PanTerra Gold Limited STRATEGIC AGREEMENT SIGNED TO UNDERPIN FUTURE ... · FUTURE GROWTH & PROFITABILITY ... grinding, flotation and filtering of the ore will be designed to produce

26 February 2015

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ASX: PGI

ABN: 48 008 031 034 Registered Office: 55 Kirkham Road Bowral NSW 2576 Australia

PO Box 846 Bowral NSW 2576 Australia

T: 61 2 4861 1740 Email: [email protected]

Project Office:

DOMINICAN REPUBLIC Calle Mayaguano No. 2 Los Cacicazgos, Santo Domingo, Distrito Nacional T: +1 809 482 0876

PanTerra Gold Limited

STRATEGIC AGREEMENT SIGNED TO UNDERPIN FUTURE GROWTH & PROFITABILITY

Controlling interest to be earned in underground gold mine development in British Columbia, Canada

Gold resource of 1,155,000 oz at 12.3g/t

Source of low cost, high-grade refractory concentrate to produce 100,000 oz Au per year for 10 years

Offtake agreement for concentrate to extend life of Las Lagunas project to 2028

Potential increase in Company value to US$200 million

Development decision December 2016 PanTerra Gold Limited (ASX: PGI) (PanTerra Gold or the “Company”), is pleased to advise that its wholly-owned subsidiary, PanTerra Gold (British Columbia) Ltd (“PGBC”), has signed a binding Pre-Development and Earn-In Agreement (“Agreement”) with Vancouver-based, Canarc Resource Corp (“Canarc”), that is expected to lead to the development of the New Polaris Gold Mine in north-west British Columbia (refer Location – Attachment 1). The Agreement provides for PGBC, at its option, to progressively spend C$10 million (A$10.2 million or US$8.0 million at current exchange rates) on three Stages of predevelopment activities, to earn a 50% interest in the mine development. PGI may purchase an additional 1% interest from Canarc for 1% of the Net Present Value (“NPV”) established by the project’s Definitive Feasibility Study (“DFS”). The move to a controlling interest can occur within six months of completion of the DFS in Q4 2016. New Polaris Gold Mine The aim of the Parties is to jointly develop an underground mine based on resources held by Canarc’s wholly-owned subsidiary, New Polaris Gold Mine Limited. The current resource of arsenopyrite ore (Toronto Stock Exchange NI43-101 compliant) contains 1,155,000 oz gold at an average grade of 12.3g/t Au with a cut-off at 6.0g/t Au. Of this resource, 519,000

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PanTerra Gold Limited – ASX Announcement 26 February 2015

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oz is Measured and Indicated, and 636,000 oz is Inferred (refer Attachment 2 for breakdown of resource tonnage, grades, and categories). The relatively small mine should be able to be developed for under US$100 million, including adequate working capital, and be expected to produce high-grade refractory concentrate (90g/t Au to 100g/t Au) at the rate of 40,000 dry metric tonnes (“DMT”) per year. PanTerra Gold will purchase the concentrate ex-mine site for life of mine, for shipment to the Dominican Republic and production of doré at its Las Lagunas Albion/CIL process plant. The PanTerra Gold Group will have to provide approximately US$25 million of equity for the development in 2017-18, the majority of which should be able to be generated by the existing Las Lagunas operation. It is anticipated that gold recovery from the concentrate will be around 85% and yield approximately 100,000 oz Au per year for 10 years. The New Polaris claims, which are adjacent to old underground mine workings, have been held by Canarc for over 20 years during which time they have expended approximately C$30 million on exploration, resource modelling, and metallurgical test work. Over 73,000m of drilling to date has confirmed an ore body of consistent grades and characteristics. Consultants are confident that with additional drilling, an economically mineable resource will be established that is capable of supporting a 10 year mine life at the targeted production rates. Pre-Development Expenditure and Earn-In Stage 1 of the predevelopment expenditure will cost approximately C$500,000 over a five month period and involve production of concentrate from representative ore samples and test work at Xstrata Technology’s Albion pilot plant in Brisbane. The first Stage will also involve a technical and economic review of the proposed mine development and updating of Canarc’s existing Financial Model to reflect a 900tpd mining rate, and production of approximately 40,000 DMT pa of concentrate. Field work for seasonal collection of environmental data at the mine site will commence during this Stage. Following completion of Stage 1, PGBC will have 60 days in which to elect to proceed to Stage 2 of the predevelopment expenditure, at a cost of approximately C$3.5 million. Approximately 50% of this expenditure will be on a 10,000m drilling program in order to increase the Measured and Indicated Resource. The ore body is currently open at depth and along strike with the primary vein averaging 3m in width with consistently high ore grades varying from 10g/t Au (at a 3g/t cut-off) to 14g/t Au (at an 8g/t cut-off) (refer Attachments 2 and 3). Completion of the seasonal collection of field data for environmental permitting will occur during Stage 2, with Consultants confirming the application for approval can be submitted by June 2016 and the approval process should be relatively straightforward with the proposed operations being limited to production of concentrate.

