fat prophets, page-21

Surface success at Pelumat and drilling success at Kuini
In a Portfolio News item published in FAT-MIN-309, we reviewed the results from drilling by the company at its Kuini project in Aceh Indonesia. Subsequently, the company has also reported encouraging results from surface exploration at its Pelumat project (Prosperity’s interest 73%) also in Aceh Indonesia. The following map shows the locations of both Kuini and Pelumat projects (highlighted).

 
Prosperity Resources has just completed drilling three holes on returning to exploring at its Kuini prospect, reporting encouraging results from all three holes. While at Pelumat, the company has been conducting surface activities and again has reported encouraging results.
The initial surface results from Pelumat have indicated the presences of gold, silver, copper and molybdenum. The following figure shows the locations of the soil samples taken at Pelumat (AU is the symbol for gold).

 
The better results from the soil samples were 1.59 grams per tonne (g/t) gold, 0.7g/t silver, 319 parts per million (ppm) copper and 11 ppm of molybdenum and 1.08g/t gold, 1.4g/t silver, 6,310 ppm copper and 18 ppm of molybdenum. The gold grades at the surface are satisfactory and may indicate the presences of a mineralised source. The grades cannot be looked at in isolation of the rock chip results detailed next.
Rock chip sampling at Pelumat has also returned encouraging results. The following figure shows the locations of the rock chip samples taken at Pelumat (Au is the symbol for gold).

 
The better results from the rock chip samples were 109g/t gold, 490g/t silver and 36.9% copper and 21.2g/t gold, 243g/t silver, 2.84% copper and 42 ppm of molybdenum. These are very good result and likely point to a nearby mineralised source.
With the aid of a 3D inversion model generated from an airborne survey of total magnetic intensity (TMI) magnetic data, the company has sited the drill location for three holes. The following figure shows the TMI data model with drill hole locations (red dots) (north is identified by the red pointer). 

 
To place the location of the red dots into perspective on the tenement, these align with the proposed drill hole locations in the previous two figures. Apart from the surface results, what has the company excited is the extension of the magnetic anomaly at depth. Two initial holes will be drilled to explore the extension of the anomaly at depth, with a third to be drilled dependent on results.
A second round of drilling will explore the south eastern extension of the anomaly. A total of five to six holes will be drilled in the programme. We remind Members that exploration carry’s with it a high risk as expectation and outcomes may differ considerably; this is especially the case at Pelumat where exploration is in its infancy.
In FAT-MIN-309, we published a Portfolio News item on the results of the Kuini drill programme. The focus of the article was on the results from the third hole of the programme which was the best of the three drilled, where results have been received. The following is a schematic of the deposit intersected by holes PNGD020 and PNGD021 (Au is the symbol for gold and Cu copper).

The results received from the three holes drilled, have confirmed the presences of gold, copper and molybdenum and have reinforced our view on the prospective nature of the Kuini tenement. A fourth hole on the tenement is drilling ahead. We await the results with interest.
When the company was last required to report its cash position at 31 December 2011, it had cash on hand of A$384,000, with a potential spend of A$350,000 in the current quarter. We consider it very likely the company will seek to raise capital in the months ahead. We are of the opinion however the company has the assets with the potential to deliver future value across a bigger share base.     

The bearish moving average cross in place since February 2011 is suggestive of momentum to favour the downside. The recent low printed was 2.1 cents. The recent break above the 50 day moving average at 4.3 cents is indicative of short term momentum to have rotated back to the upside.

With reference to the weekly chart, prices are testing structural support. Now that prices have lifted off this region, we would target a move towards the 200 week moving average of 9.7 cents over the medium term.
The return to exploration activities at Kuini adds a fresh news flow stream, as the company seeks to makeup lost exploration time on the tenement. We do expect news flow, especially from Kuini and Pelumat, will continue to be positive. With this in mind, we have retained our buy recommendation on Prosperity Resources for Members who have no exposure to the stock.