UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC   20549


Form 6-K


REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 or 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934


For the month of November 2015


Commission File No. 001-33580


ASANKO GOLD INC.


(Translation of registrant’s name into English)


Suite 680, 1066 West Hastings Street, Vancouver, British Columbia, V6E 3X2


(Address of principal executive office)


Indicate by check mark whether the registrant files or will file annual reports under the cover Form 20-F or Form 40-F

Form 20-F o

 Form 40-F  x


Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):   o


Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):   o


SUBMITTED HEREWITH


Exhibit No.

Document


99.1

Interim consolidated financial statements for the three and nine months ended September 30, 2015 and 2014

99.2

Management’s Discussion & Analysis for the three and nine months ended September 30, 2015 and 2014

99.3

CEO certification of interim filings

99.4

CFO certification of interim filings


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


ASANKO GOLD INC.

(Registrant)

 

 

By:

/s/ Greg McCunn

 

Greg McCunn

 

Chief Financial Officer

 

Date:

November 16, 2015

 
















[exhibit991001.jpg]



CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


Three and nine months ended  September 30, 2015 and 2014

_______________________



 



















1



ASANKO GOLD INC.


Condensed Interim Consolidated Statements of Financial Position (Unaudited)

Expressed in United States Dollars


 

 

September 30,

2015

 

December 31,

2014

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

$

159,265,183

$

228,679,552

Receivables

 

13,877

 

150,211

Prepaid expenses and deposits

 

3,057,127

 

227,645

 

 

162,336,187

 

229,057,408

 

 

 

 

 

Non-current assets:

 

 

 

 

Property, plant and equipment (note 4)

 

226,996,786

 

65,862,616

Reclamation deposit (note 5)

 

1,695,664

 

-

Mineral interests and development assets (note 6)

 

212,026,244

 

183,244,562

Deferred debt financing costs (note 8)

 

300,000

 

2,936,146

Investment in associate

 

-

 

1,000

 

 

441,018,694

 

252,044,324

 

 

 

 

 

Total assets

$

603,354,881

$

481,101,732

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and accrued liabilities

$

 33,658,133

$

 15,353,474

Foreign currency forward contract liability (note 18(d)(i))

 

58,565

 

-

Current portion of long term debt (note 8)

 

8,636,151

 

-

 

 

42,352,849

 

15,353,474

 

 

 

 

 

Non-current liabilities:

 

 

 

 

Long term debt (note 8 and note 18(d)(ii))

 

118,713,582

 

57,447,225

Asset retirement provision (note 9)

 

17,758,192

 

12,638,318

Deferred income tax liability

 

12,184,259

 

12,083,658

 

 

148,656,033

 

82,169,201

 

 

 

 

 

Total liabilities

 

191,008,882

 

97,522,675

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Share capital (note 10)

 

540,132,896

 

 505,468,841

Equity reserves (note 11)

 

45,655,519

 

43,032,396

Accumulated deficit

 

(173,442,416)

 

(164,922,180)

Total shareholders’ equity

 

412,345,999

 

383,579,057

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

$

603,354,881

$

481,101,732


Acquisition (note 3)

Commitments and obligations (note 14)

Contingencies (note 5 and note 15)


Approved by the Board of Directors on November 10, 2015:

“Peter Breese”

 

“Marcel de Groot”

Director

 

Director

SEE ACCOMPANYING NOTES



2





ASANKO GOLD INC.


Condensed Interim Consolidated Statements of Comprehensive Loss (Unaudited)

Expressed in United States Dollars


 

Three months ended September 30,

Nine months ended September 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

Administration expenses:

 

 

 

 

 

 

 

 

Consulting fees, wages and benefits

$

529,139

$

623,789

$

1,305,704

$

2,249,683

Depreciation

 

10,961

 

13,915

 

48,190

 

57,378

Office, rent and administration (note 13)

 

272,580

 

264,353

 

921,523

 

1,317,072

Professional fees

 

141,762

 

277,844

 

573,728

 

732,044

Regulatory fees, transfer agent and

 

 

 

 

 

 

 

 

shareholder information

 

41,231

 

81,205

 

180,670

 

316,867

Share-based payments (note 11(a))

 

223,802

 

553,050

 

1,463,045

 

2,201,245

Travel, promotion and investor relations

 

155,991

 

175,187

 

649,633

 

654,132

 

 

1,375,466

 

1,989,343

 

5,142,493

 

7,528,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration and evaluation expenditures (note 7)

 

463,592

 

113,469

 

1,566,703

 

245,567

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses (income):

 

 

 

 

 

 

 

 

Accretion expense (note 9)

 

101,486

 

73,405

 

256,715

 

246,160

Bank charges and interest

 

19,135

 

45,482

 

72,612

 

80,049

Business development

 

76,883

 

(15,770)

 

251,413

 

4,482,273

Change in embedded derivative

     liability (notes 8 and 18(d)(ii))

 

348,147

 

13,179

 

21,629

 

13,179

Change in fair value of foreign currency        

     forward contracts

 

115,961

 

-

 

58,565

 

-

Change in foreign currency warrant liability

 

-

 

(178,627)

 

-

 

(236,684)

Foreign exchange (gain)/loss (note 18(e))

 

1,084,480

 

578,244

 

1,758,259

 

(1,584,845)

Interest and other income

 

 (251,764)

 

 (286,609)

 

 (709,754)

 

(1,018,942)

Restructuring costs (note 12)

 

-

 

19,626

 

-

 

2,998,456

Settlement of dispute (note 15)

 

-

 

6,977,773

 

-

 

6,977,773

Write-off of investment in associate

 

1,000

 

-

 

1,000

 

-

 

 

 

 

 

 

 

 

 

 

 

1,495,328

 

7,226,703

 

1,710,439

 

11,957,419

 

 

 

 

 

 

 

 

 

Loss before taxes

 

3,334,386

 

9,329,515

 

8,419,635

 

19,731,407

 

 

 

 

 

 

 

 

 

Deferred income tax expense (recovery)

 

(28,395)

 

-

 

100,601

 

-

Loss and comprehensive

 

 

 

 

 

 

 

 

loss for the period

$

3,305,991

$

9,329,515

$

8,520,236

$

19,731,407

 

 

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

 

 

 

Basic and diluted

$

 0.02

 $

 0.05

$

 0.04

$

 0.12

 

 

 

 

 

 

 

 

 

Weighted average number of

 shares outstanding

 

196,941,509

 

173,489,616

 

193,468,794

 

161,160,404


SEE ACCOMPANYING NOTES





3






ASANKO GOLD INC.


Condensed Interim Consolidated Statements of Changes in Equity (Unaudited)

Expressed in United States Dollars


 

Number of shares

 

Share capital

 

Equity reserves

 

Accumulated deficit

 

Total equity

 

 

 

 

 

 

 

 

 

 

Balance as at December 31, 2013

85,054,338

$

334,423,542

$

36,461,969

$

(142,280,546)

$

228,604,965

Issuance of common shares for:

 

 

 

 

 

 

 

 

 

Acquisition of PMI (note 3)

87,149,919

 

166,546,246

 

2,342,086

 

 -

 

168,888,332

Settlement of dispute (note 15)

1,000,000

 

2,347,151

 

-

 

-

 

2,347,151

Exercise of share-based options (note 10(b))

871,350

 

2,151,902

 

(401,004)

 

 -

 

1,750,898

Share-based payments (note 11(a))

 -

 

 -  

 

4,127,069

 

 -

 

4,127,069

Loss and comprehensive loss for the period

 -

 

 -

 

-

 

(19,731,407)

 

 (19,731,407)

Balance September 30, 2014

174,075,607

$

505,468,841

$

42,530,120

$

(162,011,953)

$

385,987,008


 

 

 

 

 

 

 

 

 

Balance as at December 31, 2014

174,075,607

$

505,468,841

$

43,032,396

$

(164,922,180)

$

383,579,057

Issuance of common shares for:

 

 

 

 

 

 

 

 

 

Bought deal financing (note 10(b))

22,770,000

 

34,283,788

 

-

 

-

 

34,283,788

Exercise of share-based options (note 10(b))

150,000

 

380,267

 

(134,134)

 

-

 

246,133

Share-based payments (note 11(a))

 -

 

 -  

 

2,757,257

 

-

 

2,757,257

Loss and comprehensive loss for the period

 -

 

 -

 

-

 

(8,520,236)

 

(8,520,236)

Balance as at September 30, 2015

196,995,607

$

540,132,896

$

45,655,519

$

(173,442,416)

$

412,345,999

 

 

 

 

 

 

 

 

 

 


SEE ACCOMPANYING NOTES







4





ASANKO GOLD INC.


Condensed Interim Consolidated Statements of Cash Flows (Unaudited)

Expressed in United States Dollars

 

 

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

 

 

              2015

                2014

 

2015

2014

 

 

 

 

 

 

 

 

 

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

 

 

Loss for the period

 

$

(3,305,991)

$

(9,329,515)

$

(8,520,236)

$

(19,731,407)

Items not involving cash:

 

 

 

 

 

 

 

 

 

Accretion expense

 

 

101,486

 

73,405

 

256,715

 

246,160

Change in embedded derivative liability

 

 

348,147

 

13,179

 

21,629

 

13,179

Change in fair value of foreign currency

       forward contracts

 

 

115,961

 

-

 

58,565

 

-

Change in foreign currency warrant liability

 

 

-

 

(178,627)

 

-

 

(236,684)

Deferred income tax expense

 

 

(28,395)

 

-

 

100,601

 

-

Depreciation

 

 

10,961

 

13,915

 

48,190

 

57,378

Interest and other income

 

 

(251,764)

 

(263,375)

 

(709,754)

 

(995,708)

Settlement of dispute

 

 

-

 

5,617,297

 

-

 

5,617,297

Share-based payments

 

 

223,802

 

553,050

 

1,463,045

 

2,201,245

Share-based payments included in

 

 

 

 

 

 

 

 

 

exploration and evaluation expenditures

 

 

36,401

 

-

 

218,918

 

-

Unrealized foreign exchange loss (gain)

 

 

1,773,747

 

(240,029)

 

2,904,111

 

(515,972)

Write-off of investment in associate

 

 

1,000

 

-

 

1,000

 

-

Write-off of property and equipment (note 12)

 

 

-

 

-

 

-

 

205,695

Changes in non-cash working capital:

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

(1,477,910)

 

3,178,685

 

(224,880)

 

(5,078,522)

Prepaid expenses and deposits

 

 

550,572

 

(738,948)

 

(2,829,482)

 

(818,730)

Receivables

 

 

2,217

 

(349,285)

 

66,174

 

(256,104)

 

 

 

(1,899,766)

 

(1,650,248)

 

(7,145,404)

 

(19,292,173)

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

 

Cash acquired on acquisition of PMI

 

 

-

 

-

 

-

 

82,351,619

Restricted cash (note 3)

 

 

-

 

-

 

-

 

1,174,090

Mineral interests and development assets

 

 

(11,846,653)

 

(14,353,538)

 

(22,843,228)

 

(22,103,276)

Purchase of property, plant and equipment

 

 

(54,806,811)

 

(6,082,267)

 

(136,078,770)

 

(9,174,382)

Reclamation bond

 

 

-

 

-

 

(1,695,664)

 

-

Interest received

 

 

251,765

 

386,605

 

777,844

 

1,098,965

 

 

 

(66,401,699)

 

(20,049,200)

 

(159,839,818)

 

53,347,016

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

Shares issued for cash, net of share

 

 

 

 

 

 

 

 

 

            issuance costs

 

 

246,133

 

1,431,760

 

34,529,921

 

1,524,475

Long term debt proceeds, net of draw down fees

 

 

-

 

19,100,000

 

68,950,000

 

19,100,000

Deferred debt financing costs

 

 

(661,864)

 

(1,257,861)

 

(2,449,669)

 

(1,630,087)

 

 

 

(415,731)

 

19,273,899

 

101,030,252

 

18,994,388

 

 

 

 

 

 

 

 

 

 

Impact of foreign exchange on cash and cash

 

 

 

 

 

 

 

 

 

equivalents

 

 

(1,572,132)

 

(376,789)

 

(3,459,399)

 

(88,073)

Increase (decrease) in cash and cash equivalents for the period

 

 

(70,289,328)

 

(2,802,347)

 

(69,414,369)

 

53,137,304

Cash and cash equivalents, beginning of period

 

 

229,554,511

 

(230,541,089)

 

228,679,552

 

174,601,438

Cash and cash equivalents, end of period

 

$

159,265,183

$

227,738,742

$

159,265,183

$

227,738,742

Supplemental cash flow information (note 16)

SEE ACCOMPANYING NOTES




5



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



1.

Nature of operations

Asanko Gold Inc. (“Asanko” or the “Company”), changed its name from Keegan Resources Inc. on March 1, 2013. The Company was incorporated on September 23, 1999 under the laws of British Columbia, Canada.  The Company is in the exploration and development stage and is focused on advancing its principal project, the Asanko Gold Mine (“the Project”), to commercial production. In addition to its principal project, the Company holds a portfolio of other Ghanaian gold concessions in various stages of exploration.

On February 6, 2014, the Company completed the acquisition of 100% of the issued and outstanding shares of PMI Gold Corporation (“PMI”) (note 3). PMI is a resource exploration and development company which, through its subsidiaries, holds exploration and mining leases in the Ashanti and Asankrangwa Gold Belts of Ghana, Africa. PMI’s principal project is a gold development project known as the Obotan Gold Project which has been combined with Asanko’s principal project known as the Esaase Gold Project, to form the Asanko Gold Mine (“AGM” or  “the Project”).

The head office, principal address and registered and records office of the Company are located at 1066 West Hastings Street, Suite 680, Vancouver, British Columbia, V6E 3X2, Canada.

2.

Basis of presentation

 (a)

Statement of compliance

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). The accounting policies followed in these condensed interim consolidated financial statements are the same as those applied in the Company’s most recent audited consolidated financial statements for the year ended December 31, 2014. The condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2014.


These condensed interim consolidated financial statements were authorized for issue and approved by the Board of Directors on November 12, 2015.


 (b)

Basis of presentation and consolidation

The financial statements have been prepared on the historical cost basis, with the exception of asset retirement provisions (note 9), forward currency contracts (note 18(d)(i)) and interest rate floor derivative liability (note 18(d)(ii)) which are measured at fair value.

All amounts are expressed in US dollars, unless otherwise stated, and the US dollar is the Company’s functional currency. References to C$ are to Canadian dollars.



6



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



2.

Basis of presentation (continued)

(b)

Basis of presentation and consolidation (continued)

These condensed interim consolidated financial statements incorporate the financial statements of the Company and its controlled subsidiaries. Control exists when the Company has power, directly or indirectly, to govern the financial and operating policies of an entity as to obtain benefits from its activities. All significant intercompany amounts and transactions have been eliminated on consolidation.

