African Gold has the results, so why hasn’t the market caught up?
By Ted Niles
Mike Nikiforuk is baffled. The President of African Gold Group Inc explains, “If you look at companies in our peer group that are trading at three and four times our market cap, companies like Orezone or Volta or more recently Keegan in Ghana, our results are far stronger intercepts of gold mineralization—better grade over bigger intervals.”
Nikiforuk is right; the results are there, a string of them. November 10 assays from the Kobada Gold Project in Mali reveal 2.08 grams per tonne gold over 53 metres (including 9.12 g/t over 4 metres), 0.91 g/t over 90 metres, 1.71 g/t over 16 metres, 1.34 g/t over 36 metres, 1.97 g/t over 26 metres, 1.03 g/t over 41 metres and 1.42 g/t over 26 metres. November 4 assays included 1.04 g/t over 125 metres and 1.29 g/t over 90 metres, while August 31 assays included 2.11 g/t over 44 metres and 1.65 g/t over 17 metres.
“The drill holes are exceptional,” Nikiforuk declares. “This is beyond economic grade over mineable width.”
These results validate the company’s confidence in Africa. But African Gold found success there only after a false first step. They started in the Congo, but it was a short-lived venture. By 1998, with that country on the brink of the catastrophic Second Congo War, they reluctantly pulled up stakes. “We were taught a very significant lesson in terms of geopolitical risk,” Nikiforuk explains.
Both Mali and Ghana rank in the top three of the continent’s biggest gold producers after South Africa. Perhaps more important, both are, according to US Aid for International Development, “stable and democratic.”
African Gold acquired its first Ghana landholdings in 2003 and went public in 2004. “We raised approximately $35 million in a half-dozen tranches to develop the portfolio, with a primary focus on our Kobada flagship asset,” Nikiforuk says. “The deal was struck to acquire Kobada in 2005 from an organization of the French government and was closed after some due-diligence drilling in 2006.”
African Gold controls five contiguous gold concessions in Ghana, comprising 456 square kilometres. Exploration of these holdings is, as Nikiforuk admits, “at a very early stage,” but one gets a good idea of their potential from other miners in the area. The 120-kilometre radius surrounding their concessions—with properties owned by such companies as Newmont Mining, AngloGold Ashanti and Gold Fields—has resulted in the discovery of 150 million ounces of gold. Of particular interest is Keegan’s Esaase concession, which is contiguous with the Asankrangwa Gold Belt, and 94% of that Belt is held by African Gold. Keegan reported a 2009 mineral resource estimate for its Esaase Project of approximately 2 million ounces gold indicated and 1.45 million ounces inferred.
The first resource estimate for Kobada, in 2008, was 740,000 ounces gold at 0.3 g/t cut-off, but Nikiforuk expects a substantial increase. “Ninety percent of the ground remains to be tested through general exploration activities. We fully anticipate discovering additional satellite deposits in the magnitude of a half million ounces, and we believe that our potential within the oxidized profile of the first 100 vertical metres of the project is in the magnitude of three million ounces.”
Kobada has the gold—and the infrastructure. It’s seven kilometres from the Niger River, a sizeable advantage in a part of the world where, as Nikiforuk notes, “You either have too much water or none at all.” It is approximately 45 kilometres from the Sélingué hydroelectric dam and a three-and-a-half hour drive from Bamako International Airport.
The drill holes are exceptional—beyond economic grade over mineable width - Mike Nikiforuk
West Africa’s potential to be an outstanding gold resource was confirmed in September when Kinross Gold Corporation acquired Red Back Mining Inc for $7.1 billion. In light of this, Nikiforuk is keeping his options open. “If the right proposal were to come on the table, I can see us being acquired on a friendly basis,” he says. “One of the things that intrigues us most is joining forces with a company within our peer group, so that our assets combined with their assets and balance sheet would be worth far more than the two of us standing alone.”
For now, however, African Gold’s stock price continues to languish, and people are starting to ask why. Thom Calandra of Stockhouse recently bemoaned the lack of “investor respect” for the company, pointing out that “every few weeks, in yet another round of results, the stock goes nowhere.” He predicted that African Gold’s $45-million market cap “likely will step out soon.”
Nikiforuk agrees. He concludes, “We’ve got quite a strong interest in the project from a variety of players, either our neighbours or those who are very interested in the West African theatre—a theatre which has the biggest spotlight on it in the world.”