FREE ARTICLE PREVIEW: You are enjoying a free sample of exclusive
subscriber content. There is a limit of three free articles per week.

DAILY NEWS Dec 5, 2012 5:02 PM - 0 comments

Keegan and PMI merge to form Asanko Gold

TEXT SIZE bigger text smaller text

Keegan Resources (KGN-T) and PMI Gold (PMV-T), who share a property boundary in Ghana, are tying the knot to form Asanko Gold.

The merger is an attempt by both management teams to forge West Africa’s next mid-tier producer in the most efficient way, and could be the beginning of a larger trend of consolidation — a trend than many in the industry see as necessary in cost sensitive times.

From a shareholders perspective, a merged company will win a more advanced development project for Keegan shareholders, while PMI shareholders get access to Keegan’s considerable cash position and its further down the line development project. As of September 30, Keegan had roughly $186 million in cash in cash equivalents on its balance sheet.

PMI has the Obotan project, which is expected to turn out 200,000 oz. of gold per year, starting in 2014, while Keegan owns the Esaase project, which is slated to contribute between 150,000 and 200,000 oz. per year by 2017. The two properties sit side-by-side on Ghana’s prolific Asankrangwa gold belt.

Esaase has measured and indicated resource of 68.9 million tonnes grading 1.73 grams gold for 3.83 million oz. of gold while Obotan has measured and indicated resources of 44.79 million tonnes grading 2.16 grams gold for 3.11 million oz.

The plan will be to use Keegan’s capital to help drive development of Obotan and then fund Esaase out of cash flows generated from the mine.

By combining the land packages, the newly formed Asanko Gold will control roughly 1,000 sq. km and will have consolidated the 70-km of strike length along the Asankrangwa gold belt.

Bringing the two projects together should also yield both operational and capital synergies, but hard numbers on such synergies won’t be known until an optimization analysis is done.

The deal will see PMI shareholders get 0.21 Asanko shares for each PMI share, while Keegan shareholders do nothing. That balancing out will give both shareholders an equal stake in the 171.7 million shares outstanding of the merged entity.

The two companies have similar market caps with Keegan’s coming in at roughly $325million, while PMI is close to $335 million and the combined company will have about $340-million in cash on hand and no debt.

In Toronto on Dec. 4, Keegan shares closed 1.5% or 6¢ higher at $3.97 a share while PMI shares were up 12% or 9¢ to 81¢ per share.

© 1915 - 2016 The Northern Miner. All Rights Reserved.

Related News
Asanko pours first gold in Ghana
A sobering look at gold M&A since 2010
Gold stocks that soared in 2015's H1
Related Press Releases
Asanko Gold Mine Announces First Gold Production
Asanko Gold Mine Commissioning Underway
Asanko Gold Strengthens Board

Monitor These Topics
More Topics »

Horizontal ruler
Horizontal Ruler

Post A Comment

Note: By submitting your comments you acknowledge that Northern Miner has the right to reproduce, broadcast and publicize those comments or any part thereof in any manner whatsoever. Please note that due to the volume of e-mails we receive, not all comments will be published and those that are published will not be edited. However, all will be carefully read, considered and appreciated.

Your Name (this will appear with your post) *

Email Address (will not be published) *

Comments *

* mandatory fields