Alkane Resources Ltd (ASX:ALK) has received an upgraded target share price valuation from Edison Research, now A$1.07 a share, up from A$0.94 a share previously, and a potential valuation of A$2.22 a share based on improved production guidance from the gold exploration and production company.
Alkane’s shares sit at A$0.88 each at time of writing, with a market cap of $520.93 million.
ALK recently updated its Financial Year 23 guidance to 65,000-73,000 ounces of gold at an all-in sustaining cost (ASIC) of A$1,550-1,700 per ounce, improving production ranges by about 3,000 ounces and reducing the ASIC range by $100 per ounce (down from A$1,550-A$1,800 per ounce).
The company also announced gold sales for the quarter of more than 19,000 ounces which, at an average price of A$2,787 per ounce, generated revenue of A$53.4 million.
Tomingley underpins valuation
Alkane’s flagship project is the Tomingley Gold Operations, 50 kilometres southwest of Dubbo in central western New South Wales.
The mine has been in operation since 2014, with four open cut pits: Wyoming One (completed 2019), Wyoming Three (completed 2015), Caloma One (completed 2017) and Caloma Two (completed 2019).
An extension project for the mine was recently approved by the New South Wales Minister for Planning, allowing open-cut and underground mining at the new Roswell and San Antonio deposits, extending the mine life to at least 2031.
The company has also produced an initial mineral resource for a new deposit at the nearby Northern Molong Porphyry Project, dubbed Kaiser, of 4.7 million ounces gold equivalent, and two packages of tenements in the New South Wales Macquarie Arc.
Edison research points to Tomingley, the Kaiser and Boda deposits at Northern Molong and ALK’s liquid assets as the basis for its valuation.
“This represents a total valuation estimate for Alkane of A$1.07/share (cf A$0.94/share previously),” the report concluded.
“Including all other contingent assets, this takes our estimate of Alkane’s potential valuation to A$2.22/share (cf A$1.53/share previously).
“In the meantime, our forecasts for FY23 and FY24 are under review in the wake of both Alkane’s guidance upgrade and the continuing strength of the gold price.”