By Steven Ralston, CFA
Pelangio Exploration (TSXV:PX.V and OTC Markets:PGXPF) is a junior gold exploration company currently continuing with a Second phase Drilling program at the company’s Manfo property located in Ghana. The Manfo diamond drilling program was increased to 40,000 meters in early 2012. Management expects to file an initial NI 43-101 compliant inferred resource report on the Pokukrom East, Pokukrom West and Nfante West deposits on Manfo property later in 2012.
On the Manfo property, Pelangio has completed over 160 diamond drill holes totaling 34,199 meters in the Second Phase program. The pace of drilling increased with the addition of a third drilling rig early in 2012. During the first quarter, a follow-up induced polarization (IP) survey was completed at Manfo. A 350 line kilometer program identified 20 new targets in areas of high resistivity where cover appears to mask underlying gold mineralization that geochemical surveys cannot detect.
Drilling results at Pokukrom East have defined a strike length of bulk gold mineralization of at least 850 meters, which is open to the north and at depth. The geochemical anomaly is much longer at approximately 1,200 meters in length. In addition, to the north the zone plunges at approximately 40 degrees from near-surface to a depth of 210 meters with a currently defined length of approximately 600 meters.
Earlier this month, Pelangio announced results from preliminary scoping metallurgical tests on composite samples taken from Pokukrom East and Pokukrom West. Undertaken by SGS Mineral Services, four samples exhibited a conventional metallurgical profile with the expectation of gold recoveries between 84% and 94%. Initial indications suggest a recovery circuit composed of crushing and grinding, gravity separation (achieving recoveries between 21% and 50%) and cyanide leaching (48 hours in the laboratory test). Though the optimal grind size has yet to be determined, the 84% to 94% recovery rates assumed 80% of the ore passing through 75 micron screens. Also, the study suggested that a whole ore cyanide leaching circuit with oxygen injection may be able to achieve similar levels of gold recovery.
At Obuasi earlier in the year, Pelangio completed three trenches totaling 331 meters and four prospecting pits for a total depth of 4.90 meters; 357 trench samples, 252 outcrop samples and 4,091 soil samples were collected. During the third quarter, management plans to continue prospecting, mapping and surveying at Obuasi.
Concerning the Akroma property, the company confirmed through an announcement that the second payment of 40,000 shares was made to the optionor in June. In order to earn a 100% interest in the property, Pelangio need only issue an additional 125,000 shares to the optionor over the next two years. Since initially optioning the property last year, Pelangio has explored the property by collecting 3,712 soil samples from three areas for the purpose of identifying targets for an upcoming drill program.
Pelangio has been very successful raising funds for the acquisition of potential mining properties and its exploration program. During 2011, the company’s exploration activities were adequately funded by $16,919,544 in net proceeds from the sale of securities and the exercise of options and warrants. During the first quarter of 2012, the exercise of options provided $97,500 of additional working capital.
We maintain our Outperform rating and price target of $1.10 due to the company’s continued positive drilling results coupled with the success in raising funds for further exploration. We expect that the NI 43-101 compliant inferred resource report on the Manfo property will act as a catalyst for price appreciation.
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