Asanko Gold's (AKG) CEO Peter Breese on Q2 2016 Results - Earnings Call Transcript

| About: Asanko Gold (AKG)

Start Time: 09:00

End Time: 09:44

Asanko Gold Inc. (NYSEMKT:AKG)

Q2 2016 Earnings Conference Call

July 20, 2016, 09:00 AM ET

Executives

Peter Breese - Director, President and CEO

Greg McCunn - CFO

Rob Slater - Mining Executive

Phil Bentley - Geology and Resources Executive

Analysts

Rahul Paul - Canaccord Genuity

Ovais Habib - Scotia Capital

Geordie Mark - Haywood

Jeff Killeen - CIBC

Tyron Breytenbach - Cormark

Chris Thompson - Raymond James

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Asanko Gold Second Quarter 2016 Production Results Conference Call and Webcast. A copy of the press release and the presentation is available on the company’s Web site at www.asanko.com. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded, Wednesday, July 20, 2016.

I would now like to turn the conference over to Mr. Peter Breese, President and CEO of Asanko. Please go ahead, sir.

Peter Breese

Thanks very much, Rachael. If we could turn to Slide 2, forward-looking information. Thank you and good morning, ladies and gentlemen. We thought it was appropriate to host a conference call following the publication of our production results this morning, as this is our first quarter of commercial production.

Joining me today on the call is our CFO, Greg McCunn. He’s in Toronto. Rob Slater, our Executive of Mining; and Phil Bentley, our Executive of Geology and Resources. Going forward, our normal course of business will be to host a management call following the publication of our quarterly financial results.

Before I begin, I would like to draw your attention to the disclaimer on Slide 2 regarding customary forward-looking statements and cautionary statements regarding mineral resources and mineral reserves.

Now let’s get into it, starting with an overview of our first quarter of commercial production on Slide 3. We would like to – Slide 3 talks about the 2016 highlights. I am pleased to report that we have had a strong quarter at Asanko Gold mine. Commercial production was declared on the April 1, 2016, a full quarter ahead of plan and ramp up to steady-state production levels were achieved by June 2016.

This is a remarkable achievement to get to steady-state production levels within a six-month period considering the fact that not only did we build the mine ahead of the plan and within budget, but at the same time and like the majority of new mine projects, we had to pre-strip well over 28 million tons from a historically operated resolute first.

Gold production for the quarter was 36,337 ounces and in line with our guidance of 35,000 to 40,000 ounces. 35,074 ounces of gold was sold at an average realized price of $1,231 generating gold sales revenue of $43.2 million. At the end of the quarter, there were approximately 7,833 ounces of gold doré in inventory at a market value of approximately $10.2 million.

During the quarter, we received our first refund of VAT from the Ghanaian Revenue Authority which totaled $5.3 million. Now that the mine has reached commercial production, we expect to receive regular quarterly refunds and should be VAT neutral going forward.

The company’s balance sheet remains strong with approximately $43.7 million in cash and doré, as at June 30, 2016 and we have no significant debt obligations with regard to $150 million debt package until the first principal repayment, which is due in two years’ time on the July 1, 2018.

If we could move to Slide 4 please with reference to health and safety. Health and safety at our operations was the highest priority for us as an organization. We have an extremely focused approach to behavioral-based safety, which is purely focused on people’s attitudes and behavior towards themselves, their work colleagues and the work environment.

This is paying off tremendously as once again the health and safety record is exemplary. There were no lost time injuries during the quarter and we have had only one lost time injury in the past 12 months in March 2016. This is a very good achievement and we continue to implement a number of initiatives alongside our safety training to ensure our workforce does not get complacent.

Since the last time injury there have been 1.5 million lost time injury free man-hours worked on the property. The lost time injury frequency rate per million man hours worked is 0.14 for the last 12 months, which is considerably below industry benchmarks.

I’d like now to move to some of the technical stuff on Slide 5 on mining. Turning to our mining performance, as we guided earlier in the year, the first half of the year has been focused on opening up the Nkran deposits, getting the waste out of the way and increasing our operational flexibility within the pit, with the aim of exposing the main continuous ore zones by the end of Q2 of 2016.

