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Research: Metals & Mining
Alkane has provided a pre-quarterly update for its Tomingley Gold Operation (TGO). Strong production performance of 17koz of gold produced across April and May has led the company to revise upwards its H217 production target from 31-36koz, to 43-45koz. H217 all-in sustaining costs (AISC) are also estimated to come down from A$1,350-1,550/oz published by Alkane in January, to A$1,000-1,100/oz. This is expected to have a positive effect on the company’s cash flow, which will be confirmed via its FY17 financials due out mid-July.
Alkane Resources |
Finishing the year with a flourish |
Pre-quarterly update |
Metals and mining |
27 June 2017 |
Share price performance
Business description
Analysts
Alkane Resources is a research client of Edison Investment Research Limited |
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Alkane has provided a pre-quarterly update for its Tomingley Gold Operation (TGO). Strong production performance of 17koz of gold produced across April and May has led the company to revise upwards its H217 production target from 31-36koz, to 43-45koz. H217 all-in sustaining costs (AISC) are also estimated to come down from A$1,350-1,550/oz published by Alkane in January, to A$1,000-1,100/oz. This is expected to have a positive effect on the company’s cash flow, which will be confirmed via its FY17 financials due out mid-July.
Year end |
Revenue (A$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/15 |
101.8 |
0.1 |
1.0 |
0.0 |
24.0 |
N/A |
06/16 |
109.6 |
11.0 |
2.2 |
0.0 |
10.9 |
N/A |
06/17e |
98.0 |
(17.7) |
(1.5) |
0.0 |
N/A |
N/A |
06/18e |
104.3 |
(16.2) |
(1.2) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Alkane’s strong H2 production performance at the TGO has also led the company to revise its full-year FY17 production guidance to 65-67koz Au at all-in sustaining costs of between A$1,300/oz and A$1,400/oz. This is 12% above our TGO gold production estimate for FY17 (published in May 2017) of 58koz, and slightly ahead of our AISC estimate for FY17 of A$1,469/oz.
This positive H217 production performance sees Alkane finishing FY17 with a flourish, after a difficult H117 dominated by intense periods of rainfall, which negatively affected gold mining at the TGO. Further, Alkane has guided that it expects to produce 65-70koz of gold in FY18 at an AISC of between A$1,100/oz to A$1,200/oz. We expect to revise our base case valuation for the TGO, and Alkane’s shares, pending its release of formal revised underground mine plans for the TGO, sometime towards the end of H118 (H2 CY17). This will follow the completion of current drilling activities and a revised resource and reserve statement for the TGO.
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Disclaimer
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During FY16 Windar took some important strategic steps in rolling out its innovative LiDAR: implementing additional functionality to enlarge the addressable market and modifying its sales channels to focus on the IPP market. While y-o-y revenue growth of 26% was lower than management guidance, the results show substantial reductions in the cost-base and lower losses. Management note that recent order wins are likely to result in high double digit revenue growth during H117 and the company approaching EBITDA breakeven. We are withdrawing our estimates and valuation until the interims when there should be more clarity on test programmes converting to sales.