Asanko Gold could also make an acquisition of its own
SmallCapPower | November 10, 2016: We first wrote about the Asanko Gold Inc. (TSE:AKG) story back in April, speculating that its low-cost production and country synergies would make the Company an ideal acquisition candidate for Newmont Mining Corporation (NYSE:NEM). Since then, Asanko’s stock price has surged more than 45% and its most recent financial/operating results suggest that the Company is firing on all cylinders and may attract the attention other suitors.
Asanko Gold, a gold junior that recently declared commercial production in Ghana, West Africa, has a more than 7.9 million ounce Measured & Indicated gold resource at its flagship Asanko Gold Mine. On November 7, 2016, the Company announced third-quarter gold production of 53,986 ounces, a 49% increase from the previous quarter, allowing it to generate net income of US$11.7 million and boost its working capital to $66.7 million. All-in sustaining costs, meanwhile, fell 29% quarter over quarter to US$907/oz, and Asanko plans to bring that number down below $800.
Newmont currently has two operating mines in Ghana (Ahafo and Akyem), which saw combined production fall from 914,000 ounces in 2014 to 805,000 last year. To that end, the Company hired former Harmony Gold Mining Company COO Alwyn Pretorius to lead its Africa operations, effective March 28, 2016.
Newmont’s most recently-reported quarter (Q3) saw its free cash flow increase to US$240 million, from $159 million a year earlier, with total cash on its balance sheet of $2.1 billion at the end of the third quarter. And, on November 2, 2016, Newmont announced the closing of the sale of its Indonesian assets for $920 million plus $403 million in contingence payments.
AngloGold Ashanti Ltd. is another potential buyer for Asanko Gold, as it too has gold mining operations in Ghana, as does Kinross Gold Corporation (TSE:K).
But don’t rule out Asanko Gold making an acquisition of its own, which would boost its future takeover value. The tiny $12 million market cap Xtra-Gold Resources Corp. (TSE:XTG), a promising gold explorer with a substantial land position in Ghana’s Kibi Gold Belt, would be an interesting fit as would Asante Gold Corporation (CSE:ASE), whose CEO, Douglas MacQuarrie, was the former boss of PMI Gold, which was acquired by Asanko Gold a few years back.