Asanko: Mining ahead, but falling further behind

Disclosure: K2 & Associates has a short position in shares of Asanko Gold

1

Consistent with our original thesis, we believe the NAV of Asanko Gold is less than US$0.50/share
1. Not getting the gold


Asanko appears to be mining significantly less gold compared to the Definitive Project Plan (DPP), despite mining more material
The gap between the DPP and actual results has grown to an estimated 84koz
In Q3, we believe the Company mined deeper than plan down the high grade ‘throat’ of the orebody, and yet the gap continued to widen substantially

2. We believe the reason Asanko is experiencing a gold shortfall, is because much of it is not there


In line with our original thesis, we believe negative gold reconciliation is the cause of Asanko’s under-performance to date
We do not believe the Company’s selective “reconciliations” are representative of the aggregate problem
Asanko should have the aggregate data to discredit our initial thesis, we find it unusual that they are not showing it despite vocally contesting our work

3. Not getting the cash



Asanko’s 2016 free cash flow is unlikely to come close to the DPP forecast of $91M
The Company needs to generate $124M of FCF in H2 2016 to meet this target according to our estimates
The Company needs to generate $164M of FCF in H2 2016 to meet what we estimate is a more appropriate benchmark given their accelerated mining activities
We believe Asanko will experience a year 1 FCF shortfall ~30% the size of their total original Phase 1 NAV of $412M (5% DCF, $1,300/oz gold)

4. To mitigate the likely resource issues we perceive at Nkran, we believe Asanko will have to:
• Mine the ore bearing zone at ~2x the rate initially planned
• Defer waste stripping obligations
…If Asanko adopts this approach, it has the potential to significantly shorten Nkran’s mine life
2

1. Not getting the gold
• Asanko appears to be mining significantly less gold compared to the Definitive Project Plan (DPP), despite mining
more material
• The gap between the DPP and actual results has grown to an estimated 84koz
• In Q3, we believe the Company mined deeper than plan down the high grade ‘throat’ of the orebody, and yet the
gap continued to widen substantially

3

Asanko continues to mine substantially less gold than they were supposed to in their DPP Feasibility Schedule
Est. Reserves mined

DPP

350

The blue line shows how much gold Asanko
should have mined from Nkran in relation
to total tonnes mined

Cumulative Gold Mined (koz)

300

250

(In accordance with their DPP Feasibility schedule)

200

The orange line shows how much gold
Asanko has actually mined from reserves

150

(est. based on their disclosures to date)

100

50

0
0

5

10

15

20

25

30

35

40

The gap between the two lines represents the
shortfall compared to their initial DPP mine plan

Total Cumulative Tonnes Mined (Mt waste + ore)


Note: The DPP does not include any gold from inferred ounces – an adjustment must therefore be made
for an accurate comparison with the DPP reserves. We have adjusted for an estimated ~20koz of inferred
ounces at Q3 end. We believe this is overly conservative based on Company disclosures (See appendix A)

Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan; Company Reports & Press Releases; Graph by K2


To date, Asanko has mined ~42.4Mt from Nkran, containing
~162koz of gold from reserves
According to the DPP, Asanko should have mined 246koz of
gold by the time they mined 42.4Mt
This is a gold shortfall of 84koz vs. the DPP schedule
4

We believe the true gold shortfall is much larger than suggested by the DPP comparison, since Asanko appears
to have over-mined down the ‘throat’ of the orebody
We regard the area delineated in Red as the main
‘throat’ of Nkran’s orebody

Sep 27, 2016 Sat image of Nkran Pit with DPP block model overlain

It exists in a limited area in the South and
holds, in our analysis, the strongest and most
continuous mineralization
+200mRL

~32mRL
0mRL

-200mRL

Company materials indicate they were not supposed to be
mining into this ‘throat’ during this year (beneath a depth of ~32mRL)
… but Asanko appears to have mined well into it during Q3

Source: Company Reports, Presentations & Press Releases; K2 Estimates & Annotations; Satellite image procured by K2

