Premier Gold Mines Limited
Hardrock


Mineral Resource Estimate

The Company announced an updated mineral resource estimate on July 8, 2014 which will be used as a basis for a Feasibility study scheduled to be released H1 -- 2015. The undiluted and in-situ estimate was completed by InnovExplo Inc. utilizing a 3D block model and supported with input from the Company's geological personnel. Table 1 provides a deposit summary of the resource at Hardrock, categorized by potential open-pit (O/P) and underground (U/G) economic cut-off grades (COG). For the benefit of transparency, a comprehensive reconciliation of changes with respect to the previously released resource estimate (see press release dated October 29, 2013) is provided. In addition, an upside resource case as well as guidance on progress related to the ongoing Hardrock Feasibility Study is provided below.

Highlights of the 2014 Hardrock mineral resource estimate include:

  • Overall Indicated resources of 4.87 million (M) ounces, an increase of 1.63M ounces or 50%.

  • Overall Inferred resources of 2.74M ounces, a decrease of 1.04M ounces or 27%.

  • O/P Indicated resources of 3.97M ounces, an increase of 1.62M ounces or 69% with coincident increases in resource grades.

  • New estimate utilizes identical grade capping, COG's and gold price (in Canadian dollar terms) versus previous estimate as well as 86,500 metres of additional infill drilling for a total of 621,000 metres.


Table 1 - 2014 Hardrock Deposit Mineral Resource Summary
Cut-off Category Resource Category Tonnes ('000) Gold (Au) Grade (g/t) Au Ounces ('000)
Open Pit (O/P)
>0.5 g/t Au
Indicated (I)
Inferred
83,868
10,225
1.47
1.53
3,972
501
Underground (U/G)
>3 g/t Au
Indicated (I)
Inferred
5,169
12,922
5.40
5.40
898
2,242
Combined Total Indicated
Total Inferred
89,037
23,147
1.70
3.69
4,870
2,744

The Independent and Qualified Persons for the Mineral Resource Estimate, as defined by Regulation 43-101, are Carl Pelletier, B.Sc., P.Geo. and Karine Brousseau, P.Eng (InnovExplo Inc), and the effective date of the estimate is July 4, 2014.
* Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
* In-Pit Results are presented undiluted within a Whittle-optimized pit shell, designed with a 30-metre buffer around lakes.
* Underground Results are presented undiluted outside a Whittle-optimized pit shell, designed with a 30-metre buffer around lakes.
* The estimate includes 15 gold-bearing zones and a remaining undifferentiated envelope.
* In-pit Resources were compiled at 0.30, 0.40, 0.50, 0.60, 0.70, 0.80 and 0.90 g/t Au cut-off grades. The official In-pit resource is reported at 0.50 g/t Au cut-off grade.
* Underground Resources were compiled at 2.00, 2.50, 3.00, 3.50, 4.00 and 4.50 g/t Au cut-off grades. The official Underground resource is reported at 3.00 g/t Au cut-off grade.
* Cut-off grades must be re-evaluated in light of prevailing market conditions (gold price, exchange rate and mining cost).
* Density (g/cm3) data used is on a per zone basis (envelope: 2.76, porphyry: 2.74, S4_1: 2.77, S4_2: 2.76, S4_3:2.76, IF_N_1: 3.00, IF_N_2: 2.83, IF_N_3: 2.84, I0: 2.90, IF_HL: 2.87, IF_HU: 2.76, Tenacity: 2.86, F-Zone: 2.76, Central: 2.75, I1_1: 2.77, I1_2: 2.77)
* A minimum true thickness of 3.0 m for the interpretation of the mineralized zones was applied, using the grade of the adjacent material when assayed, or a value of zero when not assayed.
* High grade capping (g/t Au) was applied on raw assay data and established on a per zone basis (envelope: 70, porphyry: 70, S4_1: 20, S4_2: 20, S4_3: 20, IF_N_1: 40, IF_N_2: 40, IF_N_3: 40, I0: 2.5, IF_HL: 50, IF_HU: 50, Tenacity: 70, F-Zone: 70, Central: 70, I1_1: 70, I1_2: 70)
* Compositing was done on drill hole sections falling within the mineralized zones (composite = 1.5 metres).
* Resources were evaluated from drill hole using a 2-pass ID2 interpolation method in a percent block model (block size = 10 x 5 x 10 metres). The final gold grade attribute represents the grouping of the different zones from the percent model to respect the 10x5x10 smallest mining unit, in the open pit portion.
* The inferred category is only defined within the areas where blocks were interpolated during pass 1 or pass 2.
* The indicated category is only defined in areas where the maximum distance to drillhole composites is less than 35m for blocks interpolated in pass 1.
* Ounce (troy) = Metric Tonnes x Grade / 31.10348. Calculations used metric units (metres, tonnes and g/t).
* The number of metric tonnes was rounded to the nearest thousand. Any discrepancies in the totals are due to rounding effects; rounding followed the recommendations in Regulation 43-101.
* InnovExplo is not aware of any known environmental, permitting, legal, title-related, taxation, socio-political, marketing or other relevant issue that could materially affect the Mineral Resource Estimate.
* Whittle parameters used: Reference Mining cost=C$1.62, Incr. Bench cost (C$/10m bench)=C$0.032 milling cost=C$10.86/t, Royalty=3%, G&A=C$1.22/t, Re-handling = C$0.1/t, Sustaining Capital= C$0.5/t, Gold price=C$1339/oz, Shell selection at Revenue Factor 0.711 (C$953/ounces), mining recovery=95%, mining dilution=5% at 0 g/t, milling recovery=90%, pit slope 55°.


