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Trucking, carrying costs hurt as Asanko Gold, Gold Fields make start on Esaase prospect - MiningMX

Wednesday, 8 May 2019

ASANKO Gold said it was on course for production of 225,000 to 245,000 ounces in the 2019 financial year as guided following a first quarter that nonetheless resulted in a loss as a result of the commencement of mining activities at Esaase, its project.

“Costs for the quarter were impacted by higher trucking costs as we initiated mining operations at the large scale Esaase deposit,” said Greg McCunn who succeeded Peter Breese as Asanko Gold’s CEO this year.

“Commercial trucking contracts are now in place and we expect oxide ore from Esaase to represent 25% to 30% of the mill feed on an ongoing basis,” he added.

An adjustment on the carrying value of ore stockpile inventory also pushed up costs which came in at $1,123/oz compared to $1,072/oz in the fourth quarter (but better than the $1,226/oz in the first quarter of the 2018 financial year). The firm’s 2019 guidance of between $1,040 and $1,060/oz was maintained, said Asanko Gold.

It was the opportunity offered by Esaase that attracted Gold Fields to a joint venture with Asanko Gold, which is listed on the Toronto Stock Exchange. The South African gold miner paid $165m for a 50% share of Asanko’s 90% stake in Asanko Gold Mines (AGM), the Ghanaian subsidiary.

In addition, Gold Fields assisted in the recapitalisation of Asanko Gold by means of a share subscription through a rights issue in which it took a 9.9% for $17.6m. All in all, Gold Fields spent $202.6m for roughly 100,000 oz of gold annually.

McGunn said Asanko’s technical team was reviewing the current life of mine plan of AGM, including scenarios for the long-term development of the Esaase deposit. The partners were also assessing the exploration potential of the AGM’s land package, “… particularly the highly prospective South Camp tenements”, he said.

“The joint venture partners are currently considering an optimal work plan and timing required to deliver an updated life of mine plan for the AGM and expect to update the market further in H2 2019,” said McCunn.

AGM reported a net loss after tax of $14.1m which included a loss of $13.3m associated with adjustments to the carrying value of ore stockpile inventory. Asanko Gold reported a $5.3m net loss which included a proportional adjustment to net realisable value of the ore stockpiles at the AGM of $6m.

“We are now well positioned to start harvesting the benefits of these major investments as we shift our focus to maximising cash flow generation from the AGM over the next 18 to 24 months,” said McCunn.

Asanko Gold held $8.8m in cash as of March 31 with the final $20m cash payment related to the Gold Field’s transaction expected no later than December 31, it said.

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