Ashanti has the Midas touch in picking undervalued assets
Original Alert Email – June 27th, 2017 to Equity Grade Subscribers
SPECIAL REPORT: Ashanti Gold Corp. (TSXV: AGZ)
Recent Price: $0.28
We’ve been following the developments of Ashanti since late last year. This is the newest resource company from the Henk van Alphen-backed Cardero Group of companies. During the last mining cycle from 2006 through 2011, Henk delivered phenomenal returns for shareholders and was known for getting his penny stocks to several dollars per share. Some of you may remember deals like: International Tower Hill – hit $10.49 per share, Trevali Mining – high of $3.00, Balmoral Resources – nearly $2.00, Cardero Resources – had huge runs in 2007 and again in 2011. At some points during the last mining market the collective value of companies he was leading was in excess of $1.5 billion in market cap. Anyone who knows the high risk, high reward nature of these companies knows just how difficult a task that is and it needs to be commended and investors need to back players like this.
Then in 2012, Henk teamed up with long-time associate, Tim McCutcheon, a former analyst and investment banker with a knack for the details and deal-making. Tim rose to fame as the go-to expat banker in Russia for the mining industry. After backing some of Henk’s previous deals, Tim decided to go to the other side of the desk and bring some of his banking savvy to Henk’s universe. The sizzle, now had the steak.
The combination of the two at Wealth Minerals (TSXV: WML) has been rewarding to investors. Wealth, one of the leading Lithium-focused resource co.’s recently traded over $2.00 and has been an almost perfect bottom left to top right chart of when chemistry comes together. Henk, the uber schmoozer, networking genius and Tim, the always two-steps ahead details guy. Yin and Yang.
Wealth is getting positioned as a potential takeout target, likely won’t be around for much longer so what’s this team to do? Position themselves and start building a second act of course!
Enter, Ashanti Gold Corp. (TSXV: AGZ) – packaged by shell-maker extraordinaire, Mike Seifert (Cobalt 27, Cannabis Wheaton, Assure Holdings), financed by mining experts Brad Hemingson and Scotty Gibson and led by you guessed it: Tim McCutcheon and Henk van Alphen. Hmmm…all the elements for a huge home run. Let’s look deeper shall we?
Ashanti is the brainchild of Tim, with all his Euro-based precious metal contacts from his days on the banking and analyst side, he saw an opportunity. A huge gap in the market that could be exploited by his team’s expertise: The London AIM market for resource stocks hasn’t recovered like our Canadian market has. The AIM hasn’t really participated in the shareholder returns seen in the Lithium, Cobalt or Cannabis sectors like we have over here on the TSX Venture. As a result, the AIM has tremendous value for cherry-picking assets. This is what Tim and the Ashanti team have done. Each of their 3 projects have been acquired via property options. This means no dilution of shares to vendors only looking to sell or having to be married to a project for the life of a company. Smart. Two steps ahead. That’s Tim.
Ashanti has three (3) different gold projects that they’ve optioned, two in Ghana and one in Mali. Two of these have JORC resource estimates of about 250,000 ounces each giving the young company already about 500,000 ounces of gold resources in non NI 43-101 compliant reports. The TSX doesn’t like this format of technical reports and slaps the wrist of juniors touting JORC reports pretty quick. So, Tim has erred on the side of caution and the market doesn’t really know yet what Ashanti already has under option. Hopefully we can help get the spotlight on this.
For those of you that don’t know what a JORC resource estimate is, it’s a competing method to the NI 43-101 method for compiling technical reports. These types of rigorous methods keep companies honest and allows for apple-to-apple comparison.
In Ashanti’s case, they are the benefactor of nearly $10M of historic drilling and exploration work done on the dime of others to compile these reports and outline over $500M worth of gold in the ground. Today, Ashanti has a market cap of less than $9M with $2M cash in the bank. Wow. Now this is leverage.
Africa likely feels like another world away. How important is it to the production of gold? It’s more likely that you’ve been the target of a phishing scam, getting an email from someone supposedly based in Africa who has gold dust for sale or millions stuck in a bank account that they need help some help wiring overseas.
However, Africa is one of the largest gold producing regions in the world only behind Asia and Ghana and Mali are the 2nd and 3rd largest gold producing countries in Africa itself. Both countries are in the top 20 gold producing countries in the entire world.
Of Ashanti’s optioned projects, the project that has us most excited is their Kossanto East project located in the prolific gold mining region of Northwest Mali.
It’s had 215 drill holes and nearly 14,000 meters of drilling completed historically by other operators and the most recent JORC resource estimate being compiled in 2014 has outlined 247,000 ounces at an average grade of 1.14 g/t Au. The resource more than doubled from its maiden resource report in 2013 increasing from 107,000 ounces. Hello upside!
The best part? The Company just announced that they’ve started back drilling and will complete another 6,000 meters for between 45 and 55 holes. Last we checked, they have already completed 11 holes and the program will be finished prior to the end of June.
The TSX Venture has never really seen the previous drill results. They are in our review, spectacular! Here are some highlights:
As you can see, there’s gold all over the place and much of it very shallow. What’s the plan now? How does this get bigger?
The Kossanto East project is comprised of six (6) mineralized “pods”, four of which have seen some drilling and only two of which are the basis for the resource calculation.
These four targets: GRB West, GRB East, GRB NE and Berola N are the focus of the current drilling program. Continued successful drilling at Berola N and GRB NE will only add ounces to the company as these “pods” didn’t see enough drilling to be included in the JORC resource estimate.
The plan here is to drill out the six known “pods”, seek to identify others and if each were to contain say around 500,000 ounces, Ashanti would have another major gold deposit on its hands. So, who’s operating in the area that might be interested in a project like this?
All we have to do is look 4km to the West and we find the gold producing major, Randgold who are exploring and developing…the Kossanto West gold project. Randgold defines economic deposits as 3M ounces of gold with a minimal internal rate of return of 20% at a long term gold price of $1000/oz. They have developed and operate five world class gold mines – three of which are in Mali on the same Western flank of the country as Ashanti.
Not far East, Acacia Mining (formerly Africa Barrick) is exploring the Tintinba project. They are in some deep doo doo of late. They’ve been accused by the Tanzanian government of operating illegally in the country and are likely to have to make a hasty retreat, they are in desperate need of projects to fill their pipeline and Mali might see much more focus on project acquisition.
Ashanti just closed on a $2.02M private placement at $0.25 (we participated) that will allow it to aggressively advance its portfolio of projects for the next 12 months taking financing risk of the table and will likely see Ashanti significantly build on the historic 14,000 meters of drilling seen at Kossanto East.
As a peer comparable, Nexus Gold Corp (TSXV: NXS) which has two earlier stage, pre-resource projects in nearby Burkina Faso has a nearly $30M valuation…or triple Ashanti’s valuation. We think Ashanti offers great leverage with its tightly held share structure (32M shares out), high quality project portfolio that includes two with combined JORC resources of nearly 500,000 ounces of gold and the reteaming of the winning Wealth Minerals management team.
In our opinion, Ashanti Gold Corp. (TSXV: AGZ)
“Makes the Grade.” We will be buyers in the market.