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The Impact Of Lower Commodity Prices On Allied Nevada Gold Corp. (OTCMKTS:ANVGQ)

Allied Nevada Gold Corp. (OTCMKTS:ANVGQ) the operator company of the Hycroft mine, submitted request for bankruptcy protection after operational failure and lower commodity prices wiped away profitability at its sole working asset. In the filing, the company disclosed that it had assets of $941 million and debt of $664 million as of December 31, 2014.

The consent

Allied Nevada reached an agreement with a certain group of bondholders for bankruptcy financing to fund its operations while it carries out the restructuring process. The bankruptcy financing agreed to is of $78 million. As per the court filings, Allied Nevada has cash balance of less than $4.5 million.

The prices

In 2011, when gold prices were at peak, the company’s shares traded around $45 per share. From the peak levels of 2011, the stock prices have declined almost 80%. In last trading session ANVGQ share prices surged more than 4% to close at $0.115. Allied Nevada problems deepen due to operational setbacks it witnessed at Hycroft mine. The problem was related to a chalky substance that adversely affected production. As a result, the company had no choice but to lower its annual production forecast of silver and gold.

The woes

Allied Nevada has contended with declining gold prices. The yellow metal declined 28% in 2013. It was for the first time in last 13 years that gold posted an annual loss. The declined continued in 2014 and it closed the year with 1.4% loss. The company was obligated to raise cash in December 2014 as it cash depleted to extreme low levels. It offered equity for just $1 with warrants to raise the capital in December. The cash balance was $1.3million at the end of last November. The debt widened to $567.9 million by November 30, 2014. The debt balance included cash borrowings of $48 million.

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