The final countdown

Alkane Resources 23 November 2017 Update
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Alkane Resources

The final countdown

Quarterly results

Metals & mining

23 November 2017

Price

A$0.34

Market cap

A$172m

A$1.31/US$

Net cash (A$m) at end June 2017

42.0

Shares in issue

505.2m

Free float

51%

Code

ALK

Primary exchange

ASX

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

7.9

(8.1)

(26.9)

Rel (local)

6.2

(12.1)

(34.0)

52-week high/low

A$0. 4

A$0.2

Business description

Alkane Resources is a multi-commodity explorer and developer, with projects in the central west region of New South Wales in Australia. It owns the Tomingley Gold Operation (TGO) and the Dubbo Project (DP) rare metal, zirconium chemicals and rare earths projects (both 100%). TGO entered production in January 2014 and DP’s first production is planned for 2019.

Next events

Revised TGO UG plan

Q318

Analysts

Tom Hayes

+44 (0)20 3077 5725

Charles Gibson

+44 (0)20 3077 5724

Alkane Resources is a research client of Edison Investment Research Limited

The fourth quarter of CY17 going into Q1 CY18 should prove pivotal to the development of the Dubbo Project (DP), aided in no small part by a strong broad rebound in DP-relevant metal prices that account for c 80% of future annual revenue generation. We see the DP taking centre stage for Alkane, as it looks to develop its flagship project and secure commercial binding agreements over projected Phase 1 annual revenues (of c A$407m). The TGO has maintained course on cost and production guidance for the financial year, and a revised underground mine plan is due by end CY17.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/15

101.8

0.1

1.0

0.0

34.0

N/A

06/16

109.6

11.0

2.2

0.0

15.5

N/A

06/17

117.8

18.0

4.5

0.0

7.6

N/A

06/18e

108.5

(42.3)

(3.8)

0.0

N/A

N/A

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

Permanent rare earth magnets aid REE rebound

As lithium, graphite, cobalt and nickel become increasingly attractive as investments due to their use in electric vehicle (EV) manufacture, a myriad of other specialty metals should afford the same attention. These include rare earth metals associated with the production of permanent magnets used in motors and dynamos used in EVs, but also wind turbines and many other high-end green-tech applications. Praseodymium, neodymium and alloys thereof, as well as samarium, dysprosium and terbium are key rare-earth element (REE) magnet metals. Under our REE 2020 price assumptions (now below spot for these metals), magnet-REE revenues account for c 77% of total DP REE revenues, and c 29% of total DP revenues.

Zirconium products also on the rise

The DP is a multi-commodity project, and zirconium products form a major portion of total DP revenues, representing 33% of annual DP revenues at steady state production. Current prices for the pre-cursor zirconium oxychloride (which is a key indicator of the health of the downstream zirconia industry) are over 60% higher than prices seen at end 2016 (according to ALK and its consultants).

Valuation: Up on metal prices, TGO UG to change

We adjust our forecasts to reflect FY17 results, reducing by 17% our forecast FY18 loss per share. With a solid first quarter of production at the TGO, costs and guidance in line with our forecasts, and a revision to our DP product price forecasts, we increase our A$0.71/share valuation by 11% to A$0.79. Our valuation uses a 10% discount rate and commodity and changes to DP product prices as per Exhibit 3 of this report. To fully realise this valuation, Alkane would need to secure commercial and binding offtake agreements across all its DP products (ferro-niobium is already subject to such an agreement with Austrian company Treibacher Industrie). Such agreements need to be secured over the next few months to allow financing of the DP during FY18 under our assumptions.

Dubbo takes centre stage

As the Tomingley Gold Operation (TGO) continues to mine gold from open-pit sources, and management assesses the most profitable way to mine underground at the project, Alkane’s longstanding flagship the Dubbo Project (DP) is starting to take centre stage. With CY17 drawing to a close a number of objectives are being pursued and completed.

The importance of the Dubbo Project to be a sustainable western supply of strategic raw materials should not be understated. China still dominates world supply of zirconia and zirconium products, hafnium oxide, and the 17 rare metals used in a very wide range of products across the electronics spectrum. Crucially, the DP will provide a Tier 1 western supply channel of the rare-earth permanent magnet metals praseodymium, samarium and neodymium – metals that account for c 75% of the value of REE demand globally at current prices, and represent 40% of group annual revenues under our assumptions for 2020 REE and gold prices. Many of the REE price assumptions we use in our DP valuation model, as of 1 November 2017, are below Steelhome spot prices accessed via Bloomberg.

