UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2017
Commission File No. 001-33580
ASANKO GOLD INC.
(Translation of registrant's name into English)
Suite 680, 1066 West Hastings Street
Vancouver,
British Columbia, V6E 3X2, Canada
(Address of principal
executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F
Form 20-F [ ] Form 40-F [X]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) [ ]
SUBMITTED HEREWITH
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ASANKO GOLD INC.
/s/ Fausto Di Trapani | |
Fausto Di Trapani | |
Chief Financial Officer | |
Date: November 3, 2017 |
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
UNAUDITED
Three and nine months ended September 30, 2017 and 2016
TABLE OF CONTENTS
1
ASANKO GOLD INC.
CONDENSED
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
AS AT SEPTEMBER 30,
2017 AND DECEMBER 31, 2016
(In thousands of United States Dollars)
|
September 30, 2017 | December 31, 2016 | |||||||
|
Note | $ | $ | ||||||
Assets |
|||||||||
Current assets |
|||||||||
Cash and cash equivalents |
60,845 | 59,675 | |||||||
Receivables |
2,298 | 1,468 | |||||||
Inventories |
6 | 39,170 | 32,374 | ||||||
Prepaid expenses and deposits |
2,872 | 3,320 | |||||||
VAT receivable |
7 | 11,220 | 22,881 | ||||||
|
116,405 | 119,718 | |||||||
Non-current assets |
|||||||||
Reclamation deposit |
8 | 1,819 | 1,750 | ||||||
Exploration and evaluation assets |
9 | 13,081 | 12,757 | ||||||
Mineral properties, plant and equipment |
9 | 569,281 | 528,487 | ||||||
|
584,181 | 542,994 | |||||||
Total assets |
700,586 | 662,712 | |||||||
Liabilities |
|||||||||
Current liabilities |
|||||||||
Accounts payable and accrued liabilities |
50,992 | 46,934 | |||||||
Current portion of long-term debt |
10 | 18,051 | 469 | ||||||
|
69,043 | 47,403 | |||||||
Non-current liabilities |
|||||||||
Long-term debt |
10 | 139,280 | 154,503 | ||||||
Asset retirement provision |
26,623 | 25,374 | |||||||
Deferred income tax liability |
5 | 28,054 | 19,007 | ||||||
|
193,957 | 198,884 | |||||||
Total liabilities |
263,000 | 246,287 | |||||||
Equity |
|||||||||
Common shareholders' equity |
|||||||||
Share capital |
11 | 561,441 | 556,256 | ||||||
Equity reserves |
12 | 47,967 | 46,613 | ||||||
Accumulated deficit |
(173,256 | ) | (186,444 | ) | |||||
Total common shareholders' equity |
436,152 | 416,425 | |||||||
Non-controlling interest |
13 | 1,434 | - | ||||||
Total equity |
437,586 | 416,425 | |||||||
Total liabilities and equity |
700,586 | 662,712 | |||||||
Commitments and contractual obligations |
14 | ||||||||
Contingencies |
15 |
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Approved on behalf of the Board of Directors:
Peter Breese | Marcel de Groot | |
Director | Director |
2
ASANKO GOLD INC.
CONDENSED
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(In
thousands of United States Dollars, except share and dollar per share
amounts)
|
Three months ended | Nine months ended | |||||||||||||
|
September 30, | September 30, | September 30, | September 30, | |||||||||||
|
2017 | 2016 | 2017 | 2016 | |||||||||||
|
Note | $ | $ | $ | $ | ||||||||||
Revenue |
4 | 63,714 | 71,541 | 193,436 | 114,863 | ||||||||||
Royalties |
4 | (3,186 | ) | (3,577 | ) | (9,672 | ) | (5,743 | ) | ||||||
Net revenue |
60,528 | 67,964 | 183,764 | 109,120 | |||||||||||
Cost of sales |
|||||||||||||||
Production costs |
(24,818 | ) | (29,900 | ) | (87,316 | ) | (57,753 | ) | |||||||
Depreciation and depletion |
9 | (17,810 | ) | (17,556 | ) | (48,967 | ) | (30,526 | ) | ||||||
Total cost of sales |
(42,628 | ) | (47,456 | ) | (136,283 | ) | (88,279 | ) | |||||||
|
|||||||||||||||
Income from mine operations |
17,900 | 20,508 | 47,481 | 20,841 | |||||||||||
Exploration and evaluation expenditures |
(197 | ) | (188 | ) | (463 | ) | (1,042 | ) | |||||||
General and administrative expenses |
(3,259 | ) | (1,785 | ) | (9,447 | ) | (6,855 | ) | |||||||
Income from operations |
14,444 | 18,535 | 37,571 | 12,944 | |||||||||||
|
|||||||||||||||
Finance income |
266 | 121 | 559 | 416 | |||||||||||
Finance expense |
17 | (4,477 | ) | (3,961 | ) | (12,971 | ) | (8,226 | ) | ||||||
Foreign exchange loss |
(961 | ) | (278 | ) | (1,490 | ) | (276 | ) | |||||||
Gain (loss) on derivatives |
10(b) | - | 1,005 | - | (265 | ) | |||||||||
Income before income taxes |
9,272 | 15,422 | 23,669 | 4,593 | |||||||||||
|
|||||||||||||||
Income tax expense |
5 | (3,671 | ) | (3,766 | ) | (9,047 | ) | (9,332 | ) | ||||||
Net income (loss) and comprehensive income (loss) for the period |
5,601 | 11,656 | 14,622 | (4,739 | ) | ||||||||||
|
|||||||||||||||
Net income (loss) attributable to: |
|||||||||||||||
Common shareholders |
4,689 | 11,656 | 13,188 | (4,739 | ) | ||||||||||
Non-controlling interest |
13 | 912 | - | 1,434 | - | ||||||||||
|
5,601 | 11,656 | 14,622 | (4,739 | ) | ||||||||||
Earnings (loss) per share attributable to common shareholders: |
|||||||||||||||
Basic |
20 | 0.02 | 0.06 | 0.06 | (0.02 | ) | |||||||||
Diluted |
20 | 0.02 | 0.06 | 0.06 | (0.02 | ) | |||||||||
Weighted average number of shares outstanding: |
|||||||||||||||
Basic |
20 | 203,449,957 | 199,532,834 | 203,293,733 | 198,014,961 | ||||||||||
Diluted |
20 | 203,449,957 | 208,419,800 | 206,261,846 | 198,014,961 |
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
3
ASANKO
GOLD
INC.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF
CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND
2016
(In thousands of United States Dollars, except for number of common
shares)
|
Accumulated | Non-controlling | |||||||||||||||||||
|
Number of shares | Share capital | Equity reserves | deficit | interest | Total equity | |||||||||||||||
|
Note | $ | $ | $ | $ | $ | |||||||||||||||
Balance as at December 31, 2015 |
196,995,607 | 540,133 | 47,504 | (173,228 | ) | - | 414,409 | ||||||||||||||
Issuance of common shares for: |
|||||||||||||||||||||
Asset acquisition |
9(d) | 2,000,000 | 8,395 | - | - | - | 8,395 | ||||||||||||||
Exercise of share-based options |
12(a) | 2,833,600 | 7,728 | (2,493 | ) | - | - | 5,235 | |||||||||||||
Share-based payments |
12(a) | - | - | 1,411 | - | - | 1,411 | ||||||||||||||
Loss and comprehensive loss for the period |
- | - | - | (4,739 | ) | - | (4,739 | ) | |||||||||||||
Balance as at September 30, 2016 |
201,829,207 | 556,256 | 46,422 | (177,967 | ) | - | 424,711 | ||||||||||||||
|
|||||||||||||||||||||
|
|||||||||||||||||||||
Balance as at December 31, 2016 |
201,829,207 | 556,256 | 46,613 | (186,444 | ) | - | 416,425 | ||||||||||||||
Issuance of common shares for: |
|||||||||||||||||||||
Exercise of share-based options |
12(a) | 1,620,750 | 5,185 | (1,613 | ) | - | - | 3,572 | |||||||||||||
Share-based payments |
12(a) | - | - | 2,967 | - | - | 2,967 | ||||||||||||||
Net income and comprehensive income for the period |
- | - | - | 13,188 | 1,434 | 14,622 | |||||||||||||||
Balance as at September 30, 2017 |
203,449,957 | 561,441 | 47,967 | (173,256 | ) | 1,434 | 437,586 |
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
4
ASANKO GOLD INC.
CONDENSED
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 2017 AND 2016
(In thousands of United States
Dollars)
|
Three months ended | Nine months ended | |||||||||||||
|
September 30, | September 30, | September 30, | September 30, | |||||||||||
|
2017 | 2016 | 2017 | 2016 | |||||||||||
|
Note | $ | $ | $ | $ | ||||||||||
|
|||||||||||||||
Cash provided by: |
|||||||||||||||
Operating activities: |
|||||||||||||||
Net income (loss) for the period |
5,601 | 11,656 | 14,622 | (4,739 | ) | ||||||||||
Adjustments for: |
|||||||||||||||
Depreciation and depletion |
9 | 17,821 | 17,562 | 49,000 | 30,545 | ||||||||||
Finance expense |
17 | 4,477 | 3,961 | 12,971 | 8,226 | ||||||||||
Change in derivatives, net |
10(b) | - | (1,005 | ) | - | 265 | |||||||||
Deferred income tax expense |
5 | 3,671 | 3,766 | 9,047 | 9,332 | ||||||||||
Finance income |
(266 | ) | (121 | ) | (559 | ) | (416 | ) | |||||||
Share-based payments |
12(a) | 543 | 165 | 2,423 | 820 | ||||||||||
Unrealized foreign exchange (gain) loss |
(122 | ) | 155 | (337 | ) | 384 | |||||||||
Operating cash flow before working capital changes |
31,725 | 36,139 | 87,167 | 44,417 | |||||||||||
Change in non-cash working capital |
16 | 8,979 | (3,017 | ) | 1,664 | (12,808 | ) | ||||||||
Cash provided by operating activities |
40,704 | 33,122 | 88,831 | 31,609 | |||||||||||
|
|||||||||||||||
Investing activities: |
|||||||||||||||
Expenditures on mineral properties, plant and equipment |
9 | (31,955 | ) | (32,106 | ) | (81,718 | ) | (114,402 | ) | ||||||
VAT refund relating to development activities |
7 | - | 20,307 | - | 25,979 | ||||||||||
Interest received |
165 | 128 | 346 | 423 | |||||||||||
Cash used in investing activities |
(31,790 | ) | (11,671 | ) | (81,372 | ) | (88,000 | ) | |||||||
|
|||||||||||||||
Financing activities: |
|||||||||||||||
Shares issued for cash, net of share issuance costs |
11(b) | - | 1,776 | 3,572 | 5,234 | ||||||||||
Interest and associated withholding tax paid |
10(a) | (3,054 | ) | - | (10,074 | ) | (2,929 | ) | |||||||
Loan modification fees |
10(a) | - | - | - | (3,275 | ) | |||||||||
Cash used in financing activities |
(3,054 | ) | 1,776 | (6,502 | ) | (970 | ) | ||||||||
|
|||||||||||||||
Impact of foreign exchange on cash and cash equivalents |
67 | (141 | ) | 213 | 117 | ||||||||||
|
|||||||||||||||
Increase (decrease) in cash and cash equivalents for the period |
5,927 | 23,086 | 1,170 | (57,244 | ) | ||||||||||
Cash and cash equivalents, beginning of period |
54,918 | 34,470 | 59,675 | 114,800 | |||||||||||
Cash and cash equivalents, end of period |
60,845 | 57,556 | 60,845 | 57,556 | |||||||||||
|
|||||||||||||||
Supplemental cash flow information |
16 |
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
5
1. |
Nature of operations |
Asanko Gold Inc. (Asanko or the Company) was incorporated on September 23, 1999 under the laws of British Columbia, Canada, with its head office, principal address and registered and records office located at 1066 West Hastings Street, Suite 680, Vancouver, British Columbia, V6E 3X2, Canada. The Companys principal project, the Asanko Gold Mine (AGM), which consists of two neighboring gold projects, the Obotan Project and the Esaase Project, both located in the Amansie West District of the Republic of Ghana (Ghana), West Africa, is being developed in three distinct phases. January 2016 saw Phase 1 of the AGM produce and pour its first gold and on April 1, 2016, the Company declared that Phase 1 of the AGM was in commercial production. A definitive feasibility study was released on June 5, 2017 in respect of Project 5M and Project 10M (formerly described as Phases 2A and 2B, respectively).
In addition to its principal project, the Company holds a portfolio of other Ghanaian gold concessions in various stages of exploration.
2. |
Basis of presentation |
(a) |
Statement of compliance |
|
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting, using accounting policies consistent with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). These condensed consolidated interim financial statements do not include all of the necessary annual disclosures in accordance with IFRS and should be read in conjunction with the Companys audited consolidated financial statements for the year ended December 31, 2016. |
||
The accounting policies followed in these condensed consolidated interim financial statements are the same as those applied in the Companys most recent audited consolidated financial statements for the year ended December 31, 2016. |
||
These condensed consolidated interim financial statements were authorized for issue and approved by the Board of Directors on November 2, 2017. |
||
(b) |
Basis of presentation and consolidation |
|
The financial statements have been prepared on the historical cost basis. |
||
All amounts are expressed in thousands of United States dollars, unless otherwise stated, and the United States dollar is the functional currency of the Company and each of its subsidiaries. References to C$ are to Canadian dollars. |
||
These condensed consolidated interim financial statements incorporate the financial information of the Company and its controlled subsidiaries. Control exists when the Company has power, directly or indirectly, to govern the financial and operating policies of an entity as to obtain benefits from its activities. All significant intercompany amounts and transactions have been eliminated on consolidation. |
6
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
2. |
Basis of presentation (continued) |
The consolidated financial statements include the accounts of the Company and the following subsidiaries:
Subsidiary name | Jurisdiction | Ownership | |
Asanko Gold Ghana Limited (Asanko Ghana) | Ghana | 90% | |
Adansi Gold Company (GH) Limited (Adansi Ghana) | Ghana | 100% | |
Asanko Gold Exploration Ghana Limited | Ghana | 100% | |
Asanko Gold South Africa (PTY) Ltd. | South Africa | 100% | |
Asanko International (Barbados) Inc. | Barbados | 100% | |
Asanko Gold (Barbados) Inc. | Barbados | 100% | |
PMI Gold Corporation | Canada | 100% |
(c) |
Changes in accounting standards |
|
There were no new standards effective January 1, 2017 that had any impact on these condensed consolidated interim financial statements or are expected to have a material effect in the future. The following standards and interpretations have been issued but are not yet effective as of September 30, 2017. |
||
Revenue recognition |
||
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers ("IFRS 15") which supersedes IAS 11 Construction Contracts; IAS 18 Revenue; IFRIC 13 Customer Loyalty Programmes; IFRIC 15 Agreements for the Construction of Real Estate; IFRIC 18 Transfers of Assets from Customers; and SIC 31 Revenue Barter Transactions involving Advertising Services. IFRS 15 establishes a single five-step model framework for determining the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. IFRS 15 has an effective date of January 1, 2018. The Companys preliminary assessment is that the adoption of IFRS 15 will not have a significant impact on the recognition or measurement of the Companys revenue from its customer. However, the adoption of IFRS 15 is expected to result in a number of additional disclosures being included in the Companys consolidated financial statements. |
||
Financial instruments |
||
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments ("IFRS 9") to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 provides a revised model for recognition and measurement of financial instruments and a single, forward-looking 'expected loss' impairment model. IFRS 9 also includes a substantially reformed approach to hedge accounting. The standard is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. In March 2017, the IASB provided an update, clarifying how IFRS 9 is to be applied to modifications of financial liabilities. In light of this clarification, the Company is in the process of evaluating the impact that the adoption of IFRS 9 will have on its consolidated financial statements and expects to provide an update by the fourth quarter of 2017. |
||
Leases |
||
In January 2016, the IASB issued IFRS 16 Leases ("IFRS 16") which replaces IAS 17 Leases and its associated interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting remains similar to current accounting practice. The standard is effective for annual periods beginning on or after January 1, 2019, with early application permitted for entities that apply IFRS 15. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements. |
7
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
3. |
Significant accounting judgements and estimates |
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Management believes the estimates and assumptions used in these condensed consolidated interim financial statements are reasonable; however, actual results could differ from those estimates and could impact future results of operations and cash flows. The Companys significant accounting judgments and estimates were presented in Note 5 of the audited annual consolidated financial statements for the year ended December 31, 2016. |
|
4. |
Revenue |
The Company sold 50,241 and 156,519 ounces of gold to Red Kite during the three and nine months ended September 30, 2017, respectively, in accordance with an Offtake Agreement (Note 10(c)) (three and nine months ended September 30, 2016 54,393 and 89,467 ounces, respectively). Sales proceeds earned in the first quarter of 2016, prior to the commencement of commercial production, were recorded as an offset to pre-commercial production costs and included in development costs (Note 9(b)). Sales proceeds earned subsequent to the commencement of commercial production on April 1, 2016 were included in revenue in the statement of operations and comprehensive income (loss). |
|
Included in revenue is $0.2 million and $0.6 million relating to by-product silver sales for the three and nine months ended September 30, 2017, respectively (three and nine months ended September 30, 2016 $0.2 million and $0.4 million, respectively). |
|
All of the Companys concessions are subject to a 5% gross revenue royalty payable to the Government of Ghana. |
5. |
Income tax |
The classification of income taxes between current and deferred were as follows for each period presented:
|
Three months ended September 30, | Nine months ended September 30, | |||||||||||
|
2017 | 2016 | 2017 | 2016 | |||||||||
(in thousands of US dollars) |
$ | $ | $ | $ | |||||||||
Current tax (expense) recovery |
| | | | |||||||||
Deferred tax expense |
3,671 | 3,766 | 9,047 | 9,332 | |||||||||
Total |
3,671 | 3,766 | 9,047 | 9,332 |
Income taxes are assessed based on annual results and, accordingly, determining the tax expense (recovery) for an interim period involves estimating the likely effective tax rate for the year. Income tax expense (recovery) cannot be exactly calculated until the end of the financial year when all allowances and taxable items are known. Consequently, calculating income taxes on the basis of the results of an interim period, in isolation, could result in recognizing a tax expense (recovery) that is inconsistent with the manner in which tax is ultimately borne by the Company. Therefore, the calculation of the effective tax rate has been based on an estimate of the tax expense (recovery) for the current fiscal year expressed as a percentage of the expected accounting profit or loss. This percentage is then applied to net income (loss) for the current interim period, and the resulting tax expense (recovery) is recognized rateably over the year as a whole.
