Promise of PNG gold prospects is put to the test

GOLDMINEX RESOURCES The Goldminex (ASX: GMX) Papua New Guinea-focused exploration effort has shown all the promise in the world since the Melbourne-based group listed on the stock exchange back in October 2007.

But apart from a few quick holes punched in before the onset of PNG's prolonged 2008-09 wet season, none of the promise indicated by preliminary exploration has been given a serious test by the drill bit.

That is about to change, with a busy and potentially rewarding four months of drilling on targets identified in the preliminary exploration effort now under way at the group's extensive ground position in the Owen Stanley Ranges, a couple of hundred kilometres east of Port Moresby, and at the Awari prospect in the Southern Highlands.

This is the program that the punters in Goldminex have been hanging out for, including former Queensland coal baron Ken Talbot. His Talbot Group Investments holds 20.7 per cent of the stock. His hope, and that of fellow shareholders, will be that the program will put some pep back in to Goldminex's share price.

Before the global financial crisis hit last September, Goldminex got to $1.77 a share. Last Friday the stock closed at 77? for a market capitalisation of $51 million, against which Goldminex was holding cash of $22 million. It needs the healthy bank balance as exploration for "elephants" in the wilds of PNG is expensive as the terrain is as rugged as it comes.

Three prospect areas will be tested with the drill bit  Gossan Hill and Kemani in the Owen Stanley Ranges, and Awari in the Southern Highlands.

At Gossan Hill, a shear-hosted gold/copper vein system is the target. Trenching over the geochemical anomaly recently returned highly encouraging results, including two metres grading 55.4 grams of gold a tonne and two metres grading 40.7 g/tonne gold in another trench.

A buried geophysical target, believed to be 200 metres below Gossan Hill and the possible source of the overlying mineralisation, will also be drill tested. The rig then heads to Kemani, a shear-hosted gold/copper target where trenching returned impressive gold/copper values.

At Awari, a second drill rig will chase up promising results from trenching that exposed the Anomaly Hill shear zone over a strike length of 480 metres. It remains open to the east and west. Limited drilling by a previous explorer returned a 7.7 metre hit grading 11.4 g/tonne gold.

Awari is 45 kilometres north-east of Barrick's 660,000 ounce-a-year Porgera gold mine, an operation that still has more than seven million ounces of gold in reserves. They like 'em big in PNG.

REX MINERALS You've got to feel sorry for Lihir Gold (ASX: LGL) boss Arthur Hood. Still feeling the heat from the $400 million loss at the group's failed Ballarat gold project in Victoria, Hood now has to wear the embarrassment of selling out of Rex Minerals (ASX: RXM) two days too early.

Lihir injected some Victorian exploration ground into Rex as part of the original Rex float and got 7 million Rex shares in return. It sold them last Wednesday for $5.39 million or 77? a share to Melbourne-based funds manager Eye Investment. By Thursday's close, Rex had moved on to 96? a share. But worse was to come on Friday, from Hood's point of view that is.

A new batch of drill results from Rex's Hillside copper/gold project on South Australia's Yorke Peninsula put a rocket under its share price. By the close of trade on Friday, Rex had soared 46 per cent to $1.40 a share. In effect, Lihir missed out on an extra $4.4 million by deciding to sell when it did. And it is not as if Lihir needed to cash in its Rex chips for any particular reason.

As for the Rex drill results, they were impressive all right. Sixty metres grading 3 per cent copper and 0.5 grams of gold a tonne from a depth of 280 metres is hard to ignore. But it won't be until the market knows just how big the mineralised system at Hillside could be that things will get really interesting.

To that end, there was a clue in Rex's Friday announcement that additional information on Hillside's size potential is close at hand. It said high-resolution magnetic data had been collected over the project area, along with down-hole electromagnetic surveys.

The information is now being processed and the final data will be announced as the results are returned over the coming weeks. It is safe to assume that, by now, Rex would have a feel for what the data is pointing to.

The fact that Friday's announcement flagged the pending release of Rex's interpretation of the data suggested to most around town on Friday that there is more good news on the way. Bad luck Arthur.

KAROON GAS It's been one long party for Karoon Gas (ASX: KAR) shareholders on the strength of its Browse Basin gas success with the drilling of the Poseidon well.

Poseidon was the first well in a series that Karoon and its big brother partner ConocoPhillips are drilling in their Browse permits offshore from Western Australia to confirm enough gas to underpin a liquefied-natural-gas export project, with processing to take place at the ConocoPhillips-managed Darwin gas plant.

The 7 trillion-plus feet of gas found with Poseidon is equivalent to 140 million tonnes of LNG. So to say Poseidon was a good start is an understatement. Still, nervousness is creeping in to Karoon's share price before results are known from the second well in the joint venture's program, Kontiki 1.

Kontiki is being drilled in the most northern permits held by the joint venture and its results should be known by early to mid-September. While it approaches total depth, Karoon's share price has been weakening, from a record $12.10 on July 24 to Friday's $9.54.

It seems that some Karoon punters don't want to be caught staying too long at the party, should Kontiki disappoint.

But would it really matter? It's a question addressed in a recent report by Merrill Lynch. It said that success at Kontiki would add $1.50 a share to Karoon's valuation while failure could result in a $4.40-a-share downside. But having said that, the broker goes on to say its price objective for Karoon has been raised by 30 per cent to $11.80 a share.

The reason for this is that Karoon's second leg, its highly rated offshore Brazil oil exploration expedition, is starting to take shape. Drilling targets are being worked up that should allow farm-out deals and future drilling plans to be secured next year. Then the fun in the stock will really start.