Friday, 05 October 2012 12:09 PM
OURCE: VantageWire.com - Castle Peak Mining (TSX-V:CAP) is a Vancouver-based exploration company with properties located in Ghana's gold rich Ashanti belt, a region widely considered to contain one of the world's largest gold deposits. The presence of five producing mines within 50 kilometers of Castle Peak's substantial land position suggests there's a relatively high potential for new discoveries in the area, which was likely a factor in the company's strong debut in March 2011. Nevertheless, despite a reputable management team and promising drill results, Castle Peak had the misfortune of going public at the outset of a prolonged and harsh downturn in the junior mining sector. As a result, investors are now confronted with an unusual investment opportunity to purchase shares in the company at a considerable discount.
High-Growth Opportunities in a Resource Rich Continent
Amidst the uncertainty surrounding the global economic outlook, companies with operations in Africa have found it relatively difficult to attract investment capital in recent months, based on the perception that the region suffers from an elevated degree of risk. However, by grouping the 47 countries that make up the continent as a monolith, investors are likely to miss the high growth opportunities available in some of the world's most rapidly developing markets. Remarkably, according to the World Bank, Ghana's economy grew by 14.4% in 2011, largely based on its export of cocoa, minerals and oil. It also has a reputation as one of the most stable countries in the region with an extensive history of doing business with the mining industry. This is demonstrated by the country's rather large gold output, having generated 102 metric tonnes in 2011, which-impressively-ranks slightly ahead of Canada as the seventh largest gold producer in the world, according to London based metals consultation company, CRU.
The Ashanti gold belt is located in South Western Ghana and has a history of mining that dates back to the 1930s. According to a research paper published in the Journal of The School of Marine Science and Technology, the Ashanti belt is one of the largest concentrations of gold on the planet.
Although many belts in Ghana and the region in general have become very important, it is pretty evident that the Ashanti belt dwarfs all others in its natural endowment in gold. Certainly the Ashanti belt as a whole, including the adjacent marginal basin areas, is a very major gold belt that would rank amongst the best in the world. The southern 200+ km section of this belt has produced over 50-million ounces (Griffs et al.2002).
Interestingly, Castle Peak's Akorade Project is in the southern portion of the Ashanti gold belt, consisting of nine concessions of land extending over a sizable 225 square kilometers. Even more tantalizing, the properties are nestled between AngloGold Ashanti's 7.9-million ounce Iduapriem gold mine and Endeavour Mining's 3-million ounce Nzema gold mine, with Goldfield's massive combined 28.6-million ounce Tarkwa and Damang gold mines located only 20 kilometers to the north-east.
One of the advantages of working in an established mining region such as the southern Ashanti belt is that much of the infrastructure, particularly roads and power lines, have already been built, greatly reducing the need for heavy expenditures, which are often required by exploration companies in remote regions. In fact, the highway between the mining city of Tarkwa and the main port of Takoradi passes right through Castle Peak's concessions, which goes a long way towards providing some of the main building blocks for the construction and development of a future mine.
So far, Castle Peak's drilling program has yielded impressive results, as one would hope from an exploration company working in the Ashanti belt. Thus far, the highlight of the drilling program has been the Apankrah target, located on the southern Nkwanta concession, which delivered an attention grabbing intercept showing 6 meters of 80 g/t gold, including a remarkable 296 g/t over 1.6 meters. Another high grade intercept produced 9.8 meters of 6.8 g/t gold, including 1 meter of 51.8 g/t. Further drilling produced 10 meters of 6.7 g/t gold, 20 meters of 3.2 g/t gold, and 7.5 meters of 7.2 g/t gold. All to say, there's a lot to be excited about, since the company has only drilled a small portion of their 225 sq. km land package. The Nana target, located only 500 meters north of the Apankrah target, delivered encouraging results as well, with 0.5 meter of 10.3 g/t gold and 3 meters of 1.9 g/t gold. Since both targets are fairly close to each other, there's speculation that they might be connected via the Scorpio target, which resides between both areas (see map: http://www.castlepeakmining.com/i/maps/Nkwanta-geophysical.pdf).
Other noteworthy targets, such as Dansuom and AA Veins, have also been drilled and remain key areas within the Akorade Project. The Dansuom target has recently been upgraded in priority because it appears to host triple the original resource potential. This is based on further exploration and understanding of the area as work continues on this target and its surroundings. The AA Veins target is also an area of interest because it is lies on a 9,000 metre geochemical anomaly, which has a similar, if not identical, footprint to the anomaly hosting the nearby Nzema Mine (Endeavour Mining).