8
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
5. |
Income tax (continued) |
The deferred tax expense recognized in the three and nine months ended September 30, 2017 of $3.7 million and $9.0 million, respectively, arose due to timing differences with respect to tax and accounting depreciation on the Companys mineral properties, plant and equipment.
During the three and nine months ended September 30, 2016, accelerated tax depreciation as a result of Phase 1 of the AGM reaching commercial production resulted in a deferred tax expense of $3.8 million and $9.3 million, respectively.
6. |
Inventories |
|
September 30, 2017 | December 31, 2016 | |||||
|
$ | $ | |||||
Gold dore on hand |
2,241 | 5,968 | |||||
Goldinprocess |
2,042 | 4,461 | |||||
Ore stockpiles |
21,744 | 14,361 | |||||
Materials and spare parts |
13,143 | 7,584 | |||||
Total Inventories |
39,170 | 32,374 |
No inventory has been recognized at net realizable value as at September 30, 2017 or December 31, 2016.
7. |
VAT receivable |
On April 1, 2016, the Company announced that the AGM was in commercial production and in addition, in April 2016, the Company received a letter from the Ghana Revenue Agency (the GRA) stating that the Company was entitled to a VAT refund in the amount of $20.5 million with respect to the period July 2013 to December 2015. The Company considered these two events to be key triggers with respect to the recognition of all VAT receivable on the purchase of goods and services in Ghana. Since April 1, 2016, with the commencement of commercial production, the Company recognizes a VAT receivable for the total of all VAT returns filed with the GRA less associated refunds. Prior to March 31, 2016, the Company had provided a full allowance against the VAT receivable with an offsetting charge to deferred development costs.
During the nine months ended September 30, 2017, $2.6 million of VAT receivable was reclassified to depletable mineral property interests as it was determined by the GRA to relate to pre-production expenditures. The balance of $2.6 million is eligible to be capitalized to the Company’s deferred tax pools in Ghana and tax deductible over a period of five years.
As of September 30, 2017, VAT receivable of $11.2 million has been recognized (December 31, 2016 - $22.9 million).
9
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
8. |
Reclamation deposit |
The Company is required to provide security to the Environmental Protection Agency of Ghana (EPA) for the performance by the Company of its reclamation obligations in respect of the Abriem, Abore and Adubea mining leases. The initial security totaled $8.5 million and was made up of a Reclamation Deposit in the amount of $1.7 million and a bank guarantee of $6.8 million. The reclamation deposit accrues interest and is carried at $1.8 million at September 30, 2017 (December 31, 2016 - $1.8 million).
The Company deposited the Reclamation Deposit in a Ghanaian Bank in the joint names of the Company and the EPA. The Reclamation Deposit matures annually, but the Company is required to reinstate the deposit until receiving the final completion certificate from the EPA. The Company is expected to be released from this requirement 45 days following the third anniversary of the date that the Company receives a final completion certificate.
10
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
9. |
Mineral properties, plant and equipment |
|
Mineral interests | ||||||||||||||||||||
|
Depletable | Nondepletable |
Exploration
and evaluation assets |
Plant,
buildings and equipment |
Assets
under construction |
Corporate
assets |
Total | ||||||||||||||
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Cost |
|||||||||||||||||||||
As at December 31, 2015 |
| 206,706 | 12,732 | 4,669 | 281,500 | 689 | 506,296 | ||||||||||||||
Additions |
36,709 | 17,720 | 25 | 36,755 | 25,379 | 34 | 116,622 | ||||||||||||||
Reclassification of VAT recoverable |
| (25,013 | ) | | | | | (25,013 | ) | ||||||||||||
Writeoff of deferred stripping assets |
(7,123 | ) | | | | | | (7,123 | ) | ||||||||||||
Changes in rehabilitiation provision |
5,382 | 853 | | | | | 6,235 | ||||||||||||||
Transfers |
111,177 | (111,177 | ) | | 299,538 | (299,538 | ) | | | ||||||||||||
As at December 31, 2016 |
146,145 | 89,089 | 12,757 | 340,962 | 7,341 | 723 | 597,017 | ||||||||||||||
Additions |
43,843 | 4,552 | 324 | 2,258 | 35,700 | 22 | 86,699 | ||||||||||||||
Changes in rehabilitation provision |
387 | 378 | | | | | 765 | ||||||||||||||
Reclassification of VAT recoverable |
2,629 | | | | | | 2,629 | ||||||||||||||
Transfers |
12,317 | (9,875 | ) | | 1,988 | (4,430 | ) | | | ||||||||||||
As at September 30, 2017 |
205,321 | 84,144 | 13,081 | 345,208 | 38,611 | 745 | 687,110 | ||||||||||||||
Accumulated depreciation and depletion |
|||||||||||||||||||||
As at December 31, 2015 |
| | | (2,187 | ) | | (556 | ) | (2,743 | ) | |||||||||||
Depreciation and depletion |
(23,405 | ) | | | (29,606 | ) | | (19 | ) | (53,030 | ) | ||||||||||
As at December 31, 2016 |
(23,405 | ) | | | (31,793 | ) | | (575 | ) | (55,773 | ) | ||||||||||
Depreciation and depletion |
(20,857 | ) | | | (28,085 | ) | | (33 | ) | (48,975 | ) | ||||||||||
As at September 30, 2017 |
(44,262 | ) | | | (59,878 | ) | | (608 | ) | (104,748 | ) | ||||||||||
Net book value |
|||||||||||||||||||||
At December 31, 2016 |
122,740 | 89,089 | 12,757 | 309,169 | 7,341 | 148 | 541,244 | ||||||||||||||
As at September 30, 2017 |
161,059 | 84,144 | 13,081 | 285,330 | 38,611 | 137 | 582,362 |
Depreciation and depletion for the three and nine months ended September 30, 2017 includes $11 and $33, respectively, of depreciation included in general and administrative expenses (three and nine months ended September 30, 2016 - $6 and $19, respectively).
11
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
9. |
Mineral properties, plant and equipment (continued) |
(a) |
Mineral interests and plant, buildings and equipment |
|
Depletable mineral interests consist of the pits currently being mined by the Company, while non-depletable mineral interests consist of the pits not currently being mined by the Company. Other property, plant and equipment costs related to the construction of non-operating pits of the AGM are classified as Assets under construction until such time the assets are available for and put into use, at which time the assets will be classified as Plant, buildings and equipment and depreciated in accordance with the Companys accounting policy for the respective asset class. |
||
(b) |
Pre-commercial production costs |
|
During the pre-commercial production period, the Company capitalized the costs incurred for pre-commercial production mining, processing and support operations offset by the revenue from gold sales (net of royalties). A summary of the costs and revenues is provided below. Effective April 1, 2016, all such deferred development costs/assets under construction were transferred to the cost of mineral properties, plant and equipment. |
January 1, 2016 | ||||
March 31, 2016 | ||||
$ | ||||
Costs incurred during pre-commercial production | 21,222 | |||
Revenue during pre-commercial production, net of royalties | (10,048 | ) | ||
Net costs deferred to development assets | 11,174 |
(c) |
Deferred stripping |
|
During the three and nine months ended September 30, 2017, the Company deferred a total of $19.0 million and $42.2 million, respectively, of stripping costs to depletable mineral interests (three and nine months ended September 30, 2016 - $13.0 million and $25.2 million, respectively). Depletion expense of $4.0 million and $10.2 million for the three and nine months ended September 30, 2017, respectively, was charged on this asset during the periods and was recorded in cost of sales (three and nine months ended September 30, 2016 - $3.1 million and $3.8 million, respectively). |
||
(d) |
Asset acquisitions |
|
During the third quarter of 2017, the Company completed the acquisition of the Miradani Gold Project (the "Miradani Project"), which is located adjacent to the AGM. Covering an area of approximately 15km 2 , the Miradani Project is on an existing mining lease (valid until May 2025) which may enable potential mineral resources to be accelerated to production. The northern boundary of the concession is located approximately 5.5km south of the AGMs processing plant. The purchase price was paid for in cash and recognized on the balance sheet within exploration and evaluation assets. Future production from the Miradani Project is subject to a 5% royalty payable to the Government of Ghana. |
||
During the third quarter of 2016, the Company finalized the acquisition of various mining concessions located approximately 2km from the Nkran pit; the area currently being mined by Asanko. The purchase consideration was a combination of cash and shares for total consideration of $8.6 million and was recognized as part of depletable mineral interests. |
12
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
10. |
Long-term debt |
(a) |
Long-term debt |
|
September 30, 2017 | December 31, 2016 | |||||
|
$ | $ | |||||
Gross proceeds |
150,000 | 150,000 | |||||
Accrued interest |
13,894 | 13,894 | |||||
Loan obligation |
163,894 | 163,894 | |||||
|
|||||||
Deferred financing costs |
(16,475 | ) | (16,475 | ) | |||
Interest and withholding taxes paid |
(29,899 | ) | (19,825 | ) | |||
Loan accretion |
39,811 | 27,378 | |||||
|
|||||||
Total debt |
157,331 | 154,972 | |||||
|
|||||||
Current portion of debt |
18,051 | 469 | |||||
Noncurrent portion of debt |
139,280 | 154,503 |
In 2013, the Company entered into a Definitive Senior Facilities Agreement (DSFA) with a special purpose vehicle of RK Mine Finance Trust I (Red Kite), which was fully drawn for a total of $150.0 million plus $13.9 million in unpaid interest that was accrued up to May 2016 (when the loan was modified; see below). The debt is carried at amortized cost and was recorded net of unamortized financing fees of $16.5 million. Interest on the DSFA is calculated on a quarterly basis at a rate of LIBOR +6%, subject to a 1% minimum LIBOR rate which creates an interest rate floor. Interest is paid in advance at the beginning of each quarter. The Company can elect to repay the DSFA, or a portion thereof, early without penalty. The DSFA is fully secured by shares of the Companys Ghanaian subsidiaries.
During the second quarter 2016, the DSFA was amended in order to defer the repayment of the principal for two years (being the principal deferral period). The amendment provided that the first principal repayment will now be payable on July 1, 2018 after which the facility will be repaid in nine equal quarterly instalments, with the last repayment on July 1, 2020. The Company continues to pay in advance quarterly interest on the loan facility during the principal deferral period. There were no other changes to the existing debt facility terms. The amendments were considered to be a modification of the previous DSFA. A deferral fee of 2% of the loan principal, being $3.3 million, was paid in the second quarter of 2016 commensurate with signing the amendment. The deferral fee was deferred to the loan balance and is being amortized with previously deferred debt financing costs over the remaining life of the DSFA based on the revised effective interest rate of 10.9% .
Prior to April 1, 2016, all interest and accretion costs were capitalized to assets under construction. Commensurate with the declaration of commercial production, all interest and accretion costs are now charged to the consolidated statement of operations and comprehensive income (loss). During the three and nine months ended September 30, 2017, $4.3 million and $12.5 million of finance expense, respectively, was recorded at a weighted-average effective interest rate of approximately 10.9% (three and nine months ended September 30, 2016 - $3.9 million and $11.9 million, respectively, at a weighted-average effective interest rate of approximately 11.1%) . Of this balance, $nil million was capitalized to assets under construction during the three and nine months ended September 30, 2017 (three and nine months ended September 30, 2016 - $nil and $4.0 million, respectively).
13
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
10. |
Long-term debt (continued) |
Additionally, during the three and nine months ended September 30, 2017, the Company paid $3.1 million and $10.0 million, respectively, which included interest to Red Kite and withholding taxes to the GRA (three and nine months ended September 30, 2016 - $nil and $2.9 million, respectively).
The first principal repayment on the DSFA totaling $18.1 million is due in July 2018. Accordingly, this principal repayment has been classified as a current liability as at September 30, 2017. However, the Company has the option to defer the first principal repayment to July 2019 and has until March 31, 2018 to exercise this option. The fee for this extension would be 4% of the loan principal and unpaid interest.
(b) |
Embedded derivative |
|
An embedded derivative liability was originally recognized upon initial recognition for the DSFA loan in relation to the interest rate floor. The total fair value of the embedded derivative on drawdowns was estimated to be $1.4 million. During 2016, the Company changed its accounting policy in respect of its methodology to assess whether an interest rate floor embedded derivative is closely related to the host debt contract by incorporating contractual spread. Based on this change, the Company has determined that the interest rate floor embedded derivative is closely related to the host debt contract and as a result, the embedded derivative previously recognized in respect of the loan was derecognized in fiscal 2016. |
||
(c) |
Offtake agreement |
In addition to the DSFA, the Company entered into an Offtake Agreement with Red Kite with the following details:
- |
Sale of 100% of the future gold production up to a maximum of 2.22 million ounces to Red Kite; |
|
- |
Red Kite to pay for 100% of the value of the gold ten business days after shipment; |
|
- |
A provisional payment of 90% of the estimated value will be made one business day after delivery; |
|
- |
The gold sale price will be a spot price selected during a nine day quotational period following shipment of gold from the mine; and |
|
- |
Should the Company wish to terminate the Offtake Agreement, a termination fee will be payable according to a schedule dependent upon the total funds drawn under the DSFA as well as the amount of gold delivered under the Offtake Agreement at the time of termination. |
As of September 30, 2017, 313,179 ounces have been delivered to Red Kite under the offtake agreement (September 30, 2016 98,176 ounces).
11. |
Share capital |
(a) |
Authorized |
Unlimited common shares without par
value or restrictions; and
Unlimited preferred shares without par value or
restrictions.
14
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
11. |
Share capital (continued) |
(b) |
Issued and outstanding common shares |
|
Number of shares | Amount | |||||
|
$ | ||||||
Balance, December 31, 2015 |
196,995,607 | 540,133 | |||||
Issued pursuant to asset acquisition (note 9 (d)) |
2,000,000 | 8,395 | |||||
Issued pursuant to exercise of sharebased options (note 12 (a)) |
2,833,600 | 7,728 | |||||
Balance, December 31, 2016 |
201,829,207 | 556,256 | |||||
Issued pursuant to exercise of sharebased options (note 12 (a)) |
1,620,750 | 5,185 | |||||
Balance, September 30, 2017 |
203,449,957 | 561,441 |
12. |
Equity reserves |
(a) |
Share-based options |
The Company maintains a rolling share-based option plan providing for the issuance of share-based options for up to 9% of the Companys issued and outstanding common shares. The Company may grant options from time to time to its directors, officers, employees and other service providers. On May 22, 2017, the Company amended its share-based option plan. All options granted prior to this date vest 25% on the date of grant and 12.5% every three months thereafter for a total vesting period of 18 months. Any options granted subsequent to May 22, 2017 vest 33% every twelve months following the grant date for a total vesting period of three years.
During the three and nine months ended September 30, 2017, the Company recognized share-based payments expense of $0.7 million and $3.0 million, respectively, of which $0.1 million and $0.5 million, respectively, were capitalized to mineral properties during period (three and nine months ended September 30, 2016 $0.2 million share-based payment expense of which $0.1 million capitalized to mineral properties; $1.4 million share-based payment expense of which $0.6 million capitalized to mineral properties, respectively).
