Premier Gold Mines Ltd (PIRGF) CEO Ewan Downie on Q4 2019 Results - Earnings Call Transcript

Premier Gold Mines Ltd (OTCPK:PIRGF) Q4 2019 Earnings Conference Call March 5, 2020 10:00 AM ET

Company Participants

John Begeman - Executive Chairman

Steven Filipovic - CFO

Ewan Downie - President, CEO & Director

Peter Van Alphen - COO

Conference Call Participants

John Tumazos - John Tumazos Very Independent Research

Operator

Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Premier Gold Mines' Q4 and Year-end 2019 Financial Results Conference call. [Operator Instructions].

Thank you. Mr. John Begeman, Executive Chairman of Premier, you may begin your conference.

John Begeman

All right. Thank you for participating in today's call. As mentioned, I'm John Begeman, Executive Chairman of Premier Gold. With me on the call today are Ewan Downie, President and Chief Executive Officer; Steve Filipovic, Chief Financial Officer; Peter Van Alphen, Chief Operating Officer. Also on the call today with us are members of our senior management team. Matt Gollat, Steve McGibbon, Brent Kristof and Kerri Chaboyer-Jean. All will be available during the question-and-answer portion of the call.

Today, we will provide you with the company's 2019 fourth quarter and year-end financial and operational results. An update on the mine operations and projects will also be provided. For those of you that haven't already accessed the presentation, the presentation materials for today's call have been posted and are available on the company's website.

Before we get started, I first want to direct you to the Page 3 of the presentation, and the associated disclaimer regarding forward-looking statements.

Ewan and Steve will provide a discussion and summary, but first a couple of points. The company remains strong positioned with a balance sheet of over $58.4 million in cash and cash equivalents. Our cash position allows us to continue with our investments in the new mine developments in Nevada as well as at the Mercedes mine. At South Arturo, the El Nino underground reached commercial production. The Phase 1 pit waste stripping was initiated, however, it has since been suspended. Review of the Phase 1 mine plan indicates that the mine could benefit from further drilling and test work to evaluate potential additional heap leach and deeper mineralization. El Nino production remains on schedule. The cold hydrology studies are ongoing with the 2 large bore test wells having been completed and the results are currently being evaluated. Permitting options to further advance what we hope will be a future production decision at Cove are also ongoing.

We continue to work and optimize our growth pipeline. With our 50% owned Greenstone Gold mines joint venture, it has provided positive updates with growth in resources and favorable economic results. Premier is supportive of the recent updates to the economic model that have been provided by the managing partner. Operational permits -- permitting remains currently active at Greenstone. And I'm also happy to say that the Greenstone discussions and agreements with all necessary First Nations group have been achieved. Production at Mercedes was less than anticipated in Q4. The company is taking steps to assess and reduce mining dilution and doing additional drilling to enhance the short-term mine plan models. We have had considerable exploration success at Mercedes in the recent quarter. We continue to see minable grades with that drilling and plan to take advantage of the higher grades as mine plans can be developed at Mercedes. Ewan will discuss these and other topics further after Steve's financial presentation.

However, moving to Slide 4, I just want to present locations of Premier. We're 100% North American focus in safe, world-class jurisdictions with 4 core advanced stage projects. You can see we're in Canada, Nevada and Mexico.

Moving to the next slide. This is our pipeline of growth. We have several projects in exploration, the Rye, Rodeo Creek, Hasaga and Rahill-Bonanza. Conceptually in scoping, we still have South Arturo Phase 3, and in feasibility, our near-term development projects, Greenstone, with our partner, Centerra Gold, South Arturo heap leach and the McCoy-Cove project, which is 100% owned. Execution of South Arturo Phase 1 is in progress. We are working on the redevelopment of that mine plan, as I've mentioned, and as well, you can see our current production at Mercedes and South Arturo, El Nino.

I'll pass now the presentation over to Steve Filipovic to discuss some of the operational and financial results.

