The Buffalo Gulch Project is located near the north end of the Orogrande Shear Zone and is accessible year round. The property has good access via State Highway 14 from Grangeville (60 miles west of Elk City). This pre-production project is located within the 26 mile long Orogrande Shear Zone. Gold was originally discovered near Elk City, Idaho in 1861 and the Orogrande Shear zone has historically produced approximately 4,000,000 oz of gold and currently hosts 213 registered mineral workings.
The property is comprised of 107 unpatented quartz lode mining claims.
Premium Exploration entered a Letter of Intent to joint venture with Clearwater Mining Company to earn a 50% interest in the property. Terms of the Joint Venture Agreement
Buffalo Gulch is defined by a north-south trending gold in soil geochem anomaly that has a length of 3200 meters (10,500 feet). Extensive soil sampling, geophysical surveys and drill programs have defined a disseminated gold deposit containing both oxide and sulfide mineralization. The gold deposit is open along strike and at depth into sulfide mineralization. To date, deep drilling has not been conducted to test the extent of the sulfide mineralization and only 10% of the surface geochemical anomaly appears to have been drill tested by previous operators. Premium believes that substantial potential exists to significantly increase the scale of this gold deposit.
Geological interpretation compares similarities betwee that gold vein structure associated with the north Orogrande Shear Zone the high-grade gold vein structure intersected on the southern extension of Orogrande Shear Zone, where initial drilling returned 21.3m averaging 9.9 g/ton gold mineralization, including 1.5m of 67.89 g/ton.
The northern portion of the soil anomaly has undergone extensive reverse circulation drilling by a previous operator totaling 150 drill holes on lines spaced 30 meters apart (100 feet) and holes located 30 to 60 meters (100 to 200 feet) apart on the lines. The drilling defined a zone of mineralization hosted in intensely weathered and oxidized schists, gneisses and pegmatite’s down to a depth of approximately 90 meters (300 feet).
Extensive geological modeling, block modeling, engineering and metallurgical test-work has been conducted on the mineralized zone by previous operators and culminated in the definition of a resource that Premium considers a historic resource.
The historic resources as calculated by the Bema Gold subsidiary “Idaho Gold Corporation” were prepared prior to the introduction of NI43-101, but were carried out in accordance with established practice at that time.
After the drilling conducted during the period 1986-1988, Idaho Gold estimated “proven and probable geologic reserves” of oxide material to a depth of 220 feet as 4.839 million short tons at a grade of 0.023 ounce/ton containing 110,759 troy ounces of gold*. The estimate was based on a tonnage factor of 16 cubic feet per ton and a three dimensional kriging software was employed using an indicator variable of 0.0125 oz/short (0.428 g/tonne) to predict the proportion of each block above the cutoff. Premium’s CEO, Wilf Struck, was employed by Idaho Gold during this period and was directly involved in the discovery and delineation of the zone of gold mineralization as well as the resource estimation and subsequent permitting for the proposed development of the Buffalo Gulch Mine.
The resource estimate was reviewed by Micon International in 2004 on behalf of Beartooth Platinum Corporation and they concluded that the – Buffalo Gulch property has historical Mineral Resources of about 5 million tons averaging 0.023 oz/ton Au (4.5 million tonnes at 0.8 g/t Au), comparable to an indicated resource. No cutoff grade was provided. Micon does state that the density factor of 16 cubic feet per ton was confirmed by “specific gravity measurements on material from Idaho Consolidated Metals Corporation’s (ICMC) 1996 core program.” ICMC is the predecessor company to Beartooth Platinum. Micon qualified the estimate by stating that “The estimations reported here were made prior to the introduction of NI 43-101 and were carried out in accordance with practice at the time. The information is reported as part of the historical data on the Buffalo Gulch property.” Golder Associates also reviewed the historical estimate in a 2006 report. The Micon and Golder reports do not qualify the historical estimate as a current mineral resource.
* Estimates of gold resources are historical in nature, predate and are noncompliant with NI 43-101. Premium is not treating the historical estimate as current mineral resources or reserves. Premium has not undertaken any independent investigation of the resource estimates nor has it independently analyzed the results of the previous exploration work in order to verify the resources, and therefore the historical estimates should not be relied upon. The historical classes used by Idaho Gold are different from current CIM classes, however, they might be comparable to the CIM inferred or indicated resource classes.
Successful cyanide bottle roll extraction tests and column tests culminated in two pilot scale heap leach tests in the field and confirmed the favorable leaching parameters for the mineralized material. Based on the positive tests from these results; economic and production analysis were conducted by the Bema Gold subsidiary “Idaho Gold Corporation” in 1990; independent engineering group MRDI in 1991; independent engineering group MRDI in 1996; and independent engineering group Golder and Associates in 2006. The analysis by Idaho Gold and MRDI were prepared prior to the introduction of NI43-101, but were carried out in accordance with established practice at that time.
The prior economic analyses did not apply current parameters or assumptions, and they should not be relied on. Analyses done subsequent to the introduction of NI 43-101 were not based on a current resource estimate, as required by NI 43-101. The company previously disclosed basic economic parameters for Buffalo Gulch on its website; however, these were premature and should not be relied on.
Premium will conduct additional drilling on the Buffalo Gulch historic resource during the 2010 exploration season and will use the newly generated data in conjunction with the historic drill data to prepare a NI43-101 compliant resource estimate. A “preliminary assessment” will also be initiated, subsequent to the resource estimate, to develop an economic analysis of the potential viability of defined mineral resources.
