November UpdateQuote:
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The update from the South Arturo joint venture (JV) was a strong positive,
whereas new production numbers from the Mercedes underground mine continue to weigh down on the company’s performance.
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South Arturo JV
At the end of October, the junior gold producer’s joint venture partner (60/40), Barrick Gold
(ABX.T, GOLD.NYSE), declared commercial production at the El Nio underground gold mine, which lies within the South Arturo project in the North Carlin Trend of Nevada.
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The mine development came in ahead of schedule and under budget, which is unheard of in the
mining industry, but infrastructure helps.
In the third quarter, South Arturo produced 2,000 ounces of gold with more than half sourced from El Nio and the remainder from stockpiles from the Phase 2 open pit.
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Just under half of the production (950 oz) was processed at the nearby Goldstrike facility during
the pre-commercial stage of development, which will help offset capital expenditures during the
final quarter of 2019.
Premier Gold’s production for 2019 at South Arturo is expected to exceed the upper end of its guidance (>10 koz).
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Given the continued underperformance of Premier Gold’s wholly-owned Mercedes underground
gold-silver mine in Mexico, an increase in production from the higher-margin South Arturo assets will be a welcome addition.
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With access to the El Nio underground ore body firmly established, Barrick Gold has built several drill stations to infill and extend the gold mineralization (12 holes, 1,327 m).
Assays for step out holes are still pending, and we may not see the results until the company issues its end-of-year results.
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The headline intersections from the 32 reported holes included ~52 meters grading 11 grams per
tonne gold (~572 grams*meter), which is phenomenal,
but more importantly,
the average intersection was 28 meters grading 10 grams per tonne gold (280 grams*meter),
proving that the brecciated orebody that lies along the contact between the Bootstrap Limestone and the Rodeo Creek Formation may be thicker than initially modeled.
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Currently, there are only 34,000 ounces of underground resources grading 9-10 grams per tonne
gold in all categories (M&I plus Inferred) attributable to Premier Gold’s 40% stake in the JV.
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In addition to achieving commercial production at El Nio, Barrick is advancing drilling
(geotechnical and metallurgy) at the Phase 3 project, which represents an open pit amenable nearsurface target that transitions to a higher grade sulfide zone of gold mineralization at depth and to the south.
Drilling has also returned an impressive intersection of 125 meters grading 6.0 grams per tonne gold (MAD19004).
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The major producer is also advancing the Phase 1 open pit as it continues to stockpile heap leach amenable material.
Currently, there are ~300,000 ounces of open pit resources grading ~1.0 gram per tonne gold in all categories (M&I plus Inferred) attributable to Premier Gold’s 40% stake.
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Again, we will probably not see an update until Barrick issues the new reserves and resources in
the first quarter of 2020.
At that time, we should also get an updated mine plan for both the Phase 3 open pit,
which is targeted as the next stage of development, and (potentially) the Phase 1 open pit.
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The joint venture partners are also looking at new targets such as East Dee,
which is located next to the Phase 1 open pit.
Drilling in 2019 is following up significant intersections (25.9 m @ 5.8 g/t Au, BD18-05C) within a sulfide-silica breccia unit.
Although assays are pending, drilling has indicated that the mineralized dikes are thicker than anticipated and the level of oxidation is deeper than modeled, which are both positive developments.
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Mercedes
The 2019 gold and silver production guidance for Mercedes was 75,000-85,000 ounces of gold and 225,000-250,000 ounces of silver plus 5,000-10,000 for South Arturo.
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Unfortunately, year-to-date, Mercedes has only produced ~65% of the full guidance and would
have to exceed the average production levels of the first three quarters by 70% for gold and 45%
for silver, respectively, to reach its goal.
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Mine development, which led to the lower production levels, was weighed to the first half of the
year to support production growth in the second half.
However, the third quarter production for both gold (14.5 koz) and silver (37 koz) was even lower than the first and second quarters.
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The weakest link in Premier Gold was and continues to be the (under)performance of its wholly-owned Mercedes underground mine in Mexico.
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End Quote.
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Acknowledgment: Exploration Insights Newsletter 11/10/2019.
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RJ