Castle Gold Corporation
TSX VENTURE : CSG

Castle Gold Corporation

October 28, 2009 09:09 ET

Argonaut Gold Seeks to Acquire Castle Gold for a Minimum of C$1.25 Per Share

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Common Shares outstanding calculated on a fully-diluted basis must be validly deposited pursuant to the Offer and not withdrawn by 5:00 pm (Toronto time) on December 30, 2009.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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