Alamos Gold: 2022 Gold Production Was Impressive (NYSE:AGI)

Introduction

The Toronto-based Alamos Gold Inc. (NYSE:AGI) reported the fourth quarter and annual 2022 production on January 12, 2023. The Company also provided updated three-year production and operating guidance.

Note: This article is an update of my article published on December 13, 2022. I have followed AGI on Seeking Alpha since August 2017.

1 – 4Q22 and full-year 2022 Production and preliminary revenues

Alamos Gold reported a gold production of 134,200 ounces in 4Q22 and sold 133,164 ounces.

The company sold 456,574 Au ounces in 2022 at a gold price of $1,799 per ounce.

The gold production was sold at $1,741 per ounce in 4Q22.

Below is a quick summary of the press release:

The 4Q22 solid production was driven by solid performances from all three operations, including a substantial increase at Mulatos with the ramp-up of La Yaqui Grande.

Full year costs are expected to be in line with guidance for total cash costs of between $875 and $925 per ounce and AISC of between $1,190 and $1,240 per ounce, a solid performance given industry-wide inflationary pressures

Also, with higher production and lower costs, Alamos Gold will generate free cash flow while funding the Phase 3+ Expansion at Island Gold, which is expected to be completed in 2026.

Below is a 3Q presentation of the project:

Further information about the project will be available with the 4Q22 results.

Finally, the company is working on the Lynn Lake project with a CapEx, including exploration, of $17 million in 2023.

2 – Stock Performance

AGI is significantly outperforming the VanEck Gold Miners ETF (GDX) and is now up 55% on a one-year basis.

3 – Investment Thesis

Alamos Gold is an excellent gold miner with a flawless balance sheet, no debt, and solid cash. Assets location is another plus.

Our three North American mines and global development projects provide a strong platform to create long-term value for all Alamos stakeholders.

Our diversified asset base delivers stable and long-life gold production, along with a portfolio of low-cost development projects that offer peer leading, multi-stage and fully funded growth opportunities.

One crucial catalyst is that AGI will significantly increase its gold production with the low-cost La Yaqui Grande in full production in 2023.

Total cash costs are expected to decrease by 6% in 2023 to between $825 and $875 per ounce and by 22% by 2025 to $650 to $750 per ounce. Combined gold production from the Mulatos District (including La Yaqui Grande) is expected to be between 175K and 185K ounces in 2023.

In the press release:

Gold production is expected to remain at similar levels in 2024 and 2025, with increasing production from Island Gold offsetting a decrease in production at Mulatos. Consistent with 2023, production guidance for 2024 was increased reflecting stronger outlooks for both Island Gold and Mulatos. Production guidance for 2025 excludes any production from the higher grade PDA project which represents potential upside within the Mulatos District.

Another bullish argument is the price of gold that recovered strongly since October 2022 to close at $1,920 per ounce last Friday. I expect a strong H2 2023 for gold.

Alamos Gold – Financial Historical Snapshot Balance sheet 4Q22 (partial) – The Raw Numbers

Alamos Gold	4Q21	1Q22	2Q22	3Q22	4Q22
Total Revenues $ million	203.1	184.5	191.2	213.6	232.0
Quarterly Earnings in $ million	29.5	-8.5	6.4	-1.4	–
EBITDA $ million	88.0	70.9	69.7	84.8	–
EPS (diluted) $ per share	0.07	-0.02	0.02	0.00	–
Cash from Operating Activities $ million	88.1	46.5	75.7	74.0	–
CapEx in $	119.0	87.3	69.0	72.6	–
Free Cash Flow	-30.9	-40.8	6.7	1.4	–
Total Cash $ million	196.4	145.2	144.0	132.0	147*
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	392.3	391.9	394.5	391.8	–

Click to enlarge

Source: Company press release

* Cash and cash equivalent were $130 million per AGI, and equity securities totaled an estimated of ~$18 million. The company indicated the cash and cash equivalent in the press release but did not mention the equity securities amount.

Alamos Gold Financial Analysis

1 – Revenues were $232 million in the fourth quarter of 2022

The company indicated revenue of $232 million for 4Q22, a new record. Total revenues for 2022 were $821 million compared with $823.6 million in 2021.

John A. McCluskey, President and Chief Executive Officer said in the press release:

With our strongest performance of the year coming in the fourth quarter, including record production, we met full year 2022 production guidance. We also expect to meet cost guidance with a significant decrease in costs in the second half of the year driven by the ramp up of low cost production from La Yaqui Grande. We expect this trend to continue over the next several years with a 9% increase in production and 5% decrease in all-in sustaining costs in 2023 driven by a full year of production from La Yaqui Grande, and strong ongoing performances at our Canadian operations

AGI is paying a $0.10 per share annualized dividend and has a share buyback program. In 2022, the Company returned $48 million to shareholders between dividends and share repurchases, consistent with 2021.

Technical Analysis (Short Term) And Commentary

Note: The chart has been adjusted for the dividend.

AGI chart shows an ascending channel pattern with resistance at $11.25 and support at $10.35. The RSI is now 70 and signals an overbought situation.

Ascending channel patterns or rising channels are short-term bullish in that a stock moves higher within an ascending channel. Still, these patterns often form within longer-term downtrends as continuation patterns. The ascending channel pattern is often followed by lower prices.

The general strategy I usually promote in my marketplace for AGI is to keep a core long-term position and use about 30%-40% to trade LIFO while waiting for a higher final price target for your core position.

I suggest selling about 30%-40% of your Alamos Gold Inc. position between $11.2 and $11.5, with possible higher resistance at $11.85. Conversely, I recommend buying AGI between $10.5 and $9.6 with possible lower support at $9.

The gold price jumped significantly and closed at $1,920 per ounce on Friday, and I believe the precious metal is due for some retracement unless the FED decides to hike by only 25 points this month.

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.

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