2023-05-02 09:25:54 ET
Summary
- The company posted record revenues of $251.5 million in 1Q23 and a net income of $48.4 million, or $0.12 per diluted share.
- Alamos Gold reported a gold production of 128,400 ounces in 1Q23 and sold 133,668 Au ounces.
- I recommend buying AGI between $13 and $12.25, with possible lower support at $11.7.
Introduction
The Toronto-based Alamos Gold Inc. ( AGI ) released its first-quarter results on February 22, 2023.
Note: This article is an update of my article published on February 28, 2023. I have followed AGI on Seeking Alpha since August 2017.
President & CEO John McCluskey said in the conference call:
We had a strong start to the year, with costs in line with annual guidance and production of 128,400 ounces exceeding our first quarter guidance. This was driven by solid performances at all three operations, including an exceptional performance from La Yaqui Grande in its third full quarter of operation. We are well on track to achieve our full year guidance.
1 - 1Q23 Results Snapshot
The company posted record revenues of $251.5 million in 1Q23 and a net income of $48.4 million, or $0.12 per diluted share. Revenues were up a whopping 36.3% from 1Q22.
AGI pays a quarterly dividend of $0.025 per share (annualized rate of $0.10, or a yield of 1%).
AGI produced 128.4K Au ounces in 1Q23 and sold 133,668 Au ounces at $1,896 per ounce. It was a solid production, up 29.8% YoY, exceeding quarterly guidance, driven by a significant increase in production from the Mulatos District.
Below is shown the 1Q23 highlights and 2023 Guidance:
AGI 1Q23 Highlights and 2023 Guidance (AGI Presentation)
The increase was explained by a solid performance at Mulatos district and Young Davidson, slightly offset by Island Gold.
AGI Gold production per mine 4Q22 versus 1Q23 (Fun Trading)
Mulatos District production more than doubled from the first quarter of 2022 to 50.5K ounces, at substantially lower costs, with La Yaqui Grande driving a significant increase in mine-site free cash flow to $36.8 million.
Alamos Gold also runs two other ongoing projects. Gold production is expected to increase significantly by 2025.
- The Island Gold expansion Phase 3+ Ontario, Canada. (With 2,400 TPD by 2026). Construction activities on the Phase 3+ Expansion are advancing, including the start of construction of the hoist house and other shaft infrastructure.
- The Lynn Lake project. The average annual production expected is 143K Au ounces over a 10-year mine life at an average mine-site AISC of $745 per ounce. The Lynn Lake project achieved a significant permitting milestone with a positive Decision Statement issued by the Ministry of Environment and Climate Change Canada based on the completed Federal Environmental Impact Statement and Environment Act Licenses issued by the Province of Manitoba.
John A. McCluskey, President, and Chief Executive Officer, said in the conference call:
We continue to advance our various growth initiatives during the first quarter. The Phase 3+ Expansion is progressing well with the Hoist House now up and the Galloway to be used for the shot thing now on site. We also announced the acquisition of Manitou Gold which will more than triple our land package adjacent to at a long strike from Island Gold, significantly, adding to the regional exploration potential.
2 - Stock Performance
AGI is outperforming the VanEck Vectors Gold Miners ETF ( GDX ) and is now up 67% on a one-year basis.
3 - Investment Thesis
Alamos Gold is an outstanding company with excellent financials, no debt, and solid cash, paying a quarterly dividend of $0.025. One crucial positive is that the growth is fully funded.
AGI Fully Funded Growth (AGI Presentation)
In my preceding article, I said that the only issue was attached to the gold price, but this concern is not valid anymore. However, this concern has been replaced by a valuation matter now.
AGI 1-Year Chart Gold, Silver, Copper (Fun Trading StockCharts)
Trading AGI short-term LIFO using at least 40% of your entire position is crucial while keeping a core long-term for a much higher target. The method is based on technical analysis and fundamental knowledge.
This two-level strategy has succeeded in my marketplace, "The Gold And Oil Corner," and I believe it is the safer way to play AGI.
