Heiko Ihle, CFA, Senior Research Analyst Paramount Gold ...€¦ · presentations and meetings at the firm’s Winnemucca, NV office and a tour of the property, an overview of the

Paramount Gold and Silver Corp

(Ticker: PZG — $1.01)

Buy

Promising Projects In Mexico And Nevada

We initiate coverage of Paramount Gold and Silver Corp. (NYSEMkts: PZG and TSX:PZG) with a BUY recommendation. Highlights of the firm include:

• Paramount Gold & Silver is a precious metals exploration company with twoprimary projects located in northern Nevada and Chihuahua, Mexico. Bothprojects are currently in the development phase and the firm continues to focus onmoving at least one of them through the development pipeline by themselvesthrough additional exploration and engineering programs. Preliminary EconomicAssessments were completed on both properties, and Paramount remainsfocused on converting resources to reserves.

• We currently value the San Miguel property at $132 million, or $0.85 pershare. This figure is based on a 12% discount rate for the project, with firstproduction in 2017 and long-term gold and silver prices of $1,200 and $20 perounce, respectively. The San Miguel project is located in the historic mining districtof Chihuahua, Mexico, and consists of 43 concessions spanning 142,944hectares. Given recent exploration results, the company is expected to spend $4.0million for drilling at San Miguel in 2014, increasing to $9.0 million in 2015.

• We visited the San Miguel project on October 16, 2013. We highlight thatalthough the project is fairly remote (the helicopter ride from Chihuahua took wellover an hour) the infrastructure in the area is actually pretty good. We saw variousold workings in the area, from an area when artisanal miners were mining gradesof more than 15 grams per tonne. Although grades like these have mostly beenmined out, especially if located close to the surface, this displays the overallpotential for the site given historical activities.

• We currently value the Sleeper property at $112 million, or $0.72 per share.This figure is based on a 13% discount rate for the project, with first production in2017 and long-term gold and silver prices of $1,200 and $20 per ounce,respectively. The Sleeper Project was acquired by Paramount in 2010, and waspreviously an open pit operation owned and operated by Amax Gold from 1986through 1996. Under prior ownership, Sleeper produced 126,000 ounces at anaverage cost of less than $60 per ounce, making the Sleeper Project one of thelowest cost gold mines worldwide.

• On December 4, 2013, we visited Paramount’s Sleeper property. Our daystarted with an easy drive from Reno on a highway, followed by severalpresentations and meetings at the firm’s Winnemucca, NV office and a tour of theproperty, an overview of the old open-pits and some additional first-hand views ofthe infrastructure already found at the site. Our initial belief that a large appeal ofthe project continues to be the proximity to labor and infrastructure for the site wasreaffirmed during our visit.

• Paramount is currently trading at a 36.9% discount to our NAV estimate andprice target of $1.60 per share and we initiate coverage with a BUYrecommendation. We derive this NAV utilizing a long-term gold price of $1,200and a long-term silver price of $20. We currently utilize a discount rate of 12% forSan Miguel project in addition to a 13% discount rate for the Sleeper project, giventhe slightly higher risks associated with the Sleeper property and thenon-producing nature of both assets. Overall, our NAV accounts for Paramount’srelatively diverse asset base, coupled with the mining friendly jurisdictions in whichthe firm operates and a proven management team.

Initiating CoverageDecember 10, 2013

United States of AmericaMetals and Mining

Heiko Ihle, CFA, Senior Research Analyst203-559-3907, [email protected]

Sales & Trading 888-543-4448

Price $1.01

52 Week Range ($0.99 - $2.42)

Price Target $1.60

Market Cap (mil) $157.30

Shares out (mil) 155.73

3-Mo Avg Vol 545,465

Cash per share $0.06

Total Debt (mil) $0.00

Debt/Equity 0%

EPS $

Yr Jun 2013A 2014E 2015E

Actual Curr Curr

YEAR (0.09)A (0.08)E (0.10)E

Revenues (millions) $

Yr Jun 2013A 2014E 2015E

Actual Curr Curr

YEAR 5A 0E 0E

Q3 Q1 Q2 Q30

1

2

3

2013 2014

1 Year Price History for PZG

Created by BlueMatrix

Please refer to important disclosure information and Regulation Analyst Certification found on pages 22 - 23 of this report.

Investment Summary:

Paramount is currently trading at a 36.9% discount to our NAV estimate of $1.60 per share. We derive this NAV utilizing a long-term gold priceof $1,200 and a long-term silver price of $20. We currently utilize a discount rate of 12% for San Miguel project in addition to a 13% discount rate forthe Sleeper project, given the slightly higher risks associated with the Sleeper property and the non-producing nature of both assets. Overall, ourNAV accounts for Paramount’s relatively diverse asset base, coupled with the mining friendly jurisdictions in which the firm operates and a provenmanagement team.

Valuation:

• We currently value the San Miguel property at $132 million, or $0.85 per share. This figure is based on a 12% discount rate for the project,with first production in 2017 and long-term gold and silver prices of $1,200 and $20 per ounce, respectively.

• We currently value the Sleeper property at $112 million, or $0.72 per share. This figure is based on a 13% discount rate for the project, withfirst production in 2017 and long-term gold and silver prices of $1,200 and $20 per ounce, respectively.

• We value the remaining assets of the firm, including net cash, the exploratory assets and other corporate costs at $12 million, or $0.03per share.

• This derives our overall NAV of $256 million, or $1.60 per share. We assign a 1.0x multiple on our NAV for a final price target of $1.60 pershare.

Risks to achievement of target price:

• Both projects have a relatively long lead-time to first production. Sleeper and San Miguel will take several years to enter production, andgiven current uncertainty in the financial markets towards mining stocks, the company may face funding issues or a overall lack of investorinterest for long lead-time projects.

