Para Resources Announces Positive Preliminary Economic Assessment for the Gold Road Mine Pre-Tax NPV of CAD $104m at US $1,200 per Ounce of Gold
Para Resources Announces Positive Preliminary
Economic Assessment for the Gold Road Mine
Pre-Tax NPV of CAD $104m at US $1,200 per Ounce of Gold
Vancouver, British Columbia--(Newsfile Corp. - May 1, 2018) - Para Resources Inc. (the "Company" or "Para") (TSXV: PBR)
(WKN: A14YF1) (OTC Pink: PRSRF") is pleased to announce the results of an independent Preliminary Economic Assessment
study ("PEA") under National Instrument 43-101 ("NI 43-101") by RPM Global on the Gold Road mine, in Oatman, Az. The PEA
report will be posted to SEDAR May 2
nd
, 2018.
Gold Road
PEA Highlights
2
Pre-tax Net Present Value ("NPV") at a 5% discount rate of US$81.3 million [CAD$104 million
1
] and Internal Rate of
Return ("IRR") of 238%
Post-Tax NPV at a 5% discount rate of US$56.7 million [CAD$ 73 million] and IRR of 174%
Pre-tax Net Cash Flow of US$104.0 million [CAD$133M
1
]
Undiscounted cash flow after income and mining tax of US$72.9 million
Payback period of 1.5 years
Initial capital of US$5.7 million
Life of Mine ("LOM") of 7 years with 1.1 million tons of potential mill feed at an average diluted grade of 0.19 ounces of
gold per ton [6.5 grams per tonne]
Initial mining rate of 250 tons per day increasing to 500 tons per day in year 3
Total All-in Sustaining Cost of US$632.79 per ounce of gold
Assumed long term price of gold is US$1,200 per ounce
The exchange rate used was US$1.00 equals CAD$1.28.
Geoff Hampson, Para's CEO states, "We are very pleased with the results of the Gold Road PEA and the validation of the
investment thesis we developed when we acquired it. The PEA quantifies the robust returns and strong cash-flow for this project.
The NPV of this project when compared to the current market capitalization of the whole company indicates that our
shareholders will be rewarded for their patience and belief in our business plan. In addition, we consider the analysis by RPM as
a base case and have already developed strategies to quickly ramp up production in 2019 to 500 TPD, increase the head-
grade by developing working faces in historically higher-grade rock and to take advantage of the currently higher price of gold
than was used in the study."
Ian Harris, Para's President states, "The PEA provides the green-light to move forward with a quick restart of the Gold Road
Mine.
Our near-term focus will be on finalizing our startup plan, mine contract bidding, and executing an exploration plan intended
to increase the resources at Gold Road and seek higher-grade material along the TrUe Vein. We plan to re-start operations at
Gold Road in September of 2018 and expect to achieve full production by mid-2019. The PEA reports that the mill and mine
infrastructure is in excellent shape and requires very little in the way of capex. The only major capex is required to install a shaft
and headframe to reduce the cost of extracting material from the mine. We can produce using 20-tonne underground haul trucks
up the 2-mile-long decline while the shaft is under construction."
The PEA is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to
have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is
no certainty that the results included in the PEA will be realized.
If the Company were to bring the Gold Road mine into
production without first establishing mineral reserves supported by a feasibility study, the Company cautions that this could result
in higher risk of economic or technical failure of the operation than if a feasibility study had been prepared demonstrating
economic and technical viability. There are no assurances that the Gold Road mine will be found to be economic.
Mineral Resource Estimate
Resources were supported by 14,768 channel samples. The database contains 19,400 assay data excluding the 16 drill holes
which were not used in the resource estimate. The channel samples were taken within the mined stopes and the development
workings. Channels are spaced every five feet along the drifts.
All the Inferred mineral resources are reported using a 0.1 ounces per ton (opT) Au cutoff, which is roughly the current economic
cutoff. In order to meet the international requirement of reasonable prospect for eventual economic extraction, the mineral
resources quoted in this report are constrained within a maximum vertical distance of 200 ft from a drift.
