Premier Gold Announces Results

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Premier Gold Updates Hardrock project

TORONTO – MINING – Premier Gold has announced its operational and financial results for the three months and year-ended December 31, 2016. The Company previously released its production results for the fourth quarter and full year in its news release dated January 12, 2017. This press release should be read in conjunction with the Company’s Consolidated Financial Statements and related Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) for the year ended December 31, 2016, which are available on SEDAR (www.sedar.com). All dollar amounts included in this press release are expressed in Canadian dollars, unless otherwise noted, and are based on the Company’s MD&A and Consolidated Financial Statements, which were prepared in accordance with International Financial Reporting Standards.

2016 Fourth Quarter Highlights

  • Consolidated production of 81,511 ounces of gold and 98,401 ounces of silver(i)
  • Consolidated Gold revenue of USD$102.0 million (CAD$135.1 million) on sales of 82,188 ounces at an average realized price of USD$1,241 (CAD$1,644) per ounce
  • Consolidated co-product cash costs(ii) of USD$306 per ounce of gold sold
  • Consolidated co-product all-in sustaining costs(ii) of USD$356 per ounce of gold sold
  • Net income for the quarter of USD$20.4 million (CAD$27.0 million)
  • Cash flow from operating activities of USD$73.0 million (CAD$96.7 million)
    1. Final gold production lower by 279 ounces and silver higher by 410 ounces than previously released on January 12, 2017 due to final year end reconciliation
    2. See “Non-IFRS Measures”. A cautionary note and further information regarding Non-IFRS metrics is included in the “Non-IFRS Measures” section of the MD&A

2016 Full Year Highlights

  • Consolidated production 111,739 ounces of gold and 98,401 ounces of silver(i)
  • Consolidated gold revenue of USD$112.5 million (CAD$149.0 million) on sales of 90,263 ounces at an average realized price of USD$1,246 (CAD$1,651) per ounce
  • Consolidated co-product cash costs(ii) of USD$310 per ounce of gold, below 2016 guidance of USD$451 per ounce
  • Consolidated co-product all-in sustaining costs(ii) of USD$370 per ounce of gold, below 2016 guidance of USD$489 per ounce
  • Year-end cash balance of USD$89.2 million (CAD$119.7 million)
  • Year-end inventory of 23,386 ounces of gold and 40,492 ounces of silver
  • Cash flow from operating activities of USD$43.7 million (CAD$57.9 million)
  • EBITDA USD$58.2 million (CAD$77.1 million), or USD$.31 per share (CAD$.41 per share)(ii)
  • Net loss USD($549,099), CAD($727,447)
    1. Final gold production lower by 279 ounces and silver higher by 410 ounces than previously released on January 12, 2017 due to final year end reconciliation
    2. See “Non-IFRS Measures”. A cautionary note and further information regarding Non-IFRS metrics is included in the “Non-IFRS Measures” section of the MD&A

2016 Financial Highlights – For the three months and year ended December 31, 2016

2016 was Premier’s first year as a producer, with the fourth quarter being Premier’s first full quarter of production. Continued strong performance at South Arturo, and the addition of the Mercedes Mine during the fourth quarter, led to increased production and substantial cash flow for both the fourth quarter and the full year. 2016 gold production of 111,739 ounces exceeded the Company’s guidance of 100,000-110,000 ounces for the year.

At December 31, 2016, the Company remained in a strong financial position with cash and cash equivalents of USD$89.2 million (CAD$119.7 million) compared to USD$31.3 million (CAD$42.1 million) at September 30, 2016. At year-end the Company also carried precious metals inventories of 23,386 ounces gold and 40,492 ounces silver.

