Minesite article on PTQDecember 17, 2009
The Future Of Petaquilla Minerals Is Geared To The Economy Of Panama, As Well As To Gold
By Charles Wyatt
A look at the share price chart of Petaquilla Mineral over the past six months gives an interesting insight into the changes that have taken place at the company over that time. From the end of June the shares drifted down from C77 cents to C23 cents, in marked contrast to the majority of junior mining companies which have gone the other way. There was a little bounce at the beginning of November, but it died away before the shares suddenly took fire and flew straight up to C84 cents with scarcely a waver. Since then they have settled around the mid sixties, but it is clear that something dramatic sparked this major recovery. A look at the news releases shows that in the opening weeks of November Chairman Richard Fifer made a clean sweep of most of the directors of the company and brought in three friends of his, all of whom are experienced financiers.
Daniel Small leads the private placement group at Platinum Management (NY), David Levey is a member of that group and has participated in 25 capital raisings, David Kaplan is a key member of LIM Advisors where he manages a portfolio of metal and energy futures and securities for a hedge fund, and Raul Ferrer is financial adviser to a number of companies operating in Panama, which is home to Petaquilla. Within two weeks of their arrival at the company the government of Panama issued authorisation for commercial gold production at Petaquilla’s Molejon gold project.
This is the first gold mine in the country in modern times. The timing may have been a coincidence, but what was not a coincidence was that within a month or so of their arrival the company was able to announce that it was raising C$12 million by a private placement at C50 cents per share. Investors clearly approve of the new set-up, as Joao Manuel, the chief executive, has just announced that the placement has closed.
Petaquilla is another company that it was good to see back in London at this year’s Mines & Money. It is taking longer than expected to bring Molejon into production, but the project is now in the last stages of full commissioning, having produced over 26,000 ounces of gold since the first gold pour in April. Back in October 2007 an updated resource estimate of 532,801 ounces of gold in the measured category, and 223,785 ounces in the indicated was announced, plus a further 342,111 ounces inferred.
Add in the 123,000 indicated resource ounces of gold delineated at the nearby Botija Abajo deposit and it can be seen that the total gold resources at the global Molejon project has increased by 40 per cent over the previous resource estimate, which came out in April 2007. Moreover this upward trend in the number of ounces that Petaquilla has available is likely to continue, as another 458,502 inferred ounces have been geostatistically shown to exist in a new area to the northwest. In the first full year of operations throughput for the project should be 2,200 tonnes of ore per day with an estimated gold production of 100,000 ounces. The plant utilizes three ball mills and a carbon-in-pulp processing facility.
Richard Fifer has been a long time resident of Panama and has frequently said that he intends the projects of Petaquilla to be in the longer term interests of the country. In this light he got the board of directors to approve the spin-out of Petaquilla Infrastructure back in May. Petaquilla has a good track record in spin-outs, in the light of the spin out of Petaquilla Copper back in 2006. The company’s retained shares were acquired by Inmet a couple of years later at a healthy profit.
The new company’s purpose in life is to oversee the construction, operation and management of what are widely termed “infrastructure facilities” in the Petaquilla mining district. To be more accurate the focus is on the construction of roads, houses and water treatment plants, power generation and transmission, and all things mining, from blasting and fleet management to environmental controls and security.
The object behind this is clearly to ensure that the company retains a degree of control when other mining companies seek to pursue their own projects in the area. A case in point is the memorandum of understanding (MOU), which followed closely on the heels of the proposed spin-out, between Petaquilla’s wholly-owned subsidiary Panama Central Electrica and Generadora Hidroelectrica Santa María for the development of a 25MW hydroelectric plant in the Province of Veraguas. The MOU establishes the general framework within which the two partners will work to advance the hydro project to the stage of a bankable feasibility study. The partners will also work on updating the 1998 Environmental Impact Study which was previously approved by the Panamanian regulatory agencies.
Once a positive bankable feasibility study has been obtained, construction should start on this new hydroelectric plant late next year, with ownership based on capital contribution. The key statement in all this is that the two partners are also considering the subsequent development of additional hydro power projects in the central provinces of Panama, with cumulative potential of up to 100MW. This is ambitious stuff for a small mining company that has tended to be tight for cash, but clearly the new board sees an opportunity based on relations built up in Panama.
A further clue as to what in store may lie in the fact that Panama, through its ports and the canal, is an international business centre, and has the largest economy in Central America. It is also the fastest growing economy and the largest per capita consumer in Central America. Richard Fifer was once president of Panama’s State Mining Company, governor of a province and national security adviser to the Presidency. He knows what is going on in the country, realises what infrastructure is needed, and has surrounded himself with a group of powerful fund raisers.
Meanwhile, the Molejon gold mine held by the parent company will shortly be pumping out profitable cash flow. It all makes for a combination of opportunities with huge potential, and investors should no longer look on Petaquilla Minerals as a simple gold mining company. Its future will now also be geared to the economy of Panama, so the rise in the share price is explained.
The gold mine should not be ignored, however. In the last few days the company announced the results of a regional exploration field programme on the Oro Del Norte concession, which is 22 kilometres north east of the Molejon plant. Soil and rock chip sampling carried out there in the 1990s had highlighted a 12 kilometre by four kilometre gold-in-soil anomaly. This is now being re-assessed, and a total of 1,054 samples have recently been collected across various zones within this anomaly. Peak gold assay results include: 151.5 grammes per tonne, 59.8 grammes per tonne, 58.5 grammes per tonne, 48.4 grammes per tonne, 27.7 grammes per tonne, 19.25 grammes per tonne and 15.4 grammes per tonne. Not a bad start, and it is worth remembering that Petaquilla holds 100 per cent of the exploration and exploitation rights to 842 square kilometres of concessions surrounding its Molejon gold project and Inmet Mining’s world class copper project, both of which are located within the Petaquilla Mineral District in Central Panama.