Forget Barrick: ALAMOS GOLD is the BEST OF THE BEST

Forget Barrick: ALAMOS GOLD is the BEST OF THE BEST

Today we’re going to do a stock analysis on Alamos Gold. I think that this may be the very best run company of any gold producer, perhaps even better than Agnico Eagle Mines, which is widely considered to be the very best company in the space. Before the end of this video, we’re going to look at the company’s future cash flows, what the stock could be trading at in the future, and whether or not it’s a buy today. By the way, this shouldn’t be taken as financial advice, and I always recommend that you do lots of your own research before investing any of your hard earned money. First, let’s compare Alamos to some other popular precious metals producers. So in this chart here, you can see Alamos’ gross margins in the blue column on the very left. And next to that, we have Barrick Gold in black. We have Agnico Eagle Mines in green, Pan American Silver in orange, and then IAMGold in purple. And as you can see, the only one that can compete with Alamos on gross margins is Agnico Eagle, and they’re almost exactly the same. And Alamos’ gross margins are a little over 56%. So for every hundred dollars worth of gold that they take out of the ground, it costs them about $44 to take that out of the ground. And then they have $56 left over. Or Iamgold, it costs them $88 to take it out of the ground, and they have $12 left over. I think knowing the gross margins is really helpful because it tells you how profitable the company’s mines are. However, it doesn’t tell the whole story. So now let’s look at operating margins. Operating margins is gross margins minus what it costs to run the business. So this is going to take into account general and administrative expenses, also drilling and exploration cost, depreciation, stock compensation and other operating expenses as well. Something that operating margins does not take into account, though, is how much debt the company has, because this doesn’t include debt service cost. So here you can see that Alamos Gold is the standout with operating margins of 31%, whereas Barrick Gold and Agnico Eagle mines are down at about 21 or 22%. And Pan American Silver, which is generally considered a pretty good operator, has operating margins of just 1.5%. And Iamgold is actually negative. And I mentioned that the operating margins don’t take into account interest expense. So now let’s look at the amount of debt these companies have relative to how much money they’re making. So here we have the last five years of data in this chart, and on the right hand side over here is the most recent year. So let’s look at this one. There’s five companies that it’s showing here, but there’s only four bars. And that’s because Alamos has no debt at all. So they don’t even show up as a bar because they’re 0.00, the very best number you can have. And in this chart in particular, the lower the number the better. So the next best in terms of debt to EBITDA is Agnico Eagle mines. Then it’s Barrick gold in green. Then it’s pan american silver in orange or a salmon color there. And then finally you have Iamgold with that huge purple bar at 8.6 Debt to EBITDA ratio. Because they have a lot of debt and not a lot of earnings. It’s great to have really profitable lines. But a big part about being a well run company is keeping your expenses under control. General administrative expenses cover a lot of things, but a big portion of this is typically the executive salaries. So let’s take a look at this chart comparing Alamos gold to b2gold over the last nine years. Because these are both gold companies and they both have three different mining operations. So in terms of the scope and the size of the company, they’re actually pretty similar. And looking at this chart with b2gold here in the blue bars and Alamos in the black bars. You might think that b2gold is a terrible operator because they’re spending money like crazy. But the truth is that b2gold is also a very well run company. So this is just comparing a very well run company, b2gold, to Alamos, which is probably the best of the best. And in the most recent year, on the right hand side here you have Alamos Gold at a little under $28 million. And then you have b2gold at a little under $68 million. So in the most recent year, B2gold’s G&A expenses were two and a half times that of Alamos. And another big part about being a very well run company is growing on a per share basis. So let’s take a look at this chart that compares Alamos’ cash flow per share to Barrick Gold’s cash flow per share over the last nine years. So on the left hand side, in 2015, Alamos had thirty one cents per share. And in the most recent year they had $1.20 per share of cash flow. So in nine years, they have four x’ed their cash flow per share. Now it’s very important to look at this as a per share metric because companies will often grow a lot. However, they blow out their share structure at the same time, and their numbers on a per share