Premier Gold Mines’ (TSX: PG; US-OTC: PIRGF) CEO Ewan Downie recently talked to The Northern Miner about the company’s decision to buy Pure Gold Mining’s (TSXV: PGM; US-OTC: LRTNF) land package so that it could expand its Hasaga gold property in Ontario’s Red Lake district.
He also touched on the events planned next year at the company’s four other gold assets, including starting production at the 40%-held South Arturo mine in Nevada with partner Barrick Gold (TSX: ABX; NYSE: ABX), and completing a feasibility study on the partly owned Hardrock deposit in Ontario, with partner Centerra Gold (TSX: CG; US-OTC: CAGDF).
The Northern Miner: The company had success with its 2015 exploration program at Hasaga, and afterwards bought Pure Gold’s land package. Can you elaborate?
Ewan Downie: We are testing what could be a significant open-pit target in Red Lake, and we are having good success in the early part of our program.
Even with our existing land package, where we have drilled, if we wanted to build an open pit, the west side of the pit wall would extend onto Pure Gold’s grounds. For that reason it was important to get the land extension.
But we’re also drilling 50 to 100 metres on strike from the boundary, and getting compelling results.
Protecting the upside on strike was an important part of the acquisition.
TNM: This year Premier is drilling 60,000 metres at Hasaga. How many metres will be drilled next year, and what is the program’s focus?
ED: Probably 40,000 to 60,000 metres again next year — a similar-sized program to what we had this year.
A lot of the drilling would be infill and hopefully extension drilling … in the second half of next year, with an initial resource for the Hasaga property, or now, the combined Hasaga property.
TNM: Would the resource estimate include the newly acquired ground?
ED: Early in the year we plan to step across the boundary and test the newly acquired ground, and we hope that [the mineralization] continues onto the property package.
If it does, the properties will be included in the resource.
TNM: One analyst estimated that based on the drill results, Hasaga’s resource could be over 1 million oz. Do you agree, or do you have wait until the resource estimate is out?
ED: I’m pretty confident that if we did a fully unconstrained resource model, it would be a multi-million ounce resource.
But the next component is that we would have to do Whittle pit shell work, and analyze how much of the resource could fit in realistic pit shells.
A million-plus resource would easily be in the realm of what we expect.
TNM: The project is in the same mining camp as Rubicon Minerals’ (TSX: RMX) recently suspended Phoenix gold project. Could you tell us how similar Hasaga’s mineralization is to the F2 deposit?
ED: It is an entirely different mineralization style.
The Red Lake mine — what we are drilling on the joint venture, the Bruce Channel, or the [under construction] Cochenour mine at Goldcorp — are all deposits, sort of narrow-vein, high-grade deposits that are intimately associated with an ultramafic rock sequence, and consistent with Rubicon.
What we are testing in the Hasaga area is a quartz-feldspar porphyry. It is a large porphyry unit that is more similar to what Osisko had at Canadian Malartic, which was taken over, and a bit more similar to what we have at Hardrock.
TNM: Why did the company acquire the Hasaga property? Is it because the mineralization is similar to its Hardrock deposit?
ED: I wouldn’t say it’s similar to Hardrock, but it’s a similar target: an open-pit target proximal to an historic underground mine. The mineralization would be similar to Canadian Malartic. Most companies — especially since discovering the High Grade zone [at Goldcorp’s Red Lake mine] — that go to Red Lake are in search of the elusive high-grade zone.
Since Goldcorp found the High Grade zone, there hasn’t been another one like it. The real sexiness of the camp was built out of the High Grade zone discovery — one of the highest-grade gold discoveries in the Earth’s history.
But one thing that was overlooked in the camp, especially after the High Grade zone, was the lower-grade, broad, mineralized open-pit mineralization.
We identified the Hasaga property as being perhaps the best in the camp, and we acquired it from Goldcorp in 2015.
TNM: It’s still early, but where would the gold price have to be for a low-grade gold project like Hasaga to be economic?
