000)
	 	 	$21,294	  	 	 	$18,319	  	 	 	$60,081	  	 	 	$63,795	  	 	 	$55,962	  
	   Earnings per share
	 				 				 				 				 			
	   - basic
	 	 	$0.18	  	 	 	$0.16	  	 	 	$0.51	  	 	 	$0.55	  	 	 	$0.52	  
	   - diluted
	 	 	$0.18	  	 	 	$0.16	  	 	 	$0.51	  	 	 	$0.55	  	 	 	$0.51	  
						
	   Comprehensive income (000)
	 	 	$21,703	  	 	 	$15,918	  	 	 	$60,333	  	 	 	$62,463	  	 	 	$56,655	  
	 Weighted average number of common shares outstanding
	 				 				 				 				 			
	   - basic
	 	 	118,308,000	  	 	 	116,100,000	  	 	 	117,375,000	  	 	 	115,183,000	  	 	 	  106,765,000	  
	   - diluted
	 	 	119,563,000	  	 	 	117,735,000	  	 	 	118,669,000	  	 	 	116,907,000	  	 	 	108,749,000	  
						
	   Assets (000) (2)
	 				 				 	 	$599,224	  	 	 	$506,436	  	 	 	$360,282	  
						
	   Dividends paid (000)
	 	 	$8,280	  	 	 	$4,056	  	 	 	$14,114	  	 	 	$7,495	  	 	 	-	  
		 				 				 				 				 			

  

	(1)	 A non-GAAP measure calculated as cash
provided by operating activities as presented on the consolidated statements of cash flows and adding back changes in non-cash working capital. 

	(2) 	 Assets are shown as at December 31, 2011 and December 31, 2010. 

	(3)	 Financial highlights for 2009 are in
accordance with Canadian GAAP. 

 Higher realized gold prices and continued low cash costs contributed to the
Company generating record cash from operating activities and record earnings in the fourth quarter of 2011. Cash from operating activities after changes in non-cash working capital in the fourth quarter of 2011 of $37.3 million ($0.32 per basic
share) increased 10% relative to the same period of 2010. 
 Earnings before income taxes in the fourth quarter of 2011 were
$37.1 million or $0.31 per share, compared to $27.3 million or $0.23 in the fourth quarter of 2010. Earnings in the fourth quarter of 2011 of $21.3 million or $0.18 per share increased 16% over 2010. 

For the year ended December 31, 2011, cash from operating activities of $106.5 million or $0.91 per share increased 19% from the
prior year due primarily to higher realized gold prices. Earnings before income taxes of $105.9 million or $0.90 per share increased 17% compared to the prior year. For the year ended December 31, 2011, earnings of $60.1 million were 6% lower
than in 2010 as a result of higher deferred tax expense in 2011 and a $12.5 million ($0.11 per share) non-recurring gain in 2010 associated with a legal settlement. In addition, 

  
  

12 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 
reported earnings in 2011 exclude earnings associated with the sale of ounces produced from Escondida of approximately $3.2 million, which were offset against capitalized development costs.

 Gold Sales 
 Details of gold sales are presented below: 
  

																	
	 	 	 Q4
 2011
	 	  	 Q4
 2010
	 	  	2011	 	  	2010	 
					
	   Gold sales (ounces)
	 	 	45,224	  	  	 	44,507	  	  	 	151,000	  	  	 	154,343	  
					
	   Gold sales revenues (000)
	 	 	$76,319	  	  	 	$60,791	  	  	 	$234,748	  	  	 	$189,272	  
	   Less: Pre-production revenues
	 	 	($5,186)	  	  	 	            -	  	  	 	($7,384)	  	  	 	            -	  
	   Operating revenues (000)
	 	 	$71,133	  	  	 	$60,791	  	  	 	$227,364	  	  	 	$189,272	  
					
	   Realized gold price per ounce
	 	 	$1,688	  	  	 	$1,366	  	  	 	$1,555	  	  	 	$1,226	  
	   Average gold price for period (London PM Fix)
	 	 	$1,687	  	  	 	$1,367	  	  	 	$1,572	  	  	 	$1,225	  

 Gold sales revenues in the fourth quarter of 2011 were $76.3 million, 26% higher than sales of $60.8
million in the fourth quarter of 2010. The increase in gold sales in the fourth quarter is attributable to a 24% increase in the realized gold price per ounce, in addition to a 2% increase in the number of ounces sold. For the 2011 year, gold sales
revenues of $234.7 million increased 24% due primarily to a higher gold price. In 2011, the Company estimated that $7.4 million of gold sales revenues was derived from the Escondida zone. This revenue was considered to be pre-production revenues and
was offset against capitalized Escondida development costs. 
 The Company generally enters into forward sales contracts in order
to match sales contracts with the next expected delivery date. The Company’s objective is to realize a gold sales price consistent with the average London PM Fix spot gold price. The realized gold price per ounce for the fourth quarter of 2011
was $1,688 per ounce, consistent with the average gold price for the period. For 2011, the realized gold price per ounce was $17 below the average gold price for the year as a result of lower than budgeted production in the third quarter, which
limited the Company’s ability to benefit from an increase in the gold price during that period. As at December 31, 2011, the Company did not have any significant derivative activity outstanding related to gold, and is therefore fully
leveraged to future changes in the price of gold. 
 Assessment of Gold Market 

The market price of gold continues to exhibit significant volatility. Subsequent to the end of the fourth quarter of 2011, the spot market
gold price had increased to over $1,750 per ounce on February 21, 2012. At this gold price, the Company realizes a mine operating cash margin (before taxes and corporate and administrative costs) in excess of $1,200 per ounce. 

  
 13 

 2011 RESULTS 

 
 Operating Expenses and Operating Margins 

Mine operating costs allocated to ounces sold are summarized in the following table for the periods indicated: 

 

															
	 	  	2011	 	  	2010	 	  	Change %  	 	  	 
					
	   Gold production (ounces) (1)
	  	 	153,000	  	  	 	156,000	  	  	 	(2%)	  	  	
	   Gold sales (ounces) (2)
	  	 
	151,000(2)	 
 	  	 	154,343	  	  	 	(2%)	  	  	
					
	   Cash operating costs (000)(3)

	  	 	$53,868	  	  	 	$46,560	  	  	 	16%	  	  	
	   - Per ounce sold
	  	 	$368	  	  	 	$302	  	  	 	22%	  	  	
					
	   Royalties (000)(4)
	  	 	$11,157	  	  	 	$9,090	  	  	 	23%	  	  	
	   Total cash costs (000)(5)

	  	 	$65,025	  	  	 	$55,650	  	  	 	17%	  	  	
	   - Per ounce sold
	  	 	$444	  	  	 	$361	  	  	 	23%	  	  	
					
	   Amortization (000)
	  	 	$23,423	  	  	 	$20,486	  	  	 	14%	  	  	
	   Total production costs (000)(6)

	  	 	$88,448	  	  	 	$76,136	  	  	 	16%	  	  	
	   - Per ounce sold
	  	 	$604	  	  	 	$493	  	  	 	23%	  	  	
					
	   - Realized gold price per ounce
	  	 	$1,555	  	  	 	$1,226	  	  	 	27%	  	  	
	   - Operating cash margin per ounce (7)
	  	 	$1,111	  	  	 	$865	  	  	 	28%	  	  	

  
  

 

	(1)	 Reported gold production is subject to
final refinery settlement. 