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Detailed design and construction budgeting for the tailings dam will be also undertaken during this Stage. The valley site selected is 1500m from the mine and apparently has sound foundation conditions, and the topography necessary for the required storage volume. On completion of the second Stage of predevelopment expenditure, PGBC will have earned a 20% interest in the Joint Venture (“JV”). The Company will then have 60 days in which to commit to proceeding with the third and final Stage of the predevelopment phase of the proposed project. Stage 3 expenditure of approximately C$6.0 million will be primarily on the completion of a DFS for the project, which will involve further in-fill drilling, additional metallurgical test work, and preliminary engineering. On completion, PGI will have earned a 50% interest in the Project and be appointed Manager for the JV. The Agreement allows for the 50% Earn-In to occur over a 30 month period, but the documented aim of the Parties is to finalise the DFS in sufficient time for a development decision to be made by 31 December 2016. Development Plans Assuming a decision to proceed with the development is made by the end of 2016, it is intended that engineering be completed and all approvals obtained prior to the summer construction period in mid-2017, with commissioning planned for around Q3 or Q4 2018. The current mine plan is relatively straightforward and based on stoping from drives developed from a decline through competent ground. Mining will be undertaken by an experienced Canadian contractor at the planned mine development and production rates. A relatively small milling circuit involving crushing, grinding, flotation and filtering of the ore will be designed to produce a concentrate with 8% moisture content and grades of approximately 90g/t gold, 14% arsenic, and 25% sulphide sulphur. The concentrate will be delivered by the JV to a barge load-out wharf on the Taku River, 10 km from the mine site and transferred to 150t capacity self-propelled barges operated by a marine contractor. PanTerra Gold will purchase all concentrate produced, FOB barge for the life of mine, at a price determined by the average prevailing market price nominated by two selected major, experienced, and reputable traders in refractory concentrates containing precious metals, taking into account penalties for the high arsenic content and other contaminants (which can be handled by the Company’s Las Lagunas plant without physical modification other than an enclosed storage facility). Las Lagunas Project Extension During the Canadian summer months, PanTerra Gold will barge the annual production of concentrate 55km downstream to a 10,000t capacity floating storage platform moored in the Taku River estuary near the Port of Juneau in Alaska. Concentrate will be craned directly to vessels for shipment to the Dominican Republic where the Company will use its existing Albion/CIL process plant at Las Lagunas to recover approximately 100,000 oz Au per year.