Steven Filipovic

All right. Thanks, John, and good morning, everyone. If we turn everyone's attention to, I believe it's Slide 6, we'll just speak to some of the highlights for both Q4 2019 and for the year-to-date. During Q4, the company produced a total of 16,880 ounces of gold and 45,500 ounces of silver. That compares to 23,042 ounces of gold and 120,730 ounces of silver during the fourth quarter of 2018. Of the just under 17,000 ounces of gold produced during the quarter, about 72% or 12,000 -- just over 12,000 ounces of that came from our Mercedes mine and the balance of about 4,600 ounces from South Arturo. For the full year, the company produced a total of 67,427 ounces of gold and 192,829 ounces of silver. That's compared to just under 90,000 ounces of gold in 2018 and 321,000 ounces of silver. Of the 67,000-or-so ounces of gold produced during the quarter, about 59 -- just under 60,000 came from Mercedes, and that represents about 67% of our total production for 2019.

As John mentioned, the company faced a variety of challenges at Mercedes during 2019, including higher-than-planned dilution in several mining zones and a large natural void at Rey de Oro. These factors, when combined, resulted in lower head grades and ultimately lower-than-planned production from Mercedes throughout the year. The company did, however, benefit from earlier-than-expected production from South Arturo with the commencement of commercial production at El Nino late in the third quarter. Production from El Nino helped boost fourth quarter production levels. It also obviously contributed to our year-end totals. However, on a consolidated basis, production for the year did fall short of our 2019 guidance.

From an operating cost perspective, costs during the year were generally held at budgeted levels. However, lower-than-planned production did have an impact on our unit operating costs. For the fourth quarter, on a consolidated basis, our cash costs came in at $1,087, and our all-in sustaining costs at $1,217. Broken down, cash costs from Mercedes for that fourth quarter were $1,244. The contribution for the South Arturo for those ounces was in the order of $748, with all-in sustaining costs from Mercedes at $1,388 and South Arturo all-in sustaining costs at $846.

On a full year consolidated basis, cash costs for the year came in at $998 and all-in sustaining costs at $1,218. That's in comparison to our guidance -- all-in sustaining cost guidance of $900 to $950.

Turning over to Slide 7. During the fourth quarter, company generated revenue of $28.9 million on sales of 19,909 ounces of gold, and that was at an average price of USD 1,416. That compares to just under $20 million on sales of 15,600 ounces of gold at an average realized price of $1,250 during the fourth quarter of last year. During the fourth quarter, we reported mine operating income of $1 million, a net loss of $4.9 million or $0.02 per share. That compares to mine operating income of $6.1 million, a net loss of just under $9 million or $0.04 per share during Q4 2018.

For the full year, we reported $93.7 million on sales of just under 68,000 ounces at an average realized price of $1,332. And that's in comparison to the prior year, where we reported just under $114 million on sales of 87,000 ounces at an average realized price of $1,264.

Operating income for the full year was $3.6 million. We reported a net loss of $20 million or $0.10 per share, and that's after taking into account charges of around $24 million for exploration and development during the year. During the prior period, we reported operating income of $16.5 million and a net loss of $20.4 million or $0.10 per share. Year-over-year, relatively consistent.

The company reported $23 million in cash from operations in 2019 after taking into account movements in working capital and negative free cash flow of $28.9 million after taking into account over $50 million of capital development during the year. The company made total draws from its operating facility of $17.5 million, and that was used to assist with project funding as we finished the year with $58.4 million of consolidated cash on the balance sheet. Of that $58 million on the balance sheet, approximately half is within the accounts of our South Arturo JV, where there's been both an accumulation of cash and accounts payable during the final quarter of 2019. These balances, they have been settling a normal course by our operator.

Subsequent to year-end, the company entered into a transaction with a syndicate of banks to raise funds through a combination of debt and equity instruments. The funds for this financing, which closed yesterday, provide the company with additional capacity to address variability in its operations and it will be used for the development, expansion, working capital requirements of the Mercedes and South Arturo mines as well as to support continued expansion of the McCoy-Cove project in Nevada and for general working capital purposes.

At this point, I will turn everyone's attention to, I believe, it's Slide 8, and I'll turn the show over to Ewan here.

Ewan Downie

Okay. Thank you, Steve. I'll give just a brief introduction here. Peter will talk about the Mercedes mine and some of the ongoing initiatives we have there. On Slide 8, again, our projects are located in some of the most favorable mining jurisdictions, I think you'll find everywhere -- anywhere in the world. Premier is a company that has multiple assets that we are in various phases of advancement from exploration to development and production. And in 2020, we will look to continue to rationalize this project portfolio as we focus in on our key -- on our core assets moving forward.

