Getting it Exactly Right - PEM.V

Bob Moriarty
Archives
Jun 8, 2010

Isuppose I have done a couple of hundredof property tours over the lastten years. I've seen a lot ofprojects and a lot of companies. It is agreat pleasure to seethose companies who get it Exactly Right. They arefew and farbetween.

Newsletter writers and geologists serve as sortof freeconsultants to the companies who invite them on toursthoughobviously the companies are most interested in freepromotion.I've been on tours with most of the guys who do tours andeveryonehas something to offer. There is a lot of give and take andoftena lot of criticism of what a company is or isn't doing.You can't really fool guys who have seen dozens of projects.

Oftenwe are fed half truths, not total lies, but we run intothose as well,so you not only need to know enough to recognizethe truth of what youare being told but you also need to figureout what you aren't beingtold. But the joy of finding a hiddendiamond is worth all the middleseats in airlines, rotten foodand early hours.

I visited acompany last week that has it Exactly Right. It wasa great pleasure andshareholders are going to be greatly rewarded.The company is Premium Exploration Inc. (PEM-V).

Idahonative and Premium President Del Steiner formed the companyin 2006 withassets in Mexico, PGM minerals in Montana and thegold core project inthe Orogrande Shear Zone in Elk County,Idaho. I didn't even know Idahowas a big producer of gold butthe Central Idaho gold region producedover 4 million ouncesof gold from mostly placer projects.

Goldwas first discovered in Idaho in 1860 and pretty much wasthe reason forthe settlement. Population went up 800% from 1860until Idaho wasadmitted to the union in 1890.

It's pretty much axiomatic that where you have placer gold, youhave a lot more lode gold. For example I visited the Livengoodprojectof International Tower Hill four years ago. We knewfrom historical datathat every drainage off the hill was minedfor placer dating back to1915. I thought Livengood was goingto be a really big project.Millions of dollars of explorationhas confirmed the presence of almost10 million ounces of lodegold. So for every ounce of placer produced,there is another20 ounces of hard rock gold waiting to be produced.

I highly suspect that what Premium calls the Friday-Petsite goldproject is going to be similar.I was briefed on the projectat a meeting with Del Steiner and lovelyChristine Kopf at theVancouver Gold Show in January. Basically PEM hasa 28 km longshear zone hosting high grade gold. The old timers wentafterthe obvious gold in quartz veins seeing ounce plus material butthewall rock is highly mineralized as well. I've seen similarsystems inBrazil that went on for miles.

My feeling at the timewas that Premium was onto somethingreally big. After spending a daydriving around the project lastweek I am convinced the company is asleeper. They keep sayingthey are trying to define a million ounces of gold but they havea lot more ounces than a million.

Withprior drilling, PEM has a 43-101 resource of 532,000 ouncesof gold atFriday-Petsite. At the Buffalo Gulch open pit projecta few miles away;there is an historic resource of 110,000ounces. Buffalo Gulch was test mined and has been permitted inthe past.

DelSteiner has been planning the development of the OrograndeShear Zonefor many years. While President and CEO of Idaho ConsolidatedMineralsDel developed some 600,000 ounces of gold in the OrograndeShear Zone.He was part of the permitting for Bema Gold whenthey advanced theBuffalo Gulch Gold mine originally in 1992.

Wilf Struck, the CEOof Premium also has a long history withgold in Idaho. He was theproject Engineer for Friday-Petsiteand Buffalo Gulch when he worked atIdaho Consolidated and hewas the Supervisor of Exploration Propertieswith Bema Gold whenthey owned Buffalo Gulch.

When I visit aproject, I'm always hoping to see something thatgives me a real idea ofthe potential. When I met with managementin Vancouver in January, I wasthinking, this is really big.But you have to put boots on the ground toactually see it. Andknowing that you are dealing with a shear zone isinterestingbut it doesn't mean anything all by itself.

