Angkor Gold Signs New Cambodia Deal with Mesco

Cambodia-focused Angkor Gold (TSXV:ANK) took a step forward Tuesday with the news that it’s entered into a definitive joint venture agreement with India’s Mesco Gold (Cambodia).
Under the agreement, Mesco will have the right to explore the entirety of Angkor’s Oyadao North concession for minerals, with Angkor retaining a 15-percent free carried interest in the concession. Mesco has agreed to spend US$1.25 million on exploration at the concession, and Angkor will not have to incur “any financial obligations related to the maintenance of the licence and future exploration/mining programs.”
The deal builds on the existing relationship between Angkor and Mesco. As those following Angkor are no doubt aware, it sold its Phum Syarung gold project to Mesco several years ago for US$1.9 million, retaining a net smelter royalty (NSR) on the project. Phum Syarung is located on Angkor’s Oyadao South concession, and this year it’s set to become Cambodia’s first royalty-paying, fully licensed gold mine.
Speaking to the Investing News Network (INN), Stephen Burega, vice president, corporate development at Angkor, highlighted that Tuesday’s news shows that Mesco is “looking to expand its footprint [around Phum Syarung] — looking to expand its ability to search for more ore.” He added, “Mesco wants to increase the production capacity of the mine once it’s up and running, and [this is] an opportunity for it to do so.”

In Tuesday’s release, Angkor also notes that its NSR on Phum Syarung has been revised — it’s now set at 2 percent as long as the gold price is under US$1,000, and will increase by 0.25 percent for every US$50 that the gold price rises above US$1,000. The NSR will max out at 7.5 percent, and Angkor will receive a 7.5-percent NSR for all other minerals mined as well.
Explaining the change, Burega said, “essentially it’s just a modification of the sliding scale. We agreed that we would put a low mark and a high mark on it.” He believes the change is important given today’s market. “We have to work with [Mesco] as operators and understand that the current gold market is not where it was when we started this deal,” he said.
That said, Burega is confident that the gold price will rise in the long term. He’s also confident about Phum Syarung’s prospects, and said he believes that it will be “proof of concept for Cambodia” — in other words, once it’s in production it will show investors and miners that the country is open for business.
“We’ve been trailblazing essentially since we started working in Cambodia,” said Burega, adding, “[the country] has grown dramatically and drastically in the past 15 years, with infrastructure and development and direct foreign investment coming in. It is really quite a wonderful place to operate.” He also pointed to Cambodia’s strong, stable government as a positive aspect of the country.

In closing, Burega spoke briefly about Angkor’s plans outside Oyadao North and Phum Syarung, noting that as a prospect generator, the company has a lot on the go. For the current work season, the company’s plan is to focus on its core prospects, namely Halo, Okalla West, Koan Nheak and CW. “It’s the dry season, so we have teams actively on the ground. We have about 120+ staff working across various prospects right now.”
Overall, however, Angkor’s goal is of course to find joint venture partners to move those prospects forward. “We do exploration extremely well … we don’t think of ourselves as producers. Our goal is to identify the right strong partners to come to the table once we’ve done the core exploration,” Burega concluded.
It will certainly be interesting to see how Angkor proceeds in 2016, and in particular to watch Phum Syarung enter production. At close of day Tuesday, Angkor’s share price was sitting at $0.485. It’s traded within a 52-week range of $0.38 to $0.64.
 
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 
Editorial Disclosure: Angkor Gold is a client of the Investing News Network. This article is not paid-for content.