Alamos Gold Inc., formed in 2003 through the merger of Alamos Minerals and National Gold, is a Canadian-based gold producer. The company operates in three production sites in North America – the Island Gold District (comprising the Island Gold and Magino mines); Young-Davidson mine in Northern Ontario, Canada; and the Mulatos District in Sonora State, Mexico. The group has over 2,400 employees.

In addition to the above projects, the company has a strong portfolio of growth projects, including the Phase 3+ expansion at Island Gold, the Lynn Lake project in Manitoba, Canada and the Puerto Del Aire project in the Mulatos District.

Record gold production in 2024

Alamos Gold produced a record 567,000 oz of gold in 2024, up 7% from 2023, driven by strong performances from the Mulatos District and Island Gold. Production has also been supported by the inclusion of the Magino mine after the acquisition of Argonaut Gold Inc. in July 2024. Site wise, the Mulatos District produced 205,000 oz of gold; Island Gold, 155,000 oz; and Young-Davidson, 174,000 oz. The all-in sustaining costs (AISC) stood at $1,281 per oz during the year, in-line with revised annual guidance.

Driven by record gold production in FY 24, the company sold 560,234 oz of gold at an average realized price of US$2,379 per oz, translating to record annual revenues of US$1.3bn, which is a 32% increase from 2023. Net profit therefore rose to US$284.3m in FY 24 from US$210m in FY 23. Cash flow from operations jumped by 40% to a record US$661.1m.

Guidance projects high gold production

The company would look to sustain its record production levels and aims to achieve gold production between 580,000 oz and 630,000 oz in 2025, supported by the ramp up of production at Island Gold, and a full year of operation at Magino. Moreover, Alamos Gold anticipates AISC to decrease slightly in 2025, reaching between US$1,250 and US$1,300 per oz. In addition, total sustaining and growth capital is expected between US$560 and US$630m, driven by project expansions and exploration spending.

The group further expects gold production between 630,000 and 680,000 oz in 2026, and 680,000 oz and 730,000 oz in 2027. Increased production is expected to be complemented by fall in AISC to US$1,150-1,250 and US$1,125-1,225 in 2026 and 2027 respectively.

Rise in operating income in long term

Alamos Gold reported solid performance over FY 19-24, posting a revenue CAGR of 14.5% to reach US$1.4bn. Operating income surged 30% to US$472m in FY 24, with margins expanding by a robust 16.6% to 35%, driven by operational efficiencies. Net income rose at a CAGR of 24.2% to US$284m in FY 24.

Positive earnings trajectory helped the cash position of the company to strengthen from US$183m as of end-FY 19 to US$327m as of end-FY 24. The cash profile has also been bolstered by a steady increase in cash flow from operations, offset by extensive capex activities.

In comparison, Lundin Gold, a local peer, posted revenue CAGR of 35% over FY 20-24, reaching US$1.2bn in FY 24. Operating income surged at a CAGR of 43.9% to US$630m in FY 24, with margins expanding by 11.6% to 52.8%.

Solid run in stock prices

Over the past year, the company's stock has delivered robust returns of about 85%, reflecting a positive fundamental trajectory. In comparison, Lundin Gold delivered outstanding returns of approximately 200% over the same period. In addition, the company paid an annual dividend of US$0.1 in FY 24, resulting in a dividend yield of 0.5%. Moreover, analysts expect an average dividend yield of 0.4% over the next two years.

Despite the sharp run-up in the share prices, the company is trading lower compared to its historical average. Alamos Gold is currently trading at a P/E of 21.4x, based on the FY 25 estimated EPS of US$1.3, which is lower than its 3-year historical average of 54.7x. However, it is trading higher than that of Lundin Gold (18.2x).

Likewise, the company is currently trading at an EV/EBITDA multiple of 10.6x, based on the FY 25 estimated EBITDA of US$1,084m, which is lower than its 3-year historical average of 10.8x. However, it is trading higher than Lundin Gold’s valuation of 9.2x.

Alamos Gold is liked by 11 analysts, with all of them having ‘Buy’ ratings for an average target price of US$35, implying 25.5% upside potential from the current price. Their views are further supported by an anticipated EBITDA CAGR of 22.9% over FY 24-27, reaching US$1,286m, with margins of 64.5% in FY 27. In addition, analysts estimate net profit CAGR of 36.3%, reaching US$720m with margins of 36.1% in FY 27, with EPS expected to increase to US$1.7 in FY 27 from US$0.7 in FY 24. Likewise, analysts estimate an EBITDA CAGR of 4% and net profit CAGR of 9% for Lundin Gold.

Overall, the company appears to be set to post growth over the long term, supported by record production volumes, strong portfolio of projects in the pipeline, and encouraging outlook for gold prices. However, the group is prone to few risks, including high project costs, project execution risks and dependency on gold price performance.