A major catalyst is lurking on the horizon for NSW-focused Alkane Resources.

The company has been exploring in NSW for 50 years and has a strong track record, including the discovery of the multimillion-ounce McPhillamys gold deposit.

In 2019, Alkane got hearts racing with a Cadia-style intersection of 502m grading 0.48 grams per tonne gold and 0.2% copper from 211m, including 313m at 0.62g/t gold and 0.17% copper at its Boda prospect, part of the Northern Molong porphyry project.

Fast forward nearly five years and Boda and the neighbouring Kaiser deposit have a resource of 796 million tonnes at 0.33g/t gold and 0.18% copper for 8.3 million ounces of gold and 1.5Mt of copper, or 14.7Moz of gold equivalent.

The company has spent A$50 million on exploration at Boda over the past four years, but due to the deposit’s size, it equates to a discovery cost of less than A$4 an ounce.

“It’s the largest discovery in New South Wales in the past decade and for both copper and gold,” Alkane managing director Nic Earner told the RIU Sydney Resources Round-up this week.

Importantly, 537Mt of the resource sits in the indicated category following an update last week.

That resource will form the basis of a scoping study, which Earner said was on track to be released in the next four weeks.

“The Boda scoping study results could catalyse Alkane’s share price, as investors search for undervalued gold and copper opportunities,” Bell Potter Securities analyst Bradley Watson said last week.

Earner said the study would look at several throughput scenarios of 5Mtpa, 10Mtpa and 20Mtpa.

“Remember, it’s such a massive resource it can support any of those scenarios,” he said.

Metallurgical test work returned recoveries of 87% for copper and 81% for gold at Boda and 81% for copper and 71% for gold at Kaiser.

Bell Potter has generated a notional development scenario (NDS) for Boda, based on parameters from comparable projects, and commodity price and exchange rate forecasts.

The firm is assuming a 20Mtpa development with capital costs of A$1.5 billion.

Under that scenario, annual production would be 180,000oz of gold and 30,000t of copper.

“Recent increases in the Australian dollar gold and copper prices have increased the net present value and profitability index (NPV/capital cost) we estimate with our NDS,” Watson said.

“Our NPV lifts to A$1.5 billion with a profitability index of 1, important metrics for project financing considerations, and market value recognition.”

Alkane is already working on baseline environmental studies and Earner noted that while the NSW approvals process could be lengthy, the company had successfully permitted three projects in the state.

“We’re not babes in the woods when it comes to the approvals process,” he said.

Tomingley

While Alkane prides itself on being a successful explorer, the company is already a profitable gold producer.

Since 2014, Alkane has been in production at the Tomingley gold operations in NSW.

Tomingley has been a quiet achiever, consistently beating guidance, but is in a transition phase as it moves underground.

The Tomingley extension project will extend the life of the mine to 2032.

Tomingley produced 10,900oz of gold in the March quarter, well short of Bell Potter’s forecast of 14,900oz due to low recoveries.

“We had a disappointing quarter by our standards but we still consider ourselves on track for the lower end of our guidance of 60,000oz this year,” Earner said.

The company closed the quarter with A$34.5 million of cash and bullion.

Since then, it has also drawn A$26 million of a A$60 million Macquarie facility to fund the Tomingley expansion.

Last month, the first stope at the Roswell underground was blasted and is expected to deliver 23,000t of ore at 5.2g/t gold.

Roswell, combined with the development of the San Antonio pit, will see production ramp up to 100,000ozpa.

An underground paste plant and processing plant upgrade are due to be commissioned in the September quarter.

‘Undervalued’

Despite surging gold and copper prices, Alkane shares are down by more than 12% since the start of the year.

Earner believes it’s due to the company’s declining cash balance, which is down from almost A$100 million at June 30, 2023.

“Our cash balance has been dropping but if you do any degree of analysis at all, you’ll see our cash balance is dropping because we’re investing in the future of the company,” he said.

Alkane will release a five-year business plan in late June/early July.

Bell Potter lifted its target price for Alkane by A25c to A$1.25, more than double the current share price of around A60c.

“In our view, Alkane is undervalued relative to the expanded Tomingley gold project, and effectively the market ascribes no value to the Boda gold/copper porphyry,” Watson said.