	(2)	 Gold sales (ounces) for YTD 2011
includes 4,610 ounces estimated to be have been sold during the year from the Escondida zone. These ounces are excluded for purposes of calculating cash operating costs per ounce sold, total cash costs per ounce sold, total production costs per
ounce sold and operating cash margin per ounce. 

	(3)	 “Cash operating costs” is a
non-GAAP measure which includes all direct mining costs, refining and transportation costs and by-product credits. “Cash operating costs” is equivalent to mining and processing costs as reported in the Company’s financial statements,
which is presented net of inventory adjustments. 

	(4)	 Royalties are included as of
April 1, 2006 at 5% of net precious metals revenues (as determined in accordance with the royalty agreement). 

	(5)	 “Total cash costs” is a
non-GAAP measure which includes all “cash operating costs” and royalties. “Total cash costs” is equivalent to mining and processing costs and royalties as reported in the Company’s financial statements.

	(6)	 “Total production costs” is
a non-GAAP measure which includes all “total cash costs”, amortization, and accretion of asset retirement obligations. “Total production costs” is equivalent to mining and processing costs, royalties, amortization and accretion
of asset retirement obligations as reported in the Company’s financial statements. 

	(7)	 “Operating cash margin per
ounce” is a non-GAAP measure which is calculated as the difference between the Company’s gold sales and mining and processing and royalty expenses (“total cash costs”) as reported in the Company’s financial statements.

 Cash operating costs in 2011 were $368 per ounce of gold sold, at the low end of the Company’s full
year guidance range of $365-$390 per ounce and 22% higher than in 2010. Cash operating costs per ounce in 2011 were higher relative to the same periods of last year due to lower grades mined, higher input costs as well as the relative strengthening
in the value of the Mexican peso compared to the United States dollar. Amortization was $160 per ounce of gold sold in 2011, 20% higher than $133 per ounce in the same period of 2010. The Company made significant capital additions over the past
year, which has increased the capital cost base and resulted in higher amortization expense per ounce in 2011. 

  
  

14 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 Production from certain mining concessions within the Salamandra District is subject to a sliding scale
production royalty. At gold prices above $400, the royalty is calculated 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. With the achievement of commercial production on April 1, 2006, production to a maximum of two million ounces of gold is subject to royalty. As at December 31,
2011, the royalty was paid or accrued on approximately 806,000 ounces of applicable gold production. Royalty expense of $11.2 million increased 23% from royalty expense of $9.1 million in 2010, attributable to a higher average market gold price.

 Exploration 
 The Company’s accounting policy for exploration costs requires that exploration expenditures that do not meet the criteria for mine development be expensed as incurred. Total exploration spending in
2011 was $16.7 million, of which $9.5 million was expensed. Exploration spending in Mexico of $5.3 million was expensed, while $3.1 million was capitalized relating to drilling at San Carlos and El Victor North. In addition, $4.1 million of
exploration costs supporting development of Ağı Dağı and Kirazlı were capitalized and $4.2 million was expensed. Comparatively, in 2010, a total of $13.8 million was invested in exploration, of which $7.6 million was
expensed and $6.2 million related to Turkey was capitalized. 
 Corporate and Administrative 

Corporate and administrative expenses of $9.6 million in 2011 were 5% higher than the $9.2 million incurred in 2010. Higher corporate and
administrative costs were primarily the result of higher costs associated with the Company’s administration office in Turkey, higher salary costs related to new employees in the Toronto head office and increased travel costs. 

Share-based Compensation 
 Share-based compensation expense in 2011 was $13.5 million compared to $16.3 million in 2010. The value of share-based compensation expense related to stock options is added to the contributed surplus
account within shareholders’ equity, resulting in no net effect on total shareholders’ equity. 
 Share-based
compensation expense in 2011 is comprised of $12 million related to the Company’s stock option plan and $1.5 million related to a stock appreciation rights (“SARs”) plan that was adopted in the fourth quarter of 2011. SARs are
cash-settled liabilities which entitle the holder of a vested SAR to exercise and realize a cash payment equivalent to the intrinsic value of the SAR. The fair value of SARs is measured using the Black-Scholes option pricing model and is remeasured
using the Black Scholes model at each reporting date. At settlement, the fair value of the liability is remeasured using intrinsic value and the liability is settled by a cash payment to the holder of the SAR. 

All stock option and SARs grants are subject to vesting provisions under which 20% of all stock options and SARs granted vest on the date
of grant and 20% at each subsequent six-month period. The vesting provisions result in the calculated market value of stock option grants being charged to expense in accordance with the vesting terms of the option. 

  
 15 

 2011 RESULTS 

 
 Share-based compensation expense for 2011 was lower than in
2010 as a result of a 25% decrease in the number of stock options and SARs granted in 2011 relative to 2010. 
 Finance
Income 
 Finance income in 2011 was $1.7 million compared to $1.5 million in 2010, as a result of higher cash and short-term
investment balances. Interest rates on deposit accounts and short-term investments remain near historically low levels. 

Financing Expense 
 Financing expense includes accretion of the Company’s asset retirement and property acquisition obligation liabilities. The expense for the current year was comparable to the prior year. 

Foreign Exchange Loss 
 The Company recognized a foreign exchange loss of $0.2 million in 2011 compared to a foreign exchange loss of nil in 2010. Throughout 2011, the value of the United States dollar strengthened against all
of the Company’s operating currencies, including the Mexican peso, Turkish lira and Canadian dollar. 
 Significant foreign
exchange movements in 2011 included a $2.6 million foreign exchange gain on revaluation of the Company’s Mexican Peso-denominated net liability position, offset by a $1.2 million foreign exchange loss on revaluation of the Company’s net
Turkish lira-denominated asset position, and a $1.6 million foreign exchange loss on the Company’s Canadian dollar-denominated net assets. 
 Income Taxes 
 Tax expense in 2011 was $45.9 million compared to $26.7
million in 2010. The Single Rate Tax Law (minimum tax) that came into effect in Mexico at the start of 2008 did not contribute to a higher tax expense in 2011, but may in future periods. The Company is cash taxable in Mexico and must calculate and
provide for tax instalments on a monthly basis. The Company satisfies its tax liability through periodic instalment payments, as well as by offsetting refundable value-added tax owed from the Mexican government against its tax payable liability.

 The statutory income tax rate in Mexico for 2011 is 30%. In Canada, the combined federal and provincial statutory income tax
rate is 28% in 2011. The effective tax rate for 2011 (calculated as a percentage of earnings before income tax) was 43%, substantially higher than the statutory rate. The effective tax rate results from a number of factors, many of which are
difficult to forecast. In 2011, the Company recorded a $5 million non-cash deferred tax expense to recognize the impact of foreign exchange movements on temporary tax differences associated with foreign currency denominated non-monetary assets and
liabilities. This adjustment is required under IFRS and resulted in a material expense as both the Mexican peso and the Turkish lira weakened significantly. The Company expects the effective tax rate to continue to fluctuate in periods of
significant change to Mexican peso and/or Turkish lira foreign exchange rates. 

  
  

16 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 Summary of Quarterly Results 
 The following table summarizes quarterly results for the past eight quarters. Quarterly gold production has been adjusted to reflect final settlements, where applicable. 

