Ms. Mari Doren reports

MONTAUK METALS PROVIDES FURTHER UPDATE ON ARBITRATION PROCESS AND ANNOUNCES NON-BROKERED PRIVATE PLACEMENT

Montauk Metals Inc. has provided further updates on the continuing arbitration brought by the company against the Republic of Colombia to enforce the company's rights to compensation under the Canada-Colombia free-trade agreement, as previously described in its news releases of March 27, 2018, Feb. 25, 2019, Feb. 10, 2020, Nov. 23, 2021, and Sept. 1, 2023. Additionally, the company would also like to announce the terms of a non-brokered private placement financing, open to all existing shareholders of the company, which is expected to finance the arbitration.

Update on arbitration

Montauk contends that Colombia breached its obligations owed to the company, including specific obligations under the FTA. The claims include Colombia's refusal or failure to compensate the company for the losses incurred as a consequence of Colombia's prohibition of mining in the paramos (high-altitude ecosystems). On March 21, 2018, Galway Gold filed a request for arbitration against the Republic of Colombia before the International Centre for Settlement of Investment Disputes (ICSID).

The arbitration is being conducted in two phases. Phase 1 will determine whether the FTA has jurisdiction over this case and whether Colombia has breached its obligations under the FTA and is liable for compensation to the company. Assuming that Montauk is successful in phase 1, phase 2 will involve determining the quantum of damages awarded to Montauk to compensate it for losses incurred. The company has suffered more than $16-million (U.S.) in sunk costs and a total loss of the value of up to $180-million (U.S.) in the Reina de Oro project, as well as legal and arbitration fees. Typically, an arbitral award will include an award of costs payable by the unsuccessful party to the successful party to reimburse it for its legal and arbitration fees.

Certain costs of the proceedings, including legal and arbitration fees, have exceeded the original estimates, and the company has also had to pay Colombia's 50-per-cent share of the arbitration fees. The company must make an additional payment of $200,000 (U.S.) to ICSID before a ruling on phase 1 is rendered. As of Oct. 5, 2023, the company had a cash balance of approximately $95,000 and a working capital of approximately ($500,000) (unaudited). If the company fails to pay the required amount of $200,000 (U.S.) to obtain a ruling, the arbitration will be dismissed on Nov. 9, 2023.

The $200,000 payment to the ICSID tribunal could result in a favourable judgment. Assuming a successful minimum offering at approximately two cents per share as described further below, the potential $16.6-million (U.S.) judgment for sunk costs alone can potentially equate to 28 U.S. cents per share as of today's date, and the total judgment may be up to $3.04 (U.S.) per share (see further details on the minimum offering below).

Eco Oro Minerals Corp. also has an arbitration continuing against the government of Colombia under the FTA pending before the tribunal. In its arbitration, Eco Oro has alleged that Colombia breached its obligations under the FTA in failing to compensate Eco Oro for the losses incurred as a consequence of Colombia's prohibition of mining in the paramos. The prohibition on mining is based upon the same FTA and legislative changes and Colombian Court decisions that Montauk's arbitration claims against Colombia are based on. As such, Montauk management believes that Eco Oro's claims against Colombia may be sufficiently similar to Montauk's claims against Colombia. On Sept. 9, 2021, the tribunal in the Eco Oro arbitration issued its decision on jurisdiction, liability and directions on quantum. According to a procedural order issue by the tribunal, the tribunal ruled that it had jurisdiction over the claims raised by Eco Oro and that Colombia acted in breach of Article 805 of the FTA, entitling Eco Oro to damages. The procedural order also ordered the parties to file additional submissions in response to certain questions regarding the quantum of Eco Oro's damages. Those questions were directed to be answered within 120 days, although depending on the parties' position, there was the possibility that deadline could be extended, including for an additional 120-day briefing period. After the matter is fully briefed, the tribunal in the Eco Oro arbitration is expected to render a decision on the amount of damages. The tribunal's website currently lists the decision on damages as pending.

The tribunal considers each case before it on its own facts. The tribunal in Montauk's arbitration is not bound by any decision made by the tribunal in Eco Oro's arbitration. Nonetheless, Montauk management believes that the recent decision issued by the tribunal in the Eco Oro arbitration finding jurisdiction and liability by Colombia (in an amount to be determined) provides useful guidance in Montauk's arbitration.

Montauk's management is pleased with how the arbitration has proceeded to date, which has been consistent with Montauk's expectations. The company cannot guarantee that it will be successful at the arbitration or that the estimated amounts will not be revised as the arbitration proceeds. The company also cannot guarantee that it will be able to recover all or part of its legal and arbitration costs from the government of Colombia even if it is successful at the arbitration. The company continues to actively seek litigation financing, but cannot guarantee success in this regard, and has thus decided to proceed with a private placement financing to raise the necessary funds, the terms of which are outlined in the section below. Assuming the company is able to raise the necessary funds for a ruling on phase 1, the ruling from the arbitral tribunal would be expected on or about the first quarter of 2024. Assuming success at phase 1, further financing will likely be required at phase 2, and the company will attempt to seek litigation financing for this purpose but cannot guarantee success in this regard. The final outcome of the phase 1 arbitration and the eventual outcome of the phase 2 arbitration cannot be predicted at this time. Management of the company will continue to provide updates on material developments of the status of the arbitration.

