PARAMOUNT MINING CORPORATION LTD ABN 73 102 426 175

100 Parry Street, Perth WA 6000

Tel +61 (08) 9328 5600 Fax +61 (08) 9328 4430

Email: info@paramountmining.com

Website: www.paramountmining.com

8th September 2011

PARAMOUNT DUE DILIGENCE REVIEW OF GUNUNG ROSA

HIGH GRADE GOLD PROJECT IN INDONESIA - UPDATE

Paramount Mining Corporation Limited (ASX:PCP, Company) is pleased to announce that it is

advancing its due diligence assessment of the high grade gold-silver-base metal Gunung Rosa

Project located 125km south of Jakarta (Figure 1) and has completed its initial review of historic data

as the first stage of this assessment. This announcement focuses primarily on historic information

related to the various estimates of tonnages and grades of gold, silver and base metals made from

previous exploration and development activities.

“Paramount‟s due diligence activities have already returned encouraging results as detailed in this

announcement” Paramount‟s Chairman, Mr Mo Munshi said, “As previously stated, Paramount‟s

directors consider that the acquisition of the Gunung Rosa Project is a significant outcome for all

Highlights:

First stage due diligence confirms the high grade nature of the Gunung Rosa gold/silver/

base metals deposit and potential for strike extensions

Resources and Reserves previously announced to the ASX in 1992 were:

o Measured, Indicated and Inferred Resource of 799,348 tonnes @ 13.96 g/t gold

and 3.38% zinc for 358,832 ounces gold and 26,998 tonnes zinc, including

o Proved and Probable Reserves of 400,000 tonnes @ 11.41 g/t gold and 3.03% zinc

for 146,690 ounces gold and 12,130 tonnes zinc

Over 2,500 metres of vertical and level development completed at the mine (Figure 5)

Mineralisation developed on a number of levels over 900 metres strike length and open

to the north and south and at depth

34 of the historic diamond holes that intersected the mineralised vein returned average

grades of 14.7 g/t gold, 34.4 g/t silver & 3.7% zinc with average true thickness of 2.26m

As there has been no material work on the project since 1997, advances in mineral

extraction techniques will be assessed to enhance recoveries

Paramount has started a program of diamond drilling holes to validate the historical

results

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shareholders in the Company, and that this project provides the opportunity to develop a high-grade

gold, silver and base metal project in Indonesia.

“The historical data support our view that the Gunung Rosa Project compares favourably to Kingsrose

Mining Ltd‟s (ASX:KRM) Way Linggo Project in South Sumatra, which had a starting base of less than

200,000 ozs of gold resources. The Way Linggo Project is now producing gold at cash costs of $145

per ounce and KRM‟s market capitalisation is in excess of A$350 million.”

Total mineral resources from historical releases are shown below*:

Tonnes Au g/t Au oz Zn % Zn t

Measured Resource 125,470 12.77 51,514 3.33 4,178

Indicated Resource 302,878 13.59 132,336 2.99 9,056

Inferred Resource 371,000 14.67 174,983 3.71 13,764

Total 799,348 13.96 358,832 3.38 26,998

From these Resources, 400,000 tonnes of Proved and Probable Reserves were calculated as part of

the mining study used in the Century Metals & Mining NL feasibility study:

Tonnes Au g/t (cut) Au oz Zn % Zn t

Proved Ore Reserves 142,000 11.20 51,133 3.31 4,700

Probable Ore Reserves 258,000 11.52 95,557 2.88 7,430

Total 400,000 11.41 146,690 3.03 12,130

*source: compiled from various Releases to ASX by Century Metals and Mining NL during 1992.

Data from 34 of the diamond holes that intersected the mineralised vein and achieved vein

recoveries of greater than 80%, reported an average true thickness of 2.26m with an average grade

of 14.7 g/t gold, 34.4 g/t silver and 3.7% zinc. The mineralised structure is a steeply dipping high

grade gold-silver and base metal mesothermal vein style deposit in excess of 900 metres in strike

length. The results from this drilling were released in the Company‟s project announcement dated 4

August 2011, and are also included at the end of this announcement.

