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Alkane Resources Limited

Team Veye | 17 Sep 2020 ASX - ALK
Alkane Resources Limited
Call Buy
Asx ALK

Alkane Resources Limited (ASX: ALK) is involved in mineral exploration and evaluation, development and extraction. The Company focuses on its projects at Tomingley and Dubbo in New South Wales (NSW). It operates through two segments: gold operations and rare metals. Its Dubbo Zirconia Project is based on a resource of zirconium, hafnium, niobium, tantalum, yttrium and rare earth elements, located at Toongi, approximately 30 kilometers south of the regional center of Duddo. Its Tomingley Gold Operations are located over 50 kilometers south-west of Dubbo in the Central West of NSW. Its Northern Molong Belt Porphyry Project consists of three exploration licenses, such as EL4022-Bodangora, EL6209-Kaiser and EL8261-Finns Crossing. Its Finns Crossing is located immediately to the north-west of the Bodangora exploration license. Its Kaiser covers approximately 127 hectors and is enclosed by the Bodangora license. Its Orange East Project is located approximately 15 kilometers east-south-east of Orange (Profile source: Reuters)

 

From the Company Reports

High Grade Depth Extensions Identified at Roswell

Below Current Inferred Resource

Alkane Resources Limited (‘Alkane’ or ‘the Company’) (ASX: ALK) on 28 August 2020 announced that High Grade depth extensions had been identified at Roswell.

  • Drilling to infill the Inferred Resources at the Roswell and San Antonio deposits continues; 48 holes have been drilled for a total of 13,000 metres.
  • The drilling has confirmed depth extensions at Roswell with intercepts approximately 80 to 100 metres below the base of the previously defined Inferred Resource and confirms the potential of the system to extend to depth.

(Graphic Source – Company Reports)

  • Significant intercepts from the Roswell Deposit at greater depth than the previously defined Inferred Resource include:
    • RWD037 13.0 metres grading 6.17g/t Au from 484 metres; incl 5.0 metres grading 11.5g/t Au from 488 metres; and 2.0 metres grading 3.84g/t Au from 519 metres.
    • RWD039 16.5 metres grading 4.74g/t Au from 483.8 metres; incl 1.0 metres grading 21.0g/t Au from 489 metres; and 3.0 metres grading 13.2g/t Au from 494 metres.
    • RWD040 22.1 metres grading 5.96g/t Au from 534.9 metres.
  • Other significant intercepts from the Roswell Deposit include:
  • RWRC352 85.0 metres grading 1.47g/t Au from 273 metres; incl 7.0 metres grading 2.94g/t Au from 325 metres; and 10.0 metres grading 1.59g/t Au from 384 metres.
  • RWRC353 18.0 metres grading 2.23g/t Au from 60 metres; incl 6.0 metres grading 4.51g/t Au from 60 metres;
  • RWRC377 22.0 metres grading 3.66g/t Au from 288 metres; incl 3.0 metres grading 20.1g/t Au from 288 metres; and 18.0 metres grading 3.96g/t Au from 377 metres; incl 7.0 metres grading 8.54g/t Au from 385 metres.
  • Roswell drilling is nearing completion and an updated resource estimate is anticipated to be released in Q4 2020.
  • Significant intercepts from the San Antonio Deposit include:
  • RWRC332 15.0 metres grading 1.68g/t Au from 69 metres; and 9.0 metres grading 1.92g/t Au from 133 metres; incl 2.0 metres grading 5.47g/t Au from 139 metres.
  • RWRC346 9.0 metres grading 2.51g/t Au from 107 metres; incl 2.0 metres grading 8.33g/t Au from 107 metres;
  • RWRC357 11.0 metres grading 1.24g/t Au from 183 metres; and 17.0 metres grading 1.75g/t Au from 199 metres; incl 3.0 metres grading 5.39g/t Au from 207 metres.
  • RWRC359 16.0 metres grading 3.22g/t Au from 264 metres; incl 6.0 metres grading 6.69g/t Au from 266 metres.
  • RWRC360 30.0 metres grading 2.31g/t Au from 81 metres; incl 9.0 metres grading 5.89g/t Au from 93 metres.
  • RWRC364 23.0 metres grading 1.81g/t Au from 208 metres; incl 3.0 metres grading 4.90g/t Au from 217 metres; also 3.0 metres grading 3.62g/t Au from 226 metres.
  • RWRC381 38.0 metres grading 1.75g/t Au from 138 metres; incl 1.0 metres grading 8.86g/t Au from 162 metres; also 2.0 metres grading 7.66g/t Au from 168 metres.
  • RWRC383 39.0 metres grading 1.05g/t Au from 54 metres; incl 6.0 metres grading 3.12g/t Au from 87 metres.
  • RWRC384 7.0 metres grading 3.32g/t Au from 129 metres; incl 1.0 metres grading 8.55g/t Au from 87 metres.
  • The San Antonio updated resource estimate, with preliminary mine plans for Roswell and San Antonio, is scheduled for release late in Q4 2020.

