Going for gold in Ghana....
This company has recently come into my spotlight, and I think it deserves some more detailed consideration.
To sum up, ADU are a dual-listed company on the AXS and TSX which formed in 2001, and can be classified as either in a very advanced stage of exploration and/or an emerging producer.
Total shares on issue: 134M
Current cash position (as of Jan 08): $4M
Current trading price: Approx 49c
Resources: 2.0M oz @ 1.78g/t
Reserves: 815,000 oz @2.15g/t
The Salman Gold Project:
Situated at the southern extent of the Ashanti gold belt, along strike from several famous mines such as Prestea (10.7 Moz Au) and Bogosu (3.3 Moz Au). Currently ADU have 500 sqkm of tenure and 2.0 Moz in their books at a respectable grade of 1.78 g/t. The two main projects look to be Aniwa (912K oz) and Salman (1.05M oz). (Just a note of caution, this belt is known for its refractory ore, and it appears that a good deal of the Salman ore may be refractory).
A very appealing factor for me is that 85% of their resources are classified as indicated and measured and that they have managed to convert 815,000 oz to Reserve status, of which 85% is proven (at approx. 2.15 g/t)....the highest category under JORC, so basically a water-tight project.
Low country risk and access to good local infrastructure:
Ghana looks pretty stable atm, and is only ranked marginally above Australia in terms of country risk (Source: Chubb group of Insurance Companies).
Also the project area is close to major port facilities, sealed roads and has good communications coverage.
Management looks to be experienced:
Several directors have had roles in developing multi-million ounce projects in Asia, and others have a good deal of experience in African projects in the Congo, Zambia and Ghana for companies such as Newmont and Redback.
Looks cheap on a peer comparison:
To borrow a tool from Kennas ( yeah, I'm a convert now mate) MC to ounces is a follows:
MC/resources = 32.8
For a company at the stage ADU are at, this looks rather alluring, the Reserves to ounces comparison also looks pretty good (see latest presentation for details).
Strong Economics and potential extension of resources at depth:
Using a base case scenario of the POG at US$900, an in-ground value of US$1.8B, this would result in a projected cash flow of $331M (before Capex, taxes) and a cap payback period of 1.6 years for an approx 7 year mine life (2007 model). They're currently investigating plant options, financing and mill order. The issue of the mining licence is expected soon.
Looks pretty nice to me....thoughts?