Keegan gold project enters the big time

Following a monster resource update as its Esaase gold project in Ghana, analysts are heaping praise on Keegan Resources Inc. and declaring it a potential takeover target.

The update lifted the global resource at Esaase to a whopping 4.9 million ounces of gold, using a reasonable cut-off grade of 0.4 grams per tonne. The resource increased about 40% from the last update.

“With Esaase now reaching the [five million ounce] mark, Keegan now stands among the larger projects in West Africa,” Clarus Securities analyst Nana Sangmuah wrote in a note, adding that it is now bigger than SEMAFO Inc.’s Mana mine. However, Keegan trades at a cheaper valuation than most of its West African peers.

Dundee Capital Markets analyst Ron Stewart highlighted the fact that a third party may step up with a takeover bid for Keegan in the coming months. West Africa has certainly been a hot region for potential M&A after the US$7.1-billion takeover of Red Back Mining Inc.

“Quite simply, there are not many single asset companies out there with five million ounce deposits defined at the feasibility level,” Mr. Stewart wrote.

He rates the stock a “buy” with a target price of $12.00 a share. Mr. Sangmuah also rates it a “buy”, with a slightly higher target of $12.75 a share.