Clarus Securities Inc.

Asanko Gold Mine Site Visit

Nana Sangmuah

We return from last week’s site visit very encouraged and with furthered confidence in the project’s operational performance and management’s staged development approach to doubling production by 2022.  The plant performance to date, grade reconciliation, qualified personnel and ramp up in production to steady state by Q2/16 provide us with optimism.  Our flyover of the mine revealed the extent of artisanal activity, indicative of a highly prospective belt.  In our opinion, AKG is well positioned to boost production by 50% to 280 koz by 2018 and to doubling production to ~480 koz by 2022 supported by internally generated cash flows.

Article Highlights:

Mining Ramp-up on Track
  • Nkran can be effectively mined at a rate of 3Mtpa without requiring significant push backs that could be detrimental to the project economics...
Grade control drilling
  • In the western and eastern portions of the pit where the ore body daylights, positive reconciliation on grade has been seen and is currently being encountered in the main ore body...
Plant and Metallurgy
  • TSF has a capacity for 120 Mt, more than sufficient for the combined capacity of Phase 1 and Phase 2 of 95 Mt.  In addition, the Nkran extension which was picked up as a result of condemnation drilling and is contiguous to the TSF is planned to be mined out soon and that could provide room for additional capacity, if needed...

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Execution Remains Strong in Q2/17

Brock Winterton

During a quarter where agency trading just got more challenging, markets also saw several financings fail to fully sell. Fortunately, Clarus continued its successful capital raising activities including executing some sizable IPO’s.  In total, we raised $503 million in eight transactions of which we were lead or co-lead in six.  Noteworthy, four transactions were of $80 million or more. Three transactions raised $245 million of new equity in the cannabis industry taking our 2017 total to 8 transactions and $326 million of new equity.  In the last year, Clarus has raised $501 million in the cannabis space. Three transactions in Q2/17 totaling $98 million were completed in mining, one $80 million transaction was done in the oil and gas space and one for $81 million was done in the Special Sits space.

  Issuing Company
Capital Raised
Lead
Co-Managed
  Alio Gold Inc.
$58.7
  K92
$16
  Park Lawn Corp.
$80.5
  Med Releaf (IPO)
$100.7
  Aphria Inc.
$84.5
  Cardinal Resources
$22.8
  DFMMJ (IPO)
$60
  Leucrotta Exploration
$80

Adding Value

Brock Winterton

Clarus is an idea shop.  We don’t cover all sectors and we don’t cover all the names in a space.  By being very select in a sector, we try to deliver the best ideas that generate the best absolute returns to investors.  We have been helping our clients with ideas like these lately:

  • We got involved in the medical marijuana space early, some 2 ½ years ago, and have delivered extraordinary returns to investors by way of names like Aphria (APH), our first idea in the space in July 2014 had an equity value of $41 million (share price $0.78/sh) and is now $750 million (recent price $6.70/sh). We have been publicly involved with multiple cannabis related companies and have become a go-to player in the emergent space.

  • Our mining group has been outstanding at generating ideas like: Endeavour Mining, a deep value turnaround story, whose market cap when we initiated in February 2015 was $223 million ($5.40/sh) at writing was $2,374 million ($25.39/sh) ; Golden Predator (GPY), a new exploration play in Canada’s Yukon that is proving up a potentially major new play and Cardinal Resources (CDV-ASX) which is delineating the large Namdini play in Ghana.

  • In special situations we identified: CRH Medical, a gastrointestinal company in early 2015, trading at $3.62/sh ($250 million) it recently surpassed $11.00/sh (equity value $800 million); Polaris Infrastructure, a geothermal energy turnaround and growth story, in January 2016 traded at $8.05/sh ($125 million) and recently traded at $14.30/sh ($225 million) having traded as high as $18.80/sh.

  • Our focus on oil and gas explorers like Leucrotta Exploration whose recovery from $0.83/sh (EV $98 million) to a recent $2.40/sh ($354 million) or Yangarra Resources trading from $0.48/sh ($85 million) in January 2016 to a recent $2.64/sh ($276 million), have strongly outperformed the sector because they are not commodity price calls but fundamental reserve growth stories.

Markets Were Open in Q1 2017

Brock Winterton

As markets opened up in Q1 2017, Clarus nimbly participated with a very active calendar.  We participated in 15 transactions raising a total of $273 million.  The cannabis space remained active with four transactions, the mining exploration space heated up with five deals and the healthcare, technology and special sits area saw six transactions.

  Issuing Company
Capital Raised
Lead
Co-Managed
  Aphria Inc.
$57.5
  Scythian Biosciences
$13.0
  Kalytera Therapeutics
$15.0
  CannaRoyalty Corp.
$17.3
  Neo Lithium Corp.
$25.0
  INV Metals
$26.6
  JDL Gold
$20
  Golden Predator
$17.3
  White Gold
$10.0
  BioAmber Inc
$26.6
  Breaking Data
$5.0
  RepliCel Life Sciences
$2.7
  H-Source Holdings
$3.2
  Akumin Inc.
$13.1
  UrtheCast Corp.
$19.6

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