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Premier Gold Mines Ltd. is pleased with the discovery of high-grade gold mineralization at a drill hole on the McCoy-Cove property south of Battle Mountain. The discovery also impressed joint venture partner Barrick Gold Corp.

The company also is planning underground development at the portion of McCoy-Cove that is 100 percent Premier’s, and the company is awaiting gold production from an underground project and pit development at the South Arturo Mine operated by Barrick.

“It’s a development year for us,” said Brent Kristof, senior vice president of operations, who works out of the Reno office for the Canadian-based Premier.

The high-grade mineralization was intersected in the first hole drilled at the Antenna target between the historic McCoy and Cove open pit mines that is part of the joint venture with Barrick and will be part of the new Nevada Gold Mines joint venture between Barrick and Newmont Goldcorp.

“This exciting intersection is on JV ground,” Kristof said.

Barrick Chief Executive Officer Mark Bristow talked about the discovery in Barrick’s first-quarter earnings teleconference on May 8, stating that there is new opportunity for the Barrick-Newmont joint venture with discovery of a “very significant intersection” at McCoy-Cove.

“Our geologists are definitely excited. This reinforces the potential of Nevada,” he said.

The drill hole has a mineralization zone grading 0.145 ounces of gold per ton, with an interval of 0.555 opt, and another high-grade interval of 0.21 opt. The drill hole was lost at 2,380 feet below the surface with gold grading at 0.197 opt so the zone remains open.

“Premier and Barrick geological teams have worked closely in identifying high-quality targets that will be tested in the current drill program,” Premier’s president and chief executive officer, Ewan Downie, said in an announcement of the high-grade discovery.

In the joint venture at McCoy-Cove reached in 2018, Barrick holds an option to earn a 60 percent interest in a large block of property by spending $22.5 million by June 30, 2022. Barrick can assume the operator role now that it has spent $6 million.

“Barrick may take over management of the joint venture by the end of the year,” Kristof said in a telephone interview.

The property in the agreement with Barrick covers roughly 50 square miles.

Going underground

Premier maintains 100 percent ownership of the property that includes the planned Cove project, where the company expects to start going underground in the fourth quarter of this year.

“We’ve been focusing this year on hydrology work,” Kristof said, including drilling wells and pump testing. “The original intention was to start last fall, but we decided to hold off to do more hydrology work.”

He said Boart Longyear drilled two wells 1,600 to 1,950 deep, and the pump testing was just starting. Montgomery and Associates was hired as the hydrology consultant firm.

Premier has made engineering designs, such as changing the location for the portal, changing the location for power lines to the access road and changing the design for the waste dump, Kristof said.

After the portal is started, plans call for underground drilling to start in 2020 and begin full feasibility efforts in the fourth quarter of 2020, he said. If the feasibility work points to a mine, development work and underground production would follow, with production possibly in 2021 or 2022.

The Cove open pit is roughly 10 miles south of Newmont’s Phoenix copper and gold mine that also will become part of the Newmont Goldcorp and Barrick joint venture. Echo Bay Mines Ltd. mined for gold and silver at Cove between 1987 and 2003.

South Arturo

At South Arturo northwest of Carlin near Barrick’s Goldstrike Mine, Premier is spending 40 percent, Barrick 60 percent, in the joint venture to develop an underground mine and for stripping for the Phase I open pit. Barrick is the operator. Barrick mined Phase II before Phase I.

Two portals have been completed for the underground mine, El Nino, and Small Mine Development has been contracted to do the initial development, Kristof said.

“They expect to get into ore by July of this year,” he said. “There may be a few ounces to our account this year, but I wouldn’t call it production, but ounces from development.”

Barrick processes ore from South Arturo at Goldstrike.

Barrick is using the Phase I pit stripping as a testing ground for its automation project involving driverless haul trucks. Barrick announced a year ago that testing surface autonomous haulage technologies had begun at South Arturo.

“It’s kind of exciting. The operator is sitting in a chair,” Kristof said.

South Arturo becomes part of the Nevada Gold Mines joint venture between Barrick and Newmont, but Premier will still hold its 40 percent.

Rodeo Creek

Premier also has an option agreement with Ely Gold Royalties Inc. to acquire the Rodeo Creek property adjoining South Arturo roughly six miles northwest from Goldstrike operations and abutting Halliburton’s Rossi barite mine at the north boundary.

Premier’s option is to acquire 100 percent interest in the project by making payments to Ely Gold of $500,000 over a five-year period, with Ely Gold retaining a 2 percent net smelter royalty. According to Premier, Rodeo Creek is a 510-acre land package.

“There was a lot of snow this year. Now, the plan is to go in and do some mapping and soil sampling and geochemistry to vector in drilling. We haven’t decided to do any drilling yet,” Kristof said.

Additional Premier exploration projects are the Goldbanks and Rye sites. Premier has an agreement with Kinross Gold Corp. for exploration at Premier’s Goldbanks property in Pershing County, and agreement with Barrick for its Rye Vein adjacent to Goldbanks.

Greenstone

Premier has another exploration project called Greenstone in Ontario that Kristof said has 4 million ounces of gold reserves. Centerra Gold Inc. is earning in 50 percent of the project and should complete the earn-in by next year. Centerra is funding 100 percent of the exploration.

Kristof said there may be a production decision in 2020 for Greenstone, which would be a surface mine. A feasibility study is being updated to optimize energy and process costs.

“It’s an interesting one. We’re pretty excited about it,” he said.

Mercedes Mine

With all the exploration and development work, Premier has one producing mine, the Mercedes in Mexico. The gold and silver mine is about a 3.5-hour drive from Tucson, Ariz., Kristof said.

“We produce in the neighborhood of 85,000 ounces of gold and 240,000 to 255,000 ounces of silver” at Mercedes in a year, he said, and continuing exploration has kept the mine life at four years for some time. Premier acquired the mine in 2016.

According to Premier’s first-quarter production report released May 1, Mercedes produced 17,614 ounces of gold and 57,681 ounces of silver, compared with 30,550 ounces of gold and 59,826 ounces of silver in the 2018 quarter, mainly because there is no gold production at South Arturo.

“Our objective at Mercedes during the first quarter was to drive development work necessary to support planned production growth for the remainder of the year,” Premier’s executive chairman, John Begeman, said in the production release.

Kristof said the Reno office supports the projects in Nevada and Mercedes in Mexico, but the Greenstone project is under the Canadian office in Thunder Bay, Ontario.

Earnings report

Downie stated in the May 8 earnings report for Premier that “with the next two phases of production under construction at South Arturo and better grades expected in the first half of the year at Mercedes, the company is well positioned to return to higher levels of production and reduced costs in the near future.”

In the earnings report, Premier reported a net loss of $900,000, compared with a $2 million loss in the 2018 quarter. Capital expenditures totaled $13.4 million, including $4.6 million for mine development and construction at South Arturo, $2.6 million for development at McCoy-Cove, and the remainder at Mercedes.

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