Paramount Gold Nevada Files Technical Report on Pre-Feasibility Study for Grassy Mountain Project in Eastern Oregon
Total cash operating costs of $528 per ounce of gold produced (after silver credits)
Annual average production of 47,000 ounces of gold and 50,000 ounces of silver for 7.25 years
After tax IRR of 28%
WINNEMUCCA, Nev., July 09, 2018 -- Paramount Gold Nevada Corp. (NYSE American:PZG) ("Paramount”) announced today that its National Instrument 43-101-compliant Technical Report containing the recently completed Pre-Feasibility Study (“PFS”) for its 100%-owned Grassy Mountain Gold Project in Eastern Oregon has been filed at www.SEDAR.com as required. The Report demonstrates that the project represents a robust economic opportunity at current gold prices and confirms the information on the PFS released by Paramount on May 24, 2018.
The full Technical Report is available for download at the Company’s website.
Highlights of the PFS include:
- Average mill head grade of 0.206 opt (7.06 g/T) of Au and 0.29 opt (9.94 g/T) of Ag;
- Cash operating costs of $528 per ounce gold1;
- Total costs of $853 per ounce gold1 including initial and sustaining capital;
- After tax IRR of 27.6% and NPV (5%) of $87.8 Million at the base case metal prices2;
- Annual production of approximately 47,000 ounces of gold and 50,000 ounces of silver for 7.25 years;
- Total operating cash-flows of $254 million;
- Capital expenditures of $69.9 million for a 750 ton per day mine and milling operation;
- Total initial capital costs of $110 million including $12.2 million in mine development and pre-production costs, $13.6 million in owners and working capital and $14.2 million in contingencies;
- Payback of 2.5 years from the start of production;
- Measured plus indicated resource containing 1.06 million ounces of Au at 0.034 opt (1.17 g/T3) plus 3.3 million ounces of Ag at 0.107 opt (3.67 g/T); and
- Proven and Probable Reserves4 containing 362,000 ounces of Au at 0.21 opt (7.20 g/T) plus 516,000 ounces of Ag at 0.30 opt (10.3 g/T).
Glen Van Treek, Paramount’s President and CEO, stated that, “We are very confident that our PFS defines a sound, achievable project with exceptional economic parameters. We also see many opportunities to enhance the project’s value. For example, we have identified several highly prospective exploration targets in the immediate area where we expect to be able to add resources and extend mine life. At the same time, we are focussed on the permitting process, particularly with the approval of the remaining baselines studies and the completion of the Consolidated Permit Application to the Oregon Department of Geology and Mineral Industries (“DOGAMI”). I am happy to report that the permitting process is moving ahead on schedule thanks to the continuing co-operation of the regulators.”
The PFS was completed by a group of industry leading consulting firms led by: Mine Development Associates (“MDA”) of Reno Nevada, responsible for the overall study, updating the mineral resource estimate and completing the economic evaluation; Golder Associates (“Golder”), responsible for the geotechnical analysis and related recommendations as well as the tailing storage design; and Ausenco, responsible for processing and infrastructure design, overseeing metallurgical testing, supplemental geotechnical review and analysis, underground mine design and the final mineral reserve estimate. EM Strategies were responsible for all the environmental aspects of the PFS and will continue to coordinate both the federal and state permitting processes.
The Technical Report contains a number of recommendations by the consultants for further optimization of the project which are being evaluated and pursued by Paramount.
