Mr. Paul Huet reports

KARORA RESOURCES ANNOUNCES MERGER TRANSACTION WITH WESTGOLD RESOURCES

Karora Resources Inc. and Westgold Resources Ltd. have agreed to combine in a merger pursuant to which Westgold will acquire 100 per cent of the issued and outstanding common shares of Karora by way of a statutory plan of arrangement under the Canada Business Corporations Act.

Transaction highlights:

• Karora shareholders will receive 2.5241 Westgold fully paid ordinary shares, 68 Australian cents (61 Canadian cents) in cash and 0.30 of a share in a new company to be spun out from Karora (SpinCo) for each Karora share held at the closing of the transaction. The offer consideration represents approximately $6.60 (Australian) ($5.90 (Canadian)) per Karora share based on Westgold's closing share price on the Australian Securities Exchange of $2.28 (Australia) on April 5, 2024.
• SpinCo's assets will comprise Karora's existing 22.1-per-cent interest in Kali Metals Ltd., a 1-per-cent lithium royalty on certain mining interests held by Kali, the right to receive a deferred consideration payment due to Karora relating to the on sale of the Dumont asset and $6-million (Australian) ($5-million (Canadian)) in cash. SpinCo will be owned 100 per cent by existing Karora shareholders.
• The offer consideration represents a 10.1-per-cent premium to Karora's closing share price on the Toronto Stock Exchange of $5.995 (Australian) ($5.360 (Canadian)) on April 5, 2024, and a 25.3-per-cent premium to Karora's and Westgold's 20-day volume-weighed average price on the TSX of $5.552 (Australian) ($4.964 (Canadian)) and on the ASX of $2.421 (Australian) ($2.164 (Canadian)) up to and including April 5, 2024.
• Upon completion of the transaction, Westgold shareholders will own approximately 50.1 per cent of the combined company (Westgold after completion of the transaction referred to as enlarged Westgold), and former Karora shareholders will own approximately 49.9 per cent.
• Enlarged Westgold will have a market capitalization of approximately $2.2-billion (Australian) ($1.9-billion (Canadian)).
• Enlarged Westgold will have a portfolio of assets from an exclusively Western Australian asset base, a clear pipeline of growth projects and high-quality exploration targets.
• The enlarged Westgold intends to apply for quotation of its Westgold shares on the TSX on completion of the transaction.
• The transaction has been unanimously approved by the boards of directors of Westgold and Karora, and Karora's board of directors will recommend that the shareholders vote in favour of the transaction.
• Directors and members of senior management of Karora holding approximately 1.2 per cent of Karora shares have entered into voting support agreements pursuant to vote their Karora shares in favour of the transaction at the meeting of shareholders to be called by Karora to approve the transaction. In addition, key institutional shareholders with a combined shareholding of approximately 9 per cent including Eric Sprott have signed VSAs or otherwise have indicated they would support the transaction.
• The transaction represents a transformational step change in growth for both Westgold and Karora shareholders:
  • Creates a globally investable, mid-tier gold producer operating exclusively in Western Australia with a highly complementary combination of mining and processing assets, people, and balance sheet;
  • Top-five largest, Australian Securities Exchange-listed Australian gold producer based on the pro forma market capitalization;
  • One of the largest unhedged Australian gold producers on completion of the transaction providing investors with full exposure to the gold price;
  • Combined pipeline of advanced organic growth options and exploration targets across Karora's Beta Hunt and Higginsville properties and Westgold's Murchison and Bryah properties;
  • Estimated operating synergies of $209-million (Australian) ($187-million (Canadian)) and estimated corporate savings of $281-million (Australian) ($251-million (Canadian));
  • Robust balance sheet with financial resources of circa $160-million (Australian) ($143-million (Canadian)) in cash and liquidity through Westgold's existing corporate revolver facility (subject to requisite consents) and following full repayment of Karora's existing $44-million (Australian) ($39-million (Canadian)) revolving facility to support an accelerated resource development program at the Beta Hunt Fletcher zone and Bluebird-South Junction;
  • Enhanced capital market profile with increased scale, trading liquidity and quality, to be attractive to both gold and generalist investors across Australian Securities Exchange, Toronto Stock Exchange and OTCQX;
  • Significant rerating potential through increased scale and increased index weighting, such as the GDX and GDXJ indices;
  • Combined board of directors comprising experienced mining professionals with a proven record of maximizing value for shareholders.

Westgold managing director and chief executive officer Wayne Bramwell commented: "The prize here is Beta Hunt's gold potential. Rarely do you find a gold asset of the quality and potential of Beta Hunt hiding in a nickel belt, and drilling is expected to further unlock value at this mine.

