Alkane Resources: A Promising Australian Gold and Copper Miner

• Alkane Resources (ALK) is an Australian gold mining company producing around 70,000 ounces of gold per year at its Tomingley Gold Mine in New South Wales.
• The company has a large exploration project called Boda and Kaiser with around 15 million gold equivalent ounces. This project is roughly 50/50 gold and copper.
• The company is focused on extending the mine life at Tomingley and advancing exploration at Boda and Kaiser. Key upcoming catalysts are updated resource estimates for Boda and Kaiser.
• The company is profitable, generating around $70 million profit at the mine site level. Cash flow is invested back into exploration and mine life extension.
• The company is looking for opportunities to diversify production, including potential M&A. The share register is currently dominated by retail investors rather than institutions.

About Alkane Resources

Alkane Resources is a gold and copper mining company based in New South Wales, Australia. The company operates the Tomingley Gold Mine, which has been producing around 70,000 ounces of gold per year. Alkane also has a large exploration project called Boda and Kaiser, which has an estimated resource of 15 million gold equivalent ounces. The company is led by Managing Director Nick Earner and has a market capitalization of around AUD $400 million.

Alkane Resources was founded in 1969 and has a long track record of making mineral discoveries and advancing projects in Australia. The company’s core focus is on exploration, with the goal of developing resources and creating value for shareholders. Alkane has successfully spun off several discoveries into new companies in the past.

The company’s flagship asset is the Tomingley Gold Mine, which has been operating profitably since 2014. The open pit mine is located 50km southwest of Dubbo in New South Wales. In addition to gold, Tomingley produces a copper concentrate through a gravity circuit.

The growth driver for Alkane going forward is the large-scale Boda and Kaiser exploration project, also located in New South Wales. This project contains multiple porphyry intrusions with gold, copper, molybdenum and tungsten mineralization. The current combined resource estimate is approximately 15 million gold equivalent ounces, with further resource upgrades expected.

Interview with Nic Earner, CEO of Alkane Resources

Financial Performance

In fiscal year 2022, Tomingley Gold Mine produced over 70,000 ounces of gold and generated over AUD $50 million in net profit for Alkane. With the current gold price, the mine is forecast to deliver around AUD $70 million in site level earnings in 2023.

The consistent free cash flow from Tomingley has allowed Alkane to fund extensive exploration activities and maintain a strong cash balance. As of mid-2023, the company had approximately AUD $100 million in cash reserves. Alkane also has debt financing lined up to fund the potential development of Boda and Kaiser.

Growth Potential at Boda and Kaiser

Alkane’s major growth opportunity lies in the large-scale porphyry system at Boda and Kaiser. This exploration project currently hosts an estimated 15 million ounce gold equivalent resource. Importantly, this resource consists of both gold and copper in a 50/50 split by contained value.

The company expects to expand the current resource over the course of 2023, with an upgraded estimate for the Boda deposit scheduled for Q3 2023. This will be followed by an initial resource for the Kaiser deposit in Q1 2024. Alkane is also conducting preliminary economic assessments for potential development scenarios.

The combination of gold and copper provides Boda and Kaiser with exposure to two attractive commodity markets. The project’s scale provides the potential to transform Alkane into a mid-tier mining company. Alkane is evaluating strategic partnerships and other options to help unlock the value of this world-class asset.

Strategic Direction

Alkane’s strategy has remained consistent despite recent volatility in the gold market. The company maintains a focus on exploration, while using Tomingley's cash flow to fund ongoing discovery efforts. Bringing Boda and Kaiser into production would significantly boost Alkane's scale and leverage to metal prices.

Given the early stage of Boda and Kaiser, Alkane's management team is taking a patient and systematic approach to exploration and evaluation. Rather than rushing development, they are focused on derisking the project and demonstrating its potential value.

To advance Boda and Kaiser, Alkane is open to a range of strategic options including joint ventures, project financing, and introduction of a strategic partner. The company is also on the lookout for M&A opportunities to diversify its production base.

Alkane has adapted its cost structure to the inflationary pressures facing the Australian mining industry. The company anticipates its baseline operating costs will be approximately 30% higher compared to 3 years ago. Even with these cost pressures, Tomingley remains highly profitable at today's gold prices.

Conclusion

With its profitable gold production and exposure to a large copper-gold exploration project, Alkane Resources presents an intriguing investment opportunity. The company’s consistent free cash flow and strong balance sheet provide resilience in challenging market conditions.

Investors looking for self-funded exploration upside could see strong future growth potential in Boda and Kaiser. Upcoming resource updates over the next 6-12 months should demonstrate the scale and quality of this deposit. Alkane’s management team has extensive experience in discovering and developing mineral resources.

At current prices, Alkane offers good value given its existing production and exploration upside. Investors should watch for project milestones and strategic progress on Boda and Kaiser as potential share price catalysts.