Ann: Dispatch of Entitlements Issue Prospectus, page-4

My response to some questions from ASX:

Re: Orinoco Gold Limited (“OGX”)

Thank you for your swift response and questions.

I may have inadvertently given the impression that all the issues I raised in my original message occurred very recently, however this is not the case with the issues you have asked me to clarify.

Despite this, these issues have a direct bearing on the current situation and what I believe is the urgent need for OGX to update the market regarding current gold production results.

In May 2016, during a public presentation, the then CEO of the company made some specific claims regarding the range of the grade of Cascavel mine the company was in the process of developing, in addition to the time frame that the development would take place in.  Specifically, he advised that Cascavel mine would be in the world’s top 10 underground mines in terms of grade and this meant that the mine would be greater than 11.1 grams of gold per tonne of ore at a minimum, and because of the obvious margin of error, the inference is that it would be much higher.  The top ten underground mines were also listed on the presentation (appendix a).  A video of the presentation is listed on the company website. http://orinocogold.com/shareholder-centre/company-presentations

As a direct result of this information, I purchased a considerable number of shares in the company, as did many other shareholders.
Since that time, after an increase in share price in anticipation of mine production, the share price rapidly sank from 30c to 14c prior to a trading halt (10/10/16) and eventual suspension of trading as a capital restructure was organised.
The company eventually came out of suspension at a dramatically reduced share price forcing investors to reinvest (4 new shares for every 7 held at 7c including 2 free options) to avoid dilution, with the share price eventually settling around 5c mark.

After redesigning and redeveloping the mine including attracting investment from a major world mining company, history has been repeated with another trading halt and subsequent further cap-raise (16/09/17) at an astonishing 60% discount (1 new share for every 2 shares held) and accompanying further share price capitulation to currently 2.4c.

It is remarkable that from an original investment of around mid 25c on the back of clearly false company claims made in May 2016, the share price has now crashed to less than 1/10^th of that amount and shareholder value has been decimated.

The company has announced recently that processing operations have resumed on the 28^th of August 2017, and the current situation is that small investors who do not have close ties to the company are being asked to decide whether to participate in the current cap raise without the benefit of knowing what the current gold production grades are.  This contrasts with our JV partner AngloGold Ashanti who have apparently been evaluating Orinoco’s operation on site for more than 12 months and are set to increase their market share of the company.

I have also been previously informed by OGX management that some large/major investors have close relationships with some of the OGX board members and that certain investors have been privy to the two reports conducted by independent mining consultants as part of the previous capital restructure and it would be fairer to all shareholders if they were published in full.  

For OGX to apply a massive 60% discount in the current capital raising, would indicate a “fire-sale” and potentially poor capital management and raises the question of why they needed to agree to buy out the original mine owners 30% during this period.

The entire issue raises questions that I understand are broader than just the ASX listing rules and include corporate governance issues and therefore ASIC, but I also believe they also include a need for greater supervision and policing by authorities generally (you are welcome to share this communication with ASIC or other government departments).

Regulator policing of corporate governance should include companies potentially deliberately allowing themselves to have liquidity / solvency issues and therefore using a capital raising with a massive discount to facilitate transfer of company equity to the well-informed shareholder with close company ties, from the less informed common shareholder who may continue to suffer massive dilution of capital.

I’m not saying that is what is happening in this case, however the potential for shareholders being coerced (or held to ransom) into agreeing to a cap raising of such a massive discount, simply because the alternative may be insolvency, should not exist.  I also plan to make these issues known to political representatives to push for legislative change.

Please keep in mind the massive loss of shareholder value that has resulted from this process that was put in train following the initial estimates of the range of mine grade (in contravention of the JORC code as I understand it) in the May 2016 OGX presentation.   

For the lawful reasons of shareholder fairness and equal treatment it is imperative that the closing date of this capital raising be delayed until a reasonable time after current mine and processing figures are announced and I ask the ASX to issue a timely order to this effect.

Appendix (a)



SJB