Premier reports positive preliminary economic assessment results for Hardrock & Brookbank Projects

Shares Issued: 151,402,324

THUNDER BAY, ON, Jan. 28, 2014 /CNW/ - PREMIER GOLD MINES LIMITED ("Premier" or "the Company") (TSX:PG) is pleased to announce the results of independent Preliminary Economic Assessment Studies ("PEA") on the Company's 100%-owned Hardrock and Brookbank Deposits in Northwestern Ontario.  The PEA Studies were prepared by Stantec Mining with contributions from BBA Inc., InnovExplo Inc. and Micon International Limited, and completed in accordance with National Instrument 43-101 ("NI 43-101").  The technical report with respect to both PEA's will be filed on the Company's website and on SEDAR within 45 days. The Company has also scheduled a conference call and webcast for investors and analysts at 1:30 p.m. (Eastern Time) Tuesday, January 28, 2014.   Details for the call can be found at the bottom of this press release.

The Hardrock PEA Study was prepared as an open-pit only mining project related solely to the mineral resources reported on October 29^th, 2013 by the Company (press release "Premier Gold Releases Updated Mineral Resource Estimate On Hardrock Deposit"), for the Hardrock Project (a part of the Trans-Canada Property) some 260 kilometres by highway northeast of Thunder Bay, Ontario just south of Geraldton.

The Brookbank PEA Study was prepared as a combined open-pit and underground mining project related solely to the mineral resources reported on December 19^th, 2012 by the Company (press release "Premier Gold Releases Trans-Canada Property Resource Estimates On Four Deposits") for the Brookbank Deposit. Brookbank is located some 77 kilometres by road and highway west of the Hardrock Deposit.

Highlights of the 2014 PEA Studies (all currency amounts in Canadian dollars unless otherwise stated) include:

Hardrock Project Estimates

• Average annual gold production during the first 8 years of 253,100 ounces with life of mine "LOM" (15 years) annual production of 202,700 ounces (including low-grade stockpiles).
• Average grade over the first 8 years of 1.50 grams per tonne gold "g/t Au" with a LOM average grade of 1.18 g/t Au (including low-grade stockpiles).
• Initial processing of 10,000 tonnes per day "tpd", expanding to 18,000 tpd in Year 3.
• Pre-production capital costs of $410.6 million including $83 million for contingency.
• Pre-tax net present value "NPV" (at a 5% discount rate) of $519 million at US$1250 gold.
• Pre-tax internal rate of return "IRR" of 23.0% and a 3.5 year payback at US$1250 gold.

Brookbank Project Estimates

• Pre-tax NPV (at 5% discount rate) of $76 million and IRR of 30.7% at US$1250 gold when rock is trucked to Hardrock versus stand alone processing option.
• Average annual gold production during LOM (7 years) of 48,700 ounces.

Ewan Downie, President and CEO of Premier Gold Mines stated, "The completion of these PEA's represent a significant milestone for our technical teams and a very high quality and achievable opportunity for our shareholders.  Economics compare favourably to peer projects and Premier is well-financed to move the projects aggressively through to feasibility."

Hardrock Project

Mineral Resources Used In PEA

The Hardrock PEA study assumes that open pit mining only will be used for resource extraction.This was judged to be the quickest and least risky proposition of converting resource to reserves and execution.  The mineral resource estimate, as reported on October 29^, 2013, excluded the impact of mining dilution, which is the incidence of waste rock extracted together with mineralized material.

For the PEA, open pit mining dilution is calculated as 5% at 0 g/t gold. Open pit resources have been calculated assuming a material loss of 5%. With an open pit cut-off grade of 0.35 g/t gold, the resulting tonnages and grades for the open pit conceptual mine plan, including planned low-grade stockpiles, is shown in Table 1.

Table 1    Diluted Open Pit Mineral Resources Used in Hardrock PEA Study

The Hardrock PEA is preliminary in nature and it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the Hardrock PEA will be realized.

Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate. All assays have been capped where appropriate.

Mining

The Hardrock PEA assumes the processing of an average 10,000 tonnes per day of material during the first two (2) years of production, followed by an expansion to 18,000 tonnes per day in Year 3 for the remainder of the mine life (13 years), from a combination of direct process open pit material and stockpile reclaiming operations.

The open pit mine and stockpiling reclaim plan is a 15-year plan that utilizes a stockpile strategy to maximize grade to the mill and mines to an ultimate depth of 460 metres below surface.