Paramount will confirm the Century Metals and Mining NL (Century) results by undertaking new

drilling and underground mapping and sampling and by determining the extent of small scale mining

activities in the upper levels of the mine since that time.

All of the critical information postdates the introduction of the first release of the JORC code for

reporting resources and reserves in 1989 and revised version in 1992 with some post the 1994

revision. Century5 state that “in general the reserve/resource terminology used follows the guidelines

issued by the AusIMM in June 1988 and February 1989” (now known as the JORC code). Little new

work has been undertaken on the project since 1997.

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Figure 1: Location of the Gunung Rosa Project

Early History of Exploration and Exploitation in the Licence (IUP)

The project incorporates the historic Cikondang Gold Mine that was first discovered in 1927. However

mining operations by Dutch colonials did not commence until 1939. Production reported by Van

Bemmelin (Government Geologist) in 1940 was 33.04 kg of gold (15 g/t from 2,202 tonnes of ore) and

7.76 kg of silver. Between 1944 and mid-1945 during the period of Japanese occupation the mine

was exploited primarily for lead and zinc for military purposes and gold-silver credits.

Little further work was undertaken until 1974 to 1979 when Cisadane Pty, a Canadian Group, drilled

four diamond holes and undertook new surface exploration, underground development and mining. In

September 1978 Cisadane, advised by an Australian consultant, completed a feasibility information

statement outlining development and production costs and estimated returns for a 30,000

tonne/annum mining operation based on a simple geological block model of the deposit extending

over 900 metres of strike and containing 760,000 tonnes of ore with an average sample grade of 13.5

g/t Au; 43 g/t Ag; 4.9% Pb; 9.2%% Zn; 0.85% Cu1.

In 1979 PT Aneka Tambang (Antam), the Indonesian Government owned mineral exploration and

mining company, commenced detailed exploration of the area. Antam expended some USD4 million

between 1980-1985, completing regional mapping and rock and soil sampling, costeaning,

geophysics, 1,500 metres of diamond drilling, rehabilitation of old workings and undertaking new

underground development, metallurgical studies, commissioning mine development studies,

undertaking land acquisition and putting basic infrastructure in place for mining. In addition Antam

completed environmental assessment studies and developed an environmental management plan

appropriate for an underground mining operation. Antam confirmed a zone of vein mineralisation

extending for some 900 metres and extended this up to 1,500 metres. From their work Antam

determined a mineable tonnage and grade for the deposit which was stated by them to be:

±300,000 tonnes of “defined ore” at a cut-off grade of 10 g/t amenable to immediate

development

An additional “inferred” 1,000,000 tonnes (still at 10 g/t cut off)

1 Cikondang Project Feasibility Information Statement, September 1978 (author not cited)

Gunung Rosa

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A mine development plan was commissioned. Antam proposed developing a mine serviced via

decline access to produce 100,000 tonnes/year at grades of >10 g/t gold and 30 g/t silver with a life of

10 years. Base metal concentrates were also to be recovered but no grades were documented2.

Antam expressed some concern over metallurgical recoveries from the mixed ores3. The stated ore

tonnages given by Antam are conceptual but are similar to the other historic estimates. Antam

withdrew from direct participation in the project in July 1987 and exploration was continued through

PT Panen Sumbermas Agung (PT PSA) in which Antam held a 22.5% equity.

PT PSA sought the assistance of a group with relevant expertise to help advance the project. In

October 1988 the Australian company Century Metals and Mining NL (Century) commissioned an

Independent Geologist‟s Report to assess the merits of participation in the project4. This report

highlighted deficiencies in the mineral resource estimation by Antam, including uncertainty in grade

due to lack of core and other sample materials to validate sampling, but it did conclude that there was

excellent exploration potential to delineate 500,000 tonnes of high grade material (>3 g/t Au) present

in the vein system based on systematic underground validation sampling undertaken by Century. Of

particular note in the report is the reference to 8-9 metre wide zones carrying 2 g/t Au. The report

recommended investment in the project which was adopted and Century formed a joint venture

company in late 1988, PT Panen Antam Emas, to continue exploration, to define ore reserves and

mineral resources and initiate development.

