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Caldas Gold arranges $85-million financing

2020-11-23 09:42 ET - News Release

Mr. Mike Davies reports

CALDAS GOLD ANNOUNCES CA$85 MILLION SUBSCRIPTION RECEIPT OFFERING AND PROPOSED CHANGE OF BOARD, MANAGEMENT AND NAME

Caldas Gold Corp. has commenced a private placement financing with a group of investors principally referred by Aris Gold Corp. that will result in changes to the management and the board of directors of the company, as well as a change in the company's name to Aris Gold Corp. Once the financing is completed, Gran Colombia Gold Corp. is expected to become an approximately 45-per-cent shareholder of Caldas Gold and will have the right to nominate two directors to the Caldas Gold board at completion of the Aris transaction. Under the financing, the company has agreed to sell, on a non-brokered private placement basis, an aggregate of 37,777,778 subscription receipts of the company, at a price of $2.25 each, for aggregate gross proceeds to the company of $85-million. The financing is expected to close on or about Nov. 27, 2020.

Transaction highlights

  • The company will be led by a highly experienced board with new nominees, including Ian Telfer as chair, David Garofalo, Peter Marrone, Attie Roux, Daniela Cambone and Neil Woodyer. Gran Colombia's nominees will be Serafino Iacono and Hernan Martinez. In addition, Frank Giustra will be a strategic adviser.
  • The management team will be led by Mr. Woodyer, as CEO, with the corporate head office based in Vancouver, B.C.
  • This group of incoming board nominees, management and strategic adviser is planning to personally participate in the offering for an aggregate of $38-million.
  • Aris Gold's vision is to create a diversified precious metals mining company through a disciplined growth strategy with a focus on stakeholder value creation from free cash flow generation and the implementation of industry-leading sustainability programs.
  • The incoming team has a proven record of building successful precious metals mining companies, including the founding of Leagold Mining (now Equinox Gold), Endeavour Mining, Wheaton River Minerals (which became Goldcorp and now Newmont), Wheaton Precious Metals and Yamana Gold.
  • Following completion of the Aris transaction, the Marmato licence extension process will have been completed and the Marmato Deeps zone (MDZ) expansion project will be fully financed ahead of construction start, which is expected in the second half of 2021.
  • The company is expected to have a cash balance of $190-million (U.S.) and approximately 137.6 million issued shares outstanding upon completion of the Aris transaction.
  • The private placement price per subscription receipt of $2.25 is a 14-per-cent premium to the closing price of Caldas Gold's common shares on Friday, Nov. 20, 2020.

Mr. Woodyer commented: "It is with great pleasure that we announce the launch of the new Aris Gold today. We believe the Marmato mine with its current production and expansion plans supported by a large-scale gold resource represents an ideal platform for us to build a major gold mining company. With this $85-million financing, the existing $110-million (U.S.) streaming financing with Wheaton Precious Metals and new support from Orion Mine Finance, the MDZ expansion program is fully funded. We are thankful to have the continued support of Gran Colombia in this placement, as we transition the company into full independence. Our immediate focus will be on implementing an industry-leading sustainability program and completing the modernization and expansion of the historic Marmato gold mine. The recent prefeasibility study outlined potential average annual gold production of approximately 165,000 ounces from 2024 through 2033 once the MDZ is in full production with average life-of-mine all-in sustaining costs of $872 (U.S.) per ounce. Recent exploration success from ongoing programs indicates exciting exploration potential with significant upside potential."

Mr. Telfer commented: "I am honoured to join such a strong board with an outstanding, fully funded growth asset in Colombia. Not since the founding of Wheaton River Minerals 20 years ago have I seen such a strong macro-economic backdrop from which to launch a gold company."

Serafino Iacono, executive chairman of Caldas Gold, commented: "I am extremely excited to introduce a new leadership team and financing partners to Caldas Gold. Marmato now has all the tools at its disposal to transition to an optimized and fully modern mine in Colombia. Importantly, the company-building track record of the Aris Gold team combined with the in-country experience of Gran Colombia will enhance the Marmato mine and MDZ expansion and help bring the new Aris Gold to the world stage."

