A Saturday reflection ~smile~ Alkane does seem to be undervalued by the market. Some roughly comparable companies have gone down the capital raising path, rather than taking on debt. It seems to me that they are currently being rewarded with share price increases possibly because they are fully exposed to rising prices.
I did this chart a couple of days ago, so it will be out of date already - but the market cap now column shows how OBM and SPR have participated in the current rally, while ALK has really not. They have both also raised significant funds via adding to their shares on issue, which Alkane has not.
Both Spartan and Ora Banda (and Genesis for that matter) have gone down the Cap raise path. Spartan looks like they did a consolidation, went down from 1.5b to 299m shares, now back up to 877m before the new raise, which will add another 133m shares to the register. Ora Banda is comparable size to Alkane, with 70k oz this fin yr, and is also forecasting an increase to around 100-110k oz coming up.
Taking a three year view, it is clear that Alkane is under performing the other two companies. Notably since October last year.
On this admittedly limited view - in a market where the gold price is rising, debt and hedging limits a companies ability to participate in the appreciation. All things being equal, after Alkane's hedging agreements are finished and the company still has many fewer shares on issue than the others, shareholders will benefit from greater profitability. That being said, no one can foresee what price gold will be at in two years time, nor what benefits Alkane shareholders will have forgone from a higher price, and the greater financial optionality that would bring.
Had Alkane gone down the equity raising pathway, Ian Gandel would have had to stump up around 20% of the $50m if he wanted to retain his large percentage ownership - and it is only conjecture, but his vote on the board may have been against going that pathway - for his own reasons.
Just my musings, but interested to know what others think.
ALK Price at posting:
66.5¢ Sentiment: Hold Disclosure: Held
(20min delay)