Genesis of a golden opportunity

Alkane Resources 24 September 2019 Update
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Alkane Resources

Genesis of a golden opportunity

Acquisition update

Metals & mining

24 September 2019

Price

A$0.77

Market cap

A$390m

Net cash (A$m) at 30 June 2019

A$69.6m

Shares in issue

506.1m

Free float

78%

Code

ALKX

Primary exchange

ASX

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

92.5

81.2

220.8

Rel (local)

85.6

77.8

194.8

52-week high/low

A$0.78

A$0.19

Business description

Alkane Resources is an Australian production and development company. It previously produced 70,000oz of gold per year from the open-pit operations at its Tomingley gold mine, but is now transitioning to underground operations and expects to produce around 32,000oz of gold pa.

Next events

Q120 results

30 October 2019

Q220 results

30 January 2020

Analyst

Dr Ryan D Long

+44 (0)20 3077 5700

Alkane Resources is a research client of Edison Investment Research Limited

Alkane Resources (ALK.ASX) has had a busy summer with exceptional drill results from its Northern Molong Gold-Copper Porphyry Project, continued local and regional resource drilling at Tomingley, and the acquisition of a 15.1% interest in Genesis Minerals (GMD.ASX) for A$6.3m. The acquisition is part of Alkane’s growth strategy to increase its shareholder value by investing a portion of its significant cash balance (A$69.6m) into junior gold companies or projects that have high exploration potential or require near-term development funding. Genesis is the second investment Alkane has made in line with this strategy, the first being a 13.0% holding in Calidus Resources (CAI.ASX).

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/18

128.8

31.5

0.05

0.00

15.4

N/A

06/19

92.5

26.2

0.05

0.00

15.4

N/A

06/20e

63.7

20.7

0.03

0.00

25.7

N/A

06/21e

76.9

23.6

0.05

0.00

15.4

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Drilling at Northern Molong returns excellent results

Alkane’s recent drilling at the Northern Molong Porphyry Project returned exciting results including a huge intercept of 502m at a grade of 0.48g/t Au and 0.20% Cu. Based on these results, Alkane is prioritising a follow-up drill programme.

Genesis Minerals acquisition

Genesis is a junior gold exploration and development company. Its principal project is the Ulysses Gold Project, located in Western Australia. Ulysses has a resource estimate of 760,400oz Au at a grade of 3.3g/t Au. Recent exploration at Ulysses demonstrated the presence of gold mineralisation at near-mine and regional targets. Genesis has been drilling these targets and is expected to complete a resource update in Q419 with a feasibility study due by the end of the year.

Edison gold price forecasts updated

We have adjusted our gold price assumptions to those set out in our recent report Portents of economic weakness: Gold – doves in the ascendant.

Valuation: Tomingley upside yet to be factored in

We have updated our valuation of Alkane considering our revised gold price forecasts, the FY19 results, timing of development at the Dubbo Project, Alkane’s current share price and its investments. We do not consider the potential to extend the mine life at Tomingley from local and regional exploration. As a result of these changes, our valuation of Tomingley decreases to A$0.26/share from A$0.33/share, and our valuation of Tomingley and Alkane’s investments decreases to A$0.29/share from A$0.34/share. Assuming Alkane secures development funding for Dubbo and the prices of metals improve to the level it expects over the coming years, our valuation of Alkane could increase to A$0.97/share (from A$0.53/share).

Northern Molong Porphyry Project

The Northern Molong Porphyry Project is 100% owned by Alkane and is located around 80km to the north-east of Alkane’s operational Tomingley Gold Mine, in the Central West of New South Wales (Exhibit 1).

Exhibit 1: Location of the Northern Molong Porphyry Project (NMPP)

Source: Discovery of Significant Porphyry Gold-Copper Mineralisation at Boda Prospect within Northern Molong Porphyry Project (NSW), Alkane Resources, 9 September 2019

The project is contained within the Molong Volcanic Belt, which also contains Newcrest Mining’s (NCM.ASX) Cadia Valley Mines to the south (Exhibit 9). Cadia Valley has a JORC compliant mineral resource estimate of 38moz Au at a grade of 0.37g/t Au, 8.3mt of copper at a grade of 0.26% Cu and 67moz of silver at a grade of 0.68g/t Ag. Newcrest produced 913koz of gold from the series of mines that makes up Cadia Valley last year at an impressive AISC of US$132/oz Au (post by-product credits), generating US$965m of free cash flow before tax.

