The Number One Gold Stock Of 2019 / Commodities / Gold & Silver 2019
What happens when the world’s biggest miners run out of gold?
We already know.
We’ve already hit peak gold, and the only companies sitting on promisingnew reserves are the junior miners.
The big miners are scrambling for more gold, and merger mania has takenhold.
Large-cap miners are doing three things at record pace:
We know those juniors who have already been targeted for acquisition and microdeals, so we’re looking for the next prospective beneficiary.
Based on a series of recent events that includes the announcement of aformidable new CEO and a near-term production target of 50,000+ ounces of goldper year in one of the world’s hottest precious metal venues, African GoldGroup (TSX.V: AGG; OTC:AGGFF) could be on a fewradars. And that’s just the starting point: the companyis evaluating the potential for an increase in estimated annual production to100,000 ounces per year.
Not only is AGG sitting on a potential 2.2-million-ounce mineralresource at its Kobada Gold Project in Mali’s prolific gold-producing BirimianGreenstone Belt … but it’s also just appointed a new CEO that will turninvestor heads: Legendary mining financier Stan Bharti.
Bharti has been in Mali for over a decade already. He’s proved he can turn acompany around for a 20X profit.
He’s already done it once in this same venue. In 2008,Bharti’s Forbes & Manhattan acquired Avion in Mali for $20 million,turned it around and sold it to Endeavour for $500 millionin 2012.
Now that Mali mine is Endeavour’s main asset.
He’s hoping to do it again with African Gold Group.
His timing is exquisite, too: Gold is experiencing the perfect setup.
Major minersare gunning for junior prospects. The world’s central banks are hoarding goldat a record pace. Talk about the Gold Standard is no longer just fluff. Andmajor world powers are making every effort to disengage from the US dollar.
All of this has seen the world’s most precious metal make prodigious runs tomulti-year highs.
But Bharti doesn’t even need this perfect setup to make good on gold: The lasttime he did it in Mali was in the middle of a global financial crisis.
Here are 5 reasons to keep a close eye on AGG (TSX.V: AGG; OTC:AGGFF) rightnow:
#1 No Fracking Way
Even supported by higher gold prices, senior miners don’t have more gold to getout the ground.
That means this is a junior game for the first time in recent history, and theAfrican Gold Group (TSX.V: AGG; OTC:AGGFF) news flow is puttingthe company in a very strong position.
Junior gold-mining ETFs are blowing things out of the water. The VanEck VectorsJunior Gold Miners ETF is up over 36% year to date. 
Last year, Goldcorp Inc. Chairman Ian Tefler called peak gold, sayingproduction had finally peaked after four decades of uninterrupted growth. Goingforward, it’s extended decline for the big miners.
And while fracking led to an unexpected surge in oil and gas supplies for thefossil fuels industry, there's practically zero prospect of any unconventionalmethods or technologies to boost our gold reserves becoming economically viablein our lifetimes.
To add new gold to their portfolios, the big gold miners are entering into aphase of merger mania.
The first mega-merger was Barrick Gold’s $18.3-billionacquisition of Randgold last year.
That was followed this April by Newmont Mining’s $10-billionacquisition of Goldcorp, right after Tefler called “Peak Gold”.
The micro deals are also lining up, quickly.
There’s even more to this picture than peak gold and merger mania.
The once fantastical idea of returning to the Gold Standard is now being voicedpublicly by Trump, who thinksthere’s “something very nice about the gold standard”, and by economist JudySheldon.
Switching back to a gold standard would mean the US central bank would have topurchase massive amounts of the metal to backstop every dollar.
And central banks the world over are embarking on massive gold-buying spreesalready as equity markets cool and as Russia, China and others are stockpilingthe precious metal in a de-dollarization frenzy.
Gold stocks are outperforming the equities market, and it’s never been a bettertime to buy gold.
Stan Bharti knows this well: That’s why he’s behind African Gold Group (TSX.V: AGG; OTC:AGGFF).
He also knows that not all junior gold stocks will come out of this a winner.
He’s targeting AGG for low-cost production and undervalued assets thatare likely to yield higher returns.
And he knows Africa better than most …
#2 Low-Cost Production, World-Class Venue
Mali is the third-largest producer ofgold in all of Africa, and the Birimian Greenstone Belt—the home of Africa GoldGroup’s Kobada Project—is the motherlode of African gold with a long history ofmining that dates back to the 19th Century.
