Merger of equals with Mandalay

Under the terms of the transaction, Mandalay shareholders will receive 7.875 ordinary Alkane shares for each ordinary Mandalay share held. Former Mandalay shareholders will own approximately 55% of the combined entity, with former Alkane shareholders owning 45%. The combined company will have a market capitalisation of c A$1bn and will produce c 180koz gold equivalent in 2026 from three operating mines at an all-in sustaining cost (AISC) of c A$2,160/oz. At the current share price, we calculate that this is the equivalent of Alkane acquiring Mandalay for US$3.68/share, US$103 per resource ounce or US$343 per reserve ounce (excluding antimony co-product credits). As a going concern, using our traditional discounted dividend flow valuation technique, we calculate a value for Mandalay of US$3.15/share at Edison’s long-term real gold price of US$1,794/oz, or US$11.07/share at the currently prevailing gold price of US$3,320/oz. Moreover, the merger is demonstrably earnings accretive for Alkane in that it is acquiring Mandalay on a pro forma P/E of 5.1x to June 2025 (Edison calculation), while it is trading on a prospective P/E of 10.1x.

Valuation: Bulking up where it needs to

In the wake of the merger, our valuation of the combined Alkane/Mandalay entity has increased by 36%, from A$0.48/share previously (with Alkane valued as a standalone company) to A$0.65/share now, demonstrating the fundamentally accretive nature of the transaction. However, this is conducted at Edison’s long-term (real) gold price of US$1,794/oz. At the currently prevailing (real) price of gold, it almost trebles to A$1.87/share, generating EPS of A$0.20–0.30/share until the end of the decade (see Exhibit 11). To this should then be added A$0.22/share for Boda-Kaiser, either as an in-situ resource or as an early-stage project. However, once again, this is at a low gold price and its valuation increases to A$0.87/share at current metals prices. The value of Boda-Kaiser will inevitably be diluted by the increase in the number of shares in the combined entity (from 605.5m to 1,350.0m). However, this is more than made up for, in our opinion, by its superior cash generation potential. According to our calculations, at US$1,794/oz Au, the merged Alkane/Mandalay has the potential to accumulate A$764m in net cash by the end of FY31 (or 41% of the pre-production funding requirement for Boda-Kaiser). At US$3,320/oz Au, it has the potential to accumulate US$2,450m.

Taking flight

Since our last note on Alkane, the company has announced:

• Its interim results on 19 February;
• the results of underground resource expansion drilling at Tomingley on 28 February and 7 April;
• a merger of equals with Canadian-listed Mandalay Resources Corporation on 28 April; and
• its Q325 quarterly activities report on 29 April.

The most consequential of these announcements is obviously the merger with Mandalay Resources. Under the terms of the transaction, Mandalay shareholders will receive 7.875 ordinary shares of Alkane for each ordinary share of Mandalay, such that former Mandalay shareholders will own approximately 55% of the combined entity and former Alkane shareholders 45%. The combined company will have a market capitalisation of c A$1bn, will produce c 180koz gold equivalent in 2026 from three operating mines (two in Australia and one in Sweden) at an AISC of c A$2,160/oz, will be quoted in both Australia and Canada and will be led by Alkane’s managing director, Nic Earner, an established executive with considerable operational, management and corporate experience.

The rationale for the acquisition is that the combined entity will benefit from:

• Improved capital market positioning as it achieves the size required for VanEck Junior Gold Miners ETF (GDXJ) and potential ASX 300 index inclusion, greater trading liquidity, a larger free float and a more diverse shareholder base.
• Creating a powerful platform with a pro forma cash balance of A$188m as at 31 March 2025 (Alkane/Mandalay estimate) to pursue both organic and inorganic growth.
• Merged leadership focused on delivering a re-rating and driving growth. The combined company’s board of directors will consist of three Mandalay nominees (Brad Mills, Frazer Bourchier and Dominic Duffy), two Alkane nominees (Ian Gandel and Nic Earner) and a new independent chairman, Andy Quinn, a chartered mining engineer and highly qualified investment banking and mining industry veteran. At the same time, executive management, led by Nic Earner and including Mandalay’s operating team, will provide operational continuity and a solid foundation from which to unlock portfolio value.

