Paramount Gold and Silver trades major stake for $9M

Vancouver – Through a $9 million financing Paramount Gold and Silver (PZG-T, PZG-X) is selling as much as a quarter of the company to Toronto-based FCMI Financial.

Paramount Gold and Silver CEO Christopher Crupi says the company will use the proceeds to advance its San Miguel gold-silver project in Chihuahua state Mexico and that FCMI supports the company’s plan to make San Miguel “big and to bring in the producers.”

The financing has FCMI, a company controlled by Albert Friedberg and family, agreeing to buy 12 million units at 75¢ each. The units consist of one common share and a share purchase warrant exercisable at $1.05 over four years upon closing of the equity issue.

The 12 million shares in the deal would give FCMI a 14.5% stake in Paramount Gold and Silver at the outset and if FCMI fully exercises its 12 million warrants that interest would increase to 25.4%.

Usually a sale of such a sizable interest would require shareholder approval but Paramount Gold and Silver is invoking a Toronto Stock Exchange financial hardship exemption to try and circumvent that requirement. Paramount Gold and Silver cites the difficulty of raising capital in recent months as the reason for seeking an exemption.

Crupi says investors and analysts have reacted positively to the news, noting that since it announced the financing Mar. 6 its share price appreciated considerably. The trading-day following the financing’s announcement Paramount Gold and Silver’s share price jumped 17¢ to close at $1.14.

As the company develops its flagship San Miguel property in the Sierra Madre Occidental gold-silver belt Crupi sees FCMI bringing two assets to Paramount Gold and Silver: Its “deep pockets” and its relationship with Seabridge Gold (SEA-T) in which FCMI and related parties have a 21.6% stake.

Crupi says Paramount Gold and Silver will now have access to Seabridge technical teams “gratis”, as he puts it, and two Seabridge personnel will be joining Paramount’s board of directors. Seabridge president and CEO Rudi Fronk and Seabridge director Eliseo Gonzalez-Urien will be joining it upon completion of the financing.

“They are there for the long-haul,” Crupi says of FCMI and its commitment to seeing San Miguel advanced.

The San Miguel project is a 140,000 ha. non-contiguous land package where the two primary drill-targets have been the San Miguel and La Union vein systems located about 5-10 km east of Coeur D’Alene Mine‘s (CDM-T, CDE-N) Palmarejo project.

Paramount Gold and Silver’s latest inferred resource estimate, using a 1 gram gold per tonne equivalent cut-off, has pegged San Miguel at 4.7 million tonnes grading 2.24 grams gold, 98.8 grams silver per tonne, 0.18% lead and 0.35% zinc and La Union at 1.43 grams gold, 60.4 grams silver, 0.62% lead and 1.45% zinc.

Crupi says Paramount Gold and Silver has no plans to develop the property into a mine on its own – a plan which he says carries too many pitfalls for a junior of its size – and will instead focus on finding additional resources.

As both La Union and San Miguel are open at depth Paramount Gold and Silver will drill deeper.

Crupi says the plan is to start a $4 million, 30,000-metre, drill campaign by April, almost double the size of what the company previously indicated. In 2009 Crupi expects to spend about $2 million on the program.

Paramount Gold and Silver will also conduct infill drilling to upgrade the current resource to the measured and indicated category as the company progresses San Miguel towards a prefeasibility study.

That study, Crupi says, is not on this year’s horizon as the company will mainly concentrate on finding additional gold resources at depth.

“It wasn’t until we went deep that gold started going up and silver dropped off,” he says.