Premier intersects gold on Hardrock

Premier Gold Mines (PG-T, PIRGF-O) has intersected gold mineralization on the Hardrock project near Geraldton in northwestern Ontario. Drilling has targeted three zones, and has cut mineralization on all three.

The Hardrock project hosts the past-producing MacLeod-Cockshutt mine, which has produced 1.5 million oz. gold until 1968 at an average head-grade of 4.9 grams gold per tonne (T.N.M. March 2-8/09). More than 500,000 oz. gold has been mined elsewhere on the property, but the mines have never gone deeper than 600 metres.

“What’s truly remarkable here is that we’ve been hitting significant mineralization in every target that we’ve drilled to date,” says Tim Twomey, Premier’s exploration manager. “You don’t get that very often. That’s a rare thing. That’s incredible, actually, that we would hit in every target.”

Of the three zones, the most promising target is the EP zone, where Premier has confirmed mineralization along a 350 metre strike. EP is divided into three sub-zones, and the latest four holes, numbered 23-26, were drilled on the north limb sub-zone. Mineralization was found at depths of 24-201 metres, with grades ranging between 0.8-13 grams gold per tonne.

The highest grades were in hole 23, drilled at an angle of -55 degrees, which cut 1.3 metres of 13 grams gold per tonne from 146 metres depth; and in hole 25, drilled at a -45 degree angle, which intersected 3 metres of 9.5 grams gold from 106 metres depth.

The longest intercept returned from the EP zone was in hole 26, drilled at a -60 degrees dip, which cut 63 metres of 2.4 grams gold from 79 metres depth. Since the mineralized zone is vertical, true width is about 70% of the intercept, or 44 metres.

On March 11, Premier released assays from six holes on the north limb of the EP zone. Five holes intersected mineralization, with hole 19 not returning any gold. Among other intercepts, hole 15 returned 7.5 metres (true width 5.3 metres) of 8.6 grams gold per tonne from 115 metres, and hole 22 cut 10.8 metres (true width 7.6 metres) of 4.3 grams gold from 85 metres.

Assays from the south limb sub-zone were also released on March 11. Seven holes were reported, all mineralized. Highlights included hole 20, with 7.8 metres (true width 5.5 metres) of 7.7 grams gold per tonne from a depth of 73 metres; hole 16, with 10 metres (true width 7 metres) of 3.6 grams gold from 45 metres depth; and hole 11, with 8.8 metres (true width 6.2 metres) of 3.6 grams gold from 34 metres.

The two sub-zones are fold limbs, which are iron formations. The EP zone is wrapped around the north zone of the MacLeod-Cockshutt mine. Premier says that mineralization is open in all directions.

“These things have been left behind by the original operators, because they were focusing on the narrow, higher-grade quartz veins,” says Twomey. “And they mined out the north zone. And this EP zone actually wraps around it, and these limbs are on the outer edges, so we have a north limb and a south limb. And both of these limbs contain significant amounts of gold, that I think we can have a good shot at making a resource out of.”

Assays from the second target, named the Tenacity zone, included 11 holes numbered 1-11, of which ten were mineralized. Premier has defined 400 metres of strike length, and says that mineralization remains open in all directions. Notable intercepts include hole 11, with 19 metres (true width 13 metres) of 4.1 grams gold from 258 metres depth. A number of holes intersected 10-25 metres (true widths 7-18 metres) grading 1-2.3 grams gold. Nine more holes have been drilled, now awaiting assays, and Premier reports instances of visible gold seen in drill-core.

The third target, named the Oreo zone, returned six holes numbered 4-9, five of which were mineralized. In February, a notable assay was released from hole 2, which cut 2 metres (true width 1.4 metres) of 8.3 grams gold from 316 metres depth. A number of other holes cut 6.5-13 metres (true widths 4.5-9 metres) of 1.5-2 grams gold per tonne.

Another target, known as the E-zone, is a high-grade target. In February, Premier released three holes from E-zone, of which two were mineralized. Hole 2 cut 1.5 metres (true width 1.1 metres) of 40 grams gold per tonne from 203 metres. And a high-grade target on the EP zone returned 0.3 metres in hole 8 (true width 0.2 metres) of 2,870 grams gold per tonne from a depth of 27 metres.

Twomey describes the mineralization found so far in the EP zone as pyrite and silica replacement of magnetite iron formation. Mineralization in the other two targets consists of quartz veins and replacement zones in four types of host rock: iron formation, greywacke, arkose and quartz-feldspar porphyry.

“What’s really remarkable about this is the continuity of these . . . with pretty decent grades,” says Twomey. “So we think it’s going to hold up quite well. It gives us a lot of confidence, actually.”

With 50,000 metres of drilling planned this year, four drills are turning on the property. The program is budgeted at almost $10 million, and Premier aims at a resource estimate in the fourth quarter.

“That’s probably the biggest exploration campaign in Ontario this year of anybody, I suspect,” says Twomey.

Hardrock is in the Beardmore-Geraldton greenstone belt. Beside the past production of more than 2 million oz. gold on the project itself, past production from other mines in the area amounted to another 2 million oz. gold by the end of the 1960s. The project being located on the outskirts of Geraldton (population 4,900), infrastructure in the area is good. Premier is hunting for a few styles of mineralization, ranging from open-pit bulk deposits to narrow-vein high-grade gold. The company considers the three main target zones drilled so far as possible candidates for open-pit mining.

The project is subject to a 3% net smelter return (NSR) royalty. Premier is earning a 70% stake in Hardrock from Roxmark Mines (RMK-V, RMKMF-O). In addition to incurring exploration expenditures, it has to pay Roxmark $500,000 and issue 250,000 shares in order to acquire a 51% stake. It can then raise its stake to 70% if it pays $250,000 and issues 150,000 shares, provided it brings the project to production by 2016.

Even after earning a 70% stake, Premier will have to continue to foot all expenditures by itself. If Premier decides to advance the project to production, it will have to fund all capital expenditures.

Once the project becomes a mine, however, all cash flow initially goes to Premier, which, as operator, will collect a management fee, plus all other cash flow, until the money repays Roxmark’s 30% share of the expenditures incurred, plus interest. Only when these expenditures are fully repaid, will Roxmark start receiving its 30% share of profits.

Two major shareholders in Premier are Inmet Mining (IMN-T, IEMMF-O) and Goldcorp (G-T, GG-N), which hold a combined 25% stake.

On December 31, Premier had working capital of $18 million. The company has 78 million shares issued, or 80.8 million shares fully diluted. Premier’s shares were trading at $2 at presstime. Over the past 12 months, the shares have been trading in a $1.05-3.14 range.