The mineral resource estimate used the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by CIM Standing Committee on Reserve Definitions and adopted by CIM Council on November 27, 2010. The mineral resource estimate is classified as "indicated", or "inferred" as defined by CIM. The Company intends to file a National Instrument 43-101 ("NI 43-101") compliant technical report in respect of the updated mineral resource estimate on SEDAR and on the Company's website within 45 days of this news release.

Additional Details on Mineral Resource Estimate

The mineral resource estimate of the Hardrock gold deposit is based on interpolation of sample composites (approximately 1.5m each) constrained within fifteen lithologic wireframes and a remaining undifferentiated envelope which honour the substantial drillhole database. The U/G portion of the resource has been established using a 3.00 g/t Au COG, while the O/P portion was established using a 0.50 g/t Au COG. Key assumptions of the updated mineral resource estimate are summarized in Table 2.

Table 2 - Additional Data in 2014 Hardrock Resource Estimate
Data or Assumption Hardrock
Date of Data Used 26-May-14
Number of Drillholes in Block Model 1417
Metres of Drilling in Block Model 621,000
Number of Raw Assays 260,000
Specific Gravity (SG) 2.74 to 3.00
Block Model & Interpolation Software GEMS
Interpolation Method ID2
Block Sizes (m x m x m) 10 x 5 x 10

The Inverse Distance Squared (ID2) method, which gives a high level of selectivity, was utilized in the resource estimate to ensure that zones with internal waste remained distinct. The resource models were validated visually by sectioning, and running a parallel estimate using Nearest Neighbor (NN). The InnovExplo staff with responsibility for this resource estimate is Mr. Carl Pelletier, geo, B.Sc. and Mrs. Karine Brousseau, P.Eng. All are Qualified Persons as defined in NI 43-101, and are independent of Premier Gold Mines Ltd. InnovExplo acknowledges that it has read this press release and there are no errors contained herein.

The database used for this mineral resource estimate reflects fully complete drillhole assay and survey data as of May 26, 2014. At that time, Premier had completed some 86,500 metres of new diamond drilling and 621,374 metres of overall drilling which has been integrated into the current estimate. Note that the number of diamond drill holes, total metres of drilling and total number of raw assays in Table 2 is not directly comparable to the same Table in the October 29, 2013 release owing to the changed overall size of the block model constructed.