basis don’t actually get any better. Now, let’s compare that to Barrick Gold. Barrick Gold in 2015 earned $2.40 per share. And in 2023, they actually earned less than in 2015 at $2.20 per share. Now, that’s at the same time, the gold price has gone from something like $1,200 an ounce to about $2,000 an ounce. The gold price almost doubled. Yet Barrick Gold managed to make less money per share nine years later. And now let’s look at the same chart. But this time, let’s compare Alamos to Agnico Eagle Mines. So, over the last nine years, Alamos, like in the last chart, has quadrupled their cash flow per share, while at the same time, Agnico Eagle has a little less than doubled their cash flow per share. Now, Agnico Eagle is a much larger company, so it’s going to be harder for them to grow at a fast rate than it is for Alamos to do so. But there is a huge difference in the growth of cash flow per share in comparing Alamos to Agnico Eagle. And you know what? Alamos has done that with taking on almost zero debt during this entire nine years. Now, there were a couple of years, like back in 2015, where they took on some debt to make an acquisition, but they quickly paid that off by 2017. And ever since then, they’ve been operating and growing debt free. And when you can grow debt free, using your operating cash flow to grow even more and more and more, well, that’s a much safer way to grow than taking on debt, because there’s also a value here to not having debt and having low cost mines. Because let’s say we go into a bear market and the gold price falls a lot, well, then Alamos is still going to be making a lot of money. And they have a rock solid balance sheet, so they’ll be able to pick up other companies mines for pennies or dimes on the dollar. And Alamos has proven to be very skilled in their mergers and acquisitions, and they’ve done an excellent job of making those acquisitions countercyclically at the very best times. And now let’s compare them to another company who has done a really good job growing their cash flow per share. And that is Fortuna Silver Mines. Fortuna, in the last nine years, has grown their cash flow per share by about two and a half times. But again, over that same time period, Alamos has grown it four times. Now that I’ve told you a little bit about why I consider Alamos Gold to be one of the best run companies, let’s look at its valuation. Today, the stock is trading at about $15 per share. And this chart here shows Alamos net asset value per share over the last several years. And most recently, the most recent data we have, we’re at $14.91 per share. However, this chart does not include the acquisition of Argonaut gold because that transaction has not been finalized yet. And with that new acquisition, the net asset value of Alamos is going to go up a lot, and the share count is only going to go up about 5%. So that should improve the net asset value per share by a lot. And in addition to that, Alamos is discovering a lot of ounces and doing it at a very low cost. As a matter of fact, they’re discovering new ounces of gold on their already producing properties for just $13 per ounce. And that’s one way you’re going to see a lot of value added to this stock in the coming years. So right now, you can buy the company for about one times its net asset value. However, if you take into account that Argonaut acquisition, it’s actually going to be probably somewhere around 0.8 times the net asset value. However, now let’s look at what the company might be trading at in a few years from now, because they have a lot of growth on deck and they’re paying for this growth using the cash flow that the company is getting from its operating mines, there’s a lot of risks that come with adding debt. So when you can grow without debt, which is really rare, it’s a very, very good thing. Before we talk about my thoughts on this investment, let’s look at the reserves and resources that this company has. And this is going to be assuming that the Argonaut transaction closes, which I think it will, they’re going to have 22 million oz of gold in the proven improbable and measured in indicated categories. So this is leaving out the least confident category, which is inferred resources. So we’re just taking the highest confidence categories and including those. In a few years, I think the company is going to be ramping up to 900,000 oz per year of production. So at that mining rate, which is significantly higher than what they’re mining today, we’re looking at 24.4 years of production. And it’s also worth noting that these reserves and resources are growing net of depletion. So right now they’re mining about 500,000 oz a year, but they’re growing their reserves and resources faster than that, faster than what they’re mining. So that’s a really good sign that there’s a lot of exploration upside at or near their current producing mines. And before trying to figure out the company’s valuations, we need to look at some facts about the company to try to determine