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Keegan Resources Inc.

Keegan Resources - Mining the Warrior King

Known as "The Gold Coast" until the late 1950’s, the resource-rich sub-Sahara country of Ghana has somehow gone largely under explored by modern methods. After a decade of steady increases in the price of gold and the introduction of an investor-friendly Mining Code in 1992, Ghana is booming. Juniors like Keegan Resources [TSX-V: KGN, AMEX: KGN] have been stepping in to capitalize on what may prove to be blue sky opportunities.

A well-financed advanced gold exploration company, Keegan’s management seeks to maximize investor value through a philosophy of continuous and well thought out exploration and asset development. They have two major plays in the West African country of Ghana: the Esaase property (their current focus) and the Asumura property (in the early stages of exploration).

In today’s tough investment climate, Keegan is one of the few resource stocks getting attention from analysts. Impending visits from analysts at Dundee, Cormark, Ocean Equities in London, and Blackmont may yield some interesting news in the coming weeks.

Keegan’s primary exploration activities in Ghana (which translates literally to "The Warrior King") are focused on the Esaase Gold Project. They have a 100% stake in the property, although the government retains the right to take a 10% interest in the project (which kicks in when the project moves into the exploitation stage) as part of the Ghanaian Mining Act. A 3.5% Net Smelter Royalty is owed to the government when production starts. The project is located in the Southwest part of the country, 35 km Northeast of the capital of Kumasi, in the Ashanti Region.

The property itself is approximately 72 square km and boasts an initial 1.7M ounce 43-101 indicated resource, which was drilled within 10 months of 2007. That rate of success has continued such that Keegan’s goal is to release a multi-million ounce resource by the end of 2008. The geology of the deposit lends itself to a low-cost open pit mine. An initial metallurgical study indicates excellent recoveries with minimal grinding. The resulting combination of lower power costs and very favorable topography will see the deposit ranked as one of the lowest cost producers in Ghana.

Up until June 2008, Keegan has drilled over 85,000 metres in exploration and delineating holes. In the latter half of 2008 the plan is to continue step out holes to the North, where Keegan is currently adding resources, and drill to deeper depths in areas where potential feeder zones may occur. The exploration drilling, combined with infill drilling and the hiring of three engineering firms to commence early scoping studies, should add significant value through the efficient rapid advancement of the project. Keegan is looking to acquire adjacent properties to the South, as their drilling and exploration programs to date lead them to believe that there is significant potential to expand the size of the project and turn Esaase into a District play.

The location of the property is significant, as it is in a part of the country that hosts successful mines run by majors such as Newmont and Goldfields and Mid-tiers such as Redback. Due largely to the presence of these and other players, Keegan is working in an established mining district where important infrastructure largely exists. The site itself is reachable by 35 km of paved and gravel roads (the last 5 km are gravel) and water supplies are readily available from a previous placer operation’s tailings dams. The Esaase exploration camp and surrounding villages are connected to the national power grid, supplied by the country’s hydro-electric system. While power costs have increased, relief is in sight. A new coal-powered plant is in discussions and the price of electricity is expected to fall within the next two years.

Beyond 2008, Keegan expects to have fully delineated the size of the deposit by mid 2009 and aims to complete a scoping study in the first half of that year. They believe that bringing this project to production within two and a half years is a reasonable target, although if their success rate continues it may be unlikely that they will get the opportunity to take it to production themselves.

When asked whether they plan to see this project through to production or to sell it off, co-founder and financier Ivan Bebek says that they are not in a rush to sell the asset off, although adjacent majors and mid-tiers make a sale a distinct possibility. Their strategy of prudent investment and exploration of the asset will ultimately allow them to make the right decision to maximize their shareholders’ value when the time comes.

While a Canadian resource company with assets entirely outside the country (much less in Africa) may make an investor think "increased risk", there are several reasons that Keegan is poised for success. Their choice to pursue assets in Ghana, whose official language is English, has a number of advantages over other parts of Africa. Stable government, a growing economy, mining-friendly legislation, and a climate conducive to year-round operations are some of the key differentiators for Ghana.

Since their Constitution was passed in 1992, the government has been elected by universal suffrage and is clearly committed to a multi-party democracy. Considered one of the most stable governments on the continent, they have made significant progress on economic and social issues in recent years. With mining-friendly legislation, they improved Foreign Direct Investment from US$166M in 2000 to about US$450M in 2006 (IMF). Strong exports of gold, timber, cocoa and diamonds have driven a GDP CAGR of 5.6% between 2002 and 2006. As their prosperity as a nation has improved, poverty rates have fallen from 52% in 1992 to 28% in 2006. Perhaps the best indicator of how all of this translates into a safe and stable place to invest is Ghana’s ranking by Vision of Humanity’s Global Peace Index. Ghana ranked 40 out of 121 countries, just three behind France. Finally, their tropical climate provides favourable year-round mining conditions.

Having expertise based in the country is critical when pursuing opportunities half way around the world. Keegan’s "man on the ground" is Eric Ewen, a specialist who has over forty years experience in metals exploration. He is a Canadian who has lived in West Africa for the last sixteen years and provides a critical link to the headquarters. He oversees surface exploration, logistics, social licenses, and works closely with the Minerals Commission and relevant government parties.

The management team of Keegan Resources is stacked with over 150 years of collective industry experience, and it shows when you speak with members of the team. The level of professionalism that they approach the business with is clearly top notch. So for investors, Keegan resources may prove to be the jewel in the crown of the Warrior King.

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