Proposed Transaction

3 Months Ended

Mar. 31, 2019

16. Proposed Transaction

On February 9, 2019, the Company announced that it had entered into a binding share purchase agreement with a group of purchasers including Thomas M. Clay and certain members of the Clay family and associated entities (the “Purchaser”), whereby the Purchaser will acquire 100% of the Company’s 50% ownership interest in the Soledad Mountain Project (the “Transaction”).

The consideration from the Purchasers is comprised of (1) $4.25 million in cash; (2) the extinguishment of all amounts owing to the Purchasers by the Company under Clay Group Loan (Note 13(ii)); and (3) the cancellation of all of the Purchasers’ ownership interest in the Company (consisting of 177,701,229 Shares, 457,500 options and 18,000,000 share purchase warrants). In addition, the Purchasers may pay a contingent payment to the Company if the Soledad Mountain Project is subsequently sold or transferred to a third party in certain circumstances. The Company incurred $466 of costs relating to the Transaction during the three months ended March 31, 2019.

The transaction is subject to the approval of the shareholders of the Company. The shareholders will vote on the transaction at the Annual General and Special meeting to be held on May 13, 2019.

All payments of interest and principal on the Clay Group Loan (Note 13(ii)) are not due until completion of the proposed Transaction. If the shareholders vote against the Transaction, then the Clay Group Loan principal and accrued interest will be due immediately. Under this scenario, should the Company be unable to negotiate an extension to the Clay Group Loan, the independent directors and management will have no alternative but to pursue a reorganization or, at worst, bankruptcy, where the likely outcome for shareholders is the total loss of equity value.