1.6-million-ounce Magino mine adds to Prodigy Gold’s stellar lineup of properties, project advances to PEA
Seeking Alpha Analyst Since 2009
Booth # 2844 • prodigygold.com • 604.688.9006
Brian J. Maher
President & CEO
The word prodigy alludes to “anything that is a cause of wonder and amazement.” Prodigy Gold Inc (TSXV:PDG) believes that its flagship Magino gold mine in Wawa, Ontario can deliver just that. Born from the unification of the key assets of Kodiak Exploration and Golden Goose Resources, the company adopted the new name in January to “let the world know that we’re a gold company and not just an exploration company,” said its president and CEO, Brian Maher. In this interview, Mr Maher talks about the company’s new identity, the move to a new direction, and why the world should take note of Prodigy Gold.
Resource Intelligence: 2010 was a very exciting year for your company. What were your major accomplishments last year and how did they add value to Prodigy Gold?
Brian Maher: 2010 was a very big year for us, and the key was our acquisition of Golden Goose Resources, which brought into our portfolio the 1.6-million-ounce Magino gold mine located northeast of Wawa, Ontario. The transaction was a leapfrog event because it enabled us to move quickly from pure exploration to a company with a portfolio that includes a significant project in advanced development and a host of exploration projects. The value-added part of the proposition has already shown itself in the marketplace. Our market capitalization went from around $25 million in August 2010 to over $70 million today. It’s given us a vehicle where we can add value to the company and continue to build market capitalization as we take Magino through the PEA and then the feasibility process.
RI: I looked at your new website; it tells me how rich you are right now. I also like the new name.
BM: We’re really excited about the name change and the entire reorganization of the company. At the beginning of 2010 we had zero resource ounces on the books, and while we had our land position in the Beardmore area, we really lacked that key flagship-type property. By the end of 2010, we had added the Magino resource of 1.6 million ounces to the books. Within the next month, we will have a new updated resource estimate on Magino. We’re heading down the PEA and feasibility path with Magino, so we’re talking about production and not just exploration. When you add it all together it’s fundamentally a different company than we used to be and that’s why we felt the name change was appropriate. We want to let the world know that we’re a gold company and not just an exploration company.
Core storage at the Magino Mine site
RI: Would you say that 2011 is still a transition year for you?
BM: Absolutely. 2011 is a transition year for us and completing the transition is key. Gold resource ounces that are in the mine development process have more value in the market than pure exploration ounces. When we complete the PEA for Magino and demonstrate the strong economics that we see in that project, I believe we’ll have a major revaluation of the company. This will not only enable us to continue to grow on a market-cap basis, but it also gives us a vehicle that will allow us to acquire other high-quality gold projects. Looking at the year ahead, it’s fairly well defined in what we need to do: get the PEA out on Magino, head down the feasibility pathway targeting the first quarter of 2012, and at the same time continue to explore and advance our other gold exploration projects.
RI: So the Magino mine is the apple of your eye now.
BM: Absolutely. Its current known resource is very significant, nearly 2 million ounces. When we complete our new resource estimate, emphasizing the open-pit potential for the deposit as well as the deeper higher grade underground material, I think people will see just how robust that system really is and clearly why Magino is our lead project.
RI: You’re eyeing an open-pit mine. What are costs going to be like?
BM: It’s an interesting project in that the open-pit mining potential at Magino has been looked at several times in the past. There are a number of previous resource estimates that look at the project from the open-pit perspective. The most recent was in 2004. Since that time, our predecessor Golden Goose really focused on the underground mining opportunity. As we got to know the project during our due diligence phase, we recognized that there was a large volume of low-grade gold mineralization that’s surrounding the higher-grade structures. Our initial modeling emphasized that. As we stepped back and started to look at the project in more detail, we saw the opportunity for a fairly substantial open-pit mine at a rate of about 15,000 tonnes a day that could produce up to 150,000 ounces per year. We are targeting costs of less than $500 per ounce. Of course all of those numbers would have to be finalized in a PEA.
RI: When do you aim for production to start?
BM: It’s still very early in terms of looking at production scheduling. If we can complete our feasibility in early 2012 and given the appropriate time for financing and mine construction, it’s possible we could see production as early as 2014. But first, we need to complete the PEA process.
RI: Is the company well funded to take Magino and others to advanced stages?
BM: We currently have approximately $8 million in the bank, which certainly gives us more than enough money to work our way through the feasibility process with Magino. I believe that we are poised for a major revaluation that would be reflected in a significantly higher share price. From our perspective, locating cash to bring Magino forward as well as our other exploration programs shouldn’t be difficult.
Aerial view of the Magino Mine
RI: What else should investors evaluate when looking at Prodigy?
BM: I think the key for investors is to look at three aspects of the company. First, they need to look at the strength of our board of directors and the background and abilities of our technical team. We have been able to tap a quality technical group to lead this company. Within the last few weeks we’ve added a new vice-president of exploration, Tom Pollock. We also added a senior mining engineer to the group, Dr John Thomas, who will lead us through the PEA and feasibility process at Magino. With those gentlemen plus our field team, we have the technical group in place to work on multiple projects simultaneously and at all stages, from our very-advanced Magino mine project to some of our more greenfield exploration projects. Our board of directors has a broad range of experience in mine construction and mine operation as well as finance. You add that together with our property portfolio, I think you have the key building blocks for company growth and for added shareholder value.
RI: Take us through your plans for the next few years. Where do you see Prodigy in three to five years?
BM: We will be focusing on two areas initially. First Magino, which we will take through the feasibility process by early 2012. Simultaneously, we will continue to drill, explore and expand resources at the Magino mine project site. We expect that project to continue to grow in terms of its gold endowment from its current size to perhaps something quite substantially larger. Meanwhile, we will continue to acquire ground in the district and we believe the overall potential for the area is quite high. Prodigy has a significant land package with Magino at the core, which will be the basis for a district scale play and an opportunity to truly grow our resource base. We expect the exploration and development process to continue for the next three to five years.
In Beardmore-Geraldton, we have gold resources already documented at Hercules and another 750 square kilometres of land to explore. We will continue to look at other opportunities. We are aware of other gold resources in the Quebec and Ontario region that would complement our existing asset base.
One thing is certain, and it was demonstrated by our acquisition of Golden Goose Resources: The market likes consolidation and it likes to see projects being brought under one management, especially competent management. Our share price nearly doubled when we announced the acquisition of Golden Goose, which indicates that the market viewed this transaction very positively. We will continue to look for other opportunities like Golden Goose.
RI: What else should investors know?
BM: I would encourage all investors to visit our website and learn about our projects and learn about Magino. Our corporate presentation lays out a very straightforward business plan. This ties in to one of your earlier questions: This year is a transition for Prodigy. We’re a gold company and we’re going to take our Magino project through the feasibility process this year. What we’ve laid out are some very clear and easy-to-recognize benchmarks and they are benchmarks that should translate into improved valuation for the company at a higher share price. When an investor comes and looks at that plan, what we’ve laid out in a very simple and straightforward nature, I think they will realize that Prodigy is an outstanding investment opportunity.
- Project: Magino Mine
- Stage: Pre-feasibility
- Market cap: $74 million
- Share price: $0.35 as of February 9, 2011
- Commodity: Gold
- Production targeted: 2014
- Mine life: Projecting 10 year mine life
- Cash: $8 million as of February 9, 2011
- Ongoing PEA at Magino likely to demonstrate the project’s strong economics and set the stage for a major revaluation of the company
- Outstanding management, field and technical teams are the key building blocks for company growth and added shareholder value
- Magino mine is near-term production
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