"This merger brings the large Beta Hunt mine together with Big Bell, the emerging Bluebird and the iconic Great Fingall mine under one Australian management team. These assets combined create the foundations of a new Australian gold mining powerhouse that is focused on free cash generation, is internationally relevant and investable, and can stand head and shoulders alongside the biggest names in the Australian gold sector.

"The Westgold and Karora teams have independently been structuring our businesses for growth for several years and now is the time to bring these two businesses together. Overprint an experienced and expanded team with similar corporate journeys, strong safety and cultural alignment, and a shared commitment to developing its people, and we have a new business dominant across two historic, yet underexplored, goldfields.

"The expanded business will have several large mines, be well funded, fully leveraged to the gold price and have optionality over an enviable selection of growth opportunities. Importantly, the business will have expanded human and physical resources to extend mine lives and production scale rapidly.

"Westgold welcomes the Karora team, shareholders and stakeholders to the Westgold family, and looks forward to creating value across two of Western Australia's most iconic goldfields."

Karora chairman and chief executive officer Paul Huet commented: "For the last two years, Karora has watched Mr. Bramwell and the team consistently unlock material value for shareholders at Westgold. One of the more unique aspects of this transaction is a very strong cultural fit between both companies, which will serve shareholders of the enlarged company well for a very long time. The merger is estimated to unlock approximately $490-million (Australian) of operational, [general and administrative], and [capital expenditure] synergies while shareholders will become proud owners of the largest unhedged gold producer in Australia at completion of the transaction -- certainly a compelling opportunity in the current gold price environment.

"The team at Karora have worked diligently to execute on our strategy to build the next 200,000-plus-ounce-per-annum Australian gold producer. We have delivered value to shareholders through a disciplined growth approach by investing in our cornerstone asset in Beta Hunt, which will be fully ramped up to two [million tonnes per annum] later this year, our pipeline of projects at Higginsville, and through strategic asset acquisitions such as the Lakewood mill and Spargos gold mine to establish the next emerging junior gold producer in the Western Australia goldfields.

"With the combination of Westgold and Karora, we are taking the next step by combining two highly complementary, free-cash-flow-generating asset bases in one of the world's finest mining jurisdictions to create a premier Western Australian mid-tier gold producer. Karora shareholders will benefit from having very meaningful ownership in a larger, more diversified gold producer with a highly experienced management team located entirely in Western Australia.

"The prospects for the combined company are tremendous, with over 3,200 [square kilometres] of combined exploration tenements in Australia's most prospective gold mining regions coupled with a significantly enhanced balance sheet poised and ready to deploy into a highly compelling combined growth and exploration strategy. The combination provides Karora shareholders with significant exposure to one of the largest Australian gold producers with significant potential for an eventual share price rerate as the operational synergies and enhanced scale of the combined portfolio are realized."

Transaction details

Westgold and Karora have entered into a definitive arrangement agreement dated April 8, 2024, pursuant to which Westgold will acquire all of the Karora shares by way of a statutory plan of arrangement under the CBCA. The transaction will create a diversified Western Australian-focused Australian Securities Exchange-, Toronto Stock Exchange- and OTCQX-listed gold company with a robust portfolio of exploration, development and production assets. Enlarged Westgold will have a strong pipeline of growth opportunities.

Under the terms of the agreement, each Karora share outstanding at the effective time of the arrangement will be exchanged for the offer consideration comprising:

• 2.524 new Westgold shares, representing $5.755 (Australian) ($5.145 (Canadian)) per Karora share held, based on Westgold's last closing share price on the ASX of $2.28 (Australian) on April 5, 2024;
• 68.0 Australian cents (60.8 Canadian cents) in cash;
• 0.30 of a SpinCo share, with an implied value of 16.4 Australian cents (14.7 Canadian cents).

The offer consideration represents an approximately $6.60 (Australian) ($5.90 (Canadian)) per Karora share and a fully diluted equity value of $1,233-million (Australian) ($1,103-million (Canadian)) based on Westgold's closing share price on the ASX of $2.28 (Australian) on April 5, 2024. The offer consideration represents a 10.1-per-cent premium to Karora's closing share price on the TSX of $5.995 (Australian) ($5.360 (Canadian)) of April 5, 2024, and a 25.3-per-cent premium to Karora's and Westgold's 20-day volume-weighted average price on the TSX of $5.552 (Australian) ($4.964 (Canadian)) and on the ASX of $2.421 (Australian) ($2.164 (Canadian)) up to and including April 5, 2024.

Upon completion of the transaction, existing Westgold and Karora shareholders will own approximately 50.1 per cent and 49.9 per cent of enlarged Westgold, respectively.

Westgold intends to make an application for a secondary listing on the TSX as part of the transaction.

