ENP Newswire - 06 May 2014
Release date- 02052014 - Winnemucca, Nevada - Paramount Gold and Silver Corp. (NYSE/TSX: PZG) (Frankfurt: P6G) (WKN: A0HGKQ) reported today that a new set of structures has been discovered to the south of the richly endowed Guazapares Megastructure on its 100%-owned San Miguel Project and preliminary drilling has intersected sizeable widths of high-grade precious metals.
The 7.5 km. long Guazapares Megastructure on the San Miguel property is one of the longest continuously mineralized corridors in the Sierra Madre Metallogenic Belt, consisting of quartz veins and stock works hosting a number of connected deposits stretching from La Veronica in the north, through the La Union area, to Santa Clara in the south.
The new zone, named Sota Del Oro, adds approximately 2.5 kilometers of prospective strike to the known Guazapares corridor. The new structure was recognized last year by Paramount's geology team in surface alteration mapping and sampling of a sub-parallel zone that appears to run northwest and obliquely to the main corridor before joining the La Union area (see map below).
Preliminary drilling tested gold and silver enrichment at depth, the true width of the structure, its orientation and dip. Initial results were prolific but also complex-multiple structures were intersected in a number of the 10 holes drilled to date with intervals grading up to 12.0 g/T of gold and up to 3,335 g/T of silver (almost 100 ounce per ton of silver).
Eight of the 10 holes returned strong precious metal values. Outstanding results were obtained in drill hole LU-85 with an interval of 15 meters grading 1.46 g/T of gold and 646 g/T (almost 20 opt silver), representing a 12.23 g/T gold equivalent at a 1 to 60 gold-to-silver ratio.
Drill hole LU-79 intersected many narrow structures and one large intercept of 27.6 meters grading 1.39 g/T of gold and 49.6 g/T of silver, a 2.23 g/T gold equivalent grade. These 10 core drill holes were drilled over a strike length of 450 meters. However, almost 2 kms of prospective structure still remain to be tested. Paramount has paused the drilling in this new area to model the geology and structure three-dimensionally in order to understand the primary controls on high-grade metal deposition and plan a follow up drill program.
Paramount CEO Christopher Crupi commented that, 'the new structure has all the characteristics of a major discovery. The style, grade and pervasive nature of the mineralization make it similar to La Union-the best deposit found to date at San Miguel-but with the potential for greater size. We look forward to resuming our drilling as soon as we have modeled the data we now have.'
San Miguel Project PEA
The PEA was prepared by Metal Mining Consultants ('MMC') of Denver, Colorado incorporating a resource model developed by Mine Development Associates (www.mda.com). The PEA confirms that the San Miguel Project represents an unusually robust economic opportunity to develop a low cost mine in the prolific Sierra Madre belt in Mexico.
In their analysis, MMC proposed a 4,000 tonnes per day mill fed by open pits and underground mines, resulting in a projected 14 year operation with total metal production of 803,000 ounces of gold and 43.2 million ounces of silver (1,637,000 ounces of gold equivalent at the base case gold-to-silver price ratio of 51.7 to 1).
Start-up capital costs including working capital are estimated at $243 million. Sustaining capital costs over the project's life are projected to be an additional $227 million. With $70.3 million in contingencies, total life-of-mine capital costs are estimated at $540 million. Projected life-of-mine average cash operating costs are $512 per ounce of equivalent gold recovered. The total cost of production (including cash operating costs and total capital and contingency costs over the life of the mine) is estimated at US$842 per ounce of gold equivalent, which compares favorably with current producers in the region.
At a gold price of $1500 per ounce and a silver price of $29 per ounce (the 3 year trailing average of gold and silver prices at the end of January 2013), the San Miguel PEA estimated a $1.1 billion pre-tax net cash flow, a $707 million pre-tax net present value at a 5% discount rate and a highly accretive internal rate of return of 33.2%.
