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Prodigy Gold expects resource update in June, feasibility study is next

www.prodigygold.com • 604.688.9006

Prodigy Gold Inc (TSX-V:PDG) President and CEO Brian Maher is excited about the prospects of the company’s flagship Magino mine gold project in Ontario. A successful bought deal financing in March brought in $42.5 million, showing that institutional investors share his confidence in the project. It’s easy to see why: the current known resource is very significant — Indicated gold resources of 2,176,000 ounces grading 1.00 gpt gold (67.6 million tonnes), and 1,721,000 ounces of Inferred gold resources grading 0.99 gpt (54.2 million tonnes) gold at a cut off grade of 0.35 gpt gold — and growing. In June 2012, Prodigy will wrap up a 60,000-metre drill program, bringing to 102,800 metres the drilling completed since the beginning of 2011. With new resource estimates on the horizon and a feasibility study scheduled for completion this year, a revaluation of Prodigy’s share price is likely. Maher discusses the road that takes Prodigy closer to production and other catalysts to Prodigy’s future growth.

Resource Intelligence: Your share price has performed exceptionally well lately. What is the market reacting to?

Brian Maher: I think this is a reflection of the market realizing that we’re one of the best stories out there in terms of near-term, gold development deals. With each new drill hole we complete and announce, we’re showing that Magino is not only an outstanding project with our present resource, but also that it will continue to grow significantly.

Resource Intelligence: You raised over $42 million earlier this year. That must have been a huge vote of confidence.

Brian Maher: Yes, we were really pleased with that. We announced the deal in early February; it was a bought deal priced at market. We put it out at 9:30 am and within an hour we had to upsize it because of demand. I think that really speaks to the interest the investment community — especially the institutional side — has in Prodigy and in our story. With that deal we’ve been able to build a solid, institutional shareholder base comprising some prominent names in the industry: Sun Valley, Macquarie, K2, etc., and still have 50% free flow for the retail investor.

RI: What is driving the interest in the Magino project?

BM: Magino is a fascinating deposit. 2011 was a great year for the company and 2012 has continued in the same vein. Our PEA shows an NPV of almost a billion dollars for the project, 1.9 years payback period, our share price is up four-fold, and our market cap is up ten-fold.

I think investors are realising that the company is not standing still. We’re heading toward a feasibility study at year end, a process that will act as a value-driver. Other catalysts are increased drilling up to 60,000 metres, with seven drill rigs turning twenty-four hours per day.

RI: What is the goal of this drill program?

BM: The program aims to upgrade the resources that we used in the PEA to the measured and indicated categories so that they can be used in a reserve calculation. Beyond that, we are drilling in and around the resource, along strike, adjacent to it. The project is currently projected to have 2.7 million ounces of production but we see the possibility to increase that profile significantly.

RI: Where does the growth come from?

BM: The key area for expansion is along strike to the southwest. If we can bring in new resource ounces in that direction, we’ll have the ability to expand the overall scope of the pit and still keep a low strip ratio.

Hidden against that backdrop is the deeper part of the system. Everything we’ve been talking about in the last year has revolved around only the upper 300 metres of the deposit. Given the fact that we’re seeing almost 4 million ounces in the upper 300 metres, it is logical to assume that the roots of the system should be mineralized with gold as well. This provides us with the opportunity for high-grade underground production later on in the project’s life.

RI: What are the main challenges that you face today?

BM: The real challenge for us this year is to determine the ultimate scale of what we will propose. We need to know if we will stick with 20,000 tonnes per day or consider a larger facility in the feasibility study to capture all that shallow gold mineralization.

RI: At $461 per ounce, your operating costs look very low compared to many of your peers.

BM: Our operating costs are very low at $461 per ounce, but these could go down further in the feasibility study once we have identified areas where we could cut costs, such as the processing facility, the exact layout of the mill, electrical consumption, the grind index of the rock material and the mining operation itself.

RI: Take us through the next steps as you move to the feasibility study.

BM: We aim to complete drilling out the system this year so we have a resource number that we can build a mine plan around. The next phase is the trade-off study where we take the resource and match it to the proper processing facility that can give us the best production profile. That gets us into the fall, targeting late 2012 to complete a feasibility study. Parallel to that, we’re also initiating a permitting process, which has three components: First Nations, environmental assessment, and project description. When all three and the feasibility study are done, we can start the formal permitting process. We expect that to happen in early 2013, which could allow us to begin construction in 2014 and look at production in late 2015.

RI: Can you continue to maintain share-price growth as you move through these next steps?

BM: Yes, and I see two key catalysts: one is the feasibility study process itself, taking the risk out of the project by firmly demonstrating the strong economics, and the other is our deposit that continues to grow. Drill results that document that growth and the resource update in the summer will push our share price. Although we’re very, very happy with our stock performance last year, I think the real hint going forward was the success of the financing we did earlier this year, the appetite that the institutional marketplace had for the equity.