The same mistakes need not apply

It is also worth stating that China’s reported “war on pollution” and its positive effect on commodity prices is having and will continue to have a broadly positive effect on the western mining industry. However, as with the REE bubble of 2011, and indeed instances elsewhere in the commodities complex (noting iron and nickel as examples during their respective boom periods), projects were rushed to market that were not of a high enough quality and in some instances were arguably never going or able to be used for the highest value end-uses.

The DP is the only western REE bearing development project that is fully de-risked in terms of its process flowsheet design. There is no other western project that has run its own pilot plant for 10 years or more, which is the length of time that Alkane has run its plant outside of Sydney. There are no approvals outstanding, and pending a successful conclusion to its various offtake agreements and, in turn, its financing strategy, the DP should become a major strategic western source of specialty metals and oxides separate from the vagaries of Chinese supply.

DP product mix protects from downturns in any one metal

With 10 refined specialty products to be sold from the DP, plus additional concentrate sales and two stockpiled for future sales as prices recover, the project has revenue streams associated with a wide range of end-markets. Many of these are experiencing a potential paradigm shift in demand linked to a global push towards automation, electrification and ongoing digitisation. This breadth of supply of specialty metals from the DP should be an attractive characteristic compared to many strategic metals projects, many of which focus on a far narrower set of products and end-markets. These companies formed through the 2011 REE bubble and remain listed without a clear strategy, demonstrable flowsheet design, or funding to evaluate their assets to an appropriately high level of end-product quality. Alkane has addressed and continues to refine its process flowsheet (and has been running its own pilot plant outside of Sydney since 2008). Alkane will probably continue to refine the DP’s end products even as production commences, and as customers dictate changing end-product requirements. Even as the DP enters production, further minor adjustments can still be made to the DP’s back-end processing routes without any need to revise the project’s overall process plant design.

Alkane’s group revenue split under our assumptions for 2020, using prices as per Alkane’s modular development plan and our in-house gold price assumptions, is as follows:

Exhibit 1: Group revenue split 2020

Exhibit 2: DP revenue split 2020

Source: Alkane Resources and Edison Investment Research

Source: Alkane Resources and Edison Investment Research

Exhibit 1: Group revenue split 2020

Source: Alkane Resources and Edison Investment Research

Exhibit 2: DP revenue split 2020

Source: Alkane Resources and Edison Investment Research

The above pie charts reflect the following DP product tonnages, 2020e TGO gold production (likely to be revised pending the company’s revised underground mining plan due end CY17), and product prices:

Exhibit 3: DP pricing assumptions

Product

Units

Price used in valuation (2020e)

Previous price used (2020e)

% change

Comments

Atomic number

LREE

57

Lanthanum oxide

La2O3

4.0

2.0

100%

Stockpile for future sale

58

Cerium oxide

CeO2

2.5

2.0

25%

Stockpile for future sale

59

Praseodymium oxide

Pr6O11

80

80

0%

60

Neodymium oxide

Nd2O3

70

60

17%

61

Samarium oxide

Sm2O3

3.0

3.0

0%

62

Europium oxide

Eu2O3

80.0

300.0

-73%

63

Gadolinium oxide

Gd2O3

40

20

100%

HREE

64

Terbium oxide

Tb4O7

500.0

650.0

-23%

 

65

Dysprosium oxide

Dy2O3

200.0

350.0

-43%

66

Holmium oxide

Ho2O3

40

40

0%

67

Erbium oxide

Er2O3

40

40

0%

68

Thulium oxide

Tm2O3

NA

N/A

N/A

69

Ytterbium oxide

Yb2O3

30

30

0%

70

Lutetium oxide

Lu2O3

720

990

-27%

71

Yttrium oxide

Y2O3

10.0

15.0

-33%

 

 

Chemical zirconia

99.5% ZrO2

12.0

7.5

60%

 

Hafnium oxide (95% HfO2)

Hf Metal

500

800

-38%

Hf price has been dropped to $500/kg to reflect sale of HfO2 rather than metal at start up

Ferro-niobium (65% Nb)

Nb Metal

37.5

40

-6%

 

 

Grand total (US$m)

 

 

 

169

 

Grand total (A$m)

223

Ounces sold

US$/oz

 

 

TGO gold production in 2020

 

 

