UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2015
Commission File No. 001-33580
ASANKO GOLD INC.
(Translation of registrants name into English)
Suite 680, 1066 West Hastings Street, Vancouver, British Columbia, V6E 3X2
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under the cover Form 20-F or Form 40-F
Form 20-F o
Form 40-F x
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
SUBMITTED HEREWITH
Exhibit No.
Document
| |
99.1
| Interim consolidated financial statements for the three months ended March 31, 2015 and 2014
|
99.2
| Managements Discussion & Analysis for the three months ended March 31, 2015 and 2014
|
99.3
| CEO certification of interim filings
|
99.4
| CFO certification of interim filings
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | |
ASANKO GOLD INC.
|
(Registrant)
|
|
|
By:
| /s/ Greg McCunn
|
| Greg McCunn
|
| Chief Financial Officer
|
|
Date:
| May 14, 2015
|
|
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three months ended March 31, 2015 and 2014
_______________________
1
ASANKO GOLD INC.
Condensed Interim Consolidated Statements of Financial Position (Unaudited)
Expressed in United States Dollars
| | | | |
| | March 31,
2015
| | December 31,
2014
|
Assets
| | | | |
| | | | |
Current assets:
| | | | |
Cash and cash equivalents
| $
| 222,937,109
| $
| 228,679,552
|
Receivables
| | 129,013
| | 150,211
|
Prepaid expenses and deposits (note 13(b))
| | 2,221,584
| | 227,645
|
| | 225,287,706
| | 229,057,408
|
| | | | |
Non-current assets:
| | | | |
Property, plant and equipment (note 4)
| | 96,671,040
| | 61,101,941
|
Reclamation deposit (note 5)
| | 1,695,269
| | -
|
Mineral interests and development assets (note 6)
| | 192,071,752
| | 188,005,237
|
Deferred debt financing costs (note 8)
| | 2,936,146
| | 2,936,146
|
Investment in associate
| | 1,000
| | 1,000
|
| | 293,375,207
| | 252,044,324
|
| |
| |
|
Total assets
| $
| 518,662,913
| $
| 481,101,732
|
| | | | |
Liabilities
| | | | |
| | | | |
Current liabilities:
| | | | |
Accounts payable and accrued liabilities (notes 13 (b))
| $
| 17,199,839
| $
| 15,353,474
|
Foreign currency forward contract liabilities (note 19 (d)(i))
| | 269,051
| | -
|
| | 17,468,890
| | 15,353,474
|
| | | | |
Non-current liabilities:
| | | | |
Long term debt (note 8 and note 19(d)(ii))
| | 58,770,427
| | 57,447,225
|
Asset retirement provision (note 9)
| | 15,406,094
| | 12,638,318
|
Deferred income tax liability
| | 12,099,762
| | 12,083,658
|
| | 86,276,283
| | 82,169,201
|
| | | | |
Total liabilities
| | 103,745,173
| | 97,522,675
|
| | | | |
Shareholders Equity
| | | | |
| | | | |
Share capital (note 10)
| | 539,817,631
| | 505,468,841
|
Equity reserves (note 11)
| | 44,476,695
| | 43,032,396
|
Accumulated deficit
| | (169,376,586)
| | (164,922,180)
|
Total shareholders equity
| | 414,917,740
| | 383,579,057
|
| | | | |
| | | | |
Total liabilities and shareholders equity
| $
| 518,662,913
| $
| 481,101,732
|
Acquisition (note 3)
Commitments (note 14)
Contingencies (note 5 and 15)
| | |
Approved by the Board of Directors on May 13, 2015:
|
Peter Breese
| | Marcel de Groot
|
Director
| | Director
|
SEE ACCOMPANYING NOTES
2
ASANKO GOLD INC.
Condensed Interim Consolidated Statements of Comprehensive Loss (Unaudited)
Expressed in United States Dollars
| | | | |
| | Three months ended March 31, 2015
| | Three months ended March 31, 2014
|
| | | | |
Administration expenses:
| | | | |
Consulting fees, wages and benefits
| $
| 357,223
| $
| 812,944
|
Depreciation
| | 25,716
| | 29,065
|
Office, rent and administration (note 13)
| | 194,008
| | 651,739
|
Professional fees
| | 299,747
| | 160,426
|
Regulatory fees, transfer agent and
| | | | |
shareholder information
| | 28,401
| | 141,035
|
Share-based payments (note 11(a))
| | 843,320
| | 1,084,580
|
Travel, promotion and investor relations
|
| 186,632
|
| 285,098
|
| | 1,935,047
| | 3,164,887
|
| | | | |
| | | | |
Exploration and evaluation expenditures (note 7)
| | 545,919
| | 57,889
|
| | | | |
| | | | |
Other expenses (income):
| | | | |
Accretion expense (note 9)
| | 75,319
| | 91,775
|
Bank charges and interest
| | 17,000
| | 5,842
|
Business development (note 3)
| | 230,436
| | 4,341,363
|
Change in embedded derivative liability (notes 8 and 19(d)(ii))
| | 4,442
| | -
|
Change in foreign currency forward contract liability
| | 269,051
| | -
|
Change in foreign currency warrant liability
| | -
| | 146,670
|
Foreign exchange loss (note 19(e))
| | 1,634,010
| | 602,228
|
Interest and other income
| | (272,922)
| | (376,217)
|
Restructuring costs (note 12)
|
| -
| | 2,882,891
|
|
| 1,957,336
| | 7,694,552
|
| | | | |
Loss before taxes
| | 4,438,302
| | 10,917,328
|
Deferred income tax expense
| | 16,104
| | -
|
Loss and comprehensive
| | | | |
loss for the period
| $
| 4,454,406
| $
| 10,917,328
|
| | | | |
Loss (earnings) per share
| | | | |
Basic and diluted
| $
| 0.02
| $
| 0.08
|
| | | | |
Weighted average number of shares outstanding
| | 186,472,607
| | 137,354,845
|
ASANKO GOLD INC.
Condensed Interim Consolidated Statements of Changes in Equity (Unaudited)
Expressed in United States Dollars
| | | | | | | | | |
| Number of shares
| | Share capital
| | Equity reserves
| | Accumulated deficit
| | Total equity
|
| | | | | | | | | |
Balance as at December 31, 2013
| 85,054,338
| $
| 334,423,542
| $
| 36,461,969
| $
| (142,280,546)
| $
| 228,604,965
|
Issuance of common shares for:
| | | | | | | | | |
Acquisition of PMI (note 3)
| 87,149,919
| | 166,743,940
| | 2,342,086
| | -
| | 169,086,026
|
Exercise of share-based options (note 10(b))
| 12,500
| | 18,894
| | (6,102)
| | -
| | 12,792
|
Share-based payments (note 11(a))
| -
| | -
| | 1,991,909
| | -
| | 1,991,909
|
Loss and comprehensive loss for the year
| -
| | -
| | -
| | (10,917,328)
| | (10,917,328)
|
Balance March 31, 2014
| 172,216,757
| $
| 501,186,376
| $
| 40,789,862
| $
| (153,197,874)
| $
| 388,778,364
|
| | | | | | | | | |
Balance as at December 31, 2014
| 174,075,607
| $
| 505,468,841
| $
| 43,032,396
| $
| (164,922,180)
| $
| 383,579,057
|
Issuance of common shares for:
| | | | | | | | | |
Bought deal financing (note 10(b))
| 22,770,000
| | 34,348,790
| | -
| | -
| | 34,348,790
|
Share-based payments (note 11(a))
| -
| | -
| | 1,444,299
| | -
| | 1,444,299
|
Loss and comprehensive loss for the year
| -
| | -
| | -
| | (4,454,406)
| | (4,454,406)
|
Balance as at March 31, 2015
| 196,845,607
| $
| 539,817,631
| $
| 44,476,695
| $
| (169,376,586)
| $
| 419,917,740
|
| | | | | | | | | |
SEE ACCOMPANYING NOTES
4
ASANKO GOLD INC.
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
Expressed in United States Dollars
| | | | | |
| | | Three months ended March 31, 2015
| | Three months ended March 31, 2014
|
| | | | | |
Cash provided by (used in):
| | | | | |
| | | | | |
Operating activities:
| | | | | |
Loss for the period
| | $
| (4,454,406)
| $
| (10,917,328)
|
Items not involving cash:
| | | | | |
Accretion expense
| | | 75,319
| | 91,775
|
Change in embedded derivative liability
| | | 4,442
| | -
|
Change in value of foreign currency forward contracts
| | | 269,051
| | -
|
Change in foreign currency warrant liability
| | | -
| | 146,670
|
Deferred income tax expense
| | | 16,104
| | -
|
Depreciation
| | | 25,716
| | 29,065
|
Interest income
| | | (272,922)
| | (376,217)
|
Share-based payments
| | | 843,320
| | 1,084,580
|
Share-based payments included in
| | | | | |
exploration and evaluation expenditures
| | | 121,157
| | -
|
Unrealized foreign exchange loss (gain)
| | | 2,222,484
| | 615,717
|
Write-off of property and equipment (note 12)
| | | -
| | 205,695
|
Changes in non-cash working capital:
| | | | | |
Accounts payable and accrued liabilities
| | | (138,210)
| | (4,217,668)
|
Prepaid expenses and deposits
| | | (1,993,939)
| | (138,433)
|
Receivables
|
|
| 9,661
|
| (249,307)
|
| | | (3,272,223)
| | (13,725,451)
|
| | | | | |
Investing activities:
| | | | | |
Cash acquired on acquisition of PMI
| | | -
| | 82,351,619
|
Mineral interests and development assets
| | | (894,237)
| | (3,728,204)
|
Purchase of property, plant and equipment
| | | (31,682,376)
| | (1,277,571)
|
Reclamation bond
| | | (1,695,269)
| | |
Interest received
|
|
| 282,248
| | 296,152
|
| | | (33,989,634)
| | 77,641,996
|
| | | | | |
Financing activities:
| | | | | |
Shares issued for cash, net of share
| | | | | |
issuance costs
| | | 34,348,790
| | 12,792
|
Deferred debt financing costs
|
|
| -
|
| (102,967)
|
| | | 34,348,790
| | (90,175)
|
| | | | | |
Impact of foreign exchange on cash and cash
| | | | | |
equivalents
|
|
| (2,829,376)
|
| (676,053)
|
| | | | | |
Increase (decrease) in cash and cash equivalents for the period
| | | (5,742,443)
| | 63,150,317
|
| | | | | |
Cash and cash equivalents, beginning of period
| | | 228,679,552
| | 174,601,438
|
| | | | | |
Cash and cash equivalents, end of period
| | $
| 222,937,109
| $
| 237,751,755
|
Supplemental cash flow information (note 16)
SEE ACCOMPANYING NOTES
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
1.
Nature of operations
Asanko Gold Inc. (Asanko or the Company), changed its name from Keegan Resources Inc. on March 1, 2013. The Company was incorporated on September 23, 1999 under the laws of British Columbia, Canada. The Company is in the exploration and development stage and is focused on advancing its principal project, the Asanko Gold Mine (the Project), to commercial production. In addition to its principal project, the Company holds a portfolio of other Ghanaian gold concessions in various stages of exploration.
On February 6, 2014, the Company completed the acquisition of 100% of the issued and outstanding shares of PMI Gold Corporation (PMI) (note 3). PMI is a resource exploration and development company which, through its subsidiaries, holds exploration and mining leases in the Ashanti and Asankrangwa Gold Belts of Ghana, Africa. PMIs principal project is a gold development project known as the Obotan Gold Project which has been combined with Asankos principal project known as the Esaase Gold Project, to form the Asanko Gold Mine (AGM or the Project).
The head office, principal address and registered and records office of the Company are located at 1066 West Hastings Street, Suite 680, Vancouver, British Columbia, V6E 3X2, Canada.
2.
Basis of presentation
(a)
Statement of compliance
These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). The accounting policies followed in these condensed interim consolidated financial statements are the same as those applied in the Companys most recent audited consolidated financial statements for the year ended December 31, 2014. The condensed interim consolidated financial statements should be read in conjunction with the Companys audited consolidated financial statements for the year ended December 31, 2014.
These condensed interim consolidated financial statements were authorized for issue and approved by the Board of Directors on May 13, 2015.
(b)
Basis of presentation and consolidation
The financial statements have been prepared on the historical cost basis, with the exception of asset retirement provisions (note 9), forward currency contract liabilities (note 19(d)(i)) and interest rate floor derivative liability (note 19(d)(ii)) which are measured at fair value.
All amounts are expressed in US dollars, unless otherwise stated, and the US dollar is the Companys functional currency. References to C$ are to Canadian dollars.
6
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
2.
Basis of presentation (continued)
(b)
Basis of presentation and consolidation (continued)
These condensed interim consolidated financial statements incorporate the financial statements of the Company and its controlled subsidiaries. Control exists when the Company has power, directly or indirectly, to govern the financial and operating policies of an entity as to obtain benefits from its activities. All significant intercompany amounts and transactions have been eliminated on consolidation.
The consolidated financial statements include the accounts of the Company and the following subsidiaries:
| | | |
| Subsidiary name
| Jurisdiction
| Ownership
|
| Keegan Resources (Ghana) Limited (Asanko Ghana)
| Ghana
| 90%
|
| Asanko Gold South Africa (PTY) Ltd.
| South Africa
| 100%
|
| Asanko International (Barbados) Inc.
| Barbados
| 100%
|
| Asanko Gold (Barbados) Inc.
| Barbados
| 100%
|
| Adansi Gold Company (GH) Limited (Adansi Ghana)
| Ghana
| 100%
|
| PMI Gold Corporation
| Canada
| 100%
|
(c)
Significant accounting judgments and estimates
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The condensed interim consolidated financial statements have, in managements opinion, been properly prepared using careful judgment within the framework of the significant accounting policies summarized in note 3 of the audited consolidated financial statements for the year ended December 31, 2014.
(d)
Comparative figures
Certain comparative figures have been reclassified to conform to the presentation adopted in the current period.
7
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
3.
Acquisition of PMI
On December 17, 2013, the Company and PMI entered into a definitive agreement whereby Asanko agreed to acquire all of the common shares of PMI (Plan of Arrangement). On February 6, 2014, Asanko completed the acquisition of PMI pursuant to the terms of the Plan of Arrangement. Under the terms of the Plan of Arrangement, former PMI shareholders received 0.21 of an Asanko common share for each PMI share held. The Company issued 87,149,919 of its common shares to acquire 100% of the issued and outstanding shares of PMI.
The acquisition of PMI has created a flag ship project in Ghana by combining PMIs Obotan gold project with the Companys Esaase gold project to create the Asanko Gold Mine Project, as well as provides significant exploration potential for future project development on the consolidated 1,000 sq. km land package. With the acquisition of PMI, the Company acquired interest in certain mineral resource concessions described in note 6 as the Obotan Gold Project (note 6 (a)), Kubi (note 6 (b)), and the Diaso concessions (note 6 (b)).
