Alkane Resources Limited (ASX:ALK) saw its share price target given a 15% boost from A$1.30 to A$1.50 by Ord Minnett following its Tomingley Gold expansion study, latest reserves and FY22 guidance.
The broker reiterated its Buy recommendation on valuation and exploration option value.
It noted that Alkane Resources now trades at a discount to its net asset value (NAV) at 0.75 times and has the potential to re-rate to that of a 100,000 ounces midcap gold producer.
Tomingley thesis exceeded
The analysts said: "We have updated our model to include the Tomingley gold mine expansion, latest reserves and FY22 outlook."
Its Tomingley thesis has been exceeded with production to double back to around 100,000 ounces by FY25 for an initial eight-year life extension.
“Boda progress is slow, but we believe needs more time to drill out.”
Unexpected positive surprise
Ord Minnett highlighted that the latest exploration results at Boda revealed an unexpected positive surprise with high-grade surface mineralisation.
Key intercepts included 31 metres at around 3 g/t gold plus around 1% copper from surface.
Whilst still early days, this potentially shifts the broker's thesis towards a potential surface mining and underground combo, away from sole complex/deep underground.
With three drill rigs now on site, Alkane Resources plans to roughly double the drill program over the next 12 months to 60 kilometres.
Minority stakes
Ord Minnett also expressed surprise in discovering that Alkane Resources’ minority stakes in Genesis (TSX:GDC) Minerals Ltd and Calidus Resources Ltd (ASX:CAI) are worth a combined $78 million.
EIS approval
The Environmental Impact Statement (EIS) is now being prepared for submission this quarter with expected approval by late 2022