Note that the PEA incorporates inferred mineral resources which are considered to be too geologically speculative to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and, as such, do not have demonstrated economic viability. There can be no certainty that the estimates contained in the PEA will be realized.
The Preliminary Economic Assessment led by Scott E. Wilson Consulting Inc. (renamed Metal Mining Consultants at www.metalminingconsultants.com) and originally released on July 30, 2012, specifies a development scenario for Sleeper consisting of a large-scale open pit mining operation with a heap leach processing plant handling both oxide and sulphide material, producing a gold-silver dore.
The base case scenario incorporates an 81,000 tonnes per day operation (approximately 30 million tonnes per year throughput), resulting in a projected 17 year operation with average annual production of 172,000 ounces of gold and 263,000 ounces of silver. Projected life-of-mine average cash operating costs are US$767 per ounce of equivalent gold recovered. Start-up capital costs for this project scenario are estimated at US$346 million. Sustaining capital costs over the project's life are estimated at an additional $278 million.
Total capital cost contingencies over the project life are estimated at an additional $64 million, bringing the total life of mine capital costs to $688 million. The total cost of equivalent gold production (including cash operating costs and total capital and contingency costs over the life of the mine) is estimated at US$996 per ounce.
At a gold price of US$1,384 per ounce and a silver price of $26.33 per ounce (the 3 year trailing average of gold and silver prices as at July 3, 2012), the base case has a US$1.2 billion pre-tax net cash flow, a US$695 million net present value at a 5% discount rate and an internal rate of return (IRR) of 26.8%. At US$1,618 gold (the spot price on July 3, 2012), the total pre-tax net cash flow increases by 160% over the base case to US$1.9 billion, the net present value at a 5% discount rate almost doubles to US$1.2 billion and the internal rate of return improves to a robust 40%.
Paramount is a U.S.-based exploration and development company with multi-million ounce advanced stage precious metals projects in northern Mexico (San Miguel) and Nevada (Sleeper). Fully-funded exploration and engineering programs are now in progress at these two core projects which are expected to generate substantial additional value for our shareholders.
The San Miguel Project consists of over 142,000 hectares (over 353,000 acres) in the Palmarejo District of northwest Mexico, making Paramount the largest claim holder in this rapidly growing precious metals mining camp. The San Miguel Project is ideally situated near established, low cost production where the infrastructure already exists for early, cost-effective exploitation. A PEA for San Miguel was completed and announced on February 28, 2013.
The Sleeper Gold Project is located off a main highway about 25 miles from the town of Winnemucca. In 2010, Paramount acquired a 100% interest in the project including the original Sleeper high-grade open pit mine operated by Amax Gold from 1986 to 1996 as well as staked and purchased lands now totaling 2,570 claims and covering about 47,500 acres which stretch south down trend to Newmont's Sandman project. This acquisition is consistent with the Company's strategy of district-scale exploration near infrastructure in established mining camps. A PEA was completed for Sleeper and announced on July 30, 2012.
Safe Harbor for Forward-Looking Statements
This release and related documents may include 'forward-looking statements' including, but not limited to, statements related to the interpretation of metallurgical test results and the potential for heap leaching at San Miguel, future work at the San Miguel Project and the expected results of this work, estimates of resources including expected volumes and grades, the results of the project's PEA and the sufficiency of funding.
Forward-looking statements are statements that are not historical fact and are subject to a variety of risks and uncertainties which could cause actual events to differ materially from those reflected in the forward-looking statements including fluctuations in the price of gold, inability to complete drill programs on time and on budget, and future financing ability.
Paramount's future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable securities laws. Words such as 'believes,' 'plans,' 'anticipates,' 'expects,' 'estimates' and similar expressions should also be considered to be forward-looking statements.
There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including, but not limited to: uncertainties involving interpretation of drilling results, environmental matters, lack of ability to obtain required permitting, equipment breakdown or disruptions, and the other factors described in Paramount's Annual Report on Form 10-K for the year ended June 30, 2013 and its most recent quarterly reports filed with the SEC.