The consolidated financial statements include the accounts of the Company and the following subsidiaries:

 

Subsidiary name

Jurisdiction

Ownership

 

Keegan Resources (Ghana) Limited (“Asanko Ghana”)

Ghana

90%

 

Asanko Gold South Africa (PTY) Ltd.

South Africa

100%

 

Asanko International (Barbados) Inc.

Barbados

100%

 

Asanko Gold (Barbados) Inc.

Barbados

100%

 

Adansi Gold Company (GH) Limited (“Adansi Ghana”)

Ghana

100%

 

PMI Gold Corporation (“PMI”)

Canada        

100%


(c)

Significant accounting judgments and estimates

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  The condensed interim consolidated financial statements have, in management’s opinion, been properly prepared using careful judgment within the framework of the significant accounting policies summarized in note 3 of the audited consolidated financial statements for the year ended December 31, 2014.

(d)

Comparative figures

Certain comparative figures have been reclassified to conform to the presentation adopted in the current period.




7



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars




3.

Acquisition of PMI

On December 17, 2013, the Company and PMI entered into a definitive agreement whereby Asanko agreed to acquire all of the common shares of PMI (“Plan of Arrangement”). On February 6, 2014, Asanko completed the acquisition of PMI pursuant to the terms of the Plan of Arrangement. Under the terms of the Plan of Arrangement, former PMI shareholders received 0.21 of an Asanko common share for each PMI share held. The Company issued 87,149,919 of its common shares to acquire 100% of the issued and outstanding shares of PMI.

With the acquisition of PMI, the Company acquired interest in certain mineral resource concessions described in note 6 as the Obotan Gold Project (note 6 (a)), Kubi (note 6 (b)), and the Diaso concessions (note 6 (b)).

The allocation of the purchase price is as follows:


Purchase price:

 

 

 

87,149,919 common shares of Asanko at C$2.12 per share

$

166,743,940

3,237,491 replacement options

 

2,318,492

126,000 replacement warrants

 

23,594

Total consideration

$

169,086,026

 

 

 

Net assets acquired:

Cash and cash equivalents

$

82,351,619

Restricted cash

 

1,098,514

Receivables

 

132,090

Prepaid expenses

 

235,286

Property and equipment

 

9,153,642

Mineral interests and development assets

 

97,934,748

Accounts payable and accrued liabilities

 

(5,937,445)

Asset retirement provision

 

(1,447,277)

Deferred income tax liability

 

(14,435,151)

Net assets acquired

$

169,086,026


The fair value of the Company’s common shares, replacement options, replacement warrants and equity settled performance rights issued for the acquisition of PMI was determined using the closing market price of the Company’s shares at February 5, 2014 of C$2.12 and a foreign exchange rate of 1 CAD = 0.9025 USD at the same date. The fair value of the replacement options and replacement warrants was calculated using the Black-Scholes option pricing model using the following weighted average assumptions:


 

Replacement warrants

Replacement options

Risk free interest rate

1.01%

1.21%

Expected dividend yield

0%

0%

Share price volatility

64.5%

77.41%

Share price at the date of valuation (PMI closing share price at Feb 5, 2014)

C$0.45

C$0.45

Expected life

1.64 year

2.80 years




8



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars







3.

Acquisition of PMI (continued)

The Company commenced consolidating PMI’s financial position and results of operations effective February 6, 2014.


The Company recognized $472,393 interest income and $8,259,862 net loss related to PMI for the period from February 6, 2014 to September 30, 2014.  Had PMI been consolidated from January 1, 2014, the nine months ended September 30, 2014 consolidated statement of  comprehensive loss would include additional interest revenue of  $96,261 and an additional net loss of $(978,838).



4.    Property, plant and equipment


 

 

Administration

Asanko Gold Mine

Totals

 

 

 Office and equipment

Work in progress *

 Buildings

 Equipment

 Motor vehicles

 

Cost

$

$

$

$

$

$

 

As at December 31, 2013

 528,237

1,138,621

765,115

475,403

1,063,822

3,971,198

 

Additions

101,277

53,349,648

804,438

15,748

839,333

55,110,444

 

Acquired on acquisition of PMI

245,571

8,359,358

-

163,807

384,906

9,153,642

 

Dispositions

(214,753)

-

-

-

-

(214,753)

 

As at December 31, 2014

660,332

62,847,627

1,596,553

654,958

2,288,061

68,020,531

 

Additions

169,834

161,178,469

-

50,733

270,545

161,669,581

 

Dispositions

-

-

-

-

(122,828)

(122,828)

 

As at September 30, 2015

830,166

224,026,096

1,569,553

705,691

2,435,778

229,567,284


Accumulated depreciation

 

 

 

 

 

 

 

 

As at December 31, 2013

 (384,993)

                   -

 (174,718)

 (272,125)

(694,053)

(1,525,889)

 

Depreciation

(153,930)

-

(76,511)

(124,327)

(286,316)

(641,084)

 

Dispositions

9,058

-

-

-

-

9,058

 

As at December 31, 2014

(529,865)

-

(251,229)

(396,452)

(980,369)

(2,157,915)

 

Depreciation

(48,190)

-

(97,531)

(81,866)

(307,824)

(535,411)

 

Dispositions

-

-

-

-

122,828

122,828

 

As at September 30, 2015

 (578,055)

                  -

 (348,760)

 (478,318)

(1,165,365)

 (2,570,498)

Net book value

 

 

 

 

 

 

 

 

As at December 31, 2014

130,467

62,847,627

1,318,324

258,507

 1,307,691

65,862,616

 

As at September 30, 2015

252,111

224,026,096

1,220,793

227,373

1,270,413

226,996,786

*Work in progress at September 30, 2015 includes capitalized borrowing costs of $8.1 million (note 8).







9



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



5.    Reclamation deposit

  The Company is required to provide security to the Environmental Protection Agency of Ghana (“EPA”),  as security for the performance by the Company of its reclamation obligations in respect of the Abriem, Abore and Adubea mining leases.  The initial security totals $8.5 million and is made up of a Reclamation Deposit in the amount of $1.7 million and a bank guarantee of $6.8 million.

During the nine months ended September 30, 2015 the Company deposited the Reclamation Deposit in a Ghanaian Bank in the joint names of the Company and the EPA. The Reclamation Deposit matures annually, but the Company is required to reinstate the deposit until receiving the final completion certificate by the EPA. The Company is expected to be released from this requirement 45 days following the third anniversary of the date the Company receives a final completion certificate.

6.

Mineral interests and development assets

(a)

Asanko Gold Mine Project

The Company’s principal mineral project is the Asanko Gold Mine Project, which consists of two neighboring gold projects the Obotan Gold Project (note 3) and the Esaase Gold Project, both located in the Republic of Ghana (“Ghana”), West Africa.

Adansi Ghana owns 100% of the Obotan Gold Project which is located in the Amansie District of the Ashanti Region of Ghana, approximately 250 km northwest of the capital Accra. The Obotan Gold Project consists of the Abore, Abirem and Adubea concessions, all of which have been granted mining leases and cover an area of approximately 88.98 km2. These concessions contain five deposits: Nkran, Abore, Adubiaso Asuadai and Dynamite Hill. The Adubea concession is subject to a net smelter return royalty (“NSR”) of 0.5% payable to a third party. During 2014, the Company settled a dispute with Goknet Mining Company Limited (“Goknet”) and thereby eliminated Goknet’s claim of a 2% NSR over these three concessions.

Asanko Ghana owns a 100% interest in the Esaase Gold Project. Like Obotan, Esaase is located in the Amansie West District of Ghana. The property consists of several mining concessions of which the three largest are the Esaase Concession, Jeni River Concession and Sky Gold Concession (“SGM”).  The Esaase Concession covers an area of approximately 42.32 km2.  

The Esaase and Jeni River concessions are subject to a 0.5% royalty payable to the Bonte Liquidation Committee and the SGM concession is subject to a 2% NSR payable to Sky Gold Mines Limited.

Asanko Ghana owns a 100% interest in the Asuowin Concession situated contiguous to and directly south of the Esaase Gold property and a 100% interest in the Dawohodo prospecting concession adjacent to the Esaase Gold property.

Free carried interest to the Ghanaian government

The Government of Ghana retains the right to a 10% free carried interest in the Project under Section 8 of the Ghanaian Mining Act. This entitles the Ghanaian government to 10% of declared dividends from the net profit of the Company’s respective subsidiaries at the end of a financial year.

The Company’s concessions are also subject to a 5.0% royalty on gold production payable to the Government of Ghana.






10



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars




6.

Mineral interests and development assets (continued)

(b)

Exploration projects

Asanko Ghana owns a 100% interest in the Asumura Reconnaissance Concession (“Asumura property”) located in Ghana. The Asumura property is subject to a 3.5% NSR royalty payable to GTE Ventures Limited. (“GTE”), 50% of which may be purchased for $2,000,000 and the remaining 50% which may be purchased for an additional $4,000,000.

Adansi Ghana holds a 100% interest in the Datano, Kaniago, New Obuasi, Gyagyastreso, and Afiefiso concessions located within the Asankrangwa Gold Belt.

During February 2015, Asanko Ghana completed the acquisition of various concessions from Midlands Mineral Corporation for cash consideration of $250,000. The Midland concessions are contiguous to the Company’s other mineral tenements. 

Any of the exploration properties that are converted to a Mining License, in accordance with Ghanaian law, it will become subject to a 5% gross revenue royalty and a 10% free carried interest to the Ghanaian government.   

Pursuant to the Goknet settlement the Company transferred Adansi Ghana’s Diaso concessions (Nkronua Atifi, Diaso, Amuabaka,      Juabo, Manhia and Agyaka Manso) and the shares of Kubi Ghana, which holds a 100% interest in the Kubi mining leases to Goknet (note 15).

(c)

Mineral interests and development costs


 

 

 

 

 

 

 

Asanko Gold Mine

Other

Total

 

 

 

 

 

 

Mineral interest

 

 

 

 

Balance, December 31, 2014

$  98,560,248

$         326,182

$          98,886,430

 

Acquisitions for the period

-

250,000

250,000

 

Balance, September 30, 2015

    98,560,248

576,182

99,136,430

 

 

 

 

 

 

Development assets

 

 

 

 

Balance, December 31, 2014

84,358,132

                   -

84,358,132

 

Asset retirement costs

4,863,159

-

4,863,159

 

Community affairs and environment

155,369

-

155,369

 

Development support costs

2,655,615

-

2,655,615

 

Permitting

18,167

-

18,167

 

Phase 2 feasibility study

1,141,893

-

1,141,893

 

Share-based payments

1,075,294

-

1,075,294

 

VAT receivable allowance

18,622,185

-

18,622,185

 

Additions for the period

28,531,682

-

28,531,682

 

Balance,  September 30, 2015

112,889,814

                 -

112,889,814

 

Total mineral interest and development assets, September 30, 2015

$    211,450,062

$    576,182

$ 212,026,244





11



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



6.

Mineral interests and development assets (continued)

(c)

 Mineral interests and development costs (continued)


Prior to the commencement of construction of the Asanko Gold Mine, development costs were charge to Deferred development Assets. Now that construction is underway most of the development costs are included in Property, Plant and Equipment as Work in Progress.

 

 

 

 

 

 

 

 

Asanko Gold Mine

Kubi

Other

Total

 

 

 

 

 

 

 

Mineral interest

 

 

 

 

 

Balance, December 31, 2013

$        4,695,444

$                  -

$         170,043

$       4,865,487

 

Fair value on acquisition of PMI

93,471,540

3,963,208

500,000

97,934,748

 

Acquisitions for the period

393,264

-

1,250

394,514

 

Dispositions for the period

-

(3,963,208)

(345,111)

(4,308,319)

 

Balance, December 31, 2014

    98,560,248

    -

326,182

   98,886,430

 

 

 

 

 

 

 

Development assets

 

 

 

 

 

Balance, December 31, 2013

      56,097,384

                   -

                   -

    56,097,384

 

Asset retirement costs

2,953,356

29,291

-

2,982,647

 

Camp operations

2,484,765

-

-

2,484,765

 

Development support costs

3,259,184

-

-

3,259,184

 

Development drilling and assays

2,087,042

-

-

2,087,042

 

EPCM (early works)

9,373,479

-

-

9,373,479

 

Feasibly studies  and engineering

475,554

-

-

475,554

 

Permitting

769,283

-

-

769,283

 

Share-based payments

2,095,273

-

-

2,095,273

 

Community affairs and environment

2,652,186

-

-

2,652,186

 

VAT receivable allowance

2,110,626

-

-

2,110,626

 

Additions for the year

28,260,748

29,291

-

28,290,039

 

Dispositions for the year

-

(29,291)

-

(29,291)

 

Balance, December 31, 2014

84,358,132

-

                 -

84,358,132

 

Total mineral interest and development assets, December 31, 2014

$    182,918,380

$              -

      $    326,182

$ 183,244,562






12



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



7.

Exploration and evaluation expenditures

Exploration and evaluation expenditures are comprised of expenditures incurred on mineral interests in areas where the technical  feasibility and economic recoverability has not yet been established.


 

Three months ended September 30,

Nine months ended

September 30,

 

2015

2014

2015

2014

 

 

 

 

 

Exploration support and prospectivity mapping costs

$      427,191

$    113,469

$     1,347,785

$   245,567

Share-based compensation

36,401

-

218,918

-

 

$      463,592

$    113,469

$     1,566,703

$   245,567


8.

Long term debt

On October 24, 2013, the Company entered into a Definitive Senior Facilities Agreement (“DSFA”) with a special purpose vehicle of RK Mine Finance Trust I ("Red Kite"). An amended DSFA was entered into on July 16, 2014 with terms substantially similar to the original DSFA. The debt provided under the amended DSFA will be utilized for developing Phase 1 of the Asanko Gold Mine Project instead of the Esaase Project as previously envisaged.

The DSFA provides for two term loan facilities: a $130 million term loan facility (the "Project Facility") and a $20 million cost overrun facility (the "Overrun Facility"). Performance under the amended agreement is fully secured by the assets of the Company’s subsidiary PMI which includes the assets of Adansi Ghana, certain Asanko bank accounts and is guaranteed by the Company until Project completion.

The first tranche of the loan for gross proceeds of $20.0 million and net cash proceeds of $19.7 million was drawn on July 18, 2014, the second tranche of the loan for gross proceeds of $40.0 million and net cash proceeds of $39.4 million was drawn on December 23, 2014, and the third and final tranche of the loan was drawn on June 1, 2015 for gross proceeds of $70.0 million and net cash proceeds of $69.0 million.

The Project Facility is to be repaid by the end of the first quarter of 2020 with the first repayment date on July 1, 2016. Interest is              calculated on a quarterly basis at a rate of LIBOR +6% and payable in advance on the first date of each quarter. There is a  1% minimum LIBOR rate which creates an interest rate floor. Interest and a gross up for withholding tax on the interest are accrued on a quarterly basis before the first repayment date and added to the loan principal amount. The loan is carried at amortized costs on the statement of financial position.

