S&P Global Ratings bumped Alamos Gold Inc.'s corporate rating to B+ from B and raised its issue-level rating on the company's senior secured notes to BB- from B+, with a stable outlook, while also revising its financial risk profile on the company to significant from aggressive.

The upgrades primarily reflect the agency's expectation that Alamos will improve its earnings and cash flow following the recent hike in gold prices and an upward revision to S&P Global Ratings' gold price assumptions through 2018.

"Based on the strength of Alamos' prospective credit measures and its cash position, we believe there is a sufficient cushion to manage the risks associated with gold price volatility and high estimated development-related capital expenditures at the current rating," the agency said in a Sept. 22 note.

Despite higher gold prices, the company is expected to generate modestly negative free cash flow over the next few years mainly due to development project spending, including the underground ramp-up of the Young-Davidson mine in Ontario, as well as the Kirazli project in Çanakkale, Turkey.

However, the gold major may choose to reduce or defer growth CapEx to preserve liquidity.

"Our vulnerable business risk assessment primarily reflects the company's limited operating diversity, high exposure to gold price volatility, and cost structure above the average of its rated peer group," S&P noted.

The rating agency's business risk assessment also reflects the higher cost structure — about US$850 per ounce — of the company's Mulatos mine in Sonora, Mexico, which increased the sensitivity of its profitability with lower gold prices.

S&P Global Ratings and SNL Metals & Mining are owned by S&P Global Inc.