CORNERSTONE CAPITAL RESOURCES INC : http://www.cornerstoneresources.com/ : QwikReport

News

#July 22, 2020
20-19 - Cornerstone Intends to Requisition SolGold General Meeting to be held in late October 2020 to Replace Entire SolGold Board

  Ottawa, ON, Canada: Cornerstone Capital Resources Inc. ("Cornerstone" or the "Company") (TSXV:CGP) (Frankfurt:GWN) (Berlin:GWN) (OTC:CTNXF) announces that, under section 303 of the Companies Act 2006 of the United Kingdom (the "UK Companies Act"), it intends to formally requisition a general meeting ("General Meeting") of shareholders of SolGold plc ("SolGold") (LSE:SOLG) (TSX:SOLG) to be held on or after October 27, 2020 to replace the entire SolGold board. Cornerstone intends to submit the formal requisition at an appropriate date that will ensure that the General Meeting will be held on or after October 27, 2020.

At the requisitioned General Meeting, Cornerstone intends to propose that all members of the current SolGold board be replaced with five new nominees. Details on the proposed nominees will be provided in due course.

In accordance with applicable law, absent the agreement of SolGold and its directors, it is not possible to effect the replacement of the SolGold board without convening a General Meeting. Accordingly, Cornerstone will not be able to effect the replacement of the board simply by way of obtaining written consent from a regular majority of SolGold shareholders and must instead formally requisition a General Meeting.

Cornerstone will provide further information as required by applicable securities laws and the UK Companies Act in connection with any action taken by Cornerstone.

About Cornerstone and the Cascabel Joint Venture:
Cornerstone Capital Resources Inc. 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 north west Ecuador. Cornerstone has a 21.4% direct and indirect interest in Cascabel comprised of (i) a direct 15% interest in the project financed through to completion of a feasibility study and repayable at Libor plus 2% out of 90% of its share of the earnings or dividends from an operation at Cascabel, plus (ii) an indirect interest comprised of 7.6% of the shares of joint venture partner and project operator SolGold Plc. Exploraciones Novomining S.A. ("ENSA"), an Ecuadorian company owned by SolGold and Cornerstone, holds 100% of the Cascabel concession. Subject to the satisfaction of certain conditions, including SolGold's fully funding the project through to feasibility, SolGold Plc will own 85% of the equity of ENSA and Cornerstone will own the remaining 15% of ENSA.

Further information is available on Cornerstone's website: www.cornerstoneresources.com and on Twitter. For investor, corporate or media inquiries, please contact:

Investor Relations:
Mario Drolet; Email: Mario@mi3.ca; Tel. (514) 904-1333

Due to anti-spam laws, many shareholders and others who were previously signed up to receive email updates and who are no longer receiving them may need to re-subscribe at http://www.cornerstoneresources.com/s/InformationRequest.asp

Additional Information
The information contained in this press release does not, and is not meant to, constitute a solicitation of a proxy within the meaning of applicable securities laws. Although it is Cornerstone's current intention to requisition a General Meeting of SolGold, SolGold shareholders should note that there is currently no record or meeting date set for a requisitioned General Meeting and shareholders are not being asked to execute a proxy in favour of Cornerstone. In connection with a requisitioned General Meeting, Cornerstone may seek to solicit proxies by filing a dissident information circular in compliance with applicable securities laws or pursuant to exemptions from such requirement.

Notwithstanding the foregoing, Cornerstone is voluntarily providing the disclosure required under Section 9.2(4) of National Instrument 51-102 -- Continuous Disclosure Obligations applicable to public broadcast solicitations. Any solicitation made by Cornerstone will be made by it and not by or on behalf of management of SolGold. All costs incurred for any such solicitation will be borne by Cornerstone. Proxies may be solicited by Cornerstone pursuant to an information circular sent to shareholders after which solicitations may be made by or on behalf of Cornerstone by mail, telephone, fax, email or other electronic means as well as by newspaper or other media advertising, and in person by directors, officers and employees of Cornerstone, who may be specifically remunerated therefor. Cornerstone may also solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian securities laws, including through press releases, speeches or publications, and by any other manner permitted under applicable Canadian laws. Cornerstone may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on its behalf, which agents would receive customary fees for such services. If Cornerstone commences any solicitation of proxies, proxies may be revoked by an instrument in writing by a shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law. None of Cornerstone nor, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted upon at the requisitioned General Meeting. SolGold's head office is located at Level 27, 111 Eagle Street, Brisbane, Queensland 4000, Australia.

This press release is not being distributed, nor has it been approved for the purposes of section 21 of the Financial Services and Markets Act 2000 of the United Kingdom, as amended ("FSMA"), by a person authorised under FSMA. Therefore this press release is being distributed to persons only in circumstances in which section 21(1) of FSMA does not apply and it is not, and must not be construed as, an invitation or inducement to engage in investment activity for the purposes of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529) ("FPO").

Cautionary Notice:
This news release may contain 'Forward-Looking Statements' that involve risks and uncertainties, such as statements of Cornerstone's plans, objectives, strategies, intentions and expectations. The words "potential," "anticipate," "forecast," "believe," "estimate," "expect," "may," "project," "plan," and similar expressions are intended to be among the statements that identify 'Forward-Looking Statements.' Examples of such 'Forward-Looking Statements' in this news release include, but are not limited to, Cornerstone's current intention to requisition a General Meeting to replace the entire SolGold board. Although Cornerstone believes that its expectations reflected in these 'Forward-Looking Statements' are reasonable, such statements may involve unknown risks, uncertainties and other factors disclosed in our regulatory filings, viewed on the SEDAR website at www.sedar.com. For us, uncertainties arise from the behaviour of financial and metals markets, predicting natural geological phenomena and from numerous other matters of national, regional, and global scale, including those of an environmental, climatic, natural, political, economic, business, competitive, or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our Forward-Looking Statements. Although Cornerstone believes the facts and information contained in this news release to be as correct and current as possible, Cornerstone does not warrant or make any representation as to the accuracy, validity or completeness of any facts or information contained herein and these statements should not be relied upon as representing its views after the date of this news release. While Cornerstone anticipates that subsequent events may cause its views to change, it expressly disclaims any obligation to update the Forward-Looking Statements contained herein except where outcomes have varied materially from the original statements.

On Behalf of the Board,
Brooke Macdonald
President and CEO

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 
#July 15, 2020
20-18 - Cornerstone to Requisition SolGold General Meeting to Replace Entire SolGold Board

 

Ottawa, ON, Canada: Cornerstone Capital Resources Inc. (“Cornerstone” or “the Company”) (TSXV:CGP) (Frankfurt:GWN) (Berlin:GWN) (OTC:CTNXF) announces that, under section 303 of the Companies Act 2006 of the United Kingdom (the “UK Companies Act”), it intends to requisition a general meeting (“General Meeting”) of shareholders of SolGold plc (“SolGold”) (LSE:SOLG) (TSX:SOLG) to replace the entire SolGold board.

Greg Chamandy, Chairman of the Cornerstone Board, said:

“The time has come to put an end to SolGold’s suspect corporate governance and self-dealing practices. As one of the largest shareholders of SolGold, it is obvious to Cornerstone that the current SolGold Board is incapable of managing the affairs of SolGold for the benefit of all shareholders in a prudent and transparent manner. Additionally, it is our view that the proposed Franco-Nevada Royalty Financing will significantly destroy shareholder value for all SolGold shareholders.”

