Alkane Resources Ltd (ASX:ALK, OTC:ALKEF) has maintained a share price valuation of $2.27 from Edison Investment Research as feedback and favourable geology from the Boda Two and Three deposits at the Northern Molong Porphyry Project (NMPP) suggests greater upside than previously estimated.
The company’s FY23 results were broadly in line with the analysts’ forecasts, netting $42.5 million in profit after taxes from the nearby Tomingley Operations in central New South Wales.
Meanwhile, cash flows from operations exceeded forecasts at A$95.5 million, as a result of an increase in deferred tax liabilities, balanced by higher exploration capex of A$58.1 million to result in a net cash flow of A$4.1 million.
Looking ahead, Alkane believes the NMPP system could represent a possible tier-one gold-copper project following the completion of the Boda exploration program.
Following are excerpts from Edison’s research report:
Potential to be a tier-one asset
Drilling at the Boda, Boda Two and Boda Three deposits is complete, with final assay results expected in September, and further drilling is now solely focused on the Kaiser deposit.
Current feedback from the Boda Two and Three deposits suggests a greater upside than previously estimated following positive results in favourable geology.
Mineralisation at depth remains open down dip and along strike, sitting outside of the western boundary of the current Boda mineral resource estimation.
Further drilling is required to build on the new assay data. As per our last note, we expect Alkane to produce an updated mineral resource estimate for Boda, including Boda Two and Three, in Q4 CY23 and Kaiser in Q1 CY24.
Following the completion of the Boda exploration program, Alkane believes the system could represent a possible tier-one gold-copper project.
A potential valuation of A$2.27/share
Following its results, our valuation of Tomingley remains unchanged at A$0.60/share.
Liquid assets in the form of Alkane’s holdings in Calidus and Genesis contribute a further A$0.03/share, with Boda and Kaiser estimated at a combined US$174.8 million (US$0.29/share or A$0.44/share) to Alkane, either as an in-situ resource or as a development project.
This represents a total value estimate for Alkane of A$1.06/share.
We also estimate a potential A$0.52/share additional upside in the event of further exploration success in the Northern Molong Porphyry Project at the Boda Two and Three deposits.
Including all other contingent assets (and using current metals spot prices cf Edison’s more conservative long-term prices), this takes Alkane’s valuation to potentially as high as A$2.27/share.
Otherwise, in Alkane, investors can buy a profitable, cash-generating company at a rating of US$23.05 per resource ounce – ie little more than that of a cash-consuming explorer.