{"id":2279,"date":"2011-12-12T19:51:55","date_gmt":"2011-12-13T00:51:55","guid":{"rendered":"http:\/\/www.cusjc.ca\/ottawainsight\/?p=2279"},"modified":"2017-11-19T19:16:30","modified_gmt":"2017-11-20T00:16:30","slug":"finding-what-others-discard","status":"publish","type":"post","link":"https:\/\/www.cusjc.ca\/ottawainsight\/?p=2279","title":{"rendered":"Finding what others discard"},"content":{"rendered":"

Paramount Gold and Silver Corp. is stuck between a rock and a hard place. <\/span><\/p>\n

The rock is what\u2019s buried under the ground in Nevada and northern Mexico, where the company has found a supply of left over minerals at former mine sites. The hard place is the stock market, where uncertainties related to global events far removed from Paramount\u2019s control are pinning down\u00a0 its stock price.<\/p>\n

Paramount faces the challenge of depending on an unreliable source of funding for its most important activity \u2013 exploration.<\/p>\n

The company relies on issuing shares to fund expensive drilling and metallurgic testing at its Sleeper and San Miguel mining sites in Nevada and Mexico, respectively. For the fiscal year ending June 2011, Paramount spent close to $8 million on exploration, about eight times the next biggest cost and the largest single contributor to Paramount\u2019s $28 million loss for the year.<\/p>\n

But over the past 12 months, Paramount\u2019s share price has fallen from a 52-week high of $4.40 in March to a low of $1.65 in November 2010. In the past four months, prices have hovered between the $2 to $3 range, and shares closed at $2.67 on November 30. At the same time, Paramount has announced new discoveries of gold and silver at the company\u2019s two main sites, every few weeks since January 2011.<\/p>\n

With a share price that seems to ignore new discoveries and has more than doubled and halved in value over the past year, Paramount faces the challenge of depending on an unreliable source of funding for its most important activity \u2013 exploration.<\/p>\n

CONCENTRATE ON EXPLORATION<\/span><\/strong><\/p>\n

As an exploration-stage mining company, Paramount drills for leftover resources at existing mines before selling the property or partnering with another company for extraction. To attract a potential buyer or partner, Paramount has to show its mines hold enough gold and silver to make a profitable investment for a potential acquirer. This means Paramount must make exploration its major priority \u2013 drilling and performing metallurgic tests are necessary to prove the supply of high quality minerals beneath the ground is enough to make an attractive investment.<\/p>\n

\u201cAll gold stocks have been hammered pretty hard in the last while.\u201d<\/p>\n

Eroding stock prices are not uncommon among smaller mining companies such as Paramount, John Nyholt, a partner in the Deals group of PriceWaterhouseCoopers, said in a phone interview.<\/p>\n

\u201cThe junior gold miners index [on the New York Stock Exchange], has gone down 30 per cent since January 1, 2011,\u201d Nyholt says. \u201cAll gold stocks have been hammered pretty hard in the last while.\u201d<\/p>\n

Paramount\u2019s chief financial officer Carlo Buffone outlined two ways the company can approach its exploration budget in this volatile environment.<\/p>\n

Under the first option, the board of directors can decide to budget based on the results they believe they will achieve, Buffone says. This means assuming the cash will come through and creating a large-scale exploration plan to maximize the resources discovered.<\/p>\n

Otherwise, the board can take a more conservative approach.<\/p>\n

\u201cThe board of directors might decide, \u2018Let\u2019s slow down exploration because our ability to fund is hampered by market conditions,\u201d Buffone says. \u201cIt\u2019s an ongoing debate.\u201d<\/p>\n

LOTS OF CASH ON HAND<\/span><\/strong><\/p>\n

Having upped its exploration budget for 2012, Paramount will pursue the first of those options. The company budgets for exploration based on the calendar year, and plans to spend $20 million in 2012 compared to the $12 million budgeted for January to December 2011.<\/p>\n

For now, the company has the cash to do this. Paramount ended its first quarter on September 30 2011 with a cash balance of $10.5 million.\u00a0 Exploration expenses for that quarter were $4 million, and expected to rise as Paramount gears up to either sell its properties or enter in to a joint venture.<\/p>\n

Paramount\u2019s strategy is to seek out institutional investors who are more likely to hold their shares for the long term.<\/p>\n

\u201cYou really have to step up your drilling,\u201d Buffone says.<\/p>\n

Within the next four months, reports outlining the resource estimates at Sleeper and San Miguel will be completed and updated to include the most recent discoveries. At that point, Paramount will complete a preliminary economic assessment for each site \u2013 reports that essentially indicate how much money can be made extracting and selling gold and silver from each mine.<\/p>\n

\u201cThat\u2019s when producing acquirers start taking you more seriously,\u201d says Paramount\u2019s manager of corporate development, Chris Theodossiou.<\/p>\n

Leading up to that point, Paramount\u2019s strategy is to seek out institutional investors who are more likely to hold their shares for the long term, as opposed to individuals more susceptible to buy and sell with the bipolar ups and downs of the market.<\/p>\n

\u201cAll shareholders are important, but an institutional investor typically means the people have a professional background in analyzing the company,\u201d Buffone says.<\/p>\n

Paramount\u2019s management and board of directors currently own about 10 per cent of the company\u2019s outstanding shares. Institutions hold 20 per cent, and individual shareholders own the remaining 70 per cent.<\/p>\n

PITCHING TO INVESTORS<\/span><\/strong><\/p>\n

On November 29 and 30, Paramount\u2019s chief executive officer Chris Crupi was at the JVTIR Metals and Mining Conference in Boston to make a presentation aimed at boosting Paramount\u2019s analyst coverage and attracting more institutional investors.<\/p>\n

Despite frustration with the state of the market, Buffone says Paramount needs to maintain focus on its this key group of investors.<\/p>\n

\u201cYou\u2019ve got to almost tune out what\u2019s happening in the stock market,\u201d Buffone says. \u201cYou still have to go out and market to who you think your investors should be. You still have to go and knock on the doors and tell the story.\u201d<\/p>\n

In 2012, Paramount\u2019s story might expand to include the company\u2019s other properties. Glen van Treek, Paramount\u2019s vice president of exploration, says the company will take a closer look at its other sites in Nevada, called Mill Creek, Spring Valley and Reese River.<\/p>\n

\u201cWe are conducting a review of those [sites] now to define the plan for 2012 but these are early stage,\u201d van Treek wrote in an email while on-site in Nevada.
\nWith or without the cooperation of the stock market, Paramount\u2019s management seems determined to forge ahead.<\/p>\n","protected":false},"excerpt":{"rendered":"

Paramount Gold and Silver Corp. is stuck between a rock and a hard place. The rock is what\u2019s buried under<\/p>\n","protected":false},"author":50,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,1],"tags":[250],"class_list":["post-2279","post","type-post","status-publish","format-standard","hentry","category-corporate-profiles-2011","category-news","tag-ora-morison"],"_links":{"self":[{"href":"https:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/2279","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/users\/50"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2279"}],"version-history":[{"count":16,"href":"https:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/2279\/revisions"}],"predecessor-version":[{"id":4445,"href":"https:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/2279\/revisions\/4445"}],"wp:attachment":[{"href":"https:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2279"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2279"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2279"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}