Mercator Gold PLC

Paniai Gold Limited

Mercator holds 50 million shares in Paniai Gold Limited (‘Paniai’), which plans to list on the National Stock Exchange (NSX) of Australia. On listing, Paniai is anticipated to have a market capitalization of approximately A$10 million, and Mercator’s shareholding is expected to represent approximately 16% of Paniai’s issued share capital.

BGF Capital Ltd, an Australian broking house focused on the exploration and mining industry, 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 Australia to the extent of A$1.8 million.

Paniai is the holder of a 50% interest in a joint venture over the Area 81 gold project in Papua Province, Indonesia. The joint venture (‘the JV’), which is with a local company known as PT. Madinah Qurrata’ain, has one granted 40 hectare mining permit and applications pending for another 490 hectares of mining permits and 170,000 hectares of exploration permits.

Planned Mining Activities

The JV 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 its wider project area. The activities of the JV will be managed by Trevor Neale, a geologist with extensive and successful experience in gold mining operations in the region. Trevor Neale’s appointment was facilitated by Mercator.

A large quantity of gold, approximately 120,000 oz, has been extracted by PT. Madinah Qurrata’ain over the preceding four years using extremely unsophisticated mining methods. This indicates that the application by the JV of more sophisticated mining techniques could be exceptionally rewarding.

The JV enjoys strong support from the authorities within the Regency of Paniai, the administrative district in central Papua Province in which it is active, as well as from the local population. Local people will be incorporated wherever possible into the workforce, and the activities of the JV will provide the local community with valuable employment and training opportunities. All development will be undertaken with consideration for the environment.

The Area 81 project is located in sparsely populated country best accessed by helicopter, and a low input mining process is required in order to minimise logistics costs. High pressure water jets, known as monitors, will be employed to break up the gravels and pass them over sluice boxes. The gold concentrate produced by the sluice boxes will be processed using jigs to produce a clean gold product for smelting and sale. This method will enable high volumes of gravel to be processed at relatively low cost, and a wide range of gold particle sizes to be recovered. Processing will be by gravity only, using no chemicals. The area experiences regular rainfall so water is readily available. Nabire, a town of 50,000 inhabitants located some 90km northwest, will be the primary logistical base.

Exploration Potential

Areas of significant exploration potential have been identified in the vicinity of the Area 81 project. The renowned Grasberg copper-gold mine, operated by Freeport McMoRan Copper & Gold Inc. of the USA, is located 110km southeast of the Area 81 project, and previous exploration, which was focused on identifying Grasberg-size targets, may have missed substantial areas of interest.