As any London estate agent would tell you, nurse when it comes to buying a property, it’s all about location – especially in these markets where, provided you’re on the right side of the tracks, you’ll still be able to find a willing buyer for your £140m Knightsbridge Penthouse . Demonstrating beyond doubt that provided you’re in the right location, you can totally disregard the effects of even the most severe of economic downturns!
And if your family had the Monopoly™ board out over the Christmas break, you won’t need me to remind you how satisfying it can be if you are fortunate enough to snap up Mayfair and Park Lane early on in the game and end up with hotels on each!
If Parker Brothers ever decided to make a Mining and Exploration version of Monopoly™, with the street addresses replaced by countries and operating regions, you would probably see Ghana’s “Ashanti Gold Belt” sitting right where Mayfair & Park Lane appear on the traditional board.
The sheer number of monster mines and levels of gold produced in this region is nothing short of staggering, and whilst I would love to talk more about my family’s Christmas monopoly experience and how I effectively bankrupted my 12 year old nephew within the first 30 minutes (he has to learn right?), it would probably be of more service to readers if we moved on to take a closer look at this prolific Ghanaian gold region, where the opportunity to make some real money (rather than the Monopoly™ type) may lie.
When it comes to researching mining & exploration companies and their often vast array of licences and projects, it can often be a case of “not seeing the wood for the trees”.
As you know Goldstone Resources has gold licences within Ghana and Senegal, with applications pending in Gabon. But just for now focusing on Ghana, there is something quite material that many investors could miss unless they study the website very carefully.
And we are not talking about the initial JORC resource at Homase totalling some 282,608 ounces of inferred [52,779 ounces], indicated [72,531] and measured [157,298] gold resource.
Nor are we referring to the recently acquired Akrokerri Licence, adjacent to Homase and from which Goldstone confirmed in the interim results that a further JORC resource could be determined from existing data.
We are thinking of something different. This is about the specifics of where Goldstone operate in the Ashanti Gold belt, and “Closeology” is the theory we will be extrapolating on. In case you haven’t heard the term before, “Closeology” is the mining equivalent of “Location, Location, Location…” and this time it’s not who lives in the neighbourhood – but for Goldstone Resources, and the Ashanti Gold belt in particular, it’s who mines in the neighbourhood. And this, we believe, is enough to blow the socks off even the most ardent cynic!
Now we could expand on the prospectivity in technical terms. We could bore you rigid with details of different rock types, lava flows, jurassic formations and the other terms technical writers love to quote. But why bother? All we really all we want to know is – is there any gold there, and if so how much!
Well the short answer is yes there is, and as for how much? Well, “more than you can shake a stick at!” as the saying goes.
So let’s get cracking on a whistle-stop tour of Goldstone’s Ghanaian licence neighbours starting with Konongo located around 40km north east of Homase.
The Konongo licence area has produced some 1.65million ounces in mining activities since the 1930s. Operated by Signature Metals (ASX:SBL) the licence has a current JORC of 1.27million ounces (with a target to increase that to 1.5 – 2.0million ounces and production is scheduled to commence in early 2011 with a target of production level of 100,000 ounce per annum. Take a look at the Signature Metals October 2010 presentation for more information.
Oh and just to be clear, Konongo is 50km north east of the massive Anglo Gold Ashanti (JSE:ANG)(NYSE:AU) Obuasi mine which itself is virtually next to Goldstone’s Homase project and they are all on the same geological structure.
So, moving a little south east from Konongo to Akyem licence which is about 50 km due east of Homase. Akyem is operated by Newmont Mining (NYSE:NEM) and, along with their Ahafo project (see below), their Ghanaian assets represent around 20% of Newmont’s worldwide operational asset base.
The Ghanaian Gold business is hugely significant to Newmont. Take a look at the operations on their website to see further information on Akhem or for those ‘facts & figures’, note the 2009 interactive Newmont Annual Report and the page dealing with Akhem. 7.66million ounces of gold reserves and planned first five years gold production of 500,000 ounces per annum. Need we say more?
Swooping west and a few kilometres further south, we find Obuasi which is literally just kilometres south of Homase and Akrokerri (the Goldstone licence areas in case you had forgotten)! Obuasi is operated by Anglogold Ashanti and you can see a summary of their Ghanaian operations on their website. This huge gold mine produced 381k ounces of gold in 2009 and employed around 5,700 local people.
