Premier graduates to gold producer in 2016

South Arturo on schedule to begin production, Hardrock in permitting stage

In 2016, Premier Gold Mines Ltd. will shift from an exploration-only company to gold producer which will add about $25 million to its cash assets by the end of 2016, the company projects.

That’s largely thanks to its 40 per cent stake in the South Arturo project in Nevada (Barrick Gold Corp. owns the other 60 per cent). Pre-stripping and initial mining at South Arturo will begin in the first quarter of 2016 with production ramping up towards mid-2016, said Ewan Downie, president and CEO of Premier.

“A lot of the expected growth in cash next year will be on the back of South Arturo, especially in the second half of the year,” Downie said.

He added that he is also considering financing options to help strengthen the company should opportunities arise for drilling or purchasing new properties.

Acquisitions

“We are definitely a company that views turbulent markets as good times to make acquisitions. We are looking at opportunities – a lot of things are pretty fairly valued in this market,” he said.

Its current cash position of approximately $91 million including a recent contingency payment from Centerra of $11 million provides the latitude that many exploration companies simply do not have at the moment.

Despite the positive outlook, Premier Gold’s share price has remained flat over the last several months – something Downie also takes as a good sign.

“In the past few months, most of our peer group has gone down and we’ve stayed flat. It’s been a positive because gold prices continue to drop,” he said.

Downie said that the inflow of cash will also provide a bit of a buffer in case the market doesn’t turn around anytime soon.

South Arturo may be the money generator for 2016, but at least two other properties are showing positive signs as well. Earlier this year, Premier entered a partnership agreement with Centerra Gold Inc. to form Greenstone Gold Mines LP to develop Premier’s Trans-Canada Property, including the Hardrock project in Greenstone, 200 kilometres northeast of Thunder Bay. Centerra has committed $185 million (including $92.5 million for Premier’s half of development costs) to build the mine, an onsite mill, and cover other associated costs.

Currently, the project is in the permitting stage, which is contingent on its final feasibility study, now expected to be available in early 2016. Size and scope of the operation will also be contingent on the final feasibility study.

Downie said he does not have any estimates at the moment about production or the size of the workforce that will be required for the project.

“[Permitting is] the critical item for a go/no go. If everything goes well, we should get our permits in late 2016, which would allow construction to proceed in 2017, but that’s subject to change.”

First Nations

The project falls within the traditional territories of (or otherwise affects) several Aboriginal groups including Long Lake #58 First Nation, Ginoogaming First Nation, Aroland First Nation, the Métis Nation of Ontario, and the Red Sky Métis Independent Nation. The company has been in consultation with them for several years, and has seemingly built good relationships. Aroland expressed concerns in April 2014 about the impact of the project on its lands and resources, particularly Begooch Zaagaigan (Kenogamisis Lake), an important lake for fishing. However, Aroland has since signed a relationship agreement with the company.

“I think we’ve done a good job of having either agreements or discussions with all the relevant Aboriginal groups, and we’ll continue to consult and work with them as we move the project forward,” Downie said.

A little further down the pipeline is Premier’s 100 per cent owned Hasaga property in Red Lake, thanks to a property swap with Goldcorp earlier this year. This past-producing mine now contains relatively low-grade ore – highlight results released in September include assays of up to 1.06 g/t Au across 93 metres and 1.19 g/t Au across 107 metres – but easy access to infrastructure and mills makes the project attractive to the company.

“We feel that we’re onto a pretty significant potential discovery on the Hasaga property,” Downie said. “That drill program is ongoing.”

Other exploration projects include its Rahill-Bonanza property in Red Lake (in partnership with Goldcorp) and its McCoy-Cove property in Nevada.

Although Premier is now in a relatively strong (and growing) cash position, it will continue its strategy of partnering with other companies as appropriate to develop properties, Downie said.

“We believe that part of the reason we’ve been able to grow our company to where it is, is that we do have partners that help to carry the load. If we didn’t have partnerships, we sure would have a hard time moving five projects forward,” he said.