Table 1-1 Gold Road Mineral Resources at 0.1 op
T
Au cutoff
Distance (ft)
Au
(opT)
Tons
Ounces
<50
0.23
160,000
36,000
50-100
0.21
268,100
57,000
100-200
0.22
550,00
121,000
Total
0.22
978,000
214,000
Underground Mining
The underground mine historically used Shrinkage Stoping Mining (SSM). During the most recent mining phase, haulage of the
mineralized material and waste to the surface was with underground trucks. RPM Global reviewed the continued use of SSM for
the Gold Road Mine and has also reviewed an alternative mining method known as Raise Access Mining. Raise Access Mining
(RAM) incorporates an Alimak style raise climber to develop the access raise in materialized material from the sill level to the
top level. Once the raise is established, the climber is used to drill and blast horizontal production holes from the bottom of the
mineralized block up in retreat. The mineralized material is loaded from the bottom sill level using a mucker loading into nearby
muck bay, a truck for the haul up the decline or to the proposed new shaft loadout. Gold Road used a form of RAM in a test stope
in the past with mixed results. RPM advises that the use of RAM is the preferred method and has been used in the PEA as part
of the restart. RAM provides a safer mining process, with limited, to no exposure of the miners to unsupported ground, as well as
lower operating cost. Both mining methods are discussed in the PEA.
RPM also reviewed alternative haulage methods using the current truck haulage decline (11,000 ft. one way) as well as a
truck/shaft haulage scenario. As expected the truck/shaft method was the preferred alternative due to costs and efficiency.
Metallurgical Test
work and Mineral Processing
The processing parameters for Gold Road mineralized material have long been established by both actual processing over
many years and by metallurgical test work. The gold is present as very fine particles in extremely hard, chalcedonic quartz.
Processing requires grinding to 80% passing 325 mesh and 24-hour leaching which results in about 95% gold extraction.
Excluding the processing in the early-1900s, about one million tons of Gold Road mineralized material grading about 0.2 ounces
gold/ton have been processed by the following two plants:
A 400-ton/day counter-current-decantation/Merrill-Crowe plant, operated from 1937 to 1941
A 500-ton/day carbon-in-pulp (CIP) plant, operated from 1996 to 2016
The latter plant is still in existence and is in good condition. Tailings from the current plant are filtered and dry- stacked in a
tailings storage facility ("TSF") close to the plant.
Capital and Operating Costs
The total capital costs for the restart of the Gold Road Mine include US$5.2M for the restart, preliminary development and shaft /
hoist installation and purchase of the raise climbers completed in year 1. All other development and other capital cost are
considered to be sustaining capital for the remaining LOM.
Estimated capital cost to bring the processing plant into operational condition is US$0.5 million. No capital costs are anticipated
for the infrastructure.
The underground mine operating costs were developed on a per-foot of advance basis for the waste development. Other
operating costs includes raise mining (in mineralized material), production mining, contractor labor and management and Gold
Road site management for the underground mine. Total mining costs are US$66 per ton.
Estimated processing operating costs are US$27/ton. Estimated G&A costs are US$15/ton of mineralized material processed
or about US$2.5 million/year.
Economic Analysis
The total capital costs for the restart of the Gold Road Mine include US$5.2 M for the restart, preliminary development and shaft /
hoist installation and purchase of the raise climbers completed in Year 1 and 2. All other development and other capital, is
considered to be sustaining capital for the remaining LOM. The table below shows the economic assumptions and results.
Table 1-2 Economic Assumptions and Results
Gold Road
Units
LOM Value
Mineralized Material
Tons
1,110,274
Gold - Mined Grade
Gold oz. per ton
0.19
Gold Recovery
%
95%
Payable Gold
oz.
203,569
Gold Price
US$/oz.
$1,200
Net Revenue
US$ 000’s
$238,175
Capital Cost
US$ 000’s
$5,744
Sustaining Capital
US$ 000’s
$6,454
Total Capital
US$ 000’s
$12,198
Total Operating Cost
US$ 000’s
$110,362
Total All-in Sustaining Cost (AISC)
US$/oz. gold
$632.79
Total All in Cost
US$/oz. gold
$659.29
Payback Period
Year
1.5
Cumulative Net Cash flow
US$ 000’s
$103,964
Pre Tax NPV @ 5 %
US$ 000’s
$81,309
Pre Tax IRR
%
238%
Post Tax NPV @ 5 %
US$
000’s
$56,739
Post Tax IRR
%
175%
The NPV is still robust with changes of 10% and 20% in gold prices and capital and operating costs.
