Premier shifts focus to Geraldton gold project

Premier Gold Mines (PG-T, PIRGF-O) plans to drill 50,000 to 100,000 metres on its exploration projects in Northwestern Ontario and Mexico this year with a new focus on its project in Geraldton, Ont.

Up until January, Premier’s exploration team was mainly devoted to the Rahill-Bonanza project in Red Lake, a 50% joint venture with Goldcorp (G-T, GG-N). Goldcorp has taken over operatorship by boosting its ownership to 51%, opening up Premier to concentrate on other projects.

Premier’s chief operating officer, Stephen McGibbon, says it was no surprise when Goldcorp seized its chance to become the operator at Rahill-Bonanza given the project’s proximity to its Red Lake gold mine, which produced more than 700,000 oz. gold in 2007.

“There’s a need to be replacing those ounces on an ongoing basis so (Goldcorp’s) regional exploration program in Red Lake is very important for them,” McGibbon says. “At the time of the joint venture we were pretty sure they would be taking on operatorship within that 18-month window.”

McGibbon says that work at Rahill-Bonanza is beginning to transition from exploration to possibly underground development.

“It shows that Goldcorp has confidence in the program and they want to see it being advanced,” McGibbon explains.

The goal for Rahill-Bonanza is to do enough infill drilling to upgrade the current inferred resource to indicated, as well as to expand the size of the deposit at depth. Inferred resources stand at 2.3 million tonnes grading 6.98 grams gold per tonne over an average width of 3.1 metres, using a cutoff of 4 grams gold per tonne.

Now Premier has a chance to focus on its Geraldton project; last fall, the company signed an option with Roxmark Mines (RMK-V, RMKMF-O) to earn up to a 70% interest in Geraldton for cash and shares, including spending $7 million on exploration over four years.

The company will also continue exploration on its 100%-owned PQ North project, on the PQ limb of the iron formation that hosts the Musselwhite gold mine, (owned by Goldcorp and Kinross Gold [K-T, KGC-N]) and its Santa Teresa project in Baja California Norte state, Mexico, a 50% joint venture with Sutter Gold Mining (SGM-V, SGMNF-O).

“From the standpoint of manpower and day-to-day energy and effort, the Mexican project and the PQ North project would be secondary to Geraldton,” McGibbon says.

In total, Premier plans to have eight or nine drills turning by summer, including three at Rahill- Bonanza, three or four at Geraldton and one each at PQ North and Santa Teresa.

At Geraldton, Premier will con- centrate on the newly discovered Kailey zone, located parallel to and north of the past-producing Little Long Lac gold mine — where more than 600,000 oz. gold was produced between 1934 and 1953 at an average grade of 11.66 grams gold per tonne.

So far, two initial holes have been drilled on the Kailey zone about 150 metres apart — one drill hole returned a 51-metre intersection grading 1.33 grams gold per tonne starting from 28 metres depth and the other returned 26 metres grading 1.34 grams gold starting from 137 metres.

One of the holes also intersected the on-strike extension of the Little Long Lac Main zone with an intersection of 1 metre grading 13.58 grams gold, located about 50 metres east of where the zone was mined.

Two other important zones, known as the No. 9 and No. 10 zones, have also been intersected in drilling that cut 1 metre of 254.8 grams gold per tonne, 1 metre grading 60.88 grams gold and 1 metre grading 45.3 grams gold. The company says these results demonstrate potential for both bulk-tonnage and high-grade mineralization.

McGibbon says that Premier looks for projects in proven districts with low geopolitical risk and that Geraldton was exactly that.

“(Geraldton) has not participated in the flurry of activity that we’ve seen in Canada in general in the last five to ten years certainly, but even more than that, the ground that we’ve picked up really hasn’t seen good systematic exploration in the last 50 years or so,” McGibbon says.

The company is well-funded to spend the $8-10 million to complete its 2008 drilling with $15 million in the treasury right now.

Premier also sold its Pickle Crow gold mine, near Pickle Lake, Ont., about 430 km northwest of Thunder Bay, to privately held company PC Gold, which will provide Premier with $1.5 million in cash and $3.8 million in PC Gold shares over the next three years.