Why I’m long Minera Alamos $MAI.V $MAIFF. An abridged simplified version.
Simply put, Minera Alamos is Wesdome 2.0, other than jurisdiction of course. A very similar setup is in front of me once again. The company will be going from small producer to potentially mid-tier in the next few years if all goes according to plan (it is mining after all and anything is possible). Santana started producing and will scale up through 2023.
Cerro de Oro starts production in 2023 and scales up through 2024. La Fortuna starts production in 2024 and scales up through 2025. At least that is the order of operations at the moment. The result of all of this is a 3 to 4 year production growth profile from basically nil to 150-200k ounces a year. Such growth will come from existing assets and in a non-dilutive fashion (yes there are 450m SoS but dilution is now behind them). The company has modest capex requirements to accomplish this. $25m for CdO and $35m/40m for La Fortuna, give or take.
Santana is already built for a modest $10m, which was basically funded from investment gains. While this development, production and scale is happening, all of their properties have exploration upside. The goal is to extend mine life at each of these assets as cash flow kicks in and to ultimately reinvest capital with a non-dilutive framework in mind.
Along the way there will be a few nice surprises. In 2020, Minera bought CdO for a very modest amount. They’ll do another one of those if the opportunity comes along. And if not, they’ll figure out other creative ways to generate a return above their weighted cost of capital.
There will be a deluge of catalysts over the next few years. Very few juniors out there offer this value proposition in my opinion. I’ve seen the re-rate from small producer to mid-tier a few times already. Those have worked out well for me.
With the gold market hopefully getting exciting again, production starting at Santana, a stock price that has been kept down recently due to a corporate investor overhang and has consolidated since reaching its highs in August of 2020, this seems like an optimal time for me to dial up the notch. And as for a management team that is fully dialed in, committed, and aligned with the shareholders, it seems all but right. For example, aside from all the buying from Doug, in terms of alignment with shareholders, the company even set options above market at the time and tied their vesting to cumulative production of 200koz (50koz every 25% vest). Something almost unique in this sector. I’m with that.
Disclaimer and Disclosures:
I own the stock. Quite a bit of it, actually. Therefore, I have an inherent directional bias. I have also owned shares since 2019 and have scaled up my position.
I am not a certified investment professional nor a geologist. Assume everything I say herein is wrong. In fact, I am wrong more often than right. Please do your own due diligence and consult with your own investment advisor. Do not buy or sell on anything contained in this write up. None of this is a recommendation or solicitation to buy or sell.
I did not receive any compensation for this blog post. I did not receive any compensation from the company mentioned. I did receive a Minera Alamos shirt (still have not worn it though).
The content contained herein is strictly my opinion only. I do not warrant to the accuracy of the content or whether this is a suitable investment and disclaim any responsibility. Please consult with your own financial advisor.