On the closing date the gross proceeds from the offering will be deposited in escrow pending the satisfaction or waiver of certain release conditions, as described in more detail below. Upon the satisfaction or waiver of the release conditions at or before the release deadline (as defined below), each subscription receipt will be automatically converted, without payment of any additional consideration or further action on the part of the holder thereof, into one unit of the company, comprising one common share of the company and one common share purchase warrant of the company, and the escrowed proceeds will be released, as described in more detail below.

The net proceeds of the offering are expected to be used for the modernization and expansion of the company's underground mining operations at its Marmato mine in Colombia and for working capital purposes. In addition, upon satisfaction of the release conditions at or before the release deadline, the board and management of the company will be reorganized as described below. The Aris transaction is intended to ensure that sufficient financing for the company's MDZ expansion project is in place. Further, the Aris transaction enables the company to benefit from the extensive mine operating and development experience and knowledge of the new directors and management and best position the company for the next phase of its growth. The company anticipates that the Aris transaction will have a positive effect on the business and affairs of the company and will add value for its shareholders.

Completion of the offering is subject to receipt of all required regulatory and stock exchange approvals, including the approval of the TSX Venture Exchange.

Board, management and name changes

It is a condition for the satisfaction of the release conditions that six of the eight current members of the board of directors will resign, with the vacancies filled by the director nominees identified below. These changes will be effected at the time of the satisfaction of the release conditions at or before the release deadline and the conversion of the subscription receipts and release of the escrowed proceeds.

The new board of the company will consist of the following individuals.

Ian Telfer (chair, independent; newly nominated)

Mr. Telfer is a renowned mining entrepreneur and company-builder who created Goldcorp and founded or led other major mining companies such as Wheaton River Minerals, Silver Wheaton (now Wheaton Precious Metals) and Terrane Minerals, amongst others. He is the former chairman and CEO of Goldcorp, having built the company into one of the industry's largest gold majors before its sale to Newmont in April, 2019. Mr. Telfer previously served as chairman of the World Gold Council and was inducted into the Canadian Mining Hall of Fame in 2015 and the Canadian Business Hall of Fame in 2018.

David Garofalo (independent; newly nominated)

Mr. Garofalo has worked in various leadership capacities in the natural resources sector over the last 30 years. He is the former CEO of Goldcorp Inc. until its sale to Newmont in April, 2019. Prior to joining Goldcorp, he served as president and CEO of Hudbay Minerals Inc. Previous to this, he held various senior positions including senior vice-president, finance, and chief financial officer of Agnico Eagle Ltd. Mr. Garofalo was named mining person of the year by the Northern Miner in 2012 due to his record of successfully operating major global mining companies with high standards of environmental and safety performance and community relationships.

Peter Marrone (independent; newly nominated)

Mr. Marrone is the executive chairman of Yamana Gold. He founded Yamana Gold in 2003, which was built through acquisitions and project development. He has more than 30 years of mining, business and capital markets experience, and has been on the boards of a number of public companies, including Equinox Gold and Leagold Mining. Mr. Marrone has also been instrumental as a founding shareholder of several other companies in the extractive industries. Prior to Yamana Gold, Mr. Marrone was the head of investment banking at a major Canadian investment bank and before that a corporate lawyer in which roles he advised companies in international transactions with a focus on companies in the extractive industries in both North and South America.

Daniela Cambone (independent; newly nominated)

Ms. Cambone was formerly editor-in-chief and lead anchor for Kitco News; she has been covering global markets and commodities with a focus on gold for over a decade. She is considered one of the most recognized and respected voices amongst companies and investors in the precious metals and commodities sectors.

Neil Woodyer (non-independent; newly nominated)

Mr. Woodyer is the company-building CEO who created Endeavour Mining and Leagold Mining (now Equinox Gold). Mr. Woodyer was most recently vice-chairman of Equinox Gold and the former CEO of Leagold Mining and Endeavour Mining. Mr. Woodyer has served as a director on a number of public company boards, including Wheaton River Minerals. He was also a founder and the former managing director of Endeavour Financial, a specialist mining-focused financial advisory and merchant bank.