The transaction will be effected pursuant to a court approved plan of arrangement under the Business Corporations Act (British Columbia) and will require approval by two-thirds of the votes cast by the shareholders of Mandalay at a special meeting of Mandalay shareholders and by a simple majority of votes cast by the shareholders of Alkane at a special meeting of Alkane shareholders. Directors, officers and shareholders of Mandalay (including CE Mining and GMT Capital) who hold approximately 45% of the outstanding Mandalay common shares have entered into voting support agreements pursuant to which they have agreed, among other things, to vote their Mandalay common shares in favour of the transaction. Similarly, certain directors of Alkane who hold approximately 19% of outstanding Alkane shares have stated their intention to vote their shares in favour of the share issuance pursuant to the transaction.

In the ordinary course of events, in writing this report, we would consider the Alkane-Mandalay merger first, followed by the company’s operational and financial results and then its drilling results. Owing to the uncertain timing of the completion of the transaction, which seems likely to be in Q3 CY25, in this case we have opted to update our financial forecasts to 30 June 2025 first and then to consider the likely effects of the merger afterwards, with accounts fully consolidated from that date onwards.

H125 results, Q325 operational results and FY25 estimates

Alkane’s production in Q325 was almost exactly in line with our prior expectations and management’s guidance, with the exception of metallurgical recoveries, which were lower, and sales, which lagged production by 1,144oz (which we estimate will have temporarily cost Alkane c A$5.2m in revenue). Gold recovery from the circuit was less than designed during January and February, owing to insufficient capacity within the regeneration kiln to re-activate the carbon sufficiently from the addition of flotation reagents. However, the kiln burners were upgraded late in the quarter, resulting in increased performance, such that this problem should now have been rectified.

We have updated our FY25 operational forecasts in the light of Alkane’s Q325 operating results. In addition, we have updated our gold price forecasts for the remainder of the year to reflect recent movements in the spot price. These are shown in Exhibit 1, below:

Exhibit 1: Tomingley quarterly operating results, Q324–Q425e

Source: Edison Investment Research.

Note: Historical average realised prices in A$/oz include the effect of forward sales contracts, whereas future average realised prices do not. However, the effect of the forward sales contracts is built into our financial forecasts (below).

The main source of ore to the plant at Tomingley is now Roswell and, while only a small portion of the overall ore reserve has been mined, the initial grade reconciliations from the deposit are reported to be ‘performing well.’ The flotation and fine grind circuit and the paste plant are now in steady-state operation. Commissioning of these two projects finishes the current phase of capital growth, with expenditure now switching to the Newell Highway road diversion. This has been delayed by a few months. For the purposes of our financial forecasting, however, we have simply reallocated it from FY25 into FY26 (see Exhibit 13).

In the wake of Alkane’s H125 results, published on 19 February, Q325’s operating results and changes to our H225 assumptions, we have upgraded our financial forecasts for FY25 by more than 40% to those shown in Exhibit 2, below:

Exhibit 2: Alkane income statement, H123–H225e (A$m, unless otherwise indicated)

Source: Alkane Resources, Edison Investment Research.

Upcoming capital programme

As stated previously, the current phase of capital growth at the Tomingley Gold Expansion Project (TGEP) is now complete. However, in order to commence open-cut mining at San Antonio, the Newell Highway will need to be relocated c 1km to the west of its existing corridor. This is a substantial body of work that has been through several design iterations over a number of years to receive full approval from Transport for NSW. The ore from the open-cut operations will be added to underground mine production at Roswell to provide sufficient ore to expand the processing plant capacity with a throughput upgrade to c 1.5Mtpa (from the existing c 1.1Mtpa). Expansion will be facilitated by the installation of an additional mill, thickener and electro-winning circuit. To this end, the construction contract for the Newell Highway road diversion has been awarded and the contractor has submitted its environmental and construction management plans to the regulator. Simultaneously, the next stage of engineering for the plant upgrade is commencing, with the majority of work on these two projects anticipated to last until the end of CY25, after which open-cut mining at San Antonio will commence in H1 CY26.