Alkane’s exploration has revealed that the Northern Molong Porphyry Project contains similar stratigraphy to that of the Cadia Valley Mines, though it is more structurally complex. The project is comprised of three exploration licences: Bodangora, Kaiser and Finns Crossing. The three licences cover a combined area of 110km2.

Alkane has defined five magnetic anomalies interpreted to be intrusive complexes – Kaiser, Boda, Comobella, Driell Creek and Finns Crossing – all located within a 15km north-west to south-east trending corridor (Exhibit 2).

Exhibit 2: A map of the five magnetic anomalies

Source: Discovery of Significant Porphyry Gold-Copper Mineralisation at Boda Prospect within Northern Molong Porphyry Project (NSW), Alkane Resources, 9 September 2019

To date, four of these targets have been tested: Kaiser, Boda, Comobella and Glen Hollow. Gold mineralisation has been discovered at three of these: Boda, Kaiser and Glen Hollow.

Results from this follow-up drill programme include:

502m at a grade of 0.48g/t Au and 0.20% Cu from 211m and 35.8m at a grade of 0.21g/t Au and 0.49% Cu from 735m (KSDD003) at the Boda Prospect.

40m at a grade of 1.3g/t Au and 0.22% Cu from surface (KRSC027) and 32m at 0.53g/t Au and 0.22% Cu from 2m (KSRC029) from drilling at the Kaiser Prospect.

42m at a grade of 0.27g/t Au and 0.19% Cu from 63m (COMRC045) from drilling at the Glen Hollow Prospect.

Alkane is now prioritising a follow-up drill programme to determine the scale of its discoveries.


Genesis Minerals (GMD.ASX)

Alkane Resources has acquired a total holding in Genesis Minerals of 199,433,766 shares, subject to completion this week, for A$6.3m at an average price of A$0.032 per share, giving it a 15.1% interest in the company.

Genesis Minerals is an ASX-listed gold exploration and development company that owns 100% of the Ulysses Gold Project and a 65% interest in the Barimaia Gold Project, located in Western Australia (Exhibit 3). The company has a market capitalisation of A$48.9m with 1.3bn shares in issue.

Exhibit 3: Location of the Ulysses and Barimaia gold projects

Exhibit 4: Regional gold deposits and towns around the Ulysses Project

Source: Genesis Minerals Limited website

Source: Genesis Minerals Limited website

Exhibit 3: Location of the Ulysses and Barimaia gold projects

Source: Genesis Minerals Limited website

Exhibit 4: Regional gold deposits and towns around the Ulysses Project

Source: Genesis Minerals Limited website

The Ulysses Gold Project

The Ulysses Gold Project is located 30km south of the town of Leonora and 200km north of the major regional mining hub of Kalgoorlie (Exhibit 4). The project has a total JORC 2012 compliant mineral resource estimate of 760,400oz Au at a grade of 3.3g/t, with a higher-grade core of 628,400oz Au at a grade of 4.7g/t Au (Exhibit 5).

Exhibit 5: JORC 2012 compliant mineral resource estimate

Deposit

Resource category

Tonnes (t)

Au grade (g/t)

Contained Au (oz)

Ulysses (COG 0.75g/t)

Measured

33,000

4.1

4,350

Indicated

4,154,000

3.5

467,439

Inferred

2,932,000

3.0

282,798

Total

7,119,000

3.3

760,400

Ulysses (COG 2.0g/t)

Measured

29,000

4.4

4,102

Indicated

2,463,000

5.0

395,936

Inferred

1,647,000

4.3

227,694

Total

4,139,000

4.7

628,400

Source: Mineral Resource at Ulysses Soars 137% to 760,000oz, Genesis Minerals Limited, 9 October 2018

The Ulysses deposit was previously mined by Sons of Gwalia NL in 2002. After producing 24,985oz Au from the shallow Ulysses Open Pit (Exhibit 6), mining was terminated due to a combination of the low prevailing gold price and a 4.75% royalty that was due to become payable after the production of 25,000oz Au. This high royalty over the project has since been extinguished.

Exhibit 6: Photograph of the Ulysses open pit mined by Sons of Gwalia in 2002

Source: Acquisition of Ulysses Gold Project, Genesis Minerals Limited, 9 June 2015

Genesis agreed to acquire the project, announced on 9 June 2015, for A$100,000 in shares and A$275,000 in cash plus an expenditure commitment of A$300,000 and further payments based on toll treatment volumes.

