It’s been a dog of a market for investors in small gold stocks, with a lacklustre gold price crushing valuations and squeezing investment interest out of the sector.

And the shift of investor interest to lithium, cobalt and graphene plays, thanks to the long running electric car theme, has even dragged large base metals outfits such as Independence Group (ASX:IGO) into chasing its chances in that sector, hasn’t helped, either.

Weak gold valuations across the board prompted analysts with giant investment bank Citi to recently tell clients that local gold mining major Newcrest (ASX:NCM) could be a takeover target.

“For many peers, buying Newcrest could be better than trying to discover and define gold resources,” Citi analysts wrote in a note.

“Newcrest’s value relative to replacement cost gives it a high takeover appeal.”

Poor sector valuations just this week prompted Hill End Gold (ASX:HEG) to put its historic acreage in the central west of NSW on the block as it pivots to producing high purity alumina via a potential project in Victoria.

Hill End was the location of one of Australia’s first gold mining booms.

Good news for Alkane

Even with gold mining out of favour, the sector’s low valuations are good news for Alkane Resources (ASX:ALK), which has cash burning a hole in its pocket even as it pursues the $1 billion development of its quixotic rare earths project near Dubbo, also in NSW.

The price of gold has sunk 10 per cent since mid-April
The price of gold has sunk 10 per cent since mid-April

Alkane has $80 million cash in hand according to its latest quarterly.

It needs to outlay around $16 million to develop an underground mine at its Tomingley open cut gold mine in north western NSW as well as ongoing capital demands as it conducts a global hunt for backers for its rare earths project.

In round numbers, it has about $30 million to spend.

“We’re not looking to reverse take-over BHP, or anything,” chief executive Nic Earner tells Stockhead.

“There are companies in WA and Queensland which have had good exploration hits or need to go to the market for funds.

“Some have bankable projects and we can look at options.’’

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Given the miner’s extensive experience in the gold sector, that is where it is keenest to pursue growth options, especially given its experience in bringing gold deposits into production.

There’s been ongoing merger and acquisition activity among larger gold miners with production of over 100,000 ounces a year — but little activity among smaller outfits.

“We’re comfortable looking in the sub-100,000 ounces area — in the 25,000 to 75,000 ounce range,” Alkane’s Earner said. “There’s a fair bit of opportunity within that range.”

Some explorers are keen to spend most of their time building their resource base, but don’t have the expertise to bring a project on stream, and this is where Alkane is looking for the chance to put its money to work.

“We’re going through the opportunities. I want people to know we’re looking and not to be too surprised if we do something,” he said.

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