Alamos Gold (AGI 0.63%) shares have been underperforming the market this year, losing 23% year to date. The reason for this is simple: The company's production and revenue fell throughout 2013 and continued to decrease in the first quarter of 2014. However, Alamos Gold has certain strong points, which could position the company's shares for future upside.

Solid balance sheet and low costs justify current valuation
Unlike many other gold miners, Alamos Gold has zero debt. The company finished the first quarter with as much as $400 million of cash on the balance sheet, around a third of its market cap. Often, a situation like this occurs when a company is in a difficult situation. However, this is not the case for Alamos Gold, which has been consistently profitable -- except for the fourth quarter of 2013.

The company has maintained a low-cost profile, with all-in sustaining costs of $908 per ounce of gold in the first quarter. Keeping costs low is paramount in the current price environment as gold prices are struggling to stay above the $1,300 level.

Alamos Gold trades at a 40% premium to its book value. In comparison, miners with similar market caps like Harmony Gold Mining (HMY -3.90%) and IAMGOLD (IAG -0.47%) trade at more than a 50% discount to book. However, this fact does not make them more attractive then Alamos Gold. Both miners have all-in sustaining costs that are close to the current gold price.  This fact makes them vulnerable to any gold price downside.

Cash could bring future growth
The current amount of cash on the balance sheet gives Alamos Gold flexibility in pursuing investment opportunities. The company has two projects in Turkey that are in the permitting stages, and it could pour money into them when permits are obtained. On the other hand, Alamos Gold could take advantage of depressed asset prices and buy a producing mine.

Silver miner Silver Standard Resources (NASDAQ: SSRI) was recently in a similar situation. The company had one producing mine and lots of cash on the balance sheet. Surely, Silver Standard Resources felt the pressure to put this cash to work. As a result, the company diversified into gold with the purchase of the Marigold mine from Goldcorp and Barrick Gold.

Just like Silver Standard Resources, Alamos Gold might be feeling the need to deploy its free cash. There's barely any need to keep that much cash on the balance sheet for safety purposes. Thus, Alamos Gold could be active on the shopping front this year, especially if it doesn't get permits for its Turkish projects.

Bottom line
In my view, Alamos Gold is an interesting gold miner to consider. The company has low costs and substantial potential for growth when it finally puts its cash to work. In addition, Alamos Gold pays a dividend that yields 2.2%, which is a healthy yield for a gold miner nowadays. All in all, Alamos Gold looks attractive at current levels.