Nyala Project
Nyala Project
Adelaide, Aug 15, 2006 AEST (ABN Newswire) - Paramount Mining Corporation (ASX: PCP) is pleased to announce the proposed acquisition of up to twelve additional diamond mining projects in South Africa in a multi-staged transaction with ASX-listed diamond explorer, Rox Resources Limited (ASX: RXL).

The projects include in the first instance, two well-located alluvial diamond properties on granted tenure, Pampoene Pan and Vlakfontein, and a suite of projects in the Barkly West area with a principal focus on kimberlite. Most projects are located in the region around Kimberley, where Paramount has previously explored.

The Barkly West holdings, around 30 kilometres northwest of Kimberley, host known kimberlite pipes, including the Z1 pipe at Zoutpansfontein previously owned by De Beers, and includes granted tenure acreage.

Terms of Acquisition
The projects are to be acquired by Paramount from Rox Limited under a Heads of Agreement for which the terms include:

- Paramount acquring all the shares in Rox's South African subsidiary, Nyala Resources (Proprietary) Limited, which owns the tenement assets

- Total consideration for the acquisition payable by Paramount is up to 6 million PCP shares, plus $30,000 cash, satisfied as follows:

1. At settlement for the first three already granted properties, Rox will be paid the $30,000 and issued 2.25 million PCP shares
2. A further 2 million shares will be issued, expected to be within 6 months, as three more projects are granted
3. The final 1.75 million PCP shares to be be issued within 24 months as project applications are granted by the South African Department of Minerals and Energy and ground access is secured.

The proposed acquisitions are subject to approval by Paramount shareholders.

High calibre projects
We have been looking for some time for diamond exploration projects on granted concessions that have the high potential worthy of inclusion in the Company's portfolio," Paramount's Chief Executive Officer, Ms Maureen Muggeridge, said today.
"We are particularly pleased to have concluded a deal with Rox on the high calibre Nyala assets as it means Paramount can now resume exploration work in South Africa, while we wait for other projects to be granted," Ms Muggeridge said.

"An immediate start is possible on exploration on part of the Barkly West project, and we can also commence work on the two alluvial projects as soon as access agreements are finalised with the surface rights holders of the relevant farms."

PAMPOENE PAN ALLUVIAL DIAMOND PROJECT
The Pampoene Pan Project is located along an ancient palaeochannel which is interpreted to link the Saxendrift and Klipfontein alluvial diamonds mines. As such, it is interpreted to have high potential to contain diamonds, possibly in economically viable concentrations. Saxendrift, currenly owned by Transhex, has produced in the order of 14,000 carats per annum, with diamond prices around US$1,000 per carat.

The Klipfontein alluvial operation lies further upstream along the Orange River, closer to both Pampoene Pan and the location of South Africa's first diamond discovery in 1866 - the 21 carat "Eureka" diamond.

An additional project, on the farm Annex Klipfontein immediately adjacent to Klipfontein mine, has been applied for. The project area lies around 40 kilometres south of the town of Douglas, in the Northern Cape Province.

A very large volume of potentially diamondiferous alluvial gravel is present at Pampoene Pan. The concession was granted on 24 th February 2006. Paramount plans to commence work on the project as soon as access terms with the surface rights owner have been concluded.

VLAKFONTEIN ALLUVIAL DIAMOND PROJECT
The Vlakfontein Project is positioned to capture the dispersion of alluvial diamonds shedding downslope from the Jagersfontein kimberlite pipe, mined by De Beers. The world-famous Jagersfontein Mine has produced over 9.5 million carats of diamonds. Eight of the world's 24 largest diamonds have come from this mine, including the 972 carat Excelsior diamond, blue white in colour, estimated to be worth around US$170 million in present day terms.

The exploration model proposes that a broad zone of enrichment containing high quality diamonds dervied from the 19.6 hectare Jagersfontein pipe may exist on the flanking ground at Vlakfontein in the form of eluvial deposits, similar in context to the Limestone Creek and Smoke Creek deposits at Argyle, Western Australia, that were mined prior to open cut exploitation of the pipe itself. Surface topography indicates a funnelling of drainage by dolerite ridges south-east from the Jagersfontein pipe towards the Vlakfontein alluvial flats, which lie around 5 kilometres from the open pit. The concept is for diamonds to have shed down this pathway as the pipe eroded.

