Grassy Mountain Gold Project
Overview and Location
The Grassy Mountain Gold Project is located in Malheur County, 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, 418 unpatented lode claims, 9 mill site claims, 6 associated placer claims, and various leased fee land surface and surface/mineral rights, all totalling about 9,300 acres. The local terrain is gentle to moderate, with elevations ranging from 3300 to 4,300 ft. above mean sea level.
With the closing of the acquisition of Calico Resources Corp in early July 2016, Paramount now controls a 100% right in the Grassy Mountain Gold Project, including water rights. Certain interests are subject to underlying agreements and royalties.
The acquisition of the Grassy Mountain Gold project fit the Paramount strategy of acquiring advanced mid stage undervalued assets in the US. Paramount will build upon the Preliminary Economic Assessment (“PEA”) which was completed in 2015. The PEA contemplated a 10-year underground mining operation with low cash operating costs driven by a high average underground gold grade of 5.32 g/T. The PEA estimated average annual production of 53,000 ounces of gold and 82,000 of silver yielding robust economics at a $1,300 per ounce gold price and at a $17.50 per ounce silver price. The project contains a total measured plus indicated mineralized inventory of 1.7 million ounces of gold and 4.9 million ounces of silver. (For more details see our release of July 7, 2016).
|Grassy Mountain Economics|
|Gold Price $/Oz||1,300|
|Silver Price $/Oz||17.5|
|Operating Cost Per Au Eq produced ($/Oz)||577|
|Total Cost per Au Eq produced including all captial cost ($Oz)||880|
|Net Present Value after Tax (Millions US$)||107.7|
|Internal Rate of Return||27%|
Further to the PEA, initial permitting work was commenced, which Paramount plans to build upon through an updated Plan of Operation and the completion of an Environmental Impact Assessment.
Paramount will build upon both the PEA and initial permitting work completed at Grassy. In late August, we commenced a Pre-Feasibility Study (“PFS”) which we expect to fast track and complete in 2017. In early November 2016, the Company received approval to commence its drill program under Division 37 guidelines by the Oregon Department of Geology and Mineral Industries (“DOGAMI”). The drill program of approximately 15,000-20,000 feet is a key component to the PFS, and is designed to achieve the following objectives:
- Expand, better define and increase the confidence level in the inventory of high-grade underground mineralized material;
- Acquire material for PFS-level metallurgical testing and subsequent design of the recovery process; and
- Obtain geotechnical data on rock quality for underground mine design and mining methodology.
The PFS at Grassy Mountain is expected to deliver several important milestones to the permitting process. Paramount plans to provide the Federal Bureau of Land Management (“BLM”) with the mine Plan of Operation, including the location of infrastructure and mine facilities within both the privately and federally owned land, in late 2016. Furthermore, the Company will initiate an Environmental Impact Statement (“EIS”) and commence the permitting process in early 2017.
Exploration History at Grassy Mountain
Thirty years of high quality work by reputable operators have brought the Grassy Mountain Gold Project to its current advanced state.
The Atlas Era
In 1986 Atlas Precious Metals (Atlas) acquired the Grassy Mountain property from two independent geologists, Dick Sherry and Skip Yates.
Atlas recognized soil geochemistry as an important tool for locating buried hydrothermal cells at Grassy Mountain. Most of the Atlas exploration targets were identified by claim-corner (600’ X 1500’ grid) soil sampling anomalies. Atlas conducted detailed soil and float sampling on several anomalies and identified a genetic link between gold mineralization and silicification. Between 1986 and 1991, Atlas completed 403 drill holes totalling 221,500 ft. on the Grassy Mountain property. Out of the total, 193 were vertically oriented Reverse Circulation (RC) holes on 75 to 100 ft centers within the Grassy Mountain resource area. The remaining drill holes were located on prospects away from the main Grassy Mountain resource area. Many of these represent future exploration targets.
Atlas’ RC holes were drilled by Eklund Drilling Company from Elko, Nevada using Ingersoll Rand TH-60 and RD-10 truck-mounted drills with a nominal hole diameter of 5¼ inches. The RC cuttings were collected as five foot long samples. Twenty-two of the Atlas RC holes were drilled to at least 1,000 ft. in depth. Groundwater was reportedly not encountered above 750 ft., with the exception of some local perched water tables that were intersected along the northern portions of the deposit. Because the deposit is strongly silicified, drilling penetration rate was slow and resulted in excessive bit wear. Drilling along the main northeast structures was completed with some difficulty due to tight hole conditions and caving of rubble zones.
Atlas drilled ten core holes at Grassy Mountain to confirm high-grade mineralization identified by RC drilling methods, obtain samples for metallurgical testwork, and to collect geotechnical data. Two confirmation holes were drilled as NC and NQ angle holes by Longyear. Five core holes drilled specifically to obtain sample material for metallurgical testing were drilled as vertical PQ diameter holes by Boyles Brothers. Three geotechnical holes were also drilled by Boyles Brothers. Collar locations were surveyed by Apex Surveying from Riverton, Wyoming using a total station, and the holes were surveyed down-the-hole using an Eastman down-hole camera. Assay records indicate that the confirmation holes were sampled on interval lengths ranging from 0.5 to 7.5 ft. in length, with an average sample length of 4.5 ft. Whole core from the metallurgical holes was shipped to Hazen Research Inc. for metallurgical testwork, and the geotechnical holes were logged for various geotechnical parameters (e.g. RQD, fracture frequency, etc.).
