Paramount Gold and Silver Corp. (NYSE
MKT:PZG)(TSX:PZG)(FRANKFURT:P6G)(WKN:A0HGKQ) ("Paramount")
announced today that the Preliminary Economic Assessment ("PEA")
for its 100%-owned San Miguel gold and silver project located in
Chihuahua State, Mexico has been filed on SEDAR. The PEA was
prepared by Metal Mining Consultants ("MMC") of Denver
(http://www.metalminingconsultants.com), formerly Scott E. Wilson
Consulting Inc., a respected engineering team with experience in
mid-size projects like San Miguel.
The PEA resource model was developed by Mine Development
Associates ("MDA") of Reno, Nevada. 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.
Highlights of the PEA include:
-- Low Initial Capital of $232 Million
-- Estimated Average Annual Production of 57,300 ozs. Gold and 3.1 Million
ozs. Silver for 14 Years
-- Estimated Base Case Pre-Tax NPV of US$707 Million at a 5% Discount Rate
and IRR of 33.2%
-- Study confirms outstanding potential to continue adding to resources
MMC concludes that: "Considering the robust economics, coupled
with relatively low start- up capital, significant exploration
upside and a jurisdiction that is favorable for mining, San Miguel
represents a project that has the potential to become a very
successful mine."
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 a 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 MMC notes these costs are "well below
those being experienced by senior, intermediate and junior gold
producers in the current market environment."
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 end
of January 2013), San Miguel has an estimated $1.1 billion pre-tax
net cash flow, a $707 million pre-tax net present value ("NPV") at
a 5% discount rate and a highly accretive internal rate of return
of 33.2%. At recent spot prices of $1600 gold and $33 silver, San
Miguel's projected economics improve to $1.3 billion in pre-tax net
cash flow, $893 million of net present value at a 5% discount rate
and a 39.3% IRR. At recent metal price highs of $1,900 per ounce of
gold and $36 for silver, the estimated NPV rises to $1.2 billion
with a 48.3% IRR.
Mineral Resources
In September 2012, MDA completed a National Instrument 43-101
compliant global resource estimate for the San Miguel project (see
news release dated September 5, 2012). The San Miguel database used
for MDA's resource estimate includes 511 core and reverse
circulation drill holes totaling over 128,000 meters.
MMC has determined that the most suitable mining scenario for
the project is an underground operation for the high grade Don Ese,
a combination of open pit and underground mining for La Union and
San Miguel and open pit extraction for San Antonio and San
Francisco.
A PEA provides a basis to estimate project operating and capital
costs and establish a projection of the potential mineable resource
including measured, indicated and inferred categories as permitted
under National Instrument 43-101. The total exploitable mineral
resources from the MDA model used by MMC to estimate open pit and
underground mining are as follows(i):
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Measured and Indicated Open Pit Resources
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Class Tonnes Ag g/T Ag Oz. Au g/tT Au Oz.
----------------------------------------------------------------------------
San Miguel Measured 91,000 221 644,000 1.6 5,000
San Miguel Indicated 1,698,000 132 7,223,000 0.8 44,000
San Antonio Measured 286,000 103 947,000 -
San Antonio Indicated 2,117,000 118 8,029,000 0.02 2,000
La Union Indicated 541,000 102 1,768,000 0.6 10,000
La Veronica Indicated 113,000 104 377,000 0.2 1,000
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Total M&I 4,846,000 122 18,988,000 0.39 61,000
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Inferred Open Pit Resource
----------------------------------------------------------------------------
Class Tonnes Ag g/T Ag Oz. Au g/T Au Oz.
----------------------------------------------------------------------------
San Miguel Inferred 993,000 63 2,015,000 0.7 21,000
San Francisco Inferred 1,055,000 54 1,816,000 0.7 25,000
La Veronica Inferred 673,000 95 2,059,000 0 2,000
San Antonio Inferred 757,000 129 3,136,000 0.10 1,000
La Union Inferred 623,000 93 1,866,000 0.3 6,000
Monte Cristo Inferred 690,000 70 1,544,000 0.1 2,000
----------------------------------------------------------------------------
Total Inferred 4,792,000 81 12,436,000 0.37 57,000
----------------------------------------------------------------------------
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Measured and Indicated Underground Resources
----------------------------------------------------------------------------
Class Tonnes Ag g/T Ag Oz. Au g/tT Au Oz.
