Alacer Gold Stock Can Rise Higher

Alacer Gold [stock_market_widget type="inline" template="generic" color="default" assets="ASR.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] has managed to sustain its terrific run on the stock market this year thanks to the strong production growth the company is delivering. Its latest results indicate that the stock is primed to deliver more upside. Let’s take a closer look at how the company performed last quarter and what lies in store for investors.

Solid Production Growth Driving Results

Alacer Gold started the year on a great note, delivering gold production of 89,000 ounces during the first quarter. By comparison, the company had produced around 37,000 ounces of gold in the year-ago period. So Alacer Gold more than doubled its production year over year.

Alacer sold 91,000 ounces of gold during the quarter, generating revenue of $119 million as compared to revenue of $56 million in the prior-year period. Its cash flow from operations rose to $33.4 million after excluding the production from its sulfide plant. By comparison, Alacer generated $30 million in operating cash flow during the year-ago quarter.

This weak cash flow growth was a result of a decline in the company’s average sales price. Alacer Gold’s average realized gold price during the quarter came in at $1,305 an ounce as compared to $1,337 an ounce in the prior-year period. The lower price also had a negative impact on the company’s bottom line, which fell to $6 million from $35 million in the year-ago quarter.

Pulling the Right Strings

But the good part is that Alacer is making the right moves to increase production efficiency. Its all-in sustaining costs during the quarter came in at $721 an ounce, which is well within its full-year range of $675-$725 an ounce.

Alacer Gold plans to produce between 320,000 ounces to 380,000 ounces of gold this year compared to 170,865 ounces last year. Its production will get a massive shot in the arm this year thanks to the Çöpler gold mine, where the sulfide plant is now operational.

In fact, the sulfide plant is expected to help Alacer regularly clock annual gold production of 300,000 ounces to 400,000 ounces in the long run. But what’s even more impressive is that the higher production will be achieved at a lower cost base.

It makes sense for investors to buy the stock right now considering the massive earnings growth it is primed to deliver.

Alacer projects that the sulfide plant will help it reduce its cost base significantly because it carries an average grade of 4.75 grams per ton, while the grades at the oxide plant are much lower at 1.60 grams per ton.

Not surprisingly, the company’s earnings are expected to increase massively this year. Analysts forecast that Alacer will deliver earnings of $0.35 per share in 2019 compared to just $0.05 per share a year ago.

Given that Alacer Gold trades at a forward price-to-earnings ratio of just 9.62, it makes sense for investors to buy the stock right now considering the massive earnings growth it is primed to deliver. Even though Alacer Gold stock has rallied more than 40% so far in 2019, don’t be surprised to see more upside.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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