Alkane Resources — Boda bodes well

Alkane Resources (ASX: ALK)

Last close As at 18/05/2024

AUD0.62

0.02 (3.36%)

Market capitalisation

AUD372m

More on this equity

Research: Metals & Mining

Alkane Resources — Boda bodes well

On 9 November, Alkane reported the results of an additional 11 holes at its Boda prospect at its Northern Molong Porphyry Project. The most obvious, immediate consequence of the results is that it has doubled the north-south strike length of the system from 500m to 1,000m and, as such, is likely to represent either an extension of the original system or a whole new system. Among other things, this has caused us to increase our estimate of the upper limit of the mineralised inventory at Boda from 738Mt to 2,241Mt at an average gold grade of up to 0.35g/t. Note that Boda remains open to the northwest, south and at depth, with the relatively unexplored high grade mineralisation being the focus of further drilling.

Lord Ashbourne

Written by

Lord Ashbourne

Director of Content, Mining

Metals & Mining

Alkane Resources

Boda bodes well

Boda drilling, Roswell resources and Q1 results

Metals & mining

8 December 2020

Price

A$1.045

Market cap

A$622m

A$1.3476/US$

Net cash (A$m) at 30 September 2020

33.1

Shares in issue

595.2m

Free float

78%

Code

ALK

Primary exchange

ASX

Secondary exchange

OTC QX

Share price performance

%

1m

3m

12m

Abs

(26.4)

(9.7)

78.9

Rel (local)

(31.8)

(19.9)

76.5

52-week high/low

A$1.5

A$0.5

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 47,500oz in FY21.

Next events

San Antonio updated resource

Late Q4 CY20

Updated mine plans

Late Q4 CY20

Q221 results

Jan/Feb 2021

Q321 results

Apr/May 2021

Analyst

Charles Gibson

+44 (0)20 3077 5724

Alkane Resources is a research client of Edison Investment Research Limited

On 9 November, Alkane reported the results of an additional 11 holes at its Boda prospect at its Northern Molong Porphyry Project. The most obvious, immediate consequence of the results is that it has doubled the north-south strike length of the system from 500m to 1,000m and, as such, is likely to represent either an extension of the original system or a whole new system. Among other things, this has caused us to increase our estimate of the upper limit of the mineralised inventory at Boda from 738Mt to 2,241Mt at an average gold grade of up to 0.35g/t. Note that Boda remains open to the northwest, south and at depth, with the relatively unexplored high grade mineralisation being the focus of further drilling.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/19

94.0

25.4

4.57

0.00

22.9

N/A

06/20

72.5

20.6

2.56

0.00

40.8

N/A

06/21e

104.2

22.9

2.89

0.00

36.2

N/A

06/22e

125.3

26.3

3.31

0.00

31.6

N/A

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

Starting as it means to go on

In terms of both cost and output, Alkane’s Q121 operational results were extremely close to both our prior expectations and Alkane’s pro rata guidance (of 45–50koz gold at an all-in sustaining cost (AISC) of A$1,450–1,600/oz for the full year). Gold sold was within 70oz (0.6%) of our prior forecast, albeit from ore milled that was 12.0% higher than our prior forecast and a head grade that was 16.1% lower. However, both C1 cash costs and AISC were lower than our expectations, at A$1,178/oz and A$1,575/oz, respectively (cf our prior forecasts of A$1,268/oz and A$1,590/oz).

Updated Roswell resource

In its Roswell resource update, Alkane revealed a 3.1Mt and 216koz increase in resources at a higher grade. At least as importantly, in excess of 100% of Roswell’s original (maiden) resource was promoted from the inferred category into the higher confidence, indicated category. In the aftermath of the update, we estimate that resources at Roswell are capable of supporting production at Tomingley for an additional 6.7 years alone and potentially by an additional 3.4 years thereafter. Note that Roswell’s resource grade of 2.04g/t compares favourably with Tomingley’s underground reserve grade of 2.0g/t. Together with San Antonio’s resource, we estimate that Roswell is capable of supporting production for 11–18 yrs in total (cf Alkane’s target of 10 years, with exploration still ongoing).

Valuation: Potentially up to 125c/share

Even against the headwind provided by the stronger Australian dollar, our updated valuation of Alkane nevertheless confirms a value of 21c/share on its Tomingley asset plus cash. To this may then be added up to a further 27c for its resources at Roswell and San Antonio and potentially up to another 67c/share for Boda (albeit this valuation is contingent on the ultimate resource delineated there). Other assets and contingencies potentially add a further 10c per share.

Recent developments

Alkane has announced a number of developments since our last note on the company (Reborn, published on 3 September), including:

Its Q121 activity report.

An updated mineral resource estimate at Roswell.

Additional drilling results at its Boda prospect within the Northern Molong Porphyry Project.

This note considers each in turn and updates our valuation of Alkane accordingly.

Tomingley

Q121 results and FY21 guidance

Gold sold at Tomingley’s in Q121 was within 70oz (0.6%) of our prior forecast, although 446oz was effectively sold out of inventory and ore milled was 12.0% higher than our forecast and the grade 16.1% lower. Nevertheless, the overall result in terms of both cost and output was extremely close to both our prior expectations and Alkane’s pro rata guidance for the full year (of 45–50koz gold at an AISC of A$1,450–1,600/oz). A summary of both Alkane’s Q121 results and our forecasts for the remaining quarters of the year, plus our updated forecast for the full year is provided in the table below.

