PMI Gold spikes on Obotan resource update

Vancouver – Ghana-focused PMI Gold (PMV-V, PVM-A) has managed a 270% increase in gold resource at its Obotan project in a new resource estimate.

The interim resource spans four targets on the project, with three having previously been open-pit mined, and incorporates some 26,600 metres more drilling than the previous August 2010 resource.

The total measured and indicated resource now stands at 42.2 million tonnes grading 2.4 grams gold for 3.22 million contained oz. gold. Inferred resources add 17.5 million tonnes grading 2.35 grams gold for 1.3 million contained oz. gold.

The previous, initial resource on the project had 3 million indicated tonnes grading 1.59 grams gold plus 15.6 million inferred tonnes grading 2.1 grams gold. Both resources used a 0.5-gram-gold cutoff grade, though a deeper portion of the initial resource used a 1.5 gram cutoff.

The new resource sent PMI’s stock soaring up 45¢ or 77.6% to $1.03 on the day on almost 14 million shares traded. The company’s stock price had last seen a significant bump when it announced impressive drill results in March including 80 metres grading 7.49 grams gold per tonne from the Obotan project.

Three-quarters of the resource falls in the main Nkran deposit, which was initially separated into an above-ground and underground resource but is now grouped into one resource.

The company reports that gold mineralisation at Nkran is controlled by a very large complex system of structurally controlled NE-SW striking vein and shear systems that combine to form a central stock-work zone. Mineralized zones vary from a few metres wide to over 50 metres wide, while the deposit extends for some 700 metres along strike and is drilled to a depth of 550 metres. The gold mineralization is associated with highly altered meta sediments and occurs as mainly free gold.

The Adubiaso deposit, hosting some 280,000 oz., runs 1000 metres along strike and is drilled down to a depth of 180 metres, while the Abore deposit, hosting 380,000 oz. gold, runs 2000 metres along strike and has been drilled down to a depth of 150 metres. The deposits remain open at depth, and the company reports that current drilling is testing potential strike extensions.

The updated resource is being incorporated into a prefeasibility study due out by the end of the year. PMI is working through a $12-million exploration budget in 2011, which includes 19,000 metres of completed drilling over 75 holes not included in the resource update.

Resolute Mining (RSG-A) pulled some 730,000 oz. gold at a grade of 2.2 grams gold out of the three pits before closing the operation in 2002. In its last year of production, cash costs at Obotan were just US$172 an oz., with gold recovery at an impressive 97%.

PMI also controls the Kubi project, 65 km east of its Obotan project. Kubi hosts a total measured and indicated resource of 1.3 million tonnes grading 5.48 grams gold for 233,000 contained oz., plus 670,000 inferred tonnes grading 5.31 grams gold for 115,000 oz. gold. Overall PMI has 530-sq.-km of land holdings in the country.

The company has roughly 200 million shares outstanding, plus 62 million options and warrants with an average price of 41¢. As of late September the company had roughly $23 million in cash and no debt.