In an interview in September, Ewan Downie, Premier Gold Mines’ (TSX: PG; US-OTC: PIRGF) president and CEO, said his management team is “always on the lookout for an opportunity,” and that the company has “staffed up internally to assess resources and deposits.”
“I’m always one to preach: ‘Don’t think what we’ve got is the best in the world, there could always be something better,’” he told The Northern Miner. “We’re looking to build a growing production base with a target of being viewed as a mid-tier, high-quality, low-cost producer in 2020.”
Premier Gold came a step closer to that goal with recent agreements with Goldcorp (TSX: G; NYSE: GG) and Kinross Gold (TSX: K; NYSE: KGC) to acquire gold exploration projects in Nevada and Mexico, where recent exploration work has identified high-grade gold mineralization that could represent discoveries for the company.
At Kinross Gold’s Goldbanks gold-silver project in Nevada’s Carlin trend, 50 km south of Winnemucca, three deep holes have intersected precious metals mineralization at the Golden Devil discovery, returning intercepts of 192.50 grams gold per tonne and 10,850 grams silver per tonne over 1.1 metres and 27.90 grams gold and 17.10 grams silver over 1.1 metres.
The high-grade epithermal vein targets at depth are geologically connected to the property’s near-surface Main Zone and KW open-pit deposits (90% oxide and 10% sulphide), which host an inferred resource of 25.7 million tonnes grading 0.7 gram gold per tonne for 556,700 oz. gold. Goldbanks is made up of 875 claims totalling 16,000 acres.
At Goldcorp’s Alto-Cristina project in the southwestern part of Mexico’s Chihuahua state, drilling has returned assays of 2.8 metres grading 10.88 grams gold, 155 grams silver, 0.7% copper, 1.2% lead and 6.5% zinc, and 1.9 metres averaging 9.98 grams gold, 192 grams silver, 1.9% copper, 1.5% lead and 15.2% zinc. (Sixty holes were drilled at Alto-Cristina between 2013 and 2015, and resulted in discovering two high-grade veins — Alto and Guadalupe.)
“We consider these targets some of the most attractive that the company has identified over the past several years,” Downie wrote of Alto-Cristina and Goldbanks in his blog, adding that the agreements “adhere to our strategy of gaining access to projects with the potential of high-margin production and minimal up-front risk and costs.”
Rob Chang, an analyst at Cantor Fitzgerald, said in a research note that the Goldbanks’ resource alone — at a US$15 per oz. valuation — is worth US$8.4 million on a 100% basis, and described both acquisitions as “positive” because they “appear to have significant upside.”
In his blog, Downie described Kinross’ Goldbanks project as having similarities with the Sleeper and Midas mines in northern Nevada, and said he regards the project “as potentially hosting a low sulphidation epithermal gold deposit.”
At Alto Cristina, Downie noted that drilling should be underway to test well-defined initial targets, adding that “because of the shallow mineralization and the favourable permitting process in Mexico … a successful exploration campaign at Alto Cristina could move the project along the development pipeline quickly.”
Under the deal with Kinross, Premier has the right to earn a 50% interest in Goldbanks by spending US$20 million on exploration over five years, including a commitment to spend US$3.5 million during the first 18 months. The deal designates Premier as the operator of exploration programs on the property, but after Premier earns its 50% ownership, Kinross could become the operator.
A shovel loads a haul truck at Premier Gold Mines and Barrick Gold’s South Arturo gold mine in Nevada. Credit: Premier Gold Mines.
At Alto-Cristina, Premier has the option to acquire up to 100% of the project by making payments of US$1.5 million on each of: the date of execution of the agreement; on the year anniversary date; and on completion of a resource estimate. Premier must also make a final payment of US$2.5 million at the time of commercial production. Goldcorp retains a 2% net smelter return royalty, half of which Premier can buy for US$1.5 million for a three-year-period from the acquisition date.
The two deals follow news in August of Premier’s first gold pour at its 40%-owned South Arturo mine, a joint-venture with Barrick Gold (TSX: ABX; NYSE: ABX), and the acquisition in late July from Yamana Gold (TSX: YRI; NYSE: AUY) of its Mercedes mine and exploration properties in Sonora state. The Mercedes mine has produced since 2011, and yielded 109,000 oz. gold a year between 2012 and 2015.
This year has been a productive one for Premier. The company is targeting between 100,000 and 110,000 oz. gold production for 2016 from its operations at South Arturo and its Mercedes mine. In addition, Mercedes could generate 90,000 to 100,000 oz. silver during the fourth quarter.
On Oct. 18, the company reported that South Arturo — whose ore is processed at Barrick’s Goldstrike facility, 5 km south — produced 75,570 oz. gold on a 100% basis in the third quarter.
It estimates gold production from South Arturo attributable to Premier in 2016 will be 80,000 ounces. The mine was completed on time and on budget, and Downie described South Arturo as “one of the highest-grade open-pit operations brought into production in 2016.”
Meanwhile, Premier is reporting drill results from a number of its other projects.
In September, Premier released drill intersections from the Buffalo target at its wholly owned Hasaga gold project in northwestern Ontario’s Red Lake district. Highlights include 69 metres of 1.80 grams gold beginning at 126 metres, including 3 metres of 25.59 grams gold at 192 metres, and 67 metres of 3.66 grams gold at 170 metres.
This year Premier will have drilled 50,000 metres at Hasaga, the company’s largest exploration program in Canada. Last year at Hasaga, the company completed a 60,000-metre drill program.
At its wholly owned McCoy-Cove gold project in Nevada’s Battle Mountain-Eureka trend, results from five more step-out holes within the CSD Gap were released in late August. Recent drilling highlights include 5.77 grams gold and 689 grams silver over 2.4 metres, and 10.87 grams gold and 15.23 grams silver over 17.4 metres. The CSD Gap is between the Helen zone and the historic Cove South Deep underground deposit.
Premier Gold Mines’ 40%-owned South Arturo gold mine in Nevada — a joint-venture with Barrick Gold — which saw its first gold pour in August. Credit: Premier Gold Mines.
Premier also owns 50% of the Trans-Canada project (Centerra Gold [TSX: CG] owns the other 50%), and has a 44% interest in the Rahill-Bonanza project (Red Lake Gold Mines, an affiliate of Goldcorp, owns the other 56% interest and is the operator).
News of the latest deals with Kinross and Goldcorp sent Premier’s shares down 26¢, or 7.7%, to $3.10 on 1.2 million shares traded.
Over the last year Premier’s shares have traded within a range of $2.12 per share and $5.05 per share.
Cantor Fitzgerald’s Chang has a target price on the stock of $5.70 per share.
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