On the road to Mandalay

On 28 April, Alkane announced a merger of equals with Canadian-listed Mandalay Resources Corporation. Under the terms of the transaction, Mandalay shareholders will receive 7.875 ordinary shares of Alkane for each ordinary share of Mandalay, such that former Mandalay shareholders will own approximately 55% of the combined entity and former Alkane shareholders will own 45%. The combined company will have a market capitalisation of c A$1bn and will produce c 180koz gold equivalent in 2026 from three operating mines (Tomingley and Costerfield in Australia and Björkdal in Sweden) at an AISC of c A$2,160/oz.

Assets

Mandalay is a Canadian-based resource company with two producing assets: the Costerfield gold-antimony mine in Australia (Victoria, 10km north-east of Heathcote) and the Björkdal gold mine in Sweden. It states its mission as being to create shareholder value via the profitable operation of its existing mines and the continuation of its regional exploration programmes. By design, it operates and has interests in countries that have a long-standing tradition in mining, low political risk and clear legal frameworks for tenure and taxation.

Costerfield

Geology

The Costerfield gold-antimony vein district (of which the Augusta Lodes are a part) is located on the northern end of the Darraweit Guim Province, comprising the Murrindindi Supergroup. Stratigraphy in this area comprises a thick sequence of Lower Silurian to Lower Devonian shelf and flysch sedimentary rocks, dominated by turbiditic siltstone, with minor sandstone and argillite. At the base of the Supergroup is the Costerfield Formation, which is conformably overlain by the Wappentake (sandstone/siltstone) and Dargile (mudstone) Formations, the McIvor Sandstone and the Mount Ida Formation (sandstone/mudstone).

The gold-antimony veins in the Costerfield district are hosted within the Silurian Costerfield Siltstone unit. Within the district, four north-north-west trending zones of mineralisation have been identified. From the west, these are:

• the Antimony Creek Zone, approximately 6.5km south-west of Costerfield, on the outer western flank of the Costerfield Dome;
• the Western Zone, approximately 1.5km west of Costerfield, on the western flank of the Costerfield Dome;
• the Costerfield Zone, near the crest of the dome, centred on the Costerfield township and hosting the major producing mines and deposits; and
• the Robinsons-Browns (R-B) Zone, 2km east of Costerfield.

Mining

At Costerfield, the company’s focus is on its high-grade Youle and deeper Shepherd veins (both of which will continue to supply high-grade ore to the processing plant) and the extension of mineral reserves at Youle, in particular.

The Augusta mine has been operational since 2006 and was the sole ore source for the Brunswick processing plant until December 2013, when ore production started from the Cuffley deposit located approximately 500m to the north of the Augusta mine workings. Currently, Youle and Shepherd are the main source of material for Costerfield. The Brunswick deposit is also being mined in conjunction with the Youle deposit.

The mining method employed is long-hole stoping with cemented rock fill. Ore is accessed by a primary spiral ramp. Level spacing is at 10m centres and horizontal development is advanced in a minimum of 1.8m wide drives in both directions of the deposit. Levels are then mined out on retreat with long hole stopes drilled to a minimum width of approximately 1.5m. The stopes are subsequently backfilled with cemented rock fill in order to provide stability, reduce dilution and allow for mining above and below developed levels.