Atlas expanded the original claim block and collected a wealth of geologic, mine engineering, civil engineering, and environmental baseline data to support a feasibility study, which was completed in 1990.
Declining gold prices and the perception of an unfavorable permitting environment at that time discouraged Atlas from developing the project, and the property was optioned to Newmont Exploration Ltd (Newmont) in 1992.
The Newmont Era
Newmont leased the Grassy Mountain property from Atlas in September 1992 for US$30 million. In 1993, Newmont geologists mapped 40 square miles at a scale of 1:6000 and collected approximately 2,600 soil samples on a 400-ft by 200-ft grid to identify anomalies missed by the coarser Atlas grid. During 1993 and 1994, Newmont collected more than 400 rock chip samples and conducted several geophysical programs. A ground-based gravity survey was carried out along roadways and airborne magnetic and radiometric surveys were flown over the entire property. Ground based gradient array and ground magnetic surveys were conducted over primary target areas.
Newmont initiated an eleven-hole (11,472 ft) inclined diamond core drilling program designed to intersect and define the geometry of potential high-grade gold zones. Additionally, Newmont drilled one wedge hole off of their initial core drill hole. Three additional holes (2,912 ft) were drilled as RC pilot holes with core tails. Drilling was completed by Longyear. All of the holes were drilled as HQ diameter, with the exception of four holes which had to be reduced to NQ size due to ground conditions. Down-hole surveys were conducted by Scientific Drilling.
Newmont’s angle core program intercepted several high-grade (> 0.10 opt) gold zones within an area measuring 600 ft long by 350 ft. wide by 250 ft. thick. Mineralization was constrained to the northeast by a single hole which failed to encounter intercepts in excess of 0.10 opt. Newmont considered the western extent of the main high-grade zone effectively closed off after encountering only low grade gold (0.012 – 0.019 opt) and local barren quartz-chalcedony veins.
In late 1994, Newmont drilled 15 holes totalling 15,009.5 ft. and completed a mineral resource estimate that became the basis for an economic and mining method evaluation that was completed in 1995. Newmont determined that the project did not meet corporate objectives and returned the property to Atlas in September 1996.
The Tombstone Era
In January 1998, Atlas granted Tombstone Exploration Company Ltd (Tombstone) the option to purchase 100% of the property. Tombstone executed the option agreement and conducted an exploration program which included eight reverse circulation and two core holes totalling roughly 8,072 ft.
Prior to finalizing their agreement with Atlas, Tombstone completed an extensive review of previous work at the property and commissioned an economic study of alternative development scenarios. Relying heavily on Newmont’s gradient array surveys to define potential targets, Tombstone initiated a 10 hole drilling program that totalled 8,072 ft of reverse circulation and core drilling. Dateline Drillingperformed all of Tombstone’s RC drilling, and diamond core drilling was completed by Ray Hyne Drilling. Down hole surveys were reportedly conducted by Silver State Surveys using a gyroscopic survey tool, but no written records are present in Calico’s archives. However, the survey measurements in the historic drill hole database indicate that the drill holes did not deviate to any significant degree.
Lack of venture capital forced Tombstone to return the property to Atlas in May 1998.
The Seabridge/Calico Era
In February 2000, Seabridge Gold entered an option agreement with Atlas to acquire a 100% interest in the Grassy Mountain property. Seabridge completed its acquisition of the Grassy Mountain Project in April 2003, and in April 2011, signed an option agreement granting Calico Resources the sole and exclusive right and option to earn a 100% interest in the project.
During the 2011 exploration program, Calico mapped and sampled the Grassy Mountain deposit and completed three core and nine reverse circulation drill holes in the primary zone of mineralization on the property. Calico’s exploration strategy was to target areas where resource expansion was most probable. Historical data was thoroughly reviewed prior to drilling, and fresh sets of cross-sections and long-sections were constructed based on existing information. New interpretations of the orientation of mineralization and geology were plotted on the new sections. The new sections were then used to select areas where in-fill drilling was needed and areas where gold mineralization was open-ended and resource expansion probable. A detailed geologic model was produced based on the results of the 2011 exploration work, and subsequent supporting geophysical surveys were completed in March, 2012.
Geology and Mineralization
Grassy Mountain is the largest of twelve recognized epithermal hot spring precious metal deposits of the Lake Owyhee volcanic field. The Lake Owyhee volcanic field occurs at the intersection of three tectonic provinces: the buried cratonic margin, the northern Basin and Range, and the Snake River Plain. During the mid-Miocene caldera volcanism occurred in the shallow crust throughout the region, predominately ash-flow sheets and rhyolite tuff cones. The resulting regional stratigraphic section is a thick sequence of mid-Miocene volcanic rocks and coeval-to-Pliocene age non-marine lacustrine, volcaniclastic, and fluvial sedimentary rocks.
