Grassy Mountain Gold Project
Overview and Location
The Grassy Mountain Gold Project (“Grassy”) is located in Malheur County, eastern Oregon, approximately 22 miles south of Vale, Oregon, and roughly 70 miles west of Boise, Idaho. The project site is situated in the rolling hills of the high desert region of the far western Snake River Plain and consists of 3 patented (private) lode claims where the deposit is located, 442 unpatented lode claims, 9 mill site claims, 6 associated placer claims, and various leased fee land surface and surface/mineral rights, all totaling about 9,300 acres. The local terrain is gentle to moderate, with elevations ranging from 3,300 to 4,300 ft. above mean sea level. Paramount owns 100% of the private land in which the gold deposit sits and controls all mining claims within the 9,300 acres land package.
• Initial infrastructure CapEx of $69.9 million, total initial CapEx of $110 million for a 750tpd mine and milling operation1;
• Annual production of approx. 47,000 ounces of Au and 50,000 ounces of Ag over a 7.25 year mine life with a 2.5 year payback period1;
• P&P reserves containing 362,000 ounces of Au at 0.21 opt (7.20 g/T)3 ;
• Average mill head grade of 0.206 opt of Au (7.06 g/T)3;
• Cash operating costs of $528 per ounce gold and total costs of $853 per ounce gold3 produced including all capital3;
• Total operating cash-flows of $249 million; and
• After tax IRR of 28% and NPV (5%) of $87.7 million at the base case metal prices4.
Glen Van Treek, Paramount’s President and CEO, stated that “the PFS clearly shows that Grassy Mountain is a mine worth building. The results demonstrate a low-cost operation that would deliver exceptional cash-flows over its mine life at the current gold price. The scale and simplicity of the proposed operation is one that we are very confident Paramount can build and manage. The PFS also identifies significant opportunities for improving project economics and finding more ore to extend mine life.”
1. Permitting of Grassy Mountain
CONDITIONAL USE PERMIT – COUNTY LEVEL
In mid-2019, Paramount announced that it had received approval of the Conditional Use Permit (“CUP”) for the proposed Grassy Mountain underground mine from Malheur County. During a public meeting held in May 2019, the Malheur County planning commission voted unanimously to approve the CUP and to recommend approval of a Sage Grouse Rule Permit to the Malheur County Court. The approval of the CUP is a major milestone for the Company and exemplifies the level of commitment and support from the local communities as Paramount continues in its quest to advance Grassy Mountain towards construction.
As the permit name indicates, the county issued the CUP with conditions, which in the case of Grassy Mountain, are the following:
1. The applicant will subscribe to the Vale rangeland fire protection Association;
2. The applicant shall collaborate with the Malheur County sheriff’s office in regard to a security plan as well as law enforcement and emergency response plans;
3. Any road improvements necessary to serve Grassy Mountain must be constructed according to county design standards to the satisfaction of the County Road Master; and
4. The applicant shall obtain approval for its reclamation plan from Oregon Department of Geology and Mineral Industries (“DOGAMI”), prior to beginning mining operations. Unless otherwise prohibited by DOGAMI, the Applicant may conduct pre-construction and construction activities prior to obtaining approval for its reclamation plan.
CONSOLIDATED PERMIT APPLICATION – STATE LEVEL
The completion of the PFS in May 2018 was an integral component in completing the permit approval process. Throughout 2018 and 2019, the team has worked diligently to complete all of the baseline data reports (“BDR”) and submitting them to the DOGAMI for review. To date 18 of 23 of these BDR’s have been accepted as complete and will be included within the state Consolidated Permit Application.
The next phase of permitting will be to submit the State Consolidated Mining Permit Application with the Oregon Department of Geology and Mineral Industries (“DOGAMI”), which Paramount expects to submit in late 2019.
PLAN OF OPERATION / ENVIRONMENTAL IMPACT STATEMENT – FEDERAL PERMITTING
In January 2020 Paramount plans to submit an amended Plan of Operation (“POO”) with the remaining information required by the Federal Bureau of Land Management (“BLM”) to continue with the federal Environmental Impact Statement (“EIS”) in accordance with the previously filed POO which Paramount filed in September 2017.
2. Exploration Program
In June 2019 Paramount entered into an agreement to complete a National Instrument 43-101 Feasibility Study (“FS”) with Ausenco Engineering Canada Inc. (“Ausenco”), whereby Ausenco agreed to receive restricted common shares of Paramount in lieu of cash.
Paramount CEO, Glen Van Treek stated, “We are thrilled to have Ausenco, a globally recognized industry leader in engineering, project development and construction, as a partner to advance our high-grade Grassy Mountain gold project through feasibility, construction and ultimately production.” Mr. Van Treek added, “Having Ausenco on board and becoming a PZG shareholder is a great support that further validates the merits of the Grassy Mountain project.”
Ausenco and other consulting firms who were involved in the completion of the PFS in 2018, all continue to assist Paramount to complete all the required analysis and detailed designs necessary to be included as part of the Oregon State Consolidated Permit Application and the Plan of Operation to be updated and filed with the Federal Bureau of Land Management (“BLM”). The Ausenco along with Golder Associates and Mine Development Associates commenced work on the FS in mid-2019 and expect its completion in mid-2020.
In the fall of 2018, the Company completed a helicopter mag and radiometric survey conducted by Precision Geosurveys Inc. over the entire 9,530 acre claim area, including the Frost Project (learn more) to map structures and magnetic anomalies.
The second phase of the program will focus on drill testing the targets with the greatest potential to find additional mineralized material that can extend mine life and enhance the economics of the operation. Paramount has identified these targets, which are all in close proximity to the existing mineralized material deposit, through geophysics, resistivity, and shallow drilling.
These high priority targets include:
• North Spur is located 500 ft. north of Grassy and consists of silicified structures in an area surrounded by low grade gold which was identified in historic shallow drilling. None of the drilling in this area penetrated these silicified structures;
• Dennis Folley is located about two miles north of Grassy. To date, there has been no drilling completed in this area. However, surface mapping and sampling identified strong silicified outcrops with several geochemistry anomalies that are expected to represent the surface expression of a mineralized system below; and
• Wally/Wood is located approximately one mile north-northwest of the main deposit. Sinter has been seen on surface and previous shallow drilling has intersected up to 90 ft. grading 0.025 opt gold (0.71 g/t). In addition, this area has a well-defined resistivity anomaly which is similar to the anomaly identified at the Grassy deposit.
Future exploration may focus on other identified targets, which include:
• Crabgrass is located 2.4 km southwest of the Grassy deposit and is host to a historic non NI 43-101 compliant resource estimate of 0.6 million tonnes grading 1.35 g/t Au containing 24,473 oz Au; and
• Bluegrass is another high priority target as previous shallow drilling has had positive results including 24 meters of 1.1 g/t Au.
Paramount has not set a time frame to drill test the aforementioned targets as it is currently focusing its resources on the submission of the State and Federal permits, and the completion of an NI 43-101 Feasibility Study.
Cautionary Note to U.S. Investors Concerning Estimates of Indicated, Inferred Resources and Reserves
This web site 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 pre-feasibility 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 mineable. 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.