ED: I don’t know if we can speculate on where the gold price has to be. It appears to be a decent-grade, continuous, low-grade mineralized horizon. It would be fairly simple and straightforward to mine.
Based on historical mining in the area, the gold recoveries would be good, and especially in the Central zone discovery that we made, the strip ratios could be low.
It’s all a function of strip ratios and gold recoveries versus gold price.
This property has as good of a chance as any that I have seen of late that could be a success.
TNM: When should the feasibility study be completed on the Hardrock deposit?
ED: We are expecting the feasibility study in the first half of 2016. It’s a little behind where we wanted. But before having Centerra join us as a partner, we looked at a two-phased development approach … starting lower capital, then ramping up in year three or four.
Now we envision starting at a higher rate, right off the bat.
TNM: How much had to do with Centerra stepping in and bringing in more funds?
ED: Being Premier — a non-producer, with limited access to cash — we focused on finding the means that we could bring it into production, with as little capital as possible.
Working with a partner allows you to spread your wings a bit, and maybe this should be a little larger than what Premier envisioned, because the economics would be better.
TNM: When should first production start at the South Arturo mine?
ED: The real ramp-up in commercial production is expected in the second half of 2016.
However, we are stockpiling oxide mill ore that will be trucked likely to Barrick’s Cortez facility for processing. We’re just waiting until we have enough material to truck. But we still will essentially be in ramp-up mode until mid-2016.
TNM: Which month should first production start?
ED: We hope to get our first gold from the project in the first quarter.
TNM: What work are you planning next year at the McCoy–Cove property in Nevada?
ED: We will continue drilling. We have several initiatives we’re looking at for McCoy–Cove. The drilling will remain a high-priority item, both in expanding mineralized zones and doing regional exploration.
We are doing internal studies — assessing the metallurgy and resource side of historic tailings and heap-leach pads — to access whether reprocessing opportunities are real, or if we should even look at those.
That’s just one of the opportunities we are looking at, as we expand both open-pit and underground mineralization in multiple zones, and advance permitting.
Hopefully we can go back underground, or do pit pushbacks on the historic pits, so that we can resume mining.
The project was shut down in 2003 when gold went down to US$250, so the property has a lot of opportunities in a US$1,000-plus gold environment.
TNM: How many metres are planned for the project next year?
ED: We are planning 10,000 to 20,000 metres of drilling in different areas. It’s a reasonably sized drill program, but it will be done in phases.
We’ll test one of our perspective target areas, assess how good it is and move on to another.
TNM: What’s the plan at Red Lake’s Rahill–Bonanza joint venture with Goldcorp?
ED: We completed a surface drill program in 2015. We’re waiting on the results to see if we want to do more drilling on the Bonanza zone, but the main target area is testing the Wilmar horizon, and the new Fold target from underground.
Next year we will drill approximately the same-sized underground drill program that we had in 2015, and assess the two prospective target areas.
TNM: You say the company has a lot of “moving parts” that you say moved the company in the right direction this year. Can you elaborate? How might the story unfold in the next two years?
ED: We made several strategic, good deals for the company, in both acquiring and bringing in joint-venture partners.
We are a company that views the single-project strategy as potentially a pretty weak one … Rubicon’s share price has been down 80% [since reporting problems in October], because they have no other project that will give them a second opportunity.
This strategy could destroy your company. We have seen this with Midway and Carpathian, and the list goes on and on, about these single-project companies who think they have an excellent mine that didn’t work out the way they thought.
We like to keep our options open and we have five terrific projects, and advancing the five gives us multiple opportunities to be successful.
TNM: If you were to rank the five projects, how would you rank them in terms of prospectiveness?
ED: I’d rank them all as number one.
TNM: What is the company’s current cash position? How long should the amount last?
ED: We are probably sitting on $75 million in cash. Based on our budget, we expect to end 2015 with more than $60 million, including ongoing construction at South Arturo. And at a $1,100 gold price, because of production in 2016 at South Arturo, we actually expect to end 2016 — including all exploration, company G&A, etc. — with more cash than we will end 2015. We expect somewhere between $60 million and $70 million in cash.
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