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Marengo Mining
Progressing well towards production in PNG with Marengo Mining
Here at IRJ we’ve been keeping tabs on Marengo Mining, the ASX and TSX-listed small cap Australian miner, since the company first graced our pages in October, 2009. And as Les Emery, Marengo’s founder and Managing Director rightly says, “when things are going according to plan, no one seems as excited.” That is, until now. Yes, the Definitive Feasibility Study (DFS) for Marengo’s 100 per cent-owned Yandera copper-porphyry project in Papua New Guinea is well on track. Yes, there are no outrageous challenges, surprises or shock announcements standing in its development path, but there have been some notable events along the way. We caught up with Emery to talk all things Yandera; from the first 1,000 metre depth drill hole completed in the project’s 50-year history, to Marengo’s supportive major investors and the great potential for expanding Yandera’s resource which, at around one billion tonnes, is already one of the South Pacific’s largest undeveloped copper deposits of its kind.
The DFS continues
Marengo’s DFS, due for completion around the end of 2010, is coming along well. Work towards wrapping this up is ongoing and the first half of this year so far is on track.
“All the on-ground and in-house activity will be complete for the end of the year, there’s nothing at the moment to suggest there’ll be a delay there. A lot of the components are close to if not already finished and that’s really the main task,” Emery says.
“We kicked off with a fairly aggressive drilling programme in January. We have had four diamond drill rigs going since that date, then last month we added a fifth rig. We have been doing a combination of drilling for extensions on the existing resource together with some engineering work for the DFS.”
Emery says that the Marengo ranks have a new addition by way of Craig McGown, Vice President of Corporate Development; a well experienced finance expert ready to assist him in assembling the financial structure for Yandera and also in seeking out the strategic partnerships to advance the project.
“Principally we’re focusing the DFS and exploration drilling, for want of a better word, by looking for high-grade zones near the central deposit and testing the depth extensions,” Emery says.
“In terms of funding, our capital position is still quite strong. At the end of last quarter we were sitting at around A$12 million.”
In early May, Marengo lodged a prospectus on the TSX for additional fundraising which Emery says will see the company issue around another 250 million shares.
“Our target number is to raise something in the order of CA$25 million dollars which will be used for an ongoing aggressive exploration program and some of it used for the DFS and also for working capital,” he explains.
However before we look at the company’s enviable financial situation, there is a significant milestone back on the ground to give greater attention to.
Drilling down to expansion potential
Emery says that Marengo’s exciting breakthrough in terms of exploration and groundwork is the drilling at Yandera , down to a target depth of 1,000 metres; the first time the project has experienced work at such depth despite its long and well-documented history.
“The deposit’s been known for well over 50 years with companies such as Kennecott and BHP before us, but no one, including ourselves, has ever drilled below 400 metres from the top of the hill,” Emery says.
“Bearing in mind the deposit sits on a hill which is several hundred metres high; in most cases the holes haven’t actually reached the bottom of the hill.”
Marengo’s first vertical 1,000 metre drill hole, stemming from the hilltop, is now well-advanced with the theory being to test the feeder zones, as Emery explains that copper-porphyry deposits are equivalent to that of a tree where you have the feeder zones or root systems that feed the mineralisation.
“The theory is to drill deeper and see what extent and what grade those feeder zones are. Potentially this could dramatically increase the total resource given the depths we are drilling to, but it’s still reasonably expected to be minable because of the nature of the typography,” he explains.
“One hole is well advanced and we will drill another three deep holes over the coming months to add a different dimension to the deposit — something we’re all very interested in seeing the results of.”
It’s certainly a coup for the company and signals a new era of exploration and potential for Yandera, but Marengo remains interested in its wider project area, spanning nearly 2,000 square kilometres.
“We’ve flown a detailed heli-borne magnetic survey over the central area, in the order of 25 kilometres long, and we’ve identified quite a number of targets which have the same geophysical signature as the Yandera deposit,” Emery says.
“Whether they contain economic zones of mineralisation we’re not yet sure, but we’ve certainly got a number of targets and over the rest of the year there will be some work on testing those.”
With 1,000 metres drilling depth reached, surveying of the wider project underway and the company presence on the TSX looking promising to deliver the necessary funding to continue, Marengo is in a healthy and strong position; a position which Emery says is down to its shareholder support.
The shareholders to succeed
The market has acted with strong support to Marengo’s recent TSX prospectus, and Emery says that this, in addition to the company’s two supportive major shareholders, has left him optimistic that funding will be finalised in the near future.