• Paramount Gold has several foreign investment risks related to royalties and other geopolitical risks. Paramount Gold could potentiallyincur royalties, non-renewal of its operating licenses or even face the threat of having its assets nationalized by the Mexican Government if itbecomes strapped for cash. We note that we consider this risk to be reasonably remote, especially considering Mexico has been a member of theWorld Trade Organization (“WTO”) since 1995 and has been open to foreign businesses operating in their respective countries over the pastseveral years.

• Paramount Gold might face funding issues. The firm currently derives no cash-flow from its exploratory properties. Therefore, managementhas to either raise funds or sell assets to fund operations. Notably, given current cash levels, we do not expect any imminent cash issues for thefirm.

• The company may be forced into a disadvantageous joint venture or other partnership with a major mining company. Both ofParamount’s projects are located in close proximity to larger companies and their respective projects, which may force the firm to enter anagreement with only a minority interest, or a lack of control with one of the larger companies taking over the project due to funding issues in orderto enter production.

• Investors may be unable or unwilling to invest in international stocks. Some investors are unable or unwilling to invest in shares ofcompanies listed and based outside of the United States. Although these companies have strong potential and potentially offset any domesticeconomic declines, the fact that some investors are unable to invest in Paramount Gold shares due to its international nature remains.

Company description:

Paramount Gold and Silver Corp. (Paramount) is an exploration stage mining company with projects in northern Nevada and Chihuahua,Mexico. Through its wholly owned Mexican subsidiary, Paramount Gold de Mexico S.A. de C.V., the Company owns a 100% interest in the SanMiguel property. The San Miguel Project is located in southwestern Chihuahua in Northern Mexico. The project is about 20 kilometers north of thetown of Temoris, adjacent to the village of Guazapares. It is in the Guazapares mining district, which is part of the Sierra Madre Occidentalgold-silver belt. The San Miguel project consisted of 17 smaller concessions clustered near Guazapares, Chihuahua with a total area of 427hectares, plus the much larger Andrea, Gissel and Isabel concessions. On August 23, 2010, the Company acquired X-Cal Resources Ltd. (X-Cal).

Page 2 of 23Euro Pacific Capital, Inc.

Paramount Gold and Silver CorpCompany Note

December 10, 2013

Company Overview

Paramount Gold & Silver is a precious metals exploration company with two primary

projects located in northern Nevada and Chihuahua, Mexico. Both projects are currently in

the development phase and the firm continues to focus on moving at least one of them through

the development pipeline by themselves through additional exploration and engineering

programs. Preliminary Economic Assessments were completed on both properties, and

Paramount remains focused on converting resources to reserves.

In our opinion, the overall mining environment in Nevada and Mexico remains quite

favorable. Mexico continues to be one of the world's largest producers of several commodities,

in addition to continued exploration activities for various metals. Further, in our opinion, Mexico

has relatively low geopolitical risks, a proven labor pool and fairly good infrastructure while the

full impact from current tax code changes should be relatively low given current metal prices.

The state of Nevada remains one of the largest producers of gold around the globe, in part

due to a skilled labor force, low geopolitical risks and no Government royalties. In general,

due to the lower grade nature of mineralized zones in Nevada, open pit operations are more

common than the underground methods often employed throughout Mexico.

Exhibit 1: Geographical Overview for Paramount in Mexico & Nevada

Source: Company presentation

Property Overview

Paramount remains focused on expanding resources and reserves at both of its properties:

the San Miguel project in Chihuahua, Mexico and the Sleeper Gold Project in Nevada.

Although in our opinion the firm will be forced to divest one of its projects in order to move the



December 10, 2013

other one into production, at present management remains focused on both sites. For 2013, the

firm anticipates spending of $4.0 million on San Miguel and $1.5 million on Sleeper.

San Miguel

The San Miguel project is located in the historic mining district of Chihuahua, Mexico, and

consists of 43 concessions spanning 142,944 hectares. Historical records indicate production

around the area starting in the 17th century, while the district currently has six operating mines.

Paramount currently has royalties on 16 of the concessions, ranging up to 2.00%. A preliminary

economic assessment on San Miguel was completed on February 28, 2013.

Exhibit 2: San Miguel Project map

Source: Corporate Presentation

The San Miguel project is strategically located within the Sierra Madre Gold-Silver Belt. San Miguel surrounds claims held by Coeur Mining (NYSE:CDE; $11.11; NOT RATED) and

Fresnillo (LON:FRES; £7.75; NOT RATED). Given the significant amount of reserves at the site,

San Miguel may prove to be an attractive target for either company.

Coeur Mining’s land package in the area includes the Palmarejo mine, encompassing

approximately 12,300 hectares. This exploration-stage property consists of several mineralized

zones, most notably in the north-central portion of the property. In 2012, Coeur conducted a

$19.9 million exploration program at the property, and completed 341,975 feet of drilling

between the Palmarejo, Guadalupe and La Patria targets. Following promising results, Coeur has



December 10, 2013

since devoted over 95% of the firm’s 2013 exploration budget in Mexico to Palmarejo property.

Exhibit 3: Mines around San Miguel




December 10, 2013

Exhibit 4: San Miguel claim map


According to the preliminary economic assessment (PEA) undertaken by Metal Mining

Consultants Inc. earlier this year, the project is expected to be a combination of

underground and open pit operations. The study assigns high potential to the site, primarily

due to extensive infrastructure in the area, including access to power, water and transportation

routes.

The company currently expects initial capital expenditures of $243 million, leading to

average annual production of 57,300 ounces of gold and 3.1 million ounces of silver, at a

total cash cost of $842 per gold equivalent ounce.

According to the PEA, the life of the mine is expected to be 14 years with sustaining capital

costs of $227.3 million. The initial mine plan is based on a central processing plant with a

tailings storage facility with mineralized material being trucked to the site. Further, the main

facility would contain the central electrical facility with power lines extending to the underground

operations at Don Ese, San Miguel and La Union.

