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Report on AGG in Ticker Trax by Thom Calandra – (3 of 3)

24 February 2011

African Gold Group (AGG): Revelations may startle investors – by Thom Calandra

MOSEASE, Ghana – West Africa’s porphyry of gold is turning into the fold, figuratively and literally.

A Mali and Ghana team of two doctors of structural geology, each with specialties respectively in mapping and syngenetic oriented geology, along with a seasoned Canadian prospector, appear poised to make gold-deposit history in the coming year.

If I am correct, Derek McBride, Kevin Downing and Pierre Lalande will strike in spades the gold their employer, African Gold Group, has been pursuing in one way or another since 2002.

The headline grades, strike lengths and precisely plotted drill holes, some RC, others diamond and even others augur-rigged to punch economically through Mali duricrust, could come from Kobada in Mali. Or Foroko North in Mali. Or Asankrangwa in Ghana. Or even Mankranho, the northern extension of Newmont’s (NYSE: NEMStock Forum) massive Ahafo Project in Ghana.

“It is interesting for me how Dr. McBride looks at the folds here, the bands of gold being transported. He is much more than just a structural geo looking at intrusive,” says African Gold Group’s (TSX: V.AGGStock Forum) Kwame Opoku, lead Ghana geologist for the Canada-traded company at Mosease.

We are at Assuowunu, which is AGG’s expansive concession directly adjacent to Keegan’s (TSX: T.KGN and KGN) well financed Esaase project. (Photo of Dr. McBride examining porphyry near a digging on AGG property in Ghana – Thom Calandra photo.)

Ticker Trax subscribers received our real-time report earlier this week, when AGG shares, which I long have tracked, were 75 cents. For the first time, after witnessing for myself and subscribes what AGG has in the ground in Mali and in Ghana, I bought AGG shares – at about 91 cents each. I intend to purchase much more than my current 39,500 shares.

In Part I of this report, published for the Stockhouse audience, I dwelled on the relative value of AGG’s properties, which are priced at pennies on the dollar, vs. its neighbor at the Asankrangwa property, successful Keegan Resources and its high-grade patch of pricey real estate.

In Mali: “We think we’ll have 200 RC (reverse-circulation) exploration holes online for this year,” AGG President and founder Michael Nikiforuk says as we four-wheel it across the Mali concessions of Kobada, Foroko North and South. The Mali resource is 740,000 ounces of gold that is 43-101 compliant and likely to multiply within months, based on my on-site calculations.

Kevin McBride, based in Mali, shows me the orpaillage workings that date as far back as the mid-1800s and as recently as last month. He outlines to me in the rock the tension gashes that track and intersect shear zones at Kobada Zone 1.

African Gold Group is among a select handful of companies willing to share its detailed cross sections. One of them from a 2010 drill program shows double-digit meters of 1 gram to 3 grams per ton gold. Others in a stepout zone 4 or so kilometers north of the prime Zone 1 show 23 meters of 2.1 grams gold; 53 meters of 1.5 grams gold; 62 meters of 1.04 grams gold. More data are due back from the lab in three weeks or less.

Pierre Lalange, at age 64 having worked in West Africa, Canada and Australia, among other places, for 40 years, envisions a simple gravity recoverable process that uses de-sliming to wash away the clays and silts and spawn 90 percent-plus recovery rates. He describes himself and 68-year-old Dr. McBride in Ghana as “crotchety old rock goats.” (photo of Dr. Downing and Pierre Lalange in Trench No. 6 at Kobada Project – Thom Calandra photo)

In Ghana, where I am today: I have witnessed a flock of galamsay Ghana alluvial miners adjacent to Keegan’s Esaase. (Please see photo just above – galamsay near a humongous and dangerous illegal pit at Manso Atwere (110 meters long/40 meters wide/30 meters high. – All photos Thom Calandra)

The Ghana property controlled by African Gold Group at Asankrangwa is a mind-blower; this is the only way to describe it. The history of how Mr. Nikiforuk and AGG purchased this property involves local families’ legal feuds and the workings of courts, bankruptcy filings and maneuvering.

Neighbour Keegan got one relatively small patch, Esaase, and AGG got everything else – essentially 94 percent of the northern part of the Asankrangwa Belt some 90 minutes’ easy drive from the city of Kumasi.

To be sure, Keegan’s Esaase District is said to be worthy; I received a tour from Keegan’s Dr. Dan McCoy about 18 months ago. In comparison, AGG’s poison-pill-protected Asankrangwa covers 456 square kilometers across five contiguous concessions. Please see market cap comparisons in Part I.

The eye-opener for me bears a striking resemblance to what I felt in Colombia when I went to see Marmato for the first time in 2007, well before that rich yet troubled Medoro (TSX: T.MRSStock Forum) property drew companies such as Batero Gold (TSX: V.BATStock Forum), my beloved Bellhaven Copper & Gold (TSX: V.BHVStock Forum), Sunward Resources and many others to the country’s gold-dusted Middle Cauca Belt.

Asankrangwa, like Marmato, is swarming with illegal miners. Villagers are falling into makeshift shafts and open pits of placer ponds. They are suffocating and drowning. At some point, every company will have to contend with this growing social and political issue. Yet African Gold Group appears poised to unveil what could be remarkable diamond-drill results from the project amidst the illegal mining, just as Medoro Resources did at Marmato in Colombia.

“Our goal,” says long-timer and earthy geologist Dr. McBride, currently a consultant in Ghana to AGG, “is to show a unit that stands out like dog’s balls – the quartz sediments, the ammonites carrying the mineral.” Adds a more plain-speaking Dr. Downing, educated in Britain at the University of Leeds and age 56, “I think this is the right mix: one level-headed bloke out to entertain several theories, that would be me; and two seasoned guys who have seen just about every greenstone belt on a few continents and have their convictions about our two jurisdictions.”

Speaking of alluvial artisanal miners, or galamsay: Ghana’s Xtra-Gold Resources, another Ticker Trax featured prospect and one whose shares I own, is seven months into a supervised and contracted program that has organized the illegal so-called galamsay of Ghana, 2,000 of them in and around Xtra-Gold’s (XTGR and TSX: T.XTGStock Forum) base camp at Apapam.

I arrived today for the third time at Apapam, some 110 kilometers from the capital of Accra. Country manager James Longshore (in photo) had just concluded his monthly sale of alluvial gold, smelted on site to 92 percent gold bars. The sales in seven months have netted Xtra-Gold $1.5 million of cash. ( photo of Mr. Longshore at Apapam safe room with gold bars.)

Just as importantly, “We are harvesting information about the alluvial sources as we conduct a very aggressive diamond drill program in our main prospect zone.” (Much more about Xtra-Gold and its looming round of drill results next week.) I believe West Africa prospects, led perhaps by the two companies in this article, could rate as among the best gold-equity prospectors in the world this year of  2011. I put Colombia in there as well.

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THOM CALANDRA of Ticker Trax helps his audience find value in a quagmire of investment choices. Thom was founding editor of MarketWatch, CBS MarketWatch and FT MarketWatch. He was the voice of Thom Calandra’s StockWatch and The Calandra Report. Thom has been covering life-sciences and natural resources since 1988.