Terraco Gold Secures Second Royalty Option on the Barrick Led Spring Valley Gold Project, Nevada

Terraco Gold Corp. (TSX.V TEN | US: TCEGF) announced that it has entered into a transaction whereby the Company acquired a portion of a pre-existing net smelter returns royalty (“NSR”) and will have the option to acquire an additional NSR interest on private fee land  covering part of the Spring Valley Gold Project, located in Pershing County, Nevada.  The Spring Valley Project is a joint venture between Barrick Gold Corp. (NYSE: ABX) and Midway Gold Corp. (AMEX: MDW) & is adjoins the south side of Terraco’s 100% owned Moonlight Property .

Transaction Terms

"Under the terms of the Transaction between Terraco, the current royalty owner (the “Royalty Vendor”) and a third party investor (the “ Strategic Investor”):           
  • Terraco will acquire from the Royalty Vendor a 0.5% NSR on the Fee Land in consideration for 2,500,000 common shares of the Company;
  • the Strategic Investor will acquire from the Royalty Vendor a 1.5% NSR on the Fee Land (the “Purchased NSR Interest”) for US$2,368,421.00; and
  • Terraco will be granted an option to acquire, for US$983,211.00, 0.5% of the Purchased NSR Interest from the Strategic Investor for a period of 5 years from closing of the Transaction or within 1 year of a change of control of Terraco."

This NSR Transaction, on Fee Land consisting of 920 acres, covers the remaining portion of land covering the known gold deposit in the Barrick-led Spring Valley Project and is in addition to the first NSR transaction announced by Terraco on December 21st and December 23rd, 2011. The two transactions give Terraco direct royalty ownership, a royalty option and a first right of refusal on a perimeter royalty that collectively covers the gold deposit currently outlined in the Spring Valley Project’s National Instrument 43-101 technical report on the project filed by Midway. Terraco is excited to add significant value for its shareholders by having an opportunity to enjoy cash flow when Barrick brings the Spring Valley Project to production

--- Todd Hilditch President & CEO

Terraco Gold Announces Acquisition of Royalty Option on the Barrick Gold / Midway Gold Spring Valley Gold Deposit, Nevada and a US$5 million Cash Infusion
Terraco Gold Corp. December 21st, 2011 Press Release 

Highlights Include:         
  • A third party Strategic Investor will acquire 5% of net smelter returns (when gold prices exceed US$700 per ounce and on production greater than 500,000 ounces of gold from the claims covered by the Royalty Vendor’s NSR).
  • The Strategic Investor will pay US$20,000,000 to the Royalty Vendor and US$5,000,000 to Terraco.
  • Terraco will retain an option to acquire 2.5% of the NSR Royalty (based on gold being above $700 per ounce), for US$12,500,000 from the Strategic Investor for a period of 5 years from the closing of this transaction or within 1 year of a change of control of Terraco.
  • Terraco will also issue 4,000,000 shares to the Royalty Vendor for a right of first refusal on all or part of a separate 1% area of interest royalty owned by the Royalty Vendor, also located on the Spring Valley Project.
  • As partial consideration for the US$5,000,000 cash infusion, Terraco has issued to the Strategic Investor a 1% net smelter return royalty on its Moonlight Project and a 0.5% net smelter return royalty (and up to a 1.0% net smelter return royalty in certain circumstances) on its Almaden Gold Project in Idaho (“Almaden Project”). The Strategic Investor will also be issued 1,000,000 warrants with an exercise price of CAN$0.35 per share for a period of 5 years, subject to early expiry at the discretion of Terraco if Terraco’s shares trade at CAN$0.70 or higher for 20 consecutive trading days.
  • The Strategic Investor specializes in funding the advancement of mining projects. Terraco and the Strategic Investor have structured a right of first refusal to finance Terraco’s Almaden Project and an off-take for 30% of the minerals produced from the Almaden Project during the life of the mine.
  • Terraco intends to use the US$5,000,000 proceeds to fund continued exploration programs at both its Almaden and Moonlight Projects.
Dr. Michael Berry
March 12th, 2012
"We valued the original option using Black Scholes and $1,000 gold produced 5 years hence at $47 million in present value. That transaction was worth $.22 per share alone. (See appendix from Morning Note of December 21st)...
...Please be aware that royalties such as the ones that Terraco has acquired are very liquid. Furthermore as the Midway Gold / Barrick resource expands (and we believe it will expand) the value of the current royalty and the options to acquire royalties will increase in value substantially."
---Dr. Michael Berry
Morning Notes: March 12th, 2012

Johnston-Sequoia Commentary: 

This is yet another huge piece of the puzzle for Terraco shareholders in this developing district in Pershing County Nevada. 

Now, if I may for a moment look back on the past year on the evolution of this precious metals district just off the I-80 (exit 119 - Oreana - Rochester) in northwestern Nevada.  Beginning on;
  • May 2nd, 2011 - Barrick announced through Midway that Spring Valley had grown by 186% to 3,450,000 ounces of gold in the MI&I categories;
  • June 13th, 2011 - Terraco announces a significant enhancement of their land package at it's 100% owned Moonlight Project (which directly adjoins the north side of the Barrick/Midway Spring Valley joint venture);
  • July 13th, 2011 - Midway Announces 166 meters of 1.48 gpt gold, including 23 meters of 2.15 gpt gold in SV10-510 & 218 meters of 2.7 gpt gold including 41 meters of 12.3 gpt in SV10-511c (drill holes that are not included in the current NI 43-101 resource & also the drill holes located closest to Terraco's Moonlight Project);
  • August 18th, 2011 - One of the top Analysts (in our opinion) in the gold exploration industry has the Spring Valley deposit modeled as high as 6,000,000 (grading 0.75 gpt) ounces of gold - still open to the north towards Terraco's Moonlight Project & at depth;
  • August 25th, 2011 - Midway announces 201 meters of 0.82 grams per tonne (gpt) gold in SV11-515; and 94 meters of 1.06 gpt gold in SV11-517 (also not included in the NI 43-101 resource).
Followed by three consecutive blockbuster announcement's;

We are advisors of Terraco Gold & own shares in the company.  As always - please do your own due diligence.

***The material herein is for informational purposes only and is not intended to and does not constitute the rendering of investment advice or the solicitation of an offer to buy or sell securities. The foregoing discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (The Act). In particular when used in the preceding discussion the words “plan,” confident that, believe, scheduled, expect, or intend to, and similar conditional expressions are intended to identify forward-looking statements subject to the safe harbor created by the ACT. Such statements are subject to certain risks and uncertainties and actual results could differ materially from those expressed in any of the forward looking statements. Such risks and uncertainties include, but are not limited to future events and financial performance of the company which are inherently uncertain and actual events and / or results may differ materially. Mr. Johnston owns shares in Terraco Gold Corp., Senesco Technologies Inc. & Sama Resources Inc. Johnston-Sequoia Capital Corporation ("Johnston-Sequoia") owns shares in Terraco Gold Corp. & Sama Resources Inc. Johnston-Sequoia is a paid advisor of Terraco Gold Corp., Sama Resources Inc., Northern Vertex Mining Inc. & Touchstone Capital Inc. Johnston-Sequoia was formerly a paid advisor ofTalison Lithium Ltd., Salares Lithium Inc. & Kootenay Silver Inc. We cannot attest to nor certify the correctness of any information in this research page. Please consult your financial advisor and perform your own due diligence before considering any companies mentioned in this informational webpage.

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