Marengo Mining (ASX:MGO , MRN.TO) has announced an updated resource estimate on its Yandera copper project in Papua New Guinea. The total resource estimate now contains 5.4 billion pounds of copper, 1.8 million ounces of gold and 150 million pounds of molybdenum.

The product mix on the property is very appealing but the average grade still is relatively low at just 0.41% CuEq for the measured and indicated resources and less than 0.35% CuEq for the pounds in the inferred resource category. We also don’t agree with the meta values used by Marengo for its pit outline. We don’t think it’s very prudent to use a gold price of $1500/oz, a copper price of $3/lbs and a molybdenum price of $15/lbs which are substantially higher than the current spot prices of respectively $1190/oz, $2.76/lbs and $7.75/lbs.

We would like to see a sensitivity analysis on the resource update to check the impact of a higher cutoff grade on the company’s resources. The average grade will obviously increase, but we are very interested in the impact on the total tonnage.

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Disclosure: The author holds no position in Marengo Resources. Please see our disclaimer for current positions.

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