On November 6, 2013 Paramount released updated metallurgical tests at San Miguel which

support a Heap Leach / Open Pit operation for two of the deposits at the site. The initial PEA

completed previously required a high cut-off grade, which subsequently omitted the mid-to-low

open pit material at San Francisco and San Antonio, which can be processed at a substantially

lower cost. The possibility of a heap leach scenario at the sites could add approximately 37.8



December 10, 2013

million tonnes of ore, adding 368,430 ounces of gold and 27.8 million ounces of silver to the

overall mine plan. Our model currently does not account for this, giving additional upside.

Exhibit 5: San Miguel Vein & Claim Overview


On September 19, 2013 Paramount announced the discovery of a major structure at San

Miguel. The San Isidro system’s initial rock sampling has yielded impressive results, including

bonanza grades of over 100 g/t gold and up to 2,291 g/t silver over, displaying the production

potential of the project. Two shallow holes were drilled to test for mineralization, and both

intersected multiple veins with gold grades of up to 2.8 g/t with from 176.2m to 177.2 m and

silver up to 214 g/t from 371.20m to 372.45m, with the best intercept being an average of 0.61 g/t

of gold and 31.6 g/t of silver over 11 meters from 174m to 185m.

Given recent exploration results, the company is expected to spend $4.0 million for drilling

at San Miguel in 2014, increasing to $9.0 million in 2015. This is the majority of Paramount’s

total drilling budget of $5.5 million for 2014.



December 10, 2013

Site Visit

We visited the San Miguel project on October 16, 2013. We highlight that although the project

is fairly remote (the helicopter ride from Chihuahua took well over an hour) the infrastructure in

the area is actually pretty good. The mine is located close to a small town which currently has

power, high-speed internet and several paved roads, in addition to a steady supply of labor.

Exhibit 6: Palmarejo mine as seen from the air during our San Miguel visit

Source: Euro Pacific Capital site visit on October 17, 2013

We saw various old workings in the area, from an area when artisanal miners were mining grades

of more than 15 grams per tonne. Although grades like these have mostly been mined out,

especially if located close to the surface, this displays the overall potential for the site given

historical activities.



December 10, 2013

Exhibit 7: Historical mining area at Paramount


We also visited the core shack, which is located in a nearby village and saw the recent

drilling results firsthand. We note that recent drilling results, including the recently announced

San Francisco vein which included a section of 0.75 meters at 119.5 g/t gold and 15.6 kilos of

silver per tonne, should allow the firm to continue exploring the area for additional resources.

Exhibit 8: High-grade core at the core shack




December 10, 2013

Valuation

We currently value the San Miguel property at $132 million, or $0.85 per share. This figure

is based on a 12% discount rate for the project, with first production in 2017 and long-term gold

and silver prices of $1,200 and $20 per ounce, respectively.

Exhibit 9: San Miguel Valuation

Source: Euro Pacific Capital estimates

Sensitivity Analysis

We highlight the large impact of the gold and silver price on our valuation. In fact, a $50 rise

in the long-term price of gold would raise our NAV for the project by $0.10 per share, while a $2

change in the long-term silver price would raise our NAV by $0.08 per share. Our NAV is

impacted by $0.04 for a 0.5% increase or decrease in our discount rate for the project.

Exhibit 10: San Miguel Sensitivity analysis


2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

San Miguel Project

Tonnes processed (in '000s) 0 0 0 1,477 1,486 1,550 1,550 1,562 1,534 1,486 1,543 1,460 1,464 1,217 935 882 824

Gold recovery 0% 0% 0% 85% 94% 94% 94% 94% 94% 93% 94% 94% 94% 94% 91% 93% 84%

Gold grade (g/t) 0 0 0 0.82 1.07 1.89 2.18 2.16 1.84 2.05 1.59 1.37 1.37 1.15 0.52 0.89 0.23

Annual gold production ('000s oz) 0 0 0 33 48 89 102 102 85 91 74 60 61 42 14 23 5

% Growth 45% 84% 15% 0% -16% 7% -19% -19% 0% -30% -66% 65% -78%

Gold sales prices 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200

Silver recovery 0% 0% 0% 71% 43% 67% 69% 60% 67% 66% 40% 39% 47% 73% 80% 84% 81%

Silver grade 0 0 0 115 100 94 108 113 107 117 120 132 118 96 81 39 69

Annual silver production ('000s oz) 0 0 0 3,893 2,052 3,142 3,714 3,408 3,543 3,673 2,390 2,418 2,611 2,729 1,948 940 1,473

% Growth -47% 53% 18% -8% 4% 4% -35% 1% 8% 5% -29% -52% 57%

Silver sales price 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

Gold:Silver ratio 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60

Gold equivalents 0 0 0 65 34 52 62 57 59 61 40 40 44 45 32 16 25

Total Gold equivalents ('000s oz) 0 0 0 98 82 141 164 159 144 152 114 101 104 88 47 39 30

% Growth -16% 71% 16% -3% -9% 6% -25% -12% 3% -16% -47% -16% -24%

Total gold cash cost (320) (475) (520) (500) (510) (550) (550) (575) (600) (610) (625) (600) (600) (600) (600)

Gross profit (in '000s) 0 71,041 55,939 98,633 113,195 103,182 93,820 95,187 68,399 59,438 59,869 52,674 28,016 23,479 17,805

CapEx (in '000s) (4,000) (9,000) (125,000) (80,000) (8,000) (8,000) (8,000) (8,000) (8,000) (8,000) (8,000) (8,000) (8,000) (12,500) (12,500) (12,500) (12,500)

Tax (in '000s) 30% 1,200 2,700 37,500 2,688 (14,382) (27,190) (31,558) (28,555) (25,746) (26,156) (18,120) (15,432) (15,561) (12,052) (4,655) (3,294) (1,591)

