Q2 Gold Resources Inc.

Q2 Gold Resources Inc.

September 02, 2010 17:56 ET

Q2 Gold Intends to Cease Reporting and to Wind Up its Affairs

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 2, 2010) - Q2 Gold Resources Inc. ("Q2 Gold" or the "Company"), which has filed its unaudited interim financial statements for the three-month period ended June 30, 2010 on SEDAR (www.sedar.com), announces its intention to cease reporting and to wind up its affairs.

Q2 Gold was originally created in 2007, when Corriente Resources Inc. ("Corriente") completed a spin-off of its Piedra Liza and Caya 36 gold exploration concessions in Ecuador to the Company in an arrangement transaction that closed on June 15, 2007. Corriente was at that time focused on the development of the Corriente Copper Belt, and saw potential for the separate development of the Piedra Liza and Caya 36 concessions, which are proximate to the Fruta del Norte gold deposit and the Nambija gold skarns, as part of a larger gold play. The Company's primary strategy was to gain market momentum from potential news anticipated from the development work that was expected to be carried out by Aurelian/Kinross on the Fruta del Norte deposit in 2008 and 2009, and on that basis to raise sufficient equity financing to support an exploration program. That strategy was interrupted by the imposition by the government of Ecuador in April 2008 of a suspension of all mining-related activities in Ecuador, followed later that year by the global recession.

As part of the spin-off transaction and to assist Q2 Gold with its business objectives, Corriente originally agreed to lend Q2 Gold up to $750,000, including accrued interest, in instalments under a convertible loan facility secured against all of the assets of the Company. By amendments dated September 25, 2008 and December 3, 2009, the maximum amount of the loan was increased to $1,500,000 and the maturity date extended to December 31, 2010. At any time prior to maturity, Corriente can require the Company to convert the outstanding balance, including accrued interest, into common shares of Q2 Gold at a conversion price of $0.10 per share. As at June 1, 2010, the Company reached the maximum facility amount of $1,500,000; accordingly, monthly interest payments since that date are required to be made by the Company from cash on hand.

If the total amount of the loan were converted to shares today, Corriente would own approximately 38% of the Company's outstanding shares.

The combination of the above-noted events and their timing, the extremely early-stage nature of the Company's concessions, the country risks inherent in Ecuador and the significance of the convertible loan held by Corriente has made obtaining any new third-party financing for the Company a virtual impossibility.

On May 31, 2010, Corriente was acquired pursuant to a take-over bid by a joint venture of two Chinese state-owned companies. To that date, the Company's directors and officers were those of Corriente, except that Q2 Gold had one additional director who was independent of both Q2 Gold and Corriente. Concurrent with the take-over, all of the directors of Corriente resigned and the employment of all of the officers of Corriente was terminated. Effective June 1, 2010, all of the Company's directors and officers were independent of Corriente.

Q2 Gold's board and management have pursued all reasonable avenues, including the potential for additional interim financing by Corriente, new equity financing, a sale or joint venture of the properties, or a write-down of the Corriente debt, in an effort to improve the Company's financial situation. None of those discussions has led to a solution to our ongoing capital requirements, and given the circumstances, the board of directors has concluded that the Company has no realistic prospects for financing.

With realization by Corriente on its security in the next few months apparently inevitable, the Company's board is of the view that it would be pointless to continue to pay monthly interest payments due on the convertible loan or to incur additional expenses for rent, administrative services, and the calling and holding of an annual meeting this fall. The decision was taken not to pay the monthly interest payment that was due on August 31, with the result that the Company is now in default under the loan.

The board is also of the view that there is nothing to be gained for the Company or its shareholders or creditors from a formal winding-up process, and that it would not be prudent to incur needless expense in that regard. The Company has paid its trade creditors in full and has no liabilities other than the debt to Corriente. It assumes that Corriente will take steps to enforce its security over all of the company's remaining assets, being its interest in the Piedra Liza and Caya 36 concessions and its cash on hand.

Accordingly, the Company intends to stop filing continuous disclosure documents and annual reports with the securities and corporate regulators, as a result of which, in due course, the shares of the Company will be made subject to a cease-trade order and the Company struck from the British Columbia Register of Companies ("BC Register").

At the close of the Arrangement, the adjusted cost base ("ACB") attributed to the shares of the Company that were distributed to Corriente's shareholders was $C0.0039 per share. The Company expects that once the Company has been struck from the BC Register, its shares will have no value. Shareholders should consult their financial or tax advisors.

On July 28, 2010, the Company received the resignation of Richard Clark as a director. The officers of the Company and all of its remaining directors have resigned from the Company, effective at the close of business today.

Kenneth R. Shannon, President and CEO

Certain statements contained in this News Release, including with respect to the Company's plans to cease reporting and wind-up its affairs, constitute forward-looking statements. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company's plans to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statements were made, and readers are advised to consider such forward-looking statements in light of the risks set forth in the company's continuous disclosure filings as found at www.sedar.com.

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