Attie Roux (non-independent; newly nominated)

Mr. Roux is a metallurgical engineer with over 40 years of operational, technical and executive management experience in the mining industry. He was formerly the chief operating officer of Equinox Gold, Leagold Mining and Endeavour Mining. Previously, Mr. Roux was head of metallurgy for Anglogold Ashanti.

Serafino Iacono (non-independent; current Caldas Gold board member, Gran Colombia nominee)

Mr. Iacono is executive chairman of Gran Colombia, and a director of Caldas Gold. He is a former co-chairman and an executive director of Pacific Exploration and Production Corp. and a former director of Petromagdalena Energy Corp. Mr. Iacono was also a co-founder of Gran Colombia, Bolivar Gold Corp. and Pacific Stratus Energy, among others, and is involved in numerous resource and business ventures in Latin America, Canada and United States.

Hernan Martinez (independent; current Caldas Gold board member; Gran Colombia nominee)

Mr. Martinez is a director of both Gran Colombia and Caldas Gold. He served as the Colombian Minister of Mines and Energy from July, 2006, to August, 2010, and has also served as president of International Colombia Resources Corp., chairman of the board of Atunec SA, president and chief executive officer of Exxon Mobil Colombia SA, and manager of corporate planning for Esso Colombiana SA.

The new board will be supported by Frank Giustra, a mining financier and philanthropist who has agreed to act as a strategic adviser to the company.

Following the constitution of the new board, it is proposed that Mr. Woodyer be appointed as chief executive officer of the company and lead a new management team based out of Vancouver, B.C. These management changes will also be effected at the time of the satisfaction of the release conditions at or before the release deadline and the conversion of the subscription receipts and release of the escrowed proceeds.

New management team

Neil Woodyer, CEO

See new board biographies above.

Attie Roux, technical consultant

See new board biographies above.

Doug Bowlby, CFA, senior vice-president, corporate

Mr. Bowlby is responsible for the internal management, corporate finance and strategy of Aris Gold. He was formerly SVP corporate development of Leagold Mining and executive vice-president of corporate development of Endeavour Mining. Previously, he was managing director -- research and analysis of Endeavour Financial.

Andrew Gubbels, SVP, corporate development

Mr. Gubbels is responsible for corporate development and investor relations for Aris Gold. He was most recently head of investment management Americas at Eurasian Resources Group. Previously, Mr. Gubbels advised international mining companies as head of Americas metals and mining investment banking at UBS Investment Bank and as an executive in the mergers and acquisitions department at CIBC World Markets.

Ashley Baker, LLB, general counsel and corporate secretary

Ms. Baker acts as general counsel for Aris Gold. Prior to joining Aris Gold, Ms. Baker was VP legal at Leagold Mining. Previously, Ms. Baker was a corporate finance and M&A lawyer practising at Blake, Cassels & Graydon LLP.

Robert Eckford, CPA, VP, finance and chief financial officer

Mr. Eckford is responsible for finance and treasury at Aris Gold. Mr. Eckford was previously a controller at Leagold Mining (2017 to 2020) and held various finance roles at Yamana Gold, Barrick Gold and ERG Africa. Mr. Eckford began his career as an assurance and advisory consultant at Ernst & Young.

Richard Thomas, PEng, technical consultant

Mr. Thomas is a technical consultant to Aris Gold. He was formerly SVP operations at Leagold Mining and EVP technical services at Endeavour Mining. Mr. Thomas is a mining engineer with broad experience in underground and open-pit mining management, operations improvement and strategic planning.

As part of the Aris transaction, all required steps and proceedings will be taken to the satisfaction of Aris Gold, acting reasonably, to change the name of the company to Aris Gold. This name change will also be effected at the time of the satisfaction of the release conditions at or before the release deadline and the conversion of the subscription receipts and release of the escrowed proceeds.

