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Premium Exploration: Building A Gold District

Friday , 23 Sep 2011 Premium Exploration

In the midst of a 25,000 metre drill program on the 30 kilometre gold bearing trend known as the Orogrande Shear Zone at the Idaho Gold Project, Premium Exploration Inc. (TSX.V: PEM, OTCQX : PMMEF) has already increased the strike length of the Main Zone of the Friday-Petsite resource by 420 metres to 1,220 metres, a 53% increase over the last phase of drilling reported.

The Friday-Petsite deposit is one of three deposits the company controls within its 100% owned Idaho Gold Project. The Company is currently focused on making new discoveries while expanding the Friday-Petsite resource through focused drilling that is following up on three previous drilling phases totaling ~13,000 metres.

Four discoveries have been made to date, including:

• Main Zone - Lower Block Discovery: 2.6 g/t gold over 198 m including 9.2 g/t gold over 29.3 m

• Monday 1st Discovery: 1.4 g/t gold over 38.4 m including 9.4 g/t gold over 4.6 m

• Monday 2nd Discovery: 2.1 g/t gold over 20.1 m including 5.5 g/t gold over 6.4 m

• Buffalo Gulch Discovery: 1.3 g/t gold over 4.6 m within 0.5 g/t gold over 26.2 m

Michael Ostenson, Vice President of Exploration for Premium, said, "343,000 indicated gold ounces and 780,000 inferred gold ounces are hosted within the 800 meter strike length of the Main Resource Zone. The 53 % increase in the strike length of the Main Zone to the north and south demonstrates the additional size potential of the deposit along strike".

"Two drills led to four discoveries in Phase-Three: The expansion to three drills along the 30 kilometre gold district increases Premium's ability to aggressively pursue making more new discoveries while step-out drilling along the Friday deposit."

FRIDAY-PETSITE
The original Friday-Petsite deposit was acquired by the Company in the Autumn of 2007, and since that time the company's exploration has determined that Friday-Petsite is just one of potentially multiple multi-million ounce deposits, along this new trend, which extends 30 kilometres from north to south in north central Idaho. The project lies immediately south of the prolific Coeur d'Alene mining district near Elk City.

The Northern Miner published an article on Premium back in November 2010 that proclaimed "Premium hits more gold in Idaho".

According to the article:

"The latest round of results come out of its 10,000 metre Phase-Three program on the Main Zone where one hole returned 1.1 grams gold over 41.5 meters and 1.2 grams gold over 81.1 meters.

The drilling is being done with an eye toward developing what Premium calls "the Lower Block" of mineralization which is adjacent to and beneath the initially modeled deposit.

Two other holes were drilled to the west of the Lower Block hole, and returned 2.9 grams gold over 73.5 meters including 10.6 grams gold over 17.2 meters and 1 gram gold over 83.4 metres including 3.5 grams gold over 2.2 metres."

On August 10, 2011, the company announced additional gold intercepts from drilling at the Friday zone, where 1 gram per tonne of gold was encountered over 117.4 metres, which included a 4.9 metres section that assayed 3.3 grams per tonne gold.

"Nine of the ten step-out holes drilled to date have encountered near surface bulk-tonnage gold mineralization, extended the Main Zone from 800 to 1,220 metres, and demonstrates the multi-million oz potential of the Friday-Petsite deposit," stated Michael Ostenson, P.GEO., VP Exploration. "Upon defining the extent of the mineralized zone along strike, Premium can then begin development to potentially increase the resource. Until then, our plan is to continue stepping out to determine how large the zone really is."

BUFFALO GULCH
At the northern-most end of a 12 km gold-in-soil anomaly that trends along the Orogrande Shear Zone, the Company drilled two holes encountering 0.5 grams per tonne over 26.2 metres and 1.3 grams gold per tonne over 4.6 metres. No trip to Hollywood at this point, but the geology is consistent with that within the Friday and Monday zones, and so further drilling is required to potentially locate longer sections. In fact, geophysics and gold-in-soils geochemical testing confirm that the Buffalo Gulch zone is consistent with the main north-south trending 30 kilometre shear zone.