The following table is a reconciliation of the movement in share-based options during the period:
|
Weighted average | ||||||
|
Number of Options | exercise price | |||||
|
C$ | ||||||
Balance, December 31, 2015 |
14,786,791 | 2.57 | |||||
Granted |
2,915,000 | 2.18 | |||||
Exercised |
(2,833,600 | ) | 2.39 | ||||
Cancelled/Expired |
(276,441 | ) | 1.89 | ||||
Balance, December 31, 2016 |
14,591,750 | 2.54 | |||||
Granted |
3,324,000 | 3.67 | |||||
Exercised |
(1,620,750 | ) | 2.75 | ||||
Cancelled/Expired |
(1,792,625 | ) | 3.50 | ||||
Balance, September 30, 2017 |
14,502,375 | 2.66 |
15
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
12. |
Equity reserves (continued) |
The fair value of the share-based options granted is determined using the Black Scholes pricing model. For all grants during fiscal 2016, the assumed life, dividend yield and forfeiture rate were 3.14 years, nil and 2.89%, respectively. For all grants during the three months ended September 30, 2017, the expected life, dividend yield and forfeiture rate were 3.54 years, nil and 1.13%, respectively. For all grants during the nine months ended September 30, 2017, the weighted average expected life, dividend yield and forfeiture rate were 3.44 years, nil and 0.86%, respectively. Other conditions and assumptions were as follows:
|
Weighted | Weighted | Weighted | Weighted average | ||||||||||||
|
Number of | average exercise | average riskfree | average | BlackScholes | |||||||||||
|
options | price | interest rate | volatility | value assigned | |||||||||||
Period |
C$ | $ | ||||||||||||||
Year ended December 31, 2016 |
2,915,000 | 2.18 | 0.55% | 49.52% | 0.50 | |||||||||||
Three months ended September 30, 2017 |
325,000 | 1.11 | 1.31% | 66.82% | 0.54 | |||||||||||
Three months ended September 30, 2016 |
| | | | | |||||||||||
Nine months ended September 30, 2017 |
3,324,000 | 3.67 | 0.96% | 64.93% | 1.41 | |||||||||||
Nine months ended September 30, 2016 |
2,845,000 | 2.12 | 0.55% | 49.06% | 0.66 |
The following table summarizes the share-based options outstanding and exercisable as at September 30, 2017:
|
Total options outstanding | Total options exercisable | |||||||||||||||||
Range of exercise price |
Number |
Weighted
average contractual life (years) |
Weighted
average exercise price C$ |
Number |
Weighted
average contractual life (years) |
Weighted
average exercise price C$ |
|||||||||||||
C$1.00C$2.00 |
2,608,750 | 3.41 | 1.86 | 2,283,750 | 3.21 | 1.97 | |||||||||||||
C$2.01C$3.00 |
7,492,875 | 1.77 | 2.19 | 7,457,875 | 1.76 | 2.19 | |||||||||||||
C$3.01C$4.00 |
4,230,750 | 2.94 | 3.92 | 2,837,875 | 2.22 | 3.90 | |||||||||||||
C$4.01C$5.00 |
170,000 | 3.82 | 4.38 | 131,250 | 3.78 | 4.32 | |||||||||||||
|
14,502,375 | 2.43 | 2.66 | 12,710,750 | 2.14 | 2.55 |
(b) |
Warrants |
On December 21, 2015, the Company issued 4,000,000 share purchase warrants to Red Kite in conjunction with the drawdown of the final $20.0 million of the loan facility (Note 10(a)). The warrants have an exercise price of $1.83 and expire three years from the date of issuance. All of these warrants remain outstanding as of September 30, 2017.
13. |
Non-controlling interest |
The AGM is wholly-owned by Asanko Ghana. The Government of Ghana holds a 10% free-carried interest in Asanko Ghana; this is considered to be a non-controlling interest in Asanko Ghana. At September 30, 2017, Asanko Ghana has an income surplus in the pool from which dividends can be paid. In accordance with the Companys accounting policy for non-controlling interests, the Company has allocated $0.9 million and $1.4 million of Asanko Ghanas net earnings to the non-controlling interest for the three and nine months ended September 30, 2017, respectively (three and nine months ended September 30, 2016 - $nil for both periods presented).
16
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
14. |
Commitments and contractual obligations |
As at September 30, 2017, the Company had contractual obligations totaling $189.8 million, relating to long-term debt (December 31, 2016 $198.0 million). Contractual obligations related to long-term debt are subject to changes in the three-month LIBOR rate. Prepayment terms allow the Company to prepay the long-term debt, with no penalty, in whole or in part at any time. As at September 30, 2017, the long-term debt had a face value of $163.9 million (December 31, 2016 $163.9 million) (Note 10(a)).
In addition, the Company is a party to certain construction and engineering contracts relating to the operation of the AGM. The following table illustrates the Companys contractual obligations as they fall due as at September 30, 2017:
|
At September | At December | ||||||||||||||
|
Within 1 year | 1 5 years | Over 5 years | 30, 2017 | 31, 2016 | |||||||||||
Long-term debt, related interest payments and withholding tax payments |
31,378 | 158,451 | | 189,829 | 198,028 | |||||||||||
Accounts payable and accrued liabilities |
50,748 | | | 50,748 | 46,934 | |||||||||||
Asset retirement provision (undiscounted) |
| | 35,439 | 35,439 | 34,977 | |||||||||||
Mine operating/construction and other service contracts, open purchase orders |
23,396 | 881 | | 24,277 | 27,969 | |||||||||||
Total |
105,522 | 159,332 | 35,439 | 300,293 | 307,908 |
15. |
Contingencies |
Except as set forth below, there are no material legal proceedings to which the Company is a party or, to the best of the Company's knowledge, which any of the Company's property is or was subject to.
Godbri Datano Claim
During September 2012, Godbri Mining Limited (Godbri), a private Ghanaian company, lodged a statement of claim in the High Court of Justice, Accra, Ghana, seeking a declaration that, among other things, the sale of the Datano concession to Adansi Ghana is null and void. Godbri claims to be the owner of 38% of the issued share capital of Midras Mining Limited and states that it did not consent to the acquisition of the Datano concession by Adansi Ghana. Adansi Ghana filed a defense on November 12, 2012. Godbri subsequently amended its claim in January 2013 and again in March 2013, after which both the Company and Adansi Ghana filed further defenses. The matter is currently awaiting trial but the Company considers the claim made by Godbri to be spurious and without merit. Godbri has taken no further steps in the suit since June 2013. The Company has not reserved any amount of expense or liability in connection with the claim.
Class Action Claim
During the second quarter of 2017, the Company was named as a defendant in a class action lawsuit which alleges the Company knowingly issued misleading technical disclosures. After reviewing the claim with technical experts and legal counsel, the Company is of the view that the complaint is without merit and will be defended. Litigation is inherently uncertain and, accordingly, its outcome cannot be predicted with any degree of certainty. The Company has not reserved any amount of expense or liability in connection with claim.
17
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
16. |
Supplemental cash flow information |
Changes in non-cash working capital consist of the following:
|
Three months ended September 30, | Nine months ended September 30, | |||||||||||
|
2017 | 2016 | 2017 | 2016 | |||||||||
|
$ | $ | $ | $ | |||||||||
Receivables |
(694 | ) | (5,814 | ) | (753 | ) | (6,186 | ) | |||||
VAT receivable |
7,436 | (5,585 | ) | 10,434 | (19,706 | ) | |||||||
Prepaid expenses |
489 | 498 | 425 | 1,303 | |||||||||
Inventories |
(2,062 | ) | (5,796 | ) | (6,796 | ) | (24,764 | ) | |||||
Accounts payable and accrued liabilities |
3,810 | 13,680 | (1,646 | ) | 36,545 | ||||||||
Total |
8,979 | (3,017 | ) | 1,664 | (12,808 | ) |
17. |
Finance expense |
The following is a summary of finance expenses incurred during the three and nine months ended September 30, 2017 and 2016:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
$ | $ | $ | $ | ||||||||||
Interest charges on Red Kite loan (Note 10(a)) | (4,315 | ) | (3,872 | ) | (12,487 | ) | (7,921 | ) | |||||
Accretion charges for asset retirement
obligation |
(162 | ) | (89 | ) | (484 | ) | (305 | ) | |||||
Total | (4,477 | ) | (3,961 | ) | (12,971 | ) | (8,226 | ) |
18. |
Segmented information |
Geographic Information
The Company has two reportable operating segments determined by geographical location. Ghana is the Companys only segment with mining operations at present; Canada acts as a head office function. All revenues were derived from the mining and sale of precious metals to Red Kite under an offtake agreement (Note 10(c)).
Geographic allocation of total assets and liabilities
September 30, 2017 |
Canada | Ghana | Total | |||||||
|
$ | $ | $ | |||||||
Total assets |
30,707 | 669,879 | 700,586 | |||||||
Total liabilities |
1,858 | 261,142 | 263,000 |
December 31, 2016 |
Canada | Ghana | Total | |||||||
|
$ | $ | $ | |||||||
Total assets |
17,653 | 645,059 | 662,712 | |||||||
Total liabilities |
3,008 | 243,279 | 246,287 |
18
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
18. |
Segmented information (continued) |
Geographic allocation of the Statement of Operations and Comprehensive Income (Loss)
For the nine months ended:
September 30, 2017 |
||||||||||
|
Canada | Ghana | Total | |||||||
|
$ | $ | $ | |||||||
Revenue |
| 193,436 | 193,436 | |||||||
Net income (loss) before tax |
(7,580 | ) | 31,249 | 23,669 | ||||||
Deferred income tax expense |
| (9,047 | ) | (9,047 | ) | |||||
Net income (loss) after tax |
(7,580 | ) | 22,202 | 14,622 |
September 30, 2016 |
||||||||||
|
Canada | Ghana | Total | |||||||
|
$ | $ | $ | |||||||
Revenue |
| 114,863 | 114,863 | |||||||
Net income (loss) before tax |
(7,433 | ) | 12,026 | 4,593 | ||||||
Deferred income tax expense |
| (9,332 | ) | (9,332 | ) | |||||
Net income (loss) after tax |
(7,433 | ) | 2,694 | (4,739 | ) |
For the three months ended:
September 30, 2017 |
||||||||||
|
Canada | Ghana | Total | |||||||
|
$ | $ | $ | |||||||
Revenue |
| 63,714 | 63,714 | |||||||
Net income (loss) before tax |
(2,636 | ) | 11,908 | 9,272 | ||||||
Deferred income tax expense |
| (3,671 | ) | (3,671 | ) | |||||
Net income (loss) before tax |
(2,636 | ) | 8,237 | 5,601 |
September 30, 2016 |
||||||||||
|
Canada | Ghana | Total | |||||||
|
$ | $ | $ | |||||||
Revenue |
| 71,541 | 71,541 | |||||||
Net income (loss) before tax |
(988 | ) | 16,410 | 15,422 | ||||||
Deferred income tax expense |
| (3,766 | ) | (3,766 | ) | |||||
Net income (loss) after tax |
(988 | ) | 12,644 | 11,656 |
19. |
Financial instruments |
As at September 30, 2017, the Companys financial instruments consist of cash and cash equivalents, receivables, VAT receivable, reclamation bond, accounts payable and accrued liabilities, and long-term debt. The Company classifies cash and cash equivalents, receivables, VAT receivable and the reclamation bond as loans and receivables, and classifies accounts payable and accrued liabilities and long-term debt as other financial liabilities. All financial assets and liabilities are carried at amortized cost.
19
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
19. |
Financial instruments (continued) |
The fair value of these financial instruments approximates their carrying value, unless otherwise noted.
The risk exposure arising from these financial instruments is summarized as follows:
(a) |
Credit risk |
|
Credit risk is the risk of an unexpected loss if a customer or the issuer of a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on the cash and cash equivalent balances held at banks in each of Canada, Ghana and South Africa. The risk of loss associated with cash investments is considered to be low as the Companys cash and cash equivalents are held in highly-rated Canadian, Ghanaian and South African banking institutions. As at September 30, 2017, the Company had interest receivable of $36 (December 31, 2016 - $nil). In addition, the Company is subject to credit risk in relation the receivable balances relating to the sale of gold. The Company currently sells all of the gold it produces to Red Kite under an offtake agreement (Note 10(c)). Payments are routine in nature, scheduled and received within a contractually-agreed time frame. Total receivables from precious metal sales as at September 30, 2017 is $1.3 million (December 31, 2016 - $0.6 million). The risk associated with receivables from Red Kite as at September 30, 2017 is considered to be negligible. |
||
The Company expects to receive VAT refunds on a regular basis from the Government of Ghana and makes monthly VAT filings (as required by law). The Company does not consider there to be a significant credit risk related to the VAT receivable balance as at September 30, 2017. |
||
(b) |
Liquidity risk |
|
The Company manages liquidity risk through a rigorous planning and budgeting process, which is reviewed and updated on a regular basis, to help determine the funding requirements to support current operations, expansion and development plans, and by managing the Companys capital structure. By managing liquidity risk, the Company aims to ensure that it will have sufficient liquidity to settle obligations and liabilities as they fall due. As at September 30, 2017, the Company had a cash and cash equivalents balance of $60.8 million (December 31, 2016 $59.7 million) and is generating positive cash flows from operations, allowing the Company to settle current accounts payable and accrued liabilities of $51.0 million (December 31, 2016 - $46.9 million) and current debt of $18.1 million (December 31, 2016 - $0.5 million) (Note 10(a)). The Company fully expects to generate sufficient cash flows from operations to repay the first principal repayment on the Red Kite loan in July 2018. |
||
(c) |
Market risk |
(i) |
Interest rate risk |
|
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Companys exposure to interest rate risk is limited to its loan agreement with Red Kite (Note 10(a)), which accrues interest at a rate of LIBOR plus 6%, subject to a minimum LIBOR of 1%. |
||
With other variables unchanged, a 1% change in the annualized interest rate would not result in a material change in the Companys interest expense for the three and nine months ended September 30, 2017. |
||
(ii) |
Foreign currency risk |
|
The Company is exposed to foreign currency risk through its foreign currency monetary assets and liabilities. A significant change in the currency exchange rate between the US dollar and C$, South African Rand and Ghanaian Cedi could have an effect on the Companys results of operations, financial position and cash flows. The Company at present has not entered into any derivative instruments or forward contracts to reduce its exposure to currency risk; however, management monitors differing currency needs and seeks to reduce exposure to currency risks through exchanging currencies at what are considered to be optimal times. |
20
ASANKO GOLD INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Expressed in Thousands of United States Dollars unless otherwise stated |
19. |
Financial instruments (continued) |
(iii) |
Price risk |
Price risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from currency risk or interest rate risk. The Companys future cash flows will fluctuate due to changes in gold and silver prices. The Company has not hedged any precious metal sales as part of the Companys overall strategy.
A 10% increase or decrease in the gold price during the three and nine months ended September 30, 2017, with all other variables held constant, would have resulted in a $3.9 million and $11.9 million increase (decrease) to after-tax net income (loss), respectively (three and nine months ended September 30, 2016 $4.4 million and $7.1 million, respectively).
20. |
Earnings (loss) per share attributable to common shareholders |
For the three and nine months ended September 30, 2017, the calculation of basic and diluted earnings per share is based on the following data:
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
Earnings ($) | |||||||||||||
Net income
(loss) attributable to common
shareholders |
4,689 | 11,656 | 13,188 | (4,739 | ) | ||||||||
Number of shares | |||||||||||||
Weighted average number of
ordinary shares -
basic |
203,449,957 | 199,532,834 | 203,293,733 | 198,014,961 | |||||||||
Effect of dilutive share options and warrants | | 8,886,966 | 2,968,113 | | |||||||||
Weighted average number of ordinary shares -
diluted |
203,449,957 | 208,419,800 | 206,261,846 | 198,014,961 |
Excluded from the calculation of diluted weighted average shares outstanding for the three and nine months ended September 30, 2017 were 68,941 and 23,451 share-based options, respectively, that were determined to be anti-dilutive. Excluded from the calculation of diluted weighted average shares outstanding for the three months ended September 30, 2016 were nil share-based options that were determined to be anti-dilutive.
For the nine months ended September 30, 2016, the effect of dilutive securities was anti-dilutive given the Company realized a net loss during the period.
21
MANAGEMENTS DISCUSSION AND ANALYSIS
For the three and nine months ended September 30, 2017 and 2016
TABLE OF CONTENTS
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
This Managements Discussion and Analysis (MD&A) of Asanko Gold Inc. (Asanko or the Company) has been prepared by management as of November 2, 2017 and should be read in conjunction with the Companys condensed consolidated interim financial statements for the three and nine months ended September 30, 2017 and 2016 and the related notes thereto.
Additional information on the Company, including its Annual Information Form (AIF) for the year ended December 31, 2016 is available under the Companys profile at www.sedar.com and on the Companys website: www.asanko.com .
Unless otherwise specified, all financial information has been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. All dollar amounts herein are expressed in United States dollars (US dollars) unless stated otherwise. References to $ means US dollars and C$ are to Canadian dollars.
This MD&A contains forward-looking statements and should be read in conjunction with the risk factors described in sections 13. Risks and uncertainties and 15.1 Cautionary statement on forward looking information at the end of this MD&A.
1) |
Overview of the business |
Asanko is a Canadian-based gold producer with an operating mine, the Asanko Gold Mine (AGM or the Project), and highly prospective gold concessions, in various stages of exploration, on both the Asankrangwa and Sefwi belts in the Republic of Ghana (Ghana), West Africa. Asankos vision is to build a low cost, mid-tier gold mining company through organic production growth, exploration and disciplined deployment of its financial resources. The Companys shares are listed on the Toronto Stock Exchange (TSX) and the NYSE American (NYSE) under the symbol AKG.
