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Last close As at 25/03/2023
AUD0.71
▲ −0.02 (−2.74%)
Market capitalisation
AUD434m
Research: Metals & Mining
As expected, the NSW Minister for Planning has approved Alkane’s Tomingley Gold Extension Project, allowing both open-cut mining at the Roswell and San Antonio deposits (including underground mining at the former) and extending the mine life to 2032. The approval accepts a processing rate of up to 1.75Mtpa, with underground mining due to commence at Roswell before the end of CY23. Financing has been secured via A$50m of debt funding from Macquarie Bank, together with 100koz of gold hedging at a weighted average price of A$2,825/oz (US$1,928/oz).
Alkane Resources |
Tomingley Gold Extension Project approved |
Extension project approval |
Metals and mining |
24 February 2023 |
Share price performance
Business description
Analysts
Alkane Resources is a research client of Edison Investment Research Limited |
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As expected, the NSW Minister for Planning has approved Alkane’s Tomingley Gold Extension Project, allowing both open-cut mining at the Roswell and San Antonio deposits (including underground mining at the former) and extending the mine life to 2032. The approval accepts a processing rate of up to 1.75Mtpa, with underground mining due to commence at Roswell before the end of CY23. Financing has been secured via A$50m of debt funding from Macquarie Bank, together with 100koz of gold hedging at a weighted average price of A$2,825/oz (US$1,928/oz).
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/21 |
127.8 |
46.3 |
5.35 |
0.00 |
12.3 |
N/A |
06/22 |
165.0 |
52.1 |
3.68 |
0.00 |
18.0 |
N/A |
06/23e |
140.1 |
37.8 |
4.45 |
0.00 |
14.8 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Following Tomingley gold mine’s impressive production and financial results in H123, after which FY23 company guidance was updated to 62,000–70,000oz Au at an all-in sustaining cost (AISC) of A$1,550–1,800/oz (previously 55,000–60,000oz Au at an AISC of A$1,650–1,900/oz), Alkane has now achieved approval for project extension at Tomingley.
This approval permits open-cut mining at the Roswell and San Antonio deposits (including underground mining at the former), resulting in the diversion of a section of the Newell Highway. Commissioned in 2014, the processing plant is to be upgraded from 1Mpta to 1.75Mpta to account for the increased rate of mining from three gold deposits to five. Underground mining is expected to commence at Roswell before the end of CY23 pending applications for the environmental protection licence and mining lease (which cannot now be refused) and completion of updated management plans, potentially extending the mine life at Tomingley to 2032. Additionally, Alkane’s second near-term prospect continues to advance via an exploratory drill programme in the Northern Molong Porphyry Project, north-west of Boda.
Execution of the A$50m finance facility with Macquarie Bank is expected to fund the Tomingley Gold Extension Project. This facility is an amendment to a pre-existing agreement used for hedging. Although the key terms are confidential, an agreement for 100koz of gold production across the debt service period (March 2024 to December 2026) is to be used for hedging purposes (c 40% of expected production over the period). The first debt drawdown is permitted on the approval of the mining lease, expected in mid-2023, with the loan tenor running to 31 December 2026.
We calculate that Alkane’s share price is more than 100% covered by the book value of tangible assets underpinned by Tomingley at A$0.57/share to Alkane’s valuation. Liquid assets in the form of Alkane’s holdings in Calidus and Genesis contributed a further A$0.06/share, with Boda estimated at US$125.5m (US$0.21/ share or A$0.31/share). Also, up to A$0.58/share in additional upside is available in the form of further exploration success in the Northern Molong Porphyry Project. We will review our forecasts and valuation in due course.
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Research: Healthcare
FY22 was marked by several clinical milestones for Mendus, notably the positive survival data from the Phase II ADVANCE II study in acute myeloid leukaemia (AML) and encouraging safety data from the ongoing Phase I ALISON trial (in ovarian cancer), both investigating the company’s lead cancer vaccine candidate, vididencel (DCP-001). In 2023, we expect Mendus to focus on progressing vididencel in the AML maintenance setting, as it plans a Phase I study in AML patients post-hematopoietic stem cell transplantation (HSCT) and a Phase II trial in combination with standard of care azacitidine in AML maintenance. In our view, combination therapies will be critical for clinical breakthroughs in oncology, so we see the initiation of such a Phase II study as a sensible strategic decision. The August 2022 SEK250m fund-raising facility may fund operations past anticipated completion of these studies (in H224) albeit with significant dilution risk. Our valuation increases to SEK1.9bn or SEK9.31/share (SEK1.8bn or SEK9.1/share previously), although the valuation per share would reduce with subsequent debt-to-equity conversions.
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