An initial principal deposition site would be likely at the first break in slope, which occurs on the Vlakfontein property, constituting a highly prospective target.

The project area lies around 5 kilometres south of the town of Jagersfontein, in the Free State, with good access via a highway which crosses the property.

The Vlakfontein concession was granted on 9 th November 2005. A preliminary drilling programme in the northwest quadrant of the property has been carried out by Nyala which identified the presence of a broad deposit of lag gravels up to 2 metres thick in the eastern part of the farm, and thinner deposits of gravel in the west and north. Other prospective terrain could not be drilled at that time due to heavy rains.

Paramount will initially extend the drilling programme at Vlakfontein to determine the extent and nature of gravels present in other parts of the farm as soon as access terms with the surface rights owner have been concluded.

A number of other kimberlite pipes occur in the vicinity of the Jagersfontein pipe, within a 10 kilometre radius of Vlakfontein farm. The implication is that Vlakfontein is also prospective for undiscovered pipes of the Jagersfontein cluster. Paramount will investigate this, as part of the exploration work on the property.

Past records show drilling for uranium has taken place at Vlakfontein. The Company proposes to check into the potential for uranium, after conducting research to verify the data.


BARKLY WEST KIMBERLITE PROJECTS
Nyala's projects in the Barkly West district includes a number of known diamond-bearing kimberlites, such as the Zoutpansfontein Z1 and the Smithsdale pipes, as well as several unresolved topographic anomalies, potentially kimberlitic, occurring along prospective structural trends. Substantial virgin alluvial deposits associated with the Vaal and Leeu rivers represent additional targets. The total project area covers 140 square kilometres.

Barkly West, a historic alluvial diamond mining centre, lies 30 kilometres northwest of Kimberley in the Northern Cape Province. The area is currently seeing renewed activity along the Vaal River and its terraces, with a number of privately owned alluvial diamond mines in operation. The district also hosts at least 60 known kimberlite pipes, dykes and sills, mostly diamond-bearing. The high stone quality, illustrated by mines such as Frank Smith (US$320 per carat) and Leicester (US$265 per carat), has allowed relatively low grade kimberlite to be mined at profit.

Indicator mineral geochemistry suggests the one hectare kimberlite pipe at Smithsdale has economic potential, and other known occurrences will be tested as the ground becomes available for exploration work. A number of the concessions were previously held by De Beers, including Zoutpansfontein, which contains a 2-5 hectare pipe, and Langleg, which contains an 800 metre long dyke, both diamondiferous. Neither of these deposits has been investigated to any great extent.

Nyala has in place a data acquisition agreement with De Beers relating to the projects it previously held. Geophysical and other data thus acquired show a number of discrete targets, many of which appear to coincide with high indicator mineral counts from soil sample results, that may be kimberlites.

Paramount's work programme, initially focused on Smithsdale, will test the diamond content of known kimberlites and intensively explore for new bodies using a variety of methods, including sampling, geophysics, mapping and imagery studies. In relation to Smithsdale and other small pipes at Barkly West, it is worth noting that several pipes under one hectare are economically viable, as demonstrated by the production from Marsfontein (South Africa) of 1.83 million carats for total revenue of US$246 million. Other small pipes in production are Diavik Mine (Canada) and Merlin Mine (Northern Territory, Australia).


BLACK ECONOMIC EMPOWERMENT
Black Economic Empowerment ("BEE") provisions, as per new mining legislation in South Africa, must be incorporated into all tenement applications. Nyala has suitable arrangements in place, which entitle a BEE partner to aquire up to a 51% holding in the Nyala projects. Rox's Managing Director, Ian Mulholland, said that selling the diamond projects to Paramount would enable Rox to concentrate its efforts on the Pha Luang lead-zinc project in Laos, but at the same time offers Rox the opportunity to participate in Paramount's success with the diamond projects.

"We were particular who we dealt the diamond projects to, since we believe they have great potential and have been assembled meticulously by Rox's team over the last 18 months. We selected Paramount because they have a strong technical focus and ability, are ASX-listed, and already have an established presence in South Africa and the Kimberley region. It makes a good fit, and with their strong technical team we're sure they will have success, and we can therefore share in the upside of that through our significant shareholding in Paramount," he said.

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