The allocation of the purchase price is as follows:
Purchase price:
| | |
87,149,919 common shares of Asanko at C$2.12 per share
| $
| 166,743,940
|
3,237,491 replacement options
|
| 2,318,492
|
126,000 replacement warrants
|
| 23,594
|
Total consideration
| $
| 169,086,026
|
|
|
|
Net assets acquired:
Cash and cash equivalents
| $
| 82,351,619
|
Restricted cash
|
| 1,098,514
|
Receivables
|
| 132,090
|
Prepaid expenses
|
| 235,286
|
Property and equipment
|
| 9,153,642
|
Mineral interests and development assets
|
| 97,934,748
|
Accounts payable and accrued liabilities
|
| (5,937,445)
|
Asset retirement provision
|
| (1,447,277)
|
Deferred income tax liability
|
| (14,435,151)
|
Net assets acquired
| $
| 169,086,026
|
8
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
3.
Acquisition of PMI (continued)
The fair value of the Companys common shares, replacement options, replacement warrants and equity settled performance rights issued for the acquisition of PMI was determined using the closing market price of the Companys shares at February 5, 2014 of C$2.12 and a foreign exchange rate of 1 CAD = 0.9025 USD at the same date. The fair value of the replacement options and replacement warrants was calculated using the Black-Scholes option pricing model using the following weighted average assumptions:
| | |
| Replacement warrants
| Replacement options
|
Risk free interest rate
| 1.01%
| 1.21%
|
Expected dividend yield
| 0%
| 0%
|
Share price volatility
| 64.5%
| 77.41%
|
Share price at the date of valuation (PMI closing share price at Feb 5, 2014)
| C$0.45
| C$0.45
|
Expected life
| 1.64 year
| 2.80 years
|
The Company commenced consolidating PMIs financial position and results of operations effective February 6, 2014.
The Company recognized $162,538 interest income and $3,084,921 net loss related to PMI for the period from Feb 6, 2014 to March 31, 2014. Had PMI been consolidated from January 1, 2014, the three months ended March 31, 2014 consolidated statement of comprehensive loss would include additional interest revenue of $96,261 and a net loss of $(978,838).
4. Property, plant and equipment
| | | | | | | | | | | |
| | Administration
| Asanko Gold Mine
| Totals
|
| | Office and equipment
| Work in progress
| Buildings
| Equipment
| Motor vehicles
| |
Cost
| $
| $
| $
| $
| $
| $
|
| As at December 31, 2013
| 528,237
| 1,138,621
| 765,115
| 475,403
| 1,063,822
| 3,971,198
|
| Additions
| 101,277
| 48,588,973
| 804,438
| 15,748
| 839,333
| 50,349,769
|
| Acquired on acquisition of PMI
| 245,571
| 8,359,358
| -
| 163,807
| 384,906
| 9,153,642
|
| Dispositions
| (214,753)
| -
| -
| -
| -
| (214,753)
|
| As at December 31, 2014
| 660,332
| 58,086,952
| 1,596,553
| 654,958
| 2,288,061
| 63,259,856
|
| Additions
| 16,563
| 35,750,700
| -
| 16,179
| -
| 35,783,442
|
| As at March 31, 2015
| 676,895
| 93,837,652
| 1,569,553
| 671,137
| 2,288,061
| 99,043,298
|
Accumulated depreciation
| | | | | | | |
| As at December 31, 2013
| (384,993)
| -
| (174,718)
| (272,125)
| (694,053)
| (1,525,889)
|
| Depreciation
| (153,930)
| -
| (76,511)
| (124,327)
| (286,316)
| (641,084)
|
| Dispositions
| 9,058
| -
| -
| -
| -
| 9,058
|
| As at December 31, 2014
| (529,865)
| -
| (251,229)
| (396,452)
| (980,369)
| (2,157,915)
|
| Depreciation
| (25,716)
| -
| (38,954)
| (41,698)
| (107,975)
| (214,343)
|
| As at March 31, 2015
| (555,581)
| -
| (290,183)
| (438,150)
| (1,088,344)
| (2,372,258)
|
Net book value
| | | | | | | |
| As at December 31, 2014
| 130,467
| 58,086,952
| 1,318,324
| 258,507
| 1,307,691
| 61,101,941
|
| As at March 31, 2015
| 121,314
| 93,837,652
| 1,279,370
| 232,987
| 1,199,717
| 96,671,040
|
9
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
5. Reclamation deposit
The Company is required to provide security to the Environmental Protection Agency of Ghana (EPA), as security for the performance by the Company of its reclamation obligations in respect of the Abriem, Abore and Adubea mining leases. The initial security totals $8.5 million and is made up of a Reclamation Deposit in the amount of $1.7 million and a bank guarantee of $6.8 million.
During the three months ended March 31, 2015 the Company deposited the Reclamation Deposit in a Ghanaian Bank in the joint names of the Company and the EPA. The Reclamation Deposit matures annually, but the Company is required to reinstate the deposit until receiving the final completion certificate by the EPA. The Company is expected to be released from this requirement 45 days following the third anniversary of the date the Company receives a final completion certificate.
6.
Mineral interests and development assets
(a)
Asanko Gold Mine Project
The Companys principal mineral project is the Asanko Gold Mine Project (the Project), which consists of two neighboring gold projects the Obotan Gold Project (note 3) and the Esaase Gold Project, both located in the Republic of Ghana (Ghana), West Africa.
Adansi Ghana owns 100% of the Obotan Gold Project which is located in the Amansie District of the Ashanti Region of Ghana, approximately 250 km northwest of the capital Accra. The Obotan Gold Project consists of the Abore, Abirem and Adubea concessions, all of which have been granted mining leases and cover an area of approximately 88.98 km2. These concessions contain five deposits: Nkran, Abore, Adubiaso Asuadai and Dynamite Hill. The Adubea concession is subject to a net smelter return royalty (NSR) of 0.5% payable to a third party. During 2014, the Company settled a dispute with Goknet Mining Company Limited (Goknet) and thereby eliminated Goknets claim of a 2% NSR over these three concessions.
Asanko Ghana owns a 100% interest in the Esaase Gold Project. Like Obotan, Esaase is located in the Amansie West District of Ghana. The property consists of several mining concessions of which the three largest are the Esaase Concession, Jeni River Concession and Sky Gold Concession (SGM). The Esaase Concession covers an area of approximately 42.32 km2.
The Esaase and Jeni River concessions are subject to a 0.5% royalty payable to the Bonte Liquidation Committee and the SGM concession is subject to a 2% NSR payable to Sky Gold Mines Limited.
Asanko Ghana owns a 100% interest in the Asuowin Concession situated contiguous to and directly south of the Esaase Gold property and a 100% interest in the Dawohodo prospecting concession adjacent to the Esaase Gold property.
Free carried interest to the Ghanaian government
The Government of Ghana retains the right to a 10% free carried interest in the Project under Section 8 of the Ghanaian Mining Act. This entitles the Ghanaian government to 10% of declared dividends from the net profit of the Companys respective subsidiaries at the end of a financial year. As the free carried interest does not result in an obligation on behalf of the Ghanaian government to contribute to the capital nor share in the entitys losses, a non-controlling interest is not recognized while the respective subsidiaries of the Company are in a net liability position.
The Companys concessions are also subject to a 5.0% royalty on gold production payable to the Government of Ghana.
10
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
6.
Mineral interests and development assets (continued)
(b)
Exploration projects
Asanko Ghana owns a 100% interest in the Asumura Reconnaissance Concession (Asumura property) located in Ghana. The Asumura property is subject to a 3.5% NSR royalty payable to GTE Ventures Limited. (GTE), 50% of which may be purchased for $2,000,000 from GTE and the remaining 50% may be purchased for an additional $4,000,000.
Adansi Ghana owns 100% interest in the Datano, Kaniago, New Obuasi, Gyagyastreso, and Afiefiso concessions located within the Asankrangwa Gold Belt.
During February 2015, Asanko Ghana completed the acquisition of various concessions from Midlands Mineral Corporation for cash consideration of $250,000. The Midland concessions are contiguous to the Companys other mineral tenements.
If any of the exploration properties are converted to a Mining License, in accordance with Ghanaian law, it will become subject to a 5% gross revenue royalty and a 10% free carried interest to the Ghanaian government.
Pursuant to the Goknet settlement the Company transferred Adansi Ghanas Diaso concessions (Nkronua Atifi, Diaso, Amuabaka, Juabo, Manhia and Agyaka Manso) and Kubi Ghana, which holds a 100% interest in the Kubi mining leases to Goknet (note 15(b)).
(c)
Mineral interests and development costs
| | | | |
| | | | |
| | Asanko Gold Mine
| Other
| Total
|
| | | | |
| Mineral interest
| | | |
| Balance, December 31, 2014
| $ 98,560,248
| $ 326,182
| $ 98,886,430
|
| Acquisitions for the period
| 250,000
| -
| 250,000
|
| Balance, March 31, 2015
| 98,810,248
| 326,182
| 99,136,430
|
| | | | |
| Deferred development assets
| | | |
| Balance, December 31, 2014
| 89,118,807
| -
| 89,118,807
|
| Asset retirement costs
| 2,692,457
| -
| 2,692,457
|
| Camp operations
| 44,994
| -
| 44,994
|
| Development support costs
| 163,211
| -
| 163,211
|
| Phase 2 feasibility study
| 376,873
| -
| 376,873
|
| Share-based payments
| 479,822
| -
| 479,822
|
| Community affairs and environment
| 59,158
| -
| 59,158
|
| Additions for the period
| 3,816,515
| -
| 3,816,515
|
| Balance, March 31, 2015
| 92,935,322
| -
| 92,935,322
|
| Total mineral interest and deferred development assets, March 31, 2015
| $ 191,745,570
| $ 326,182
| $ 192,071,752
|
Prior to the commencement of construction of the Asanko Gold Mine development costs were charge to Deferred development Assets. Now that construction is underway most of the development costs are included in Property, Plant and Equipment as Work in Progress.
11
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
6.
Mineral interests and development assets (continued)
(c)
Mineral interests and development costs (continued)
| | | | | |
| | | | | |
| | Asanko Gold Mine
| Kubi
| Other
| Total
|
| | | | | |
| Mineral interest
| | | | |
| Balance, December 31, 2013
| $ 4,695,444
| $ -
| $ 170,043
| $ 4,865,487
|
| Fair value on acquisition of PMI
| 93,471,540
| 3,963,208
| 500,000
| 97,934,748
|
| Acquisitions for the period
| 393,264
| -
| 1,250
| 394,514
|
| Dispositions for the period
| -
| (3,963,208)
| (345,111)
| (4,308,319)
|
| Balance, December 31, 2014
| 98,560,248
| -
| 326,182
| 98,886,430
|
| | | | | |
| Deferred development assets
| | | | |
| Balance, December 31, 2013
| 56,097,384
| -
| -
| 56,097,384
|
| Asset retirement costs
| 2,953,356
| 29,291
| -
| 2,982,647
|
| Camp operations
| 2,484,765
| -
| -
| 2,484,765
|
| Development support costs
| 3,259,184
| -
| -
| 3,259,184
|
| Development drilling and assays
| 2,087,042
| -
| -
| 2,087,042
|
| EPCM (early works)
| 9,373,479
| -
| -
| 9,373,479
|
| Feasibly studies and engineering
| 5,236,229
| -
| -
| 5,236,229
|
| Permitting
| 769,283
| -
| -
| 769,283
|
| Share-based payments
| 2,095,273
| -
| -
| 2,095,273
|
| Community affairs and environment
|
2,652,186
|
-
|
-
|
2,652,186
|
| VAT receivable allowance
| 2,110,626
| -
| -
| 2,110,626
|
| Additions for the year
| 33,021,423
| 29,291
| -
| 33,050,714
|
| Dispositions for the year
| -
| (29,291)
| -
| (29,291)
|
| Balance, December 31, 2014
| 89,118,807
| -
| -
| 89,118,807
|
| Total mineral interest and deferred development assets, December 31, 2014
| $ 187,679,055
| $ -
| $ 326,182
| $ 188,005,237
|
12
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
7.
Exploration and evaluation expenditures
Exploration and evaluation expenditures are comprised of expenditures incurred on mineral interests in areas where the technical feasibility and economic recoverability has not yet been established.
| | |
| Three months ended March 31, 2015
| Three months ended
March 31, 2014
|
| | |
Exploration support and prospectivity mapping costs
| $ 424,762
| $ 57,889
|
Share-based compensation
| 121,157
| -
|
| $ 545,919
| $ 57,889
|
8.
Long term debt
On October 24, 2013, the Company entered into a Definitive Senior Facilities Agreement (DSFA) with a special purpose vehicle of RK Mine Finance Trust I ("Red Kite"). An amended DSFA was entered into on July 16, 2014 with terms substantially similar to the original DSFA. The debt provided under the amended DSFA will be utilized for developing Phase 1 of the Asanko Gold Mine Project instead of the Esaase Project as previously envisaged.
The DSFA provides for two term loan facilities: a $130 million term loan facility (the "Project Facility") and a $20 million cost overrun facility (the "Overrun Facility"). Performance under the amended agreement is fully secured by the assets of the Companys Ghanaian subsidiaries and is guaranteed by the Company until Project completion.
The first tranche of the loan for gross proceeds of $20.0 million and net cash proceeds of $19.7 million was drawn on July 18, 2014 and the second tranche of the loan for gross proceeds of $40.0 million and net cash proceeds of $39.4 million was drawn on December 23, 2014.
The Project Facility is to be repaid by the end of the first quarter of 2020 with the first repayment date on July 1, 2016. Interest is calculated on a quarterly basis at a rate of LIBOR +6% and payable in advance on the first date of each quarter. There is a 1% minimum LIBOR rate which creates an interest rate floor. Interest accrued on a quarterly basis before the first repayment date is added to the loan principal amount. The loan is carried at amortized costs on the statement of financial position.
As at March 31, 2015 the Company had incurred a total of $5.5 million in deferred debt financing costs (December 31, 2014 - $5.5million). Deferred financing costs are initially deferred and subsequently reclassified as part of the loan on a pro-rata basis of the loan amount drawn and amortized over the life of the DSFA using the effective interest rate method. As at March, 31, 2015 and December 31, 2014, $3.4 million of the deferred debt financing costs, which included 0.9 million of draw down fees, were recognized as part of the loan. As at March 31, 2015 an aggregate amount of $2.1 million (December 31, 2014 - $0.8 million) of loan accretion and accrued interest was capitalized to property, plant and equipment at an effective interest rate of approximately 9.59% .
An embedded derivative liability has been recognized for the loan in relation to the interest rate floor. The fair value of the embedded derivatives on draw down was estimated to be $0.7 million (note 19 (b)(ii)). The embedded derivative liability was revalued at March 31, 2015 with the change in fair value recognized in the statement of operations.
13
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
8.
Long term debt (continued)
| | | |
| Long term loan liability
| March 31, 2015
| December 31, 2014
|
| |
|
|
| Gross proceeds
| $ 60,000,000
| $ 60,000,000
|
| Accrued interest
| 1,731,815
| 670,088
|
| | 61,731,815
| 60,670,088
|
| Deferred financing costs and fair value of embedded derivative
liability at date of drawdowns
| (3,742,879)
| (3,999,911)
|
| | 57,988,936
| 56,670,177
|
| Fair value of embedded derivative liability
| 781,491
| 777,048
|
| Long term loan liability
| $ 58,770,427
| $ 57,447,225
|
At March 31, 2015, $2.1 million (December 31, 2014 - $0.8 million) of loan accretion and accrued interest had been capitalized to property, plant and equipment. The Company is not obligated to commence making repayments of the long-term loan and accrued interest until July 1, 2016.