Details of the Pre-feasibility outcomes are as follow:
Mineral Resources
Mineralized material is reported under the Canadian Institute of Mining (“CIM”) standards for reporting mineralized material. Grassy Mountain’s “in-pit mineralization” was estimated using the Lerch-Grossman algorithm to define all potentially economic mineralization that could be mined from surface in an open pit configuration. The primary parameters entered by MDA for the in-pit constrained resources, which comprise more than 99% of the total mineral resources, include $1,500/oz of gold and $20/oz silver (typical of industry resource reporting), a 5,000 tonne per day processing rate using a $2.00 per tonne mining cost, $13 per tonne processing cost, and average gold and silver recovery of 80% and 60% respectively. Processing is assumed to consist of crushing, milling and first stage gravity separation followed by Carbon in Leach (“CIL”) recovery resulting in the production of a DORE bar on site. In-pit and underground mineral resources are tabulated below as follows:
MINERAL RESOURCES
| Class | TonsI (millions) | Au (opt) | Au (ozs) | Ag (opt) | Ag (ozs) |
| Measured | 17.93 | 0.020 | 363,000 | 0.079 | 1,409,000 |
| Indicated | 12.89 | 0.054 | 695,000 | 0.146 | 1,882,000 |
| Measured + Indicated* | 30.82 | 0.034 | 1,058,000 | 0.107 | 3,291,000 |
| Inferred | 1.06 | 0.040 | 42,000 | 0.119 | 125,000 |
| I in imperial tons | |||||
| *Grassy Mountain mineral resources are inclusive of the mineral reserves. | |||||
MINERAL RESOURCES
| Class | TonnesII (millions) | Au (g/T) | Au (ozs) | Ag (g/T) | Ag (ozs) |
| Measured | 16.27 | 0.69 | 363,000 | 2.71 | 1,409,000 |
| Indicated | 11.69 | 1.85 | 695,000 | 5.01 | 1,882,000 |
| Measured + Indicated* | 27.96 | 1.17 | 1,058,000 | 3.67 | 3,291,000 |
| Inferred | 0.96 | 1.37 | 42,000 | 4.08 | 125,000 |
| II in metric tonnes | |||||
| *Grassy Mountain mineral resources are inclusive of the mineral reserves. | |||||
Mineral Reserves
Proven and Probable Mineral Reserves are reported using a CIM standard and were based on all defined parameters in the PFS using Measured and Indicated Resources. Reserves are estimated for an underground mining operation with defined portal access and decline development to access the mineralized material. Initial economic material was defined using an underground stope size of 13 ft. high by 20 ft. wide and 20 ft. long and a cut-off grade of 0.103 opt Au (3.53 g/T Au) was also initially estimated using the following parameters:
| Cost Item | Value | Units | ||
| UG Mining Costs | $ 80.00 | $/ton Processed | ||
| Surface Re-handle | $ 0.16 | $/ton Processed | ||
| Process Costs | $ 30.00 | $/ton Processed | ||
| G&A Costs | $ 11.11 | $/ton Processed | ||
| Total Operating Costs | $ 121.27 | $/ton Processed | ||
| Refining Cost | 5.00 | $/oz Au Recovered | ||
| NSR Royalty | 1.50% | |||
| Gold Recovery | 94.50% | |||
| Gold Price | $ 1,275 | $/oz of Au | ||
Reserves are reported using Measured and Indicated resources inside the defined mining stopes, including 5% of ore lost and external dilution from Measured and Indicated resources.
MINERAL RESERVES
| Class | Tonsa (millions) | Au (opt) | Au (ozs) | Ag (opt) | Ag (ozs) |
| Proven | 0.23 | 0.191 | 43,000 | 0.27 | 62,000 |
| Probable | 1.49 | 0.214 | 319,000 | 0.30 | 454,000 |
| Proven & Probable | 1.72 | 0.210 | 362,000 | 0.30 | 516,000 |
| a in imperial tons |
MINERAL RESERVES
| Class | Tonnesb (millions) | Au (g/T) | Au (ozs) | Ag (g/T) | Ag (ozs) |
| Proven | 0.21 | 6.55 | 43,000 | 9.26 | 62,000 |
| Probable | 1.35 | 7.34 | 319,000 | 10.29 | 454,000 |
| Proven & Probable | 1.56 | 7.23 | 362,000 | 10.29 | 516,000 |
| b in metric tonnes |
Mine Plan and Production
The mine plan was developed using a drift and fill up-raising mining methodology. A cut-off grade of 0.103 opt of Au (~3.53 g/T of Au) was used to define economic stopes. Ore processing from the upper portion of the mine is expected to commence concurrently with the completion of the processing plant and infrastructure. The construction of the decline will continue to the bottom of the mine for an additional 10-month period. Following ramp up, the mine is expected to produce an average of 1,300 to 1,400 tonnes per day, 4 days a week, which will provide enough material for the 750 ton per day mill and processing plant to operate at full capacity for 7 days a week.
Stope size and support were defined by Ausenco’s geotechnical group using geotechnical work and consideration provided by Golder coupled with additional geotechnical and stopes stability analysis conducted by Ausenco. Depending on the rock quality, the support and reinforcement will include bolts, steel nets and shotcrete. Mine methodology is based on primary drifts intercalated with secondary drifts. Primary drifts once mined will be back filled with cemented rock fill (“CRF”), and once the fill is cured the adjacent secondary drift can be mined and later filled with run-of-mine waste from a surface borrow source. Approximately 46% of the tons are coming from primary drifts and 54% from the secondary ones. The mine plan includes 5% of ore lost and approximately 10% dilution.