 

																																	
	 	  	 Q1    

2010    
  
	 	  	
Q2    
2010    

 
	 	  	 Q3    

2010    
  
	 	  	
Q4    
2010    

 
	 	  	 Q1 2011    

 
  
	 	  	
Q2    
2011    

 
	 	  	
Q3    
2011    
 (1)    

 
	 	  	
Q4    
2011    
(1)    

 
	 
	 Gold production (ounces)
	  	 	41,600  	  	  	 	38,400  	  	  	 	30,200  	  	  	 	45,800  	  	  	 	37,500  	  	  	 	36,000  	  	  	 	33,000  	  	  	 	46,500  	  
									
	 Gold sales (ounces)
	  	 	42,148  	  	  	 	39,688  	  	  	 	28,000  	  	  	 	44,507  	  	  	 	39,186  	  	  	 	37,800  	  	  	 	28,790  	  	  	 	45,224  	  
									
	 Gold sales revenues ($000)
	  	 	46,651  	  	  	 	47,494  	  	  	 	34,336  	  	  	 	60,791  	  	  	 	54,376  	  	  	 	56,864  	  	  	 	47,191  	  	  	 	76,317  	  
									
	 Earnings from mine operations ($000)
	  	 	22,041  	  	  	 	18,624  	  	  	 	11,331  	  	  	 	28,058  	  	  	 	25,245  	  	  	 	25,231  	  	  	 	20,038  	  	  	 	35,723  	  
									
	 Earnings ($000)
	  	 	15,525  	  	  	 	9,474  	  	  	 	20,472  	  	  	 	18,333  	  	  	 	17,857  	  	  	 	15,494  	  	  	 	5,436  	  	  	 	21,294  	  
									
	 Earnings ($ per share) – basic/diluted
	  	 
 	0.14 /  
0.13  	  
  	  	 	0.08  	  	  	 
 	0.18 /  
0.17  	  
  	  	 	0.16  	  	  	 	0.15  	  	  	 	0.13  	  	  	 	0.05  	  	  	 	0.18  	  

  

	 	(1)	 Gold sales (ounces) for the third and
fourth quarter of 2011 include ounces sold from the Escondida zone. Accordingly, gold sales revenues include $2.2 million and $5.2 million in Q3 2011 and Q4 2011 respectively of revenue from the sale of Escondida ounces which is considered to be
pre-production revenue and is offset against capitalized Escondida development costs. 

 Gold sales revenues
generally trended higher over the past eight quarters as the Company has benefited from rising gold prices. Higher realized gold prices and gold sales have resulted in generally improved financial results. Gold production in the first and fourth
quarters are generally higher than in the second and third quarters of the year, which can be adversely affected by weather-related production issues. The third quarter rainy season in northwestern Mexico adversely impacted gold production, sales
and operating results in 2011 and 2010. Seasonal conditions could continue to impact production and financial results in future years if rainfall is significantly different from seasonal averages. 

Financial and Other Instruments 
 The Company’s financial assets and liabilities consist of cash and cash equivalents, short term investments, amounts receivable, available-for-sale and held-for-trading securities, accounts payable
and accrued liabilities and deferred tax liabilities, some of which are denominated in Canadian dollars (“CAD”), Mexican pesos (“MXN”) and Turkish Lira (“TRL”). The Company is exposed to financial gains or losses as a
result of foreign exchange movements against the United States dollar (“USD”). 
 The Company’s cash and cash
equivalents may be invested in short-term liquid deposits or investments which provide a revised rate of interest upon maturity. At December 31, 2011, the majority of the Company’s reported cash and cash equivalents were held in bank
deposit accounts or 60-day to 90-day term deposits. The Company’s short-term investments are generally term deposits with an initial term-to-maturity on acquisition of greater than 90 days. 

  
 17 

 2011 RESULTS 

 
 The majority of the Company’s cash balances are held in
United States dollars. However, the Company does maintain cash and cash equivalents denominated in CAD, MXN and TRL. At December 31, 2011, the Company had entered into derivative contracts in order to manage its exposures to fluctuations in CAD:USD
foreign exchange rates. 
 The Company is exposed to monetary assets and liabilities denominated in CAD. The Company maintains
CAD cash and investment balances, which are not fully offset by CAD-denominated liabilities. As a result, the Company has entered into forward foreign currency contracts in order to reduce its exposure to changes in the value of the CAD compared to
the USD. In 2011, the weakening of the CAD resulted in a $1.6 million foreign exchange loss. The mark-to-market gain associated with the Company’s forward foreign currency contracts was $nil for year ended December 31, 2011. 

The Company also has exposure to monetary assets and liabilities denominated in MXN. Significant cash balances, outstanding amounts
receivable, accounts payable or tax liabilities denominated in MXN expose the Company to foreign exchange gains or losses. The Company maintains cash balances in MXN in order to partially mitigate its balance sheet exposure to changes in the MXN/USD
exchange rate resulting from its MXN-denominated taxes payable and future tax liability balances. For the year ended December 31, 2011, the Company’s net MXN-denominated liability position resulted in a foreign exchange gain on revaluation
of approximately $2.6 million. 
 At December 31, 2011 the Company’s TRL-denominated net monetary assets consist of
approximately $10 million in TRL-denominated cash and short-term investments, in addition to value-added tax (“VAT“) receivables. This exposure contributed to a $1.2 million foreign exchange loss for the quarter due to the weakening of the
TRL compared to the USD during the period. 
 Liquidity and Capital Resources 

At December 31, 2011, the Company had $222.6 million in cash and cash equivalents and short-term investments compared to $188.2
million at December 31, 2010. The increase in total cash and cash equivalents and short-term investments of $34.4 million reflects positive cash flows from operations and financing activities offset primarily by capital spending in Mexico and
Turkey. Significant cash in-flows in 2011 included $106.5 million cash provided by operating activities, $22.3 million cash proceeds on exercise of options and $0.9 million on proceeds from the sale of equipment. Significant cash out-flows in 2011
included $77 million of capital and exploration expenditures in Mexico and Turkey, $2.2 million in purchases of available-for-sale securities, and $14.1 million in the payment of dividends. The Company’s working capital surplus increased to
$251.1 million at December 31, 2011 from $214.6 million at December 31, 2010. 
 The Company has ongoing budgeted
capital and exploration expenditures in Mexico and significant budgeted exploration and development costs in Turkey for 2012. The Company expects to invest in development and construction activities at its projects in Turkey over the next several
years, which the Company expects to be able to finance from a combination of existing cash balances and operating cash flows. 

The Company has increased its semi-annual dividend from $0.03 per share in the first quarter of 2010 to $0.10 per share in the first
quarter of 2012. The Company will continue to evaluate its dividend policy with the objective of continuing to maximize shareholder returns. 

  
  

18 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 Conversion to International Financial Reporting Standards (“IFRS”) 

Effective February 2008, the Accounting Standards Board announced that publicly accountable entities would be required to prepare
financial statements in accordance with IFRS for interim and annual financial statements for periods beginning on or after January 1, 2011. The transition date of January 1, 2011 required the restatement into IFRS for comparative purposes
of amounts previously reported under Canadian GAAP by the Company for the year ended December 31, 2010, including a revised opening balance sheet as at January 1, 2010. 

IFRS is based on a conceptual framework that is similar to Canadian GAAP, however, significant differences exist in certain areas of
recognition, measurement and disclosure. While the adoption of IFRS did not have a material impact on reported cash flows, it did have a material impact on the statements of financial position and statements of comprehensive income. The impact of
these differences on the January 1, 2010 opening statement of financial position, as well as the December 31, 2011 and December 31, 2010 statements of financial position have been disclosed in the consolidated financial statements. In
addition, the impact of these differences on the statements of comprehensive income for the years ended December 31, 2011 and 2010 have been disclosed in the consolidated financial statements. 