Genesis produced 6,917oz Au from the Ulysses West Open Pit (Exhibit 7) via a toll-treatment agreement with the Paddington Mill (commenced October 2016 and ended in May 2017).

Exhibit 7: Photograph of the Ulysses West Open Pit mined by Genesis Minerals 2016–17

Source: First Gold Ore Dispatched from Ulysses, Genesis Minerals Limited, 14 November 2016

A scoping study for the development of an underground mining operation at the project (Exhibit 8) (announced 23 November 2018) demonstrated the potential for the annual production of 89,500oz Au over a four-year mine life. The study assumed a recovery rate of 89% using an industry standard crushing, grinding and carbon-in-leach (CIL) circuit with doré bar production plant.

Exhibit 8: A 3D image of the potential underground workings at Ulysses

Source: Quarterly Activities Report for Quarter Ended 30 September 2017, Genesis Minerals Limited, 12 October 2017

While no economics associated with the scoping study were published, due to ASX listing rules, which state that the size of inferred mineral resources should not be the determining factor in the viability of a project, the company considers the project to be economically viable. The scoping study defined a capex of A$84.4m, including 15% contingency, and an average all in sustaining cost (AISC) of A$1,046/oz Au.

Genesis is currently focused on increasing the size of the total mineral resource estimate with an updated estimate expected in Q419, which could increase the life of mine and feed into a feasibility study due to be completed by the end of 2019.

Additional drilling immediately to the east of the current mineral resources estimate has demonstrated further upside potential at depth, including: 4m at a grade of 3.32g/t Au from 218m (18USRC272); 5m at 2.15g/t Au from 167m (18USRC275); and 4m at 2.44g/t Au from 150m (18USRC282). While drilling below Ulysses West Open Pit returned 9.05m at a grade of 9.94g/t Au from 142.15m (19USDH079); 6.24m at a grade of 10.62g/t Au from 223.03m (19USDH083); and 6.14m at a grade of 9.52g/t Au from 232.48m (19USDH085).

Local exploration drilling around the Ulysses deposit has defined gold mineralisation over a strike of 600m at the Ulysses East Target (Exhibit 9) and returned significant results, including: 7m at a grade of 3.58g/t Au from 70m (19USRC333); 10m at a grade of 3.05g/t Au from 102m FY19 (18USRC293); and 5m at a grade of 5.08g/t Au from 75m (18USRC287).

Exhibit 9: Magnetic image showing the regional geological structure and location of exploration targets around the Ulysses deposit

Source: More thick, shallow gold hits strengthen open pit opportunity at Orient Well NW, Genesis Minerals Limited, 22 May 2019

Genesis has generated several other regional targets that could, with further success, provide additional feed stock for the proposed plant. Orient Well NW is a 5km long target, which is located 10km east of the Ulysses deposit (Exhibit 9); drilling has returned: 20m at a grade of 9.10g/t Au from 50m (18USRC302); 20m at 3.37g/t Au from 85m (19USRC345); 11m at 6.16g/t Au from 91m (19USRC369); and 5m at a grade of 8.04g/t Au from 50m (18USRC368).

The Ulysses Project benefits from the significant regional and local infrastructure already established within this mining district.

As the tenements are a brownfield site, Genesis will amend the approved Mining Proposal and Mine Closure Plan to incorporate infrastructure associated with a treatment facility onsite. A Mining Proposal is already in place for portal development and underground mining from the Ulysses West pit. An amendment to the land clearing permit is also required. An application to increase the ground water abstraction licence also through the Department of Water and Environmental Regulation is currently being progressed.

Genesis is targeting construction at the project by the end of 2020 with initial gold production to commence in Q121.

The Barimaia Gold Project

Genesis holds 100% of Metallo Resources Pty Ltd, which owns a 65% interest in the Barimaia Gold Project, with the potential to earn up to 80% by spending an additional A$1.75m. The Barimaia Gold Project is located in the Murchison District of Western Australia, around 4km south of the 6moz Mt Magnet Gold Mine.

At Barimaia, Genesis is targeting porphyry-hosted gold deposits. To date three gold-in-bedrock anomaly targets (Exhibit 10) have been generated with gold mineralisation tested over a strike length of 1km, with another 3km of the same controlling structure yet to be tested.