Exhibit 1: Tomingley quarterly operating results, Q120–Q421e

Q120

Q220

Q320

Q420

Q121e

Q121

Q221e

Q321e

Q421e

FY21e

FY21e

(previous)

Ore milled (t)

289,282

231,493

113,699

204,269

227,203

254,423

227,203

227,203

227,203

936,033

908,813

Head grade (g/t)

0.96

1.21

1.83

2.20

1.86

1.56

1.86

1.86

1.86

1.78

1.86

Contained gold (g/t)

8,929

9,006

6,690

14,448

13,587

12,761

13,587

13,587

13,587

53,522

54,348

Recovery (%)

87.4

88.3

85.6

89.3

87.4

88.4

87.4

87.4

87.4

88.0

87.4

Gold poured (oz)

7,497

6,929

5,723

13,358

11,875

11,499

11,875

11,875

11,875

47,124

47,500

Gold sold (oz)

6,997

9,143

3,864

12,992

11,875

11,945

11,875

11,875

11,875

47,570

47,500

Gold price (US$/oz)

1,474

1,483

1,581

1,713

1,906

1,911

1,868

1,749

1,749

1,819

1,831

Forex (A$/US$)

1.4593

1.4627

1.5282

1.5226

1.4025

1.3987

1.3745

1.3476

1.3476

1.3671

1.3924

Average realised price (A$/oz)

2,151

2,084

2,126

2,327

*2,674

2,261

*2,567

*2,357

*2,357

2,385

2,549

C1 site cash costs (A$/oz)

1,000

1,024

995

981

1,268

1,178

1,268

1,268

1,268

1,246

1,268

AISC (A$/oz)

1,268

1,441

1,346

1,368

1,590

1,575

1,593

1,586

1,592

1,570

1,592

Source: Alkane Resources, Edison Investment Research. Note: *Forecast average realised gold prices in Q121e and Q2–Q421e exclude future forward sales over 11,890oz at an average price of A$1,854/oz.

Among other things, readers should note our relatively conservative assumption that the price of gold will fall to US$1,749/oz (in real terms) in CY21 (and therefore ALK’s H221) coupled with a stronger Australian dollar (vs US dollar) than at any time since July 2018 (this forex rate recorded a recent peak of A$1.7408/US$ on 19 March 2020).

A summary of our estimate of Alkane’s FY21 results in the light of its Q121 operating activities report plus our quarterly forecasts, as shown in Exhibit 1 is shown in the table below. There is an anomaly whereby Alkane’s H119, FY19 and H120 results were reported with its recently demerged Australian Strategic Materials’ (ASM) numbers fully consolidated, but its FY20 results were reported with ASM reflected as ‘classified as held for distribution to owners’ and/or ‘discontinued’. The consequences of this are most obviously apparent in the line items entitled ‘loss after tax from discontinued operations’. However, this is not considered material enough to significantly detract from the overall trends apparent from the figures.

Exhibit 2: Alkane FY21e vs H119, H219, H120, H220 and FY20 (A$m, unless otherwise indicated)

H119

H219

H120

H220

FY20

FY21

(current)

FY21e

(previous)

Revenue

52.352

41.643

34.098

38.451

72.549

104.169

105.664

Cost of sales

(28.829)

(24.827)

(16.500)

(16.400)

(32.868)

(62.005)

(62.861)

Gross profit

23.523

16.815

17.598

22.051

39.681

42.163

42.803

Other net income

1.759

(1.667)

0.111

(0.201)

(0.090)

(0.090)

(0.090)

Administration expenses

(4.797)

(2.570)

(4.993)

(5.276)

(10.269)

(7.367)

(7.367)

Exploration and evaluation expenditure expensed

0.000

0.000

0.000

(0.329)

(0.329)

-

0.000

Impairments

0.000

0.000

0.000

0.000

0.000

-

0.000

Gain/(loss) on disposal

0.000

0.000

0.000

(0.317)

(0.317)

-

0.000

EBITDA/(LBITDA)

20.485

12.579

12.747

15.929

28.676

34.706

35.346

Depreciation

(5.990)

(1.265)

(1.429)

(7.722)

(9.151)

(12.429)

(12.480)

EBIT/(LBIT)

14.495

11.314

11.318

8.207

19.525

22.277

22.866

Interest income/(cost)

(0.258)

(0.161)

(0.109)

0.498

0.389

0.626

0.626

Loss after tax from discontinued operations

0.000

0.000

0.000

(0.583)

(0.583)

-

0.000

PBT/(LBT)

14.237

11.153

11.209

8.122

19.331

22.903

23.492

Income tax

2.047

0.219

3.743

2.826

6.569

5.726

5.873

Effective tax rate (%)

14.4

2.0

33.4

34.8

34.0

25.0

25.0

Profit/(loss) for the year

12.190

10.934

7.466

5.296

12.762

17.177

17.619

Basic adjusted EPS (A$/share)

0.0241

0.0216

0.0146

0.0091

0.0233

0.0289

0.0296

Source: Alkane Resources, Edison Investment Research

Roswell updated resource statement

On 4 November, Alkane announced an update to its maiden mineral resource estimate at Roswell. Roswell’s maiden mineral resource estimate was announced on 28 January and was considered in our report, 007 strikes it rich, published on 23 April. The resource estimate has been calculated with a nominal 20m drill hole spacing to depths averaging c 350m below ground surface. A comparison of the updated resource with the original is provided in Exhibit 3, below. Of particular note, in addition to the expansion of the overall resource, is the promotion of (effectively) more than 100% of the resources in the inferred category into the indicated category, from which they are then eligible to be subsequently promoted into reserves (unlike resources in the inferred category):

