Asanko Gold’s directors (TSX: AKG; NYSE: AKG) have given management the green light to build the first phase of the Asanko gold mine in Ghana for US$295 million, and the company expects to break ground within a month.
The company is fully financed with US$231 million in cash and a US$150-million project debt facility, and expects to pour first gold in the first quarter of 2016. The company believes it can reach production of 200,000 oz. per year by the second quarter of 2016.
The first phase involves developing the Obotan project, which it acquired from PMI Gold Corp. earlier this year. The second phase involves bringing the adjacent Esaase gold deposit into production.
Asanko says the first phase of the open-pit mine would produce 2.25 million oz. gold over an 11.5-year mine life. According to PMI Gold’s definitive feasibility study in September 2012, cash-operating costs are estimated to come in at US$626 per oz. (US$722 per oz., including royalty and refining costs). Feed for the 3-million-tonne-per-year carbon-in-leach processing circuit will come primarily from the Nkran pit, with satellite pits at Adubiaso, Abore and Asuadai being mined later in the mine life.
Phase two will see the expansion to a 5-million-tonne-per-year facility that is designed to handle material from the Esaase deposit, 25 km from the plant. A scoping study evaluating phase two is under way and should be completed in the fourth quarter.
Andrew Breichmanas of BMO Capital Markets notes Asanko’s management team “continues to make impressive progress advancing Obotan towards production,” and that Asanko “is now a fully permitted, fully financed developer, advancing construction of a quality project in an established mining jurisdiction.” The analyst adds that the first phase of the project “offers appeal as a relatively simple project at a brownfield site, which is expected to deliver an IRR of nearly 30% at current gold prices.”
Asanko expects to put out an updated resource estimate in the fourth quarter, but for now, the combined measured and indicated resource for the Obotan pits and the Esaase deposit stand at 139.4 million tonnes grading 1.68 grams gold per tonne for 7.52 million contained oz. gold and inferred resources, and 55.5 million tonnes grading 1.63 grams gold for 2.91 million contained oz. gold.
In his latest estimate for the combination of the two projects, mining analyst Geordie Mark of Haywood Securities estimates that “an expanded single processing plant could have the potential to deliver fourteen years of production from an open-pit mining operation that feeds an up to 8-million-tonne-per-annum processing plant . . . to deliver an average annual output of 320,000 oz. gold.”
He forecasts a US$580-million total development capex and models average annual cash costs of US$729 per oz.
Mark also points out that Ghana has “an extensive mining heritage” and ranks within the top-10 gold-producing countries. Other mining companies in the country include Newmont Mining (TSX: NMC; NYSE: NEM), Kinross Gold (TSX: K; NYSE: KGC), AngloGold Ashanti (NYSE: AU), Perseus Mining (TSX: PRU; ASX: PRU), Endeavour Mining (TSX: EDV; US-OTC: EDVMF) and Golden Star Resources (TSX: GSC; NYSE-MKT: GSS).
At press time Asanko’s shares traded at $2.65, within a 52-week range of $1.67 to $3.35.
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