Allied Nevada Gold, (ANV) was up 30% yesterday. The stock had been down 31% from March 27th, the day the Company’s CEO was kicked out. Monday night Allied put out a press release that answered important questions and significantly calmed investor fears. The highlights of the press release and yesterday’s conference call are as follows:
“Previous leadership,” is largely to blame for the past 2-3 quarters of slower than expected progress. Bob Buchan, Chairman, President and interim CEO made it abundently clear on the conference call that he and new COO Randy Buffington will do whatever it takes to meet guidance and deliver shareholder value. Every aspect of the Company’s business plan is now on time and on budget. Management continues to believe it can fund ALL obligations through 2015. To be clear, that means NO NEW EQUITY PLACEMENTS.
Fears about the Company’s liquidity appear to be overblown. With $347 million of cash on 12/31/12 and a $120 million untapped credit line, the company is liquid. Add to that positive cash flow in 2013-15 and equipment lease financing flexibility, and the Company should have the remaining capital requirements to triple production by 2015 covered. As a gut check on the achievablilty of forecast cash flow to help meet funding targets, consider that the Company’s assumed gold and silver price in 2014-15 is $1,400 and $21 per ounce, respectively. Hardly an aggressive assumption by management. Importantly, on the conference call CEO Buchan reiterated that use of the undrawn $120 million credit facility would not even occur before 2h 2014 at the earliest.
Assuming gold and silver prices remain at or above current levels and assuming the Company executes, I expect the stock price to rebound to $20 per share by year end. More importantly, I think Allied Nevada is now a prime takeout candidate. Many mid-to-large sized companies have the wherewithal to take Allied out, not just the usual suspects of Barrick Gold and Newmont Mining. Companies that I believe would greatly benefit from acquiring Allied Nevada include, Yamana, Kinross, Goldcorp, Goldfields, Elderado Gold, AngloGold Ashanti, Newcrest Mining, Randgold, Agnico-Eagle Mines, Fresnillo PLC, and New Gold.
Any of these companies could prudently de-risk their asset portfolios by acquiring the very low-risk jurisdiction, world-class Nevada mining complex.