The maximum depth of the O/P portion of the mineral resource estimate, based on an optimized Whittle pit, is 587 metres from surface, an increase in depth of 118 metres compared to the previous estimate. Additional adjustments have been made in completing the estimation in 2014 versus 2013 which Premier believes contributes to a strong overall resource estimate. These adjustments and their estimated impact are outlined in Table 3 which summarizes the reconciliation of the 2014 versus 2013 Hardrock mineral resource estimates.

Table 3 - Reconciliation of the 2014 vs 2013 Mineral Resource Estimates

 

Mining Horizon

Estimates & Impact of Variables

Tonnes ('000)

Grade (g/t Au)

Ounces ('000)

Ounce Variance vs Sept 2013

Indicated Resources

O/P

October 2013 Estimate (0.50 g/t COG)

50,228

1.46

2,352

 

Conversion from Inferred

16,535

1.55

823

35%

Revised cost, steeper pit walls, deeper pit

16,588

1.48

788

34%

Voids modelling & sterilization treatment

1,404

1.71

77

3%

New drilling in sept 2013 pit

-886

2.39

-68

-3%

June 2014 Resource Estimate
(0.50 g/t COG)

83,868

1.47

3,972

69%

U/G

October 2013 Estimate (3.00 g/t COG)

5,522

 5.01

889

 

Conversion to O/P

-353

 

 9

1%

June 2014 Estimate (3.00 g/t COG)

5,169 

 5.40

 898

 

Inferred Resources

U/G

October 2013 Estimate (0.50 g/t COG)

17,792

1.50

859

 

Conversion to Indicated

-16,535

1.55

-823

-96%

Revised cost, steeper pit walls, deeper pit

9,466

1.64

498

58%

Voids modelling & sterilization treatment

562

1.83

33

4%

New drilling in sept 2013 pit

-1,061

1.91

-65

-3%

New litho-structural & block models

 

 

 

 

June 2014 Resource Estimate
(0.50 g/t COG)

10,225

1.53

501

-42%

U/G

October 2013 Estimate (3.00 g/t COG)

16,919

 5.38

2,925

 

Conversion to O/P

-3,997

 5.31

-683

-23%

June 2014 Estimate (3.00 g/t COG)

12,922

 5.40

 2,242

 


The aggregate impact of these choices and adjustments has resulted in a 50% increase in overall indicated ounces and a 69% increase in O/P Indicated ounces. Importantly, the O/P Indicated grade estimated a nominal 1% increase versus 2013. The same capping strategy as 2013 removes some 31% of the gold contained within the overall uncapped Indicated inventory. The reconstruction of a comprehensive voids model of the historic Hardrock mine has contributed 3% to 4% new ounces (at higher than average grades) in the Indicated and Inferred O/P ounces and solidified confidence in the modelling.

Table 4 - Sensitivity Analysis of Hardrock Mineral Resource Estimate at Varying COG's

Portion of Deposits

Cut-off Increment (g/t)

Resource Category

Incremental Tonnes (‘000)

Au Grade (g/t)

Au Ounces (‘000)

W:O (Strip) Ratio

O/P

0.70

Indicated (I)

59,128

1.84

3,503

9.1

 

 

Inferred

7,396

1.88

448

O/P

0.60

Indicated (I)

69,781

1.66

3,725

7.6

 

 

Inferred

8,526

1.72

471

O/P

0.50

Indicated (I)

83,868

1.47

3,973

6.2

 

 

Inferred

10,225

1.53

501

O/P

0.40

Indicated (I)

103,414

1.28

4,254

4.8

 

 

Inferred

12,369

1.34

532

O/P

0.30

Indicated (I)

131,631

1.08

4,568

3.6

 

 

Inferred

15,005

1.16

562

U/G

4.00

Indicated (I)

3,043

6.78

663

N/A

 

 

Inferred

7,941

6.61

1,689

U/G

3.50

Indicated (I)

3,894

6.11

765

N/A

 

 

Inferred

10,119

6.00

1,951

U/G

3.00

Indicated (I)

5,169

5.40

898

N/A

 

 

Inferred

12,922

5.40

2,242

U/G

2.50

Indicated (I)