Marmato mine and MDZ expansion project, Colombia

Marmato comprises the existing producing underground gold and silver mine in the Upper zone, the existing 1,200-tonne-per-day processing plant and the area encompassing the Deeps zone mineralization. The current mine has been in operation since 1991. A prefeasibility study (PFS), completed mid-2020, charts a path for expansion of mining operations comprising two distinct operations, the existing Upper zone operation and the new Deeps zone (MDZ) operation which sits directly below the Upper zone vein system. The PFS focused on the development of the MDZ mineralization, construction of a new 4,000 tpd plant and new dry stack tailings storage facilities. Mechanized mining, using an underground longhole stoping method, is expected to commence in 2023.

The 2019 drilling program was designed to provide enough tonnes and grade in the measured and indicated mineral resource categories within the MDZ to support the PFS. In 2020, Caldas Gold has plans to drill up to 15,000 metres, including approximately 10,000 metres of infill drilling designed to convert inferred mineral resources to the indicated category and to add additional mineral resources by stepping out along the southeast extension of the Main zone. Another approximately 5,000 metres of exploration drilling will focus on broad mineralized zone targets outside the Main zone. As announced on Nov. 9, 2020, the initial phases of this drilling program have been successful to infill higher-grade gold mineralization and expand and infill the strike extension of the Main zone to the southeast. These results will be included in an update of the mineral resource and reserve estimates in 2021, with the aim of significantly increasing the life of the mine.

Description of the subscription receipts and underlying securities

The subscription receipts shall be issued pursuant to a subscription receipt agreement to be entered into on the closing date among the company, Aris Gold and the subscription receipt agent. Upon the satisfaction or waiver (to the extent such waiver is permitted) of the release conditions at or before 5 p.m. Toronto time on March 31, 2021 (or as may be extended in accordance with the terms of the subscription receipt agreement), each subscription receipt will be automatically converted, without payment of any additional consideration or further action on the part of the holder thereof, into one unit comprising one common share and one warrant.

Each warrant will entitle the holder thereof to acquire one additional common share, at a price of $2.75 per warrant share, until July 29, 2025, subject to adjustment in certain circumstances as set out in the warrant indenture (as defined below). The warrants will be created and issued pursuant to the terms and conditions of the warrant indenture previously entered into on July 29, 2020, between the company and Odyssey Trust Company, as warrant agent, as supplemented by a first supplemental indenture entered into on Aug. 26, 2020, between the company and Odyssey Trust Company, and will have the same terms and conditions as the warrants issued pursuant to the company's offering of special warrants that closed on July 29, 2020 (see the press release of the company dated July 29, 2020), and the company's offering of subscription receipts that closed on Aug. 26, 2020 (see the press release of the company dated Aug. 26, 2020), which currently trade on the TSX Venture Exchange under the symbol CGC.WT.

Caldas Gold will have the right to accelerate the expiry date of the warrants after July 29, 2023, in the event that the closing price of the common shares on the TSX-V (or such other exchange on which the common shares may principally trade at such time) is greater than $2.75 per share for a period of 20 consecutive trading days, by giving notice to the holders of warrants of the acceleration of the expiry date and issuing a concurrent press release announcing same and, in such case, the warrants will expire on the 30th day following the date on which such notice is given and press release issued.

Caldas Gold has agreed to use its best efforts to have the warrants added to Caldas Gold's existing class of listed warrants and listed under the symbol CGC.WT.

The common shares, warrants and warrant shares will be subject to a statutory hold period under applicable Canadian securities laws expiring on the date that is four months and a day following the closing date.

Pursuant to a services agreement between Aris Gold and the company in which Aris Gold agreed to assist the company in certain structuring aspects of the offering, including communications strategies, developing and advancing corporate models for the company to utilize following completion of the offering, management integration matters and referring high-net-worth investors who may participate in the offering, upon completion of the offering Aris Gold will be entitled to receive a fee equal to $2.55-million, which fee is refundable in the event the release conditions are not satisfied or waived (to the extent such waiver is permitted) at or prior to the release deadline, in accordance with the provision of the subscription receipt agreement.

