FN Media Group Presents Oilprice.com Market Commentary
London – November 18, 2019 – Gold major Barrick just tripled its profits. Newmont Goldcorp, also reported a big jump in profits over the last couple of months. But what most people don’t know is that most of the money is made in the discovery of new world-class gold deposits. And geologists now think they could have hit the motherlode in a new mining frontier. Mentioned in today’s commentary includes: Kinross Gold Corporation (NYSE: KGC), Agnico Eagle Mines Ltd (NYSE: AEM), Yamana Gold (NYSE: AUY), Eldorado Gold Corp. (NYSE: EGO), First Majestic Silver (NYSE: AG).
It all started when miners found a nugget of solid gold weighing 1 kilogram…worth $45,400. Then, they repeated the feat, and dug up a second nugget weighing 2.7 kilograms, worth $122,500. The rocks came out at Kobada, a mine in Mali, owned and operated by African Gold Group Inc. (AGG.V, AGGFF). It’s a little mine with a bright future, sitting on top of the biggest mining belt in West Africa and the new center of the global gold mining industry.
Dozens of firms are dropping millions on new assets all over the Birmian mining belt. And AGG hopes to use Kobada to strike it rich in the next big gold boom.
The company has a lot going for it:
A drilling project that will reach completion on December 12, with a total resource base of an estimated 2.2 million ounces of gold, worth $4 billion at current prices. A management team of dedicated professionals, and their led by Stan Bharti, a titan of the industry who has spun gold out of nothing, turning little companies into firms 20x their original size. Gold prices look ready to rise. Interest rates are dropping. Big gold firms scrambling to acquire smaller firms to shore up their bottom lines.
So this tiny $20 million firm could realize a huge valuation or even potentially get taken over. It’s about to get very exciting for AGG (AGG.V, AGGFF).
A New Gold Hotspot
The Kobada Gold Project is in southern Mali—which is worth noting. Northern Mali has had its share of problems—but southern Mali is stable, peaceful, and very friendly to foreign investors, particularly in the mining industry. In fact, Mali is Africa’s third-largest gold producer. The mining belt running through West Africa, known as the Birman Belt, is among the most promising mineral areas in the world.
AGG’s property at Kobada covers a stretch up to 15km wide and 25km long with more than 200km2 to explore. Initial feasibility studies indicate a deposit of 2.2 million ounces—with a more detailed bankable study scheduled for April.
AGG is confident that once initial investment is complete, they can pull 50,000 ounces of gold out per year, with a future target of 100,000 ounces. The accommodation camp is 95% complete, drilling is well underway with a completion date of December 12. Right now, it’s working at breakneck speed—drilling a new hole every three days.
That 100,000 ounces could be worth nearly $150 million in revenue each year—for a firm worth just over $23 million. And recent discoveries of two massive solid nuggets mean that this is just the beginning. More nuggets could be unearthed, based on AGG’s findings.
Mineralization is clear at shallow depths with gold very close to surface all the way down to 300m. Costs should be low, with less time to market. And the Malian government has proven a reliable partner.
It used to be South Africa was the focus of mining companies’ attentions. But now, investors are shifting their focus West… where the geology promises big gains for companies that strike it rich early. According to Mining Intelligence, 61 new assets are in production or construction stages, with 24 assets undergoing economic assessments…and 367 assets in exploration, indicating a major boom is under way.
In Mali alone, there are at least twenty different mining companies buying up real estate. And the regulatory environment is perfect—the Malian government has embraced mining, Mali’s biggest GDP contributor, and has made changes to the permit process in order to quicken the rate of exploration. African Gold Group Inc. (AGG.V – AGGFF) has licenses from the Malian government that will be good until 2045, covering an area of more than 200km2
In fact, West Africa seems poised to become a new center for global gold mining—thanks to huge deposits, super low costs and a favorable regulatory environment amenable to mining interests. The local trifecta of Mali, Guinea and Burkina Faso already produce twice as much gold as South Africa, the previous gold capital of the world—and things should only get better from here.
The Billion Dollar Birmian Belt
Kobada is part of a massive belt running across a huge swath of West Africa—known as the Birmian Belt. Other companies, including mining giants Barrick and Resolute, have already hit it big. And the list of winners doesn’t stop there.
Take the Morila mine, in southern Mali, just east of Kobada. Operated by Barrick, the mine has been in operation since 2000 and has produced millions in gold and ore. Or take the Tongon mine in Cote d’Ivoire, also operated by Barrick, where the company unearthed 230,000 oz …worth $322 million. And what about the Syama Mine, in Mali, operated by Resolute, where production estimates are at 300,000 oz of gold per year—at current prices, a haul worth $420 million.
