(New throughout, adds Asanko's response, shareholder, analyst
By Nicole Mordant and Susan Taylor
VANCOUVER/TORONTO May 31 Asanko Gold Inc
on Wednesday disputed claims by U.S. hedge fund Muddy
Waters that the Canadian company would run out of cash due to
problems with its Ghana mining operations.
News that Muddy Waters was shorting the small
Vancouver-based miner's shares had pushed them down 31 percent
in the United States and 13 percent in Canada on Wednesday
morning, before trading was halted.
Muddy Waters released a 43-page report that detailed why it
was betting the stock would fall.
Asanko responded Wednesday afternoon by promising to release
an expanded feasibility study on its mine plans on Monday, which
it said would "provide a complete rebuttal" to claims from Muddy
Waters, a San Francisco firm run by prominent short seller
"The Asanko Gold Mine is a robust business," Asanko Chief
Executive Peter Breese said in a statement.
He reiterated the company's previous forecast that it would
produce 230,000 to 240,000 ounces of gold this year, which it
expects will generate between $64 million and $77 million in
cash. That forecast assumes a $1,200 an ounce gold price. Spot
gold was quoted at $1,269.11 an ounce late Wednesday.
The Muddy Waters report, which the investment fund published
on its website, said production at its Nkran mine and other
deposits would not meet the company's expectations because the
estimates were based on flawed geology.
The report predicted that production shortfalls would cause
Asanko to run out of cash next year as it struggles to repay
$165 million in debt.
The report outlined concerns that other commentators already
had raised, most of which had either been acknowledged by
management or would likely be addressed on Monday, BMO analyst
Andrew Breichmans said in a note to clients.
Maria Smirnova, a senior portfolio manager at Sprott Asset
Management, an Asanko shareholder, said it was "a shame" that
the miner had been targeted by Muddy Waters.
"I view the Asanko management team as having the utmost
integrity and always doing what's best for shareholders," said
Smirnova, whose firm is the miner's eighth-largest shareholder,
according to Thomson Reuters data.
Van Eck Associates, Asanko's biggest shareholder with a 20.4
percent stake based on latest publicly available data, did not
respond to a request for comment.
Toronto hedge fund K2 & Associates Investment Management Inc
in June 2016 took a short position in Asanko, saying its gold
resources were overinflated, notably at its Nkran deposit, which
Asanko acquired in 2014 from Resolute Mining Ltd.
K2 could not be reached for comment on Wednesday.
($1 = 1.3516 Canadian dollars)
(Additional reporting by Solarina Ho, Fergal Smith and Alastair
Sharp in Toronto; Editing by Jim Finkle, David Gregorio and