When Xstrata unwrapped its $428 million offer for Sphere Minerals last week it added weight to what many in the industry have been saying for a while: that Africa is shaping up as the new hunting ground for the worlds biggest miners.
Since 2003 the number of ASX-listed miners in Africa has risen from 54 to more than 160.
So it is no surprise that a record 1400 delegates and 10 African resources ministers will this week descend on Perth for the annual Africa Downunder conference.
Most of the biggest African mining deals struck of late have involved iron ore: Xstratas pounce on Sphere, Rio Tinto in Ghana and BHP Billiton in Liberia. However, the line-up for the conference suggests that, for Australian mining hopefuls at least, its still mostly about gold.
With some notable exceptions, including uranium groups Paladin Energy and Extract Resources, the line-up of speakers is dominated by West African gold players.
Papillon Resources will not present at the conference but, judging by the gold juniors 92 per cent share price surge in the past month, it is on investors radar.
Last week, it attracted the eye of the Australian Securities Exchange, which slapped a speeding ticket on the company.
Replying to the query, Papillon pointed to some bullish research doing the rounds, including a note from Fosters Stockbroking, which included Papillon on its list of buys, alongside more prominent explorers like Azumah Resources, Adamus Resources and Perseus Mining. For analysts at Argonaut Securities (who, it should be noted, have some skin in the game) it is one of the regions best picks.
What makes Papillon interesting isnt that its project is much better than the host of other gold hopefuls in the area it remains speculative compared with some, given a lack of metallurgical testwork but that its market capitalisation is $38 million.
Papillon holds a clutch of gold projects in Mali, where it has a 650,000-ounce resource grading 3.17 grams per tonne.
As a rough comparison Chalice Gold Mines, which has an 840,000oz resource in Eritrea, is valued at $99 million; Azumah, which has 1.1moz in Ghana, is worth $106 million; and Adamus Resources, which has 1.9moz, is valued at $218 million. None of them can compete with Perseus, whose comparatively advanced project, investor perceptions that it is a takeover target and its 6.4moz resource have combined to see it tip the scales at $1.1 billion.
Papillion is not drilling anything now because of the wet season but has this quarter earmarked to evaluate previous drilling results and some metallurgical testwork. If all goes well, it hopes to unwrap a strong resource upgrade in the first quarter of 2011.
The group wants to hit the 1moz resource milestone in the short term, but that could go as high as 2moz in the medium term, with a view to supporting a 100,000ozpa operation.
Kate Emery
PIR Price at posting:
25.0¢ Sentiment: None Disclosure: Not Held