“The important issue for us is that we have those two influential and substantial investors; the Sentient Global Fund Group and Quantum Partners out of the Soros Group. Between them they control about 47 per cent of the stock and as a small cap company we think ourselves fortunate,” he says.
“Both groups take a long-term view and are very supportive.”
Yandera contains some 5 billion pounds of copper, which is where the search for the strategic partners comes in; a factor that Emery says Marengo has worked on over the last few months.
“Given the project size —we’re talking about a project that could produce around 100,000 tonnes of contained copper-metal per year, by processing, around 25 million tonnes of ore per year, with a a CAPEX of $1.6 billion — we need to bring a partner on board,” he explains.
“The balance sheet of Marengo alone wouldn’t sustain the levels of debt so that search has begun to locate the right partner for the project.”
Marengo’s stalwart backing from its shareholders allows the company to take its time and be very selective about future partners, and rightly so, as Emery says it will be a long-term pairing and there is plenty of interest around. Marengo has already had some approaches, as opposed to doing the approaching, which bodes well for any future deals which might emerge. The company’s existing partnerships, for example with its feasibility team, including such highly regarded companies as AMEC Minproc and United Pacific Drilling, illustrates its ability to attract and collaborate with nothing less than the best on offer, a trend which will surely continue on a further financial scale.
The DFS and beyond
Marengo’s goals for the rest of this year and beyond come as little surprise as the feasibility study carries on.
“There’s the Definitive Feasibility Study and then beyond that it’s to secure a strategic partner and secure the necessary financing which will be a combination of a partnership debt and equity to take the project forward,” Emery says of the next steps for Marengo.
“Including the permitting we still believe that this project could come on-stream during mid-to-late 2013 and be in full production in 2014.”
Perhaps the only part of the story left to consider, is the company’s current undervaluing which looks likely to change soon enough.
“The only amazing thing from my point of view is that as a value in the ground we continue to be valued at less than US1c per pound of copper against the more average industry standards in North America, particularly at around US4c or US5c per pound,” Emery says.
“We put that down to two reasons. One is that we’re only a relatively recent TSX listing and it can take time for people to get to know what you’re doing, and also because Papua New Guinea is not a country which jumps out at people immediately so it’s unknown to a degree.”
This is somewhat of a conundrum given Marengo’s on ground and financial position, development and potential, but unlikely to be long-term. Soon the DFS will be complete, further cementing Marengo’s position as one of PNG’s most promising explorers today.
marengomining.com
Here at IRJ we’ve been keeping tabs on Marengo Mining, the ASX and TSX-listed small cap Australian miner, since the company first graced our pages in October, 2009. And as Les Emery, Marengo’s founder and Managing Director rightly says, “when things are going according to plan, no one seems as excited.” That is, until now. Yes, the Definitive Feasibility Study (DFS) for Marengo’s 100 per cent-owned Yandera copper-porphyry project in Papua New Guinea is well on track. Yes, there are no outrageous challenges, surprises or shock announcements standing in its development path, but there have been some notable events along the way. We caught up with Emery to talk all things Yandera; from the first 1,000 metre depth drill hole completed in the project’s 50-year history, to Marengo’s supportive major investors and the great potential for expanding Yandera’s resource which, at around one billion tonnes, is already one of the South Pacific’s largest undeveloped copper deposits of its kind.
The DFS continues
Marengo’s DFS, due for completion around the end of 2010, is coming along well. Work towards wrapping this up is ongoing and the first half of this year so far is on track.
“All the on-ground and in-house activity will be complete for the end of the year, there’s nothing at the moment to suggest there’ll be a delay there. A lot of the components are close to if not already finished and that’s really the main task,” Emery says.
“We kicked off with a fairly aggressive drilling programme in January. We have had four diamond drill rigs going since that date, then last month we added a fifth rig. We have been doing a combination of drilling for extensions on the existing resource together with some engineering work for the DFS.”
Emery says that the Marengo ranks have a new addition by way of Craig McGown, Vice President of Corporate Development; a well experienced finance expert ready to assist him in assembling the financial structure for Yandera and also in seeking out the strategic partnerships to advance the project.
“Principally we’re focusing the DFS and exploration drilling, for want of a better word, by looking for high-grade zones near the central deposit and testing the depth extensions,” Emery says.
“In terms of funding, our capital position is still quite strong. At the end of last quarter we were sitting at around A$12 million.”
In early May, Marengo lodged a prospectus on the TSX for additional fundraising which Emery says will see the company issue around another 250 million shares.
“Our target number is to raise something in the order of CA$25 million dollars which will be used for an ongoing aggressive exploration program and some of it used for the DFS and also for working capital,” he explains.
However before we look at the company’s enviable financial situation, there is a significant milestone back on the ground to give greater attention to.
