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 for 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 is trying to invoke a Toronto Stock Exchange financial hardship exemption to circumvent that requirement, citing the difficulty of raising capital in recent months.

Crupi says investors and analysts have reacted positively to the news, noting that since it announced the financing on March 6, the company’s share price has appreciated considerably. The trading day following the news, Paramount’s share price jumped 17¢ to close at $1.14. It has since settled at around $1.08.

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, SA-X) 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 1,400- sq.-km 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 Mines’ (CDM-T, CDE-N) Palmarejo silver mine.

Paramount’s latest resource estimate, using a cutoff grade of 1 gram gold equivalent per tonne, has pegged San Miguel at 4 million inferred tonnes grading 2.24 grams gold, 98.8 grams silver per tonne, 0.18% lead and 0.35% zinc; La Union holds 2.7 million inferred tones at 1.43 grams gold, 60.4 grams silver, 0.62% lead and 1.45% zinc.

Crupi says Paramount has no plans to develop the property into a mine on its own — a plan that 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, the company will drill deeper.

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

Paramount 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 Paramount 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.