It’s amassive belt the spans 350,000 square kilometers of world-class gold depositsstretching across Burkina Faso, Ghana, Guinea, Mali, Niger, Senegal and Côte d’Ivoire.
African Gold Group (TSX.V: AGG; OTC:AGGFF) is right in the middle of this belt:
The brilliant part here is that themine holds a total resource of a whopping 2.2 million ounces.
Even more brilliant: The Kobada project is a hugepart of this. It’s 4 kilometers long and 12 kilometers wide and African GoldGroup owns the entire license.
From a geological perspective, AGG could end up tripling its resourcehere.
The deepest holeAGG’s had to drill so far has been only 300 meters.
A 2016 feasibilitystudy has already demonstrated that Kobada is simple to mine on a technicallevel, and that’s music to investor ears.
This is an openpit operation with gravity separation and leach. That means it will be alow-cost, scalable, free dig.
AGG puts average LOM cash operating costs at $557/Oz Au,exclusive of royalties, and all-in LOM sustaining cash operating costs at$788/Oz Au.
#3 Payback Time
The economics are just what large-cap miners, and investors, are lookingfor: high early cash flows from starter pits and a post-tax IRR of 43%, basedon $1200 gold, or 55% based on $1400 gold.
The 2016feasibility study shows that AGG can produce 50,000 ounces of gold a year andbuild that to 100,000 ounces a year …
All for under $50million.
There are a lot of great projects out there, but many of them don’t seethe light of day because they need billions in funding to get them off theground.
That’s not the case with Kobada.
#4 TheLegend Behind the Gold
When itcomes to gold miner profiles, it’s hard to beat Stan Bharti, who just took thelead for African Gold Group (TSX.V: AGG; OTC:AGGFF).
On August7th, AGG announced the Bharti had been appointed chairman of the board of directors andpresident & CEO.
And theKobada Project is the perfect setup for Bharti’s Toronto-based Forbes &Manhattan (F&M). F&M is, after all, a leading rescuer of distressedassets.
The litmustest for the ideal distressed gold asset is lots of gold in the ground, plus asubstandard management team.
For Bhartiand F&M, Kobada represented the next big turnaround.
Why?
It alreadyhad a feasibilitystudy with a resource of 2 million ounces that wasgoing to be easy to mine. It was inone of the most prolific gold belts in AfricaThe previousmanagement wasn’t able to deliverF&M tookit over and brought on a new board, including Stan Bharti as Chairman,President & CEO. Now it’s time to get to that gold.
Bharti’strack record on turnarounds speaks for itself, but there are other AGG boardmembers and managers to be excited about here, as well:
There’s alsoBruce Humphrey, former COO of giant Goldcorp, the second-largest gold companyin the world.
John Begeman,the CEO of Avion—the Mali-based gold company that he and Bharti built up from$20 million to $500 million.
These aren’tjust board members—they’re operational legacies.
AGG also hasa full local management team on the site with a very connected and powerfulcountry manager when it comes to obtaining permits.
And now, AGGcan boast another big name: Daniel Callow, a 12-year veteran for trading/mininggiant Glencore’s African copper operations, whose just been made African GoldGroup’s COO.
#5 Rapid-FireNews Flow
This is acompany that owns a low-cost prolific gold asset with the potential to bringmany times over returns, thanks to “Bharti effect”.
To recap:
We’relooking at a production starting point of 50,000 ounces per year. But that’sjust the beginning. AGG is evaluating the potential for an increase inestimated annual production to 100,000 ounces per year.
Until now, the news flow was dominated by a brand new board of directorswith its finger on the trigger of distressed assets sitting on massive mineralresources.
Now, the news flow may change to the gold itself because they’retargeting a completion date of December 2019 for an evaluation for 100,000ounces per year.
This is potentially one of the best discount gold stories of recenttimes. AGG’s proved up resources of 2.2 million ounces alone are worth billionsin revenue at today’s soaring gold prices. They’re worth billions even atyesterday’s prices.
But what makes the company potentially worth even more is the fact thatthe big miners are on the hunt for just this type of junior they hope canreplenish their declining reserves in the only way possible.
By. Ian Jenkins
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