49,199

1,362

Will change for revised UG mine plan

Source: Alkane Resources, TZMI and Edison Investment Research

Restrictions on worldwide hafnium and hafnium-free zirconia supply

Hafnium is an important, although a relatively recent addition to the DP’s product suite. Hafnium is constrained by supply (it is produced as a by-product of zirconium refining) and its ability to enhance the physical properties of alloys has led to increased R&D and demand in the high-growth civil aerospace industry (see Exhibit 2, hafnium oxide accounts for 10% of DP revenues at steady state). One important recent development that may affect the supply of this metal is the bankruptcy of Toshiba’s Westinghouse atomic unit (announced March 2017, with proceedings expected to conclude early 2018). The closure of this business, due in large part to cost overruns in reactor construction and increased health and safety regulation post-Fukushima, may well constrain upstream supply of speciality metals produced by Westinghouse used in the nuclear industry; hafnium and hafnium-free zirconia are two such materials.

Industry feedback has been especially positive for DP hafnium output as it is not tied to the vagaries of the nuclear industry. This is because growth in the extremely small (c 50tpa) hafnium market is largely linked to high-tech material usage, such as alloys used in the aerospace and industrial gas turbine industries. Current hafnium production is linked to production of neutron transparent zirconium metals used in nuclear fuel rod casings (hafnium absorbs c 600x the amount of neutrons that zirconium absorbs and therefore needs to be refined out of zirconium metal – a process Alkane has successfully completed). As such, the depressed levels of activity in the nuclear industry currently, coupled with the Westinghouse bankruptcy, and uncertainty persisting from the Fukushima disaster of 2011, plus the increasing growth in the renewable energy economy, mean that stable hafnium output from nuclear industry sources cannot be depended on. Further, hafnium production volumes from the nuclear industry are unlikely to meet demand from other industrial sectors.

Outotec and its role in developing the DP

An important factor in terms of the DP’s overall development design was completed by Outotec over 2016 and Alkane released the outcome to market in late 2016. Before this, the DP was to be built over one construction phase requiring all offtake agreements to cover the entirety of annual production at a throughput rate of 1Mtpa of ore. The revised scope put forward for Alkane and Outotec for the DP’s construction outlined a phased development approach, with the following benefits to shareholders:

Capex of A$1.1bn, split 57:43 over two stages, in 2018 and 2023. This amount includes contingency. The eventual DP operation is still maintained at a throughput capacity of 1Mtpa, after both stages are completed. This capex figure may be revised up or down dependant on the outcome of Outotec’s pricing of the modularised plant.

Management states that the two-stage concept increases the percentage of revenue in the first stage covered by offtake contracts, memorandums of understanding and letters of intent held in place with its strategic partners.

As certain DP products have nascent end-markets (namely hafnium, but also the ever-changing landscape of rare earth element applications), a smaller 0.5Mtpa initial mine size reduces the commitment required by Alkane to secure project revenues, thereby reducing the scale of required commitment by offtake partners. Further, as confidence grows between off-takers and Alkane, product amounts can increase alongside developing stage 2 and completing the full capacity 1Mtpa mine.

Outotec’s detailed costings of the modular design approach are due to be completed by end 2017..

DP: Remaining hurdles and catalysts

The past two years have seen a number of advances in terms of getting the DP into production. We note that no major approval or mining licences are outstanding and the project is effectively ‘shovel ready’ save for certain offtake agreements being finalised and DP’s project financing being put in place. Over 2016 and 2017 Alkane announced the following agreements, arrangements and updates, all of which relate to the DP:

Vietnam Rare Earths (VTRE) due diligence (due to end during Q218). This included Alkane buying c 80 tonnes of rare earth concentrate on the open market to prove VTRE is capable of separating concentrate (which will be the main output of the DP) for key praseodymium and neodymium metals. VTRE successfully completed this task, producing 31 tonnes of REE oxides, which will be sold back onto the market.

Zirconium marketing and sales agreement with UK-based firm Minchem (August 2016).

In March 2016 Minchem secured six non-binding letters of intent (LOIs) for the supply of zirconium chemicals. If converted to commercial binding offtake agreements, these supply agreements would cover 60% of stage 1 development output, and c 15% of future project revenues.

Management states in its 30 September quarterly report, that interest in Dubbo REE output is potentially higher than the project’s planned output of these rare earth oxides.

Memorandum of understanding with European firm Siemens over certain DP product offtake and supply/maintenance of equipment (October 2016).