As at September 30, 2015 the Company had incurred a total of $11.9 million in deferred debt financing costs (December 31, 2014 - $5.5 million), of which $0.3 million in respect to the Overrun Facility commitment fees.

Deferred debt financing costs were initially deferred and subsequently reclassified as part of the loan on a pro-rata basis of the loan amount drawn and are being amortized over the life of the DSFA using the effective interest rate method.

During the nine months ended September 30, 2015, $7.3 million (three months ended September 30, 2015 - $3.3 million) of loan accretion and accrued interest was capitalized to property, plant and equipment at an effective interest rate of approximately 11.31% .

An embedded derivative liability has been recognized for the loan in relation to the interest rate floor. The fair value of the embedded derivatives on draw down was estimated to be $1.3 million (note 18 (d)(ii)). The embedded derivative liability was revalued at September 30, 2015 with the change in fair value recognized in the statement of operations.




13



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



8.

Long term debt (continued)

Long term loan liability

September 30, 2015

December 31, 2014

 

 

 

Gross proceeds

 $      130,000,000

 $      60,000,000

Accrued interest

 5,542,781

 670,088

 

 135,542,781

 60,670,088

Deferred financing costs, net of amortization, and fair value of    

    embedded derivative liability at date of drawdowns

(9,567,444)

(3,999,911)

 

125,975,337

56,670,177

 Fair value of embedded derivative liability

1,374,396

777,048

Long term loan liability

$      127,349,733

$      57,447,225

 

 

 

Current portion of long term debt

8,636,151

-

Non-current portion of long term debt

 $      118,713,582

 $      57,447,225


The first payment of principal and interest in the amount of $8.6 million is due on July 1, 2016.


  In addition to the DSFA the Company entered into an Offtake Agreement with Red Kite with the following details:


·

Sale of 100% of the future gold production from Phase 1 to a maximum of 2.22 million ounces to Red Kite;

·

Red Kite to pay for 100% of the value of the gold ten business days after shipment;

·

A provisional payment of 90% of the estimated value will be made one business day after delivery;

·

The gold sale price will be a spot price selected during a nine day quotational period following shipment;

·

Should the Company wish to terminate the Offtake Agreement, a termination fee will be payable according to a schedule dependent upon the total funds drawn under the Project and Overrun Facility as well as the amount of gold delivered under the Offtake Agreement at the time of termination.  


9.

Asset retirement provision

The asset retirement provision relates to current and historical disturbances on the mineral concessions within the area of interest of the Asanko Gold Mine. During the nine months ended September 30, 2015, the Company recognized an additional $4.9 million (uninflated and undiscounted) related to the disturbances resulting from the mine construction activities.

The following is a continuity of the asset retirement provision at Asanko Gold Mine:

 

 September 30, 2015

 December 31, 2014

 

 

 

 

 

 

Opening balance

$      12,638,318

$        9,385,102

Additions, net

 4,863,159

 2,953,356

Accretion

256,715

299,860

Closing balance

$      17,758,192

$      12,638,318

The present value of this obligation has been recorded as a non-current provision.





14



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



10.

Share capital

(a)

Authorized

Unlimited common shares without par value; and

Unlimited preferred shares without par value

(b)

Issued and outstanding common shares


 

Number
of Shares

Amount

Balance, December 31, 2013

85,054,338

$   334,423,542

Issued pursuant to the acquisition of PMI (note 3)

87,149,919

166,743,940

Issued pursuant to settlement agreement (note 15)

1,000,000

2,375,880

Share issuance costs

-

(226,423)

Issued pursuant to exercise of share-based options (note 11(a)):

 

 

- at C$ 1.12

12,500

12,792

- at C$ 1.43

5,250

7,002

- at C$ 1.96

164,850

303,124

- at C$ 2.12

112,500

224,166

- at C$ 2.15

420,000

848,414

- at C$ 2.42

156,250

355,400

Transfer from equity reserves on exercise of share-based options

-

401,004

Balance, December 31, 2014

174,075,607

$   505,468,841

 

 

 

Issued pursuant to bought deal financing

22,770,000

36,386,961

Share issuance costs

-

(2,103,173)

Issued pursuant to exercise of share-based options (note 11(a)):

 

 

- at C$ 2.12

150,000

246,133

Transfer from equity reserves on exercise of share-based options

 

134,134

Balance, June 30, 2015

196,995,607

$   540,468,841


Nine months ended September 30, 2015

On February 11, 2015, the Company closed a bought deal financing of  22,770,000 common shares at C$2.02 for gross proceeds $36.4 million or C$46.0 million. The Company incurred share issuance costs of $2.1 million, of which $1.8 million in fees were paid to the underwriters’.   

Year ended December 31, 2014

On February 6, 2014, the Company issued 87,149,919 of its common shares at a price of C$2.12 per share to acquire 100% of the issued and outstanding shares of PMI (note 3). The fair value of the shares issued was determined using the closing share price of the Company’s shares on the Toronto Stock Exchange on February 5, 2014 and an exchange rate of 1 CAD = 0.9025 USD at the same date, which were the final closing variables before the transaction completion (note 3). The Company incurred share issuance costs of $197,694 in regulatory fees.

On August 19, 2014, the Company issued 1,000,000 of its common shares at a price of C$2.60 per share, pursuant to a settlement agreement (note 15(c)). The fair value of the shares issued was determined using the closing share price of the Company’s shares on the Toronto Stock Exchange on August 19, 2014 and an exchange rate of 1 CAD = 0.9138 USD at the same date. The Company incurred share issuance costs of $28,729 in regulatory fees.



15



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



During the year ended December 31, 2014, the Company issued 871,350 common shares for gross proceeds of $1.75 million on exercise of options. In addition, the estimated fair value of these options of $401,004 was reclassified from equity reserves to share capital.




16



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



11.

Equity reserves

(a)

Share-based options

The Company maintains a rolling share-based option plan providing for the issuance of share-based options for up to 10% of the Company’s issued and outstanding common shares. The Company may grant options from time to time to its directors, officers, employees and other service providers. The options vest 25% on the date of the grant and 12 ½ % every three months thereafter for a total vesting period of 18 months.

Share-based options movement

  Number of Options

Weighted average exercise price

Balance, December 31, 2013

6,298,500

C$3.93

Granted

5,801,000

C$2.16

Replacement options granted on the acquisition of PMI


3,237,491


C$4.01

Exercised

(871,350)

C$2.14

Cancelled/Expired

(3,871,350)

C$4.51

Balance, December 31, 2014

10,594,291

C$2.95

Granted

4,771,000

C$2.05

Exercised

(150,000)

C$2.12

Cancelled/Expired

(778,500)

C$4.35

Balance, September 30, 2015

14,436,791

C$2.59

The following table summarizes the share-based options outstanding and exercisable at September 30, 2015:

 

Total options outstanding

Total options exercisable

Range of

exercise price

Number

Weighted average contractual life (years)

Weighted average exercise price C$

Number

Weighted average contractual life (years)

Weighted average exercise

price C$


C$1.00-C$2.00


1,114,141


4.25


1.93


639,141


3.98


1.93

C$2.01-C$3.00

9,838,000

3.70

2.18

7,908,750

3.55

2.20

C$3.01-C$4.00

2,827,900

1.88

3.79

2,827,900

1.88

3.79

C$4.01-C$5.00

630,500

1.42

4.54

630,500

1.42

4.54

C$6.01-C$7.00

26,250

1.69

6.10

26,250

1.69

6.10

 

14,436,791

3.28

2.59

12,032,541

3.06

2.69


During the three months ended September 30, 2015, $0.3 million (three months ended September 30, 2014 - $0.6 million) in share-based payments were recorded in the statement of comprehensive loss, which includes $0.04 million included in exploration and evaluation expenses (three months ended September 30, 2014 – $nil). In addition, during the three months ended September 30, 2015,  share-based payments of $0.2  million were included in mineral interests and development costs (three months ended September 30, 2014 –  $0.3 million).


During the nine months ended September 30, 2015, $1.7 million (nine months ended September 30, 2014 - $2.2 million) in share-based payments were recorded in the statement of comprehensive loss, which includes $0.2 million included in exploration and evaluation expenses (nine months ended September 30, 2014 –$nil). In addition, during the nine months ended September 30, 2015,  share-based payments of $1.1 million were included in mineral interests and development costs (nine months ended September 30, 2014 –  $2.2 million).



17



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



11.

Equity reserves (continued)

(a)

Share-based options (continued)

The fair value of the share-based options granted during the nine months ended September 30, 2015 and September 30, 2014 used to calculate compensation expense, has been estimated using the Black-Scholes option pricing model with the following weighted average assumptions:


 

Three months ended

September 30,

Nine months ended

September 30,

 

2015

2014

2015

2014

 

 

 

 

 

Risk free interest rate

 -

 1.37%

 0.71%

 1.38%

Expected dividend yield

 -

 -

 -

 -

Share price volatility

 -

 60.51%

 53.26%

 60.04%

Forfeiture rate

 -

 3.47%

 3.57%

 3.47%

Expected life of options

 -

 3.20 years

 3.11 years

 3.20 years

No share-based options were granted during the three months ended September 30, 2015.

(b)

Performance rights

In connection with the acquisition of PMI (note 3), the Company entered into an agreement with  employees of PMI, who held PMI performance rights, to issue an aggregate of 117,158 common shares of the Company upon vesting of the performance rights. In April 2014, the performance rights had not vested and were cancelled due to termination of the employment agreements of the performance rights holders.

(c)

Warrants

The continuity of share purchase warrants for the nine months ended  September 30, 2015 is as follows:


Exercise price

Expiry date

December 31, 2014

Issued

Exercised

Expired

September 30, 2015

 

 

 

 

 

 

 

C$  5.00

September 26, 2015

126,000

-

-

126,000

-

 

 

126,000

-

-

126,000

-

During the year ended December 31, 2014, the Company issued 126,000 replacement warrants pursuant to the acquisition of PMI (note 3).

The continuity of share purchase warrants for the year ended December 31, 2014 is as follows:


Exercise price

Expiry date

December 31, 2014

Issued

Exercised

Expired

December 31, 2014

 

 

 

 

 

 

 

C$  5.00

September 26, 2015

-

126,000

-

-

126,000

C$  4.00

November 5, 2014

9,443,500

-

-

(9,443,500)

-

 

 

9,443,500

126,000

-

(9,443,500)

126,000













18



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



12.

Restructuring costs

Restructuring charges incurred and/or accrued during the three months ended March 31, 2014 related to the closure of the PMI corporate offices in Canada and Australia as well as employee terminations due to redundancy post the acquisition of PMI. The restructuring was completed during April 2014. No restructuring charges were incurred in the three and nine months ended September 30, 2015, therefore no comparative information is provided in the table below:

Restructuring costs

Three months ended  September 30, 2014

Nine months ended September 30, 2014

 

 

 

Employee termination benefits

$               -

$      2,503,986

Contracts termination costs

19,626

288,775

Write-off of equipment

-

205,695



$     19,626


$     2,998,456

13.

Related party balances and transactions

All transactions with related parties have occurred in the normal course of operations and are measured at the exchange amount agreed to by the parties. All amounts are unsecured, non-interest bearing and have no specific terms of settlement.

(a)

Key management compensation

Transactions with key management personnel were as follows:

 

Three months ended

September 30,

Nine months ended

September 30,

 

2015

2014

2015

   2014

 





Salaries and benefits

$    315,801

$    314,110

$       866,716

$    1,046,344

Share-based payments

104,752

236,153

717,050

1,210,357

 

$     420,553

$    550,263

$    1,583,766

$    2,256,701

Key management personnel consist of directors and officers of the Company.


(b)

Other related parties balances and transactions

Related party transactions (recoveries):

 

Three months ended

September 30,

Nine months ended September 30,

 

 2015

 2014

 2015

 2014

 





Universal Mineral Services Ltd. (“UMS”) (i)

 $        -

 $    35,781

 $   52,226

 $ 131,088


Related party balances receivable (payable):

 

September 30, 2015

 December 31, 2014

 

 

 

UMS (i)

$                      -

$           (8,137)

UMS – prepaid deposit (i)

-

21,550

 

$                      -

$           13,413

UMS is a private company with certain key management personnel and directors in common with the Company, and pursuant to an agreement dated March 30, 2012, provided geological, corporate development, administrative and management services to the Company on a cost recovery basis. Effective July 1, 2013, the Company notified UMS that it would no longer require any personnel services but continued to share the cost of UMS’s office tenancy and IT services where required until May 31, 2015.



19



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



14.

Commitments and contractual obligations

As at September 30, 2015, the Company had contractual obligations totaling $171.6 million, relating to long term debt (December 31, 2014 - $73.7 million). Contractual obligations related to the long term debt are subject to changes in the three-month LIBOR rate. Prepayment terms allow the Company to prepay the long term debt, with no penalty, in whole or in part at any time. At  September 30, 2015 the long term debt had a prepayment value of $136.0 million (December 31, 2014 - $60.7 million).

In addition, the Company has entered into certain construction and engineering contracts relating to the construction of the Asanko Gold Mine Phase 1.


 Contractual obligations

Payments due by period

 

Total

1 year

2-3 years

4-5 years

 





Long term debt, including future interest charges

$    171,564,682

$        8,636,151

$       87,893,432

$   75,035,099

 

 

 

 

 

Open purchase orders and other obligations


79,955,872          


79,955,872


-


                    -

 

 

 

 

 

 

$    251,520,554

$    88,592,023

$       87,893,432

$   75,035,099


15.

Contingencies

 

Except as set forth below, there are no material legal proceedings to which the Company is a party or, to the best of the Company's knowledge, to which any of the Company's property is or was subject.

Goknet Arbitration

On August 15, 2014, the Company entered into a settlement agreement with Goknet to eliminate Goknets’s claim for a 2% NSR royalty on Phase 1 of the Asanko Gold Mine Project. The settlement involved cash, one million Asanko shares (note 10(b)) and the transfer to Goknet of two exploration projects, Kubi and Diaso (note 6(b)). Included in the agreement, the Company retained a right to match any future offer made to Goknet with respect to a disposal of the Diaso Project concessions.

Godbri Datano Claim

On September 14, 2012, Godbri Mining Limited (“Godbri”) lodged a statement of claim in the High Court of Justice, Accra, Ghana, seeking a declaration that, among other things, that the sale of the Datano concession to Adansi Ghana is null and void. Godbri claims to be the owner of 38% of the issued share capital of Midras Mining Limited (“Midras”) and states that it did not consent to the acquisition of the Datano concession by Adansi Ghana. Adansi Ghana filed a defence on November 12, 2012. Godbri subsequently amended its claim on January 29, 2013 and in March 2013, both the Company and Adansi Ghana filed further defences. The matter is currently awaiting trial. The Datano concession was acquired in August 2013 from Midras. The Company considers the claim made by Godbri to be spurious and without any merit. Godbri is a private Ghanaian company.

