Premier Gold launches US$205 million Hardrock bid

By Peter Kennedy

Premier Gold Mines Ltd. [PG-TSX; PIRGF-OTC] said Monday March 30 that it has made a US$205 million offer to acquire the remaining 50% interest in the Greenstone Gold Mines Partnership which is held by Centerra Gold Inc. [CG-TSX; CAGDF-OTC].

However, Centerra has given no indication as to whether the offer will be accepted or rejected.

Greenstone Gold mines is a partnership, held equally by Centerra and Premier. Previously known as the Trans-Canada Property, it is located within the Beardmore-Geraldton greenstone belt in northwestern Ontario, approximately 275 km northeast of Thunder Bay. The partnership aims to facilitate the development of the Hardrock, Brookbank, and Viper properties.

Between 1930 and 1970, more than 4.0 million ounces of gold was extracted from multiple mines in the region, with Hardrock being the largest. It produced 269,081 ounces.

In a press release on Monday, Premier said Hardrock is the product of more than 12 years of exploration, development and engineering work that resulted in the delivery of an initial feasibility study in late 2016.

The 2016 study envisaged annual life-of-mine gold production of 288,000 ounces over 14.5 years of operations. The initial capital cost was estimated at US$962 million and an after-tax payback period of 4.5 years.

In November, 2019, Premier announced that Greenstone Gold Mines had signed a long-term relationship agreement with the Aroland First Nation, Animbiigoo Zaagi’igan Anishinaabek, and Ginoogaming First Nation in relation to the development and operation of the Hardrock Project.

“The signing of this agreement represents another important milestone as the Partnership continues to advance the project to an ultimate production decision,” Premier said in a press release.

The announcement came just weeks after Premier announced an updated mineral resource estimate for the Hardrock deposit, which is estimated to contain a total Measured and Indicated Resource of 7.1 million ounces of gold, marking an 11% increase on a 2016 estimate.

However, in a February 18, 2020 news release, Premier said it has served a statement of defence and counterclaim in response to the action commenced by Aurico Canadian Royalty Holdings Inc., a unit of Centerra in the Ontario Superior Court of Justice on December 23, 2019.

Under the limited partnership agreement, Premier said the partners are obliged to develop the project if certain agreed criteria are met in a feasibility study prepared under the supervision of the managing partner Greenstone Gold Mines GP Inc.

In its action, AuRico claims that the 2019 Hardrock Project Update, which was prepared by third party experts under the supervision of the managing partner, and submitted for the board of the partnership for approval, should not be considered a feasibility study that meets the criteria for advancing the Hardrock Project.

In its defence and counterclaim, Premier rejects AurRico’s contentions and asks that they be dismissed. In its counterclaim, among other things, Premier is asking the court to declare that Greenstone has presented the partners with a feasibility study that meets agreed criteria, requiring both partners to proceed to develop the Hardrock Project in accordance with the 2019 Hardrock Project Update.

Meanwhile, on Monday, Premier said its offer is comprised of a cash payment of US$175 million, an in addition the assumption of all Centerra’s obligations under the partnership agreement, including the remaining earn-in obligation of approximately US$30 million.

In its press release, Premier said the acquiring party, at the option of Premier, will be another company that is an assignee of Premier’s rights under the offer letter.

On Monday, Premier shares advanced on the news, rising 4.5% or $0.05 to $1.15. The shares trade in a 52-week range of 86 cents and $2.55. Centerra was unchanged at $8.81 and trades in a 52-week range of $5.52 and $13.00.