Operating cash flow (2,800) (6,300) (87,500) (6,271) 33,557 63,443 73,636 66,628 60,074 61,031 42,279 36,007 36,308 28,122 10,861 7,685 3,713

Cash flow discount rate 12% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Present value of opening cash flow (2,800) (5,625) (69,754) (4,464) 21,326 35,999 37,307 30,139 24,263 22,008 13,613 10,351 9,319 6,445 2,222 1,404 606

Total current cash flow 132,359

Fully diluted shares 155,731

Project NAV per share 0.85$

LT Gold Price NAV/share LT Silver Price NAV/share Discount Rate NAV/share0.85$ 0.85$ 0.85$

950 0.30$ 10 0.46$ 9.50% 1.08$

1000 0.41$ 12 0.54$ 10.00% 1.03$

1050 0.53$ 14 0.62$ 10.50% 0.98$

1100 0.64$ 16 0.70$ 11.00% 0.94$

1150 0.75$ 18 0.77$ 11.50% 0.89$

1200 0.85$ 20 0.85$ 12.00% 0.85$

1250 0.95$ 22 0.93$ 12.50% 0.81$

1300 1.05$ 24 1.00$ 13.00% 0.77$

1350 1.15$ 26 1.08$ 13.50% 0.73$

1400 1.25$ 28 1.16$ 14.00% 0.70$

1450 1.35$ 30 1.24$ 14.50% 0.66$



December 10, 2013

Sleeper Gold Project

The Sleeper Project was acquired by Paramount in 2010, and was previously an open pit

operation owned and operated by Amax Gold from 1986 through 1996. When Amax Gold

first commenced production at the site in 1986, the firm expected production of 40,000 ounces

throughout the year. However, due to grades that came in substantially higher than anticipated,

the firm produced 126,000 ounces at an average cost of less than $60 per ounce, making the

Sleeper Project one of the lowest cost gold mines worldwide. Paramount acquired ownership of

the property when it acquired all the issued and outstanding shares of X-Cal Resources in 2010.

Notably, the mill from previous operation at the site was sold off, thus a completely new mill

must be built at the site.

The project is located approximately 25 miles from Winnemucca, Nevada, about 3 hours by

car outside of Reno, NV. In addition to the Sleeper project, the firm also purchased a land

package totaling 2,570 claims spanning a total of 47,500 acres. The total land package extends to

Newmont’s (NYSE:NEM; $24.18; NOT RATED) Sandman project. Given the proximity to a

major producing mine, infrastructure including power, paved roads and water access should not

be a major issue for the Sleeper project. This also insinuates that Newmont is a logical JV or

takeover partner for the project.

Exhibit 11: Sleeper Project location




December 10, 2013

Currently, the Sleeper Project is a lake that was created through three open pits operations.

According to management, it should take around six months to pump down the lake using a 4,000

liter per second pump.

According to the PEA, the project is expected to process 81,000 tpd through an open pit

heap-leach operation. The PEA was completed on July 30, 2012, and concluded that a large

open-pit operation could extract a large amount of resources from the site.

The project is expected to have a 17 year mine life, with average annual production of

172,000 ounces of gold and 263,000 ounces of silver at an average operating cash cost of

$767 per gold equivalent ounce. We highlight the favorable conditions for mining in Nevada,

notably the availability of a trained mining workforce in Winnemucca, just 25 miles from the site.

Exhibit 12: Sleeper Project Property

Source: Company Website http://www.paramountgold.com/Projects/Sleeper_Photos.asp

Site visit:

On December 4, 2013, we visited Paramount’s Sleeper property. Our day started with an easy

drive from Reno on a highway, followed by several presentations and meetings at the firm’s

Winnemucca, NV office and a tour of the property, an overview of the old open-pits and some

additional first-hand views of the infrastructure already found at the site. We concluded the day

by visiting the core shack, conveniently located close-by, and saw various core samples



December 10, 2013

displaying visible pieces of gold. The property is located 3 hours outside of Reno, NV, easily

accessible by highway and (for the last few miles) an all-weather road.

Exhibit 13: Local road & power lines giving access to the Sleeper property

Source: Euro Pacific Capital site visit on December 4, 2013

Our first impression was primarily surprise at the size and scale of the old operations,

including the three old pits that have now converged into a single lake. We highlight that a

building, currently housing equipment and storage for other miscellaneous items can be found

just to the right past the picture below. While infrastructure at the site is fairly accessible,

Paramount has enough space for future expansion in all directions in order to create its “super-

pit” at the project site.

We concluded the day with a visit to Paramount’s core shack close to the Sleeper property.

Notably, the firm ships out samples for full assay results, but maintains storage and logging space

at the site. We highlight that staff levels at the core shack are limited, in-line with limited capital

expenditure spending over the next two years for the project. That being said, the firm was able to

show us various pieces of core with visible gold, in addition to several pieces of high-grade ore.



December 10, 2013

Exhibit 14: Sleeper core shack


Exhibit 15: High-grade core samples at the Sleeper core shack




December 10, 2013

In conclusion, our initial belief that part of the attraction for Sleeper stems from proximity

and the strong access to infrastructure and labor at the site was reaffirmed during our visit.

We left Reno in the morning, consummated a full tour of the property during the day, drove back

and still had enough time for some additional work in the hotel room before leaving for dinner.

This ease of access does not hold true for many other mining projects and mines we have seen in

the past, and in fact is much better than at Paramount’s San Miguel project.

That being said, given the relatively low grades and somewhat long lead-time for the

project, we continue to favor San Miguel over Sleeper. In addition, the overall capital

expenditure requirements for San Miguel are lower, and although the site is not as accessible as

Sleeper, both areas have decent access to a skilled labor pool due to various mining activities in

their respective areas.

Valuation

We currently value the Sleeper property at $112 million, or $0.72 per share. This figure is

based on a 13% discount rate for the project, with first production in 2017 and long-term gold and

silver prices of $1,200 and $20 per ounce, respectively.