Millions CAD$, except for earnings/(loss) per share Three months ended December 31, 2016 Twelve months ended December 31, 2016 Millions USD $, except for earnings/(loss) per share Three months ended December 31, 2016 Twelve months ended December 31, 2016
Revenue 136.6 150.5 Revenue 103.1 113.6
Gross profit 40.3 43.7 Gross profit 30.4 33.0
EBITDA (i)(ii) 96.8 77.1 EBITDA (i)(ii) 73.1 58.2
Net income \ (loss) 27.0 (0.7) Net income\ (loss) 20.4 (0.5)
Earnings \ (loss) per share 0.16 0.00 Earnings \ (loss) per share 0.12 0.00
Change in cash 77.6 46.6 Change in cash 57.8 34.7
Millions CAD$ For the year ended December 31, 2016 For the year ended December 31, 2015 Millions USD$ For the year ended December 31, 2016 For the year ended December 31, 2015
EBITDA (i)(ii) 77.1 20.4 EBITDA (i)(ii) 58.2 16.0
Cash flow from operating activities 57.9 (19.6) Cash flow from operating activities 43.7 (15.3)
Cash and cash equivalents 119.7 73.1 Cash and cash equivalents 89.2 52.8
    1. Earnings before interest, tax, depreciation and amortization
    2. See “Non-IFRS Measures”. A cautionary note and further information regarding Non-IFRS metrics is included in the “Non-IFRS Measures” section of the MD&A

Capital expenditures during the fourth quarter were USD$5.5 million (CAD$7.3 million) and exploration, evaluation and pre-development expenses were USD$8.3 million (CAD$11.1 million). Capital expenditures during the year were USD$37.1 million (CAD$49.8 million) and exploration, evaluation and pre-development expenses were USD$26.2 million (CAD$34.7 million).

Strong operating results from both mines contributed to an EBITDA(ii) of USD$73.1 million (CAD$96.8 million) for the fourth quarter and USD$58.2 million (CAD$77.1 million) for the year. Net income of USD$20.4 million (CAD$27.0 million) was reported for the fourth quarter, Premier’s first full quarter of production. A net loss of USD$0.5 million (CAD$0.7 million) was recorded for the year due primarily to the expensing of exploration expenditures and depletion, depreciation and amortization.

2016 Operational Highlights – For the three months and year ended December 31, 2016

South Arturo

The South Arturo Mine, which is 40% owned by Premier and is operated by joint venture partner Barrick Gold, was brought into production in Q3-2016 and has been a solid performer with industry-low production costs. The mine achieved commercial production on August 1, 2016 and has exceeded production guidance primarily due to revised scheduling of ore through the roaster and positive grade reconciliation.

South Arturo Operating Results
in CAD $, unless otherwise stated
Three months ended December 31, 2016 Twelve months ended December 31, 2016
Ore milled tonnes 213,346 330,415
Gold produced ounces 59,030 89,258
Gold sold ounces 67,569 75,644
Average gold grade grams/tonne 9.48 9.27
Average gold recovery rate % 90.8 90.6
Revenues and realized prices
Gold revenue 000s 111,587 125,499
Average realized gold price (i,ii) $/ounce 1,651 1,659
Non-IFRS Performance Measures
Co-product cash costs per ounce of gold sold (i,ii) USD $/oz 223 236
Co-product all in sustaining costs per ounce of gold sold (i,ii) USD $/oz 258 285
    1. See “Non-IFRS Measures”. A cautionary note regarding Non-IFRS metrics is included in the “Non-IFRS Measures” section of 2016 Management’s Discussion and Analysis
    2. Cash costs, all-in sustaining costs as well as average realized gold price per ounce are Non-IFRS metrics and discussed in the “Non-IFRS Measures” section of the Company’s MD&A

Performance for the fourth quarter and for the year was better than plan both in production and costs. Production attributed to Premier was 59,030 ounces of gold compared to 30,228 ounces of gold for the prior quarter. Gold recovery of 90.6% was greater than plan. Lower cash costs compared to the third quarter were due to achieving full efficiencies after start-up.

Capital expenditures during the fourth quarter were USD$0.10 million (CAD$0.13 million). Capital expenditures totaling USD$31.5 million (CAD$42.3 million) during 2016 consisted mainly of pre-production development costs.

The joint venture continues to advance additional development opportunities including potential open pit (Phases 1&3) and the El Nino underground.

Earlier in 2016, Barrick submitted permits for potential underground mine development at El Nino which would utilize a ramp from the bottom of the current open pit. Drilling to support initial planning at El Nino is expected be completed in 2017 and 2018.

