Begging for Attention
I continue to be amazed at the action in the junior gold shares market. One of my favorite stocks announced a major PEA on their primary Mexican gold/silver project. Paramount Gold & Silver has two major projects, the San Miguel property in Chihuahua State and the Sleeper project in Nevada. The stock went down. What a shock.
The PEA on San Miguel calls for a 14-year mine life with annual production of over 57,000 ounces of gold with 3.1 million ounces of silver. Using a 3-year trailing price for silver and gold, the project shows a Net Present Value of $707 million with a capex of $243 million and an IRR of 33.2%.
Paramount completed a PEA on their Sleeper Nevada gold project in September of 2012. It called for a 17 year mine life processing about 30 million tonnes per year with average gold production of 172,000 ounces of gold and 263,000 ounces of silver at a total cost of $996 per gold equivalent ounce. Using a three-year trailing average for gold and silver Paramount shows a NPV of $695 million.
Between the two projects, Paramount counts about 10 million gold equivalent ounces. Adding the NPV of both projects using pretty conservative numbers shows a total NPV of $1.4 billion. At today’s market prices, the company has a market cap of $310 million. The company is well cashed up.
Coeur d’Alene Mines is on the prowl. They just announced the purchase of Orko Silver for $350 million. Orko’s La Preciosa project in Mexico contained about 264 million ounces of silver in a 43-101 resource so Coeur is paying about $1.40 an ounces for in the ground silver.
In the bidding for Orko, Coeur beat out First Majestic Silver. That means First Majestic Silver is still on the prowl and is cashed up for an acquisition. First Majestic is a primary silver company but one can’t help but wonder if they might want a low cost gold producer in their stable.
In any case, sentiment is showing some of the lowest readings ever recorded for resource shares and for gold/silver. In any rational world we would be perfectly positioned for both more M&A activity due to the low prices and 12-18 months of increasing demand for shares.
With PEAs on both of their projects, Paramount has to be the subject of some pretty intensive scrutiny by other producers interested in solid assets capable of large production located in low risk areas. You don’t get much safer than Mexico and Nevada.
PZG has an especially strong management team led by Chris Crupi as CEO and Glen Van Treek as VP, Exploration. The company is well positioned to either make a production decision in Mexico or Nevada or to be bought out. Paramount is an advertiser and as such I have to be biased. Their website is clear and concise and they do a good job of communication.
I expect the company either to be bought out or to lead share prices higher as the public realizes the value of gold/silver production stories.
Paramount Gold & Silver