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.
PIR Price at posting:
$1.60 Sentiment: Hold Disclosure: Held
