In a May 4 research note, Analyst Tom Hayes with Edison reported that Alkane Resources Ltd. (ALK:ASX; ANLKY:OTCQX) saw "marked improvement" at its Tomingley gold operation in the most recent quarter, Q3 FY18.
The company generated operating cash flows of AU$21.2 million (AU$21.2M). It ended the quarter with AU$60.6M in cash and AU$8.4M in on-hand bullion.
Alkane produced 18,635 ounces of gold, which was in line with management's guidance and up 12% from Q2 FY18. Its all-in sustaining cost was down 9% from last quarter, at AU$962 per ounce. Gold sold at an average of AU$1,708 per ounce.
Looking forward, two significant catalysts are expected in the final quarter of FY18. One is Alkane's decision on how to extend mine life at Tomingley. "With open-pit operations due to naturally end as planned in Q1/19 (the July to September quarter of 2019), the focus is to decide on whether to invest in an underground phase or potentially revert to exploration and development of the proven prospective region surrounding Tomingley and Alkane's old Peak Hill gold mine," Hayes explained. Alkane would likely use its own cash for whatever approach it pursues.
The other catalyst is release of the final modular execution plan for Alkane's Dubbo project, which should outline the "exact operating cost structures and capital expenditure profile required to build out the project in stages," noted Hayes. Financing for Dubbo, which "stands alone in the mining industry as the only viable rare metal project," continues.
Positive for the Dubbo project is the various metals/minerals that would be mined there have had significant price increases, such as zirconium products, certain rare earth elements related to magnets, hafnium and ferro-niobium, Hayes pointed out. Prices have been driven up by supportive changes in their end markets, such as zircon supply shortages (affecting zirconium), a vanadium pentoxide price increase (pushing up ferro-niobium's price) and a muted global nuclear industry (buoying hafnium).
Edison values Dubbo at AU$0.90 per share on a FY19 basis, which is up from its FY18-based figure of AU$0.79 per share. As for Tomingley, the firm will revalue it once its future becomes clearer. Alkane is currently trading at around AU$0.30 per share.
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1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Edison Investment Research, Alkane Resources, May 4, 2018
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