 | | | Published : October 04th, 2007 | Larry Myles Reports: Another Look at PMI Gold Corporation. |
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| | Thursday, October 04, 2007
Another Look at PMI Gold Corporation.
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Douglas MacQuarrie has done it all. Spends more time out in the field than he does in his Vancouver office. Has quietly put together a stellar and respected Board of Directors and Advisory Board. Doug Hadfield brings a fresh perspective to the meaning behind PMI Gold's brilliant acquisition of Nevsun's Kubi Gold Project.
PMI Gold Adds Nearly 1 Million Ounces In Ground to Portfolio
By Doug Hadfield, Resourcex Investor - September 2007
Junior exploration company PMI Gold Corp. (TSXV: PMV) has added a fourth past producing mine to its portfolio in Ghana's famous Ashanti Gold Belt. The new concession is located just twenty kilometers away from Anglogold Ashanti's 55 million ounce Obuasi mine and is within southwest Ghana's Golden Triangle, which has combined current reserves and historical gold production of over 170 million ounces.
Kubi has seen extensive work to date. Project exploration and development costs total more than US$20 million. In the 1920s, artisans completed numerous adits and provided a foundation for later work by BHP, which included a program of ground geophysics and drilling. BHP later optioned the property to NS Ghana, who completed extensive exploration throughout the 1990s.
The geological picture of mineralization at Kubi is described as a one to 15 metre thick blanket of gold mineralization over a span of 1,800 metres long by up to700 metres deep. The mineralized block is contained within a northeast trending shear zone straddling a major contact between the Birimian and Tarkwaiian. According to a report by The Resource Investor, more than 100 million ounces of gold have been identified within the Birimian Gold Belt. The presence of Tarkwaiian rocks is also closely linked to many large gold deposits found in Ghana.
According to a September 2007 NI43-101 technical report for the Kubi property, "The "Ashanti Trend" is a structural feature that hosts many of the gold deposits in the Obuasi area is interpreted to run through the western part of the Kubi property. Exploration in this area has not been exhaustive and additional potential for Ashanti style deposits is possible."
Between 1996 and 2006, Ashanti mined 58,696 ounces of gold from two open pits on the property. The total ore milled was 500,230 tonnes grading 3.65 g/t. The recovered grade was 28 per cent higher than expected per Ashanti's mine modeling. Seven mineralized zones have been defined on the property, within three major generative corridors, with 85% of the reserve base currently within a zone known as the Main Garnet Zone.
Significantly, the technical report notes that a "Garnet Zone equivalent has been intersected with associated grade in boreholes drilled at (the nearby) Kubi South." Any future drill program will make this mineralized zone a primary target. The Kubi Main Zone has been traced for two kilometers along a consistent strike and is open at a depth of 700 metres.
The details of the transaction stipulate that PMI will acquire all the shares of Nevsun Resources (Ghana) - a subsidiary of Nevsun Resources (TSX: NSU) - for nine-million shares in PMI, plus an additional $3-million in cash or stock payments. Nevsun's holdings may not exceed 20% of the outstanding shares of PMI. Ghanaian tax and royalty considerations will be offset by project expenditures to date. At $0.28 per share of PMV.V, the total cost of the transaction to PMI is approximately US$5.5 million. Following the transaction, Nevsun will hold approximately 9% of PMI on a fully diluted basis.
Prior to announcing its acquisition of the Kubi concessions, PMI hired Golder Associates Africa to prepare a NI43-101 resource estimate on the property. Using data from NS Ghana's work, which included 212 drill holes - and by subtracting the resource already mined by AngloGold Ashanti - Golder showed that the Kubi deposit has close to 920,000 ounces inferred and indicated.
PMI has noted that a portion of the Kubi mining lease is covered by a forest reserve. The company stated, "[We] will proceed with an underground operation "by shaft or decline from the non-forest reserve area and trucking the material off site for processing, and therefore will not be overly impacted by forest reserve issues." The main Kubi mining lease covers 19.2 square kilometres and has a renewable 10-year term valid to April 29, 2009.
The qualified person on the project, David Farrow, stated that the Kubi Main trend "contains significant resources drilled to a depth of 700 meters vertical."
The region in which Obuasi and the Kubi mines are located is rich in gold and historical gold mines. The Obuasi gold mine has been in continuous production for 110 years. Ghana is famous for its Ashanti Gold Belt, which is part of a volcano sedimentary belt and presently includes seven producing mines. In fact, Ghana is Africa's second largest gold producer, mining about 80t of the yellow metal per year. Ghana is already producing over two million ounces of gold per annum This is an area of majors, too, with companies like Anglogold Ashanti, BHP, Newmont and others operating large both large scale exploration and mining activities in the region.
Over the past few years, PMI Gold has acquired three other former gold producing mines in Ghana: Nkran, Abore and Adubiaso. All were previously operated as the Obotan Gold Mine by Resolute Amansie Limited, a subsidiary of Resolute Mining of Australia.
According to PMI documents, between 1997 and 2002, "the Nkran pit at Obotan produced an average of 146,000 ounces of gold per year for a total of 590,000 ounces of gold at an average grade of 2.2 g/t. The Abore and Adubiaso pits located 12.5 km and 4.0 km northwest respectively of Nkran, together produced a further 140,000 ounces at similar grades."
The mine was mothballed in 2002 after Resolute struggled for five consecutive years of low gold prices, averaging approximately US$300 per ounce. The price of gold on September 24th remained over $730 per ounce. Many gold bulls continue to argue that gold is undervalued and that demand for bullion (and therefore its price tag) will increase with the declining US dollar and diminishing production.
In 1997, a bankable feasibility study (BFS) reported 38 million tonnes grading 1.96 g/t for 2.823 million ounces at for the Obotan Gold Mine. In total, Resolute mined over 730,000 ounces of gold before closing the mine. PMI Gold believes there is an exploration target below the Nkran pit of one to two million ounces of gold grading from 3 to 6 g/t Au.
PMI Gold (TSXV: PMV) has 77 million shares outstanding including the 9 million for the Kubi acquisition (105 million fully diluted). Its 12-month high-low is $0.47 - $0.14. On September 24, 2007 the company opened at $0.27 per share.
This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.
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