7,095

4.68

1,067

N/A

 

 

Inferred

17,886

4.66

2,678

U/G

2.00

Indicated (I)

10,134

3.94

1,285

N/A

 

 

Inferred

26,086

3.89

3,263


Upside Resource Opportunity

Premier has always held a manageable preproduction and sustaining capital approach to the development of Hardrock given the difficult market conditions that have persisted during the past several years. This conservatism was evident in the PEA issued this past March where production capacity was determined on a capital-constrained basis. Ongoing work by the development team, however, clearly demonstrates the potential to enhance the Hardrock opportunity through the development of larger pit options and greater throughput capacity. Premier believes that these upside scenarios highlight the emergence of a truly world class gold deposit at Hardrock. Potential resource models utilizing larger and deeper pit shells that could be considered in a less-constrained capital environment are profiled in Table 5.

Table 5 - Whittle Pit Upside Analysis of Hardrock Mineral Resource Estimate

Whittle Upside # COG = 0.50

Cut-off Category

Resource Category

Tonnes (’000)

Gold (Au) Grade (g/t)

Au Ounces (’000)

# 1 (C$1133 Au) 

Open Pit (O/P) 

Indicated (I)

99,907

1.47

4,716

Inferred

30,574

1.54

1,511

Underground (U/G) 

Indicated (I)

3,641

5.37

629

Inferred

10,376

5.53

1,845

Combined 

Total Indicated

103,548

1.61

5,345

Total Inferred

40,950

2.55

3,356

# 2 (C$1339 Au) 

Open Pit (O/P) 

Indicated (I)

113,080

1.47

5,340

Inferred

42,177

1.52

2,055

Underground (U/G) 

Indicated (I)

2,380

5.13

392

Inferred

9,264

5.58

1,661

Combined

Total Indicated

115,460

1.54

5,732

Total Inferred

51,441

2.25

3,716



Preliminary Economic Assessment

In January 2014 the Company released a PEA Study with respect to Hardrock Project.

Highlights of the 2014 PEA Studies (all currency amounts in Canadian dollars unless otherwise stated) include:

Hardrock Project Estimates
  • Average annual gold production during the first 8 years of 253,100 ounces with life of mine "LOM" (15 years) annual production of 202,700 ounces (including low-grade stockpiles).
  • Average grade over the first 8 years of 1.50 grams per tonne gold "g/t Au" with a LOM average grade of 1.18 g/t Au (including low-grade stockpiles).
  • Initial processing of 10,000 tonnes per day "tpd", expanding to 18,000 tpd in Year 3.
  • Pre-production capital costs of $410.6 million including $83 million for contingency.
  • Pre-tax net present value "NPV" (at a 5% discount rate) of $519 million at US$1250 gold.
  • Pre-tax internal rate of return "IRR" of 23.0% and a 3.5 year payback at US$1250 gold.
Mineral Resources Used In PEA

The Hardrock PEA study assumes that open pit mining only will be used for resource extraction. This was judged to be the quickest and least risky proposition of converting resource to reserves and execution. The mineral resource estimate, as reported on October 29, 2013, excluded the impact of mining dilution, which is the incidence of waste rock extracted together with mineralized material.

For the PEA, open pit mining dilution is calculated as 5% at 0 g/t gold. Open pit resources have been calculated assuming a material loss of 5%. With an open pit cut-off grade of 0.35 g/t gold, the resulting tonnages and grades for the open pit conceptual mine plan, including planned low-grade stockpiles, is shown in Table 1.

Table 1 Diluted Open Pit Mineral Resources Used in Hardrock PEA Study
Cut-off Category Resource Category Tonnes (Mt) Gold (Au) Grade (g/t) Au Ounces (Moz)
Open Pit (O/P) Indicated 64.663 1.18 2.454
  Inferred 24.669 1.18 0.938

The Hardrock PEA is preliminary in nature and it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the Hardrock PEA will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate. All assays have been capped where appropriate.