SUMMARY OF PROCESSED ORE
| Processed Ore | Total | Yr-1 | Yr-2 | Yr-3 | Yr-4 | Yr-5 | Yr-6 | Yr-7 | Yr-8 |
| Tons (000’s) | 1,759 | 217 | 274 | 274 | 275 | 274 | 274 | 154 | 18 |
| Au (opt) | 0.206 | 0.201 | 0.266 | 0.205 | 0.184 | 0.196 | 0.215 | 0.139 | 0.241 |
| Au (000’s of ozs) | 362 | 44 | 73 | 56 | 51 | 54 | 59 | 21 | 4 |
| Ag (opt) | 0.293 | 0.25 | 0.28 | 0.29 | 0.26 | 0.29 | 0.34 | 0.34 | 0.28 |
| Ag(000’s of ozs) | 517 | 55 | 77 | 79 | 73 | 81 | 94 | 53 | 5 |
| Au recovery | 94.2% | 94.1% | 95.2% | 94.2% | 93.7% | 94.0% | 94.4% | 92.3% | 94.8% |
| Au recovered (000’s of ozs) | 340 | 41 | 69 | 53 | 47 | 50 | 56 | 20 | 4 |
| Ag Recovery | 70.1% | 66.2% | 68.9% | 69.6% | 67.5% | 70.2% | 73.8% | 73.9% | 69.0% |
| Ag recovered (000’s of ozs) | 362 | 36 | 53 | 55 | 49 | 57 | 69 | 39 | 4 |
Metallurgy and Process
Ausenco`s metallurgists and process design engineers evaluated and reviewed extensively the previously completed metallurgical testing. They concluded that the best and most effective process was a first stage of gravity concentration of ground material and a subsequent leaching circuit of the gravity tails in a CIL circuit. Analysis of additional material collected during the 2016-2017 drilling campaign was used to define recoveries. Analysis shows that recovery is primarily and best correlated with grade. Ausenco provided a recovery relationship between grade and recovery and this relationship was incorporated into the mine plan on a monthly basis to provide the most accurate representation of the recovered gold. Additionally, Ausenco defined maximum and minimum gold recoveries whereby this relationship can be used as the most accurate for the Grassy Mountain design process flowsheet. Overall recovery for the life of mine is estimated to average 94.2 % for gold and 70.1 % for silver.
Total operating costs were estimated at $27.55 per ton of ore processed for a gravity concentration followed by a CIL and ADR (Absorption, Desorption and Recovery) plant.
| Item | Total Costs (000’s of $/year) | Total Costs (%) | Mill Feed ($/t) | |
| Fixed Costs | ||||
| Labor | 3,315 | 44% | 12.11 | |
| General Maintenance | 459 | 6% | 1.68 | |
| Sub-total (Fixed Costs) | 3,774 | 50% | 13.79 | |
| Variable Costs | ||||
| Power | 1,487 | 20% | 5.43 | |
| Reagents & Operating Consumables | 1,800 | 24% | 6.58 | |
| Maintenance Consumables | 479 | 6% | 1.75 | |
| Sub-total (Variable Costs) | 3,767 | 50% | 13.76 | |
| TOTAL | 7,541 | 100% | 27.55 | |
| Note: Rounding may cause apparent discrepancies. | ||||
Capital Costs
Grassy Mountain is located on both private and federal land with no services. The Grassy Mountain Project will require an upgrade of the access road to be suitable for additional traffic. Electricity will be provided by Idaho Power, from the Hope substation in Malheur County, through the construction of a power line that will bring power to site, increasing efficiency while being environmentally conscious as compared to the alternative of an on-site diesel generator. Tailings disposal during the life of mine will be constructed in two stages, however a total of four stages have been designed in order to accommodate potential mine life expansion whereby additional ore will be processed. The processing plant will consist of a crushing facility, gravity separation, CIL processing of the gravity tails, resulting in a mill processing capacity of 750 tons per day. Capital costs were estimated using all new equipment. Substantial savings in capital could be achieved by sourcing used equipment which is plentiful in the western U.S.
