Getting it Exactly Right - Bob MGetting it Exactly Right
Bob Moriarty
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I suppose I have done a couple of hundredof property tours over the last ten years. I've seen a lot ofprojects and a lot of companies. It is a great pleasure to seethose companies who get it Exactly Right. They are few and farbetween.
Newsletter writers and geologists serve as sort of freeconsultants to the companies who invite them on tours thoughobviously the companies are most interested in free promotion.I've been on tours with most of the guys who do tours and everyonehas something to offer. There is a lot of give and take and oftena lot of criticism of what a company is or isn't doing.You can't really fool guys who have seen dozens of projects.
Often we are fed half truths, not total lies, but we run intothose as well, so you not only need to know enough to recognizethe truth of what you are being told but you also need to figureout what you aren't being told. But the joy of finding a hiddendiamond is worth all the middle seats in airlines, rotten foodand early hours.
I visited a company last week that has it Exactly Right. It wasa great pleasure and shareholders are going to be greatlyrewarded.The company is Premium Exploration Inc. (PEM-V).
Idaho native and Premium President Del Steiner formed the companyin 2006 with assets in Mexico, PGM minerals in Montana and thegold core project in the Orogrande Shear Zone in Elk City,Idaho. I didn't even know Idaho was a big producer of gold butthe Central Idaho gold region produced over 4 million ouncesof gold from mostly placer projects.
Gold was first discovered in Idaho in 1860 and pretty much wasthe reason for the settlement. Population went up 800% from 1860until Idaho was admitted to the union in 1890.
It's pretty much axiomatic that where you have placer gold, youhave a lot more lode gold. For example I visited the Livengoodproject of International Tower Hill four years ago. We knewfrom historical data that every drainage off the hill was minedfor placer dating back to 1915. I thought Livengood was goingto be a really big project. Millions of dollars of explorationhas confirmed the presence of almost 10 million ounces of lodegold. So for every ounce of placer produced, there is another20 ounces of hard rock gold waiting to be produced.
I highly suspect that what Premium calls the Friday-Petsite goldproject is going to be similar. I was briefed on the projectat a meeting with Del Steiner and lovely Christine Kopr at theVancouver Gold Show in January. Basically PEM has a 28 km longshear zone hosting high grade gold. The old timers went afterthe obvious gold in quartz veins seeing ounce plus material butthe wall rock is highly mineralized as well. I've seen similarsystems in Brazil that went on for miles.
My feeling at the time was that Premium was onto somethingreally big. After spending a day driving around the project lastweek I am convinced the company is a sleeper. They keep sayingthey are trying to define a million ounces of gold but they havea lot more ounces than a million.
With prior drilling, PEM has a 43-101 resource of 532,000 ouncesof gold at Friday-Petsite. At the Buffalo Gulch open pit projecta few miles away; there is an historic resource of 110,000ounces. Buffalo Gulch was test mined and has been permitted inthe past.
Del Steiner has been planning the development of the OrograndeShear Zone for many years. While President and CEO of IdahoConsolidatedMinerals Del developed some 600,000 ounces of gold in theOrograndeShear Zone. He was part of the permitting for Bema Gold whenthey advanced the Buffalo Gulch Gold mine originally in 1992.
Wilf Struck, the CEO of Premium also has a long history withgold in Idaho. He was the project Engineer for Friday-Petsiteand Buffalo Gulch when he worked at Idaho Consolidated and hewas the Supervisor of Exploration Properties with Bema Gold whenthey owned Buffalo Gulch.
When I visit a project, I'm always hoping to see something thatgives me a real idea of the potential. When I met with managementin Vancouver in January, I was thinking, this is really big.But you have to put boots on the ground to actually see it. Andknowing that you are dealing with a shear zone is interestingbut it doesn't mean anything all by itself.
You see things on a visit that management knows about but itmay not mean anything to them. Here's what I saw, miles and milesand miles of placer workings. Over the last 100 years or so,there has been 400,000 ounces of gold taken out of the valleythat the shear zone has created. That's a lot of placer gold.And when you see piles of cobbles stacked up for miles, it'seasy to see that there is a lot of gold in the Orogrande ShearZone waiting to be mined.
Every mining company is run differently.It's pretty common for them to use the Beanie Baby approach wherethey have picked up a variety of projects in differentcommodities,even in different countries. For those few companies who really"Get It Right" they shed the excess baggage when theyare ready to focus on the really big deal.
PEM is vending out their Mexican projects that consume both moneyand focus. They are spinning off their giant potential PGMmineralsin Montana to a new company and vending most of the shares toexisting shareholders. That's a brilliant move. They are gettingabsolutely no traction or value from the project and shareholderscan get far more value from it being put into a new company.
Premium has a new gold district in Idaho at the Orogrande ShearZone and it's going to be very big. Some of the already releaseddrill results are mind bending. They announced some drillresults in January. The best hole was 2.66 g/t over 198.4meters. That's a giant hole.
I've used the concept of cubing a hole before. That is you presumethe intercept is cubed to determine the total potential quantityof gold. It is not a scientific measure, as a matter of fact;unless you drilled vertically into a mineralized body that allthe rock was exactly the same, you couldn't possibly getthe same number. But it is a way of comparing one drill holeagainst another.
Very long intercepts can be quite important. 2.66 g/t is nice$106 rock and 198.4 meters is over 600 feet of mineralization.If you cube the hole, you come up with 1.7 million ounces ofgold. With another hole showing 2.94 grams of gold over 73.5meters, the 43-101 resource is going to grow in a hurry.
Those holes are not incorporated into the current 43-101 forFriday-Petsite. An updated resource will not be released untilthe fall but a few more holes like that and the market will wakeup and bark.
Along with the shedding of assets that are not contributing tomarket value, PEM has embarked on a major 10,000-meter drillprogram in April and results will be coming out on a regularbasis shortly. PEM is concentrating on increasing their visibilityas well and more newsletter writers have been invited to do atour and will be seeing the project shortly.
I would be very surprised if this isn't another multi-millionounce project with similar potential to that of Livengood forITH and Rattlesnake Hills for Evolving Gold. It's a big systemand Del Steiner has locked up the biggest and most prospectiveareas in the shear zone. He's got a serious drill program goingand has hired top-notch people who know both the project andthe area.
My opinion is that Premium is going to be a big surprise to mostinvestors. They have been way off the radarscope but that ischanging as I write. Del is doing everything exactly right andthe results are already showing up. The company has just shortof 70 million shares outstanding right now and is in the midstof a 23 million-share placement to pay for the major drillprogram.There are a lot of warrants outstanding but the price on themis non-dilutive. When they get exercised, the money will go forthe next major drill program.
Premium is going to move from a tiny junior with interestingpotential into a major junior with near term production potential.The Buffalo Gulch project doesn't' show much in the way of aresource but the material is so soft that it doesn't need blastingand the first 90 meters of material can be simply ripped witha Cat and fed onto a leach pad. PEM is advancing permitting rightnow and looks for production in 18-24 months.
I liked the company enough to buy some shares as soon as I gotback. So I am biased. Premium is an advertiser. Christine Kopris in charge of shareholder communication and quite competentas well as lovely. Feel free to call her and any questions shecan't answer, either Del or Wilf can. Please take theresponsibilityfor your own due diligence.
In any case, in my view, they are doing things Exactly Rightand I expect big things out of them.