Canada's Asanko Gold Inc. rejected claims by short-seller Muddy Waters LLC that it is heading for bankruptcy and urged shareholders to ignore the report.
The Muddy Waters report, which was released May 31, claims that "flawed geology" led Toronto-listed Asanko to unrecoverable investments in Nkran, Esaase and various satellite deposits.
The investment company expects Asanko to run out of cash in 2018 while trying to service US$165 million in debt.
However, Asanko President and CEO Peter Breese said the Asanko gold mine is a robust business.
According to Muddy Waters, the Nkran deposit is already experiencing a "serious collapse of its west wall," and Asanko needs to spend between US$75 million and US$115 million to keep mining the pit.
Breese said the sidewall issue was previously disclosed and has not materially impacted Asanko's ability to operate.
The company has maintained its 2017 production guidance of 230,000 to 240,000 ounces, which is expected to generate between US$64 million and US$77 million based on a gold price of US$1,200 per ounce.
"The short report has no merit and our upcoming expansion definitive feasibility study will by itself provide a complete rebuttal to Muddy Waters' technical claims and will also make other information available to refute the non-technical allegations," Breese said.
In its first-quarter report, released in early May, Asanko said its balance sheet remains strong, with US$65.0 million worth of immediately available cash and equivalents and US$76.8 million of working capital at the end of March.
Meanwhile, Muddy Waters also claimed Breese and Chairman Colin Steyn have "taken significant money off the table" by selling a chunk of their original holdings in Asanko in 2015.
According to Asanko, both executives have regularly purchased company shares and have not sold any.
Asanko said the 2015 transaction referred to in the Muddy Waters report was simply a change of indirect to direct holdings among shareholders within a private company.
The company plans to release its expansion definitive feasibility study June 5.
Asanko shares closed down 13.1%, or 33 Canadian cents, to C$2.19 following the release of the Muddy Waters report. At least three law firms are investigating potential securities claims on behalf of shareholders.