Favorable Gold Recoveries From Bio-Oxidation At Sleeper

WINNEMUCCA, NV - Paramount Gold and Silver Corp. reported that a successful preliminary bio-oxidation test of the high grade sulfide material from the West Wood area of Paramount’s 100%-owned Sleeper Gold Project indicates that this high grade resource could be included in a revised Preliminary Economic Assessment (PEA). Resources from West Wood were not included in the original 2012 PEA because of poor expected recoveries from the heap leach operation proposed for Sleeper in the PEA.

Paramount CEO Christopher Crupi confirmed that the bio-ox test results "could have a major impact on the economics of the Sleeper Project. West Wood contains the highest grade material at the project, is close to the processing facilities and has a favorable strip ratio. Getting this resource into the economic model has been a high priority for us since completing the PEA."

The West Wood area is on the south west side of the Sleeper deposit and consists of stock work, breccia and disseminated mineralization of exceptional gold and silver grades. For example, last year’s drilling returned up to 35 meters grading 2.49 g/T of gold and 14.7 g/T of silver. Cyanide leach tests of the sulfide-rich West Wood mineralization showed poor amenability to heap leaching and this material was therefore not incorporated in the PEA mine plan. Further work tested several alternative recovery methods, with the bio-oxidation process providing the most promising and cost effective results.

A bio-oxidation test on West Wood material was supervised by McClelland Laboratories of Reno, Nevada. The aim was to achieve a partial oxidation of the sulfides using industry-standard bacteria and a subsequent cyanide leach. Initial oxidation testing was conducted on a 45 micron crush size for 21 days continuously. Portions of the sample material were then subjected to cyanide leaching after 5 days, 7-8 days and 21 days of bio-ox treatment. The samples tested returned excellent gold recoveries averaging 91.5% after partial oxidation for just 7-8 days.

Paramount is now conducting multiple column tests at various crush sizes to further evaluate gold recoveries and grind size optimization in a heap leach process. Successful completion of these tests should allow the West Wood material to be incorporated into the project’s resources and mine plan. An updated NI 43-101 resource estimate is scheduled for the first quarter of this year.

The PEA prepared by Metal Mining Consultants of Denver, Colorado (formerly Scott E. Wilson Consulting Inc.), was released on July 30, 2012. The PEA specifies a development scenario for Sleeper consisting of a large-scale open pit mining operation with a heap leach processing plant handling both oxide and sulphide material, producing a gold-silver dore. The base case scenario incorporates 81,000 tones per day operation (approximately 30 million tones per year throughput), resulting in a projected 17 year operation with average annual production of 172,000 ounces of gold and 263,000 ounces of silver. Projected life-of-mine average cash operating costs are US$767 per ounce of equivalent gold recovered. Start-up capital costs for this project scenario are estimated at US$346 million. Sustaining capital costs over the projects life are estimated at an additional $278 million. Total capital cost contingencies over the project life are estimated at an additional $64 million, bringing the total life of mine capital costs to $688 million. The total cost of equivalent gold production (including cash operating costs and total capital and contingency costs over the life of the mine) is estimated at US$996 per ounce.

At a gold price of US$1,384 per ounce and a silver price of $26.33 per ounce (the 3 year trailing average of gold and silver prices as at July 3, 2012), the Sleeper base case has a US$1.2 billion pre-tax net cash flow, a US$695 million net present value at a 5% discount rate and an internal rate of return (IRR) of 26.8%. At lower metal prices, Sleeper still shows excellent economic performance. At US$1,200 gold and US$20 silver, the estimated total pre-tax net cash flow equals US$603 million and the net present value at a 5% discount rate is a healthy $295 million with an internal rate of return of 15%.