Bedrock outcrops in the vicinity of the Grassy Mountain property are typically composed of olivine-rich basalt and siltstones, sandstones, and conglomerates of the late Miocene Grassy Mountain Formation. These rocks are locally covered with relatively thin, unconsolidated alluvial and colluvial deposits. Erosion-resistant basalts cap local topographic highs. Arkosic sandstones have been encountered at the surface and at depth, but have not been correlated across the project area, in part due to lateral discontinuity associated with sedimentary facies changes and structural offset.
The basal unit to the Grassy Mountain Formation is the Kern Basin Tuff, a non-welded, pumiceous, crystal tuff which displays cross beds and local surge structures. The Kern Basin Tuff ranges in thickness from 300 ft on the south bluffs of Grassy Mountain, to 1,500 ft in a drill hole beneath the Grassy Mountain Project area.
The Kern Basin Tuff is overlain by a series of fluvial, lacustrine, and tuffaceous sediments. Most of the sedimentary units in the project area are silicified and strongly indurated. These sedimentary units include granitic clast conglomerate, arkosic sandstone, fine grained sandstone, siltstone, and tuffaceous siltstone/mudstone. The sedimentary facies of the Grassy Mountain Formation reportedly range from 300 to over 1,000 ft thick, and provide the host rocks of the Grassy Mountain mineral resource.
Several siliceous terraces are interbedded with the silicified sediments of the Grassy Mountain Formation. Terrace construction was apparently episodic and intermittently inundated by fluvial/lacustrine sediments and ash, resulting in an interbedded sequence of siltstone, tuffaceous siltstone, sandstone, conglomerate, and sinter terrace deposits. Proximal deposits are angular, inhomogeneous, clast-supported breccias of sandstone, siltstone, and sinter with indistinct clast boundaries in a sulfidic mud-textured matrix.
Grassy Mountain is a prominent, 150 ft. high, silicified and iron-stained knob. Bedding is approximately horizontal at the hilltop, and dips at 10° to 25° to the north-northeast on the northern and eastern flanks of the hill. The bedding dip steepens to 30° to 40° on the west side of the hill due to drag folding in the footwall of the N20W striking Antelope Fault. The southwest slope of Grassy Mountain is covered by silicified arkose landslide debris.
Grassy Mountain is a horst block which has been raised 50 to 200 ft. in a region of complex block faulting and rotation. Faulting at Grassy Mountain is dominated by post-mineral N30W to N10E striking normal faults developed during Basin and Range extension. On the northeast side of the deposit, these faults progressively down-drop mineralization beneath post-mineral cover. These offsets are suggested by interpreted offsets of a prominent white sinter bed in drill holes as well as intersections with fault gouge. The N70E striking Grassy Mountain Fault shows minor vertical offset of only 10 to 40 ft.
The surface expression of the Grassy Mountain system is indicated by weak to moderately strong silicification and iron staining with scattered chalcedonic veins/veinlets. Approximate dimensions of the Grassy Mountain deposit are 1600 ft. long by 1000 ft. wide by 600 ft. thick. The deposit has a general N70 E elongation and a 15° bedding plane dip to the north-northeast as a result of faulting and fault block rotation. There is an envelope of lower grade mineralization at depths of 200 to 800 ft. which contains a higher-grade zone of mineralization between 500 and 750 ft. below the surface. The well-defined base of higher grade mineralization from about 700 to 750 ft. in depth suggests a strong pressure-temperature control on gold deposition. Sinters and breccias parallel the paleosurface present at the time of mineralization. Fractures created a stockwork pattern generally found below the sinter, though some vein extensions may extend to the surface. The stockwork is surrounded by silicified sediments.
Mineralized quartz-adularia stockwork and vein types include single, banded, colliform, brecciated, and calcite-pseudomorphed veins. Visible gold (0.5 mm) has been found within the stockwork portions of the boiling horizon. The gold mostly occurs as electrum along the fracture margins or within microscopic voids. A brassy color is imparted due to the high silver content. The average silver to gold ratio at Grassy Mountain is 2.5:1.
Silicification occurs both pervasively as silica flooding and as cross-cutting veins, veinlets and stockworks. The silicified envelope has plan dimensions of 3000 ft (N-S) by 2500 ft (E-W). Silicification is surrounded by barren, relatively unaltered, clay-rich (20-40% montmorillonite), tuffaceous siltstone and arkose with minor disseminated diagenetic pyrite. Many of the sinters occur as sheets instead of mounds, which suggests that they may be related to vents along faults rather than point sources. Potassic alteration occurs as adularia flooding with destruction of biotite. The adularia is extremely fine-grained and is identified microscopically or by cobaltinitrite staining. Sulfate phases identified by XRD include jarosite and alunite in several mineralized samples. Clast-supported breccias contain sub-rounded to sub-angular sand to boulder-sized clasts of silicified arkose and siltstone in a jarosite-sericite clay matrix.