5

‘High-grading’ the mine: In Q3 2016 Asanko appears to have mined ahead of schedule down the ‘throat’ of the orebody
• In the southern end of the pit, we estimate*
that Asanko is ~16m deeper than the max
depth initially planned in the DPP in 2016

Sep 27, 2016 Sat image of Nkran

~45m
~60m
~70m

• To put that into perspective, we calculate that
in the DPP, Asanko was supposed to descend
this structure at an average rate of only ~6m
per quarter beyond 2016 (~99 vertical m/~4 years)
• In other words, during Q3 2016, the Company
appears to have mined a heavily outsized
number of benches from what we perceive to
be the richest zone of the orebody
• We refer to this as ‘high-grading’ the ‘throat’ vs.
their initial mine plan
This is the course of action that we would
expect a miner experiencing reconciliation
difficulties to undertake

* Further supported by email correspondence with Asanko in June 2016
Source: Company Reports, Presentations & Press Releases; K2 Estimates & Annotations; Satellite image procured by K2

6

If Asanko ‘high-graded’ the orebody in Q3, they should have easily outperformed the DPP… instead the gold
shortfall widened again in Q3
Est. Reserves mined

DPP

350

At the end of Q2, shortly after publishing our
initial report, the gold shortfall was at 63koz
($82mm* value)

Cumulative Gold Mined (koz)

300
250

84koz

200
150

63koz

100
50
0
0

5

10

15

20

25

30

35

40

In Q3 2016, this gap widened further to 84koz
($109mm* value)
In Q4, we once again expect this shortfall to
widen further

Total Cumulative Tonnes Mined (Mt waste + ore)

Recall that in our initial report, we cautioned investors not to focus on grade/production, as both can be managed in the shortterm - instead we said to focus on mined gold which, as predicted, continues to fall short

* Using US$1,300/oz gold – from DPP
Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan; Company Reports, Presentations & Press Releases; Graph by K2

7

2. We believe the reason Asanko is experiencing a gold shortfall, is because much of it is
not there
• In line with our original thesis, we believe negative gold reconciliation is the cause of Asanko’s under-performance
to date
• We do not believe the Company’s selective “reconciliations” are representative of the aggregate problem
• Asanko should have the aggregate data to discredit our initial thesis, we find it unusual that they are not showing it
despite vocally contesting our work

8

Negative gold reconciliation issues are likely driving this gap wider
Quotes from our initial report:

In our view, it is extremely unlikely that Asanko’s reserve
estimate is reconciling positively if a gold shortfall this large is
occurring

“We expect that total gold mined will consistently
underperform compared to the mine plan”

We believe Asanko ‘high-graded’ the mine during Q3, but still
could not reduce the shortfall compared to their DPP.

“The option likely exists for the Company to instead reach
deeper into the Stage 3 “piggy bank” to support the
present at the expense of the future. If we witness this
unfolding, it will be a clear nod in our view that the future
of Nkran has been deemed compromised.”

We are not surprised by any of these perceived occurrences, as
we predicted that:

The company had this mitigating option at their disposal

Using this approach would still fail to close the gap due to the
severity of Nkran’s resource/reserve overestimation that we
estimated

www.asankoreport.com

“We believe the Company has numerous buffers/levers at
their disposal to prop-up near-term production numbers;
however, the scale of the resource overestimate that we
perceive suggests that, even if they pull from these
options, the Company will still struggle to match their
DPP. We believe this divide will increasingly widen as time
progresses”

9

Asanko’s “Preliminary Resource Reconciliations”: Continuing to only show selective data vulnerable to bias
With selective data, mining Companies have the ability to:


First grade control drill ore zones
Locate areas that reconcile the strongest in GC drilling
Target that select area for mining/reconciliation purposes

… Selective data rarely represents the bigger picture. We believe
the Company should provide the aggregate data they possess.