Impact of IFRS on Financial Position 
 The following is a discussion of the accounting standards that had a significant financial statement impact on the Company’s opening statement of financial position. 

 

	1)	IFRS 1, First-Time Adoption of IFRS: 

 Significant adjustments required on transition to IFRS were made, retrospectively, to opening retained earnings as at January 1, 2010, the date of the first comparative balance sheet presented under
IFRS. However, IFRS 1 provides entities adopting IFRS for the first time a number of optional exemptions and mandatory exemptions, in certain areas, to the general requirement for full retrospective application of IFRS on the date of transition. The
following are the optional exemptions which the Company elected: 
  

	•	 	 Business combination election – The election allows the Company to adopt IFRS 3(R) prospectively from the date of transition.

  

	•	 	 Fair value or revaluation as deemed cost election – The election allowed the Company to record certain items of property, plant and equipment at
fair value at the date of transition. The Company obtained independent fair value appraisals for its mobile equipment fleet and identified certain differences between the carrying value and fair value which reduced retained earnings and the related
carrying values of mineral property, plant and equipment by approximately $1 million (net of tax) as at the transition date. 

  

	•	 	 Share-based payments election – The election enabled the Company to adopt IFRS 2 for unvested options at the date of transition to IFRS.

  

	•	 	 Decommissioning liabilities included in the cost of mineral property, plant and equipment – This election enabled the Company to apply a
simplified approach to the determination of the corresponding asset balance relating to decommissioning liabilities at the date of transition. 

  
 19 

 2011 RESULTS 

 
 Due to changes in the discount rate applied to expected
future cash out-flows, the adjustment decreased the decommissioning liability by $0.3 million, with a corresponding decrease to the related asset of approximately $0.3 million. 

 

	•	 	 Borrowing costs - This election enabled the Company to not have to retrospectively restate balances relating to the implementation requirements of IAS
23(R), as a first-time adopter is able to apply the transitional provisions from the later of January 1, 2009 or the transition date. 

  

	2)	IAS 37, Provisions – Differences between Canadian GAAP and IFRS with respect to the discounting calculation and discount rates applied to future asset retirement
costs were noted, however, the impact on the Company’s property acquisition liability was not material. 

  

	3)	IFRS 2, Share-based payments – As a result of the adoption of IFRS, the Company changed the methodology used to calculate stock option forfeitures and the
calculation of graded vesting for compensation expense. Based on the IFRS 1 election discussed above, the transition date adjustment resulted in a reduction of retained earnings of approximately $3.0 million, with a corresponding increase to
contributed surplus. 

  

	4)	IFRS 6, Exploration costs – The Company’s policy under Canadian GAAP requires that exploration and evaluation costs be capitalized when the properties are
identified as having development potential, as evidenced by a positive economic analysis of the project. There was no impact on transition as a result of the IFRS 6 accounting policies elected, other than reclassifications on the statement of
financial position. 

  

	5)	IAS 12, Income Taxes – A key difference exists in that a deferred tax liability is recognized under IFRS for a temporary difference, except to the extent the
deferred tax liability arises from: 

  

	 	a.	The initial recognition of goodwill; or 

  

	 	b.	The initial recognition of an asset or liability in a transaction that is not a business combination; and at the time of the transaction, affects neither accounting
profit nor taxable profit (i.e. an asset acquisition). 

 The Company identified differences for certain
transactions in which deferred tax liabilities were recognized under Canadian GAAP. The adjustment reduced the future tax liability by $2.7 million, reduced mineral property, plant and equipment balances by approximately $3.0 million, and decreased
opening retained earnings by $0.3 million, as at the transition date. 
 IAS 12, Income Taxes – A key difference has been
identified in that a deferred tax liability is recognized under IFRS for a temporary difference caused by changes in the exchange rate of non-monetary assets and liabilities settled in a foreign currency. Differences existed, given that Canadian
GAAP prohibited recognition of deferred tax liabilities for foreign currency changes. The adjustment increased the future tax liability balance by approximately $5.4 million as at the transition date, with a corresponding decrease to opening
retained earnings. 
 Impact of IFRS on Statements of Comprehensive Income 

The following is a discussion of the accounting standards that had a significant financial statement impact on the Company’s
comparative statements of comprehensive income for the years ended December 31, 2011 and 2010. 

  
  

20 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
  

	 	1)	Mineral property, plant and equipment - Due to the adjustments to the provision for decommissioning liabilities and the adjustment for the deemed cost election
discussed above, the cost of property plant and equipment is different in accordance with IFRS than in accordance with Canadian GAAP. As a result, even though amortization is calculated in the same manner, the amount of amortization expense differs
by $0.3 million for the year ended December 31, 2010. 

  

	 	2)	Share-based payments - The effect of applying IFRS 2 was an increase to stock based compensation expense by $3.0 million for the year ended December 31, 2010, with
an offsetting adjustment to contributed surplus. 

  

	 	3)	Provision for decommissioning liabilities - The effect was an increase in financing expense by a nominal amount for the year ended December 31, 2010, with an
offsetting adjustment to decommissioning liability. 

  

	 	4)	Provision for property acquisition obligations - The effect was a decrease in financing expense by a nominal amount for the year ended December 31, 2010, with an
offsetting adjustment to the property acquisition obligation. 

  

	 	5)	Deferred tax liability - The effect was a reduction of the deferred income tax liability balance of $2.7 million as at January 1, 2010, with an offsetting
adjustment to mineral property, plant and equipment of $2.9 million and opening retained earnings of $0.2 million. In addition, in 2010, mineral property, plant and equipment and deferred income taxes were reduced by $17.7 million, as well as
foreign exchange loss and deferred income tax expense increased by a total of $1.9 million for the year ended December 31, 2010, with an offsetting adjustment to increase the deferred income tax liability. 

 

	 	6)	Deferred tax asset/liability - The effect was an increase in deferred income tax liability by $5.4 million as at January 1, 2010, with an offsetting adjustment to
opening retained earnings. In addition, the effect was a decrease in deferred income tax expense by $2.5 million for the year ended December 31, 2010, with an offsetting adjustment to deferred income tax liability. 

 

	 	7)	Available-for-sale financial assets - For available-for-sale financial assets, foreign exchange amounts arising from translation of the assets are recorded in other
comprehensive income, resulting in an adjustment to foreign exchange gain of $0.4 million for the year ended December 31, 2010, with an offsetting adjustment to comprehensive income. 

Internal Control over Financial Reporting 
 Management is responsible for the design and operating effectiveness of internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the financial statements in accordance with accounting principles generally accepted in Canada. Based on a review of its internal control procedures at the end of the period covered by this MD&A, management believes its internal
controls and procedures are appropriately designed and operating effectively as at December 31, 2011. 
 Disclosure
Controls 
 Management is also responsible for the design and effectiveness of disclosure controls and procedures to provide
reasonable assurance that material information related to the 

  
 21 

 2011 RESULTS 

 
 
Company, including its consolidated subsidiaries, is made known to the Company’s certifying officers. The Company’s Chief Executive Officer and Chief Financial Officer have each
evaluated the effectiveness of the Company’s disclosure controls and procedures as at December 31, 2011 and have concluded that these controls and procedures are effective. 

