If all goes to plan, 2015 will be the year Premier Gold Mines Ltd. (TSX: PG) moves from being a gold exploration company to a gold producer.
And that’s just the biggest news in what has been quite an eventful year so far for the junior mining company from Thunder Bay.
On April 7, the company announced that it had entered into an agreement to acquire Goldcorp Inc.’s 40 per cent interest in the South Arturo Mine Project in Nevada in exchange for $20 million and 5per cent of Premier’s Rahill-Bonanza project in Red Lake.
Premier noted that the agreement was contingent on South Arturo’s other co-owner, Barrick Gold, “not exercising its right of first refusal in respect of the project.”
“We’re not sure what (Barrick) is going to do,” said Premier president and CEO, Ewan Downie, about the possibility. However, the deal contains a number of contingencies in the event that Barrick does exercise its right of first refusal, including a minimum $1.1 million (US) payment to Premier from Goldcorp.
Its future looks optimistic though, based on the fact that Premier outlined its plans for what will be its first producing mine, should Barrick allow the deal to close. What makes the South Arturo project so attractive besides its relatively short time to production is that it is near Barrick’s Goldstrike mine.
All ore will be sent to Goldstrike for processing, reducing infrastructure construction costs.
There is also underground potential, too, once the open pit mine is exhausted. The open pit mine is currently being pre-stripped and is fully permitted.
Premier also gets a strong partner in Barrick.
As Premier noted, partnerships like this one are a key part of the company’s successes to date.
In fact, Premier announced earlier in the year that it had partnered with Centerra Gold Inc. to develop its Trans-Canada Property including the Hardrock Gold Project, a past-producing mine that still holds 7.5 million ounces of gold (indicated and inferred). In this case, the partnership helps reduce risk as well as bring expertise to the project.
“We figured the best way to de-risk… was to see if there was a good partner for the project,” Downie said. “(Centerra is) a company that didn’t need to raise cash – they have a very strong balance sheet. They’re a very proven operator with international mining experience.”
The two companies will form a joint company for the project called the Trans-Canada Partnership.
As part of the deal, Centerra paid Premier an initial cash contribution of $85 million. Downie said that project is getting ready to go into production as well, though it won’t likely start producing until late 2018 or early 2019. Building permits to start construction are expected to be in place by 2016, Downie said.
Premier also announced in February that it had taken per cent interest in the Hasaga property in Red Lake in a property swap with Goldcorp.
In the deal, Premier transferred its 35 per cent stake in the East Bay property, also in Red Lake, and its 100 per cent stake in the PQ-North Property near Goldcorp’s Musselwhite Mine.
Downie said that the Hasaga property is similar to the Hardrock project in that it is a past-producing gold mine, from which approximately 240,000 ounces was mined before it was abandoned in 1952.
Premier describes the mine as an “underexplored, target-rich” property. Development would probably be about two years behind the Hardrock property, Downie said, though it is difficult to tell for sure at this point.
Premier and Goldcorp still share the Rahill-Bonanza property in Red Lake – another promising prospect.
In fact, Downie said that this property might actually go into production sooner than the Hardrock project. Should the company find something that’s economic, it could be fast-tracked due to the Goldcorp infrastructure already in place in the area.
These recent transactions are all part of Premier Gold’s deliberate strategy of exploring multiple properties, finding the right partners, and planning for future development. Companies that take the leap from an exploration-based company to a producer do it “by coming up with a portfolio of projects and building that portfolio, not by having a single asset,” Downie said.
