Alkane Resources

By Dan Stratful

Tuesday 6th March 2012 3 Comments

Alkane Resources (ASX: ALK) has a bright future according to several Analysts’ who have placed a net present value (NPV) of around $4 per share on the stock.

If this valuation proves to be correct, ALK has significant upside for investors with the shares currently trading at $1.20 with a market capitalisation of $322 million. ALK is in the midst of a capital raising which has reportedly been well supported, and the shares have gone ex-entitlement, giving shareholders the option of buying more shares at $1.10 each.

ALK’s strategy is to focus on a single geographic area, the central west of New South Wales in Australia, allowing it to apply its geological, exploration and mining expertise across multiple commodities.

ALK has two projects heading towards production in 2013/2015 - the Tomingley Gold Project and the nearby Dubbo Zirconia Project.

Production from Dubbo is scheduled for 2014 and about 60% of the zirconium and niobium output is already precommitted with arrangements for heavy and light rare earths.

ALK has a diversified commodity mix with projects in multiple commodities including gold, rare earths and metals. The Dubbo Zirconia Project (DZP), which has completed a definitive feasibility study, recently upgraded its ore reserves by 400% and proved and probable reserves total nearly 36 million tonnes, giving an initial 36 year open pit life. The DZP has the potential of making ALK a significant world producer of zirconium products and heavy rare earths.

Its new gold development is planned to commence at Tomingley in 2013 based upon a 660,000 oz resource and it has reported a major gold discovery at McPhillamys, a joint venture with Newmont.

ALK reports that there is concern over medium term supply-demand-prices in the light rare earth markets as two large light rare earth producers, Lynas and Molycorp, increase output over the next three years. However ALK reports that supply of heavy rare earths remains problematic and DZP is regarded as a strategically important supplier.

ALK is forecast to make a loss in 2011 and again in 2012 as it progresses the projects towards production in 2013 – 2015. The shares are speculative and high risk and investors need to bear that in mind.

Investors can read various Analyst reports on the stock at ALK’s webpage under ‘Reports’.

Status: SPECULATIVE BUY

ALK’s shares today traded at $1.20

For portfolio, sharemarket and fixed income enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz
**A disclosure statement is available, on request and free of charge.

Disclosure: ALK

Disclaimer
In accordance with the Financial Advisers Act 2008 (“the Act”) Sharechat is “Class Advice” and any advice or recommendations contained on this webpage is not “Personalised Advice” as defined by the Act. This means Sharechat does not take into account an investor’s particular financial position, financial needs, financial goals, risk profile or asset allocation. Investor’s who require “Personalised Advice” should contact an Authorised Financial Adviser (AFA).

Comments from our readers

On 6 March 2012 at 10:11 pm Peter said:

Australian Lynas new plant in Malaysia facing uncertainty as strong Malaysians protests underway. The Opposition, with great prospect to be the next govt., vowed to close Lynas when in power. Election shall be held before mid 2013. miem88@yahoo.co.nz

On 8 March 2012 at 11:48 am sam said:

since irg first recommended lynas as a buy (spec) i would like them to make a further comment based on peter's comment of 6th march

On 8 March 2012 at 5:12 pm Don said:

The Malaysian protests would appear to be mostly "political" in nature, along with the rent a protester mobs, like elsewhere. Ring any bells? However Lynas could be much more transparent in their disclosures to both shareholders & the wider public.