Paramount Gold & Silver Files Final PEA Report on Its Sleeper Project in Nevada
Study Predicts 17 Year Operation with Average Annual Gold Production of 172,000 Ounces Estimated Pre-Tax NPV of US$695 Million at 5% Discount Rate, IRR of 26.8% at $1384 Gold Resources grow substantially over earlier estimates due to lower cut-off for sulphide materialWINNEMUCCA, NEVADA -- (Marketwire) -- 09/13/12 -- Paramount Gold and Silver Corp. (NYSE MKT: PZG)(NYSE Amex: PZG)(TSX: PZG)(FRANKFURT: P6G)(WKN: A0HGKQ) ("Paramount") announced today that it has filed on SEDAR (www.sedar.com) the final NI-43-101-compliant Preliminary Economic Assessment (PEA) report on its 100%-owned Sleeper Gold Project in Humboldt County, Nevada. The PEA report was prepared by Scott E. Wilson Consulting Inc. ("SEWC") using resource and geologic information developed by SRK Consulting (Chile) S.A. ("SRK").
The PEA confirms that the Sleeper Gold Project represents an excellent economic opportunity in the current gold price environment with significant upside potential. (http://www.paramountgold.com/_docs/PreliminaryEconomicAssessment092012.pdf)
In their analysis, SEWC evaluated two distinct development scenarios: (i) a heap leach only operation consisting of large-scale open pit mining, followed by standard heap leaching with a carbon-in-column and ADR recovery plant, for all oxide and suitable sulphide material; and (ii) a combined heap leach and conventional milling option consisting of large-scale open pit mining followed by standard heap leaching for all oxide material and conventional milling for suitable sulphide material.
SEWC has concluded that the most attractive development scenario at this stage for Sleeper consists 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. A "heap leach only" base case scenario was developed for the project incorporating 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$1384 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 of 26.8%. At US$1618 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%.
Global Mineral Resources Increase Substantially
In September 2011, SRK completed a National Instrument 43-101-compliant global resource estimate for the Sleeper project (see news release dated September 13, 2011 for details). The Sleeper database used for SRK's resource estimate includes more than 4,000 reverse circulation and core drill holes, as well as historical surface mapping and interpretations, to create a comprehensive lithological and structural model over the entire deposit. Additionally, data from more than 378,000 blast holes, collected while the project was in operation, were utilized to define trends, orientations and inclinations for the principal mineral zones. In their analysis, SRK estimated mineral resources for oxide and sulphide material separately, and reported these resources at various cut-off grades. The resource estimate prepared by SRK, in the form of the resource block model, was used by SEWC as the basis for determining mineable mineralization in the PEA.
In its initial news release on the PEA results of July 30, 2012, Paramount reported estimated resources at a gold cut-off grade of 0.1 g/t for oxide material and 0.2 g/t for sulfide material. Subsequent to this release, SEWC has advised that, in its opinion, it is appropriate to report both oxide and sulphide resources using the same cut-off grade of 0.1 g/t of gold and the project's global resource estimate has therefore been revised upward in the final PEA report (see table below). The effect of this restatement is to increase the measured and indicated global resource by 428,000 ounces of gold (a 14% increase) and the inferred resource by 592,000 ounces of gold (a 42% increase). Measured and indicated silver resources in this restatement have risen nearly 25% and inferred silver resources climbed by nearly 66%.
Using a long term gold-silver price ratio of 1-to-60, the global resource for Sleeper at a 0.1 cut-off grade for gold now equates to 4.156 million gold equivalent ounces in the measured and indicated category and 2.313 million gold equivalent ounces as inferred.
National Instrument 43-101-compliant global mineral resources estimated by SRK at a cut-off grade of 0.1 grams of gold per tonne for oxide and sulfide material are as follows:
Global Measured Resources
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Material Tonnes (000) Au Grade Au ('000 Oz) Ag Grade Ag ('000 Oz)
Type (g/T) (g/T)
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Oxide 51,140 0.30 493 3.69 6,067
Sulphide 116,343 0.37 2,000 4.21 22,516
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Total 217,483 0.36 2,493 4.09 28,583
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Global Indicated Resources
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Material Type Tonnes Au Grade Au ('000 Ag Grade Ag ('000
(000) (g/T) Oz) (g/T) Oz)
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Oxide 21,252 0.24 164 3.69 2,521
Sulphide 88,228 0.29 819 3.35 9,503
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Total 109,480 0.28 985 3.42 12,024
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Global Measured Plus Indicated Resources
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Material Tonnes Au Grade Au Ag Grade Ag
Type (000) (g/T) ('000 Oz) (g/T) ('000 Oz)
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Oxide 72,392 0.28 659 3.69 8,588
Sulphide 254,571 0.34 2,820 3.91 32,018
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Total 326,963 0.33 3,479 3.86 40,606
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Global Inferred Resources
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Material Type Tonnes Au Grade Au Ag Grade Ag
(000) (g/T) ('000 Oz) (g/T) ('000 Oz)
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Alluvial 152 1.96 10
Oxide 29,635 0.23 214 3.18 3,030
Sulphide 171,423 0.28 1,532 2.85 15,708
Mine Dumps(i) 22,414 0.30 216 2.39 1,712
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Total 223,624 0.27 1,972 2.84 20,450
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(i) SEWC Estimated old mine dumps NI 43-101 resource based on 9 Sonic 65
Reverse circulation drill holes performed by Paramount in 2011 and 2012 on
the mine dumps.