An agreement is already in place for the DP’s output of ferro-niobium, with a commercial offtake and JV agreement signed with Austrian firm Treibacher Industrie AG (TIAG), in 2013. This agreement will see TIAG have sole marketing rights for DP FeNb and it will also allow Australia Strategic Materials (Alkane’s DP operating subsidiary) the right to use TIAG’s proprietary processing technology to produce FeNb from DP concentrates at a new plant located on site at the Dubbo Project. TIAG will be able to buy 50% in this new downstream processing company three years after commissioning.

To get the DP into the construction phase Alkane needs to:

agree commercial offtake agreements for its REE and zirconium-based product output;

secure ECA and conventional debt funding of c A$325m (as per our modelling assumptions) for stage 1, and c A$272m for stage 2 by FY23; and

commence construction by early CY18. Note all permits and project licences are already in place for the DP. All land required for development has been purchased.

We have limited the changes to our DP valuation to the size and nature of development pending release of Outotec’s detailed project costing. We have adjusted our capex profile to reflect development over the five-year period from 2017 to 2023, but kept operating costs as per our original valuation and as per the company’s published definitive feasibility and front end engineering design (FEED) studies for the DP.

Valuation rises to A$0.79 on higher metal prices used

The following exhibit is based on the two-stage development concept for the DP. It also includes our value for the TGO, although we highlight that the potential future revenues and profits occurring from the DP (starting in FY19 under our assumptions) dwarf the relatively small cash generation levels that result from gold mining.

Exhibit 4: Edison’s estimate of theoretical EPS, diluted EPS, DPS and dividend discount flow (DDF is in A$)

Source: Edison Investment Research

As can be seen above, earnings are depressed until FY23 as production from the DP ramps up and the project’s capital expenditure dominates. We forecast gold production of 65koz from the TGO in FY18 (ie the lower bound of the company’s guidance announced on 27 June 2017), with earnings lowered in this coming financial year as a result of A$7m in capex required to develop an underground mining phase at Wyoming, with an additional A$13m in TGO UG capex capitalised as the reserve base is expected to grow as mining commences. A slight rise in earnings is seen over FY20 and FY21 as first DP profits materialise, but reduces again as stage 2 capex is spent over FY22. The following year (FY23) sees the first full year of mining at the maximum 1Mtpa ore throughput rate.

Note that our current underground mining assumptions for the TGO may change as the company finalises a revision to the mine schedule.

Breakdowns of discounted earning valuations for the following periods of our valuation horizon are given in Exhibit 5 below.

Exhibit 5: Base case, TGO-only and DP scenario valuations (A$ per share)

 

FY18e

TGO only, without any dilution, financing, costs or revenues associated with the DP

0.27

Base case – TGO and DP fully developed

0.79

 

 

The following valuation scenarios include TGO production

Post stage one capex with stage 2 developed

0.86

Post stage 2 capex

1.11.

Source: Edison Investment Research

Our financing assumptions for the DZP

Alkane’s financing team (including debt advisors Sumitomo Mitsui Banking Corporation) is pursuing the US$0.5bn (A$0.63bn) initial capex required to bring the DP into Phase 1 production. Alkane’s plan includes selling a small stake in its wholly owned subsidiary containing the DP. Alkane is also pursuing Export Credit Agency (ECA) funding, which may provide hundreds of millions of Australian dollars in the form of loans at very low interest rates. These two financing routes would be joined with more conventional debt and equity financing to satisfy the requirement.

The exact financing structure of the DP has not been finalised. However, we understand from discussions with management that the financing structure for the total US$0.84bn (US$1.1bn, A$1.8bn) required to develop the DP could be secured by a series of staged transactions. An example is:

Selling a stake in Phase 1 equivalent to c 10% of Phase 1 capex or NPV (ie c A$70–100m); and

Raising 35% of Phase 1 capex (total Phase 1: US$480m, A$632m) as equity. It is anticipated that Alkane would be seeking a higher valuation for its project prior to the issue of significant equity. For Phase 1, subject to project valuation, one can, for example, notionally assume the issue in FY18 of 353m new shares priced at A$0.60 each to raise a gross A$212m (US$162m). However, for the purposes of our current model, we maintain our A$0.35 per Alkane share price to raise equity under our valuation assumptions. If Alkane were to achieve a share price of A$0.60 to raise equity, our valuation would become A$1.10/share.

In the above scenario, we calculate that this would leave Alkane with a maximum required net debt position in FY18 of A$317m to fund Phase 1, which equates to a gearing (debt/equity) ratio of 82% and a leverage (debt/debt+equity) ratio of 45%. Alkane is looking to cover this requirement using ECA loans incurring very favourable interest rates, as well as conventional project financing routes, potentially incurring higher interest rates.

