Shares of precious metals miner Alamos Gold (NYSE:AGI) headed sharply higher as soon as trading began on Oct. 29. By 11 a.m. EDT, the stock had gained just shy of 13%. The main driver was the company's after-the-close earnings release on Oct. 28. But you need to read beneath the headline numbers here.
Alamos Gold's revenue in the third quarter was roughly $218 million, an increase of around 26% compared with the same period in 2019. Adjusted earnings came in at $0.15 per share, up from $0.06 in the prior year. With the gold miner able to hold its sustaining costs roughly flat year over year, the big change was the sizable 30% increase in its realized sales price of gold. All in, this was good reading, and it makes sense that investors were pleased.
However, there's some nuance in these numbers. For example, the company actually sold slightly less gold in the third quarter of 2020 than it did in the same period of 2019. That same trend holds true through the first nine months of the year, though to a greater degree. The reason for that decline is important, as it was related to operating disruptions caused by the COVID-19 crisis. But third-quarter production increased nearly 50% sequentially from the second quarter, which suggests that operations at Alamos' mines are getting back to normal. That's very good news and something that investors should truly be excited about. The upbeat mood here was further bolstered by the fact that the annualized dividend was increased by 33% and, subsequent to the quarter's end, the miner repaid all of its debts, leaving it debt free.
Alamos Gold's second-quarter results were pretty solid all around, so it's not surprising that investors were positive about the stock this morning. That said, long-term investors shouldn't get too caught up in the daily gyrations here. Precious metals are notoriously volatile, and investments in the space are probably best viewed as diversifying assets. In other words, one day's gain isn't a good enough reason to buy Alamos Gold -- you need to think more strategically than that, even when the company appears to be hitting on all cylinders.