Exposure To Country Risk: The Alamos Gold Edition

| About: Alamos Gold (AGI)

In a series of recent articles we investigated the country risk of various mining jurisdictions in which US-listed precious metal miners are active. We collated country risk ratings for these countries from eight different sources and averaged these ratings into compounded country risk scores. The most recent results from this work can be found in this article. Most definitions of country risk include factors such as political risk, exchange rate risk, economic risk, sovereign risk, transfer risk, socio-economic risk and others. Depending on the source, various contributing factors of country risk are weighted differently. Readers interested in the specific definitions are encouraged to follow the links to our sources given in this article. We used our compounded country risk score to evaluate country risk exposure for selected gold and silver mining companies using 2011 production results and reserve statements. As 2012 data becomes available we are providing updates and in the present article we would like to do so for Alamos Gold (NYSE:AGI).

Alamos Gold is a mid-tier gold mining company with a market capitalization of $1.7B. Yahoo.com lists the forward P/E as 14.55 and has a median analyst price target of $19.50. Shares traded for $13.39 at the time of writing and yielded about 1.5% in dividends. Alamos operates the Mulatos mine in Mexico and has two advanced projects (Agi Dagi and Kirazli) in Turkey with Camyurt being a possible extension to the Agi Dagi project. During the past year Alamos Gold has been trying unsuccessfully to take over Aurizon Mines (AZK) in an unfriendly bid showing their intentions to further expand into additional jurisdictions. Total production in 2012 was 200,000 ounces of gold and has given guidance for similar production in 2013. The table below gives the 2012 numbers for production, reserves and resources at each of Alamos Gold's mines and projects.

Consolidating the production, reserve and resource data showing summations for each country of exposure results in the table below. The data is already calculated in percentages of gold-equivalent ounces. Country risk ratings as documented here are also shown in the central column of the table. Country risk ratings range from 0 to 100 with low numbers indicating low risk and high numbers indicating high risk. The right side of the table shows the weighted risk contributions for each country separately for production, reserves and resources with summarized scores in the bottom line. The individual ratings can be interpreted as ratings going from present risk (production) into the future (inferred resource).


Alamos Gold presently carries only moderate country risk (37.3) with producing assets and reserves concentrated in Mexico. The risk rating is bound to increase going into the future as Turkish assets are getting closer to production. Turkey is associated with a higher country risk than Mexico which is reflected in the increased risk ratings taking into consideration the resources of the company (41.49 for measured and indicated, and 42.97 for inferred resources).

Alamos Gold has displayed an appetite for acquisitions. It will be interesting to observe whether this appetite will be realized in the future and whether new jurisdictions will be added to the mix of assets.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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