Exhibit 3: Roswell updated mineral resource estimate vs maiden resource

Category

Tonnage

(kt)

Grade

(g/t)

Contained gold

(koz)

Updated

Measured

0

0.00

0

Indicated

7,880

2.07

524

Inferred

2,190

1.93

136

Total

10,070

2.04

660

Maiden

Measured

0

0.00

0

Indicated

0

0.00

0

Inferred

7,020

1.97

445

Total

7,020

1.97

445

Change (units)

Measured

0

0.00

0

Indicated

7,880

2.07

524

Inferred

-4,830

-0.04

-309

Total

3,050

0.07

216

Change (%)

Measured

N/A

N/A

N/A

Indicated

N/A

N/A

N/A

Inferred

-68.8

-2.0

-69.4

Total

43.4

3.5

48.5

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

The resource definition drilling programme at Roswell (and San Antonio – see below) is ongoing as part of an extensive regional exploration programme aimed at providing future additional ore feed, either from surface or underground, to the Tomingley mill, approximately 3km to the north of Roswell. At the current milling rate of 1.0Mtpa, resources at Roswell are capable of supporting a 10.1 year increase in the life of operations at Tomingley. Pro-rata with Tomingley’s existing reserve and resource ratio (see Alkane Resources: Reborn, published on 3 September), Roswell’s resources could convert into a reserve of 3.2Mt at 1.94g/t containing 188koz gold and could therefore be sufficient to support an additional 3.2 years of production. However, a reserve estimate performed solely on this basis may be unduly conservative. Whereas the Roswell resource is stated ‘pre-mining’, the Tomingley resource reflects a mature mine that has already mined out its open pit reserves and has started to mine its underground ones. On a similar, pre-mining, basis the resource at Tomingley was c 921koz, of which c 434koz have now been mined, with 610koz remaining in reserves, of which c 179koz are included in the underground mine plan (Edison assumption), which suggests that a more appropriate conversion factor would be in the order of 67% ((434+179)/921), in which case, Roswell’s resource could convert into a reserve in the order of 6.7Mt, containing 442koz gold at a grade of 1.94g/t, and be sufficient to support production for an additional 6.7 years alone (cf Alkane’s target of 10 years, with exploration still ongoing). Resources could then extend this by an additional 3.4 years. Note that Roswell’s resource grade of 2.04g/t and our estimated reserve grade derived from that number of 1.94g/t compares favourably with Tomingley’s existing underground reserve grade of 2.0g/t, despite a lower cut-off level of 0.5g/t (cf 2.5g/t).

Although resource drilling at Roswell is now nearing completion, the resource nevertheless remains open for extensions at depth and will be subject to further infill and extensional drilling with a view to both defining the continuity of the mineralisation in the high-grade zones in southern Roswell at depth, to the north and to the west, within the poorly constrained western monzodiorite. In the meantime, land acquisitions have taken place, an underground exploration drive from Tomingley to Roswell is under development and consultation, permitting and licensing to facilitate expedited mining is underway with the relevant stakeholders and New South Wales government.

Roswell and San Antonio resources combined

The Tomingley Gold Project covers an area of approximately 440km2, stretching 60km north-south along the Newell Highway from the Tomingley mine in the north, through Peak Hill and almost to Parkes in the south.

Over the past two years, Alkane has conducted an extensive regional exploration programme with the aim of defining additional resources that have the potential to be mined either via open pit or underground methods and fed through the Tomingley gold plant. In general, the programme has yielded broad, shallow, high-grade intercepts that demonstrate the potential for material project life extension (subject to resource confirmation, landholder agreements and regulatory approvals).

The San Antonio deposit is a continuation of the Roswell mineralised zone to the south of the Rosewood fault and, on 20 April, Alkane announced a maiden resource at San Antonio. Together, the Roswell and San Antonio resources now comprise a 17,990 kt resource (cf 14,940kt previously) at an average grade of 1.93g/t (cf 1.87g/t previously), containing 1,114koz gold (cf 898koz previously). Moreover, the tonnage of the resource at Roswell now exceeds the upper bound of its target range by 62.4% in terms of tonnage and by 74.3% in terms of contained gold at a grade that is 7.3% higher:

Exhibit 4: Roswell and San Antonio maiden resources* versus target

Target

Actual

Uplift of actual vs target

Prospect

Bound

Tonnage (kt)

Grade
(g/t)

Contained
gold (koz)

Tonnage
(kt)

Grade
(g/t)

Contained
gold (koz)

Tonnage (%)

Grade
(%)

Contained gold (%)

Roswell

Upper

6,200

1.90

379

10,070

2.04

660

62.4

7.3

74.3

San Antonio

Upper

10,200

2.80

918

7,920

1.78

453

-22.4

-36.4

-50.6

Lower

7,400

2.30

547

7,920

1.78

453

7.0

-22.6

-17.2

Total

17,990

1.93

1,114

Source: Alkane Resources, Edison Investment Research. Note: *All San Antonio resources currently categorised as inferred.