Ore is trucked on the surface from the Augusta mine portal to the Brunswick processing plant, where it is stockpiled and blended into the processing circuit. Costerfield is currently planning a second mine portal at Brunswick. The circuit comprises primary crushing, primary and secondary ball mills, rougher, scavenger, cleaner flotation, a gravity circuit and filtering. Gravity gold concentrate is sold to a refinery in Melbourne, while gold-antimony flotation concentrate is shipped to a smelter in China.

Björkdal

Geology

The Björkdal gold deposit is a lode-style, sheeted vein deposit that is hosted within the upper-portions of the Skellefteå Group lithologies as they are found at Björkdal (see Mandalay Resources website). Gold is found within vertical to sub-vertical dipping quartz veins that range in thickness from less than a few centimetres to over several decimetres. Locally, the veining is structurally complex, with many cross-cutting features as well as thin quartz veinlets, which introduce mineralisation into the wall rocks proximal to the main quartz veins.

Gold-rich quartz veins are most often associated with the presence of minor quantities of sulphide minerals, such as pyrite, pyrrhotite, marcasite and chalcopyrite alongside more common non-sulphide minerals, such as actinolite, tourmaline and biotite. Scheelite and bismuth-telluride compounds (eg tellurobismuthite and tsumoite) are also commonly found within the veins and are both excellent indicators of gold mineralisation.

Gold occurs dominantly as free gold, although it is also associated with bismuth-telluride, electrum and pyroxenes. Silver is seen as a minor by-product (assumed to be associated with electrum).

Mining

Björkdal is located within the Boliden mining district of Sweden, approximately 750km north of Stockholm. Operational since 1983, Björkdal was only acquired by Mandalay in 2014, at which point it produced from both open pit and underground operations until the former was suspended in 2019, such that it now operates solely as an underground mine, focusing on the higher-margin underground Aurora zone (80% of mill feed) and stockpiled ore (20% of mill feed). Mandalay expects to increase the processing rate to 1.45Mtpa from 2024.

Underground mining is accomplished by long-hole stoping using a combination of contractors and an owner-operated mobile fleet. Access is via dual ramps from the open pit. The processing plant includes multiple crushers, a ball mill, a rod mill, a gravity circuit and a flotation circuit, producing four separate gravity and flotation gold concentrates that are sold to smelters in both Sweden and Germany.

Reserves and resources

At targeted processing rates, Mandalay’s reserves are capable of supporting production for approximately nine years, while its resources are capable of supporting production for over 20 years. Including antimony (Sb), Mandalay’s most recently stated resources across its two assets may be summarised as follows:

Exhibit 3: Mandalay reserves and resources

Source: Mandalay Resources Corporation. Note: Resources stated inclusive of reserves.

These compare to the 1,753koz of gold resource that Alkane is contributing to the merged company from its Tomingley, Roswell and San Antonio mines (ie 41.9% of the merged total) at an average grade of 2.18g/t and the 698koz of reserves that it is contributing from the same assets (ie 48.8% of the merged total) and an average grade of 1.85g/t.

If its resources at Kaiser and Boda are also considered, however, then Alkane is contributing 80.5% (10.0Moz Au) of the gold resource of the merged company of 12.5Moz (excluding by-products).

Of note is the fact that while Costerfield is currently mining at above both its average reserve and resource grades for gold, it is mining below both its average reserve and resource grades for antimony. Björkdal is similarly mining below its reserve and resource grades for gold.

Mandalay profile and guidance

Whereas Alkane’s year-end is June, Mandalay’s is December, which is a complicating factor. Nevertheless, Mandalay has provided operational guidance for CY25 and produced quarterly results up to and including March 2025. Its guidance for CY25 is reproduced below:

Exhibit 4: Mandalay guidance for CY25

Source: Mandalay Resources Corporation. Note: Gold equivalent (AuE) calculation assumes average metal prices of US$2,575/oz Au and US$20,000/t Sb.

Without going into excessive detail, Mandalay’s quarterly operational results to 31 March 2025 were thoroughly in line with its guidance for CY25 and we are, therefore, expecting that the period from March to June will also be very similar, with the main difference between the two likely to be metals prices.

