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PAPILLON RESOURCES LIMITED
Impressive Fekola Resource Growth 34% to 4.2Moz
Papillon Resources Limited (“Papillon”, “PIR”, “Company”) has updated the
mineral resource estimate for its Fekola Project (PIR 90%), located southwest
Mali, with an impressive 34% growth in contained gold to 4.21Moz.
The upgraded Fekola resource estimate (100%-basis) is now 54.97Mt @
2.38g/t Au for 4.21Moz (3.8Moz attr.), up from 40.1Mt @ 2.4g/t Au for
3.14Moz Au (2.8Moz attr.), reported at a 1g/t Au lower cut. Measured and
Indicated resource categories now make up 3.5Moz (or 83%) of the new
estimate and there has been little change to the overall resource grade
which is now 2.38g/t Au down only slightly from 2.4g/t Au. Mineralisation at
Fekola remains open at depth and along strike and we expect more
significant resource growth to come. The updated resource estimate will be
used in the Pre-feasibility Study (PFS), which is well underway and remains
on track for a June Quarter (late April/early May) 2013 release.
Extensional Drilling Set to Grow Resources Further
Papillon recommenced drilling at Fekola in November 2012, with the
~100,000m campaign focused on expanding the Fekola resource along
strike and at depth. The Company also plans to test priority targets along
the +11km strike of the Fekola Corridor. The Company currently has 4 drill
rigs (2 diamond, 1 RC and 1 multipurpose- diamond/RC rigs) on site with
another multipurpose rig to arrive soon. The program is split between
30,000m of diamond drilling testing depth extensions and further infilling the
current resource and 70,000m of RC which is testing northern extensions to
the deposit. Extensional drill results have already been received for ~20
completed holes (~8,500m) which reaffirms strong continuity to the main
mineralised structures at Fekola outside the current resource estimate
(extending at depth and to the north). Some of the recent drill highlights
include 73m @ 2.27g/t Au from 254m; 71m @ 4.93g/t Au from 337m; 49m
@ 2.18g/t Au from 287m and 34m @ 3.27g/t Au.
Improved Valuation; Strong Potential for Up-scaled Project
Following the release of the updated Fekola resource estimate we have
updated our model, which has improved our valuation for Papillon to
$2.28/share (up from $2.14/share). Our 12-month price target for the
Company is now $2.86/share (up from $2.58/share). The increase in
resource size and improved resource categories bodes well for a large
reserve (+3Moz potential) which provides opportunities for PIR to increase
project scale. The scoping study was based on a 4mtpa operation, which
could increase in the PFS to 4.5mpta enabling production of over 300Kozpa
(100% basis). Our updated model now assumes a 4.5mpta operation which
decreases unit operating costs but increases pre-production capital costs.
With drilling ongoing, more results to come, and PFS set for release in the
coming months, we continue to recommend Papillon Resources as a
Speculative Buy. Any investment, however should take into account the
current increased sovereign risk of Mali, with French and West African
troops now a few weeks into the intervention to “clean-up” the north of the
country and halt the al Qaeda-backed militants advance south. At this stage
there have been no interruptions to gold producers or explorers (like PIR),
which have operations located in the south-western parts of the country.