what kind of multiplier to give it. So a really good company is going to get a high multiplier, whereas a not so good company is going to get a much lower multiplier. So let’s look at some facts about the company here. They’ve experienced very fast growth in that chart I showed you earlier. They’ve nearly quadrupled their cash flow per share over the last nine years. And I think they’re going to do that again in the next nine years. And then also they’re in safe jurisdictions. After this Argonaut transaction closes, 88% of the company’s net asset value is going to be in Canada, and the remainder is in the safest state for mining in Mexico. And then their reserves and resources are enormous. They have 24.4 years of production at a much higher production profile than what they’re producing at today, which is one of the best numbers in the business. They have no debt, so it’s a low risk company in that sense. And they’ve been growing a lot without debt as well. They have some of the lowest cost mines in the industry. And also it’s worth mentioning that they have decreasing production costs. This is one of the few companies, I don’t know if there’s any other companies in the whole gold producing industry that has been decreasing their production costs over the last few years. Most have seen tremendous increases in production costs. And in addition to the low cost mines, they also have low expenses. They run a really tight ship and the executives are not overpaid. As a matter of fact, comparing it to similar sized companies, the executives at Alamos make a lot less than other similar sized companies in the US. And I think Alamos has the best of the best management. The more I research this company, the more I’m convinced that this is the best management in the business. And they have a lot of growth ahead of them from acquisitions they’ve already made and from projects they already own. And looking at their financials and what they’ve been able to achieve, they have the best numbers on almost any financial metric that you can measure out of all of the gold producers. In addition to that, the insiders own a lot of shares, meaning that they’re aligned with us, the shareholders, and they’re discovering a lot of ounces at their properties, and they’re doing so for just $13 an ounce. And they’ve made a lot of smart acquisitions. The management is really great at making countercyclical acquisitions. You might say that this most recent acquisition of Argonaut was not countercyclical because the gold price is way up. However, it was countercyclical in the sense that the junior companies are really depressed right now. Even the quality junior companies. So they picked up that company for a steal. And one thing I just remembered that I also think is worth mentioning is that in the history of the company, they have paid more money out in dividends than they have ever raised from the market. So everything they’ve raised has already been returned to shareholders. And then they’ve created a ton of value on top of that. So, as you can see, this company has a lot going for it. And I honestly can’t find any negatives. Now, maybe you could argue that a negative is that they don’t have any tier one mines, but on any other metric that you could possibly measure, financial or otherwise, they’re at the top of their class. So with all these things considered, I think they easily deserve a twelve times cash flow multiplier. Or perhaps even more. So using this twelve times number, we’re going to go find a valuation for this company, for this stock. Our time horizon is going to be about three and a half years or the end of 2027, for a few reasons, because their production profile should be about 900,000 oz based on some growth projects they have coming up. And also in the meantime, they have some projects that they’re working on that are reducing the cost at some of their mines. And also, we’re shooting for the end of 2027, because with this recent acquisition of Argonaut Gold, they also took on some gold hedges. For these 350,000 hedged ounces, they can only receive a little over $1,800 per ounce. So they won’t be able to get the full market price for that portion of their production. But by the end of 2027, all of those hedges are gone. So, because those hedges will be gone and costs should be lower and production should be a lot higher, I think that’s a good time frame to shoot for to maximize our return on this investment. So by the end of 2027, they should be producing about 900,000 oz of gold per year at an all in sustaining cost of somewhere around $1,150, Even taking into account inflation from now until then. And as a matter of fact, this number may even be conservative, it could very well be lower than this. And we’re going to calculate this using today’s gold price of $2,314 per ounce, which equals a cash from operations of $1.0476 billion. We take out what I estimate the G&A expenses are going to be in 2027 of $38 million, which is significantly higher than what the G&A