Exhibit 16: Sleeper Valuation



As with San Miguel, we highlight the large impact of the gold price on our valuation. At

Sleeper, a $50 rise in the long-term price of gold would raise our NAV for the project by $0.25

per share, while most silver price changes have essentially no impact on the overall project NAV

given the limited silver production. The NAV remains positive until gold falls below $1,000 per

ounce. Finally, our NAV is impacted by $0.06 per share for a 0.5% increase or decrease in our

discount rate for the project.

Sleeper Project 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2027E 2028E 2029E 2030E

Tonnes processed (in '000s) 0 0 0 29,200 29,200 29,200 29,200 29,200 29,190 29,200 29,200 29,200 29,190 29,200 29,250 24,610 29,200 15,900

Gold recovery 0% 0% 0% 65% 63% 81% 77% 67% 74% 73% 71% 86% 77% 87% 82% 75% 57% 75%

Gold grade (g/t) 0 0 0 0.31 0.43 0.27 0.31 0.33 0.28 0.29 0.28 0.25 0.27 0.22 0.23 0.31 0.31 0.33

Annual gold production ('000s oz) 0 0 0 190 256 206 223 209 195 198 188 201 194 181 178 184 167 126

% Growth 35% -20% 8% -6% -7% 2% -5% 7% -4% -7% -1% 3% -9% -24%

Gold sales prices 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200

Silver recovery 0 0 0 9% 9% 10% 11% 11% 10% 10% 11% 10% 10% 10% 10% 11% 12% 10%

Silver grade (g/t) 0 0 0 4.29 5.08 4.65 3.16 2.64 3.00 3.12 1.92 3.65 2.82 3.85 3.77 2.71 1.47 3.63

Annual silver production ('000s oz) 0 0 0 343 430 453 315 267 284 289 190 337 257 359 345 229 160 188

% Growth 25% 5% -30% -15% 6% 2% -34% 77% -24% 40% -4% -34% -30% 18%

Silver sales price 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

Gold:Silver ratio 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60

Gold equivalents 0 0 0 6 7 8 5 4 5 5 3 6 4 6 6 4 3 3

Total Gold equivalents ('000s oz) 0 0 0 196 263 214 228 214 199 202 191 207 198 187 184 188 170 129

% Growth 34% -19% 7% -6% -7% 2% -6% 9% -4% -6% -1% 2% -10% -24%


Gross profit (in '000s) 107,860 136,998 111,201 118,690 111,044 103,649 105,252 99,148 107,650 103,155 97,024 95,603 97,766 88,275 67,304

CapEx (in '000s) (1,500) (2,500) (346,000) (35,000) (30,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (20,000) (20,000) (20,000) (15,000) (15,000)

Tax (in '000s) 24% 360 600 83,040 (17,486) (25,680) (20,688) (22,486) (20,651) (18,876) (19,261) (17,796) (19,836) (18,757) (18,486) (18,145) (18,664) (17,586) (12,553)

Operating cash flow (1,140) (1,900) (262,960) 55,373 81,319 65,513 71,204 65,394 59,773 60,992 56,353 62,814 59,398 58,538 57,458 59,102 55,689 39,751

Cash flow discount rate 13% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Present value of opening cash flow (1,140) (1,681) (205,936) 38,376 49,874 35,558 34,201 27,796 22,484 20,303 16,601 16,375 13,703 11,951 10,381 9,450 7,880 4,978






December 10, 2013

Exhibit 17: San Miguel Sensitivity analysis


Other projects

Paramount owns the Mill Creek and Spring Valley Projects in Nevada. Mill Creek is located

approximately 25 km from Newmont’s Phoenix mine. The Lower Plate rocks at the site exhibit

many of the characteristics seen in other gold Carlin-style mineralized structures in the area. The

last assessment of Mill Creek occurred in 2005 and we do not currently expect Paramount to

focus on further exploring the property until San Miguel and Sleeper exploration has been moved

forward.

The Spring Valley Property is located a few kilometers from Barrick’s Spring Valley high-

grade deposit and Coeur Mines Rochester silver mine. Paramount conducted initial rock

sampling in 2011, but has not completed enough reconnaissance to warrant initial drill targets.

Notably, gold-bearing quartz veins and trace element geochemistry has indicated that the

aforementioned nearby mineralized properties may extend to Spring Valley.

LT Gold Price NAV/share LT Silver Price NAV/share Discount Rate NAV/share0.72$ 0.72$ 0.72$

950 (0.56)$ 10 0.68$ 10.50% 1.05$

1000 (0.31)$ 12 0.69$ 11.00% 0.97$

1050 (0.05)$ 14 0.70$ 11.50% 0.90$

1100 0.21$ 16 0.70$ 12.00% 0.84$

1150 0.46$ 18 0.71$ 12.50% 0.78$

1200 0.72$ 20 0.72$ 13.00% 0.72$

1250 0.97$ 22 0.72$ 13.50% 0.66$

1300 1.23$ 24 0.73$ 14.00% 0.61$

1350 1.48$ 26 0.74$ 14.50% 0.56$

1400 1.74$ 28 0.74$ 15.00% 0.51$

1450 1.99$ 30 0.75$ 15.50% 0.47$



December 10, 2013

Exhibit 18: Spring Valley Property Location

Source: Company Website http://www.paramountgold.com/_img/SpringValley-LandMap.jpg

Reserves & Resources

Paramount Gold currently has resources of 6.9 million ounces of gold, including 4.1 million

ounces of M&I and 2.8 million ounces of inferred. This is in addition to 161 million ounces of

silver, consisting of 94.2 million ounces of M&I and 66.7 million ounces of inferred. We note

that approximately 80%, of the resources are located at the Sleeper project, which is considered a

potential large-scale open pit mining project.