The AGM is multi-deposit complex, with two main deposits, Nkran and Esaase, and nine satellite deposits. The mine is being developed in phases. The first phase comprised the construction of a 3 million tonne per annum (Mtpa) carbon-in-leach (CIL) processing facility and bringing the first pit, Nkran, into production. Phase 1 was funded by cash on hand and a $150 million debt facility (see section 8.0 Liquidity and capital resources below) and was completed in early 2016 within budget and ahead of schedule. Gold production commenced in January 2016, commercial production was declared on April 1, 2016, and the operation reached steady-state production levels by the end of the second quarter of 2016.
The Company plans to expand the AGM through two organic growth projects, namely Project 5 Million (P5M) and Project 10 Million (P10M), which is expected to ultimately double the mines processing capacity and increase production to ~450,000 ounces per year. The Company intends to fund these expansion projects predominantly from internally generated operating cash flows whilst maintaining a cash buffer of approximately $30.0 million throughout construction, supported by a possible debt financing and favourable market conditions.
A positive Definitive Feasibility Study (DFS) on the planned expansion projects was published on June 5, 2017 and a technical report prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) has been filed, both of which are available on the Companys website and on SEDAR, www.sedar.com (see section 4.2 Expansion projects below). The DFS was based on the optimal NPV on a capital unconstrained basis for the AGM, which assumed the sequential development of each project. However, there is complete flexibility on the timing of these expansion projects, which will be at the Boards discretion.
The first stage of P5M, the brownfield modifications and upgrades to the CIL processing plant to increase throughput to 5Mtpa, was approved in November 2016. The Company has completed the volumetric upgrades to the plant under budget and ahead of schedule. Installation and commissioning of the recovery circuit upgrades are expected to be completed by Q1 2018. The second stage of P5M is the construction of an overland conveyor and development of the Esaase deposit, which is estimated to have a total capital cost of $128 million. The decision to proceed with the second stage of P5M has been deferred until 2018. The timing of P10M will be at the Boards discretion and dependent on the Companys balance sheet, financing opportunities as well as favourable market conditions.
2
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
2) |
Highlights and key business developments |
Q3 2017 Business developments
|
During Q3 2017, the Company achieved gold production of 49,293 ounces, an increase of 7% over Q2 2017, as the Company focused on operational delivery, introducing a number of mining interventions including an improved ore delineation methodology, the deployment of blast movement technology and improved methodology in reconciling the grade control model with the resource model. The improved production was achieved in spite of three mill motor outages during the quarter which resulted in 11 days of lost milling time, equating to in excess of 5,000 ounces of gold production. |
|
|
||
|
Gold sales of 50,241 ounces at an average realized gold price of $1,265 per ounce generating gold revenue of $63.7 million. |
|
|
||
|
Ore mining rates for the AGM during the quarter averaged 393,000 tonnes per month (tpm) at an average mining grade of 1.8 g/t and a strip ratio of 6.2:1. |
|
|
||
|
At Nkran, mining operations extracted ore from multiple zones of mineralization with an average mining grade of 1.8 g/t during the quarter. The deployment of blast monitoring technology to minimize ore losses and dilution continued to yield positive results. |
|
|
The grade control versus resource model reconciliation continues to be positive and the reserve to mill feed reconciliation was within 1% for the quarter, validating both the Nkran Mineral Resource and Reserve Estimates. |
|
|
At the Akwasiso satellite deposit, mining operations delivered approximately 20,000tpm of oxide ore at a grade of 1.3g/t. These levels of ore mining are expected to continue in Q4 2017. |
|
|
||
|
At Dynamite Hill, the second satellite pit to be brought into production, site establishment commenced during the quarter in preparation of mining operations in Q4 2017. This included 3,096m of grade control drilling which validated the resource model and confirmed the mine plan and associated oxide ore volumes. |
|
|
||
|
In spite of the lost milling time during the quarter, the plant processed 862,000 tonnes with a feed grade of 1.9 g/t. Gold recovery continued to exceed design levels at 94%. |
|
|
||
|
Commissioning of the P5M volumetric upgrades was completed during the quarter, ahead of schedule and under budget. Despite reduced volumes of oxides, the plant has been achieving milling rates in excess of 13,500 tonnes on a per day campaign basis. |
|
|
||
|
There were no lost time injuries recorded in the quarter and the rolling lost time injury frequency rate is an excellent 0.19 per million man hours worked. |
|
|
||
|
The Company acquired the Miradani Mining Lease (the Miradani Project) from AngloGold Ashanti. Further details are included in section 4. Development and exploration update below. |
|
|
||
|
The Company is on track to meet its revised 2017 guidance of 205,000-225,000 ounces at all-in sustaining costs 1 (AISC) of $920-$960 per ounce, see section 7. 2017 Outlook below. |
Key consolidated financial information
|
Cash provided by operating activities in Q3 2017 was $40.7 million, representing a 21% increase on Q2 2017, with the increase primarily driven by movements in non-cash working capital. Operating cash flow before working capital changes was $31.7 million in Q3 2017, which was a 19% increase over Q2 2017 of $26.7 million. |
|
|
||
|
The Company earned net revenues (after royalties) of $60.5 million in Q3 2017. Total cost of sales (including depreciation and depletion) of $42.6 million resulted in income from mine operations of $17.9 million for the quarter. |
|
|
||
|
The Company earned net income attributable to common shareholders of $4.7 million in Q3 2017, an increase of $4.0 million compared to Q2 2017. Net income before taxes for Q3 2017 was $9.3 million. |
_____________________________________________
1
See
9.
Non
GAAP
measures
3
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
|
The Company incurred operating cash costs per ounce 1 , total cash costs per ounce 1 and AISC 1 of $485, $549 and $975 respectively in Q3 2017. |
|
|
||
|
Mining and processing costs averaged $3.35/tonne mined and $12.94/tonne milled, respectively, during Q3 2017. Mining costs per tonne were moderately higher than Q2 2017 as a result of the progression of Cut 2 into more competent material, offset partially by lower per unit costs associated with the development of the Akwasiso pit in oxides. Of the mining costs incurred during Q3 2017, a total of $19.0 million was deferred as stripping costs. Processing unit costs were also moderately higher than Q2 2017 due to the impact of three mill motor outages that resulted in higher maintenance costs, while fewer tonnes were milled which had the impact of increasing fixed processing cost on a per unit basis. |
|
|
||
|
As at September 30, 2017, the Company had cash of $60.8 million on hand, along with unrefined gold dore at a cost of $2.2 million (and a market value of $3.7 million as at September 30, 2017) and $1.3 million in receivables from gold sales. |
_____________________________________________
1
See
9. NonGAAP measures
4
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Selected consolidated data
|
Three months ended September 30, | Nine months ended September 30, | ||||||||||
|
2017 | 2016 | 2017 | 2016 | ||||||||
Key performance Data |
||||||||||||
Tonnes of ore milled (000s) |
862 | 852 | 2,658 | 1,554 | ||||||||
Gold produced (ounces) |
49,293 | 53,986 | 153,496 | 90,323 | ||||||||
Gold sold (ounces) |
50,241 | 54,393 | 156,519 | 89,467 | ||||||||
Average realized price per gold ounce sold ($) |
1,265 | 1,311 | 1,232 | 1,279 | ||||||||
Average London PM fix ($) |
1,278 | 1,335 | 1,251 | 1,297 | ||||||||
Operating cash costs ($ per gold ounce) 1 |
485 | 544 | 546 | n/a | ||||||||
Total cash costs ($ per gold ounce) 1 |
549 | 609 | 608 | n/a | ||||||||
Allin sustaining costs ($ per gold ounce) 1 |
975 | 907 | 955 | n/a | ||||||||
|
||||||||||||
|
Three months ended September 30, | Nine months ended September 30, | ||||||||||
Financial Data |
2017 | 2016 | 2017 | 2016 | ||||||||
(in thousands of US dollars except per share amounts) |
||||||||||||
Revenue |
63,714 | 71,541 | 193,436 | 114,863 | ||||||||
Income from mine operations |
17,900 | 20,508 | 47,481 | 20,841 | ||||||||
Net income (loss) attributable to common shareholders |
4,689 | 11,656 | 13,188 | (4,739 | ) | |||||||
Adjusted net income (loss) attributable to common shareholders 1 |
4,689 | 10,651 | 13,188 | (4,474 | ) | |||||||
Income (loss) per share attributable to common shareholdersbasic and diluted |
$ | 0.02 | $ | 0.06 | $ | 0.06 | ($0.02 | ) | ||||
Operating cash flows before working capital changes |
31,725 | 36,139 | 87,167 | 44,417 | ||||||||
Assets |
||||||||||||
Mining interests |
582,362 | 547,694 | 582,362 | 547,694 | ||||||||
Total assets |
700,586 | 657,093 | 700,586 | 657,093 | ||||||||
Liabilities |
||||||||||||
Longterm liabilities |
193,957 | 179,788 | 193,957 | 179,788 | ||||||||
Total liabilities |
263,000 | 232,382 | 263,000 | 232,382 | ||||||||
Equity |
||||||||||||
Common shareholders' equity |
436,152 | 424,711 | 436,152 | 424,711 | ||||||||
Noncontrolling interest |
1,434 | | 1,434 | | ||||||||
Weighted average shares outstanding (basic) |
203,449,957 | 199,532,834 | 203,293,733 | 198,014,961 | ||||||||
Weighted average shares outstanding (diluted) |
203,449,957 | 208,419,800 | 206,261,846 | 198,014,961 |
The Company commenced commercial production on April 1, 2016 and as a result, some measures presented in the table were not applicable for the full period in 2016 given the Company was not yet considered to be operating for financial reporting purposes. All results in the table above are the consolidated results of the Company. The Company operates in two segments, Ghana and Canada; the Canadian segment is a head office function and is not presented separately in the results below as its results are not material to the Companys overall operations. All financial results in this MD&A are discussed on a consolidated basis and include 100% of the results from the Ghanaian operations.
5
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
3) |
Operating performance |
The following table provides a summary of operating performance at the AGM for the three and nine months ended September 30, 2017 and 2016. The Company commenced commercial production on April 1, 2016 and as a result, some measures presented in the table below were not applicable for the full period in 2016.
|
Three months ended September 30, | Nine months ended September 30, | ||||||||||
|
2017 | 2016 | 2017 | 2016 | ||||||||
Key performance Data |
||||||||||||
Tonnes of ore mined (000s) |
1,181 | 1,326 | 3,246 | 2,569 | ||||||||
Tonnes of ore milled (000s) |
862 | 852 | 2,658 | 1,554 | ||||||||
|
||||||||||||
Mining cost ($/t mined) |
3.35 | 3.88 | 3.47 | 3.81 | ||||||||
Processing cost ($/t treated) |
12.94 | 13.25 | 13.03 | 13.49 | ||||||||
|
||||||||||||
Average mill head grade (g/t) |
1.9 | 2.1 | 1.9 | 1.9 | ||||||||
Average recovery rate (%) |
94% | 94% | 94% | 93% | ||||||||
|
||||||||||||
Gold produced (ounces) |
49,293 | 53,986 | 153,496 | 90,323 | ||||||||
Gold sold (ounces) |
50,241 | 54,393 | 156,519 | 89,467 | ||||||||
|
||||||||||||
Silver produced (ounces) |
12,174 | 12,701 | 37,839 | 20,423 | ||||||||
Silver sold (ounces) |
12,419 | 13,632 | 28,613 | 23,675 | ||||||||
|
||||||||||||
Average realized price per gold ounce sold ($) |
1,265 | 1,311 | 1,232 | 1,279 | ||||||||
Average London PM fix ($) |
1,278 | 1,335 | 1,251 | 1,297 | ||||||||
|
||||||||||||
Operating cash costs (per gold ounce) 1 |
485 | 544 | 546 | 638 | ||||||||
Total cash costs (per gold ounce) 1 |
549 | 609 | 608 | 702 | ||||||||
Allin sustaining costs (per gold ounce) 1 |
975 | 907 | 955 | 1,045 |
Health and Safety
There were no lost time injuries reported during the quarter and the 12-month rolling lost time injury frequency rate per million man hours worked is 0.19.
Mining
Ore mining rates for the AGM during the quarter averaged 393,000tpm at an average mining grade of 1.8 g/t and a strip ratio of 6.2:1. Mining operations adopted the new CSA Mineral Reserve Estimate (MRE) and grade control estimation process during Q1 2017, which were fully implemented in the Nkran pit by the end of April 2017. The new MRE and associated grade control processes have been operational since May 2017. A reconciliation process commenced in Q2 2017 to measure the entire value chain from gold in the ground through to mill feed and eventual gold production against the MRE.
_____________________________________________
1
See
9. NonGAAP measures
6
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
As announced in the Q2 2017 MD&A, for the three-month period (May, June and July) the grade control model was within 2% of the resource model. In Q3 2017, this positive trend continued and the average quarterly reconciliation improved to a positive ounce variation of 8% between the grade control model and the resource model. This positive grade and ounce variance is significant as it scientifically validates the gold endowment at Nkran and the life of mine plans based on that endowment.
The next stage of the reconciliation, which is confirmation of the mill feed to the reserve model, continued in Q3 2017. This reserve reconciliation measures the ability of the mining operations to deliver the planned tonnages and grade predicted by the reserve model to the processing plant. The mill feed to reserve model reconciliation on an ounce basis has improved to within 1% for the quarter.
During Q3 2017, mining operations at the Nkran pit extracted ore from multiple zones of mineralization with an average mining grade of 1.8 g/t. The key focus area was on improving ore delineation and the design of the ore polygons to be mined in order to reduce ore dilution and losses. Following the implementation of blast movement technology in July, there has been a continual improvement in the ability of the mining operation to deliver the planned grades and volumes of ore to the processing plant. This is evidenced by the significant improvement in the mill feed to reserve model reconciliation over the past three months. With the ore delineation and operational system improvements now bedded down, there is now a high level of confidence that the improved performance and alignment with the reserve design parameters is now achievable on an ongoing basis.
At the satellite deposit, Akwasiso, mining operations delivered approximately 20,000tpm of oxide ore at an average mined grade of 1.3g/t. These levels are expected to continue in Q4 2017. In addition, a confirmatory drilling program to infill drill test the previously inaccessible area which was covered with tailings from historic artisanal mining activities was completed and the results firmed up the Akwasiso reserve model.
At Dynamite Hill, the second satellite pit to be bought into production, site establishment commenced during the quarter in preparation of ore mining operations in Q4 2017. This included 3,096m grade control drilling which has validated the resource model and confirming the mine plan and associated oxide ore volumes. In addition, the haul road linking Dynamite Hill to Akwasiso and the central processing facility was completed during the quarter, approximately two months ahead of schedule.
From Q4 2017 onwards, Asanko’s mine plan will incorporate all sources of ore available from its multiple pits to blend to the mill to enable the optimization of the various pit extraction rates, the stockpile balances and operating costs. As a consequence, the mill feed grades are expected to reflect the average reserve grades from the respective pits as they are mined, including the blended grade average from the various stockpiles.
Processing
The processing plants performance during the quarter was impacted by three mill motor outages during July and August, which resulted in a total of 11 days of lost milling time and in excess of 5,000 ounces of lost production. Two new upgraded mill motors have been ordered and are due for delivery in Q1 2018, with a spare mill motor currently onsite as backup. Metallurgical recovery continued to exceed design levels at 94%.
Commissioning of the P5M volumetric upgrades was completed during the quarter, ahead of schedule and under budget with the plant achieving milling rates in excess of 13,500 tonnes per day (“tpd”) on a per day campaign basis. The mill designs for P5M were based on a blend of 9,000tpd of fresh and 6,000tpd of oxides ores. However, even though higher fresh ore tonnes are being fed to the plant, the milling rates being achieved on a campaign basis represent a significant improvement over and above the design parameters. This improvement in milling rates has been achieved through modifications to the comminution circuit, with the addition of two mobile crushers to reduce the size fraction of the fresh ore delivered to the SAG mill, thus allowing higher throughput rates. This is an interim measure until the installation of a permanent secondary crusher, which is expected to be installed and commissioned in Q2 2018.
7
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Despite the mill motor outages, the Company processed 862,000 tonnes during the quarter with a feed grade of 1.9 g/t and produced 49,293 ounces of gold, resulting in $63.7 million in revenue at an average realized price of $1,265 per ounce. Gold production averaged 16,431 ounces per month for the quarter.
Total cash costs per ounce 1 for Q3 2017 was $549 per ounce, a 10% reduction from Q3 2016. The reduction in total cash cost per ounce was predominantly due to a reduction in mining and processing costs relative to Q3 2016, partly offset by the impact of lower gold sales volumes which had the effect of increasing fixed production cost on a per unit basis.
Relative to Q2 2017, total cash cost per ounce 1 reduced by 13% from $634 to $549 per ounce. The reduction was predominantly the result of lower production costs (after the addback of capitalized stripping costs as discussed in section 2. Highlights and key business developments ), augmented by the impact of higher sales volumes which had the impact of reducing fixed production costs on a per unit basis.
