Gold has fallen to around $1,190 US an ounce from its 2018 high of $1,366 in January.
This Canadian gold stock is well positioned to profit when gold prices recover. The company continues to increase its output from four producing mines. Its strong balance sheet will help with further development; that development got a boost recently when the company received the final permit to proceed with a project in Turkey that could produce 100,000 ounces a year.
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ALAMOS GOLD (Toronto symbol AGI; www.alamosgold.com)owns the Mulatos and El Chanate mines in Mexico, and the Young-Davidson and Island mines in northern Ontario.
Late last year, Alamos bought Richmont Mines (symbol RIC on Toronto) for $929 million in Alamos shares. Richmont’s main asset was the Island Gold mine, northeast of Wawa, Ontario. The Island Gold mine is expected to produce nearly 100,000 ounces of gold this year.
The deposit could hold as much as 1.7 million additional ounces of gold. Richmont released a preliminary economic assessment (PEA) in May 2017. The plan is based on a proposed $28 million expansion project. It would lift Island Gold’s 2019 production by 25%, to 125,000 ounces.
The company also has a number of development projects in Turkey, the U.S., Mexico and Canada. These include its advanced-stage La Yaqui project, near the Mulatos mine in Mexico, and its advanced-stage Kirazli gold project in Turkey. Both are due to enter production over the next few years.
Mining Stocks: Output and cash flow both rose in the most recent quarter
In July 2018 Alamos received the final permit required for the development of the Kirazli project. The company can now ramp up full-scale construction activities at the site. Initial production should start in 2020.
A 2017 feasibility study for Kirazli projects a mine producing 100,000 ounces per year at a cost of $400 U.S. per ounce. Development costs are estimated at $152 million U.S., with Alamos expected to spend $50 to $60 million this year.
In the quarter ended June 30, 2018, Alamos’s gold output increased 19.0%, to 126,500 ounces from 105,900 a year earlier. That output also exceeded guidance of 125,000 ounces. Cash flow rose 21.3% to $54.7 million from $45.1 million (all figures in U.S. dollars), thanks largely to strong gold production in the quarter. However, cash flow per share fell 6.6%, to $0.14 from $0.15, on more shares outstanding.
Alamo’s debt-free balance sheet, and its prospects for increasing production, give it strong speculative appeal. The company pays a semi-annual dividend of $0.01 a share. It yields 0.5%.
Recommendation in Stock Pickers Digest: Alamos Gold is a buy.
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