Premier Gold bringing new deposits on stream in Mexico

Premier Gold Mines is advancing development of new deposits at its Mercedes gold mine in Mexico with the aim of increasing throughput.

The company previously announced plans to raise ore production to fill the capacity of the 2,000t/d mill, which has run below nameplate rates since Premier took over Mercedes in October 2016.

Premier acquired two new equipment fleets during Q3 to allow it to develop the new deposits, which include Diluvio, Rey de Oro and Marianas, CEO Ewan Downie said in an earnings call.

"Diluvio is now essentially a full part of the mine plan at Mercedes and will help us achieve our goal of hitting 2,000t/d and eventually build a stockpile so we can maintain that throughput going forward," he said.

Ontario-based Premier has also started underground development at the Rey de Oro zone, which the company expects to become part of the Mercedes mine plan in 2018, Downie added.

EXPLORATION

Premier expects to complete 40,000-50,000m of drilling at Mercedes this year, with up to 10 drills active at the mine in Q3.

A similar amount of drilling is planned for 2018, including an increased focus on step-out drilling aimed at building reserves and resources and building the mine life, Downie said.

The Marianas deposit is also a priority for future development. Underground drilling is aimed at upgrading 90,000-100,000oz gold contained in resources to reserves, the CEO said.

Mercedes includes about 45km of untested structures, he added.

COSTS

All-in sustaining costs at Mercedes were US$998/oz gold, on a co-product basis, up from US$707/oz in Q2 and above full-year guidance of US$810-840/oz.

Costs were higher partly due to the mine site team assisting the community to extinguish forest and grass fires during a two-week period, and adjustments to the mining sequence to address localized ground conditions.

The company expects to achieve cost guidance for 2017, Downie said.

Mercedes produced 18,564oz gold and 82,856oz silver in Q3, down from 21,893oz and 89,474oz, respectively, in the previous quarter.

Net income slipped to US$3.0mn from US$10.9mn in Q2, with revenue at US$47.7mn, down from US$55.9mn. Premier also has mines and projects in Canada and the US.