Precious Metals Equity Research - Merrex Gold Inc.

More documents

Recommendations

Info

Phone No. 604-607-5348Email: gold@goldenbar.comJanuary, will contribute to an updatedresource estimate for the current quarter(Q3), and we are looking for a slightexpansion at depth and along strike –butperhaps leading to a larger increase in theglobal estimate than in the pit constrainedone, as a lot of what they are getting atdepth will probably require undergroundmining methods. What is apparent is thatFekola is typical of the deposits in thisregion. They all tend to be structurallycontrolled, north-north-west oriented,steeply dipping, and sometimes containinghigher grade and more shallow plungingpay shoots, and pretty much from surfacein oxides in the first couple hundred metersthen w/sulphides. And they mostly occuralong the Senegal-Mali shear zone –eitherdirectly off it or from a splay.According to a note I saw by geologistQuinton Hennigh, based on an interviewwith Papillon’s CEO Mark Connelly withwhom he worked at Newmont in a past life,“Fekola is one of several depositssituated along the north-southtrending Senagalo-Malian shearzone, a +100 kilometer long zoneof faults that served as conduitsfor gold-bearing fluids at the timeof formation. About 60 kilometersto the north of Fekola are two largedeposits belonging to Randgold:Gounkoto (5.4 million ounces) and Loulo(12.5 million ounces).”Papillon’s Fekola is near the south end of this longshear and a key inlier, with IAMGOLD and Merrexcontrolling essentially the southernmost andrelatively underexplored end, which only started togarner interest 5 years ago. Yet, it is geologicallyas prospective as any other part of the structure.With regard to the potential growth of Fekola,adds Hennigh,“Mr. Connelly presented geochem datafrom surface sampling along the structuralzone that clearly indicates several newtargets are emerging on Papillon’sground”, and “...it is not unreasonable toassume that there may be several moredeposits, each with potential for a fewhundred thousand to a million ounces,nearby. Other mines in the region tend tohave clusters of such deposits.”Indeed, some of those clusters already exist onIAMGOLD and Merrex Gold’s permits 10-20kmsouth and southeast of Fekola (see map above).Papillon is moving the Fekola deposit through adefinitive feasibility study and updated resourceestimate with a plan to put it into production soonafter – so we expect Connelly’s promotionalmachine to start up over here at around the timethe company goes to market for a financing.IAMGOLD yesterday announced its first resourceestimate for the Boto deposit in Senegal adjacentto its 50/50 Siribaya JV with Merrex Gold in Malijust across the faleme river.The company reported an indicated resource of1.14 million ounces averaging 1.6 g/t Au plusanother 81,000 ounces at a lower grade of about1.4 g/t. This is lukewarm, bordering on non news,for IAMGOLD, who has a ~3 million oz thresholdbefore something is taken seriously.We were expecting 2 million ounces plus.However, this may be very good news for MerrexGold (MXI:TSXV) who has a 50% interest in the2
Phone No. 604-607-5348 Email: gold@goldenbar.com605,000 ounce higher grade (2.3 g/t Au) Siribayadeposit about 20km east of IAMGOLD’s Botodiscovery in Senegal (IAMGOLD has the other50% interest).I have always argued that Merrex’s Siribayaproject (consisting of six separate and adjacentpermits as outlined in black above –all shared50/50 with IAMGOLD) is far more prospectivethan most of IAMGOLD’s other explorationprospects in West Africa, and at least asprospective as Papillon’s.Based on the geochem and other data that we’veseen, and what I know of the structures, I thinkthe 910 sq km Siribaya permit area representssome of the best exploration real estate in thedeveloping district south of Papillon’s Fekola...andI believe that IAMGOLD knows it.That could be one reason it agreed to increase itsstake in Merrex a week and a half ago.Another reason may be related to the fact that ithas been aggressively drilling two of Merrex’sseven best targets on the other side of the falemeriver (adjacent to its 100% owned Boto discoveryin Senegal) – results are due in August – andperhaps it likes what it sees so far. The gold isnot easily visible, but they might have a sense ofwhether they are drilling into the right material.Let’s just say that if it were wrong maybe theincrease in control wouldn’t have occurred.Either way, given that Boto came in underexpectations (I speculate), the exploration team atIAMGOLD is going to be highly motivated to provesomething up in the region. If they need 3 millionounces, and they have 1.2 million at Boto plus605,000 at Siribaya, all they need is another 1.2 orso...i.e. just two more ore bodies like Siribaya.I’m confident they can do that along the mainSiribaya megastructure alone –without testing theseven geochem targets that are the goal of thisseason’s exploration. So it is possible that theweaker than expected outcome for Boto increasesthe value of Siribaya, especially if those targets onMerrex’s ground can help IMG get over the goalline (3Moz +) in the district.Apart from IAMGOLD’s debt settlement at 6 centsannounced recently, which frees up some workingcapital for Merrex, Merrex’s previously announcedfinancing has been postponed until the results areout, assuming they are good, or until better marketconditions if they are not.Conclusions and RecommendationsMy belief is that Papillon may already be inplay. Someone may be ready to take a run at it –
Page 1: Precious Metals Equity ResearchPhon
Page 5: Phone No. 604-607-5348 Email: gold@

Precious Metals Equity Research - Merrex Gold Inc.

Create successful ePaper yourself

Delete template?

Save as template?