AGG’s (AGG.V, AGGFF) Kobada Mine is right smack in the middle of this promising new belt, where the mining boom is just taking off. And that means things could only get better.
The discovery of 1kg gold nuggets is just a hint of what’s to come at Kobada. AGG is keeping its expectations small—it only wants to pull up 50,000 oz a year.
The full lode at Kobada is reckoned to be 2.2 million oz, a figure a new definitive feasibility study in April might add to. At current prices, that full haul is more than $3 billion—all for a company with a $23 million valuation. And even that $3 billion figure should only climb higher and higher.
Plus, AGG is in safe hands—it’s got a management team that knows how to spin gold from silk, and they’re led by a titan in the field.
Gold Standard in Management
The team at African Gold Group Inc. (AGG.V – AGGFF) is an all-star group of mining industry professionals. Two directors, Sir Sam Jonah and Bruce Humphrey, have a hundred years of combined experience working the finances for mining operations. Jonah served as CEO of Ashanti Goldfields Company Ltd in the mid-1980s, while Humphrey was CEO and President of Desert Sun Mining and COO of Goldcorp.
Taking on matters on the ground is mining engineer Danny Callow. Callow served as the head of Glencore’s Africa Copper division, and he built a copper operation in Africa from green fields to a 210,000-ton producer while serving at Glencore. But the big news is AGG’s new CEO, President and Chairman: Stan Bharti.
With thirty years of experience, Bharti is bringing a particular expertise to AGG, promising to take the company into a new golden age.
His accomplishments include:
- Started and founded Desert Sun in 2002 at $0.40 a share sold 2006 $750 million or $7.50 a share
- Started and founded Consolidated Thompson 2004 at $0.25 a share sold in 2011 for $4.9 billion or $17.50 a share
- Started Avion Gold 2008 at $0.40 a share and sold in 2012 for $400 million or $0.88 a share
- Started Sulliden 2009 at $0.40 a share and sold in 2014 for merged value of $464 million or $ 1.47
Bhart’s gathered more than $3 billion in investment capital for his companies and released billions to his shareholders. And he knows his way around a gold mine: Bharti predicted gold prices would bounce back in the mid-1990s and he knew gold would rebound again between 2003 and 2015.
In Mali, he led the company Avion, a $20 million firm in 2008, which he turned around and sold for $500 million—all during the Great Recession. That’s a 20x growth rate. And Bharti’s ready to repeat the miracle.
“I have always bought or acquired undervalued assets in emerging markets. This gives our shareholders the best potential for HUGE returns. AGG (AGG.V, AGGFF) fits in that category very well.”
The Next Gold Rush
As the global economy looks increasingly unstable, gold – and gold companies – are likely to keep climbing. This year alone, many majors have enjoyed impressive gains.
Take Kinross Gold Corporation (NYSE: KGC), for example. Though faced significant loses in 2018, the company has completely turned itself around. Year-to-date, Kinross has enjoyed a 34 percent increase in its share prices, and its positioning itself for even more exciting things in the future.
Agnico Eagle Mines Ltd (NYSE: AEM) is another company with a lot of exposure to gold, letting investors take advantage of long-term and short-term price movements. Though it joins a long list of gold majors that reported losses in 2018, this year has been a spectacular year for the Agnico, with the company’s stock price rising an impressive 48 percent since January.
Taking advantage of both gold and silver exposure, Yamana Gold (NYSE: AUY), has seen its stock price jump by 42 percent since the beginning of the year. And it’s not stopping there. The company plans to ramp up its gold production by 20% through 2019 and its silver production by a whopping 200%.
Eldorado Gold Corp. (NYSE: EGO) has taken a diversified approach, with assets in Europe and Brazil. It has managed to cut cost per ounce significantly in recent years, and though its share price isn’t as high as it once was, Eldorado has doubled its share price since the beginning of the year.
While it’s primary focus remains on silver mining, First Majestic Silver (NYSE: AG) does hold a number of gold assets, as well. Additionally, silver tends to follow gold’s lead when wider markets begin to look shaky. Already this year, First Majestic has seen a 74 percent increase in its share price.
And though major miners have seen impressive returns, the real potential lies in junior miners like African Gold Group (AGG.V, AGGFF)..
By. Ian Jenkins
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