Interestingly, Darren Lindsay, CEO of Castle Peak, is optimistic about the cost of extracting the gold, explaining how the high-grade intercepts, so far, have been located close to the surface, appearing as 'free milling' gold, which means that it is not complicated by carbon or arsenopyrite, allowing for the use of simple mining processes.
The local artisanal miners are showing how easy it can be for small scale production. Castle Peak is targeting more bulk mineable, near surface deposits and what we have defined to date is relatively shallow, higher grade material that may be economically viable if we can define enough volume.
Financing through Strategic Partnerships
In terms of funding, Castle Peak is in pretty good shape, with no debt on the books and $2 million in the bank. Like many other exploration companies, Castle Peak has been faced by tough markets in the last 18 months, largely as a result of macro-economic conditions out of Europe. However, the company has managed to avoid returning to the market through the creative development of strategic partnerships, such as with Grizal Enterprises, which has agreed to help finance the Akorade Project.
We are looking at different ways to access capital to fund the exploration programs ... We do have the support of a solid strategic investor, Grizal Enterprises Ltd., whom we have had some preliminary discussions with around the early exercise of warrants which would provide some of the funding required to advance the Akorade Project.
In keeping with an innovative financing strategy, the company has also added Allan Green to the Board of Directors, President and Owner of Conseillior SAS, a French company that provides advisory services with strong ties to European financial institutions.
Castle Peak's management team has a variety of backgrounds in the mining sector, as well as a wide array of competencies. CEO Darren Lindsay is a professional geoscientist with 15 years of experience working for industry stalwarts such as Newmont Mining, Miramar Mining, BHP Minerals Canada, Inmet Mining, and Kodiak Exploration. Clive Arthur, Vice-President of Exploration, has 30 years of experience on the front lines of the mining industry, particularly in prospecting and extraction techniques. Significantly, he has 20 years of experience working in Africa for companies such as Anglo-American and African Eagle. Prior to joining in Castle Peak in 2012, he was European Goldfields Exploration Manager for Romania.
Perhaps the most recognizable name associated with Castle Peak is Randy Smallwood, current CEO and president of Silver Wheaton, who is seated on the Board of Directors. The presence of the leader of one of the most reputable and successful companies in the mining sector, itself, adds an unusual credibility to the young enterprise. Other board members include Peter Hawley, a consulting geologist with 33 years of experience working with mining companies such as Teck and Barrick; and Jurgen Eijgendaal, who has extensive experience in Ghana's mining industry, having served as the President of the Ghana Chamber of Mines for two terms between 2006 and 2010, as well as a former member of the Board of Directors of the Ghana Railway Development Authority.
The Bottom Line
Castle Peak Mining is a relatively new and lesser known story, having been traded on the open market for only a year and a half. Lindsay's near term goal is to identify the company's main "anchor projects" through further exploration and development of the Akorade Project's most attractive, high-grade targets. Interestingly, in terms of the longer term prospects of the company, he's leaving all options open, including the possibility of opening a mine.
Castle Peak's approach is one step at a time: define our highest potential targets, define a resource or resources building shareholder value. Given our location and our Board experience there are many possible final steps. We could build a mine or use a toll mill at a nearby mining operation - there are currently five active mines around us reporting upwards of 50 million ounces in reserve and resource. And, if some group comes along with the right price, that may be an option as well.
Overall, based on the location of the land claims, as well as the high grade intercepts in the Apankrah target, Castle Peak's future looks promising. With competent management, a great land position, no debt and an attractive stock price, Castle Peak is a provocative story with a great opportunity to "get in early."
CLICK FOR ORIGINAL ARTICLE -- http://www.vantagewire.ca/articles/castle-peak-mining-early-stage-gold-explorer-offers-promising-outlook-52706
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REFERENCES:
http://www.bloomberg.com/news/2012-04-05/top-10-gold-producing-countries-in-2011-table-.html
http://www.dailyguideghana.com/?p=61990
http://allafrica.com/stories/201209271209.html
http://in.reuters.com/article/2012/09/11/ghana-mining-tax-idINL5E8KBJH420120911
http://www2.scc.u-tokai.ac.jp/www3/kiyou/pdf/2010vol8_3/jerry.pdf
http://www.castlepeakmining.com/i/pdf/mda-q2-2012.pdf
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