Alio Gold Inc. (ALO, Financial) has updated shareholders with first-quarter results for fiscal 2018.
Figures were disappointing. The miner invoiced gold customers for $23.3 million, which, compared to a year ago, marks a nearly 28% decline. The drop was the result of a lower volume of gold and silver placed on the market. At the San Francisco mine, the only producing asset in Alio Gold’s portfolio, production went down because of a lower-than-expected ore grade.
A higher gold price combined with lower production costs were not enough to stop the slash in profits and a resulting cash outflow from operations. The net profit was 7 cents per share or $3.23 million. In 2017, the miner closed with a net profit of 17 cents per share or $6.04 million.
However, Alio Gold succeeded in beating consensus on earnings by 4 cents. The beat will generate a positive surprise of 33.3%. Time will tell whether the surprise will significantly impact the market value of Alio Gold that, as of May 9, is at $1.95 per share.
According to the chart powered by GuruFocus, Alio Gold has fallen 58% over the 12 trailing months and is now below the 200, 100 and 50-SMA lines.
As of May, five 5 analysts were surveyed on Alio Gold. Three analysts suggested buying the stock while two recommended holding it. The recommendation rating is 2.4 out of 5.
The average target price, which is a mean of five estimates ranging from $4.33 to $7.09 per share, is $5.47 per share. From the current market valuation, it is a nearly 180% growth.
Investors who are buying Alio Gold today are hopeful that operations at the San Francisco will be optimized and put the miner back on the right track to full production at guidance’s higher limit of 100,000 ounces. The low-limit of the guidance is 90,000 ounces. Investors may experience a huge remuneration, commodities permitting.
For the development of the Ana Paula project, the company anticipates using approximately $20 million in 2018. The company has already invested $5.6 million. That sum,Ă‚ together with $6.2 million spent on the San Francisco mine and $0.4 million in expenditures for the transaction with Rye Patch, produced $39.3 million in liquidity.
Alio Gold is studying the possibility of increasing productivity at the Florida Canyon mine. CEO Greg McCunn believes the move will provide the company “with increased diversification and is expected to enhance the capital markets profile and appeal to a broader investor base.”
The Florida Canyon Mine will be included as asset in the portfolio of Alio Gold after the closing of the transaction with Rye Patch, which is scheduled for May 25.
(Disclosure: I have no positions in any stock mentioned in this article.)
