Paramount Gold and Silver (NYSEMKT:PZG) has announced the assay results from three additional holes, which were drilled on the Don Ese deposit which is part of the San Miguel project in Mexico. Drill hole 49 was an infill drill hole aiming at confirming the continuity of the mineralization between previously drilled holes. As could be expected, the result was positive as the drill bit intersected almost 16 meters of 2.59 g/t gold and almost 9 ounces of silver per tonne of rock. This includes a higher-grade intercept of almost 6 meters of 4.24g/t gold and 18 ounces of silver per tonne of ore.
Hole number 48 is professionally being ignored in the press release as the grades aren't that shocking (0.25g/t gold and about 2 ounces of silver per tonne), and hole 50 intersected multiple mineralized zones with some pretty decent grades. This year's round of infill and expansion drilling will help the company to get an even better understanding of the mineralized structure at Don Ese and will increase the confidence in the deposit, its geological model and the economics. Paramount plans to move ahead with a pre-feasibility study on San Miguel, which is expected sometime next year. Meanwhile, the company will continue to drill as it says the cost of drilling has decreased substantially. This could put additional pressure on Coeur Mining (NYSE:CDE), which is rumored to be pursuing an acquisition of Paramount Gold and Silver or at least its San Miguel project. This would make sense from their point of view, as their mine is just half a mile away.
I'm particularly impressed with infill drill hole 49 as not only did it confirm the continuity of the mineralization, it also had a higher grade than the surrounding holes. This will result in a higher amount of ounces in the measured and indicated category and could also result in an increase of the average grade. This will obviously enhance the economics of the project and the pre-feasibility could be a chance to positively surprise the market.
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