Matisse and Madison Claim

On October 22, 2013, Matisse & Madison Co. Ltd. (“M&M”) lodged a statement of claim in the High Court of Justice, Accra, Ghana, seeking compensatory damages of $20 million plus interest for breach of a verbal contract related to the purchase of the Datano Concessions from Midras. The Company maintains that this is a frivolous lawsuit lacking in merit and will vigorously defend itself.




20



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



16.

Supplemental cash flow information


 

Three months ended September 30,

Nine months ended September 30,

 

2015

2014

2015

2014

 

 

 

 

 

Change in asset retirement provision included in mineral interest


$     1,677,389

 

 $           13,810


$       4,863,159       

 

 $        481,635

Change in accounts payable related to mineral interests and development costs


-


1,036,773


-


4,157,133

Change in accounts payable related to property, plant and equipment


5,673,071


(2,501,910)


17,787,048


335,831

Borrowing costs included in property, plant and equipment


3,364,538


300,168


7,334,952


300,168

Fair value of mineral interests assigned on acquisition of PMI


-


-


-


 115,285,828

Reclassification of equity reserves on exercise of share-based options


(134,134)


(384,116)


(134,134)


(401,004)

Shares included in dispute settlement costs

-

2,375,880

-

2,375,880

Share-based compensation included in mineral interests and development cost


212,466


278,673


1,075,294


1,925,824


17.

Segmented information

Geographic Information

The Company operates in one reportable operating segment, being the exploration and development of resource properties.

Geographic allocation of non-current assets

September 30, 2015

Canada

Ghana

Total

 

 

 

 

Property, plant and equipment

$        65,181

$      226,931,605

$        226,996,786

Reclamation deposit

-

1,695,664

1,695,664

Deferred debt financing costs

-

300,000

300,000

Mineral interest and development assets

-

212,026,244

212,026,244

 

$        65,181

$      440,953,513

$       441,018,694



December 31, 2014

Canada

Ghana

Total

 

 

 

 

Property, plant and equipment

$        60,120

$        65,802,496

$        65,862,616

Deferred debt financing costs

-

2,936,146

2,936,146

Mineral interest and development assets

-

183,244,562

183,244,562

Investment in associate

1,000

-

1,000

 

$        61,120

$      251,983,204

$      252,044,324







21



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



17.

Segmented information (continued)


Geographic allocation of loss (income)


 

Three months ended September 30,

Nine months ended September 30,

 

2015

2014

2015

2014

 

 

 

 

 

Canada

$     3,446,131

$   4,799,167

$     8,958,522

$   13,153,082

Ghana

(140,140)

4,530,348

(438,286)

6,578,325

Total

$     3,305,991

$   9,329,515

$     8,520,235

$   19,731,407



18.

 Financial instruments


As at September 30, 2015 the Company’s financial instruments consist of cash and cash equivalents, receivables, reclamation bond, accounts payable and accrued liabilities, current portion of long term debt, long term debt and an embedded derivative in relation to an interest rate floor, and foreign currency forward contracts.


The fair value of these financial instruments approximates their carrying value, unless otherwise noted.


The risk exposure arising from these financial instruments is summarized as follows:


(a)

Credit risk

Credit risk is the risk of an unexpected loss if a customer or a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on the cash and cash equivalent balances held at banks in each of Canada and Ghana. The majority of the Company’s cash is held in Canadian based banking institutions, authorized under the Bank Act (Canada) to accept deposits. As at September 30, 2015, the Company had interest receivable of $nil (December 31, 2014 - $0.07 million).

 (b)

Liquidity risk

The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to settle obligations and liabilities when due. As at September 30, 2015 the Company had a cash and cash equivalents balance of $159.3 million (December 31, 2014 – $228.7 million) to settle current accounts payable and accrued liabilities of $33.6 million (December 31, 2014 - $15.3 million) that are considered short term and expected to be settled within 30 days. The Company’s first payment of $8.6 million of interest, withholding tax and principal on the long term debt is due on July 1, 2016.  The Company also has a $20.0 million cost overrun facility available.










22



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



18.

 Financial instruments (continued)

(c)

Market risk

(i)

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company’s loan agreement with Red Kite (note 8) provides for interest at LIBOR plus 6% with a minimum LIBOR of 1%.

The Company’s sensitivity to a 1% decrease or increase in market rates of interest would have an immaterial effect on the Company’s interest expense/income for the nine months ended September 30, 2015.

 (ii)

Foreign currency risk

The Company is exposed to foreign currency risk through its foreign currency monetary assets and liabilities. A significant change in the currency exchange rate between the US dollar and Canadian dollar (CAD) and South African rand (ZAR) could have an effect on the Company’s results of operations, financial position and cash flows.  During the nine months ended September 30, 2015, the Company had entered into a series of forward contracts to purchase a total of ZAR 346.6 million in exchange for Canadian and US dollars at specified exchange rates.

During the three months ended September 30, 2015, the Company settled several currency forward contracts and realized a foreign exchange loss of $0.01 million. During the nine months ended September 30, 2015, the Company realized a foreign exchange gain of $0.3 million on settlement of currency forward contracts.

As at September 30, 2015, the Company had a CAD cash balance of $7.2 million (December 31, 2014 – $30.8 million) and ZAR balance of $7.5 million (December 31, 2014 - $0.4 million) expressed in US dollar equivalent.


 (iii)

Other price risk

Other price risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from currency risk or interest rate risk. As at September 30, 2015 and December 31, 2014, the Company had no financial instruments exposed to other price risk.

(d)

Fair values

(i)

Foreign currency forward contracts derivative

During the nine months ended September 30, 2015, the Company entered into a series of forward contracts to purchase ZAR in exchange for Canadian  and US dollars at specified exchange rates. These forward contracts had or have settlement terms that range from one month to eleven months.

At September 30, 2015, the company had outstanding foreign currency forward contracts to buy ZAR 24.7 million in exchange for C$ 2.3 million with settlement dates between one and five months.

The fair values of outstanding foreign currency forward contracts are determined using the forward rates at the measurement date, with the resulting value discounted to present value and are categorized within level 2 of the fair value hierarchy.










23



ASANKO GOLD INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

Three and nine months ended September 30, 2015 and 2014

Expressed in United States Dollars



18.

 Financial instruments (continued)

(d)

Fair values (continued)

(ii)

Embedded derivative

The embedded derivative liability associated with the interest rate floor of the long term loan is categorized within level 2 of the fair value hierarchy. The fair value of the embedded derivative was estimated using the three-month LIBOR forward rates to 2020 ranging from 0.33% to 2.12%  using an option pricing model.

(iii)

Other

The carrying values of cash and cash equivalents, receivables and accounts payable and accrued liabilities approximate their respective fair values due to the short-term nature of these instruments. The fair value of the current and non-current portions of the long term debt approximates its carrying value due to the floating rate nature of the debt instrument.

(e)

Items of income, expense, gains or losses arising from financial instruments


 

Three months ended September 30,

Nine months ended September 30,

 

2015

2014

2015

2014

 

 

 

 

 

Interest income from loans and receivable

$     251,764

$   286,609

$     709,754

$     1,018,942

 

 

 

 

 

Realized foreign exchange gain (loss) from currency forward contracts

(10,419)

-

265,818

-

 

 

 

 

 

Realized and unrealized net foreign exchange gain (loss) from other financial instruments

(1,074,061)

(578,244)

(2,024,077)

1,584,845





24
















[exhibit992001.jpg]








MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and nine months ended September 30, 2015 and 2014

_______________________






ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



This Management’s Discussion and Analysis (“MD&A”) of Asanko Gold Inc. (“Asanko” or the “Company”) has been prepared by management as of November 10, 2015 and should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2015 and 2014 and the related notes thereto. All financial information has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. All dollar amounts herein are expressed in United States dollars unless stated otherwise. References to C$ are to Canadian dollars.


This MD&A contains Forward Looking Information. Please read the Cautionary Statements on page 29 carefully.


Description of the Business


The Company was incorporated on September 23, 1999 under the laws of British Columbia. The Company’s shares trade on the Toronto Stock Exchange and NYSE MKT Equities Exchange under the symbol “AKG”.  The Company’s primary asset is its Asanko Gold Mine Project (the “Project”) located on the Asankrangwa gold belt in Ghana.


Asanko’s vision is to become a low cost, mid-tier gold producer.  Asanko’s vision will be achieved through the phased development of the Asanko Gold Mine. Phase 1 of the Project is fully funded and construction is in its final stages, with commissioning to commence in December 2015. First gold is expected by January 2016 with commercial production by Q2 2016. It is envisioned in a current Phase 2 pre-feasibility study that the Project will be expanded from approximately 200,000 ounces per year to over 400,000 ounces per year by 2018.


Overall Performance


Financial Performance

The Company does not expect to generate revenues until the commencement of production at the Asanko Gold Mine in Q1 2016.  As such, during the three months ended September 30, 2015 (“Q3 2015”) Asanko had a net loss of $3.3 million or a loss of $0.02 per share compared to net loss of $9.3 million or $0.05 per share during the three months ended September 30, 2014 (“Q3 2014”).


Phase 1 Operations

Mining

Mining of the Nkran Pit, the main mineral resource for Phase 1, has continued at rates above long term steady-state mining rates.  Mining operations are now entirely in fresh rock with the drill-blast-load-haul cycle fully operational.


As at November 8, 2015, the contractor has mined 16.6 million tonnes (“Mt”) from the pit, and the pre-strip is nearly complete.  To date, approximately 99,000 tonnes of ore at a grade of 1.69 g/t gold have been stockpiled ahead of the processing plant. The ore mined to date has been mostly from Inferred Resources that are located peripheral to the main orebody, and have been exposed as the mining pushback has advanced.


Mineralized extensions to the main Nkran orebody were intercepted in late October, opening up two significant mining faces, which have been drilled for grade-control.  An additional 150,000 tonnes of ore is expected to be mined during November, bringing the stockpile to approximately 250,000 tonnes of ore ahead of commissioning.  Initial grade control drilling results are being reconciled back to the resource model.  


Grade control drilling has progressed during the pre-stripping operation, and during September evaluated zones of Inferred Mineral Resources that were encountered.  The grade control model is now fully integrated with the resource model and is now being used as the basis of ore delineation and the selective ore mining methodology.  With the Nkran pit now fully commissioned, producing at above design capacity and effectively utilizing all the control methodologies, including grade control drilling, sample preparation and analysis, reserve model compilation, ore delineation, bench production planning and



2




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



ultimately selective ore mining, the Project has taken a significant step forward in de-risking project production by removing mining as a commissioning risk.


De-watering of the pit has essentially been completed and is no longer critical for access to the orebody.  The pit is expected to be empty in November.


Construction

The primary crusher, overland conveyor, stockpile tunnel and mill feed conveyors have been completed and the process of vendor commissioning is now underway.  Hot commissioning of the crusher is expected to take place in early December.


The two grinding mills are now fully erected with trommel screens installed and alignment of the mills underway. The mill classification, screening and gravity concentration equipment is all mechanically installed along with the intense cyanide leach reactor and dedicated elution column.  Piping throughout the circuit is underway and on the critical path to Project completion.  Piping contractors are now working 24 hours a day, 7 days a week.  


The carbon-in-leach (“CIL”) circuit is mechanically complete with all seven tanks fully erected, including installation of the agitators and inter-stage carbon screens.  The pre-leach thickener is also mechanically complete with the thickener rake mechanism and feed well installed.  The carbon stripping and elution equipment has been installed.  The gold room is also mechanically complete with the electrowinning circuit, doré furnace and gold safe all installed.


The reagents preparation area is essentially complete, with vendor commissioning planned this month.  All other ancillary services, such as change house, workshop, raw water dam and pollution control dam are nearing completion.


The Tailings Storage Facility (“TSF”) is complete and was inspected by an independent third party in October.  The final inspection report has been delivered to the Environmental Protection Agency (“EPA”) and the Company expects to receive confirmation that all conditions of the permit have been met and the TSF is ready to accept tailings following a final inspection by the EPA in November.  The tailings pipeline and return water system are well under construction and due for completion in November.  During the short rainy season in October, sufficient water was captured in the TSF for start-up and commissioning of the process plant.


Electrical & Instrumentation in all areas is underway and also on the critical path for completion of the Project.  Contractors are now working 24 hours per day, 7 days a week in these key areas.  The motor control centres (“MCC”) in the processing facility were assembled overseas and shipped in containers to site.  Installation and wiring of the MCC’s is 50% complete, with the critical MCC for the milling operations 80% complete.  Associated low voltage transformers and bays are being installed and will be ready to energize in November.


Power Supply Update

In June 2015 Asanko signed a life of mine Power Purchase Agreement (“PPA”) with the independent power producer Genser Energy Ghana Limited (“Genser”).  Under the PPA, Genser committed to deliver temporary power to the Project by November 1, 2015 and build a permanent dedicated plant by May 1, 2016.  Genser has been unable to meet the deadline for providing temporary power to the Project. Genser and Asanko are in discussions to resolve the issue and Asanko has reserved all its rights in connection with the matter.

 

The 30km long, 161kV power line connecting the Project site to the national power grid at the Asawinso substation was completed in November, along with the 161/11kV substation at site.  The line is now energized and ready to deliver power to the Project site for commissioning. The Company plans to receive power from the state authority at rates materially in line with the Definitive Project Plan.


In addition, the Company is in the process of installing 20 megawatts of diesel generator capacity at site as a 100% redundant back-up supply of power.  The back-up power will be fully operational by early December.





3




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



Ramp-up and Commissioning

The entire processing facility is expected to be ready for commissioning during December 2015. Commissioning will commence on stockpiled ore.  As over 40% of the gold is expected to be recovered from the gravity gold circuit, gold will be electrowon and poured to doré approximately 14 days after ore is fed to the mills.  Approximately 7,000 ounces of gold will be locked-up in the CIL circuit as the carbon becomes fully loaded.  Mill feed rates and gold recoveries are expected to ramp-up to steady-state levels over the first quarter of operations with commercial production expected in Q2 2016.


The Company has been focusing on business readiness for the past several months ahead of the hand-over of the process plant from the EPCM contractor, DRA Global to Asanko.  Recruitment is now nearing completion with training of operators and trades personnel well underway.  Standard operating procedures and management operating systems have been fully developed and are being implemented on site.


Health and Safety

The Company has fully implemented its health and safety policies and protocols in preparation for the processing plant hand-over, including implementation of the recommendations following the fatal mining accident that occurred in the pit with the mining contractor in June 2015. The mining contractor’s health and safety protocols have now been completely integrated and aligned with those of the Company.  


The Asanko Gold Mine continues to have a strong safety record with over 7.5 million man hours worked since the last Lost Time Injury, which occurred in July 2012.  As part of this record, the EPCM contractor, DRA Global, and its sub-contractors have achieved an impressive 3.7 million man hours on the Project without a Lost Time Injury.


