KUMASI, Ghana – “There were no hotel rooms, so I had to sleep on the floor.”
That was a telecommunications CEO in Sierra Leone, telling me about a mining conference in Guinea a week ago. Joe Spytek and his Perth, Australia, company were there servicing and prospecting producers and near-term producers in West Africa. The hot companies are aluminum and iron ore, which is metal du jour in Guinea right now.
Some ofthe companies packing those hotelrooms: Bechtel (aluminum), Rio Tinto (iron ore), Newmont Mining (gold), West African Iron Ore … and a crop of junior prospectors.
I am in West Africa (Ghana this week a visit to a Sierra Leone diamond project) to see a few gold prospectors for the first time and two favourites for repeat visits. (See article.)
I am traveling with a well-known geologist and a global asset manager. The trip also takes me to Mali and elsewhere in pursuit of fresh prospects, mostly in gold. Companies I am visiting include Midland Minerals (TSX: V.MEX, Stock Forum), PMI Gold (TSX: V.PMV, Stock Forum) and several others, among them companies whose shares I own and properties I have visited before.
What I find in my sixth (or seventh) visit to West Africa are overbooked drilling rigs that split time ripping to one project from another. Like the freshly painted rig I saw at one of PMI Gold’s Obotan concessions earlier this week – hauled from its spot drilling at Keegan’s (TSX: T.KGN, Stock Forum) nearby Esaase gold project to the north.
What I find are reports of tortuous delays at local metal assay labs in Tarkwa, Obuasi and in Kumasi, Ghana. What I find are slabs of core (at PMI’s Obotan and at Apapam for Xtra-Gold Resources, a company whose shares I own) riddled with visible gold and promising metallurgical indicators.
What I find across Ghana are artisanal alluvial miners, more than during my last visit just three months ago. In one case: an entire village plopped onto a waste pit at PMI’s lead property at Obotan. “They are probably good for a half-gram to a gram of gold per day per person,” says Neil Macfarlane, a Canada-trained country manager and geologist for PMI. He’s been in Ghana seven years now. (See photo: Mr. Macfarlane and two of his local geologists, scanning core at base camp at Obotan. – Thom Calandra photo)
What I find are improving though trafficked roads and improving though sometimes spotty wireless broadband service at most small gold camps, which rely on satellite dishes and cell towers for communications.
What I find are professional miners and prospectors waiting to see the launch of mining in six weeks at Perseus Mining’s (TSX: T.PRU, Stock Forum) Ayanfuri mine in the Ashanti Belt. The Central Gold Project, as it is called, is projected to produce 220,000 ounces of gold at an operating cost of $500 an ounce in its first year. Yet the grade for that Australia-run miner is said by observers to be no more than 1.3 grams per tonne.
There is scepticism, as always, among observers. How can Perseus be scheduled to produce gold for $500 an ounce with 1.3-grams gold? Especially against this Ghana landscape: the KinrossGold (former Red Back) Chirano mine (TSX: T.K, Stock Forum; KGC) is producing 2.4-grams-per-tonne gold at a pace of almost 250,000 ounces yearly.
Newmont’s (NYSE: NEM, Stock Forum) Ahafo mine is doing 2.4 grams per tonne in an open pit, and at a pace that is said to be 500,000 ounces a year headed to one million ounces. “There’s a high-tech village at Ahafo, swimming pool and all,” said Yves Clement, geologist and VP of Exploration at Xtra-Gold (TSX: T.XTG, Stock Forum and XTGR).
Ghana is now the second largest gold producer in Africa, after the Republic of South Africa. If I am correct, the current sell-off in commodities equities worldwide will (and already has) presented a temporary discounted ticket for admission into one of the developing world’s finest governmental and logistical frameworks for mining.
“There is gold everywhere in the world. But there is only economic gold when you see a confluence of events and criteria,” says Quinton Hennigh, that American geologist who is traveling with me. The Colorado-trained doctor of geology and mining consultant continues: “That means the geology, the people, the grades, the roads, the mining commission and a lot of other s---. Ghana has proven itself many times over in that regard.”
(Aside from Xtra-Gold, Thom owns none of the company shares in this article. He receives no compensation from these companies. He is negotiating with Xtra-Gold about performing investor outreach services.)