Hey, I'm Nic Earner, the Managing Director and CEO of Alkane Resources. We're ASX listed, TSX listed, and also on the OTC. We've got three producing gold mines — two in Australia, one in Sweden — and things are going very well at the company.
They are indeed. And good day to you. [laughter] I love that. Good day, mate. Right, we're in Toronto, PDAC. You've also been on the road for a bit. Before this, down in Miami — Red Cloud, PDAC. Yeah.
Right, so it's been a long trip, but you're in demand. You're executing everywhere.
Yeah, that's right. I mean, the rationale for merging with Mandalay — relevance, increased working capital and therefore the security that comes with that for investors, the rebalancing from index inclusions and the significant liquidity increases that lets fundamental funds come in with bigger tickets — all of that has happened and then some. So yeah, it's really good, as you know, to do M&A for a purpose and have that purpose realised. So that's been great.
And it was quite the change, really, if you think about it. Two years ago it was, you know, we need to get to some kind of steady state, settle things down a bit. It looked like a complicated environment. The gold wasn't on the rise back then.
But you put a plan in place that hasn't changed much, apart from the M&A obviously, with...
Well, yeah. I mean, even the M&A was part of the plan. Obviously, we didn't know that that would be Mandalay.
Mandalay, yeah. But is an environment like this tempting to kind of say, well, look how clever we are — let's be a bit more aggressive?
I mean, it's an interesting question. We continue to be aggressive because we still have the plan of growth. It's not so much that we're that much clever, right? It's nice when something goes together. It means that potentially investors will reward that in the sense of backing that capability.
Yeah, I don't think anything's really changed in the market. Gold prices are higher and the fundamentals driving that are apparent to us all as we shoot this video. And profit, cash flow and margins continue to stay very high. But the fundamentals, I think, in the gold sector — of scale, relevance, then the capacity to allocate capital, particularly on exploration, building a pipeline, a high enough market cap to access passive funds and therefore liquidity to give people chances to move in and out of the stock — all of that is unchanged. And I personally think that's just the new thematic of investing at the moment. But I think the margin and the cash build-up does change thinking, and it does change pressures, and it does give you optionality.
True. To move at a different pace as well. So there's something to be said about metal prices obviously doing something, but ultimately you need to execute totally on point.
That is true. So yeah, we're a very consistent executor, have been for many, many years. But you're right — one of the messages that we have into this budget cycle, so we're a July to June budget cycle, is we're saying to the teams on site, okay, let's go back and look at all the different capital things. It could be automation, it could be development in a new area that we've been considering, and how can we deploy capital — which was more than we budgeted and expected — to either increase reserves, increase production, or drive the cost of production down. And yeah, more of that will form this budget cycle than we previously would have anticipated 18 months ago.
Okay. And again, so sticking with this, but now in terms of that comparison, that transition, as it were, from two years ago to today — I've changed my perception of the company and the management team. I am no longer concerned about your ability to mine and produce gold. I know you look for efficiencies in every stage and every phase. How do you feel that you've done? I mean, the team's evolved, the portfolio's evolved.
Yeah, we have — I mean, we have a new board, but the team holds together. I think we've been able to show that we're quite good assessors of assets and their potential, you know, particularly for people that have known us for many years, with some of the investments we've made and then the acquisition. I think we're reasonably good, in the dynamic market and in these smaller mines — which, you know, plus or minus 10% is quite a lot — at understanding and predicting our performance and communicating that well. I think we take risks...
...that are aggressive and commensurate with the size of our organization. So if you take a BHP, you want a certain dividend, you want stability, you want a long-term thing, you don't expect them to take big swings at things. Whereas you come and invest in Alkane, you're after capital growth, you're after exploration risk, you're after sort of seizing-the-moment type decisions. And that's what we do, and I think we've done that well. Like if you rewind right back to Tomingley, for instance, we approved — when we just had drill holes — an exploration drive worth 30 million bucks down to that deposit.