The table below shows the
sensitivities to these changes.
Table 1-3 Economic Sensitivities
Percent Change
from Base Case
Gold Price US$
NPV at 5%
Discount X
$1,000,000
Gold Price
Base Case
1200
58.2
-20.00%
960
28.7
-10.00%
1080
42.7
10.00%
1320
70.7
20.00%
1440
84.7
OPEX
Base Case
1200
58.2
-20.00%
1200
70.0
-10.00%
1200
63.3
10.00%
1200
50.1
20.00%
1200
43.5
CAPEX
Base Case
1200
58.2
-20.00%
1200
61.3
-10.00%
1200
59.7
10.00%
1200
56.6
20.00%
1200
55.0
Qualified Persons
The report was prepared under the direction of Mr. Richard Kehmeier. Mr. Kehmeier is a Qualified Person under NI 43-101 and
has reviewed and approved the technical information contained in this news release.
1
All Canadian Dollar amounts are for reference only and based on an April 29
th
, 2018 exchange rate of CAD$1.28 per $USD.
2
Cautionary statement NI 43-101: The PEA was prepared in accordance with National Instrument 43-101 Standard of
Disclosure for Mineral Projects ("NI 43-101").
Note: The PEA is preliminary in nature and includes Inferred Mineral Resources
that are considered too speculative geologically to have the economic considerations applied to them that would enable them to
be categorized as Mineral Reserves, and there is no certainty that the PEA based will be realized.
Mineral Resources are not
Mineral Reserves and do not have demonstrate economic viability.
Calendar years used are for illustrative purposes.
Some
figures may not sum exactly due to rounding.
Unless otherwise indicated the currency used is United States dollars.
ABOUT PARA RESOURCES:
Para is a junior producing gold mining company. Para owns approximately 80% of the El Limon project, in Colombia, which in
addition to its current underground operation is purchasing mineralized rock mined by small artisanal miners working on the
Company's property. The El Limon and OTU properties also have exploration and development upside. The Company also
owns 88% of the Gold Road Mine in the Oatman District of Arizona. The Company has hired RPMGlobal as consulting
engineers in order to produce a NI 43-101 Technical Report, which it expects, will establish a current Mineral Resource estimate
and anticipates that it will publish a NI 43-101 PEA thereafter.
Para will continue to take advantage of current market conditions
to acquire and develop additional highly economic, near-term production assets that have strong exploration and development
upside.
ABOUT RPMGLOBAL
RPMGlobal is an international mineral resources consulting and engineering company offering a full array of services to the
mining and environmental industries including all facets of mining, from exploration to site closure/remediation.
RPMGlobal has
gained worldwide recognition for its due diligence and independent engineer technical support work for financial institutions and
also offers expertise in engineering studies, planning, design, and management of mining industry projects for base and
precious metals, coal and energy, and industrial minerals.
Cautionary Notes:
This press release contains forward-looking information under Canadian securities legislation. Forward-looking information.
Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or
"does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may",
"could", "would", "might" or "will be taken", "occur" or "be achieved". All information contained in this news release, other than
statements of current and historical fact, is forward looking information. Forward-looking statements are subject to known and
unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of
Para to be materially different from those expressed or implied by such forward-looking statements, including but not limited to
those risks described in the annual information form of Para and in its public documents filed on SEDAR from time to time.
Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made.
Although management of Para has attempted to identify important factors that could cause actual results to differ materially from
those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated
or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-
looking statements. Para does not undertake to update any forward-looking statements, except in accordance with applicable
securities laws. Para's Readers should also review the risks and uncertainties sections of Para's annual and interim MD&As.
On behalf of the Board of Directors
"C. Geoffrey Hampson"
C. Geoffrey Hampson, Chairman, Chief Executive Officer and Director
For further information, please contact Andrea Laird, telephone: +1-604-259-0302
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.