Partial Relocation of Nkran Village

The partial relocation of the Nkran village (88 building structures) was completed during the period.  A formal handover ceremony was held on 15 September and the villagers were moved into their new houses. The new resettlement project offers a substantial improvement in quality of life with all the houses fitted with kitchen and bathroom facilities, electricity and potable water. There is also street lighting, a water storage facility and an integrated waste management system. A community centre, school and football field were also built. All the relocated properties were built by local Ghanaians from the region, adding considerable value to the communities impacted by the mine.


Key Milestones

An update on the key milestones that the Company is working towards are, as follows:


Original Guidance

Current Status

Commence early works

Q2 2014

Complete

Near mine resource definition drilling at Dynamite Hill

Q2 2014

Complete

Finalize revisions to the Red Kite financing arrangements

Q2 2014

Complete

Investment Decision for Phase 1

Q3 2014

Complete

DPP including updated Mineral Resource Estimate (“MRE”)

Q4 2014

Complete

Commence Project Construction

Q3 2014

Complete

Phase 2 Pre-Feasibility Study

Q1 2015

Complete

Commence Commissioning and Ramp-up

Q1 2016

Q4 2015

Steady State Commercial Production

Q2 2016

Q2 2016

Phase 2 Definitive Feasibility Study

Q2 2016

Q3 2016




4




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



Phase 1 Development Expenditures

The capital cost budget for the Project as approved by the board of directors is $295 million with the Project commencing July 1, 2014.  Phase 1 development expenditures as at September 30, 2015 were recorded through Property, Plant and Equipment at $198.4 million, as follows:


 

 

Asanko Gold Mine

Totals

Cost of Property, Plant and Equipment

$ millions

 

As at Sept 30, 2015

229.5

 

Less: costs incurred prior to July 1, 2014 (pre-construction decision)

(13.8)

 

Less: costs acquired through the acquisition of  PMI

(9.2)

 

Less: capitalized interest

(8.1)

 

Total Phase 1 Development Expenditures

198.4


Of the $198.4 million, approximately $31.9 million of Phase 1 development expenditures were in payables as at September 30, 2015.



Commitments and Contractual Obligations

As at September 30, 2015, the Company had incurred capital costs and has contractual obligations and open purchase orders totaling $278.4 million relating to the construction of the Asanko Gold Mine Phase 1.  Approximately $198.4 million has been paid or invoiced, with the balance of $80 million due to be paid within 1 year as work is completed on Phase 1.  Procurement is now 94% complete and proceeding on schedule. Nearly all of the capital expenditure has now been committed and the Project is expected to be completed within the $295 million capital expenditure budget.


Contractual Obligations

$ millions

%

Phase 1 development expenditures paid

166.2

56%

Invoiced amounts in payables

31.9

11%

Total costs incurred

198.4

67%

Further commitments made

80.0

27%

Total committed

278.4

94%

Estimated additional to complete

13.6

5%

Remaining contingency

3.0

1%

Total estimated cost

295.0

100%




5




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



Development Costs


During the nine months ended September 30, 2015, $22.6 million was spent on development costs, not including asset retirement costs additions or share-based payments, compared to $21.1 million during the nine months ended September 30, 2014. Deferred development costs for the current period include $18.6 of VAT receivable allowance related to VAT paid on costs capitalized to property, plant and equipment and work in progress.


 

Nine months ended September 30,

 

2015

2014

 

 

 

Development support costs

$       2,655,615

$      2,800,808

Development drilling and assays

-

1,480,903

EPCM, early works

-

7,806,556

Feasibility studies and engineering

-

6,724,598

Permitting

18,167

461,420

Phase 2 feasibility

1,141,893

-

Community affairs and environment

155,369

1,840,439

VAT receivable allowance

18,622,185

-

 

22,593,229

21,114,724

Asset retirement costs

4,863,159

510,926

Share-based payments

1,075,294

1,925,824

 

$     28,531,682

$    23,551,474

Certain comparative figures have been reclassified to conform to the presentation adopted in the current period.


Exploration and Evaluation


During the period, the Company continued an exploration program focused on high priority targets that have the potential to add oxide resources to the Asanko Gold Mine using systematic and low-cost exploration methods. This follows positive results from an extensive regional prospectivity mapping exercise undertaken in 2014 by external consultants.


The Asankrangwa Gold Belt and wider Kumasi Basin in Ghana contain a number of large economic gold systems such as Nkran, Esaase and Edikan. Significant potential exists for Asanko to generate further value on its land holdings as demonstrated with the recent discovery of the Dynamite Hill deposit.


The study concluded that only 7% of Asanko’s highly prospective concession area had been explored historically. The study has provided a better understanding of the controls on the location of gold deposit formation and the expression of these controls in exploration data and a significant number of new exploration targets have been generated. The identified targets provide a clear opportunity for the exploration team and offer the potential for rapid delineation of new deposits and resource areas.


The 2015 exploration programme has been designed to provide a cost effective validation of the prospectivity targets, as well as establish a level of parity to the data coverage. To this end, an airborne geophysical survey was conducted during the period in order to infill areas not flown already, and importantly lay the foundation for contiguous geological and structural modelling of targets. Near surface oxide targets are being prioritized for investigation during the 2015 programme, and will be ear-marked for initial drill testing during 2016.  It is anticipated that the integration of the airborne geophysical survey results and current structural modelling will yield further near mine targets. The budget for the 2015 program is approximately $2.0 million, of which approximately $1.6 million was spent during the nine months ended September 30, 2015, as follows:




6




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




 

Three months ended Sept 30,

Nine months ended Sept 30,

 

2015

2014

2015

2014

 

 

 

 

 

Exploration support and

       prospectivity mapping costs


$      427,191


$     113,469


$    1,347,785


$   245,567

Share-based compensation

36,401

-

218,918

-

 

$      463,592

$     113,469

$  1,566,703

$   245,567


Expenditures during the nine-month period ended September 30, 2015 were predominantly related to investigations on properties within 10 kilometers of the Nkran pit.  Investigations included trenching, sampling and some drilling.  




Corporate Overhead

During the nine-month period ended September 30, 2015, $3.6 million was incurred in corporate overhead, including wages, consulting fees, professional fees, office rents and investor relations activity, as follows:


 

Three months ended Sept 30,

Nine months ended Sept 30,

 

2015

2014

2015

2014

Corporate overhead

 

 

 

 

Wages and consulting fees

$     529,139

$     623,789

$     1,305,704

$     2,249,683

Office rent and administration

272,580

264,353

921,523

1,317,072

Professional fees

141,762

277,844

573,728

732,044

Regulatory fees

41,231

81,205

180,670

316,867

Travel, promotion and Investor

     relations


155,991


175,187


649,633


654,132

Total corporate overhead

  1,140,703

  1,422,378

   3,631,258

    5,269,798

Non-cash items:

 

 

 

 

   Depreciations

10,961

13,915

48,190

57,378

   Share-based compensation

223,802

553,050

1,463,045

2,201,245

Total administration expenses

$  1,375,466

$  1,989,343

$    5,142,493

$   7,528,421



A significant reduction in corporate overhead was achieved during the period in relation to the same period in 2014 by rationalizing management and offices following the February 2014 merger with PMI Gold Corporation.


Funding

In June 2015, the Company drew-down the third and final tranche of the project debt facility resulting in aggregate draw-downs of $130.0 million. There are no gold price related covenants on the loan, no hedging and no sweep of excess free cash. The first quarterly payment of approximately US$8.6 million is due on July 1, 2016. The first five quarterly payments are 4% of principal plus interest, with the remaining ten payments at 8% of principal plus interest. The Company can also elect to repay the loan early with no penalties.


The Company believes it is fully funded through to commencement of commercial production of Phase 1 of the AGM with US$159.3 million in cash on-hand, as at September 30, 2015 (December 31, 2014 - $228.8 million) and an undrawn US$20 million cost-overrun facility for total available funding of US$179.3 million. The Company expects to generate positive cash flows commencing in Q2 2016. The remaining use of funds (including commissioning and startup costs) is $140.0 million, creating a current funding buffer of approximately $40 million.




7




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014





Forecast Cash Uses 30-Sept-15 to 1-Apr-16

$ millions

Invoiced amounts in payables

31.9

Further commitments made

80.0

Estimated additional to complete

13.9

Remaining contingency

3.0

Total Remaining Project Spend

128.8

Working capital less pre-production revenue (incl. VAT)

8.2

Corporate overhead and other

3.0

Total Cash Uses

140.0


Phase 2 Pre-Feasibility Study

The Company completed a Pre-Feasibility Study on the Project in May 2015 (the “May 2015 AGM PFS”) outlining the expansion of the processing facilities and bringing the Esaase pit into the mine plan as Phase 2 of the Asanko Gold Mine construction.  The Phase 2 expansion envisions one large, multi-pit mine, including the Phase 1 pits, producing an average of 411,000 ounces of gold annually over a 10.5 year Life of Mine (“LoM”) from 2018.  The Esaase ore would be mined and crushed at Esaase and then conveyed to a central processing facility at Obotan. The Obotan facility would be expanded with a 5 Mtpa flotation plant to be built alongside the 3 Mtpa Carbon-in-Leach (“CIL”) plant currently under construction for Phase 1.  In addition the annual throughput of the Phase 1 CIL plant would be upgraded and increased to 3.8Mtpa by adding 2 extra CIL tanks to allow for the blending of oxide ores from Esaase into the feed from the current Phase 1 pits. Highlights of the May 2015 AGM PFS are, as follows:


·

Life of Mine gold production of 4.7 million ounces over a 12.5 year mine life (Phase 1 and 2).

·

Lowest quartile All-In Sustaining Costs of US$798/oz including corporate overhead and interest on debt.

·

Robust project economics with strong cash flow generation even in a weak gold price environment:


Total AGM Economics

NPV (5%)*

US$ (millions)

IRR*

(%)

2018 - 2021
After-Tax FCF

(US$ millions)

Spot - US$1,150/oz

476

20

702

Study Basis - US$1,300/oz

770

27

848

Upside Case - US$1,500/oz

1,149

36

1,043

* After-tax project NPV & IRR over Life of Mine basis 1 July 2014


As a result of the positive project economic outcomes of the May 2015 AGM PFS, a portion of the Esaase Mineral Resources have been upgraded to Mineral Reserves with total AGM mineral reserves, as follows:


Total AGM

Mineral Reserves

Tonnage

(Mt)

Grade

(g/t)

Ounces

(millions)

Proven

38.0

1.75

2.14

Probable

58.9

1.64

3.11

Total

96.9

1.68

5.25


The Board of Directors has approved the commencement of a Definitive Feasibility Study (“DFS”) for Phase 2, which will include optimization of the mine plan, further metallurgical test work and more detailed engineering. The DFS is expected to be complete in Q3 2016. Completing a successful DFS, arranging financing for the $270 million capital cost, and obtaining permitting for Phase 2 will be required for the Board of directors to make an investment decision.





8




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014





Discussion of Operations


Asanko Gold Mine Project


The acquisition of PMI in early 2014 has created a flagship project in Ghana and the foundation on which to build a mid-tier gold mining Company. The flagship project was created by combining both the Obotan and Esaase Projects into one mine now referred to as the “Asanko Gold Mine”. The Asanko Gold Mine (“AGM” or the “Project”) consists of six known open pit deposits over a 25km trend and is located in Ghana, West Africa (below figure).


The Government of Ghana has a 10% free carried interest in the AGM in accordance with Ghanaian Law.  Section 43.1 of the Ghanaian Minerals and Mining Act of 2006, (Government Participation in Mining Lease) provides:  Where a mineral right is for mining or exploitation, the Government shall acquire a ten percent free carried interest in the rights and obligations of the mineral operations in respect of which financial contribution shall not be paid by Government.

In order to achieve this legislative objective, 10% of the common shares of the Company’s Ghanaian subsidiary, Keegan Resources (Ghana) Limited, which owns the Esaase concession have been issued into the name of the Government of Ghana with a goal of settling the obligation. The government has a nominee on the board of this subsidiary. There is no shareholders’ agreement between the Company as the 90% shareholder and the Government of Ghana as the 10% shareholder. The Ghanaian Government is entitled to 10% of declared dividends from the net profits of Asanko’s operations in Ghana but does not have to contribute to its capital investment.

The Company’s Ghanaian subsidiary which owns the Abore, Abirem and Adubea mining leases has neither issued 10% of the Company’s shares to the Government of Ghana nor appointed a government representative to the board of the subsidiary.  The Company has initiated a corporate restructuring for housekeeping purposes following the PMI acquisition.  The Company intends to transfer all mining leases and concessions held by Adansi Gold Company (GH) Limited to Keegan Resources Ghana Ltd.  In addition, Keegan Resources Ghana Ltd will transfer the Asumura exploration concessions to a new subsidiary, Asanko Gold Exploration Ltd.  Asanko Gold Exploration Ltd. will become the Company’s exploration vehicle in Ghana and continue to be owned 100% by Asanko Gold Barbados Inc.

Following the re-organization, Keegan Resources Ghana Ltd will be renamed Asanko Gold Ghana Ltd and will be the Company’s operating entity in Ghana, holding all of the assets of the Asanko Gold Mine.  Asanko Gold Ghana Ltd will be 90% owned by Asanko Gold (Barbados) Inc. and the Government of Ghana will have a 10% free-carried interest.  

In the future, the Company intends on winding up Adansi Gold Limited and PMI Gold Corporation.


Development Strategy

The Company envisions developing the Asanko Gold Mine in two phases.  Phase 1 is based on the November 2014 Definitive Project Plan and is fully financed, fully permitted and under construction.  Phase 1 is targeting steady-state production averaging 190,000 ounces per year by Q2 2016, mining ore from the main pit at Nkran, along with feed from satellite pits at Adubiaso, Abore, Asuadai and Dynamite Hill, and processed via a 3Mtpa CIL plant.  

The Company completed a Pre-Feasibility Study in May 2015, outlining the expansion of the processing facilities to include a 5Mtpa flotation plant and bringing the Esaase pit into the mine plan as Phase 2 of the Asanko Gold Mine construction.  The Phase 2 expansion envisions one large, multi-pit mine producing an average of 411,000 ounces of gold annually over a 10.5 year Life of Mine (“LoM”) from 2018.   


The Company engaged DRA Mineral Projects (“DRA”) to manage the May 2015 AGM PFS. DRA are currently building Phase 1 of the Project on an EPCM basis.  




9




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



[exhibit992002.jpg][exhibit992003.jpg]


Mineral Resources

The AGM Mineral Resources are divided between the Obotan deposits (Nkran, Adubiaso, Abore, Dynamite Hill & Asuadai deposits) for which a 0.8 g/t cut-off was used, and the Esaase deposit for which a 0.6 g/t cut-off was used. The estimation for all the deposits forming the AGM were compiled by Charles J. Muller, of CJM Consulting. The Obotan deposit estimation was completed in September 2014 whilst the Esaase estimation was completed in September 2012.