Exhibit 10: Map showing the gold-in-bedrock anomalies at the Barimaia Project

Source: Genesis Minerals Limited website

Valuation assumptions

In updating our valuation of Tomingley and Dubbo, we have made the following four changes to our assumptions:

We have pushed out the development of the Dubbo Project by two years from our previous forecasts with development to commence in 2022, given the international trade tensions and uncertainties surrounding the rare earth element (REE) market. We now believe a strategic asset, such as the Dubbo Project, will take longer to secure development finance.

We have adjusted our gold price assumptions to those set out in our recent report Portents of economic weakness: Gold – doves in the ascendant, published on 14 August 2019 (Exhibit 11). Our forecast gold price for 2020 has been increased to US$1,572/oz Au from US$1,482/oz. The 2021 forecast has decreased to US$1,395/oz Au from US$1,437/oz. Our 2022 forecasts have increased to US$1,387/oz Au from US$1,304/oz Au. Post 2022, we use a long-term price of US$1,350/oz Au.

Exhibit 11: Updated Edison gold price forecasts*

US$/oz

2020

2021

2022

2023

Updated real gold price forecast (US$/oz)

1,572

1,395

1,387

1,350

Previous real gold price forecast (US$/oz)

1,482

1,437

1,304

1,303

Source: Edison Investment Research. Note: *See Portents of economic weakness: Gold – doves in the ascendant, published on 14 August 2019.

We have updated our US dollar to Australian dollar exchange rate to the current rate of 1.49 from 1.42 in our previous forecasts.

We have updated Alkane’s share price to match the current share price of A$0.77/share from A$0.31/share in our previous forecasts. This reduces the amount of equity dilution assumed in the Dubbo development financing and as a result has a positive effect on our valuation.

Valuation update

The total effect of the updates to our forecasts is a decrease in our valuation of the Tomingley Gold Mine to A$0.26/share from A$0.33/share using a discounted dividend model. This is largely a result of the mine life not having been extended during the last financial year as we rolled our model forward.

It is important to point out that our valuation does not include two critical elements that Alkane is working on, which could add significant value to the company. First, the mineral resource to the south of Tomingley, the potential of which we discussed in our last note. Second, the potential of the Northern Molong Porphyry Project to become a standalone project. While both developments have attracted significant investor interest, we are waiting on the release of the initial mineral resource estimate for Tomingley and additional drill results from Northern Molong before factoring these developments into our valuation.

It is also important to note that Alkane has defined resources below the current depth of the existing underground mine plan at Tomingley, which could, with further definition drilling, extend the life of mine beyond 2022.

Further, recent regional drilling has highlighted the potential for both the San Antonio and Roswell Prospects, located under 5km from the Tomingley plant, to extend the plant life. We expect that a resource estimate will be established for both projects by the end of the calendar year.

An underground operation could also be established at the old Peak Hill Gold Mine, located 20km south of the Tomingley plant, where Alkane has a complaint mineral resource estimate of 108,000oz Au at a grade of 3.29g/t Au.

We value Alkane’s 13.0% holding in Calidus Resources at A$0.015/share (previously A$0.012/share) and its 15.1% holding in Genesis Minerals at A$0.014/share, both using the current market price for each company’s shares. We have updated the value of the Zircon Tech investment based on movements in exchange rates to A$0.004/share (previously A$0.003/share).

While our forecasts for the Dubbo project have been pushed back by two years, it is outweighed by the increase in Alkane’s share price to A$0.77/share from A$0.31/share in our last valuation update (published on 7 June 2019) means that we forecast a lower amount of dilution relating to the potential equity component of funding the Dubbo project, which increases our valuation per share. We continue to assume that the prices of metals improve to the level that Alkane expects over the next three years. On this basis, our valuation of Alkane including Dubbo could increase to A$0.97/share (previously A$0.53/share).

Financials

FY19 results: Comparison to our forecasts

Gold production from Tomingley totalled 48,969oz, ahead of our forecast of 48,000oz. Gold sales of 52,068oz were slightly lower than our forecast of 52,800oz due to lower inventory sales than forecast.

The average all in sustaining cost (AISC) for FY19 was US$646.25 (A$947/oz) compared to our forecast of US$703/oz (A$1,004/0z) Au due to lower sustaining costs than anticipated during Q419.

