There are few things more likely to put a smile on the face of a company director than a spot of enforced short-covering, and the grins will be pretty broad over at Alkane Resources after a stellar day on the market.
Alkane was the darling of the exploration set last year, after a discovery hole at its NSW Boda prospect in 2019 showed up big widths of copper and gold mineralisation, giving the company the sniff it was onto a repeat of Newcrest’s massive Cadia deposit, 110km away.
Follow-up drilling turned up more solid hits and Alkane shares rose, with its exploration program underpinned by the strong price for the gold produced at its Tomingley mine.
Its market status was further helped by the successful spin-out of its unwanted rare earths project at Dubbo into Australian Strategic Materials.
And, to be fair, its fortunes may well have been helped along by the joyful exuberance of bored workers stuck at home without the oversight of pesky bosses, and nobody around to shout at them for spending their work time reading drilling results and playing silly buggers on their day trading platform.
By September Alkane shares had peaked at $1.54, giving the company a market cap around $900m — not bad for a company that poured 33,507 ounces last financial year, and booked a full year net profit of only $12.8m.
But with great prospectivity comes scrutiny and the short positions have been building at Alkane since its share price peaked, on doubts around whether the Boda discovery will turn out to be viable.
By last week, when Alkane entered a trading halt ahead of the release of new drilling results, 6.2 per cent of its shares were held short.
The best of those results were respectable — 383m grading 0.8 grams a tonne gold and 0.31 per cent copper — and the shorts appear to have come unstuck in a hurry on Monday, with Alkane shares closing up 22.5c, or 30.7 per cent, to 96c.
While there will be a few short sellers with stinging hands as a result, Alkane is still a long way down from its $1.54 peak.
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