From PATERSONS: Event Primary Gold (PGO) has initiated a mining...

From PATERSONS:
Event

• Primary Gold (PGO) has initiated a mining optimisation study on its Coolgardie Gold Project in Western Australia.
• The study will focus on the MacPhersons and Tycho deposits, which contain Mineral Resources of nearly 200,000oz of gold with a development strategy of using experienced local contract miners and toll treatment of ore.
• In October, PGO plans to commence a drill program at Coolgardie to target further extensions of known gold mineralisation at the MacPhersons deposit, along the southern extent of the Tonalite Dyke. This will be incorporated into the study.
• In addition, a 30,000m drill program at Mount Bundy in the Northern Territory is expected to get underway shortly to grow the existing gold resource base via both the expansion of brownfield resources and also identification and delineation of undrilled greenfield gold targets. Ausdrill has agreed to drill for $3m in equity.

Impact

• As we highlighted in our research note on 12/8/2016, the Coolgardie gold project offers a near term development opportunity which should allow the Company to reach production in 2017.
• PGO has a significant amount of newsflow approaching with drill results from Coolgardie in November, drill results from Mount Bundy also in November/December and the results of the Coolgardie mining study by the end of the year which will provide important inputs into 2017 operations. The Company is reasonably well funded with c.$5m in cash (at the end of August) and the Ausdrill agreement to drill for equity in the Northern Territory.
• Since the release of our report (12/8/2016), the stock reached a high of $0.17/sh, with increased liquidity, and has since dropped back to $0.105/sh representing a buying opportunity when compared to our price target of $0.39/sh.
• We continue to rate PGO a Speculative Buy.