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Mariusz Skonieczny
Mariusz Skonieczny
Articles (1311)  | Author's Website |

Yukon-Nevada Gold Corp – Interesting Dynamics are Taking Place

June 15, 2012

Allied Nevada Gold Corporation had an Investor Day in Toronto a few days ago. According to a research report by RBC Capital Markets, this is what was said:

“ANV [Allied Nevada] continues to negotiate with several parties to place the sulphide concentrate at Hycroft and management reiterated their view that adequate processing capacity exists within the Western U.S. so an autoclave would not be required.”

Here is the link to the report:


This could be significant to you if you are a shareholder of Yukon-Nevada. Here is why. Allied Nevada was telling their investors that they were going to build an autoclave to process their sulphide concentrate (another way of processing it is through a roaster). Now, they are saying that they will not be building an autoclave because adequate processing capacity exists within the Western U.S. The only adequate processing capacity that they would be referring to that I can think of would be Yukon-Nevada’s roaster. The other players, such as Newmont and Barrick, are running at full capacity.

Could this possibly mean that Allied Nevada is about to acquire Yukon-Nevada? Allied Nevada has obviously been in discussions with Yukon-Nevada because they just struck a deal to process loaded carbon as indicated in the following press release:


I think there is a good chance of Allied Nevada wanting to acquire Yukon-Nevada, but not yet. Yukon-Nevada’s stock price is too low ($0.30 per share). At this point, Allied Nevada could get away with offering $0.45 per share for Yukon-Nevada, but large shareholders of Yukon-Nevada would probably not agree because they know that the company is worth much more. However, if Yukon-Nevada managed to get the stock price to around $0.60 per share, for instance, then Allied Nevada could offer $0.90 per share and get the 50 percent premium approved by their board of directors.

Now, the question is whether the company will be able to get the stock price higher. On June 3, 2012, Christopher Ecclestone said this:

“Yet, it is good to report that the situation has turned around at YNG, just, even if the market does not see it that way. For two weeks the facility has been running at full pelt with production at 450 ounces per day.”

Today, it is June 15, which means that if Yukon-Nevada continued this kind of production, it gives them four weeks of 450-ounce-per-day production or a run rate of more than 150,000 ounces of gold per year. About two years ago when the company announced a steady state of 150,000 ounces of gold, the stock price tripled within weeks. While it is unlikely that the same scenario would play out again because there are too many investors who abandoned the ship, I would not be surprised to see the stock price appreciate aggressively after the company announces the steady state. When this happens, the sale of the company at an acceptable price for both parties becomes feasible.

If you want to read my previous report on Yukon-Nevada, you can download it here.

Disclosure: Long Yukon-Nevada Gold Corp


About the author:

Mariusz Skonieczny
Mariusz Skonieczny is the founder and president of Classic Value Investors, LLC, an investment management firms that builds and manages customized investment portfolios for its clients. He is the author of Why Are we So Clueless about the Stock Market? Learn How to Invest Your Money, How to Pick Stocks, and How to Make Money in the Stock Market. Email: mskonieczny [at] classicvalueinvestors [dot] com. Webpage: www.classicvalueinvestors.com

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