As you can see from the slide and the pit renderings on this slide, there was excellent progress made over the period in this regard, and we began mining ore from the gas of the deposit in June. During the quarter, 5.8 million tons of waste was removed from the pit and 1.2 million tons of ore mined at an average grade of 1.48 grams per ton and a strip ratio of 4.7 to 1.

As expected, the bulk mining of the main periphery ore resulted in high levels of dilution and gold losses than are expected at steady state. In the last few weeks of June, as anticipated, we encountered the main ore zone and we have seen dilution and ore losses drop to a more normal level resulting in higher feed grades to the processing plant.

Our mining efficiencies are showing signs of improvement as a result of receiving part of the new mining contractor fleet during the quarter to replace the second-hand fleet that we started the pre-strip back in early 2015.

During the quarter, we received a new 992 frontend loader, a new 300 ton shovel and 10 new CAT 777 haul trucks. In the third quarter, we expect an additional 10 new CAT 777s and three new drill rigs which will go a long way to improving net asset utilization, increasing our efficiencies and lowering our costs.

Now that we are entering the main domains of mineralization, we can see the steady uptick in the mill feed grade which is exactly what we have been predicting. The average mill feed grade for the month of June was around 2 grams a ton and currently the feed grade for the mill are in-line with the Mineral Reserve grade for Nkran.

Moving to Slide 6, preliminary resource reconciliations. Grade control drilling continues to be a key focus area in the mine planning cycle to delineate ore well before we get to it. Grade control drilling is completed with RC drilling or reverse circulation drilling on a 5 by 10 meter grid fastened through various bench depth.

This assist us in developing detailed short-term mine plans well ahead of the mining and sequence, making predictability of volumes and grades more accurate than using the mineral resource estimates as a basis for planning. We have currently drilled out approximately 10 weeks of production in front of us that we are using for detailed mine planning purposes.

Grade control drilling continues to be hampered by input flexibility due to space constraints whilst we have been aggressively stripping back the waste to get to the gas of the deposit. Now that we are moving into the main ore zones, grade control drilling will be able to delineate future production more quickly and we are targeted to have 12 months of ore drilled [indiscernible] mining operations by this time next year.

In June, we accounted the first two mineral domains forming the company’s mineral reserve estimate we saw in the heart of the Nkran deposits. These are Domain 2000 and 2500 which are shown in red and orange on the slide and are right in the middle of the deposit. There are seven mineralized domains in total that have been identified in the Nkran pits and we started mining these first two domains in June.

As you can see from the table on this slide, the grade control drilling that has taken place in the main ore zones is reconciling extremely well with the mineral resource estimate. Both the grade control and mineral resource estimates are undiluted, so we are comparing apples-with-apples.

In Q2, the grade control models predicted about 257,000 tons of ore, which was about 10% less than the measure that indicated mineral resource estimated in the same volume of material. However, the grade control drilling estimated about 13% higher grades resulting in a 2% positive gold reconciliation. This is very encouraging and a more meaningful reconciliation will only be feasible once more mining has taken place in these larger domains, which form easily the bulk of our mineral reserve estimate for the Nkran pits.

We will anticipate that this reconciliation will take another six months of mining in the main mineral domain to be able to clearly reconcile our mineral resource to grade control and our reserve estimate to plan feeds. As the main orebody continues to be exposed in early Q3, dilution and gold losses are expected to meet bad levels.

Looking at the second table in this slide, it is important to note that the mine is doing very well at predicting the grades being mined from the pit to those at the process plant is receiving. This in our opinion is an important operational metric that we manage on a daily basis to make sure that what we expect in terms of efficiencies out of the mine in terms of dilution can impact us, mining even slow, dilution management, truck factors, stockpiling and blending are all working as they should be.

