Loading ...ANV is 1.06 down 23% today….izzit goin bankrupt?
Allied Nevada Is Crashing, Investors Should Continue To Avoid The Stock
Oct. 30, 2014 1:28 PM ET | About: Allied Nevada Gold Corp (ANV)
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)
Summary
Allied Nevada’s stock price is crashing as the company is probably going to have a funding shortfall.
The problem is they have very little cash, but their debt obligations per year are substantial.
With gold and silver now declining again, the cash flow from Hycroft won’t cover these obligations.
The company needs to either start hedging production or be acquired.
Even though a buyout is highly likely, investors should avoid the shares as they could decline a lot more before a buyout even occurs.
On September 22, 2014, I wrote an article on Allied Nevada (NYSEMKT:ANV)titled “Allied Nevada Better Get Some Hedges In Place”. The reason that they needed to start hedging was because their projections for covering all debt obligations were based on roughly $1,300 gold and $21 silver prices. Gold was in the low $1,200’s and silver was at $17-$18. If they didn’t act fast they were going to have a funding shortfall.
The company has backed themselves into a corner as their cash has dwindled to just $13.5 million at the end of Q2 2014, yet they still have $570 million in debt and have no way to build their $1.4 billion expansion at Hycroft.