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Alamos Gold: A Dirt-Cheap Valuation For This Organic Growth Story

Oct. 05, 2021 2:03 PM ETAlamos Gold Inc. (AGI) Stock, AGI:CA Stock44 Comments
Taylor Dart profile picture
Taylor Dart


  • Alamos Gold has slid nearly 40% from its highs, but is one of the few gold miners that has not dropped beneath its March 2021 lows.
  • The company is preparing to release its Q3 2021 earnings results in the next month, and continues to track well against guidance, with 240,000 ounces produced in H1 2021.
  • However, the most exciting news was continued exploration success from Island Gold, with Alamos recently drilling a record intercept of 21.33 meters of 71.21 grams per tonne gold.
  • At barely 12x FY2023 earnings estimates and a P/NAV ratio of ~0.70x, I see Alamos as dirt-cheap, and view this correction as a low-risk buying opportunity.
Gold mining underground

agnormark/iStock via Getty Images

It's been a rough year thus far for the Gold Miners Index (GDX), with the ETF sliding nearly 40% from its Q3 2020 highs and some producers falling as much as 50%. One name that's held up relatively well

This article was written by

Taylor Dart profile picture
"A bull market is when you check your stocks every day to see how much they went up. A bear market is when you don't bother to look anymore."- John Hammerslough You can access more in-depth research, my current portfolios, my top-12 miner rankings, GDX buy/sell signals, new positions I am entering/exiting, plus proprietary sentiment indicators updated weekly for gold miners in my newsletter below. Returns Link: https://imgur.com/a/sreY6SzSubscription LinksMonthly: https://buy.stripe.com/7sI14d4b92vFdUc15cAnnual: https://buy.stripe.com/4gw28h0YXeen7vObJP - Disclosure: I am not a financial advisor. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading or investing.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of GLD, KL, AGI either through stock ownership, options, or other derivatives. 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.

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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Comments (44)

Q3. Ouch..., painful. Didn't expect these results.
fazsha profile picture
Alright, I'm in; 16,000 shares between $7.70-$7.75.
fazsha profile picture
Q3 GAAP eps .06, non-GAAP .10. Negative FCF. I follow AGI but do not own.

@fazsha Do you think anyone knew in advance about this disastrous report ?
fazsha profile picture
@BurntOnceTooMany I don't think so.
Taylor Dart profile picture
@BurntOnceTooMany Exactly what about the report was "disastrous"?
Is the Turkey loss old news? No chance of flipping back? Also, i assume it is not valued in the P/NAV of 0.68. Other cos in turkey like Eldorado. Why have they not been expropriated?
vozmozhno profile picture
I bought $AGI at the top and am down considerably. Some have suggested since $KL is off the table, that Barrick might be interested in $AGI. Problem is that Barrick apparently wasn't willing to offer fair value for Kirkland, so why would they do so for Alamos? All the same I'll probably buy more if it stays down here, if for no other reason than to lower my cost basis. Then we wait for gold to head up again and float all boats.
Taylor Dart profile picture
Hi Vozmozno,

I don't think AGI is on the table for Barrick. They are looking for mines with 250,000 ounces of production at a minimum to meet their Tier-2 target. Young Davidson would barely meets this criterion when firing on all cylinders and having a record year, Island Gold could get to this level, but it wouldn't be reached until 2025, and Mulatos is not even a 200,000-ounce producer. The mines are simply too small for Barrick. If Barrick were to acquire Alamos, it would solely be for Island Gold, and that would mean divesting the other two assets, and it's not worth it if Barrick has to dump 2/3 of the operating portfolio. Alamos Gold is a great story, but too small for Barrick.
Thank you Taylor for your always excellent analysis. My 1st tranche of AGI was recently filled at $7 and the future looks bright for this well-managed company. Unfortunately, the trend for gold is still down so I'm planning on more opportunities to buy AGI at lower levels.

