Re: Purchase and Sale of Magnetic Resources Ltd. ("Magnetic")

Exhibit 10.6

Paramount Gold & Silver Corp.
346 Waverley Street, Suite 110
Ottawa, Ontario, Canada  K2P 0W5

February 12, 2009

Max Ventures Ltd. and

Mitchell Innovations Ltd.

both c/o 218 – 470 Granville Street

Vancouver, BC

Dear Sirs:

Re:

Purchase and Sale of Magnetic Resources Ltd. (“Magnetic”)

This letter agreement (the “ Letter Agreement ”) confirms and documents the terms and conditions upon which Paramount Gold and Silver Corp. (the “ Purchaser ”) will acquire from Mitchell Innovations Ltd. (“ Mitchell ”) and Max Ventures Ltd. (“ Max ”, collectively with Mitchell the “ Vendors ”) all of the issued and outstanding shares of Magnetic and acquire, by way of assignment, the shareholder loans owed by Magnetic to Mitchell and Max (the “ Acquisition ”).  Magnetic is the sole beneficial shareholder of Minera Gama, S.A. de C.V. (“ Minera Gama ”) which holds interests in various mineral concession in Mexico which the Purchaser wishes to retain in Minera Gama and as more particularly described in Schedule “A” attached hereto (the “ Properties ”).  In addition, Minera Gama holds interests in various mineral concessions in Mexico (other than the Properties) which will be transferred to the Vendors or their nominee following closing of the Acquisition (“ Closing ”), which properties will be identified by the Vendors prior to Closing (the “ Vendors’ Properties ”).

On acceptance of this Letter Agreement by each of the Vendors, this Letter Agreement will constitute a binding agreement as between Purchaser and the Vendors (herein collectively referred to as the “ Parties ” and each individually as a “ Party ”) on the terms and conditions set forth below.

Purchase

1.

Subject to the terms and conditions of this agreement, on Closing, the Vendors will sell, and the Purchasers will buy:

(a)

all issued and outstanding shares of Magnetic, being 8,400,000 common shares, of which 4,200,000 shall be sold to the Purchaser by Mitchell and 4,200,000 will be sold to the Purchaser by Max (collectively the “ Magnetic Shares ”); and

(b)

all shareholder loans of Magnetic owed to the Vendors including all principal amounts outstanding on the date of Closing (the “ Magnetic Loans ”).

Minera Gama, the sole subsidiary of Magnetic, will indirectly be acquired by the Purchaser as a result of the Purchaser’s acquisition of the Magnetic Shares.

2.

The aggregate purchase price for the Magnetic Shares and Magnetic Loans shall be the sum of SIX HUNDRED SEVENTY-FIVE THOUSAND DOLLARS in United States currency (US$675,000.00) to be paid and satisfied by the issuance of shares of common stock in the capital of the Purchaser as set out in Section 3.

3.

The purchase price shall be paid and satisfied by the Purchaser issuing to the Vendors the aggregate of 1,350,000 shares of common stock in the capital of the Purchaser (the “ Paramount Shares ”).

4.

The Paramount Shares shall be issued in equal numbers to each of the Vendors, or to their nominees, or in such other ratios between them as they may direct in writing.

5.

The Purchase Price shall be allocated first to the Magnetic Loans in an amount equal to the face value of such loans, and the balance shall be allocated to the Magnetic Shares.

Representations and Warranties of the Vendors

6.

Each of Max and Mitchell hereby represents, warrants and covenants to the Purchaser that:

(a)

it is a corporation duly incorporated and organized and validly existing under the laws of the jurisdiction of its incorporation;

(b)

it has full corporate power, authority and capacity to enter into this Letter Agreement and to carry out its respective obligations under this Letter Agreement;

(c)

it has been duly authorized to enter into, and to carry out its respective obligations under this Letter Agreement and no obligation of Max or Mitchell, as the case may be, in this Letter Agreement conflicts with or will result in any breach or violation of any term or requirement in:

(i)

its respective constating documents;

(ii)

any other agreement to which it is a party; or

(iii)

the laws of British Columbia or Mexico;

(d)

it has duly executed and delivered this Letter Agreement, which binds it in accordance with its terms;

(e)

it legally and beneficially owns 4,200,000 Magnetic Shares, representing 50% of the total issued and outstanding shares in the capital of Magnetic, and such Magnetic Shares owned by it are owned free and clear of any charges or encumbrances; and

(f)

it is not a non-resident of Canada for the purposes of the Income Tax Act (Canada).

