Allied Nevada Gold Corp ANV

Analysis--ANV Increases Gold Sales 19% Annually

[goldguy007]

https://seekingalpha.com/article/2838366-update-allied-nevada-increases-gold-sales-19-percent-annually-but-remains-a-sell?auth_param=ln3gr:1ac0aee:d31d9a888558c93ef32ad328a4d0d022&uprof=51&dr=1

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Update: Allied Nevada Increases Gold Sales 19% Annually, But Remains A Sell Jan. 21, 2015 5:34 PM ET  |  6 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. (More...)

Summary

• Allied Nevada just announced preliminary production and sales for 2014, and an update on its mill expansion financing.

• The company produced 216,937 ounces of gold, a 19% increase year-over-year, and 1.84 million silver ounces, a 115% increase.

• These figures are impressive, but the real question is how low cash costs will come in at; the company has still not secured financing for its mill expansion.

Allied Nevada (NYSEMKT:ANV) just announced some pretty impressive preliminary production and sales for the full-year 2014, and gave an update on the status of the company's mill expansion financing process.

For 2014, the company increased its gold production by 12% to 214,345 ounces, and its gold sales by 19% to 216,937 ounces. The company also increased silver production by 106% to 1.81 million ounces, and silver sales by 115% to 1.84 million ounces.

In addition, Allied Nevada said it has not secured financing yet for the company's mill expansion project, although it has received "significant interest" in the project.

Readers will remember that I first recommended avoiding Allied Nevada shares in August of 2014 at $3 per share for a few reasons. First, the company's cash balance was dwindling, with just $13.6 million in the bank, which is made even worse given the fact that the company had $495 million in debt. Although the company is producing a lot of gold and silver from its Hycroft mine, all-in costs were higher than expected, and the company's debt interest expense was also eating into any profits. So, I thought Allied Nevada was just too risky to invest in - despite its huge upside potential, the company's high debt loan and dwindling cash reserves are a major cause for concern, and a common stock and warrant offering did little to alleviate these concerns.

While the higher production figures are nice, and a higher gold price certainly helps a little bit, the story remains the same at Allied Nevada. Besides a dwindling cash balance and a high debt burden, Allied Nevada's mine expansion project at Hycroft will require $1.39 billion in initial capital, which I highly doubt the company will be able to raise. I also don't think Allied Nevada is a takeover target for this same reason. I recommend avoiding shares here.

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Comments (6)

Omer Altay

, contributor

 Anv provides the most upside in a 1,500-1,600 gold price environment. commodity prices move up and down violently. if gold snaps to 1,600 the economics of hycroft are mind blowing. at 1,600 shares will be a 20 bagger. if gold drudges at 1100-1200 anv is dead, at 1.300 it can keep its head above water. consider anv an option.

 

Small Fish

Yep, it's a $0 call expires around June 2015 or whenever the next bond interest payment is due.

Hard Asset Investments

, contributor

 Author’s reply » That's incredibly risking trading strategy IMO and I doubt shares still provide that much upside - what are you basing it on? Remember, the company has issued equity recently which limits the upside a bit. While I agree that at $1,500 gold shares will certainly be worth more than they are currently, why not just buy out of the money call options on the GDXJ? That's essentially what the trade is at this point.

T-time

, contributor

 Yes, convenient timing - you didn't disclose it but I might assume you are short and disappointed at how the shares have advanced in the last month or so. You were right back at 3+ dollars / share, but for some of us that got in more recently at ~89 cents post offering about a month ago, we're doing very well thank you very much. These shares are a bargain right now, and as long as gold price accelerates these shares continue to go UP. I am over 50% at the moment (no thanks to articles like this one) in the last month or so ... I agree there are financial problems and the clock is ticking - but if anyone got in on shares under or at 1.00 - knowing the value of the mine and even the debt load exceeds this value - pretty good spot at the moment. Also, I do not agree that there will not be acquisition or partnership interest - at least in the short term it is a good bet. You do not explain why there would be no interest, only to say you don't think there would be. This mine is valuable - and would be for any miner at the moment. These shares are worth at a minimum 3 dollars in the short to mid term (2 to 3 months), and depending on what management has plans for the near-term - shareholders might be rewarded for patience and DD on the value of the Hycroft mine.
For now, this is not a sell - but a HOLD, and for a spec play, still a BUY under 2 dollars. I am watching for any actions that may come up in the near term - admittedly, if nothing besides gold price keeps these shares advancing, prior to Feb 12 is a key date as that is when the holders of the latest offering will be able to sell or cash warrants. Watch this spot! Finally, I wonder why investors to the tune of 21 million (last offering) would believe that something is not in the works. I guess you are implying they created funding for "nothing".... nice try but if you're shorting I guess it is time to write a negative article, huh?

Hard Asset Investments

, contributor

 Author’s reply » It's too speculative. A lot of gold miners are up the same percent since you got in $.89 that provide far less risk than Allied Nevada. Take Argonaut Gold. B2Gold or Rubicon Minerals for example, which I believe have returned just as much but hold far less risk IMO. Again just my opinion