And we understood that that was a risk, but we understood that it wouldn't circumvent permitting — not circumvent permitting, but it would mean that if you ran things in parallel, your ability to bring that on fast was there. So we did all of those things and yeah, and of course that paid off, right? And that's why we're mining 1.3 million tonnes per annum from there, and we wouldn't be doing that otherwise.
Ditto, looking at similar things in Mandalay. They have the capacity now — the asset we have at Costfield, which is a Mandalay asset — to do a similar development across the group. We're viewing it with that degree of aggressiveness. Björkdal, Storliden, we're viewing that with that degree of aggressiveness. So yeah, I do think that investors should have reasonable faith in that. Of course, there's always people that think you're a goose, right? That's understood. [laughter]
Numbers game. Yeah, look, I'm just trying to understand and really get a sense of what you're about going forward. I get the kind of risk appropriate to the size of the organization — makes sense, because you don't want to blow your brains out on taking a big chance, and that's the kind of thing that kills companies. So the commensurate bit is well understood, but at the same time you've now reached a certain size — 2.2 billion Aussie.
Not too shabby. Yeah, we've been higher than that, but in this volatility at the moment... No, no. What we want to be is what you've described. So for instance, right now we are making a substantial amount of cash which we're banking.
And absolutely we want to do incremental organic growth on that, but that includes extending mine lives, it includes lowering unit cost — things that I referred to at the start of our conversation. So that's who we are. As well as that, we have our long-dated boat at Boda–Kaiser and we're progressing that through approvals. So that reflects, I think, very little in our share price at the moment.
Remind me the basic outline of the numbers there.
So Boda–Kaiser has 15 million equivalent ounces. 10 million of that roughly is indicated. It's just under 6 g per tonne equivalent — that's like 3 g per tonne gold, 0.19% copper — that we're taking through permitting. So 20 million tonnes per annum, it would do, you know, 160,000 ounces a year of gold and 35,000 tonnes a year of copper. So we're taking that through permitting; clearly, once that's permitted, the financial impact that that must reflect in our share price is quite high. So that's a leverage play.
But in between that, we very much would like to grow the business in scale, for the reasons that I said right at the start of the conversation. So yeah, we absolutely look for assets that are in the 80 to 120,000 ounce range — meaningful, material, like the engine room of Tomingley but a bit bigger — that we could bring into production, or ideally, you know, merge with again, but bring into production as soon as practical.
So how does, with Tomingley say for instance, you obviously want to extend mine life there, but what does that production profile look like at the moment without exploration?
Yeah, pretty flat. So we're moving a highway which allows some open cuts to come online. So, you know, our guidance issued was 75 to 80,000 ounces; we're tracking at the 80,000 ounce end of that. So we expect guidance over the next few years to be in and around plus or minus that 80,000 ounce range. We'd looked at an expansion project, but we've already expanded the mill through other means to sort of halfway there, so the capital return on that is not as good. So that's very flat out for sort of six, seven years. After that it starts to tail away into more inferred resources.
But separate to that, we have a thing we call the MNEs — a couple of hundred thousand ounces — and that Roswell, Western Mozzie, you know, that sort of lens in behind, put in a different mineralisation type in behind our existing pit, and potential for 100,000 plus ounces in that, as well as exploration up and down the corridor. So yeah, we should be remaining at or around that rate.
With some grade-driven variation. So that's kind of got a multi-decade base.
Well, at the moment it's seven years in reserve, and you know, clearly we want to be pushing that beyond 10.
Yeah. Yeah. Okay, so there's that. And also — 160,000 ounces — when, how, so you get permitting, and then what does that look like in terms of moving to... for Boda?
So on an equivalent basis, it's sort of like bringing a 250 to 300,000 ounce producer on an equivalent basis.
