Adamus (ADU.V;Sydney:ADU) may buy out its hedge book
Adamus considering buying out its gold hedge book
The emerging Australian gold producer expects to begin producing gold in West Africa between April and June, which may lead it to buy out its hedge book, the CEO said.
Author: Sonali Paul (Reuters)
Posted: Monday , 21 Mar 2011
MELBOURNE (Reuters) -
Emerging Australian gold producer Adamus Resources (ADU.AX) expects to become the newest gold producer in West Africa Between April and June, which may lead the company to buy out its gold hedge book, its chief executive said on Monday.
"We will probably be (producing commercially) some time in the June quarter," Chief Executive Mark Connelly told the Reuters Global Mining and Steel Summit in an interview, adding the target is for early April.
Adamus poured the first gold at its Nzema project in the nation of Ghana in January and is in the process of ramping up output from its processing mill to full capacity.
The company has hedged 290,000 ounces of gold at $1,075 an ounce, which means it will partly miss out on a rally that took prices to a record high of $1,444.40 an ounce on March 7.
Connelly said Adamus would think about closing the hedge book only if investors show enough confidence in production rates and cash costs to push the share price near A$1, from around 71 Australian cents now, a jump of just above 40 percent.
"I'd like to think we can get our share price toward A$1 certainly in the next number of months as we, one, demonstrate we can run a continuous operation, and two, demonstrate that we can deliver on the cash costs that we think we can produce at. That's going to be somewhere between $500 and $550 an ounce."
He said the ramp up was going well, with the plant processing at an annual rate above 2 million tonnes.
"Based on the composition of the ore we have, we're actually running it at an annualized rate of about 2.4-2.5 million tonnes," he said.
HOT SPACE
Amid a frenzy of takeovers in the gold sector, companies with exploration permits in West Africa are hot targets as cash operating costs there are lower than in mining centers like Australia. Those developing projects are even more attractive.
Connelly was not shy in talking up the company's prospects as a takeover target.
"To be a prey, no question that there's many people looking over our shoulder."
"We've been approached over the last number of years. There's definitely an activity space that you want to be in --West Africa is a hot spot right now," Connelly said.
There are three majors in the Ashanti gold belt around Adamus: Newmont Mining (NEM.N), AngloGold Ashanti (ANGJ.J) and Kinross Gold (K.TO).
While Adamus may be stalked, it is in a strong position to bulk up its resources by taking over companies with neighboring holdings in Ghana and expand through drilling in its own permit areas.
"What we have in our favor is we have a built operating process plant. Anything that's downstream of us, the smaller explorers with potential resources close to our plant present opportunities," Connelly said.
He said junior miners with holdings close to Adamus had approached it to take them over but he had little interest in buying companies.
"Quite honestly, I'd rather take the resource rather than the company. I don't need another public company to deal with."
Companies in the area include Australian juniors Castle Minerals (CDT.AX), Noble Minerals (NMG.AX), Viking Ashanti (VKA.AX) and Hodges Mining (HDG.AX).
(Reporting by Sonali Paul; Editing by Ed Lane)