AlSC 1 for Q3 2017 amounted to $975 per ounce, an increase of 8% compared to Q3 2016. The higher AISC in Q3 2017 was predominantly due to higher sustaining capitalized stripping cost, partly offset by the reduction in total cash cost per ounce relative to Q3 2016.
Relative to Q2 2017, AlSC 1 increased by 5% as the impact of higher sustaining capitalized stripping cost more than offset the relatively lower total cash cost per ounce 1 .
The Company is on track to meet its revised 2017 guidance of 205,000-225,000 gold ounces produced at AISC of $920-$960 per ounce (see section 7. 2017 Outlook ).
AGM Key Production Statistics | Units | Q1 2017 | Q2 2017 | Q3 2017 |
Ore Treated | 000 t | 908 | 887 | 862 |
Gold Feed Grade | g/t | 2.1 | 1.7 | 1.9 |
Gold Recovery | % | 95 | 94 | 94 |
Gold Produced | oz | 58,187 | 46,017 | 49,293 |
4) |
Development and exploration update |
4.1 Phase 1
Development expenditures
The development of the first phase of the AGM was completed in 2016, both ahead of schedule and approximately $3.0 million under budget.
4.2 Expansion projects
Asanko plans to expand the AGM and increase production up to an average of approximately ~450,000 ounces per year through the development and execution of two expansion projects, P5M and P10M. A DFS on these expansion projects has confirmed the viability of these projects and a NI 43-101 Technical Report was published on July 18, 2017, which is available on the Companys website and on SEDAR.
|
P5M: upgrade the existing CIL circuit from 3.6Mtpa to 5Mtpa and development of the Esaase pit, including the construction of a 27km overland conveyor to transport the Esaase ore to the existing processing facility. P5M is expected to be completed in two separate stages, with the first stage being limited to the expansion of the processing facility; and |
|
|
||
|
P10M: construction of an additional 5Mtpa CIL plant to double the total processing capacity to 10Mtpa. |
_____________________________________________
1
See
9. NonGAAP measures
8
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Overview of Project 5 Million First stage
|
Plant Upgrade to 5Mtpa |
|
The first stage of P5M, which will be funded from cash on hand, comprises brownfield modifications to upgrade the CIL processing plant to 5Mtpa, including volumetric upgrades as well as upgrades to the recovery circuit. The Company completed the volumetric upgrades under budget and ahead of schedule. The upgrades to the recovery circuit are expected to be completed and commissioned in Q1 2018. To date, the Company has spent $21.7 million on the first stage of P5M. |
Overview of Project 5 Million Second stage
|
Development of the Esaase Deposit |
|
The Esaase deposit will be developed using open pit contractor mining. Mining activities will initially mine oxide ore to open up the deposit. The mining schedule will allow both oxide and fresh ore to be delivered to the 5Mtpa CIL processing facility. The ore will be transported via a 27km overland conveyor, constructed as part of the P5M project, to the expanded process facility. The Environmental Permit and Mine Operating Permit were received in January 2017 from the Ghanaian EPA and the Ghanaian Minerals Commission, respectively. |
|
Capital Cost |
|
Based on Front End Engineering Design (FEED), the final capital cost estimates are $22.0 million for the plant upgrade, $78.0 million for the conveyor, $32.0 million for the development of the Esaase deposit and associated infrastructure and $17.0 million for engineering and project costs and contingencies, with a total project capital cost of approximately $149.0 million. |
|
Funding |
|
The construction of the overland conveyor has been deferred until 2018, with commissioning of the conveyor and the Esaase pit expected in H2 2019. However, the Board will consider the optimal timing of the development of Esaase and the conveyor, based on the Companys balance sheet, cash position and market conditions. |
Overview of Project 10 Million
P10M comprises the construction of an additional 5Mtpa CIL processing facility to double throughput from 5Mtpa to 10Mtpa with a life of mine in excess of 12 years. Ore is expected to be sourced from Nkran and the surrounding satellite deposits at a rate of 3Mtpa and Esaase at a rate of 7Mtpa. Gold production at steady state is expected to be ~450,000 ounces per year.
| Capital Cost |
The capital cost estimate is $200.0 million for the additional CIL plant and associated infrastructure.
| Funding |
A construction decision to proceed will be at the Boards discretion and dependent on the Companys balance sheet and financing opportunities as well as favourable market conditions.
4.3 Exploration and evaluation
The exploration program during Q3 2017 continued to focus on the strategic objective to delineate additional resources to augment the life of mine planning. The Company received the first pass of the 3D inversion model that has been carried out independently using the VTEM (Versatile Time Domain Electromagnetic) geophysical data. Detailed targeting of geophysical and structural targets is now taking place which will result in a prioritized exploration target list for future exploration.
Akwasiso
During July and August, a confirmatory drilling program was undertaken at the Akwasiso satellite deposit, located approximately three kilometres north east of the processing facility. The purpose of the program was to infill drill test the previously inaccessible area which was covered with tailings from historic artisanal mining activities. The drilling program firmed up the Akwasiso reserve model.
9
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
In addition, the drilling was aimed at further investigating any potential mineralization on the eastern contact between the granite and the sandstone mineralization trends. A total of 4,051m were drilled and the drilling program confirmed the continuity of mineralization at depth and also discovered a new near surface zone of mineralization along the eastern edge of the deposit. In line with the previous phases of drilling, this drilling program intersected significant near surface mineralization widths and some exceptional grades.
Some of the significant intercepts from the confirmatory drilling program are shown in the table below. A complete table showing all the recent Akwasiso drill results is included in the Appendix.
Table 1: Akwasiso Drill Intercepts
Notes: | Gold intercepts are generated as a weighted average. No upper cut has been applied. |
Gold intercepts are generated using a 0.5 g/t cut-off with no more than 3m of inclusive internal waste and a minimum intercept of 3m |
Midras South
Located 5km south of Nkran pit, the Midras South target comprises 3 en echelon zones of mineralization that have been delineated by previous exploration work, which was conducted by AngloGold Ashanti, and a preliminary geological and confirmatory drilling program conducted by Asanko during 2016. During Q3 2017, a 13,000m drilling campaign commenced with the objective of collecting enough data for a shallow Measured and Indicated Mineral Resource Estimate. This program is expected to be completed in November 2017.
Miradani Project
In September 2017, the Company completed the acquisition of the Miradani Project, which is located within 10km of the AGM. Covering an area of approximately 15km 2 , the Miradani Project is on an existing mining lease (valid until May 2025) which may enable potential mineral resources to be accelerated to production.
The northern boundary of the concession is located approximately 5.5 km south of the AGMs processing plant on the NE-SW Asankrangwa structural corridor. The underexplored Asankrangwa Gold Belt is about 7 km wide and over 50 km long. The area is highly prospective with multiple geochemical anomalies aligning with the structures interpreted from the airborne VTEM and magnetic surveys completed by Asanko in 2015. Asanko holds the largest land package on this belt and it hosts all of the Companys 5.1 million ounces of reserves.
Three significant initial target areas along the main structural trend, Miradani, Central, and Tontokrom, have been identified. A phased drilling campaign is expected to commence in Q4 2017, with a view to completing a maiden Mineral Resource Estimate in H2 2018 (see section 7. 2017 Outlook) . Historical trench and soil geochemistry data, along with recent mechanized artisanal mine workings, indicate that each target area consists of multiple parallel mineralized zones, individually ranging between 3m and 37m in width. Individual 1.5m trench samples assayed up to 47.3 g/t.
10
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
4.4 Global AGM Mineral Resource and Reserve Estimates
AGM Mineral resources
The Global MRE for the AGM was updated (refer to news release dated February 24, 2017) as at December 31, 2016 to reflect depletion from the first two years of mining the Nkran pit, the application of updated constraining parameters for resource modelling in line with best practice, and includes the three deposits discovered in 2016: Akwasiso, Nkran Extension and Adubiaso Extension, and two additional pits at Esaase. This included an updated MRE for the Nkran pit and Dynamite Hill, which was prepared by a second independent expert CSA, a leading mineral consulting group. The Global MRE was then updated in April 2017 to reflect the revised mineral resource and reserve estimations for the Akwasiso satellite deposit.
With regards to the Nkran deposit, the resource has been depleted by 270,471 ounces during 2015 and 2016 due to mining operations through to the end of December 2016. In addition, the application of the constraining parameters resulted in a further 352,000-ounce reduction when compared to the original unconstrained November 2014 Definitive Project Plan MRE (see press release dated November 13, 2014). The MRE includes the grade control drilling data on a 10m x 5m grid below the December 31, 2016 pit floor.
Analysis was conducted using uniform conditioning, indicated kriging and ordinary kriging to align the MRE methodology to reflect the reconciliation of production during 2016. The sensitivity of the indicated kriging method for ore zone delineation was analyzed in detail and the method confirmed to be appropriate for the Nkran style of mineralization.
During Q2 2017, the Phase 2 drilling program at the Akwasiso deposit provided the basis for an updated MRE as at April 25, 2017 (see Table 2 below). There have been other incremental increases in the satellite pits due to an adjustment of Whittle input parameters such as an improved fuel price, mining and processing costs, process plant throughput and gold recovery rates.
Ore from the Abore, Akwasiso, Adubiaso, Asuadai, Adubiaso Extension and Nkran Extension satellite pits have been metallurgically tested internally and benchmarked against the Nkran ore and found to behave in the same manner as the Nkran ore, giving recoveries of between 94% and 95%. These recoveries are consistent with the recoveries achieved by Resolute Mining (the former owner of the Nkran deposit) when the Adubiaso and Abore satellite pits were mined. The Nkran, Esaase and Dynamite Hill deposits were all metallurgically tested externally.
In July 2017, the DFS NI 43-101 Technical Report included an update to the AGM Global MRE to align the MRE with other resource estimates in the gold sector and the Mineral Resource constraining pit shell gold price assumption was lowered from $2,000/oz to $1,500/oz, above a cut-off grade of 0.5 g/t Au and using a 0.3 g/t Au waste determination (refer to Table 1). The resultant MRE is fully compliant with the intent of the CIM 2014 Code (Canada) with respect to stating mineral resources that have a reasonable prospect of eventual economic extraction. Importantly, the AGM mineral reserves remain unchanged at 101Mt at 1.57 g/t for 5.1 million ounces of contained gold, based on a $1,300/oz gold price. The DFS NI 43-101 Technical Report is available on SEDAR and the Companys website.
Table 1: Asanko Gold Mine Global Mineral Resource Estimate Comparison of Constraining Gold Price Sensitivity
Measured | Indicated | Total (M&I) | |||||||
Gold Price | Mt | g/t Au | Moz | Mt | g/t Au | Moz | Mt | g/t Au | Moz |
$2,000/oz | 37.4 | 1.42 | 1.70 | 123.0 | 1.46 | 5.79 | 160.4 | 1.45 | 7.49 |
$1,500/oz | 37.3 | 1.43 | 1.72 | 101.7 | 1.49 | 4.87 | 139.0 | 1.47 | 6.59 |
Notes:
All pits are at a cut-off of 0.5g/t Au. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding. As at December 31, 2016 except for Akwasiso, which is estimated as at April 25, 2017.
11
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Table 2: Asanko Gold Mine Global Mineral Resource Estimate (as at April 25, 2017)
Measured | Indicated | Total (M&I) | |||||||
Deposit | Mt | g/t Au | Moz | Mt | g/t Au | Moz | Mt | g/t Au | Moz |
Esaase | 26.49 | 1.38 | 1.17 | 57.53 | 1.38 | 2.55 | 84.02 | 1.38 | 3.72 |
Nkran | 5.50 | 1.68 | 0.30 | 24.57 | 1.81 | 1.43 | 30.07 | 1.78 | 1.72 |
Akwasiso | - | - | - | 6.33 | 1.50 | 0.31 | 6.33 | 1.50 | 0.31 |
Abore | 2.23 | 1.41 | 0.10 | 3.09 | 1.48 | 0.15 | 5.33 | 1.45 | 0.25 |
Dynamite Hill | - | - | - | 3.41 | 1.48 | 0.16 | 3.41 | 1.48 | 0.16 |
Adubiaso | 1.38 | 1.89 | 0.08 | 1.35 | 1.72 | 0.07 | 2.73 | 1.80 | 0.16 |
Esaase D | 0.83 | 1.11 | 0.03 | 1.16 | 1.42 | 0.05 | 2.00 | 1.29 | 0.08 |
Esaase B | 0.75 | 1.01 | 0.02 | 1.90 | 0.78 | 0.05 | 2.65 | 0.84 | 0.07 |
Asuadai | - | - | - | 1.88 | 1.22 | 0.07 | 1.88 | 1.22 | 0.07 |
Adubiaso Extension | 0.16 | 1.96 | 0.01 | 0.26 | 1.71 | 0.01 | 0.42 | 1.61 | 0.02 |
Nkran Extension | - | - | - | 0.19 | 2.70 | 0.02 | 0.19 | 2.70 | 0.02 |
Total | 37.34 | 1.43 | 1.72 | 101.67 | 1.49 | 4.87 | 139.01 | 1.47 | 6.59 |
Notes:
CJM estimated Esaase in October 2012, Abore, Adubiaso, and
Asuadai in April 2014, Adubiaso Extension and Nkran Extension in 2016.
CSA
Global re-estimated Nkran and Dynamite Hill in January 2017 and Akwasiso in
April 2017 and audited Esaase.
The resource cut-off grade used for
all deposits is 0.5 g/t Au within a Whittle Pit Shell at $1,500/oz Au.
Columns may not add up due to rounding.
All references to tonnes
are in metric tonnes.
The Mineral Resources are stated as in situ
tonnes. The tonnages and contents are stated as 100%, which means no
attributable portions are stated in the table.
Individual Densities
were used per mineral zone.
Conversion from grams to ounces 31.1035
Table 3: Asanko Gold Mine Global Inferred Mineral Resource Estimate (as at December 31, 2016)
Deposit |
Mt | g/t Au | Moz |
Esaase Main |
0.09 | 1.08 | 0.003 |
Nkran |
0.31 | 1.86 | 0.018 |
Abore |
1.28 | 1.61 | 0.066 |
Dynamite Hill |
0.21 | 1.58 | 0.011 |
Akwasiso |
0.18 | 0.81 | 0.005 |
Adubiaso |
0.01 | 1.92 | 0.000 |
Esaase D |
1.01 | 1.26 | 0.041 |
Esaase B |
2.12 | 0.86 | 0.058 |
Asuadai |
0.63 | 1.75 | 0.035 |
Adubiaso Ext |
0.14 | 3.10 | 0.014 |
Nkran Ext |
0.01 | 1.02 | 0.000 |
Total |
5.96 | 1.31 | 0.251 |
Qualified Persons for Mineral Resource Estimates
Malcolm Titley (CSA Global Principal Geologist; AIG), is the Qualified Person for the sign-off of the Nkran, Dynamite Hill and Akwasiso MRE. Charles J. Muller, (B.Sc. Geology (Hons), PR.Sci.Nat., MGSSA, a Director of CJM Consulting Pty Ltd. of Johannesburg, South Africa) is the Qualified Person for the sign off of the Esaase, Abore, Adubiaso, Adubiaso Extension, Asuadai and Nkran Extension MRE. The MREs are reported in accordance with Canadian NI 43-101 requirements and the South African Code of Reporting of Exploration Results (SAMREC), which is consistent with the CIM Estimation Best Practice Guidelines in Canada. Mr. Titley and Mr. Muller have reviewed and approved the technical content of this MD&A. Phil Bentley, former Asanko Executive: Geology and Resources (Pr.Sci.Nat.) was the Asanko Qualified Person under NI 43-101 guidelines who assumed technical responsibility for Mineral resource contents of this MD&A.
AGM Mineral Reserves
The AGM Mineral Reserve Estimate (MRev) was updated at December 31, 2016 and incorporates a more conservative CSA resource model for the Nkran deposit. In April 2017, following the successful Akwasiso infill drilling program which increased reserves and grade, the Akwasiso MRev was updated.
In addition, the MRev was modified, as part of the DFS process, to reflect new cut-off grades following an NPV optimization exercise that was completed for each pit. This optimization process sought to determine the best outcome balance between the highest NPV, the maximum ounces produced and the lowest cost per ounce produced per pit. As a result, cut-off grades vary according to ore type. At Nkran, the cut-off grade is now 0.7 g/t for fresh ore. At Esaase, 0.6 g/t cut-off is used for all ore. For the satellite deposits, 0.5 g/t cut-off is used for oxide ore and 0.7 g/t cut-off is used for fresh ore.
12
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
The MRE was prepared by an independent engineering firm, DRA Projects (Pty) Ltd., and can be found in the DFS NI 43-101 Technical Report, dated July 18, 2017, and filed on SEDAR and the Companys website.
Table 4: Asanko Gold Mine Global Mineral Reserve Estimate (as at April 25, 2017)
Notes:
Reserves estimated at a forward
looking $1,300/oz gold price.
All figures are rounded to reflect
appropriate levels of confidence. Apparent differences may occur due to
rounding.
