Alkane Resources — Update 14 March 2016

Alkane Resources (ASX: ALK)

Last close As at 18/03/2024

AUD0.59

−0.02 (−3.28%)

Market capitalisation

AUD357m

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Research: Metals & Mining

Alkane Resources — Update 14 March 2016

Alkane Resources

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Written by

Metals & Mining

Alkane Resources

Clear path to financing and securing off-takes

EPL granted

Metals and mining

15 March 2016

Price

A$0.23

Market cap

A$95m

Net cash (A$m) at 31 December 2015

14.8

Shares in issue

414.2m

Free float

52%

Code

ALK/ANLKY

Primary exchange

ASX

Secondary exchange

OTCQX

Share price performance

Business description

Alkane Resources is a multi-commodity explorer and developer, with projects in the central west region of New South Wales in Australia. It owns the Tomingley Gold Operation and DZP rare metal and rare earths projects (both 100%). TGO entered production in January 2014 and DZP is currently planned for first production during FY18. Alkane is debt free.

Analysts

Tom Hayes

+44 (0)20 3077 5725

Charles Gibson

+44 (0)20 3077 5724

Alkane Resources is a research client of Edison Investment Research Limited

Alkane’s wholly owned subsidiary, Australian Zirconia, has been granted an Environmental Protection Licence (EPL). This finalises the approval process for the Dubbo Zirconia Project (DZP) and significantly de-risks the path towards financing. With all the development permits now in place, Alkane can provide assurance to its finance team that no fundamental obstacle, whether technical, commodity price (the DZP is robustly profitable at current commodity prices), governmental or otherwise, can hinder the project’s development post financing being secured.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/14

35.5

3.4

(0.4)

0.0

N/A

N/A

06/15

101.8

0.1

1.0

0.0

23.0

N/A

06/16e

101.6

(6.5)

(1.6)

0.0

N/A

N/A

06/17e

101.5

(19.5)

(1.8)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, share-based payments

The EPL provides key guidance on the DZP’s emission limits to air, land and water and details environmental monitoring requirements. The EPL follows planning approval (announced 2 June 2015), approval of the mining lease (announced 21 December 2015) and approval for the actual construction period of the project.

The approval the EPL means that Alkane can finalise key off-take agreements and progress financing of the project. Such off-take agreements centre on the future sale of the DZP’s diverse range of specialty metals including zirconia based products, niobium, hafnium and rare earths. We expect Alkane to announce finalised off-takes and provide guidance on financing over the remainder of CY16.

The DZP is a A$1.3bn project that Alkane will look to finance through a mixture of project equity (initially via a strategic partner sell-down geared to the project’s NPV), conventional bank debt and Export Credit Agency funding bearing low- interest rates. For an overview of our financing assumptions please refer to our October 2015 note Ready to develop with more value to come and for our valuation of Alkane’s shares please refer to our February 2016 note Gold production on target, costs within budget.

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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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