Off-Balance Sheet Arrangements 
 The Company does not have any off-balance sheet arrangements. 
 Commitments

 The following table summarizes the Company’s contractual obligations at December 31, 2011: 

Payments due by period ($000) 

																					
	  Contractual Obligations	  	Total     	 	  	Less   
than 1   
year   	 	  	2 – 3   
years   	 	  	4 – 5   
years   	 	  	  
 More   
than 5   
years   
	 
	 Escondida development
(1)
	  	 	1,500	  	  	 	1,500	  	  	 	-	  	  	 	-	  	  	 	-	  
	 Operating lease
	  	 	955	  	  	 	221	  	  	 	476	  	  	 	258	  	  	 	-	  
	 Accounts payable and accrued liabilities
	  	 	17,024	  	  	 	17,024	  	  	 	-	  	  	 	-	  	  	 	-	  
	 Asset retirement obligations
	  	 	13,431	  	  	 	-	  	  	 	-	  	  	 	-	  	  	 	13,431	  
	 Property acquisition obligations
	  	 	507	  	  	 	363	  	  	 	144	  	  	 	-	  	  	 	-	  
		  	 	33,417	  	  	 	19,108	  	  	 	620	  	  	 	258	  	  	 	13,431	  

  

	 	(1)	 During the third quarter of 2009, the
Company signed a contract with an international mining contractor to develop the Escondida zone of the Mulatos deposit. Total remaining expected costs associated with this contract are approximately $1.5 million to be incurred in 2012.

 Contractual obligations exist with respect to royalties; however gold production subject to royalty cannot
be ascertained with certainty and the royalty rate varies with the gold price. Based on the current gold price and rates of production, royalty expense is expected to be in the range of $4 to $5 million per quarter. 

The Company has signed relocation contracts with certain property owners and possessors in the town of Mulatos. In addition, negotiations
for surface rights with respect to the La Yaqui and Cerro Pelon development properties are ongoing. Negotiation efforts are currently focused on resolving differences in price expectations between the Company and various counterparties. 

During the second quarter of 2008, the Company entered into a land purchase agreement with certain landowners. Pursuant to the land
purchase agreement, the Company made a payment of $1.25 million in order to secure temporary occupation rights to specified land. An additional payment of $1 million based on current exchange rates is payable once the land has been vacated and is
transferred to the Company, which has not been accrued as at December 31, 2011. The probability and timing of this additional payment is currently unknown to the Company. 

  
  

22 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 During 2010, the Company received notice that the Mulatos Ejido had filed a complaint with the Unitary Agrarian
Court to nullify the 2008 land purchase agreement. The Company has received a legal opinion that the action is without merit. Preliminary hearings are being held, and the matter remains unresolved by the Court at this time. The Company is committed
to completing the agreement based on the original terms. The land purchase agreement does not affect current mining operations of the Company. 
 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. 

Outstanding Share Data 
 The table below describes the terms associated with the Company’s outstanding and diluted share capital: 

 

					
	 	  	February 21, 2012	 
	 Common shares
	  			
	  - Common shares outstanding
	  	 	119,114,006	  
		
	 Stock options
	  	 	5,674,700	  
	  - Average exercise price CAD$13.30; approximately 70% vested
	  			
		
	 Total
	  	 	124,788,706	  
		  			

 Outlook 
 The Company successfully achieved its revised production and cost guidance in 2011, with the Mulatos Mine producing 153,000 ounces at a cash operating cost (exclusive of the 5% royalty) of $368 per ounce
of gold sold. Despite a number of operational challenges, including cyanide supply and weather-related issues, gold production exceeded 150,000 ounces for the fourth consecutive year in 2011, while maintaining cash operating costs well below $400
per ounce. 
 In 2012, the Mulatos Mine is forecast to produce its one millionth ounce of gold. Ongoing exploration success has
resulted in a track record of mined reserves being replaced. In 2012, the Company expects production to increase to between 200,000 and 220,000 ounces at a cash operating cost of $365 to $390 per ounce of gold sold ($450 to $475 per ounce of gold
sold inclusive of the 5% royalty, assuming a $1,700 gold price). The Company expects that gold produced from the gravity mill, which will process high-grade ore from Escondida, will add a minimum of 67,000 ounces of production in 2012 at a grade of
13.4 g/t Au. Based on bulk sample testing conducted in 2007, the Company believes that there is the potential for higher production from the gravity mill as a result of realizing positive grade reconciliation to the reserve grade. 

The high-grade gravity mill has been constructed and is currently undergoing commissioning and is expected to be operational with
high-grade production by the end of the first quarter of 2012. The current life of the Escondida zone is approximately three years and exploration efforts in Mexico in 2012 will continue to focus on sourcing additional high-grade mill feed.

  
 23 

 2011 RESULTS 

 
 Metallurgical testing completed in 2011 on higher grade ore
from San Carlos demonstrated that it is amenable to gravity processing, potentially doubling the amount of available mill feed. Further optimization and metallurgical studies are underway in order to increase the amount of high grade ore that can be
processed through the gravity plant. 
 In 2011, the Company demonstrated exploration success at its Ağı Dağı
and Kirazlı projects in northwestern Turkey, with measured and indicated resources more than doubling since the Company acquired the projects in early 2010. In addition, the discovery of Çamyurt project is expected to further increase
resources and to materially contribute to the Company’s production profile in Turkey. An updated resource estimate which incorporates the initial resource for Çamyurt is expected to be released in March 2012. 

Throughout 2012, activities in Turkey will be focused on completing the preliminary feasibility study in the second quarter, securing EIA
approvals in the third quarter and the commencement of construction activities in the fourth quarter of 2012. The preliminary feasibility study will incorporate the additional resources and accommodate the increased scope of the projects since
acquisition. The Company believes that the revised combined production profile of Ağı Dağı and Kirazlı could result in annual production rates in Turkey that are substantially higher than initially reported in the March 2010
Scoping Study of 135,000 ounces per annum over an expected 8-year mine life. 
 Exploration activities in 2012 are expected to
continue to expand resources in both Mexico and Turkey. In Mexico, the focus will be on step-out drilling at San Carlos and expansion of the mineralized zone at El Victor North, in addition to the initiation of underground development for
exploration drilling. In Turkey, drilling activities in the first half of 2012 will focus on engineering activities to support the project development plan. Infill and expansion drilling at Çamyurt will continue, in addition to drill programs
at the highly prospective Rockpile target. 
 The Company continues to strengthen its financial position: debt-free with over
$240 million in cash and short-term investments at February 21, 2012 and continued strong cash flows from operations. This financial strength will continue to allow the Company to finance its immediate capital, development and exploration
plans, as well as provide significant funding for development of additional projects through internal growth or acquisitions. 

Future accounting policy changes 
 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 was issued by the IASB on November 12, 2009 and will
replace IAS 39. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple classification options available in IAS 39. The approach in IFRS 9 is based on how an entity
manages its financial impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2013. The impact of IFRS 9 on the Company’s financial instruments has not been determined. 

  
  

24 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 (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. The impact of adoption of IFRS
10 on the consolidated financial statements has not been determined. 
 (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 

  
 25 

 2011 RESULTS 

 
 
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.

 (vi) 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 sets out the criteria for the capitalization of production stripping costs to non-current assets, and states that the stripping activity
is recognized as a component of the larger asset to which it relates. 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 intends to adopt the amendments in its financial statements for the annual period beginning on January 1, 2013. The impact of adoption of IFRIC 20 has not yet been determined. 

