Access road at ASANKO GOLD's Esaase gold project in Ghana. Photo: Asanko Gold

Access road at ASANKO GOLD's Esaase gold project in Ghana. Photo: Asanko Gold

Peter Breese: Asanko's Savings
to Top $100m

Issue 89, June 2014

Asanko Gold expects savings from its takeover of PMI Gold to top $100m, says chief executive Peter Breese.

Asanko swallowed Ghana-based PMI in a $173m all-paper deal in February, merging Asanko’s Esaase project with PMI’s Obotan project, 30km to the south. The new company has cash of $270m, plus $150m in available debt from lender Red Kite, which it is funneling into Obotan, funding Esaase from internal cash flow. Combined, the two projects are projected to produce 400,000 gold ounces per annum for at least 12 years.

“We have a clear strategic objective,” Breese says, “to become a midtier gold producer. I think we’re in a better place than anybody else because we’ve got two projects that will get us there already, but to become a midtier, you also have to have a pipeline of assets, because every ounce you mine is gone tomorrow.”

The merger was billed as offering savings of $100m, but Breese says this only reflects corporate administrative costs over a 12-year mine life, already taken out. Asanko has closed PMI’s Australian office and has merged their camps and offices in Ghana.

“Social capital” budgeted into both projects at around $80m, including labs and medical facilities, can also be combined, whilst Esaase may be built as a large satellite pit, shuttling ore by road or conveyer to an expanded plant at Obotan, avoiding separate power lines and personnel.

Asanko is backed by Highland Park, a consortium of private investors and hardened mine builders, including Breese and Asanko chairman, Colin Steyn.

The market is ripe for consolidation, Breese says. “It costs 4 or 5 times as much to find an ounce than it does to acquire it. Look at Hummingbird, look at our transaction. It’s much cheaper to buy ounces than to find them.”

Eligible assets he says must be at the scoping stage and capable of 150,000 ounces per annum for at least 10 years. “Our strategy is to start building Obotan, but at the same time we want to consolidate pre-production assets in West Africa, not for growth’s sake, but because we can add value."

“It costs 4 or 5 times as much to find an ounce than it does to acquire it.”

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