Of particular note:

Asanko has never achieved a month of mining, either before or after the date of this
“reconciliation”, at average grades close to this “preliminary resource reconciliation”
grade of 2.45g/t

Our observations and criticisms of Asanko’s “Preliminary Resource Reconciliations” closely
mirror the criticisms within our initial report on a prior bulk sample performed by the
Company (refer to section 6.2 of our initial report), including the selectivity of the sample and the
anomalously high grades when compared to all mining/processing data at the time

Data Source: Company Reports, Presentations & Press Releases

10

Asanko has the aggregate data, so why do they continue to only show selective fragments of it?
• Asanko should know the quantity and location of resource blocks they have extracted from the pit to date
• Unless Asanko has been accidentally sending large quantities of gold to the waste pile, we believe they should
already have a clear picture of how much gold they have mined vs. what was predicted in their initial model:
• For all their effort to discredit our initial report without providing substantial data, a simple statement such as
the following would accomplish far greater:

‘Our original resource model contained

X

ounces of gold within the specific resource blocks we have mined to date’

11

Asanko has the aggregate data, so why do they continue to only show selective fragments of it?

Asanko also has a Grade Control Model covering over 4Mt of
ore that should be fully integrated and comparable to their
Resource Model:
• They have shown small isolated comparisons of this data
in the past
• Asanko should have this data for every bench as well as in
aggregate
• Providing the aggregate data comparison on all grade
control drilled resource blocks to date, vs. their intial
resource model would likewise paint a much clearer
picture

Data Source: Company Reports, Presentations & Press Releases; K2 Estimates

12

3. Not getting the cash
• Asanko’s 2016 free cash flow is unlikely to come close to the DPP forecast of $91M
• The Company needs to generate $124M of FCF in H2 2016 to meet this target according to our estimates
• The Company needs to generate $164M of FCF in H2 2016 to meet what we estimate is a more appropriate
benchmark given their accelerated mining activities
• We believe Asanko will experience a year 1 FCF shortfall ~30% the size of their total original Phase 1 NAV of $412M
(5% DCF, $1,300/oz gold)

13

Mining faster + deeper = pulling economics from the future of the initial mine plan into the present

From Company Disclosures:

According to the Feasibility Study:

• In June correspondence, Asanko told
us* they intended to mine 28.9Mt
out of Nkran in 2016

• Following the DPP schedule, an extra 5.3Mt
mined out of Nkran would yield ~1.1Mt of
additional ore being mined

• This would amount to total tonnage
mined from Nkran by YE2016 of
~50.2Mt

• We believe this is conservative as, based on
our internal analysis, we think Asanko is
disproportionately mining from the richest ore
zones compared to their DPP

• This is ~5.3Mt more than the DPP
schedule of ~44.9Mt by the end of
2016

• Nevertheless, for conservatism and simplicity’s
sake we will use this 1.1Mt figure

* Email correspondence in June 2016
Source: Company Reports, Presentations & Press Releases; Asanko Gold Mine – Phase 1 Definitive Project Plan; K2 Estimates

14

2016 and 2017 were each supposed to generate FCF in excess of US$90M in the DPP Feasibility Study
2016 was supposed to generate:
Waste

Ore

25.0

25.0

20.0

20.0

DPP Tonnage (Mt)

DPP Tonnage (Mt)

Ore

2017 was supposed to generate:

15.0

10.0

15.0

10.0

5.0

5.0

0.0

0.0

2016

3.7Mt Ore
Mined

21.1Mt Waste
Mined

US$91M Free Cash Flow

Waste

2017

3.1Mt Ore
Mined

21.9Mt Waste
Mined

US$96M Free Cash Flow

Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan; Company Reports, Presentations & Press Releases; K2 Estimates

15

Asanko is on pace to heavily underperform their 2016 free cash flow estimate from their feasibility study:
• As at June 30th 2016, we calculate that Asanko
has generated US$-32.5M* of cash flow
through H1 2016: (excluding Phase 1 CapEx)

• We therefore calculate that Asanko would
have to generate $124M* of free cash flow in
H2 2016 to meet the DPP guidance.

…2016’s target appears well beyond reach

(US$M)
CFO + CFI
Add back Phase 1 Capex
Non-capex Cash flow

Non-capex cash flow
Current gap
2016 Forecast

Q1
-$47.2
$32.4
-$14.8

Q2
-$30.7
$13.0
-$17.7

2016 Q1+Q2
-$77.9
$45.4
-$32.5

(US$M)
-$32.5
$124
$91

*NOTE: Various other push/pull factor adjustments will be necessary at YE for
a full ‘apples-to-apples’ comparison; however we expect the net impact of
these items to be relatively marginal, i.e. VAT in/outflows, relative differences
in gold stockpiles, expansion capex outflows, additional gold sale inflows due
to expansion capex, etc.