----------------------------------------------------------------------------
Don Ese Indicated 2,277,000 172 12,609,000 2.6 191,000
San Miguel Measured 398,000 102 1,309,000 1.7 22,000
San Miguel Indicated 1,293,000 75 3,122,000 1.9 79,000
La Union Measured 200,000 16.5 106,000 3.7 24,000
La Union Indicated 768,000 25.5 630,000 3.9 96,000
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Total 4,936,000 112 17,776,000 2.60 412,000
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Inferred Underground Resources
----------------------------------------------------------------------------
Class Tonnes Ag g/T Ag Oz. Au g/tT Au Oz.
----------------------------------------------------------------------------
Don Ese Inferred 2,179,000 149 10,462,000 2.5 176,000
San Miguel Inferred 797,000 66 1,695,000 1.8 47,000
La Union Inferred 942,000 23.5 711,000 3.5 106,000
----------------------------------------------------------------------------
Total Inferred 3,918,000 102 12,868,000 2.61 329,000
----------------------------------------------------------------------------
(i) rounding may cause discrepancies
Note: Mineral resources that are not mineral reserves do not
have demonstrated economic viability. The PEA also 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.
Metallurgy & Processing
MMC concluded that test work performed at McClelland
Laboratories Inc. in Sparks, Nevada, has provided a reliable basis
for deriving gold and silver recoveries for each of the deposits
included in this PEA. MMC used gold and silver recoveries specific
to each of the deposits. Overall, gold recoveries exceeded 90
percent and silver recoveries averaged above 70 percent in cyanide
leach bottle roll tests at a grind of 74 microns. Estimates of
cyanide and lime consumptions have also been obtained from the test
work and were used to develop the processing methodology. The
economic scenario defined by MMC incorporated a conventional 4,000
tonne per day mill facility followed by agitated cyanide leach in
tanks with a Merrill Crowe recovery circuit which would produce a
dore bar.
Mine Planning
The PEA recommends combined conventional open pit and
underground mining operations. The recommended open pit mining
method is conventional drilling and blasting with mineralized
material and overburden loaded into rigid frame haul trucks.
Mechanized underground mining would be from sublevel open stoping
with delayed backfilling. A vertical mining sequence was assumed
based on panels defined by local bottom elevations from which
vertical overhand mining would proceed. Where required, the panel
bottom was assumed to be filled with cemented rockfill, to create
intermediate sills to allow underlying panels to be developed later
in the production schedule as mining advanced vertically downward.
The majority of stope backfilling would use uncemented development
waste (unmineralized material) or open pit waste backhauled from
the surface. These mining methodologies are in common use in this
region of Mexico.
Key production statistics are as follows:
----------------------------------------------------------------------------
Open Pit Underground
----------------------------------------------------------------------------
Mined Mineralization (000 tonnes) 9,637 8,855
----------------------------------------------------------------------------
Mined Resource Classification:
Measured (% of tonnes mined) 4 7
Indicated (% of tonnes mined) 46 49
Inferred (% of tonnes mined) 50 44
----------------------------------------------------------------------------
Contained Ag (000 ounces) 31,423 30,643
Contained Au (000 ounces) 118.3 741.1
----------------------------------------------------------------------------
Strip ratio (waste:ore) or UG 7.69 2.54
Unmineralized:Mineralized
Material ratio
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Annual Gold Production (oz) 57,300
----------------------------------------------------------------------------
Process Gold Recovery (average) 93%
----------------------------------------------------------------------------
Annual Silver Production (oz) 3,082,500
----------------------------------------------------------------------------
Process Silver Recovery (average) 70%
----------------------------------------------------------------------------
Capital Costs
Capital costs were developed based on scaling costs from similar
facilities with comparable production rates and from design basis
assumptions. The costs are collected in three separate categories;
(1) Initial capital (construction costs to initiate mining
operations including EPCM, pre-stripping and start-up working
capital), (2) Sustaining capital (costs due to delayed construction
of the underground mines below open pit, plus additions to the
mobile mining equipment fleet and equipment rebuilds, and (3)
Contingency estimates. The estimated capital costs are as
follows:
----------------------------------------------------------------------------
Capital Category Millions
----------------------------------------------------------------------------
Initial Capital $243.1
----------------------------------------------------------------------------
Sustaining Capital $227.3
----------------------------------------------------------------------------
Contingency $70.3
----------------------------------------------------------------------------
Total Capital Expenditures $540.7
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Operating Costs
Operating costs are based on similar mining operations in the
immediate area of San Miguel and on information from other mining
operations in North America using similar mining methods. Operating
cost estimates are as follows:
----------------------------------------------------------------------------
$/Tonne
----------------------------------------------------------------------------
Open Pit Waste Mining $1.59
----------------------------------------------------------------------------
Open Pit Ore Mining $1.59
----------------------------------------------------------------------------
Open Pit Mining per tonne processed $14.16