Historic Detailed Assessment of Resources and Reserves by Previous Explorers

From May 1989 until March 1992 Century embarked on an extensive drilling and underground

development program to determine measured and indicated resources and to convert these to proven

and probable reserves as the basis for development. To undertake this, Century completed 63

diamond drill holes. The locations of most are shown in Figure 2 and a typical summary cross section

is included in Figure 3. Assays of Century‟s drill hole intersections are given at the end of this

announcement. In addition to the drilling, approximately 2,500 metres of underground horizontal and

vertical development was also undertaken which was channel, bulk and grab sampled5. Laboratory

analytical results and plan sections from the development sampling are held by Paramount. . The

scope document (footnote 5) details the sampling protocols and methods used for the drilling and

channel sampling. Ore Reserves were determined including dilution with a cut off grade of 3 g/t.

Century commissioned Kinhill Engineers Pty Ltd in 1989 on behalf of the PT Panen Antam Emas joint

venture to examine the technical and economic feasibility at a conceptual level for the re-development

of mining at the Cikondang (Gunung Rosa) project6.

Paramount has obtained quarterly reports from the ASX archives lodged by Century for periods

ending December 1991 until December 1992. These contain details of resources and reserves

announced by Century to the ASX and the information shown below has been extracted directly from

these lodgments. The figures are based on systematic sampling undertaken during underground

development and from drill hole intersections. The location of resource blocks and drill hole traces are

2 Mining And Processing of Gold Ores & its Associated Minerals at Karyamukti Village - Cikondang, Sub-Regency: Campaka;

Regency: Cianjur, DU-813/West Java, Main Report. PT Aneka Tambang (1990). 3 PT Aneka Tambang metallurgical study reports.

4 Independent Geologists Report on Cikondang Project West Java by Farnley Nominees Pty Ltd for Century Metals and Mining

NL, October 1988

5 Cikondang Project - Scope Document. Prepared for PT Panen Antam Emas by Century Metals and Mining NL, Perth, March

1992, D. G. Benham

6 Cikondang Project - A PT Aneka Tambang and PT Panen Sumberems Agung Joint Venture Part1: Executive Summary; Part

2: Technical Evaluation; Part 3: Economic Evaluation. PT Jaya Kinhill Arkonin (1990)

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illustrated on longitudinal sections in Figures 5 and 6. Some of the drilling is from underground

development drives and the decline access.

Century‟s Quarterly Report for the period ended 31 March 1992 detailed mineral resources as shown

in Table 1 below.

Tonnes Au g/t Au oz Zn % Zn t

Measured Resource 125,470 12.77 51,514 3.33 4,178

Indicated Resource 302,878 13.59 132,336 2.99 9,056

Inferred Resource* 371,000 14.67 174,983 3.71 13,764

Total 799,348 13.96 358,832 3.38 26,998

Table 1: Century’s Quarterly Report for the period ended 31 March 1992. Minimum mining width 1.2

metres; dilution factor 0.2 metres on each wall of vein; Au grades over 50 g/t cut to 50 g/t. *Source:

Scope Document (footnote 5)

The Quarterly Report for period ended 30 June 1992 reports the conversion of these resources to

reserves following receipt of new analytical results during the period from systematic underground

development sampling and outlined reserves as follows:

Tonnes Au g/t (cut) Au oz Zn % Zn t

Proved Ore Reserves 142,000 11.20 51,133 3.31 4,700

Probable Ore Reserves 258,000 11.52 95,557 2.88 7,430

Total 400,000 11.41 146,690 3.03 12,130

Table 2: Century’s Quarterly Report for the period ended 30 June 1992. Minimum mining width 1.2

metres; dilution factor 0.2 metres on each wall of vein; Au grades over 50 g/t cut to 50 g/t and using a

3 g/t cut off.

