Improved gold prices were offset by reduced production in the most-recent quarter and revenue fell 24.9%.
But now that full operations have resumed after that COVID-19 shutdown, the company is well-positioned to take advantage of higher prices for the yellow metal.
ALAMOS GOLD (Toronto symbol AGI; www.alamosgold.com) took its current form in July 2015. That’s when it merged with AuRico Gold, at that time a Stock Pickers Digest recommendation. The combined firm owns the Mulatos and El Chanate mines in Mexico, and the Young-Davidson and Island mines in northern Ontario.
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In the quarter ended June 30, 2020, Alamos’ revenue fell 24.9%, to $126.2 million from $168.1 million. (All figures except share price and market cap in U.S. dollars.) That’s because gold production dropped 37.4%, to 78,400 ounces from 125,200. Operations at both the Island Gold and Mulatos mines were temporarily suspended due to COVID-19. Both have now returned to normal operating levels.
Despite higher gold prices, Alamos’ cash flow per share fell 38.9%, to $0.11 from $0.18. That reflects the reduced output.
Mining Stocks: Daring robbery was covered by insurance
Back in April, the company has reported that a group of armed robbers intercepted gold dore bars on the runway at its Mulatos mine site in Mexico Wednesday. (A dore bar is a semi-pure alloy of gold and silver. It is usually created at the site of a mine and then transported to a refinery for further purification.)
Five heavily armed people mounted the attack, subduing the security guards who were loading the bars for transport on a plane. At the same time, a light plane, described as a “Cessna-206 type,” landed, and within 10 minutes the aircraft was airborne with the armed group and the bars headed towards the mountains.
Alamos says no one was hurt in the dramatic robbery, adding another mine, owned by Mineria Penmont, a subsidiary of U.K.-based Fresnillo plc, was robbed a few weeks earlier.
What’s more, Alamos says that the Mulatos loss is covered by insurance.
Meanwhile, with cash of $201.3 million and no debt, the company has strong speculative appeal. Its prospects for increased production are also good. The shares yield 0.6%.
Thanks for your comment. Alamos Gold trades at a more reasonable multiple of its cash flow per share.
We think that the best measure of the ability of a company to pay dividends is cash flow from operations (before working capital changes), rather than earnings per share.
Earnings per share includes a number of non-cash items such as depreciation and amortization or depletion….and earnings are not always an accurate reflection of a company’s health or ability to pay its dividend.
The best examples of this are real estate and resource firms, including mining stocks. For example, real estate companies are not as concerned as industrials in putting profits aside to replace depreciated/obsolete plant and equipment…they can buy a new property and take out a new mortgage.
We do look at earnings per share…but we find (as do the majority of analysts, brokers and so on) that cash flow per share is a better measure in some cases.
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my pick T.FNV
Thanks for your view on Franco-Nevada Corp.
T.FNV tues.wed (2days) big BLOCK volume (bottoms) +400,000 shares strong buy
Thanks for your view on Franco-Nevada Corp.
83 times earnings, 1.7 times equity – seems expensive.
Thanks for your comment. Alamos Gold trades at a more reasonable multiple of its cash flow per share.
We think that the best measure of the ability of a company to pay dividends is cash flow from operations (before working capital changes), rather than earnings per share.
Earnings per share includes a number of non-cash items such as depreciation and amortization or depletion….and earnings are not always an accurate reflection of a company’s health or ability to pay its dividend.
The best examples of this are real estate and resource firms, including mining stocks. For example, real estate companies are not as concerned as industrials in putting profits aside to replace depreciated/obsolete plant and equipment…they can buy a new property and take out a new mortgage.
We do look at earnings per share…but we find (as do the majority of analysts, brokers and so on) that cash flow per share is a better measure in some cases.