expenses are today. However, by then, they’ll be adding another mining operation on which will add some to that G&A expense. So that equals an annual cash flow of $1.096 billion. So we take this cash flow number, we multiply it times twelve, our multiplier that we discussed earlier, which brings our enterprise value to a little over $13 billion. And because they have no debt at all, that’s also the market cap we’re shooting for. So now, taking this number, we’re going to turn that into a per share metric using the new number of shares that the company will have after the Argonaut transaction closes. Before I get to my verdict here, I want to remind you that this is just a snapshot in time. What’s true today, based on my best research, may not be true tomorrow or a year from now, depending on how things have changed with the company, how things have changed with the countries they operate in, and so on. Now, if you’re going to take advice from somebody, I recommend that you continue to follow that person closely and continue to follow what they say. So in this case, that could mean subscribing to the channel. But keep in mind that I won’t be updating you anytime something happens with Alamos, but something I do offer is my newsletter. I recently launched it, and out of all the companies in my portfolio in the newsletter, I follow them really closely, and I let you know before I buy or sell. I follow the companies very closely. I read the quarterly reports, the annual reports. I do research into what’s happening in the countries they operate in. Similar services like this charge $500 a year, $1,000 a year, even $3,000 a year. But you can get my service for just $9.95 a month, or even cheaper than that if you choose the annual plan. And I offer a 30 day money back guarantee if you’re not satisfied for any reason. So go to miningstockmonkey.com or click the link in the description or the comments below. Now I know a lot of you have signed up already and some of you have emailed me saying, "hey, I signed up but I haven’t gotten any emails. What’s going on?" And I’ve been looking into that and in almost every case it’s because it’s going to your spam. So if you haven’t received any emails from me, be sure to check your spam folder and if you find it there, mark it as "not spam" to make sure future emails go straight to your inbox. But with all that said, let’s get on to my verdict here. So as discussed, our investment time horizon is about three and a half years or the end of 2027. Our risk level, one being the least risky, ten being the most risky, is a five. And you might be thinking "a five? based on everything you said, it sounds like it’s not a risky company" and it’s not for a gold miner. Five is actually my very best rating for a gold producer. So in terms of gold producers, I think this is not a risky company. However, gold producers are a risky business. And then my verdict. My verdict is a buy on weakness. I think after this Argonaut transaction closes, some people will be wanting to sell because a lot of the Argonaut shareholders were holding, hoping for a takeover. And now that the takeover will have happened, they’ll be looking for a time to sell. So I suspect that there will be some selling pressure on the stock in the months going forward. So I think it’s a very high quality company at a fair price and this should be a staple as part of your gold portfolio. However, you always want to buy it at a good price and I think there will be some weakness. So buy on weakness is my verdict there. And my target price. We take a little over $13 billion divided by the number of shares that will be outstanding after the Argonaut transaction closes, which equals a share price of $31.52. And this is assuming that the gold price doesn’t change. If you would like to check out my newsletter, you can click on that link right here. And next, watch one of these videos. It’s a couple other stock analysis that I’ve done recently and I think you will get a lot of value out of.

Forget Agnico Eagle and Barrick Gold. Alamos Gold might be the most impressive gold miner you’ve never heard of.
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In this video, I’ll break down why this company boasts industry-leading margins, explosive growth, and rock-solid financials. Plus, I’ll reveal if Alamos is trading at a bargain price right now.

Key points covered:

Why Alamos Gold crushes the competition in profitability.
How Alamos is growing rapidly without taking on debt.
Alamos’s massive reserves and exploration potential.
My honest verdict: Is the stock a screaming buy?

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Disclaimer: This is for informational purposes – always conduct your own research before investing. Never make any investment decisions based on my videos. This sector is very risky and this should not be considered investment advice. Always do a lot of your own research before investing your hard earned money.

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