PGXPF Pelangio Exploration Inc (PK)

Pelangio’s high grade discoveries will bolster resource estimate expected in 3Q

Steven Ralston, CFA

Pelangio Exploration (PX.V: TSX-V, V.PX, and PGXPF: OTC) is a junior gold exploration company currently proceeding with a second phase drilling program at the company’s Manfo property in Ghana. The program has now been increased to 40,000 meters. In addition, last week, Pelangio announced the results from seven additional diamond drill holes, which totaled 1,574 meters.

Three of the seven holes were highly significant. Hole SPDD-184 was drilled on a section which had not previously been drilled and encountered 113 meters of 1.19 g/t Au bulk mineralization, the longest mineralized intersection yet encountered at Manfo. In addition, the intersection included 9.05 g/t gold over 7 meters at a depth of 210 meters, which indicates a moderate-to-high grade plunge zone which links with the 7.01 g/t gold over 19 meters encountered at a depth of 35 meters with an earlier hole (SPDD- 088). Also, holes SPDD-192 and SPDD-188 added credence to the plunge, having encountered 4 meters grading 16.72 g/t gold (a depth of 49 meters down-hole) and 10 meters of 11.94 g/t Au (at a depth of 136 meters down-hole), respectively. The length of the moderate-to-high grade plunge appears to be approximately 600 meters.

Through the end of 2011, over 27,000 meters of diamond drill holes have been completed on the Manfo property. With the addition of a third drilling rig, another 13,000 meters are planned during the first half of 2012. Drilling results at Pokukrom East have defined a strike length of bulk gold mineralization of at least 850 meters, which is open to the north and at depth. The geochemical anomaly is much longer at approximately 1,200 meters in length. Management plans not only infill drilling at 50 meter spacing but also 100 meter step-out drilling in hopes to increase the strike length to over 1,000 meters. The initial NI 43-101 compliant inferred resource report is now expected in the second half of 2012.

A public offering in December 2011 raised an estimated $7.44 million to further fund the company’s exploration activities. Importantly, management participated in the offering, raising its ownership in the company from 13.0% to 13.8%.

We reiterate our Outperform rating based upon the attractive valuation level of the stock and the expectation that the NI 43-101 compliant inferred resource report on the Manfo property will act as a catalyst for price appreciation. Our target is $1.00.

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