Asanko Gold Inc NYSEMKT:AKG (AKG) is a gold exploration company, focused on becoming a mid-tier gold producer. The company’s main focus is the multi-million ounce Esaase gold project located in Ghana, West Africa. Presently, the company’s US listing has a market capitalization of $169 million and an average daily volume of 85,400.
Asanko could offer deep value that is hard to pass up
Asanko Gold Inc NYSEMKT:AKG (AKG) was formerly known as Keegan Resources, unfortunately, in my view this immediately puts the company on its back foot, as I have a healthy distrust of companies that have changed their name. Still, Asanko could offer deep value that is hard to pass up.
Indeed, at the end of the company’s fiscal second quarter, Asanko Gold Inc NYSEMKT:AKG (AKG) had cash on its balance sheet of $190.4 million and total assets of $244.2 million. Total liabilities meanwhile only came to $13.2 million. With 85 million shares outstanding, this means that Asanko had a book value per share of $2.70 at the end of the reported period. What’s more, the company’s cash balance at the end of the period worked out to approximately $2.24 per share. So, at a current share price of $1.99, Asanko is trading at a price-to-cash ratio of 0.89 and price-to-book ratio of 0.74.However, financing is paramount with all early stage development companies and a healthy cash balance can soon be frittered away on exploration and development. Nonetheless, Asanko Gold Inc NYSEMKT:AKG (AKG) already has financing in place for the initial development of its mine. One of the key take-away’s to note here, is the fact that Asanko received this financing back in September, despite the current environment of falling gold prices and general distain for small mining projects, many of which are collapsing under lack of investment and rising capital spending. Asanko Gold Inc NYSEMKT:AKG (AKG) received this financing commitment from Red Kite Mine Finance Trust, a subsidiary of Red Kite and comes in two tranches, a $130 million term loan facility and a $20 million overrun facility. The term facility has actually been offered on quite favorable terms for Asanko. Specifically, interest demanded is LIBOR +6%, with a 1% minimum LIBOR rate, this works out at around 7% at present. The facility also comes with a two year principle and interest payment holiday. That said, both facilities are dependent upon the completion of the Definitive Feasibility Study, which is expected this quarter.