The Hardrock open pit is designed as a conventional surface mining operation blasting 30 million tonnes of material per year in the first two years of operations and 45 million tonnes per year thereafter. The primary equipment fleet would consist of up to two 27 m³ hydraulic shovels, one 15 m³ hydraulic shovel, one 18 m³ wheel loader, 150 and 250 tonne-class haul trucks, and a fleet of support equipment. Production drilling will be carried out by up to five diesel-powered track-mounted units on 203 mm holes. Operating bench heights of 10 metres have been assumed for mining operations.

Over the life of the open pit, a total of 391 million tonnes of waste rock and overburden material would be moved. During the pre-production period, 1.6 million tonnes of overburden and waste rock would be removed as part of development work. Waste rock-to-mill-feed operating strip ratio are expected to average 5.37 during mining operations and 4.38 over the life of the mine (including low grade stockpiles and overburden).

Open pit mining operating costs include mine supervision, drilling, blasting, loading, hauling, services, dumps, roads and maintenance costs. These costs were evaluated using data from other similar projects and from budget quotes provided by suppliers. An extra 38% was added to the salaries to account for benefits, and depending on the job, bonuses were also included. Table 2 presents a summary of the estimated operating costs. A maximum of 207 direct positions have been estimated for mining requirements based on past experience and industry averages.

Table 2  Summary by Total, Per Tonne Mined & Per Tonne Milled of Estimated Hardrock Operating Costs

Metallurgy & Processing

Recent metallurgical testing conducted during 2013 on open-pit resource material served as a basis for the milling flowsheet developed by BBA.  The highlights of the process flowsheet include:

1. Primary crushing and two-stage grinding;
2. Gravity recovery;
3. Whole-rock carbon-in-leach circuit;
4. Cyanide destruction;
5. Carbon stripping, electro-winning, and smelting to produce gold doré.

Major equipment for the initial process facility includes a gyratory crusher sized for 18,000 tpd, a 32' x 14' semi-autogenous ("SAG") mill and a 20' x 30.5' ball mill. Mill feed would be ground to a P₈₀ of 75 µm before entering a gold leaching circuit.  Major requirement related to the 3^rd year expansion to 18,000 tonnes per day include additional crushing, ball milling, solid-liquid separation units and leach capacity.  Metallurgical recoveries for gold over the life of the mine are expected to average 89.6%. No by-product credits are anticipated.

Table 3     Estimated Mill Operating Expenses per Tonne Milled

The estimated mill operating expenses were based on available reagent consumptions and additions from testwork, local manpower costs, and industry standards where applicable.  A breakdown of the mill operating expenses is shown in Table 3.  A roster total of 62 workers (increasing to 71 with the 18,000 tpd expansion) is established for the milling and assay lab requirements based on past experience and industry averages.  An electrical power cost of $0.08/kWh is assumed for this study.

Infrastructure

The Hardrock Project benefits from world-class infrastructure, services and available labour within several communities in the immediate area. The project site is located only 260 km from Thunder Bay, Ontario (population 108,000), a few kilometres south of Geraldton, Ontario (population 1,893) and at 32 kilometres west of Longlac (population 1,388) all within the Municipality of Greenstone, and the Long Lac #58/Ginoogaming (population 600) First Nation Reserves. It resides along the Trans-Canada Highway and is accessible year-round. The Trans-Canada natural gas pipeline passes close to the site. Finally, some infrastructure will need to be relocated to accommodate the project.

Infrastructure is anticipated to include:

• Plant site and haul roads, gate house, parking, bus station and weigh station;
• Administration building, including all services; engineering, geology, administration, environment, health and safety, mine supervision, fire fighting, emergency office (ERT) and human resources;
• 9 door open pit garage and warehouse;
• Assay lab;
• Electrical surface infrastructure;
• Emulsion plant;
• Fuel storage facilities;
• Fresh water supply and fire protection;
• Dewatering and water contact treatment plant;
• Sewage treatment;
• One tailings pond;
• Power to the project supplied by an existing 115-kV transmission line connected to the provincial grid;

A total of 65 workers have been estimated for the general and administrative expense (G&A) requirements based on past experience and industry averages.  The G&A costs include, for the operation,  administrative personnel, general office supplies, safety and training supplies, contracted consultant services, insurance, permits property taxes, security, camp, building maintenance, environment management, geology, engineering and all indirect cost. Estimated annual G&A costs are summarized in Table 4.

