Dundee: Premium at a Discount

Adding PEM to our Mineral Exploration Watch List

We are adding Premium Exploration Inc. to our Mineral Exploration Watch List with a Buy Recommendation, Venture Risk rating and no price target. PEM is a micro-cap exploration Company focused exclusively on their 100% owned land holdings covering a 30km stretch of the Orogrande Shear Zone (OSZ), located in North Central Idaho (see Figure 1). The ground covers the past producing Friday/Petsite property, Buffalo-Gulch and Deadwood prospects all centered along the OSZ.

The OSZ is believed to be the primary controlling feature for gold mineralization in the district. The shear cuts both the basement Proterozoic aged metasediments and the Cretaceous aged, quartz-monzonite batholith. Gold mineralization is found over much of the 30 km length of the shear, occurring within zones characterized by silica, sericite and clay alteration. To the south of the Friday zone, a small Eocene aged rhyolitic stock measuring roughly 300 meters in diameter has been mapped. This stock is pervasively altered and mineralized. This area, known as the Petsite Zone, locally contains some high grade vein related mineralization.

During 2010, the Company focused its exploration efforts on the Friday / Petsite target area completing around 10,000 metres of drilling aimed at expanding and better defining the resource. In January, 2011 PEM issued two separate releases, reporting the results of some of this work including holes PFR2010_21, which returned 1.5 g/t over 330.4 metres from 29.9m down-hole (See Figure 2) and PFR2010_23, which returned 0.8 g/t over 370.9 metres from surface, including a 134.3 metre interval that graded 1.5 g/t (See Figure 3). We expect that the final results of the 2010 drill program will be released shortly.

New Resource Should Set the Stage for a PEA

In March 2010, PEM released a NI 43-101 compliant resource estimate completed on the Friday/Petsite project that totalled 549,000 ounces of gold (15.13 Mt @ 1.13 g/t above a 0.5 g/t cut-off). Based on the results of the 2010 campaign, it is our opinion that Premium should have little trouble in achieving its targeted 1.0 to 1.5 million ounce resource upgrade when a new update is released later in this quarter. This should set the stage for the Company to initiate a Preliminary Economic Analysis (PEA) on this deposit.

PEM is planning to spend some $6 to $8 million in exploration during 2011 which will include an additional 25,000 metres of drilling primarily on the Friday/Petsite target. They also intend on completing ground magnetics, Induced Polarization (IP) surverys and detailed soil geochemistry to define drill targets elsewhere on the belt. We expect that 2011 could yield some exciting new prospects for PEM investors.

Capital Structure

Premium Exploration trades on the TSX-V. The Company has 114.3 million shares outstanding along with 37.8 million share purchase warrants and 8.2 million options outstanding for 160.4 million shares on a fully diluted basis. As at December 31, 2010, we estimate that PEM had $5.0 million in cash.