Toronto-listed Asanko Gold has reported a net loss of $147.5-million in the third quarter of 2019, after recognising an impairment charge of $128.3-million on its equity investment in its joint venture (JV) mine with South Africa-headquartered Gold Fields in Ghana.
The impairment was the result of ongoing work associated with the life-of-mine (LoM) plan for the Asanko Gold Mine (AGM).
The company explained on Thursday that the latest available information from the ongoing work associated with the LoM plan indicated that the target mine life and production could result in the extraction of “materially less” than the total previously estimated reserves, and that the overall resource base for the AGM might be “reduced considerably”.
The updated LoM was still subject to completion, but CEO Greg Mcunn said that the company would publish it along with an updated mineral resource and reserve declaration during the first quarter of 2020.
The third quarter loss compares with a loss of $0.3-million in the same period a year earlier.
The AGM had a strong third-quarter operational performance and produced a record 62 440 oz, at an all-in sustaining cost (AISC) of $1 179/oz. The mine is on track to reach its guidance of 225 000 oz to 245 000 oz, at an AISC range of $1 040/oz to $1 060/oz.
Costs should drop in the fourth quarter, with the completion of the Nkran Cut 2 pushback.
"We have now completed the significant capital expenditure programme which was undertaken with the Cut 2 pushback at Nkran. As a result, we expect to see substantially reduced AISC in the fourth quarter and through 2020, which is expected to translate into free cash flow from the Asanko gold mine generating a return on invested capital to the JV partners.
“With cash building and no debt, we believe that we are initiating a prudent capital allocation strategy, balancing the requirement for value-enhancing exploration with a potential return of capital to our shareholders,” said McCunn.
The record output, combined with an average realised sales price of $1 443/oz, resulted in record proceeds of $91-million for the quarter.
SHARE BUYBACK
Meanwhile, Asanko announced that it would buy back up to 5% of its issued and outstanding shares.
The company explained that market price of its common shares, from time to time, did not “fully reflect the underlying value” of its operations and future prospects and that in such circumstances, the outstanding common shares represented an “appealing investment option”.
“The board of directors of the company believes that the proposed purchases are in the best interests of the company and are an appropriate use of corporate funds,” it said in a statement.
Asanko’s stock fetched C$1.09 apiece in Toronto on Thursday, down 4% on the previous day’s closing price.