A high grade multi-project gold producer emerges in West Africa
In October, PMI Gold Corporation (TSX-V: PMV) (ASX: PVM)—the West African focused, ambitious gold junior with four previously mined deposits including two near-term production high grade projects—more than tripled the gold resource at its flagship project, Obotan, and confirmed high grade intersections which underpin its resource model. On track to complete the project’s pre-feasibility study (PFS) in December as TABJ goes to press, followed by a bankable feasibility study (BFS) scheduled for completion in mid-2012 and production in late 2013, it’s fair to say that we aren’t dealing with your average junior gold group.
PMI Gold’s Obotan project, in Ghana, is the near-term production opportunity capturing market attention and the first of three emerging mining centres the company is developing as it goes about becoming a significant West African gold producer. PMI Gold shares rocketed more than 67 per cent when Obotan’s gold resource raised 270 per cent in October. In summary, the project is now home to:
An NI43-101/JORC compliant measured resource estimate of 14.67 million tonnes at 2.66 grams per tonne gold for 1.22 million contained gold ounces;
Indicated resources of 27.5 million tonnes at 2.32 grams per tonne gold for 2.00 million gold ounces; and 17.54 million tonnes of inferred resources grading 2.35 grams per tonne gold for 1.29 million contained ounces.
The highlights from intersections returned bolstered this surge of investor interest (35 diamond drill holes for 7,614 metres revealing 3.47 grams per tonne gold over 30 metres, and 51.17 grams per tonne gold over eight metres) and the release of the pre-feasibility study will wrap up what continues to be an outstanding development project; now in the hands of the right team to realise its full potential.
Add in PMI Gold’s other assets—including additional near-term production opportunities at the Kubi project, 65 kilometres east of Obotan in the Ashanti gold belt, and the large ground holding along strike at the Asankrangwa belt—and the company is sitting on 3.45 million measured and indicated ounces and 1.4 million inferred ounces.
Seven years spent acquiring land and exploring in one of the world’s most prolific gold producing regions is about to pay off, and as Managing Director Collin Ellison says, to have PMI Gold’s ground holding in this region is unusual (530 square kilometres in the Golden Triangle) and having the funding and expertise to develop it to production places PMI Gold in an excellent position for growth.
Outstanding results on track at Obotan
Recent results from Obotan continue to support project robustness in line with PMI Gold’s plans for a pre-feasibility model of approximately 200,000 ounces per annum. The project’s history offers equally good encouragement, and PMI Gold has expanded upon data provided by previous owners, Resolute Mining, who focused on the upper portion of Obotan’s Nkran deposit and smaller satellite deposits Abore and Adubiaso. Without mining the project’s other satellite, the Asuadai deposit, Resolute produced 730,000 ounces at an average grade of 2.2 grams per tonne gold during prices of less than US$350 per ounce.
Approximately 590,000 ounces came from Nkran; where over three-quarters of PMI Gold’s resource now falls (2.5 million ounces measured and indicated grading 2.54 grams per tonne, and 1.02 million ounces inferred grading 2.54 grams per tonne).
Since acquiring the Obotan project at the end of 2006, PMI Gold has completed 225 resource extension, confirmation and infill diamond drill holes for 59,084 metres of drilling, and Ellison says that while these works have continued to target Nkran in particular, plenty of highly prospective exploration upside remains. Resource definition drilling is ongoing—aimed at evaluating the ground down to approximately 350 metres below the surface (or 200 metres below the Resolute open pit) and the latest high grade intersections have confirmed internal continuity. Also, as part of ongoing works at Nkran, PMI Gold plans to test the deeper, down-plunge extensions of mineralisation below the current resource. This will allow for evaluation of future underground potential at the deposit.
In addition to drilling within the current exploration programme, is the interpretation of both Resolute and PMI Gold geological, geochemical and geophysical databases to underpin the planned January 2012 quarter revised resource estimate (ahead of the bankable feasibility study). This work has enabled PMI Gold to identify further targets in the same multiple parallel gold bearing shear zones which house Obotan’s four known deposits, and the company states that they now offer an interpreted combined strike length of over 30 kilometres for the project.
As is the case for other exploration targets found in both the Kubi project and Asankrangwa project (covering the southern 45 kilometre strike extension at Obotan), the PMI Gold team also plans to carry out sustained drill testing on new areas of encouragement during the 2011 year-end. Activity will begin when two PMI Gold rigs arrive onsite—an RC/Diamond and an Air Core/RAB—and in early 2012 (well-timed for the new resource estimate ahead of the BFS) another RC/Diamond will also make its way over to Obotan.