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Underground Drifting $39.00
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Underground Drop Raise $27.75
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Underground Stoping $27.75
----------------------------------------------------------------------------
Underground Mining per tonne processed $37.41
----------------------------------------------------------------------------
Mill Processing $13.75
----------------------------------------------------------------------------
Administration $5.00
----------------------------------------------------------------------------
Reclamation per tonne/processed $1.62
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Total Operating Cost per tonne/processed $45.31
----------------------------------------------------------------------------
Economic Analysis
The base case economic evaluation used historical three-year
trailing averages for gold and silver prices This approach is
consistent with the guidance of the United States Securities and
Exchange Commission, is accepted by the Ontario Securities
Commission and is industry standard. A second case was prepared
using recent spot prices for gold and silver. The pre-tax results
for the base case and spot case are as follows:
----------------------------------------------------------------------------
Base Case Spot Case
----------------------------------------------------------------------------
Gold Price Per Ounce $1,500 $1,600
Silver Price Per Ounce $29 $33
----------------------------------------------------------------------------
Net Cash Flow $1.1 billion $1.3 billion
----------------------------------------------------------------------------
NPV @ 5% Discount Rate $707 million $893 million
----------------------------------------------------------------------------
Internal Rate of Return 33.2% 39.3%
----------------------------------------------------------------------------
Operating Costs Per Ounce of Gold
Equivalent Produced (life of mine) $512 $495
----------------------------------------------------------------------------
Total Costs Per Ounce of Gold
Equivalent Produced (includes amortized
capital costs) $842 $814
----------------------------------------------------------------------------
Infrastructure
The development of mining and processing infrastructure was
defined in a conceptual plan that was based on a central processing
facility with an associated tailings storage facility. Individual
open pit mines would be developed as satellite production
operations with mineralized material transported to the process
site by haul truck. A main electrical power line and power center
would be developed at the process facility, with individual power
lines going to the underground mining operations at Don Ese, San
Miguel and La Union. Each underground mining operation would have
separate infrastructure including offices, warehouse, equipment
shop, change house, shotcrete plant, cemented fill plant, explosive
storage and fuel storage. Underground mines would have separate
ventilation and dewatering systems because of their location remote
from each other. Access/haul roads would be developed to each
mining operation. It is assumed that personnel for the mining
operation would live in the local communities or the Town of
Temoris and that no camp facility would be constructed.
Please click here to see a map of the proposed milling site and
zone locations.
National Instrument 43-101 Disclosure
The PEA for the San Miguel project was prepared by Metal Mining
Consultants of Denver, Colorado and incorporates the work of its
professional Geologists, Metallurgist and Mining Engineers who are
Qualified Persons in their areas of expertise as defined under
National Instrument 43-101. Resource estimates and block models
were developed by Michael Gustin of MDA Reno who is also a
Qualified Person. Patricia Aguayo from Hermosillo, Mexico has
advised on environmental planning and regulations in Mexico. All
persons involved are independent of Paramount. Each of these
consultants has reviewed and approved this news release.
About Paramount Gold
Paramount Gold is a U.S. based exploration and development
company with multi-million ounce advanced stage precious metals
projects in Nevada (Sleeper) and northern Mexico (San Miguel).
Fully funded exploration programs are now in progress at these two
core projects which are expected to generate substantial additional
value for our shareholders.
The 100% owned San Miguel Project consists of over 142,000
hectares (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 current work program at
San Miguel is part of Paramount's strategy of expanding and
upgrading known, large-scale precious metal occurrences in
established mining camps, defining their economic potential and
then partnering them with nearby producers. The San Miguel Project
is ideally situated near established, low cost production where the
infrastructure already exists for early, cost-effective
exploitation. Paramount also owns 100% of the Sleeper Gold Project
which is emerging as one of Nevada's largest new undeveloped gold
resources.
Cautionary Note to U.S. Investors Concerning Estimates of
Indicated and Inferred Resources
All resource estimates reported by the Corporation were
calculated in accordance with the Canadian National Instrument
43-101 and the Canadian Institute of Mining and Metallurgy
Classification system. These standards differ significantly from
the requirements of the U.S. Securities and Exchange Commission.
Mineral resources which are not mineral reserves do not have
demonstrated economic viability. In particular, Paramount notes
that the San Miguel Preliminary Economic Assessment referred to
above incorporates inferred mineral resources which are considered
to be too geologically speculative to have economic considerations
applied to them that would enable them to be categorized as mineral
reserves. Therefore, Paramount advises that there can be no
certainty that the estimates contained in the San Miguel PEA will
be realized.