Alkane’s resources at Tomingley amount to 9.4Mt at a grade of 1.9g/t, containing 610koz gold. As such, the combined resources at Roswell and San Antonio increase Alkane’s aggregate group resources by more than 180%.

In terms of mine life, at a milling rate of 1Mtpa, Roswell and San Antonio’s resources could therefore potentially add 18 years to the life of operations at Tomingley (cf 14 years previously). Pro-rata with Tomingley’s existing reserve and resource ratio, Roswell and San Antonio’s resources could convert into a reserve of 5.6Mt at 1.84g/t containing 317koz gold and therefore be sufficient to support an additional 5.6 years of production (cf 4.7 years previously). As before, however, a reserve estimate performed solely on this basis may be unduly conservative as it is conducted on a post-mining, rather than a pre-mining, basis. At a 67% conversion basis (see above), Roswell and San Antonio’s reserves combined could prove to be in the order of 12.1Mt (cf 9.0Mt previously), containing 746koz gold (cf 539koz previously) at a grade of 1.93g/t (cf 1.87g/t previously), sufficient to support production for an additional circa 12 years (cf Alkane’s target of 10 years, with exploration still ongoing). Note that the resources at San Antonio will need to be upgraded from the inferred category into the indicated category, before they are eligible for conversion into reserves, which is expected later this month.

In our report Gold stars and black holes, published in January 2019, we calculated an average value of in-situ resources quoted in the Australian market of US$24.08/oz, on which basis we would value the Roswell and San Antonio resources combined (ie 1,114koz – see Exhibit 4)) at US$26.8m (cf US$21.6m previously), or A$36.1m (cf A$30.0m previously), or 6.1 Australian cents per share (cf 5.0cps previously).

Exhibit 5 demonstrates the value that Alkane may immediately add to its operations via success at all of its prospects to the south of Tomingley (ie Roswell, San Antonio and El Paso) in the event that it hits its exploration targets:

Exhibit 5: Alkane exploration targets’ potential value (US$m, A$m, A$/share)

Tonnage
(kt)

Grade
(g/t)

Contained gold (koz)

Valuation (US$/oz)

Valuation (US$m)

Valuation
(A$m)

Valuation
(A$/share)

Total*

Upper

23,800

2.19

1,678

24.08

40.4

54.4

0.091

Lower

15,800

1.81

920

24.08

22.1

29.8

0.050

Source: Alkane Resources, Edison Investment Research. Note: *Comprises Roswell, San Antonio and El Paso.

These valuations in Exhibit 5 are based purely on the in-situ value of the resources that Alkane is targeting for delineation. Self-evidently, these valuations are subject to increase to the extent that these resources are subsequently upgraded to reserves and included in the Tomingley mine plan.

Boda drilling results

On 9 November, Alkane reported the assay results of an additional five diamond drill holes (denoted DD) at its Boda prospect at its Northern Molong Porphyry Project and a further six reverse circulation (RC) holes. The drilling is part of a 30,000m (5,974m) diamond and RC core exploration programme that began in July 2020 to test the dimensions and extensions to the large, low grade mineralised envelope at Boda, as well as any internal high-grade zones.

A summary of all 11 holes is as follows:

Exhibit 6: Boda diamond drill hole assay results

From

(m)

To

(m)

Aggregate intercept

(m)

Average gold grade

(g/t)

Average Cu grade

(%)

KSDD010

189.0

1,144.0

869.0

0.17

0.08

KSDD011

9.0

1,737.8

1,305.8

0.13

0.09

KSDD012

39.0

1,198.0

1,159.0

0.18

0.12

KSDD013

198.0

1,032.0

834.0

0.24

0.12

KSDD022

685.0

1,159.0

394.0

0.53

0.02

KSRC031

0.0

401.0

239.0

0.06

0.09

KSRC032

0.0

503.0

503.0

0.10

0.11

KSRC034

33.0

487.0

201.0

0.20

0.14

KSRC036

60.0

477.0

291.0

0.11

0.11

KSRC037

0.0

433.0

385.0

0.10

0.11

KSRC038

94.0

498.0

404.0

0.35

0.07

Source: Alkane Resources, Edison Investment Research

For the purposes of Exhibit 6, multiple intersections have been amalgamated and grades averaged according to the width of the individual intersections.

Analysis and interpretation of Boda drill results

The most obvious, immediate consequence of the most recent drilling at Boda is to have doubled the north-south strike length of the system from 500m to 1,000m, as demonstrated by the fact both holes KSDD022 and holes KSRC031-037 continued to intersect broad widths of mineralisation to the south of KSDD009 (see Exhibit 7). Note that the results from KSDD022 were particularly significant as the hole intersected a large pyrite shell comprising stringers and aggregates of pyrite within a sequence of propylitic altered basaltic andesites and monzodiorite sills and dykes. In this case, the thick intersection of strong gold mineralisation with anomalous copper and pathfinder elements could be indicative of a distal component to a new large fertile magmatic system (Boda Two).