Escrow of funds and release conditions

On the closing date, the escrowed proceeds will be deposited in escrow with the subscription receipt agent, pending the satisfaction or waiver (to the extent such waiver is permitted) of the release conditions at or prior to the release deadline, in accordance with the provisions of the subscription receipt agreement.

The release conditions consist of the following:

  1. Caldas Gold Marmato SAS, a wholly owned subsidiary of the company, shall have obtained an extension from the applicable Colombian governmental authority of the expiration date for mining contribution/concession contract 014-89M (whether in the form of an extension to or an amendment of such concession, or in the form of a new concession) for an additional minimum period of 20 years.
  2. The company shall have received all required shareholder and regulatory approvals required in connection with the offering.
  3. All required steps and proceedings shall have been taken to the satisfaction of Aris Gold, acting reasonably, to:
    1. Reconstitute the board to consist of the new board;
    2. Appoint new management of the company identified by Aris Gold including the delivery of written resignations and mutual releases from current management of the company.
  4. The company shall have delivered an officer's certificate dated the date of the release notice (as defined below) certifying for and on behalf of the company that:
    1. The investor agreement between the company and Gran Colombia remains in full force and affect, unamended;
    2. The precious metals purchase agreement entered into between the company and Wheaton Precious Metals International Ltd., among others, remains in full force and effect, unamended, and that none of the parties thereto are in breach or default, in any material respect, thereunder.
  5. All required steps and proceedings shall have been taken to the satisfaction of Aris, acting reasonably, to change the name of the company to Aris Gold.

Upon receipt by the subscription receipt agent of a notice from the company and Aris Gold confirming the satisfaction or waiver (to the extent such waiver is permitted) of the release conditions at or before the release deadline, each subscription receipt shall be automatically converted, for no additional consideration and with no further action by the holders thereof, into one unit; the escrowed proceeds (less any outstanding fees payable to the subscription receipt agent) will be released to the company; and the company will effect the reconstitution of the board to consist of the new board and the name change of the company to Aris Gold.

In the event that: (a) the release conditions are not satisfied at or before the release deadline; or (ii) prior to the release deadline, the company and Aris Gold determine, each acting reasonably, that the company will not be able to satisfy any one or more of the release conditions, the fee will be refunded to the company by the subscription receipt agent from the escrowed proceeds, the balance of the escrowed proceeds will be distributed by the subscription receipt agent to the holders of subscription receipts such that each holder receives an amount equal to its investment amount and the subscription receipts will immediately become null, void and of no further force or effect. If this were to occur, the proposed board and management changes would not occur. To the extent that the escrowed proceeds are insufficient to refund the aggregate purchase price paid by the holders of subscription receipts, the company shall be responsible and liable to contribute such amounts as are necessary to satisfy any shortfall.

Additional information regarding the Aris transaction

As a condition to the Aris transaction, Gran Colombia has entered into an investor agreement with the company, which includes the following terms, among others:

