Alkane Resources Ltd (ASX:ALK) has received a 131% increase in its share price valuation to A$2.22 per share in a report by Edison Investment Research.
Notably, the company’s share price continues to be more than 100% covered by the value of tangible assets underpinned by the Tomingley operations, which contribute A$0.61 per share to its valuation.
Alkane improved its FY23 production guidance to 62,000–70,000 ounces after an impressive first-half production at Tomingley which now expects to reach the upper end of this range.
Furthermore, increased production guidance at Tomingley bodes well for further investment in both expansion of Tomingley and continued efforts to increase the accuracy of its resources at the nearby Boda and Kaiser projects.
Following are excerpts from Edison’s research report:
Tomingley to fund further exploration
Following the announcement of the Tomingley Gold Extension Project, Alkane expects underground mining to commence at Roswell before the end of CY23.
Increased production guidance at Tomingley bodes well for further investment in both expansion of Tomingley and continued efforts to increase the accuracy of its resources at Boda and Kaiser.
We estimate that cash flows will cover capex as the Tomingley mine extension is constructed, and further exploration is undertaken at the Kaiser-Boda deposits.
Valuation: Tangible assets cover 131% of share price
As per our valuation of Boda, we estimate that the inferred resource at Kaiser would offer an additional value to Alkane of US$49.4 million (US$0.08/share or A$0.12/share).
Therefore, Alkane’s share price continues to be more than 100% covered by the value of tangible assets underpinned by Tomingley, which contributes A$0.61/share to Alkane’s valuation.
Liquid assets in the form of Alkane’s holdings in Calidus and Genesis contribute a further A$0.03/share, with Boda estimated at US$125.5 million (US$0.21/share or A$0.31/share) to Alkane, either as an in-situ resource or as a development project.
This represents a total valuation estimate for Alkane of A$1.07/share (cf A$0.94/share previously).
We also estimate A$0.56/share additional upside in the event of further exploration success in the Northern Molong Porphyry Project (NMPP) at the Boda Two and Three deposits.
Including all other contingent assets, this takes Alkane’s potential valuation to A$2.22/share (cf A$1.53/share previously).