Alamos Gold: A Golden Stability Sheet (NYSE:AGI)


Picture: Mulatos Mine. Supply: goldindo.wordpress

Funding thesis

The Toronto-based Alamos Gold (AGI) launched its third quarter outcomes on October 28, 2020. The small gold producer is again to regular this quarter after a weak manufacturing the previous quarter as a result of COVID-19 restrictions. Gold Manufacturing was 117.1K Oz in 3Q’20.

The funding thesis continues to be the identical this quarter once more. The corporate reveals a superb steadiness sheet with no debt and good progress potential, as proven under. Thus, I consider AGI is a wonderful candidate for long-term funding. Nonetheless, I strongly advocate buying and selling quick time period about 30% of your place to benefit from the volatility and handle dangers.

Gold manufacturing detailed per gold mine on the finish of September 30, 2020.

AGI is usually outperforming the VanEck Vectors Gold Miners ETF (GDX), as we will see within the chart under:

ChartKnowledge by YCharts

Alamos Gold monetary snapshot 3Q’20: The uncooked numbers

AGI 3Q’19 4Q’19 1Q’20 2Q’20 3Q’20

Whole Revenues $ million

172.9 186.0 176.9 126.2 218.4
Quarterly Earnings $ million 17.7 38.0 -12.3 11.7 67.9
EBITDA $ million 78.4 88.4 76.7 35.5 130.5
EPS (diluted) $ per share 0.04 0.09 -0.03 0.03 0.17
Money from Working Actions $ million 67.9 77.8 58.6 49.6 130.8
CapEx in $ 66.3 72.9 118.1 54.6 54.8
Free Money Movement 1.6 4.9 -61.5 -5.0 76.0
Whole money $ million 202.5 205.6 230.3 231.5 314.1
Whole LT Debt in $ million 0 0 100.0 100.0 100.0
Dividend $/ share (semi-annual) 0.01 0.015 0.015 0.015 0.015
Shares Excellent 394.4 394.2 391.3 394.9 395.6

Supply: Company press release

Alamos Gold – Gold manufacturing and steadiness sheet particulars

1 – Revenues and Development. Revenues had been a file of $218.4 million in 3Q’20

In the course of the third quarter of 2020, Alamos Gold generated revenues of $218.4 million. Alamos Gold bought 117.1K ounces of gold at a median realized worth of $1,882 per ounce this quarter. The web earnings had been $67.9 million or $0.17 per share.

Reported adjusted web earnings had been $56.9 million or $0.15 per share.

CEO john McCluskey indicated within the conference call:

We have had a superb third quarter operationally and financially and we have delivered on a number of key catalysts which have solidified our robust outlook. These embody the completion of the decrease mine growth at Younger-Davidson, the announcement of the Section 3 growth at Island Gold and the La Yaqui Grande development selections.

The gold worth realized this quarter is a brand new multi-year file excessive at $1,882 per ounce once more, as we will see within the chart under:

2 – Free money movement was $76.0 million in 3Q’20. A file for the corporate.

Be aware: The generic free money movement is the money from working actions minus CapEx.

Annual free money movement (“ttm”) is 331.1 million and a quarterly free money movement of $76.0 million within the third quarter. Due to the gold worth reaching a file and manufacturing again to regular this quarter, Alamos Gold is popping right into a money cow.

The corporate is elevating the quarterly dividend to $0.02 per share and implementing a share buyback.

3 – Alamos Gold is debt-free since October.

It’s the better part. The corporate is sitting in a steady money place.

The corporate continues to be web debt-free and has whole money of $314.1 million on the finish of the third quarter. It is a wonderful monetary profile that matches a long-term method. The corporate can now put money into tasks just like the Island gold Section III growth or the Yaqui Grande venture in Mulatos.

Alamos Gold withdrew $100.0 million from its credit score facility to boost the corporate’s monetary flexibility in gentle of COVID-19, leaving $400.0 million undrawn on September 30, 2020. Alamos Gold repaid the revolver in October.

The corporate has been debt-free since 1Q’17, which is a major factor to contemplate AGI as a long-term funding perspective.

4 – Gold manufacturing particulars. The corporate produced 117.1K Ozand bought 116.035K Ozin 3Q’20. Alamos Gold produced 117.1K Au Oz this quarter, down 3.9% in comparison with the identical quarter final 12 months and up 49.4% sequentially. The corporate bought 116.04K ounces of gold at a median realized worth of $1,882 per ounce.

The graph under is displaying the drop sequentially.

1 – Island Gold produced 39.6K Oz this quarter. The corporate is now finding out the Section III growth.

Supply: Presentation

2 – Younger‐Davidson produced 36.4K Oz. The mine is doing nicely:

Supply: Presentation

3 – Mulatos mine produced 41.1K ounces within the third quarter.

Supply: Presentation

The corporate decided to go ahead with the Yaqui Grande development within the previous quarter.

Given the venture’s robust economics and its proximity to the prevailing Mulatos operation, the Firm is continuing with development of the venture beginning within the second half of 2020.

Supply: Presentation

Nonetheless, CEO John McCluskey mentioned within the convention name:

This mirrored a powerful quarter at Mulatos one other file quarter at Island Gold and Younger-Davidson beginning to reveal its full potential with underground mining charges rising as deliberate […]

At present gold costs Island Gold and Mulatos can greater than self-finance their respective tasks permitting us to proceed producing robust free money movement and assist increased dividends. These tasks will in flip drive extra free money movement progress and additional returns to shareholders which are sustainable over the long run.

Conclusion and technical evaluation (quick time period)

Alamos Gold’s third quarter outcomes had been excellent, with an enormous achieve in free money movement. It places this small miner in an enviable monetary place with no debt and an enormous amount of money used to develop internally, as I defined above.

I see Alamos Gold as an ideal candidate for an acquisition. Good property are positioned in a protected location with progress potential.

AISC went down considerably this quarter at $949/Oz, which is clearly what the corporate realized traditionally apart from the big bump up final quarter.

Technical evaluation

AGI kinds a descending channel sample with resistance between $9.25 to $9.75 and a assist vary between $8.15 and $7.75.

The short-term technique is sort of easy. You commerce your lengthy place recurrently. Proper now, I like to recommend taking some revenue above $9.25 and accumulate once more under $8.

AGI follows the worth of gold, and if the gold worth can’t maintain $1,850 and drops decrease and even under $1,800, AGI will in all probability revisit the excessive $6 areas.

On this case, I see it as an ideal alternative to construct an excellent long-term place. Conversely, if the gold worth trades increased, particularly above $1,980 per ounce, I see AGI breaking out to a variety between $10 and $11.50.

Watch the worth of gold like a hawk and all the time consider Plan A and Plan B.

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Disclosure: I/we have now no positions in any shares talked about, and no plans to provoke any positions inside the subsequent 72 hours. I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (apart from from Searching for Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.