  1. Subject to adjustment in certain circumstances, for so long as Gran Colombia or any of its affiliates beneficially owns or exercises control or direction over more than 20 per cent of the issued and outstanding common shares of the company (on a non-diluted basis), Gran Colombia shall have the right to nominate two directors to the board of the company.
  2. For so long as Gran Colombia or any of its affiliates beneficially owns or exercises control or direction over more than 20 per cent of the issued and outstanding common shares of the company (on a non-diluted basis), for a period of two years from closing of the Aris transaction, Gran Colombia shall vote and cause its affiliates to vote all of their common shares held from time to time at any meeting of shareholders of the company, and in any action by written consent of the company's shareholders in accordance with the recommendations of the new board or new management of the company on all matters to be submitted to the shareholders of the company in connection with such meeting or action including, but not limited to, voting such common shares for the election of management's nominees for directors of the company, except in the case of voting or actions by written consent in respect of, in connection with or related to certain predetermined matters, including, among others: any transaction resulting in a change of control of the company; any issuer bid, insider bid or related party transaction; any amendment to the constating documents of the company, other than immaterial changes that are administrative in nature; and any equity financing or non-cash transaction where dilution, on an issued share basis, is greater than 50 per cent.
  3. Subject to the rules and policies of the TSX-V and applicable securities laws, so long as Gran Colombia or any of its affiliates beneficially owns or exercises control or direction over more than 20 per cent of the issued and outstanding common shares of the company (on a non-diluted basis), Gran Colombia shall have the right for a period of two years to maintain its equity interest in the company in the event that the company were to issue equity securities in connection with an equity financing or non-cash transaction.
  4. For a period of two years from the effective date of the investor agreement, Gran Colombia shall not sell, and shall cause its affiliates not to sell, any of its common shares or warrants (including previously issued warrants) to a third party without prior consent from the company.

Approval requirements

Mindful of the best interests of the company and its shareholders and due to the related party aspects of the Aris transaction resulting from the participation of Gran Colombia in the offering and the payment of the change of control payments to existing management (each as defined below) upon their replacement by new management, the board of Caldas Gold appointed a special committee made up of entirely independent directors to review and evaluate the Aris transaction.

The special committee of Caldas Gold, after due consideration and receiving advice from DLA Piper (Canada) LLP, as independent legal counsel to the committee, determined that the Aris transaction is in the best interests of the company and recommended approval of the Aris transaction to the company's board. The recommendation of the special committee is based on, among other considerations, the company's forecasted financial requirements, current financial position and expected medium-term financing prospects, as well as the strength of experience that the new board and new management are expected to bring to the company.

Due to the change of control payments to be made to several of its related parties as a result of the Aris transaction, the board of directors of Gran Colombia also struck a special committee made up of independent directors, a majority of whom are unconflicted in respect of the Aris transaction, to review and evaluate the transaction. Such special committee, after due consideration and receiving advice from Blake, Cassels & Graydon LLP, as independent legal counsel to the committee, determined that the Aris transaction is in the best interest of Gran Colombia and recommended that the Gran Colombia board support the transaction.

Given its reliance on Section 5.7(1)(a) of Multilateral Instrument 61-101 (as defined and explained below), the company is not required to, nor does it intend to seek, minority approval in connection with the Aris transaction.

The proposed appointment of the new board and new management is deemed to be a change in management (as defined in TSX Venture Exchange Policy 1.1 -- Interpretation), pursuant to Section 6.4 of TSX-V Policy 3.2 -- Filing Requirements and Continuous Disclosure. Before the TSX-V will accept any change in management, the TSX-V can require that certain supporting documents be filed, including, among others, evidence of shareholder approval.

Following initial discussions with the TSX-V, the company has been advised that evidence of shareholder approval can be provided in the form of written consent. As such, the company intends to seek shareholder approval for the new board and new management by way of written consent in the near future.

Change of control payments and amendments to existing securities

As a result of the completion of the Aris transaction, Serafino Iacono, the current chief executive officer of the company; Lombardo Paredes, the current president of the company; Michael Davies, the current chief financial officer of the company; and Amanda Fullerton, the current corporate secretary of the company (collectively, existing management), will be replaced by the new management to be appointed by the new board, and will be entitled to certain change of control and related payments from the company under the terms of their existing consulting agreements with the company when terminated. The severance pay obligations to existing management are as follows:

  1. Mr. Iacono -- $600,000 (U.S.);
  2. Mr. Paredes -- $600,000 (U.S.);
  3. Mr. Davies -- $465,500 (U.S.);
  4. Ms. Fullerton -- $312,000 (Canadian).

Additional cash severance pay to certain members of existing management is as follows:

  • Mr. Iacono (2 per cent of market capitalization) -- $3.44-million (U.S.);
  • Mr. Paredes (1 per cent of market capitalization) -- $1.72-million (U.S.);
  • Mr. Davies (1 per cent of market capitalization) -- $1.72-million (U.S.).

