Solgold Cornerstone Merger

22-22 - SolGold & Cornerstone Announce Friendly Merger Transaction

Consolidates 100% of the Cascabel Project

Strategic Review Process Initiated for Combined Group

SolGold plc (LSE:SOLG; TSX:SOLG) (“SolGold”) and Cornerstone Capital Resources Inc. (TSXV:CGP; OTC:CTNXF; FWB:GWN1) (“Cornerstone”) (together the “Parties” and individually, a “Party”) are pleased to announce that they have entered into a definitive agreement (the “Agreement”) whereby SolGold will acquire all of the issued and outstanding shares of Cornerstone (“Cornerstone Shares”), other than Cornerstone Shares already held, directly or indirectly, by SolGold, pursuant to a court-approved plan of arrangement (the “Transaction”).

Under the terms of the Agreement, Cornerstone Shares will be exchanged for 15 SolGold ordinary shares (“SolGold Shares”) for each Cornerstone common share held. Pursuant to the terms of the Agreement, SolGold may elect to pay up to 20% of the consideration in cash, in which case the cash would be pro rated among all Cornerstone shareholders and the number of SolGold Shares issuable to Cornerstone shareholders would be reduced. Upon completion of the Transaction, if SolGold elects not to pay any portion of the consideration in cash, existing SolGold and Cornerstone shareholders are expected to own approximately 80% and 20% of the combined entity (the “Combined Group”), respectively, on a fully diluted in-the-money basis which is consistent with the current effective exposure of approximately 80/20 to the Cascabel Project prior to the Transaction.

The merger of Cornerstone and SolGold will significantly strengthen the ability of the Combined Group to create value for shareholders by consolidating ownership of the Cascabel Project along with a robust portfolio of other projects primarily across Ecuador.

Darryl Cuzzubbo, CEO and Managing Director of SolGold, stated: “It has been my view from the start that SolGold and Cornerstone are more valuable together than apart. This is an exciting value enhancing transaction for all stakeholders. This Transaction also sets the stage for a strategic review of the Combined Group as we methodically assess options that are in the best interest of our shareholders.”

Brooke Macdonald, President and CEO of Cornerstone, stated: “This merger transaction makes sense for both sets of shareholders. The merger allows our shareholders to maintain exposure to the world class Cascabel Project and is a step towards maximizing value. Having considered the landscape, we are convinced that combining forces with SolGold will unlock significant value for all shareholders. The strategic review for the combined group aligns with our views on the best path forward. Today represents a significant milestone for all Cornerstone stakeholders and I would like to thank them for their support over the years."

Transaction Summary
The proposed Transaction will be completed pursuant to a court-approved plan of arrangement under the Business Corporations Act (Alberta). The Transaction will require approval by two-thirds of the votes cast by the shareholders of Cornerstone and a majority of the votes cast by disinterested shareholders at a special meeting of Cornerstone shareholders expected to be held in the fourth quarter of 2022.

All Cornerstone directors, executive officers and certain shareholders, collectively representing 44.1% of the Cornerstone Shares (47.0% on a fully diluted basis) have entered into voting support agreements with SolGold, agreeing to, among other things, vote their Cornerstone Shares in favour of the Transaction. The Transaction is subject to obtaining customary approvals including applicable court and stock exchange approvals. The Agreement includes customary deal protection provisions in favour of SolGold.

In addition, the Parties have agreed to make any amendments to the Agreement or plan of arrangement if necessary or desirable in order to implement an exchangeable share structure to allow eligible Canadian Cornerstone shareholders to receive a tax-deferred roll-over under the Income Tax Act (Canada) to the extent that the non-share consideration received does not exceed the shareholder's cost base for Canadian tax purposes. The implementation of such amendments will not be a condition of closing of the Transaction and there is no assurance that such a structure will be implemented.

Upon closing of the Transaction, the SolGold board of directors will be comprised of up to ten individuals with Cornerstone entitled to nominate two directors.

Full details of the Transaction and the Agreement will be included in Cornerstone’s management information circular which is expected to be filed with the regulatory authorities in Canada and mailed to shareholders of Cornerstone in the fourth quarter of 2022. Further, SolGold intends on filing a prospectus with the applicable regulatory authorities in the UK with respect to the shares to be distributed to Cornerstone shareholders pursuant to the Transaction, which is expected to be filed in the fourth quarter of 2022.

Pursuant to the Agreement, SolGold is pursuing a strategic review process with the goal of maximizing value for all shareholders (the “Strategic Review Process”). Accordingly, SolGold has appointed Citigroup Global Markets Inc. and Maxit Capital LP (“Maxit Capital”) to act as financial advisors to assist with exploring value creating alternatives for the Combined Group. The Strategic Review Process may include, but shall not be limited to, evaluating and pursuing the following:

• evaluating financing alternatives for the Combined Group;
• a spin-out of assets, other than the Cascabel Project, to all shareholders of the Combined Group;
• the direct or indirect acquisition of an interest in ENSA and/or the Cascabel Project howsoever effected; or
• any other transaction or series of related transactions as may be agreed to between the Parties.

The completion of the Transaction is not contingent on the completion of the Strategic Review Process and there can be no assurance that the Strategic Review Process will lead to any transaction.

Board of Directors’ Recommendation
The Transaction has been unanimously approved by the boards of directors of SolGold and Cornerstone including, in the case of Cornerstone, following the unanimous recommendation of a special committee of independent directors. The Cornerstone board of directors unanimously recommends that Cornerstone shareholders vote in favour of the Transaction.

Paradigm Capital Inc. (“Paradigm Capital”), financial advisor to Cornerstone, has provided a verbal opinion to the Cornerstone board of directors stating that, and based upon and subject to the assumptions, limitations, and qualifications set forth therein, the consideration to be received pursuant to the Transaction is fair, from a financial point of view, to the Cornerstone shareholders (other than SolGold).