Safe Harbor for Forward-Looking Statements
This document contains "forward-looking information" within the
meaning of Canadian securities legislation and "forward-looking
statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995. This information and
these statements, referred to herein as "forward-looking
statements", are made as of the date of this document.
Forward-looking statements concerning the expected design, economic
viability or performance of the San Miguel project as set out in
the PEA, the completion of goals or objectives, or the completion
of work programs, relate to future events or future performance and
reflect current estimates, predictions, expectations or beliefs
regarding future events and include, but are not limited to,
statements with respect to: (i) the amount and category of mineral
resources; (ii) the amount of future production over any period;
(iii) cumulative pre-tax net cash flow of the proposed mining
operation; (iv) capital costs; (v) operating costs; (vi) mining
rates; (vii) mine life; and (vii) planned expenditures. Any
statements that express or involve discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives,
assumptions or future events or performance (often, but not always,
using words or phrases such as "expects", "anticipates", "plans",
"projects", "estimates", "envisages", "assumes", "intends",
"strategy", "goals", "objectives" or variations thereof or stating
that certain actions, events or results "may", "could", "would",
"might" or "will" be taken, occur or be achieved, or the negative
of any of these terms and similar expressions) are not statements
of historical fact and may be forward-looking statements.
All forward-looking statements are based on Paramount's or its
independent consultants' current beliefs as well as various
assumptions made by them and information available to them on the
date the statements are made. These assumptions include: (i) the
presence of and continuity of metals at the Project at modeled
grades; (ii) the capacities of various machinery and equipment;
(iii) the availability of personnel, machinery and equipment at
estimated prices; (iv) metals sales prices; (v) appropriate
discount rates; (vi) tax rates and royalty rates applicable to the
proposed mining operation; (vii) financing structure and costs;
(viii) anticipated mining losses and dilution; (ix) metals recovery
rates; (x) reasonable contingency requirements; and (xi) receipt of
regulatory approvals on acceptable terms. Although management
considers these assumptions to be reasonable based on information
currently available to it, they may prove to be incorrect. Many
forward-looking statements are made assuming the correctness of
other forward-looking statements, such as statements of cumulative
pre-tax net cash flow, which are based on other forward-looking
statements and assumptions. The cost information is also prepared
using earlier values, but the time for incurring the costs will be
in the future and it is assumed costs will remain stable over the
relevant period.
By their very nature, forward-looking statements involve
inherent risks and uncertainties, both general and specific, and
risks exist that estimates, forecasts, projections and other
forward-looking statements will not be achieved or that assumptions
do not reflect future experience. We caution readers not to place
undue reliance on these forward-looking statements as a number of
important factors could cause the actual outcomes to differ
materially from the beliefs, plans, objectives, expectations,
anticipations, estimates, assumptions and intentions expressed in
such forward-looking statements. These risk factors may be
generally stated as the risk that the assumptions and estimates
expressed above do not occur, but specifically include, without
limitation, risks relating to variations in the mineral content
within the material identified as mineral reserves from that
predicted; variations in rates of recovery and extraction;
developments in world metals markets;, increases in the estimated
capital and operating costs or unanticipated costs; difficulties
attracting the necessary work force; increases in financing costs
or adverse changes to the terms of available financing, if any; tax
rates or royalties being greater than assumed; changes in
development or mining plans due to changes in logistical, technical
or other factors; changes in project parameters as plans continue
to be refined; risks relating to receipt of regulatory approvals;
the effects of competition in the markets in which Paramount
operates; operational and infrastructure risks; and the additional
risks including those described in Paramount's most recent Annual
Report Form 10-K filed with the U.S. Securities and Exchange
Commission on EDGAR (available at www.sec.gov/edgar.shtml) and
SEDAR in Canada (available at www.sedar.com). Paramount cautions
that the foregoing list of factors that may affect future results
is not exhaustive.
When relying on our forward-looking statements to make decisions
with respect to Paramount, investors and others should carefully
consider the foregoing factors and other uncertainties and
potential events. Paramount does not undertake to update any
forward-looking statement, whether written or oral, that may be
made from time to time by Paramount or on our behalf, except as
required by law.
Contacts: Paramount Gold and Silver Corp. Christopher Crupi CEO
866-481-2233 Paramount Gold and Silver Corp. Glen Van Treek VP
Exploration & COO 866-481-2233 Paramount Gold and Silver Corp.
Chris Theodossiou Investor Relations 866-481-2233
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