Alamos falls as Mulatos disappoints

Shares in Canada’s Alamos Gold slumped on January 18 to levels not seen since April 2020, as production at the Mulatos mine in Mexico continued to disappoint in the fourth quarter of 2021.

Nathan Richardson
 Alamos Gold's Mulatos operation in Mexico

Alamos Gold's Mulatos operation in Mexico

The company's total production for the year was at the lower end of already downgraded guidance. 

Alamos also released a three-year production outlook - which predicted a modest increase. 

On January 18, the miner closed trading on the TSX at C$8.31/share, which is down 7% day-on-day. Alamos is also listed on the NYSE. 

Production at the Mexican Mulatos mine -one of three of Alamos' producing mines - slumped to 23,100 ounces in the fourth quarter, which was down from 31,200oz a year earlier. For the full-year, Mulatos' production fell to 121,300oz from 150,800oz the previous year. 

The company's total gold production for the quarter was 112,500oz, down from 120,400oz a year earlier. 

BMO Capital Markets analyst Brian Quast said the fourth-quarter production was "well below" BMO's and consensus forecasts of 125,600oz and 123,900oz, respectively. 

The result saw Alamos' total gold production finish the year at 457,200oz, against guidance of 455,000-495,000oz - which was downgraded from 470,000-510,000oz in late October due to a lacklustre performance at Mulatos that the miner attributed to above average rainfall and the operation going through a transitional phase. 

Alamos forecasted that Mulatos' production would climb to 130,000-145,000oz in 2022, 160,000-175,000oz in 2023, and to 135,000-145,000oz in 2024.

For 2022, the company expected its total production to be in the range of 440,000-480,000oz and set the guidance at 460,000-500,000oz/year for both 2023 and 2024. 

Canaccord Genuity Capital Markets analyst Dalton Baretto said the outlook was generally in-line with CG's expectations, but added that "our production estimates were among the lowest on the street". 

"As such, we believe the market views the guidance update as generally negative," he said. 

Quast said the three-year guidance was at a "meaningful" level below BMO's and consensus estimates. 

He added that the "silver lining" to Alamos' announcement was the guidance for all-in sustaining costs. 

Alamos said that AISC would rise from an expected US$1,120-US$1,140/oz in 2021 to US$1,190-US$1,240/oz in the current year, before easing to US$1,075-US$1,175/oz in 2023, and US$950,000-US$1,050/oz in 2024.

"The completion of La Yaqui Grande will be the key near-term driver of lower costs, and Island Gold will be the primary driver of significantly lower costs over the longer term with the phase-three expansion," Alamos' president and CEO John A McCluskey said. 

"These high-return reinvestments are fully funded and form a key part of our sustainable business model that can support growing returns to our stakeholders over the long term," he said. 

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