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Asanko Gold: New Life After Joint Venture With Gold Fields - Seeking Alpha

Thursday, 27 September 2018

Summary

  • Asanko Gold received major support from the recent deal with Gold Fields.
  • Nevertheless, the company's future performance remains unclear and under the current share price dynamics reflect this uncertainty.
  • Prerequisites for a momentum trade already exist, while further information is necessary to evaluate the fundamental situation.

Following a look at Gold Fields (GFI) (see >here), it was natural to take a closer look at Asanko Gold (AKG) since Gold Fields has recently entered into a 50/50 joint-venture in Asanko's Ghanaian assets. Without further ado, let's discuss Asanko, which, in my view, is a very interesting case.

Source: Asanko website

Asanko's main asset is the Asanko Gold Mine that is located in Ghana. The mine consists of 11 open pit deposits. Currently, 3 deposits are being mined: Nkran, Dynamite Hill, and Akwasiso. The company is currently working on bringing the fourth pit, Esaase, into production.

Source: Asanko website

The company has previously had problems with delivering on its guidance for the mine. At the end of 2016, the company guided for gold production of 230,000-240,000 ounces at all-in sustaining costs (AISC) of $810-840 per ounce. This never came true. The company's 2017 production was 205,047 ounces of gold at AISC of $1007 per ounce. In 2017, prominent short-sellers made profits on the company's misfortunes. Muddy Waters argued that Nkran's geology was flawed and that the company will run out of liquidity in 2018. Asanko refuted the report, but the market sided with the short-seller point of view and the stock had a horrible 2017:


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