Mr David Benham, who managed the Cikondang Project from 1987 to 1992, was contracted by

Paramount Mining Corporation Ltd to review the Resources and Reserves statements released by

Century Metals and Mining NL in 1992. Mr Benham stated that in his opinion „sampling, analysis and

QA/QC were to industry best practice. With regard to the Resources quoted, these are considered

conservative due to the full width of the orebody not being available for sampling in many of the

mining drives. With regard to the Reserves, significant material running 7 to 9 g/t was not included as

ore due to the prevailing gold price of USS350 per ounce at the time‟.

The detailed sampling undertaken in development drives along the vein system demonstrate the

highly variable nature of grade distribution in both precious and base metals within the vein, a feature

characteristic of most hydrothermal and mesothermal vein systems. Further, development sampling

also demonstrated that drilling produced on average lower estimates of grade compared to

underground bulk and channel sampling with bulk sampling typically returning better grades than

channel sampling. The bulk sampling highlighted local zones of exceptional precious metal grades

that do not report in drill holes. This is summarised in the following figures from the Scope Document

cited above at footnote 5.

An analysis of the drilling data using all holes with adequate recovery (34 holes) that intersected the

structure gives the following average grades:

Au (g/t) Au-cut (g/t) Zn% Pb% Cu% As% Ag (g/t)

14.67 12.64 3.71 0.79 0.57 0.58 34.4

This also indicates an average true thickness of 2.26 metres. The average vein recovery for these

holes was 80%.

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An analysis of all underground channel assay data that exceeded 1 g/t gold (1,381 samples) yielded

the following average grades:

Au (g/t) Au-cut (g/t) Zn% Pb% Cu% As% Ag (g/t)

10.46 9.42 2.58 0.92 0.31 0.29 26.4

The Century work reconfirmed and further highlighted the exploration potential of the vein system

defined by previous exploration, noting that it is open at both ends., and the deepest holes drilled so

far have not reached the bottom of the system (footnote 5). The extent of the widespread occurrence

of mineralised veins within the IUP area, taken from Farnley (footnote 4), is illustrated in Figure 7.

In mid-December 1992 Century ceased direct involvement with the project following the collapse of

financing arrangements needed to construct the processing plant and develop the mine. Mining

ceased and the operation was placed on care and maintenance. Approximately USD10,000,000 had

been expended by the joint venture on the project at the time of cessation of activities.

In December 1996 Canadian joint-venture partners Chase Resource Corporation and Delta Gold

Mining Corporation (Chase) commissioned the Snowden Group to undertake an independent

technical review of the Cikondang Project. The objective was to enable Chase to initiate a diamond

drilling program to expand the resource inventory to 1,000,000 tonnes from that which was already

outlined by previous exploration, both surface and underground7. Chase also proposed extensive

systematic regional soil sampling to locate new mineral resources.

In the Report Summary Snowden stated that they had examined the available data, including the

reserve and resource calculations and believe that the project warranted further exploration

expenditure on the basis that there was a good chance of increasing the resource inventory, with the

future possibility of an economic mining operation. Snowden did bring attention to the fact that the

veins are highly variable in thickness and in grade, making resource calculations more prone to error.

With complex mineralogy, the success of the project lies in estimating grades accurately, minimising

mining dilution and maximising metallurgical recovery. Further metallurgical testing will be required

as part of any new feasibility study.

Between 1996 and 1997 Chase drilled 10 additional diamond drill holes which reportedly produced

generally disappointing results north of the Cap Palu mine area. Drill logs and assay results are not

at hand. Chase did demonstrate the potential for broad mineralised zones which carry sufficient

grade and width to allow consideration of bulk underground mining methods8.

Snowden were not required to carry out an independent resource or reserve calculation but had

examined the data and methodology used in the estimate in the 1992 Century Feasibility Study.

Snowden accepts that the calculations were carried out with integrity, with due recognition to the

extreme variability of the vein widths and grades and with the cognisance being given to the 1988

standards of resource reporting of the Australasian Institute of Mining and Metallurgy (JORC first

edition). They further note that the reserve figure quoted in the Feasibility Study was based on

prevailing economic parameters that may require updating as part of any new feasibility study. Chase

withdrew from the project as it could not raise funds for investment in Indonesia following the Bre-X

scandal in 1996.

