Paramount Gold details Sprott financing proposal

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Paramount Gold Nevada Corp. (PZG-NYSE) said Wednesday it has executed a non-binding term sheet with Sprott Resource and Streaming Royalty Corp for a royalty convertible note (RCN) that will provide for proceeds of between $10 million and $15 million.

Proceeds will be used to fund the continued permitting of the proposed high-grade underground Grassy Mountain gold mine in eastern Oregon.

“While substantial technical and legal due diligence has been completed by Sprott Streaming, there can be no assurance that the proposed financing will be completed,’’ Paramount said in a press release.

If the proposed financing is closed, the funds will be available once the company has received the notice to proceed with the development of the project from Oregon state permitting agencies. The company said it expects the State to issue the notice within the next few months.

Paramount is a spin-out of Coeur Mining Co.’s [CDE-NYSE] $200 million acquisition of Paramount Gold and Silver, in April 2015. With a focus on gold assets in the United States, the company is backed by a shareholder group that includes Seabridge Gold Co. [SEA-TSX] with an 8% interest.

On October 29, 2020, the company filed a NI-43-101 technical report containing a feasibility study for a proposed high-grade underground mining operation at Grassy Mountain.

At that time proven and probable reserves stood at 390,000 ounces of gold and 425,000 ounces of silver.

The feasibility study envisages initial capital expenditure of US$97.5 million, US$10.1 million of estimated contingencies, US$25.6 million of sustaining CapEx and US$6.3 million closure costs for a 750 tonne per day mine and milling operation.

The study forsees annual production of approximately 47,000 ounces of gold and 55,000 ounces of silver over an eight-year mine life with a 3.1-year after-tax payback period.

The life of mine all-in-sustaining cost is estimated at US$672 an ounce of gold, delivering total after-tax free cash flow of US$165 million.

Subject to the terms of the definitive documentation, the RCN will carry an interest rate of 10% annually, which, at the company’s discretion, will be payable in cash or shares at a 7.0% discount to the 10-day volume weighted average price from the scheduled date of interest payment.

The RCN may be repaid in cash or through the issuance of the royalty at the earlier of the commencement of commercial production or five years from the RCN closing date. The RCN is convertible into a gross revenue royalty of 3.17% to 4.75% of the gold and silver produced from the proposed Grassy Mountain gold mine, proportionate to the final amount of funds that have been advanced upon reaching commercial production.

On February 28, 2023, Paramount Gold shares closed at US0.30. The shares are currently trading in a 52-week range of US$1.10 and US0.28.

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