ADU - Adamus Resources

[jman2007]

Going for gold in Ghana....

This company has recently come into my spotlight, and I think it deserves some more detailed consideration.

To sum up, ADU are a dual-listed company on the AXS and TSX which formed in 2001, and can be classified as either in a very advanced stage of exploration and/or an emerging producer.

Total shares on issue: 134M
Current cash position (as of Jan 08): $4M
Current trading price: Approx 49c
Resources: 2.0M oz @ 1.78g/t
Reserves: 815,000 oz @2.15g/t

The Salman Gold Project:

Situated at the southern extent of the Ashanti gold belt, along strike from several famous mines such as Prestea (10.7 Moz Au) and Bogosu (3.3 Moz Au). Currently ADU have 500 sqkm of tenure and 2.0 Moz in their books at a respectable grade of 1.78 g/t. The two main projects look to be Aniwa (912K oz) and Salman (1.05M oz). (Just a note of caution, this belt is known for its refractory ore, and it appears that a good deal of the Salman ore may be refractory).

A very appealing factor for me is that 85% of their resources are classified as indicated and measured and that they have managed to convert 815,000 oz to Reserve status, of which 85% is proven (at approx. 2.15 g/t)....the highest category under JORC, so basically a water-tight project.

Low country risk and access to good local infrastructure:

Ghana looks pretty stable atm, and is only ranked marginally above Australia in terms of country risk (Source: Chubb group of Insurance Companies).

Also the project area is close to major port facilities, sealed roads and has good communications coverage.

Management looks to be experienced:

Several directors have had roles in developing multi-million ounce projects in Asia, and others have a good deal of experience in African projects in the Congo, Zambia and Ghana for companies such as Newmont and Redback.

Looks cheap on a peer comparison:

To borrow a tool from Kennas o yeah, I'm a convert now mate) MC to ounces is a follows:

MC/resources = 32.8

For a company at the stage ADU are at, this looks rather alluring, the Reserves to ounces comparison also looks pretty good (see latest presentation for details).

Strong Economics and potential extension of resources at depth:

Using a base case scenario of the POG at US$900, an in-ground value of US$1.8B, this would result in a projected cash flow of $331M (before Capex, taxes) and a cap payback period of 1.6 years for an approx 7 year mine life (2007 model). They're currently investigating plant options, financing and mill order. The issue of the mining licence is expected soon.

Looks pretty nice to me....thoughts?

Cheers
jman

 

[jman2007]

Looking pretty lonely on this thread ,

But I don't mind talking to myself, nice acoustics in here.

It has been little difficult to gauge market and investor sentiment towards ADU, so I have been doing a little research elsewhere.

The situation appears a little unusual, awaiting the development of the project has apparently been an excrutiatingly long process, akin to watching the breakup of Gondwana Land in real time. Basically, the stock does appear to be undervalued on fundamentals, but looks to be a tad illiquid on a trading basis. The mining lease however, was granted in early April 08.

On the 9th of April Dundee Precious Metals ceased to be a substansial holder since aquiring the shares in 2006, and sold their holdings at 47c which is marginally less than they paid for them. Probably a sign of exasperation perhaps? Another determined seller(s) with a substansial parcel of shares has also recently been offloading from 56c to 50c, which has not helped matters.

The refractory component looks to be a bit of a bugbear, along the Salman trend almost 500K oz of ADU's current JORC is considered refractory. Bogoso operated by Golden Star Resources have apparently been struggling optimizing their bio-leach circuit, and since the ore characteristics will probably be quite similar with ADU's sulfide ore, ADU will oviously be watching the outcome of their neighbours testwork closely.

jman

Disclaimer: DNH

 

[Golf 16]

Hi Jman,
you are not talking to yourself. I have been following too, since Clarus Securities gave a recommendation (on April 20.) They suggested a target price of 95c (at that time SP was 41c). Since then it has been pretty well downhill - and nearly all of the indicators are negative. PoG has risen in that time.
I am not sure why the negative sentiment, other than following the market down. High volatility on Friday - High of 38c and low of 33 c on about average volume.
Any ideas why this should be so?
I do not hold.
Cheers
Golf 16

 

[Sean K]

I've been waiting for an opportunity to pick this puppy up and it may be just around the next corner if the market goes pear, and sends this down to silly Oz to EV valuations when they are cashed up and on the road to production. All looks on track, so far. Current EV to Oz au $41, while the likes of PRU and GRY are sitting on about $60. AZM at $35, and they are wayyy behind these guys. Valuations range from 60 - 80c, see their website for company reports.

http://www.adamusresources.com.au/

Updated gold stock comparison att.

