Exposure To Country Risk: The Alacer Gold Edition

| About: Alacer Gold (ALIAF)
This article is now exclusive for PRO subscribers.

In an ongoing series of articles we are exploring the exposure to country risk for selected gold mining companies. This article will document our results for another mid-tier Canadian mining company with operations in Turkey and Australia called Alacer Gold (OTCPK:ALIAF).

Definitions of country risk include factors such as political risk, exchange rate risk, economic risk, sovereign risk, transfer risk, socio-economic risk and others. Depending on the source, various contributing factors of country risk are weighted differently. We collated country risk ratings for selected countries from eight different sources and averaged these ratings into compounded country risk scores. The most recent results from this work can be found in this article. Readers interested in the specific definitions are encouraged to follow the links to our sources given in this article. Country risk ratings range from 0 to 100 with low numbers indicating low risk and high numbers indicating high risk.

Alacer Gold is operating one mine in Turkey (Copler) and two production centers in Australia (South Kalgoorlie Operations and Higginsville). Furthermore, several Turkish projects are presently explored and developed by Alacer Gold. We are using 2012 end-of-the year data for this study. Since then the Frogleg mine has been divested reducing the South Kalgoorlie Operations. Alacer Gold is a mid-tier gold mining company with a market capitalization of $839M. Morningstar.com lists the forward P/E as 15.7 at the time of writing. The table below gives the 2012 numbers for attributable production, reserves and resources at each of Alacer's mines and projects.

The table above was consolidated showing summations for each country of exposure in percentages of gold-equivalent ounces. Country risk ratings as documented here are also shown in the central column of the table. The right side of the table shows the weighted risk contributions for each of the two countries separately for production, reserves and resources with summarized scores in the bottom line. The individual ratings can be interpreted as ratings going from present risk (production) into the future (inferred resource).


Based on production data a country risk rating of 29.93 was computed for Alacer indicating moderate country risk exposure. The country risk rating increases to 36.44 when considering reserves and drops back to 34.38 for measured and indicated resources and 30.97 for inferred resources.

Considering the divestment of the interest in the Frogleg mine and the large reserves at the Copler operations the Turkish components of the company are set to gain in importance in future considerations which will probably lead to an increase in the ratings. However, Turkey is improving its reputation as a mining-friendly jurisdiction and this might put a cap on the country risk exposure of Alacer Gold going into the future.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.