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Premier confirms $205m offer for Centerra’s stake in Hardrock project

30th March 2020

By: Mariaan Webb

Creamer Media Senior Deputy Editor Online

     

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TSX-listed Premier Gold Mines on Monday confirmed a $205-million offer to buy Centerra Gold’s 50% interest in the Greenstone Gold Mines (GGM) partnership, which owns the Hardrock project, in Ontario.

The acquiring party, Premier said, would be another company that was an assignee of Premier rights under the offer letter. The proposed assignee had the financial muscle to acquire Centerra’s interest and advance Hardrock through to construction.

The assignee also intended to work with Premier to assist in securing the financial resources required for Premier to fund its 50% share of related mine construction costs.

A 2016 feasibility study estimates that the project would require C$1.25-billion in capital.

The offer comprises a $175-million cash payment and the assumption of Centerra's obligations under the partnership agreement, including the remaining earn-in obligation of about $30-million.

"This offer should be viewed favourably by Centerra as we believe that it represents a substantial premium to the median of current analyst consensus valuations attributed to Centerra's 50% interest in GGM, full recovery of their total investment in GGM to date, and aligns with Centerra's stated focus of maximizing the value of its existing operating assets over new build opportunities,” stated Premier president and CEO Ewan Downi.

"The value of the offer is in excess of Premier's market capitalisation, especially when you consider the company's considerable cash position.”

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 late in 2016.

Since release of that initial study, GGM completed another three years of work, including additional drilling to better assess continuity and grade of the Hardrock deposit, and significant detailed engineering to further refine project design and optimise project economics. The impact of this additional three years of work in relation to project economics has been positive.

During that same time, GGM obtained federal and provincial environmental assessment approval, filed an updated closure plan and signed long-term relationship agreements with all locally impacted First Nation communities.

Premier said that the project was essentially “shovel ready”.

The feasibility study outlines plans for a mine producing 356 000 oz/y of gold for the first four full years of production, entailing 38-million tonnes milled with an average head grade of 1.27 g/t gold.

Prepared by consulting engineering firm G Mining Services, the feasibility study calculated an after-tax net present value, at a 5% discount rate, of C$709-million, and an after-tax 14.4% project internal rate of return on a pre-finance basis.

According to the study, the project is expected to process 141.7-million tonnes at an average grade of 1.02 g/t gold, producing 4.2-million ounces of recovered gold at an average all-in sustaining cost of $780/oz sold over a fourteen-and-a-half-year mine life.

Premier's stock climbed 11% on the TSX on Monday to C$1.22 a share, giving the company a market capitalisation of C$289.50-million.

Edited by Creamer Media Reporter

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