Exhibit 7: Boda prospect drilling update

Source: Alkane Resources

At first glance, the results of these holes suggest either an extension of the original system or a whole new system. In terms of our attempts to estimate a mineralised inventory from the results of the holes drilled, however, it highlights a complication, which is that, almost without exception, the results from the RC holes demonstrate lower widths and grades than those from the diamond core drill holes. A summary of this effect may be seen in Exhibit 8:

Exhibit 8: Boda drilling assay results, diamond vs RC

Type of drill hole

Average intercept

(m)

Average gold grade

(g/t)

Average copper grade

(%)

Previously announced DD results

749.4

0.37

0.17

Previously announced RC results

252.5

0.21

0.12

New DD results

912.4

0.21

0.09

New RC results

337.2

0.16

0.10

All DD results

823.5

0.29

0.13

All RC results

303.3

0.17

0.10

Source: Edison Investment Research, Alkane Resources.

In general, it can be seen from these results that RC drill hole intercepts are, on average, 37% of the (downhole) width of diamond drill hole intercepts, while gold grades are 59% and copper grades 77% of those recorded in diamond drill cores. In general, this may be attributed to the zonation of the system being tested and the fact that the RC drill holes are testing the upper part of the system, where grades are anyway anticipated to be lower (as is typical of this type of porphyry system). In addition, some of the RC drill holes are pre-collars for subsequent diamond drill holes in order to reduce the overall cost of the holes (NB Alkane has mobilised a second diamond drill rig to Boda for this purpose). Of note within this context is the fact that four RC holes (KSRC031, KSRC032, KSRC037 and KSRC038) finished in mineralisation and that two of these holes (KSRC032 and KSRC038) will be extended by diamond tails at a later date.

Exhibit 9 updates our estimates of the potential mineralised inventory implied by the updated drilling results at Boda. In recognition of the difference between RC and diamond drill results however, we have included two updated estimates – one based on the whole population of results (in the Updated column) and the other based on the results of the diamond drill holes only (as was the case for our estimates of 3 September and 23 April as well).

Within this context, it is worth noting the like-for-like increase in the upper end of our estimate of the potential resource at Boda, as represented by the ****Updated and ****Surface column projections (cf Exhibit 10 in our last note on the subject, Reborn, published on 3 September) primarily as a result of the increase in our estimate of the strike length of the deposit and, as a result, our estimate of the surface projection of the Boda mineralisation at >0.2g/t AuE (see Exhibit 7).

In broad terms, we are happy to state that (given the information available), our best estimate of the overall size of the Boda deposit is 533–2,241Mt (cf 575–738Mt previously) at an average gold grade of 0.26–0.35g/t (cf 0.34–0.35g/t previously) containing 4.5–12.3Moz Au (cf 6.4–8.3Moz previously) plus copper and containing a high-grade pod of in excess of 2.2Moz gold equivalent at a grade above its 3.0g/t cut-off. However, in this case, we are also happy to state we believe there is an increasing likelihood that the ultimate result will be a resource in the region 6.4–9.0Moz.

A summary of our estimates and the calculations from which they are derived is provided in the table below and is compared with the resources disclosed by Newcrest for Cadia Ridgeway c 100km to the south (see Exhibit 10).

Exhibit 9: Edison estimate of the potential size of Boda mineralisation

Source of underlying data

Edison

Alkane Resources

Newcrest

Characteristic (units)

Updated

****Updated

****3 Sept

****23 Apr

ALK dimensions

High-grade pod

****Surface projection

Cadia Valley Ridgeway

Cadia Ridgeway underground actual**

Strike (m)

891

891

640

712

1,000

150

250

Ave est true width (m)

243

348

317

353

400

100

150

Est surface area (Mm2)

0.721

Ave est true depth (m)

819

1,036

945

977

1,100

500

1,036

600

Est volume (Mm3)

177

321

192

246

440

7.5

747

22.5

Est density (t/m3)

3.0

3.0

3.0

3.0

3.0

3.0

3.0

3.0

Est tonnage (Mt)

533

964

575

738

1,320

22.5

2,241

67.5

150

Est ave gold grade (g/t)

0.26

0.29

0.34

0.35

*0.29

0.52

Est ave copper grade (%)

0.13

0.13

0.17

0.17

*0.13

0.33

Est ave AuE grade (g/t)

0.43

0.46

0.52

0.51

0.46

3.0

0.2

2.0

0.84

Est contained gold (koz)

4,480

8,985

6,354

8,342

12,307

2,400

Est contained copper (kt)

682

1,253

985

1,285

1,716

480

Est contained AuE (koz)

7,322

14,211

***9,707

***12,140

19,464

2,170

14,412

4,340

***4,033

Source: Edison Investment Research. Note: *Edison estimates; **From Newcrest reserve & resource statement, 31 December 2019; ***Conducted at prices of US$6,529/t Cu and US$1,919/oz Au; ****Diamond drill hole results only. Updated gold equivalent inventory and grades calculated at US$1,840/oz Au and US$7,674/t Cu.

Clearly such an estimate is very far from being anything close to JORC code-compliant and experience would suggest such estimates have an accuracy of approximately ±75%. However, the increasing number of results in the region of 6.4–9.0Moz contained gold increases our confidence that the ultimate resource estimate will be of this order of magnitude. If this does prove to be the case, it would suggest a multi-million ounce gold deposit at Boda with a potential valuation (based on the US$24.08/oz average valuation of in-situ ounces calculated in our report Gold stars and black holes, published in January 2019) of A$0.24–0.67/share at updated forex rates (cf A$0.36–0.47/share previously).

In the meantime, drilling is testing identified anomalies at Kaiser and an area about 5km in length to the south of Boda, as well as other regional targets within the 15km monzonite intrusive corridor that extends from Boda to Finns Crossing defined by both the 3D-IP survey and existing Alkane data, with the next round of results anticipated to be reported later this month.

