Mickey Fulp, "Mercenary Geologist": Look for the Right Share Structure, People, and Projects
Source: The Gold Report 12/16/2008

Excerpt:

MF: I have one other gold company that I like—PDX Resources Inc (TSX:PLG), formerly called Pelangio Exploration.

TGR: What’s caused you to focus on this one?

MF: I followed the story for quite some time, did my detailed due diligence, and became a shareholder. PDX owns 19 million shares of Detour Gold (TSX:DGC); the Detour Lake gold property in Northern Ontario. Detour Gold, at a $700 gold engineered pit, has 10.75 million ounces of gold resource. That’s measured and indicated resource. That’s always important—measured and indicated. It has some additional inferred, but I don’t pay much attention to inferred resources.

If you do the math, Detour Gold is now being valued at over $15 per ounce of contained gold. PDX Resources owns 42.4% of Detour Gold shares and their valuation now is $10.50 an ounce. Detour Gold is in the final throes of a feasibility study. It was scheduled to be out by the end of this year; I do not know if they’re presently on schedule for that, but they become a takeover candidate with a positive feasibility. You have leverage there for PDX shares vs. Detour Gold shares, at a 30% discount per ounce of gold in the ground.

TGR: But you’re saying Detour is the potential takeout candidate?

MF: Yes, it is.

TGR: Isn’t this what you mentioned earlier, where the only potential company that would take them out because of their share structure is PDX?

MF: No, PDX Resources originally spun out 50% of the deposit to a new entity, Detour Gold, a Hunter-Dickinson company and now exists only as a shareholder of Detour Gold. It is the minority shareholder, and is comprised of expert explorationists. So recently in September, it spun out all its other properties into a new exploration company, which is Pelangio Exploration; thus PDX holds its Detour Gold shares solely for investment purposes. With 10.75 million ounces, this is a huge deposit; it was a past producer of Placer Dome. It failed because of a low gold price in the previous downturn in the gold business. I think you’re probably looking at a bidding war for Detour Gold.

Goldcorp (TSX:G) (NYSE:GG) is the obvious candidate and we saw what Goldcorp did with its acquisition of Gold Eagle in the Red Lake District. Kinross Gold Corp (K.To) (NYSE:KGC) is a possible suitor. With this size of deposit, you’ve got to throw in the big boys—Barrick Gold Corp (NYSE:ABX), Newmont, Anglo, Gold Fields Ltd. (NYSE:GFI)—and some of the mid-tier gold companies looking to become major producers. It’ll get taken out at the Detour Gold share price, which is now trading at $15 per ounce of gold in the ground, while PDX is currently trading at $10.50. That’s 30% discount, so you have leverage to the upside with PDX Resources. Make sense?

TGR: That’s a great and very interesting play. Mickey, thank you for your time.