It’s a deal that came like a bolt from the blue. |
Just two weeks ago, Asante Gold (ASE.CN; ASGOF.OTC) catapulted itself from a relatively sleepy gold story into a major development-stage company set to breathe new life into Ghana’s huge, past-producing Bibiani mine. |
And make no mistake, Bibiani is big. It’s already produced more than four million ounces of gold through the mid 2000s and has been on care and maintenance since 2006. |
Australian gold company Resolute Mining bought the mine in 2012 and used drilling to establish a significant underground resource there.
A 2018 preliminary economic assessment, based on Australian compliance standards, showed Bibiani capable of producing 100,000 ounces gold per year for 10 years at extremely modest operating costs. |
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| Bibiani has historically produced four million ounces of gold. Resolute Mining’s work on the project in the 2010s showed it capable of producing a lot more. |
So enticing was this project, in fact, that Resolute had recently attracted a Chinese buyer willing to pay US$105 million for the project.
The deal blew up in April, however, with the buyer’s discovery that the government had terminated Resolute’s mining lease for Bibiani.
Sounds ominous right? But as you’re about to see, where that Chinese buyer encountered frustration, Asante Gold sees opportunity. |
A Company-Making Acquisition |
Asante has such confidence that its leadership team can shepherd Bibiani back into production that it agreed to pay Resolute US$90 million cash for the project.
Much of that confidence comes from the combined track records of two of Asante’s key players — President and CEO Doug MacQuarrie and Executive Director Malik Easah. |
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| President & CEO Doug MacQuarrie and Executive Director Malik Easah give Asante Gold an insider’s advantage when it comes to operating in Ghana. |
MacQuarrie has been operating in West Africa for 27 years and led PMI Gold prior to its successful 2013 takeout by Asanko Gold (now Galiano Gold) for C$183 million.
As a Ghana native, Easah is intimately connected with key players within the government.
More importantly, though, he’s fresh off selling Cardinal Resources, a company he founded and led through the outlining of a seven-million-ounce gold resource, for A$600 million. |
Cardinal 2.0:
Looking To Repeat An A$600 Million Success |
That sale closed in March and left Easah with a huge windfall.
But rather than rest on his laurels, he immediately began looking for Cardinal 2.0. |
He found it in Bibiani, a past-producing operation where Resolute had outlined 2.5 million ounces gold mineable at a life-of-mine, all-in sustaining cost of $765/ounce. |
Granted, that resource can’t officially be relied upon until Asante has the chance to do the pro-forma work needed to make it compliant with Canada’s NI 43-101 rules.
But as that prior bid for Bibiani made clear, this project has legitimate, in situ value. |
So much so that Easah was able to pull together a concurrent C$80 million subscription receipt financing to pay for the acquisition. |
And thanks to the participation of two key investment groups, he was able to do so at C$0.70 a share, a small miracle considering Asante was trading at C$0.40 the day before it announced the Bibiani acquisition.
That smart-money players were willing to pay such a big premium for Bibiani speaks volumes about the reputations and connections Easah and MacQuarrie have in Ghana.
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The Right Team For The Job |
The team these gentlemen have put together to lead Asante includes a combination of Ghanaian citizens and outside mine developers who have years of experience working there.
As Easah’s sale of Cardinal made clear, having in-country connections is critical to doing business in this West African country. |
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| Asante’s management team, board and advisors have deep roots in Ghana, giving the company a decided edge as it looks to return Bibiani to production. |
A likely reason Resolute didn’t keep its license for Bibiani is that the government didn’t consider the Chinese buyer to be sufficiently aligned with the country’s interests.
A casual glance through Asante’s executive team, board and advisors should confirm for you the extent to which the company is “on side” in terms of local backing. |
Awakening A Sleeping Giant |
As mentioned, Asante plans to quickly bring Bibiani into compliance with Canadian mining standards. |
When it does, it will become clear to the market that this project’s 2.5-million-ounce gold resource is for real, as is its potential to return to profitable production. |
Success with this effort alone could justify a big re-rating in Asante Gold’s share price. |
But the company is also contemplating an aggressive drilling program to expand the existing resource and, potentially, to re-imagine it as a larger, open-pit operation. |
Given the past track records of the team leading this company, odds are high that this work will succeed in awakening the sleeping giant that Bibiani represents.
With short-term weakness in gold providing an inviting entry point, Asante Gold and its newly acquired, development-stage project deserve your immediate attention. |
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