Amara’s (LON:AMA) chief executive John McGloin is heading off to the Denver Gold show shortly.
What will he find there?
In the current gold price environment, that’s hard to say. It’s no good arguing that gold is still a long way higher than it was ten years ago.
Because of cost inflation, the numbers aren’t really comparable. So, is the current US$1,100 per ounce the new US$400 as far as the gold price is concerned?
McGloin sees some merit in such a view.
Either way, under the new paradigm the gold price weakness has prevailed for so long now that many companies are regaining their poise.
And there are signs of activity. Randgold (LON:RRS) has just announced a joint venture deal with AngloGold (NYSE:AU) on one of the world’s largest gold mines, Obuasi in Ghana.
There could be more to come.
“People aren’t going to be high-fiving in Denver,” says McGloin. “But there will be a lot of M&A discussion at the show. People are more willing to have the conversation now. There could be more deals coming out of this one.”
He won’t be drawn on the topic of Amara’s own intentions, but it’s widely known that the company is considering several options when it comes to securing the development financing it needs for its flagship Yaoure gold project in Cote D’Ivoire.
As it stands, Yaoure is shaping up to be one of the ten largest gold mines in Africa. But there are many ways to slice a cake, and a big capex bill for a company that’s only worth around £70mln wouldn’t be ideal.
So McGloin and his team are working hard to get the potential capex bill for Yaoure down to more manageable levels, with the aspiration for total costs for the build to go to around US$300 mln or lower.
Recent drilling work has revealed new high grade zones that will allow for an improvement in the quality of the ore going into the processing plant.
That in turn will reduce the burden on the plant itself, allowing for a corresponding reduction in costs.
How exactly this will all play out remains to be seen.
Once the Denver Gold Show is over, McGloin will head down to site in Cote D’Ivoire, and begin work on a new resource model.
This should be ready by November and will then be plugged into the optimised pre-feasibility study, which is due out during the first half of next year.
“We’re pretty confident that the next resource model will be more robust than the last one,” says McGloin.
Whether there’ll be any kind of reaction in the market remains an open question.
McGloin likens previous market responses to releases to being “hit in the face by a wet kipper.”
But capitulation’s been and gone. Amara’s share price fell out of bed long ago, with the rest of the sector.
And now - with US$1,100 gold the new US$400 - begins the long climb back.
The company has a big resource, big plans, and an experienced team. Will it do a deal at the Denver Gold Show?
Who knows? The more propitious time will probably be once the bankable study is in the market next year.
But the deals that get done then may very well have their germs in conversations that are being initiated right now.
Watch this space.