Saturday, November 11, 2017

Alio Gold - I Was Wrong

On November 9, 2017 Alio Gold (ALO) released its 3Q 2017 report. As expected, the company delivered the worst results this year but...they were not that bad as I predicted:

source: Simple Digressions

As you surely remember, I projected the 3Q 2017 gross margin of  US$1.6M but the company reported a higher figure (US$7.7M).

What happened? Well, I had underestimated Alio - instead of the mining cost of US$3.2 per ton of ore processed, the company recorded the actual cost of US$2.6 per ton of ore.
In other words, I took the average cost of production reported during the latest four quarters but Alio was able to cut it even below the 2Q 2017 figure. So, hats off to the management and shame on me (I was too skeptical).

Unfortunately, the company has cut its 4Q 2017 production guidance from 20 - 22 thousand ounces of gold to 14.5 - 18.5 thousand ounces. The cut resulted in another selling wave:


Very likely, the price drop has also something to do with Torex and its problems in the Guerrero State, Mexico.

To remind my readers, Alio is going to build its Ana Paula gold mine in the same, quite dangerous, state so problems at Torex the El Limon - Guajes mine may have a negative impact on Alio.


  1. If in your assumption Alio price drop was "Very Likely" due to Torex union problems, why was not the share price of "Leagold Mining", right next store to Torex, not affected?

    Also, why would Alio weekly share price drop the day (November 9) 3Q earnings was release while holding steady earlier in the week during the time period Torex union problems was announced?

    Somewhat surprised at your quick assumption, and lack of research.

    1. It is not a question of any research. Nobody knows for sure what drives stock prices so even if I were to check, analyze or read tons of reports I would not know definitely what was the casue of a drop or an increase of stock prices.
      The same with Alio - it was my own assumption. What is more, this assumption cannot be verified with certainty of 100%.

      By the way, on November 7 the difference between the closing price on November 6 and the low on November 7 was minus 3.3% for Alio and a mere 0.8% for GDX. So Alio shares were definitely under performing against GDX. Why? Most likely due to Torex problems. Note that "most likely" does not mean that I am 100% sure.

      As for Leagold - the stock is immune to Torex problems so it looks like something different drives the prices of these stocks. What is it? I have neither any idea nor any assumption.