Seeking Alpha: Alacer Gold Still Looks Underrated Amidst Operating Risks

Even though Alacer Gold (OTCPK:ALIAF) is down about 20% from its July highs and down a third from its 52-week high, the shares are still up about 14% from when I wrote about the company in December as an undervalued and unloved gold stock. That's nothing to brag about relative to the performance of the industry, with the Market Vectors Gold Miners ETF (NYSEARCA:GDX) and Market Vectors Junior Gold Miners Fund (NYSEARCA:GDXJ) up around 30% and 40% over that time and investors should ask themselves whether the ongoing operating risks are likely to be adequately rewarded from here. My use of a higher discount rate than most sell-side analysts leads to a roughly 20% lower fair value estimate and while Alacer looks well-positioned to remind a low-cost miner with exploration upside, the risk-reward is not necessarily absolutely convincing at present.

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Alacer Gold Still Looks Underrated Amidst Operating Risks

Seeking Alpha: Alacer Gold Looks Like A Low-Cost Miner That Nobody Wants To Love

The history of Alacer Gold (OTCPK:ALIAF) (ASR.TO) hasn't been a conventional one. Once a junior gold company focused solely on Turkey and known as Anatolia Minerals, Alacer came out of a merger of Anatolia and Avoca Resources in 2011 that added assets in Australia. Recently the company sold its Australian assets and has essentially become Anatolia all over again - a company with a very low-cost producing gold mine in Turkey, but one with very limited conventional production life left.

Alacer does have some worthwhile exploration assets in Turkey (which it owns through a 50/50 joint venture), as well as follow-on expansion potential at the core Copler mine. The real key, though, is moving forward with a plan to process sulfides - a move that would unlock more than 60% of the company's measured and indicated resources. With declining gold prices making investors and analysts exceptionally nervous in general, and an uncertain path forward with the sulfide process making them specifically nervous about Alacer, there could be some real value here.

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Alacer Gold Looks Like A Low-Cost Miner That Nobody Wants To Love