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Allied Nevada recently reported third quarter 2014 earnings.
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Results were worse than expected, with higher cash costs and a dwindling cash balance.
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I recommend avoiding the shares as the company is in serious trouble.
Allied Nevada (NYSEMKT:ANV) has reported third quarter 2014 financial results, and it's not looking pretty. Here is a highlight of the results:
- The company reported adjusted cash costs of $856 per ounce for the quarter before write-downs, but wrote-down production inventories in the quarter by $70.7 million, leading to adjusted cash costs of $1,904.
- A net loss of $62.4 million or $.60 per share was reported. Excluding the effects of the write-down, Allied Nevada still would have lost $13.1 million or $.13 per share.
- Most notably, cash and equivalents as of Sept. 30, 2014 were just $5.8 million, excluding $10 million in restricted cash. The company also borrowed $5 million under a revolving credit facility at the end of the quarter.
Previously, I argued that Allied Nevada was a sell following the company's Q2 2014 results as the company had just $13.6 million in cash and a huge debt burden of $495 million. Cash and equivalents decreased $35.5 million that quarter, a huge red flag. In addition, the company's planned expansion at its Hycroft mine carries a price tag of $1.32 billion - money which the company simply does not have.
The latest quarterly results confirm my thesis that Allied Nevada is a sell here, as the company continues to quickly burn through cash. Time is clearly not on the company's side, as the price of gold has fallen under $1,200 an ounce and the company has just $5.8 million in cash. So what's the company's plan? Take on more debt:
"During the next 12 months, we expect to fulfill any future cash and liquidity needs that exceed our existing cash and cash equivalents balances and cash flow from mining operations (if any) by accessing our Revolver."
The company's management also said it can issue equity and/or debt securities to raise capital, if it needed to, or sell a gold stream. With an already high debt burden and a falling share price, I don't think any of these scenarios is plausible, so I recommend investors stay away from this stock as the company's solvency is a huge concern.