Paramount Gold & Silver (PZG.TO, NYSEMKT:PZG) has released the long-awaited PEA on their 100%owned San Miguel gold-silver project in Chihuahua, Mexico.
The PEA outlines an annual production of 57,000 ounces of gold and 3.1Moz of silver for a combined output of 110,000 gold equivalent ounces. The company only gives a cash cost for the gold equivalent ounces and does not provide a cash cost per ounce of gold net of silver as a by-product.
Initial capex comes in at $243M but there’s also a sustaining capex of approximately $227M over the life of mine. Total costs per gold equivalent ounce come in at $842 in the base case scenario (which uses a gold price of $1500/oz). The total costs include the operating costs, capital costs and contingency costs over the life of mine. The NPV5% at $1500 gold is a healthy $707M, and the IRR is 33.2%.
We would have loved to see more sensitivity analyses (such as using a $1200/oz gold price and an 8% discount rate for the NPV), to see how robust the San Miguel economics are using those parameters.
Disclosure: The author holds no position in Paramount Gold and Silver Corp. yet. Please see our disclaimer for current sponsors.
