Premier Gold unveils US$68 million financing

The South Arturo gold mine on the Carlin Trend, Elko County, Nevada, a joint venture between Premier Gold Mines and Barrick Gold. Source: Premier Gold Mines Ltd.

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The South Arturo gold mine on the Carlin Trend, Elko County, Nevada, a joint venture between Premier Gold Mines and Barrick Gold. Source: Premier Gold Mines Ltd.

Premier Gold Mines Ltd. [PG-TSX, PIRGF-OTC] on Friday January 25 announced a US$68 million financing package to fund project development.

The multi-pronged financing package includes a credit facility with Investec Bank for US$50 million and an equity investment and silver/gold stream with Orion Mine Finance totalling US$18 million.

News of the financing sent the shares up 5.66% or $0.09 to $1.68. The 52-week range is $3.64 and $1.39.

Premier Gold is a gold producer and an exploration and development company with multiple projects in Ontario, Nevada and Mexico.

They include the Mercedes mine in Sonora Mexico, which produced 68,719 ounces of gold and 309,165 ounces of silver in 2018.

Other key assets include a 40% interest in the South Arturo Project located on the prolific Carlin Trend in Elko County, Nevada. South Arturo is a joint venture with Barrick Gold Corp. [ABX-TSX, NYSE], which owns the remaining 60%.

South Arturo produced 20,980 ounces of gold and 12,649 ounces of silver in 2018 from stockpiled material. Future production will come from two additional developments underway at the property, including the Phase 1 open pit and El Nino underground mine.

Both the Phase 1 open pit and El Nino mine are currently under construction, with production expected to ramp up late in the second half of 2019.

Premier’s Cove Property, located in the Battle Mountain trend in northern Nevada, hosts one of the highest grade undeveloped gold deposits in Nevada.

On Friday, the company said proceeds of the financing will be used for development, including South Arturo and the underground development and drilling program at Cove.

Scotiabank said in a report that Premier Gold and Nevada joint venture partner Barrick Gold are likely looking to release a three-year guidance on South Arturo in mid-February.

Scotiabank said Barrick may want to move forward with the South Arturo heap leach project, which would require a higher capital expenditure.

Meanwhile, Premier said the Orion financing includes an equity placement of 7 million shares at $1.58 per share for gross proceeds of $11 million. In connection with the equity financing, Orion was granted 2.0 million three-year warrants at a strike price of about $2.05 a share.

Closing of the financing is subject to a number of conditions. They include the execution of an amended and restated silver stream agreement reached in September 2016. Under the restated agreement Orion will advance US$10 million to Premier in exchange for a silver stream consisting of 100% of the silver production from the Mercedes and South Arturo mines until such time as 3.75 million ounces has been delivered (including deliveries previously made to Orion), after which the delivery will be reduced to 30% of the silver output from both mines.

The amended agreement also includes an increase in the annual gold sale quantity to 60,000 ounces. Orion will pay 20% of the spot silver price on delivery.

The US$50 million credit facility with Investec is a four-year facility bearing interest at LIBOR plus 3% to 4.3%. The facility is secured by the assets at South Arturo and Mercedes. In connection with the facility, Investec was granted 216,000 shares of Premier Gold plus 1.5 million three-year warrants with a strike price of $2.17.

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