Mining

The Hardrock PEA assumes the processing of an average 10,000 tonnes per day of material during the first two (2) years of production, followed by an expansion to 18,000 tonnes per day in Year 3 for the remainder of the mine life (13 years), from a combination of direct process open pit material and stockpile reclaiming operations.

The open pit mine and stockpiling reclaim plan is a 15-year plan that utilizes a stockpile strategy to maximize grade to the mill and mines to an ultimate depth of 460 metres below surface.

The Hardrock open pit is designed as a conventional surface mining operation blasting 30 million tonnes of material per year in the first two years of operations and 45 million tonnes per year thereafter. The primary equipment fleet would consist of up to two 27 m3 hydraulic shovels, one 15 m3 hydraulic shovel, one 18 m3 wheel loader, 150 and 250 tonne-class haul trucks, and a fleet of support equipment. Production drilling will be carried out by up to five diesel-powered track-mounted units on 203 mm holes. Operating bench heights of 10 metres have been assumed for mining operations.

Over the life of the open pit, a total of 391 million tonnes of waste rock and overburden material would be moved. During the pre-production period, 1.6 million tonnes of overburden and waste rock would be removed as part of development work. Waste rock-to-mill-feed operating strip ratio are expected to average 5.37 during mining operations and 4.38 over the life of the mine (including low grade stockpiles and overburden).

Open pit mining operating costs include mine supervision, drilling, blasting, loading, hauling, services, dumps, roads and maintenance costs. These costs were evaluated using data from other similar projects and from budget quotes provided by suppliers. An extra 38% was added to the salaries to account for benefits, and depending on the job, bonuses were also included. A maximum of 207 direct positions have been estimated for mining requirements based on past experience and industry averages.

Metallurgy & Processing

Recent metallurgical testing conducted during 2013 on open-pit resource material served as a basis for the milling flowsheet developed by BBA. The highlights of the process flowsheet include:
  1. Primary crushing and two-stage grinding;
  2. Gravity recovery;
  3. Whole-rock carbon-in-leach circuit;
  4. Cyanide destruction;
  5. Carbon stripping, electro-winning, and smelting to produce gold doré.
Major equipment for the initial process facility includes a gyratory crusher sized for 18,000 tpd, a 32' x 14' semi-autogenous ("SAG") mill and a 20' x 30.5' ball mill. Mill feed would be ground to a P80 of 75 µm before entering a gold leaching circuit. Major requirement related to the 3rd year expansion to 18,000 tonnes per day include additional crushing, ball milling, solid-liquid separation units and leach capacity. Metallurgical recoveries for gold over the life of the mine are expected to average 89.6%. No by-product credits are anticipated.

The estimated mill operating expenses were based on available reagent consumptions and additions from testwork, local manpower costs, and industry standards where applicable. A roster total of 62 workers (increasing to 71 with the 18,000 tpd expansion) is established for the milling and assay lab requirements based on past experience and industry averages. An electrical power cost of $0.08/kWh is assumed for this study.

Infrastructure

The Hardrock Project benefits from world-class infrastructure, services and available labour within several communities in the immediate area. The project site is located only 260 km from Thunder Bay, Ontario (population 108,000), a few kilometres south of Geraldton, Ontario (population 1,893) and at 32 kilometres west of Longlac (population 1,388) all within the Municipality of Greenstone, and the Long Lac #58/Ginoogaming (population 600) First Nation Reserves. It resides along the Trans-Canada Highway and is accessible year-round. The Trans-Canada natural gas pipeline passes close to the site. Finally, some infrastructure will need to be relocated to accommodate the project.

Infrastructure is anticipated to include:
  • Plant site and haul roads, gate house, parking, bus station and weigh station;
  • Administration building, including all services; engineering, geology, administration, environment, health and safety, mine supervision, fire fighting, emergency office (ERT) and human resources;
  • 9 door open pit garage and warehouse;
  • Assay lab;
  • Electrical surface infrastructure;
  • Emulsion plant;
  • Fuel storage facilities;
  • Fresh water supply and fire protection;
  • Dewatering and water contact treatment plant;
  • Sewage treatment;
  • One tailings pond;
  • Power to the project supplied by an existing 115-kV transmission line connected to the provincial grid;
Community

Premier is a proud member of the local Greenstone communities, participating in a number of local events, initiatives and boards. The company's community relations office provides members of the public with the opportunity to engage with the company directly, outside of regular communications, mailings, and open houses. Additionally, Premier also has a site office, multiple staff residence properties and extensive local staff.