Asanko appears to be mining well beyond 2016’s plan though, so we believe the shortfall on cash flow will actually
be more severe

Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan; Company Reports, Presentations & Press Releases; K2 Estimates

16

Mining a portion of next year’s ore should also give you a portion of next year’s cash flow
Est. 4.2Mt of Waste
mined ahead of schedule
Waste

Ore

25.0

25.0

20.0

20.0

DPP Tonnage (Mt)

DPP Tonnage (Mt)

Ore

15.0

10.0

5.0

0.0

Waste

15.0

10.0

5.0

0.0

2016 Material
2016

2017 Material
2017

Est. 1.1Mt of Ore mined
ahead of schedule
By our estimates, this should result in an additional $40M in cash flow being pulled
from 2017 into 2016…
Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan; Company Reports, Presentations & Press Releases; K2 Estimates

17

We believe extra material mined in 2016 should yield US$40M in additional free cash flow in accordance with the
DPP figures
Detailed breakdown
Simplified breakdown of the additional US$40M:

1.1Mt Ore

5.3Mt Fractional Breakdown

+ $85M

Gold Revenue

Ore Mining
Waste Mining
Processing
Royalties (5% NSR)
G&A, Tax, Other
Total Cash Outflow

- $19M

Mining + Processing

Revenue

Unit Cost
$6.50
$2.75
$13.40
$1.03
$1.32

$1,300 $/oz Gold

Units

$/t Ore
$/t Waste
$/t Processed
Avg $/t mined
$/t mined

1.1
4.2
1.3
5.3
5.3

Mt $7 US$M
Mt $12 US$M
Mt $15 US$M
Mt $4 US$M
Mt $7 US$M
$45 US$M

65.4 koz $85 US$M

Free Cash Flow

4.2Mt Waste

- $15M

Mining

Royalties

- $4M

5% NSR

G&A, Tax, Other

- $7M

Based on full year
$/t unit costs

= $40M additional Free Cash
Flow Potential




$40 US$M

Ore & waste mining costs calculated from DPP figures ($/oz LOM)
Processing costs from DPP
Royalties at 5% of revenue
G&A, Tax, Other, used as a plug to arrive at the full year free cash
flow below – implies a unit cost of $1.32/t

Full 2017 Breakdown
Ore Mining
Waste Mining
Processing
Royalties (5% NSR)
G&A, Tax, Other
Total Cash Outflow
Revenue
Free Cash Flow

Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan; Company Reports, Presentations & Press Releases; K2 Estimates

Total

$6.50
$2.75
$13.40
$0.52
$1.32
$1,300

Unit Cost
$/t Ore
$/t Waste
$/t Processed
Avg $/t mined
$/t mined
$/oz

Units
3.1 Mt
21.9 Mt
3.0 Mt
25.1 Mt
25.1 Mt

Total
$20 US$M
$60 US$M
$40 US$M
$13 US$M
$33 US$M
$167 US$M

202 koz

$263 US$M
$96 US$M

18

We believe Asanko will fall short on cash flow by an amount equal to nearly 1/3rd
of the Phase 1 Feasibility study’s entire NPV in only the first year of production

2016 was supposed to generate:
25.0
Ore

• The DPP modeled $91M of free cash flow for 2016

US$91M

Free Cash Flow

This shortfall represents 28% of the Company’s original
project NPV of $412M in only year 1 of a 12 year mine
plan (5% DCF, $1,300/oz gold)

15.0
10.0
5.0
0.0

• This would bring 2016’s free cash flow forecast to
$131M, and requires Asanko to generate $164M of free
cash flow in H2 2016 to meet this target
• Even if Asanko can achieve $48M of FCF in H2 2016 (2017
run rate), they will still fall short of this benchmark by
$116M.

