Premier Gold Mines Limited (TSX: PG) – Initiating Coverage – Ramping Up Production at Two Gold Mines

Key Highlights

• Premier Gold Mines Limited (“Premier”, “company”) is advancing a portfolio of eight projects, including two operating mines, two advanced development stage projects, and four exploration stage projects. Among the eight projects, one is in Mexico, four are in Nevada, and three are in Ontario.
• The projects have a combined proved and probable reserves of 3 Moz, an additional measured and indicated resource of 3.5 Moz, and an inferred resource of 3.6 Moz.
• Of the two producing assets, one is the 100% owned Mercedes mine in Sonora, Mexico, that is expected to produce 75 Koz – 85 Koz in 2019, at a cash cost of $730 – $780 per oz gold. The other is the South Arturo mine in Nevada, which is 40% held by Premier and 60% by operator Barrick Gold (TSX: ABX). South Arturo, located just 5 km northwest from Barrick’s largest gold mine (Goldstrike), is expected to resume production this year.
• Premier is also aggressively advancing its two advanced stage assets – the Greenstone Gold Mines property in Ontario (50/50 joint venture between Premier and Centerra Gold / TSX: CG) that has a completed Feasibility Study (“FS”) on the Hardrock open-pit deposit, and the 100% owned Cove project in Nevada where Premier has completed a Preliminary Economic Assessment (“PEA”). Hardrock’s FS showed an After Tax – Net Present Value (“AT-NPV”) at 5% of C$709 million at $1,250 per oz gold, and Cove’s PEA showed an AT – NPV at 5% of $142 million at $1,250 per oz gold.
• Based on gold sales of 77 Koz and silver sales of 237,500 oz in 2019, we estimate 2019 revenues to be $108 million. Our 2020 revenue forecast is $122 million, which is based on gold sales of 87.5 Koz and silver sales of 250 Koz.
• Healthy balance sheet with $26 million in cash at the end of Q2-2019, with a relatively low debt to capital of 10%. As of March 31, 2019, the Greenstone Gold Mines property, and the McCoy-Cove property, had combined required earn-in obligations by Centerra and Barrick of approximately $82 million.
• We estimate the company’s shares are trading at $113 per oz reserves versus the gold producers’ average of $274 per oz.
• We are initiating coverage on Premier at BUY with a fair value estimate of C$3.35 per share.

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