So let's assume this is my pragmatic timeline. It's not crazily optimistic, it's not crazily pessimistic. We're in the sort of a quarter-way into two years of baseline studies and meeting with landholders and meeting with other parties, and what local roads we do and where does water go and all this sort of stuff. So through to the end of next year, through the end of 2027, you then put your application into the New South Wales government. There's a lot of consultation that occurs with the government in that cycle. So late '27, early 2028, put in the project application. Typically it's a one to two year consideration period, so we'll call that consuming the whole of 28 and 29. You get indications as to how smoothly that's going. You start doing iterations on stuff. Do a bankable feasibility study so that you're ready for financing, start seeking partners through that 2029 period. 2030 you have an FID decision. Then you have a two-year construction, 31–32.
So in terms of that phasing and layering of those answers — it's just like, because you know, you guys have got to come in here and tell me about a growth story, right? I'm trying to make money and I want to know I'm going to make it with you.
There's different aspects of the growth story, right?
So number one is, what is our relative valuation versus other people that are doing stuff, right? So right back when you spoke with Fraser and I in London and all this stuff — and we were right back doing, you know, our share price equival... so the combined but equivalent share price — we spent periods of time in the 70 cents, right, where we've been $1.70.
It was really obvious that this was going to happen, right? It was obvious we were going to get the indexes, it was obvious that these are stable. But a lot of people wait until something seems to make... Fair enough, right? Fair enough.
Here we are now. Last quarter, we just banked 55 million bucks, but we had a delayed shipment of concentrate. We're going to do the same thing this quarter, most likely do exactly the same thing next quarter, barring some disaster. What does that mean? That means if you then go and look at the peers — TSX, ASX — you say, well, who else is banking 200 million net post growth, all the other stuff I talk about, post all of that? Who else is banking 200 million? What's their market cap? What's their profile? People will see, hang on a minute, these guys look cheap, right? So there's one growth opportunity. It's not a growth in anything we're doing — it's just a growth in people understanding the Mandalay assets and doing that.
Second thing, potentially we roll as a result of that, versus peers and all that stuff, into the ASX 200. People can look back and see the effect, they can look at other companies going into the ASX 200, make their own judgment, but it should be an increase in liquidity, should pass. There's another growth opportunity without us doing anything except delivering. Then we start coming into true growth of what we're doing — Boda–Kaiser and the leverage delivery of that in the permitting. Yes, but what about the other thing that we want to do? We continue to explore and we could get great exploration results and incrementally increase production. Absolutely. We can dive into that. But we continue to look at how do we get another asset that is going into financing but it's at a lower price to NAV, so therefore it's a lower cost per ounce than ours. So that if we can de-risk it through financing, delivery, experience, balance sheet, deliver that, then it should move from its multiple to our multiple, and there's a value uplift. I look for those assets. Mandalay's looking for those assets. We're looking for those assets combined. We, the new company, look for those assets. Have discussions, of course, in a place like PDAC about those kind of assets. Yeah, that's another part of the growth we're looking to do.
Excellent. Lay that out. Yeah, I might get you to come back and do something specifically on that. I mean, I had an interesting chat with a CEO about six months ago. They picked up something recently. I think the market said, 'You've overpaid for this.' And he said, 'Well, maybe on the face of it. But the reality is I needed one part of that deal because it releases huge cash flow to something else in our portfolio.' So sometimes 1 plus 1 equals 3.
But what he did say as part of that conversation I thought was interesting. I said, well, they had a feasibility study and you've just done a PEA on this. Why the backtrack? He said, well, you know, sometimes these studies are a work of fantasy and a work of entrepreneurs, and it's not — everything is as described. So you've got to redo the numbers yourself. So when you're out there looking, and there's an ever-dwindling amount of development stories, advanced development stories — when you're looking at these advanced development stories, do you feel the same thing when you sort of get in the data rooms of these things?
Yeah, of course. Of course.
Not naming names. I'm just saying.
Of course. I mean, we are explorers, operators, builders.