Critical Accounting Estimates 
 The preparation of financial statements under IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
and revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments
about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 
 The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and further periods if the review affects both current and future periods. Accounts which require management to make material estimates and significant assumptions in determining amounts recorded include:
impairment of tangible and intangible assets, recoverable reserves, inventory recoveries, share-based payments, decommissioning liabilities, units of production amortization, provisions and contingencies, and recovery of deferred tax assets.

 Judgments made by management in the application of IFRS that have a significant effect on the financial statements and
estimates with a significant risk of material adjustment in the current and following fiscal years include: determination of functional currency and amortization methods. 
 i) Impairment: 
 The Company assesses its mineral property, plant and equipment and
exploration and evaluation assets annually to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value
less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential and operating performance. 

  
  

26 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 ii) Recoverable reserves: 
 Ore reserves are estimates of the amount of ore that can be economically and legally extracted from the Company’s mining properties. The Company estimates its recoverable reserves based on
information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires complex geological judgments to interpret the data. The estimation of recoverable reserves is based
upon factors such as estimates of commodity prices, production costs, future capital requirements, and foreign exchange rates, along with geological assumptions and judgments made in estimating the size and grade of the ore body. Changes in the
reserve or resource estimates may impact the carrying value of exploration and evaluation assets, mineral property, plant and equipment, decommissioning liabilities, and amortization expense. 

iii) Units-of-production (“UOP”) amortization: 
 Estimated recoverable reserves are used in determining the amortization of certain mineral property, plant and equipment. This results in an amortization charge proportional to the depletion of the
anticipated remaining mine life. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves and estimates of future capital expenditures. Numerous UOP amortization methods are available to choose
from; the Company has adopted a methodology based on estimated recoverable reserves over the life of mine. 
 iv) Inventory:

 The Company accounts for its in-process precious metals inventory using a process flow for applicable costs appropriate to the
physical transformation of ore through the mining, crushing, leaching and gold recovery process. The Company is required to estimate the ultimate recovery based on laboratory tests and ongoing analysis of leach pad kinetics in order to determine the
recoverable metals from the leach pad at the end of each accounting period. If the Company determines at any time that the ultimate recovery should be adjusted downward, then the Company will adjust the average carrying value of a unit of metal
content in the in-process inventory and adjust upward on a prospective basis the unit cost of subsequent production. Should an upward adjustment in the average carrying value of a unit of metal result in the carrying value exceeding the realizable
value of the metal, the Company would write down the carrying value to the realizable value. 
 v) Share based payments:

 The Company follows accounting guidelines in determining the fair value of share-based compensation. The computed amount is
not based on historical cost, but is derived based on subjective assumptions input into an option pricing model. The model requires that management make forecasts as to future events, including estimates of: the average future hold period of issued
stock options or stock appreciation rights before exercise, expiry or cancellation; future volatility of the Company’s share price in the expected hold period (using historical volatility as a reference); and the appropriate risk-free rate of
interest. Share-based compensation incorporates an expected forfeiture rate. The 

  
 27 

 2011 RESULTS 

 
 
expected forfeiture rate is estimated based on historical forfeiture rates and expectations of future forfeiture rates, and is adjusted if the actual forfeiture rate differs from the expected
rate. 
 The resulting value calculated is not necessarily the value that the holder of the instrument could receive in an
arm’s length transaction, given that there is no market for these instruments and they are not transferable. It is management’s view that the value derived is highly subjective and dependent upon the input assumptions made. 

vi) Decommissioning liabilities: 
 The Company is required to determine the expected value of the estimated costs of decommissioning liabilities and to recognize this value as a liability when reasonably determinable. Key assumptions in
determining the amount of the liability are: total undiscounted cash outflows, expected timing of payment of the cash outflows and appropriate inflation and discount rates to apply to the timing of cash outflows. Because the liability is recorded on
a discounted basis, it is increased due to the passage of time with an offsetting charge to financing expense in the statement of comprehensive income. The Company calculated its estimated mine site closure costs based on a mine closure and
reclamation plan prepared by management and reviewed by an independent third party. The majority of the expenditures associated with reclamation and mine closure will be incurred at the end of the mine life, expected to be approximately 9 years
based on expected proven and probable reserves and the current rate of production. 
 vii) Provisions: 

The Company records provisions which include various estimates, including the Company’s best estimate of the future costs associated
with settlement of the obligation, and discount rates applied. Such estimates are necessarily calculated with reference to external sources, all of which are subject to annual review and change. 

viii) Recovery of deferred tax assets: 
 Judgment is required in determining whether deferred tax assets are recognized on the statement of financial position. Deferred tax assets require management to assess the likelihood that the Company will
generate taxable income in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted cash flows and the application of existing tax laws in each jurisdiction. 

Risk Factors and Uncertainties 
 The financing, exploration, development and mining of any of the Company’s properties is subject to a number of factors including the price of gold, laws and regulations, political conditions,
currency fluctuations, environmental regulations, hiring qualified people and obtaining necessary services in jurisdictions where the Company operates. The current trends relating to these factors are favorable but could change at any time and
negatively affect the Company’s operations and business. 
 The following is a brief discussion of those distinctive or
special characteristics of the Company’s operations and industry which may have a material impact on, or constitute risk factors in respect of the Company’s future financial performance. 

  
  

28 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 Industry 
 The Company is engaged in exploration, mine development and the mining and production of precious metals, primarily gold, and is exposed to a number of risks and uncertainties that are common to other
companies in the same business. Unusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, cave-ins, landslides and the inability to obtain suitable adequate machinery, equipment or labour are risks
involved in the operation of mines and the conduct of exploration programs. The Company has relied on and may continue to rely upon consultants and others for mine operating and exploration expertise. Few properties that are explored are ultimately
developed into producing mines. Substantial expenditures are required to establish ore reserves through drilling, to develop metallurgical processes to extract the metal from the ore and in the case of new properties, to develop the mining and
processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineral deposit, the Company may not be able to raise sufficient funds for development. The economics
of developing mineral properties are affected by many factors including the cost of operations, variations in the grade of ore mined, fluctuations in metal markets, costs of mining and processing equipment and such other factors as government
regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. Where expenditures on a property have not led to the discovery of mineral reserves, spent costs will
not usually be recoverable. 
 Commodity Price 
 The value of the Company’s mineral resources and future operating profit and loss is affected by fluctuations in gold prices, over which the Company has no control. A reduction in the price of gold
may prevent the Company’s properties from being economically mined or result in the write-off of assets whose value is impaired as a result of low gold prices. The price of gold may also have a significant influence on the market price of the
Company’s common shares. The price of gold is affected by numerous factors beyond the Company’s control, such as the level of inflation, fluctuation of the United States dollar and foreign currencies, global and regional demand, sale of
gold by central banks and the political and economic conditions of major gold producing countries throughout the world. The price of gold has increased significantly in the past several years. The current gold price is significantly above impairment
levels. The Company has elected not to engage in significant forward selling, as a number of gold mining companies have been adversely affected by maintaining a substantial forward sales book in the face of a rising gold market. At the current rate
of production, revenue will change by approximately $160,000 with each $1 change in the price of gold. 
 Currency