Only Measured and Indicated Mineral Resources were converted to
Mineral Reserves.
Nkran includes depletion since February 2015 of
5.08Mt at 1.66 g/t Au for 270,471 ounces, as at December 31, 2016.
Reserves excludes the ROM stockpile of 1.52Mt at 1.36 g/t Au for
66,669 ounces and the marginal stockpile of 0.43Mt at 0.67 g/t Au for 9,121
ounces as at end December 2016.
Qualified person
The Reserve Statements were all prepared by Thomas Obiri-Yeboah, B.Sc. Mining Engineering (Hons), PR.Eng, a Senior Mining Engineer of DRA Projects Pty Ltd. of Johannesburg, South Africa. The reserve is reported in accordance with Canadian NI 43-101 requirements, which is consistent with the CIM Estimation Best Practice Guidelines in Canada. Frederik Fourie, Asanko Senior Mine Engineer, Pr.Eng., is the Asanko Qualified Person under NI 43-101 who assumes responsibility for the mineral reserves.
13
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Notes on Mineral Resources and Reserves Terminology
Mineral resources and reserves are derived from Canadian Institute of Mining definitions (CIM 2014) which are aligned with the Canadian NI 43-101 guidance for reporting Mineral resources and reserves. Similar terminologies are in use in Australia (JORC) and South Africa (SAMRAC) and are being considered in the United States.
Mineral resources do not have demonstrated economic viability, but have reasonable prospects for eventual economic extraction. They fall into three categories: measured, indicated and inferred. Measured and indicated mineral resources can be estimated with sufficient confidence to allow the appropriate application of technical, economic, marketing, legal, environmental, social and governmental factors to support evaluation of the economic viability of the deposit. For measured resources: we can confirm both geological and grade continuity to support detailed mine planning. For indicated resources: we can reasonably assume geological and grade continuity to support mine planning.
Mineral reserves are the economically mineable part of measured and/or indicated mineral resources demonstrated by at least a preliminary feasibility study. The reference point at which mineral reserves are defined is the point where the ore is delivered to the processing plant. Mineral reserves fall into two categories: a) proven reserves: the economically mineable part of a measured resource for which at least a preliminary feasibility study demonstrates that economic extraction is justified; and b) probable reserves: the economically mineable part of a measured and/or indicated resource for which at least a preliminary feasibility study demonstrates that economic extraction is justified.
14
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
5) |
Financial results |
The following table is a summary of the consolidated Statement of Operations of the Company for the three and nine months ended September 30, 2017 and 2016.
|
Three months ended September 30, | Nine months ended September 30, | ||||||||||
|
2017 | 2016 | 2017 | 2016 | ||||||||
(in thousands of US dollars) |
$ | $ | $ | $ | ||||||||
|
||||||||||||
Revenue |
63,714 | 71,541 | 193,436 | 114,863 | ||||||||
Royalties |
(3,186 | ) | (3,577 | ) | (9,672 | ) | (5,743 | ) | ||||
Net revenue |
60,528 | 67,964 | 183,764 | 109,120 | ||||||||
|
||||||||||||
Cost of sales |
||||||||||||
Production costs |
(24,818 | ) | (29,900 | ) | (87,316 | ) | (57,753 | ) | ||||
Depreciation and depletion |
(17,810 | ) | (17,556 | ) | (48,967 | ) | (30,526 | ) | ||||
Total cost of sales |
(42,628 | ) | (47,456 | ) | (136,283 | ) | (88,279 | ) | ||||
|
||||||||||||
Income from mine operations |
17,900 | 20,508 | 47,481 | 20,841 | ||||||||
Exploration and evaluation expenditures |
(197 | ) | (188 | ) | (463 | ) | (1,042 | ) | ||||
General and administrative expenses |
(3,259 | ) | (1,785 | ) | (9,447 | ) | (6,855 | ) | ||||
Income from operations |
14,444 | 18,535 | 37,571 | 12,944 | ||||||||
|
||||||||||||
Finance income |
266 | 121 | 559 | 416 | ||||||||
Finance expense |
(4,477 | ) | (3,961 | ) | (12,971 | ) | (8,226 | ) | ||||
Foreign exchange loss |
(961 | ) | (278 | ) | (1,490 | ) | (276 | ) | ||||
Gain (loss) on derivatives |
| 1,005 | | (265 | ) | |||||||
Income before income taxes |
9,272 | 15,422 | 23,669 | 4,593 | ||||||||
|
||||||||||||
Income tax expense |
(3,671 | ) | (3,766 | ) | (9,047 | ) | (9,332 | ) | ||||
Net income (loss) and comprehensive income (loss) for the period |
5,601 | 11,656 | 14,622 | (4,739 | ) | |||||||
Net income (loss) attributable to: |
||||||||||||
Common shareholders |
4,689 | 11,656 | 13,188 | (4,739 | ) | |||||||
Noncontrolling interest |
912 | | 1,434 | | ||||||||
|
5,601 | 11,656 | 14,622 | (4,739 | ) | |||||||
Earnings (loss) per share attributable to common shareholders: |
||||||||||||
Basic |
0.02 | 0.06 | 0.06 | (0.02 | ) | |||||||
Diluted |
0.02 | 0.06 | 0.06 | (0.02 | ) |
Three months ended September 30, 2017 and 2016
Revenue and royalties
During Q3 2017, the Company sold 50,241 ounces of gold at an average realized gold price of $1,265/oz for total revenue of $63.7 million (including $0.2 million of by-product revenue). During Q3 2016, the Company sold 54,393 ounces of gold at an average realized gold price of $1,311/oz for total revenue of $71.5 million (including $0.3 million of by-product revenue). Lower revenues year on year were a function of fewer ounces sold in Q3 2017 as compared to Q3 2016 and lower realized gold prices.
15
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Production costs
During the three-month period ended September 30, 2017, the Company incurred production costs of $24.8 million relating to the sale of 50,241 ounces of gold. In Q3 2016, the Company incurred production costs of $29.9 million relating to the sale of 54,393 ounces of gold. Production costs were lower in Q3 2017 due to the reduction in operating cash cost per ounce 1 , augmented by the impact of fewer ounces sold compared to Q3 2016.
In accordance with the Companys accounting policy for stripping costs, to the extent that excess waste is mined during the period in an identified component of the mine, as compared to the expected waste (based on the component-specific stripping ratio), a portion of costs are deferred to mineral properties. A total of $19.0 million of stripping costs were deferred to mineral properties during Q3 2017 with the progression of Cut 2 and are not included in cost of sales (three months ended September 30, 2016 - $13.0 million). For a discussion of production costs incurred during the period see section 3. Operating performance above.
Depletion and depreciation
Depreciation and depletion expense of $17.8 million (including $4.0 million of depletion of amounts capitalized in respect of deferred stripping) was recorded during Q3 2017 as a result of mining 1.2Mt of ore (three months ended September 30, 2016 - $17.6 million of depletion expense with $3.1 million of depletion on capitalized deferred stripping on 1.3Mt of ore mined). Depletion of the mineral asset is charged to the statement of operations based on a units of production basis and is not impacted by any other factors. Depreciation and depletion expense in Q3 2017 was consistent with Q3 2016 due to a higher asset cost base offset by a change in the Companys mineral reserve estimates (effective April 1, 2017) which are applied prospectively for accounting purposes. Refer to section 4.4 Global AGM mineral resource and reserve estimate for additional information on the Companys updated reserve and resource estimates.
Depletion of the mineral asset is charged to the statement of operations based on a units of production basis and is not impacted by any other factor. Depreciation related to plant, equipment and other fixed asset is determined based on a units of production basis (over estimated proven and probable reserves) or straight-line over their useful economic lives.
General and administrative expenses
A summary of general and administrative expenses for the three months ended September 30, 2017 and 2016. Certain of the comparative period figures were reclassified to conform to the current period presentation:
|
Three months ended September 30, | |||||
|
2017 | 2016 | ||||
|
$ | $ | ||||
Wages, benefits and consulting |
2,038 | 368 | ||||
Office, rent and administration |
364 | 396 | ||||
Professional fees and legal costs |
431 | 574 | ||||
Sharebased payments |
286 | 76 | ||||
Travel, marketing, investor relations and regulatory |
125 | 341 | ||||
Corporate reorganisation |
| 24 | ||||
Other |
15 | 6 | ||||
Total |
3,259 | 1,785 |
_____________________________________________
1
See
9. NonGAAP measures
16
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
General and administrative expenses of $3.3 million were incurred in Q3 2017 as compared to $1.8 million in the same period in 2016. The increase in general and administrative expenses from Q3 2016 to Q3 2017 is primarily a result of increased wages, benefits and consulting ($1.7 million increase) and higher share-based payments expense ($0.2 million increase), reflecting the increased efforts to support steady-state operations at the AGM (which only occurred in mid-Q2 2016), while the Company has also refined its accrual process resulting in a more even distribution of short-term incentive compensation during the 2017 fiscal year. In addition, the wages, benefits and consulting for Q3 2017 reflected severance costs associated with management changes that were made during the quarter. These factors were partially offset by lower professional and legal costs ($0.1 million decrease).
Finance expense
Total finance expense of $4.5 million incurred during Q3 2017 consists of $4.3 million of interest recognized in relation to the Companys $150 million long-term loan (see section 8. Liquidity and capital resources below) and $0.2 million in accretion charges relating to the asset retirement obligation recognized in respect of the AGM. In Q3 2016, total finance expense was $4.0 million consisting of $3.9 million of interest on the Companys long-term loan and $0.1 million in accretion charges on the Companys asset retirement obligation. The marginal increase in finance expense from Q3 2016 to Q3 2017 was due to an increase in LIBOR rates resulting in a higher interest expense (LIBOR plus 6%) on the Companys long-term loan.
Income tax expense
The Company recorded a deferred tax expense of $3.7 million for the three months ended September 30, 2017 (three months ended September 30, 2016 - $3.8 million). The deferred tax expense arose due to temporary differences between tax and accounting depreciation on mineral properties, plant and equipment. For tax purposes in Ghana, assets are depreciated over a period of 5 years; whereas, for accounting purposes, the same assets are depreciated on a units-of-production basis over the life of mine. No current income taxes were recorded or paid by the Company during the period as the Company has sufficient tax loss carry forwards to offset taxable income.
Nine months ended September 30, 2017 and 2016
Revenue and royalties
For the nine months ended September 30, 2017, the Company sold 156,519 ounces of gold at an average realized gold price of $1,232/oz for total revenue of $193.4 million (including $0.6 million of by-product revenue). For the nine months ended September 30, 2016, the Company sold 89,467 ounces of gold at an average realized gold price of $1,279/oz for total revenue of $114.9 million (including $0.4 million of by-product revenue). The AGM commenced commercial production on April 1, 2016; accordingly, revenues for the nine months ended September 30, 2016 only include revenues from April 1, 2016 onwards and, as a result, revenues and royalties during the nine months ended September 30, 2017 were considerably higher than during the comparative nine-month period. The positive impact of higher sales volumes during the nine-month period ended September 30, 2017 was partly offset by lower gold prices realized during this period, relative to the comparative period.
Production costs
During the nine-month period ended September 30, 2017, the Company incurred production costs of $87.3 million relating to the sale of 156,519 ounces of gold. Over the same period in the prior year, the Company incurred production costs of $57.8 million relating to the sale of 89,467 ounces of gold. The higher production costs during the nine months ended September 30, 2017 were attributable to the higher sales volumes reported in 2017, as the comparative period did not reflect ounces sold prior to the AGM achieving commercial production on April 1, 2016. The impact of higher sales volumes was partly offset by a 14% reduction in operating cash cost per ounce 1 during the nine months ended September 30, 2017, relative to the comparative period.
In accordance with the Companys accounting policy for stripping costs, to the extent that excess waste is mined during a period in an identified component of the mine, as compared to the expected waste (based on the component-specific stripping ratio), a portion of costs are deferred to mineral properties. A total of $42.2 million of stripping costs were deferred to mineral properties during the nine months ended September 30, 2017 and are not included in cost of sales (nine months ended September 30, 2016 - $25.2 million).
_____________________________________________
1
See
9. NonGAAP measures
17
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Depreciation and depletion expense of $49.0 million (including $10.2 million of depletion of amounts capitalized in respect of deferred stripping) was recorded during the nine months ended September 30, 2017 as a result of mining 3.2Mt of ore (nine months ended September 30, 2016 - $30.5 million of depletion expense with $3.8 million of depletion on capitalized deferred stripping on 2.6Mt of ore mined). Depreciation and depletion expense were lower for the nine months ended September 30, 2016 due to the fact the AGM did not achieve commercial production until April 1, 2016, and steady state production until mid-Q2 2016.
Depletion of the mineral asset is charged to the statement of operations based on a units of production basis and is not impacted by any other factor. Depreciation related to plant, equipment and other fixed asset is determined based on a units of production basis (over estimated proven and probable reserves) or straight-line over their useful economic lives.
General and administrative expenses
A summary of general and administrative expenses for the nine months ended September 30, 2017 and 2016. Certain of the comparative period figures were reclassified to conform to the current period presentation:
|
Nine months ended September 30, | |||||
|
2017 | 2016 | ||||
|
$ | $ | ||||
Wages, benefits and consulting |
4,615 | 2,037 | ||||
Office, rent and administration |
999 | 1,355 | ||||
Professional fees and legal costs |
1,193 | 886 | ||||
Sharebased payments |
1,267 | 484 | ||||
Travel, marketing, investor relations and regulatory |
1,333 | 1,237 | ||||
Corporate reorganisation |
| 837 | ||||
Other |
40 | 19 | ||||
Total |
9,447 | 6,855 |
General and administrative expenses of $9.4 million were incurred during the nine months ended September 30, 2017 as compared to $6.9 million in the same period in 2016. The increase is a result of higher salaries, wages and benefits ($2.6 million increase), share-based payments expense ($0.8 million increase), reflecting the increased efforts to support steady-state operations at the AGM (which only occurred in mid-Q2 2016), while the Company has also refined its accrual process resulting in a more even distribution of short-term incentive compensation during the 2017 fiscal year. In addition, the wages, benefits and consulting for the nine months ended September 30, 2017 reflected severance costs associated with management changes that were made during the quarter, while professional fees and legal costs increased by $0.3 million. These factors were partially offset by lower administrative costs ($0.4 million decrease) and non-recurring corporate reorganization costs ($0.8 million decrease) incurred in 2016 in relation to the Companys Ghanaian subsidiaries which were reorganized to move all operating assets (post-acquisition of PMI Gold) into the same legal entity.
Finance expense
Total finance expense of $13.0 million incurred during the nine months ended September 30, 2017 consists of $12.5 million of interest recognized in relation to the Companys $150 million long-term loan (see section 8. Liquidity and capital resources below) and $0.5 million in accretion charges relating to the asset retirement obligation recognized in respect of the AGM. During the nine months ended September 30, 2016, total finance expense was $8.2 million consisting of $8.0 million of interest on the Companys long-term loan and $0.2 million in accretion charges on the Companys asset retirement obligation.
Finance expense for the nine months ended September 30, 2017 is higher than for the same period in 2016 as prior to the AGM being in commercial production on April 1, 2016, all interest expenses relating to the long-term loan were capitalized to deferred development costs in accordance with the Companys accounting policy on borrowing costs. Additionally, finance expense was higher during the nine months ended September 30, 2017 due to an increase in LIBOR rates compared to the same period in the prior year, resulting in a higher interest expense (LIBOR plus 6%) on the Companys long-term loan.
18
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
The Company recorded a deferred tax expense of $9.0 million for the nine months ended September 30, 2017 (nine months ended September 30, 2016 - $9.3 million). The deferred tax expense arose due to temporary differences between tax and accounting depreciation on mineral properties, plant and equipment. For tax purposes in Ghana, assets are depreciated over a period of 5 years; whereas, for accounting purposes, the same assets are depreciated on a units-of-production basis over the life of mine. No current income taxes were recorded or paid by the Company during the period as the Company has sufficient tax loss carry forwards to offset taxable income.
The deferred tax expense of $9.3 million for the nine months ended September 30, 2016 was also due to temporary differences between tax and accounting depreciation on mineral properties, plant and equipment.
