I have finally been able to track down the PDF report put out by Brent Cook at Rick Rules site. gril.net where he implies a potential 7 million ozs at Luicho. Please download the PDF file if you can as my attempt to convert to WP was not entirely successful and I had to do a bit of typing.
The report was written when PFGs share price was approx. $1.20
Good investing!
QD
THE
GLOBAL EXPLORATION ANALYST
Company Analysis, Minera Property Evaluations, Exploration Insights and Research
K Brent Cook Exploration and Mining Analyst September 17, 1999
Recommendation: Buy. Very high risk, sell some on way up.
Summary: It's all or nothing this time for PFG. All indications are that Luicho offers multi-million ounce gold potential and a ten-fold increase over today's share price. This is the best grassroots gold play to come around in quite some time.
These same folks discovered and sold the Pierina gold deposit for $1.1bi. The exploration will be directed at proving the multi-million ounce potential.
PFG has just optioned a 100% interest on Luicho property in Peru. The deal calls for a US$200,000 initial payment, US$400,000 one year after regulatory approval, US$1mil after two years and US$24.4mil after three years. It includes a 2.5% to 3.5% royalty. The agreement has yet to be registered in Peru.
PFG is comprised of many of the same people responsible for the discovery of the Pierina gold deposit and subsequent sale of Arequipa Resources to Barrick for $1.1bil. President, Catherine Mcleod-Seltzer is well respected in the Canadian mining scene and a tough negotiator. David Lowell is probably the most
successful prospector in South America and is associated with numerous gold and copper discoveries in Chile and Peru in addition to the Pierina gold deposit. CEO, Tom Shrake was previously VP Exploration Gibraltar Mining and is responsible for the sale of the Lomas Bayas copper deposit to Westmin for $350mil.
PFG's game plan is to further define and prove the multi-million ounce potential of Luicho then sell it to the highest bidder. They have all done this before and are quite capable of doing it again given the right property. The exploration program going forward will involve more detailed geologic work and sampling
prior to drilling. Drilling should start by next spring.
All indications are that Luicho is real and could host in excess of 7 mi ounces. Taking 460 surface samples to 7 mi oz takes a major leap in faith Mining, milling and recovery do not appear to be a major obstacle yet. NPV calculation suggests US $700mi possible. Major gold mining companies seem to be willing to pay up for large deposits. Alteration and mineralization has been sampled over a 1.2km x 400m area and a known vertical distance of 300m. Mineralization is open in all directions. Of 431 samples collected by PFG, 41% exceeded .62 g/t au averaging 3.52 g/t au. Some of the better samples include; 10m @ 26g/t, 15m @ 5.4 g/t and 46m @3.6 g/t. All indications are that the mineralization shows good continuity through this entire block of rock and could represent a substantial mineralized tonnage. Making some very broad assumptions, Luicho could conceivably contain over 100Mt @ 2.5 g/t or in excess of 7mil oz. Going from 460 surface samples to a seven million ounce deposit takes a very large leap of faith. I have not been on the property but am fairly comfortable with the overall prospectivety and potential based on discussion with other competent geologists who have been on site. If you are comfortable with this,
the next question is; what's it worth. Establishing some basic mining parameters requires a rough evaluation of the geologic and local setting. The quartzite is very brittle and fractured and should
break along the auriferous quartz veins thereby keeping milling and leaching costs down. The mineralization occurs on a steep hill and strip will be low. This is a low sulfide system, much of which seems to be oxidized so recovery should be good. Access is poor but the elevation is modest, between 1,700m and 2,900m so infrastructure and related costs should not be excessive. Let's assume; capital costs in line with Pierina, about $260mil, cash costs of roughly $120/oz (Pierina averages $105 LOM) and 500,000oz/yr production (Pierina will average 835,000oz/yr) beginning in 2002. Over a 10 year mine life
producing 500,000 oz/yr and selling for $260 old price, NPV(10%) comes to US$700mil. This represents a major asset that will attract the interest of Barrick, Newmont, Homestake, Placer Dome, etc.
Past purchases by major mining companies suggest they do not rely on NPV calculations alone to value multi-million ounce properties, presumably because they are either hedged at higher gold prices or able to issue (overvalued) stock for the acquisition. The point here is; if Luicho is perceived to contain over
5mil ounces, PFG's current cap of around C$23mil falls far short of $700mil and offers the possibility of a ten-fold increase. If however, Luicho does not reach this multi-million threshold, the stock could lose 80% of its value. |