At the requisitioned General Meeting, Cornerstone intends to propose that all members of the current board be replaced with five new nominees, each with the requisite skill set and independence to direct SolGold for the benefit of all shareholders. Cornerstone further intends to vote its entire 7.58% equity stake in SolGold in favour of such proposals at the requisitioned General Meeting.

Cornerstone expects that any new board would seek to conduct a strategic review to maximize value for all SolGold shareholders. As part of that process, we expect that the new board would carefully review the terms of the Franco-Nevada Royalty Financing and take appropriate action to terminate the deal if, as we expect, the board determines that the financing is not in the best interests of SolGold and its shareholders. In light of the foregoing, Cornerstone expects that the current SolGold board will not proceed to completion of the Franco-Nevada Royalty Financing and, should it nevertheless proceed to do so, Cornerstone reserves all its rights to pursue any derivative claim or other appropriate remedies against SolGold and/or the members of the board.

Based on public disclosures made in the insider shareholders that own more than 3% of the voting share capital of SolGold are set out in the table below:

Insider Shareholders (over 3%) Number of Shares % Outstanding Shares
DGR 204,151,800 9.85%
Tenstar Trading Limited 119,485,083 5.77%
Nick Mather 90,634,554 4.37%
Total of Insider Shareholders 414,271,437 19.99%

Despite the board of SolGold authorizing dilutive financings for the benefit of both insiders of SolGold and associates of Nick Mather, CEO and a director of SolGold (such as issuing over 142,311,592 shares to DGR and Tenstar in 2016 alone), Mr. Mather, DGR and Tenstar still only have a 19.99% stake (in aggregate) in SolGold.

Brian Moller is the Chairman of SolGold and also has a longstanding relationship with Mr. Mather, having served for many years as legal counsel to Mr. Mather and his related entities. This relationship may explain, as a further example of SolGold’s suspect governance practices, the following provision in SolGold’s Corporate Governance Charter which purports to exclude certain conflicts of interest (emphasis added):

The [SolGold] Board, Management and employees must not involve themselves in situations where there is an actual, perceived or potential conflict of interest (either direct or indirect) between them as individuals and the interest of the Company (excluding those matters which may be subject to legal professional privilege).

Such an exception to the conflict of interest provisions in the Corporate Governance Charter is highly unusual, completely at odds with the legal requirements applicable to SolGold and its board and management team, and should not be supported by shareholders.

Based on public disclosures made in accordance with Rule 5 of the DTR, there are only four independent shareholders (listed in the table below) that have a shareholding in excess of 3% in SolGold and, on a combined basis, these shareholders hold a stake in SolGold in excess of 40%. If the other large independent shareholders of SolGold have a similar desire for change and wish to change the board, the change could almost certainly be assured. In that regard, if turnout at the requisitioned General Meeting is consistent with the typical voter turn out for SolGold's recent general meetings (which has averaged approximately 62% for the last four meetings), the votes of the shareholders below would be sufficient to change the SolGold board.

Independent Shareholders (over 3%) Number of Shares % of Outstanding Shares
BHP 282,721,826 13.64%
Newcrest 281,216,471 13.57%
Cornerstone 157,100,000 7.58%
BlackRock 108,607,081 5.24%
Total of Independant Shareholders 829,645,378 40.04%

Cornerstone will provide further information as required by applicable securities laws and the UK Companies Act in connection with any action taken by Cornerstone.

About Cornerstone and the Cascabel Joint Venture:

Cornerstone Capital Resources Inc. 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 north west Ecuador. Cornerstone has a 21.4% direct and indirect interest in Cascabel comprised of (i) a direct 15% interest in the project financed through to completion of a feasibility study and repayable at Libor plus 2% out of 90% of its share of the earnings or dividends from an operation at Cascabel, plus (ii) an indirect interest comprised of 7.6% of the shares of joint venture partner and project operator SolGold Plc. Exploraciones Novomining S.A. (“ENSA”), an Ecuadorian company owned by SolGold and Cornerstone, holds 100% of the Cascabel concession. Subject to the satisfaction of certain conditions, including SolGold’s fully funding the project through to feasibility, SolGold Plc will own 85% of the equity of ENSA and Cornerstone will own the remaining 15% of ENSA.

Further information is available on Cornerstone’s website: www.cornerstoneresources.com and on Twitter. For investor, corporate or media inquiries, please contact:

Investor Relations:
Mario Drolet; Email: ; Tel. (514) 904-1333

Due to anti-spam laws, many shareholders and others who were previously signed up to receive email updates and who are no longer receiving them may need to re-subscribe at http://www.cornerstoneresources.com/s/InformationRequest.asp

Additional Information

The information contained in this press release does not, and is not meant to, constitute a solicitation of a proxy within the meaning of applicable securities laws. Although it is Cornerstone’s current intention to requisition a General Meeting of SolGold, SolGold shareholders should note that there is currently no record or meeting date set for a requisitioned General Meeting and shareholders are not being asked to execute a proxy in favour of Cornerstone. In connection with a requisitioned General Meeting, Cornerstone may seek to solicit proxies by filing a dissident information circular in compliance with applicable securities laws or pursuant to exemptions from such requirement.

Notwithstanding the foregoing, Cornerstone is voluntarily providing the disclosure required under Section 9.2(4) of National Instrument 51-102 -- Continuous Disclosure Obligations applicable to public broadcast solicitations. Any solicitation made by Cornerstone will be made by it and not by or on behalf of management of SolGold. All costs incurred for any such solicitation will be borne by Cornerstone. Proxies may be solicited by Cornerstone pursuant to an information circular sent to shareholders after which solicitations may be made by or on behalf of Cornerstone by mail, telephone, fax, email or other electronic means as well as by newspaper or other media advertising, and in person by directors, officers and employees of Cornerstone, who may be specifically remunerated therefor. Cornerstone may also solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian securities laws, including through press releases, speeches or publications, and by any other manner permitted under applicable Canadian laws. Cornerstone may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on its behalf, which agents would receive customary fees for such services. If Cornerstone commences any solicitation of proxies, proxies may be revoked by an instrument in writing by a shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law. None of Cornerstone nor, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted upon at the requisitioned General Meeting. SolGold’s head office is located at Level 27, 111 Eagle Street, Brisbane, Queensland 4000, Australia.

This press release is not being distributed, nor has it been approved for the purposes of section 21 of the Financial Services and Markets Act 2000 of the United Kingdom, as amended ("FSMA"), by a person authorised under FSMA. Therefore this press release is being distributed to persons only in circumstances in which section 21(1) of FSMA does not apply and it is not, and must not be construed as, an invitation or inducement to engage in investment activity for the purposes of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529) ("FPO").

Cautionary Notice:
This news release may contain ‘Forward-Looking Statements’ that involve risks and uncertainties, such as statements of Cornerstone’s plans, objectives, strategies, intentions and expectations. The words “potential,” “anticipate,” “forecast,” “believe,” “estimate,” “expect,” “may,” “project,” “plan,” and similar expressions are intended to be among the statements that identify ‘Forward-Looking Statements.’ Examples of such 'Forward-Looking Statements' in this news release include, but are not limited to, Cornerstone's current intention to requisition a General Meeting. Although Cornerstone believes that its expectations reflected in these ‘Forward-Looking Statements’ are reasonable, such statements may involve unknown risks, uncertainties and other factors disclosed in our regulatory filings, viewed on the SEDAR website at www.sedar.com. For us, uncertainties arise from the behaviour of financial and metals markets, predicting natural geological phenomena and from numerous other matters of national, regional, and global scale, including those of an environmental, climatic, natural, political, economic, business, competitive, or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our Forward-Looking Statements. Although Cornerstone believes the facts and information contained in this news release to be as correct and current as possible, Cornerstone does not warrant or make any representation as to the accuracy, validity or completeness of any facts or information contained herein and these statements should not be relied upon as representing its views after the date of this news release. While Cornerstone anticipates that subsequent events may cause its views to change, it expressly disclaims any obligation to update the Forward-Looking Statements contained herein except where outcomes have varied materially from the original statements.