We are focused on production at two sites. Moving to Slide 9. Mercedes is an operation as Steve and John had both mentioned. We had a challenging year this year, but a number of initiatives are ongoing in order to further stabilize operations there moving forward, including the discovery of new mineralization at Lupita extension and San Martin that is currently being advanced into the mine plan.

At South Arturo, the El Nino mine, as Steve mentioned, achieved production ahead of schedule in -- late in the third quarter of 2019, and we continue to advance the Phase 1 pit, the Phase 3 pit, East Dee and other opportunities on the property. Right now, we are doing some additional planning that I'll talk about further in this presentation when we get to the South Arturo section.

With that, I'll hand over the presentation for Slide 10 to Peter Van Alphen, and he will discuss the Mercedes mining operation.

Peter Van Alphen

Good morning, everyone. As has Ewan stated is that we had a challenging year at Mercedes and a lot of that has had to do with dilution in the mining operation as well as some issues revolving around the ongoing resource modeling and some design adjustments that we've been making there. And then also, Steve had mentioned, the unexpected void in Rey de Oro that impacted somewhere between 4,000 to 5,000 ounces of gold production that was unexpected.

The -- and I'll get straight to the issue of dilution is one that we've spoken about before. We continue working towards that and with efforts to reduce that. By year-end, we had brought in an exchange for the brought-in units to be able to get the heading size down from a nominal 4x4 meter down to a 3x3 meter heading, 2 of them belong to Premier Gold and 2 of them were brought in by our contractor [indiscernible]. And so we continue to focus on the reduction of the heading sizes to be able to eliminate dilution in the ore body. The work at the plant, the new resource model has also continued, and we expect to start seeing from these efforts, improvements in the grade, the head grade that we see in the mill.

On the Slide 10, we've also -- we speak to the 2,000 tonnes per day of production in 2019 was below that, and we continue to work on measures that will increase our production from roughly 7 -- just over 7 -- between 1,700 and 1,800 tonnes a day on average in Q4 to get that to closer to getting them all filled up at 2,000 tonnes per day.

If we go into Slide 11, it's fairly self-explanatory, but with a production of only 12,274 ounces in the quarter, our cash costs were higher than planned at $1,244 an ounce sold against -- and all-in sustaining of $1,388. The impact on the year, similarly, the cash costs were higher than planned as well as the all-in sustaining costs for the 59,900 ounces of gold that we produced for Mercedes.

And with that I'll hand back to Ewan.

Ewan Downie

Thank you, Peter. We'll take further questions at the end of the presentation, if anybody wants to have any further detail on any of the items we have today.

Slide 12, what we would like to highlight, despite some of the challenges we had during the year and continue to have some challenges operationally at Mercedes, we did have what we feel is likely our most successful year in terms of exploration success at the property in 2019. As shown in Slide 12, adjacent are on strike from the Lupita deposit that is or was a smaller part of our mining operation. We did have substantial exploration successes. You can see the difference on the slide of the -- what the deposit look like in -- prior to 2019 and after 2019. We did make some very material extensions to both Lupita extension and the San Martin zone. We're currently developing the Lupita extension deposit such that it will be part of our mine plan this year and is moving into reserves. This -- in 2020, our plan is to do additional drilling, both at Lupita extension and the San Martin in order for San Martin to be advanced into our future mine plan. Both of these projects based on surface drilling appear to have grades comparable or higher than our current reserves at Mercedes.

Moving on to Slide 13, South Arturo. South Arturo is an important project for our company. It's situated at the Northeast end of the North Carlin trend. Makes Premier one of the -- the only company in the North Carlin with operations other than Nevada Gold Mines. The property is operated by Nevada Gold Mines, who's been a long time -- for several years now, a long-time partner of Premier, and we've always enjoyed our relationship and working with Barrick and Nevada Gold Mines. Commercial production was achieved at the El Nino mine ahead of schedule in Q3 and is expected to contribute positively to Premier's operations in the future. The optimizing -- the development plan for Phase 1 and Phase 3 is ongoing, including the heap leach option auction and some developments that occurred during the year in 2019, and in my opinion, very positive developments, have led to rethinking exactly how we're going to advance this project. And I'll explain that in the upcoming slides. The expansion for long-term production at El Nino will be -- will continue this year with underground drilling. And we are also planning drill programs in several areas, including the heap leach. We're just discussing how big this program is going to be.