DPP Tonnage (Mt)

• By mining ahead of schedule, we calculate that Asanko
should pull an additional $40M of free cash flow into
2016

Waste

20.0

2016

3.7Mt Ore Mined

21.1Mt Waste Mined

Est. excess material mined in 2016:

+ US$40M

Addtl Free Cash
Flow potential
through excess
mining

5
0
Excess Tonnage

1.1Mt Ore Mined

4.2Mt Waste Mined

= US$131M
Adj. Free Cash
Flow by 2016YE

Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan; Company Reports, Presentations & Press Releases; K2 Estimates

19

4. To mitigate the likely resource issues we perceive at Nkran, we believe Asanko will have to:
• Mine the ore bearing zone at ~2x the rate initially planned
• Defer waste stripping obligations
• …If Asanko adopts this approach, it has the potential to significantly shorten Nkran’s mine life

20

Nkran is scheduled to be mined from 2 locations for the near future; it is important to understand how they work
Stage 3 vs. 4 mine schedule & ore contributions:

Where Stage 3 and 4 are located:

1,000

Approx. aerial view
of Stage 3 and 4

Q4 18

Q3 18

Q2 18

Q1 18

Q4 17

Q3 17

Q2 17

4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Q1 17

Stage 3 + 4 shown in
cross section

Table 1: Total Material Mined
Stage 3
Stage 4

Stage 4 stripping is
supposed to represent
the vast majority of
mining going forward

Table 2: Total Ore Mined from Nkran
Stage 3
Stage 4

But Stage 3 contributes
almost all of the ore
from Nkran going
forward

800
600
400
200

Data Source: Company Reports, Presentations & Press Releases; K2 Estimates; Satellite image procured by K2

Q4 18

Q3 18

Q2 18

Q1 18

Q4 17

Q3 17

Q2 17

Q1 17

0

21

A simple solution if reconciliation is underperforming expectations

• Mine more from Stage 3 where the ore is
• Mine less from the Stage 4 waste cutback (necessary for
future access but not necessary for current access)

This makes strip ratios very manageable at Nkran for
the near-term… you can essentially choose what strip
ratio you mine at based on whether you maintain the
~2:1 ratio of planned mining from Stage 4 stripping vs
Stage 3

22

We believe Asanko will have to continuously over-mine the ore zones in Stage 3 vs. their initial DPP Mine Plan
If only half of the reserve grade ore and gold exists per mining bench vs. their initial estimates, then a simplistic solution
is to mine ore benches twice as fast as initially planned to get the same quantity of gold:

As An Example:
Imagine you model your reserve grade ore as the thick gold pillar
on the right, and you only plan to mine Bench 1 and 2:

BENCH 1
BENCH 2
BENCH 3
BENCH 4

But once you grade control drill, you realize it’s much thinner and
only half of the reserve grade ore you expected per bench exists
As long as the zones are thick enough to mine, you can still mine at
reserve grades in the short term, and get the same amount of ore,
you just need to mine twice as many benches in a selective area:
If, at the same time you do less stripping, then you can achieve
mining numbers that look similar to what was supposed to be
achieved from your initial mine plan

BENCH 1
BENCH 2
BENCH 3
BENCH 4

BENCH 1
BENCH 2
BENCH 3
BENCH 4

Intended Pit
outline
Modelled high
grade ore
Actual high
grade ore,
~50% less
Deviated pit
outline
(narrower and
deeper)

This roughly approximates how we believe Asanko
mined during Q3…
… If Asanko continues under this approach, as we
expect they will have to, it will be readily apparent in
their equipment placement and selection…
23

If you need to mine ore 2x as fast, then you’ll need to bring a bigger shovel
In 2017 & 2018, Nkran is supposed to be mined at an average annual rate of only 14.9Mtpa in accordance with the DPP
According to the DPP and our analysis, this was to be accomplished with 2 different sized hydraulic shovels:

(There is supposed to be a reduction of equipment in Nkran)



1 larger CAT6030 with 10.1Mtpa of mining capacity
and 1 smaller CAT6015 with 4.8Mtpa of mining capacity
Totalling 14.9Mtpa (See Appendix C)

