90fd4538be1c72eb85ec58eb475d2c41West African gold developer, Asanko Gold (AKG:TSX) (previously Keegan Resources) has announced the final piece of funding needed to build their $290 million Esaase gold mine in Ghana.  AKG has signed a definitive agreement with Red Kite Mine Finance for a $150 million project debt facility comprised of $130 million project facility (LIBOR + 6) and a $20 million overrun facility (LIBOR +10%).  As part of the agreement, Red Kite will be entitled to purchase 100% of the gold produced at Esaase at spot prices under a commercial off-take agreement.  The funds are contingent upon a Definitive Feasibility Study being completed which is in line with their current pre-feasibility.

Commenting on the announcement, Peter Breese, President and CEO, said, "I am delighted to announce that the Esaase Gold Project is now fully financed through construction and commissioning, including working capital. This will enable us to progress with the development of the project upon conclusion of the DFS, which is due later this quarter. Our intention is to start the Front End Engineering and Design program before year-end and construction in Q1 2014 to achieve our target of steady state production of 200,000 ounces per year by Q4 2015.

The project is a robust one, providing a $335 million post-tax NPV(5%) and a 23% IRR.  Esaase has 2.4 million ounces in 2P gold reserve ounces which should produce 200,000 ouces of gold per year at $724 per ounce cash costs over a 10 year mine-life.  The company expects roughly $87 million in annual free cash flow from the project.

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Asanko has been trading at cash value over the last few months mainly as a result of the financing risk associated with the project.  Given the gold price environment as well as many recent operational and political issues across the sector, this should help boost confidence in the ability of strong companies to get the financing they need to construct their projects.  With the funding gap now filled (provided they can successfully complete a feasibility which should not be an issue), the stock should start to re-rate.

Earlier this year the company failed in a merger attempt with fellow Ghana gold developer PMI Gold (PMV:TSX).