Alamos Gold - Financial Snapshot 1Q23 - The Raw Numbers
Alamos Gold | 1Q22 | 2Q22 | 3Q22 | 4Q22 | 1Q23 |
Total Revenues $ million | 184.5 | 191.2 | 213.6 | 231.9 | 251.5 |
Quarterly Earnings in $ million | -8.5 | 6.4 | -1.4 | 40.6 | 48.4 |
EBITDA $ million | 70.9 | 69.7 | 84.8 | 100.4 | 119.9 |
EPS (diluted) $ per share | -0.02 | 0.02 | 0.00 | 0.10 | 0.12 |
Cash from Operating Activities $ million | 46.5 | 75.7 | 74.0 | 102.3 | 94.3 |
CapEx in $ | 87.3 | 69.0 | 72.6 | 84.8 | 83.8 |
Free Cash Flow | -40.8 | 6.7 | 1.4 | 17.5 | 10.5 |
Total Cash $ million | 145.2 | 144.0 | 132.0 | 148.4 | 159.6 |
Total LT Debt in $ million | 0 | 0 | 0 | 0 | 0 |
Dividend $/share (semi-annual) | 0.025 | 0.025 | 0.025 | 0.025 | 0.025 |
Shares Outstanding | 391.9 | 394.5 | 391.8 | 395.82 | 396.95 |
Source: Company press release .
* Estimated by Fun Trading.
Alamos Gold Financial Analysis
1 - Revenues were $251.5 million in the first quarter of 2023
AGI Quarterly Revenue History (Fun Trading)
The company indicated a net income of $48.4 million, or $0.12 per share, up from a loss of $8.5 million, or $0.02 per share, in 1Q22.
AGI generated cash flow from operating activities of $94.3 million.
The cost of sales was $155.2 million in the first quarter, 14.5% higher than the prior-year period.
2 - Free cash flow was $10.5 million in 1Q23
AGI Quarterly Free cash flow History (Fun Trading)
Trailing 12-month free cash flow ("FCF") was $36.1 million, and the company posted an FCF of $10.5 million in 1Q23. Free cash flow will continue to increase in 2023 with the completion of La Yaqui.
3 - The company is debt-free (net cash) and had total cash of $159.6 million in 1Q23.
AGI Quarterly Cash versus Debt History (Fun Trading)
Alamos Gold ended the first quarter with cash and cash equivalents of $159.6 million and no debt. Liquidity is $660 million.
CFO Jaimie Porter said in the Q1 conference call:
Our balance sheet remained strong with no debt, $134 million in cash, $26 million of equity securities and $500 million of undrawn credit capacity. With stronger production and costs trending lower over the next several years, we remain well positioned to continue generating solid free cash flow while funding our high return growth projects and supporting ongoing returns to shareholders.
4 - Total quarterly production in 1Q23 was 128.4K Au ounces and sold 133,668 Au ounces
AGI Quarterly Gold Production History (Fun Trading)
Alamos Gold reported a gold production of 128,400 ounces in 1Q23 and sold 133,668 Au ounces. According to the press release:
- Mulatos District production more than doubled from the first quarter of 2022 to 50.5K ounces, with La Yaqui Grande driving a significant increase in mine-site free cash flow to $36.8 million
- Island Gold produced 32.9K ounces, a 34% increase from the first quarter of 2022, while continuing to make significant progress on the Phase 3+ Expansion, including the start of construction of the hoist house and other shaft infrastructure.
- Young-Davidson produced 45K ounces and generated mine-site free cash flow of $16.3 million with mining rates averaging 8,010 TPD, in line with guidance.
Below is the 1Q22 production per mine:
AGI 1Q23 Gold production per mine (Fun Trading)
The price of gold realized for the first quarter was $1,896 per ounce, up 8.9% sequentially.
AGI Quarterly Gold Price History (Fun Trading)
All-in-sustaining-costs, AISC, remains low this quarter at $1,176 per ounce.
AGI Quarterly AISC History (Fun Trading)
5 - 2023 Guidance
Production is expected to be between 480K oz and 520K oz in 2023, an increase of 9% YoY (mid-point of guidance). AISC is expected to be $1,125-$1,175 per ounce, improving to $950 to $1,050 per ounce in 2024.
AGI 2023 Guidance (AGI Presentation)
Technical Analysis (Short Term) And Commentary
AGI TA Chart short-term (Fun Trading StockCharts)
Note: The chart has been adjusted for the dividend.
AGI chart shows an ascending wedge pattern with resistance at $14.1 and support at $12.90.
The rising wedge is a bearish chart pattern that occurs at the end of a bullish uptrend and usually represents a trend reversal. The pattern indicates the end of a bullish trend and is a frequently occurring pattern in financial markets. It is the opposite of the falling wedge pattern that occurs at the end of a bearish downtrend and is known as a bullish pattern.
The general strategy I usually promote in my marketplace for AGI is to keep a core long-term position and use about 40% to trade LIFO while waiting for a higher final price target for your core position between $15 and $16.
I suggest selling about 40% of your position between $14.2 and $13.5, with possible higher resistance at $14.75. Conversely, I recommend buying AGI between $13 and $12.25, with possible lower support at $11.7.
Watch the gold price like a hawk.
Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.
For further details see:
Alamos Gold: Expecting A Solid Performance In 2023