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Thursday, 20 June 2013
Asanko Gold should be a focus for investors seeking strong gold project, low financing risk: Jennings
Asanko Gold Inc. (TSE:AKG)(AMEX:AKG) retained a buy recommendation from Jennings Capital Thursday, the same day the Vancouver-based miner updated on its activity at the Esaase gold project in Ghana, including raising several measures designed to improve project economics.
The West African site is moving ever-closer to production, with the multi-million ounce near term gold project on-track to commence early site works by the end of 2013, according to the company.
The company says it expects to hit production levels of 200,000 ounces per year by the end of 2015.
Asanko initiated a Definitive Feasibility Study (DFS) immediately after the site’s Pre-feasibility Study (PFS) was published in May.
Aside from the DFS, current activities include a continuing permitting process underway following a successful public hearing, with the submission of an environmental impact statement due in July and the initiating of project financing with a South African financial advisor already engaged.
Critical to the recommendation from Jennings analyst Dan Hrushewsky, which put the 12 month target for the shares at $4.75, more than twice its most recent close, are several key opportunities the company is pursuing to further enhance the project’s economics.
Singled out for special mention is the fact that the company is taking the step of pursuing key improvements to project parameters that should result in improved project economics and a better resource- to-reserve conversion ratio than that published in the recently updated pre-feasibility study (PFS).
Among other measures the company plans to take is the expedient of using lower cost figures which were available toward the end of the PFS update, but were not incorporated due to time constraints, as well as the tack of increasing the processing rate in the early years when the deposit's oxides will be mined.
Added to these are the measures decreasing the mass pull of the flotation circuit through optimization, which could reduce capital and operating cost estimates, as well as the possibility of steepening the pit walls with additional geotechnical analysis, thus reducing the strip ratio.
The analyst also focused on the fact that Asanko, which is seeking debt project financing of $150 million, benefits from the fact that South African banks, subsidized by state incentives to promote the use of South African suppliers, are making very favourable loans to mining projects.
“[The company], with a South African financial advisor and South African based management (the ex Lion Ore group), should be in a good position to benefit from such opportunities,” read the Jennings note in part.
“More mineable material in the mine plan and (especially) a fully-funded mine construction financing program should result in a re-rating of the stock. With its large cash position, in addition to its sizable project with good grades and continuity, intriguing exploration potential and good jurisdiction, we believe AKG should be a focus for investors seeking a strong gold project with low financing risk.”