Moving to Slide 7, on the processing plant, the processing plant processed 702,318 tons of ore at an average grade of 1.69 grams per ton during the quarter. Recovery of gold was in line with expectations with high recoveries achieved in the latter half of the quarter once the oxygen plant was fully operational. The average gold recovery for the quarter was 92% with June achieving a very good recovery of about 94%, which is considerably above feasibility planned levels. Year-to-date, we have now produced about 51,600 ounces of gold and sold 43,800 ounces.

As we mentioned in our April update, we wanted to debottleneck and optimize the flow sheet to achieve throughputs of greater than 275,000 tons per month, which is approximately 10% above design rates of 250,000 tons a month on a continuous basis. This has come about from our observation that the mills have excess capacity which will enable many operations to process above feasibility design levels into the future.

The modification to the crushing, milling and leaching [ph] circuits were completed during the quarter whilst the mining operations were being ramped up to steady-state levels. As you can see from the table, production was low in April and May as a result of these operational improvements. These planned changes resulted in considerably lower than normal operating hours. And now that the works are being completed, we are seeing the entire circuit being able to run at higher levels of throughput on a continuous basis.

Turning to the last slide, which is just the outlook. We expect to announce our financial results for the second quarter on or about August 16, 2016. As we have guided, expected cost for the second quarter will be disproportionately higher compared to our steady-state life of mine expectations because of one, the mining and processing operations was still ramping up during the period; two, considerably high expenditure levels were incurred completing the process facility upgrades to allow for increased throughput, which have been put into operating costs; and three, one-off expenditures were incurred in mobilizing a new contractor owned mining fleet with our mining contractor PW to improve the efficiencies within open pit.

We expect these costs to fall in the second half of the year and to start to come in line with company expectations, as throughputs and grades improve in the second half. Importantly, we are confident in our production guidance of 90,000 to 100,000 ounces for the second half of 2016.

In closing, I would like to give a brief update on our proposed Phase 2 expansion. The Phase 2 Definitive Feasibility Study remains on track to be published during this quarter, Q3 2016, alongside the economics of the stage Phase 2A and Phase 2B expansion we will be providing in an updated schedule for mining, the newly discovered satellite pit starting in early 2017.

So in conclusion, ladies and gentlemen, we’ve had a strong quarter pushing the waste out of the pit in an aggressive fashion to allow long-term operational flexibility, doing the expansive plant upgrades to facilitate higher throughputs and hitting a number of key milestones to reach steady-state production levels within the first six months of operations.

As a closing note and before handing over to questions, I would like to make a comment regarding an opinion piece published by hedge fund out of Toronto a few weeks ago, as we have had a few inquiries about it. We have today posted a formal rebuttal to the report on our Web site, which show that their opinion is demonstrably wrong and should not be relied upon by any investor.

Clearly this fund is conducting a disinformation campaign in order to attempt to drive down our share price so that they can close what we can only imagine is a poorly continued and losing short trade. I would encourage any investor to put questions concerning the hedge fund opinion to please read our rebuttal under the investor section of our Web site.

I would now like to hand over to the operator who will manage the handling of questions. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]. Our first question comes from the line of Rahul Paul with Canaccord Genuity. Please proceed with your question.

Rahul Paul

Hi, everyone. Peter and team congratulations on the strong Q2. Just one question on mining. How much dilution are you seeing, excelled dilution are you seeing right now versus your steady-state plan?

Rob Slater

Good morning and good afternoon, everybody. It’s Rob Slater speaking. At the moment, Rahul, when we consider the main orebody, at this point still to be confirmed but we’re estimating around dilution between 7% and 9% external dilution at this point in time and it will continue to improve not only that measurement but our reconciliations over the H2 period.

Rahul Paul

Yes, I want to see – how much dilution has been included in the [indiscernible] steady state?

Rob Slater

So the original design for DPP dilution was 10%, which was made up of two factors; one, dilution being 5 and one, ore losses being 5%.

Rahul Paul

Okay. So that 7% to 9% is just the dilution not taking into account the ore losses then?

Rob Slater

That is correct but bearing in mind we are just very early days and early indication, we will continue to work on the detailed reconciliations and as Peter said, be reporting to the market in 2017.