 

[Pivotonian]

Wow. This has just spiked ~10% this morning on news of the POG correcting in o/s markets over the weekend.

No announcements, but something is going on here.

 

[Sean K]

Been a while since I've had a good look at this which is a shame.

Going well into production and still having exploration success.

UBS comments 20 Sep

First gold production imminent

␣ Initiated coverage on Adamus Resources with a Buy Adamus Resources Limited (ADU) is a Perth-based mineral exploration and development company and is listed on Australian Stock Exchange, Toronto Stock Exchange and the Frankfurt Stock Exchange. ADU is developing its 90%-owned Nzema Gold Project in Ghana, West Africa. With resources of 2.1Moz and reserves of 1.1Moz, ADU estimates production of ~100kozpa over a life of 10 years from the near surface material. Cash costs are estimated at US$490/oz.

␣ First production expected soon With dry commissioning of the plant on track for December, we anticipate first production will be announced in the March quarter 2011. We model production of 41koz in FY11, increasing to 95koz in FY12. As part of project financing, the company was required to hedge 27% of the reserve base at US$1075/oz, reducing the gold leverage in the early years.

␣ Initiated with a Buy – expect reserves to grow and potential for expansion While ADU is expected to be only a small producer initially, we recently initiated coverage with a Buy rating as we believe reserves will increase with the completion of the sulphide study, potentially resulting in a future production expansion to ~150kozpa. We also believe more oxide ounces will be delineated resulting in mine life extensions.

␣ Valuation: $0.82/share (DCF, 6% discount rate) Our valuation includes the Nzema Oxide deposit over the anticipated 10-year life, and we assume an additional two-year, exploration-driven extension. We have set our target price at $0.95/share using a multiple of 1.1x our NPV.

 

[AngusSmart]

Been a while since I've had a good look at this which is a shame.

Going well into production and still having exploration success.

UBS comments 20 Sep

First gold production imminent

␣ Initiated coverage on Adamus Resources with a Buy Adamus Resources Limited (ADU) is a Perth-based mineral exploration and development company and is listed on Australian Stock Exchange, Toronto Stock Exchange and the Frankfurt Stock Exchange. ADU is developing its 90%-owned Nzema Gold Project in Ghana, West Africa. With resources of 2.1Moz and reserves of 1.1Moz, ADU estimates production of ~100kozpa over a life of 10 years from the near surface material. Cash costs are estimated at US$490/oz.

␣ First production expected soon With dry commissioning of the plant on track for December, we anticipate first production will be announced in the March quarter 2011. We model production of 41koz in FY11, increasing to 95koz in FY12. As part of project financing, the company was required to hedge 27% of the reserve base at US$1075/oz, reducing the gold leverage in the early years.

␣ Initiated with a Buy – expect reserves to grow and potential for expansion While ADU is expected to be only a small producer initially, we recently initiated coverage with a Buy rating as we believe reserves will increase with the completion of the sulphide study, potentially resulting in a future production expansion to ~150kozpa. We also believe more oxide ounces will be delineated resulting in mine life extensions.

␣ Valuation: $0.82/share (DCF, 6% discount rate) Our valuation includes the Nzema Oxide deposit over the anticipated 10-year life, and we assume an additional two-year, exploration-driven extension. We have set our target price at $0.95/share using a multiple of 1.1x our NPV.

Hey Kennas, i had a good read over this company after a friend said he put some money into it..

the managment looks pretty good and alot of constant updates! then things they are doing with the local community there is outstanding!

if A1 minerals moves up a little i think i may make the jump!

hopefully some more discussion will come on this stock!

 

[stickman]

Hi weekly chart looks okay , i have a buy in place atm - a break above .75 will see me in


cheers

 

[Wysiwyg]

ADU have produced better than expected in their maiden quarter (started in April 2011) at an average cost per ounce of US$544 which compared to other companies is low but realistically they forecast ...

2012 financial year consolidated gold production is forecast to be between 100,000 and 105,000 ounces of gold.

*Cash costs for the 2012 financial year are expected to be between US$550 - 600/oz,
marginally higher than achieved to date due to price increases in fuel and consumables.

While in contrast I notice Resolute Mining, who have been around for awhile, produce over 300 ounces per year at an average cost over 900 per ounce. Proven and probable reserves over 5 million ounces.

Obviously the cost to produce an ounce defines the profit margin and I think ADU has good upside confidence with their comparatively low production cost.