In addition to the DSFA the Company entered into an Offtake Agreement with Red Kite with the following details:
·
Sale of 100% of the future gold production from Phase 1 to a maximum of 2.22 million ounces to Red Kite;
·
Red Kite to pay for 100% of the value of the gold ten business days after shipment;
·
A provisional payment of 90% of the estimated value will be made one business day after delivery;
·
The gold sale price will be a spot price selected during a nine day quotational period following shipment;
·
Should the Company wish to terminate the Offtake Agreement, a termination fee will be payable according to a schedule dependent upon the total funds drawn under the Project and Overrun Facility as well as the amount of gold delivered under the Offtake Agreement at the time of termination, and
·
Prior to removal of the conditions precedent for the Project Facility, the Company can terminate the Offtake Agreement with Red Kite by repaying the loan and paying an Offtake termination fee which is fixed at $6 million after the additional $40 million is drawn.
9.
Asset retirement provision
The asset retirement provision relates to current and historical disturbances on the mineral concessions within the area of interest of the Asanko Gold Mine. During the three months ended March 31, 2015, the Company recognized an additional $2.2 million to the cost estimate of the asset retirement provision in relation to the disturbances resulting from the mine construction activities.
The following is a continuity of the asset retirement provision at Asanko Gold Mine:
| | |
| March 31, 2015
| December 31, 2014
|
|
|
|
|
|
|
Opening balance
| $ 12,638,318
| $ 9,385,102
|
Additions (reductions)
| 2,692,457
| 2,953,356
|
Accretion
| 75,319
| 299,860
|
Closing balance
| $ 15,406,094
| $ 12,638,318
|
The present value of this obligation has been recorded as a non-current provision.
14
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
10.
Share capital
(a)
Authorized
Unlimited common shares without par value; and
Unlimited preferred shares without par value
(b)
Issued and outstanding common shares
| | |
| Number
of shares
| Amount
|
Balance, December 31, 2013
| 85,054,338
| $ 334,423,542
|
Issued pursuant to the acquisition of PMI (note 3)
| 87,149,919
| 166,743,940
|
Issued pursuant to settlement agreement (note 15)
| 1,000,000
| 2,375,880
|
Share issuance costs
| | (226,423)
|
Issued pursuant to exercise of share-based options (note 11(a)):
| | |
- at C$1.12
| 12,500
| 12,792
|
- at C$ 1.43
| 5,250
| 7,002
|
- at C$ 1.96
| 164,850
| 303,124
|
- at C$ 2.12
| 112,500
| 224,166
|
- at C$ 2.15
| 420,000
| 848,414
|
- at C$ 2.42
| 156,250
| 355,400
|
Transfer from equity reserves on exercise of share-based options
| | 401,004
|
Balance, December 31, 2014
| 174,075,607
| $ 505,468,841
|
| | |
Issued pursuant to bought deal financing
| 22,770,000
| 36,386,961
|
Share issuance costs
| -
| (2,038,171)
|
Balance, March 31, 2015
| 198,845,607
| $ 539,817,631
|
Three months ended March 31, 2015
On February 11, 2015, the Company closed a bought deal financing of 22,770,000 common shares at C$2.02 for gross proceeds $36.4 million or C$46.0 million. The Company incurred share issuance costs of $2.0 million, of which $1.8 million in fees were paid to the underwriters.
Year ended December 31, 2014
On February 6, 2014, the Company issued 87,149,919 of its common shares at a price of C$2.12 per share to acquire 100% of the issued and outstanding shares of PMI (note 3). The fair value of the shares issued was determined using the closing share price of the Companys shares on the Toronto Stock Exchange on February 5, 2014 and an exchange rate of 1 CAD = 0.9025 USD at the same date, which were the final closing variables before the transaction completion (note 3). The Company incurred share issuance costs of $197,694 in regulatory fees.
On August 19, 2014, the Company issued 1,000,000 of its common shares at a price of C$2.60 per share, pursuant to a settlement agreement (note 15(c)). The fair value of the shares issued was determined using the closing share price of the Companys shares on the Toronto Stock Exchange on August 19, 2014 and an exchange rate of 1 CAD = 0.9138 USD at the same date. The Company incurred share issuance costs of $28,729 in regulatory fees.
During the year ended December 31, 2014, the Company issued 871,350 common shares for gross proceeds of $1.75 million on exercise of options. In addition, the estimated fair value of these options of $401,004 was reclassified from equity reserves to share capital.
15
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
11.
Equity reserves
(a)
Share-based options
The Company maintains a rolling share-based option plan providing for the issuance of share-based options for up to 10% of the Companys issued and outstanding common shares. The Company may grant options from time to time to its directors, officers, employees and other service providers. The options vest 25% on the date of the grant and 12 ½ % every three months thereafter for a total vesting period of 18 months.
| | | |
| Share-based options movement
| Number of Options
| Weighted average exercise price
|
| Balance, December 31, 2013
| 6,298,500
| C$3.93
|
| Granted
| 5,801,000
| C$2.16
|
| Replacement options granted on the acquisition of PMI
|
3,237,491
|
C$4.01
|
| Exercised
| (871,350)
| C$2.14
|
| Cancelled/Expired
| (3,871,350)
| C$4.51
|
| Balance, December 31, 2014
| 10,594,291
| C$2.95
|
| Granted
| 4,121,000
| C$2.07
|
| Cancelled/Expired
| (125,000)
| C$2.18
|
| Balance, March 31, 2015
| 14,590,291
| C$2.71
|
The following table summarizes the share-based options outstanding and exercisable at March 31, 2015:
| | | | | | |
| Total options outstanding
| Total options exercisable
|
Range of
exercise price
| Number
| Weighted average contractual life (years)
| Weighted average exercise price C$
| Number
| Weighted average contractual life (years)
| Weighted average exercise
price C$
|
C$1.00-C$2.00
|
464,141
|
4.09
|
1.94
|
239,141
|
3.37
|
1.95
|
C$2.01-C$3.00
| 10,020,500
| 4.18
| 2.18
| 4,879,875
| 3.96
| 2.22
|
C$3.01-C$4.00
| 3,163,900
| 2.14
| 3.79
| 3,163,900
| 2.14
| 3.79
|
C$4.01-C$5.00
| 630,500
| 1.92
| 4.54
| 630,500
| 1.92
| 4.54
|
C$6.01-C$7.00
| 311,250
| 0.33
| 6.18
| 311,250
| 0.33
| 6.18
|
| 14,590,291
| 3.56
| 2.71
| 9,224,666
| 3.06
| 3.05
|
During the three months ended March 31, 2015, $1.0 million (three months ended March 31, 2014 - $1.1 million) in share-based payments were recorded in the statement of comprehensive loss, which includes $0.1 million included in exploration and evaluation expenses (three months ended March 31, 2014 $nil). In addition, during the three months ended March 31, 2015, share-based payments of $0.5 million were included in mineral interests and development assets (three months ended March 31, 2014 $0.9 million).
16
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
11.
Equity reserves (continued)
(a)
Share-based options (continued)
The fair value of the share-based options granted during the three months ended March 31, 2015 and 2014 used to calculate compensation expense, has been estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
| | | |
| | Three months ended
| Three months ended
|
| | March 31, 2015
| March 31, 2014
|
| |
|
|
| Risk free interest rate
| 0.70%
| 1.37%
|
| Expected dividend yield
| -
| -
|
| Share price volatility
| 53.37%
| 59.92%
|
| Forfeiture rate
| 3.57%
| 3.47%
|
| Expected life of options
| 3.11 years
| 3.20 years
|
(b)
Performance rights
In connection with the acquisition of PMI (note 3), the Company entered into an agreement with employees of PMI, who held PMI performance rights, to issue an aggregate of 117,158 common shares of the Company upon vesting of the performance rights. In April 2014, the performance rights had not vested and were cancelled due to termination of the employment agreements of the performance rights holders.
(c)
Warrants
The continuity of share purchase warrants for the three months ended March 31, 2015 is as follows:
| | | | | | |
Exercise price
| Expiry date
| December 31, 2014
| Issued
| Exercised
| Expired
| March 31, 2015
|
| | | | | | |
C$ 5.00
| September 26, 2015
| 126,000
| -
| -
| -
| 126,000
|
| | 126,000
| -
| -
| -
| 126,000
|
During the year ended December 31, 2014, the Company issued 126,000 replacement warrants pursuant to the acquisition of PMI (note 3).
The continuity of share purchase warrants for the year ended December 31, 2014 is as follows:
| | | | | | |
Exercise price
| Expiry date
| December 31, 2014
| Issued
| Exercised
| Expired
| December 31, 2014
|
| | | | | | |
C$ 5.00
| September 26, 2015
| -
| 126,000
| -
| -
| 126,000
|
C$ 4.00
| November 5, 2014
| 9,443,500
| -
| -
| (9,443,500)
| -
|
| | 9,443,500
| 126,000
| -
| (9,443,500)
| 126,000
|
17
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
12.
Restructuring costs
Restructuring charges incurred and/or accrued during the three months ended March 31,2014 related to the closure of the PMI corporate offices in Canada and Australia as well as employee terminations due to redundancy post the acquisition of PMI. The restructuring was completed during April 2014. No restructuring charges were incurred in the three months ended March 31, 2015, therefore no comparative information is provided in the table below:
| |
Restructuring costs
| Three months ended
March 31, 2014
|
| |
Employee termination benefits
| $ 2,408,047
|
Contracts termination costs
| 269,149
|
Write-off of equipment
| 205,695
|
|
$ 2,882,891
|
13.
Related party balances and transactions
All transactions with related parties have occurred in the normal course of operations and are measured at the exchange amount agreed to by the parties. All amounts are unsecured, non-interest bearing and have no specific terms of settlement.
(a)
Key management compensation
Transactions with key management personnel were as follows:
| | |
| |
| Three months ended March 31, 2015
| Three months ended
March 31, 2014
|
|
|
|
Salaries and benefits
| $ 278,761
| $ 455,600
|
Share-based payments
| 419,171
| 713,786
|
| $ 697,933
| $ 1,169,386
|
Key management personnel consist of directors and officers of the Company.
(b)
Other related parties balances and transactions
Related party transactions (recoveries):
| | |
|
|
| Three months ended March 31, 2015
| Three months ended March 31, 2014
|
|
|
|
UMS (i)
| $ 31,666
| $ 47,355
|
Related party balances receivable (payable):
| | |
| March 31, 2015
| December 31, 2014
|
|
|
|
UMS (i)
| $ -
| $ (8,137)
|
UMS prepaid deposit (i)
| 19,738
| 21,550
|
| $ 19,738
| $ 13,413
|
UMS is a private company with certain key management personnel and directors in common with the Company, and pursuant to an agreement dated March 30, 2012, provided geological, corporate development, administrative and management services to the Company on a cost recovery basis. Effective July 1, 2013, the Company notified UMS that it would no longer require any personnel services but continues to share the cost of UMSs office tenancy and IT services where required.
18
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
14.
Commitments and contractual obligations
As at March 31, 2015, the Company had contractual obligations totaling $73.7 million, relating to long term debt (December 31, 2014 - $73.7 million). Contractual obligations related to the long term debt are subject to changes in the three-month LIBOR rate. Prepayment terms allow the Company to prepay the long term debt in whole or in part at any time. At March 31, 2015 the long term debt had a prepayment value of $61.7 million (December 31, 2014 - $60.7 million).
In addition, the Company has entered into certain construction and engineering contracts relating to the construction of the Asanko Gold Mine Phase 1.
| | | | |
Contractual obligations
| Payments due by period
|
| Total
| 1 year
| 2-3 years
| 4-5 years
|
|
|
|
|
|
Long term debt, including future interest charges
| $ 73,739,673
| $ -
| $ 27,817,281
| $ 45,922,392
|
| | | | |
Open purchase orders
| 145,000,000
| 145,000,000
| -
| -
|
| | | | |
| $ 218,739,673
| $ 145,000,000
| $ 27,817,281
| $ 45,922,392
|
15.
Contingencies
(a)
Financial guarantee
The Company continues to provide a financial guarantee for the UMS office lease until May 2015 (note 13 (b)).
(b)
Legal proceedings
Except as set forth below, there are no material legal proceedings to which the Company is a party or, to the best of the Company's knowledge, to which any of the Company's property is or was subject.
Goknet Arbitration
On August 15, 2014, the Company entered into a settlement agreement with Goknet to eliminate Goknetss claim for a 2% NSR royalty on Phase 1 of the Asanko Gold Mine Project. The settlement involved cash, one million Asanko shares (note 10(b)) and the transfer to Goknet of two exploration projects, Kubi and Diaso (note 6(b)). Included in the agreement, the Company retained a right to match any future offer made to Goknet with respect to a disposal of the Diaso Project concessions.
Godbri Datano Claim
On September 14, 2012, Godbri Mining Limited (Godbri) lodged a statement of claim in the High Court of Justice, Accra, Ghana, seeking a declaration that, among other things, that the sale of the Datano concession to Adansi Ghana is null and void. Godbri claims to be the owner of 38% of the issued share capital of Midras Mining Limited (Midras) and states that it did not consent to the acquisition of the Datano concession by Adansi Ghana. Adansi Ghana filed a defence on November 12, 2012. Godbri subsequently amended its claim on January 29, 2013 and in March 2013, both the Company and Adansi Ghana filed further defences. The matter is currently awaiting trial. The Datano concession was acquired in August 2013 from Midras. The Company considers the claim made by Godbri to be spurious and without any merit. Godbri is a private Ghanaian company.
Matisse and Madison Claim
On October 22, 2013, Matisse & Madison Co. Ltd. (M&M) lodged a statement of claim in the High Court of Justice, Accra, Ghana, seeking compensatory damages of $20 million plus interest for breach of a verbal contract related to the purchase of the Datano Concessions from Midras. The Company maintains that this is a frivolous lawsuit lacking in merit and will vigorously defend itself.
19
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
16.
Supplemental cash flow information
| | |
| Three months ended March 31, 2015
| Three months ended March 31, 2014
|
| | |
Change in asset retirement provision included in mineral interest
| $ 2,692,457
| $ 91,335
|
Change in accounts payable related to mineral interests and development assets
|
-
|
358,682
|
Change in accounts payable related to property, plant and equipment
| 2,593,679
| -
|
Depreciation included in mineral interest and
development costs
| 188,627
| 139,619
|
Fair value of mineral interests assigned on acquisition of PMI
| -
| 115,285,828
|
Reclassification of equity reserves on exercise of share-based options
| -
| (6,102)
|
Share-based compensation included in mineral interests and development cost
|
479,822
|
907,329
|
17.
Segmented information
Geographic Information
The Company operates in one reportable operating segment, being the exploration and development of resource properties.