To the north of our joint venture, Premier owns 100% of Rodeo Creek, and the Rodeo Creek project is currently idled. And we don't intend to do any exploration there this year, but it is a very strategic property, we believe, for the future in this area.

On Slide 14, just go over, as I said, the first quarter production, full quarter production for the El Nino underground mine was in Q4. So we saw production of just over 4,600 ounces during the quarter. And the cash cost for this operation for the quarter was $748 an ounce and all-in sustaining at just under $850. Again, we expect this to continue to be a low-cost operation for the company. And it is a relatively small operation. However, when we grow the larger mine plan, this will be a significant operation, and we believe will have many years of production for the company.

On Slide 15, the image -- the upper image is the conceptual plan for South Arturo. We completed mining the open pit on the left in 2017. That's a Phase 2 pit. And since then, we have constructed the El Nino underground mine, which began production in late 2019. You can see in the lower image, we backfilled the portion of the pit. There's 2 portals from within the Phase 2 pit that access the higher-grade material down-plunge of the historic deposit. We did complete approximately $50 million in stripping on Phase 1 during 2019. However, some developments there. I will highlight that the reconciliation on the run-of-mine heap leach material within that stripping reconciled approximately 90 -- just over 90% greater than in the model. So we really highlighted the need for potential -- or likely for additional drilling in order to more fully assess how much heap leach material is here, given that we are -- or we were stockpiling that heap leach material for future processing. What Premier would like to see is the heap leach pad built, and then we process that material while we resume stripping. That's one of the ongoing discussions we have with our partner.

The Phase 3 pit project, which is looked at as being the next phase of mining at South Arturo has some very positive developments as well, including the drill program in 2019. The grade versus the model of that drilling reconciled approximately 72% higher than in the model, which is one of the more positive developments during the year on that project. However, we also intersected high-grade mineralization outside the current pit design, really, in my opinion, highlighting the need for -- again, for additional drilling here prior to full mine planning, and that drilling is expected to resume as well in 2020.

A good image to show that is on Slide 16 of the presentation. You can see some very spectacular intercepts, both within and outside of the pit design. So that's the current conceptual pit design for Phase 3, very high-grade mineralization within the pit, up to 62.5 meters of nearly 8 grams per tonne. And MAD, MAD19004 drill hole intersected almost 113 meters of 7.29 grams per tonne outside of the pit. So it suggests pretty substantial upside potential and resources. And at these grades, we need to more fully assess the mineralization here prior to implementing a full mine plan. The heap leach opportunity remains open around Phase 3 as well. And our view is that in at least the first part of this year, we should be doing a substantial drill program increase in order to more properly assess what we have and how many ounces are here. It's ultimately -- I know there's always been some challenge of guidance for us. We're also looking to initiate. And it's our intent to move this project to where we can actually complete a feasibility study for the project, so we can give more fulsome guidance to the market going forward.

Moving on to our other projects. The flagship asset in our portfolio on Slide 17 is our Greenstone Gold or the Hardrock Project in Northwestern Ontario. This is the near shovel-ready project located on the Trans-Canada highway. That now has full government and aboriginal support, and we are eager to move this project forward. We fully support our -- the partnership company, Greenstone Gold Mines, who, in our opinion, have done a very good job at getting the project to where it is. And we are, as most people may know, we are in the process of an ongoing case with our partner, Centerra Gold, and it's Premier's hope that this will be resolved sooner than later, and we can move forward with this world-class project.

McCoy-Cove is one of the highest grade undeveloped gold deposits in the United States. It is a project that we are advancing towards what we ultimately view as being a feasibility study. We'll be prepared for this project. We're just internally discussing the timing of that given the scale of development we have at Arturo and Greenstone. It's our view that we can't build all 3 projects at once. So McCoy-Cove, we will continue to advance to a feasibility study, but we are not fast-tracking it, so to speak.

The Greenstone Gold property on Slide 18. The image on the lower left really highlights one of the main attributes of this property that I think makes it one of the Premier Gold deposits in all of North America. Including the underground, globally, the resource exceeds 10 million ounces, sits right on the Trans-Canada Highway. In fact, part of this project will involve moving the Trans-Canada Highway. Those approvals are in place. The project in the '16 feasibility study, which was completed at $1,250 gold resulted to Premier because economics is different to both partners because Centerra is fully funding the project of an internal -- after-tax internal rate of return of 17.5%. We believe with the new resource shown on the ensuing -- the next slide, Slide 19, with the grade and tonnage increase within the pit, the economics for this property have only been enhanced over the past 3 years.