Rahul Paul

Okay. Thanks, Rob. And then a question again on the mining. What was the total tons of ore and waste mined in June versus May? It looks like mining is well ahead of the mill and you’re able to comfortably stockpile low grade and put high grades to the mill. Were you still a bit constrained within the pit in June or is the bottleneck mostly grade control drilling at this point?

Peter Breese

Rahul, it’s Peter speaking. I’ve got the numbers right in front of me. Grade control drilling is the constraint. And you’ve been to the pit and it’s because we’re still pushing the [indiscernible] pushback down. But to give you an idea, in June we mined 493,000 tons of ore at a grade of 1.6.

Rahul Paul

Okay. Thanks. That’s pretty much all that I have. Congratulations on a good quarter and thanks.

Peter Breese

Thank you.

Operator

Our next question comes from the line of Ovais Habib with Scotia Bank. Please proceed with your question.

Ovais Habib

Hi, Peter. Hi, everyone. Again, congrats on a good quarter. Most of my questions have been answered. A question remained on terms of Adubiaso extension and an Nkran extension, were you looking to put out or release any resource estimates in the second half of the year?

Peter Breese

Ovais, good morning. Thanks for the question. Yes, we will be putting out a resource statement. We just finalized and we obviously put out a resource statement on Adubiaso. We just haven’t done that on Nkran extension. We’re just finalizing those numbers and we will put out a news release in the coming weeks, yes.

Ovais Habib

Perfect. Thanks, Peter.

Peter Breese

And both of those will be included in the Phase 2 feasibility study for bringing it to production early next year.

Ovais Habib

And in terms of additional exploration work, is that currently being conducted or have you kind of tapered back on exploration?

Peter Breese

No, sir. We tape in – when you add size to [ph] north of Nkran, there are a number of anomalies between Nkran and Dynamite Hill. Dynamite Hill is about 5 kilometers north of Nkran. And what we are doing right now is we are drill testing a number of those anomalies that showed up during the [indiscernible] and prospectively analysis. We’re testing those targets right now. None of them are having extensive drilling on them. It’s more of a testing program right now.

Ovais Habib

I see. And just going back in terms of the release you guys put out today, in terms of grade control drilling, I think I missed it, but how far ahead are you in terms of grade control drilling? And you did mention that you’re getting more equipment, so that should improve productivity there as well.

Peter Breese

Yes, we’re 10 weeks ahead right now. So we have a detailed mine plan for this entire quarter. So we know exactly grades [indiscernible], et cetera, done. We go through phases where the grade control gets to three months in advance and then it comes back to two months in advance. And it’s just a function of – grade control drilling is not a production driver although it’s key to the future. So the problem is when we need ore and we need material, the ore takes preference over the grade control drilling. So [indiscernible] really struggles to sort of catch up on that. But now that the pit is healthy enough and we have more tons per vertical meter at the base of the pit, which you saw when you came to site, and you could see by the sheer volume of ore mines in the last month, we are now having more flexibility to allocate more hours every single day to do grade control drilling. So our target is to get that up dramatically by this time next year. In fact, we would like it up dramatically before the end of this year as well. That’s really the secret behind planning any kind of mine of this nature.

Ovais Habib

Perfect. Okay. Thanks, Peter. That’s it for me.

Peter Breese

Thanks, Ovais.

Operator

Our next question comes from the line of Geordie Mark with Haywood Securities. Please proceed with your question.

Geordie Mark

Good afternoon, Peter and team. Good stuff. Just a few follow-on questions from Ovais. In terms of the grade control, I guess you got until the end of Q3, how many ore tons are sort of defined within that? And how would you like to see your sort of grade control sort of forward pattern sort of progress over the year? Where would you like to be I guess by the end of the year in terms of the forward sort of drilling in time?

Rob Slater

Geordie the grade control drilling right now we’re planning to be mining more than we milling, so the grade control drilling is covering about 1.2 million to 1.3 million tons right now for the quarter. And the whole plan is – the plan is we want to be about six months by the end of this year and 12 months by this time next year.