(Chart source: TradingView)

Alkane Delivers Profit After Tax of A$12.8 Million for FY2020

Alkane Resources Limited on 25 August 2020 delivered results for the financial year ended 30 June 2020.

The profit was largely driven by excellent production and cost performance at the Tomingley Gold Operation where full year guidance was met with 33,507 ounces of gold produced at an all in sustaining cost (AISC) of $1,357 per ounce.

As at 30 June 2020 the company’s cash, bullion and listed investments totalled $98.4 million, with $66.9 million in cash, bullion on hand at fair value of $5.8 million and $25.7 million of listed investments at market value.

$18.5 million of the cash balance was allocated to Australian Strategic Materials (ASX:ASM) and subsequently transferred to ASM on demerger and listing in late July 2020.

Tomingley Gold Extension Project Consultation Plans

Alkane Resources Limited on 19 August 2020 advised that the approval process with the New South Wales Government to allow the development of the San Antonio and Roswell deposits, within the Company’s 100% owned Tomingley Gold Project (TGP) in Central West New South Wales, is well underway.

  • Extensive consultation has been taking place with local landholders and key government agencies.
  • This consultation is expanding to broader community and stakeholders. Preliminary pit and underground designs have been prepared to show potential plans and impacts during this consultation.
  • The surveys and testing needed to prepare an Environmental Impact Statement are underway.
  • Land that will be affected by the potential development has been purchased or is under contract.
  • Resource drilling continues to allow further resource upgrades, which will allow detailed economic evaluation once the resource definition has increased.

(Graphic Source – Company Reports)

Resource and Reserve Statements FY20

Alkane Resources Limited on 18 August 2020 released its Annual Resource and Reserve Statements FY20

  • This report is a compilation of identified Mineral Resources and Ore Reserves for the Tomingley Gold Operations, Tomingley Gold Project and the Peak Hill Gold Project in the Central West region of New South Wales, as at 30 June 2020.
  • Mineral Resources and Ore Reserves for the Tomingley Gold Operations have been reestimated to account for depletion, changes in the gold price and operating costs:
    • Total Mineral Resources 9.45 Mt grading 1.9g/t Au (610,000oz)
    • Total Ore Reserves 2.97 Mt grading 1.8g/t Au (176,000oz)
  • Regional, near-mine exploration program continued between Tomingley and Peak Hill (Tomingley Gold Project), and during the year Mineral Resources were defined at Roswell and San Antonio:
    • Roswell Mineral Resource 7.02 Mt grading 1.97g/t gold (445,000oz).
    • San Antonio Mineral Resource 7.92 Mt grading 1.78g/t gold (453,000oz)
  • The Mineral Resource estimate for the Peak Hill Gold Project‘s Proprietary underground ore body remains unchanged from October 2018:
    • Inferred Resource 1.02Mt grading 3.29g/t gold & 0.15% copper (108,000oz)
  • Total Project Mineral Resources are 25.4 Mt grading 1.9g/t Au (1,616,000oz)
Alkane Resources Limited (ASX: ALK)
Stock Overview
Sector Materials
Risk Medium
Market Cap $806.75 million
Share Volume 595.39 million
EPS (FY) -
PE RATIO -
Yearly Dividend Yield  -
Target Price (s) T1 $1.85 T2 $2.45
Stop Loss $1.10
Recommendation Buy
52 weeks High $1.360
52 weeks Low $0.465
Managing Director Mr Nicholas Earner
Non Executive Directors Mr Tony Lethlean
Mr Gavin Smith

 

 

Veye’s Take

Alkane Resources identified significant high-grade intercepts below the existing Inferred Resource at Roswell. These show the potential for an underground mine that continues to extend at depth, with impressive grades continuing. The regulatory engagement on developing Roswell and San Antonio is well underway and will continue as rapidly as practicable. The next big step is updating the Inferred Resource at Roswell to Indicated, and the Company is expecting to get this completed in October. The progress being made at Roswell and San Antonio further demonstrate Alkane’s objective of creating value by extending the production mine life at Tomingley, in combination with strategic exploration and acquisition. Alkane has become profitable over the past 5 years, growing earnings by 47.7% per year. ALK’s short term assets ($198.6m) exceed its short term liabilities ($40.8m). ALK’s short term assets ($198.6m) exceed its long term liabilities ($19.5m). ALK’s debt to equity ratio(2.5%) is considered satisfactory. ALK’s debt is well covered by operating cash flow (432%). ALK earns more interest than it pays, so coverage of interest payments is not a concern. The stock after a brief correction, reversed its RSI. It formed a bullish hammer. The stock is trading above all MAs. It can have the potential of growing very strongly in the short to medium term. Veye recommends a "Buy" on “Alkane Resources Limited” at the current price of $1.39


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