Premier Gold Mines Is Progressing in the Right Direction


Premier Gold Mines [stock_market_widget type="inline" template="generic" color="default" assets="PG.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] investors have been a lucky lot this year as the stock of the miner has appreciated strongly in the past few months as prices of the yellow metal have risen. Had it not been for favourable gold prices, Premier’s stock might not have gained 33% in 2019 as the company’s operational performance has not been up to the mark.

However, Premier Gold gave investors some hope with its second-quarter results, indicating improvement in the financial performance of the company. Let’s take a look at how Premier performed last quarter and what to expect from the company in the coming quarters.

Getting Back on Track

Premier Gold’s first-quarter production had left a lot to be desired. The company’s gold and silver output were down substantially year-over-year thanks to the bottlenecks it was facing at the South Arturo and Mercedes mines, but it seems to have overcome those problems now.

In the second quarter of 2019, Premier’s production increased slightly to 16,450 ounces as compared to the prior-year period, while silver production also saw a slight increase to 51,792 ounces. The average realized price of gold clocked by Premier Gold was constant year over year at $1,283 an ounce. However, the average realized price of silver fell by a dollar to $15 an ounce.

Still, the improvement in Premier Gold’s production profile last quarter is a positive takeaway that investors should be happy with. That’s because higher production will allow the company to take advantage of the gold price rally. But then, that benefit might not arrive soon as Premier Gold’s cost profile seems unfavourable.

Cash costs per ounce of gold sold increased to $1,005 during the second quarter as compared to $949 an ounce in the year-ago period. On the other hand, all-in sustaining costs per ounce of gold increased to $1,227 an ounce from $1,079 an ounce in the year-ago period. So Premier also needs to bring its ballooning costs under control in a bid to maximize its margins.

Premier Gold Is Taking Steps a Better Operating Performance

The good news for Premier investors is that the company is taking steps to boost production in high-grade zones that will help it reduce costs and increase output simultaneously.

The company recently announced the results of drilling at a couple of areas in the Mercedes mine – Lupita and San Martin.

The company is now on its way to access much higher gold grades, and that should allow it to increase its output and reduce costs.

At Lupita, Premier intercepted gold grades of 4.57 grams per ton and silver grades of 27.07 grams per ton. It also carried out successful delineation at the Rey De Oro area where 18.15 grams per ton of gold and 27.49 grams per ton of silver were intercepted.

Now, Premier Gold’s average gold grade last quarter stood at 3 grams per ton, while average silver grade was 27.24 grams per ton. So the company is now on its way to access much higher gold grades, and that should allow it to increase its output and reduce costs.

So it makes sense to remain invested in Premier Gold mines as a potential improvement in its production profile will lead to stronger results.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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