Alamos Gold Inc. (NYSE: AGI)
At $940 per ounce, Alamos Gold’s AISC is a little bit higher than the other miners we’ve discussed.
However, those costs are shrinking and production is on the rise.
Total gold production is expected to fall between or even exceed 400,000 to 430,000 oz. in 2016, up from 392,000 oz. in 2016 and 380,000 oz. in 2015.
At the same time, AISC fell more than 7% annually from 2015-17. AISC margin jumped a shocking 300% from 2015 to 2016 and another 35% in 2017 to an estimated to $310 per ounce:
Alamos is also in a strong fiscal position, with about $168 million in cash and no debt.
The company’s flagship mine is the Young-Davidson mine in Ontario, Canada. It has 3.9 million oz. of proven and probable reserves and another 1.2 million oz. measured, indicated, and inferred. Young-Davidson has a 15-year reserve life.
Production from that mine came in at 170,000 oz. in 2016 at an AISC of $897 per ounce. In 2017, the mine produced 200,000-210,000 oz. at an AISC of $775.
Alamos Gold’s Mulatos mine has proven and probable reserves of 1.5 million oz. of gold and more than 3 million oz. measured, indicated, and inferred. It contributed 154,000 oz. in 2016, up from 140,000 oz. in 2015.
Beyond that, the Kirazli, Agi Dagi, and Camyurt pipeline projects are under development in Turkey.
The company has $2.6 billion market cap and has performed exceptionally well for investors both over the short and long term:
Pan American Silver Corp. (NASDAQ: PAAS)
Pan American Silver is the second-largest primary silver miner in the world. It has a portfolio of quality assets throughout North and South America.
It has proven and probable reserves of 286 million oz. of silver.
It’s similar to Alamos Gold in that it has a $2.35 billion market cap.
The company produced 25.4 million oz. of silver and 183,900 oz. of gold in 2016. ASIC per ounce of silver produced is roughly $10.50, which compares to a recent price of $17 per ounce for the metal.
Broadly speaking, Pan American has been extremely successful in its exploration efforts. Over the past 12 years, it’s added 293 million oz. of silver reserves, fully replacing the 291 million oz. of silver depleted through mining activities in that same period.
Most recently, Pan American reported a 5% increase in proven and probable silver reserves at La Colorada. The mine now holds approximately one-third of the company’s reserve book. La Colorada added 5.2 million oz. of silver to its proven and probable mineral reserves. And in 2016, exploration activities will focus on upgrading the approximately 23 million oz. of inferred silver resources.
Manantial Espejo and San Vicente had exploration success, as well, adding 4 million oz. of silver. That completely replaced the 3.9 million oz. depleted over the course of the year. San Vicente added 3.2 million oz. of silver, replacing 80% of silver oz. mined last year.
Wheaton Precious Metals Corp. (NYSE: WPM)
Wheaton Precious Metals Corp. is the largest pure precious metals-streaming company in the world. That is, it’s not a miner.
Rather than spend billions on tools and labor, streaming or royalty companies offer upfront payments to miners for the right to purchase silver and gold at cheap prices in the future.
That’s a good business to be in during a bear market because there are so many distressed miners looking for cash. Wheaton is especially good at that. It’s been in this industry for a very long time, and its management knows how to take advantage of industry slumps.
Silver was the core of Wheaton’s business five years ago, but it took advantage of low prices to broaden its assets and add more gold.
For example, Wheaton now claims 75% of the gold produced at Vale’s (NYSE: VALE) Salobo mine in Brazil. It also paid Panoro $140 million in upfront cash for 25% of its gold production and 100% of its silver production from the Cotabambas Project in Peru.
As a result, Wheaton’s gold output and sales volumes climbed more than 35% in the first quarter of 2017. The company is on track to meet or exceed full-year gold production guidance. And its forecasts are suggesting that gold production will average 330,000 oz. per year through 2020 — at a price of $403 per ounce.
That last part is key. Having financed miners upfront, Wheaton is now free to acquire gold for a mere $403 per ounce. Gold is currently trading around $1,300 per ounce, more than three times Wheaton’s cost. And as the price of gold rises, its profit margins expand.
The company is paying about $4 per ounce for silver, which (again) is currently trading at $17 per ounce.
Over the next five years, Wheaton expects attributable output to be about 29 million oz. of silver and 340,000 oz. of gold per year.
It also pays a $0.09 dividend that currently yields more than 1%.