Alkane Resources Ltd (ASX:ALK) is due for an earnings review after the company upgraded its FY 2023 guidance for the Tomingley Gold Operations in Central West New South Wales, according to Edison Investment Research Ltd.
The company raised its guidance to between 62,000 and 70,000 ounces of gold at an all-in sustaining cost (AISC) of $1,550 to $1,800 per ounce for this year, from 55,000 to 60,000 ounces of gold at an AISC of $1,650 to $1,900 per ounce estimated previously.
This is after Tomingley exceeded forecast in the December quarter to produce 18,301 ounces of gold, bringing the six months to December 31, 2022 production to 37,790 ounces.
“The revised guidance for higher production and lower unit costs in FY23 is clearly positive news. We will review our forecasts in due course,” the research firm said.
Edison currently has a $140.1 million revenue forecast for Alkane and a pretax profit estimate of $37.8 million for the financial year to June 2023.
Following are excerpts from Edison's research report:
Alkane has two major near-term catalysts in prospect, namely approval of the Tomingley Gold Extension Project and for a maiden resource at its Kaiser prospect, northwest of Boda in the Northern Molong Porphyry Project. The former was expected to receive approval by the end of December 2022.
With all information requested from Alkane now provided, the project remains under consideration by the Department of Planning and Environment. However, Alkane anticipates this approval by early February 2023 and the maiden resource at its Kaiser prospect is also expected in February.
At the time of our last note on Alkane, our valuation continued to be underpinned by Tomingley, which we estimated contributed $0.57 per share to Alkane’s valuation. Liquid assets in the form of Alkane’s holdings in Calidus and Genesis contributed a further $0.06 per share.
Where before these had been the only two tangible contributors to Alkane’s valuation, they had, at that time, been joined by Boda, which we estimated was worth an immediate US$125.5 million or US$0.21 per share to Alkane, either as an in-situ resource or as a development project, albeit with the proviso that the project-based valuation would increase inexorably, both as a result of continued resource increases and upgrades, and as a result of Alkane’s de-risking the project by achieving future development milestones.
As such, we calculated that Alkane’s share price was more than 100% covered by the value of tangible assets, compared to 56% previously, with up to $0.59 per share in additional upside available in the form of further exploration success in the Northern Molong Porphyry Project, as well as the ever-increasing probability of the Roswell underground extension project being sanctioned.