Allied Nevada Gold Corp ANV

ANV Reduces Initial Capital Spending At Hycroft By 18%

[goldguy007]

This author is somewhat bearish on ANV.

Since I am bullish on gold and see ANV as providing excellent leverage to POG at about $1350 gold and higher, I remain a holder.

It is high risk, but if you are bullish on gold near term, it is a decent gamble.

goldguy.

https://seekingalpha.com/article/2714035-update-allied-nevada-reduces-initial-capital-spending-at-hycroft-by-18-percent?uprof=51&dr=1

Update: Allied Nevada Reduces Initial Capital Spending At Hycroft By 18%

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Summary

• Allied Nevada has announced an 18% reduction of phase I costs at the Hycroft mill expansion.

• An initial capital outlay of $768 million is still required for the expansion, which will allow the company to produce 340,000 ounces of gold annually.

• The news is positive, but Allied Nevada is still running out of cash; I remain bearish.

Allied Nevada (NYSEMKT:ANV) recently announced that it has optimized phase I of the Hycroft mill expansion, with improved upfront capital requirements. The company now needs initial capital of $768 million, a reduction of 18% from phase I costs that were shown in the company's feasibility study. A detailed capital cost estimate is scheduled to be completed in early 2015. Once completed, the expansion will give the company the potential to produce 340,000 ounces of gold and 15.1 million ounces of silver annually at adjusted cash costs between $575 and $600 an ounce.

Previously, I've argued that Allied Nevada is a sell as the company has a huge debt load of close to $500 million, a dwindling cash balance, and a large initial capital requirement at the Hycroft mill expansion which it cannot afford to finance. Third quarter earnings proved my point as the company had just $5.8 million in cash and equivalents at the end of the quarter, compared to $472 million in long-term debt. And the company's plan to solve its liquidity issue is to take on more debt from accessing its revolver.

While it's certainly a positive that Allied Nevada has reduced initial capital spending for the mill expansion, the story remains the same: Allied Nevada is running out of cash and has too much debt. With gold sitting at $1,200 an ounce, Allied Nevada is not turning a profit, with a net loss last quarter of $13.1 million (not counting a write-down). The company's only hope here is a takeover or selling a gold stream on Hycroft, but I remain skeptical and would recommend avoiding the stock.

[chuck8]

Thanks for the info link, Goldguy, and I agree with your position on risk/reward. This is a crappy metals market and ANV certainly has challenges ahead but on the other hand it was $40 only 2 years ago and it all comes down to bullion price for a chance to execute it's plan. Otherwise someone will take it over as I can't see a big operation like this going under. I recall picking up some