A previous operator, Idaho Gold a subsidiary of Bema Gold (which was eventually acquired by Kinross), estimated a resource that, due to its pre-NI 43-101 status, is not to be relied upon by investors, but nonetheless is noteworthy. According to Premium's website:

"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 late 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.

Buffalo Gulch was formerly permitted for an open-pit heap-leach operation for Bema Gold in 1991, but thanks to weak gold prices at that time, it was put on care and maintenance. Bema also undertook metallurgical testing that demonstrated 75% recovery of gold-in-oxides after 25 days from column leach testing, and 75 - 90% recovery from bottle-roll testing (recoveries were as high at 95 % with agglomeration).

DEADWOOD ZONE
The Deadwood Zone, immediately to the south of Buffalo Gulch, also contains a historic, non-43-101 compliant gold resource consisting of:

• 38,940 Indicated oz gold 1.6 Mt @ 0.75 g/t Au with a 0.4 g/t Au cut-off;

• 18,480 Inferred oz gold 0.7 Mt @ 0.75 g/t Au with 0.4 g/t Au cut-off;

• Remains open along strike & depth;

• The historic deposit located within 1.0 km of 8 km gold-in-soil and airborne anomalies.

Premium Exploration's website describes the Deadwood Zone as a highly prospective target as 8 km of the 12 km gold-in-soil anomaly that trends through Deadwood and Buffalo Gulch and coincides with the north-south trending 30 km Orogrande Shear Zone, covers the Deadwood zone. Deadwood exhibits intruding structural complexity and many signs of mineralization and alternation at surface. It is conceived of as a "bulk tonnage target with high-grade structural potential at depth".

MONDAY, LUCKY STRIKE ZONES
Two additional zones that have yet to see significant drill testing are the Monday Zone, a structure to the west and parallel to, the Friday-Petsite deposit, and the Lucky Strike Zone, immediately west and parallel to, the Deadwood and Buffalo Gulch zones.

Both demonstrate similar geophysics and geochemical signatures to the Buffalo Gulch, Deadwood and Friday zones which are better understood. These two zones will be the subject of future drill programs.

The Monday discoveries intercepted 1.4 g/t gold over 38.4 m including 9.4 g/t gold over 4.6 m and 2.1 g/t gold over 20.1 m including 5.5 g/t gold over 6.4 m.

All together, the Idaho Gold Project encompasses approximately 172 km2 with over 60 kilometres of structural targets identified by airborne geophysics. All with the potential to host economic gold mineralization.

HISTORY REPEATING
Gold and silver mining have been a feature of Idaho's history since 1860. According to the Idaho State University web site:

"The discovery of gold caused the Idaho territory to be established in 1863. As the gold deposits began to disappear, the search for other minerals began. By the late 1800s silver, lead and zinc deposits were uncovered in the Coeur d'Alene area. This area has become known as one of the world's richest mineral areas. Idaho today produces the most newly mined silver in the nation. Almost 45 per cent of all silver mined in the United States comes from Idaho. Silver and phosphate are the two major minerals produced in Idaho. We are the nation's second largest producer of phosphate with 15 per cent of the United States yearly production.

Although Idaho produces little gold, the United States Bureau of Mines says that we have more mineable gold than any other state. In recent years, as the price of gold has risen, many old mines have been reopened and the value of gold produced in Idaho has grown steadily."

CONCLUSION
Premium's exploration program has been concentrated exclusively on the Idaho Gold Project for the last three years, and the effort continues to pay off in ever-longer intercepts of better grades amidst an intriguing picture of what has become a district-sized gold play. Such a big land package takes a lot of time and money to explore thoroughly, but for risk-tolerant investors, time just may end up becoming money in the case of Premium. A rising gold price certainly doesn't hurt either.