Premier Gold Mines (TSX: PGM) has signed an option agreement with Ely Gold Royalties (TSXV: ELY; US-OTC: ELYGF) to acquire its Rodeo Creek property, which sits adjacent to Premier’s South Arturo open-pit mine, a joint-venture operation between Premier (40%) and Barrick Gold (TSX: ABX; NYSE: ABX) (60%).
Under the agreement with Ely Gold Royalties, Premier Gold can acquire a 100% stake in the 206-hectare Rodeo Creek land package, which sits about 10 km northwest of Barrick’s Goldstrike operations, where ore from South Arturo is processed.
Premier can obtain the property by paying Ely Gold US$500,000 over a period of five years. Ely Gold would retain a 2.0% net smelter return royalty.
Rodeo Creek is located along the Bootstrap Reef/Margin, and is underlain by the same rock units as the mines in the area, Premier Gold’s president and CEO, Ewan Downie, states in a news release, noting that it “has seen little exploration compared to the rest of the Carlin Trend and we are excited to get to work on this project.” South Arturo, a high-grade oxide deposit, is 40 km northwest of the town of Carlin, in Elko County.
In the third quarter, Premier’s attributable production from South Arturo stood at 2,635 ounces of gold, which were produced at cash costs of US$396 per oz. and all-in sustaining costs of US$498 per oz.
For 2018, Premier expects its attributable production from South Arturo will reach 20,000 to 25,000 ounces of gold, at cash costs of U$425-475 per oz. and AISCs of US$475-525 per oz.
Production at South Arturo fell from 8,113 ounces in the third quarter of 2017 to this year’s 2,635 ounces, because mining from one of the pits was transitioning to lower grade stockpiled ore. Processing of lower grade ore is expected to continue on a limited basis until the end of the year.
In the meantime, Premier is pushing ahead with the El Nino underground development from the bottom of that pit, as well as stripping a new open pit, which it expects to be in production in 2019. The company is also evaluating a potential third pit on the property.
The company also plans to continue to drill at South Arturo, focusing on near-pit delineation, underground expansion, and testing additional target areas.
Premier owns a second producing mine, Mercedes, 150 km northeast of Hermosillo, in the Mexican state of Sonora.
Production guidance for Mercedes this year is 70,000-75,000 ounces of gold at cash costs of US$775-825 per oz. and AISCs of US$900-950 per oz.
Premier’s shares are trading at $1.65 within a 52-week range of $1.65 and $3.94. The company has 203 million common shares outstanding for a market cap of $335 million.