On Behalf of the Board,
Brooke Macdonald
President and CEO

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 
#July 14, 2020
20-17 - Cornerstone Board Formally Rejects Hostile Bid by SolGold for the Second Time

 

Ottawa, ON, Canada: Cornerstone Capital Resources Inc. (“Cornerstone” or “the Company”) (TSXV:CGP) (Frankfurt:GWN) (Berlin:GWN) (OTC:CTNXF) today announced that its Board of Directors, upon the unanimous recommendation of an independent committee of the Board (the “Independent Committee”) and following a detailed review conducted in consultation with its financial and legal advisors, has unanimously rejected SolGold plc’s (“SolGold”) unsolicited offer to acquire Cornerstone (the “Hostile Bid”) for the second time. The Hostile Bid was formalized by SolGold on June 30, 2020 nearly a year and a half after SolGold announced its intention to make an unsolicited offer to acquire Cornerstone. The Board previously announced its first rejection of the proposed bid as outlined in Cornerstone’s press release dated March 8, 2019.
The Board unanimously recommends that Cornerstone shareholders REJECT the Hostile Bid and not tender their shares. In the Board’s view, the Hostile Bid:

  • is wholly inadequate and is not in the best interests of Cornerstone and its shareholders -- in fact, the Hostile Bid has been swiftly rejected by holders of a majority of Cornerstone shares following the formal commencement of the Hostile Bid;
  • is exploitive, as SolGold has withheld and continues to withhold material non-public information in respect of the Cascabel Project (including information on the progress of the ongoing pre-feasibility study at the Cascabel Project) from both the market and Cornerstone shareholders;
  • is not compliant with Canadian securities laws, including the requirement that an insider (which would include SolGold by virtue of its participation, including as operator, in Exploraciones Novomining S.A. (“ENSA”), the Ecuadorian company owned by SolGold and Cornerstone that holds 100% of the Cascabel concession) provide enhanced disclosure and a formal valuation in connection with a take-over bid; and
  • offers consideration consisting solely of SolGold shares and exchangeable shares of SolGold Canadian ExchangeCo Corp. (“ExchangeCo”) which exposes Cornerstone shareholders to shares of an illiquid company with a history of significant dilution, suspect corporate governance and self-dealing practices

Greg Chamandy, Chairman of the Cornerstone Board and holder of over 10% of the outstanding Cornerstone shares, said:

“For the second time, the Board is unanimous that SolGold’s proposal substantially undervalues Cornerstone, a fact that has clearly been recognized by our shareholders, as holders of approximately 65% of the outstanding Cornerstone shares have advised Cornerstone that they will not support SolGold’s Hostile Bid.

As one of the largest shareholders of SolGold, we are very disappointed that the current SolGold management team and board continue to waste significant resources and divert benefits to insiders, all while making a bid that fails to comply with Canadian securities laws, and all at the expense of shareholders. SolGold’s proposed royalty financing, which will see SolGold transfer significant value to Franco-Nevada, is but one example of SolGold’s mismanagement and questionable decisions.

Additionally, the timing of the Hostile Bid is highly suspect given it is set to expire five days before BHP is free from their unusual standstill, which extends not only to shares of SolGold but also Cornerstone shares.

I would also like to personally thank each and every supportive Cornerstone shareholder for their prompt and decisive rejection of the SolGold Hostile Bid which will enable Cornerstone to minimize the costs of responding to this failed Hostile Bid.”

The Cornerstone Board believes that SolGold’s Hostile Bid has no chance of success. The reasons for the Board of Directors’ recommendation are outlined in the Directors’ Circular which has been filed with Canadian regulators, is being mailed to Cornerstone's shareholders and is available on Cornerstone's website. These reasons include, but are not limited to, the following:

1. SOLGOLD’S HOSTILE BID CANNOT BE SUCCESSFUL

Shareholders that, together with their respective associates and affiliates, collectively own or exercise control over approximately 65% of the outstanding Cornerstone shares (63% on a fully-diluted basis) have advised Cornerstone of their intention to reject SolGold’s Hostile Bid and, accordingly, NOT to tender their Cornerstone shares to the Hostile Bid.

Canadian take-over bid rules require that the majority of the outstanding shares subject to a take-over bid (excluding those shares held by the bidder and any parties acting jointly or in concert with the bidder) be tendered to a formal offer before any shares can be taken up. Given that this 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.

2. THE HOSTILE BID SIGNIFICANTLY UNDERVALUES CORNERSTONE AND IS OPPORTUNISTICALLY TIMED

SolGold is offering consideration of, for each Cornerstone common share not already owned by SolGold and its affiliates, either: (i) 11 SolGold shares; or (ii) at the election of certain shareholders subject to tax in Canada, 11 exchangeable shares of ExchangeCo. As at July 13, 2020, this would imply approximately $4.33 per common share, or total consideration for all of the outstanding Cornerstone shares of approximately $140 million. The Board views this consideration as wholly inadequate based on the substantial value of Cornerstone’s assets.

The Hostile Bid Fails to Recognize the Strategic Value of Cornerstone’s Asset Base
ENSA, an Ecuadorian company owned by SolGold and Cornerstone, holds 100% of the Cascabel concession, widely considered to have the potential to be a world class mineral property due to its significant copper and gold resources. Subject to the satisfaction of certain conditions, including SolGold fully funding the project through to feasibility, SolGold will own 85% of the equity of ENSA and Cornerstone will own the remaining 15% of ENSA. Cornerstone also owns approximately 7.6% of the outstanding shares of SolGold. In effect, Cornerstone has a combined direct and indirect 21.4% interest in the Cascabel Project and the projects falling within the Cascabel area of mutual interest in addition to Cornerstone’s ENAMI Strategic Exploration Alliance and other assets.

SolGold is responsible for funding 100% of the operations and activities at Cascabel, including funding Cornerstone’s 15% interest, until completion of a bankable feasibility study. Following completion of a bankable feasibility study, SolGold is entitled to receive 90% of Cornerstone’s distribution of earnings or dividends from ENSA until such time as the amounts so received equal the aggregate amount of expenditures incurred by SolGold that would have otherwise been payable by Cornerstone, plus interest thereon from the dates such expenditures were incurred at a rate per annum equal to LIBOR plus 2%.

The benefit to shareholders of Cornerstone’s strategic 15% carried interest in ENSA is apparent considering the significant dilution that SolGold’s shareholders have experienced, and are likely to continue to experience, as a result of SolGold’s attempts to finance the substantial ongoing development costs associated with the Cascabel Project.

The significant value of Cornerstone’s carried interest is clearly demonstrated in the following example. Assuming that the total costs of the Cascabel Project to completion of feasibility will be US$347 million1, SolGold must fund US$52 million to cover Cornerstone’s portion of the development costs in addition to the US$295 million required for SolGold’s interest.

In effect, SolGold must fund US$100 million for every US$85 million it needs to finance for its 85% interest.