The enlarged Westgold board will be composed of the current directors of Westgold and two directors from Karora. Cheryl Edwardes will be the chair of enlarged Westgold, and Mr. Bramwell will be managing director and chief executive officer. Leigh Junk, currently managing director, Australia, and Shirley In't Veld, a director of Karora, will be included on the enlarged Westgold board. Mr. Huet will continue with enlarged Westgold in a special advisory role for six months postcompletion of the transaction.

In connection with closing of the transaction, Karora will spin out certain assets to former Karora shareholders, being its shareholding in Kali, a 1-per-cent lithium royalty on certain mining interests held by Kali, the right to receive future payments related to the sale of the Dumont asset and cash of $6-million (Australian) ($5-million (Canadian)) to a newly formed SpinCo. Under the arrangement, Karora shareholders will receive 0.30 of a SpinCo share for each Karora share held.

Strategic rationale and highlights

1. Creation of a leading mid-tier gold producer:

• Top-five Australian gold producer with a pro forma market capitalization of $2.2-billion (Australian) ($1.9-billion (Canadian));
• Positioned as one of the largest unhedged Australian gold producer, providing investors with full exposure to gold prices following transaction completion;
• Flexibility and optionality from a combined total of five mills and 6.9 Mtpa of processing capacity in Western Australia;
• Significant exploration upside through highly prospective approximately 3,200-square-kilometre land package across two of Western Australia's most prolific goldfields;
• Best-in-class team with extensive resources and complementary underground mining and exploration expertise;
• Tremendous platform for future organic growth and optionality over nickel co-production at Beta Hunt.

2. Diversified production in Tier 1 jurisdiction:

• Diversification across four production centres in Western Australia;
• Leveraging Westgold's established management team that has significant experience in Western Australia;
• Westgold's operating hub model is well suited to optimizing value of Karora's two strategically located mills.

3. Exciting organic growth pipeline:

• Significant near-mine and regional-scale exploration opportunities across Karora's assets provide exciting potential to realize major resource growth at Beta Hunt/Higginsville;
• Creates a strong organic growth pipeline when combined with Westgold's highly prospective exploration ground in the Murchison region;
• Option for growing nickel byproduct production from Karora's Beta Hunt asset.

4. Material synergies driving substantial value creation:

• The merger delivers key strategic synergies including:
  • Increased mining and processing facilities offer operating flexibility and optionality;
  • Ability to leverage and complement Westgold's sizable mining and drilling fleet with an estimated replacement value of approximately $200-million (Australian) ($179-million (Canadian)) with Karora's newly purchased equipment;
  • Combined in-house expertise enables rapid development of new projects (for example, Spargos);
  • Increased ability to attract and retain talent as a larger and more significant Western Australian employer;
• Estimated $490-million (Australian) ($438-million (Canadian)) in total synergies available through the business combination:
  • Estimated $281-million (Australian) ($251-million (Canadian)) of identified potential cost benefits through elimination of duplicate corporate, operational and administrative functions;
  • Estimated $209-million (Australian) ($187-million (Canadian)) in identified potential operational savings in procurement and supply chain through leveraging of increased scale.

5. Financial resources to execute:

• Enlarged Westgold will have financial resources of circa $160-million (Australian) ($143-million (Canadian)), including Westgold's existing corporate revolving facility (subject to requisite consents), and following the repayment of Karora's existing $44-million (Australian) ($39-million (Canadian)) revolving facility, combined with an outstanding forecast free cash flow profile;
• Strong financial platform to continue investing in organic growth opportunities;
• Westgold's inaugural fiscal 2024 dividend policy will be enhanced by the increased production and cash flow generation from Karora's assets.

6. Enhanced capital market profile:

• Enhanced profile of enlarged Westgold to elevate the company's capital market presence and value proposition to a wider range of global investors;
• Increased scale and diversity to enhance potential demand from index funds tracking the GDX and GDXJ, amongst others.

Transaction and the plan of arrangement

The transaction will be effected by way of a court-approved plan of arrangement under the CBCA, requiring the approval of 66-2/3rds per cent of the votes cast by Karora shareholders at the annual and special meeting of shareholders of Karora and, if required under Canadian law, a simple majority of the votes cast by Karora shareholders excluding for this purpose the votes held by any person required under Multilateral Instrument 61-101. Karora expects to call a shareholder meeting to be held in July, 2024, to seek approval for the transaction. Closing of the transaction is currently expected to occur in late July, 2024.

In addition to shareholder and court approvals, the transaction is subject to applicable regulatory approvals, including those of FIRB, TSX and ASX, and the satisfaction of certain other closing conditions customary for a transaction of this nature, including, among others, receipt of key third party consents, no material breaches of the representations, warranties and covenants of the parties, no material adverse effects being suffered by the parties, and no more than 5 per cent of Karora shareholders having exercised dissent rights provided for under the CBCA.