Northern Molong Porphyry Project background

The Northern Molong Porphyry Project is 100% owned by Alkane, covers c 115km2 of the northern Molong Volcanic Belt (MVB) and is around 80km to the north-east of its Tomingley Gold Mine, in the Central West of New South Wales (Exhibit 10).

Exhibit 10: Location of the Northern Molong Porphyry Project

Source: Alkane Resources

To date, Alkane’s drill results at Boda have demonstrated both a similar stratigraphic sequence as well as style of alteration and mineralisation to Newcrest’s Cadia Province mines 110km to the south, although it is also more structurally complex. Nevertheless, together, the Cadia Province mines host a JORC-compliant mineral resource estimate of 36.8Moz Au at a grade of 0.36g/t Au and 8.2Mt of copper at a grade of 0.25% Cu plus silver and molybdenum and produced 843koz of gold last year at an AISC of US$160/oz Au (net of by-product credits).

The Northern Molong Porphyry Project now comprises four exploration licences, Bodangora, Boda South, Kaiser and Finns Crossing, within which Alkane has defined five magnetic anomalies interpreted to be intrusive complexes, Kaiser, Boda, Comobella, Driell Creek and Finns Crossing, all within a 15km north-west to south-east trending corridor (Exhibit 11) and all close to road, rail, gas and water infrastructure. Importantly, the Boda anomaly correlates with a historical induced polarisation (IP) survey completed by CRA Exploration (now Rio Tinto) over the Boda Intrusive Complex (BIC), which showed a strong high chargeable anomaly along the northern edge of the survey area coincident with the magnetic anomaly. As a result, Alkane has recently completed a 70-line kilometre IP survey over the 6km strike extensions of the BIC to generate further drilling targets in the area.

Exhibit 11: Northern Molong Porphyry Project regional geology

Source: Alkane Resources

Four of these targets have now been drill tested: Kaiser, Boda, Comobella and Glen Hollow. Exploration has identified the margins of major monzonite intrusive complexes that provide the primary control for porphyry and epithermal mineralisation with significant intersections being reported along the western margin of both the Kaiser Intrusive Complex and the BIC. Specifically, gold mineralisation has been discovered at Kaiser, Boda and Glen Hollow (which is part of Comobella), with recent drilling identifying multiple phases of monzonite to monzogabbro intrusion that are plumbing a northwest structural corridor hosting extensive (calc-)potassic alteration and significant gold-copper mineralisation. In this case, the northwest orientation of the structural zones is significant in that similarly oriented structural zones are important controls to Macquarie Arc alkali gold-copper porphyry mineralisation such as the Lachlan Transverse Zone at the Cadia Valley (and Northparkes) deposits. Within this context, the alteration at Boda suggests the prospect is positioned in the upper parts of an alkali porphyry system with high-level epithermal gold veins observed in some of the drilling coincident with strongly pyritic zones, while deeper drilling has defined strong pervasive hydrothermal alteration that is dominantly calc-potassic (ie, a biotite+actinolite+epidote+magnetite+chalcopyrite±kspar±bornite mineral assemblage) phasing out to a more distal propylitic alteration (albite+epidote+chlorite+pyrite±chalcopyrite).

COVID-19

Since February, Alkane has been acting in response to information supplied by state and federal authorities and complying with recommended measures to combat COVID-19. These include heightened cleaning protocols, social distancing, stringent hygiene practices and health screening.

Tomingley is a predominantly a residential operation and only personnel and contractors essential to the safe operation of the mine are permitted on site. All non-essential travel has ceased.

At present, operations continue as planned. However, COVID-19 has the potential to interrupt operations in the event of any of the following:

despite the extensive measures taken, sufficient employees test positive for COVID-19 and the majority of any crew is unable to attend while they self-isolate;

despite increasing inventory from suppliers and continuing to liaise closely with them, their capacity to supply critical parts and reagents is compromised; and/or

the New South Wales state government introduces regulations that inhibit suppliers or employees from attending beyond a skeleton crew.

Tomingley valuation

As always, our valuation of Tomingley is based on the present value of our forecast life of operations dividend stream to investors in Alkane as a result of the execution of the Tomingley mine plans (now shorn of any contribution from Dubbo/ASM) discounted back to present value at a rate of 10% per year, excluding exploration expenditure.

On this basis, our valuation of the dividend stream potentially available to Alkane shareholders from its immediate Tomingley operations is now A$0.183/share (ie almost unchanged cf A$0.186/share previously). However, to this must be added the value of residual resources at the end of the life of operations, which we estimate to be 0.4Moz with a current value of US$10.2m (A$13.8m), or A$0.023/share, to bring our total valuation of Tomingley to A$0.206/share (including cash).

A graph of our expectations for Alkane’s EPS, DPS and valuation from the present to FY23 is as follows:

Exhibit 12: Alkane life of operations’ forecast EPS and (maximum potential) DPS (A$/share)

Source: Edison Investment Research

Note that the DPS columns in Exhibit 12 represent theoretical, maximum potential dividends payable, rather than actual dividends forecast and are used solely for valuation purposes. In reality, we would expect any dividend that could be payable (in FY21 for example) to instead be re-invested into the business, either in the form of exploration expenditure or capital expenditure to develop Alkane’s options at Tomingley further.

