A Hot Gold Stock for 2019


Atlantic Gold [stock_market_widget type="inline" template="generic" color="default" assets="AGB.V" markup="(CVE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] has sizzled on the stock market this year, rising close to 40% in the span of just three months as investor confidence in the junior gold miner seems to have increased. This is not surprising given the recent uptick in gold prices, which could keep getting better thanks to a potential undersupply of gold.

However, the improving end-market scenario isn’t the only reason why Atlantic Gold shares have taken off. The company’s operating performance improved last year and it expects to repeat the same in 2019. Let’s take a closer look at the reasons why Atlantic investors can expect the company’s momentum to continue.

What’s Working for Atlantic?

Atlantic Gold delivered production of 90,531 ounces last year, which exceeded the higher end of its own guidance range. Its cash costs came in at C$558 an ounce, while all-in sustaining costs per ounce of gold stood at C$731. Atlantic’s costs for the year were within the company’s originally guided range.

The good part is that Atlantic was able to achieve its targets in the first year of its commercial production. Looking ahead, Atlantic expects its production to get better in 2019.

The company is targeting production in the range of 92,000 to 98,000 ounces of gold at the Touquoy gold mine this year. What’s more, it expects cash costs in the range of C$560 to C$610 per ounce, while all-in sustaining costs are expected to fall in the range of C$695 to C$755.

Also, Atlantic is making moves to ensure long-term production growth. The company has made a strategic investment worth C$9 million in Velocity Minerals, which gives it control over 19.8% of the latter’s shares. Atlantic’s stake in Velocity could rise to 39.1% assuming that its debentures are converted and warrants exercised.

Velocity is going to use the proceeds from this investment to fund its Rozino gold project and also explore other ancillary deposits in the region. So, success in this venture has the capability to boost the company’s output in the future, though it hasn’t pointed out to what extent as the feasibility study is still being carried out.

Why You Should Be Buying

Further improvements in the company’s production and an increase in gold prices will be tailwinds for Atlantic Gold going forward as it will be able to further strengthen the balance sheet.

The Vancouver-based company is clearly looking for ways to expand its production and keep costs under control as well. So, it isn’t surprising to see why analysts are expecting a strong increase in the company’s top line this year, as well as a nice bottom-line bump.

More importantly, the improvement in its headline numbers is also driving growth in other key metrics. For instance, its cash balance increased to C$50.3 million at the end of last year as compared to C$32.7 million at the end of the previous year. This was a result of an increase in its cash flow, which was also used to pare its debt.

Atlantic’s net debt fell 39% in 2018 to C$63.7 million. So, further improvements in the company’s production and an increase in gold prices will be tailwinds for Atlantic Gold going forward as it will be able to further strengthen the balance sheet. This should keep investor confidence in the stock high and lead to more upside.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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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