Geographic allocation of non-current assets
| | | |
March 31, 2015
| Canada
| Ghana
| Total
|
| | | |
Property, plant and equipment
| $ 63,607
| $ 96,607,433
| $ 96,671,040
|
Reclamation deposit
| -
| 1,695,269
| 1,695,269
|
Deferred debt financing costs
| -
| 2,936,146
| 2,936,146
|
Mineral interest and development assets
| -
| 192,071,752
| 192,071,752
|
Investment in associate
| 1,000
| -
| 1,000
|
| $ 64,607
| $ 293,310,600
| $ 293,375,207
|
| | | |
December 31, 2014
| Canada
| Ghana
| Total
|
| | | |
Property, plant and equipment
| $ 60,120
| $ 61,041,821
| $ 61,101,941
|
Deferred debt financing costs
| -
| 2,936,146
| 2,936,146
|
Mineral interest and development assets
| -
| 188,005,237
| 188,005,237
|
Investment in associate
| 1,000
| -
| 1,000
|
| $ 61,120
| $ 251,983,204
| $ 252,044,324
|
20
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
17.
Segmented information (continued)
Geographic allocation of loss (income)
| | | |
| Canada
| Ghana
| Total
|
| | | |
Three months ended March 31, 2015
| $ 4,631,049
| $ (176,643)
| $ 4,454,406
|
Three months ended March 31, 2014
| $ 9,473,191
| $ 1,444,137
| $ 10,917,328
|
18.
Loss (earnings ) per share
Basic loss (earnings) per share amounts are calculated by dividing the net loss (income) for the period by the weighted average number of ordinary shares outstanding during the period.
Weighted average number of common shares are calculated as follows:
| | |
| Three months ended
March 31, 2015
| Three months ended
March 31, 2014
|
| | |
Issued common shares, beginning of period
| 174,075,607
| 85,034,338
|
Effect of shares issued on:
| | |
Acquisition of PMI (note 3)
| -
| 52,289,951
|
Bough deal financing (note 10(b))
| 12,397,000
| -
|
Exercise of share-based options
| -
| 10,556
|
Weighted average number of
common shares (basic and diluted), end of period
|
186,472,607
|
137,334,845
|
Basic and diluted loss per share amounts are the same as there are no instruments that have a dilutive effect on earnings.
19.
Financial instruments
As at March 31, 2015 the Companys financial instruments consist of cash and cash equivalents, receivables, reclamation bond, accounts payable and accrued liabilities, long term debt and an embedded derivative in relation to an interest rate floor, and foreign currency forward contracts.
The fair value of these financial instruments approximates their carrying value, unless otherwise noted.
The risk exposure arising from these financial instruments is summarized as follows:
(a)
Credit risk
Credit risk is the risk of an unexpected loss if a customer or a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on the cash and cash equivalent balances held at banks in each of Canada and Ghana. The majority of the Companys cash is held in Canadian based banking institutions, authorized under the Bank Act (Canada) to accept deposits. As at March 31, 2015, the receivables excluding refundable sales tax consist of interest receivable of $0.06 million (December 31, 2014 - $0.07 million).
21
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
19.
Financial instruments (continued)
(b)
Liquidity risk
The Companys approach to managing liquidity is to ensure that it will have sufficient liquidity to settle obligations and liabilities when due. As at March 31, 2015 the Company had a cash and cash equivalents balance of $222.9 million (December 31, 2014 $228.7 million) to settle current accounts payable and accrued liabilities of $17.2 million (December 31, 2014 - $15.4 million) that are considered short term and expected to be settled within 30 days. The Company is not obligated to commence making repayments of the long term loan and accrued interest until July 1, 2016.
(c)
Market risk
(i)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Companys loan agreement with Red Kite (note 8) provides for interest at LIBOR plus 6% with a minimum LIBOR of 1%. The Companys sensitivity to a 1% decrease or increase in market rates of interest in relation to its long term debt liability would have an immaterial effect on the Companys interest expense for the three months ended March 31, 2015.
The Companys cash and cash equivalents attract interest at floating rates and have maturities of 90 days or less or maturity over ninety days but redeemable on demand without penalty. The interest is typical of Canadian banking rates, which are at present low, however the conservative investment strategy mitigates the risk of deterioration to the investment. A sensitivity analysis suggests that a change of 10 basis points in the interest rates would result in a corresponding increase or decrease in loss for the three months ended March 31, 2015 of approximately $0.2 million (three months ended March 31, 2014 - $0.2 million).
(ii)
Foreign currency risk
The Company is exposed to foreign currency risk through its foreign currency monetary assets and liabilities. A significant change in the currency exchange rate between the US dollar and Canadian dollar (CAD) and South African rand (ZAR) could have an effect on the Companys results of operations, financial position and cash flows. As at March 31, 2015, the Company had entered into a series of forward contracts to purchase a total of ZAR233 million in exchange for Canadian and US dollars at specified exchange rates. These forward contracts have settlement terms that range from one month to eleven months. As at March 31, 2015, the Company had a CAD cash balance of $15.1 million (December 31, 2014 $30.8 million) and ZAR balance of $9.0 million (December 31, 2014 - $0.4 million) expressed in US dollar equivalent.
22
ASANKO GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
Three months ended March 31, 2015 and 2014
Expressed in United States Dollars
19.
Financial instruments (continued)
(c)
Market risk (continued)
(iii)
Other price risk
Other price risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from currency risk or interest rate risk. As at March 31, 2015 and December 31, 2014, the Company had no financial instruments exposed to other price risk.
(d)
Fair values
(i)
Foreign currency forward contracts derivative
During the three months ended March 31, 2015, the Company entered into a series of forward contracts to purchase ZAR in exchange for Canadian and US dollars at specified exchange rates. These forward contracts have settlement terms that range from one month to eleven months.
During the three months ended March 31, 2015, the Company settled several currency forward contracts and realized a foreign exchange gain of $364,054. The fair values of outstanding foreign currency forward contracts are determined using the forward rates at the measurement date, with the resulting value discounted back to present value and are categorized within level 2 of the fair value hierarchy.
(ii)
Embedded derivative
The embedded derivative liability associated with the interest rate floor of the long term loan is categorized within level 2 of the fair value hierarchy. The fair value of the embedded derivative was estimated using the three-month LIBOR forward rates to 2020 ranging from 0.27% to 2.38% using an option pricing model.
(iii)
Other
The carrying values of cash and cash equivalents, receivables and accounts payable and accrued liabilities approximate their respective fair values due to the short-term nature of these instruments. The fair value of the long term debt approximates its carrying value due to the floating rate nature of the debt instrument.
(e)
Items of income, expense, gains or losses arising from financial instruments
| | |
| Three months ended March 31, 2015
| Three months ended March 31, 2014
|
| | |
Interest income from loans and receivable
| $ 272,922
| $ 376,217
|
Realized foreign exchange gain from currency forward contracts
| 364,054
| -
|
Realized and unrealized foreign exchange loss from other financial instruments
| (1,998,064)
| (602,228)
|
23
MANAGEMENTS DISCUSSION AND ANALYSIS
Three months ended March 31, 2015 and 2014
_______________________
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
This Managements Discussion and Analysis (MD&A) of Asanko Gold Inc. (Asanko or the Company) has been prepared by management as of May 13, 2015 and should be read in conjunction with the Companys condensed interim consolidated financial statements for the three months ended March 31, 2015 and 2014 and the related notes thereto. All financial information has been prepared in accordance with International Financial Reporting standards (IFRS) as issued by the International Accounting Standards Board. All dollar amounts herein are expressed in United States dollars unless stated otherwise. References to C$ are to Canadian dollars.
This MD&A contains Forward Looking Information. Please read the Cautionary Statements on page 29 carefully.
Description of the Business
The Company was incorporated on September 23, 1999 under the laws of British Columbia. The Companys shares trade on the Toronto Stock Exchange and NYSE MKT Equities Exchange under the symbol AKG. The Companys primary asset is its Asanko Gold Mine Project (the Project) located on the Asankrangwa gold belt in Ghana.
Asankos vision is to become a low cost, mid-tier gold producer. Asankos vision will be achieved through the phased development of the Asanko Gold Mine. Phase 1 of the Project is fully funded and under construction with approximately 48% complete. The first gold pour is expected in Q1 2016. It is envisioned in a current pre-feasibility study that the Project will be expanded from 200,000 ounces per year to over 400,000 ounces per year by 2018 as Phase 2.
Overall Performance
Financial Performance
The Company does not expect to generate revenues until the commencement of production at the Asanko Gold Mine in Q1 2016. As such, during the three months ended March 31, 2015 (Q1 2015) Asanko had a net loss of $4.5 million or a loss of $0.02 per share compared to a net loss of $10.9 million or $0.08 per share during the three months ended March 31, 2014 (Q1 2014). The main drivers for the decrease in net loss in Q1 2015 were the rationalization of management and offices following the merger with PMI Gold Corporation in February 2014 and the large business acquisition costs expensed in Q1 2014.
Phase 1 Construction
Construction of Phase 1 is advancing according to schedule, with 48% of Phase 1 of the Project complete and on track for first gold production in Q1 2016.
The concrete pour of the SAG and ball mill foundations is progressing well. The pour is being done in a series of lifts. The first and second lifts have been completed and the third and final lift is underway. The SAG and ball mills have been delivered to site, ahead of schedule, and installation work is due to commence in May 2015.
Erection of the eight tanks for the CIL circuit is underway. Four tanks are fully erected, with welding and painting in progress. The remaining four tanks are due for completion during May 2015. The pre-leach thickener base has been completed and steel erection and platework are progressing well, targeting completion by the end of Q2 2015. Work has also commenced on the reagents building, with the steelwork and platework expected to be finished during May 2015. The foundations for the Gold Room have also been completed. The electrical and Instrumentation (E&I) contract has been awarded and the contractor is mobilizing to site, in readiness to start with E&I installation in May 2015.
Casting of the concrete panels for the run-of-mine tip wall at the primary crusher is nearing completion and construction of the reinforced earth wall has commenced. The first and second lift of the stockpile tunnel has also been completed.
Progress on the preparation of the tailings storage facility is advancing according to schedule and laydown of the HDPE liner commenced in March 2015.
2
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
The contractor camp housing is fully functioning and accommodating 460 contractors. There are now over 1,000 contractor personnel on site, with the full complement of 1,400 contractors expected by the end of Q3 2015.
Power
The Company is in final negotiations to sign a definitive power purchase agreement (PPA) with Genser Energy Ghana Limited (Genser), in Q2 2015. Genser is an independent power producer and power plant operator in Ghana that focuses on providing power to large industrial and parastatal clients. Under the proposed terms of the PPA, a 20MW heavy-fuel ICE power plant will be built adjacent to the Asanko Gold Mine and supply 18MW of power to Phase 1 on a fixed-price, life-of-mine contract. The contracted rates are in line with the rates budgeted for Phase 1 operations in the Definitive Project Plan published in November 2014.
The Company is also installing a 161kV power line to connect to the grid. Under the PPA, Genser will have the ability to utilize the power line to sell excess power into the grid or to supply power through the grid from their coal-fired power plant at the Chirano mine site (owned by Kinross Gold). Bush clearing and ground preparation has been completed on 82% of the 30 km route for the 161 kV line. Foundation work has commenced for the towers as well as the medium voltage substation at the project site.
Mining
Pre-stripping of the Nkran Pit, the main mineral resource for Phase 1, is advancing well with three excavators working in the pit on a 24hr/day operation. To-date, 2 million tonnes of waste has been mined and approximately 1,700 ore tonnes have been identified and placed on the run-of-mine pad at a grade of 2.7g/t. The pit requires 21.7 million tonnes of waste to be pre-stripped prior to commencing milling operations in Q1 2016. Included in the pre-strip is a planned 423,000 tonnes of ore at a gold grade of 2.09 g/t which will be stockpiled ahead of plant commissioning.
De-watering of the Nkran pit commenced in December 2014 and by the end of March, 1.67 million of the expected 6 million cubic metres of water has been discharged from the pit. The water level in the Nkran pit has reduced by approximately 11 metres. The de-watering is on schedule and expected to take until October 2015 to complete. De-watering will continue in parallel with pre-stripping operations.
Health and Safety
There have been no lost time incidents on site with 350 days of construction activity. The Project recently achieved a milestone of over 1 million man-hours completed on the project to date without a lost time incident. All Safety, Health and Environmental systems and procedures have been fully implemented on site.
Partial Relocation of Nkran Village
A portion of the Nkran village, consisting of 88 building structures, will be relocated ahead of commencing ore mining operations. The site for the relocation was selected by the Relocation Negotiation Committee and approved by the Ghanaian Lands Commission. Construction commenced in February 2015 with bulk earthworks and terracing. The buildings tenders have been awarded and the construction of the new houses is underway with 10 local contractors having been selected to build the houses. The relocation is expected to be completed by the end of Q3 2015.
3
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Key Milestones
An update on the key milestones that the Company is working towards are, as follows:
Original Guidance
Current Status
Commence early works
Q2 2014
Complete
Near mine resource definition drilling at Dynamite Hill
Q2 2014
Complete
Finalize revisions to the Red Kite financing arrangements
Q2 2014
Complete
Investment Decision for Phase 1
Q3 2014
Complete
Definitive Project Plan including updated MRE
Q4 2014
Complete
Commence Project Construction
Q3 2014
Complete
Phase 2 Pre-Feasibility Study
Q1 2015
Complete
Commence Commissioning and Ramp-up
Q1 2016
Q1 2016
Steady State Commercial Production
Q2 2016
Q2 2016
Phase 1 Development Expenditures
The capital cost budget for the Project as approved by the board of directors is $295 million with the Project commencing July 1, 2014. Phase 1 development expenditures as at March 31, 2015 were recorded through Property, Plant and Equipment at $78 million, as follows:
| | |
| | Asanko Gold Mine
Totals
|
Cost of Property, Plant and Equipment
| $ millions
|
| As at March 31, 2015
| 99.1
|
| Less: costs incurred prior to July 1, 2014
| (9.7)
|
| Less: costs acquired through the acquisition of PMI
| (9.2)
|
| Less: Corporate office equipment
| (0.1)
|
| Less:Capitalized interest
| (2.1)
|
| Total Phase 1 Development Expenditures
| 78.0
|
Of the $78 million, approximately $16 million of Phase 1 development expenditures were in payables as at March 31, 2015.
Commitments and contractual obligations
As at March 31, 2015, the Company had contractual obligations and open purchase orders totaling $223 million relating to the construction of the Asanko Gold Mine Phase 1. Approximately $78 million has been paid or invoiced, with the balance of $145 million due to be paid within 1 year as work is completed on Phase 1. Procurement is now 76% complete and proceeding on schedule. Equipment and materials deliveries, none of which are on the project critical path, remain on schedule. Nearly three-quarters of the capital expenditure has now been committed and the Project is expected to be completed within the US$295 million capital expenditure budget.
| |
as at 31-March-15
| $ Million
|
Phase 1 Development Expenditures paid
| 62.0
|
Invoiced amounts in Payables
| 16.0
|
Further commitments made
| 145.0
|
Estimated additional to complete
| 60.4
|
Remaining contingency
| 11.6
|
Total Estimated Cost
| 295.0
|
4
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Deferred development costs
During Q1 2015 $0.6 million was spent on deferred development costs, not including asset retirement costs or share-based payments, compared to $4.1 in Q1 2014. This significant reduction in costs reflects the shift of resources to the Phase 1 construction project where costs are being capitalized to property plant and equipment work in-progress. Costs in Q1 2015 reflect the reduction in activity at the Esaase camp and the Phase 2 PFS.
| | |
| Three months ended March 31, 2015
| Three months ended
March 31, 2014
|
| | |
Camp operations
| $ 44,994
| $ 779,448
|
Development support costs
| 163,211
| 420,932
|
Feasibility studies and engineering
| 376,873
| 2,205,408
|
Permitting
| -
| 185,490
|
Community affairs and environment
| 59,158
| 501,227
|
| 644,236
| 4,092,505
|
Asset retirement costs
| 2,692,457
| 91,335
|
Share-based payments
| 479,822
| 907,329
|
| $ 3,816,515
| $ 5,091,169
|
Exploration and Evaluation
During the period, the Company commenced a near mine exploration program focused on high priority targets that have the potential to add oxide resources to the Asanko Gold Mine using systematic and low-cost exploration methods. This follows positive results from an extensive regional prospectivity mapping exercise undertaken in 2014 by external consultants.