Geordie Mark

Okay. And not many questions been asked around the plant, so I’ll ask something there. Obviously that’s now performing nicely sort of coming into the end of June up to 94% recoveries there. I guess if I read correctly, you’re getting up to around about maybe 275,000 tons a month now, true capacity in the middle in early Q3. Are you expecting sort of sales to remain as low as they are given you actually have improved recoveries with increasing grade. And is 94% recovery a sustaining sort of number or are you --?

Peter Breese

Geordie, good question. What we find in this plant is this goal of leaches isn’t as easy as any product we’ve ever seen in our life before. But only leaches is a function of the efficient operating of the oxygen plant. So we’ve got two oxygen plants and they are pretty high-tech plants, and that’s why we made specific mention that we’re really trying to get our heads around the continuous operation of the oxygen plant, because as soon as the oxygen plant doesn’t run, the tails go whacker. So we’re doing a lot of work on managing the oxygen plant. That being said, when the oxygen plant is running we get 94% recoveries and that is at reserve grades in excess of 2.1 grams a ton. So we see no reason at those throughputs. We see no reason at 275,000 tons a month that we should be 93.5%, 94% recoveries on a continuous basis.

Geordie Mark

Okay. Thank you. Again, nice quarter there, so look to see the results coming out in – thank you.

Peter Breese

Thank you.

Operator

Our next question comes from the line of Jeff Killeen with CIBC. Please proceed with your question.

Jeff Killeen

Hi, gentlemen. Thanks for your time today. A couple of questions. So first off, just with respect to the definitive project plan, I’m wondering if you can clarify the second half of 2016 your suggesting will be about the long-term life of the mine reserve grade, so about 2.2 whereas the DPP did have 2016 feed grade being closer to 2.6. So I’m just wondering if you can clarify why there’s a difference in those two numbers.

Peter Breese

That’s quite correct, the metric is actually in process [ph]. Obviously, the DPP was based however on the 250,000 ton per month throughout rate. And so with the increase in the plant capacity that’s offsetting the slightly softer 2.1 versus the 2.2 grade feed average for H2.

Jeff Killeen

Okay, very well. And then with respect to your stockpiles, it looks like you had a very significant climb in the high grade stockpile both in terms of tons and grade. Can you comment on how that growth of the high grade stockpile marries to what your sort of internal budget numbers look like? Is that growing at the pace you expected and are those grades reconciling to where your expectations were?

Peter Breese

Jeff, those stockpiles are a function of trying to maintain a blended grade to the plant. If you look at those stockpiles of north of 3 grams, it would be lovely to go and put that into the circuit and produce 42,000 ounces in the quarter. The fact of the matter is the lead circuit will throw it all onto the [indiscernible]. So despite having some high grades and considerable high grades around, we blend what we call a weekly mine plan or a short-term plan and what we do from it is we work up detailed plant plans. And the purpose of those plant plans is to get as steady a grade on a continuous day-by-day, day-in and day-out basis into the process facility so that we can optimize not only tonnage throughput but gold recovery and ounces produced. So there’s no point taking 3 grams, putting it in and trying [indiscernible]. So it’s all about blend control.

Jeff Killeen

Okay. Thanks. I appreciate that. And really maybe just ask more specifically, I was wondering is the amount of materials you are taking off the high grade stockpile and blending, is that still in line with your original projections or are you using less of that material?

Peter Breese

It’s exactly what we would expect right now.

Jeff Killeen

Okay. Thanks. And then maybe just to shift to the process plant itself, just wondering these extra few items that you’ve added into the plant to expand process rate. Understanding that the capital spend is one-time and not likely to continue on, do you actually see any potential for a slight increase in any of the unit cost in the process plant because you’ve got a few extra components in there, or how would that work out?