7.

Max and Mitchell hereby jointly and severally represents, warrants and covenants to the Purchaser that:

(a)

Magnetic is duly incorporated and organized and validly existing under the laws of the Province of British Columbia and is in good standing in each jurisdiction where, by reason of its business or assets, it is required to be qualified or licensed, and it has all powers, licenses, franchises and permits required to own its assets and carry on its business as presently carried on;

(b)

neither of the Vendors, Magnetic nor Minera Gama is a party to, bound by, or subject to any agreement, indenture, mortgage, lease, instrument, law, order, judgment, decree, or any provision of its constating documents, which would be violated, contravened or infringed by the execution and delivery of this Letter Agreement by the Vendors or the performance of their respective obligations under this Letter Agreement;

(c)

to the knowledge of the Vendors, each of Magnetic and Minera Gama is conducting its business in material compliance with all applicable laws;

(d)

the authorized capital of Magnetic consists of 100,000,000 shares, of which 8,400,000 common shares have been duly issued, are outstanding as fully paid and non-assessable shares, and are legally and beneficially owned by the Vendors as to 4,200,000 common shares owned by Max and 4,200,000 common shares owned by Mitchell;

(e)

no person has any option or right to acquire any of the unissued shares in the capital of Magnetic;

(f)

to the knowledge of the Vendors, the corporate records and minute books of Magnetic and Minera Gama contain in all material respects complete and accurate minutes of all meetings of, and all written resolutions passed by, the directors and shareholders of Magnetic and Minera Gama held or passed since incorporation;

(g)

the financial statements of Magnetic for the year ending December 31, 2008, true copies of which are attached hereto as Schedule “B”, are materially accurate, and there have been no material adverse changes to the financial position of Magnetic since December 31, 2008;

(h)

at the time of Closing the only assets of Magnetic will be its 100% interest in the shares of Minera Gama, including the beneficial ownership of the Nominee Shares (as hereinafter defined), and loans in the amount of Cdn$348,448 owed by Minera Gama to Magnetic plus any additional accrued and unpaid interest outstanding on the date of Closing and for greater certainty all cash will be paid out prior to Closing;

(i)

there are no actions, suits or proceedings, judicial or administrative pending or, to the knowledge the Vendors, threatened by or against Magnetic, at law or in equity, or before or by any federal, provincial, state, municipal or other governmental court, department, commission, board, bureau, agency or instrumentality, domestic or foreign, and the Vendors are not aware of any existing ground on which any such action, suit or proceeding might be commenced with any reasonable likelihood of success;

(j)

at the time of Closing, Magnetic will have no debts or liabilities, contingent or otherwise, other than the Magnetic Loans, which as at December 31, 2008 equalled in the aggregate approximately Cdn$35,450 being owed by Magnetic to the Vendors (but for greater certainty all available cash in Magnetic will be used to pay down the Magnetic Loans prior to Closing);

(k)

Magnetic has filed all tax returns, and has withheld or collected and remitted all amounts to be withheld or collected and remitted with respect to any taxes as required under all applicable tax laws and there are no accrued and unpaid taxes of any nature owed by Magnetic as at the date of Closing;

(l)

Minera Gama is a corporation duly incorporated and organized and validly existing under the laws of Mexico, is a wholly owned subsidiary of Magnetic and is in good standing in each jurisdiction where, by reason of its business or assets, it is required to be qualified or licensed, and it has all powers, licenses, franchises and permits required to own its assets and carry on its business as presently carried on;

