MACIG Connect Series
Douglas MacQuarrie (DM): Since Asante Gold listed on the TSX Venture Exchange in February 2012, the company conducted greenfield exploration on an early stage concession, Fahiakoba. The property is posi-tioned in the center of Ghana’s “Golden Triangle,” adjacent to Perseus Mining’s Edikan mine and on strike with AngloGold Ashanti’s/Randgold’s Obuasi mine. Asante’s primary focus however is its Kubi mine, located 9 kilometers (km) east of Fahiakoba, and a program of drilling to test its new Betanase concession recently optioned from Perseus.
In October 2014, Asante acquired the right to earn up to a 100% interest on a proven and measured re-source, the Kubi mine with Goknet Mining—a private Ghana company that has been active in Ghana for the past fifteen years. At present, closing is subject to final due diligence and financing. Asante plans on taking Kubi to production at circa 30,000 ounces (oz) per year within approximately one year. Nestled among key players such as Newmont (Ahafo), Gold Fields (Tarkwa), Kinross (Chirano) and AngloGold Ashanti/Randgold (Obuasi), the Kubi mine is located in the heart of Ghana’s “Golden Triangle,” home to one of the world’s greatest ore bodies, and enjoys a prime location and nearby infrastructure.
The company will use the cash flow generated from its flagship property to fund exploration at Betanase and Fahiakoba as well as to source new high margin precious metal projects and royalties to add to its portfolio, whether in Ghana or elsewhere around the globe.
How has Asante Gold’s Kubi mine evolved over time?
DM: The term “Asante” is the local spelling for the word “Ashanti,” which represents a predominant and historic gold mining area of Ghana, and is synonymous with the great Ashanti nation. Dating back to the 1920s, when a series of adits were driven, the Kubi mine is steeped in history. In its lifetime, the brownfield near-term development project has undergone $30 million in drilling, exploration and development.
In the late 1980s BHP carried out some soil sampling and discovery drilling, and soon realized the property’s high grade potential with grades to 12 grams per ton (g/t) gold. However, despite its high grade, the property was too small for a company of BHP’s size, so they optioned it to Nevsun Resources, who invested $20 million to $30 million in drilling and developing the property during the 1990s. The property was then leased to AngloGold Ashanti in return for a production royalty, who mined roughly 58,700 oz gold from two open pits by 2006. Kubi was then sold the following year to PMI Gold (now Asanko Gold). Although not a primary focus for PMI, the company still completed scoping studies, geophysics and drilling, which resulted in a significant new discovery at the property in 2009. Goknet Mining acquired the Kubi mine in 2014, as a result of a recent agreement between PMI and Goknet.
What stage has Asante Gold reached with its Kubi mine and what plans does the company have over the coming months?
DM: Since October 2014 Asante Gold has been working on the preliminary mining permits, portal and de-cline mine design, as well as refining underground costs. Discussions have also commenced with various toll-milling facilities to mill the Kubi ore on a contract basis.
It is expected that Asante will then complete a pre-feasibility study to assist it to raise the startup capital. Asante will be sourcing $15 million to $20 million for working and development capital to be invested in Kubi, predominantly through debt financing and possibly convertible equity (at higher prices).
Thereafter it will simply be a case of moving swiftly to final permitting, portal and decline construction. Then, over a period of approximately six months, from drill stations on the decline, Asante intends to start resource upgrade drilling to reserve status. Initially ore shoots with +7 g/t gold will be targeted. The ore is not refractory and test metallurgy suggests recoveries to +92% are obtainable. Ideally, eight to 10 months after financing the company will be moving initial test ore to the surface.
The current business plan utilizes trucking and toll milling. So essentially, once the company starts producing ore – cash flow will commence. Asante’s Kubi mine is a quick-to-production opportunity, with a very early payback to the debt funding.
What potential does the Kubi mine hold for Asante Gold?
DM: The mining industry is at the bottom of a three-year decrease in gold price, but no matter what the market conditions are, the right projects will always achieve the required financing. In the current price environment, investment will only come to projects that boast high grade and high margins. The grades that the Kubi mine enjoys are within the top ten percentile, meaning in a low price environment these are the projects that are able to seek funding, as they will generate a healthy profit margin.
An annual production estimate at the company’s Kubi mine is in the region of 30,000 oz gold. Despite Kubi’s size, Asante Gold’s flagship property is set to be a fruitful one because of its low costs and high grades. Ten years ago the market cared about how many ounces a company had, today the fundamental question is what is the margin.
What areas need to be improved in Ghana’s mining industry and how will Asante Gold contribute?
DM: Ghana has been coined as one of the best mining jurisdictions in Africa due to its political stability, world-class gold deposits, and decent infrastructure, but there are issues that need to be addressed. In comparison with other mining friendly countries, Ghana’s current royalties, corporate taxes and user fees are too high and are seriously hampering new mining investment, particularly for high capital—low grade type gold deposits. Ultimately, there needs to be a significant improvement for Ghana to regain its status as the “go to place for gold mining in West Africa.” Royalty and tax structures must be more flexible to accommodate periods of low commodity pricing.
Recently, Ghana’s “Golden Triangle” region witnessed a major investment announcement with Randgold, subject to closing, agreeing to partner with AngloGold Ashanti to re-develop the Obuasi mine–with a planned investment of $1 billion. Asante’s Kubi, located just 25 km south of the Obuasi mine, is in the right place, at the right time, and will be a part of the resurgence in Ghana’s gold mining industry.
This interview was conducted as part of research by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2016. A pre-release report on the Central African Copperbelt was released in October 2015 and can be accessed here. To participate in this report, please contact Sharon Saylar at firstname.lastname@example.org.