We also note that management is open to further acquisition opportunities, while continued

drilling may increase future resources. In general, we believe that with continued drilling, a

good resource base and an experienced technical team of which we met several members,

Paramount has a great opportunity to continue to create shareholder value through the

development of San Miguel or Sleeper.



December 10, 2013

Exhibit 19: Reserves & Resources Summary

Source: Company Presentation

Overall Valuation

Paramount is currently trading at a 36.9% discount to our NAV estimate of $1.60 per

share. We derive this NAV utilizing a long-term gold price of $1,200 and a long-term silver price

of $20. We currently utilize a discount rate of 12% for San Miguel project in addition to a 13%

discount rate for the Sleeper project, given the slightly higher risks associated with the Sleeper

property and the non-producing nature of both assets. Overall, our NAV accounts for

Paramount’s relatively diverse asset base, coupled with the mining friendly jurisdictions in which

the firm operates and a proven management team.

We value Paramount at a 1.0x multiple of our NAV for a final price target of $1.60 per

share. We believe a 1.0x NAV multiple is appropriate for the company as a whole, given the

fairly low geopolitical risks of the assets, and continued efforts to move the assets through the

development pipeline.

Our discount rates reflect the non-producing nature of the firms’ projects, coupled with the

relatively long lead-time for them to enter production. Notably, even if management decided

to move forward with only a single project (and we expect this project to be San Miguel rather

than Sleeper) the firm will need to raise funds in order to build the mine. In our opinion,

Paramount will choose to focus on turning one of the assets into a producing mine, while

divesting the other. We assign the higher discount rate to the Sleeper project due to the higher

capital expenditures and the lower grades from the site, coupled with a longer timeline to first

production.

Project Classification TonnesAu

(g/T)

Au

(Ounces)

Ag

(g/T) Ag (Ounces)

Measured and Indicated 23,918,000 0.83 639,000 70.00 53,559,000

Inferred 37,470,000 0.69 830,000 38.00 46,243,000

Measured and Indicated 326,963,000 0.33 3,479,000 3.86 40,606,000

Inferred 223,624,000 0.27 1,972,000 2.84 20,459,000

Measured and Indicated 4,118,000 94,165,000

Inferred 2,802,000 66,702,000

Combined 6,902,000 160,867,000

Combined AuEq (Ag:Au 51.7:1) 10,013,373References:1. NI 43-101 Technical Report for the San Miguel Project completed by Mine Development Associates in September 20122. NI 43-101 Technical Report for the Sleeper Project completed by SRK Consulting in July 2012

San Miguel

Sleeper

Total



December 10, 2013

Exhibit 20: Overall valuation


Paramount Gold & Silver

2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

San Miguel Project

Tonnes processed (in '000s) 0 0 0 1,477 1,486 1,550 1,550 1,562 1,534 1,486 1,543 1,460 1,464 1,217 935 882 824

Gold recovery 0% 0% 0% 85% 94% 94% 94% 94% 94% 93% 94% 94% 94% 94% 91% 93% 84%

Gold grade (g/t) 0 0 0 0.82 1.07 1.89 2.18 2.16 1.84 2.05 1.59 1.37 1.37 1.15 0.52 0.89 0.23


% Growth 45% 84% 15% 0% -16% 7% -19% -19% 0% -30% -66% 65% -78%


Silver recovery 0% 0% 0% 71% 43% 67% 69% 60% 67% 66% 40% 39% 47% 73% 80% 84% 81%

Silver grade 0 0 0 115 100 94 108 113 107 117 120 132 118 96 81 39 69

Annual silver production ('000s oz) 0 0 0 3,893 2,052 3,142 3,714 3,408 3,543 3,673 2,390 2,418 2,611 2,729 1,948 940 1,473

% Growth -47% 53% 18% -8% 4% 4% -35% 1% 8% 5% -29% -52% 57%





% Growth -16% 71% 16% -3% -9% 6% -25% -12% 3% -16% -47% -16% -24%


Gross profit (in '000s) 0 71,041 55,939 98,633 113,195 103,182 93,820 95,187 68,399 59,438 59,869 52,674 28,016 23,479 17,805

CapEx (in '000s) (4,000) (9,000) (125,000) (80,000) (8,000) (8,000) (8,000) (8,000) (8,000) (8,000) (8,000) (8,000) (8,000) (12,500) (12,500) (12,500) (12,500)

Tax (in '000s) 30% 1,200 2,700 37,500 2,688 (14,382) (27,190) (31,558) (28,555) (25,746) (26,156) (18,120) (15,432) (15,561) (12,052) (4,655) (3,294) (1,591)

Operating cash flow (2,800) (6,300) (87,500) (6,271) 33,557 63,443 73,636 66,628 60,074 61,031 42,279 36,007 36,308 28,122 10,861 7,685 3,713


Present value of opening cash flow (2,800) (5,625) (69,754) (4,464) 21,326 35,999 37,307 30,139 24,263 22,008 13,613 10,351 9,319 6,445 2,222 1,404 606




Sleeper Project 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2027E 2028E 2029E

Tonnes processed (in '000s) 0 0 0 29,200 29,200 29,200 29,200 29,200 29,190 29,200 29,200 29,200 29,190 29,200 29,250 24,610 29,200

Gold recovery 0% 0% 0% 65% 63% 81% 77% 67% 74% 73% 71% 86% 77% 87% 82% 75% 57%

Gold grade (g/t) 0 0 0 0.31 0.43 0.27 0.31 0.33 0.28 0.29 0.28 0.25 0.27 0.22 0.23 0.31 0.31


% Growth 35% -20% 8% -6% -7% 2% -5% 7% -4% -7% -1% 3% -9%


Silver recovery 0 0 0 9% 9% 10% 11% 11% 10% 10% 11% 10% 10% 10% 10% 11% 12%

Silver grade (g/t) 0 0 0 4.29 5.08 4.65 3.16 2.64 3.00 3.12 1.92 3.65 2.82 3.85 3.77 2.71 1.47

