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Alkane Resources reaps revenue rewards at Tomingley Gold

Alkane's Tomingley is operating at design capacity and July - August production was 15,191 ounces at an All-in-sustaining-cost of A$1088 an ounce. With the price of gold recently sitting comfortably above A$1500 an ounce, this is delivering significant margins.

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Alkane Resources’ (ASX:ALK) continues to power ahead at its Tomingley Gold Operations in New South Wales, with July - August production 15,191 ounces at an All In Sustaining Cost (AISC) of A$1088 an ounce.

Tomingley is operating at design capacity.

With the price of gold recently sitting comfortably above A$1500 an ounce, this is delivering significant margins.

The ore is predominantly being sourced from the Caloma pit as Wyoming Three nears completion.

FY16 production is estimated to be 60,000 – 70,000 ounces within an AISC range of A$1,200 -1,300 an ounce.

The company said that the costs are higher than the anticipated long term life-of-mine AISC of A$1,000 – 1,100 an ounce due to waste stripping in FY16 at the Wyoming One pit.


Hedge book

The hedge book stands at 22,000 ounces at average price of A$1592 an ounce, as at the end of August 2015.

Ian Chalmers, managing director for Alkane, recently told Proactive Investors that the company have targeted around 30% to 40% of annual production as hedging positions.


Resources / Reserves

Reconciliation of gold recovery to resource estimates remains positive with Wyoming Three at +41% and Caloma +1%.

Resources and Reserves have been re-estimated to account for depletion, and are now:

- Resources: 11.25 million tonnes at 1.90g/t gold for 687,800 ounces; and
- Reserves: 4.36 million tonnes at 1.60g/t gold for 235,000 ounces.


Tomingley's free cash flow

The key driver of free cash flow from Tomingley over the past twelve months has been to assist the nearby Dubbo Zirconia Project (DZP) with pre-construction costs.

The importance of the DZP as a new source of critical metals and oxides is significant to diversify supply, with support coming from companies and governments seeking to reduce dependence from China.

Alkane has been conducting meetings in Asia, Europe and North America, involving process development, tolling, product off take and financing.

Chalmers also recently told Proactive Investors that hopefully in the next six months a separate funding opportunity will be put into place at the DZP, which then frees up the remaining cash coming out of Tomingley.

"We will then re-active some of our exploration efforts, as we have some high quality assets in the region, and we would like to allocate some of the free cash flow to evaluate."


Analysis

Alkane remains well-funded with a$14.8 million in cash at the end of June 2015, along with A$4.8 million in bullion. The company has no debt.

FY16 gold production is off to a flying start, and with an AISC of A$1088 an ounce and a gold price comfortably above A$1500 an ounce - margins are circa A$450 an ounce.

With 15,191 ounces poured already in FY16, this delivers revenue of over A$16 million and gross profit margins of around A$7 million.

FY16 production is estimated to be 60,000 – 70,000 ounces within an AISC range of A$1,200 -1,300 an ounce.

 

Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX emerging companies with distribution in Australia, UK, North America and Hong Kong.

Quick facts: Alkane Resources Ltd

Price: 0.66 AUD

ASX:ALK
Market: ASX
Market Cap: $335.29 m
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