IKN

Tis rigor and not law

Asanko thing

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On why they put out the release:
  • I’m guessing there was internal concern about the materiality of the information they have been sitting on
  • Seems like the minimum form of disclosure for a cover your ass scenario for regulatory purposes/capital raising
 
On the third party review of their resources/reserves:
  • I
    am not familiar with CSA Global, I reached out to numerous people who
    spend a lot of time immersed in technical reports and none said they
    were familiar with them
  • I do know Asanko mgmt has a history with CSA Global as they used them in some capacity for Mantra
  • I
    don’t think you hire a bucket shop who you have a previous history with
    as your independent third party to review your resource/reserve
    problems if your intention is to come clean
 
On the project by project “variances”:
  • I’ll
    be very interested to see what they’ve done here.  They’ve mined about
    260koz out of Nkran, at most 240koz of that came from reserves but
    probably less. based on our estimates we believe they’ve
    depleted reserve blocks that were supposed to contain over double that
    amount
  • This creates a problem, you have to
    include the depletion, and that will show the rate at which they’ve been
    losing ounces from Nkran as they extract blocks from the pit, so what
    we have cynically
    expected for a long time is the following:

    • They will write down what they’ve
      already lost due to depletion, which will be hundreds of thousands of
      ounces more than what they’ve reported fed to the mill and sitting on
      stockpile
    • They will change the parameters of their
      reserve estimates while lumping in new assets to backfill, making it a
      non apples-to-apples presentation of reserves so that it isn’t clear how
      many have
      been lost from mining to date, only the net change will be apparent
    • In other words, they’ll be forced to
      write down what they’ve already mined out, they’ll leave as much of
      their estimates from below intact, and they will present it in a way
      that won’t make it
      clear what they’re doing
 
Overall:
  • I doubt this is over just yet, reading
    between the lines on who they hired to perform the review.  In general
    ponzi schemes don’t collapse until people are told they aren’t getting
    their money
    back, no matter how obvious they are if you apply basic math… I don’t
    expect this to be any different and I doubt the Company is about to
    fully throw in the towel.  Their satellites are garbage though in our
    opinion, and so is Essase, I wish them good luck
    on making those work.
 
As a general aside:
  • The gold shortfall that we told people to watch increased by its largest amount in Q4.
  • Their
    feasibility has been delayed 6 times now, it was supposed to come out
    in Q2 2016 initially, then they pushed it to Q3, then they told people
    by the Site tour, then they said by early Dec
    reportedly, then they said by the end of 2016, then they said in early
    Q1 2017, now they’re saying by the end of February… we have our thoughts
    as to what is going on behind the scenes
  • They appear to be dropping the pit
    around 25-30m in the ore zones and pulling the amount of gold they were
    supposed to get by going down every 10m
  • Their
    accounting appears ridiculous to us and has major red flags surrounding
    their inventory accounting, their reported AISC numbers, their reported
    unit costs, and their reported Capex spending,
    if you’re interested in this stuff, let me know and I’ll be happy to
    point it out

    • We
      pointed out these accounting problems to some analysts and asked them
      to try and explain them, they were unable to do so and reached out to
      the Company for an answer, that was 2 months ago and
      the Company still hasn’t provided an answer to them as far as I
      understand
  • If
    people thought the CFO resigning to go take on an exciting opportunity
    to be CEO of Timmins gold was unrelated to what is going on inside AKG,
    then I think it’s time for them to rethink that. 
    FWIW, we first engaged with the company through a call with their CFO
    on May 26th after the CEO refused to meet with us and
    cancelled a scheduled meeting.  On June 3 we sent him a follow-up list
    of questions.  On June 8th, he blew out
    ~500k options… I doubt that was unrelated either.

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