Sensitivities

Tomingley mine life

Our valuation of Alkane is based on the present value of future dividends potentially payable to shareholders based on a three-year mine plan. However, Alkane reports that the approval process with the New South Wales government to allow the development of the San Antonio and Roswell deposits is ‘well underway’. Extensive consultation has taken place with local landholders and key government agencies and is in being expanded to the broader community and stakeholders. At the same time, preliminary pit and underground designs have been prepared, surveys and testing to prepare an Environmental Impact Statement are underway and affected land either has been purchased or is under contract.

With the caveat that the exact cost parameters around extending the mine plan at Tomingley into Roswell and San Antonio are, as yet, unknown, we calculate that, as we increase the life of the operation, our valuation of Tomingley (based on discounted dividends) increases as follows:

Exhibit 13: Tomingley and extensions’ valuation sensitivity to mine life increases (Australian cents per share)

Mine life extension
(years)

To end

Valuation

Incremental valuation
change

Total valuation change

0

FY23

18.3

u/c

u/c

1

FY24

20.2

+1.9

+1.9

2

FY25

23.8

+3.6

+5.5

3

FY26

27.0

+3.2

+8.7

4

FY27

30.0

+3.0

+11.7

5

FY28

32.6

+2.6

+14.3

6

FY29

35.0

+2.4

+16.6

7

FY30

37.2

+2.2

+18.8

8

FY31

39.2

+2.0

+20.8

9

FY32

41.0

+1.8

+22.6

10

FY33

42.6

+1.6

+24.2

11

FY34

44.0

+1.4

+25.6

12

FY35

45.3

+1.3

+27.0

Source: Edison Investment Research

Hence, increasing the life of Tomingley by 11 years (ie the same as the amount implied by our conversion of Roswell and San Antonio resources into reserves on page 5) adds 27.0c to our valuation cf our 6.1c per share in-situ resource valuation, which approximates to just more than two additional years’ worth of mining (ie below the bottom end of what might reasonably be expected given historical reserve to resource conversion ratios at Tomingley – see page 5). Note that updated resource statements for Roswell and San Antonio (including the promotion of existing resources from the inferred into the indicated category) are anticipated later in December, as are updated mine plans.

Gold price

If the gold price remains at US$1,840/oz in flat real terms (ie the price at the time of writing cf US$1,695/oz average over ten quarters otherwise, in our financial model), then our valuation of Alkane (based on the present value of potential dividends payable to Alkane shareholders) increases by 2.5cps, or 13.7%, from 18.3 to 20.8 cents.

Combined valuation of Alkane

A summary of our updated valuation of Alkane within the context of all of its assets is as follows:

Exhibit 14: Alkane Resources’ valuation summary (Australian cents per share)

Asset

Existing assets’ valuation

Contingent assets’ valuation

Potential total

Tomingley plus cash

21

23

23

Investments in Calidus* and Genesis

5

5

Roswell and San Antonio resources

6

27

27

El Paso and ongoing Tomingley extension exploration

3

3

Boda exploration

24–67

67

Total

32

76–120

125

Source: Edison Investment Research. Note: Totals may not add up owing to rounding; *excludes recent, additional A$3.2m investment by Alkane into Calidus in July 2020 at a share price of A$0.51/share (cf a share price of A$0.575 at the time of writing).

Exhibit 15: Financial summary

2018

2019

2020

2021e

2022e

30 June

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

129,973.6

93,994.9

72,549.0

104,168.5

125,257.1

Cost of Sales

(51,080.9)

(53,656.4)

(32,868.0)

(62,005.4)

(76,532.7)

Gross Profit

78,892.7

40,338.5

39,681.0

42,163.1

48,724.4

EBITDA

 

 

70,378.7

32,971.7

29,412.0

34,796.4

41,357.7

Normalised operating profit

 

 

31,658.3

25,808.8

20,171.0

22,277.3

25,598.6

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

Reported operating profit

31,658.3

25,808.8

20,171.0

22,277.3

25,598.6

Net Interest

(579.0)

(418.8)

389.0

626.0

671.7

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

(646.0)

0.0

0.0

Profit before tax (norm)

 

 

31,079.3

25,390.0

20,560.0

22,903.2

26,270.3

Profit before tax (reported)

 

 

31,079.3

25,390.0

19,914.0

22,903.2

26,270.3

Reported tax

(6,919.9)

(2,266.1)

(6,569.0)

(5,725.8)

(6,567.6)

Profit after tax (norm)

24,159.4

23,123.9

13,991.0

17,177.4

19,702.7

Profit after tax (reported)

24,159.4

23,123.9

13,345.0

17,177.4

19,702.7

Minority interests

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

(583.0)

0.0

0.0

Net income (normalised)

24,159.4

23,123.9

13,991.0

17,177.4

19,702.7

Net income (reported)

24,159.4

23,123.9

12,762.0

17,177.4

19,702.7

Basic average number of shares outstanding (m)

506

506

547

595

595

EPS – basic normalised (A$)

 

 

0.05

0.05

0.03

0.03

0.03

EPS – diluted normalised (A$)

 

 

0.05

0.04

0.02

0.03

0.03

EPS – basic reported (A$)

 

 

0.05

0.05

0.02

0.03

0.03

Dividend (A$)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

10.3

(-27.7)

(-22.8)

43.6

20.2

Gross margin (%)