You seethings on a visit that management knows about but itmay not meananything to them. Here's what I saw, miles and milesand miles of placerworkings. Over the last 100 years or so,there has been 400,000 ouncesof gold taken out of the valleythat the shear zone has created. That'sa lot of placer gold.And when you see piles of cobbles stacked up formiles, it'seasy to see that there is a lot of gold in the OrograndeShearZone waiting to be mined.

Everymining company is run differently.It's pretty common for them to usethe Beanie Baby approach wherethey have picked up a variety of projectsin different commodities,even in different countries. For those fewcompanies who really"Get It Right" they shed the excess baggage whentheyare ready to focus on the really big deal.

PEM is vendingout their Mexican projects that consume both moneyand focus. They arespinning off their giant potential PGM mineralsin Montana to a newcompany and vending most of the shares toexisting shareholders. That'sa brilliant move. They are gettingabsolutely no traction or value fromthe project and shareholderscan get far more value from it being putinto a new company.

Premium has a new gold district in Idaho atthe Orogrande ShearZone and it's going to be very big. Some of thealready releaseddrill results are mind bending. They announced some drillresults in January. The best hole was 2.66 g/t over 198.4meters. That's a giant hole.

I'veused the concept of cubing a hole before. That is you presumetheintercept is cubed to determine the total potential quantityof gold. Itis not a scientific measure, as a matter of fact;unless you drilledvertically into a mineralized body that allthe rock was exactly thesame, you couldn't possibly getthe same number. But it is a way of comparing one drill holeagainst another.

Verylong intercepts can be quite important. 2.66 g/t is nice$106 rock and198.4 meters is over 600 feet of mineralization.If you cube the hole,you come up with 1.7 million ounces ofgold. With another hole showing 2.94 grams of gold over 73.5meters, the 43-101 resource is going to grow in a hurry.

Thoseholes are not incorporated into the current 43-101 forFriday-Petsite.An updated resource will not be released untilthe fall but a few moreholes like that and the market will wakeup and bark.

Along withthe shedding of assets that are not contributing tomarket value, PEMhas embarked on a major 10,000-meter drillprogram in April and resultswill be coming out on a regularbasis shortly. PEM is concentrating onincreasing their visibilityas well and more newsletter writers havebeen invited to do atour and will be seeing the project shortly.

I would be very surprised if this isn't another multi-millionounce project with similar potential to that of Livengood forITH and Rattlesnake Hills for Evolving Gold. It's a big systemand Del Steiner has locked up the biggest and most prospectiveareas in the shear zone. He's got a serious drill program goingand has hired top-notch people who know both the project andthe area.

Myopinion is that Premium is going to be a big surprise to mostinvestors.They have been way off the radarscope but that ischanging as I write.Del is doing everything exactly right andthe results are alreadyshowing up. The company has just shortof 70 million shares outstandingright now and is in the midstof a 23 million-share placement to pay forthe major drill program.There are a lot of warrants outstanding but theprice on themis non-dilutive. When they get exercised, the money willgo forthe next major drill program.

Premium is going to move from a tiny junior with interestingpotential into a major junior with near term production potential.The Buffalo Gulch project doesn't' show much in the way of aresourcebut the material is so soft that it doesn't need blastingand the first90 meters of material can be simply ripped witha Cat and fed onto aleach pad. PEM is advancing permitting rightnow and looks forproduction in 18-24 months.

I liked the company enough to buysome shares as soon as I gotback. So I am biased. Premium is anadvertiser. Christine Kopris in charge of shareholder communication andquite competentas well as lovely. Feel free to call her and anyquestions shecan't answer, either Del or Wilf can. Please take theresponsibilityfor your own due diligence.

In any case, in my view, they are doing things Exactly Rightand I expect big things out of them.

Premium ExplorationInc
PEM-V Cdn$.35 (Jun 7, 2010)
PMMEF-PK 68.5 million shares
Premium Exploration website

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Bob Moriarty
President: 321gold