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Cornerstone Capital Resources Inc (3)
Symbol CGP
Shares Issued 32,393,161
Close 2020-06-30 C$ 3.61
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Cornerstone receives formal hostile bid from SolGold

2020-06-30 16:38 ET - News Release

Mr. Brooke Macdonald reports

CORNERSTONE RECOMMENDS SHAREHOLDERS TAKE NO ACTION IN RESPONSE TO HOSTILE TAKEOVER BID BY SOLGOLD

SolGold PLC has formally commenced an unsolicited offer to acquire all of the issued and outstanding common shares of Cornerstone Capital Resources Inc., nearly 18 months since announcing its intention to make a takeover bid for Cornerstone on Jan. 31, 2019.

As noted in Cornerstone's March 8, 2019, press release in response to SolGold's initial proposed bid, Cornerstone's board of directors, upon the unanimous recommendation of an independent committee of the board and following a detailed review conducted in consultation with its financial and legal advisers, at that time unanimously determined to reject the proposed bid on the basis that it was not in the best interests of Cornerstone's shareholders.

In March, 2019, the board rejected SolGold's proposed bid because, among other reasons, the proposed bid had already been rejected by Cornerstone shareholders who collectively owned or controlled a majority of the outstanding shares of the company. Cornerstone has already been advised today by shareholders who collectively own or control over 50 per cent of the outstanding common shares of the company that they intend to reject the hostile bid and will not tender their shares. Canadian takeover rules require the majority of Cornerstone's outstanding common shares (excluding those shares held by SolGold) be tendered to a formal offer before any shares can be taken up. Given that the statutory minimum tender condition cannot be waived by SolGold, the proposed hostile bid is incapable of being completed on the basis that it lacks sufficient shareholder support.

The board also rejected SolGold's proposed bid in March, 2019, because the proposed bid significantly undervalued Cornerstone and failed to recognize the substantial value of Cornerstone's assets, as more fully discussed in Cornerstone's March 8, 2019, press release. SolGold's present offer of 11 ordinary shares of SolGold for each Cornerstone common share tendered into the hostile bid is consistent with SolGold's initial proposed bid in 2019. The board and its financial advisers will update their financial analysis and make a formal recommendation to shareholders in this regard.

Cornerstone believes that the timing of SolGold's announcement is highly dubious given the deadline for Cornerstone shareholders to tender their shares is Oct. 14, 2020. One can assume it is intended to pre-empt Cornerstone's ability to enter into a value-enhancing transaction with third parties, such as BHP, which has an unusual standstill that does not expire until Oct. 19, 2020.

Cornerstone shareholders are advised to take no action in connection with the hostile bid until the board of directors has made a formal recommendation to shareholders. An independent committee of the board will consider and evaluate the hostile bid, with the assistance of financial and legal advisers, and the board will make a formal recommendation to shareholders and file a directors circular within 15 days, in accordance with Canadian securities laws.

About Cornerstone Capital Resources Inc.

Cornerstone is a mineral exploration company with a diversified portfolio of projects in Ecuador and Chile, including the Cascabel gold-enriched copper porphyry joint venture in northwest Ecuador. Cornerstone has a 21.4-per-cent direct and indirect interest in Cascabel composed of: (i) a direct 15-per-cent interest in the project financed through to completion of a feasibility study and repayable at London interbank offered rate plus 2 per cent out of 90 per cent of its share of the earnings or dividends from an operation at Cascabel, plus: (ii) an indirect interest composed of 7.6 per cent of the shares of joint venture partner and project operator SolGold. Exploraciones Novomining SA, an Ecuadorean company owned by SolGold and Cornerstone, holds 100 per cent of the Cascabel concession. Subject to the satisfaction of certain conditions, including SolGold's fully financing the project through to feasibility, SolGold will own 85 per cent of the equity of ENSA, and Cornerstone will own the remaining 15 per cent of ENSA.

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