Mercedes

The acquisition of the Mercedes Mine located in Sonora, Mexico closed on September 30, 2016. Production during the fourth quarter was 22,481 ounces of gold and 98,401 ounces of silver. Costs for the quarter, on a co-product basis, remained under budget with average all-in sustaining costs coming in at USD$811 per ounce of gold and USD$11 per ounce of silver.

Mercedes Operational Results
in CAD $, unless otherwise stated
Three months ended December 31, 2016 (i) Twelve months ended December 31, 2016 (i)
Ore milled tonnes 175,007 175,007
Gold produced ounces 22,481 22,481
Silver produced ounces 98,401 98,401
Gold sold ounces 14,619 14,619
Silver sold ounces 65,380 65,380
Average gold grade grams/tonne 4.27 4.27
Average silver grade grams/tonne 44.49 44.49
Average gold recovery rate % 94.8 94.8
Average silver recovery rate % 39.1 39.1
Revenues and realized prices
Gold revenue 000s 23,521 23,521
Silver revenue 000s 1,490 1,490
Total revenues 000s 25,011 25,011
Average realized gold price (ii,iii) $/ounce 1,609 1,609
Average realized silver price (ii,iii) $/ounce 23 23
Non-IFRS Performance Measures
Co-product cash costs per ounce of gold sold (ii,iii) USD $/oz 690 690
Co-product all in sustaining costs per ounce of gold sold (ii,iii) USD $/oz 811 811
Co-product cash costs per ounce of silver sold (ii,iii) USD $/oz 10 10
Co-product all in sustaining costs per ounce of silver sold (ii,iii) USD $/oz 11 11
By-product cash costs per ounce of gold sold (ii,iii) USD $/oz 656 656
By-product all in sustaining costs per ounce of gold sold (ii,iii) USD $/oz 785 785
    1. Twelve month results include Mercedes Q4 2016
    2. See “Non-IFRS Measures”. A cautionary note regarding Non-IFRS metrics is included in the “Non-IFRS Measures” section of 2016 Management’s Discussion and Analysis
    3. Cash costs, all-in sustaining costs as well as average realized gold price per ounce are Non-IFRS metrics and discussed in the “Non-IFRS Measures” section of the Company’s 2016 MD&A

Mercedes continued to deliver improved performance during the fourth quarter as a result of revised mine planning, operational improvements and reductions in the mine’s cost structure. At the processing plant, Mercedes commissioned an oxygen injection system, resulting in an increase in recoveries for gold in the range of 1% and silver in the range of 4%. With a continued focus on business optimization and operating efficiencies, Mercedes delivered on expectations for 2016. Additional production initiatives, including development of the Diluvio deposit, are expected to positively impact the future mining rate at Mercedes.

Capital expenditures totaling USD$5.3 million (CAD$7.1 million) during the fourth quarter included USD$1.1 million (CAD$1.5 million) in underground sustaining mine development, USD$0.5 million (CAD$0.7 million) for heavy equipment, USD$1.1 million (CAD$1.5 million) for expansionary underground development and USD$2.1 million (CAD$2.8 million) in capitalized exploration.

Three drill rigs were active at site during the year, completing 27,442 metres in 135 holes, of which 8,532 metres in 44 holes was completed during the fourth quarter. Diluvio infill and extension drilling returned the best results. Several new vein zones that were identified proximal to existing mine workings will be the focus of early exploration during 2017.

Mercedes reported no Lost Time Injuries during 2016. Management would like to recognize and congratulate mine management, employees and contractors for the achievement of this important milestone.

McCoy-Cove

A total of 9,370 metres of drilling was completed on the McCoy‑Cove property during the fourth quarter, including 4,067 metres of core drilling and 2,322 metres of pre‑collar rotary drilling in 14 drill holes in and near the GAP target area. A total of 22,199 metres of drilling was completed during the year.

Table 1 – Resource Estimate, McCoy-Cove Property

Property
Deposit
Participating Interest
Cut-off Category Resource
Category
Tonnes
(Mt)
Gold Grade
(g/t Au)
Gold Ounces
(000’s)
McCoy-Cove
Helen/CSD GAP/2201
100%
Underground Measured (M)
Indicated (I) 0.61 11.55 228
Subtotal M & I 0.61 11.55 228
Inferred 3.38 12.17 1,322

*See Press Release dated March 21, 2017 for the details and assumptions of the mineral resource estimate.

