AREA 81 GOLD PROJECT – Considerable Upside Potential
Between September and December 2008 Mercator invested £175,000 in the Area 81 gold project in Papua Province, Indonesia, by way of a loan to GOC Holdings Ltd (“GOC”), a Hong Kong registered company. This loan enabled GOC to earn a 50% interest in the Area 81 project.
During the course of the year, Mercator’s loan was converted into a holding of 50 million shares in an Australian company named Paniai Gold Ltd (“Paniai”), which was formed to hold the interest of GOC in the Area 81 project. Paniai has since invested a further A$700,000 in the project, having raised pre-IPO funding ahead of an IPO planned for 2010.
Mining & Exploration Potential
Paniai is the holder of a 50% interest in a joint venture over the Area 81 project with a local company. The joint venture has one granted 40 hectares mining permit and applications pending for another 490 hectares of mining permits and 170,000 hectares of exploration permits.
The joint venture initially intends to mine sizable bodies of gold bearing gravels located within its granted mining permit, and will additionally undertake exploration for new gold and copper-gold deposits within the wider project area, which lies less than 100km from the immense Grasberg copper-gold mine operated by Freeport McMoRan Copper & Gold Inc. Paniai plans to implement hydraulic mining methods and recover gold by means of sluice boxes.
The joint venture has already established solid support from the authorities within the Regency of Paniai, the administrative district in central Papua Province in which the Area 81 project is located, as well as from the local population.
Whilst the Area 81 project presents some logistical challenges, the large amount of gold (approximately 120,000 ounces) that has been extracted by Paniai’s Indonesian partner over the past four years using extremely unsophisticated mining methods indicates exceptional potential for both the application of more sophisticated mining techniques and for the systematic exploration of the wider area with a view to the discovery of new deposits.
In order that the Area 81 project has the best possible chance of success, Mercator introduced Paniai to Trevor Neale, a noted specialist in gold mining operations in Papua New Guinea who has now been appointed Operations Manager of the Area 81 project. Mercator also introduced Paniai to BGF Capital Ltd, a new broking house focused on the exploration and mining industry in Australia. BGF has raised approximately A$500,000 in pre-IPO funding for Paniai and has agreed to underwrite Paniai’s listing on the National Stock Exchange (“NSX”) in Newcastle, Australia, for approximately A$1.8 million. On listing, Mercator expects to hold 16% of Paniai Gold’s issued share capital (equating to an 8% indirect project interest).