On Wednesday, Jefferies, a global investment banking firm, initiated coverage on shares of Alamos Gold (NYSE:AGI), an intermediate gold miner. The firm set a Buy rating on the stock, with a price target of $14. The newly established price target is based on 1.1 times Price/Net Asset Value (P/NAV) and 8.0 times Enterprise Value/Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA) multiples, using a 70/30% weighting.
The endorsement comes with an optimistic view on the company's ability to control costs and create value. According to Jefferies, Alamos Gold has demonstrated strong performance in managing expenses and has capitalized on mergers and acquisitions, exploration successes, and proficient operational execution. The analyst noted that the company's Island Phase 3 project is expected to contribute to a reduction in All-in Sustaining Costs (AISC), which are projected to decrease from approximately $1,150 per ounce to around $1,025 per ounce by 2026.
The positive outlook is further supported by anticipated increases in production, which are expected to bolster the company's financial results. Despite Alamos Gold's commendable performance in comparison to its peers and the gold price, Jefferies suggests that the stock has additional potential for appreciation. This assessment is tied to the successful delivery of the Island Phase 3 expansion and beyond.
Alamos Gold's strategic initiatives, particularly the Island Phase 3 project, are seen as key drivers for the company's future growth. The project's impact on reducing costs and increasing production is central to Jefferies' optimistic stance on the stock's value and potential for a rising bottom line.
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