Patience, prudence now paying off in PNG

Managing director and major shareholder Peter McNeil was tightening the corporate belt, deferring his own salary and shedding staff at the company's gold and base metals projects in Papua New Guinea and Tasmania.

"We were prepared to do whatever it took to pull through the financial crisis," he said.

Today, the story is very different.

The economy has all but recovered, metals prices are on the increase and Frontier's work at its new Bulago exploration licence in the Southern Highlands of PNG, located between the world-class OK-Tedi porphyry copper-gold and the Porgera gold deposits, has finally hit paydirt.

Six years after the company's foray into PNG it has reported the return of several very high-grade gold outcrop channel assays from prospects at Bulago, including a best reading of 27m grading 66.8 grams of gold to the tonne and 25g of silver at the Suguma prospect.

According to McNeil, who has worked in the region for 25 years, the highly anticipated find, funded by a modest capital raising in late 2009, was "the best intersection I have quoted in my career".

"We went into this with the knowledge that the entire Bulago drainage basin is gold anomalous with a very large area of copper-lead-zinc-silver mineralisation," he said.

"The key to the area is the high-grade gold and we believe we have found exactly that at Suguma. It is incredibly exciting.

"Frontier is more confident now than we have ever been.

"The results we are getting from Suguma show that there is very high-grade gold there but just how much is the question. What we plan to do next month is to go back and try to establish the strike extents of these gold zones."

While keen to continue the post-crisis momentum, McNeil is all too aware of the role that finances will play in the move forward.

"The main issue facing many junior explorers is access to the right level of funding to enable them to deliver on a schedule of activities," he said.

"Unless your investors believe that you have a very robust and potentially economically viable project on your hands, it can be quite difficult to raise the required capital.

"We are fortunate that the two major capital raisings we have done have helped us accomplish our short-term objectives but for many juniors, it can get quite tight."

McNeil is considering undertaking a third capital raising in mid-2010, the amount of which will depend on whether the company is successful in its search for suitable joint venture partners for its PNG properties.

"We have been in talks with possible partners over the last few months and we were fairly near to closing a deal around the time of the Bulago announcement," he said.

"We are now re-evaluating our strategy in light of those excellent results.

"I think it could be a great thing for Frontier to partner with an appropriate world-class producer to further our projects in PNG, maximising value and minimising further dilution to our shareholders."

Sharing the exploration and development of a potential company-maker such as Bulago is something McNeil is not averse to - in fact, he looks forward to the day when Frontier is positioned as an attractive takeover target.

"Of course I would be happy [for the company] to be taken over at a highly competitive market capitalisation," he said.

"It can be difficult for a junior explorer to successfully make the transition to a large-scale miner, so for us to prove the prospectivity of our projects and then pass them on to an experienced producer is, in many ways, a logical, positive and very fruitful progression.

"I believe that within the next few months, we will attract an excellent joint venture partner to spend significant capital advancing our PNG exploration licenses.

"Then in the following years we anticipate being able to find additional major and world-class deposits to boost our profile even further."

McNeil said Frontier's destination of choice will be a bonus for potential partners. "PNG has always been very attractive for mineral exploration purely because it is in a part of the world where there are enormous deposits of several varieties," he said.

"The Australian financial community is now becoming more accepting of it as an exploration destination and, frankly, it is about time.

"PNG is Australia's closest neighbour, our time zones are similar and its sovereign risk is deemed to be good overall.

"It has always offered one of the highest levels of geological prospectivity and opportunities to Australian juniors but few have ever taken up the challenge, for political or other reasons.

"For us though, the benefits far outweigh the detractions."

High on the agenda for 2010 - and with $800,000 cash at the ready - is refining identified targets at Bulago and promoting them to drill status.

McNeil said this could be followed with scout drilling after the wet season for which Frontier has purchased a small rig to add to its exploration fleet of larger rigs and ground support and geophysical equipment.

Aside from Bulago, McNeil and his team have several other highly prospective projects in PNG, such as the Leonard Schultz exploration license, where the company recently announced an intersection of 384.6m grading 0.67gpt gold in a hand trench.

Also present were higher-grade internal sections that ran 22m of 2.71gpt gold and 36m of 1.15gpt gold, showing the prospect's economic potential.

Additional good gold results are anticipated, according to McNeil, based on visual examination of the remaining trenches.

"Having two exploration projects producing great results at the same time is like a reward for the tenacity required to keep moving forward and be successful," McNeil said

Additionally, the company is planning to commence a large soil-sampling grid in mid-April and a 3D IP geophysical survey at Mt Andewa, near the northern coast of West New Britain Province, which has five targets requiring evaluation.

The objective is to demonstrate a larger system than what is indicated on the present, limited geological database.

After Andewa, the company will investigate the Likuruanga exploration licence with two porphyry copper occurrences that McNeil says "strongly warrant" drilling and another three licence applications containing very high-grade gold and additional porphyry copper occurrences.

"We are planning to go back to PNG in mid-April to continue exploration for very high-grade gold at Bulago, trying to find the big one we have been working towards since we listed in 2003," McNeil said.

"We have always set out to own all the means of production which enables us to do things more cost-effectively and without delay.

"When you team that with a socially responsible approach and a tenement portfolio of highly prospective, large and potentially world-class precious and base metals mineralised systems, it is a major part of why I believe we will soon be very successful.

"Frontier has substantial unrecognised value that we are only now finally beginning to unlock.

"If there is such as thing as average, I would say our portfolio and our ambition is definitely far above that."

First published in the May/June issue of ResourceStocks

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