Hedge fund claims 90% downside potential at Asanko Gold
Peter Koven, 29 June 2016
Gold miner Asanko Gold Inc. has come under attack from a Toronto-based hedge fund that claims its stock price could plunge 90 per cent. The main allegation from K2 & Associates Investment Management Inc. is that Asanko’s gold resources “don’t add up” and appear to be over-inflated by a factor of two. K2 has a short position in Asanko, and in the grand tradition of short sellers, the hedge fund published its report on the company on a public website, allowing anyone to download it.
The strategy is reminiscent of previous short-seller attacks on Chinese-Canadian firms Sino-Forest Corp. and Silvercorp Metals Inc., which were highly effective in driving down the stock prices of the targets. However, this short report only had a minor impact. Asanko shares dropped five per cent on Wednesday, closing at $5.17 on the Toronto Stock Exchange.
“We thought it was important for our work and opinions to be entered into the public conversation,” K2 founder Shawn Kimel said in an emailed response to questions. He noted at least nine other groups are publishing opinions on Asanko and that it is the largest short position in K2’s precious metals portfolio.
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