Table 4  Annual G&A Cost Estimate for the Hardrock Mine

The base price for the fuel used in calculations is $1.00/ litre.

Capital & Operating Costs

Open pit pre-production capital costs require a minimal overburden and waste stripping component as the bedrock material to be mined is already exposed on surface.  The breakdown of open pit pre-production, sustaining capital costs and mill expansion are summarized in Tables 5 and 6 respectively.

Table 5     Hardrock Pre-Production Capital Costs Estimate

Table 6     Hardrock Sustaining and Mill Expansion Capital Costs Estimate

The cash cost profiles on a per ounce and per tonne basis for the Hardrock Project are summarized in Table 7 and Table 8 respectively.

Table 7    Hardrock Cash Cost Per Ounce Summary

Table 8   Hardrock Cash Cost Per Tonne Summary

Community

Premier is a proud member of the local Greenstone communities, participating in a number of local events, initiatives and boards. The company's community relations office provides members of the public with the opportunity to engage with the company directly, outside of regular communications, mailings, and open houses. Additionally, Premier also has a site office, multiple staff residence properties and extensive local staff.

Premier regularly engages with local Aboriginal communities, and is proud of the relationship that has and continues to develop. Premier utilizes personnel from local Aboriginal communities on the Hardrock Project, such as representatives from each community as part of the environmental monitoring team.

Environment

A formal environmental baseline work program has been ongoing since 2011. Since 2013, Premier began more extensive regional monitoring and assessment work that was undertaken to gain a thorough understanding of the current environmental conditions in the region, including the impacts of the Trans-Canada Highway on this former industrial site.

Project Economics

Key economic performance metrics are summarized in Table 9 on both a pre-tax and after-tax basis.  A range of gold prices (US$) are shown for sensitivity purposes only.  At US$1250 gold price, the Hardrock open pit project has a pre-tax Internal Rate of Return (IRR) of 23.0% (19.% after-tax), a pre-tax NPV (discounted at 5%) of some $519 million ($359 million after-tax) and a payback of 3.5 years on a pre-tax basis (3.9 years on an after-tax basis).

Table 10 is a spider graph representing the sensitivity of the change of any one variable over a range of percentage difference versus the base case.  Of the five variables measured, changes in grade and gold price have the greatest impact on the NPV (pre-tax) of the project.

Table 9    Pre-tax and After-tax IRR, NPV & Payback Summary

Exchange Rate CAN$1.00 = US$ 0.95

Opportunities & Risks

Opportunities to improve Hardrock Project economics include the following:

• The Hardrock PEA is based on the August 9, 2013 mineral resource cut-off date and does not include subsequent infill drilling of some 45,000 metres completed to the end of 2013.
• The next resource update is planned for Q2/2014 and will include a more refined underground voids model which could potentially contribute resource tonnes and ounces previously included at zero grade.
• Infill assays of previously unsampled drill core will improve the confidence of the grade estimate in some areas.
• Refining the litho-structural model by incorporating information gleaned from historic drilling (not assay data) will improve confidence in the model constraints.
• Follow-up drilling in the North Wall area could bring additional mineral resources into the optimized pit.
• Completing an underground study to further enhance project economics.
• Potential improvement in metallurgical recovery

Risks requiring mitigation strategies include:

• Management of construction/engineering and procurement schedules, costs, and cost containment.
• Operating risks related to recruitment and training of open-pit workforce.
• Currency risk relating to equipment purchases denominated in US currency.
• Permitting risk

Next Steps

Technical

• Complete infill drill program for revised mineral resource estimate in 2014.
• Proceed with baseline environmental work for completion by summer 2014 (ongoing monitoring work forecasted for life of mine.
• Optimization work (testing and engineering) for minimizing capital and operating costs.
• Detailed engineering work for final feasibility.

Exploration

• Renewed focus on regional targets and new deposit discovery.

Community and Environment

• Complete the baseline environmental and optimization work (testing and engineering) necessary to ensure a successful environmental assessment process.
• Submission of a project description is anticipated in spring 2014 to federal and provincial governments to begin the formal environmental assessment processes. This will comprise baseline environmental information collected over past years, comprises formal public and aboriginal consultation periods and helps ensure a mine design that avoids and mitigates environmental impacts.

Qualified Persons  

Each of the following individuals is a "qualified person" for the purposes of NI 43-101.  All scientific and technical information in this press release in respect of the Hardrock Project or the Hardrock PEA is based upon information prepared by or under the supervision of such individuals.