The mineral resource and ore reserves combined at Obuasi, as detailed in their 2008 Country Report, were around, wait for it….47million ounces! Current production is running at around 400,000 ounces of gold per annum.
All this from a neighbour situated literally next door to Goldstone’s licence areas. But let’s continue the loop and travel slightly south west to Ayanfuri, located some 50 km from Homase. Ayanfuri is operated by Perseus Mining (ASX:PRU) who acquired the licence in mid-2006 with less than 1 million ounces in situ at the time. By December 2010, they had managed to increase the resource to 4.3million ounces of Measured and Indicated, 1.68million ounces of Inferred and 3.3million ounces of Reserves.
And even at current levels, Perseus are very confident that significant resource expansion potential is still possible and they are cracking on with further drilling whilst intending to commence production in 2011!
Further information on their projects can be sourced direct from the Perseus Website and as a point of comparison, with 422million shares outstanding and a share price of A$3.12 the company has a market capitalisation of some A$1.3billion or around £815million.
Continuing our tour north west of Ayanfuri we reach Chirano, approximately 40km slightly south west of Homase. Chirano was the principal asset of Red Back Mining which in September 2010 became part of Kinros Gold Corp (NYSE:KGC)(TSX: K)
Corporate history to one side, we also found a super guide on the Kinross website which gives a great explanation of the different levels of confidence in a gold resources and all the relevant terminology (e.g. Inferred, Indicated, Measured). Click here to view. It’s well worth bookmarking!
Kinross are one of the largest gold miners in the world, and being so, as you would imagine, they don’t do small scale. A couple of years ago they acquired one of the world’s most exciting gold discoveries of recent times,Fruta del Norte in Ecuador, from the exploration tiddler-come-giant, Aurelian Resources.
So too they joined with Red Back Mining to secure Chirano with 2.24million ounces of proven and probable reserves and production of around 200,000 ounces per annum. Further information on Chirano can be found here.
Travelling a few kilometres north east of Chirano we reach Obotan, about 25km east of Homase. Obotan is operated by PMI Gold Corporation (TSX:PMV)(ASX:PMV) and hosts some 1.2million ounces of indicated and inferred resources. Take a look at the properties section on the PMI website and specifically the Ghana section.
It’s noted that the resources at Obotan are near to or under, four previously mined pits which were successfully mined at much lower gold prices. They also make reference to the substantial de-risking as a result, particularly in the areas of environmental and social permitting, metallurgy, process engineering, infrastructure etc.
This may rings a bell for Goldstone Resources investors, where the initial JORC resource at Homase is based around the existing pit, previously mined by AngloGold, again at much lower gold prices!
Moving 30km back out west we come across Bibiani, operated by ASX listed Noble Mineral Resources (ASX:NMR) and located about 60km west of Homase. The Bibiani licence was formerly run by AIM listed Central African Gold but was acquired in mid 2010 by Noble and currently has Measured, Indicated and Inferred Resources of just under 2million ounces. That, by the way, is on top of the four million ounces we understand was produced from the licence previously by AngloGold - in a world of much lower gold prices.
Can you see the theme developing? A lot more information on Bibiani can be secured from the project page of the company website. We would note also that the plan is to commence production in 2011 and reach a targeted production of 150,000ounces per annum by 2012!
And, continuing our northern march we reach Ahafo, another Newmont operated licence, which is about 100km north west of Homase. A quick view of Newmont’s operations will provide the initial information but for more thorough analysis you will need to dig a little deeper. Check out the Newmont presentation to the 2010 Indaba Conference. This is interesting and confirms Reserves in excess of nine million ounces, with production running at around 500,000 ounces per annum. Yet another hugely significant gold licence.
So we have now completed a full loop of Homase and Akrokerri and found multi-million ounce gold resources in each direction, at each stop-off - In addition to many multi-hundred-thousand ounces of annual gold production!
Before we continue we must say well done to those who made it this far. To be honest we never anticipated taking so long on this research piece. But given the extent of Ghanaian gold prospectivity, and sheer number of massive multimillion ounce projects, it takes this long to cover them all!.
Of course, the Goldstone’s Ghanaian operations don’t end with Homase. We should also note that about 100km South West of Homase is the earlier stage Manso Amenfi licence. Now it might be earlier stage, but what of its own neighbours? And here we will try to be brief.