The Asankrangwa Gold Belt and wider Kumasi Basin in Ghana are well endowed and contain a number of large economic gold systems such as Nkran, Esaase and Edikan. Significant potential exists for Asanko to generate further value on its ground holdings as demonstrated with the recent discovery of the Dynamite Hill deposit.
The study concluded that only 7% of Asankos highly prospective concession area had been historically explored effectively. The study has provided a better understanding of the controls on the location of gold deposit formation and the expression of these controls in exploration data and a significant number of new exploration targets have been generated. The identified targets provide a clear opportunity for the exploration team and offer the potential for rapid delineation of new deposits and resource areas.
In February 2015, the Company acquired various concessions from Midlands Mineral Corporation (Midlands) (TSX-V: MEX) for a cash consideration of US$250,000. These concessions are contiguous with Asankos current mineral tenements and importantly extend the strike distance of a number of targets on Asankos ground. The exploration data acquired with Midlands is being integrated with Asankos exploration database, and near mine targets are in the process of being prioritized and validated.
The 2015 exploration programme has been designed to provide a cost effective validation of the prospectivity targets, as well as establish a level of parity to the data coverage. To this end, an airborne geophysical survey is planned during Q2 2015, and will infill areas not flown already, and importantly lay the foundation for contiguous geological and structural modelling of targets. Near surface oxide targets are being prioritized for investigation during the 2015 programme, and will be ear-marked for initial drill testing during 2016. It is anticipated that the integration of the airborne geophysical survey
5
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
results and current structural modelling will yield further near mine targets. The budget for the 2015 program is approximately $2 million, of which approximately $0.4 million was spent during the period, as follows:
| | |
| Three months ended March 31, 2015
| Three months ended
March 31, 2014
|
| | |
Exploration support costs and prospectivity mapping
| $ 424,762
| $ 57,889
|
Share-based compensation
| 121,157
| -
|
| $ 545,919
| $ 57,889
|
Expenditures during the period were predominantly related to a prospectivity mapping exercise undertaken by Corporate Geoscience Group (CGSG), a respected consulting company based in Australia. The scope of the exercise was to undertake a detailed geological framework, prospectivity and targeting study of Asankos concession packages in the Asankrangwa Gold Belt, Kumasi Basin and the broader region. The objective of this study was for CGSG to deliver new knowledge, new concepts and new targets for resource expansion and acquisition that would enable Asanko to rapidly grow the resource inventory of the Asanko Gold Mine. The process followed by CGSG included:
·
Re-processing and filtering all geophysical datasets available covering the AKG concession package;
·
Applying Algorithm-driven structure detection to magnetic, EM and SRTM grids delivered new, detailed structural information promoting better geological understanding; and
·
Utilising data driven Weights of Evidence (WoE) and knowledge driven Fuzzy Inference System (FIS) prospectivity analyses to generate a significant number of new exploration targets.
The outcomes of their study include:
·
Identifying 13 high priority exploration targets within Asankos existing tenement package;
·
The development of a new, more detailed geological framework, mineral systems model and exploration guide for gold systems in the Asankrangwa Gold Belt and Kumasi Basin; and
·
The provision of a detailed set of recommendations providing a framework for the development of future brownfields and greenfields exploration programmes.
Corporate Overhead
During the period $1.0 million was incurred in corporate overhead, including wages, consulting fees, professional fees, office rents and investor relations activity, as follows:
| | |
| Three months ended
March 31, 2015
| Three months ended
March 31, 2104
|
Wages and Consulting Fees
| $ 357,223
| $ 812,944
|
Office Rent and Administration
| 194,008
| 651,739
|
Professional Fees
| 299,747
| 160,426
|
Regulatory Fees
| 28,401
| 141,035
|
Travel, promotion and Investor Relations
| 186,632
| 285,098
|
Total Corporate Overhead
| $ 1,066,011
| $ 2,051,242
|
A significant reduction in corporate overhead was achieved during the period in relation to the same period in 2014 by rationalizing management and offices following the February 2014 merger with PMI Gold Corporation.
Funding
The Company strengthened its balance sheet in February 2015, by raising C$46 million through a bought-deal financing completed at C$2.02/share. Net proceeds of the fund raising were converted to approximately $34.7 million US dollars and
6
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
will be used to complete Phase 1 of the Project and for working capital and general corporate purposes, including the completion of a Definitive Feasibility Study on Phase 2.
The Company believes it is fully funded with $222.9 million in cash on-hand as at March 31, 2015 and undrawn project debt facilities of $70 million plus a $20 million cost-overrun facility for total available funding of approximately $313 million and expects to be cash flow positive in Q2 2016. The remaining use of funds is $273 million (below) which creates a current funding buffer of $40 million.
| |
Forecast Cash Uses 31-Mar-15 to 1-Apr-16
| $ Million
|
Invoiced amounts in Payables
| 16.0
|
Further commitments made
| 145.0
|
Estimated additional to complete
| 60.4
|
Remaining contingency
| 11.6
|
Total Remaining Project Spend
| 233.0
|
VAT Expenditures (later Receivable)
| 17.9
|
Working Capital & Pre-Production Op. Costs
| 22.5
|
Less: Pre-Production Revenue
| (9.6)
|
Corporate Overhead and other
| 9.2
|
Total Cash Uses
| 273.0
|
Phase 2 Pre-Feasibility Study
The Company completed a Pre-Feasibility Study on the Project in May 2015 (the May 2015 AGM PFS) outlining the expansion of the processing facilities and bringing the Esaase pit into the mine plan as Phase 2 of the Asanko Gold Mine construction. The Phase 2 expansion envisions one large, multi-pit mine, including the Phase 1 pits, producing an average of 411,000 ounces of gold annually over a 10.5 year Life of Mine (LoM) from 2018. The Esaase ore will be mined and crushed at Esaase and then conveyed to a central processing facility at Obotan. The Obotan facility will be expanded with a 5 Mtpa flotation plant to be built alongside the 3 Mtpa Carbon-in-Leach (CIL) plant currently under construction for Phase 1. In addition the annual throughput of the Phase 1 CIL plant will be upgraded and increased to 3.8Mtpa by adding 2 extra CIL tanks to allow for the blending of oxide ores from Esaase into the feed from the current Phase 1 pits. Highlights of the May 2015 AGM PFS are, as follows:
·
Life of Mine gold production of 4.7 million ounces over a 12.5 year mine life (Phase 1 and 2).
·
Lowest quartile All-In Sustaining Costs of US$798/oz including corporate overhead and interest on debt.
·
Robust project economics with strong cash flow generation even in a weak gold price environment:
| | | |
Total AGM Economics
| NPV (5%)*
US$ (millions)
| IRR*
(%)
| 2018 - 2021
After-Tax FCF
(US$ millions)
|
Spot - US$1,150/oz
| 476
| 20
| 702
|
Study Basis - US$1,300/oz
| 770
| 27
| 848
|
Upside Case - US$1,500/oz
| 1,149
| 36
| 1,043
|
* After-tax project NPV & IRR over Life of Mine basis 1 July 2014
As a result of the positive project economic outcomes of the May 2015 AGM PFS, a portion of the Esaase Mineral Resources have been upgraded to Mineral Reserves with total AGM mineral reserves, as follows:
7
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
| | | |
Total AGM
Mineral Reserves
| Tonnage
(Mt)
| Grade
(g/t)
| Ounces
(millions)
|
Proven
| 38.0
| 1.75
| 2.14
|
Probable
| 58.9
| 1.64
| 3.11
|
Total
| 97.0
| 1.68
| 5.25
|
The Board of Directors has approved the commencement of a Definitive Feasibility Study (DFS) for Phase 2, which will include optimization of the mine plan, further metallurgical test work and more detailed engineering. The DFS is expected to be complete in Q2 2016. Completing a successful DFS, arranging financing for the $270 million capital cost, and obtaining permitting for Phase 2 will be required for the Board of directors to make an investment decision.
Discussion of Operations
Asanko Gold Mine Project
The acquisition of PMI in early 2014 has created a flagship project in Ghana and the foundation on which to build a mid-tier gold mining Company. The flagship project was created by combining both the Obotan and Esaase Projects into one mine now referred to as the Asanko Gold Mine. The Asanko Gold Mine (AGM or the Project) consists of six known open pit deposits over a 25km trend and is located in Ghana, West Africa (below figure).
The Government of Ghana has a 10% free carried interest in the AGM in accordance with Ghanaian Law. Section 43.1 of the Ghanaian Minerals and Mining Act of 2006, (Government Participation in Mining Lease) provides: Where a mineral right is for mining or exploitation, the Government shall acquire a ten percent free carried interest in the rights and obligations of the mineral operations in respect of which financial contribution shall not be paid by Government.
In order to achieve this legislative objective, 10% of the common shares of the Companys Ghanaian subsidiary, Keegan Resources (Ghana) Limited, which owns the Esaase concession have been issued into the name of the Government of Ghana with a goal of settling the obligation. The government has a nominee on the board of this subsidiary. There is no shareholders agreement between the Company as the 90% shareholder and the Government of Ghana as the 10% shareholder. The Ghanaian Government is entitled to 10% of declared dividends from the net profits of Asanko Ghana but does not have to contribute to its capital investment.
The Companys Ghanaian subsidiary which owns the Abore, Abirem and Adubea mining leases has neither issued 10% of the Companys shares to the Government of Ghana nor appointed a government representative to the board of the subsidiary. The Company has initiated a corporate restructuring for housekeeping purposes following the PMI acquisition. The Company intends to transfer all mining leases and concessions held by Adansi Gold Company (GH) Limited to Keegan Resources Ghana Ltd. In addition, Keegan Resources Ghana Ltd will transfer the Asumura exploration concessions to a new subsidiary, Asanko Gold Exploration Ltd. Asanko Gold Exploration Ltd. will become the companys exploration vehicle in Ghana and continue to be owned 100% by Asanko Gold Barbados Inc.
Following the re-organization, Keegan Resources Ghana Ltd will be renamed Asanko Gold Ghana Ltd and will be the Companys operating entity in Ghana, holding all of the assets of the Asanko Gold Mine. Asanko Gold Ghana Ltd will be 90% owned by Asanko Gold Barbados Inc. and the Government of Ghana will have a 10% free-carried interest.
In the future, the Company intends on winding up Adansi Gold Limited and PMI Gold Corp.
Development Strategy
The Company envisions developing the Asanko Gold Mine in two phases. Phase 1 is based on the November 2014 Definitive Project Plan and is fully financed, fully permitted and under construction. Phase 1 is targeting steady-state production averaging 190,000 ounces per year by Q2 2016, mining ore from the main pit at Nkran, along with feed from satellite pits at Adubiaso, Abore, Asuadai and Dynamite Hill, and processed via a 3Mtpa CIL plant.
The Company has completed a Pre-Feasibility Study (the May 2015 AGM PFS) outlining the expansion of the processing facilities to include a 5Mtpa flotation plant and bringing the Esaase pit into the mine plan as Phase 2 of the Asanko Gold Mine construction. The Phase 2 expansion envisions one large, multi-pit mine producing an average of 411,000 ounces of gold annually over a 10.5 year Life of Mine (LoM) from 2018.
8
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
The Company engaged DRA Mineral Projects (DRA) to manage the May 2015 AGM PFS. DRA are currently building Phase 1 of the Project on an EPCM basis.
Mineral Resources
The AGM Mineral Resources are divided between the Obotan deposits (Nkran, Adubiaso, Abore, Dynamite Hill & Asuadai deposits) for which a 0.8 g/t cut-off was used, and the Esaase deposit for which a 0.6 g/t cut-off was used. The estimation for all the deposits forming the AGM were compiled by Charles J. Muller, of CJM Consulting. The Obotan deposit estimation was completed in September 2014 whilst the Esaase estimation was completed in September 2012.
Asanko Gold Mine Global Resource Estimate
| | | | | | | | | | | | | | | | | | | | |
Deposit
| Measured
| Indicated
| Total (M&I)
| Inferred
|
Tonnes (millions)
| Grade (g/t)
| Oz (millions)
| Tonnes (millions)
| Grade (g/t)
| Oz (millions)
| Tonnes (millions)
| Grade (g/t)
| Oz (millions)
| Tonnes (millions)
| Grade (g/t)
| Oz
(millions)
|
Nkran
| 13.24
| 2.55
| 1.09
| 25.80
| 2.23
| 1.85
| 39.04
| 2.34
| 2.94
| 7.06
| 2.34
| 0.53
|
Abore
| 1.61
| 1.70
| 0.09
| 3.37
| 1.63
| 0.18
| 4.98
| 1.65
| 0.27
| 6.59
| 1.65
| 0.35
|
Adubiaso
| 0.73
| 2.60
| 0.06
| 1.40
| 2.04
| 0.09
| 2.13
| 2.23
| 0.15
| 0.20
| 2.27
| 0.02
|
DynamiteHill
| 0.00
| 0.00
| 0.00
| 1.84
| 1.86
| 0.11
| 1.84
| 1.86
| 0.11
| 0.52
| 1.51
| 0.03
|
Asuadai
| 0.00
| 0.00
| 0.00
| 1.64
| 1.34
| 0.07
| 1.64
| 1.34
| 0.07
| 1.25
| 1.61
| 0.06
|
Phase 1 Total
| 15.58
| 2.47
| 1.24
| 34.05
| 2.10
| 2.30
| 49.63
| 2.22
| 3.54
| 15.62
| 1.96
| 0.99
|
Esaase
| 23.38
| 1.49
| 1.12
| 71.25
| 1.44
| 3.28
| 94.63
| 1.45
| 4.40
| 33.59
| 1.40
| 1.51
|
Total
| 38.96
| 1.88
| 2.36
| 105.30
| 1.65
| 5.58
| 144.26
| 1.71
| 7.94
| 49.21
| 1.58
| 2.50
|
Notes:
Due to rounding differences some M&I totals may not add exactly with the Measured and Indicated figures. The MRE for the Phase 1 (comprising the Nkran, Adubiaso, Abore, Dynamite Hill and Asuadai deposits) and Phase 2
9
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
(comprising the Esaase deposit) resources were all prepared by Charles J. Muller, B.Sc. Geology (Hons), PR.Sci.Nat., MGSSA, a Director of CJM Consulting Pty Ltd. (CJM) of Johannesburg, South Africa. The MRE is reported in accordance with Canadian National Instrument 43-101 requirements and the South African Code of Reporting of Exploration Results (SAMREC), which is consistent with the CIM Estimation Best Practice Guidelines in Canada. Mr. Muller has reviewed and approved the technical content of this MD&A. Benjamin Gelber P.Geo. Exploration Manager for Asanko, a qualified person with respect to NI 43-101, has supervised the scientific or technical information for the Project.