Stantec
Michel St. Laurent, P. Eng., (Mining & Environment)
Fiona Christianson, M.Sc. (Environment)

BBA Inc.
Julie Fournier, ing. (Metallurgy & Processing)

InnovExplo Inc.
Carl Pelletier, B.Sc., P.Geo. and Karine Brousseau, P.Eng. (Resource Estimate)
Sylvie Poirier, ing.  (Mining)

Brookbank Project

Mineral Resources Used In PEA

The Brookbank PEA study assumes that open pit and underground mining will be used for resource extraction.  The mineral resource estimate as reported on December 19, 2012 excludes the impact of mining dilution, which is the incidence of waste rock extracted together with mineralized material. For the PEA, open pit mining dilution is calculated as 25% at 0.22 g/t gold. Open pit resources have been calculated assuming a material loss of 10%.

Underground excess mining dilution is calculated as 15% at 0.00 g/t gold after a 27.6% planned internal dilution at 2.5g/t gold.  Underground mining also assumes a material loss of 10%. With open pit and underground cut-off grades of 1.52 g/t gold (before dilution and mill recovery) and 4.50 g/t gold respectively, the resulting tonnages and grades for the open pit and underground conceptual mine plan is shown in Table 11.For the purpose of this study, it has been assumed that the ore would be processed at a future Hardrock mill.

Table 11     Diluted Open Pit & Underground Mineral Resources Used for Brookbank PEA Study

Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate. All assays have been capped where appropriate.

Mining

The Brookbank PEA assumes the processing of an average 900 tonnes per day of material from open pit and underground sources during the life of the mine.  Open pit mining (average grade of 2.31 g/t gold) would be conducted for a period of 2.5 years at 600 tonnes per day in the beginning of the mine life followed by underground mining operations (average grade of 6.25 g/t gold) at up to 900 tonnes per day for a period of 6 years.  The waste rock-to-mill-feed operating strip ratio averages 5 to 1 over the life of the open pit.

Underground mining operations would be accessed via a single portal and main ramp from surface. The operation would utilize longitudinal longhole stoping (25-metre sub-levels), with consolidated and unconsolidated rockfill as a  mining method and require up to 4,000 metres of pre-preproduction  and sustaining capital development and some 7,000 metres of operating lateral development (waste and silling) over the life of the mine.

Metallurgy & Processing

Based on available historical information and test work at Brookbank, the proposed process flowsheet determined by BBA remains similar to the historical flowsheet.  It includes primary and secondary crushing, single-stage grinding, CIL, cyanide destruction, carbon stripping, electrowinning, and refining.  As such, Brookbank material would also be amenable to the proposed Hardrock flowsheet.

A trade-off study was conducted which determined that transporting Brookbank material to Hardrock for processing and gold recovery significantly enhances the Brookbank PEA economics when compared to a stand-alone milling complex for Brookbank rock. No additional processing facilities are anticipated at Hardrock to facilitate the Brookbank rock milling.

Infrastructure

The Brookbank Project benefits from world-class infrastructure, services and available labour within several communities in the immediate area. The project site is located only 232 kilometres from Thunder Bay, Ontario (population 108,000) and 28 kilometres northeast of Beardmore, Ontario (population 400) within the Municipality of Greenstone. It resides 12 kilometres from the Trans-Canada Highway and is accessible by road year-round.

Infrastructure at the Brookbank Project is anticipated to include, among other things, the following facilities:

• Plant site and haul roads, gate house, parking, bus station and weigh station;
• Separate administration building, compressor building;
• Assay lab, core shack, surface shop;
• Mine maintenance garage, warehouse;
• Fuel storage facilities; power distribution;
• Fresh water supply and fire protection;
• Sewage treatment;
• Coarse and fine material storage pads;
• Non-acid generating waste storage;

Power to the project supplied by electric transmission line connected to the provincial grid.

Capital & Operating Costs

Total pre-production and sustaining capital cost estimates for both the open pit and underground portions of the Brookbank Project are summarized in Table 12.

Table 12   Pre-production and Sustaining Estimated Capital Costs for Brookbank Open-pit & Underground Mines

The estimated cash cost profile for the Brookbank Project is summarized in Table 13. Operating expenses shown below reflect a blend of Brookbank and Hardrock operation at a nominal 18,000 tpd.