Peter Breese

Actually quite the contrary to be honest with you, sir. The whole thing was designed around 250,000 tons a month and you know the mills aren’t drawing the power. So knowing that we can mine higher albeit at a slightly lower grade because obviously grade at those sort of volumes would reduce slightly. We did major modifications to the crusher and the whole reason for that was just so that the crusher could have higher utilization numbers and handle more tons per hour. So the crusher is currently running at over 100 tons an hour more than we originally planned. We had gearbox problems on the signal [ph], so those are just issues that we had to fix to be able to put the power into the mill. And the other alterations were really around speeding up [indiscernible] pumps and in-circuit pump lines, changing lines, et cetera. None of those will have the effect of increasing operating cost. In fact, to get to 275,000 tons a month they will have the effect of hopefully reducing unit cost of production.

Jeff Killeen

Okay. Thanks. And then maybe one last question. I know we’re still a ways away from next year but with this expanded circuit and being able to process more ore, would it be simple to think of from 2017 onward that if we’re thinking about a 10% increase in throughput, would you be confident enough to say that we could start thinking about a similar type of number in terms of total output in ounces?

Peter Breese

Look, Jeffery, we’re going to be publishing a DFS for Phase 2A and B in this quarter. That DFS, obviously because we mix into a common process in plant, will be a brand new life of mine plan for Phase 1, Phase 2A and Phase 2B combined. So all of those will come into the equation, so it will give you a very good guideline as to kind of the guidance we’re going to give next year and for the year after. But at the same time I think it is safe to say, because we will be [indiscernible] we would expect an increase in ounce production profile next year.

Jeff Killeen

Okay. Thank you very much. That’s it for me.

Peter Breese

Thanks, Jeff.

Operator

Our next question comes from the line of Tyron Breytenbach with Cormark. Please proceed with your question.

Tyron Breytenbach

Hi, guys. Thanks for hosting the call. Just a quick question on the 700,000 tons milled in the quarter. Specifically, the 450,000 component that doesn’t come from the big domains, the 225,000 domain, I’m just curious if that fringe material is coming from inferred or M&I component of resources?

Peter Breese

It’s coming from a combination of the two.

Tyron Breytenbach

Okay. And going forward for the rest of the year, how do you envision the split between ore coming from these main domains and the fringe areas for the rest of the year?

Peter Breese

So we expect from now between 85% and 95% of ore to be from the main domain.

Tyron Breytenbach

Okay, great. And then just one final question on the mole. I know when we were at site you guys commented that the hardness was pretty predictable. There was a [indiscernible] part that was a little bit harder than some of the sediments around it. Is it still proving that predictable and can you comment a little bit on the moles availability given the ramp up thus far?

Peter Breese

Okay. So let’s just deal with the hardness first. What we’ve done now is we’ve developed a – as part of our RC drilling program, as you know, we drill on a 5 by 10 meter grid through three benches and six benches on consecutive holes. What we’re doing right now is as a predictor of hole hardness and not only is RC drilling looking at grade control in terms of what is the grade and where the mineralization is so we can drill [indiscernible] detailed mine planning, but we’re also using the penetration rates to define hole hardness. So the end result is instead of just having a RC program that gives you grade and where the grade is, it will tell you where the grade is and by hardness kind. So it will go into low, medium, and high grades, it will also go to soft, medium, and hard ore and we’ll have to do blending on that basis. From that perspective is we are – we have been kind of [indiscernible] in the second quarter just because of the excess to a decent grade ore which was only coming in small portions of 40% from the bottom of the pit. So we haven’t been able to get into that blending routine, so it’s a new system that we’ve implemented. And I would hazard a guess that our plan is that now we are kind of getting 85% to 95% of ore from the bottom of the pit that we’ll be able to get into more steady-state control of hardness and grade together. So we expect that to be working fine from now. The second part of your question was --

Tyron Breytenbach

Just on the moles availability to-date.

Peter Breese

Okay. So the moles availability, our plan is kind of 92%. Our mole availability for June was pretty close to 92%. But as we said in April and May, mole availability was very low, because we were doing all those modifications. So right now we are easily seeing upwards of 92%, 93% on a continuous basis, no problem.

Tyron Breytenbach

Okay, great. That’s a very helpful answer. Thank you so much.

Peter Breese

Thanks.

Operator

Our final question for today is from Chris Thompson with Raymond James. Please proceed with your question.

