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Alamos Gold Posts Record Cash Flow in Q3, Confirms FY Guidance and Raises Dividend 33%

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Shares of Alamos Gold traded 12% higher after the company reported record free cash flow in Q3/20 and a 49% sequential increase in gold production versus the previous quarter.

Intermediate gold producer Alamos Gold Inc. (AGI:TSX; AGI:NYSE) yesterday announced financial results for its third quarter of 2020 ended September 30, 2020.

The company's President and CEO John A. McCluskey commented, "We had an excellent third quarter financially and operationally with strong performances at all three operations driving costs significantly lower. This included another record quarter at Island Gold and Young-Davidson starting to demonstrate its full potential following the completion of the lower mine expansion. We previously outlined our expectation to transition to strong free cash flow generation in the second half of 2020 and we delivered with record free cash flow of $76 million in the quarter."

"Given our strong free cash flow outlook, we are pleased to announce a 33% increase in our dividend, which has now grown by 300% since 2018. We expect to continue to generate strong free cash flow while reinvesting in high-return projects like La Yaqui Grande and the Phase III Expansion at Island Gold which will support further growth and returns to shareholders," McCluskey added.

The company reported on several operating and financial highlights and stated that it achieved record quarterly free cash flow of $76.0 million in Q3/20 driven by higher margins at all of its operations.

The firm indicated that it produced 117 Koz Au in Q3/20, which was a 49% increase compared to Q2/20. Alamos Gold commented that the increase was due to production returning to budgeted levels following the temporary suspension of operations due to COVID-19 at the Island Gold and Mulatos mines in Q2/20.

The company pointed out that through the first nine months of the 2020 fiscal year it has produced 306.4 Koz gold and remains very well positioned to meet its FY/20 guidance of 405-435 Koz gold.

Alamos stated that in Q3/20 it sold 116.035 Koz Au at an average price of $1,882/oz, resulting in revenues of $218.4 million.

The firm additionally announced that it was increasing its common shareholder's dividend by 33% to US$0.08 per share starting with the dividend payable in December 2020. The company stated that the increase is justified and supported by the record free cash flow in Q3/20 and strong forward outlook.

The company noted that in Q3/20 consolidated total cash costs were $681 per ounce and all-in sustaining costs were of $949 per ounce and that both of these decreased significantly from H1/20.

Alamos reported that it reported record adjusted net earnings of $56.9 million, or $0.15 per share in Q3/20, which increased by 143% compared to Q3/19. The firm additionally reported that in the quarter it realized record net earnings of $67.9 million, or $0.17 per share.

The company indicated that the record financial performance it achieved in Q3/20 was due to a combination of very strong operational performance and higher gold prices. The firm advised that gold production increased to 117.1 Koz in the quarter, which represented a 49% increase over Q2/20. The company added that these volumes were registered along with much lower total cash costs of $681 per ounce.

Alamos Gold advised that it expects that production in Q4/20 will be at similar levels, which will position the company to meet its revised FY/20 production and cost guidance that the firm issued earlier this year in July.

Alamos Gold is an intermediate gold producer headquartered in Toronto. The company employs more than 1,700 people and operates three mines in North America, which include the Island Gold and Young-Davidson mines in northern Ontario and the Mulatos mine located in the state of Sonora in Mexico. The firm noted that it also has a large number of other development stage projects in the U.S. Turkey, Canada and Mexico.

Alamos Gold started the day with a market capitalization of about $3.2 billion with approximately 391.4 million shares outstanding. AGI shares opened 3% higher today at US$8.36 (+$0.24, +2.96%) over yesterday's US$8.12 closing price. The stock has traded today between US$8.32 and US$9.19 per share and is presently trading at US$9.11 (+US$0.98, +12.05%).


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