For the year to 30 June 2025 as a whole, we expect Mandalay to produce 80,227oz Au, or 52.7% of the pro forma production of the combined group.

That being the case, from its published balance sheet on 30 June 2024, we are able to estimate an income statement and a cash flow statement for the 12 months to 30 June 2025 and therefore to construct a balance sheet as at 30 June 2025. These are shown below. Note that we do no expect revenue from co-produced antimony to account for more than 14.1% of Mandalay’s total for the year to June 2025.

Exhibit 5: Mandalay forecast income statement, balance sheet and cash flow statement for the year to June 2025

Source: Edison Investment Research, Mandalay Resources Corporation.

We are then able to convert this balance sheet into Australian dollars (from US dollars) and to consolidate it into our forecast balance sheet for Alkane as at the same date, which is shown in Exhibit 13.

While the Alkane-Mandalay transaction is being described as a ‘merger of equals’ and, from the point of view of production and immediately accessible reserves and resources, this is true, from an accounting perspective, since it is Alkane’s shares that are being used as the functional currency for the transaction, it will be considered an acquisition of Mandalay by Alkane. Within this context, we assume that the goodwill implicit in merger terms (see below) will be written off for accounting purposes, rather than consolidated and amortised.

Merger terms and Mandalay balance sheet valuation

Having forecast Mandalay’s balance sheet as at 30 June 2025, we are able to make some preliminary observations as to the value that the proposed merger terms place on Mandalay and Mandalay’s assets, which are shown in Exhibit 6, below.

Exhibit 6: Preliminary Mandalay valuation as per merger terms

Source: Edison Investment Research (underlying data: Alkane Resources, Mandalay Resources Corporation)

A number of observations may be made:

• Alkane is acquiring US$282.9m in net assets (US$2.99/share) for a consideration of only US$348.4m (US$3.68/share).
• Mandalay’s shares are trading at a modest 5.1% discount to the implied value of the transaction, demonstrating that the market is pricing in only a small percentage chance of the merger not completing.
• Once net cash of US$97.6m is netted off against the consideration, Alkane is effectively acquiring Mandalay for US$102.96 per resource ounce, US$342.55 per reserve ounce and US$3,125.53 per production ounce (for the year to 30 June 2025, excluding antimony).

Mandalay’s valuation as an operating entity

For the purposes of our valuation of Mandalay as an operating entity, we have made a number of assumptions, of which the major ones are summarised below:

• We have assumed that Costerfield will achieve its targeted throughput rate in the year to June 2027 and that it will continue to process ore at that rate until the reserve has been exhausted (in 2029), after which it will continue to mine until only c 38% of the residual resource remains (estimated 2034).
• We assume that Costerfield will continue to mine at grades above its reserve and resource grades of gold until 2029, when it will revert to the average residual reserve grade, and 2030 when it will revert to the average residual resource grade of gold. We assume that it will revert to the average residual reserve grade of antimony from 2027 and that it will revert to the average residual resource grade of antimony from 2031.
• We have assumed that Björkdal will similarly achieve its targeted throughput rate in the year to June 2027 and that it will continue to process ore at that rate until the reserve has been exhausted (in 2034), after which it will continue to mine until only c 46% of the residual resource remains (estimated 2041).
• We assume that mining at Björkdal will continue at a grade below the reserve and resource grade until 2027, when it will revert to the average residual reserve grade, and 2034 when it will revert to the residual resource grade.

On the basis of these assumptions, our group production profile until 2041 for both gold and antimony is as follows:

Exhibit 7: Forecast Mandalay life of operations’ production

Source: Edison Investment Research

From a financial perspective, we have also made the following assumptions:

• We assume long-term cash operating costs of US$435/t at Costerfield from 2027 in real terms and US$45/t at Björkdal from 2027 in real terms.
• We assume a standard company corporate tax rate of 30% in Australia from 2027 and a standard corporate income tax rate of 20.6% in Sweden from 2027.