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At the anticipated purchase price of concentrate, plus quoted transport charges, and processing costs at Las Lagunas, PanTerra Gold’s total non-inflated production costs including royalties are estimated to be approximately US$700 per oz Au, which would result in annual operating profits in the order of US$50 million at a gold price of US$1200 per oz. Based on PanTerra Gold borrowing the estimated US$25 million necessary to provide the Taku River barging equipment, and the cost of upgrading the Las Lagunas plant to accommodate the additional project duration, the estimated NPV of the extension to the Las Lagunas project is approximately US$150 million at a 10% discount rate, calculated at commencement of the New Polaris development, January 2017. This transaction has the potential to substantially increase the value of PanTerra Gold in the medium term with the combined anticipated values of the Canadian mine development, the extension of the Las Lagunas project, and the residual cash flow from the current Las Lagunas tailings retreatment, totalling approximately US$200 million, at a discount rate of 10%. Additional Production The 40,000 DMT pa of concentrate from the New Polaris mine will take up only 25% of the Las Lagunas annual plant capacity, providing scope for sourcing additional refractory concentrate that could increase the 100,000 oz Au per year expected to be recovered from the New Polaris concentrate, with investigations continuing on a number of prospective developments within the region that might add to the New Polaris supply. The Company is now in the position to enhance current production in the near-term if it can purchase high-grade refractory concentrate from existing producers, suitable for blending with the low-grade Las Lagunas tailings. The Company will appoint a major international trading company involved in the market for concentrate containing precious metals, to assist in sourcing additional feed for the Dominican operations. Mr Brian Johnson, Executive Chairman of PanTerra Gold Limited, said that the ability to control the development of the New Polaris resource should ensure continuation of the Las Lagunas project at substantially increased production. Mr Johnson also said that the Company had entered into negotiations with several substantial US lenders to the resources sector, interested in refinancing the existing Las Lagunas project loan in order to spread repayments over a longer period. This will permit early cash flows to support anticipated expenditure on the New Polaris project and avoid shareholder dilution. The same financiers have expressed interest in ultimately providing debt funding for the New Polaris development. End

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ATTACHMENT 1 NEW POLARIS MINE LOCATION

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ATTACHMENT 2 PUBLISHED NEW POLARIS RESOURCES (TSX NI 43-101 compliant) Updated February 1, 2007, and using a 6 gram per tonne cut-off (0.17 oz per ton), the total resource at New Polaris is 1,155,000 oz gold contained within 2,916,000 tonnes of mineralized vein material at an average grade of 12.3 grams per tonne (0.36 oz. per ton). Greater than 95% of the measured and indicated resources are located within the C vein system where infill drilling programs were conducted over the past three years. Approximately 75% of the inferred resources are also located within the C vein system, with the remainder attributable to the Y19 and Y20 veins. See the tables below for the breakdown of the resource categories.

MEASURED UNDILUTED RESOURCE

Cutoff Grade Mineralized Tonnage Average Grade Contained Gold

(g/tonne) (oz/ton)* (tonnes) (tons) (g/tonne) (oz/ton) Au (oz)

2 0.058 390,000 429,902 9.48 0.277 119,000

4 0.117 330,000 363,763 10.62 0.310 113,000

6 0.175 271,000 298,727 11.89 0.347 104,000

8 0.233 203,000 223,769 13.54 0.395 88,000

INDICATED UNDILUTED RESOURCE



2 0.058 1,280,000 1,410,960 10.97 0.320 451,000

4 0.117 1,180,000 1,300,728 11.65 0.340 442,000

6 0.175 1,017,000 1,121,052 12.71 0.371 416,000

8 0.233 806,000 888,464 14.22 0.415 368,000

MEASURED PLUS INDICATED UNDILUTED RESOURCE



2 0.058 1,670,000 1,840,861 10.62 0.310 570,000

4 0.117 1,510,000 1,664,491 11.42 0.333 555,000

6 0.175 1,288,000 1,419,778 12.54 0.366 519,000

8 0.233 1,009,000 1,112,233 14.08 0.411 457,000

INFERRED UNDILUTED RESOURCE



2 0.058 2,060,000 2,270,763 10.5 0.307 697,000

4 0.117 1,925,000 2,121,951 11.0 0.322 683,000

6 0.175 1,628,000 1,794,564 12.2 0.354 636,000

8 0.233 1,340,000 1,477,098 13.3 0.387 571,000

*ton equals short dry ton Gary Giroux, MASc., P.Eng., is the Qualified Person who prepared the NI 43-101 resource estimate set out above. The complete NI 43-101 report, titled "Resource Potential New Polaris", is available on SEDAR at www.sedar.com and was filed on March 16, 2007.

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http://www.sedar.com/

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CANARCRESOURCE CORP.

New Polaris Project,Northwest B.C.