Premier regularly engages with local Aboriginal communities, and is proud of the relationship that has and continues to develop. Premier utilizes personnel from local Aboriginal communities on the Hardrock Project, such as representatives from each community as part of the environmental monitoring team.

Environment

A formal environmental baseline work program has been ongoing since 2011. Since 2013, Premier began more extensive regional monitoring and assessment work that was undertaken to gain a thorough understanding of the current environmental conditions in the region, including the impacts of the Trans-Canada Highway on this former industrial site.

Project Economics

Key economic performance metrics are summarized in Table 9 on both a pre-tax and after-tax basis. A range of gold prices (US$) are shown for sensitivity purposes only. At US$1250 gold price, the Hardrock open pit project has a pre-tax IRR of 23.0% (19.% after-tax), a pre-tax NPV (discounted at 5%) of some $519 million ($359 million after-tax) and a payback of 3.5 years on a pre-tax basis (3.9 years on an after-tax basis).

Table 10 is a spider graph representing the sensitivity of the change of any one variable over a range of percentage difference versus the base case. Of the five variables measured, changes in grade and gold price have the greatest impact on the NPV (pre-tax) of the project.

Opportunities & Risks

Opportunities to improve Hardrock Project economics include the following:
  • The Hardrock PEA is based on the August 9, 2013 mineral resource cut-off date and does not include subsequent infill drilling of some 45,000 metres completed to the end of 2013.
  • The next resource update is planned for Q2/2014 and will include a more refined underground voids model which could potentially contribute resource tonnes and ounces previously included at zero grade.
  • Infill assays of previously unsampled drill core will improve the confidence of the grade estimate in some areas.
  • Refining the litho-structural model by incorporating information gleaned from historic drilling (not assay data) will improve confidence in the model constraints.
  • Follow-up drilling in the North Wall area could bring additional mineral resources into the optimized pit.
  • Completing an underground study to further enhance project economics.
  • Potential improvement in metallurgical recovery
Risks requiring mitigation strategies include:
  • Management of construction/engineering and procurement schedules, costs, and cost containment.
  • Operating risks related to recruitment and training of open-pit workforce.
  • Currency risk relating to equipment purchases denominated in US currency.
  • Permitting risk
Next Steps

Technical
  • Complete infill drill program for revised mineral resource estimate in 2014.
  • Proceed with baseline environmental work for completion by summer 2014 (ongoing monitoring work forecasted for life of mine.
  • Optimization work (testing and engineering) for minimizing capital and operating costs.
  • Detailed engineering work for final feasibility.
Exploration
  • Renewed focus on regional targets and new deposit discovery.
Community and Environment
  • Complete the baseline environmental and optimization work (testing and engineering) necessary to ensure a successful environmental assessment process.
  • Submission of a project description is anticipated in spring 2014 to federal and provincial governments to begin the formal environmental assessment processes. This will comprise baseline environmental information collected over past years, comprises formal public and aboriginal consultation periods and helps ensure a mine design that avoids and mitigates environmental impacts.

Assays

2013/2014 Open pit drilling (as at March 24, 2014)

2013 Open pit drilling (as at October 29)




Presentations

July Hardrock Mineral Resource Webcast

July 2014 Hardrock Mineral Resource Presentation

January 2014 PEA Hardrock and Brookbank PEA presentation




Technical Reports

July 4, 2014 Hardrock Project Mineral Resource Technical Report

Trans-Canada Property-Hardrock and Brookbank Projects-Preliminary Economic Assessment

December 13, 2013 Mineral Resource Technical Report

January 30, 2013 Trans-Canada Resource Technical Report




MAPS

 



Photos

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Historic Mine Photos

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