Asanko Gold Mine Global Resource Estimate

Deposit

Measured

Indicated

Total (M&I)

Inferred

Tonnes (millions)

Grade (g/t)

Oz (millions)

Tonnes (millions)

Grade (g/t)

Oz (millions)

Tonnes (millions)

Grade (g/t)

Oz (millions)

Tonnes (millions)

Grade (g/t)

Oz
(millions)

Nkran

13.24

2.55

1.09

25.80

2.23

1.85

39.04

2.34

2.94

7.06

2.34

0.53

Abore

1.61

1.70

0.09

3.37

1.63

0.18

4.98

1.65

0.27

6.59

1.65

0.35

Adubiaso

0.73

2.60

0.06

1.40

2.04

0.09

2.13

2.23

0.15

0.20

2.27

0.02

DynamiteHill

0.00

0.00

0.00

1.84

1.86

0.11

1.84

1.86

0.11

0.52

1.51

0.03

Asuadai

0.00

0.00

0.00

1.64

1.34

0.07

1.64

1.34

0.07

1.25

1.61

0.06

Phase 1 Total

15.58

2.47

1.24

34.05

2.10

2.30

49.63

2.22

3.54

15.62

1.96

0.99

Esaase

23.38

1.49

1.12

71.25

1.44

3.28

94.63

1.45

4.40

33.59

1.40

1.51

Total

38.96

1.88

2.36

105.30

1.65

5.58

144.26

1.71

7.94

49.21

1.58

2.50

Notes:

 Due to rounding differences some M&I totals may not add exactly with the Measured and Indicated figures. The MRE for the Phase 1 (comprising the Nkran, Adubiaso, Abore, Dynamite Hill and Asuadai deposits) and Phase 2 (comprising the Esaase deposit) resources were all prepared by Charles J. Muller, B.Sc. Geology (Hons), PR.Sci.Nat., MGSSA, a Director of CJM Consulting Pty Ltd. (“CJM”) of Johannesburg, South Africa.  The MRE is reported in accordance with Canadian National Instrument 43-101 requirements and the South African Code of Reporting of Exploration Results (SAMREC), which is consistent with the CIM Estimation Best Practice Guidelines in Canada.  Mr. Muller has reviewed and approved the technical content of this MD&A.   Benjamin Gelber P.Geo. Exploration Manager for Asanko, a qualified person with respect to NI 43-101, has supervised the scientific or technical information for the Project.






10




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



Asanko Gold Mine Mineral Reserve Statement

As a result of the positive economic outcomes of the May 2015 AGM PFS, a portion of the Company’s Mineral Resources for Esaase have been upgraded to Mineral Reserves. The Mineral Reserves have been restated assuming a $1,300 per ounce gold price (previously assumed $1,400 per ounce gold price) and include revised modifying factors when compared to the Mineral Reserves from the standalone Esaase PFS published in May 2013.  The combination of these changes has resulted in an increase in the Esaase Mineral Reserves of 0.3 million ounces.


2015 Updated Mineral Reserve Statement


1.1 Deposit

Proven

Probable

Total P&P

1.2

Tonnes
(millions)

Grade (g/t)

Oz (millions)

Tonnes
(millions)

Grade (g/t)

Oz (millions)

Tonnes
(millions)

Grade (g/t)

Oz (millions)

1.3

Nkran

13.5

2.32

1.00

17.7

2.12

1.20

31.2

2.21

2.20

1.4

Adubiaso

0.9

2.23

0.06

0.9

1.90

0.05

1.8

2.07

0.11

Abore

1.2

1.69

0.06

0.9

1.87

0.05

2.1

1.77

0.11

1.5

Asuadai

0.0

0.00

0.00

0.5

1.26

0.02

0.5

1.26

0.02

1.6

Dynamite Hill

0.0

0.00

0.00

1.1

1.88

0.07

1.1

1.88

0.07

Phase 1 Total

15.5

2.26

1.13

21.0

2.07

1.39

36.7

2.15

2.52

1.7

Esaase

22.5

1.40

1.01

37.9

1.42

1.72

60.3

1.41

2.73

1.8

Total

38.0

1.75

2.14

58.9

1.64

3.11

97.0

1.68

5.25


Notes: A 'Mineral Reserve' is the economically mineable part of a Measured or Indicated Mineral Resource, demonstrated by at least a Preliminary Feasibility Study. It includes diluting materials and allowances for losses that may occur when the material is mined. DRA is of the opinion that the classification of Mineral Reserves as reported herein meets the definitions of Proven and Probable Mineral Reserves as stated by the CIM Definition Standards (2005). Measured and Indicated Mineral Resources that are not Mineral Reserves have not demonstrated economic viability.  Inferred Mineral Resources are excluded from the Mineral Reserve Estimate. All figures are rounded to reflect appropriate levels of confidence. Apparent differences may occur due to rounding.


The Reserve Statement for the Phase 1 (comprising the Nkran, Adubiaso, Abore, Dynamite Hill and Asuadai deposits) were all prepared by Thomas Obiri-Yeboah, B.Sc. Mining Engineering (Hons), PR.Eng, a Senior Mining Engineer of DRA Projects Pty Ltd. (“DRA”) of Johannesburg, South Africa.  The Reserve Statement is reported in accordance with Canadian National Instrument 43-101 requirements, which is consistent with the CIM Estimation Best Practice Guidelines in Canada.  Mr. Obiri-Yeboah has reviewed and approved the technical content of this MD&A.



Mining Operations

A Phase 1 LoM schedule was developed to supply a 3Mtpa mill feed rate from the Nkran pit and the four satellite deposits.  A mining contractor has been established on site and is currently carrying out pre-stripping activity at the Nkran pit.  It is anticipated that a mining contractor will be used for all ore and waste mining activities.

The deposits will all be mined utilizing a conventional truck and shovel method. Grade control drilling together with onsite laboratory facilities will be used to delineate the ore from the waste.  Ore and waste will be drilled and blasted, then loaded and hauled to either the run-of-mine (“ROM”) pad or direct tip into the crushing facility from the Nkran deposit.  For the satellite deposits - Adubiaso, Dynamite Hill, Abore and Asuadai – ore will be placed on pit rim stockpiles or on waste rock storage facility with haul trucks.  A fleet of contracted road trucks will be utilized to haul ore from the respective pit rim stockpiles to the ROM stockpile.  



11




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



Ore from Esaase will be primary and secondary crushed to a particle size -90 mm at Esaase and then transferred to the expanded central processing facility on an industry standard, troughed overland conveyor.  The conveyor corridor will be secured with high security fencing and motion sensors and will be monitored on a continuous basis.  Extensive studies were completed on the optimal ore transfer methodology which included trade off studies that reviewed rail, pumping and road transport in addition to the selected conveyor option. Esaase waste material will be hauled to the two allocated waste rock dump positions to the West and South of the Esaase pit.


AGM Mine Plan

Pre-stripping operations are currently underway at the Nkran pit with a total of 21.7 million tonnes (“Mt”) of waste to be stripped in 2015 ahead of ore mining.  During the first year of production in 2016, ore will be mined primarily from the Nkran pit, resulting in a feed grade to the mill of 2.15 g/t gold.  The Esaase pit will be brought into production in Q1 2018 with feed being blended over the 12.5 year mine life and augmented by the four satellite pits.  

Life of mine it is estimated that 94.0Mt of ore and 405.5Mt of waste (excluding the Nkran pre-strip) will be mined, resulting in a LoM strip ratio of 4.3:1.

PFS Mine Plan for Combined Phase 1 & 2


Years 2015-2022

 

 2015

2016

2017

2018

2019

2020

2021

2022

Obotan Pits

 

 

 

 

 

 

 

 

Ore mined (‘000t)

230

3,704

3,123

3,319

3,000

2,951

2,850

3,001

Grade mined (g/t)

2.44

2.15

2.22

2.15

2.30

2.28

2.23

2.20

Waste (‘000t)

19,761

21,254

21,928

21,152

20,993

23,179

22,754

18,147

Esaase Pit

 

 

 

 

 

 

 

 

Ore mined (‘000t)

 

 

2,500

5,003

5,846

6,842

5,303

6,003

Grade mined (g/t)

 

 

1.33

1.56

1.70

1.48

1.33

1.24

Waste (‘000t)

 

 

5,276

10,699

18,820

22,413

24,138

26,243

Combined

 

 

 

 

 

 

 

 

Ore mined (‘000t)

230

3,704

5,623

8,321

8,846

9,793

8,154

9,004

Grade mined (g/t)

2.44

2.15

1.82

1.80

1.91

1.72

1.64

1.56

Waste (‘000t)

19,761

21,254

27,205

31,850

39,813

45,591

46,892

44,390

Strip ratio (w:o)

86.05

5.74

 4.84

3.83

4.50

4.66

5.75

4.93

Plant feed (‘000t)

0.00

3.00

3.40

8.15

8.23

8.60

8.80

 8.80

Feed grade (g/t)

0.00

2.15

1.85

1.97

1.92

1.68

1.73

1.37

Recovery (%)

0.0%

88.1%

90.9%

89.6%

90.7%

89.8%

91.0%

90.1%

Gold produced (oz)

0

182,428

183,658

460,817

461,502

416,285

446,365

 349,190




12




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




Years 2023-2028

 

2023

2024

2025

2026

2027

2028

LoM Total

Obotan Pits

 

 

 

 

 

 

 

 Ore mined (‘000t)

3,001

3,001

3,000

3,001

2,325

0

36,505

Grade mined (g/t)

2.15

1.93

1.94

2.08

2.12

0.00

2.15

Waste (‘000t)

8,484

9,761

4,619

1,863

889

0

194,784

Esaase Pit

 

 

 

 

 

 

 

Ore mined (‘000t)

5,359

4,597

4,356

4,910

5,000

1,988

57,707

Grade mined (g/t)

1.49

1.21

1.24

1.25

1.37

2.29

1.43

Waste (‘000t)

29,235

30,904

31,067

21,777

8,034

1,900

230,506

Combined

 

 

 

 

 

 

 

Ore mined (‘000t)

8,360

7,597

7,357

7,910

7,325

1,988

94,212

Grade mined (g/t)

1.73

1.50

1.53

1.56

1.61

2.29

1.71

Waste (‘000t)

37,719

40,665

35,686

23,641

8,923

1,900

 425,289

Strip ratio (w:o)

4.51

 5.35

4.85

2.99

1.22

0.96

4.51

 Plant feed (‘000t)

8,774

8,000

8,000

8,000

7,325

4,519

94,212

Feed grade (g/t)

1.63

1.57

1.58

1.56

1.66

2.26

1.71

Recovery (%)

91.7%

89.8%

89.8%

91.7%

92.2%

96.6%

 91.0%

Gold produced (oz)

419,931

385,298

389,780

387,983

395,090

216,621

4,694,949



PFS Ore Mine Plan (un-optimized) for Asanko Gold Mine


[exhibit992004.jpg]




13




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




Processing

The Phase 1 processing plant is currently under construction and approximately 76.4% complete.  The design is based on a typical single stage crushing, SAG, ball milling circuit (SABC) and CIL flow sheet.  It includes single stage jaw crushing with reclaim from a live stockpile and open circuit SAG mill, feeding cyclones that in turn operate in a closed circuit with a ball mill.  A pebble crusher will receive scats from the SAG mill, crush them and return them to the SAG for further grinding.  The hydrocyclones will achieve the final product size of P80 106 μm.  A gravity circuit will be utilized to treat a portion of the cyclone underflow stream to recover coarse free gold, around 40%, from the recirculating load.  The milled product will gravitate to a trash screen before entering a pre-leach thickener followed by a conditioning tank. 


A seven stage CIL circuit will be used to leach and absorb gold from the milled ore onto activated carbon.  An AARL elution circuit will be used to recover gold from loaded carbon.  Cyanide in the CIL tailings will be detoxified using the SO2 / Air method.  The detoxified tailings are then pumped to the Tailings Storage Facility (“TSF”).  


This process flow sheet is well known in the industry, and is relatively low risk as it was proven as a successful processing route for the Nkran ores during Resolute Mining Ltd operations from 1998 to 2002.


The Phase 2 expansion project will expand the central processing facility with the addition of a 5Mtpa ball mill, gravity concentrator followed by a flotation circuit. The concentrate from the float circuit at a mass pull of 10% will be reground and then transferred to a new CIL circuit for leaching and then final gold production.  


Phase 2 further makes provision for the opportunity to optimize feed material streams to either the flotation or whole ore leach circuit via interlinking conveyors between the respective mill feed circuits.  In doing this, there is an opportunity to optimize recoveries and operating costs depending on the ore types being mined. The milling circuits could be operated at different grinds to facilitate maximum liberation and therefore optimum value add.


The relatively soft, easy milling oxide ores from Esaase can be blended into the Phase 1 CIL circuit allowing the tonnage throughput to be increased to 3.8Mtpa. These oxide ores also give improved recovery through the CIL circuit compared to the flotation plant. In the construction of the Phase 1 CIL circuit the civil work has been done to allow two additional CIL tanks to be added to the circuit to ensure that the residence time is maintained at the higher throughput. All the other equipment is sized to handle the additional tonnage.


In addition, testwork has shown that similar recoveries can be achieved by processing the Nkran fresh ore through the flotation circuit at potentially lower operating cost. Additional testwork is planned during the DFS to optimize the economic benefits of this scenario.


Having the two milling circuits in the same location will also allow any new, near-mine geological exploration discoveries to be processed under optimal economic conditions.


The final tailings from Phase 1 and Phase 2 will report to a single TSF. The TSF currently being constructed to service Phase 1 is designed to hold all the tailings from both phases for the life of the operations. Services and infrastructure between Phase 1 and Phase 2 will be shared as far as possible.









14




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




Phase 1 Process Flow Sheet – 3Mtpa CIL Plant


[exhibit992005.jpg]



Phase 2 Process Flow Sheet – Addition of 5Mtpa Flotation Plant




15




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



[exhibit992006.jpg]

Life of Mine Process Plant Discounted Recoveries


Gold Recovery

Phase 1

DPP

AGM
(Phases 1&2)

Ore sourced from Obotan

Oxide

94.8%

90.7%

Transitional

95.1%

91.1%

Fresh

93.8%

93.0%

Ore sourced from Esaase

Oxide

-

89.8%

Transitional

-

87.0%

Fresh

-

92.4%

LoM Blend Recovery

93.9%

91.7%

LoM Blend Discounted Recovery

92.6%

90.9%



Life of Mine Process Plant Operating Costs


LoM US$/t milled

Phase 1
DPP

AGM
(Phases 1&2)

Labour

0.7

0.3

Power

6.5

5.2

Reagents & other consumables

4.4

4.9

Other

1.9

1.2

Total

13.4

11.7




16




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



Note:  The information in this MD&A that relates to Processing is based on information compiled by Mr. Glenn Bezuidenhout, who is a Metallurgist and a Fellow of the South African Institute of Mining and Metallurgy. Mr. Bezuidenhout is a Director of DRA Mineral Projects. Mr. Bezuidenhout has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify and is a "Qualified Person" under National Instrument 43-101 - 'Standards of Disclosure for Mineral Projects'. The Qualified Person has verified the data disclosed in this MD&A, was satisfied with the verification process and consents to the disclosure in this MD&A. Mr. Bezuidenhout has reviewed and approved the technical content of this MD&A.




