In 2024, the company expects to produce around 505,000 ounces (oz.) of gold at a cost of around $1,150/oz. (the recent price of gold was about $2,375/oz.). Alamos is an efficient producer with the potential to drive production costs down by about 10% over the next two years.While the company’s current assets and production profile are attractive enough to drive shares higher during a gold stock rally, the recent acquisition of Argonaut Gold is a nice little sweetener. The main attraction with Argonaut is its flagship Magino mine, located just 300 meters from Alamos’ Island gold mine in Ontario.Magino just started producing gold last summer, has an estimated 19-year reserve life, and a new mill with capacity for 10,000 tonnes per day (tpd) now, with expansion potential. This mill is expected to become the central mill for an expanded complex, allowing Alamos to decommission the old Island mill and operate a much more efficient, new mill with capacity for both Magino and Island.Big picture, the Argonaut acquisition likely adds about 10% to gold production this year (total estimated production of 550,000 oz.), ramping up to an additional 20% in 2026 (660,000 oz.) and just north of 800,000 oz. by 2029.While the price of gold is a huge variable to forward revenue and EPS estimates (and overall gold stock performance), the current best guess is Alamos delivers revenue of $1.36 billion this year (+33%) then grows by about 10% in 2025. With Argonaut wrapped in and efficiency gains, EPS could jump 80% to almost $0.93 this year, then grow between 10% and 15% in 2025.My recommended action would be to consider purchasing shares of Alamos Gold.
About the Author
Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential. He has spent his entire career managing, consulting, and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets, and achievement of major developmental milestones.Tyler’s small-cap portfolios favor a high allocation to stable, high growth companies, upon which he layers strategic purchases of higher risk, event-driven investments. He first began publishing his analysis of small-cap opportunities in 2009. Since 2012, he has led his subscribers into 10 doubles. Between 2012 and September, 2015 his small-cap recommendations generated cumulative returns of over 2,300%, including both winners and losers, and outperformed the Russell 2000 Index by an average of 28% per year.Prior to joining Cabot, Tyler founded and operated a small business for 15 years. He then worked as a consultant for start-up technology companies, as well as Vermont’s largest health care institution. From 2009 to 2015, he was the chief analyst of growth stocks at Wyatt Investment Research, where his research spanned the full spectrum of the growth stock universe, from micro-cap start-ups to multi-national mega-caps.Tyler holds a B.S. and MBA from The University of Vermont, where he graduated Valedictorian. He has been a long-time contributor to the Wall Street’s Best Investments, has been quoted by U.S. News & World Report, and has presented investing ideas and strategies for The Money Show and Bloomberg Markets LiveINSIGHTS.More By This Author:Johnson & Johnson: A Healthcare Giant That’s Looking More Attractive By The Day
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