NYSE American: ALO
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Message from the CEO

A Message to the Shareholders from Mark Backens, CEO Alio Gold Inc.

This is my second time as CEO of the Company.  I was previously at the helm from October 2015 to March 2017 and now again since March of 2019.

Over the last few years, poor operating results, missed guidance, a dwindling treasury, contract disputes and a myriad of other issues have caused an erosion of the trust our shareholders had in the company.  This has resulted in severe underperformance of our share price as investors have looked elsewhere and hence the reason our share price has not responded to the recent rise in gold price.

Since March, Alio leadership has been focused on making the necessary changes to the culture, strategy and structure of the Company to turn us around and regain our credibility in the market and with our shareholders.

I am confident in our ability to execute on our plans which provides a compelling reason to invest in the Company.

Top priority for us is to achieve safe, profitable production from our cornerstone asset Florida Canyon.  2020 is poised to be a break-out year for us post completion of significant value enhancing initiatives at the mine.  During the last half of the year we have replaced the loading and hauling fleet with new equipment that addresses the most significant cause of our underperformance in production, permitted and financed the construction of a new leach pad and, perhaps most importantly, have completed a near total overhaul in the leadership team at the mine.  These efforts will bear fruit as we expect production in 2020 to be in the 60,000 to 70,000 ounce range at cash costs of $975 to $1,075 per ounce.  This represents nearly a 50% increase in production and a 15% reduction in costs over recent results.

The Company has a very pragmatic approach to our San Francisco Mine and the Ana Paula project.

The San Francisco mine is transitioning to residual leach in 2020 and we expect production to be between 12,500 and 15,000 ounces at a meaningful cash margin.  There remains a significant resource at the mine although at this time the capital requirements to restart mining are of a magnitude that it would be fiscally irresponsible for the Company to pursue such activity.  We are active in investigating alternatives for the asset to surface value for the Company and our shareholders.

Similarly, the Ana Paula project will remain idle for 2020 as we have reduced our spending there to essentially holding costs.  The project and land package are attractive and have a lot of potential but currently the Company does not have the financial resources available to invest further in the project.  We are fully aware of the execution and financial risk associated with delivery of a green field project which is not in alignment with our corporate philosophy and strategy.  Ideally, during the year we will be successful in finding a way forward with Ana Paula that is of benefit to the Company, our shareholders and the local communities.

In closing, we say what we do and do what we say, exercise prudent, conservative financial management and execute on a clear, concise and communicated strategy of value creation to benefit of all our stakeholders.


Mark Backens

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