Getting it Exactly Right
Jun 8, 2010
I suppose I have done a couple of hundred
of property tours over the last ten years. I've seen a lot of
projects and a lot of companies. It is a great pleasure to see
those companies who get it Exactly Right. They are few and far
Newsletter writers and geologists serve as sort of free
consultants to the companies who invite them on tours though
obviously the companies are most interested in free promotion.
I've been on tours with most of the guys who do tours and everyone
has something to offer. There is a lot of give and take and often
a 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 into
those as well, so you not only need to know enough to recognize
the truth of what you are being told but you also need to figure
out what you aren't being told. But the joy of finding a hidden
diamond is worth all the middle seats in airlines, rotten food
and early hours.
I visited a company last week that has it Exactly Right. It was
a great pleasure and shareholders are going to be greatly rewarded.
The company is Premium Exploration Inc. (PEM-V).
Idaho native and Premium President Del Steiner formed the company
in 2006 with assets in Mexico, PGM minerals in Montana and the
gold core project in the Orogrande Shear Zone in Elk City,
Idaho. I didn't even know Idaho was a big producer of gold but
the Central Idaho gold region produced over 4 million ounces
of gold from mostly placer projects.
Gold was first discovered in Idaho in 1860 and pretty much was
the reason for the settlement. Population went up 800% from 1860
until Idaho was admitted to the union in 1890.
It's pretty much axiomatic that where you have placer gold, you
have a lot more lode gold. For example I visited the Livengood
project of International Tower Hill four years ago. We knew
from historical data that every drainage off the hill was mined
for placer dating back to 1915. I thought Livengood was going
to be a really big project. Millions of dollars of exploration
has confirmed the presence of almost 10 million ounces of lode
gold. So for every ounce of placer produced, there is another
20 ounces of hard rock gold waiting to be produced.
I highly suspect that what Premium calls the Friday-Petsite gold
project is going to be similar. I was briefed on the project
at a meeting with Del Steiner and lovely Christine Kopr at the
Vancouver Gold Show in January. Basically PEM has a 28 km long
shear zone hosting high grade gold. The old timers went after
the obvious gold in quartz veins seeing ounce plus material but
the wall rock is highly mineralized as well. I've seen similar
systems in Brazil that went on for miles.
My feeling at the time was that Premium was onto something
really big. After spending a day driving around the project last
week I am convinced the company is a sleeper. They keep saying
they are trying to define a million ounces of gold but they have
a lot more ounces than a million.
With prior drilling, PEM has a 43-101 resource of 532,000 ounces
of gold at Friday-Petsite. At the Buffalo Gulch open pit project
a few miles away; there is an historic resource of 110,000
ounces. Buffalo Gulch was test mined and has been permitted in
Del Steiner has been planning the development of the Orogrande
Shear Zone for many years. While President and CEO of Idaho Consolidated
Minerals Del developed some 600,000 ounces of gold in the Orogrande
Shear Zone. He was part of the permitting for Bema Gold when
they advanced the Buffalo Gulch Gold mine originally in 1992.
Wilf Struck, the CEO of Premium also has a long history with
gold in Idaho. He was the project Engineer for Friday-Petsite
and Buffalo Gulch when he worked at Idaho Consolidated and he
was the Supervisor of Exploration Properties with Bema Gold when
they owned Buffalo Gulch.
When I visit a project, I'm always hoping to see something that
gives me a real idea of the potential. When I met with management
in Vancouver in January, I was thinking, this is really big.
But you have to put boots on the ground to actually see it. And
knowing that you are dealing with a shear zone is interesting
but it doesn't mean anything all by itself.
You see things on a visit that management knows about but it
may not mean anything to them. Here's what I saw, miles and miles
and miles of placer workings. Over the last 100 years or so,
there has been 400,000 ounces of gold taken out of the valley
that the shear zone has created. That's a lot of placer gold.
And when you see piles of cobbles stacked up for miles, it's
easy to see that there is a lot of gold in the Orogrande Shear
Zone waiting to be mined.
Every mining company is run differently.
It's pretty common for them to use the Beanie Baby approach where
they have picked up a variety of projects in different commodities,
even in different countries. For those few companies who really
"Get It Right" they shed the excess baggage when they
are ready to focus on the really big deal.
PEM is vending out their Mexican projects that consume both money
and focus. They are spinning off their giant potential PGM minerals
in Montana to a new company and vending most of the shares to
existing shareholders. That's a brilliant move. They are getting
absolutely no traction or value from the project and shareholders
can get far more value from it being put into a new company.
Premium has a new gold district in Idaho at the Orogrande Shear
Zone and it's going to be very big. Some of the already released
drill results are mind bending. They announced some drill
results in January. The best hole was 2.66 g/t over 198.4
meters. That's a giant hole.
I've used the concept of cubing a hole before. That is you presume
the intercept is cubed to determine the total potential quantity
of gold. It is not a scientific measure, as a matter of fact;
unless you drilled vertically into a mineralized body that all
the rock was exactly the same, you couldn't possibly get
the same number. But it is a way of comparing one drill hole
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 of
gold. With another hole showing 2.94 grams of gold over 73.5
meters, the 43-101 resource is going to grow in a hurry.
Those holes are not incorporated into the current 43-101 for
Friday-Petsite. An updated resource will not be released until
the fall but a few more holes like that and the market will wake
up and bark.
Along with the shedding of assets that are not contributing to
market value, PEM has embarked on a major 10,000-meter drill
program in April and results will be coming out on a regular
basis shortly. PEM is concentrating on increasing their visibility
as well and more newsletter writers have been invited to do a
tour and will be seeing the project shortly.
I would be very surprised if this isn't another multi-million
ounce project with similar potential to that of Livengood for
ITH and Rattlesnake Hills for Evolving Gold. It's a big system
and Del Steiner has locked up the biggest and most prospective
areas in the shear zone. He's got a serious drill program going
and has hired top-notch people who know both the project and
My opinion is that Premium is going to be a big surprise to most
investors. They have been way off the radarscope but that is
changing as I write. Del is doing everything exactly right and
the results are already showing up. The company has just short
of 70 million shares outstanding right now and is in the midst
of a 23 million-share placement to pay for the major drill program.
There are a lot of warrants outstanding but the price on them
is non-dilutive. When they get exercised, the money will go for
the next major drill program.
Premium is going to move from a tiny junior with interesting
potential into a major junior with near term production potential.
The Buffalo Gulch project doesn't' show much in the way of a
resource but the material is so soft that it doesn't need blasting
and the first 90 meters of material can be simply ripped with
a Cat and fed onto a leach pad. PEM is advancing permitting right
now and looks for production in 18-24 months.
I liked the company enough to buy some shares as soon as I got
back. So I am biased. Premium is an advertiser. Christine Kopr
is in charge of shareholder communication and quite competent
as well as lovely. Feel free to call her and any questions she
can't answer, either Del or Wilf can. Please take the responsibility
for your own due diligence.
In any case, in my view, they are doing things Exactly Right
and I expect big things out of them.
PEM-V Cdn$.35 (Jun 7, 2010)
PMMEF-PK 68.5 million shares
Premium Exploration website