Premier Gold invests in IDM Mining

Premier Gold Mines (TSX: PG) expects to be in production this year at its 40%-owned South Arturo gold project in Nevada, but is looking for investment opportunities beyond its project pipeline in Nevada and Ontario. And so it has taken a stake in IDM Mining (TSX: IDM), which is advancing its Red Mountain gold project in northwestern British Columbia.

IDM Mining said Premier Gold acquired 6.5% of its shares, or 9.4% on a partly diluted basis, in a recently completed private placement. IDM is advancing Red Mountain to a potential construction decision in 2017, and last month updated the resource estimate for the underground gold project — a porphyry-related hydrothermal gold system in the Stikine terrain of B.C.’s Golden Triangle, 15 km northeast of Stewart.

Ewan Downie, Premier’s CEO, could not be reached for comment on the investment decision.

A preliminary economic assessment completed in July 2014 concluded that most of the deposit is amenable to bulk underground long-hole mining methods, and could be built at an initial capital cost of US$76 million (including a 15% contingency). The now out-of-date PEA also estimated a five-year mine life, with an average life-of-mine annual payable production of 55,000 oz. gold and 171,000 oz. silver.

Based on the latest resource update, measured and indicated resources stand at 1.6 million tonnes grading 8.36 grams gold per tonne and 26 grams silver per tonne for 441,500 oz. gold and 1.40 million oz. silver, with inferred resources adding 548,100 tonnes at 6.1 grams gold and 9 grams silver for 107,500 oz. gold and 153,700 oz. silver. The resource is based on a cut-off of 3 grams gold.

Meanwhile, in the Red Lake mining district of northwestern Ontario, Premier continues to extend the near-surface mineralization in the Hasaga porphyry area of its wholly owned Hasaga project.

The Hasaga property hosts the past-producing Hasaga and Gold Shore underground mines, which ceased production in the early 1950s. Premier acquired 100% of Hasaga from Goldcorp (TSX: G; NYSE: GG) in February 2015.

Premier has just provided the latest update from its winter drill program at Hasaga, which was completed on May 1, and reported that initial results suggest there is potential to expand both the open-pit and underground mineralization at the project.

Highlights from the drill program include hole 103, about 200 metres southwest of previous drilling, that returned 3 metres of 7.52 grams gold. The step-out hole was also significant because it represents drilling on the recently bought Buffalo portion of the project.

In a corporate blog, Stephen McGibbon, Premier’s executive vice-president of corporate and project development, noted that the Hasaga porphyry system “appears to be wide open, as it crosses onto the Buffalo ground … and targeting this potential extension will be an important part of our exploration campaign during the latter half of the year.”

Other intercepts are 1.27 grams gold across 85 metres in hole 105 and 1.18 grams gold over 117 metres in hole 106.

So far the drilling has focused on defining bulk lower-grade mineralization, but the winter program “suggests higher-grade vein structures exist within the Hasaga porphyry that warrant more infill drilling to establish potential continuity,” the company said in a news release.

Hasaga will be Premier’s largest exploration program this year, and for the rest of 2016 will consist of a mix of infill and step-out drilling, bulldozer stripping, mapping and channel sampling on outcrop exposures, wedge drilling to test the continuity of recently identified high-grade gold mineralization and more step-out drilling. The company is also undertaking metallurgical profiling and test programs, and will report those results in the second half of the year.

McGibbon said the follow-up drill program at Hasaga could result in a maiden resource estimate later this year or in early 2017.

Last month Premier updated investors on its 2016 exploration program at the McCoy-Cove project along the Battle Mountain-Eureka trend in Nevada. The McCoy-Cove open-pit gold mines together produced 3.3 million oz. gold and more than 110 million oz. silver over 17 years, from 1986 to 2003.

Premier has budgeted US$4.5 million for a 10,000-metre drill program there this year that will begin on the high-grade Helen-CSD target, where Premier hopes to expand mineralization northwest of the Cove open-pit mine.

Step-out drilling will focus on testing the on-strike extension of the Helen zone to the southeast and towards a hole Premier drilled in 2014. That hole — PG-1 — is 365 metres along strike from the Helen zone deposit, with mineralization hosted in the same carbonate rock units.

The company also has permission to build a portal and a ramp to explore the Helen zone using underground drill stations, and collect potential bulk samples.

Eric Lemieux of PearTree Securities said in a research note after the May 3 release of the Hasaga drill results that Premier Gold “provides exposure to potential precious metal production in low-risk jurisdictions, and has a stellar track record as a superior project generator.”