The project we are working with Endeavor Financial or Greenstone Gold Mines, the partnership company is working with Endeavor Financial, continuing to work on the project financing for the Hardrock mine that's shown in this image. The Hardrock project is an open pit -- large open pit and has an underground extension. The underground extension was not factored into any of the previous economics and provides substantial upside for the project. The underground deposit continues to remain open down-plunge with the last step-out hole drilled several years back being 18.5 grams over 20.5 meters. We also have the nearby Brookbank and Key Lake deposits. Brookbank is a fully delineated project that could be moved into a mining scenario fairly quickly, and we expect that will be done once the Hardrock project kicks off, and it will become a satellite deposit. Again, Brookbank was not factored into any of the economics. So this represents a mine that we expect will run for -- once the underground comes online, I believe, for well over 20 years, and is truly one of the top gold deposits, I think you'll find anywhere in North America.

The McCoy-Cove property on Slide 20, you can see in the inset image there is immediately south of Nevada Gold Mines' Phoenix operation. The Phoenix gold mine is a copper-gold mine that produces approximately 200,000 ounces a year. Just south of that in blue is our 50 square mile McCoy-Cove property. The blue circle within that is the historic Cove pit. The Cove and McCoy mines produced over 3 million ounces of gold and 100 million ounces of silver, up until the early 2000. The -- what we have delineated since then is an underground deposit, which we call the Cove deposit, which includes the Helen and the Gap structures. And those represent now approximately 340,000 ounces of gold in the indicated category and over 1.3 million ounces in inferred, in total, representing over 1.6 million ounces at a grade of over 11 grams per tonne, making this project likely one of, if not the highest grade undeveloped plus-1 million-ounce gold deposit in the United States. We completed a PEA that suggests very strong economics with low capital, given the project would be accessed by a ramp. And in 2019, some of the major developments were that we did complete the hydro line into the portal site or the planned portal site. And we did complete all of the -- as John mentioned earlier, the wells were completed. We completed the hydrology flow test, and we're just waiting on the results of those. That flow test will be used to assess when and how much water we will access as we put in this decline, and we need the results of this prior to initiating the decline that is shown on Slide 21.

The longer-term plan for Cove is to put in the decline in the underground ramp. That will take the underground workings almost to the Helen zone deposit. And from underground platforms, it's our intent to complete the delineation drilling required to advance the 1.32 million ounce inferred resource to indicated and move to a full feasibility study for this project. In the interim, we're completing additional metallurgy and discussions with potential processors or processing opportunities for this mineralization as the bulk of it is refractory.

The gap zone, shown in blue on Slide 21, remains wide open for expansion. The last step-out holes from surface in that area intersected 3 meters of 40 grams gold and 50.9 meters of 7 grams including 13.1 meters of 16-gram material. So we believe with further underground drilling, there's excellent potential that this deposit will grow to well over 2 million ounces of gold. In addition to that, in 2020 -- actually, in the coming weeks, we will initiate a drill program on some very large and exciting targets that we delineated with the assistance of Barrick on this project. Some of our top targets that were delineated in 2018 and '19 have not been drilled and will be drilled in the upcoming drilling campaign.

Lastly, I won't talk about all of our other projects within our portfolio because we have several exploration-stage properties, but the real flagship of our exploration portfolio is in Red Lake. The Hasaga project is a past-producing operation. In fact, the Howey/Hasaga mine was the -- is the initial mining operation in the Red Lake camp. This was a bit different of a mine than other mines in the Red Lake camp, given it's more of a bulk underground mine rather than a high-grade narrow vein. Produced over 640,000 ounces and remained open at depth in the past. The final step-out hole of our program intersected 23.4 meters true width 5.69 grams within 67 meters of 4 grams; the 67 meter is core width.

