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Alamos Gold stocks slide on disappointing Q4 results, lower 2014 guidance

Alamos Gold stocks slide on disappointing Q4 results, lower 2014 guidance

Photo by Bloomberg

17th January 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – The TSX-listed stock of Canadian miner Alamos Gold on Friday continued its downward spiral after the company on Thursday announced lower-than-expected results for the fourth quarter ended December 31, and provided a lower output outlook for 2014, which wiped out C$1.88 a share on Thursday.

At noon on Friday, the company’s stock was down another C$0.12 a share, seeing shares change hands at C$11.19 apiece.

Alamos, which operates the Mulatos mine, in Mexico, sold 42 400 oz of gold in the quarter, for revenues of $53.8-million, a 50% decline from $106.9-million reported in the same three months of 2012, and below guidance of $59-million. The company attributed the disappointing performance to a lower realised gold price and fewer ounces sold.

For the full-year 2013, Alamos reported total output of 190 000 oz of gold, on target and within guidance, and sold a record 198 200 oz at a realised price of $1 424/oz, $13/oz above the average London PM fix price. Revenues for the year fell 14% to $282.2-million owing to the weaker gold price.

Alamos has about $410-million in cash, and no debt.

Gold sales were higher than production in 2013 reflecting a drawdown of in-process inventory prior to the Mexican tax reform becoming effective on January 1, 2014, the company said.

"We had yet another strong year at Mulatos, achieving the mid-range of our production guidance, with costs expected to come in at the low end of our guidance. Despite realising lower-than-expected grades from the Escondida high-grade deposit as production from that zone winds down, our openpit heap leach production, the driver of our Mulatos mine, continued to perform extremely well.

"2013 was a challenging year with the sharp decrease in the gold price, yet with our low cost structure we continued to generate strong cash flow,” Alamos CEO John McCluskey said.

The company said it expected 2014 gold output to range between 150 000 oz to 170 000 oz, mainly a result of the transition to Escondida Deep and San Carlos this year, and all-in sustaining costs of $960/oz to $1 000/oz of gold sold.

The company expected to have depleted the Escondida high-grade zone by the end of the first quarter, at which point the Escondida Deep zone is expected to provide additional feed to continue mill production to the end of the second quarter. The company intends to transition to processing high-grade ore from the San Carlos zone once the Escondida Deep zone has been depleted.

Analysts at Desjardins Capital Markets Research said in a note to clients, the lower year-over-year production and higher cash costs at Mulatos might create negative sentiment toward Alamos’ story as a low-cost producer with a premium valuation, particularly so as development in Turkey might potentially be stalled pending permit approval.

The analysts had lowered their price target to C$15 from C$16.00, but maintained a ‘buy – above-average risk’ rating.

Edited by Creamer Media Reporter

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