Drilling down to expansion potential
Emery says that Marengo’s exciting breakthrough in terms of exploration and groundwork is the drilling at Yandera , down to a target depth of 1,000 metres; the first time the project has experienced work at such depth despite its long and well-documented history.
“The deposit’s been known for well over 50 years with companies such as Kennecott and BHP before us, but no one, including ourselves, has ever drilled below 400 metres from the top of the hill,” Emery says.
“Bearing in mind the deposit sits on a hill which is several hundred metres high; in most cases the holes haven’t actually reached the bottom of the hill.”
Marengo’s first vertical 1,000 metre drill hole, stemming from the hilltop, is now well-advanced with the theory being to test the feeder zones, as Emery explains that copper-porphyry deposits are equivalent to that of a tree where you have the feeder zones or root systems that feed the mineralisation.
“The theory is to drill deeper and see what extent and what grade those feeder zones are. Potentially this could dramatically increase the total resource given the depths we are drilling to, but it’s still reasonably expected to be minable because of the nature of the typography,” he explains.
“One hole is well advanced and we will drill another three deep holes over the coming months to add a different dimension to the deposit — something we’re all very interested in seeing the results of.”
It’s certainly a coup for the company and signals a new era of exploration and potential for Yandera, but Marengo remains interested in its wider project area, spanning nearly 2,000 square kilometres.
“We’ve flown a detailed heli-borne magnetic survey over the central area, in the order of 25 kilometres long, and we’ve identified quite a number of targets which have the same geophysical signature as the Yandera deposit,” Emery says.
“Whether they contain economic zones of mineralisation we’re not yet sure, but we’ve certainly got a number of targets and over the rest of the year there will be some work on testing those.”
With 1,000 metres drilling depth reached, surveying of the wider project underway and the company presence on the TSX looking promising to deliver the necessary funding to continue, Marengo is in a healthy and strong position; a position which Emery says is down to its shareholder support.
The shareholders to succeed
The market has acted with strong support to Marengo’s recent TSX prospectus, and Emery says that this, in addition to the company’s two supportive major shareholders, has left him optimistic that funding will be finalised in the near future.
“The important issue for us is that we have those two influential and substantial investors; the Sentient Global Fund Group and Quantum Partners out of the Soros Group. Between them they control about 47 per cent of the stock and as a small cap company we think ourselves fortunate,” he says.
“Both groups take a long-term view and are very supportive.”
Yandera contains some 5 billion pounds of copper, which is where the search for the strategic partners comes in; a factor that Emery says Marengo has worked on over the last few months.
“Given the project size —we’re talking about a project that could produce around 100,000 tonnes of contained copper-metal per year, by processing, around 25 million tonnes of ore per year, with a a CAPEX of $1.6 billion — we need to bring a partner on board,” he explains.
“The balance sheet of Marengo alone wouldn’t sustain the levels of debt so that search has begun to locate the right partner for the project.”
Marengo’s stalwart backing from its shareholders allows the company to take its time and be very selective about future partners, and rightly so, as Emery says it will be a long-term pairing and there is plenty of interest around. Marengo has already had some approaches, as opposed to doing the approaching, which bodes well for any future deals which might emerge. The company’s existing partnerships, for example with its feasibility team, including such highly regarded companies as AMEC Minproc and United Pacific Drilling, illustrates its ability to attract and collaborate with nothing less than the best on offer, a trend which will surely continue on a further financial scale.
The DFS and beyond
Marengo’s goals for the rest of this year and beyond come as little surprise as the feasibility study carries on.
“There’s the Definitive Feasibility Study and then beyond that it’s to secure a strategic partner and secure the necessary financing which will be a combination of a partnership debt and equity to take the project forward,” Emery says of the next steps for Marengo.
“Including the permitting we still believe that this project could come on-stream during mid-to-late 2013 and be in full production in 2014.”
Perhaps the only part of the story left to consider, is the company’s current undervaluing which looks likely to change soon enough.
“The only amazing thing from my point of view is that as a value in the ground we continue to be valued at less than US1c per pound of copper against the more average industry standards in North America, particularly at around US4c or US5c per pound,” Emery says.
“We put that down to two reasons. One is that we’re only a relatively recent TSX listing and it can take time for people to get to know what you’re doing, and also because Papua New Guinea is not a country which jumps out at people immediately so it’s unknown to a degree.”
This is somewhat of a conundrum given Marengo’s on ground and financial position, development and potential, but unlikely to be long-term. Soon the DFS will be complete, further cementing Marengo’s position as one of PNG’s most promising explorers today.
marengomining.com
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