Asanko Gold Mine Mineral Reserve Statement
As a result of the positive economic outcomes of the May 2015 AGM PFS, a portion of the Companys Mineral Resources for Esaase have been upgraded to Mineral Reserves. The Mineral Reserves have been restated assuming a US$1,300 per ounce gold price (previously assumed US$1,400 per ounce gold price) and include revised modifying factors when compared to the Mineral Reserves from the standalone Esaase PFS published in May 2013. The combination of these changes has resulted in an increase in the Esaase Mineral Reserves of 0.3 million ounces.
2015 Updated Mineral Reserve Statement
| | | | | | | | | |
Deposit
| Proven
| Probable
| Total P&P
|
| Tonnes
(millions)
| Grade (g/t)
| Oz (millions)
| Tonnes
(millions)
| Grade (g/t)
| Oz (millions)
| Tonnes
(millions)
| Grade (g/t)
| Oz (millions)
|
1.3
Nkran
| 13.5
| 2.32
| 1.00
| 17.7
| 2.12
| 1.20
| 31.2
| 2.21
| 2.20
|
1.4
Adubiaso
| 0.9
| 2.23
| 0.06
| 0.9
| 1.90
| 0.05
| 1.8
| 2.07
| 0.11
|
Abore
| 1.2
| 1.69
| 0.06
| 0.9
| 1.87
| 0.05
| 2.1
| 1.77
| 0.11
|
1.5
Asuadai
| 0.0
| 0.00
| 0.00
| 0.5
| 1.26
| 0.02
| 0.5
| 1.26
| 0.02
|
1.6
Dynamite Hill
| 0.0
| 0.00
| 0.00
| 1.1
| 1.88
| 0.07
| 1.1
| 1.88
| 0.07
|
Phase 1 Total
| 15.5
| 2.26
| 1.13
| 21.0
| 2.07
| 1.39
| 36.7
| 2.15
| 2.52
|
1.7
Esaase
| 22.5
| 1.40
| 1.01
| 37.9
| 1.42
| 1.72
| 60.3
| 1.41
| 2.73
|
1.8
Total
| 38.0
| 1.75
| 2.14
| 58.9
| 1.64
| 3.11
| 97.0
| 1.68
| 5.25
|
Notes: A 'Mineral Reserve' is the economically mineable part of a Measured or Indicated Mineral Resource, demonstrated by at least a Preliminary Feasibility Study. It includes diluting materials and allowances for losses that may occur when the material is mined. DRA is of the opinion that the classification of Mineral Reserves as reported herein meets the definitions of Proven and Probable Mineral Reserves as stated by the CIM Definition Standards (2005). Measured and Indicated Mineral Resources that are not Mineral Reserves have not demonstrated economic viability. Inferred Mineral Resources are excluded from the Mineral Reserve Estimate. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding.
The Reserve Statement for the Phase 1 (comprising the Nkran, Adubiaso, Abore, Dynamite Hill and Asuadai deposits) were all prepared by Thomas Obiri-Yeboah, B.Sc. Mining Engineering (Hons), PR.Eng, a Senior Mining Engineer of DRA Projects Pty Ltd. (DRA) of Johannesburg, South Africa. The Reserve Statement is reported in accordance with Canadian National Instrument 43-101 requirements, which is consistent with the CIM Estimation Best Practice Guidelines in Canada. Mr. Obiri-Yeboah has reviewed and approved the technical content of this MD&A.
Mining Operations
A Phase 1 LoM schedule was developed to supply a 3Mtpa mill feed rate from the Nkran pit and the four satellite deposits. A mining contractor has been established on site and is currently carrying out pre-stripping activity at the Nkran pit. It is anticipated that a mining contractor will be used for all ore and waste mining activities.
10
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
The deposits will all be mined utilizing a conventional truck and shovel method. Grade control drilling together with onsite laboratory facilities will be used to delineate the ore from the waste. Ore and waste will be drilled and blasted, then loaded and hauled to either the run-of-mine (ROM) pad or direct tip into the crushing facility from the Nkran deposit. For the satellite deposits - Adubiaso, Dynamite Hill, Abore and Asuadai ore will be placed on pit rim stockpiles or on waste rock storage facility with haul trucks. A fleet of contracted road trucks will be utilized to haul ore from the respective pit rim stockpiles to the ROM stockpile.
Ore from Esaase will be primary and secondary crushed to a particle size -90 mm at Esaase and then transferred to the expanded central processing facility on an industry standard, troughed overland conveyor. The conveyor corridor will be secured with high security fencing and motion sensors and will be monitored on a continuous basis. Extensive studies were completed on the optimal ore transfer methodology which included trade off studies that reviewed rail, pumping and road transport in addition to the selected conveyor option. Esaase waste material will be hauled to the two allocated waste rock dump positions to the West and South of the Esaase pit.
AGM Mine Plan
Pre-stripping operations are currently underway at the Nkran pit with a total of 21.7 million tonnes (Mt) of waste to be stripped in 2015 ahead of ore mining beginning in Q4 2015. During the first year of production in 2016, ore will be mined primarily from the Nkran pit, resulting in a feed grade to the mill of 2.15 g/t gold. The Esaase pit will be brought into production in Q1 2018 with feed being blended over the 12.5 year mine life and augmented by the four satellite pits.
Life of mine it is estimated that 94.0Mt of ore and 405.5Mt of waste (excluding the Nkran pre-strip) will be mined, resulting in a LoM strip ratio of 4.3:1.
PFS Mine Plan for Combined Phase 1 & 2
Years 2015-2022
| | | | | | | | |
| 2015
| 2016
| 2017
| 2018
| 2019
| 2020
| 2021
| 2022
|
Obotan Pits
| | | | | | | | |
Ore mined (000t)
| 230
| 3,704
| 3,123
| 3,319
| 3,000
| 2,951
| 2,850
| 3,001
|
Grade mined (g/t)
| 2.44
| 2.15
| 2.22
| 2.15
| 2.30
| 2.28
| 2.23
| 2.20
|
Waste (000t)
| 19,761
| 21,254
| 21,928
| 21,152
| 20,993
| 23,179
| 22,754
| 18,147
|
Esaase Pit
| | | | | | | | |
Ore mined (000t)
| | | 2,500
| 5,003
| 5,846
| 6,842
| 5,303
| 6,003
|
Grade mined (g/t)
| | | 1.33
| 1.56
| 1.70
| 1.48
| 1.33
| 1.24
|
Waste (000t)
| | | 5,276
| 10,699
| 18,820
| 22,413
| 24,138
| 26,243
|
Combined
| | | | | | | | |
Ore mined (000t)
| 230
| 3,704
| 5,623
| 8,321
| 8,846
| 9,793
| 8,154
| 9,004
|
Grade mined (g/t)
| 2.44
| 2.15
| 1.82
| 1.80
| 1.91
| 1.72
| 1.64
| 1.56
|
Waste (000t)
| 19,761
| 21,254
| 27,205
| 31,850
| 39,813
| 45,591
| 46,892
| 44,390
|
Strip ratio (w:o)
| 86.05
| 5.74
| 4.84
| 3.83
| 4.50
| 4.66
| 5.75
| 4.93
|
Plant feed (000t)
| 0.00
| 3.00
| 3.40
| 8.15
| 8.23
| 8.60
| 8.80
| 8.80
|
Feed grade (g/t)
| 0.00
| 2.15
| 1.85
| 1.97
| 1.92
| 1.68
| 1.73
| 1.37
|
Recovery (%)
| 0.0%
| 88.1%
| 90.9%
| 89.6%
| 90.7%
| 89.8%
| 91.0%
| 90.1%
|
Gold produced (oz)
| 0
| 182,428
| 183,658
| 460,817
| 461,502
| 416,285
| 446,365
| 349,190
|
11
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Years 2023-2028
| | | | | | | |
| 2023
| 2024
| 2025
| 2026
| 2027
| 2028
| LoM Total
|
Obotan Pits
| | | | | | | |
Ore mined (000t)
| 3,001
| 3,001
| 3,000
| 3,001
| 2,325
| 0
| 36,505
|
Grade mined (g/t)
| 2.15
| 1.93
| 1.94
| 2.08
| 2.12
| 0.00
| 2.15
|
Waste (000t)
| 8,484
| 9,761
| 4,619
| 1,863
| 889
| 0
| 194,784
|
Esaase Pit
| | | | | | | |
Ore mined (000t)
| 5,359
| 4,597
| 4,356
| 4,910
| 5,000
| 1,988
| 57,707
|
Grade mined (g/t)
| 1.49
| 1.21
| 1.24
| 1.25
| 1.37
| 2.29
| 1.43
|
Waste (000t)
| 29,235
| 30,904
| 31,067
| 21,777
| 8,034
| 1,900
| 230,506
|
Combined
| | | | | | | |
Ore mined (000t)
| 8,360
| 7,597
| 7,357
| 7,910
| 7,325
| 1,988
| 94,212
|
Grade mined (g/t)
| 1.73
| 1.50
| 1.53
| 1.56
| 1.61
| 2.29
| 1.71
|
Waste (000t)
| 37,719
| 40,665
| 35,686
| 23,641
| 8,923
| 1,900
| 425,289
|
Strip ratio (w:o)
| 4.51
| 5.35
| 4.85
| 2.99
| 1.22
| 0.96
| 4.51
|
Plant feed (000t)
| 8,774
| 8,000
| 8,000
| 8,000
| 7,325
| 4,519
| 94,212
|
Feed grade (g/t)
| 1.63
| 1.57
| 1.58
| 1.56
| 1.66
| 2.26
| 1.71
|
Recovery (%)
| 91.7%
| 89.8%
| 89.8%
| 91.7%
| 92.2%
| 96.6%
| 91.0%
|
Gold produced (oz)
| 419,931
| 385,298
| 389,780
| 387,983
| 395,090
| 216,621
| 4,694,949
|
PFS Ore Mine Plan (un-optimized) for Asanko Gold Mine
12
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Processing
The Phase 1 processing plant is currently under construction and approximately 48% complete. The design is based on a typical single stage crushing, SAG, ball milling circuit (SABC) and CIL flow sheet. It includes single stage jaw crushing with reclaim from a live stockpile and open circuit SAG mill, feeding cyclones that in turn operate in a closed circuit with a ball mill. A pebble crusher will receive scats from the SAG mill, crush them and return them to the SAG for further grinding. The hydrocyclones will achieve the final product size of P80 106 μm. A gravity circuit will be utilized to treat a portion of the cyclone underflow stream to recover coarse free gold, around 40%, from the recirculating load. The milled product will gravitate to a trash screen before entering a pre-leach thickener followed by a conditioning tank.
A seven stage CIL circuit will be used to leach and adsorb gold from the milled ore onto activated carbon. An AARL elution circuit will be used to recover gold from loaded carbon. Cyanide in the CIL tailings will be detoxified using the SO2 / Air method. The detoxified tailings are then pumped to the Tailings Storage Facility (TSF).
This process flow sheet is well known in the industry, and is relatively low risk as it was proven as a successful processing route for the Nkran ores during Resolute Mining Ltd operations from 1998 to 2002.
The Phase 2 expansion project will expand the central processing facility with the addition of a 5Mtpa ball mill, gravity concentrator followed by a flotation circuit. The concentrate from the float circuit at a mass pull of 10% will be reground and then transferred to a new CIL circuit for leaching and then final gold production.
Phase 2 further makes provision for the opportunity to optimize feed material streams to either the flotation or whole ore leach circuit via interlinking conveyors between the respective mill feed circuits. In doing this, there is an opportunity to optimize recoveries and operating costs depending on the ore types being mined. The milling circuits could be operated at different grinds to facilitate maximum liberation and therefore optimum value add.
The relatively soft, easy milling oxide ores from Esaase can be blended into the Phase 1 CIL circuit allowing the tonnage throughput to be increased to 3.8Mtpa. These oxide ores also give improved recovery through the CIL circuit compared to the flotation plant. In the construction of the Phase 1 CIL circuit the civil work has been done to allow two additional CIL tanks to be added to the circuit to ensure that the residence time is maintained at the higher throughput. All the other equipment is sized to handle the additional tonnage.
In addition, testwork has shown that similar recoveries can be achieved by processing the Nkran fresh ore through the flotation circuit at potentially lower operating cost. Additional testwork is planned during the DFS to optimize the economic benefits of this scenario.
Having the two milling circuits in the same location will also allow any new, near-mine geological exploration discoveries to be processed under optimal economic conditions.
The final tailings from Phase 1 and Phase 2 will report to a single TSF. The TSF currently being constructed to service Phase 1 is designed to hold all the tailings from both phases for the life of the operations. Services and infrastructure between Phase 1 and Phase 2 will be shared as far as possible.
13
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Phase 1 Process Flow Sheet 3Mtpa CIL Plant
Phase 2 Process Flow Sheet Addition of 5Mtpa Flotation Plant
14
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Life of Mine Process Plant Discounted Recoveries
| | |
Gold Recovery
| Phase 1
DPP
| AGM
(Phases 1&2)
|
Ore sourced from Obotan
|
Oxide
| 94.8%
| 90.7%
|
Transitional
| 95.1%
| 91.1%
|
Fresh
| 93.8%
| 93.0%
|
Ore sourced from Esaase
|
Oxide
| -
| 89.8%
|
Transitional
| -
| 87.0%
|
Fresh
| -
| 92.4%
|
LoM Blend Recovery
| 93.9%
| 91.7%
|
LoM Blend Discounted Recovery
| 92.6%
| 90.9%
|
Life of Mine Process Plant Operating Costs
| | |
LoM US$/t milled
| Phase 1
DPP
| AGM
(Phases 1&2)
|
Labour
| 0.7
| 0.3
|
Power
| 6.5
| 5.2
|
Reagents & other consumables
| 4.4
| 4.9
|
Other
| 1.9
| 1.2
|
Total
| 13.4
| 11.7
|
15
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Note: The information in this MD&A that relates to Processing is based on information compiled by Mr Glenn Bezuidenhout, who is a Metallurgist and a Fellow of the South African Institute of Mining and Metallurgy. Mr Bezuidenhout is a Director of DRA Mineral Projects. Mr Bezuidenhout has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify and is a "Qualified Person" under National Instrument 43-101 - 'Standards of Disclosure for Mineral Projects'. The Qualified Person has verified the data disclosed in this MD&A, was satisfied with the verification process and consents to the disclosure in this MD&A. Mr Bezuidenhout has reviewed and approved the technical content of this MD&A.