 The Company is subject to currency risks. The Company’s functional currency is the United States dollar, which is
subject to recent fluctuations against other currencies. The Company’s primary operations are located in Mexico and many of its expenditures and obligations are denominated in Mexican pesos. In addition, the Company has exploration and
development activities ongoing in Turkey where the majority of its expenditures and obligations are in Turkish lira or Euros. The Company’s head office is in Canada where it maintains cash accounts in United States and Canadian dollars. As a
result, the Company has monetary assets and liabilities and expenditures in United States dollars, Canadian dollars, Mexican pesos, Turkish lira and Euros. The Company’s results of operations are subject to foreign

  
 29 

 2011 RESULTS 

 
 
currency fluctuation risks and such fluctuations may adversely affect the financial position and operating results of the Company. The Company has not undertaken to mitigate transactional
volatility in either the Mexican peso or the Canadian dollar at this time. A 1% change in the relative value of the Canadian dollar would impact corporate and administrative costs by approximately $80,000 annually; a 1% change in the relative value
of the Mexican peso would impact operating costs by approximately $270,000 annually. A significant strengthening in the value of the Turkish lira compared to the United States dollar could adversely impact the economics associated with the
Company’s development-stage assets in Turkey. 
 Business 

The Company has limited financial resources which could affect its ability to carry out its business plan. The Company’s ability to
secure fixed gold prices or future foreign exchange rates is affected by its creditworthiness. Because of its limited operating record, it may not be able to hedge future risk to the extent it feels is appropriate. The Company’s ability to
obtain financing to explore for mineral deposits and to continue and complete the development of those properties it has classified as assets is not assured, nor is there assurance that the expenditure of funds will result in the discovery of an
economic mineral deposit. 
 Competitive 
 The Company’s business is intensely competitive, and the Company competes with other mining companies, many of which have greater resources and experience. Competition in the precious metals mining
industry is primarily for mineral rich properties which can be developed and produced economically; the technical expertise to find, develop, and produce such properties; the labour to operate the properties; and the capital for the purpose of
financing development of such properties. Many competitors not only explore for and mine precious metals, but conduct refining and marketing operations on a world-wide basis and some of these companies have much greater financial and technical
resources than the Company. Such competition may result in the Company being unable to acquire desired properties, recruit or retain qualified employees or acquire the capital necessary to fund its operations and develop its properties. The
Company’s inability to compete with other mining companies for these mineral deposits could have a material adverse effect on the Company’s results of operations and business. 

Country 

The Company conducts exploration, mine development and mining and production activities in Sonora, Mexico. Mexico is a developing country
and obtaining financing, finding or hiring qualified people or obtaining all necessary services for the Company’s operations in Mexico may be difficult. Mexico’s status as a developing country may make it more difficult for the Company to
attract investors or obtain any required financing for its mining projects. 
 The Company recently acquired development-stage
assets in Turkey and is subject to risks associated with conducting exploration activities and planning mine development activities in Turkey, including risks with respect to staffing, financing, obtaining the required goods and services,
permitting, community relations and environmental risks. 
 The Company strives to maintain good relations with the local
communities in which it operates by providing employment opportunities and social services. The Company has entered into surface agreements with the Mulatos Ejido. In addition, the Company has entered

  
  

30 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 
into agreements with individual Ejido members for the surface rights to which they have been assigned. The transfers of title to these surface rights have been registered under Mexican law.

 The Company is also in negotiations with Ejido and non-Ejido members, as a group and individually, to relocate the existing
community of Mulatos, and to acquire additional surface rights. Negotiations with the Ejido can become time-consuming if demands for compensation become unreasonable. In addition, risk exists that Ejido and/or non-Ejido members could take action in
attempts to physically impede access to the mine or mining operations. Such actions could include a blockade of the mine and could result in significant downtime and associated costs or suspension of operations and loss of production. With the
assistance of experienced legal advisors and input and assistance from state and local government officials, the Company expects that it will be able to acquire its land-use requirements at a reasonable cost, however, there can be no assurance that
this will be the case. The Company also expects that any actions taken by Ejido or non-Ejido members to interrupt or otherwise impede mine operations will be addressed by the appropriate state and federal government authorities. 

During 2010, the Company received notice that the Mulatos Ejido had filed a complaint with the Unitary Agrarian Court to nullify the 2008
land purchase agreement. The Company has received a legal opinion that the action is without merit. Preliminary hearings are being held, and the matter remains unresolved by the Court at this time. The land purchase agreement does not affect current
mining operations of the Company. 
 The acquisition of the right to exploit mineral properties is a detailed and time-consuming
process. Although the Company is satisfied it has taken reasonable measures to acquire unencumbered rights to explore on and exploit its mineral reserves on the Salamandra group of concessions, no assurance can be given that such claims are not
subject to prior unregistered agreements or interests or to undetected or other claims or interests which could be material and adverse to the Company. 
 Mexico recently enacted new tax laws which provide an additional layer of complexity and uncertainty in evaluating the financial benefit from current and future operations. 

Environmental 
 The operations of the Company are subject to environmental regulations promulgated by government agencies from time to time. Specifically, the Company activities related to its Salamandra Concessions are
subject to regulation by SEMARNAP, the environmental protection agency of Mexico. Regulations require that an environmental impact statement, known in Mexico as a Manifesto Impacto Ambiental, be prepared by a third-party contractor for
submittal to SEMARNAP. Studies required to support the Manifesto Impacto Ambiental include a detailed analysis of the following areas: soil, water, vegetation, wildlife, cultural resources and socio-economic impacts. The Company must also
provide proof of local community support for a project to gain final Manifesto Impacto Ambiental approval. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in
association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain
types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards, and enforcement, fines and penalties for non-compliance are more
stringent. 

  
 31 

 2011 RESULTS 

 
 Environmental assessments of proposed projects carry a
heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of operations. 

Regulatory 
 The Company’s activities are subject to extensive laws and regulations governing worker health and safety, employment standards, waste disposal, protection of historic and archaeological sites, mine
development, protection of endangered and protected species and other matters in both Mexico and Turkey. Specifically, the Company’s activities related to its Mulatos Mine and the Salamandra group of concessions are subject to regulation by
SEMARNAP, the environmental protection agency of Mexico, Comisión Nacional del Aqua (“CAN”), which regulates water rights, and the Mexican Mining Law. Mexican regulators have broad authority to shut down and/or levy
fines against facilities that do not comply with regulations or standards. The Company’s mineral exploration and mining activities in Mexico may be adversely affected in varying degrees by changing government regulations relating to the mining
industry or shifts in political conditions that increase the costs related to the Company activities or maintaining its properties. Operations may also be affected in varying degrees by government regulations with respect to restrictions on
production, price controls, export controls, income taxes, expropriation of property, environmental legislation and mine safety. 