17




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




Capital Costs

The initial capital cost of the mine, process plant and associated infrastructure for Phase 1 is estimated at $295 million. The cost is inclusive of all infrastructure and indirect costs required for the Project including allowances for contingencies and estimating inaccuracies of 8.3% in aggregate (amounting to $22.75 million).  

 

Phase 1 Capital Cost Estimate

$ millions

Process plant

85

Mining (pre-production costs)

71

Power infrastructure

18

Buildings, offices and accommodation

12

TSF, WRD, ROM, water supply, civil works

23

CSR, owners team, G&A

47

EPCM

16

Sub total

272

Contingency & estimating inaccuracies

23

Total

295


The incremental capital cost of the mine, process plant and associated infrastructure for Phase 2 is estimated at US$270 million. The cost is inclusive of all additional infrastructure and indirect costs required.


Phase 2 Expansion Capital Cost Estimate

$ millions

Front End materials handling

30

Overland conveyor

62

Process plant

83

Infrastructure

30

Indirect costs

38

Contingencies

27

Total

270





18




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




Operating costs

The average cash operating cost for the AGM (Phases 1 and 2) is estimated at $670 per ounce. Estimated All in Sustaining Costs (World Gold Council definition of AISC) are $798 per ounce, which places the AGM in the lowest quartile of industry costs. These costs are based on the treatment of 8.8Mtpa of ore producing an average 411,000 ounces of gold per annum and are inclusive of corporate overheads and interest on debt*.


Operating costs were developed in conjunction with the project design criteria, process flow sheet, mass and water balance, mechanical and electrical equipment lists, currently contracted mining costs and in-country labour cost data. The cash operating costs are defined as the direct operating costs including contract mining, processing, tailings storage, water treatment, general and administrative and refining costs.


Operating Cost Estimate (US$/oz)

Phase 1

AGM (Phases 1&2)

Waste mining

243

299

Ore mining

105

69

Processing

210

243

General and administrative

83

55

Refining

4

4

Cash Costs

645

670

Royalties

65

68

Sustaining and deferred capex

19

23

Corporate Overhead

35

24

Interest on Phase 1 Project Debt

17

7

Interest on Phase 2 Debt*

-

6

All-in sustaining cash costs

781

798

*Assumes a further US$170 million in debt on same terms and conditions as current facility for illustrative purposes only




19




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




Annual Cash Flows (based on $1,300/oz of gold)


 

UOM

LOM

2014 and 2015

2016

2017

2018

2019

2020

Tonnes milled

‘000t

94,212

-   

3,000

3,400

8,150

8,225

8,600

Head grade

g / t

           1.71

            -   

 2.15

1.85

1.97

1.92

1.68

Recovery

%

90.9%

0.0%

88.1%

90.9%

89.5%

90.7%

89.8%

Production

Oz

4,694,949

-   

182,428

183,658

460,817

461,502

416,285

Net cash flow

$’000

1311

(279.6)

(93.4)

(19.0)

275.0

217.6

173.9


 

UOM

2021

2022

2023

2024

2025

2026

2027

2028

Tonnes milled

‘000t

      8,800

      8,802

      8,774

      8,473

      8,498

      8,398

8,000

3,092

Head grade

g / t

        1.73

        1.37

        1.63

        1.57

        1.58

        1.56

1.66

2.26

Recovery

%

91.2%

90.0%

91.6%

89.9%

90.1%

91.9%

92.4%

96.6%

Production

Oz

  446,364

  349,190

  419,931

  385,298

  389,780

  387,983

395,090

216,620

Net cash flow

$’000

  182.0

    78.9

  149.4

  104.1

  107.6

  120.0

157.8

136.7



Royalty rates in Ghana are governed by section 25 of the Minerals and Mining Act of 2006 (Act 703) which stipulates that the holder of a mining lease, restricted mining lease, or small scale mining license, pay a royalty in respect of minerals obtained from its mining operations to Ghana at the rate of 5% of the total revenue earned from minerals obtained by the holder.


Key Sensitivities

A range of Project sensitivities have been evaluated to assess their impact on the base case numbers included in the financial model for the combined Phase 1 and 2. The significant financial sensitivities identified were discount rate and gold price shown here after taxes and royalties.


 

Net Present Value at Various Discount Rates ($ million)

 

Gold Price  $/oz

3%

5%

6%

7%

8%

IRR

1,100

497

378

328

282

241

17.34%

1,200

725

574

510

452

399

22.57%

1,300

952

770

692

621

557

27.33%

1,400

1,180

965

873

790

714

31.73%

1,500

1,407

1,160

1,054

958

871

35.89%

1,600

1,634

1,355

1,235

1,127

1,029

39.87%

Note:The information in this MD&A that relates to the economic assessment is based on financial models compiled by Mr. John Stanbury of CRESCO Project Finance. Mr. Stanbury has acquired the qualifications of BSc (Eng), BProc, LLB and MBA and has been a member of senior management in a number of mining companies across various industries. Mr Stanbury has sufficient experience to prepare the financial sections as disclosed in this release based on the relevant



20




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



technical inputs provided by other competent persons. Mr. Stanbury consents to the inclusion of such financial information in this release in the form and context in which it appears.

Other significant sensitivities, identified as installation capital, operating costs, feed grade, taxation and process recovery were evaluated and presented as a tornado plot, as follows:


 

 

Impact on NPV(5%) in $000’s

 

Flex Amount

Positive Case

Negative Case

Process recovery

1%

13,094

(13,094)

Taxation

2.5%

28,934

(28,934)

NPV Discount Rate

1%

78,132

(78,132)

Ore Gold Grade

1%

11,909

(11,909)

Gold selling price

$100/oz

195,131

(195,484)

Operating cost

3%

44,936

(44,887)

Installation capex

10%

36,590

(36,686)


[exhibit992008.gif]

Employment

Phase 1 of the Project will employ approximately 660 employees, including contractors, to operate the mine. Currently during the construction of Phase 1, there are over 2,000 personnel working on the Project site.


The Company is closely engaged with all local stakeholders and has implemented a number of vocational training schemes in the local communities aimed at developing the capabilities of the local youth in employable skills to support the construction and operation stages of the Project.




21




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



Phase 2 of the Project will employ an additional 350 employees during operations, including contractors, which will bring the total workforce of the AGM to approximately 1,000 people.  The majority of the workforce will be sourced from local communities and elsewhere in Ghana, which has a highly trained workforce due to a mature gold mining industry.


Resettlement

The partial relocation of the Nkran village (88 building structures) was completed during the third quarter of 2015.  A formal handover ceremony was held on 15 September and the villagers were moved into their new houses.


Phase 2 mining activities will impact certain communities in close proximity to the Esaase pit. These communities have been engaged through earlier studies on the Essase standalone PFS. The Company will continue detailed stakeholder engagement as part of the DFS.


Permitting

In November 2012, the Company received mining leases on the Abore, Abirem and Adubea prospecting licences. The mining leases have been granted for different periods, with the Abore lease expiring on November 1, 2017, the Abirem lease expiring on March 27, 2026, and the Adubea lease due to expire on November 1, 2018. All leases are renewable under the terms of the Minerals and Mining Act, 2006. In conjunction with the formal issue of the mining leases, the Company also received a key water discharge permit which allowed the commencement of dewatering operations of the Nkran pit and the future dewatering operations of the Adubiaso pits.


In November 2013, the Company received the Environmental Permit from the Environmental Protection Agency (“EPA”) in Ghana and the Mine Operating Permit from the Mines Inspectorate in Ghana for Phase 1 of the Project.  The Company has renewed the Environmental permit as of September 12, 2015, valid until March 31, 2017.  The Company hasor has applied for renewal, of all necessary major permits required for the construction of Phase 1 of the Project.


The Phase 1 Environmental Permit incorporates the requirement for limited backfilling of the smaller satellite pits, relocation planning for potentially affected dwellings, cyanide detoxification of discharge water and installation of a tailings dam liner.  These items are all incorporated and allowed for in the Phase 1 capital cost estimate.  


The Company continues to advance the permitting required to mine Dynamite Hill in 2015.  It is expected that a modification to the existing Mining Permit will be required and applications are in the process of being filed.


The Company received the Environmental Invoice (the "Invoice") and Water Use Permits for the Esaase deposit from the relevant Ghanaian Regulatory Authorities in March 2014. The Invoice, issued by the EPA, through its Technical Review Committee, is a pre-cursor to receiving the final Environmental Permit. Asanko has now finalized its Environmental Impact Statement (“EIS”) to incorporate the comments of the Invoice and submitted it to the EPA for final permitting, which will occur in due course.  Following the receipt of the Invoice from the EPA, Asanko applied for and received a temporary mining permit for Esaase.   


The Esaase EIS is in the process of being amended to exclude the processing and the tailings storage facility at Esaase and include the conveyor belt from Esaase to the existing processing facility sitel.  The Scoping Document was submitted to the EPA on August 27, 2015 and the public comment period has now passed.  The EPA will be holding a Community Consultation meeting on November 24, 2015.  Following the meeting, the EIS will be updated to include the conveyor route baseline survey data.  It is expected that the amended EIS will be submitted to the EPA for final approvals in Q1 2016.



The Phase 1 EIS will be amended to include the expansion of the processing facility to accommodate a 5Mtpa flotation plant and the deposition of Esaase tailings at the current TSF. This is expected to be submitted to the EPA for approval in in conjunction with the amended Esaase EIS.






22




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




Project Schedule

Phase 1 is on schedule to produce first gold in January 2016 with commercial production by Q2 2016.  The Phase 2 Pre-Feasibility Study was completed on the basis that construction of the Phase 2 expansion will commence in July 2016 with steady state operations of over 400,000 ounces per annum projected in 2018.  A Definitive Feasibility Study (“DFS”) is now underway which will optimize the mining operations by more efficiently sequencing the six open pit deposits into one integrated mining schedule, as well as evaluate process synergies and optimizations.  A positive DFS, requisite permits and project financing will be required in order for the Company to make an investment decision on whether to proceed with the expansion.

Legal Proceedings

Except as set forth below, there are no legal proceedings to which the Company is a party or, to the best of the Company's knowledge, to which any of the Company's property is or was subject, and there are no such proceedings known by the Company to be contemplated, where there is a claim for damages that exceeds ten percent of the Company’s current assets.

Godbri Datano Claim

On September 14, 2012, Godbri Mining Limited (“Godbri”) lodged a statement of claim in the High Court of Justice, Accra, Ghana, seeking a declaration that, among other things, that the sale of the Datano concession to Adansi Ghana is null and void. Godbri claims to be the owner of 38% of the issued share capital of Midras Mining Limited (“Midras”) and states that it did not consent to the acquisition of the Datano concession by Adansi Ghana. Adansi Ghana filed a defence on November 12, 2012. Godbri subsequently amended its claim on January 29, 2013 and in March 2013, both the Company and Adansi Ghana filed further defences. The matter is currently awaiting trial. The Datano concession was acquired in August 2013 from Midras. The Company considers the claim made by Godbri to be spurious and without any merit. Godbri is a private Ghanaian company.

Matisse and Madison Claim

On October 22, 2013, Matisse & Madison Co. Ltd. (“M&M”) lodged a statement of claim in the High Court of Justice, Accra, Ghana, seeking compensatory damages of $20.0 million plus interest for breach of a verbal contract related to the purchase of the Datano Concessions from Midras. The Company maintains that this is a frivolous lawsuit lacking in merit and will vigorously defend itself.

 

Selected Annual Information


 

 

Year ended December 31, 2014

 

Year ended December 31, 2013

 

Nine months ended December 31, 2012

 

 

 

 

 

 

 

Total revenue

$

NIL

$

NIL

$

 NIL

Loss for the year

 

22,641,634

 

1,692,203

 

13,546,202

Loss per share – basic and diluted

 

0.14

 

0.02

 

0.17

Total assets

 

481,101,732

 

242,180,938

 

254,296,574

Total long-term financial assets

 

 NIL

 

 NIL

 

 NIL

Cash dividends declared per share

 

NIL

 

NIL

 

NIL

Working capital

 

 213,703,934

 

 170,757,759

 

 201,741,827






23




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




Summary of Quarterly Results


The following table is a summary of certain consolidated financial information concerning the Company for each of the last eight reported quarters:


Quarter ended

Interest and other                    income

 Income (loss) and comprehensive income (loss)

 Earnings (loss) per                  share

September 30, 2015

$      251,764

 $       (3,305,991)

 $      (0.02)

June 30, 2015

185,068

 (759,839)

     (0.00)

March 31, 2015

272,922

  (4,454,406)

  (0.02)

December 31, 2014

 233,945

  (2,910,227)

      (0.02)

September 30, 2014

286,609

 (9,329,515)

 0.05)

June 30, 2014

 356,116

 515,436

      0.00

March 31, 2014

376,217

   (10,917,328)

  (0.08)

December 31, 2013

247,604

   (2,262,150)

    (0.03)



Liquidity and Capital Resources


The Company had working capital of $120.0 million and cash and cash equivalents of $159.3 million at September 30, 2015 compared to $213.8 million and $228.7 million respectively at December 31, 2014.

On February 11, 2015, the Company closed a bought deal financing of 22,770,000 common shares at a price of C$2.02 per share, for gross proceeds to the Company of approximately $36.4 million (C$46.0 million). The Company paid $1.8 million (C$2.2 million) in fees to a syndicate of underwriters and an additional $0.3 million in legal and regulatory fees in relation to the bought deal financing.


The Company expects that its available cash resources and its undrawn $20.0 million Over-run Facility, will be sufficient to complete Phase 1 of Project construction, cover its administrative overhead and pursue further growth through organic exploration and mergers and acquisitions.


As at September 30, 2015 the Company’s contractual obligations under the Senior Definitive Facilities Agreement was $171.6 million, consisting of $130.0 million drawn under the facility as well as accrued future interest payments.


Contractual obligations

Payments due by period

 

Total

1 year

2-3 years

4-5 years

 





Long term debt, including future interest charges

$    171,564,682

$          8,636,151

$       87,893,432

$   75,035,099

 

 

 

 

 

Open purchase orders and other obligations

79,955,872

79,955,872

-

-

 

 

 

 

 

 

$    251,520,554

$       88,592,023

$       87,893,432

$   75,035,099




24




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



The Company may receive additional funds through the exercise of outstanding common stock warrants and options or, if required, through the sale of additional common shares either as a private placement or common stock offering.  