The primary capital costs are highlighted in the following table:
| Initial (000’s of $US) | Sustaining (000’s of $US) | TOTAL (000’s of $US) | |
| Mining Capital | 2,928 | 1,399 | 4,328 |
| Buildings & Site Infrastructure | 12,787 | - | 12,787 |
| Process Capital | 25,935 | - | 25,935 |
| Tailings Storage Facility | 8,215 | 5,026 | 13,241 |
| Plant & Infrastructure Indirect | 9,691 | - | 9,691 |
| Off-Site Power and Access | 10,328 | - | 10,328 |
| Subtotal Infrastructure & Equipment | 69,885 | 6,426 | 76,311 |
| Mine Development | 7,640 | 1,799 | 9,439 |
| Mine Pre-Production | 4,598 | - | 4,598 |
| Subtotal Mine Pre-Production | 12,238 | 1,799 | 14,037 |
| Owner's Capital | 7,005 | (4,142) | 2,863 |
| Other Capital | 2,092 | 166 | 2,259 |
| Working Capital | 4,464 | (4,464) | - |
| Subtotal Other Capital | 13,561 | (8,439) | 5,122 |
| Subtotal | 95,684 | (214) | 95,470 |
| Contingency | 14,195 | 1,282 | 15,477 |
| Total Capital | 109,880 | 1,067 | 110,947 |
Note: Negative owner’s capital is due to assumption that bonding uses a surety bond and that the 2/3rds of the bond amount paid at the start of the project can be released after 3 years of mining. Negative working capital is due to the return of initial working capital once the operating cash-flow becomes positive.
Operating Costs
Total cash operating costs per ounce of payable gold are estimated at $528.12 (after silver credits). Cost per ton processed over the life of mine are estimated at $105.63 per ton of ore. Details of all operating costs are outlined below:
| Life-of-Mine Cost (000’s of $US) | Cost/ton Processed ($US) | Cost per Oz Au * ($US) | |
| Mining | 114,969 | 65.37 | 326.81 |
| Processing | 49,332 | 28.05 | 140.23 |
| G&A | 15,275 | 8.68 | 43.42 |
| Reclamation | 6,213 | 3.53 | 17.66 |
| Total | 185,789 | 105.63 | 528.12 |
| *Assumes silver credit | |||
Economic Analysis
A base case for the economic analysis was performed at gold and silver prices of $1,300 and $16.75 per ounce respectively. The base case scenario provides a post-tax IRR of 28% and a NPV (5%) of $88 million.
| Base Case | Upside Case | Lower Case | |
| Gold Price ($/oz) | 1,300 | 1,500 | 1,200 |
| Silver Price ($/oz) | 16.75 | 19.33 | 15.46 |
| Cash Operating Cost Per Au Ounce 1 | $ 528 | $ 528 | $ 528 |
| Total Cost Per Ounce Au (includes all capital)1 | $ 853 | $ 853 | $ 853 |
| Internal Rate of Return | 27.6 % | 37.8 % | 22.1 % |
| Net Present Value (5%) ( 000’s of USD’s) | $ 87,754 | $ 133,243 | $ 64,871 |
| Net Present Value (8%) ( 000’s of USD’s) | $ 70,621 | $ 112,050 | $ 49,714 |
| Net Present Value (10%) ( 000’s of USD’s) | $ 60,455 | $ 99,499 | $ 40,714 |
| Payback from start of production (years) | 2.51 | 1.97 | 2.91 |
| 1 After silver credits |
Methods and Parameters Relevant to the Resource Estimation
The gold and silver mineral resources at Grassy Mountain were modeled and estimated by:
- evaluating the drill data statistically;
- separately interpreting gold and silver mineral domains on a set of 070°-looking cross sections spaced at 50-foot intervals;
- rectifying the cross-sectional mineral-domain interpretations on level plans spaced at 10-foot vertical intervals and using these plans to code a block model;
- analyzing the modeled mineralization spatially and statistically to aid in the establishment of estimation and classification parameters; and
- interpolating grades into the block model using the coding of the level-plan gold and silver mineral domains to constrain the estimation.
Resources with a reasonable expectation of potential extraction by open-pit methods are constrained to lie within an optimized pit. Additional parameters used in the optimization to those provided above include a general and administrative (G&A) cost of $2.22 per ton processed and a refining cost of $5.00 per ounce produced. The in-pit resources were then tabulated by the application of a gold-equivalent cut-off of 0.012 opt. The gold-equivalent grades were determined as follows: gold grade + (silver grade ÷ 100).
The effective dates of the mineral resources and mineral reserves are May 1, 2018.
NI 43-101 Disclosure
The metallurgical analysis and process design were completed and reviewed by Tommaso Roberto Raponi of Ausenco, a Qualified Person (as defined under National Instrument 43-101) and is independent of Paramount Gold Nevada Corp.
