Alamos Gold surges on expansion plan with 69% IRR
Island Gold District expansion to 20,000 tonnes per day could create Canada's lowest-cost gold mine
Alamos Gold shares rose nearly 4% on Wednesday after the Canadian miner unveiled an expansion study for its Island Gold District that projects extraordinary returns, including a 69% after-tax internal rate of return and $12.2 billion in net present value.
The expansion plan, announced on February 4, 2026, would increase production capacity to 20,000 tonnes per day by 2028, creating one of Canada's largest and lowest-cost gold operations. The financial metrics assume a gold price of $4,500 per ounce, with the study highlighting what the company described as "attractive economics" including robust project metrics.
The Toronto-based company, which currently trades with a market capitalization of approximately $15.5 billion, is positioning itself for substantial production growth. The Island Gold District produced 250,400 ounces of gold in 2025, slightly below revised guidance, but management anticipates significant improvements in 2026 and beyond as expansion projects come online.
"The company's CEO anticipates a substantial improvement in operations and significant production growth from the Island Gold District in 2026 and beyond, with a long-term goal of achieving one million ounces of annual production by the end of the decade," according to the company's production report.
The expansion strategy leverages the company's existing infrastructure. The Magino mill, which Alamos Gold acquired in 2024, is already permitted for 35,000 tonnes per day capacity, providing headroom for the planned expansion. The Island Gold shaft construction is substantially complete, supporting the ramp-up to higher production levels.
Financial results for 2025 demonstrated the company's growing momentum. Alamos Gold achieved record quarterly revenues of $568 million and annual revenues of $1.8 billion. The company's cash reserves increased 35% from the third quarter to reach $623 million at year-end, while maintaining a net cash position of $423 million and total liquidity of $1.2 billion.
The strong balance sheet allows Alamos Gold to fund its expansion internally. In 2025, the company returned $81 million to shareholders through dividends and share buybacks, including repurchasing 928,729 shares in the fourth quarter alone for $28.8 million. The company also eliminated forward sale contracts for 50,000 ounces inherited from the Argonaut Gold acquisition at a cost of $113.5 million, positioning it to benefit from current gold prices.
Analysts have taken notice of Alamos Gold's trajectory. Thirteen analysts cover the stock, with five rating it a strong buy and eight rating it a buy, according to market data. The average price target stands at $51.50, representing significant upside from Wednesday's trading price of around $38.29.
The expansion to 20,000 tonnes per day represents the upper end of the company's growth ambitions. Initial expansion to 12,400 tonnes per day is already underway, integrating the Magino mill with 10,000 tonnes per day from the open pit and 2,400 tonnes per day from the Island Gold underground operation. This intermediate expansion is expected to be completed in 2026.
The company's 2026 regional exploration program includes 16,000 meters of surface drilling at the Island Gold District, suggesting additional resource expansion potential beyond the current 20,000-tonne-per-day scenario. Recent drilling has extended high-grade mineralization across the deposit, with one recent hole intersecting 178 grams per tonne gold over 3.5 metres.
Investors will get additional details on the expansion plan during the company's 2026 Investor Day on February 4, where management will provide updated three-year guidance and a longer-term outlook. The company is scheduled to release its full 2025 financial results on February 18, followed by a conference call on February 19.