Jumping to the Slide 23. You can see the mineralization that we have identified since we acquired 100% ownership of this property. We completed the initial drill programs we drilled here. We're looking at an open pit -- potential open pit opportunity proximal to these historic mines given they were bulk underground mines, and we successfully delineated quite a significant near-surface mineral resource within several zones, the main zone being the central zone deposit, which is a brand-new area or discovery area for this property. But since then, we've had some very exciting results at depth, extending the historic Hasaga mine to depth. You can see in gray, the workings of the Howey/Hasaga operation, and down-plunge of the B zone is our C-zone intercepts. Some of our top intercepts in drilling up until 2018 included 54 meters of nearly 11 grams, 50 meters of 9.1 grams, 21 meters of 12 grams, and on the plunge direction, our last step-out hole 67 meters at 4 grams, just over 4 grams per tonne with a higher grade section within that. We are currently drilling down-plunge of that. We've completed the first hole. We successfully intersected the targeted structure, and we're waiting on our assays. So good expansion potential.

Approximately 500, 600 meters further down-plunge, we intersected with a deeper hole in 2017, 181 meters of 1.2 grams with several higher grade sections. It's our intent to drill from the C-zone to that intercept in an effort to significantly increase the resources here. Closer to surface, we have what we call the upper D zone immediately adjacent to some of the historic underground workings where we had intercepts including 6 meters of 13.7 grams and 8 meters of 9.5 grams. Further follow-up drilling will be completed there.

At the end of this year's program, we expect to complete a revised resource estimate that will include both the open pit and the underground mineralization. And we expect this to be one of the fastest-growing deposits in the entire Red Lake camp. Another note I should put about Red Lake is we do have a partnership with Goldcorp or Newmount at the Red Lake mine, which is just in the process of being acquired by Evolution. And we have initiated initial discussions with Evolution regarding a go-forward time for that property. We expect that they will be completing a major exploration program beginning this year, and I believe they have already commenced that program. And that program is expected to have a pretty significant drug program on the joint venture portion as well.

So the summary, Premier is a company that is growing our production through new mine development in Nevada, with the El Nino mine having its first full quarter of production in Q4 and the El Nino underground, 2020 will be the first full year of production for El Nino. We continue to advance multiple other mining opportunities on the property, and we're quite excited by the long-term opportunity that South Arturo offers for our company. We continue to advance 2 projects for -- in permitting, Hardrock or Greenstone and McCoy-Cove, which we view as being the next 2 operations that will be developed by our company. We continue to look at opportunities to grow our reserve and resource base. We -- this year's major updates, we expect will come from Arturo and Hasaga for -- in terms of growing our resource and reserves. And when you look at the appendix slides, I think you'll see that Premier has a very substantial mineral endowment that supports, in my opinion, a much higher share price than where we're trading at.

We continue to focus on delivering long-term cash flow. The main cash flow development we expect will come from the long-term development of Greenstone. And that is, as I said, remains our top project in our portfolio.

As a summary, the last slide, 25, shows our global reserves and resources because Premier has reserves at multiple sites, including Greenstone, Mercedes and Arturo. The proven and probable reserves for the company total now nearly 3 million ounces. And the global resources measured and indicated for the company now total more than -- almost 5.7 million ounces and inferred resources on top of that of 3.764 million ounces. So very substantial gold resources and reserves at multiple projects that will lead to longer-term development and production for our company.

With that, we'll open up the floor for any questions. And as John mentioned earlier, we do have the entire contingent available on this call.

Question-and-Answer Session

Operator

[Operator Instructions]. And your first question is from John Tumazos from John Tumazos Very Independent Research.

John Tumazos

Could you just review which are the core assets you're aggressively pursuing, prioritizing? I think it's Mercedes, South Arturo, Hardrock, Cove, maybe 1 or 2 others. And which are the assets which you're not spending on aggressively this year that might be asset sale candidates or just dormant for whenever you're a little more flush with money?

Ewan Downie

Yes. Thanks, John, for the question. The Greenstone, the Hardrock project is our company's cornerstone asset. With mineral endowment underground and open pit of well over 10 million ounces, we expect it will be in operation that will produce 300,000 to 400,000 -- even greater than 400,000 ounces on a 100% basis in some years.