The consulting agreements for the members of existing management were approved by the board effective March 1, 2020, and provide for certain payments if: (a) there is a change of control of Caldas Gold; and (b) a specified trigger event occurs within one year of the change of control. The change of control payment to each member of existing management under the agreements is equal to two times their annual salary and target annual bonus, and each of Mr. Iacono, Mr. Paredes and Mr. Davies are additionally entitled to an aggregate payment equal to 4 per cent of the company's market capitalization.

The board granted the change of control entitlements in recognition of the possibility that the enhancement of shareholder value could involve the direct control or effective management control of the company being assumed by a third party, and the board wanted to ensure that its executive officers would be rewarded for enhancing that shareholder value. Additionally, in recognition of the fact that Caldas Gold was formed for the initial strategic objective of creating a new vehicle to own, operate and expand the Marmato project in Colombia, and that doing so would require considerable effort to finance Marmato's expansion, the board also granted the market capitalization payment described above to provide further incentive to the recipients to drive value for shareholders and complete the steps necessary for Marmato to serve as the engine of that value growth.

The board has determined that a change of control will occur upon satisfaction of the release conditions and that therefore each member of existing management shall be entitled to the payments in the amounts set forth above upon the release conditions being satisfied.

Additionally, 100 per cent of the stock options of the company held by existing management will vest and will continue to be exercisable until their expiry on March 1, 2025, rather than expiring 90 days after the termination of their employment.

In accordance with the terms of the directors' deferred share unit plan of the company, all directors resigning from the board will have their unvested deferred share units (DSUs) accelerated and settled in cash. The current value of the 431,304 DSUs held by resigning directors is estimated to be $700,000 (U.S.).

Multilateral Instrument 61-101 -- Related Party Transactions

Gran Colombia has agreed to participate in the offering and purchase 8,666,667 subscription receipts, for an aggregate subscription of $19.5-million (Canadian). Participation by Gran Colombia in the offering constitutes a related party transaction for the company within the meaning of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions. Additionally, the issuance of the change of control payments to existing senior management constitute a related party transaction within the meaning of MI 61-101. MI 61-101 provides exemptions from the requirements to obtain a formal valuation and minority shareholder approval in connection with the participation by Gran Colombia in the offering and the making of the change of control payments, and the company has relied on the exemptions available in sections 5.5(a) and 5.7(1)(a) of MI 61-101. A material change report with respect to the closing of the offering, the participation of Gran Colombia in the offering and the issuance of the change of control payments will be filed shortly. While the release conditions and therefore completion of the Aris transaction will not close until at least 21 days after the filing of the material change report, it is anticipated that the closing of the related offering will occur within that 21-day period; the company deemed this abbreviated period reasonable in the circumstances so as to be able to complete the offering in an expeditious manner.

Interest of insider

Prior to the completion of the offering, Gran Colombia owned, directly or indirectly, or exercised control or direction over, an aggregate of 53,435,989 common shares, representing approximately 53.5 per cent of the number of issued and outstanding common shares prior to the offering, as well as an aggregate of 18,388,889 share purchase warrants entitling Gran Colombia to acquire one common share at either $2.75 (Canadian) or $3 (Canadian). Upon the conversion to common shares and warrants of all 37,777,778 subscription receipts to be issued in connection with the offering, Caldas Gold will have 137,577,940 common shares issued and outstanding, of which Gran Colombia will hold an aggregate of 62,102,656, or 45.1 per cent, of the undiluted issued and outstanding common shares.

About Caldas Gold Corp.

Caldas Gold is a Canadian junior mining company currently advancing a major expansion and modernization of its underground mining operations at its Marmato project in the department of Caldas, Colombia. Caldas Gold also owns 100 per cent of the Juby project, an advanced exploration-stage gold project located within the Shining Tree area in the southern part of the Abitibi greenstone belt about 100 kilometres south-southeast of the Timmins gold camp.

We seek Safe Harbor.

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