A number of other approvals, licenses and permits are required for various aspects of mine development. While the Company has used its
best efforts to ensure title to all its properties and secured access to surface rights, these titles or rights may be disputed, which could result in costly litigation or disruption of operations. The Company is uncertain if all necessary permits
will be maintained on acceptable terms or in a timely manner. Future changes in applicable laws and regulations or changes in their enforcement or regulatory interpretation could negatively impact current or planned exploration and development
activities within the Company’s Salamandra group of concessions or any other projects with which the Company becomes involved. Any failure to comply with applicable laws and regulations or failure to obtain or maintain permits, even if
inadvertent, could result in the interruption of exploration and development operations or material fines, penalties or other liabilities. 
 A new Mining Law was adopted in Turkey in 2010. It contains certain provisions designed to streamline the permitting and development processes and encourage concession-holders to advance their projects on
a more timely basis in order to maintain the concessions in good standing. The Company’s concessions in Turkey are subject to meeting specific deadlines for obtaining certain permits and advancing its concessions in Turkey. While the Company is
confident in its ability to meet all required deadlines or milestones to maintain its concessions in good standing, there is no guarantee that the Company will be able to do this. The loss of key concessions could have a significant adverse impact
on the Company’s operating and development plans. 
 Estimates 

The mineral reserves and resource estimates of the Company are estimates only and no assurance can be given that any particular level of
recovery of minerals will in fact be realized or that an identified reserve or resource will ever qualify as a commercially mineable (or viable) deposit which can be legally and economically exploited. The Company relies on laboratory-based recovery
models to project estimated ultimate recoveries by ore type at 

  
  

32 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 
optimal crush sizes. Actual gold recoveries in a commercial heap leach operation may exceed or fall short of projected laboratory test results. In addition, the grade of mineralization ultimately
mined may differ from that indicated by drilling results and such differences could be material. Production can be affected by such factors as permitting regulations and requirements, weather, environmental factors, unforeseen technical
difficulties, unusual or unexpected geological formations, inaccurate or incorrect geologic, metallurgical or engineering work, and work interruptions, among others. Short term factors, such as the need for orderly development of deposits or the
processing of new or different grades or ore types, may have an adverse effect on mining operations or the results of operations. There can be no assurance that minerals recovered in small scale laboratory tests will be duplicated in large scale
tests under on-site conditions or in production scale operations. Material changes in proven and probable reserves or resources, grades, waste-to-ore ratios or recovery rates may affect the economic viability of projects. The estimated proven and
probable reserves and resources described herein should not be interpreted as assurances of mine life or of the profitability of future operations. Based on the expected 2011 rate of production and budgeted cash operating costs, a 1% change in the
expected rate of recovery of gold would result in a $4 per ounce change in cash operating costs, and an approximate $2,000,000 change in income and cash flow annually, before royalties and income taxes. A 1% change in cash cost per tonne of ore
would result in a $3 per ounce change in cash cost, and approximately $500,000 change in income and cash flow annually, before royalties and tax charges. 
 Dependence on Management 
 The Company is dependent on key personnel and the
absence of any of these individuals could result in a significantly negative effect on the Company. The Company strongly depends on the business and technical expertise of its management and key personnel. There is little possibility that this
dependence will decrease in the near term. As the Company’s operations expand, additional general management resources will be required, especially since the Company encounters risks that are inherent in doing business in several countries. The
Company is dependent, in particular, on its Chief Executive Officer, John McCluskey and its Chief Operating Officer, Manley Guarducci. Key man life insurance is not in place on Messrs. McCluskey or Guarducci. If the services of the Company’s
management and key personnel were lost, it could have a material adverse effect on future operations. 
 Legal

 Substantially all of the Company’s assets are located outside of Canada, and are held indirectly through foreign
affiliates. It may be difficult or impossible to enforce judgments obtained in Canadian courts predicated upon the civil liability provisions of the securities laws of certain provinces against the portion of the Company’s assets located
outside of Canada. 
 Forward-Looking Statements 
 Except for historical information contained in this management’s discussion and analysis, disclosure statements contained herein are forward-looking, as defined in the United States Private
Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those in such forward-looking statements. 

This MD&A contains forward-looking statements concerning the Company’s plans for its properties and other matters within the
meaning of Section 21E of the Securities Exchange 

  
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 2011 RESULTS 

 
 
Act of the United States. Forward-looking statements include, but are not limited to: statements with respect to anticipated commencement dates of mining expansions; potential expansion costs;
operations; projected quantities of future metal production; anticipated production rates and mine life; operating efficiencies; costs and expenditures and conversion of mineral resources to proven and probable reserves; and other information that
is based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. 
 Statements
concerning proven and probable reserves and mineral resource estimates may also be deemed to constitute forward-looking statements to the extent that they involve estimates of the mineralization that will be encountered if the property is developed,
and in the case of mineral resources or mineral reserves, such statements reflect the conclusion based on certain assumptions that the mineral deposit can be economically exploited. Exploration results that include geophysics, sampling and drill
results on wide spacings may not be indicative of the occurrence of a mineral deposit. Such results do not provide assurance that further work will establish sufficient grade, continuity, metallurgical characteristics and economic potential to be
classed as a category of mineral resource. It cannot be assumed that all or any part of an “indicated mineral resource” or “inferred mineral resource” will ever be upgraded to a higher category of resource. Investors are
cautioned not to assume that all or any part of the mineral deposits in these categories will ever be converted into proven and probable reserves. 
 Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always,
using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that
certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be “forward-looking statements.”
Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements. 

The Company has made projections of its annual production and operating costs based on an annual budget which incorporates assumptions
based on mining in sequence its mineral reserves at projected rates of tonnes and grade, assessing probable costs for mining and processing activities, projecting reasonable foreign exchange rates and achieving indicated rates of gold recovery
derived from laboratory testing and historical experience. These assumptions are considered reasonable in the circumstances, but may be subject to change as additional information becomes available. 

Cautionary Non-GAAP Measures and Additional GAAP Measures 
 Note that for purposes of this section, GAAP refers to IFRS. The Company believes that investors use certain Non-GAAP and additional GAAP measures as indicators to assess gold mining companies. They are
intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP. 
 Additional GAAP measures which are presented on the face of the Company’s consolidated statements of comprehensive income include “Mine operating costs”, “Earnings from mine
operations” and “Earnings from operations”. These measures are intended to provide an indication of the Company’s mine and operating performance. “Cash flow from operating activities before changes in non-cash working
capital” is a non-GAAP performance measure 

  
  

34 | ALAMOS GOLD INC 

 MANAGEMENT’S DISCUSSION & ANALYSIS 

(All amounts are expressed in United States dollars, unless otherwise stated) 
  
 
which could provide an indication of the Company’s ability to generate cash flows from operations, and is calculated by adding back the change in non-cash working capital to “Cash
provided by (used in) operating activities” as presented on the Company’s consolidated statements of cash flows. “Mining cost per tonne of ore” and “Cost per tonne of ore” are Non-GAAP performance measures which could
provide an indication of the mining and processing efficiency and effectiveness of the Mine. These measures are calculated by dividing the relevant mining and processing costs and total costs by the tonnes of ore processed in the period. “Cost
per tonne of ore” is usually affected by operating efficiencies and waste-to-ore ratios in the period. “Cash operating costs per ounce” and “total cash costs per ounce” as used in this analysis are Non-GAAP terms typically
used by gold mining companies to assess the level of gross margin available to the Company by subtracting these costs from the unit price realized during the period. These Non-GAAP terms are also used to assess the ability of a mining company to
generate cash flow from operations. There may be some variation in the method of computation of “cash operating costs per ounce” as determined by the Company compared with other mining companies. In this context, “cash operating costs
per ounce” reflects the cash operating costs allocated from in-process and dore inventory associated with ounces of gold sold in the period. “Cash operating costs per ounce” may vary from one period to another due to operating
efficiencies, waste-to-ore ratios, grade of ore processed and gold recovery rates in the period. “Total cash costs per ounce” includes “cash operating costs per ounce” plus applicable royalties. Cash operating costs per ounce and
total cash costs per ounce are exclusive of exploration costs. Non-GAAP and additional GAAP measures do not have a standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other companies.

  
 35

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