As at September 30, 2015, the other sources of funds potentially available to the Company are through the exercise of the outstanding share-based options with terms as follows:


 

Total options outstanding

Total options exercisable

Range of

exercise price

Number

Weighted average contractual life (years)

Weighted average exercise price C$

Number

Weighted average contractual life (years)

Weighted average exercise

price C$


C$1.00-C$2.00


1,114,141


4.25


1.93


639,141


3.98


1.93

C$2.01-C$3.00

9,838,000

3.70

2.18

7,908,750

3.55

2.20

C$3.01-C$4.00

2,827,900

1.88

3.79

2,827,900

1.88

3.79

C$4.01-C$5.00

630,500

1.42

4.54

630,500

1.42

4.54

C$6.01-C$7.00

26,250

1.69

6.10

26,250

1.69

6.10

 

14,436,791

3.28

2.59

12,032,541

3.06

2.69


There can be no assurance, whatsoever, that any of these outstanding securities will be exercised. As at September 30, 2015 0.7 million of the Company’s share-based options were in-the-money.


Off-Balance Sheet Arrangements


None


Transactions with Related Parties

All transactions with related parties have occurred in the normal course of operations and are measured at the exchange amount agreed to by the parties. All amounts are unsecured, non-interest bearing and have no specific terms of settlement.

(a)

Key management compensation

Transactions with key management personnel were as follows:

 

Three months ended

September 30,

Nine months ended

September 30,

 

2015

2014

2015

   2014

 





Salaries and benefits

$    315,801

$    314,110

$       866,716

$    1,046,344

Share-based payments

104,752

236,153

717,050

1,210,357

 

$     420,553

$    550,263

$    1,583,766

$    2,256,701


Key management personnel consist of directors and officers of the Company.


(b)

Other related parties balances and transactions

Related party transactions (recoveries):

 

Three months ended

September 30,

Nine months ended September 30,

 

 2015

 2014

 2015

 2014

 





Universal Mineral Services Ltd. (“UMS”)

$        -

$    35,781

$   52,226

 $ 131,088


25




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014






Related party balances receivable (payable):

 

September 30, 2015

 December 31, 2014

 

 

 

UMS

$                   -

$       (8,137)

UMS – prepaid deposit

-

21,550

 

$                   -

$        13,413


UMS is a private company with certain key management personnel and directors in common with the Company, and pursuant to an agreement dated March 30, 2012, provided geological, corporate development, administrative and management services to the Company on a cost recovery basis. Effective July 1, 2013, the Company notified UMS that it would no longer require any personnel services but continued to share the cost of UMS’s office tenancy and IT services where required until May 31, 2015.


Proposed Transactions


None


Critical Accounting Estimates


The presentation of financial statements requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Significant areas requiring the use of estimates include the assessment of impairment of mineral properties, measurement of asset retirement obligations, the effective interest rate of long term debt, embedded derivatives and the valuation of share-based payments and foreign currency warrant liability. Actual results could differ from those estimates.


The accounting policies described below are considered by management to be essential to the understanding and reasoning used in the preparation of the Company’s financial statements and the uncertainties that could have a bearing on its financial results.


Asset retirement obligations: The fair value of a liability for an asset retirement obligation, such as site reclamation costs, is recognized in the period in which it is incurred if a reasonable estimate of the fair value of the costs to be incurred can be made. The Company records the estimated present value of future cash flows associated with site reclamation as a liability when the liability is incurred. Future costs are calculated using an estimated inflation rate in the country that the third party costs are expected to be incurred. At the end of each reporting period, the liability is increased to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying any initial fair value measurements (additional asset retirement costs).


The assumptions used to determine the Company’s asset retirement obligation are as follows:


 


 Nine months ended

 Year ended

 


 September 30, 2015

 December 31, 2014

 


 

 

Undiscounted and uninflated estimated future cash obligation


 $        17,956,961

 $        12,769,063

Range of expected term until settlement


 13.25-15.25 years

 14-16 years

Discount rate range

 

2.29%

2.35%


Share-based payments: Management determines the fair value of share-based payments and foreign currency warrant liability using the Black-Scholes Option Pricing Model. Option pricing models require the input of highly subjective



26




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



assumptions including the expected price volatility and the period in which the option will be exercised or the expected life of the options. The estimates concerning volatility are made with reference to historical volatility, which is not necessarily an accurate indicator of future volatility. Changes in the subjective input assumptions can materially affect the fair value estimate.


Foreign currency forward contracts: The fair values of the foreign currency forward contracts are determined using the forward rates at the measurement date, with the resulting value discontinued to present value.


Embedded derivative liability: the Company recognizes an embedded derivative liability relating to the interest rate floor of the long term loan. The Company used three month LIBOR forward curve rates and assumptions about the time value of the embedded derivative to estimate its fair value. Changes in these inputs can materially affect the fair value estimate.


Effective interest rate: Management estimated the effective interest rate of the long term debt based on three-month LIBOR as at September 30, 2015. Changes in the three-month LIBOR rate can affect the effective interest rate.


Development costs: Based on the positive results of the PFS, effective October 1, 2011, the Company commenced capitalizing all development costs associated with the Asanko Gold Mine Project. Exploration and evaluation expenditures reflect those expenditures incurred to identify new deposits that are not envisaged to be part of the Asanko Gold Mine. Management has determined that the mineral interest and development costs that have been capitalized are economically recoverable. Management uses several criteria to assess economic recoverability and probability of future economic benefit including geological information, life of mine models, scoping and pre-feasibility studies, and existing permits and permitting programs.


Changes in Accounting Policies including Initial Adoption


There has been no significant change in significant accounting policies during the nine months ended September 30, 2015.


Financial Instruments and Other Instruments


The risk exposure arising from these financial instruments is summarized as follows:


(a)

Credit risk

Credit risk is the risk of an unexpected loss if a customer or a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on the cash and cash equivalent balances held at banks in each of Canada and Ghana. The majority of the Company’s cash is held in Canadian based banking institutions, authorized under the Bank Act (Canada) to accept deposits. As at September 30, 2015, the Company had interest receivable of $nil (December 31, 2014 - $0.07 million).

(b)

Liquidity risk

The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to settle obligations and liabilities when due. As at September 30, 2015 the Company had a cash and cash equivalents balance of $159.3 million (December 31, 2014 – $228.7 million) to settle current accounts payable and accrued liabilities of $33.7 million (December 31, 2014 - $15.4 million) that are considered short term and expected to be settled within 30 days. The Company’s first payment of $8.6 million of interest and principal on the long term debt is due on July 1, 2016.  The Company also has a $20.0 million cost overrun facility available.




27




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




(c)

Market risk

(i)

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company’s loan agreement with Red Kite provides for interest at LIBOR plus 6% with a minimum LIBOR of 1%.

The Company’s sensitivity to a 1% decrease or increase in market rates of interest would have an immaterial effect on the Company’s interest expense/income for the nine months ended September 30, 2015.

 (ii)

Foreign currency risk

The Company is exposed to foreign currency risk through its foreign currency monetary assets and liabilities. A significant change in the currency exchange rate between the US dollar and Canadian dollar (CAD) and South African rand (ZAR) could have an effect on the Company’s results of operations, financial position and cash flows.  During the nine months ended September 30, 2015, the Company had entered into a series of forward contracts to purchase a total of ZAR 346.6 million in exchange for Canadian and US dollars at specified exchange rates.

During the three months ended September 30, 2015, the Company settled several currency forward contracts and realized a foreign exchange loss of $0.01 million. During the nine months ended September 30, 2015, the Company realized a foreign exchange gain of $0.3 million on settlement of currency forward contracts.

As at September 30, 2015, the Company had a CAD cash balance of $7.2 million (December 31, 2014 – $30.8 million) and ZAR balance of $7.5 million (December 31, 2014 - $0.4 million) expressed in US dollar equivalent.


 

(iii)

Other price risk

Other price risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from currency risk or interest rate risk. As at September 30, 2015 and December 31, 2014, the Company had no financial instruments exposed to other price risk.

(d)

Fair values

(i)

Foreign currency forward contracts derivative

During the nine months ended September 30, 2015, the Company entered into a series of forward contracts to purchase ZAR in exchange for Canadian and US dollars at specified exchange rates. These forward contracts had or have settlement terms that range from one month to eleven months.

At September 30, 2015, the company had outstanding foreign currency forward contracts to buy ZAR 24.7 million in exchange for C$ 2.3 million with settlement dates between one and five months.

The fair values of outstanding foreign currency forward contracts are determined using the forward rates at the measurement date, with the resulting value discounted to present value and are categorized within level 2 of the fair value hierarchy.


(ii)

Embedded derivative

The embedded derivative liability associated with the interest rate floor of the long term loan is categorized within level 2 of the fair value hierarchy. The fair value of the embedded derivative was estimated using the three-month LIBOR forward rates to 2020 ranging from 0.33% to 2.12% using an option pricing model.




28




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014




(iii)

Other

The carrying values of cash and cash equivalents, receivables and accounts payable and accrued liabilities approximate their respective fair values due to the short-term nature of these instruments. The fair value of the current and non-current portions of the long term debt approximates its carrying value due to the floating rate nature of the debt instrument.

(e)

Items of income, expense, gains or losses arising from financial instruments


 

Three months ended September 30,

Nine months ended September 30,

 

2015

2014

2015

2014

 

 

 

 

 

Interest income from loans and receivable

$     251,764

$   286,609

$     709,754

$     1,018,942

 

 

 

 

 

Realized foreign exchange gain (loss) from currency forward contracts

(10,419)

-

265,818

-

 

 

 

 

 

Realized and unrealized net foreign exchange gain (loss) from other financial instruments

(1,074,061)

(578,244)

(2,024,077)

1,584,845


 

 


Disclosure Controls and Procedures


Evaluation of Disclosure Controls and Procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company’s Chief Executive Officer and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, have evaluated the design and effectiveness of the Company’s disclosure controls and procedures and the design as required by Canadian and United States securities legislation, and have concluded that such procedures are adequate to ensure accurate, complete and timely disclosures in public filings.


Internal Control over Financial Reporting


Management is responsible for the establishment and maintenance of a system of internal control over financial reporting. This system has been designed to provide reasonable assurance that assets are safeguarded and that the financial reporting is accurate and reliable. Management used the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013) to evaluate the effectiveness of the Company’s internal controls over financial reporting.


There are inherent limitations in all control systems and no matter how well designed. An economically feasible control system, even determined to be effective, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.




29




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



Changes in internal control over financial reporting


There has been no material change in the Company’s internal control over financial reporting during the nine months ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.



Summary of Outstanding Share Data


As of the date of this MD&A, there were 196,995,607 common shares of the Company issued and outstanding and 14,436,791 share purchase options outstanding. The fully diluted outstanding share count is therefore 211,558,398.


Forward-looking Statements


This MD&A may contain “forward-looking statements” which reflect the Company’s current expectations regarding the future results of operations, performance and achievements of the Company, including but not limited to statements with respect to the Company’s plans or future financial or operating performance, the estimation of mineral reserves and resources, conclusions of economic assessments of projects, the timing and amount of estimated future production, costs of future production, future capital expenditures, costs and timing of the development of  deposits, success of exploration activities, permitting time lines, requirements for additional capital, sources and timing of additional financing, realization of unused tax benefits and future outcome of legal and tax matters.


The Company has tried, wherever possible, to identify these forward-looking statements by, among other things, using words such as “anticipate,” “believe,” “estimate,” “expect”, “budget”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”.


The statements reflect the current beliefs of the management of the Company, and are based on currently available information.  Accordingly, these statements are subject to known and unknown risks, uncertainties and other factors, which could cause the actual results, performance, or achievements of the Issuer to differ materially from those expressed in, or implied by, these statements. These uncertainties are factors that include but are not limited to risks related to international operations; risks related to general economic conditions and credit availability, uncertainty related to the resolution of legal disputes and lawsuits; actual results of current exploration activities, unanticipated reclamation expenses; fluctuations in prices of gold; fluctuations in foreign currency exchange rates, increases in market prices of mining consumables, possible variations in mineral resources, grade or recovery rates; accidents, labour disputes, title disputes, claims and limitations on insurance coverage and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, changes in national and local government regulation of mining operations, mineral tenure rules, tax rules and regulations, and political and economic developments in countries in which the Company operates, as well as those factors discussed in the 40-F filing for the year ended December 31, 2014, available on SEDAR at www.sedar.com.


The Company’s management reviews periodically information reflected in forward-looking statements. The Company has and continues to disclose in its Management’s Discussion and Analysis and other publicly filed documents, changes to material factors or assumptions underlying the forward-looking statements and to the validity of the statements themselves, in the period the changes occur.


Historical results of operations and trends that may be inferred from the following discussions and analysis may not necessarily indicate future results from operations.  Historically, the Company’s operations have been primarily funded from share issuances through private placements and the exercise of warrants and share-based options. The Company has and may continue to have capital requirements in excess of its currently available resources. In the event the Company’s plans change, its assumptions change or prove inaccurate, or its capital resources in addition to projected cash flow, if any, prove to be insufficient to fund its future operations, the Company may be required to seek additional financing.




30




ASANKO GOLD INC.


Management’s Discussion & Analysis

Three and nine months ended September 30, 2015 and 2014



Although the Company has been successful in raising capital, there can be no assurance that the Company will have sufficient financing to meet its future capital requirements or that additional financing will be available on terms acceptable to the Company in the future.


Readers are cautioned that there can be no certainty that Phase 2 of the Project will be built or that the overall conclusions of the Definitive Feasibility Study will confirm the May 2015 AGM PFS outcomes, which is on file at www.sedar.com.



31







Form 52-109F2

Certification of interim filings - full certificate


I, Peter Breese, Chief Executive Officer of Asanko Gold Inc., certify the following:

1.

Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Asanko Gold Inc. (the “issuer”) for the interim period ended September 30, 2015.


2.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.


3.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.


4.

Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.


5.

Design:  Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings


(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that


(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and


(ii)

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and


(b)

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.


5.1

Control framework:  The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is based on Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.


5.2

ICFR – material weakness relating to design: N/A


5.3

Limitation on scope of design:  N/A


6.

Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2015 and ended on September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.


Date: November 16, 2015


//Peter Breese

_______________________

Peter Breese

Chief Executive Officer








Form 52-109F2

Certification of interim filings - full certificate


I, Greg McCunn, Chief Financial Officer of Asanko Gold Inc., certify the following:

1.

Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Asanko Gold Inc. (the “issuer”) for the interim period ended September 30, 2015.


2.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.


3.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.


4.

Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.


5.

Design:  Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings


(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that


(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and


(ii)

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and


(b)

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.


5.1

Control framework:  The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is based on Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.


5.2

ICFR – material weakness relating to design: N/A


5.3

Limitation on scope of design:  N/A


6.

Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2015 and ended on September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.


Date: November 16, 2015


//Greg McCunn

_______________________

Greg McCunn

Chief Financial Officer




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