Allied Nevada Gold Corp (NASDAQOTH:ANVGQ) recently reported preliminary second quarter production of 56,864 ounces of gold compared to 39,135 ounces in the corresponding period last year. For the first six months of 2014, Allied Nevada reported a 51% increase in gold production and is on track to meet its production guidance for 2014. While these preliminary results are positive for Allied Nevada, what's next for a company that has seen its share price utterly decimated over the last couple years?

Mill expansion or bust
Allied Nevada is currently undergoing a feasibility study which is expected to be completed later this year for a mill expansion at its Hycroft Mine. The construction of a mill would allow Allied Nevada to recover metals contained in additional transitional and sulfide ores. The Hycroft Mine is an open-pit heap leach operation which currently mines gold and silver from oxide and transitional ores. It is understandable why Allied Nevada is so desperate to find a way to finance the expansion as the deposit had sizable proven and probable mineral reserves of 10.6 million ounces of gold and 467.1 million ounces of silver. Without the mill expansion, Allied Nevada expects to be able to mine 225,000 ounces of gold and 2.0 million ounces of silver annually, through 2020.

Not earning enough
Allied Nevada reported net income of $0.3 million for the first quarter, which was a drop from $8.8 million in the first quarter of 2013. For 2013, Allied Nevada reported net income of $1.4 million and during the high gold prices of 2012 and 2011 they reported net income of $47.7 and $36.7 million respectively. The lack of earnings for Allied Nevada begs the question of how Allied Nevada is going to finance its proposed $1.3 billion mill expansion project. Another major problem Allied Nevada faces is its long-term debt of $494.2 million, with $361.9 million of that debt coming due in 2019. While that is still a long way off, investors have to wonder how a company struggling to record earnings will be able to pay off debt, let alone get financing for a massive project.

Despite Allied Nevada's assertion that it will not sell the company and is seeking financing options for its mill expansion, it seems that the only likely outcomes for Allied Nevada are a sale of the entire company or a stake in the company. With Allied Nevada having sizable gold and silver reserves, it could be an attractive buyout target for a company willing to fork out the cash that would be required for the mill expansion. On the other hand, the mill expansion carries a high price tag, and with many gold miners divesting non-core assets and cutting back spending it might be a difficult sell.

Comeback candidate
Harmony Gold Mining Co. (NYSE:HMY) is a high-cost producer with operations in South Africa and Papua New Guinea; like Allied Nevada, it has also seen its shares beaten down. Harmony Gold Mining has struggled with costs but has managed to make some improvements. All-in sustaining costs were $1,224 per ounce for the quarter ended March 31, 2014. These costs were similar to the previous quarter's all-in sustaining costs of $1,222 per ounce. Overall, Harmony Gold Mining is seeing a downward trend in costs, as all-in sustaining costs decreased by 18% from $1,509 per ounce for the nine months ended March 2013 to $1,234 per ounce for the nine months ended March 2014.

Harmony Gold Mining is also trimming capital expenditures, with capex for 2014 estimated at $245 million, down from $413 million in 2013. Earnings for the March 2014 quarter were $3 million, compared to a net loss of $10 million in the December 2013 quarter.

Harmony Gold Mining reported that its underground recovered grade increased for a third consecutive quarter, representing a cumulative increase of 17% so far for 2014. This is good news, and with Harmony expecting to increase production over the 1.14 million ounces of gold it produced in 2013, hopefully this will translate to increased earnings.

Foolish bottom line
Allied Nevada is in a tough position, with the sale of part or all the company seeming to be the only viable option. If this occurs shareholders may receive a premium to the current depleted stock price. However, if there is no sale, Allied Nevada will likely struggle to stay afloat, let alone fund an expensive expansion. Harmony Gold Mining has made headway against high costs, but still has a ways to go in terms of cost cutting. If gold prices rise, Harmony should once again be able to return substantial profits to its shareholders.