Chris Thompson

Good morning, guys. Thanks for hosting the conference call. Save the best to last here. A lot of my questions have been answered. A couple little questions. Just looking at I guess some of the – I guess the new fleet that you acquired or the contract is acquired right now, was this to beat or improve upon guided efficiencies or rather to just sustain efficiencies in line with expectations?

Peter Breese

Chris, good morning. Thanks for the question. Let’s just wind us back a little bit. We originally signed an under two-year contract to do the pre-strip with PW in Ghana. And so because it was such a short contract, PW mobilized I think three new shovels; two 200 ton shovels and a 150 ton shovel. But all the rest of the trucks was second-hand high powered machines. And now that we are moving into a more sustainable longer term mining process and everything else, what they’ve done is they bought on a new fleet to manage a proper mining operation. So it was all about short contract equals don’t overspend on capital, which we could understand that.

Chris Thompson

Got it.

Peter Breese

So the efficiencies question is the efficiencies are improving. In fact, I think when you were there last time – since you’ve been there, our efficiencies have improved dramatically in the pit as a result of using this new fleet.

Chris Thompson

Great. Thanks, Peter. And just finally I understand there’s an election at the end of the year that’s in Ghana. Do you have any comments on that? And just a quick comment, if you would, of the Genser, they still on standby and maybe the power availability?

Peter Breese

Okay. So let’s just stay with the elections first. As you’re well aware, Ghana is the oldest multiparty democracy in Africa. They have elections on a regular basis, which is quite normal for Africa. The elections are pretty free and fray and if the sitting incumbent isn’t deemed to be doing a good job, the next person takes over. And it really is a true democracy which is fantastic for Africa, right. So that election is happening in November. We have no doubt that it will be just like all the other elections. It will be open. It will be strongly contested. We don’t expect any violence because they don’t have any history of that kind of thing. And I think it’s going to be a pretty close run fight which is really positive, I think. A good strong multiparty democracy is great for business to be honest with you. Bear in mind that I come from Africa and that’s not always the case. The second question that you had is power, yes, the 21 megawatt GridCo standby units is still on site. We now are paying $70,000 a week to have those on site. I’m pleased to say the GridCo state power that we get over the power line that we built is pretty stable. We have sold them use of the Genser power units. We did budget for 10% use and we are certainly miles below that. So power usage from the state is the main driver of our value and I’m happy to say that it’s pretty good.

Chris Thompson

Great. Thank you, Peter. Thanks, guys.

Peter Breese

No problem.

Rob Slater

Thanks, Chris.

Operator

Mr. Breese, I’ll turn the call back to you. Please continue with your closing remarks.

Peter Breese

Okay. So ladies and gentlemen, this is the first quarter that Asanko has been in commercial production. I must be honest. I think we are pretty pleased with our performance. We’ve taken the opportunity during the quarter because we quickly see and saw in the first quarter of this year that the new processing facility has a lot of excess capacity.

So we took the decision early on, let’s get in there and let’s get this mill to be able to do what it can do. And even at 275,000 tons a month that the new alterations have got us to for very limited expenditure to be honest with you is still well below the capacity of these mills without major capital expenditure that needs to be spent.

In other words, what we’ve done is we’ve tried to design it around the capacity of the money that we’ve got and also the mining constraints. We’ve only got 1% really and we can’t run that much harder than we run it, because that would be disastrous for the future of this company.

So Nkran is behaving exceptionally well. We are very pleased with what we see now with the efforts. Every day that we mine this deposit, we can daily see that the gold is there. The zones of mineralization are extensive, the grades are there and we are managing to mine the deposit to the required standards that we’ve put into our feasibility study.

So for a company that is really six months old, I think we’ve achieved a lot and I’m sure shareholders will continue to be pleased with our ability to outperform in terms of what the other people in our peer group continue to do in the future. So thank you for your time. Thanks for listening. I know it’s a busy reporting period but it was good to see that we had 62 people on the call, so thank you very much. Goodbye and have a good day. Thank you.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.