More generally, the value of Cornerstone’s carried interest can be expressed by the following equation:

The chart below depicts the value of the carried interest to Cornerstone based on a range of illustrative potential costs until completion of a bankable feasibility study.

Conservatively assuming that Cornerstone could otherwise finance its carried interest on a zero discount and zero cost basis, the value of Cornerstone’s carried interest is equal to approximately an additional 7.4% interest in the Cascabel Project. The strategic benefit and value to Cornerstone of its carried interest is even greater when considering the costs of development through to a bankable feasibility study on comparable projects are well in excess of US$350 million.

Furthermore, as noted above, Cornerstone’s attributable costs prior to feasibility will be repaid in the future out of 90% of Cornerstone’s share of earnings from ENSA. If a mine is built, Cornerstone repays its carried interest at an interest cost per annum equal to LIBOR plus 2%, which is well below the cost of capital for both Cornerstone and SolGold. In effect, SolGold is required to fund Cornerstone’s 15% carried interest on terms much more favourable to Cornerstone than SolGold’s cost to finance, which is value-accretive to Cornerstone’s shareholders and further dilutes SolGold’s shareholders.

For example, SolGold is currently paying a minimum of 12% per annum to Franco-Nevada on a secured bridge loan. The bridge loan agreement, which is not publicly available and has not been filed by SolGold on SEDAR, may include other fees and costs. Assuming the loan maturity is extended to eight months, SolGold will be required to issue 12.2 million warrants to Franco-Nevada. Using a Black-Scholes model2, the value of the warrants imply an effective interest rate of over 30% per annum for the bridge loan.

The Proposed Exchange Ratio is Vastly Out of Proportion to Cornerstone’s Combined Direct and Indirect Interest in Cascabel
As of July 13, 2020, the exchange ratio proposed by SolGold would result in Cornerstone’s shareholders owning approximately 14.7% of the issued and outstanding SolGold shares when compared to Cornerstone’s combined direct and indirect 21.4% interest in the Cascabel Project (assuming zero additional value for Cornerstone’s carried interest). This represents an approximate 32% reduction for Cornerstone’s shareholders (assuming zero value is ascribed to Cornerstone’s other assets). Including the value of Cornerstone’s carried interest (as more particularly described above), the discount for Cornerstone’s shareholders increases to over approximately 49%. Assuming SolGold had liquid shares acceptable to Cornerstone’s shareholders, SolGold would need to increase the exchange ratio to in excess of 22 SolGold shares per Cornerstone common share to provide Cornerstone shareholders with an interest equivalent to their interest currently held through their Cornerstone shares.

The Value Offered in the Hostile Bid is Well Below the Value Offered in Precedent Transactions
The Hostile Bid represents a significant discount to the multiples in precedent transactions involving other mineral exploration companies. Assuming SolGold had liquid shares acceptable to shareholders, the Hostile Bid represents an implied valuation for Cornerstone of US$0.014 per copper equivalent resource pound, whereas precedent transactions with assets of lower grade and smaller size represent an average implied valuation of approximately US$0.07 per copper equivalent resource pound. SolGold would need to increase its implied bid by approximately five times its current amount for Cornerstone to match the average from precedent transactions.

The Implied Offer Price of the Hostile Bid is at a Significant Discount to the Implied Value for Cornerstone’s Interest in the Cascabel Project Paid by BHP and Newcrest for Their Non-Controlling Interest in SolGold
Since 2018, BHP Billiton Holdings Limited (“BHP”) has acquired 282,721,826 SolGold shares at an average cost of approximately 0.33 per SolGold share, which would result in an implied Cornerstone share price of approximately $10.65 per Cornerstone common share. In addition, the SolGold shares acquired by BHP are encumbered by an unusual standstill, which extends not only to shares of SolGold but also common shares of Cornerstone, precluding BHP from making a competing offer for, or working with any third party to effect a change of control of, Cornerstone prior to October 19, 20203 in the absence of another third party bid for Cornerstone.

On December 14, 2018, Newcrest acquired 27,870,000 SolGold shares at a price of 0.40 per SolGold share, which would result in an implied Cornerstone share price of approximately $12.99 per Cornerstone common share.

SolGold would need to increase its implied price for Cornerstone’s shares under the Hostile Bid by approximately 146% and 200% to match the implied price paid by BHP and Newcrest, respectively, for their non-controlling interests in SolGold.

The Timing of the Proposed Hostile Bid is Highly Suspect
The Board believes that SolGold launched the Hostile Bid to:

  • exploit its inside knowledge about the Cascabel Project prior to the release of the pre-feasibility study for Cascabel, and before material information was appropriately disseminated to Cornerstone and the market;
  • pre-empt Cornerstone’s ability to enter into a value enhancing transaction with third parties such as BHP, given BHP's unusual standstill that does not expire until October 19, 2020 (five days after SolGold’s Hostile Bid expires); and
  • deny Cornerstone’s shareholders the opportunity to realize the full value of Cornerstone’s carried interest in the Cascabel Project.

3 .SOLGOLD’S TRACK RECORD DEMONSTRATES THAT IT IS INCAPABLE OF FINANCING THE CASCABEL FEASIBILITY STUDY ON REASONABLE TERMS

SolGold’s Proposed Royalty Financing with Franco-Nevada Transfers Massive Value to Franco-Nevada at the Expense of SolGold Shareholders
SolGold’s proposed royalty financing with Franco-Nevada (the “Royalty Financing”), is extremely onerous and transfers enormous value to Franco-Nevada without any discernable risk to Franco-Nevada. Assuming SolGold fully exercises its rights to “up-size” its initial royalty payment in order to receive a total of US$150 million in funding, Franco-Nevada will be entitled to a perpetual 1.5% NSR royalty based on the gross proceeds of ENSA less certain allowable deductions payable by SolGold alone. Consequently, SolGold has effectively given a royalty interest on all minerals from the entire Cascabel concession (i.e., not just the Alpala Deposit) that still contains many un-drilled highly prospective targets.

According to SolGold, the Royalty Financing will be used to finance anticipated costs through to a Definitive Feasibility Study. Based on the Alpala Deposit alone and applying consensus prices, the Royalty Financing implies at least a 12% cost of capital to SolGold, with Franco-Nevada paying well below 0.4x net present value at a 5% discount rate. By contrast, most royalty transactions are completed at levels two-and-a-half times higher, or approximately 1.0x net present value. Although the royalty interest granted to Franco-Nevada covers the entire gross proceeds of ENSA, SolGold alone is liable for the royalty which, assuming SolGold’s 85% interest in Cascabel is perfected4, is equivalent to an approximate 1.8% NSR royalty on SolGold’s interest in Cascabel.

The Royalty Financing also includes highly burdensome terms in favour of Franco-Nevada, such as a “top-up” mechanism that requires SolGold to make certain additional payments to Franco-Nevada if production levels do not meet specified projections. Furthermore, Franco-Nevada will be entitled to minimum royalty payments to backstop its rate of return at the expense of all SolGold shareholders. In addition, if SolGold does not satisfy certain conditions (including SolGold fully funding the Cascabel Project through to feasibility) and fails to perfect its 85% interest in ENSA, the NSR royalty on SolGold’s interest in Cascabel will effectively increase to over 3%.

SolGold also has a "make-whole" obligation under the Royalty Financing with Franco-Nevada which requires SolGold to make additional payments to Franco-Nevada in cases where its NSR payments to Franco-Nevada fall below certain thresholds. Such "make-whole" payments may be made by SolGold through the issuance of additional SolGold shares at a discount to market prices, leading to the prospect of further dilution to SolGold's shareholders.

