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Austral Gold Ltd
Symbol AGLD
Shares Issued 566,065,407
Close 2020-12-14 C$ 0.18
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Austral Gold to invest $1.48-million in Ensign Gold

2020-12-15 10:00 ET - News Release

Mr. Stabro Kasaneva reports

AUSTRAL GOLD AGREES TO EXPAND FOOTPRINT IN THE U.S.

One of Austral Gold Ltd.'s Canadian subsidiaries, Argentex Mining Corp., has entered into a subscription and investment agreement with Ensign Gold Inc., a Canadian corporation, pursuant to which Argentex has agreed to purchase 5.95 million units of Ensign for 25 cents per unit, for an aggregate purchase price of $1,487,500 ($1,162,109 (U.S.) at an assumed exchange rate of 1.28). Each unit will consist of one Class A share in the capital of Ensign and one-half of one transferable share purchase warrant. Each warrant will entitle the holder to purchase one additional share at an exercise price of $1.50 for a period of 36 months, subject to an acceleration provision that will accelerate expiration of the warrants if the closing sale price for a share on a public market exceeds $2 for 30 consecutive trading days. After adjusting for this subscription, Argentex would own approximately 19.96 per cent of the issued and outstanding Ensign shares on an undiluted basis and approximately 27.22 per cent on a partially diluted basis (approximately 22.90 per cent on a fully diluted basis).

The proposed transaction is not at arm's length (as that term is defined by the TSX Venture Exchange). Austral chairman Wayne Hubert is a member of the Ensign board and he is an Ensign shareholder. Mr. Hubert owns 1,464,865 Ensign shares, 132,935 Ensign share purchase warrants and 100,000 Ensign stock options representing 6.1 per cent of the issued and outstanding Ensign shares on an undiluted basis and approximately 7.05 per cent on a partially diluted basis (in each case without accounting for the Argentex subscription).

In addition, Stabro Kasaneva, a director and the chief executive officer of Austral, is a member of the Ensign board. Mr. Kasaneva owns no Ensign shares, but he does own 100,000 Ensign stock options, representing 0.42 per cent of the Ensign shares on a partially diluted basis, and 0.33 per cent of the issued and outstanding Ensign shares on a fully diluted basis (without accounting for the Argentex subscription).

Significant transaction terms

  • Purchase of 5.95 million units at a price of 25 cents per unit;
  • Argentex will be granted anti-dilution or pre-emptive rights entitling Argentex and its affiliates (including Austral) to participate in any subsequent issuances, sales or offerings of equity securities as long as Argentex and its affiliates then own at least 5 per cent of Ensign's issued and outstanding shares of a fully diluted basis;
  • Transaction is subject to TSX Venture Exchange approval;
  • Provided Argentex and its affiliates (including Austral) maintains at least a 5-per-cent interest and provided it does not already have board representation, Austral is entitled to appoint one Ensign director reasonably acceptable to Ensign's board;
  • Austral's nominee to the Ensign board will also be entitled to join the Ensign exploration and/or technical committee;
  • 80 per cent of the proceeds from the Austral subscription are to be used for exploration purposes pursuant to a budget attached to the subscription agreement.

About Ensign Gold Inc.

Ensign is a privately held federally incorporated Canadian company. It is not a reporting issuer in any province of Canada, nor is it listed on any stock exchange. It is currently assembling a 5,000-hectare land package on favourable Carlin-type gold deposit geology in the state of Utah with the goal of consolidating the Mercur camp for the first time. Ensign owns 54 patented claims, 370 unpatented claims and five SITLA claims on South Mercur, West Mercur and North Mercur, while Barrick Gold Corp. owns the central Mercur mine area. Historically, this region produced over three million ounces of gold and was shut down over two decades ago when gold was less than $300 per ounce. Ensign intends to initiate a phase 1 drilling program in early December.

In the subscription agreement, Ensign has agreed to use commercially reasonable efforts to conduct an initial public offering and list its shares on an internationally recognized stock exchange.

Mr. Kasaneva commented: "This investment is consistent with our expansion plans into North America -- investing in one of the first Carlin-type discoveries, with significant exploration upside remaining at today's gold prices. The Mercur property is adjacent to the prolific Bingham Canyon mine which has produced over 50 million ounces of gold and over 30 million tonnes of copper on the other side of the mountain range. This represents a modest investment to potentially unlock another gold opportunity for us in North America."

About Austral Gold Ltd.

Austral Gold is a growing gold and silver mining, development and exploration company building a portfolio of quality assets in Chile, the United States and Argentina. Its flagship Guanaco/Amancaya project in Chile is a gold and silver producing mine with further exploration upside. Austral also holds the Casposo mine (San Juan, Argentina), a 26.46-per-cent interest in the Rawhide mine (Nevada, USA) and an attractive portfolio of exploration projects including its controlling interest in the Pinguino and Sierra Blanca projects in Santa Cruz, Argentina. With an experienced local technical team and highly regarded major shareholder, Austral's goal is to continue to strengthen its asset base through acquisition and discovery. Austral Gold is listed on the TSX Venture Exchange and the Australian Securities Exchange.

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