Total Material Mined
Stage 3

Stage 4

4,000
3,500
3,000
2,000
1,500
1,000
500
Q4 18

Q3 18

Q2 18

Q1 18

Q4 17

Q3 17

0
Q2 17

We therefore conclude that the CAT6030 was supposed
to be dedicated to Stage 4, while the smaller CAT6015
would be mining Stage 3

2,500

Q1 17

We’ve previously shown that the DPP envisioned Stage 4
being mined at ~2x the rate of Stage 3 (or a 2:1 ratio)

Simply put, if Asanko wanted to double their mining rate in Stage 3, they would just use a CAT6030 instead of the
CAT6015 in Stage 3… and this is very easy to observe

Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan; Company Reports, Presentations & Press Releases; K2 Estimates

24

Pit Observations At Q3 End : Narrow down the ‘throat’ with excess equipment in Stage 3 already
2x CAT6030 Shovels active within
Stage 3 currently (End of Sept):

Sep 27, 2016 Sat image of Nkran

~45m
~60m

~70m

• ~1.7Mt combined monthly rock
movement capacity as per the DPP
• This is approximately 40%-50%
greater rock movement capacity
currently active within Stage 3
compared to any month Sep
through Dec 2016 in the DPP
• Likely trying to lower the East wall
as quickly as possible to re-open
the base of the pit which has been
mined to narrow depths during Q3
due to over-mining of the ‘throat’

Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan; Satellite image procured by K2

25

Pit Observations At Q3 End : Falling behind on waste mining development in the North/West

Between April and June 2016, this haul road was
supposed to be mined out and deactivated

It appears this work was necessary for Asanko to
perform substantial waste development mining on
the West wall in September through December

Data Source: Company Reports, Presentations & Press Releases; K2 Estimates

26

Pit Observations At Q3 End: Falling behind on waste mining development in the North/West
Sep 27, 2016 Sat image of Nkran

It appears Asanko did not perform this development work, as this
haul road is still intact and operational at the end of September
Since the haul road is still in use, we also don’t think Asanko has performed
the development work on the West wall where the road still runs along it
Data Source: Company Reports, Presentations & Press Releases; K2 Estimates; Satellite image procured by K2

27

In summary, this is how we envision Asanko’s predicament by the end of 2016
This is roughly how we expect the Nkran pit profile to look
at the end of 2016 based on Company imagery and data:
We predict the Company will need to keep a CAT6030
(10Mtpa mining rate) operating in Stage 3 to mine ~2x the
material planned from the ore zones vs. their initial DPP
going forward

Accelerate Stage 3 ore structures with larger/more equipment

At the same time, however, if reconciliation is off by ~half at
Nkran, Asanko will need to de-emphasize the planned ~2:1 ratio
of material mined from the Stage 4 strip vs. Stage 3 to reduce
stripping ratios and control costs De-emphasize Stage 4, reduce the ratio mined from here
In other words… our internal expectations are that Asanko will:


Over-mine the ore zones (Stage 3)
Relatively under-mine the development cutbacks (Stage 4) within the pit to prop-up near-term mine performance and reduce costs
Our observations of the pit from Q3 indicate to us that this is likely already taking place
Ultimately though, if Asanko pulls from this option we believe it will be unsustainable…
Data Source: Company Reports, Presentations & Press Releases; K2 Estimates; Annotations by K2

28

We see certain avenues for Asanko to manage the problem in the short term, but at the expense of the long term
We believe Asanko will have to mine Stage 3 at 2x the rate originally planned:

This would shorten Stage 3’s remaining life from ~4 to ~2 years,
causing it to be depleted by the end of 2018

Based on our thesis, we believe this is the likely outcome

Cross-Section view of Stage 3 + 4:

At the same time, we also expect Asanko to slow down or defer
Stage 4 stripping, as well as other satellite developments that
require substantial waste stripping.
Under this scenario, Nkran will reach a pinch-point where Stage 3
is mined out and the delayed Stage 4 stripping has accumulated
and effectively cut off access to Nkran’s main ore body. This is
how we expect mining at Nkran to end.
We view the satellite deposits as small band aids rather than solutions:

Asuadai
Dynamite Hill

Akwasiso*

Abore

Adubiaso Ext.
Adubiaso

The Company remains heavily reliant on Nkran as its foundation, as it
comprises the vast majority of its resources

Nkran Ext.