(m)

Magnetic owns an undivided 100% legal and beneficial interest in all of the issued and outstanding shares of Minera Gama other than two shares of Minera Gama (the “ Nominee Shares ”) one of which is held by Mitchell and the other one of which is held by Minera Cima S.A. de C.V. (collectively referred to as the “ Nominee ”) on behalf of Magnetic, free and clear of all security interests, liens, charges, mortgages, pledges, encumbrances, adverse claims and demands of any nature or kind whatsoever recorded or unrecorded;

(n)

Magnetic owns an undivided 100% beneficial interest in all of the Nominee Shares, free and clear of all security interests, liens, charges, mortgages, pledges, encumbrances, adverse claims and demands of any nature or kind whatsoever recorded or unrecorded;

(o)

the authorized capital of Minera Gama consists of 60,000 fixed capital shares and an unlimited number of variable capital shares with 60,000 fixed capital shares and 4,501,000 variable capital shares issued and outstanding, of which:

(i)

all 60,000 fixed capital shares have been duly issued and are legally and beneficially owned by Magnetic;

(ii)

4,500,998 variable capital shares have been duly issued and are legally and beneficially owned by Magnetic; and

(iii)

a total of two variable capital shares have been duly issued and are registered in the name of the Nominee and are beneficially owned by Magnetic;

(p)

no person has any option or right to acquire any of the unissued shares in the capital of Minera Gama;

(q)

Minera Gama is the registered and beneficial owner of the Properties, free and clear of all liens, charges and claims of others, except as otherwise set out in Schedule “A” hereto;

(r)

at the time of Closing the only assets of Minera Gama will be the Properties, and the Trust Property as defined in Section 11;

(s)

there are no actions, suits or proceedings, judicial or administrative pending or, to the knowledge the Vendors, threatened by or against Minera Gama or involving the Properties or the Vendors’ Properties, at law or in equity, or before or by any federal, provincial, state, municipal or other governmental court, department, commission, board, bureau, agency or instrumentality, domestic or foreign, and the Vendors are not aware of any existing ground on which any such action, suit or proceeding might be commenced with any reasonable likelihood of success;

(t)

at the time of Closing, Minera Gama will have no debts or liabilities, contingent or otherwise, other than Cdn$348,448 owed by Minera Gama to Magnetic;

(u)

Minera Gama has filed all tax returns, and has withheld or collected and remitted all amounts to be withheld or collected and remitted with respect to any taxes as required under all applicable tax laws and there are no accrued and unpaid taxes of any nature owed by Minera Gama as at the date of Closing;

(v)

other than as set out in Schedule “A” there are no outstanding agreements or options to acquire or purchase any of the Properties or any interest in or any portion thereof and no person, firm or corporation has any proprietary or possessory or royalty interest in any of the Properties;

(w)

to the knowledge of the Vendors, all of the Properties are properly and accurately described in Schedule “A” hereto and the concessions that comprise the Properties have been duly and validly located and recorded in a good and miner-like manner pursuant to the laws of Mexico and are in good standing in Mexico as of the date of this Letter Agreement;

(x)

to the knowledge of the Vendors, Minera Gama is not in default under the terms of the Iris Agreement as described in Schedule “A” and a true copy of the Iris Agreement is attached hereto as Schedule “C” and Minera Gama has fully complied with all of its obligations thereunder;

(y)

to the knowledge of the Vendors, Minera Gama is not in default under the terms of the Morelos Agreements as described in Schedule “A” and a true copy of the Morelos Agreements are attached hereto as Schedule “D” and Minera Gama has fully complied with all of its obligations thereunder;

(z)

to the knowledge of the Vendors, Minera Gama is not in default under the terms of the Temoris Agreements as described in Schedule “A” and a true copy of the Temoris Agreements are attached hereto as Schedule “E” and Minera Gama has fully complied with all of its obligations thereunder;

(aa)

to the knowledge of the Vendors, the Iris Agreement, the Morelos Agreements and the Temori