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Why Alamos Gold Inc. Shares Jumped Nearly 17% in September

By Reuben Gregg Brewer – Oct 11, 2016 at 8:24AM

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Alamos Gold changed some key numbers in a big way, and investors got very excited.

Image source: Getty Images

What happened

Shares of Alamos Gold Inc. (AGI 1.47%) bucked the trend last month, rising just under 17%. Other notable companies in the industry didn't do nearly as well. For example, Gold Corp , one of the better performers, was up around 8% and Barrick Gold was up half that much. Some of the smaller players, such as Sibanye Gold Limited, actually fell during September.   

So what

One of the key reasons for Alamos Gold's solid advance was an update the company provided on some of its exploration efforts. At the risk of sounding campy... Alamos struck gold!

On Sept.12, the company announced a 93% increase in the amount of gold it believes it can extract from its La Yaqui mine. That's pretty good news, but its really just part of a bigger story. The company announced in March that the combined reserves and resources at La Yaqui and the Cerro Pelon mine were being increased by 145%! So the September announcement was really just good news on top of good news.   

Looking back a little further, Alamos' reserves have increased 570% since the end of 2014. To be fair, its proven and probable reserves haven't really grown all that much. What's increased are the company's indicated and inferred resources. That's material the company thinks it can get, but isn't completely sure. In other words, this positive news is still a little speculative.   

Now what

If you are looking for a precious metals miner with a solid production growth profile, it's probably worth taking a deeper dive into Alamos Gold. It increasingly appears that the company has found some good areas to develop in the future. That said, Alamos' future is still heavily dependent on the often volatile price of gold. The current news is clearly positive, if still somewhat speculative, but it can't outweigh the impact of the price of gold.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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