Paramount Gold and Silver (NYSEMKT:PZG) has announced it has directed not less than four core drill rigs to its Mexican San Miguel project in the Palmarejo district. This move comes after Paramount has released the results of an updated Preliminary Economic Analysis on the San Miguel project where the initial capital expenditure has been reduced after a strategic change to process only oxide ore in the first few years of the mine life.
Even though I'm not impressed with this PEA based on the current gold and silver price, Paramount is going ahead with the project (which is the correct decision, as it's better than doing nothing at all) and the drill rigs will increase and upgrade the currently known resource estimate so it can be used as a starting point for a pre-feasibility study. One of the drill rigs will be tasked to further investigate a newly discovered structure, which seems to be running parallel with the Don Ese zone at San Miguel. As the newly discovered zone seems to have the same characteristics like Don Ese, this could potentially impact the NPV and IRR of the project, as the Don Ese zone most definitely is the best and highest grade zone of the San Miguel project.
By converting the inferred resources to measured and indicated resources, the confidence in the mineralization and the outline of the zones will be increased and should increase the quality of the pre-feasibility study. Additionally, I'll be looking forward to the drill results from the newly discovered Dana zone, as a "Don Ese II" would be very welcome to improve the economics of San Miguel as a whole.
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