In conjunction with Edison’s relatively conservative long-term gold price projections of US$1,794/oz (in real terms), these assumptions combine to create the following life of operations’ EPS and DPS profiles (assuming that all excess cash is paid out as a dividend distribution to shareholders whenever possible).

Exhibit 8: Mandalay’s standalone life of operations’ EPS and (maximum potential) DPS profile (US$/share)

Source: Edison Investment Research

The NPV₁₀ of the dividend stream to investors on this basis is US$3.15/share, while the equivalent discounted cash flow (DCF) valuation (not shown), also at a 10% discount rate, is US$3.24/share. The principal difference between the two being that the discounted dividend analysis assumes payout of the first dividend after June 2026 (ie in one year’s time), whereas the DCF gives the full value of Mandalay’s net cash position of US$97.6m (or US$1.03/share) to investors as at 30 June 2025.

As noted previously, however, this analysis is performed at Edison’s distinctly conservative long-term (real) gold price of US$1,794/oz. In the event that the current gold price continues to prevail for the remainder of Mandalay’s operations’ lives, our discounted dividend valuation rises to US$11.07/share, while our equivalent DCF valuation rises to US$11.17/share.

Earnings accretion

Consensus EPS expectations for Mandalay for its financial year to December are US$0.64/share for FY25 and US$0.75/share for FY26 (source: LSEG Data & Analytics, 22 May 2025). Note that Mandalay reported January-March 2025 EPS of US$0.16/share.

These compare with Edison’s forecasts for Mandalay for its pro forma year to June 2025 of US$0.72/share and US$0.66/share for its pro forma year to June 2026. Note that it reported an aggregate US$0.44/share in the nine months to March 2025. The pickup in April to June 2025 largely arises from the assumed non-repetition of relatively large losses on both financial instruments and fx in January-March 2025.

On the basis of Edison’s estimates (so that they are directly comparable) Alkane will then be acquiring Mandalay on a P/E ratio of 5.1x to June 2025 and 5.5x to June 2026. These compare to our forecast of Alkane’s P/E of 10.1x to June 2025, on which basis its acquisition of Mandalay is clearly earnings accretive.

Valuing the combined Alkane/Mandalay entity

As in previous reports, our valuation of the merged Alkane/Mandalay entity is based on the present value of our forecast life of operations dividend stream to investors discounted back to present value at a (real) rate of 10% per year, excluding exploration expenditure. In the wake of the Q325 quarterly activities report, our updated forecasts for H225 and its proposed merger with Mandalay, our valuation of the dividend stream potentially available to Alkane/Mandalay shareholders from its combined mining operations has increased by 48.5% to A$0.628/share (cf A$0.423/share previously). This increases to A$0.655/share once the value of residual resources at Tomingley/San Antonio/Roswell is also included.

A graph of our updated expectations for Alkane/Mandalay’s EPS, (maximum potential) DPS and valuation from the present to end FY41 (cf FY31 previously) is provided in Exhibit 9, below.

Exhibit 9: Alkane/Mandalay life of operations forecast EPS and (maximum potential) DPS (A$/share)

Source: Edison Investment Research

Investors should note the significant change in the graph since our last note on Alkane considered as a standalone entity, which was published in January and is reproduced below. The increase in the valuation from A$0.423/share to A$.628/share, despite the significant increase in the number of Alkane/Mandalay shares in issue (from 604.6m to 1,350.0m) being a definitive demonstration of the transaction’s value accretion.

Exhibit 10: Prior Alkane life of operations forecast EPS and (maximum potential) DPS (A$/share)

Source: Edison Investment Research

Note that, in this case, the DPS columns in Exhibits 9 and 10 represent theoretical, maximum potential dividends that we believe could be paid by the company, rather than actual dividends forecast, and are used for valuation purposes. In reality, and given the likely capital requirements of the Northern Molong Porphyry project, a balance will need to be found between shareholder returns in the form of capital growth and dividend distributions (see ‘Financials’ below).