Annual silver production ('000s oz) 0 0 0 343 430 453 315 267 284 289 190 337 257 359 345 229 160

% Growth 25% 5% -30% -15% 6% 2% -34% 77% -24% 40% -4% -34% -30%





% Growth 34% -19% 7% -6% -7% 2% -6% 9% -4% -6% -1% 2% -10%

Total gold cash cost (650) (680) (680) (680) (680) (680) (680) (680) (680) (680) (680) (680) (680) (680)

Gross profit (in '000s) 107,860 136,998 111,201 118,690 111,044 103,649 105,252 99,148 107,650 103,155 97,024 95,603 97,766 88,275

CapEx (in '000s) (1,500) (2,500) (346,000) (35,000) (30,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (20,000) (20,000) (20,000) (15,000)

Tax (in '000s) 24% 360 600 83,040 (17,486) (25,680) (20,688) (22,486) (20,651) (18,876) (19,261) (17,796) (19,836) (18,757) (18,486) (18,145) (18,664) (17,586)

Operating cash flow (1,140) (1,900) (262,960) 55,373 81,319 65,513 71,204 65,394 59,773 60,992 56,353 62,814 59,398 58,538 57,458 59,102 55,689


Present value of opening cash flow (1,140) (1,681) (205,936) 38,376 49,874 35,558 34,201 27,796 22,484 20,303 16,601 16,375 13,703 11,951 10,381 9,450 7,880




COMBINED 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

Annual gold production 0 0 0 33 48 89 102 102 86 91 74 61 61 43 14 24 5

Annual silver production 0 0 0 3,897 2,057 3,147 3,718 3,411 3,546 3,676 2,392 2,422 2,614 2,733 1,952 942 1,475

Total gold equivalents 0 0 0 104 89 148 169 163 149 157 117 106 108 94 52 43 32

PV of cash flow from San Miguel (2,800) (5,625) (69,754) (4,464) 21,326 35,999 37,307 30,139 24,263 22,008 13,613 10,351 9,319 6,445 2,222 1,404 606

PV of cash flow from Sleeper (1,140) (1,681) (205,936) 38,376 49,874 35,558 34,201 27,796 22,484 20,303 16,601 16,375 13,703 11,951 10,381 9,450 7,880

Total PV of operating cash flow (3,940) (7,306) (275,691) 33,913 71,200 71,557 71,507 57,935 46,747 42,312 30,214 26,727 23,023 18,396 12,604 10,854 8,486

Current value of cash flows 244,025

Plus cash & equivalents 9,513

Plus exploratory assets 2,532

Less debt 0

Total current value 256,070

Common shares 155,731 diluted

Warrants 0

Options 3,777


PZG share price in $ 1.01$

PZG NAV in US$ 1.60$ 36.9% discount to NAV

NAV Premium for target price 0%

Price target 1.60$ 36.9% discount to NAV



December 10, 2013


Our NAV is very dependent on the long-term gold price utilized in our model. For a $50

increase in the price of gold, our overall NAV increases by $0.36 per share, primarily due to the

large impact of the gold price on the large-scale Sleeper project. Given the low silver production

at Sleeper, our NAV for the firm as a whole is only impacted by $0.09 for a $2 increase in the

long-term silver price. Finally, a 0.5% increase in the discount rate for San Miguel will decrease

our NAV by $0.04. This compares with a $0.05 decrease for our overall NAV given a 0.5%

increase of the discount rate for the Sleeper project.

Exhibit 21: Overall Sensitivity Analysis

Source: Company Presentation

Manamement Team

Christopher Crupi, CEO: Mr. Crupi has been the co-founder and CEO of the firm since 2004

and is responsible for building and financing the firm. Mr. Crupi has more than 10 years of

experience in international accounting firms, including Ernst & Young and

PricewaterhouseCoopers. Prior to his accounting career, Mr. Crupi was an assistant in the office

of the Deputy Prime Minister of Canada. Mr. Crupi is a Chartered Accountant (CA) and Certified

Public Accountant (CPA).

Carlo Buffone, CFO: Mr. Carlo A. Buffone is the CFO of the firm. Mr. Buffone has

approximately 20 years of experience as a corporate finance professional with several private and

public companies, including Huber Suhner Canada (Swiss: HUBN; CHF 46.25; NOT RATED),

IvyNet Corporation, CMA Holdings Group. Mr. Buffone also has his own business, Mama’s Boy

Wines. Mr. Buffone has been a Certified Management Accountant (CMA) since 1995 and

received his Bachelor of Commerce Degree from the University of Ottawa in 1993. Mr. Buffone

also studied mergers and acquisitions at the Kellogg School of Management at Northwestern

University in 2004.

Glen Van Treek, Exploration Vice President: Mr. Van Treek has been Exploration Vice

President since January 2011, directing all of the firm’s exploration activities. Mr. van Treek has

over 20 years of experience with exploration projects in various stages and various locales. He

San Miguel Sleeper

LT Gold Price NAV/share LT Silver Price NAV/share Discount Rate NAV/share Discount Rate NAV/share

950 (0.23)$ 10 1.18$ 9.50% 1.83$ 10.50% 1.92$

1000 0.15$ 12 1.27$ 10.00% 1.78$ 11.00% 1.85$

1050 0.52$ 14 1.35$ 10.50% 1.73$ 11.50% 1.79$

1100 0.88$ 16 1.44$ 11.00% 1.69$ 12.00% 1.72$

1150 1.24$ 18 1.52$ 11.50% 1.65$ 12.50% 1.66$

1200 1.60$ 20 1.60$ 12.00% 1.60$ 13.00% 1.60$

1250 1.96$ 22 1.69$ 12.50% 1.56$ 13.50% 1.55$

1300 2.32$ 24 1.77$ 13.00% 1.53$ 14.00% 1.50$

1350 2.67$ 26 1.86$ 13.50% 1.49$ 14.50% 1.45$

1400 3.02$ 28 1.94$ 14.00% 1.46$ 15.00% 1.40$

1450 3.37$ 30 2.03$ 14.50% 1.42$ 15.50% 1.36$



December 10, 2013

previously worked for Teck (NYSE: TCK; $24.12, NOT RATED) and Placer Dome in Chile,

USA and Africa. Mr. van Treek is a graduate from the University of Chile.

