Alamos Gold Inc

Alamos Gold Inc. (TSX: AGI) is engaged in the acquisition, exploration, and production of gold and other precious metals, and operates in two principal geographic areas of Canada and Mexico.

Key Highlights:

• Bearish technical: On the daily chart, the stock of AGI ended its short-term uptrend and made a bearish engulfing patten on Thursday’s close, indicting a possible correcting in the coming days. Moreover, the stock also closed below its long-term simple moving averages of 100-days and 200-days, respectively, which shows a further weakness in the stock price.

Daily Price Chart (October 28, 2021). Source: REFINITIV, Analysis by Kalkine Group

• Sluggish quarterly performance: In Q3FY21, the company posted a slide in its top-line (USD 198 million v/s USD 218.4 million in pcp) due to lower gold sales (110,488 ounces v/s 116,035 ounces in pcp). Moreover, the group reported higher input costs during the period, which resulted to a decline in the net profit of USD 25.1 million, as compared to the USD 67.9 million in pcp.

• Lower guidance: The company has reduced its full-year production guidance by ~15,000 ounces due to the challenges witnessed by the company from the Mulatos mine during the third quarter of FY21. Notably, the company lowered its full-year production guidance from 150,000 to 160,000 ounces to 135,000 to 145,000 ounces.

Valuation Methodology (Illustrative): Price to Cash flow

Stock Recommendation:

For 9MFY21, the company reported a net loss of USD 96.2 million, as compared to a net profit of USD 67.3 million in pcp. Mine-site free cash flow dipped to USD 37.4 million in 9MFY21, significantly lower than USD 69.6 million in pcp.  We have valued the stock using the Price to CF based relative valuation method and have arrived at a double-digit downside (in percentage terms). For the said purposes, we have considered peers like Centerra Gold Inc, B2Gold Corp etc. Considering the aforesaid facts, we recommend a ‘SELL’ rating on the stock of AGI at the last traded price of CAD 9.60 on October 28, 2021.

One-Year Technical Price Chart (as on October 28, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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