Accordingly, SolGold has effectively written a “blank cheque” to Franco-Nevada that may expose SolGold shareholders to an attributable royalty on SolGold’s interest in Cascabel in excess of 3%. Despite key taxation and other terms of the Royalty Financing being redacted, the non-redacted terms alone demonstrate a significant transfer of value to Franco-Nevada at the expense of SolGold shareholders. Furthermore, given SolGold’s practices to date, Cornerstone has serious doubts that SolGold’s entrenched management team and board will prudently use the proceeds of the financing for the benefit of all shareholders. See the section below entitled "Cornerstone Shareholders would be Exposed to SolGold's Suspect Corporate Governance and Self-Dealing Practices" for a discussion of SolGold's suspect governance practices.

4. SOLGOLD’s SHARES ARE HIGHLY ILLIQUID AND SOLGOLD SHAREHOLDERS HAVE SUFFERED A HISTORY OF SIGNIFICANT DILUTION

SolGold Shares are Illiquid
SolGold’s average daily liquidity is extremely limited which would adversely impact the ability of Cornerstone’s shareholders to monetize their SolGold shares without creating significant selling pressure. Based on the 12 months’ average daily trading to June 29, 2020 of the SolGold shares in both the U.K. and Canada, it would take nearly three years of trading (over 680 trading days) to monetize the SolGold shares that would be issued as consideration under the Hostile Bid, assuming responsible trading at 15% of SolGold's total trading volume on the LSE. On the TSX, where the SolGold shares are even more illiquid, it would take over 294 years or over 74,000 trading days to monetize the SolGold shares.

SolGold is Expected to Dilute Existing Shareholders Further to Fund Through to Feasibility
SolGold shareholders have experienced, and are likely to continue to experience, significant dilution as a result of SolGold’s efforts to finance its substantial ongoing development costs associated with the Cascabel Project. Despite public statements by SolGold asserting that it would not need to issue additional equity after the Royalty Financing, SolGold completed an equity financing at a 9% discount (plus commissions and other issue costs) and raised only US$40 million. Since SolGold’s announcement of the financing, SolGold has traded consistently below the financing price which is likely due to its shareholders recognizing that there is meaningful dilution ahead and understanding the true cost of the Royalty Financing.

In the past five years, SolGold has issued over 1.3 billion shares and increased the total number of SolGold shares outstanding by over 170%, meaning that SolGold shareholders have seen their effective per share interest in the Cascabel Project decline significantly compared to the per share interest of Cornerstone shareholders in the Cascabel Project over the same period. On the other hand, for Cornerstone to maintain its current direct interest in Cascabel, no financing is required until after the completion of a bankable feasibility study. Cornerstone’s Shareholders will benefit if a robust feasibility study is delivered, following which Cornerstone will only be required to fund its 15% interest in Cascabel and SolGold will be required to fund its 85% interest.

5. CORNERSTONE SHAREHOLDERS WOULD BE EXPOSED TO SOLGOLD’S SUSPECT CORPORATE GOVERNANCE AND SELF-DEALING PRACTICES

SolGold is Largely Controlled by a Group with Conflicting Loyalties and Divided Attention
Many of SolGold’s directors and officers overlap with those of one of its major shareholders, DGR Global Limited (“DGR”). DGR was founded by Nick Mather, the Chief Executive Officer of SolGold, who also acts as Managing Director and Chief Executive Officer of DGR. As founder, Mr. Mather directly or indirectly owns 18.3% of DGR and appears to commonly staff his associates to the management team and/or board of directors of DGR’s “portfolio” companies, including SolGold.

Many of SolGold’s directors and officers divide their attention with three other publicly traded entities related to DGR: Aus Tin Mining, IronRidge Resources and Dark Horse Resources Limited. Brian Moller, the chairman of the board of SolGold, is perhaps the most egregious example of Mr. Mather staffing his associates at DGR’s various portfolio companies, as he serves alongside Mr. Mather as a non-executive director of DGR itself as well as two of its publicly traded portfolio companies. Despite the common directorship and clear connection to Mr. Mather, Mr. Moller was previously touted as the “independent” chairman of SolGold.
This pattern of rewarding associates for their loyalty continues with SolGold’s management team, as each of Mr. Mather, Karl Schlobohm (SolGold’s Corporate Secretary) and Priy Jayasuriya (SolGold’s Chief Financial Officer) all fill similar positions with each of DGR and three of its publicly traded portfolio companies.

It is important to note that two-thirds of directors (including the Chairman) of SolGold can hardly be characterized as “independent,” and all of them have been generously compensated at the expense of SolGold shareholders. In addition, SolGold directors Mr. Moller and James Clare and their respective law firms both represent, and are compensated by, SolGold and are assisting SolGold in connection with the Hostile Bid.

SolGold Has Neutralized its Largest Independent Shareholder until October while SolGold’s Second Largest Independent Shareholder has Clearly Lost Confidence in the SolGold Board
BHP is SolGold’s largest independent shareholder, holding 13.64% of SolGold’s ordinary shares. BHP is required to vote alongside the non-independent SolGold Board until October 19, 2020 on certain matters. This arrangement provides Mr. Mather and his associates with significant influence over SolGold until that date and provides one obvious reason for why the Hostile Bid expires on October 14, 2020.

Newcrest is SolGold’s second largest independent shareholder, holding 13.57% of SolGold’s ordinary shares. Newcrest has been publicly critical of SolGold’s mismanagement and governance practices.

On June 25, 2020, Newcrest’s nominee on the SolGold board, Craig Jones, resigned as a director of SolGold at the request of Newcrest. Newcrest previously telegraphed the resignation as a way to relieve Craig Jones of the fiduciary and legal responsibilities of directorship5.

The mismanagement and suspect corporate governance at the helm of SolGold by Mr. Mather and his associates are destroying significant shareholder value while enriching Mr. Mather and his associates. In addition, Cornerstone is considering steps that it may take as a shareholder of SolGold to address its concerns about mismanagement and suspect governance practices at SolGold.

The SolGold Board has a History of Ignoring the Views of Non-related SolGold Shareholders and Diverting Benefits to Insiders at the Expense of those Shareholders
SolGold’s board of directors has repeatedly authorized punitively dilutive financings for the benefit of SolGold insiders and associates of Mr. Mather at the expense of SolGold’s other shareholders. For example, in March 2016, SolGold issued 87,449,092 shares at 0.023 to DGR and Tenstar Trading Limited for settlement of loans and convertible notes, notwithstanding that it is highly unusual for any exploration company to finance its operations with debt given the destructive effect it can have on equity value. A total of 142,311,592 shares were issued to DGR and Tenstar Trading Limited in 2016 for settlement of debts.

In addition, SolGold has established an unusual loan plan in order to provide financial assistance to employees in exercising stock options. The plan essentially allows certain insiders of SolGold to pay for the exercise of options using an interest-free loan from SolGold. On October 29, 2018, SolGold enabled certain insiders to exercise 19,950,000 options through an interest-free loan. However, these employee benefits were not disclosed to the SolGold shareholders or the market until February 13, 2019 -- over 108 days after the loans were made. Further, independent shareholders of SolGold were not asked to approve these loans, including an extension of the maturity of these loans for another 12 months to October 29, 2021. As at March 31, 2020 there have been no repayments against the loans provided in 2018. As the same concessions were not available to SolGold’s other securityholders, the loans demonstrate how SolGold's board and management ignore the views of non-related SolGold shareholders and divert benefits to insiders at the expense of those shareholders.