The sales price per ounce of A$1,777 during FY19 was above our forecast for the year of A$1,755oz, and as a result revenue from gold sales during FY19 totalled A$92.5m, slightly ahead of our forecast of A$92.1m. Profit after tax was A$23.3m, ahead of our forecasts of A$21.1m due to lower reported tax and an increase in deferred tax liabilities.

Net cash at the end of the period was A$69.6m, ahead of our forecasts of A$59.6m, largely due to increased deferred tax liabilities and lower than expected sustaining capex.

Year-on-year comparison (12 months)

Revenue from gold sales for FY19 totalled $92.5m, down 28.2% from A$128.8m in FY18, despite a 4.2% increase in the realised gold price to A$1,777/oz in FY19 from A$1,706/oz. The decline in revenue was driven by the move to underground mining, which reduced gold production by 37.6% to 48,969oz in FY19 compared to 78,533oz in FY18, with gold sales reduced by 31.0% to 52,068oz in FY19 compared to 75,507oz in FY18. AISC declined 5.6% during FY19 to A$946/oz Au from A$1,002/oz Au in FY18. Net cash decreased to A$69.6m at the end of FY19, down 3.3% from A$72.0m at the end of FY18.

Changes to our FY20 forecasts

Operational changes: our operational forecasts for Tomingley remain unchanged. We expect the mine to produce 27,212oz in 2020, increasing to 36,973oz in 2021, then decreasing to 33,128oz in 2022. We forecast AISC to be US$936/oz Au in 2020, decreasing to US$842/oz Au in 2021 and decreasing further to US$681/oz Au in 2022. Our forecasts for the Dubbo Project have been pushed out by two years.

Income statement changes: our forecast revenue from gold sales for FY20 increases to A$63.7m from A$57.3m, driven by the increased gold price, with cost of sales increasing to A$26.7m from A$26.5m. As a result, EBITDA increases to A$28.6m from A$21.0m and PBT to A$20.7m from A$7.7m.

Cash flow statement changes: our estimated operating cash flow for FY20 has increased to A$11.8m from A$11.2m, with cash used in investing activities increasing to A$32.6m from A$119.3m, largely due to the push back in the timing of the development of the Dubbo project. As a result, we estimate net cash at end FY20 of A$49.3m (previously A$38.5m).

Exhibit 12: Financial summary

A$’000s

2017

2018

2019

2020e

2021e

2022e

30 June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

117,792.0

128,799.0

92,513.0

63,738.9

76,850.9

73,749.8

Cost of Sales

(57,073.0)

(51,304.0)

(53,747.0)

(26,664.6)

(36,627.6)

(30,418.2)

Gross Profit

60,719.0

77,495.0

38,766.0

37,074.4

40,223.2

43,331.6

EBITDA

 

 

49,333.0

67,403.0

30,461.0

28,603.3

31,582.7

34,518.2

Normalised operating profit

 

 

7,607.0

30,932.0

25,152.0

20,251.7

23,018.5

26,089.4

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

Reported operating profit

7,607.0

30,932.0

25,152.0

20,251.7

23,018.5

26,089.4

Net Interest

(1,035.0)

572.0

1,062.0

493.5

598.2

104.7

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

(40,140.0)

(188.0)

(582.0)

0.0

0.0

33,761.2

Profit before tax (norm)

 

 

6,572.0

31,504.0

26,214.0

20,745.1

23,616.7

26,194.1

Profit before tax (reported)

 

 

(33,568.0)

31,316.0

25,632.0

20,745.1

23,616.7

59,955.3

Reported tax

4,631.0

(6,845.0)

(2,339.0)

(5,186.3)

0.0

0.0

Profit after tax (norm)

11,203.0

24,659.0

23,875.0

15,558.8

23,616.7

26,194.1

Profit after tax (reported)

(28,937.0)

24,471.0

23,293.0

20,745.1

23,616.7

59,955.3

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

11,203.0

24,659.0

23,875.0

15,558.8

23,616.7

26,194.1

Net income (reported)

(28,937.0)

24,471.0

23,293.0

20,745.1

23,616.7

59,955.3

Basic average number of shares outstanding (m)

503

506

506

506

506

520

EPS – basic normalised (c)

 

 

0.02

0.05

0.05

0.03

0.05

0.05

EPS – diluted normalised (c)

 

 

0.02

0.05

0.05

0.03

0.05

0.05

EPS – basic reported (c)

 

 

(0.06)

0.05

0.05

0.04

0.05

0.12

Dividend (c)

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

N/A

9.3

(28.2)

