Premier expands Cove’s resource envelope

In the latest batch of results from 20 holes drilled into the Helen Zone at Premier Gold Mines’ (PG-T, PIRGF-O) Cove gold project in northeastern Nevada’s Eureka-Battle Mountain Trend, 19 hit mineralization.

The drilling also has extended the high-grade mineralization by about 365 metres to the southeast and 245 metres to the northwest of the previously tested Helen deposit, and it remains open in multiple directions.

Highlights from the Upper Helen Zone include 19.60 grams gold per tonne across 10.8 metres; 37.01 grams gold across 2.7 metres and 9.98 grams gold across 9.6 metres.

In the Lower Helen Zone, intercepts include 6.52 grams gold across 84 metres, 21.49 grams gold across 4.5 metres and 40.47 grams gold across 10.5 metres.

The Cove deposit was mined primarily by open pit between 1986 and 2001 and produced about 2.6 million oz. gold and more than 100 million oz. silver, and Premier believes there is substantial upside in the existing resource areas as well as opportunities to find new high-grade gold deposits within the district.  

The Cove project is held under lease from Newmont Mining (NMC-T, NEM-N), which has the option at any time to earn back 51% by funding expenditures equal to 250% of all exploration expenditures on the project since March 2006. If Premier completes a positive feasibility study containing 500,000 oz. gold or greater, Newmont has a window of 90 days to confirm its participation.

In May, the Bureau of Land Management (BLM) approved Premier’s plan of operation for the Cove-Helen underground project, which gives Premier the flexibility to consider up to 100 acres of disturbance for exploration and development purposes and to build a portal and ramp to explore the Helen Zone further from underground.  

Rob Chang of Cantor Fitzgerald has a “buy” recommendation on the stock and a one-year target price of $6.30 per share—significantly higher than its current trading price in Toronto of $1.62. Over the last year Premier has swung between a low of $1.51 and a high of $6.79. The company has 150 million shares outstanding.

Chang points out in a research note that the drilling campaign has improved the average grade reported for the Helen zone so far, and expanded the resource envelope “significantly.”

“The previous envelope for the Upper Helen Zone was approximately 175 metres by 65 metres and it now stands at about 700 metres by 180 metres,” he writes. “The Lower Helen Zone was around 125 metres by 120 metres and now appears to about 480 metres by 150 metres.”

Chang notes that the resource envelope now seems to be about 300 metres away from the edge of the Cove pit.

“It is possible that additional gold mineralization exists beneath the pit and that the Helen Zone may in fact extend right through to that point,” he concludes.

For the remainder of the year, Premier says it will undertake additional expansion drilling in the Helen Zone and the testing of targets beneath the historic Cove pit. It expects to complete a resource estimate in the fourth quarter of 2013.

Premier Gold is one of the preferred exploration names of Jeff Killeen of CIBC World Markets, who notes that the company has a strong balance sheet with over $80 million in cash and a number of near-term catalysts at several of its projects. As for Cove, “the overall mineralized footprint has been expanded significantly in the past year,” he pens in a research note. “Compared to the current compliant resource estimate, the Helen zone footprint is more than five times that of the resource outline [and] as such we expect material expansion of resources in the coming 12-18 months.”

Killeen’s 12-18 month target price on the stock is $7.00 per share.