The lower gold cut-off grade (3 g/t) applied was based upon an economic value of the ore using a

gold price of USD400/ounce. Gold, silver and base metal prices are trading at significantly higher

values than were used in the economic assessment of the project in 1991-1992.

7 Independent Technical Review of the Cikondang project, Java prepared for Delta Gold Mining Corporation and Chase

Resource Corporation. M.P. Everett, PT Snowden Indoasia, December 1996

8 Report for Oropa Limited: Initial review of the Cikondang KP, Cianjur, West Java, Indonesia. G.S. Eupene, Eupene

Exploration Enterprises Pty Ltd. January 2002

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Importantly, Snowden noted that the estimation of the mineral resource may have been conservative

as the underground development often did not expose the full width of the vein zone.

In October 1997 sampling by Yamana Resources Inc. in an assessment of the project demonstrated

the potential for much wider widths in the existing underground workings where cross cuts permitted

sampling9. At present gold prices such material would fall into a lower revised cut off grade.

Results of sampling cross cuts of over 4 metres width from the Cisudi - Cap Palu zone gave the

following:

7.13 m @ 3.39 g/t 6.33 m @ 2.49 g/t

5.20 m @ 2.69 g/t 10.07 m @ 1.26 g/t

4.24 m @ 1.59 g/t 6.00 m @ 3.06 g/t

5.71 m @ 0.81 g/t 5.40 m @ 0.38 g/t

4.45 m @ 4.56 g/t 6.09 m @ 33.03 g/t (uncut)

5.78 m @ 10.86 g/t 4.01 m @ 11.57 g/t

6.43 m @ 5.43 g/t 5.62 m @ 2.69 g/t

4.59 m @ 2.67 g/t 8.77 m @ 2.98 g/t

4.83 m @ 6.68 g/t 9.17 m @ 2.58 g/t

8.07 m @ low but includes 0.51 m @ 4.55 g/t

These figures further highlight the tonnage potential of the project. Whether widths such as sampled

by Yamana Resources can be mined will need to be assessed by engineering studies. .

Mr David Benham was the Cikondang Project Manager for Century Metals & Mining NL from 1987 to

1993. Mr Benham has extensive knowledge of the Cikondang Project and similar style deposits

elsewhere in Asia and the Americas.

Competent Persons Statement

The Mineral Resources and Ore Reserves contained in this report have been reviewed by David Benham FAusIMM. Mr Benham is a Fellow of the Australasian Institute of Mining and Metallurgy. He is a full time employee of Benham & Associates Pty Ltd, mineral industry consultants. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration, and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code).

This review and comments by Mr Benham incorporated in the release text are based upon a review of the Resources and Reserves calculated by Century Metals and Mining NL and released to the ASX in 1992.

David Benham has consented to the inclusion in this report of the matters based on this information in the form and context in which it appears.

9 Preliminary Review, Cikondang Project West Java, Indonesia, Yamana Resources Inc. 1997

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Figure 2: Distribution of drill holes along vein system. (From Cikondang Scoping Report (6)).

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Figure 3 : Section showing vein intersections in drill hole CDD005. (Figure from Farnley Report (3) report).

(See Figure 2 Line 42 for location Cap Palu section).

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Figure 4: Example of channel sampling results in Cap Palu development (from Century report (6)). Refer to Figure 2 showing regional plan for location and Figures 7 & 8 sections (Cap Palu section).

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Figure 5: Projection of drill hole locations and location of underground development, Figure 2 shows surface location of drill holes. (From Century Report (6)). Significant intercepts detailed in table at the end of this announcement.

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Figure 5 : Resource Blocks and underground development established by Century Metals and Mining NL (as at December 1992 (6)).

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Figure 6 : Location of prospects and workings in the central portion of the farm-in area. (From Farnley Report (4)).

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AG

g/t

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AG

g/t

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AG

g/t

MG = metre-gram

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