Why Bell Potter think investors should buy gold producer Alkane Resources
Flagship NSW gold mine is set for a huge expansion after Q2 FY23 gold production above estimates
Source: iStock
Mentioned
KEY POINTS
- Bell Potter ranked Alkane Resources a “Buy” on Tuesday
- Broker has its eye on current expansion plans for the company’s flagship gold mine play in NSW
- Bullish on the back of higher-than-expected gold production in the December quarter, allowing for funds to bankroll project growth
Stockbroker Bell Potter recommended ASX investors buy Alkane Resources (ASX:ALK) on Tuesday as the company’s gold production is set to increase.
Bell Potter has given Alkane a price target of $1.00.
The stock is worth 67.5c as at 12:00PM AEDT Tuesday 31 January 2023.
At the time of writing its research note, Alkane shares were worth 65c, reflecting a total 12 month return of 53%.
Why is Bell Potter bullish?
The broker has its eye first and foremost on Alkane’s Tomingley Gold Operation (TGO).
December quarter gold production from TGO exceeded the broker’s expectations by 30% at 18,300 ounces of gold (18.3Koz).
Located in NSW, the 100% Alkane owned project has been in the works since 2014 with gold production now set for an uptick.
Bell Potter had expected only 13.7Koz of production across the period, leaving the broker now regarding Alkane as a “nice little earner.”
The company has won NSW state government approvals to expand TGO in Q3 of the 2023 financial year (read: January to March of 2023).
The expansion is set to see processing plant capacity grow to handle 1.5 million tonnes of ore per annum (1.5Mtpa), up from its current capacity of 1Mtpa.
The company will mine the San Antonio deposit, as well as a new underground mine, to boost the total combined project resource to 1.26 million ounces of gold (1.26Moz), up from 380,000Koz of gold.
New underground mine on radar
Potter highlighted that Alkane has re-invested cash flows into TGO where it is building out its new Roswell Underground Mine which has a reserve grade of 2.6 grams of gold per tonne of ore (2.6g/t).
This reflects a mid-tier gold grade, according to investor information provider Undervalued Equity, which classifies high grade gold as that in concentrations above 5g/t.
However, mines with easily accessible large mid-grade deposits can often be more profitable than projects with smaller pockets of high-grade gold.
Want to know more?
Market Index’s free company data provides a number of early-stage datapoints for potential investors and analysts alike to consider regarding Alkane’s performance.
Those considerations include but are not limited to:
Share price 67.5c*
Market cap of $404.1m*
598.79m shares on issue
One year returns down -17.68%
Year to date performance up 26.17%
Average 4 week volume of 1.3m shares
Ranked 96 of 946 materials sector companies
Five brokers rate Alkane a “Buy”, one broker rates “Hold”
No brokers rate Alkane a “Sell”
In its latest quarterly, Alkane reported its “cash, bullion and listed investments position totalled $119.6m”.
A look at Alkane's six month charts
*As at 1200PM AEST Tuesday 31 January 2023
