Premier Gold hopes to grow production at Mexican mine in H2 2019

Mercedes operation in Sonora, Mexico. Photo by Premier Gold Mines.

Premier Gold Mines (TSX:PG) expects its Mercedes operation in Mexico to grow production in the second half of 2019, although the miner believes output will be on the low end of its 75,000-85,000 ounces of gold guidance and on the high-end of projected costs.

This week, the Thunder Bay-based company published its operational and financial results for the second quarter and first half of 2019, and even though Mercedes’ production increased when compared to the previous year, Premier is certain that more will come from the Rey de Oro and Lupita zones where higher grades have been found.

Besides mining these two new areas, the company says stope production is consistent at the Diluvio zone.  

Premier’s shares started the year trading at $C1.67/share and closed Q2-2019 at $C2.04/share

During Q2 2019, Mercedes produced 15,532 ounces of gold and 51,354 ounces of silver compared to 13,780 ounces of gold and 44,366 ounces of silver during the Q2 2018. Year to date, mine production totalled 33,146 ounces of gold and 109,035 ounces of silver, compared to 28,789 ounces of gold and 101,736 ounces of silver in the prior year to date.

Premier reported that exploration activities continued during the quarter that ended in June, with 11,281 metres of drilling targeting the Diluvio, Marianas and Barrancas veins to replace reserves, support mine production, test extensions of the main mine trends and to test new geological targets. 

This implied that a big chunk of the quarter’s capital expenditures went into exploration and underground mine development to support a transition to the new mining zones. In total, the Canadian firm spent $1.2 million of exploration capital and $0.7 million of expansionary capital. With the added $2.4 million of sustaining capital, total capital expenditures in Q2 2019 added up to $4.5 million, a 2.24% increase from Q2 2018.

Total revenue from the mine for the three months ended in June 2019 was $21.8 million, and year-to-date was $44.9 million, the latter an almost 5% increase from the previous year.

The Mercedes mine is 150 kilometres northeast of the city of Hermosillo in the northwestern state of Sonora. Operations are exploiting low-sulfidation quartz veins and quartz veinlet stockwork for gold and silver with an ore extraction rate targeting 2,000 tonnes per day.  

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