Alkane Resources (ALK)

Business description

Alkane Resources is a multi-commodity explorer and developer, with projects in the central west region of New South Wales in Australia. Alkane owns the Tomingley Gold Operation and DZP rare metal and rare earths projects (both 100%).

Stock data

Market cap.A$151.8m
Last closeA$0.30
High / Low (52 weeks)A$0.4 / A$0.2
Stock market listingAU
Forecast net debt (A$m)316.7
Forecast gearing ratio (%)82
TeamResources - Mining
SectorMining

Price performance

%1m3m12m
Actual(9.1)(23.1)(22.1)
Relative *(9.2)(26.8)(28.5)

* % Relative to local index

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Company news

Y/E Jun Revenue (A$m) EBITDA (A$m) PBT (A$m) EPS (c) P/E (x) P/CF (x)
2016A 109.6 40.9 11.0 2.2 13.6 3.4
2017A 117.8 61.3 18.0 4.5 6.7 2.9
2018E 108.5 31.8 (42.3) (3.8) N/A 13.6
2019E N/A N/A N/A N/A N/A N/A

Last updated on 08/12/2017

Investment summary

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

Last updated on 13/12/2017

Industry outlook

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

Last updated on 13/12/2017

Key management

Ian Gandel, Chairman
Nic Earner, MD
Ian Chalmers, Technical director

Company address

65 Burswood Road
Burswood
WA 6100
Australia
+61-8-92275677
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