Asante Gold's Striking Contrasts in Ghana

Asante Gold is a paradoxical case in the gold mining industry. On one hand, it has two operating mines in Ghana and sits on a substantial asset base of 4.6 million ounces of measured and indicated resource and 2.83 million ounces of reserves.

On the other hand, its stock price has been lagging behind the historic surge in gold prices, closing at C$0.71 in July compared to its 52-week high of C$2.62.

The appeal for Asante Gold lies in its leverage to rising gold prices. When gold trades near record highs, a producer's revenue can balloon while much of its cost base stays fixed. In the first quarter, Asante's revenue reached US$300.4 million, up more than 110% year on year, driven by a realised gold price of US$4,769 an ounce and higher volumes sold.

However, costs are a major concern for Asante Gold. Its all-in sustaining costs were punishingly high at US$3,886 an ounce on a consolidated basis, rising to US$4,197 at Bibiani. Even with exceptional gold prices, that leaves thinner margins than the top line suggests.

Asante is targeting additional financing of around US$100 million by 31 August and has secured a US$50 million gold forward arrangement. Securing funding without heavy dilution would ease balance-sheet worries.