*Historical, non-compliant resource
Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan Company Reports, Presentations & Press Releases; K2 Estimates; Annotations by K2

Nkran

29

Actions speak louder…
We do agree with the Company on one thing: (Company quotes)
“Feasibility studies are always fraught with danger because, in our opinion, people
don’t really pay enough attention to them”
- Asanko, on their 2014 DPP call

“We normally have a pretty dim view of feasibility studies built by previous parties”
- Asanko, during their 2016 BMO presentation

… Feasibility studies are always fraught with danger, and some are more detailed than others
Ultimately, the mitigating actions that we believe Asanko will have to undertake in our thesis would
require a major overhaul of the mine plan and an acceleration of mining in the ore zones
Whether they adopt this approach may or may not be clear in their feasibility studies, but it will be
evident from their equipment selection, placement, and benches mined… which we will closely monitor

Data Source: Company Reports, Presentations & Press Releases

30

Appendices

31

Appendix A: Calculation of estimated reserve gold mined to date

The company has mined approximately 3.8Mt of ore to the end of Q3 2016, containing 181koz of gold
• 2.2Mt reportedly processed + 1.6Mt reportedly on various stockpiles

Reserves exclude ounces from inferred ore

In Asanko’s Q4 2015 MD&A, released on March 17th, the company disclosed that a majority of the 0.9Mt of ore mined up to
that date was from inferred zones (minimum ~450kt)

Estimated grade equivalent to approximate total grade mined to that date (1.25g/t)

450kt * 1.25g/t = 18k inferred ounces of gold mined

Additionally, on Asanko’s Q2 call, they said they had continued to mine from inferred zones, so we have rounded only
another 2koz up to 20koz

We believe this is an overly conservative estimation, as we have essentially taken the minimum

Our estimated reserves mined to date is therefore 163koz

Data Source: Company Reports, Presentations & Press Releases; K2 Estimates;

32

Appendix B: Breakdown of Stage 3 and Stage 4 DPP data for 2017

2017 DPP Schedule
Stage 3 Ore
Stage 4 Ore
Total Ore

Kt
Kt
Kt

Jan-17
370
0
370

Feb-17
244
0
244

Mar-17
224
7
231

Apr-17
203
3
206

May-17
227
2
229

Jun-17
232
0
232

Jul-17
110
47
156

Aug-17
199
17
216

Sep-17
165
1
166

Oct-17
146
10
155

Nov-17
150
7
156

Dec-17
107
18
125

Total
2,375
111
2,486

Stage 3 Waste
Stage 4 Waste
Total Waste

Kt
Kt
Kt

483
341
824

590
283
873

311
836
1147

141
821
962

281
706
987

283
767
1050

199
934
1133

404
769
1173

182
883
1065

193
882
1075

197
782
978

292
873
1165

3,555
8,877
12,432

Stage 3 Total Tonnage
Stage 4 Total Tonnage
Total Tonnage Mined

Kt
Kt
Kt

853
341
1194

833
283
1116

535
843
1378

344
824
1168

508
708
1216

515
767
1282

309
981
1290

603
786
1389

347
884
1231

339
892
1231

346
788
1135

400
890
1290

5,930
8,988
14,919

Grade
Gold Mined

g/t Au

2.25
26.7

2.16
16.9

1.91
14.1

2.31
15.3

2.23
16.4

2.20
16.5

2.06
10.4

2.35
16.4

2.09
11.2

2.04
10.2

2.61
13.1

Note: The DPP also included Adubiaso in 2017 and the grade is a blend of the 3 ore sources. We have assumed the grade is the same for all 3 sources. This is
conservative as Adubiaso’s reserves are lower grade than Nkran’s (~2.06g/t vs. ~2.2g/t)and are likely biasing the Nkran grade downward here.

Data Source: Asanko Gold Mine – Phase 1 Definitive Project Plan; Company Reports & Press Releases; K2 Estimates

2.41
9.7

2.21
176.8