GoldCorp buys Detour!Is this the future headline we'll be high fiving about in the near future??
Ingrid Hibbard was in London last week and her enthusiasm for mining, and her own company in particular, shone through, despite the depressing market conditions. Ms Hibbard is president and chief executive of a Canadian-listed company called Pelangio Mines. Pelangio’s share price has shown remarkable resilience of late, so that may be one of the reasons for her ongoing enthusiasm. The company’s shares have more than doubled to C$4.62 since last October, and even the latest market fall-out has had minimal impact. Not many of these around as it’s not even a producer, so Minews was intrigued to hear the story.
What came through immediately was that Ingrid had been immersed in mining from birth, as both her father and uncle were prospectors. The inheritance she gained from her father was a confidence that the Detour Lake gold project on the prolific Abitibi greenstone belt in northeastern Ontario - on which he had spent money, time and effort - would pay off as a major new gold camp.
When Pelangio listed on the TSX in September 2005 its main asset was Detour Lake, so a lot of Canadian investors were somewhat mystified a couple of months later when the company acquired options on a major land position adjacent to AngloGold Ashanti’s famous Obuasi mine. “Why?” they asked, “would a Canadian company with what looked like an excellent asset in Canada go swanning off to Ghana?”
“Very simple”, answers Ingrid. “Pelangio is an exploration company and its aim is to add value to projects and then sell them on. We intend to focus on proven gold belts with a record of world class production, and the Ashanti gold belt, which is some 300 kilometres long, compares favourably with Abitibi”. As a qualified mining lawyer she knew that such opportunities do not present themselves very often, so went ahead with the acquisition. It helped, of course, that her uncle had already been involved in the project and could vouch for its potential.
Just for good measure, and to convince the doubters, she also points out that: “the Obuasi mine’s combined historical and current reserve is greater than the entire combined production from all the mines in the Kirkland Lake Gold camp to date. Ghana’s mining history is more than 300 years old, and the country is one of the best developing nations in which to conduct mineral exploration and mining”. One always needs a bit of luck in mining and Ingrid’s luck has clearly come from her family, with her father contributing Detour Lake and her uncle the Ghanaian project.
Exploration in Ghana started in May 2006, but the focus in that year was on Detour Lake, where the company reported a succession of excellent results. In August of that year Ingrid Hibbard lived up to her commitment to trade assets approaching the development stage when she announced that agreement had been reached with the ubiquitous Hunter Dickinson group to sell Detour Lake to a newly created company, Detour Gold, for 20 million shares in Detour Gold and C$5 million in cash. This deal was completed early in 2007 and since then the share price of Detour Gold has gone up by 130 per cent to C$21.25, which means that Pelangio’s shareholding is now worthC$425 million.
At the time of the deal Detour Lake boasted resources amounting to around two million ounces, which meant that it was approaching the development stage and Ingrid felt that Hunter Dickinson was the ideal company to finance a move to production. At that time she anticipated more drilling to upgrade the resource followed by a feasibility study. Ingrid explains that the deal was in line with Pelangio’s strategy of seeking partners for, or selling an interest in, promising properties that are reaching the development stage, while maintaining the company’s upside exposure to the project.
And upside it has proved to be, as Detour Gold has just reported a further resource estimate based on a detailed engineered pit design. This takes the resource up a further 125 per cent to 10.8 million ounces in the measured and indicated categories and brings the project up full square and central on the radar screens of the big producers.There is now a distinct possibility that a bid may be received in the not too distant future and to get the approval of Pelangio Mines it would have to be at a fairly hefty premium to the present price. But, if, for the sake of argument, the bid was C$25 a share in cash, Pelangio would be trousering C$500 million which would take the Ghanaian project a long way towards development.
But Ms Hibbard has another trick up her sleeve. She’s renaming Pelangio PDX Resources, and plans to retain 19 million shares in Detour inside PDX. She’ll also form a new company called Pelangio Exploration which will have one million Detour shares plus the Obuasi exploration properties. This will mean that Pelangio, or rather PDX, still owns 42.4 per cent of Detour, and so plays a leading role in any takeover talks, given that it also has board representation, but in the meantime Detour will move on towards feasibility boosted by the encouraging news that metallurgical testwork indicates gold recovery of 92 per cent. If a bidder appears, and Goldcorp is certainly one name in the frame, the new company will have funds of its own and PDX can then look around for new acquisitions.
Always keeping one foot on the ground it’s called in boxing, but Ms Hibbard prefers two feet, and the Obuasi property certainly looks like a winner, even if it is still early days. An airborne survey has been carried out and this confirms that the structure continues onto the property, only 2.5 kilometres away from the Eaton Turner shaft at AngloGold Ashanti’s mine. The actual acquisition deal consisted of Pelangio acquiring 100 per cent of the 290 square kilometre property from three private Ghanaian corporations through the payment of US$3.8 million and the issuance of 16 million shares over five years. In fact it has elected to acquire a 51 per cent stake early by paying a total of US$800,000 and issuing eight million shares. Joint ventures will be formed subsequently.
So there you have it. PDX has one foot deep in Detour Gold and another in Ghana via Pelangio Exploration. The potential for a handsome profit on Detour Gold is the most immediate, but over time the Obuasi project in Ghana could pay off big time. Warren Bates, vice president exploration, has had plenty of experience of greenstone belts in North and South America and he is using this in Ghana to good effect. In fact he gave a very detailed account of exploration to date while he was in London and he clearly has the bit between his teeth. He and Ms Hibbard make a good team and she knows exactly what she expects from Ghana. While that is in progress she may be able to come up with another winner in Ontario where her fan club continues to grow.