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Solgold PLC
Symbol C : SOLG
Shares Issued 1,837,012,007
Close 2019-02-08 C$ 0.62
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Solgold "disappointed" at Cornerstone dismissal

2019-02-08 07:32 ET - News Release

Mr. Nicholas Mather reports


The directors of Solgold PLC have reviewed the announcement by Cornerstone Capital Resources in response to Solgold's announced intention to bid for all of the issued and outstanding shares and warrants of Cornerstone.

The directors of Solgold are surprised and disappointed that Cornerstone has so quickly dismissed Solgold's stated intention to offer its shareholders and warrant holders 0.55 Solgold share for every Cornerstone share (and prescribed ratios for warrants). The Solgold offer would represent a 20-per-cent premium over Cornerstone's closing price before Solgold's statement, which Solgold believes is a compelling offer to Cornerstone shareholders and warrantholders and a premium that is in line with comparable recent transactions in the sector.

Solgold notes the apparent lack of consideration given to its announcement that it intends to make a premium offer for Cornerstone securities. Cornerstone's announcement on Jan. 31, 2019, was lodged with the Toronto Stock Exchange at 9:52 a.m. Eastern Standard Time, less than three hours after the announcement of the intention to make an offer by Solgold. Was there time that early in the morning to actually make contact with shareholders representing more than 50 per cent of those outstanding? Did Cornerstone have time to hold a board meeting to consider the offer between the time board members woke up in the morning and the time the press release was issued? Did the board of Cornerstone form an independent committee of directors to consider, on behalf of shareholders, the premium to be offered by Solgold? Did Cornerstone receive advice from a financial adviser with respect to the proposed offer before issuing its responding news release dismissing the proposed offer? These are all questions that Solgold believes holders of Cornerstone securities, specifically minority holders, should be asking in light of the responding press release issued by Cornerstone.

Solgold notes that the market reaction to its announced intention to make an offer to holders of Cornerstone securities was a marked increase in the price of common shares of Cornerstone. Solgold believes this reflects the fact that the market understands that the proposed offer from Solgold would:

  1. Present all equity classes in Cornerstone with a significant premium equal to the highest price Cornerstone has enjoyed in two years;
  2. Remove the financing risks to equity value imposed by the current structure of Cornerstone's 15-per-cent interest in Cascabel;
  3. Enhance the value of a Solgold control premium for Cornerstone shareholders (which they currently do not enjoy);
  4. Provide impressive pan-Ecuadorean exploration value upside from the multitarget first mover copper gold project portfolio in Solgold's four wholly owned subsidiaries covering the entire length of the Ecuadorean sector of the Andean copper belt;
  5. Probably see the bid succeed, in contrast to the statements by the Cornerstone board in its release.

Solgold shareholders currently enjoy a value premium over Cornerstone. Solgold expects that this premium exists for many reasons, including, specifically, its ability to exercise management and financial control over Cascabel, Solgold's 100-per-cent-owned, potentially Tier 1, pan-Ecuadorean copper-gold portfolio, including 11 major targets, Solgold's multiaward-winning skilled and experienced management team and the strong backing of BHP, the world's largest mining company, and Newcrest Mining, Australia's largest gold miner and a block cave expert.

Solgold rejects Cornerstone's misleading assertion in respect of the Blanca vein project, as the relevant prospect is outside of the area of mutual interest pursuant to the governing agreements, meaning that Cornerstone has no current interest or ability to earn an interest in this project.

Solgold advises that Cornerstone's interpretation of the agreements with Solgold is also misleading. In fact, Solgold owns 85 per cent of the beneficial and registered title in the shares in ENSA, which holds 100 per cent of the Cascabel concession. Further, the interest Solgold and Cornerstone hold in ENSA is in the nature of shareholdings -- the parties have not entered into a joint venture and no fiduciary obligation by Solgold in favour of Cornerstone exists.

Solgold believes that all Cornerstone shareholders and warrantholders should be given the opportunity to make an informed decision with regard to the merits of the Solgold proposal, and that an independent review should be conducted by the Cornerstone board, properly advised by an independent committee thereof, before making public statements about the proposed offer. Solgold also recommends that Cornerstone shareholders take time to analyze the rationale of a combination of Cornerstone and Solgold as outlined in Solgold's announcement.

Solgold presently intends to proceed with its offer in accordance with the terms announced.

Readers are cautioned that Solgold may determine not to make the offer if: (i) it identifies material adverse information concerning the business, affairs, prospects or assets of Cornerstone not previously disclosed by Cornerstone; (ii) Cornerstone implements or attempts to implement or activate defensive tactics (such as a material change in Cornerstone's capital structure or the grant of an option (or similar right) to purchase material assets) in relation to the offer; (iii) Cornerstone determines to engage with Solgold to negotiate the terms of a combination transaction and Solgold and Cornerstone determine to undertake that transaction utilizing a structure other than a takeover bid (such as a plan of arrangement); (iv) a third party makes a competing offer for Cornerstone; or (v) there is a change of control of Cornerstone or any of its material subsidiaries. Accordingly, there can be no assurance that the offer will be made or that the final terms of the offer will be as set out in this news release.


Solgold has retained Hannam & Partners and Cormark Securities Inc. as its financial advisers in connection with the offer. Bennett Jones LLP is acting as Canadian legal adviser to Solgold and HopgoodGanim is acting as Australian legal adviser to Solgold.

About the Cascabel project

The Cascabel project's Alpala deposit is located in northern Ecuador, lying upon the northern section of the prolific Andean copper belt, renowned as the base for nearly half of the world's copper production. The project area hosts mineralization of Eocene age, the same age as numerous Tier 1 deposits along the Andean copper belt in Chile and Peru to the south. The project is a three-hour drive north of Quito, close to water, power supply and Pacific ports. Solgold holds an 85-per-cent registered and beneficial interest in ENSA which holds 100 per cent of the Cascabel tenement.

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