16
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Capital Costs
The initial capital cost of the mine, process plant and associated infrastructure for Phase 1 is estimated at $295 million. The cost is inclusive of all infrastructure and indirect costs required for the Project including allowances for contingencies and estimating inaccuracies of 8.3% in aggregate (amounting to $22.75 million).
| |
Phase 1 Capital Cost Estimate
| $ million
|
Process plant
| 85
|
Mining (pre-production costs)
| 71
|
Power infrastructure
| 18
|
Buildings, offices and accommodation
| 12
|
TSF, WRD, ROM, water supply, civil works
| 23
|
CSR, owners team, G&A
| 47
|
EPCM
| 16
|
Sub total
| 272
|
Contingency & estimating inaccuracies
| 23
|
Total
| 295
|
The incremental capital cost of the mine, process plant and associated infrastructure for Phase 2 is estimated at US$270 million. The cost is inclusive of all additional infrastructure and indirect costs required.
| |
Phase 2 Expansion Capital Cost Estimate
| $ million
|
Front End materials handling
| 30
|
Overland conveyor
| 62
|
Process plant
| 83
|
Infrastructure
| 30
|
Indirect costs
| 38
|
Contingencies
| 27
|
Total
| 270
|
17
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Operating costs
The average cash operating cost for the AGM (Phases 1 and 2) is estimated at $670 per ounce. Estimated All in Sustaining Costs (World Gold Council definition of AISC) are $798 per ounce, which places the AGM in the lowest quartile of industry costs. These costs are based on the treatment of 8.8Mtpa of ore producing an average 411,000 ounces of gold per annum and are inclusive of corporate overheads and interest on debt*.
Operating costs were developed in conjunction with the project design criteria, process flow sheet, mass and water balance, mechanical and electrical equipment lists, currently contracted mining costs and in-country labour cost data. The cash operating costs are defined as the direct operating costs including contract mining, processing, tailings storage, water treatment, general and administrative and refining costs.
| | |
Operating Cost Estimate (US$/oz)
| Phase 1
| AGM (Phases 1&2)
|
Waste mining
| 243
| 299
|
Ore mining
| 105
| 69
|
Processing
| 210
| 243
|
General and administrative
| 83
| 55
|
Refining
| 4
| 4
|
Cash Costs
| 645
| 670
|
Royalties
| 65
| 68
|
Sustaining and deferred capex
| 19
| 23
|
Corporate Overhead
| 35
| 24
|
Interest on Phase 1 Project Debt
| 17
| 7
|
Interest on Phase 2 Debt*
| -
| 6
|
All-in sustaining cash costs
| 781
| 798
|
*Assumes a further US$170 million in debt on same terms and conditions as current facility for illustrative purposes only
18
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Annual Cash Flows (based on $1,300/oz of gold)
| | | | | | | | |
| UOM
| LOM
| 2015
| 2016
| 2017
| 2018
| 2019
| 2020
|
Tonnes milled
| 000t
| 94,212
| -
| 3,000
| 3,400
| 8,150
| 8,225
| 8,600
|
Head grade
| g / t
| 1.71
| -
| 2.15
| 1.85
| 1.97
| 1.92
| 1.68
|
Recovery
| %
| 90.9%
| 0.0%
| 88.1%
| 90.9%
| 89.5%
| 90.7%
| 89.8%
|
Production
| Oz
| 4,694,949
| -
| 182,428
| 183,658
| 460,817
| 461,502
| 416,285
|
Net cash flow
| $000
| 1,311
| (186.4)
| (93.4)
| (19.0)
| 275.0
| 217.6
| 173.9
|
| | | | | | | | | |
| UOM
| 2021
| 2022
| 2023
| 2024
| 2025
| 2026
| 2027
| 2028
|
Tonnes milled
| 000t
| 8,800
| 8,802
| 8,774
| 8,473
| 8,498
| 8,398
| 8,000
| 3,092
|
Head grade
| g / t
| 1.73
| 1.37
| 1.63
| 1.57
| 1.58
| 1.56
| 1.66
| 2.26
|
Recovery
| %
| 91.2%
| 90.0%
| 91.6%
| 89.9%
| 90.1%
| 91.9%
| 92.4%
| 96.6%
|
Production
| Oz
| 446,364
| 349,190
| 419,931
| 385,298
| 389,780
| 387,983
| 395,090
| 216,620
|
Net cash flow
| $000
| 182.0
| 78.9
| 149.4
| 104.1
| 107.6
| 120.0
| 157.8
| 136.7
|
On March 19, 2010, the Government of Ghana amended section 25 of the Minerals and Mining Act of 2006 (Act 703) which stipulates the royalty rates on mineral extraction payable by mining companies in Ghana. The Act now requires the holder of a mining lease, restricted mining lease, or small scale mining license to pay a royalty in respect of minerals obtained from its mining operations to Ghana at the rate of 5% of the total revenue earned from minerals obtained by the holder.
Key Sensitivities
A range of Project sensitivities have been evaluated to assess their impact on the base case numbers included in the financial model for the combined Phase 1 and 2. The significant financial sensitivities identified were discount rate and gold price shown here after taxes and royalties.
| | | | | | |
| Net Present Value at Various Discount Rates ($ million)
| |
Gold Price $/oz
| 3%
| 5%
| 6%
| 7%
| 8%
| IRR
|
1,100
| 497
| 378
| 328
| 282
| 241
| 17.34%
|
1,200
| 725
| 574
| 510
| 452
| 399
| 22.57%
|
1,300
| 952
| 770
| 692
| 621
| 557
| 27.33%
|
1,400
| 1,180
| 965
| 873
| 790
| 714
| 31.73%
|
1,500
| 1,407
| 1,160
| 1,054
| 958
| 871
| 35.89%
|
1,600
| 1,634
| 1,355
| 1,235
| 1,127
| 1,029
| 39.87%
|
Note:The information in this MD&A that relates to the economic assessment is based on financial models compiled by Mr. John Stanbury of CRESCO Project Finance. John has acquired the qualifications of BSc (Eng), BProc, LLB and MBA and has been a member of senior management in a number of mining companies across various industries. Mr Stanbury has sufficient experience to prepare the financial sections as disclosed in this release based on the relevant technical inputs
19
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
provided by other competent persons. Mr. Stanbury consents to the inclusion of such financial information in this release in the form and context in which it appears.
Other significant sensitivities, identified as installation capital, operating costs, feed grade, taxation and process recovery were evaluated and presented as a tornado plot, as follows:
| | | |
| | Impact on NPV(5%) in $000s
|
| Flex Amount
| Positive Case
| Negative Case
|
Process recovery
| 1%
| 13,094
| (13,094)
|
Taxation
| 2.5%
| 28,934
| (28,934)
|
NPV Discount Rate
| 1%
| 78,132
| (78,132)
|
Ore Gold Grade
| 1%
| 11,909
| (11,909)
|
Gold selling price
| $100/oz
| 195,131
| (195,484)
|
Operating cost
| 3%
| 44,936
| (44,887)
|
Installation capex
| 10%
| 36,590
| (36,686)
|
Employment
Phase 1 of the Project will employ approximately 660 employees, including contractors, to operate the mine. Currently during the construction of Phase 1, there are over 1,500 personnel working on the Project site.
The Company is closely engaged with all local stakeholders and has implemented a number of vocational training schemes in the local communities aimed at developing the capabilities of the local youth in employable skills to support the construction and operation stages of the Project.
20
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Phase 2 of the Project will employ an additional 350 employees during operations, including contractors, which will bring the total workforce of the AGM to approximately 1,000 people. The majority of the workforce will be sourced from local communities and elsewhere in Ghana, which has a highly trained workforce due to a mature gold mining industry.
Resettlement
A portion of the Nkran village, consisting of 88 building structures, will be relocated ahead of commencing ore mining operations for Phase 1. The construction of the new dwellings for this resettlement is well underway and expected to be complete by the end of Q3 2015.
Phase 2 mining activities will impact certain communities in close proximity to the Esaase pit. These communities have been engaged through earlier studies on the Essase standalone PFS. The Company will continue detailed stakeholder engagement as part of the DFS.
Permitting
In November 2012, the Company received mining leases on the Abore, Abirem and Adubea prospecting licences. The mining leases have been granted for different periods, with the Abore lease expiring on November 1, 2017, the Abirem lease expiring on March 27, 2026, and the Adubea lease due to expire on November 1, 2018. All leases are renewable under the terms of the Minerals and Mining Act, 2006. In conjunction with the formal issue of the mining leases, the Company also received a key water discharge permit which will allow the commencement of dewatering operations of the Nkran and Adubiaso pits.
In November 2013, the Company received the Environmental Permit from the Environmental Protection Agency (EPA) in Ghana and the Mine Operating Permit from the Mines Inspectorate in Ghana for Phase 1 of the Project. The Company has, or has applied for renewal, of all necessary major permits required to proceed with the construction of Phase 1 of the Project.
The Phase 1 Environmental Permit incorporates the requirement for limited backfilling of the smaller satellite pits, relocation planning for potentially affected dwellings, cyanide detoxification of discharge water and installation of a tailings dam liner. These items are all incorporated and allowed for in the Phase 1 capital cost estimate.
The Company continues to advance the permitting required to mine Dynamite Hill in 2015. It is expected that a modification to the existing Mining Permit will be required and applications are in the process of being filed.
The Company received the Environmental Invoice (the "Invoice") and Water Use Permits for the Esaase deposit from the relevant Ghanaian Regulatory Authorities in March 2014. The Invoice, issued by the EPA, through its Technical Review Committee, is a pre-cursor to receiving the final Environmental Permit. Asanko has now finalized its Environmental Impact Statement (EIS) to incorporate the comments of the Invoice and submitted it to the EPA for final permitting, which will occur in due course. Following the receipt of the Invoice from the EPA, Asanko applied for and received a temporary mining permit for Esaase.
The Esaase EIS will now be amended to exclude the processing facility and the tailings storage facility at Esaase and resubmitted to the EPA for approval. This is expected to occur in Q4 2015.
The conveyor route will require an environmental permit and an operating permit. An EIS will commence shortly and is expected to be completed by Q4 2015.
The Phase 1 EIS will be amended to include the expansion of the processing facility to accommodate a 5Mtpa flotation plant and the deposition of Esaase tailings at the current TSF. This is expected to be submitted to the EPA for approval in Q4 2015.
21
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Project Schedule
Phase 1 is on schedule to produce first gold in Q1 2016 with steady state production by Q2 2016. The Phase 2 expansion study will be advanced to a Definitive Feasibility Study (DFS), which will also seek to optimize the mining operations by more efficiently sequencing the six open pit deposits into one integrated mining schedule, as well as process synergies and optimizations. The DFS will commence during Q2 2015, with an investment decision planned for Q2 2016. If a positive investment decision is made at that time, steady-state production of over 400,000 ounces per annum is projected in 2018.
Legal Proceedings
Except as set forth below, there are no legal proceedings to which the Company is a party or, to the best of the Company's knowledge, to which any of the Company's property is or was subject, and there are no such proceedings known by the Company to be contemplated, where there is a claim for damages that exceeds ten percent of the Companys current assets.
Godbri Datano Claim
On September 14, 2012, Godbri Mining Limited (Godbri) lodged a statement of claim in the High Court of Justice, Accra, Ghana, seeking a declaration that, among other things, that the sale of the Datano concession to Adansi Ghana is null and void. Godbri claims to be the owner of 38% of the issued share capital of Midras Mining Limited (Midras) and states that it did not consent to the acquisition of the Datano concession by Adansi Ghana. Adansi Ghana filed a defence on November 12, 2012. Godbri subsequently amended its claim on January 29, 2013 and in March 2013, both the Company and Adansi Ghana filed further defences. The matter is currently awaiting trial. The Datano concession was acquired in August 2013 from Midras. The Company considers the claim made by Godbri to be spurious and without any merit. Godbri is a private Ghanaian company.
Matisse and Madison Claim
On October 22, 2013, Matisse & Madison Co. Ltd. (M&M) lodged a statement of claim in the High Court of Justice, Accra, Ghana, seeking compensatory damages of $20 million plus interest for breach of a verbal contract related to the purchase of the Datano Concessions from Midras. The Company maintains that this is a frivolous lawsuit lacking in merit and will vigorously defend itself.
Selected Annual Information
| | | | | | |
| | Year ended December 31, 2014
| | Year ended December 31, 2013
| | Nine months ended December 31, 2012
|
| | | | | | |
Total revenue
| $
| NIL
| $
| NIL
| $
| NIL
|
Loss for the year
| | 22,641,634
| | 1,692,203
| | 13,546,202
|
Loss per share basic and diluted
| | 0.14
| | 0.02
| | 0.17
|
Total assets
| | 481,101,732
| | 242,180,938
| | 254,296,574
|
Total long-term financial assets
| | NIL
| | NIL
| | NIL
|
Cash dividends declared per share
| | NIL
| | NIL
| | NIL
|
Working capital
| | 213,703,934
| | 170,757,759
| | 201,741,827
|
22
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Summary of Quarterly Results
The following table is a summary of certain consolidated financial information concerning the Company for each of the last eight reported quarters:
| | | |
Quarter ended
| Interest and other income
| Income (loss) and comprehensive income (loss)
| Earnings (loss) per share
|
March 31, 2015
| $ 272,922
| $ (4,454,406)
| $ (0.02)
|
December 31, 2014
| 233,945
| (2,910,227)
| (0.02)
|
September 30, 2014
| 286,609
| (9,329,515)
| 0.05)
|
June 30, 2014
| 356,116
| 515,436
| 0.00
|
March 31, 2014
| 376,217
| (10,917,328)
| (0.08)
|
December 31, 2013
| 247,604
| (2,262,150)
| (0.03)
|
September 30, 2013
| 233,233
| (1,009,842)
| (0.01)
|
June 30, 2013
| 294,955
| 1,715,473
| 0.02
|
Liquidity and Capital Resources
The Company had working capital of $207.8 million and cash and cash equivalents of $222.9 million at March 31, 2015 compared to $213.8 million and $228.7 million respectively at December 31, 2014.
On February 11, 2015, the Company closed a bought deal financing of 22,770,000 common shares at a price of C$2.02 per share, for gross proceeds to the Company of approximately $36.4 million (C$46.0 million). The Company paid $1.8 million (C$2.2 million) in fees to a syndication of underwriters and an additional $0.2 million in legal and regulatory fees in relation to the bought deal financing.
The available cash resources and $90 million in undrawn debt financing, position the Company well to complete Phase 1 of Project construction, cover its administrative overhead and pursue further growth through organic exploration and mergers and acquisitions.
As at March 31, 2015 the Companys contractual obligations under the Senior Definitive Facilities Agreement was $73.7 million including $60 million drawn under the facility as well as future interest payments.
| | | | |
Contractual obligations
| Payments due by period
|
| Total
| 1 year
| 2-3 years
| 4-5 years
|
|
|
|
|
|
Long term debt, including future interest charges
| $ 73,739,673
| $ -
| $ 27,817,281
| $ 45,922,392
|
| | | | |
Open purchase orders
| 145,000,000
| 145,000,000
| -
| -
|
| | | | |
| $ 218,739,673
| $ 145,000,000
| $ 27,817,281
| $ 45,922,392
|
23
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
The Company may receive additional funds through the exercise of outstanding common stock warrants and options or, if required, through the sale of additional common shares either as a private placement or common stock offering.
