-Significant increase to resource
-Quality project excites brokers
-Quick route to first gold


By Eva Brocklehurst

Papillon Resources ((PIR)) is a strong contender in the West African gold play with its flagship Fekola gold project in Mali. The company has continued to add value with a significant increase to the Fekola resource and, according to Macquarie Bank, a very competent CEO in Mark Connelly.

After reporting a maiden resource in June 2012, Papillon has increased its resource calculation by 34% to 55 million tonnes at 2.4g/t gold for 4.21m ounces. But there's more that excites Macquarie - 3.5m ozs sits within the measured and indicated category, making the conversion to reserve possible with sufficient pre-feasibility work. The deposit remains open at depth and along strike. Macquarie believes the quality of the project, coupled with a clear timeline to delivery of first gold, makes the company a potential high-return stock for those comfortable with the risks associated with a West African explorer.

Deutsche Bank is equally impressed, noting the updated resource goes a long way to supporting a base case 15 year mine life for 4m ounces of production. The broker expects the Fekola deposit to grow as drilling progresses. A resource update is likely late this year/early next year. Deutsche notes further clarity on development will be presented in the pre-feasibility study in the June quarter. Deutsche is also encouraged by the increased grade, noting the majority is contained within a single, continuous deposit. Moreover, ongoing drilling is focused purely on resource growth, with recent results clearly showing mineralisation continues outside the resource envelope.

The downside risks, according to Deutsche are the usual - project delays, cost blow-out and the gold price. Both Deutsche and Macquarie have a $2.20 price target on FNArena's database with Buy recommendations.

In November 2012,