SolGold’s Disclosure with Respect to its Additional Exploration Concessions is Misleading
SolGold cites its additional non-Cascabel early-stage exploration projects in Ecuador as additional upside to which Cornerstone shareholders would gain exposure. The additional projects, most of which were acquired in 2017 through public bidding processes, are subject to work expenditure commitments over an initial four-year period that in total exceed US$500 million, a sum similar to SolGold’s market capitalization. It is highly unlikely that SolGold will be able to fund these massive commitments which could result in not only losing the concessions but also harming SolGold’s credibility with the Ecuadorian government and other important stakeholders.

6. THE HOSTILE BID DOES NOT COMPLY WITH IMPORTANT CANADIAN SECURITIES LAWS INTENDED TO PROTECT SHAREHOLDERS AND WHICH REQUIRE SOLGOLD TO OBTAIN AN INDEPENDENT FORMAL VALUATION

MI 61-101 requires that SolGold obtain, at its own expense, an independent formal valuation, prepared under the supervision of an independent committee of the Board of Cornerstone.

Instead of properly disclosing all material non-public information to the market and Cornerstone, SolGold boasts about its insider status by noting in their take-over bid circular that “the prospects of Cornerstone are inextricably linked to those of SolGold” and Cornerstone has a “lack of data room access” and does not “maintain any influence in the [Cascabel] project decision making.”
SolGold’s disregard for Canadian securities laws will not go unchallenged by Cornerstone. In that regard, Cornerstone’s counsel will submit a letter to the Alberta Securities Commission and Ontario Securities Commission describing SolGold's non-compliance with securities laws.

7. THE HOSTILE BID IS FINANCIALLY INADEQUATE

Paradigm Capital Inc. (“Paradigm”) has provided a written opinion to the Independent Committee and the Board that the consideration being offered pursuant to the Hostile Bid was, as of the date of such opinion, inadequate, from a financial point of view, to Cornerstone shareholders (other than SolGold and its affiliates).

8. CORNERSTONE HAS A UNIQUE POSITION THAT MAKES IT VERY ATTRACTIVE FOR THOSE LOOKING TO ACQUIRE CONTROL OF, OR A DIRECT INTEREST IN, CASCABEL

Cornerstone’s combined direct and indirect 21.4% interest in the Cascabel Project is unique, as it provides an attractive opportunity for a potential acquirer to secure a strategic position in the Cascabel Project. The Board believes that this, in part, may be why many of Cornerstone’s shareholders have advised Cornerstone that they do not support the proposed Hostile Bid.

The Board believes it is entirely reasonable for parties other than SolGold to consider a possible acquisition transaction of Cornerstone appealing, as interested third parties have an opportunity to secure a position in Cascabel that is superior to any other SolGold shareholder given the significant value of Cornerstone’s carried interest. In that regard, sophisticated mineral resource companies could leverage Cornerstone’s strategic position to acquire an even larger interest in the Cascabel concession.

The Board does not consider an acquisition of Cornerstone to only be attractive to those looking to acquire a controlling interest in Cascabel. Maintaining both a direct and indirect stake in SolGold creates competitive pressure that would not exist if the Cascabel Project was consolidated under one company. In the Board’s view, Cornerstone’s combined direct and indirect interest in the Cascabel Project also significantly increases the buyer universe for Cornerstone, making it attractive to royalty companies and private equity participants in addition to mining companies.

No one has a right of first refusal on a change of control of Cornerstone.

Take No Action and Reject SolGold’s Hostile Bid

Cornerstone shareholders are urged to REJECT the Hostile Bid. To do so, Cornerstone shareholders should TAKE NO ACTION.

Shareholders are encouraged to carefully review the Directors' Circular in its entirety. This document is available on the Cornerstone website, is being mailed to Cornerstone shareholders and is available free of charge on SEDAR at www.sedar.com.

Cornerstone shareholders who have already tendered their Cornerstone shares to the Hostile Bid and who wish to obtain assistance in withdrawing them are urged to contact their broker or D.F. King Canada, at 1-800-294-4817 (toll-free in North America), or 1-416-682-3825 (collect calls outside of North America), or by email at .

Advisors

Cornerstone’s financial advisor is Maxit Capital LP and its legal counsel is Davies Ward Phillips & Vineberg LLP. The Independent Committee’s independent financial advisor is Paradigm.

About Cornerstone and the Cascabel Joint Venture:

Cornerstone Capital Resources Inc. 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 north west Ecuador. Cornerstone has a 21.4% direct and indirect interest in Cascabel comprised of (i) a direct 15% interest in the project financed through to completion of a feasibility study and repayable at Libor plus 2% out of 90% of its share of the earnings or dividends from an operation at Cascabel, plus (ii) an indirect interest comprised of 7.6% of the shares of joint venture partner and project operator SolGold Plc. Exploraciones Novomining S.A. (“ENSA”), an Ecuadorian company owned by SolGold and Cornerstone, holds 100% of the Cascabel concession. Subject to the satisfaction of certain conditions, including SolGold’s fully funding the project through to feasibility, SolGold Plc will own 85% of the equity of ENSA and Cornerstone will own the remaining 15% of ENSA.

Further information is available on Cornerstone’s website: www.cornerstoneresources.com and on Twitter. For investor, corporate or media inquiries, please contact:

Investor Relations:
Mario Drolet; Email: ; Tel. (514) 904-1333

Due to anti-spam laws, many shareholders and others who were previously signed up to receive email updates and who are no longer receiving them may need to re-subscribe at http://www.cornerstoneresources.com/s/InformationRequest.asp

Cautionary Notice:
This news release, including the discussion of the reasons for the Board’s unanimous recommendation that Cornerstone shareholders reject the Hostile Bid and not tender their Cornerstone shares thereto, contains forward-looking information and/or forwardlooking statements within the meaning of applicable securities laws (collectively, “forward looking statements”). The words “may”, “will”, “would”, “should”, “could”, “might”, “expects”, “plans”, “forecasts”, “projects”, “intends”, “trends”, “indicates”, “anticipates”, “believes”, “estimates”, “predicts”, “likely” or “potential” or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Examples of such forward looking statements in this news release include, but are not limited to, expectations regarding Cornerstone’s and ENSA’s prospects for growth, profitability and shareholder value creation; the availability of financing to fund Cornerstone’s and SolGold’s obligations; the development costs associated with the Cascabel project; the value and trading volumes of SolGold shares; the response to, likelihood of success and consequences of the Hostile Bid; the terms of the Hostile Bid; and the availability of strategic alternative transactions emerging.

Forward-looking statements contained in this news release are based on a number of estimates and assumptions including, but not limited to: assumptions as to competitive conditions in the copper and gold mining industry; general economic conditions; Ecuador country risk; changes in laws, rules and regulations applicable to Cornerstone; and whether or not an alternative transaction financially superior to the Hostile Bid may emerge. These estimates and assumptions are made by Cornerstone as of the date of this news release in light of its experience and perceptions of historical trends, current conditions and expected future developments, as well as other factors that Cornerstone believes are appropriate and reasonable in the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct.

