Investment thesis: Buy, TP$1.00/sh (Previously TP$1.30/sh) With this update we reduced our target price by 23%. We Increased the risk discount we apply to our valuation of the NMPP, reflecting continued relative weakness in USD copper prices, and reductions in market values of comparable copper development companies. We maintain our Buy recommendation for ALK, based on our sum-of-the-parts valuation and our ratings structure. ALK’s exploration activities are underwritten by TGO, which again outperformed guidance. The TGO expansion is forecast to yield ~110kozpa production from FY25. ALK’s key exploration asset (NMPP) provides leverage to gold and copper discovery and prices, through very-large, low-grade, porphyry deposits. EPS changes in this report include: FY23 +5%, FY24 +19% and FY25 +8% driven by FY23 production-to-date and increases to our Australian Dollar gold price forecast.
Changes to our forecasts and valuation
We update our model for the 1QFY23 results and make the following changes to our model.
- Updated our model for changes to our forecast commodity prices and foreign exchange rates.
- Updated our modelling of the Tomingley Expansion Project timeline, given the delay in receiving project approvals (one quarter), notwithstanding that some approved early works have commenced.
- Increased our forecast of the Tomingley Expansion Project capital cost by 20% to ~$105m, to reflect expected inflation in project development costs.
- Reduced our exploration valuation of the Northern Molong Porphyry Project (from $360m to $150m. The valuation change is driven by increasing our risk discount we apply to our potential development scenario from 65% to 85%. The principal reason for the increase in the applied risk discount is the continued relative weakness in copper prices, and the corresponding reduction in the market values of comparable ASX copper development companies.
Still buying at these levels as much as my funds allow, regard this as a long term investments. Looking forward to the next lot of results for by NMPP and Tomingley, as well as news regarding the SAR approval.
(20min delay)