The Bogoso and Prestea licences some 20-30km south east of Manso Amenfi, are run by Golden Star Resources (ASX: GSR) and historically, some 13million ounces of gold have been produced here. Current Proven and Probable Mineral Reserves total some 2.75million ounces with Measured, Indicated and Inferred Resources of some 3.2 million ounces. Full analysis can be found on the Operations Page on their website.
Travelling South of Bogoso and Prestea and approaching the Atlantic Ocean (although still only 100km from Manso Amenfi) you reach the Salman licence. Salman is operated by Adamus Resources (ASX:ADU) . Adamus acquired the Salman licence in 2002 and operates this as the Nzema Gold Project . With 2.1million ounces in the Measured, Indicated and Inferred categories of resource, Nzema is yet another multimillion ounce gold project and is gearing up to produce 100,000 ounces per annum, starting in 2011, with a ten year mine life.
Keeping up the pace and travelling slightly north east we have the Iduopriem licence (incorporating the Tegerebie gold project with which it was merged in 2000) approximately 60km from Manso Amenfi. This is yet is another AngloGold licence, further information on which can be sourced from the company website .
Iduopriem produces approaching 200,000 ounces per annum. Moreover looking at the Project Specific Report from 2008 it shows a Mineral Resource of 4.87million ounces and Ore Reserves of 2.55million ounces.
A few kilometres further north is the Tarkwa licence, again about 50km south west of Manso Amenfi. Tarkwa is operated by GoldFields (JSE:GFE) and further details of the licence can be viewed on the project page of the company website .
In summary however Tarkwa has a Mineral Resource of some 15.3million ounces and a Mineral Reserve of 9.9million ounces. Taking a deep breath, we can also advise that 2010 production was a whopping 700,000 ounces from just this one project!
But the enormous Tarkwa alone is not the limit of Goldfields interests in the region. Just a short drive 25km North East leads to Damang where you will find another one of their project. Damang is located approximately 30-40 Km East of Manso Amenfi and once again, full details can be scrutinised on the project page of the Goldfield’s website. Although smaller than Tarkwa, Damang still has a Mineral Resource of 4.7million ounces and a Mineral Reserve of 2.1million ounces. What’s more, production in 2010 was just over 200,000 ounces.
Finally our tour wraps up at the Abosso mine, run by Ghanaian company Abosso Goldfields Ltd which is situated very close by and weighs in with 4 million ounces of gold within its licence!
So there you have it. We hope you enjoyed our virtual tour of the gold mines of the Ashanti Gold belt, but more importantly, we hope it has helped to demonstrate exactly why this gold mining region is considered to be one of the richest and most prolific in the world today.
And since MiningMaven’s point of reference is always value and potential value, we are obviously looking at Goldstone Resources’ assets in relation to those of its neighbours.
Admittedly Goldstone’s prospects are nowhere near as developed as some, but then again neither is the share price!
Goldstone’s market cap currently stands at around £14m, a fraction of that of most of its neighbours. But when you are operating in such a fertile environment for gold exploration, and already demonstrating a healthy level of success, the presence of such illustrious neighbours can only add to Investor confidence going forward.
I believe it was Warren Buffet who said, “you pay a high price for certainty” and this is never truer than in the resource sector. As confidence in a project grows so in turn will the share price, as risk gives way to certainty.
Some people also use the “follow the money” doctrine when investing. In this respect we also note that Athol Gold (AIM:ATG) (Formally Hameldon Resources) has been a buyer of late, with a price target of 20p!
Athol’s Chief Investment Officer is Tom Winnifrith who runs the T1ps Gold Fund. His fund did rather well in 2010, up 127% on the year.
So in the meantime we will be looking in the direction of the Ashanti Gold Belt and closely following the Goldstone Resources story as it unfolds during 2011, with the view that any progress on the ground is unlikely to go unnoticed by some of Goldstone’s more heavyweight and hopefully, nosey neighbours !
And in closing, what of that Christmas Monopoly™ game? Well the yield from my high end property portfolio, along with an enforced tight monetary policy (i.e. refusing to allow other players to be bailed out by “borrowing” from the bank) was enough to ensure there was one clear winner as the game found a timely and natural conclusion. No “kicking the can down the road” at chez MiningMaven!
Perhaps for next Christmas, Parker Brothers will consider launching that Gold Mining version of the game and include an option to convert or maybe back their Monopoly™ Money with real Monopoly™ Gold!
Disclosure: The Authors hold shares in GRL