ThomCalandra – Resource investors do see things in this mediocre metals equities market. But those things have to be big.
PMI Gold’s rip higher Friday, and overnight in Australia, came after the Ghana prospector nearly tripled its global resource at Obotan. I toured the project in May and bought 40,000 shares in August at 44 cents Canadian. (See first report.)
PMI’s (TSX: V.PMV, Stock Forum) 3.2 million ounce measured-indicated resource is the documented lay-up to what will become an actual mine at the historic Nkran pit, which is crawling with alluvial miners and ancient workings. (Photo: Obotan – Thom Calandra) When I was there, PMI’s team, led by seven-year-Ghana tried-and-true country manager Neil Macfarlane, was so eager to drill the bejeebers out of the Obotan pit, it was relying on a transported rig from nearby Keegan Resources (TSX: T.KGN, Stock Forum and KGN) at its Esaase project.
Today, Friday, PMI’s global resource triple (4.5 million ounces total) is pushing the stock almost 80 percent higher. PMI’s dedication to the Asankrangwa Gold Belt area of Ghana comes amidst a rocky year for the Australian company. The company raised money at a robust price in Australia, 70 cents Canadian in autumn 2010, then eased out PMI’s CEO when the stock price collapsed.
Macquarie Group of Australia holds 15 percent of PMI. The new CEO, Collin Ellison, is a mining engineer who has developed gold and nickel properties in Burkina Faso and Vietnam. (Photo here: Mr. Macfarlane and his team at Obotan and to his left, our right, is PMI senior geologist Ernest Opoku – Thom Calandra photo)
For investors, there are at least three takeaways from all this:
PMI’s fast-track mine plan, thanks to the upgraded resource report, is good news for Keegan Resources and another Ghana prospector with nearby properties, African Gold Group (TSX: V.AGG, Stock Forum) and its Esaase-neighboring Asankrangwa holdings. (See investor Ross Beaty’s comments below.)
- PMI’s thick grades of 2.5 gold grams per tonne and strategy for a three million-tonne-a-year plant at Obotan make Endeavour Financial’s bid (TSX: T.EDV, Stock Forum) for another West Africa prospector based in Australia, Adamus, look worthy. Still, my run at this is that Obotan will be a producer of gold well before Adamus is at its Ashanti Belt property near Golden Star (TSX: T.GSC, Stock Forum) / (AMEX: GSS, Stock Forum).
- PMI’s share price of approximately $1 Canadian and $1.04 Australian give the company a $200 million stock market worth, with $20 million to spend on studies and more drilling. By year’s end, PMI shares will have gained another 40 percent based on ounces in the ground and takeover talk and still be a bargain. (I own the shares; please see above.)
Ross Beaty, a silver and copper success story who hails from Vancouver, Canada, is a recent investor in nearby Keegan Resources. I have trekked on and next to Keegan’s Esaase several times.
“I bought Keegan just recently after they dropped to $5 and released their prefeasibility study,” Mr. Beaty tells me from Copenhagen via Iceland (geothermal project for his Magma Energy). “Seems good value in this market. I don’t own a lot. Ventana (mundo-big Colombia gold winner for Mr. Beaty’s investment firm Lumina) was sold, and that was my last gold name. I don’t expect anything similar for Keegan, but it could be worth $8 or $9 a share, so a decent low-risk gain potential.” Keegan shares are about US$5.50 right now.
I don’t own Keegan but have tutto–mundo respect (as in mucho) for the geologist who led the Esaase charge in Ghana, Dr. Dan McCoy. I do own shares of the company whose Asankrangwa properties are a spittoon spit away from Keegan’s drilling lines. That’s Michael Nikiforuk’s Mali and Ghana prospector, African Gold Group (AGG).
Just so you know: I always will go for the $50 million scraps on the table – AGG, PMI (now $100 million) and Ghana’s Xtra-Gold Resources (TSX: T.XTG, Stock Forum and XTGR) – and leave the $450 million ones, Keegan, for others. (Please see: More PMI early coverage from visit)
“I can see a major right today buying PMI for $100 an ounce in the ground, so that’s what, $400 million total,” says James Longshore, Mr. Macfarlane’s counterpart, a project manager for Xtra-Gold Resources. “It’s basically an underground mine with PMI drilling beneath the pit, a lot like Perseus was – the oxides all scooped out. Perseus went in and bought that Edikan property (in central Ashanti Gold Belt) and is now pouring bars.”
EUROPE: I will be accompanying a group of miners, prospectors, professors and promoters across several European cities. The road show on a big honking bus will make its way to the Munich Gold Show and hit Zurich, Geneva, Hamburg and Vienna. If you’d like to know more, get a free lunch and meet some of us along the way, please visit: http://roadtrip.zimtu.com/. The sponsor is Zimtu Capital (TSX: V.ZC, Stock Forum) and seven of its portfolio companies.
MUNDO: I will be speaking at Brien Lundin’s New Orleans Investment Conference. Click on this link for a discount. The topic: “10x Return Candidates In Ghana, Colombia, Sierra Leone, Quebec and Ethiopia.” I go on at 7:35 p.m. Thursday Oct. 27, followed by a workshop. … I am a partner of Torrey Hills Capital, which is in Del Mar, near San Diego, California. African Gold Group is a client. So is Xtra-Gold, whose shares I own.