Pani is potentially a world class asset. If J Resources and...

Pani is potentially a world class asset. If J Resources and Merdeka can finalise this JV, I think LSX will be in great shape. I think many people are deceived by the head grade of these two deposits (collectively close to 5 Moz at under 1 g/t). What they don't appreciate is much of the mineralisation outcrops (at surface) and the strip ratio as a consequence will be negligible. One Asia did an internal scoping study on Pani (one of the deposits) back in 2013 and the strip ratio was just 0.5:1 (see the attachment below). Back then Macquarie Bank were willing to fund the entire development of this project based on the PEA alone (100% debt financed). This is when the ownership dispute flared up.

I always find it interesting when companies fight over project interests. It tells you there is something of value there worth fighting for. The final result of this protracted dispute is the present JV between Merdeka (66.7%) and Lion Selection Group (33.3%). Pani was previously owned by One Asia who sold LSX their remaining 33.3% project interest. One Asia formerly gave up a large share of their ownership in Pani to the highly influential Provident Capital in exchange for securing some form of ownership (its better to own 33.3% of something than 100% of nothing). Provident then sold this 66% interest to Merdeka which I understand is backed by Provident Capital (they are essentially the mining arm of Provident Capital). I like this final arrangement given Merdeka is an experienced mining company in Indonesia. If you are going to operate in Indonesia you need a solid JV partner.

If you took the Pani PEA numbers at face value, you get an SARG (strip adjusted recovery grade) of 0.59 g/t. I challenge anyone out there to find an SARG for an open pit development stage project (of comparable size) anywhere in the world which is higher. B2 Gold's Fekola in Mali (0.61 g/t) comes to mind but this is now a mature production asset. Another project also in Indonesia was the Martabe gold mine in North Sumatra (0.6 g/t), also a producing asset. Both of these projects at the development stage had SARG's in excess of 0.5 g/t (quite rare). I understand both mines have been incredibly lucrative. At this stage I am unsure if the J Resources deposit shares the same favourable characteristics as Pani but given its close proximity (its shares a boundary) I am thinking there is a pretty good chance.

Collectively we would be looking at a global resource close to 5 Moz (especially once the sterilised ground between these two deposits is drilled sufficiently). My understanding is LSX's share in the proposed JV would be about 20%. This would give them a share of 1 Moz in a world class project. I really like it when junior mining companies can "successfully" secure non-management JV interests in world class mining projects which are managed by experienced operators. Tribune Resources/Rand Mining's East Kundana JV comes to mind as an example of how lucrative an arrangement like this can be over a long period of time. Another example was Sedimentary Holding's Cracow deposit which Newcrest Mining originally managed. Sedimentary Holdings was eventually acquired by Lion Selection Group. This mine is still operating today and was recently sold by Evolution Mining. Lion Selection played a significant role in the formation of Evolution Mining (originally Catalpa) which made shareholders a lot of money.

In my opinion Pani has been completely under appreciated by the market (potentially due to the legacy associated with the ownership dispute and its protracted nature). My feeling is more progress needs to be made by the Indonesian JV partners before the market really starts to sit up and take notice of what is actually there. This will take more time but my feeling is the outcome could be a highly lucrative one for those with the patience.

PaniScopingStudy.pdf