Although Cornerstone believes that its expectations reflected in these forward looking statements are reasonable, such statements may involve unknown risks, uncertainties and other factors disclosed in our regulatory filings, which are available on the SEDAR website at www.sedar.com. These uncertainties may cause actual results and developments to be materially different than those expressed in our forward looking statements. Although Cornerstone believes the facts and information contained in this news release are reasonable as at the date hereof, Cornerstone does not warrant or make any representation as to the accuracy, validity or completeness of any facts or information contained herein and these statements should not be relied upon as representing its views after the date of this news release. While Cornerstone anticipates that subsequent events may cause its views to change, it expressly disclaims any obligation to update the forward looking statements contained herein except where outcomes have varied materially from the original statements.

On Behalf of the Board,
Brooke Macdonald
President and CEO

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

1 Implied anticipated cost based on the SolGold Circular.

2 Assumes 5-year maturity, at-market exercise and approximately 75% volatility per FactSet.

3 SolGold's November 25, 2019 press release indicates that this standstill expires on October 15, 2020. This appears to be inconsistent with the terms of the subscription agreement between BHP and SolGold dated October 16, 2018, which provides that this standstill expires on October 19, 2020.

4 SolGold must complete a bankable feasibility study to secure 85% ownership.

5 Peter Ker, “BHP, Newcrest bypass SolGold fundraising,” The Australian Financial Review(June 5, 2020).

 

 
#July 13, 2020
20-16 - Espiritu trench at Bramaderos Au-Cu Project (Ecuador) exposes gold-silver polymetallic veins intersecting 4m at 415g/t silver, 0.9g/t gold, 6.9% zinc and 6.0% lead

  Ottawa, ON, Canada: Cornerstone Capital Resources Inc. ("Cornerstone" or "the Company") (TSXV-CGP) (F-GWN) (B-GWN) (OTC-CTNXF) is pleased to provide an update on its Bramaderos gold and copper joint venture in southern Ecuador in which it has a 12.5% interest carried by JV partner and project operator Sunstone Metals Inc. (ASX: STM) through to the start of commercial production (see "About Bramaderos", below).

Figures related to this news release can be seen in PDF format by accessing the version of this release on the Company's website (www.cornerstoneresources.com) or by clicking on the link below:

http://www.cornerstoneresources.com/i/pdf/NR20-16Figures.pdf.

HIGHLIGHTS:

  • Exploration at the Bramaderos gold-copper project in Ecuador has resumed with a staged re-entry consistent with covid-19 protocols
  • The initial focus is on the Espiritu gold-silver target where the first trench has been completed and intersected gold-silver polymetallic veins intersecting 4m at 415g/t silver, 0.9g/t gold, 6.9% zinc and 6.0% lead
  • This follows previously reported rock chip and float sampling that returned results of 4.2g/t gold and 101g/t silver, 11.9g/t gold and 175 g/t silver, and 11.6g/t gold and 2,962g/t silver
  • The Espiritu target, defined on the basis of gold and silver soil anomalies with supporting rock chip samples extends over an area of 800m x 600m with what appears to be multiple parallel mineralized structures
  • The trenching program is ongoing at Espiritu in preparation for a resumption of drilling in September
  • 12 other gold-silver targets are also being followed up including target E1, with more detailed soil sampling, including target E1 which has historical rock chip sampling returned results of up to 32.5g/t gold, 271g/t silver and 0.16% lead
  • Drill targeting and follow-up surface exploration over 5 porphyry targets is progressing well, and drilling at the Brama and Porotillo porphyry gold-copper targets is expected to begin in September

FURTHER INFORMATION:
The initial work program is focused on the Espiritu gold-silver target (Figures 1 & 2). The results from the first trench sampling program have been received and are shown in the table below. The system is interpreted to be a gold-silver polymetallic vein system (see below for technical explanation). Multiple targets within the broader Espiritu anomaly have been identified for further soil sampling, trenching and drilling.

Trench ES-01 Interval (m) Gold (g/t) Silver (g/t) Lead (%) Zinc (%)
  21 0.3 82.4 1.2 1.4
including 4 0.9 414.8 6.0 6.9
including 1 1.4 1001.0 16.9 5.7

Targeting of similar mineralized systems within the Bramaderos concession has been on-going during the Covid-19 shut down period and has resulted in the generation of multiple targets (Figure 1). These will be explored initially with more detailed soil sampling. This work has commenced at target E-1 (Figure 1).

Polymetallic Gold-Silver deposits:
Polymetallic gold-silver deposits are a class of epithermal to mesothermal vein deposits and replacement bodies which typically occur around the margins of porphyry gold-copper deposits. They are structurally controlled, display a range of gold-silver-lead-zinc-copper ratios and can occur over many kilometres around large porphyry systems. They appear to be relatively more common in South America and can develop into significant orebodies in their own right, such as Fresnillo in Mexico (83mt at 0.58g/t gold and 395g/t silver)(ref - J. Cunliffe, in Terry Leach Symposium 2008).

About Bramaderos
Measuring 4,948 hectares, the Bramaderos project is located approximately 130km from the Loja provincial capital in southern Ecuador. The project is easily accessible via the Pan American Highway that crosses the property.

The Bramaderos concession is owned by La Plata Minerales S.A. ("PLAMIN"), which in turn is owned 87.5% by Sunstone (the project operator) and 12.5% by Cornerstone. Cornerstone's 12.5% interest is carried by Sunstone through to the start of commercial production and repayable at Libor plus 2% out of 90% of Cornerstone's share of earnings or dividends from the Bramaderos project (see news release 20-01 dated January 7, 2020).

More information about the property can be found at www.cornerstoneresources.com.

Qualified Person:
Yvan Crepeau, MBA, P.Geo., Cornerstone's Vice President, Exploration and a qualified person in accordance with National Instrument 43-101, is responsible for supervising the exploration program at the Bramaderos project for Cornerstone and has reviewed and approved the information contained in this news release.

Sampling and assaying
PLAMIN uses a fire assay gold technique for Au assays (FAS-111) and a four acid multi element technique (IMS-230) for a suite of 48 elements. FAS-111 involves Au by Fire Assay on a 30-gram aliquot, fusion and atomic absorption spectroscopy (AAS) at trace levels. IMS-20 is considered a near total 4 acid technique using a 20g aliquot followed by multi-element analysis by ICP-AES/MS at ultra-trace levels. This analysis technique is considered suitable for this style of mineralization.

Standards, blanks and duplicates are inserted ~1/28 samples. The values of the standards range from low to high grade and are considered appropriate to monitor performance of values near cut-off and near the mean grade of the deposit. The check sampling results are monitored and performance issues are communicated to the laboratory if necessary.

Sample security was managed through sealed individual samples and sealed bags of multiple samples for secure delivery to the laboratory by permanent staff of the joint venture. MS Analytical is an internationally accredited laboratory that has all its internal procedures heavily scrutinized in order to maintain their accreditation. MS Analytical is accredited to ISO/IEC 17025 2005 Accredited Methods.

PLAMIN's sampling techniques and data have been audited multiple times by independent mining consultants during various project assessments. These audits have concluded that the sampling techniques and data management are to industry standards. All historical data has been validated to the best degree possible and migrated into a database.

Rock samples are collected by PLAMIN's personnel, placed in plastic bags, labeled and sealed, and stored in a secure place until delivery by PLAMIN employees to the LAC y Asociados ISO 9001-2008 certified sample preparation facility in Cuenca, Ecuador.

