marengo hits gold

MOST investors with an eye on Marengo Mining are waiting for the first sod to be turned at the company’s $A1.6 billion Yandera project in Papua New Guinea but a few have spotted an emerging gold play inside the stock.

Marengo Mining's giant Yandera copper-molybdenum project, 95km southwest of provincial capital Madang in PNG.

Early stage soil and rock chip exploration inside Marengo’s 1900 square kilometre tenement package has revealed hints of gold but no assays, yet.

News that the company is stepping up its exploration effort outside the Yandera project site was the highlight of an otherwise low key presentation by Marengo chief executive Les Emery during day two of the Resource Rising Stars conference on the Gold Coast.

“We are moving further afield, following up some of the copper prospects, and we’ve also identified some very interesting gold prospects,” he said.

“In 2009 we flew a magnetic survey over part of the block and we’re about to fly another survey, so we’re generating lots of targets.”

Emery said the regional exploration program had been allocated a budget of $5 million for 2011-12, with the airborne surveys adding to data gathered by chip sampling and reconnaissance mapping.

On Yandera, Emery had little new to say, largely because the project is in the final stages of a definitive feasibility study. Major recent developments include signing agreements with the PNG Government, a Chinese engineering company, and banks.

When it starts production in 2015, Yandera is expected to yield 100,000 tonnes of copper a year, plus 15,000t of molybdenum, from a resource last estimated to contain 6.5 billion pounds of copper and 204 million pounds of molybdenum plus by-products of gold, silver and rhenium.

At its current size Yandera contains the third biggest inventory of contained copper by an Australian company, beaten only by Indophil and OZ Minerals.

However, Emery said that on an enterprise value per tonne of contained copper Marengo ranked 22nd, a hint that he believes the company’s shares are significantly undervalued.

“On an enterprise value [as at April] we were capped at around $US100 per tonne of contained copper,” he said.

“Today, we’re capped at around $US70 a tonne while the average for North American copper stocks is $400 per tonne of contained copper.”