While GLD, the SPDR Gold Trust, has appreciated over the past year, its performance pales in comparison to Premier Gold Mines (PG.TSX) as well as many other gold stocks. Gold ETFs such as GLD have performed well - posting gains matching the price of gold- but their returns have significantly lagged the performance of shares of Premier Gold and many other small-cap gold stocks. Premier Gold is a Canadian-based company with multiple gold projects and deposits in Canada as well as a joint venture in Mexico. Two of its promising projects are joint ventures with Goldcorp (GG) - the world’s second largest gold mining company.

Over the past 52 weeks, GLD has increased 34% while Premier Gold’s stock has advanced by 134%. The reason for this dramatic difference is both the leverage to the gold price offered by mining shares as well as the continued drilling success Premier has had in discovering and expanding their gold deposits. As the price of gold has reached new all-time highs, demand for gold companies that control high-grade gold deposits has risen materially. This demand has emanated not only from investors, but from large gold mining producers looking to bolster their future production profile by purchasing their smaller counterparts that control advanced-stage development projects.

Merger and acquisition activity has begun to pick up in the gold sector. This fact is evident in yesterday’s acquisition by Goldcorp (GG) of a 70% ownership stake in the El Morro copper-gold project in north-central Chile. El Morro became an attractive takeover candidate due to the high-grade nature of the deposit - one of the most valuable ingredients for a gold company. This acquisition follows Goldcorp’s recent takeover bid for Canplats Resources (CPQ.TSXV) - which controls a high-grade gold deposit located in Mexico.

Importantly, Premier Gold has multiple projects that have demonstrated the presence of high-grade gold. The Canadian-based gold company has been aggressively drilling and building ounces at its Hardrock Project in Northwestern Ontario, Canada in order to define a multi-million ounce gold resource. Over the past six months, Premier Gold has announced a multitude of high-grade gold intersections that further demonstrate the potential at Hardrock. Recent drilling has intercepted a huge 33.33 ounces of gold per ton across 6.6 feet and 1.54 ounces per ton over 25.9 feet.

On December 9, Premier Gold announced several other discoveries which expanded near-surface mineralization along strike to the west at Hardrock. Ewan Downie, Premier Gold’s President and CEO, commented that the “outstanding results that continue to be intersected in both our open pit and underground target zones demonstrate the potential for the Hardrock Project to host a multi-million ounce gold resource that can be moved quickly towards feasibility.”

Just this past week, on January 5, the gold explorer announced that multiple deep drill holes intersected broad zones of high-grade gold mineralization beneath the bottom level of the historically-mined North Zone at Hardrock. Highlights from these results consisted of intercepts of 0.29 ounces per ton of gold across 79.4 feet and 0.25 ounces per ton of gold across 75.1 feet. Premier stated that this drilling confirms that the North Zone deposit is wide open at depth, and went on to state that ongoing work at Hardrock is testing both open pit and underground-type targets. Furthermore, several potential open pit zones have been delineated and will be incorporated into a NI43-101 compliant resource estimate that is expected to be completed in early 2010 (initial open pit resource). Premier Gold also stated that the focus of drilling has now moved towards defining underground-style zones that will be incorporated in an updated resource that is expected in the third quarter of 2010.

Hardrock has the meaningful advantage of extensive infrastructure - an attribute that will boost the profitability of the future gold mine. The location of the deposit will contribute to a lower cost structure due to its close proximity to the Trans-Canada Highway, Trans-Canada Pipeline, and major power lines. The Hardrock project is one of several gold targets being drilled by Mr. Downie’s team - with the gold explorer demonstrating high-grade gold in several districts.

In a recent report titled, “The Next Tier in Golds: Ready to Respond,” Blackmont Capital identified Premier Gold as an emerging gold company poised to become a member of a new class of mid-tier gold miners. The Blackmont team also characterized Premier’s projects as being located in “some of the most established producing and past-producing gold camps in Ontario,” including Red Lake, Geraldton, and Musselwhite. The Blackmont report concentrated on companies with the potential to host world-class multi-million ounce gold deposits.

In addition to Hardrock, Mr. Downie and his team are advancing other Canadian joint venture projects with Goldcorp (GG). The jointly-owned Rahill-Bonanza project is located in a gold-rich belt between Red Lake Gold Mines and the Bruce Channel deposit - which Goldcorp purchased for in excess of $1 billion. As mentioned previously, Goldcorp has been active on the merger and acquisition front with their recent bids for Canplats Resources (CPQ.TSXV) and 70% of El Morro. With a dearth of attractive gold deposits - notably in politically-stable jurisdictions such as Canada - it is likely that Premier Gold will be acquired as large gold producers such as Goldcorp seek to acquire the limited number of world-class gold assets left.

GLD will continue to appreciate if the gold bull market makes it ten consecutive years of higher gold prices in 2010. However, companies such as Premier Gold - while higher risk- offer returns that may be multiples of the appreciation of gold ETFs such as the GLD.