Allied Nevada Gold Corp ANV

ANV Earnings Show The Company Is In Serious Trouble

[goldguy007]

https://seekingalpha.com/article/2638595-update-allied-nevada-earnings-show-the-company-is-in-serious-trouble?uprof=51&dr=1

Hard Asset Investments

Long only, gold & precious metals, oil & gas, alternative energy

Update: Allied Nevada Earnings Show The Company Is In Serious Trouble

Nov. 4, 2014 4:24 PM ET | 7 comments | About: Allied Nevada Gold Corp (ANV)

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 recently reported third quarter 2014 earnings.

• Results were worse than expected, with higher cash costs and a dwindling cash balance.

• 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.

Comments (7)

Ninja Trader

Calm down. Earnings report said they have enough available funds for another twelve months. With gold bottoming in December, this stock will end up being a twenty bagger at the least if they don't get bought out first.

Hard Asset Investments

, contributor

Author’s reply » And you believe both of these things why?

The company has $5.8 million in cash compared to $500 million in debt. They said they will raise funds by tapping into the revolving, which is not a great idea.

The Hycroft expansion requires $1.32 billion in capital.

Please tell me what mining company is willing to buyout Allied Nevada here with the company's heavy debt burden and major capital requirements. I'd like to know.

Supernov4

gold will rally soon enough... soon enough for allied to hang in there? i hope so! cause im not giving up my shares. im there till the bitter end like a true warrior.

jdawg888

Hypothetically, a large institutional investor can buy ANV bonds on the cheap, wipe out the equity, convert bonds to new stock in bankruptcy, then relist the shares. This game has been played out many times before.

a alto

Bankruptcy is inevitable. Glad I got out of this one , but hey I lost my azz on Gtat ! This is a example of why going in debt for expansion is a bad thing .

George Spritzer, CFA

, contributor

Does anyone know the latest price of the senior unsecured 8.75% senior notes (private placement)?

[John76]

Hello guys, I do not know to much about 'ANV' but it looks like a great opportunity if the price of gold indeed does turn around at some point. This stock has taken a beating looking at its chart over the past year or so. Are things as bad as they seem or aren't they? As I understand, this year required CAPEX for the Merill-Crowe plant that was built. Shouldn't CAPEX costs be a lot

[goldguy007]

I still hold a small position in ANV. I consider the biggest risk, right now, is that the company will enter bankruptcy proceedings at some point. If that happens, bond holders (if there are any) would have first claim on company assets and shareholders face the possibilty of being wiped out. However, it may be possible that the assets of ANV are worth more that the current SP if/when the miner

[John76]

Thanks for that GoldGuy007, I will watch this stock closely. Will be interesting to see the fourth quarter financial report. I agree, this company as it stands is very risky. If gold goes up I hope this company is still around...