Update: Premier Gold Mines' Acquisition Of Cove-McCoy Gold Properties

Aug. 5.14 | About: Premier Gold (PIRGF)

Summary

Premier Gold fully consolidated its Cove-McCoy gold properties by purchasing 100% interest in it from Newmont Mining for $21 Million.

In our opinion this shows a lot of confidence of management in the Nevada property as they are already developing their Canadian Hardrock property.

This confirms and possibly adds to our earlier valuation of the company as we only considered the Hardrock property in the valuation.

Premier Gold Mines (OTCPK:PIRGF) recently announced that it has signed a binding agreement with Newmont Mining (NYSE:NEM) to acquire a 100% interest in the Cove-McCoy Gold Properties located along the Eureka-Battle Mountain Trend in Nevada. Premier will make staged payments to Newmont over 18 months equal to US$21 Million (plus bonding), of which $15 Million will be paid on signing, and will transfer to Newmont all land sections that comprise its South Carlin Project.

This transaction should be noted by investors because it obviously removes Newmont from the picture in terms of buying out the property. But more importantly, we think this transaction confirms our opinion that shows investors that Premier is not a buyout target (at least not a friendly acquisition target). The reason being that if the company was truly looking to sell itself off it would not be acquiring full interests in properties (remember it is also developing the Hardrock project in Canada) - making a $21 million purchase is not what a company looking to be bought out does.

This changes our opinion (that we discussed previously) that the company is focused on Hardrock, but instead it is looking to potentially become a mid-tier producer by developing multiple properties in parallel. In our opinion this is very intriguing because it shows that management has a lot of confidence in its Nevada properties and that may show an even higher valuation than we concluded in our earlier piece as we solely focused on its Canadian Hardrock property. There are no guarantees in mining, but it would be a huge mistake for management of a zero-revenue development company to spend $21 million on the property without anticipating high quality future results. We think investors should take this transaction as bullish news for the company.

Disclosure: The author is long PIRGF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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