So it represents for our company, the main development project that we believe would generate very significant cash flow, especially when you look at a gold price of $1,600. This operation could be cash flowing close to our current market cap. So it is our core asset. And it is something that we are most keen on advancing towards a production decision, notwithstanding our current discussions that we're having with our partner on the project. Our other core assets, I would say, in our portfolio is South Arturo. That would be my personal opinion. I can't speak for all of our management and board. But for me, that represents for our company, a major long-term opportunity. And I just highlight the positive reconciliations that we had in drilling in 2019 that really highlight the continued upside on the project. And that upside, I don't think is yet being realized owing to perhaps a little lack of drilling to date. So I do expect there to be a more substantial drill program this year than we've seen in the past as we get a better handle on exactly what we have there.

Next to that, I'm a big fan of our Cove property. I'd say it's #3 in our portfolio. It is a very high grade. 11 -- plus-11-gram deposits are, as you know, John, quite rare. And I'd say most junior companies on the planet are trying to find one of those. It is idle for us now, but I would not say it's necessarily an asset that we would rush to sell.

Next in our portfolio being Mercedes. Mercedes has had its challenges in the past year, 1.5 years. However, our team is working hard to improve that operation. And then less core for the company would be the Red Lake assets and some of our exploration projects in Nevada. So if you -- your question was what assets would you sell, if you were to sell one, I'd say the Red Lake portfolio would be the first we view as a sale candidate, but I'm not saying we are selling it. So I hope that answers your question.

John Tumazos

Yes. It's possible that your stock is trading for less than your half of Hardrock is worth, and that everything else is free. Or that the collection of assets confuses the market or the cash calls at the development phase, cause financings like a few weeks ago that, unfortunately, the market is not embracing. What do you think is the best way to address that inefficiency where your portfolio of assets is worth less than Hardrock alone?

Ewan Downie

I'd just say at the board level and the management level, we're currently in, I'd say, very fulsome discussions of how do we rationalize this portfolio. As you say, we don't believe that we trade as -- people don't add up the sum of the parts. So it's the best strategy to stay the course and look at long-term developing all of these assets. Do we sell 1 or more assets? We're currently assessing, is that a good strategy. Ultimately, our goal is to be in a position to finance the Hardrock build. And lastly, is it -- would there be more value to our shareholders if we perhaps did a spin of company with maybe one or more of the current asset portfolio. So we're looking at all opportunities that I believe, in 2020, will bring much greater value.

And like I said, that could involve asset sales or spinco. So we're currently really digging deep into our portfolio, John, and saying, okay, what is core, what is not and what do we do with those ones that may be noncore. Despite the rising gold price, we haven't seen that pandemonium gold market, I think, than we've seen in the past that really helps companies finance in these scenarios. Now that I'm truly a believer that the gold price is going to continue to move here, and we will see that in the near future. But definitely, as you can see, I'm a big shareholder in the company. I took a fairly large piece of the financing, and you'll see an insider trading that I will continue to buy our stock because I believe that the long-term value proposition here is better than any company I know.

John Tumazos

The harder your team works, the more the market penalizes you because you have to spend a little money to drill and work. Let's just say hypothetically, you sold Hardrock to the highest bidder for your 50%. And the highest bidder paid money for Premier Gold and everything else was a spinco. That way, your shareholders would get to that the market value of Hardrock and your shareholders would still have the other portfolio that maybe the market is giving a negative value to at the moment, even though there's two producing mines, Mercedes and Arturo. Is that a possible scenario?

Ewan Downie

I'd just say, John, that's a good one, that probably we can talk about for half an hour. So you're welcome. Please feel free to give me a call to discuss that further. But yes, when I say rationalizing our portfolio, I'd say we are looking at all options. So never say never is one of my models when we look at that...

John Tumazos

What I'd like you to say if I could put words in your mouth, Ewan, and when I think the market might be afraid of is a scenario where you sell Hardrock for a cash payment, the cash stays in Premier and you spend $50 million a year in exploration without cash going to the shareholders. You might find something and you might not. But I think when you restructure the company, your long-suffering shareholders hope to enjoy a payday.

Ewan Downie

I'd just say, John, in thinking about that, I am a large shareholder of the company. And whatever we do, will, in my view, be the best thing for the shareholder. So feel free to give me a call.

Operator

[Operator Instructions]. At this time, there are no further questions. You may proceed.

Ewan Downie

Okay. Thank you very much for attending today's call. As always, the Premier team is very accessible, and give any one of us a call if you have further questions or would like clarification on any of the items discussed here today. Again, thank you very much, and we look forward to talking to you at the end of the -- at our Q1 call.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.