Premier Bolsters Portfolio with Mercedes Mine

The Mercedes mine lies in the arid Sonora desert, framed by hilly scrubland and a scattering of green and goldleafed trees. It is a 2,000t/d relatively low-cost, high-grade producing asset with a five-year mine life that Yamana Gold took into production before selling in late July 2016. Although this deal marked the exit of Yamana Gold from Mexico, it also heralded the entry of Premier Gold Mines, a small miner with two projects in Nevada – one operated by Barrick Gold – that is hoping to become a mid-sized miner by 2020. And its US$150 million investment means Mercedes plays a key role in that strategy.

“We have had around six months working as a producer,” says Ewan Downie, Premier’s President and CEO. “Until 2016 we had one operation in production so we were actively looking for additional mining operations to make sure we had a longer-term production pipeline.” Downie’s team had previous experience in Mexico on the Santa Teresa JV located in the historic El Alamo mining district in Baja California. The Mercedes project, he says, was an opportunity to acquire a producing asset surrounded by a great deal of favorable deposits. “We see this as a launching pad for expanding our operations across the Americas.''

Part of what made the Mercedes mine so attractive was the fact that it was already highly de-risked at the point of acquisition. “It was already built, it had experienced staff and is a very safe mine,” says Downie. “There has been no LTI in over one year – contractor or employee.” The property also has significant potential outside of the existing mine and the Premier team has not abandoned its exploration roots, which is evident with the US$10 million exploration budget it allocated to Mercedes. This program is designed to constantly extend the mine life of the deposit and the way to do this, according to Downie, is through external exploration. Premier has installed the infrastructure necessary for this program and in early March 2017 was drilling a known deposit when it hit new mineralized vein zones.

Because the asset was noncore to Yamana’s activities, the operator carried out little near-mine exploration when it owned the property. Downie, however, sees a great deal of potential in finding new veins. “Historically, the mine drifted on known veins and Yamana traced it up dip and down dip but failed to look in the surrounding areas in search of parallel veins,” he says. Since Premier acquired the property, it has already discovered three new vein systems very close to the existing discovery by using this technique.

“We will drill several new target areas this year and hopefully they will become future resources that we can move into reserves,” says Downie. Premier’s goal for the year is to continue drilling and finding new resources that will allow it to replenish reserves year on year. “I would like to believe we can extend this mine’s life to around 10 years through systematic annual exploration,” he says.

Premier also expects to build its first mine – McCoy-Cove – from the ground up later in 2017 in Nevada. With initial development planned for late in 2017, Downie expects this to enter full production by 2020. He anticipates that this will be financed by existing cash flow without the need to borrow more money or dilute shares, so Premier share prices should stay strong. This cash flow will also be used to finance part of the work required to create an underground mine at the South Arturo JV with Barrick Gold, given that the current pit will run out of ore at the end of 2017.

Until then, the Mercedes project will underpin the company’s growth while it makes the necessary preparations for development and expansion of its other assets. “The areas surrounding Mercedes hold a great deal of opportunities and since we already have the mill, we will be actively seeking new deposits in that area,” Downie says.