Anthony Alfidi's  Instablog

Anthony Alfidi
Send Message
Anthony J. Alfidi is the founder and CEO of Alfidi Capital, a private research firm in San Francisco, California. Alfidi Capital publishes free financial research with honesty and humor. Mr. Alfidi holds a Bachelor's degree in human resource management from the University of Notre Dame (cum... More
My company:
Alfidi Capital
My blog:
Alfidi Capital Blog
  • Asanko Gold Used To Be Keegan Resources 0 comments
    Jul 4, 2013 5:39 PM | about stocks: AKG

    Keegan Resources is now Asanko Gold. Name changes do not change the underlying fundamentals of a company. Asanko Gold used to trade as KGN.TO but now trades as AKG. It's still a gold explorer in Ghana, an African country that ranks 64th on Transparency International's Corruption Index (above the median) and 77th in the Heritage Foundation's Index of Economic Freedom (above the median). Ghana also ranks 108th on the World Bank's 2012 Logistics Performance Index. Noting country risk is always important when evaluating investments in emerging markets. Ghana is less corrupt and more stable than its peers but its infrastructure is still immature.

    I had noted in my analysis of Cayden Resources last year that some of that company's management team also had responsibilities with Keegan. That is no longer the case with Asanko's present management. The Asanko team looks like they have a lot of experience with a variety of mining projects plus experience specific to Ghana.

    The last time I checked on these folks when they were called Keegan, their Esaase project had MII resources. They now have a 43-101 pre-feasibility study dated June 2013 that shows 2P reserves of 1.41 g/t Au. That's not bad at all these days. Good work, folks. The PFS estimate for initial capex is US$286.5M with a total cash cost of production (I always ignore tax adjustments) of almost US$813/oz Au.

    I like that their IRR estimated ranges at different market prices for gold have been fairly consistent at various stages of the Esaase project's development. Yes, I've been tracking them for some time and I kept their previous estimates for comparison. I'm concerned that the cash cost of production is significantly higher than gold's long-term average market price of US$615/oz. Gold prices will have to remain significantly higher for the ten-year life of this mine for it to maintain its projected production.

    Asanko's most recent quarterly statement dated March 31, 2013 shows cash on hand of about US$197M. That is a phenomenal war chest but they will still need to raise more money to start production at Esaase. The good news is that they seem to manage their burn rate quite well, which increases their chance of surviving until they can find a larger partner to help fund full production.

    I like Asanko but I'm not buying the stock just yet. I want to see whether a major producer finds the Esaase project attractive enough to make Asanko an offer they can't refuse.

    Full disclosure: No position in Asanko Gold at this time.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: AKG
Back To Anthony Alfidi's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.