Could Allied Nevada Gold Corp. Be up for Sale?

As Allied Nevada Gold searches for a partner for the Hycroft mill expansion, it could consider selling itself at some point.

Jun 6, 2014 at 1:03PM

Allied Nevada Gold (NYSEMKT:ANVGQ) has been among worst performers in the gold mining sector, along with bigger companies like Alamos Gold (NYSE:AGI), which is suffering from project permit delays, and Yamana Gold (NYSE:AUY), whose acquisition of Osisko Mining was negatively met by the market.

Allied Nevada Gold has its own reasons for underperforming. The company is experiencing technical difficulties at its sole mine and has no money for its expansion project.

Lawsuits filed against the company
During the first quarter earnings call, Allied Nevada Gold stated that the start-up of the crushing facility at its Hycroft mine has been a disappointment. In fact, both primary and secondary crushing units have suffered production delays due to engineering issues with these units. What's more, the company was not able to give a definite date for the final solution for these crushers.

Allied Nevada Gold difficulties attracted the attention of several law firms that specialize in securities litigation. In the filed class action lawsuits, the company is accused of understating operating difficulties and underestimating challenges with the Hycroft mine mill expansion.  It's too early to say who will win this legal battle, but it will surely add to Allied Nevada Gold's headaches.

No liquidity problems in the near term
In the meantime, the company is making ends meet. This year, Allied Nevada Gold expects capital spending of $87 million, debt repayments of $53 million, and interest expense of $44 million. The company finished the first quarter with $49 million of cash on the balance sheet and generated $23.8 million of operating cash flow.

What's more, the company was able to increase the size of its revolving credit facility from $40 million to $75 million. Notably, Allied Nevada Gold holds $51.5 million on the balance sheet classified as assets for sale. Considering all these facts, there's no liquidity crisis ahead for the company in the near term.

Allied Nevada Gold lacks money for expansion project
Even if Allied Nevada Gold solves its technical problems fast, the main challenge remains. The company has no money for the Hycroft mill expansion project. During the first quarter earnings call, Allied Nevada Gold was asked whether it was considering selling itself to maximize shareholder value. The answer was no. Allied Nevada Gold stated that it was looking for a partner rather than considering a sale.

At the beginning of the year, a company called China Gold Stone Mining Development announced a $7.50 per share offer for Allied Nevada Gold. Allied Nevada Gold responded that it was questioning the credibility of the proposal. In fact, soon after this announcement China Gold Stone stated that this proposal was published in error. The whole story looks mysterious, but it did put the prospects of an Allied Nevada Gold sale on the radar.

It seems like big players currently favor good mining deposits in safe jurisdictions. The bidding battle for Osisko Mining, which was won by Yamana Gold and Agnico Eagle Mines, highlighted this trend. That said, major miners Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:ABX), which have a strong presence in Nevada, could have considered additional assets in the area.

Bottom line
While Allied Nevada Gold states that it is not considering putting itself up for sale, such a possibility exists in the longer term. With that in mind, the company might be attractive at current levels for investors who can tolerate risk.

Take advantage of this little-known tax "loophole"
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

 

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers