PREMIER GOLD MINES LIMITED (“Premier” or “The Company”) (TSX:PG) is very pleased to release an updated mineral resource estimate for the Company’s 100%-owned Hardrock gold deposit, located in Northwestern Ontario some three (3) kilometres south of the Town of Geraldton. 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.
A conference call and webcast is planned for investors and analysts at 8:00 a.m. (Eastern Time) Tuesday, July 8, 2014 to present the results. Details for the call can be found at the bottom of this press release.
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.
“Ongoing drilling and engineering work has provided a better understanding of the characteristics of the Hardrock deposit, resulting once again in the delivery of solid results” commented Premier President & CEO Ewan Downie. “This updated mineral resource estimate clearly demonstrates an increase in the quality and quantity of the deposit. The sensitivity analysis provided below conveys the considerable optionality that exists at Hardrock which our development team is currently analyzing in order to deliver the optimal Feasibility Study to our shareholders.”
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)||Indicated (I)||83,868||1.47||3,972|
|>0.5 g/t Au||Inferred||10,225||1.53||501|
|Underground (U/G)||Indicated (I)||5,169||5.40||898|
|>3 g/t Au||Inferred||12,922||5.40||2,242|
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|
|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)
|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|
|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.
In the fall of 2013, Premier stated that a key component of the final phase of diamond drilling was to ensure nearly complete conversion of Inferred resource material to Indicated within the confines of the Whittle shell used in the 2013 resource estimate. While this goal was achieved using the 2013 Whittle shell, the 2014 Whittle shell is both deeper and utilizes steeper pit walls. This has contributed to not just an increase in O/P Indicated resources, but also new O/P Inferred resources not targeted in the final phase drill program. As a result, Premier estimates an additional 35,000 metres of diamond drilling will be required in 2014 to target converting the final O/P Inferred ounces to Indicated prior to completion of the Feasibility Study.
Feasibility Study Progress
Premier today reaffirms its goal to complete the Hardrock Feasibility Study (see press release dated May 15, 2014) during H1-2015. Progress by the development team since completion of the Preliminary Economic Assessment (“PEA”) issued by Stantec — Mining on March 13, 2014 has enabled Premier to provide the following guidance with respect to the Feasibility Study:
- The previous resource estimate (See Press Release dated October 29, 2013) used to prepare the PEA utilized a COG of 0.50 g/t. Ongoing cost analysis strongly suggests that a COG in the range of 0.35g/t to 0.40g/t is viable and therefore should be considered when optimizing the O/P portion of the deposit. The impact of variations in COG, including the reduction in strip ratio as COG is lowered, can be seen in Table 4.
- Strip ratios associated with the October 2013 mineral resource estimate (COG - 0.50 g/t) and March 2014 PEA (COG - 0.38 g/t) are 6.0 and 4.38 respectively.
- The PEA issued this past March modelled a 15 year mine life with gold production in excess of three (3) million ounces mined at a rate 10,000 tonnes per day (TPD) during initial mining operations and 18,000 TPD following an expansion in the third year of operations. The larger in-pit gold resources identified during the preparation of this new resource estimate, however, suggest that production throughput in excess of 10,000 and 18,000 TPD respectively, may be achievable. Premier is currently evaluating the impact that these increased production scenarios have on mine life and overall gold production as part of the ongoing trade-off analysis while maintaining pre-production capex discipline.
- Ongoing metallurgical work continues to support the recovery estimate of 89.6% gold used in the PEA.
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|
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|
|Underground (U/G)||Indicated (I)||3,641||5.37||629|
|# 2 (C$1339 Au)||Open Pit (O/P)||Indicated (I)||113,080||1.47||5,340|
|Underground (U/G)||Indicated (I)||2,380||5.13||392|
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