Table 13     Cash Cost Summary for Brookbank Open-pit & Underground Mines

Community

Premier continues to operate a local office in Beardmore, and has conducted community meetings as well as outreach efforts to local Aboriginal communities. While these have been preliminary in nature, Premier is anticipating continued engagement throughout the development of this project.

Environment

Environmental information to support a Project Definition and Closure Plan for the Brookbank site has been collected since 2011. Existing data consists of quarterly surface water quality and terrestrial and aquatic wildlife studies.

Project Economics

As alluded to in the Metallurgy and Processing sub-section of this document, trade-off studies were performed which confirmed that transporting Brookbank rock material some 77 kilometres to an existing processing facility at Hardrock realized the greatest economic benefit for the Brookbank Project.

Key economic performance metrics are summarized in Table 14 on both a Pre-tax and After-tax basis.  A range of gold prices (US$) are shown for sensitivity purposes only.  At US$1250 gold price, the Brookbank open pit and underground mining project has a pre-tax Internal Rate of Return (IRR) of 30.7% (24.7% after-tax), a pre-tax NPV (discounted at 5%) of some $76 million ($52 million after-tax) and a payback of 4.3 years on a pre-tax basis (4.4 years on an after-tax basis).

Table 14     Pre-tax and After-tax IRR, NPV & Payback for the Brookbank Project

 Exchange Rate CAN$1.00 = US$ 0.95

Opportunities & Risks

Opportunities to improve Brookbank Project economics include the following:

• Infill assays of previously unsampled drill core will improve the confidence of the grade estimate in some areas
• Refining the litho-structural to improve confidence in the model constraints.
• Follow-up drilling in at Cherbourg and Foxear to delineate mineral resources

Risks requiring mitigation strategies include:

• Management of construction/engineering and procurement schedules, costs, and cost containment.
• Operating risks related to recruitment and training of open-pit and underground workforces.
• Currency risk relating to equipment purchases denominated in US currency.
• Permitting risk

Next Steps

Technical

• Optimization work (testing and engineering) for minimizing capital and operating costs

Exploration

• Renewed focus on regional targets and new deposit discovery

Community and Environment

• Premier intends to continue to engage with the local Beardmore and Aboriginal communities on its plans for the Brookbank project. These will include open houses, direct communications and bilateral engagements.

Qualified Persons  

Each of the following individuals is a "qualified person" for the purposes of NI 43-101.  All scientific and technical information in this press release in respect of the Brookbank Project or the Brookbank PEA is based upon information prepared by or under the supervision of such individuals.

Stantec
Michel St. Laurent, P. Eng., (Mining & Environment)
Helga Sonnenberg (Environment)

BBA Inc.
Julie Fournier, ing. (Metallurgy & Processing)

Micon International Limited
Messrs Alan J. San Martin, MAusIMM(CP) and Charley Murahwi, P.Geo, FAusIMM. (Resource Estimation)

Live Conference Call and Webcast Access Information

North American callers please dial:  1-888-231-8191
Local and international callers please dial: 647-427-7450  

TAPED REPLAY: 416-849-0833 or 1-855-859-2056
Reference number: 49097250
Available until February 28, 2014 at midnight

WEBCAST URL: A live audio webcast will be available at: www.premiergoldmines.com

Premier Gold Mines Limited is one of North America's leading exploration and development companies with a high-quality pipeline of gold projects focused in proven, safe and accessible mining jurisdictions in Canada and the United States.  The Company is well financed with a portfolio of advanced-stage assets in world class gold mining districts such as Red Lake and Geraldton in Ontario and the most prolific gold trends in Nevada.

This Press Release contains certain information that may constitute "forward-looking information" under applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, statements about strategic plans, including future operations, future work programs, capital expenditures, discovery and production of minerals, price of gold and currency exchange rates, timing of geological reports and corporate and technical objectives. Forward-looking information is necessarily based upon a number of assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking information, including the risks inherent to the mining industry, adverse economic and market developments and the risks identified in Premier Gold's annual information form under the heading "Risk Factors". There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. All forward-looking information contained in this press release is given as of the date hereof and is based upon the opinions and estimates of management and information available to management as at the date hereof. Premier Gold disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

SOURCE Premier Gold Mines Limited

Image with caption: "Table 10 - Hardrock Sensitivity Analysis of Significant Parameters (CNW Group/Premier Gold Mines Limited)". Image available at: http://photos.newswire.ca/images/download/20140128_C5557_PHOTO_EN_35946.jpg