The agreement also includes customary reciprocal deal protections, including fiduciary-out provisions, non-solicitation covenants and a right to match any superior proposals. A mutual reciprocal break fee of $45-million (Australian) ($40-million (Canadian)) is payable in certain circumstances, and a reciprocal expense reimbursement fee will be $2.2-million (Australian) ($2-million (Canadian)).

The agreement may be terminated in certain circumstances, including (but not limited to) by either party, if the transaction is not approved by shareholders or if certain third party consents and approvals are not obtained, if the transaction is not completed by Sept. 30, 2024 (unless extended by the parties), if a party breaches its representations and warranties or fails to perform any covenants or there has occurred a material adverse effect to the other party that is not capable of being cured by Sept. 30, 2024, or if either party enters into a superior proposal.

The directors, members of senior management of Karora and certain shareholders have entered into VSAs, pursuant to which they agreed to vote their Karora shares in favour of the transaction at the shareholder meeting.

Under the agreement, all incentive securities of Karora shall be conditionally accelerated and redeemed or exercised immediately prior to closing of the arrangement so that such holders may participate in the transaction as Karora shareholders.

In connection with closing of the transaction, Karora will spin out certain assets to Karora shareholders, being its shareholding in Kali, a 1-per-cent lithium royalty on certain mining interests held by Kali, the right to receive future payments related to the sale of the Dumont asset and cash of $6-million (Australian) ($5-million (Canadian)) to the newly formed SpinCo. Under the arrangement, Karora shareholders will receive 0.30 of a SpinCo share for each Karora share held.

Full details of the transaction will be included in the meeting materials which are expected to be mailed to Karora shareholders in June, 2024. The agreement will be filed on SEDAR+ under Karora's profile.

Boards of directors' recommendations

The transaction has been unanimously approved by the boards of directors of Westgold and Karora, and Karora's board of directors unanimously recommends that Karora shareholders vote in favour of the transaction. The board of directors of Karora has received opinions from Cormark Securities Inc. and Haywood Securities Inc., and the special committee has received an opinion from Desjardins Capital Markets and Cormark Securities Inc. that, based upon and subject to the assumptions, limitations and qualifications stated, the offered consideration to be received by Karora shareholders pursuant to the transaction is fair, from a financial perspective, to Karora shareholders.

Advisers

Westgold has engaged Argonaut PCF as financial adviser, Thomson Geer as Australian legal adviser and Stikeman Elliott LLP as Canadian legal adviser in relation to the transaction.

Karora has engaged CIBC World Markets Inc., Desjardins Capital Markets and Cormark Securities Inc. as co-advisers, HopgoodGanim as Australian legal adviser, and Bennett Jones LLP as Canadian legal adviser to the transaction.

Conference call/presentation

Westgold and Karora will host a joint investor call at 9 a.m. Australian Western Standard Time on April 8, 2024/9 p.m. EDT on April 7, 2024. It is recommended that you log on at least five minutes before the scheduled commencement time.

About Westgold Resources Ltd.

Westgold (ASX: WGX and OTCQX: WGXRF) is an innovative Western Australian gold miner producing circa 220,000 to 230,000 ounces per year. With more than 1,300 square kilometres of highly prospective tenure, Westgold is the dominant gold miner in the Murchison and Bryah regions of Western Australia and uniquely an owner-operator of its five underground mines.

With a proven team, a history of cash flow generation, a new cash-flow-based dividend policy, increasing operational delivery, no debt, unhedged gold sales, and a strong balance sheet consisting of $247-million (Australian) in cash and bullion at March 31, 2024, Westgold is structuring for continued profitability and shareholder returns in fiscal 2024.

About Karora Resources Inc.

Karora is focused on increasing gold production at its integrated Beta Hunt gold mine with beneficial nickel byproduct production and Higginsville gold operations in Western Australia. Ore is processed at two centralized plants: the 1.6 Mtpa Higginsville mill and the 1.2 Mtpa Lakewood mill, both located near its mining operations. Karora is continuing to build off its strong history of delivering consistent gold production and cash flow with 2024 gold production guidance at 170,000 to 185,000 ounces and all-in sustaining cost guidance at $1,250 (U.S.) to $1,375 (U.S.) per ounce sold.

Beta Hunt hosts a robust gold mineral resource and reserve in multiple gold shears, with gold intersections along a seven-kilometre strike length remaining open in multiple directions.

Higginsville has a substantial mineral gold resource and reserve and highly prospective land package totalling approximately 1,900 square kilometres.

Karora's shares trade on the Toronto Stock Exchange under the symbol KRR and on the OTCQX market under the symbol KRRGF.

Qualified person statement

The scientific and technical information in this press release has been reviewed and approved by Steve Devlin, BEng, MAusIMM. Mr. Devlin is a qualified person as defined in National Instrument 43-101 (Standards of Disclosure for Mineral Projects). Mr. Devlin is a full-time senior executive of the company.

We seek Safe Harbor.