6) |
Selected quarterly financial data |
The following table provides summary unaudited financial data for the last eight quarters:
|
2017 | 2016 | 2015 | |||||||||||||||||||||
|
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | ||||||||||||||||
(in thousands of US dollars) |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Revenue, net of royalties |
60,528 | 57,182 | 66,054 | 66,789 | 67,964 | 41,156 | | | ||||||||||||||||
Total cost of sales |
(42,628 | ) | (42,726 | ) | (50,929 | ) | (53,367 | ) | (47,456 | ) | (40,823 | ) | | | ||||||||||
Writeoff of deferred stripping asset |
| | | (7,123 | ) | | | | | |||||||||||||||
Income from mine operations |
17,900 | 14,456 | 15,125 | 6,299 | 20,508 | 333 | | | ||||||||||||||||
Exploration and evaluation expenditures |
(197 | ) | (80 | ) | (186 | ) | (383 | ) | (188 | ) | (226 | ) | (628 | ) | (1,948 | ) | ||||||||
General and administrative expenses |
(3,259 | ) | (3,388 | ) | (2,800 | ) | (5,683 | ) | (1,785 | ) | (1,677 | ) | (3,393 | ) | (2,127 | ) | ||||||||
Income (loss) from operations |
14,444 | 10,988 | 12,139 | 233 | 18,535 | (1,570 | ) | (4,021 | ) | (4,075 | ) | |||||||||||||
Other income (expenses) |
(5,172 | ) | (4,300 | ) | (4,430 | ) | (6,604 | ) | (3,113 | ) | (5,337 | ) | 99 | 1,208 | ||||||||||
Income tax recovery (expense) |
(3,671 | ) | (5,479 | ) | 103 | (2,106 | ) | (3,766 | ) | (5,620 | ) | 54 | 3,086 | |||||||||||
Net income (loss) for the period |
5,601 | 1,209 | 7,812 | (8,477 | ) | 11,656 | (12,527 | ) | (3,868 | ) | 219 | |||||||||||||
Basic and diluted income (loss) per share |
$ | 0.02 | $ | 0.00 | $ | 0.04 | ($0.04 | ) | $ | 0.06 | ($0.06 | ) | ($0.02 | ) | $ | 0.00 |
With the commencement of commercial production effective April 1, 2016, the Company began recording revenue and cost of sales in Q2 2016 (see section 5. Financial results ). During Q2 2016, the Company was still ramping-up operations and bulk mining to obtain access to the main orebody, which was reached at the end of the quarter. From Q3 2016 onwards, the Company saw the operation achieve expected levels of production, resulting in higher revenues and income from operations. During Q2 2017, production reduced relative to the preceding quarters as mining operations worked through a low-grade section of the Nkran pit and encountered ore dilution as a result of blast movements. Production recovered again during Q3 2017, despite being impacted by three mill motor outages, as the Company introduced a number of mining initiatives to minimize ore losses.
General and administrative expense primarily consists of wages and benefits, office rental costs, professional fees, legal fees, corporate reorganization, business development and share-based payments. These costs were higher in 2017 as a result of general cost increases to support steady-state operations at the AGM (which only occurred in mid-Q2 2016) while the Company has also refined its accrual process resulting in a more even distribution of certain general and administrative expenses during the 2017 fiscal year (see section 5. Financial results ).
19
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
With the commencement of commercial production at the AGM on April 1, 2016, the related mineral properties, plant and equipment started being depreciated for tax purposes; this resulted in a deferred income tax expense of $5.6 million in Q2 2016 and $3.8 million in Q3 2016. The tax expense in Q4 2016 related primarily to current withholding taxes incurred in Ghana in relation to service and direct costs charged from the Companys Canadian subsidiaries to the Companys Ghanaian subsidiary which houses the operating mines of Asanko. The deferred tax expense of $5.5 million and $3.7 million in Q2 2017 and Q3 2017, respectively, are due to the Company forecasting that mineral properties, plant and equipment will be depreciated at a faster rate for tax purposes relative to accounting depreciation resulting in an increase of the associated deferred tax liability.
A $7.1 million write-down of a deferred stripping asset in Q4 2016 contributed to a net loss of $8.5 million in the fourth quarter of 2016.
7) |
2017 Outlook |
Revised 2017 production guidance maintained
The AGM produced 49,293 ounces of gold during Q3 2017, despite three mill motor outages, which equated to in excess of 5,000 ounces of lost gold production. During the nine months ended September 30, 2017, the AGM produced 153,596 ounces of gold and the Company is on track to meet its revised 2017 guidance of 205,000-225,000 ounces at AISC of $920-$960 per ounce.
The Company expects to source approximately 20,000tpm of oxide ore from Akwasiso during Q4 2017. Ore from Akwasiso is expected to be supplemented by the addition of Dynamite Hill, with operations at the latter pit expected to commence in Q4 2017 and ramp up to full mining rates during Q1 2018.
From Q4 2017 onwards, Asanko’s mine plan will incorporate all sources of ore available from its multiple pits to blend to the mill to enable optimization of the various pit extraction rates, the stockpile balances and operating costs. As a consequence, the mill feed grades are expected to reflect the average reserve grades from the respective pits as they are mined, including the blended grade average from the various stockpiles.
Planned expansion
The Company proposes to increase gold production through the development and execution of two expansion projects, namely P5M and P10M. A DFS on these expansion projects was published in June 2017 and was based on the optimal NPV on a capital unconstrained basis for the AGM, which assumed the sequential development of each project. However, there is flexibility on the timing of the development of each of P5M and P10M, respectively.
P5M comprises two stages, the first stage of which represents brownfield modifications to upgrade the CIL processing plant to 5Mtpa will be completed in Q1 2018 and is being funded from cash on hand and cash from operations. The decision to proceed with the second stage of P5M has been deferred until 2018. This stage comprises the development of the Esaase pit and construction of an overland conveyor from Esaase to the processing plant (see section 4.2 Expansion projects ).
Exploration outlook
The Company expects to complete the 13,000m drill program on Midras South in November 2017 with the intention of incorporating the drill results in a shallow Measured and Indicated Mineral Resource Estimate.
The Company is currently planning a phased drilling campaign on the Miradani Project, which is expected to commence in Q4 2017, with a view to completing a maiden Mineral Resource Estimate in H2 2018.
20
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
8) |
Liquidity and capital resources |
A key financial objective of the Company is to actively manage its cash balance and liquidity in order to meet the Companys strategic plan. The Company aims to achieve positive cash flows from operations to internally fund operating, capital and project development requirements. A summary of the Companys net assets and key financial ratios related to liquidity are as follows:
|
September 30, 2017 | December 31, 2016 | ||||
(in thousands of US dollars) |
$ | $ | ||||
|
||||||
Cash and cash equivalents |
60,845 | 59,675 | ||||
Other current assets |
55,560 | 60,043 | ||||
Noncurrent assets |
584,181 | 542,994 | ||||
Total assets |
700,586 | 662,712 | ||||
Current liabilities (excluding current portion of longterm debt) |
50,992 | 46,934 | ||||
Noncurrent liabilities (excluding longterm debt) |
54,677 | 44,381 | ||||
Debt |
157,331 | 154,972 | ||||
Total liabilities |
263,000 | 246,287 | ||||
Working capital 2 |
65,413 | 72,784 | ||||
Common shareholders' equity |
436,152 | 416,425 | ||||
Noncontrolling interest |
1,434 | | ||||
Total equity |
437,586 | 416,425 | ||||
Total common shares outstanding |
203,449,957 | 201,829,207 | ||||
Total options outstanding |
14,502,375 | 14,591,750 | ||||
Total warrants outstanding |
4,000,000 | 4,000,000 | ||||
Key financial ratios |
||||||
Current ratio |
2.28 | 2.55 | ||||
Total liabilities to common shareholders' equity |
0.60 | 0.59 | ||||
Debttototal capitalization |
0.18 | 0.19 |
2 Current assets less current liabilities (excluding current portion of long-term debt).
The Company anticipates that its balance sheet shall continue to strengthen as the Company is now in a cash accumulation phase as steady-state operations have been reached. The Company was in a strong net asset position at both September 30, 2017 and December 31, 2016 and had a significant cash balance of $60.8 million as at September 30, 2017. Through a combination of this cash balance and cash flows from operations, the Company believes it is in a position to meet all working capital requirements, debt principal repayments, contractual obligations and commitments as they fall due (see Commitments below). However, the Companys cash flows and its ability to meet working capital requirements and contractual obligations is significantly influenced by the price of gold. The Company aims to manage its liquidity by ensuring that, even in a low gold price environment, its operations can manage spending and provide adequate cash flow to meet all commitments. The Company has a VAT receivable balance of $11.2 million as of September 30, 2017. In any given period, the Company expects to have one quarter of VAT receivable outstanding, or approximately $8.0 million.
Debt
In 2013, the Company entered into a Definitive Senior Facilities Agreement (DSFA) with a special purpose vehicle of RK Mine Finance Trust I (Red Kite), which is now fully drawn for a total of $150.0 million. Interest on the DSFA is calculated in advance on a quarterly basis at a rate of LIBOR +6%, subject to a floor LIBOR rate of 1%. The Company can elect to repay the DSFA, or a portion thereof, early without penalty. During Q2 2016, the DSFA was amended in order to defer the repayment of the principal for two years (being the principal deferral period). The amendment provided that the first principal repayment will be payable on July 1, 2018 after which the facility is scheduled to be repaid in nine equal quarterly installments, with the last repayment on July 1, 2020. The Company continues to pay quarterly interest on the loan facility during the principal deferral period with the first interest payment having occurred on July 1, 2016. There were no other changes to the original debt facility terms. A deferral fee of 2% of the loan principal (for a total of $3.3 million) was paid commensurate with signing the amendment.
21
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Equity
The Company is financially stable with a total liabilities-to-common shareholders equity ratio of 0.60 as of September 30, 2017.
The Government of Ghana (the Government) has a 10% free carried interest in the AGM in accordance with Ghanaian Law. This was granted through the issuance of 10% of the common shares of the Companys Ghanaian subsidiary, Asanko Gold Ghana Limited (formerly Keegan Resources (Ghana) Limited), which owns the Abore, Abirem, Adubea and Esaase mining leases, to the Government. The Government has a nominee on the board of this subsidiary and is entitled to 10% of declared dividends being paid out of the subsidiary but does not have to contribute to the subsidiarys capital investment. At September 30, 2017, Asanko Gold Ghana Limited had an income surplus in the pool from which dividends can be paid. In accordance with the Companys accounting policy for non-controlling interests, the Company allocated $0.9 million and $1.4 million of Asanko Ghanas net earnings to the non-controlling interest for the three and nine months ended September 30, 2017, respectively (three and nine months ended September 30, 2016 - $nil and $nil). All results in this MD&A show 100% of results as being attributable to the Company with non-controlling interest accounted for as a separate component of equity.
Commitments
The following table summarizes the Companys contractual obligations as at September 30, 2017 and December 31, 2016:
|
Total | Total | ||||||||||||||||
(in thousands of US dollars) |
Within 1 year | 13 years | 45 years | Over 5 years | September 30, 2017 | December 31, 2016 | ||||||||||||
Longterm debt and related interest and withholding tax payments |
31,378 | 158,451 | | | 189,829 | 198,028 | ||||||||||||
Accounts payable and accrued liabilities |
50,748 | | | | 50,748 | 46,934 | ||||||||||||
Asset retirement provision (undiscounted) |
| | | 35,439 | 35,439 | 34,977 | ||||||||||||
Mine operating/construction and other service contracts, open purchase orders |
23,396 | 881 | | | 24,277 | 27,969 | ||||||||||||
Total |
105,522 | 159,332 | | 35,439 | 300,293 | 307,908 |
The Company has no off-balance sheet arrangements.
22
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
The following table provides a summary of cash flows for the three and nine months ended September 30, 2017 and 2016:
|
Three months ended September 30, | Nine months ended September 30, | ||||||||||
|
2017 | 2016 | 2017 | 2016 | ||||||||
Cash provided by (used in): |
||||||||||||
Operating activities |
40,704 | 33,122 | 88,831 | 31,609 | ||||||||
Investing activities |
(31,790 | ) | (11,671 | ) | (81,372 | ) | (88,000 | ) | ||||
Financing activities |
(3,054 | ) | 1,776 | (6,502 | ) | (970 | ) | |||||
Impact of foreign exchange on cash and cash equivalents |
67 | (141 | ) | 213 | 117 | |||||||
Increase (decrease) in cash and cash equivalents for the period |
5,927 | 23,086 | 1,170 | (57,244 | ) | |||||||
Cash and cash equivalents, beginning of period |
54,918 | 34,470 | 59,675 | 114,800 | ||||||||
Cash and cash equivalents, end of period |
60,845 | 57,556 | 60,845 | 57,556 |
Three months ended September 30, 2017 and 2016
Cash provided by operating activities
During the three months ended September 30, 2017, the Company realized cash flows from operations of $40.7 million, being cash inflows before working capital changes of $31.7 million and inflows from non-cash working capital of $9.0 million (three months ended September 30, 2016 cash provided by operations of $33.1 million consisting of cash inflows before working capital changes of $36.1 million and outflows from non-cash working capital of $3.0 million). The cash flows before working capital changes consist primarily of cash earnings from mine operations of $35.7 million less cash G&A of $3.3 million. The cash inflow of $9.0 million from non-cash working capital was primarily the result of a $7.4 million decrease in the VAT receivable balance, $3.8 million increase in trade payable and accruals and $0.5 million decrease in prepaid expenses, partially offset by a $2.0 million increase in inventories and $0.7 million increase in receivables.
During the same period in the prior year, cash flows from operations were lower due to cash outflows related to working capital of $3.0 million, specifically related to receivables.
Cash used in investing activities
During the three months ended September 30, 2017, the Company spent $32.0 million on additions to mineral properties, plant and equipment. The total expenditure on investing activities during the period included $19.0 million related to capitalization of deferred stripping costs, $6.3 million related to P5M, $0.8 million related to the tailings storage facility raise, $0.9 million related to capitalized exploration and evaluation costs, $3.2 million on the development of Akwasiso and Dynamite Hill, and $1.8 million related to other additions to property, plant and equipment including additions relating to the crusher circuit upgrade.
During the same period in the prior year, the Company spent $11.7 million on investing activities including $32.1 million on additions to mineral properties, plant and equipment partially offset by the collection of $20.3 million in VAT related to development activities and interest received on cash balances of $0.1 million.
Capital expenditures in Q3 2017 were comparable in quantum to Q3 2016. During Q3 2017, the Company continued the development of its P5M mine plan, while in Q3 2016 the Company was finalizing the development of and payment for the AGM.
Cash provided by financing activities
During the three months ended September 30, 2017, the Company paid $3.1 million in interest relating to the DSFA (see Debt above).
During the three months ended September 30, 2016, the Company received $1.8 million from the exercise of stock options.
23
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Cash provided by operating activities
During the nine months ended September 30, 2017, the Company recorded cash flows from operations of $88.8 million, being cash inflows before working capital changes of $87.2 million and inflows from non-cash working capital of $1.6 million (nine months ended September 30, 2016 cash provided by operations of $31.6 million consisting of cash inflows before working capital changes of $44.4 million and outflows from non-cash working capital of $12.8 million). The cash flows before working capital changes consist primarily of cash earnings from mine operations of $96.4 million less cash G&A of $9.4 million. The cash inflow of $1.6 million from non-cash working capital was primarily the result of a $10.4 million decrease in the VAT receivable balance and $0.4 million decrease in prepaid expenses, partially offset by a $6.8 million increase in inventories, $1.6 million decrease in trade payable and accruals and $0.8 million increase in receivables.
During the same period in the prior year, cash flows from operations were lower due to the fact the AGM did not achieve commercial production until April 1, 2016, and steady state production until mid-Q2 2016.
Cash used in investing activities
During the nine months ended September 30, 2017, the Company spent $81.7 million on additions to mineral properties, plant and equipment. The total expenditure on investing activities during the period included $42.2 million related to capitalization of deferred stripping costs, $21.2 million related to P5M, $4.6 million related to the tailings storage facility raise, $3.0 million related to capitalized exploration and evaluation costs, $6.1 million on the development of Akwasiso and Dynamite Hill and $4.6 million related to other additions to property, plant and equipment including additions relating to the crusher circuit upgrade.
During the same period in the prior year, the Company spent $88.0 million on investing activities including $114.4 million on additions to mineral properties, plant and equipment partially offset by the collection of $26.0 million in VAT related to development activities and interest received on cash balances of $0.4 million.
As previously noted, capital expenditures were higher period to date in fiscal 2016 compared to fiscal 2017 as the Company was finalizing the development of and payment for the AGM.
Cash provided by financing activities
During the nine months ended September 30, 2017, the Company paid $10.1 million in interest relating to the DSFA (see Debt above). In addition, the Company received $3.6 million from the exercise of stock options.
During the nine months ended September 30, 2016, the Company paid $2.9 million in interest relating to the DSFA and $3.3 million in fees to defer the principal repayments on the DSFA to July 2018. Additionally, the Company received $5.2 million from the exercise of stock options.