The Company is working toward completing a Preliminary Economic Assessment (“PEA”) in the second half of 2017. The Cove-Helen Underground Exploration Plan of Operations (“PoO”), which was approved in 2013, grants Premier the option to pursue an underground exploratory drill program as well as test mining in the Helen Zone. Premier has initiated preliminary engineering, dewatering and baseline studies to advance the underground exploration PoO toward development. Optimization and validation of the dewatering scenario is ongoing, and includes a pump test planned for the first half of 2017 to confirm dewatering rates prior to completing the PEA in the second half of 2017.

Greenstone Gold Mines

The Hardrock Feasibility Study was released in November, 2016. Approximately USD$23.4 million (CAD$31.0 million) was spent by Greenstone Gold during 2016 on a range of exploration and project development activities including USD$2.1 million (CAD$2.8 million) on exploration. Exploration activity during the year included orientation till sampling programs, line cutting, core re‑logging and orientation geophysical surveys. A comprehensive review of historical geological, geophysical and geochemical datasets and an IP geophysical study to supplement and upgrade existing data was also conducted.

Hasaga

A total of 2,974 metres of drilling was completed at Hasaga during the fourth quarter, bringing the year to date total to 48,197 metres. In addition to drilling, a program of bulldozer stripping, mapping and channel sampling continued through the quarter.

An initial mineral resource estimate (see Table 2 below) was released in January of 2017.

Table 2 – Resource Estimate, Hasaga Property

Property
Deposit
Participating Interest
Cut-off Category Resource
Category
Tonnes
(Mt)
Gold Grade
(g/t Au)
Gold Ounces
(000’s)
Red Lake District
Hasaga
100%
Open Pit Measured (M)
Indicated (I) 42.29 0.83 1,124
Subtotal M & I 42.29 0.83 1,124
Inferred 25.14 0.78 631

*see Technical Report dated December 30, 2016 and press release dated February 24, 2017

Goldbanks

Two holes were drilled for a total of 1,306 metres on the Goldbanks property during the fourth quarter and for the year. Both drill holes will be used to build a geological interpretation and model in advance of testing for high grade structures related to historical drill holes. Assay results included narrow high grade silver in one drill hole.

Alto Cristina

Three holes were drilled for a total of 450 metres on the Alto Cristina property during the fourth quarter and for the year. These holes at 90 meter horizontal spacing were drilled to test the continuity of historical high grade intercepts in the Alto and Bajo vein structures. All drill holes hit the target horizons and ongoing drilling will continue to assess prospective vein zones on the property.

CEO Commentary

Ewan Downie, President and CEO stated, “A well-executed ramp-up at the Arturo JV with Barrick delivered higher than budgeted mine grades and lower costs. This, combined with excellent performance delivered by the operating team at Mercedes, has resulted in an impressive first year of production and financial performance for Premier. 2017 will see increased annual production and the continued advancement of several new development initiatives”.

2017 Guidance

The Company is currently targeting between an aggregate of 125,000 and 135,000 ounces of gold production for 2017 from its operations at South Arturo and the recently acquired Mercedes Mine in Sonora, Mexico.

The Mercedes Mine is also expected to produce 325,000 to 350,000 ounces of silver during 2017.

Production estimates for 2017 are derived from life of mine operating plans prepared on the basis of mineral reserves associated with each property. Assumptions underlying 2017 gold production estimates for South Arturo and Mercedes are presented in the table below.

USD, unless otherwise noted Guidance 2017
Mine Gold Production
ounces
Realized Gold Price
per ounce (i)
Cash Cost per
ounce (i)
AISC per ounce (i)
South Arturo 40,000 – 45,000 $1,250 $440 – $470 $450 – $480
Mercedes 85,000 – 90,000 $1,250 $680 – $710 $810 – $840
Consolidated 125,000 – 135,000 $1,250 $580 – $610 $660 – $690
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