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TORONTO,
ONTARIO--(Marketwire - Oct. 28, 2009) - CASTLE GOLD CORPORATION (TSX
VENTURE:CSG) is pleased to announce today that it has entered into a
support agreement with Argonaut Gold Inc. ("Argonaut") in
connection with the proposed acquisition (the "Offer") by
Argonaut of all of the common shares of Castle Gold Corporation
("Castle Gold"). Under the terms of the Support Agreement,
Argonaut will offer to acquire, by way of a take-over bid, all of the
issued and outstanding Common Shares at a price of C$1.25 per fully
diluted share, subject to an increase in such price by C$0.01 for every
1% increase in the price of gold calculated from a starting gold price
of US$1,050 to the 5 day average London Gold Fix (PM) price for
December 18, 21, 22, 23 and 24, 2009, provided that the maximum final
Offer price shall not exceed C$1.50 per Common Share.
The Board of Directors of the Company upon consultation with its
financial and legal advisors, has unanimously determined that the Offer
is fair to shareholders, that the Offer is in the best interests of
Castle Gold and the shareholders, and accordingly, has unanimously
approved the entering into of the Support Agreement and the making of a
recommendation that shareholders accept the Offer. All members of the
Board and Management have entered into Shareholder lock-up agreements
for their issued and outstanding Common Shares and agreed to tender
such Common Shares to the Offer. The Board has received a verbal
opinion that, subject to the assumptions, limitations and qualifications
stated in such opinion, the consideration to be received under the
Offer is fair, from a financial point of view, to Castle Gold's
shareholders.
The Offer is subject to certain conditions that are required to be
satisfied prior to take-up and payment by Argonaut. Argonaut must raise
the capital necessary on or before November 23, 2009 to pay the final
offer price to shareholders. In addition, at least 66 2/3% of the
Common Shares outstanding calculated on a fully-diluted basis must be
validly deposited pursuant to the Offer and not withdrawn by 5:00 pm
(Toronto time) on December 30, 2009.
To date Shareholders representing 43% of the issued and outstanding
Common Shares have entered into Shareholder lock-up agreements and
agreed to tender such Common Shares to the Offer.
Castle Gold may terminate the Support Agreement under certain
circumstances, including if the Board determines in good faith that it
has received a Superior Proposal (as such term is defined in the
Support Agreement). If Castle Gold terminates the Support Agreement in
order to accept a Superior Proposal, it must pay a break fee of C$3
million. If Argonaut does not meet certain obligations, then it must
pay a fee to Castle of US$600,000 to assist in covering expenses
incurred during the transaction.
The Offer represents a significant premium of 39% at the minimum Offer
price to the closing price of $0.90 on October 27, 2009. Further, the
minimum Offer price represents a premium of 46% over the
volume-weighted average trading price of Common Shares on the last 20
trading days before the announcement. This premium has the potential to
increase based on a possible rise in the gold price during the course
of the Offer.
Mark Selby,
Milt Baehr, and James Mark Plaxton of the Mergers & Acquisitions
Committee (M&AC) of Castle Gold comment that "This Offer is a
result of the Strategic Alternative Review Process initiated by the
Board of Directors earlier this year. The offer recognizes the future
growth potential of our assets and allows Castle Gold shareholders to
realize a substantial portion of this value today. The pricing
increment in the offer also allows our shareholders to participate in
increases in the gold price through the remainder of the year should
the transaction be consummated." Castle Gold's Chairman of the
Board and M&AC James Mark Plaxton adds "I am very proud of the
work done by our entire technical and operating teams in the
development of our assets and the results achieved by the members of
our M&A Committee, as recognized by the value in this Offer. The
dedication and hard work from our team and Board of Directors has
allowed us to present this attractive acquisition to our shareholders
without typical investment banking transaction fees - allowing our
shareholders to realize additional value. I encourage all shareholders
to tender their shares under the Offer."
In conjunction with the transaction, Castle Gold will seek to raise
C$3.5 million in a private placement. The proceeds from the financing
will be used for our continued production expansion at El Castillo and
pay one-time expenses associated with the transaction.
The take-over bid circular, containing the full terms of the Offer, is
expected to be sent to the Company's shareholders, together with the
directors' circular and other related documents in connection with the
Offer, on or before November 24, 2009. If the take-over bid circular is
mailed prior to November 24, 2009, the expiry date of the Offer may
occur as early as December 24, 2009. The full text of the fairness
opinion received by the Board, which Castle Gold shareholders are urged
to read in their entirety, will be set forth in Castle Gold director's
circular. The Offer will remain open for at least 35 days following the
mailing of the Offer.
GMP Securities L.P. and Auramet Trading LLC have been engaged as
financial advisors to Argonaut and Fraser Milner Casgrain LLP has been
engaged as legal advisor to Argonaut. Gryphon Partners Canada Inc. has
provided a verbal fairness opinion to Castle Gold and Cassels Brock
& Blackwell LLP has been engaged as legal advisor to Castle Gold.
About Castle Gold
Castle Gold Corporation is a growth oriented gold producer with
projects focused in the Americas. Castle Gold owns a 100% interest in
the El Castillo gold mine in Mexico and a 50% interest in the El Sastre
gold mine in Guatemala. Castle Gold is also advancing exploration and
development work at its La Fortuna gold-silver-copper project in
Mexico.
About Argonaut Gold
Argonaut Gold Inc. is a private company formed by Brian Kennedy, Peter
Dougherty and Edgar Smith, former senior executive leadership of
Meridian Gold Inc. Argonaut was formed with the goal of creating the
next quality mid-tier gold company.
Forward Looking Statements
Certain statements in this press release constitute
"forward-looking" statements that involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Castle Gold to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. When used in
this news release, words such as "plans", "hope"
and "expects" and similar expressions to the extent they
relate to Castle Gold are intended to identify forward-looking
statements. There is no assurance that any strategic transaction will
be completed. Unless required by applicable securities law, Castle Gold
does not assume any obligation to update forward-looking statements.
-------------------------------------------------- TSX-V Trading Symbol: CSG Total Shares Outstanding: 75.5MM Fully Diluted: 82.8MM 52-Week Trading Range: C$0.15 - $1.05 --------------------------------------------------
The TSX Venture Exchange does not accept responsibility for the
adequacy or accuracy of this news release.
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