Phase 2 development depends on the success of Phase 1 and prevailing commodity prices. It would be expected that the company would be-rerated in the market before commencing Phase 2 capex, and therefore achieve much of the second phase on debt.

The TGO: UG mine planning due by end CY17

Alkane has set production guidance of 65koz to 70koz at AISC of between A$1,100/oz and A$1,200/oz for FY18. We forecast production at the lower end of guidance, 65,447oz at AISC of A$1,092/oz. The TGO experienced a torrid H117 due to extreme levels of rainfall hampering open-pit production, and the mine’s true performance can only be assessed via its H217 data.

Exhibit 6: Quarterly unit cost breakdown

C1 cash costs

Additional costs to C1

With both costs levels

Source: Alkane Resources, Edison Investment Research

During H117 the TGO mined a total of 3.9Mt of material, of which 0.5Mt was milled to recover 22,191oz of gold. This first half performance compares with 5.0Mt of material mined, and 0.6836Mt of ore mined (of which 63% was mined in Q417), for 47,410oz of gold produced in H217. The fourth quarter FY17 saw 27,924oz of gold produced at a grade of 2.12g/t.

Q118 saw a continuance of H217 operational performance producing 24,122ozs gold, a slight q-o-q decrease of 14%, though 131% up from the corresponding period a year before. As mentioned previously, H117 production suffered from extreme levels of rainfall.

Beyond FY18, the TGO’s growth relies on Alkane making an investment decision on the profitability and return on investment of developing an underground mining phase. With resources and reserves having been recently revised to account for, among other things, ore grade material being left out previously due to its situation in crown pillars, we await Alkane’s revised underground mine plan, anticipated before the end of FY17.

We maintain our TGO production forecasts as per our July note TGO shows it can, and Dubbo’s value re-emerges. As the first quarter of FY18 saw 37% of its lower end of production guidance (ie 65,000oz) already mined, and as in previous years the greatest risk of inclement weather hampering production occurs in the first half of the financial year, we refrain from adjusting our forecasts for 65,447oz produced at AISC of A$1,1092/oz.

Exhibit 7: TGO quarterly production, stockpiles, costs and revenue breakdown

Production

Q117

Q217

Q317

Q417

Q118

Waste mined

BCM

1,533,279

1,799,904

2,165,717

2,180,210

1,807,545

Implied strip ratio

Tonnes

18.3

15.4

23.0

13.1

16.0

Ore mined

g/t

221,139

318,216

249,109

434,404

289,627

Ore grade

Tonnes

1.51

1.39

2.42

2.69

2.55

Ore milled

g/t

231,797

279,338

281,654

295,194

281,191

Head grade

%

1.50

1.48

2.36

3.10

2.80

Recovery

Ounces

90.1%

90.4%

91.1%

92.8%

92.7%

Gold recovered

A$/oz

10,435

11,756

18,721

27,924

24,122

Gold sold

A$m

10,000

12,519

16,303

31,107

21,610

Gold revenue

A$/oz

16.3

20.8

27.6

52.6

36.4

Implied realised gold price/ actual

A$m

1,627

1,694

1,694

1,690

1,685

Cost of sales

A$/oz

19.2

21.2

22.5

25.3

23.7

AISC operating cost

%

2,139

1,803

1,201

905

982

Gross Margin

-11.6%

6.1%

58.3%

140.7%

71.6%

Operating profit margin

 

53.7%

 

Stockpiles and bullion on hand

 

Bullion on hand

Ounces

3,368

2,572

4,986

1,814

4,303

Value of bullion on hand (based on implied gold price above)

A$m

5.48

4.36

8.20

2.98

7.00

Tonnes in stockpile

Tonnes

661,645

709,148

620,271

761,829

770,136

 

Stockpile grade

g/t Au

0.80

0.79

0.75

0.95

0.86

Contained gold in stockpiles

oz

17,201

18,195

15,126

23,300

21,086

Value of stockpiled gold ounces at quarter's average price

A$m

28.0

30.8

25.6

39.4

35.5

 

Detailed cost summary

 

