Alamos Gold (NYSE:AGI) is expected to report its second-quarter earnings on July 31. Having reported revenue of $156 million, the company beat analysts' expectations of $148 million last quarter, and it met expectations on the bottom line, reporting earnings per share of $0.03 adjusted for one-time costs. In Q2, analysts expect the company to report earnings of $0.04 per share on revenue of $168 million.
Although it will be interesting to see how Alamos Gold fares in meeting expectations, savvy investors know that there's much more to a company's quarterly performance than just top- and bottom-line metrics. So let's prepare for the Q2 report by keying in on some points we can expect management to address.
1. Steady as she goes
Reporting gold production of 125,300 ounces for the first quarter, Alamos Gold indicated that it remains well-positioned to achieve its 2019 annual gold production guidance of 480,000 to 520,000 ounces. Management expects a performance in Q2 similar to what it achieved last quarter, so investors should look for the company to report gold production of about 125,000 ounces.
In terms of individual assets, look for Alamos Gold to report that it began mining ore from the San Carlos pit at Mulatos in the second quarter -- an important feat for Alamos Gold to achieve its 2019 gold production forecast of 150,000 to 160,000 ounces at the Mexican mine. Moreover, investors can confirm that Young-Davidson and Island Gold reported gold production of about 45,000 and 36,000 ounces, respectively, consistent with what they reported in the first quarter. At El Chanate, Alamos Gold ceased mining activities last October and transitioned to residual leaching; consequently, El Chanate is forecast to produce 9,200 to 19,200 gold ounces in the last three quarters of the year.
2. A matter of timing
Thanks, in large part, to low-cost production growth at Island Gold, Alamos Gold reported all-in sustaining costs (AISC) of $957 per gold ounce in the first quarter. Although management foresees a repeat performance regarding gold production, it expects AISC to increase due to the timing of sustaining capital spending. Nonetheless, management believes the company is well-positioned to meet its 2019 forecast for AISC per gold ounce of $920 to $960 -- the midpoint of which represents a 5% decrease from the company's 2018 AISC of $989 per gold ounce.
Digging deeper into the company's cost profile, investors can expect Mulatos to be one of Alamos Gold's higher-margin assets in the second quarter. While Mulatos reported AISC of $809 per gold ounce in Q1, management acknowledges that this was due to the timing of sustaining capital spending and lower cash costs, maintaining that the mine is still expected to report AISC per gold ounce of about $880 for 2019, consistent with initial guidance.
3. Lustrous growth opportunities
Aside from Alamos Gold's operating assets, investors should watch the projects that the company has in development as it strives to expand its portfolio. For one, look for commentary regarding Lynn Lake, in Canada. According to a feasibility study released in 2017, Lynn Lake, over a 10-year life of mine, could average annual production of 143,000 ounces with annual AISC per gold ounce of $745, representing a 12.5% internal rate of return. But it may glitter even more brightly than that. Management is updating the feasibility study as it evaluates further cost-saving initiatives, thereby increasing the profitability of the asset. The updated feasibility study is expected to be released in the middle of 2019, so investors may gain some insight during the Q2 earnings presentation.
Furthermore, look for management to provide some color on Kirazli. Having received the operating permit for Kirazli in March, Alamos Gold stated on its Q1 conference call that it expects to begin pre-surfacing the open pit in May, and to ramp up construction activities at the asset through the year.
What to focus on from Alamos
While I'll be watching to see if Alamos Gold meets expectations and achieves gold production of approximately 125,000 ounces in the second quarter, I'm more interested to see whether management provides commentary on its growth projects: Lynn Lake and Kirazli. Whereas it will be several years before Lynn Lake starts producing the yellow stuff, Kirazli is expected to achieve commercial production by the end of 2020 -- at which point, according to management's estimation, it will become a major driver of free cash flow.