9) |
Non-GAAP measures |
The Company has included certain non-GAAP performance measures throughout this MD&A. These performance measures are employed by management to assess the Companys operating and financial performance and to assist in business decision-making. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors and other stakeholders use this information to evaluate the Companys operating and financial performance; however, these non-GAAP performance measures do not have any standardized meaning. Accordingly, these performance measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
24
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
The Company has included the non-GAAP performance measures of operating cash costs per ounce and total cash costs per ounce on a by-product basis, throughout this MD&A. In the gold mining industry, this is a common performance measure but does not have any standardized meaning. The Company follows the recommendations of the Gold Institute Production Cost Standard. The Gold Institute, which ceased operations in 2002, was a non-regulatory body and represented a global group of suppliers of gold and gold products. The production cost standard developed by the Gold Institute remains the generally accepted standard of reporting cash costs of production by many gold mining companies. Management uses operating cash costs per ounce and total cash costs per ounce to monitor the operating performance of its mines and to assess the attractiveness of potential acquisition targets. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, some investors use this information to evaluate the Companys performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
The following table provides a reconciliation of operating and total cash costs per gold ounce on a by-product basis to operating expenses (the nearest GAAP measure) as presented in the consolidated financial statements of the Company for the three and nine months ended September 30, 2017 and 2016. Note that the AGM did not commence commercial production until April 1, 2016 and, therefore, operating and total cash costs per ounce may not be comparable for the nine months ended September 30, 2017 and 2016.
|
Three months ended September 30, | Nine months ended September 30, | ||||||||||
|
2017 | 2016 | 2017 | 2016 | ||||||||
(in thousands of US dollars except per ounce amounts) |
$ | $ | $ | $ | ||||||||
Total production costs from consolidated statement of operations |
24,818 | 29,900 | 87,316 | 57,753 | ||||||||
Share-based payment expense included in production costs |
(258 | ) | (76 | ) | (1,159 | ) | (255 | ) | ||||
By-product revenue |
(186 | ) | (258 | ) | (630 | ) | (413 | ) | ||||
Total operating cash costs |
24,374 | 29,566 | 85,527 | 57,085 | ||||||||
Royalties and production taxes |
3,186 | 3,577 | 9,672 | 5,743 | ||||||||
Total cash costs |
27,560 | 33,143 | 95,199 | 62,828 | ||||||||
Gold ounces sold |
50,241 | 54,393 | 156,519 | 89,467 | ||||||||
Operating cash costs per gold ounce ($/ounce) |
485 | 544 | 546 | 638 | ||||||||
Total cash costs per gold ounce ($/ounce) |
549 | 609 | 608 | 702 |
9.2 All-in sustaining costs per gold ounce
In June 2013, the World Gold Council (WGC), a non-regulatory association of many of the worlds leading gold mining companies established to promote the use of gold to industry, provided guidance for the calculation of all-in sustaining costs per gold ounce in an effort to encourage improved understanding and comparability of the total costs associated with mining an ounce of gold. The Company has adopted the reporting of all-in sustaining costs per gold ounce, which is a non-GAAP performance measure. The Company believes that the all-in sustaining costs per gold ounce measure provides additional insight into the costs of producing gold by capturing all of the expenditures required for the discovery, development and sustaining of gold production and allows the Company to assess its ability to support capital expenditures to sustain future production from the generation of operating cash flows. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, some investors use this information to evaluate our performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
The following table provides a reconciliation of all-in sustaining costs per gold ounce to the consolidated financial statements for the three and nine months ended September 30, 2017 and 2016. Note that the AGM did not commence commercial production until April 1, 2016 and, therefore, all-in sustaining costs per gold ounce may not be comparable for the nine months ended September 30, 2017 and 2016.
25
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
|
Three months ended September 30, | Nine months ended September 30, | ||||||||||
|
2017 | 2016 | 2017 | 2016 | ||||||||
(in thousands of US dollars except per ounce amounts) |
$ | $ | $ | $ | ||||||||
Total cash costs (as reconciled above to the Statement of Operations) |
27,560 | 33,143 | 95,199 | 62,828 | ||||||||
Cash corporate general and administrative expenses |
2,960 | 1,709 | 8,141 | 3,228 | ||||||||
Sustaining capital expenditures |
1,603 | 1,378 | 6,448 | 2,131 | ||||||||
Sustaining capitalized stripping costs 3 |
16,719 | 13,044 | 39,191 | 25,179 | ||||||||
Reclamation cost accretion |
162 | 39 | 484 | 83 | ||||||||
All-in sustaining cost |
49,003 | 49,313 | 149,462 | 93,449 | ||||||||
Gold ounces sold |
50,241 | 54,393 | 156,519 | 89,467 | ||||||||
All-in sustaining cost per gold ounce ($/ounce) |
975 | 907 | 955 | 1,045 |
3 Excludes stripping costs on operating pits which have yet to achieve steady-state production.
All-in sustaining costs adjust Total cash costs, for corporate general and administrative expenses, reclamation cost accretion, sustaining capitalized stripping costs (excludes operating pits which have not achieved steady-state operations) and sustaining capital expenditures. Corporate general and administrative expenses used in the calculation are those included as a line item on the Companys statement of operations excluding share-based payments and depreciation. Sustaining capital expenditures, capitalized stripping costs and reclamation cost accretion are not line items on the Companys financial statements. Sustaining capital expenditures are defined as those capital expenditures which do not increase annual gold ounce production at a mine site and exclude all expenditures at the Companys projects and certain expenditures at the Companys operating sites which are deemed expansionary in nature. Capitalized stripping costs represent costs incurred at steady-state operations during the period which have been deferred to mining interests as they allow the Company to gain access to ore to be mined in future periods; these costs relate to the currently identified reserves and resources and are not considered expansionary in nature. Reclamation cost accretion represents the growth in the Companys decommissioning liability due to the passage of time. This amount does not reflect cash outflows but it is considered to be representative of the periodic costs of reclamation and remediation. Reclamation cost accretion is included in finance expense in the Companys consolidated statements of operations and comprehensive income (loss).
The following table reconciles sustaining capital expenditures to the Companys total capital expenditures as presented in the Companys consolidated statement of cash flows for the three and nine months ended September 30, 2017 and 2016.
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
$ | $ | $ | $ | |||||||||
Capital expenditures in the consolidated
statement of
cash flows |
31,955 | 32,106 | 81,718 | 114,402 | ||||||||
Less: non-sustaining capital expenditures and
capitalized stripping costs |
(30,352 | ) | (30,728 | ) | (75,270 | ) | (112,271 | ) | ||||
Total sustaining capital expenditures | 1,603 | 1,378 | 6,448 | 2,131 |
The majority of the non-sustaining capital expenditures during the three and nine months ended September 30, 2017 related to the raising of the tailings storage facility, mine development costs for the Akwasiso, Esaase and Dynamite Hill pits, deferred stripping costs for the Akwasiso pit and the advancement of P5M.
9.3 Adjusted Net Income (Loss)
The Company has included the non-GAAP performance measures of adjusted net income (loss) and adjusted net income (loss) per share, throughout this MD&A. Neither adjusted net income nor adjusted net income per share have any standardized meaning and are therefore unlikely to be comparable to other measures presented by other issuers. Adjusted net income excludes certain non-cash items from net income or net loss to provide a measure which helps the Company and investors to evaluate the results of the underlying core operations of the Company and its ability to generate cash flows. The Company believes that the presentation of adjusted net income is appropriate to provide additional information to investors regarding items that we do not expect to continue at the same level in the future or that management does not believe to be a reflection of the Companys ongoing operating performance. The Company further believes that its presentation of this non-IFRS financial measure provides information that is useful to investors because it is an important indicator of the strength of our operations and the performance of our core business. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The following table provides a reconciliation of adjusted net income to net income (the nearest GAAP measure) per the condensed consolidated interim financial statements for the three and nine months ended September 30, 2017 and 2016. All adjustments are shown net of estimated tax.
26
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
(in thousands of US dollars except share per share amounts) | $ | $ | $ | $ | ||||||||
Net income (loss) for the period attributable
to common
shareholders |
4,689 | 11,656 | 13,188 | (4,739 | ) | |||||||
Unrealized loss (gain) on derivative instruments | | (1,005 | ) | | 265 | |||||||
Adjusted net income (loss) for the period attributable
to
common shareholders |
4,689 | 10,651 | 13,188 | (4,474 | ) | |||||||
Basic weighted average number of common share
outstanding |
203,449,957 | 199,532,834 | 203,293,733 | 198,014,961 | ||||||||
Diluted weighted average number of common
share
outstanding |
203,449,957 | 208,419,800 | 206,261,846 | 198,014,961 | ||||||||
Adjusted net income (loss) per share
attributable to
common shareholders - basic and diluted |
$ | 0.02 | $ | 0.05 | $ | 0.06 | ($0.02 | ) |
10) |
Summary of outstanding share data |
As of the date of this MD&A, there were 203,449,957 common shares of the Company issued and outstanding and 14,502,375 share purchase options and 4,000,000 warrants outstanding (with exercise prices ranging between C$1.11 and C$4.77 per share). The fully diluted outstanding share count at the date of this MD&A is 217,952,332.
11) |
Related party transactions |
As at September 30, 2017, the Companys related parties are its subsidiaries and key management personnel. During normal course of operations, the Company enters into transactions with its related parties. During the three and nine months ended September 30, 2017, all related party transactions were in the normal course of business including compensation payments to key management personnel.
12) |
Critical accounting policies and estimates |
12.1 Estimates and judgements
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Management believes the estimates and assumptions used in the condensed consolidated interim financial statements are reasonable; however, actual results could differ from those estimates and could impact future results of operations and cash flows. The Companys significant accounting judgments and estimates were presented in Note 5 of the audited annual consolidated financial statements for the year ended December 31, 2016 and have been consistently applied in the preparation of the condensed consolidated interim financial statements. There are no new judgments and estimates applied in preparing the condensed consolidated financial statements for the three and nine months ended September 30, 2017.
12.2 Changes in Accounting Policies including Initial Adoption
There have been no significant changes to significant accounting policies during the three and nine months ended September 30, 2017. A full list of the Companys accounting policies is presented in the Companys annual consolidated financial statements for the year ended December 31, 2016.
27
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
13) |
Risks and uncertainties |
13.1 Financial instruments & risk
The Companys business, operations and future prospects are subject to significant risks. For details of these risks, please refer to the risk factors set forth in the Companys Annual Information Form for the year ended December 31, 2016, which can be found under the Companys corporate profile on SEDAR at www.sedar.com, and the Companys Form 40-F Annual Report for the year ended December 31, 2016, which can be found on EDGAR at www.sec.gov.
There were no significant changes to those risks or to the Companys management of exposure to those risks during the three and nine months ended September 30, 2017. These risks could materially affect the Companys business, operations, prospects and share price and could cause actual events to differ materially from those described in forward-looking statements relating to the Company. Additional risks and uncertainties not presently known to the Company or that the Company currently considers immaterial may also impair the business, operations, prospects and share price of the Company. If any of the risks actually occur, the business of the Company may be harmed and its financial condition and results of operations may suffer significantly.
For a description of the risks faced by the Company with respect to financial instruments, see the Companys condensed consolidated interim financial statements for the three and nine months ended September 30, 2017.
14) |
Internal control |
14.1 Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Companys Chief Executive Officer and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, have evaluated the design and effectiveness of the Companys disclosure controls and procedures and the design as required by Canadian and United States securities legislation as at the end of the period covered by this report, and have concluded that such procedures are adequate to ensure accurate, complete and timely disclosures in public filings.
14.2 Internal Controls Over Financial Reporting
The Companys management, with the participation of its President and Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of the President and Chief Executive Officer and Chief Financial Officer, the Companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The Companys internal control over financial reporting includes policies and procedures that:
|
pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, the transactions and dispositions of assets of the Company; |
|
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS and that the Companys receipts and expenditures are made only in accordance with authorizations of management and the Companys Directors; and |
|
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the Companys consolidated financial statements. |
There has been no change in the Companys internal control over financial reporting during the three months ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
14.3 Limitations of controls and procedures
The Companys management, including the President and Chief Executive Officer and Chief Financial Officer, believes that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any control system also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
28
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
15) |
Cautionary statements |
15.1 Cautionary statement on forward-looking information
This MD&A may contain forward-looking statements which reflect the Companys current expectations regarding the future results of operations, performance and achievements of the Company, including but not limited to statements with respect to the Companys plans or future financial or operating performance, the estimation of mineral reserves and resources, conclusions of economic assessments of projects, the timing and amount of estimated future production, costs of future production, future capital expenditures, costs and timing of the development of deposits, success of exploration activities, permitting time lines, requirements for additional capital, sources and timing of additional financing, realization of unused tax benefits and future outcome of legal and tax matters.
The Company has tried, wherever possible, to identify these forward-looking statements by, among other things, using words such as anticipate, believe, estimate, expect, budget, or variations of such words and phrases or state that certain actions, events or results may, could, would, might or will be taken, occur or be achieved. The statements reflect the current beliefs of the management of the Company, and are based on currently available information. Accordingly, these statements are subject to known and unknown risks, uncertainties and other factors, which could cause the actual results, performance, or achievements of the Company to differ materially from those expressed in, or implied by, these statements. These uncertainties are factors that include but are not limited to risks related to international operations; risks related to general economic conditions and credit availability, uncertainty related to the resolution of legal disputes and lawsuits; actual results of current exploration activities, unanticipated reclamation expenses; fluctuations in prices of gold; fluctuations in foreign currency exchange rates, increases in market prices of mining consumables, possible variations in mineral resources, grade or recovery rates; accidents, labour disputes, title disputes, claims and limitations on insurance coverage and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, changes in national and local government regulation of mining operations, mineral tenure rules, tax rules and regulations, and political and economic developments in countries in which the Company operates, as well as those factors discussed in the Companys AIF for the year-ended December 31, 2016, and its 40-F filing for the year ended December 31, 2016, available under the Companys profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov.
The Companys management reviews periodically information reflected in forward-looking statements. The Company has and continues to disclose in its Managements Discussion and Analysis and other publicly filed documents, changes to material factors or assumptions underlying the forward-looking statements and to the validity of the statements themselves, in the period the changes occur.
Historical results of operations and trends that may be inferred from the following discussions and analysis may not necessarily indicate future results from operations. Historically, the Companys operations have been primarily funded from debt and share issuances, as well as the exercise of share-based options. The Company has had and may have future capital requirements in excess of its currently available resources. In the event the Companys plans change, its assumptions change or prove inaccurate, or its capital resources in addition to projected cash flow, if any, prove to be insufficient to fund its future operations, the Company may be required to seek additional financing.
Although the Company has been successful in raising capital, there can be no assurance that the Company will have sufficient financing to meet its future capital requirements or that additional financing will be available on terms acceptable to the Company in the future.
29
ASANKO GOLD INC. |
MANAGEMENTS DISCUSSION AND ANALYSIS |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 |
15.2 Cautionary note for United States investors
As a British Columbia corporation and a reporting issuer under Canadian securities laws, the Company is subject to certain rules and regulations issued by Canadian Securities Administrators. The Company is required to provide detailed information regarding its properties including mineralization, drilling, sampling and analysis, on security of samples and mineral reserve estimates under Canadian NI 43-101. The United States Securities and Exchange Commission applies different standards than the standards under NI 43-101 in order to classify mineralization as a reserve. Accordingly, mineral reserve estimates contained in this MD&A may not qualify as reserves under SEC standards. Further, the Company describes any mineral resources associated with its properties utilizing terminology such as measured resources, indicated resources or inferred resources which are terms recognized by Canadian regulators under NI 43-101 but not recognized by the United States Securities and Exchange Commission. United States investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into mineral reserves. These terms have a greater amount of uncertainty as to their existence and feasibility than reserves recognized by the United States Securities and Exchange Commission. Further, inferred resources have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Therefore, United States investors are also cautioned not to assume that all or any part of the inferred resources exist. United States investors are also cautioned that disclosure of exploration potential is conceptual in nature by definition and there is no assurance that exploration of the mineral potential identified will result in any category of NI 43-101 mineral resources being identified.
30
Form 52-109F2
Certification of interim filings -
full certificate
I, Peter Breese, Chief Executive Officer of Asanko Gold Inc., certify the following:
1. |
Review: I have reviewed the interim financial report and interim MD&A (together, the interim filings) of Asanko Gold Inc. (the issuer) for the interim period ended September 30, 2017. |
2. |
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
3. |
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
4. |
Responsibility: The issuers other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer. |
5. |
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
(a) |
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
||
(i) |
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
||
(ii) |
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
||
(b) |
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 |
Control framework: The control framework the issuers other certifying officer and I used to design the issuers ICFR is based on Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. |
5.2 |
ICFR material weakness relating to design: N/A |
5.3 |
Limitation on scope of design: N/A |
6. |
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers ICFR that occurred during the period beginning on July 1, 2017 and ended on September 30, 2017 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR. |
Date: November 3, 2017
/s/ Peter Breese
_______________________
Peter
Breese
Chief Executive Officer
Form 52-109F2
Certification of interim filings -
full certificate
I, Fausto Di Trapani, Chief Financial Officer of Asanko Gold Inc., certify the following:
1. |
Review: I have reviewed the interim financial report and interim MD&A (together, the interim filings) of Asanko Gold Inc. (the issuer) for the interim period ended September 30, 2017. |
2. |
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
3. |
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
4. |
Responsibility: The issuers other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer. |
5. |
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
(a) |
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
||
(i) |
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
||
(ii) |
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
||
(b) |
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 |
Control framework: The control framework the issuers other certifying officer and I used to design the issuers ICFR is based on Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. |
5.2 |
ICFR material weakness relating to design: N/A |
5.3 |
Limitation on scope of design: N/A |
6. |
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers ICFR that occurred during the period beginning on July 1, 2017 and ended on September 30, 2017 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR. |
Date: November 3, 2017
/s/ Fausto Di Trapani
_______________________
Fausto Di Trapani
Chief Financial Officer