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jannethompson

TextBox

ATTACHMENT 3 - CANARC RESOURCE CORP. - NEW POLARIS PROJECT

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CAUTION – Forward Looking Statements

Certain statements contained herein regarding the Company and its operationsconstitute “forward-looking statements” within the meaning of the United StatesPrivate Securities Litigation Reform Act of 1995. All statements that are nothistorical facts, including without limitation statements regarding future estimates,plans, objectives, assumptions or expectations of future performance, are“forward-looking statements”. We caution you that such “forward lookingstatements” involve known and unknown risks and uncertainties that could causeactual results and future events to differ materially from those anticipated in suchstatements. Such risks and uncertainties include fluctuations in precious metalprices, unpredictable results of exploration activities, uncertainties inherent in theestimation of mineral reserves and resources, fluctuations in the costs of goods andservices, problems associated with exploration and mining operations, changes inlegal, social or political conditions in the jurisdictions where the Company operates,lack of appropriate funding and other risk factors, as discussed in the Company’sfilings with Canadian and American Securities regulatory agencies. Resource andproduction goals and forecasts may be based on data insufficient to support them.James Moors, P.Geo. and/or Bradford Cooke, P.Geo. are the Qualified Persons forthe Company as required by NI 43-101. The Company expressly disclaims anyobligation to update any forward-looking statements. We seek Safe Harbour.For

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New Polaris - Location

New Polaris is located in northwestern B.C., 60 km northeast of Juneau, Alaska

Atlin, BC

NewPolaris

Juneau,AlaskaF

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New Polaris – Geology

500 feet

iceice

500 m

Volcanic rocks

Feld.porph.and.

Limestone

Schist

Boundary schist

Quartzsericite schist

Serpentinite

Amplibolite

Gabbro

Basalt

No.1Fault

101Fa

ult

Tulseq

uah

Rive

r

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500 feet

-Greenschist facies altered maficvolcanic rocks host themineralized quartz-carbonateveins

-There are three principal veinorientations

-AB and Y are antithetic shearveins; C-veins are dilatational

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New Polaris – Alteration/Mineralization

500 feet

Green alteration is pervasive chloriteand actilolite +/- sericite; trace pyrite

White veins are late and carbonate filled

5 cm diametre core

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500 feet


Brown alteration is pervasive biotite,sericite and ankerite; minor pyritepresent

White veins are late quartz and/orankerite

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500 feet


Yellow-green alteration is pervasivesericite, silica +/- Cr-muscovite; Strongpyrite and arsenopyrite mineralization(associated with Au)

White veins are late quartz and/orankerite (minor sulfides)

5 cm diametre core

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500 feet


Late stibnite + quartz veins present inparts of the C-vein system.

Occasionally contains visible gold; likelyscavenged from arsenopyrite (i.e. not aseparate gold event)

2 cm

5 cm diametre core

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New Polaris – 3D Model

500 feet

Over 220 drill holes have tested extensions of previously mined deposit

D Level

CLevel

BLevel

AJLevel

PolarisLevel

150 Level

300 Level

450 Level

600 Level

CWM

CHIE

CLOE

Y20

Y19

N

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CWM#

1Fa

ult

View looking down plunge of theintersection of the C-veins and theNumber 1 fault. Up roughly north.

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New Polaris – Drilling (2003-2006)

Year Holes Metres Assays

2003 3 1,561 227

2004 11 2,767 455

2005 9 2,390 499

2006 69 24,394 1,417

Total 92 31,112 2,598

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New Polaris - C Vein Long Sections

C-vein mineralization plunges to south-east, wide open to depth

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New Polaris – Resource

457,000 oz Au measured and indicated in 1,009,000 tonnes grading 14.1gpt and 571,000 oz Au inferred in 1,340,000 tonnes grading 13.3 gpt (8gpt cutoff). NI 43-101 compliant.

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Documents

PanTerra Gold Limited STRATEGIC AGREEMENT SIGNED TO UNDERPIN FUTURE ... · FUTURE GROWTH & PROFITABILITY ... grinding, flotation and filtering of the ore will be designed to produce