In its work, SEWC determined which portions of the global resource could reasonably be included as an in-pit resource for the purposes of the PEA, based on pit design and the selected extraction method. SEWC determined that most of the high grade material from West Wood deposit does not currently meet the standard for economic viability within a heap leach configuration. Further metallurgical testing and the assessment of other recovery alternatives could potentially bring this valuable resource into the in-pit resource.
Estimated In-Pit Resource and Mine Planning
The average grade of the Sleeper mineral resources is relatively low, which dictates a different mining approach than previously employed in exploitation of the high grade mineralization at the Sleeper Mine during the 1980s. These low grades, which are now being mined successfully elsewhere in Nevada, appear to be economically viable in combination with the current high gold price environment and low operating costs that could result from large surface mining throughputs. This mining approach is the basis of the analysis and evaluation developed by SEWC for the PEA.
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. Whittle pit optimization was performed using estimates of operating costs typical of operating surface mines using heap leach processing in northern Nevada, and using estimates of metallurgical recovery based on test work performed on Sleeper core and waste dump material and consideration of historical operating results for heap leaching at the original Sleeper mine. The ultimate pit shell was determined using a gold price of $1,300 per ounce. In-pit resources and mineralized dumps used for production scheduling are as follows:
IN-PIT RESOURCE
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Resource Mineralized
Category Material Gold Silver Silver
(000s Gold Grade (000s of Grade (000s of
Tonnes) (g/t) ounces) (g/t) ounces)
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Measured 194,450 0.34 2,090 3.59 22,500
Indicated 90,050 0.27 790 3.26 9,400
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Measured and
Indicated 284,500 0.32 2,880 3.49 31,900
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Inferred 136,000 0.27 1,196 2.95 12,900
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The estimated strip ratio for the economic pit is 1.08.
Paramount notes that the PEA incorporates inferred mineral resources which are considered too geologically speculative to have the 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 PEA will be realized.
Paramount's CEO Christopher Crupi commented: "This PEA demonstrates that the Sleeper Gold Project can once again be a successful gold and silver producer. The PEA estimates relatively low start-up capital and unit operating costs which make Sleeper a valuable opportunity, especially in the present gold price environment and considering our proximity to existing infrastructure. Paramount is now focused on improving the project's economics. We are proceeding with additional drilling in close to the designed pit where we are confident we can find higher grade material to generate higher estimated cash flows and extend mine life. We are also planning further metallurgical test work which could enable us to include the West Wood higher grade deposit as in-pit resources in the next engineering study which could be at the Preliminary Feasibility level required for reporting reserves."
About the Sleeper Gold Project
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.
National Instrument 43-101 Disclosure
The PEA for the Sleeper project was prepared by Scott E. Wilson Consulting Inc. ("SEWC") under the direction of Scott E. Wilson, CPG and incorporates the work of a number of industry-leading consultants, all of which are Qualified Persons (as defined under National Instrument 43-101) and are independent of Paramount. Each of the consultants has reviewed and approved this news release.
About Paramount
Paramount 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 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 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 consistent with 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.
Cautionary Note to U.S. Investors Concerning Estimates of Indicated and Inferred Resources
This news release uses the terms "measured and indicated resources" and "inferred resources". We advise U.S. investors that while these terms are defined in, and permitted by, Canadian regulations, these terms are not defined terms under SEC Industry Guide 7 and not normally permitted to be used in reports and registration statements filed with the SEC. "Inferred resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of a feasibility study or prefeasibility studies, except in rare cases. The SEC normally only permits issuers to report mineralization that does not constitute SEC Industry Guide 7 compliant "reserves", as in-place tonnage and grade without reference to unit measures. U.S. investors are cautioned not to assume that any part or all of mineral deposits in this category will ever be converted into reserves. U.S. investors are cautioned not to assume that any part or all of an inferred resource exists or is economically or legally minable.
Safe Harbor for Forward-Looking Statements:
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 Sleeper Preliminary Economic Assessment referred to above incorporates inferred mineral resources which are considered 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 Sleeper PEA will be realized.
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 completion of a Preliminary Feasibility Study, other 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 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 Information Form filed with SEDAR in Canada (available at www.sedar.com) and in the Corporation's Annual Report Form 10-K filed with the U.S. Securities and Exchange Commission on EDGAR (available at www.sec.gov/edgar.shtml). 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.
Glen Van Treek, VP Exploration
Chris Theodossiou, Investor Relations
866-481-2233
