Kubi offers upside for PMI Gold

A month after PMI Gold (PMV-V) and Keegan Resources (KGN-T, KGN-X) called off their merger plans in February because it appeared unlikely that PMI Gold’s shareholders would approve the deal, drill results continue to identify anomalous gold at its Kubi tenements in southwestern Ghana, about 65 km east of its flagship Obotan project.

Highlights from air core drilling included 24 metres grading 1.87 grams gold per tonne from 0 metres; 10 metres of 3.42 grams gold from 9 metres; 11 metres of 1.19 hrams gold from 21 metres and 2 metres of 5.43 grams gold from 18 metres.

PMI Gold’s Kubi tenements are 15 km south of, and along strike of, AngloGold Ashanti’s (AU-N) high-grade Obuasi mine, the largest underground mine in West Africa, and 12 km northeast of Perseus Mining’s (PRU-T, PRU-A) Edikan gold mine. The company says the results indicate shallow anomalous gold is “extensively distributed along the Ashanti and Kubi shears.”

The Kubi main deposit currently has 0.66 million tonnes grading 5.30 grams gold for 112,000 oz. gold in the measured category; 0.66 million tonnes grading 5.65 grams gold for 121,000 oz. in the indicated category; and 0.67 million tonnes grading 5.31 grams gold for 115,000 oz. in the inferred category.

So far PMI Gold has drilled 549 air core holes for 24,818 metres that has broadly tested a 10 km strike of the Ashanti Shear and 2 km of the Kubi Shear.

Nevsun Resources (NSU-T, NSU-X) conducted prior exploration work at Kubi between 1997 and 1998, during which it drilled more than 35,500 metres of RAB, RC and diamond core drilling, and nearly 14 km of trenches.

PMI launched exploration at Kubi in 2009, and the project consists of two mining leases covering 19.34 sq km and prospecting licences over 32.83 sq km.

A previous operator mined 59,000 oz. gold from Kubi at an average grade of 3.65 grams gold.

PMI Gold’s flagship asset is the Obotan project in the Asankrangwa Gold Belt, which is forecast to produce 221,500 oz. gold over the first five years.

Obotan contains 44.8 million measured and indicated tonnes grading 2.16 grams gold for 3.1 million oz. of gold, and inferred resources add 21.91 million tonnes grading 1.99 grams gold for 1.4 million oz. The resource was based on a cut-off grade of 0.5 gram gold.

Obotan was mined from three open pits by Resolute Mining (RSG-A) during a period of low gold prices. Resolute produced 730,000 oz. gold from the mine up until December 2002.

Because of its previous mining history, PMI Gold argues that the project is considerably de-risked in terms of environmental and social permitting, metallurgical and process engineering and infrastructure development.

Of Obotan’s four known deposits (Nkran, Adubiaso, Abore and Asuadai), Nkran is the largest, with about 75% of the project’s total gold.  It has been developed over a strike extent of more than 500 metres and maximum widths greater than 100 metres in the central portion, and delineated to a vertical depth of more than 250 metres below Resolute’s old open pit. The deposit remains open at depth.

In a recent research note, mining analysts at Raymond James contended that “given the robust economics and rapid de-risking of the Obotan project … PMI Gold presents a compelling opportunity for investors to accumulate shares at depressed levels for a gold developer located in a stable mining jurisdiction (Ghana), with construction expected to commence later this year.”

 “In our view the stock is poised to follow the traditional developer curve towards first gold production for 2H14,” the analysts continued, noting that they consider Obotan “to be one of the upper quartile development projects currently moving forward within the battered developer group.”

In Toronto at presstime, PMI Gold’s shares were trading at 59¢ within a one-year range of 54¢-$1.11. The junior has about 414 million shares outstanding.