Non-brokered private placement financing

The company intends to complete a non-brokered private placement financing of between 17.5 million and 37.5 million common shares in the capital stock of the company at a price of two cents per common share for aggregate gross proceeds of between $350,000 and $750,000 for the minimum offering and the maximum offering, respectively. As of Oct. 5, 2023, the company has 41,627,979 common shares issued and outstanding. In the event of a minimum offering, the company is expected to have 59,127,979 common shares issued and outstanding, representing an increase of 42 per cent. In the event of a maximum offering, the company is expected to have 79,127,979 common shares issued and outstanding, representing an increase of 90 per cent. The company continues to actively seek litigation financing concurrently with the private placement.

The offering is open to shareholders of the company. The offering to shareholders is subject to the exemption for existing shareholders as described in Section 2.9 of Ontario Securities Commission Rule 45-501 (Distributions to Existing Security Holders). The company will also offer securities under the accredited investor exemption and other exemptions available to the company. The existing shareholder exemption is available to shareholders residing in all Canadian provinces. Subscriptions may be accepted from shareholders outside of Canada with evidence that there is a comparable or otherwise applicable exemption permitting the subscription in that jurisdiction.

Shareholders of the company as at Oct. 4, 2023, are eligible to participate in the offering under the existing shareholder exemption. Any person who becomes a shareholder of the company after the record date is not permitted to participate in the offering using the existing shareholder exemption, but may still participate under other exemptions available to them. Shareholders who became shareholders after the record date should consult their professional advisers when completing their subscription form to ensure that they use the correct exemption.

There are conditions and restrictions when relying upon the existing shareholder exemption, namely, the subscriber must: (a) be the company's shareholder on the record date; (b) be purchasing the common shares as a principal and for their own account and not for any other party; and (c) not subscribe for more than $15,000 of securities from the company in any 12-month period. In the event that a subscriber wants to subscribe to more than the $15,000 value of securities, then they may do so provided they have first received suitability advice from a registered investment dealer. In this case, subscribers will be asked to confirm the registered investment dealer's identity and employer.

The offering will remain open until 4:30 p.m. Toronto time on Oct. 26, 2023, subject to earlier cut-off if the offering is oversubscribed or in the event of a material change in the affairs of the company. Subscriptions will be accepted by the company on a first-come, first-served basis. Therefore, if the offering is oversubscribed, it is possible that a shareholder's subscription may not be accepted by the company even though it is received within the offering period. Additionally, in the event of an imbalance of large subscriptions compared with smaller subscriptions, management reserves the right in its discretion to reduce large subscriptions in favour of smaller shareholder subscriptions. A subscription will be deemed to be received by the company when a completed subscription form, together with payment of the subscription price in prescribed form, has been received by the company. The offering may be closed in one or more tranches as subscriptions are received. Commissions and/or finders' fees may be paid in respect of this offering. The securities issued pursuant to the offering will be subject to a statutory hold period of four months and one day.

The company intends to use the net proceeds from the offering to finance the arbitration and for general working capital purposes. The net proceeds received from the minimum offering are expected to be used for the following corporate purposes: to finance the continuing arbitration, in particular by paying to ICSID the arbitration fee advance requested by ICSID of $200,000 (U.S.) (as of Oct. 5, 2023, approximately $274,200 (Canadian)) necessary to render a ruling on phase 1 of the arbitration, with a buffer of approximately $6,000 to account for fluctuations in currency exchange rates between the closing of the offering and the payment of the fees to Colombian authorities; and for working capital purposes, including the general and administrative deficit of approximately $500,000.

The net proceeds received from the maximum offering after payment of issue costs and finders' fees/commissions, if any, are expected to be used for the following corporate purposes: to finance the continuing arbitration, in particular by paying to ICSID the arbitration fee advance requested by ICSID of $200,000 (U.S.) (as of Oct. 5, 2023, approximately $274,200 (Canadian)) necessary to render a ruling on phase 1 of the arbitration, with a buffer of approximately $6,000 to account for fluctuations in currency exchange rates between the closing of the offering and the payment of the fees to Colombian authorities and for working capital purposes, including the general and administrative deficit of approximately $500,000; and to finance phase 2 of the arbitration, by paying future legal costs, which cannot be determined at this time, and for general corporate and working capital purposes.

If the offering is not fully subscribed, then management of the company will determine the allocation of net proceeds in excess of the minimum offering to be in the best interests of the company.

How to participate in the private placement

To participate in this private placement, shareholders and interested investors must complete a subscription form and return the completed subscription form plus payment in prescribed form for the total purchase price payable to Montauk to the offices of its legal representatives Peterson McVicar LLP. Funds will be held in trust by Peterson McVicar until the closing date and the issuance of securities to investors.

Subscription forms are available from Peterson McVicar, solicitor, to the company at 110 Yonge St., Suite 1601, Toronto, Ont., M5C 1T4, by e-mail request to alunyov@petelaw.com, or directly by contacting the company at 1-800-761-2770 or at mdoren@galwayinc.com.

The offering is subject to certain conditions, including, but not limited to, the receipt of all necessary approvals, including the approval of the TSX Venture Exchange and applicable securities regulatory authorities. The company intends to close the offering on or around Oct. 26, 2023.

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