Gold hasn't bottomed yet IMO. I'm still convinced we need to see a pukefest on high volume. That is what bottoms look like and we're not there yet. I'm salivating at the opportunities this will present in the best miners and AGI is certainly one of them.
Taylor Dart profile picture
Hi Bsmith,

Nice buy there, I am in a little bit higher than $7.00, but would gladly add on weakness to average down since this is one of few companies I see as a long-term hold in the sector.
They stole Island Gold...I had shares of Richmont and if memory serves the buyout was for nothing over the price it was trading at. But I own AGI now so all is well. The CEO has a recent interview on youtube which is excellent. Top notch guy dedicated to growth and returning to shareholders
I continue to add to $AGI, here and there. I am surprised that they haven't been taken over yet.
Lallemand profile picture
Thanks for the article. AGI is my largest gold miner position, followed by Yamana and Argonaut. Well managed company, and I hope they learned from their Turkish fiasco that they should stay in tier 1 juridictions
Taylor Dart profile picture
Hi Lallemand,

Happy it was of value, thanks for reading. I think the risk was worth the reward, but unfortunate how it's panned out so far. I would never advocate going into Tier-2 jurisdictions, but when it's a small portion of the production profile and margins are very accretive (lower quartile for costs), I don't mind the move. If it was Colombia, South Africa, Guatemela or Kyrgyzstan, it'd be a different story, but Turkey is actually a very solid jurisdiction, just a case of Alamos being treated unfairly. Alacer/SSR Mining and Eldorado have been very successful there to date with minimal issues.
Thanks Taylor, always helpful updates.
Taylor Dart profile picture
Hi Tman,

Flattered it was of value, thanks for reading!
jmatson profile picture
ARNGF is located next to AGI's Island Gold project.

Eventually a take out?
Taylor Dart profile picture
Hi Jmatson,

I think they've got more than enough gold at Island, and already locked up tons of initial land with Trillium. I also don't think Argonaut's operating portfolio compliments Alamos's portfolio as much, since they are very small assets, even after factoring in a higher production profile at La Colorada, so they'd really just be going after Magino. Magino would be nice, as would be the extra processing capacity, but I don't think Alamos needs Magino, Island looks like it can probably prove up over 3 million ounces of reserves / 6 million ounces of resources by Q2 2023, which will keep Alamos busy for 20+ years at the current mine life projections. The better investment would be an investment in the mill in my opinion if they can get permits to increase throughput to 2,400 - 2,500 tonnes per day.
Two different ore bodies...CEO was asked this question and was clear they have more than enough local land now to keep busy for a long time
Taylor Dart profile picture
@passionatepiper65 Thanks! I wasn't aware he had been asked before, but the answer makes sense.
Fine little company with limited interest and selling below value.
Kind of rare for you isn't it to find a gold with a decent valuation? Of course, I'm too cheap to pay for your premium subscrip serv. For now.
05 Oct. 2021
Thanks for drawing attention to Alamos again Taylor, it was great value in April and tremendous value now.
Taylor Dart profile picture
Hi Urris,

No prob! Happy it was of value.
05 Oct. 2021
Hugh upside in production in the next four years, difficult to understand why the price does not reflect this. Also still the best crumb available to Barrick. Buy and hold for $12.50
Taylor Dart profile picture
Hi Urris,

Couldn't agree more. Alamos is in a tricky spot from a takeover standpoint. I think it's a little too small for Barrick to be interested, but a little too big for most million-ounce producers, but I think investors will do very well even in a non-takeover scenario here as the company continues to buy back shares, drive costs lower, and grow production meaningfully. The only suitor I could have seen buying this would have been Agnico Eagle Mines, but they're now busy with Kirkland Lake. I suppose someone like Pan American could take a run at them to reduce reliance on less favorable jurisdictions or even Gold Fields, but that would be a pretty large deal for either of those two.
@Taylor Dart AEM 2 is the best one to buy it. Until silver price takes off, I don't think purchasing AGI by PAAS will be accretive. However, AGI can be an acquirer too. What do you think of it buying PVG?
Taylor Dart profile picture
Hi EA,

They’ve got a big enough development pipeline it would make no sense to do any acquiring, and I think their target mine has prob moved up to 240,000 - 300,000 ounces minimum, so the Mexican assets wouldn’t do anything for them and would likely be divested. I don’t think PAAS acquiring AGI is likely, just noting that it would be a good fit.
The articles about gold investments have interesting, alluring, and neat illustrations.
Taylor Dart profile picture
Hi Tag,

I try to add pictures to help break up all the text as to not bore people to death with my writing.
@Taylor Dart Thanks for the very timely column. It looks like AGI has completely written off its assets in Turkey.
@Taylor Dart I know SA wasn't a fan but I do miss your expertly crafted 'photoshop' pictures :-)
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