Muddy Waters Takes A Shot At Asanko Gold

Asanko Gold Inc AKG sunk 30 percent Wednesday on a Muddy Waters Capital report predicting an impending plunge to zero.

“On the back of flawed geology, AKG made investments in Nkran, its satellite pits, and Esaase that we believe will never be recovered,” Carson Block, research director at Muddy Waters, said in the report.

Using key mgmt assumptions on production & costs, we see $AKG running out of cash in 2018. If mgmt assumptions are aggressive, then sooner

— MuddyWatersResearch (@muddywatersre) May 31, 2017

Benzinga has reached out to Asanko Gold for comment.

Partly justifying the thesis is a collapse of Nkran’s west wall, which Muddy Waters considers “a sign of AKG’s desperation.” The research firm estimates anvestment of $75 million to $115 million is needed to continue mining Nkran, a sum that may drive Asanko Gold to expend its liquidity in 2018. Failure to invest could mean forfeiting critical cash flow to apply toward Esaase, Asanko Gold’s most significant deposit.

Meanwhile, supplementary satellite deposits are not likely to generate cash flow considering their flawed geology, the firm said.

Not only are Asanko Gold’s resources troublesome, but the research firm registered concern about the company’s financials. The company modeled its guidance on record gold prices and “smeared” ore models, which yield inflated value estimates.

“Management is outwardly assured and confident, but their behavior reeks of desperation and short-termism,” Block said in the note.

At time of publication, shares of Asanko had sunk 31 percent on the day to $1.29.