What happened
Shares of gold miner Alamos Gold (AGI -0.47%) rose a dramatic 58% in April according to data from S&P Global Market Intelligence. That comes off of a pretty awful March, when the stock fell roughly 14% but was, at one point, down around 30%. Through the first four months of the year Alamos rose 34%. Gold, using SPDR Gold Shares (GLD -0.79%) as a proxy, was basically flat in March, advanced roughly 13% in April, and was up by about 11% between January and April.
So what
Alamos is a relatively small gold miner, with just three main operating assets. In late March, while the broader market was still fretting about the spread of COVID-19, it was forced to shut down one of those mines, known as Island Gold. In early April it had to shut another mine, Mulatos. However, financial results in the first quarter remained relatively strong, news that was finally released in late April when the company reported earnings. Gold production fell roughly 12% year over year in the first quarter, which isn't surprising given the mine disruption, but higher realized gold prices offset most of the pain. Adjusted earnings came in at $0.08 per share, up from $0.03 in the previous year.
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The bigger news, however, was that the company's development projects remained largely on course through this difficult period. On the negative side, the company has withdrawn its full-year guidance and the second quarter will likely continue to be hit by the mine closures. However, management believes that an expansion study at its Island Gold operation and an expansion project at its Young-Davidson mine will both be completed as expected in the middle of the year. Management believes this will set the company up for a strong second half, assuming it is able to start up its two shuttered mines as expected in the second quarter.
Now what
Alamos gold is a mid-tier gold miner with a relatively small number of mines and high operating costs (all in sustaining costs were $1010 per ounce in the first quarter). For most investors looking to the gold space for diversification, this wouldn't be a great fit. A larger miner or a streaming company would be more appropriate. That said, the news here appears to have improved materially since COVID-19 fears in March resulted in a mine closure, but investors clearly rewarded the shares for the shift in the outlook in April.