Rock samples are prepared crushing to 70% passing 2 mm (10 mesh), splitting 250 g and pulverizing to 85% passing 75 microns (200 mesh) (MSA code PRP-910). Prepared samples are then shipped to MS Analytical Services (MSA), an ISO 9001-2008 laboratory in Langley, BC, Canada, where samples are assayed for a multi-element suite (MSA code IMS-136, 15.0 g split, Aqua Regia digestion, ICP-AES/MS finish) and gold by Fire Assay (MSA code FAS-111, 30 g fusion, AAS finish). Over limit results for Cu (>1%) are systematically re-assayed (MSA code ICF-6Cu, 0.2 g, 4-acid digestion, ICP-AES finish). Gold is assayed using a 30 g split, Fire Assay (FA) and AAS finish (MSA code FAS 111). Over limit results for Au (>10 g/t) are systematically re-assayed (MSA code FAS-415, FA, 30g., gravimetric finish).

Soil samples are dried at low temperature, screened to 80 mesh (MSA code PRP-757); a 15 grams portion is then assayed for a multi-elements suite (MSA code IMS-136, Aqua Regia digestion, ICP-AES/MS finish).

Quality assurance / Quality control (QA/QC)
The MSA Analytical Laboratory is a qualified assayer that performs and makes available internal assaying controls. Duplicates, certified blanks and standards are systematically used (1 control sample every 20-25 samples) as part of PLAMIN's QA/QC program. Rejects, a 100 g pulp for each rock sample, are stored for future use and controls.

About Cornerstone
Cornerstone Capital Resources Inc. 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% direct and indirect interest in Cascabel comprised of (i) a direct 15% interest in the project financed through to completion of a feasibility study and repayable at Libor plus 2% out of 90% of its share of the earnings or dividends from an operation at Cascabel, plus (ii) an indirect interest comprised of 7.6% of the shares of joint venture partner and project operator SolGold Plc. Exploraciones Novomining S.A. ("ENSA"), an Ecuadoran company owned by SolGold and Cornerstone, holds 100% of the Cascabel concession. Subject to the satisfaction of certain conditions, including SolGold's fully funding the project through to feasibility, SolGold Plc will own 85% of the equity of ENSA and Cornerstone will own the remaining 15% of ENSA.

Further information is available on Cornerstone's website: www.cornerstoneresources.com and on Twitter. For investor, corporate or media inquiries, please contact:

Investor Relations:
Mario Drolet; Email: Mario@mi3.ca; Tel. (514) 904-1333

Due to anti-spam laws, many shareholders and others who were previously signed up to receive email updates and who are no longer receiving them may need to re-subscribe at http://www.cornerstoneresources.com/s/InformationRequest.asp

Cautionary Notice:
This news release may contain 'Forward-Looking Statements' that involve risks and uncertainties, such as statements of Cornerstone's beliefs, plans, objectives, strategies, intentions and expectations. The words "potential," "anticipate," "forecast," "believe," "estimate," "intend", "trends", "indicate", "expect," "may," "should," "could", "project," "plan," or the negative or other variations of these words and similar expressions are intended to be among the statements that identify 'Forward-Looking Statements.' Although Cornerstone believes that its expectations reflected in these 'Forward-Looking Statements' are reasonable, such statements may involve unknown risks, uncertainties and other factors disclosed in our regulatory filings, viewed on the SEDAR website at www.sedar.com. For us, uncertainties arise from the behaviour of financial and metals markets, predicting natural geological phenomena and from numerous other matters of national, regional, and global scale, including those of an environmental, climatic, natural, political, economic, business, competitive, or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our Forward-Looking Statements. Although Cornerstone believes the facts and information contained in this news release to be as correct and current as possible, Cornerstone does not warrant or make any representation as to the accuracy, validity or completeness of any facts or information contained herein and these statements should not be relied upon as representing its views after the date of this news release. While Cornerstone anticipates that subsequent events may cause its views to change, it expressly disclaims any obligation to update the Forward-Looking Statements contained herein except where outcomes have varied materially from the original statements. On Behalf of the Board,
Brooke Macdonald
President and CEO

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

1 13 samples collected historically, along a ~N-S trench with 1m individual sample length, range gold 32.5 to 0.2g/t, average 2.7g/t. Range of Silver is 0.2 to 271.5g/t, and average 29.9g/t silver. Range of lead 7 -- 1981ppm, with average 533ppm (0.05%). Note that grab samples are selected samples and are not necessarily representative of the mineralization hosted on the property.

 
#June 30, 2020
Cornerstone Recommends Shareholders Take No Action in Response to Hostile Takeover Bid by SolGold

 Ottawa, June 30, 2020: Cornerstone Capital Resources Inc. ("Cornerstone" or "the Company") (TSXV:CGP) (Frankfurt:GWN) (Berlin:GWN) (OTC:CTNXF) today acknowledged that SolGold plc ("SolGold") has formally commenced an unsolicited offer (the "Hostile Bid") to acquire all of the issued and outstanding common shares of Cornerstone, nearly eighteen months since announcing its intention to make a takeover bid for Cornerstone on January 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 advisors, 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 that collectively owned or controlled a majority of the outstanding shares of the Company. Cornerstone has already been advised today by shareholders that collectively own or control over 50% 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 advisors 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 October 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 that have an unusual standstill that does not expire until October 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 advisors, 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 and the Cascabel Joint Venture:

Cornerstone Capital Resources Inc. 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 north west Ecuador. Cornerstone has a 21.4% direct and indirect interest in Cascabel comprised of (i) a direct 15% interest in the project financed through to completion of a feasibility study and repayable at Libor plus 2% out of 90% of its share of the earnings or dividends from an operation at Cascabel, plus (ii) an indirect interest comprised of 7.6% of the shares of joint venture partner and project operator SolGold Plc. Exploraciones Novomining S.A. ("ENSA"), an Ecuadorean company owned by SolGold and Cornerstone, holds 100% of the Cascabel concession. Subject to the satisfaction of certain conditions, including SolGold's fully funding the project through to feasibility, SolGold Plc will own 85% of the equity of ENSA and Cornerstone will own the remaining 15% of ENSA.

Further information is available on Cornerstone's website: www.cornerstoneresources.com and on Twitter. For investor, corporate or media inquiries, please contact:

Investor Relations:
Mario Drolet; Email: ; Tel. (514) 904-1333

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Cautionary Notice:
This news release may contain 'Forward-Looking Statements' that involve risks and uncertainties, such as statements of Cornerstone's plans, objectives, strategies, intentions and expectations. The words "potential," "anticipate," "forecast," "believe," "estimate," "expect," "may," "project," "plan," and similar expressions are intended to be among the statements that identify 'Forward-Looking Statements.' Although Cornerstone believes that its expectations reflected in these 'Forward-Looking Statements' are reasonable, such statements may involve unknown risks, uncertainties and other factors disclosed in our regulatory filings, viewed on the SEDAR website at www.sedar.com. For us, uncertainties arise from the behaviour of financial and metals markets, predicting natural geological phenomena and from numerous other matters of national, regional, and global scale, including those of an environmental, climatic, natural, political, economic, business, competitive, or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our Forward-Looking Statements. Although Cornerstone believes the facts and information contained in this news release to be as correct and current as possible, Cornerstone does not warrant or make any representation as to the accuracy, validity or completeness of any facts or information contained herein and these statements should not be relied upon as representing its views after the date of this news release. While Cornerstone anticipates that subsequent events may cause its views to change, it expressly disclaims any obligation to update the Forward-Looking Statements contained herein except where outcomes have varied materially from the original statements.

On Behalf of the Board,
Brooke Macdonald
President and CEO

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

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