There are definitely pros and cons to gold mining in Ghana, the second biggest gold producer in Africa. On the down side, its tough terrain, hot and can be very expensive to develop a project.
The upside is simple; there’s a lot of gold in the ground, but when the end of a decade-long gold rally sunk bullion prices 28 percent in 2013, some majors started losing faith in prospects in the western Africa country. That included Newmont Mining (NYSE:NEM) and AngloGold Ashanti (NYSE:AU) laying off workers at mines in Ghana. AngloGold, the world’s third largest gold miner, said this week that it is shuttering its Obuasi mine in Ghana in order to re-work the operations over the next year and a half into smaller operations it hopes are more profitable.
Vancouver’s Castle Peak Mining Ltd. (TSX-Venture:CAP) is looking to show its bigger brethren that gold in Ghana hasn’t lost its luster at all, even at lower prices. The company holds a nine-concession, 225-square-kilometrr land package in the Ashanti gold belt in Ghana, one of the most prolific belts in the country with past production of more than 150 million ounces of gold.
Castle Peak’s Akorade project is within 50 kilometrrs of five producing gold mines that account for approximately 50 million ounces of gold and reserves.
A published inferred mineral resource estimate for the property shows 275,000 tons at 8.6 grams per ton gold for a total of 76,000 contained ounces. The estimate was based on drill results from 20 of 33 holes totaling 4,253 metres of drilling. Highlights from the drill included cuts of six metres grading 80 g/t gold, including 1.6 metres at a whopping 296 g/t gold. Results from other drilling released in February also showed high grade gold, including an intersect of one metre grading 89.0 g/t gold within a larger section of four metres at 22.87 g/t gold. The company is planning to use the results to assemble a Preliminary Economic Assessment and ultimately a bulk sample of the Apankrah deposit of Akorade.
On Wednesday, Castle Peak announced a partner to help shepherd Apankrah towards production. The company has signed a binding letter of intent with CJP Capital Corp. that spells out the terms of a proposed transaction that will put some cash in Castle Peak’s coffers and developmental responsibility on CJP Capital in exchange for up to a 70% interest in the Nkwanta prospecting license, which host the Apankrah deposit.
Per the letter of intent, CJP Capital can earn its stake by making cash payments to Castle Peak for an aggregate of $1.5 million and incurring $10.5 million in exploration expenditures over three years. Subsequent to the acquisition of interest by CJP Capital, the two companies plan to form a joint venture to bring Apankrah to commercial production.
In order to kick off the deal, CJP Capital must make a non-refundable $100,000 payment to Castle Peak within 25 days. Castle Peak has given CJP Capital a 30-day period of exclusivity for their due diligence and to enter into a definitive agreement, which is expected to provide a provision for CJP Capital to fast track the project to production without the full $10.5 million in exploration if it so chooses.
Castle Peak had a market capitalization of only $1.7 million coming into trading on Wednesday, with shares closing Tuesday at 1.5 cents. With the news, shares shot as high as 2.5 cents, but have since settled back down to 1.5 cents on 281,000 in volume.