In the meantime, it is worth noting that this valuation is calculated at a conservative long-term (real) gold price of US$1,794/oz. At the current gold price of US$3,320/oz, it almost trebles to A$1.87/share.

Exhibit 11: Alkane life of operations forecast EPS and (maximum potential) DPS at US$3,320/oz Au

Source: Edison Investment Research

In-situ resources remain cheap

Nevertheless, the combined entity will remain cheap relative to its peers on an enterprise value equating to just US$42.15 per combined ounce of resources (albeit this is approximately double the equivalent rating of US$21.37/oz for Alkane alone at the time of our last note), despite it being a profitable, cash-generating company with the potential for dilution-free development.

Merged Alkane/Mandalay group valuation

A summary of our merged Alkane/Mandalay valuation is as follows:

Exhibit 12: Alkane/Mandalay merged valuation summary (Australian cents per share)

Source: Edison Investment Research. Note: Totals may not add up owing to rounding.

A number of features of the valuation are noteworthy:

• The 36.4% increase in the value of Alkane’s operating assets (plus cash), demonstrating the accretive nature of the Mandalay merger. As a result, Alkane’s current share price of A$0.73 could be interpreted as being at least 119% covered by the value of ‘core’ assets, with no value (or a negative value) being afforded to its ‘contingent’ assets. Alternatively, Alkane’s share price could be thought of as being at a discount of 16.1% to the value of its ‘core’ assets, with no value being afforded to it for its ‘contingent’ assets.
• When considering either the merged entity’s ‘Core assets valuation’ or its ‘Potential total’ valuation, a noticeably larger percentage of the totals is accounted for by ‘Operating assets plus cash’.
• The valuation of Boda-Kaiser has been, inevitably, diluted by the merger. However, we believe that this is more than made up for by the combined entity’s increased cash generation potential until 2031, which has the ability to fund the project’s pre-production capex requirement (see ‘Financials’ below). For the purposes of our valuation of Boda-Kaiser, we have included the in-situ valuation of the combined resource as a ‘core’ asset. We have included the discounted dividend flow valuation as a ‘contingent’ asset, although we note the convergence of the two, which confers confidence in the valuation (see our note Kaiser a winner, published on 24 July 2024). However, in due course, while we would expect the Boda and Kaiser in-situ valuation to remain relatively constant (all other things being equal) the discounted dividend flow valuation of the asset will inevitably rise with the passage of time and the attainment of the various milestones inherent in bringing such a deposit to account.

Financials

As at end-H125 (ie 31 December 2024), Alkane had net debt on its balance sheet of A$27.7m. As at 30 June 2025, we estimate that it will consolidate a pro forma US$97.6m onto its balance sheet with its merger with Mandalay to leave it with net cash of A$164.6m (in conjunction with interim cash flows).

Boda-Kaiser has a pre-production capex requirement of US$1,188m, or A$1,856m at the prevailing fx rate.

At Edison’s relatively conservative long-term gold price of US$1,794/oz, we estimate that the merged Alkane/Mandalay entity has the potential to accumulate A$764m in net cash by the end of FY31 in order to contribute to the funding of the Boda-Kaiser project (cf A$335m previously for Alkane as a standalone entity). This amounts to 41% of the total capex requirement and, in our opinion, would obviate the need for Alkane/Mandalay to either raise additional equity or seek a strategic partner to develop the project. At the current (real) gold price of US$3,320/oz however, we estimate that the combined Alkane/Mandalay could accumulate A$2,450m in net cash to contribute towards Boda-Kaiser pre-production capex (cf A$808m previously for Alkane as a standalone entity), in which case it could simultaneously contemplate dividend distributions to shareholders in the intervening timespan.

Exhibit 13: Financial summary

Source: Company accounts, Edison Investment Research