Some 7 kilometres northwest of Obotan on the same north-northeast trending shear zone as Nkran, the un-mined Asuadai deposit offers more strong potential for future discovery and adding to the resource statement. To date, the 17 holes drilled in shallow dipping stacked quartz veins outcropping on a small rise have turned up a flurry of good results (including 24 metres at 2.32 grams per tonne from 108 metres, 7 metres at 3.38 grams per tonne from 71 metres, and 11 metres at 4.33 grams per tonne from 90 metres).
Even during tough times for capital raising, PMI Gold has dedicated funds to a significant drill programme—a clear sign that this is the company to pick up where Resolute left off (building on a period of mining success for Obotan despite substantially lower gold prices). In addition to taking Obotan to fruition and becoming a gold producer in the process, drilling is ongoing at the Kubi Project where the PMI Gold team intends to commence a pre-feasibility study during 2012 and swiftly follow Obotan with another potentially company-making asset.
Exploration upside at Kubi
Located 65 kilometres east of Obotan is Kubi, where PMI Gold reports advanced exploration and development potential. It is 15 kilometres south of the AngloGold Ashanti’s 60 million ounce Obuasi Gold Mine—the largest underground mine in West Africa which has been up and in operation for a full 113 years—and Ashanti previously mined approximately 59,000 ounces of gold at 3.65 grams per tonne from two shallow pits at Kubi 1998 to 2005.
Now home to a JORC compliant resource of 0.35 million gold ounces (112,000 ounces measured; 121,000 ounces indicated; 115,000 ounces inferred), a granted mining lease and plenty of blue sky potential to increase the resource, Kubi has undergone a detailed exploration programme of its own throughout the past year. PMI Gold has carried out drill testing at highly prospective gold anomalous areas, which fall along strike from Kubi and the parallel Ashanti Trend at the company’s 513 Prospect, and along strike and 15 kilometres south of Obuasi. Magnetic and radiometric surveying has been run and finished throughout Kubi’s concessions and main structural controls identified, revealing a number of areas as high priorities for further drill testing. From the intersection of the Ashanti shear zone and Perseus mineralising east-west structures, to the Dunkwa area alluvial gold and extensive near-surface mineralisation running along 25 kilometres of the Ashanti and Kubi trends, Kubi houses plenty to get excited about.
Ramping up at Asankrangwa (Asanko)
PMI Gold’s Asankrangwa regional exploration project has shifted from exploring the largely untested 70 kilometre length of the Asankrangwa gold belt, to drilling for new discoveries and following up on drill testing at a number of high priority gold targets; activities planned within the next programme of work. With respect to discovery targets, the team is focused on its ground within 15 kilometres of Obotan. Meanwhile, the Southern Asankrangwa is shaping up to become the company’s third mining centre (after Obotan and Kubi) where existing exploration facilities have enabled PMI Gold to set up shop and ready for the work ahead. The arrival of new rigs, establishment of the dedicated sample preparation facility, and additions made to the geologist and field personnel onsite each bolster the company’s capabilities on the ground—and latest reports from management state that the group remains well funded to aggressively progress exploration across entire tenement package, with activity due to ramp-up in 2011-2012.
Golden advantages: grade, team & ground
As peers and investors alike brace themselves for the imminent announcement of the Obotan pre-feasibility study and February 2012 revised resource estimate, a mere glance at how PMI Gold measures up to other gold explorer/producers in West Africa shows that when it comes to grade and ground holding, this junior outshines much of the competition.
October results have revealed that PMI Gold is relatively higher grade and relatively cheaper on a resource ounce comparison to other listed African gold companies, and as drilling ramps up across the three emerging mining centres, starting with Obotan as the most advanced, rapidly developing mine, there’s no telling quite how much the company’s resource inventory may be added to during the months to come.
Compared with West African peers, PMI Gold sits undervalued on an EV/oz basis. It has one of the larger sized and higher grade gold exploration and development opportunities in the country, and its land package remains highly prospective. Mines like Obuasi have ensured that existing infrastructure (and interest) are strong, and if the past 12 months are any indication, the PMI Gold team is more than technically, monetarily and strategically capable of carrying out the works necessary (under favourable gold prices) to bring its projects into commercial operation.
The October share price hike confirms that investors are starting to catch on to quite how significant a gold producer PMI Gold is becoming; and it won’t be long before Obotan’s development in 2012 and the team’s track record in successful exploration fuel mounting attention and more accurate understanding of this highly focused, advanced multi-project emerging West African gold producer.
TABJ thanks Kirsti Mattson, corporate communications and Rebecca J Greco of Fig House Communications (PMI Gold) for their assistance.