The development of the process plant capital and operating cost estimates were supervised and reviewed by David Baldwin of Ausenco, a Qualified Person (as defined under National Instrument 43-101) and is independent of Paramount Gold Nevada Corp.
The mineral reserve calculation was overseen and reviewed by Boris Caro for Ausenco, a Qualified Person (as defined under National Instrument 43-101) and is independent of Paramount Gold Nevada Corp.
The mineral resource calculations were completed and reviewed by Michael Gustin of MDA, a Qualified Person (as defined under National Instrument 43-101) and is independent of Paramount Gold Nevada Corp.
The financial modelling was completed and reviewed by Thomas Dyer, P.E. of MDA, a Qualified Person (as defined under National Instrument 43-101) and is independent of Paramount Gold Nevada Corp.
The environmental assessment was completed and reviewed by Richard DeLong of EM Strategies Inc., a Qualified Person (as defined under National Instrument 43-101) and is independent of Paramount Gold Nevada Corp.
All the above-named Qualified Persons have reviewed and approved this news release.
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About Paramount Gold Nevada Corp.
Paramount Gold Nevada is a U.S. based precious metals exploration and development company. Paramount’s strategy is to create shareholder value through exploring and developing its mineral properties and to realize this value for its shareholders in three ways: by selling its assets to established producers; entering into joint ventures with producers for construction and operation; or constructing and operating mines for its own account.
Paramount owns 100% of the Grassy Mountain Gold Project which consists of approximately 9,300 acres located on private and BLM land in Malheur County, Oregon. The Grassy Mountain project contains a gold-silver deposit (100% located on private land) for which a PFS has been prepared and key permitting milestones accomplished. Additionally, Paramount owns a 100% interest in the Sleeper Gold Project located in Northern Nevada. The Sleeper Gold Project, which includes the former producing Sleeper mine, totals 2,322 unpatented mining claims (approximately 60 square miles or 15,500 hectares).
Cautionary Note to U.S. Investors Concerning Estimates of Indicated, Inferred Resources and Reserves
This news release uses the terms "measured and indicated resources", "inferred resources" and “proven and probable reserves”. 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. Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.
Safe Harbor for Forward-Looking Statements
This release and related documents may include "forward-looking statements" and “forward-looking information” (collectively, “forward-looking statements”) pursuant to applicable United States and Canadian securities laws. 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 are intended to identify forward-looking statements, although these words may not be present in all forward-looking statements. Forward-looking statements included in this news release include, without limitation, statements with respect to: production estimates and assumptions, including production rate and grade per tonne; revenue, cash flow and cost estimates and assumptions; statements with respect to future events or future performance; anticipated exploration, development, permitting and other activities on the Grassy Mountain project; the economics of the Grassy Mountain project, including the potential for improving project economics and finding more ore to extend mine life; and mineral reserve and mineral resource estimates. Forward-looking statements are based on the reasonable assumptions, estimates, analyses and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made, but which may prove to be incorrect. Management believes that the assumptions and expectations reflected in such forward-looking statements are reasonable. Assumptions have been made regarding, among other things: the conclusions made in the PFS; the quantity and grade of resources included in resource estimates; the accuracy and achievability of projections included in the PFS; Paramount’s ability to carry on exploration and development activities, including construction; the timely receipt of required approvals and permits; the price of silver, gold and other metals; prices for key mining supplies, including labor costs and consumables, remaining consistent with current expectations; work meeting expectations and being consistent with estimates and plant, equipment and processes operating as anticipated. 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; the ability to obtain required permitting; equipment breakdown or disruptions; additional financing requirements; the completion of a definitive feasibility study for the Grassy Mountain project; discrepancies between actual and estimated mineral reserves and mineral resources, between actual and estimated development and operating costs and between estimated and actual production; and the other factors described in Paramount’s disclosures as filed with the SEC and the Ontario, British Columbia and Alberta Securities Commissions.
Except as required by applicable law, Paramount disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this document.
Paramount Gold Nevada Corp.
Glen Van Treek, President, CEO and Director
Christos Theodossiou, Director of Corporate Communications
866-481-2233
Twitter: @ParamountNV
1 Payable gold after silver credits
2 Base case metal prices of $1,300/oz of Au and $16.75/oz of Ag
3 T (tonnes) = metric tonnes; t (ton) = short tons
4 Resources are inclusive of reserves
