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Centerra and Premier Gold form 50/50 partnership to advance Ontario project

5th February 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Canadian miner Centerra Gold and explorer Premier Gold Mines are forming a 50/50 partnership to jointly own and develop Premier's Trans-Canada property, including the Hardrock gold project, in the Geraldton-Beardmore Greenstone Belt of Ontario.

"As we have stated in the past, it has been our goal to identify and acquire an additional production platform. We feel that the Trans-Canada property, including the flagship Hardrock gold project, complements our growth pipeline which includes the Gatsuurt project, in Mongolia and the Öksüt project, in Turkey,” Centerra president and CEO Ian Atkinson said on Thursday.

Centerra operated its flagship Kumtor mine in Kyrgyzstan, where the firm had been in talks with the Kyrgyz government for more than a year on a deal that would involve the State swapping its 32.7% stake in Centerra for half of a joint venture that would control the gold deposit.

The announcement of the partnership sent Premier’s TSX-listed stock up 15% to C$2.35 in early trading on Thursday, while Centerra’s stock also rose.

Under the terms of the transaction, Centerra would contribute up to C$300-million in cash to the partnership pending certain conditions, while Premier would contribute all property, assets and rights it held on the Trans-Canada property.

On closing, Centerra would make an initial payment of $85-million to Premier, after which it would make capital contributions to the partnership of C$185-million, of which half would be on behalf of Premier.

A portion of these funds would initially be used to complete a comprehensive technical and economic feasibility study, including an updated mineral resource calculation for the Hardrock project. Subject to the satisfaction of certain feasibility and project advancement criteria, the remainder of the funds would be used for construction and development of the Hardrock project.

Premier would not be required to make any contributions to the partnership until Centerra had provided the full amount of its development commitment, after which cash calls would be satisfied by both project partners on an equal basis, according to the approved yearly programmes and budgets.

The partnership agreement contained customary dilution mechanisms for failures to meet cash calls and certain other events.

Centerra had also agreed to make an additional contingent capital contribution to the partnership of up to C$30-million, based on the results of the updated mineral resource.

A corporation owned 50/50 by Centerra and Premier would manage the partnership and the board of directors of the managing partner would at first consist of four directors with two nominees from each partner.

The transaction was expected to close by March 6, subject to regulatory approvals and the satisfaction of customary conditions precedent. 

Premier’s president and CEO Ewan Downie noted that the partnership gave it a clearer and more certain path toward realising the potential that the Trans-Canada property represented to its shareholders and neighbouring communities.

The Trans-Canada property comprised a group of mineral claims situated within the Geraldton-Beardmore Greenstone Belt that extended for 110 km between Lake Nipigon and the community of Long Lac, in Northern Ontario, about 250 km north-east of Thunder Bay. Together, the claim blocks covered an area of about 33 000 ha consisting of unpatented mineral claims, mining leases and mining patent claims.

Located along the Trans-Canada highway, the flagship Hardrock project was found on one of the larger claim blocks and was central to a historic gold camp that produced about three-million ounces of gold between 1936 and 1970.

The Hardrock project was an advanced-stage project currently undergoing a feasibility study. The results of a preliminary economic assessment (PEA) were published by Premier on January 28 last year, followed by an updated mineral resource in July.

The project currently held about 4.87-million contained ounces of gold at an average grade of 1.7 g/t within an indicated resource and 2.74-million ounces of gold, grading 3.69 g/t, in the inferred category.

The Trans-Canada property also held other deposits, including the Brookbank, Kailey and Key Lake gold deposits.

In December, 2012, Premier reported an estimated openpit indicated resource at Brookbank of 171 000 oz of gold at a grade of 2.02 g/t gold, together with an underground indicated resource estimated to hold 429 000 oz at a grade of 7.21 g/t gold. The project also held an inferred resource estimated to be 66 000 oz.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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