Risk Factors

Paramount Gold has several foreign investment risks related to royalties and other

geopolitical risks. Paramount Gold could potentially incur royalties, non-renewal of its operating

licenses or even face the threat of having its assets nationalized by the Mexican Government if it

becomes strapped for cash. We note that we consider this risk to be reasonably remote, especially

considering Mexico has been a member of the World Trade Organization (“WTO”) since 1995

and has been open to foreign businesses operating in their respective countries over the past

several years.

Paramount Gold might face funding issues. The firm currently derives no cash-flow from its

exploratory properties. Therefore, management has to either raise funds or sell assets to fund

operations. Notably, given current cash levels, we do not expect any imminent cash issues for the

firm.

Both projects have a long lead-time to first production. Sleeper and San Miguel will take

several years to enter production, and given current uncertainty in the financial markets towards

mining stocks, the company may face funding issues or a overall lack of investor interest for long

lead-time projects.

The company may be forced into a disadvantageous joint venture or other partnership with

a major mining company. Both of Paramount’s projects are located in close proximity to larger

companies and their respective projects, which may force the firm to enter an agreement with

only a minority interest, or a lack of control with one of the larger companies taking over the

project due to funding issues in order to enter production.

Investors may be unable or unwilling to invest in international stocks. Some investors are

unable or unwilling to invest in shares of companies listed and based outside of the United States.

Although these companies have strong potential and potentially offset any domestic economic

declines, the fact that some investors are unable to invest in Paramount Gold shares due to its

international nature remains.



December 10, 2013

Important Research Disclosures

Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q30

1

2

3

4

5

2011 2012 2013 2014

Rating and Price Target History for: Paramount Gold and Silver Corp (PZG) as of 12-09-2013

Created by BlueMatrix

Distribution of Ratings/IB ServicesEuro Pacific Capital

IB Serv./Past 12 Mos.

Rating Count Percent Count Percent

BUY [BUY] 27 69.23 7 25.93SPECULATIVE BUY [SB] 2 5.13 1 50.00HOLD [NEUTRAL] 9 23.08 0 0SELL [SELL] 0 0.00 0 0NOT RATED [NR] 1 2.56 0 0

Disclosures

Euro Pacific expects to receive or intends to seek compensation for investment banking services from all companiesunder research coverage within the next three months. Euro Pacific or its officers, employees or affiliates may executetransactions in securities mentioned in this report that may not be consistent with the report’s conclusions.

Regulation Analyst Certification ("Reg AC") — Heiko Ihle, Senior Research Analyst

The views expressed in this report (which include the actual rating assigned to the company as well as the analyticalsubstance and tone of the report) accurately reflect the personal views of the analyst(s) covering the subject securities.An analyst's sector is the universe of companies for which the analyst provides research coverage. Accordingly, therating assigned to a particular stock represents solely the analyst's view of how that stock will perform over the next 12months relative to the analyst's sector average.

No part of the compensation of the analyst preparing this report was, is, or will be, directly or indirectly, related to thespecific recommendations or views expressed by such analyst in this report.

Ratings

Buy: Expected to materially outperform sector average over 12 months and indicates total return of at least 10% overthe next 12 months.

Neutral: Returns expected to be in line with sector average over 12 months and indicates total return betweennegative 10% and 10% over the next 12 months.

Sell: Returns expected to be materially below sector average over 12 months and indicates total price decline of atleast 10% over the next 12 months.

Speculative Buy: Expected to materially outperform sector average over 12 months and indicates total return of atleast 25% if certain factors materialize, with potential for high return volatility and greater than average risk for lower ornegative total annual returns over this time period.



December 10, 2013

Volatility Index

1 (Low): Little to no sharp movement in stock price in a 12 month period

2 (Low to medium): Modest changes in stock price in a 12 month period

3 (Medium): Average fluctuation in stock price in a 12 month period

4 (Medium to High): Higher than average changes in stock price in a 12 month period

5 (High): Extremely sharp movements in stock price in a 12 month period

All financial information is taken from company disclosures and presentations (including Form 10Q, 10K and 8K filingsand other public announcements), unless otherwise noted. Any prices or quotations contained herein are indicativeonly and are not a commitment by Euro Pacific to trade at any price.

Euro Pacific may trade as principal in instruments mentioned herein. This commentary is therefore not independentfrom the proprietary interests of Euro Pacific, which interests may conflict with your interests. Opinions expressedherein may differ from the opinions expressed by other divisions and/or business units of Euro Pacific. The Firm doesnot undertake any obligation to update this material. This material is current as of the indicated date and as of the timeit was sent to you. This material was prepared from information believed to be reliable, but Euro Pacific makes norepresentations or warranties as to its accuracy or completeness.

This communication and the information contained herein is neither an offer to buy or sell nor a solicitation of an offerto buy or sell any security or instrument or to participate in any particular trading strategy.

This report should not be used as a complete analysis of the company, industry or security discussed in the report.Additional information is available upon request. Any opinions or estimates in this report are subject to change withoutnotice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materiallyfrom the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk andmay not be suitable for all investors. No part of this report may be reproduced without the express written permission ofEuro Pacific Capital. Copyright 2013. Member FINRA/SIPC.



December 10, 2013

Documents

Heiko Ihle, CFA, Senior Research Analyst Paramount Gold ...€¦ · presentations and meetings at the firm’s Winnemucca, NV office and a tour of the property, an overview of the