A conversation with Ingrid Hibbard
President and Chief Executive Officer
What is Pelangio's strategy and focus?
Pelangio Mines Inc. is a Canadian junior gold exploration company active in two of the top-ranked mining jurisdictions in the world, Canada and Ghana. The Company focuses on the acquisition and exploration of under-valued or early-stage exploration prospects located in world-class gold belts. Pelangio focuses on early-stage exploration where discovery can provide a significant return on investment. Exploration is conducted up to the development stage, at which point Pelangio seeks to structure a deal where the company maintains upside potential.
What is the rationale behind the strategy?
Once a discovery is made and a significant resource is outlined, the next step is extensive drilling to upgrade to mineral reserves as required for a feasibility study.
This stage requires additional capital and a different skill set to advance a project toward development and production. Pelangio's strength is early-stage exploration and the Company plans to stay focused on its main skill set. Therefore, when a project reaches the development stage, the company looks for a partner with the experience and resources to move it forward.
How did this strategy lead to Pelangio's sale of the Detour Lake property?
At Detour Lake, over the past couple of years the gold resource increased from 1.7 million ounces to a current level of approximately 3.4 million ounces. Those results indicated substantial potential to further increase the mineral resource and management aimed to expose Pelangio shareholders to this growth. The best way for Pelangio to achieve that was to bring in a management team with the skills to advance the project toward development and production. Normally, Pelangio's strategy is either to bring in a partner with the necessary experience, or to sell the property. At Detour Lake, Pelangio did both. The Company sold the asset to a new company, Detour Gold Corporation, which is part of the Hunter Dickinson group of resource companies. In consideration for the property, Pelangio received $5 million cash and 20 million shares of Detour Gold (50% of the shares issued and outstanding).
The most important aspect of the transaction was that Pelangio shareholders continue to maintain upside in the project via the Company's holding position in Detour Gold.
What does Hunter Dickinson bring to the project?
They have an outstanding track record in advanced-stage mine development. Hunter Dickinson has the technical expertise and practical experience with large-scale, open pit mines. And most importantly, a relatively new addition to their team is Gerald Panneton, an experienced geologist who worked at Barrick Gold for 12 years before joining Hunter Dickinson. This will be his fourth feasibility study in six years, and we believe that his experience and passion for the project will drive the project in the right direction.
How does that translate into an investment strategy as a shareholder of Detour Gold Corporation?
Pelangio management brought the property to the advanced exploration stage. Now Detour Gold will take it to the feasibility study level and, assuming positive results, will take it through to mine development. As shareholders, Pelangio will not be required to raise funding and management will not have to devote time to those activities, which means we can concentrate on exploration.
As a result, Pelangio benefits from a knowledgeable and experienced development team moving the project forward, while maintaining significant exposure to the upside potential of the project. It is a winning situation] for our shareholders.
Since the foundation of Pelangio in 1937, all the company's interests have been in Canada. Why did Pelangio go to Ghana, West Africa?
The African project is a scenario not unlike Detour Lake. Once again, it is a large land package comprising 411 square kilometres. It is located adjacent to the AngloGold Ashanti Obuasi mine, which has produced approximately 30 million ounces of gold in the last century.
There is also a strong management tie to the property. The father of Ingrid Hibbard, CEO of Pelangio, owned claims at Detour Lake when the mine was founded in the late 1970s. His youngest brother worked with him in the mining industry and then went to Africa, where he has been working for the past dozen years. Ms. Hibbard stepped in as CEO of Pelangio after her father passed away in 1995, and her uncle encouraged the company to investigate opportunities in Ghana. Ms. Hibbard visited the region and came away impressed, comparing it to the early days of the Porcupine mining camp in Timmins. The company undertook a due diligence process and acquired an option on four properties in late 2005. Their distinguishing characteristic is the Obuasi main mine trend which extends for at least 12 kilometres onto the property.
Will Pelangio take the same approach as Detour Lake if the company is successful in Ghana?
Yes, but Pelangio is still at the grassroots stage at Obuasi. There has been very little exploration done on this land package. Coming off of the company's success at Detour Lake, management can now focus on gold exploration at the Obuasi property.
In the past year, exploration teams have identified several targets that will be drill tested in 2007. At this stage we are leaving our options open for future of the property.
The property is located adjacent to a world-class mine. Why has there been only limited exploration?
The property has been overlooked for a number of reasons. There is a significant change in topography and vegetation on the property. In addition, the outcrop density is low. Historically the land was controlled by a different tribe than the one present at the Obuasi mine, which may have prevented or discouraged some companies from exploring.
What are the company's next steps?
Pelangio will continue exercising its options in Ghana. Management is required to complete significant exploration work every year to justify decisions on further increasing the Company's interest in the properties. The plan for the next few years is to build on the encouraging results obtained from the surface exploration program in the past year.
During 2007, Pelangio will continue to advance target definition work and initiate a diamond drilling program. The budget for 2007 is $1.5 million and plans call for drilling to commence in the second half of the year.
What is your long-term objective for Pelangio?
Pelangio will remain an exploration company focusing its activities on world-class gold belts where the potential for discovery is greater. Management intends to continue implementing its strategy of seeking partners for, or selling an interest in, promising properties that are reaching the development stage, while maintaining upside exposure for resource expansion and potential new discoveries. Management believes the company's investment in Detour Gold will yield benefits for shareholders. Pelangio will continue to explore its Obuasi property and evaluate prospective properties to complement the current property portfolio. The company's objective is to create shareholder value through the discovery of additional significant gold deposits -- and management expects to achieve success through exploration.
Are you looking at any other properties?
Right now we are primarily focused on exploration at Obuasi but we continue to look for promising properties in areas with which we are familiar, Canada and Africa. Our objective however is not to spread ourselves too thin, and to advance our existing properties as quickly as possible.