Mining

A$/oz

1,188

1,029

721

485

501

Processing

A$/oz

505

450

269

168

208

Site support

A$/oz

148

118

80

49

56

C1 site cash costs

A$/oz

1,841

1,597

1,070

702

766

Royalties

A$/oz

35

40

51

57

54

Sustaining capital

A$/oz

130

37

8

46

34

Rehabilitation

A$/oz

68

72

38

71

97

Corporate

A$/oz

65

57

34

29

31

AISC

A$/oz

2,139

1,803

1,201

905

982

Source: Alkane Resources

Financials

Alkane finished Q118 with cash of A$46.3m, to which can be added A$7.0m in bullion-on-hand at fair value for total liquid assets of A$54.3m. This is after the addition of net cash from operating activities of A$7.8m, resulting from the sale of 21,610oz gold at an average gold price of A$1,685/oz for revenues of A$36.4m. Costs totalled A$28.6m (net of interest received of A$0.2m), and included A$16.6m in production costs (annualised this would be A$66.4m, cf our forecast of A$71.4m), exploration costs of A$3.3m and development capex of A$5.3m.

Exhibit 8: Financial summary

A$'000s

2014

2015

2016

2017

2018e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

35,474

101,813

109,624

117,792

108,523

Cost of Sales

(25,692)

(74,809)

(76,236)

(57,073)

(71,443)

Gross Profit

9,782

27,004

33,388

60,719

37,080

EBITDA

 

 

3,890

26,478

40,913

61,258

31,796

Operating Profit (before GW and except.)

3,890

(79)

10,984

18,993

(42,970)

Intangible Amortisation

0

0

0

0

0

Exceptionals/discontinued

(4,798)

(8,211)

(4,375)

(51,526)

63,244

Other

0

0

0

0

0

Operating Profit

(908)

(8,290)

6,609

(32,533)

20,273

Net Interest

(471)

153

54

(1,035)

630

Profit Before Tax (norm)

 

 

3,419

74

11,038

17,958

(42,341)

Profit Before Tax (FRS 3)

 

 

(1,379)

(8,137)

6,663

(33,568)

20,903

Tax

(4,893)

4,051

(1,968)

4,631

0

Profit After Tax (norm)

(1,372)

4,125

9,070

22,589

(42,341)

Profit After Tax (FRS 3)

(6,272)

(4,086)

4,695

(28,937)

20,903

Average Number of Shares Outstanding (m)

373.7

413.4

420.8

502.9

1,121.8

EPS - normalised (c)

 

 

(0.4)

1.0

2.2

4.5

(3.8)

EPS - FRS 3 (c)

 

 

(1.7)

(1.0)

1.1

(5.8)

1.9

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

27.6

26.5

30.5

51.5

34.2

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

160,174

162,624

182,691

148,474

722,145

Intangible Assets

53,406

65,251

72,553

83,107

87,107

Tangible Assets

100,032

89,787

102,941

60,627

630,298

Investments

6,736

7,586

7,197

4,740

4,740

Current Assets

 

 

40,811

28,342

38,569

54,276

13,980

Stocks

15,391

11,505

12,394

9,644

11,988

Debtors

4,906

1,988

1,720

2,445

1,774

Cash

15,569

14,849

24,455

41,969

0

Other

4,945

0

0

218

218

Current Liabilities

 

 

(14,726)

(11,251)

(10,448)

(19,335)

(330,744)

Creditors

(13,755)

(9,726)

(8,745)

(11,166)

(5,872)

Short term borrowings

0

0

0

0

(316,703)

Other

(971)

(1,525)

(1,703)

(8,169)

(8,169)

Long Term Liabilities

 

 

(12,039)

(9,265)

(20,502)

(18,488)

(18,488)

Long term borrowings

0

0

0

0

0

Other long term liabilities

(12,039)

(9,265)

(20,502)

(18,488)

(18,488)

Net Assets

 

 

174,220

170,450

190,310

164,927

386,893

CASH FLOW

Operating Cash Flow

 

 

(3,508)

28,454

37,432

52,284

24,829

Net Interest

(369)

153

54

(1,035)

630

Tax

0

0

0

3,498

0

Capex

(95,281)

(32,588)

(40,423)

(43,705)

(648,437)

Acquisitions/disposals

40,534

3,151

416

3,016

63,244

Financing

9,800

162

12,127

3,455

201,064

Dividends

0

0

0

0

0

Net Cash Flow

(48,824)

(668)

9,606

17,513

(358,671)

Opening net debt/(cash)

 

 

(64,294)

(15,569)

(14,849)

(24,455)

(41,969)

HP finance leases initiated

0

0

0

0

0

Other

99

(52)

0

0

0

Closing net debt/(cash)

 

 

(15,569)

(14,849)

(24,455)

(41,969)

316,703

Source: Alkane Resources accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Alkane Resources and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Alkane Resources and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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