60.7

42.9

54.7

40.5

38.9

EBITDA margin (%)

54.1

35.1

40.5

33.4

33.0

Normalised operating margin (%)

24.4

27.5

27.8

21.4

20.4

BALANCE SHEET

Fixed assets

 

 

138,275.0

172,196.0

129,077.0

136,407.9

133,938.8

Intangible assets

93,136.0

103,894.0

32,745.0

42,745.0

52,745.0

Tangible assets

36,266.0

51,038.0

62,322.0

59,652.9

47,183.8

Investments & other

8,873.0

17,264.0

34,010.0

34,010.0

34,010.0

Current assets

 

 

93,306.0

76,501.0

59,096.0

64,613.9

87,979.7

Stocks

19,153.0

4,816.0

7,647.0

3,995.5

4,804.4

Debtors

2,030.0

1,998.0

2,940.0

8,561.8

10,295.1

Cash & cash equivalents

72,003.0

69,582.0

48,337.0

51,384.6

72,208.2

Other

120.0

105.0

172.0

672.0

672.0

Current liabilities

 

 

(27,430.0)

(21,762.0)

(14,238.0)

(9,909.3)

(11,103.4)

Creditors

(9,299.0)

(8,007.0)

(9,425.0)

(5,096.3)

(6,290.4)

Tax and social security

(6,929.0)

(9,317.0)

0.0

0.0

0.0

Short-term borrowings

0.0

0.0

(2,090.0)

(2,090.0)

(2,090.0)

Other

(11,202.0)

(4,438.0)

(2,723.0)

(2,723.0)

(2,723.0)

Long-term liabilities

 

 

(13,647.0)

(13,059.0)

(19,522.0)

(19,522.0)

(19,522.0)

Long-term borrowings

0.0

0.0

(4,515.0)

(4,515.0)

(4,515.0)

Other long-term liabilities

(13,647.0)

(13,059.0)

(15,007.0)

(15,007.0)

(15,007.0)

Net assets

 

 

190,504.0

213,876.0

154,413.0

171,590.4

191,293.1

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

190,504.0

213,876.0

154,413.0

171,590.4

191,293.1

CASH FLOW

Operating cash flow before WC and tax

69,941.3

33,135.8

28,173.0

34,706.4

41,267.7

Working capital

(9,498.0)

(5,172.0)

(3,481.0)

(6,299.0)

(1,348.2)

Exceptional & other

1,277.0

1,454.0

3,704.0

0.0

0.0

Tax

(6,919.9)

7,047.9

(249.0)

(5,725.8)

(6,567.6)

Net operating cash flow

 

 

54,800.5

36,465.7

28,147.0

22,681.6

33,352.0

Capex

(9,224.0)

(19,621.0)

(46,122.0)

(9,760.0)

(3,200.0)

Acquisitions/disposals

0.0

4.0

(20,068.0)

0.0

0.0

Net interest

(579.0)

(418.8)

389.0

626.0

671.7

Equity financing

(5.0)

0.0

39,442.0

0.0

0.0

Exploration and Evaluation

(10,969.0)

(11,578.0)

(20,132.0)

(10,000.0)

(10,000.0)

Other

(4,317.0)

(7,442.0)

(9,522.0)

(500.0)

0.0

Net cash flow

29,706.4

(2,590.1)

(27,866.0)

3,047.6

20,823.6

Opening net debt/(cash)

 

 

(41,969.0)

(72,003.0)

(69,582.0)

(41,732.0)

(44,779.6)

FX

311.6

169.1

0.0

0.0

0.0

Other non-cash movements

16.0

0.0

16.0

0.0

0.0

Closing net debt/(cash)

 

 

(72,003.0)

(69,582.0)

(41,732.0)

(44,779.6)

(65,603.2)

Source: Company sources, Edison Investment Research. Note: FY18 and FY19 income and cash-flow statements are pro-forma, sourced from Alkane’s Demerger Booklet released to the ASX on 17 June 2020; balance sheet is ‘as reported’ until FY20 at which point ‘group classified as held for distribution to owners’ is removed from the reported figures.

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 2020 Edison Investment Research Limited (Edison).

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

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

1185 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

1185 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 2020 Edison Investment Research Limited (Edison).

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

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

1185 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

1185 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

More on Alkane Resources

View All
Alkane-Resources_resized

Metals & Mining

Alkane Resources — Boda continuing to add value

Alkane-Resources_resized

Metals & Mining

Alkane Resources — The Bodas continue to grow

Alkane-Resources_resized

Metals & Mining

Alkane Resources — Expanding its resources

Alkane-Resources_resized

Metals & Mining

Alkane Resources — Guidance increased again

Latest from the Metals & Mining sector

View All Metals & Mining content

Research: Investment Companies

Deutsche Beteiligungs — Minor negative NAV total return in FY20

Deutsche Beteiligungs (DBAG) saw a mixed impact from the COVID-19 crisis on portfolio earnings in FY20, with its ‘growth’ sectors (broadband/telecom in particular) proving resilient, while its industrial portfolio was hit harder. Strong public equity markets drove an increase in the average EBITDA multiple used to value its portfolio (8.8x vs 7.8x in FY19). DBAG’s mid-term ambition to FY23 assumes a strong pickup in investments through the recently launched DBAG Fund VIII and long-term investments carried out solely from DBAG’s own balance sheet. Portfolio growth should be funded by a combination of debt and equity.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free