(31.1)

20.6

(4.0)

Gross margin (%)

51.5

60.2

41.9

58.2

52.3

58.8

EBITDA margin (%)

41.9

52.3

32.9

44.9

41.1

46.8

Normalised operating margin (%)

6.5

24.0

27.2

31.8

30.0

35.4

BALANCE SHEET

Fixed assets

 

 

148,474.0

138,275.0

172,196.0

175,420.0

184,743.2

374,834.1

Intangible assets

83,107.0

93,136.0

103,894.0

98,266.8

108,266.8

118,266.8

Tangible assets

60,627.0

36,266.0

51,038.0

52,101.2

51,424.4

231,515.3

Investments & other

4,740.0

8,873.0

17,264.0

25,052.0

25,052.0

25,052.0

Current assets

 

 

54,276.0

93,306.0

76,501.0

57,633.9

70,188.6

55,168.7

Stocks

9,644.0

19,153.0

4,816.0

2,444.8

2,947.7

2,828.8

Debtors

2,445.0

2,030.0

1,998.0

5,238.8

6,316.5

6,061.6

Cash & cash equivalents

41,969.0

72,003.0

69,582.0

49,345.3

59,819.4

45,173.4

Other

218.0

120.0

105.0

605.0

1,105.0

1,105.0

Current liabilities

 

 

(19,335.0)

(27,430.0)

(21,762.0)

9,440.1

11,178.8

(7,894.3)

Creditors

(11,166.0)

(9,299.0)

(8,007.0)

(2,191.6)

(3,010.5)

(2,500.1)

Tax and social security

0.0

(6,929.0)

(9,317.0)

(2,557.6)

0.0

0.0

Short-term borrowings

0.0

0.0

0.0

0.0

0.0

0.0

Other

(8,169.0)

(11,202.0)

(4,438.0)

14,189.3

14,189.3

(5,394.2)

Long-term liabilities

 

 

18,488.0

13,647.0

13,059.0

13,059.0

13,059.0

(21,641.0)

Long-term borrowings

0.0

0.0

0.0

0.0

0.0

(34,700.0)

Other long-term liabilities

18,488.0

13,647.0

13,059.0

13,059.0

13,059.0

13,059.0

Net assets

 

 

201,903.0

217,798.0

239,994.0

255,552.9

279,169.6

400,467.5

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

201,903.0

217,798.0

239,994.0

255,552.9

279,169.6

400,467.5

CASH FLOW

Operating cash flow before WC and tax

49,333.0

67,403.0

30,461.0

28,603.3

31,582.7

34,518.2

Working capital

5,518.0

(9,498.0)

(5,172.0)

(6,685.0)

(761.7)

(136.5)

Exceptional & other

672.0

2,823.0

2,438.0

1,856.0

1,856.0

1,856.0

Tax

0.0

(6,845.0)

6,975.0

(11,945.7)

(2,557.6)

0.0

Net operating cash flow

 

 

55,523.0

53,883.0

34,702.0

11,828.6

30,119.4

36,237.7

Capex

(33,551.0)

(9,224.0)

(19,621.0)

(11,270.8)

(9,743.4)

(190,375.8)

Acquisitions/disposals

53.0

0.0

4.0

0.0

0.0

54,540.0

Net interest

(1,035.0)

572.0

1,062.0

493.5

598.2

104.7

Equity financing

3,471.0

(5.0)

0.0

0.0

0.0

22,711.1

Exploration and Evaluation

(10,154.0)

(10,969.0)

(11,578.0)

(13,000.0)

(10,000.0)

(10,000.0)

Other

2,963.0

(4,317.0)

(7,442.0)

(8,288.0)

(500.0)

37,436.3

Net cash flow

17,270.0

29,940.0

(2,873.0)

(20,236.7)

10,474.1

(49,346.0)

Opening net debt/(cash)

 

 

(24,455.0)

(41,969.0)

(72,003.0)

(69,582.0)

(49,345.3)

(59,819.4)

FX

0.0

0.0

0.0

0.0

0.0

0.0

Other non-cash movements

244.0

94.0

452.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(41,969.0)

(72,003.0)

(69,582.0)

(49,345.3)

(59,819.4)

(10,473.4)

Source: Alkane Resources, Edison Investment Research

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United Kingdom

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Alkane Resources and prepared and issued by Edison, in consideration of a fee payable by Alkane Resources. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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