As at March 31, 2015, the other sources of funds potentially available to the Company are through the exercise of 126,000 warrants with a weighted average exercise price of C$5.00 per share and the outstanding share-based options with terms as follows:
| | | | | | |
| Total options outstanding
| Total options exercisable
|
Range of
exercise price
| Number
| Weighted average contractual life (years)
| Weighted average exercise price C$
| Number
| Weighted average contractual life (years)
| Weighted average exercise
price C$
|
C$1.00-C$2.00
|
464,141
|
4.09
|
1.94
|
239,141
|
3.37
|
1.95
|
C$2.01-C$3.00
| 10,020,500
| 4.18
| 2.18
| 4,879,875
| 3.96
| 2.22
|
C$3.01-C$4.00
| 3,163,900
| 2.14
| 3.79
| 3,163,900
| 2.14
| 3.79
|
C$4.01-C$5.00
| 630,500
| 1.92
| 4.54
| 630,500
| 1.92
| 4.54
|
C$6.01-C$7.00
| 311,250
| 0.33
| 6.18
| 311,250
| 0.33
| 6.18
|
| 14,590,291
| 3.56
| 2.71
| 9,224,666
| 3.06
| 3.05
|
There can be no assurance, whatsoever, that any of these outstanding securities will be exercised. As at March 31, 2015 none of the Companys outstanding share purchase warrants or share-based options were in-the-money.
Off-Balance Sheet Arrangements
None
Transactions with Related Parties
All transactions with related parties have occurred in the normal course of operations and are measured at as the exchange amount agreed to by the parties. All amounts are unsecured, non-interest bearing and have no specific terms of settlement.
Key management compensation
Transactions with key management personnel were as follows:
| | |
| |
| Three months ended March 31, 2015
| Three months ended
March 31, 2014
|
|
|
|
Salaries and benefits
| $ 278,761
| $ 455,600
|
Share-based payments
| 419,171
| 713,786
|
| $ 697,933
| $ 1,169,386
|
Key management personnel consist of directors and officers of the Company.
Other related parties balances and transactions
Related party transactions (recoveries):
| | |
|
|
| Three months ended March 31, 2015
| Three months ended March 31, 2014
|
|
|
|
UMS (i)
| $ 31,666
| $ 47,355
|
24
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Related party balances receivable (payable):
| | |
| March 31, 2015
| December 31, 2014
|
|
|
|
UMS
| $ -
| $ (8,137)
|
UMS prepaid deposit
| 19,738
| 21,550
|
| $ 19,738
| $ 13,413
|
UMS is a private company with certain key management personnel and directors in common with the Company, and pursuant to an agreement dated March 30, 2012, provided geological, corporate development, administrative and management services to the Company on a cost recovery basis. Effective July 1, 2013, the Company notified UMS that it would no longer require any personnel services but continues to share the cost of UMSs office tenancy and IT services where required.
Proposed Transactions
None
Critical Accounting Estimates
The presentation of financial statements requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Significant areas requiring the use of estimates include the assessment of impairment of mineral properties, measurement of asset retirement obligations, the effective interest rate of long term debt, embedded derivatives and the valuation of share-based payments and foreign currency warrant liability. Actual results could differ from those estimates.
The accounting policies described below are considered by management to be essential to the understanding and reasoning used in the preparation of the Companys financial statements and the uncertainties that could have a bearing on its financial results.
Asset retirement obligations: The fair value of a liability for an asset retirement obligation, such as site reclamation costs, is recognized in the period in which it is incurred if a reasonable estimate of the fair value of the costs to be incurred can be made. The Company records the estimated present value of future cash flows associated with site reclamation as a liability when the liability is incurred. Future costs are calculated using an estimated inflation rate in the country that the third party costs are expected to be incurred. At the end of each reporting period, the liability is increased to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying any initial fair value measurements (additional asset retirement costs).
The assumptions used to determine the Companys asset retirement obligation are as follows:
| | | |
|
| Year ended
| Year ended
|
|
| March 31, 2015
| December 31, 2014
|
|
|
|
|
Undiscounted and uninflated estimated future cash obligation
|
| $ 14,974,495
| $ 12,769,063
|
Range of expected term until settlement
|
| 14-16 years
| 14-16 years
|
Discount rate range
| | 2.13%
| 2.35%
|
Share-based payments: Management determines the fair value of share-based payments and foreign currency warrant liability using the Black-Scholes Option Pricing Model. Option pricing models require the input of highly subjective assumptions including the expected price volatility and the period in which the option will be exercised or the expected life of the options. The estimates concerning volatility are made with reference to historical volatility, which is not necessarily an
25
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
accurate indicator of future volatility. Changes in the subjective input assumptions can materially affect the fair value estimate.
Foreign currency forward contracts: The fair values of the foreign currency forward contracts are determined using the forward rates at the measurement date, with the resulting value discontinued back to present value.
Embedded derivative liability: the Company recognized embedded derivative liability relating to the interest rate floor of the long term loan. The Company used three month LIBOR forward curve rates and assumptions about the time value of the embedded derivative to estimate its fair value. Changes in these inputs can materially affect the fair value estimate.
Effective interest rate: Management estimated the effective interest rate of the first tranche of long term debt based on three-month LIBOR as at March 31, 2015. Changes in the three-month LIBOR rate can affect the effective interest rate.
Development costs: Based on the positive results of the PFS, effective October 1, 2011, the Company commenced capitalizing all development costs associated with the Asanko Gold Mine Project. Exploration and evaluation expenditures reflect those expenditures incurred to identify new deposits that are not envisaged to be part of the Asanko Gold Mine. Management has determined that the mineral interest and development costs that have been capitalized are economically recoverable. Management uses several criteria to assess economic recoverability and probability of future economic benefit including geological information, life of mine models, scoping and pre-feasibility studies, and existing permits and permitting programs.
Changes in Accounting Policies including Initial Adoption
There has been no significant change in significant accounting policies during the three months ended March 31, 2015.
Financial Instruments and Other Instruments
The risk exposure arising from these financial instruments is summarized as follows:
(a)
Credit risk
Credit risk is the risk of an unexpected loss if a customer or a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on the cash and cash equivalent balances held at banks in each of Canada and Ghana. The majority of the Companys cash is held in Canadian based banking institutions, authorized under the Bank Act (Canada) to accept deposits. As at March 31, 2015, the receivables excluding refundable sales tax consist of interest receivable of $0.06 million (December 31, 2014 - $0.07 million).
(b)
Liquidity risk
The Companys approach to managing liquidity is to ensure that it will have sufficient liquidity to settle obligations and liabilities when due. As at March 31, 2015 the Company had a cash and cash equivalents balance of $222.9 million (December 31, 2014 $228.7 million) to settle current accounts payable and accrued liabilities of $17.2 million (December 31, 2014 - $15.0 million) that are considered short term and expected to be settled within 30 days. The Company is not obligated to make repayments of the long term loan and accrued interest until July 1, 2016.
(c)
Market risk
26
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
(i)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Companys loan agreement with Red Kite (see note 8 of the Companys condensed interim consolidated financial statements for the three months ended March 31, 2015) provides for interest at LIBOR plus 6% with a minimum LIBOR of 1%. The Companys sensitivity to a 1% decrease or increase in market rates of interest in relation to its long term debt liability would have an immaterial effect on the Companys interest expense for the three months ended March 31, 2015.
The Companys cash and cash equivalents attract interest at floating rates and have maturities of 90 days or less or maturity over ninety days but redeemable on demand without penalty. The interest is typical of Canadian banking rates, which are at present low, however the conservative investment strategy mitigates the risk of deterioration to the investment. A sensitivity analysis suggests that a change of 10 basis points in the interest rates would result in a corresponding increase or decrease in loss for the three months ended March 31, 2015 of approximately $0.2 million (three months ended March 31, 2014 - $0.2 million).
(ii)
Foreign currency risk
The Company is exposed to foreign currency risk through its foreign currency monetary assets and liabilities. A significant change in the currency exchange rate between the US dollar and Canadian dollar (CAD) and South African rand (ZAR) could have an effect on the Companys results of operations, financial position and cash flows. As at March 31, 2015, the Company had entered into a series of forward contracts to purchase a total of ZAR233 million in exchange for Canadian and US dollars at specified exchange rates. These forward contracts have settlement terms that range from one month to eleven months. As at March 31, 2015, the Company had a CAD cash balance of $15.1 million (December 31, 2014 $30.8 million) and ZAR balance of $9.0 million (December 31, 2014 - $0.4 million) expressed in US dollar equivalent.
(iii)
Other price risk
Other price risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from currency risk or interest rate risk. As at March 31, 2015 and December 31, 2014, the Company had no financial instruments exposed to other price risk.
(d)
Fair values
(i)
Foreign currency forward contracts derivative
During the three months ended March 31, 2015, the Company entered into a series of forward contracts to purchase ZAR in exchange for Canadian and US dollars at specified exchange rates. These forward contracts have settlement terms that range from one month to eleven months.
During the three months ended March 31, 2015, the Company settled several currency forward contracts and realized a foreign exchange gain of $364,054. The fair values of outstanding foreign currency forward contracts are determined using the forward rates at the measurement date, with the resulting value discontinued back to present value and are categorized within level 2 of the fair value hierarchy.
27
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
(ii)
Embedded derivative
The embedded derivative liability associated with the interest rate floor of the long term loan is categorized within level 2 of the fair value hierarchy. The fair value of the embedded derivative was estimated using the three-month LIBOR forward rates to 2020 ranging from 0.27% to 2.38% using an option pricing model.
(iii)
Other
The carrying values of cash and cash equivalents, receivables and accounts payable and accrued liabilities approximate their respective fair values due to the short-term nature of these instruments. The fair value of the long term debt approximates its carrying value due to the floating rate nature of the debt instrument.
(e)
Items of income, expense, gains or losses arising from financial instruments
| | |
| Three months ended March 31,
|
| |
| 2015
| 2014
|
| | |
Interest income from loans and receivable
| $ 272,922
| $ 376,217
|
Realized foreign exchange gain from currency forward contracts
| 364,054
| -
|
Realized and unrealized foreign exchange loss from other financial instruments
| (1,998,064)
| (602,228)
|
Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Companys Chief Executive Officer and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, have evaluated the design and effectiveness of the Companys disclosure controls and procedures and the design as required by Canadian and United States securities legislation, and have concluded that such procedures are adequate to ensure accurate, complete and timely disclosures in public filings.
28
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Internal Control over Financial Reporting
Management is responsible for the establishment and maintenance of a system of internal control over financial reporting. This system has been designed to provide reasonable assurance that assets are safeguarded and that the financial reporting is accurate and reliable. Management used the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013) to evaluate the effectiveness of the Companys internal controls over financial reporting. Based on this evaluation, management concluded that the Companys internal control over financial reporting was effective as at March 31, 2015 and provided a reasonable assurance of the reliability of the Companys financial reporting and preparation of the financial statements.
There are inherent limitations in all control systems and no matter how well designed. An economically feasible control system, even determined to be effective, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Changes in internal control over financial reporting
There has been no material change in the Companys internal control over financial reporting during the three months ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
Summary of Outstanding Share Data
As of the date of this MD&A, there were 196,845,607 common shares of the Company issued and outstanding, 14,940,291 share purchase options outstanding and 126,000 share purchase warrants outstanding. The fully diluted outstanding share count is therefore 211,911,898.
29
ASANKO GOLD INC.
Managements Discussion & Analysis
Three months ended March 31, 2015 and 2014
Forward-looking statements
This MD&A may contain forward-looking statements which reflect the Companys current expectations regarding the future results of operations, performance and achievements of the Company, including but not limited to statements with respect to the Companys plans or future financial or operating performance, the estimation of mineral reserves and resources, conclusions of economic assessments of projects, the timing and amount of estimated future production, costs of future production, future capital expenditures, costs and timing of the development of deposits, success of exploration activities, permitting time lines, requirements for additional capital, sources and timing of additional financing, realization of unused tax benefits and future outcome of legal and tax matters.
The Company has tried, wherever possible, to identify these forward-looking statements by, among other things, using words such as anticipate, believe, estimate, expect, budget, or variations of such words and phrases or state that certain actions, events or results may, could, would, might or will be taken, occur or be achieved.
The statements reflect the current beliefs of the management of the Company, and are based on currently available information. Accordingly, these statements are subject to known and unknown risks, uncertainties and other factors, which could cause the actual results, performance, or achievements of the Issuer to differ materially from those expressed in, or implied by, these statements. These uncertainties are factors that include but are not limited to risks related to international operations; risks related to general economic conditions and credit availability, uncertainty related to the resolution of legal disputes and lawsuits; actual results of current exploration activities, unanticipated reclamation expenses; fluctuations in prices of gold; fluctuations in foreign currency exchange rates, increases in market prices of mining consumables, possible variations in mineral resources, grade or recovery rates; accidents, labour disputes, title disputes, claims and limitations on insurance coverage and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, changes in national and local government regulation of mining operations, mineral tenure rules, tax rules and regulations, and political and economic developments in countries in which the Company operates, as well as those factors discussed in the 40-F filing for the year ended December 31, 2014, available on SEDAR at www.sedar.com.
The Companys management reviews periodically information reflected in forward-looking statements. The Company has and continues to disclose in its Managements Discussion and Analysis and other publicly filed documents, changes to material factors or assumptions underlying the forward-looking statements and to the validity of the statements themselves, in the period the changes occur.
Historical results of operations and trends that may be inferred from the following discussions and analysis may not necessarily indicate future results from operations. Historically, the Companys operations have been primarily funded from share issuances through private placements and the exercise of warrants and share-based options. The Company has and may continue to have capital requirements in excess of its currently available resources. In the event the Companys plans change, its assumptions change or prove inaccurate, or its capital resources in addition to projected cash flow, if any, prove to be insufficient to fund its future operations, the Company may be required to seek additional financing.
Although the Company has been successful in raising capital, there can be no assurance that the Company will have sufficient financing to meet its future capital requirements or that additional financing will be available on terms acceptable to the Company in the future.
Readers are cautioned that there can be no certainty that Phase 2 of the Project will be built or that the overall conclusions of the Definitive Feasibility Study will confirm the May 2015 AGM PFS outcomes, which will be on file at www.sedar.com after no later than June 30, 2015.
30
Form 52-109F2
Certification of interim filings - full certificate
I, Peter Breese, Chief Executive Officer of Asanko Gold Inc., certify the following:
1.
Review: I have reviewed the interim financial report and interim MD&A (together, the interim filings) of Asanko Gold Inc. (the issuer) for the interim period ended March 31, 2015.
2.
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.
Responsibility: The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer.
5.
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a)
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i)
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii)
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b)
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP.
5.1
Control framework: The control framework the issuers other certifying officer(s) and I used to design the issuers ICFR is based on Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
5.2
ICFR material weakness relating to design: N/A
5.3
Limitation on scope of design: N/A
6.
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers ICFR that occurred during the period beginning on January 1, 2015 and ended on March 31, 2015 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR.
Date: May 14, 2015
// Peter Breese
_______________________
Peter Breese
Chief Executive Officer
Form 52-109F2
Certification of interim filings - full certificate
I, Greg McCunn, Chief Financial Officer of Asanko Gold Inc., certify the following:
1.
Review: I have reviewed the interim financial report and interim MD&A (together, the interim filings) of Asanko Gold Inc. (the issuer) for the interim period ended March 31, 2015.
2.
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.
Responsibility: The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer.
5.
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a)
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i)
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii)
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b)
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP.
5.1
Control framework: The control framework the issuers other certifying officer(s) and I used to design the issuers ICFR is based on Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
5.2
ICFR material weakness relating to design: N/A
5.3
Limitation on scope of design: N/A
6.
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers ICFR that occurred during the period beginning on January 1, 2015 and ended on March 31, 2015 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR.
Date: May 14, 2015
// Greg McCunn
_______________________
Greg McCunn
Chief Financial Officer
Asanko Gold (AMEX:AKG)
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