Paramount finds more gold at Sleeper

The old Sleeper Pit has been hiding more gold than Paramount Gold and Silver (TSX: PZG; NYSE-MKT: PZG) realized.

The company says core drilling at its wholly owned Sleeper Gold project in Nevada has intercepted gold and silver mineralization west of the area’s Pad zone and directly beneath the old Sleeper Pit.

The results were part of the 24 holes totalling 10,300 metres it has drilled at the site to extend the known resource areas and update the resource model.

Drilling from the Pad zone towards the Sleeper Pit, Paramount was looking to test the original high-grade Sleeper structure below the deepest holes drilled by previous operators.

This proved to be a shrewd move, as the holes returned sections above the resource grade.

The best was a 32-metre intercept averaging 1.47 grams gold and 1.9 grams silver. The intercept was located 100 metres below the bottom of the Sleeper Pit.

The hole provides evidence that the original high-grade Sleeper structure remains open at depth.

Previous drilling by Amax, the former mine operator, had failed to find mineralization because obstructions prevented it from drilling the target effectively, Paramount says.

Amax operated the Sleeper mine from 1986 to 1996, and produced 1.66 million oz. gold and 2.3 million oz. silver during that time. 

Since Paramount’s own preliminary economic assessment (PEA) was released last July, the company is looking to incorporate results from 44 new drill holes totalling 15,000 metres into a resource update.

To go along with the new results the company says it is developing a new geological and structural model. It hopes the new model will help improve the economics of the existing PEA by adding resources at a better grade, while finding higher-grade structures.

The PEA outlined a base-case scenario of an 81,000-tonne-per-day operation, with a 17-year mine life pushing out annual production of 172,000 oz. gold and 263,000 oz. silver per year at average cash-operating costs of US$767 per equivalent oz. gold recovered. The study estimated it would cost US$346 million to start up the mine, with sustaining capital costs coming in at US$278 million.

Using a US$1,384 per oz. gold price, a US$26.33 per oz. silver price and a 5% discount rate, the mine would have a US$695-million net present value and a 26.8% internal rate of return.

On Aug. 1, the day the news was released, the company’s shares were off 3¢ to $1.41.