Alamos Gold awash in record profits

Alamos Gold’s (AGI-T) fourth-quarter and year-end results primarily show higher gold sales and lower operating costs with positive cash flows, which contributed to the company’s decision to introduce a semi-annual dividend.

With its producing Mulatos gold mine in Mexico’s Sonora state up and running smoothly and advanced gold exploration projects in Turkey, Alamos said it would pay a dividend of US3¢ per share on April 30, 2010, to its shareholders on record as of April 15.

In the fourth quarter ended Dec. 31, 2009, the debt-free company had record earnings of US$20.1 million (US18¢ per share) compared to US$9.1 million (US10¢ per share) in the same quarter of 2008.

Revenue for the last quarter of 2009 was up 62% to US$52.6 million on gold sales of 49,145 oz., compared to US$32.4 million on gold sales of 40,176 oz. for the fourth period in 2008.

Similarly, revenue for all of 2009 climbed 29% to US$171.4 million from $133 million in 2008.

“The increase in gold sales revenues is attributable to a combination of a 17% increase in the number of ounces sold and a 10% increase in the average realized gold price,” the company wrote in a report.

Alamos boasted a higher average gold price of US$1,071 per oz. for the last quarter of 2009 compared to the average price of US$806 for the fourth quarter of 2008.

Similarly, the full year saw higher gold sales and average gold prices. The company sold 177,824 oz. gold at an average price of US$974 — a noticeable increase from 2008’s total gold sales of 151,560 oz. and average gold price of US$877.

This upward trend was reflected in the production numbers for 2009 at Mulatos.

Mulatos, which belongs to the company’s fully owned 303-sq.-km Salamandra concessions, hosts 47.6 million tonnes of proven and probable reserves grading 1.35 grams gold per tonne, with 2.05 million contained oz. as at Dec. 31, 2008.

The open-pit, leap-leach operation, boasted an 18% increase in production in 2009 thanks to improved grades, tonnages and gold recoveries.

The total amount of gold mined from Mulatos in 2009 was 178,500 oz. compared to 151,000 oz. in 2008.

And as the gold production grew at the company’s flagship mine, operation costs sank. The mine churned out 48,000 oz. gold over the fourth quarter of 2009 at a total cash cost of US$320 per oz. compared to 42,500 oz. gold at a cost of US$314 per oz., in the third quarter of 2009.

Similarly, the year’s cash cost per gold oz. sold by Alamos dropped by 16% to US$327 from US$389 in 2008.

“The low per ounce costs for the fourth quarter and year ending 2009 are a direct result of continued re- covery improvements, operational efficiencies and a favourable exchange rate between the Mexican peso and the dollar,” the company said in a release.

Cash flows from operating activities in 2009 were up 45% from the year prior to US$95.6 million. Alamos reinvested US$36.6 million of that amount in development and exploration activities.

The unhedged company, which saw its first gold pour in April 2006, mainly focused its attention in 2009 on the construction of a closed crushing circuit to increase gold recoveries, and the development of its Escondida zone on the Mulatos pit.

The company plans to release an updated reserve and resource estimate for Mulatos, shortly.

For 2010, the company plans to slightly shift its attention to its exploration projects in northwestern Turkey, where the company expects to start drilling this month.

The company acquired its Turkish gold assets — Agi Dagi and Kirazli — in January 2010 from Fronteer Development Group (FRG-T, FRG-X) and Teck Resources (TCK. B-T, TCK-N) for $40 million in cash and 4 million issued shares (60% to Teck and 40% to Fronteer).

For this transaction, Alamos received a thumbs-up from Paradigm Capital analysts who calculated that production from Agi Dagi could result in a potential 40% increase in Alamos’ annual gold production.

At presstime in Toronto, Alamos shares were trading at $14. The company has a 52-week trading range of $7.25-$14.54 per share and 114.2 million shares outstanding.