"On closing the AuRico Private Placement, AuRico acquired beneficial ownership of 4,700,000 units (each, a “Unit”) of the
Company, at a price of $0.30 per Unit, for aggregate consideration to the Company of $1,410,000. Each Unit was
comprised of one common share in the capital of the Company (each, a “Common Share”) and one half of one Common Share purchase warrant of the Company (each whole warrant, a Warrant”).
In connection with the closing of the AuRico private placement, the Company entered into an investor rights agreement
with AuRico, which provides AuRico with certain rights, subject to the terms and conditions of the agreement, including the right to:
(i) participate pro rata in subsequent equity offerings by the
Company to maintain its shareholdings; (ii) a right of first refusal on the transfer by the Company of its interest in the Pen Gold Project; (iii) certain standstill restrictions; (iv) certain exclusivity rights in favour of AuRico with respect to transactions involving the Company and the Pen Gold Project; and (v) appoint one member to the Company’s technical committee.
Prior to the completion of the private placement, AuRico did not beneficially own or exercise control or direction over any securities of the Company. Following completion of the private placement, AuRico beneficially owns 4,700,000 Common Shares and 2,350,000 Warrants. This represents approximately 19.9% of the issued and outstanding Common Shares of the Company on an undiluted basis, or approximately 27.2% on a partially diluted basis, assuming full exercise of the 2,350,000 Warrants, and that no other party exercises warrants or options. The private placement was a private transaction outside of any market or other facility and the Units acquired by AuRico were acquired for investment purposes. Subject to the standstill provision in the investor rights agreement between AuRico and the Company, AuRico may, in the future, increase or decrease its ownership of securities in the Company, from time to time depending upon the business and prospects of the Company and future market conditions."