Sun Valley Gold LLC

March 14, 2007 20:10 ET

Sun Valley Gold LLC: Holdings of Securities of Chesapeake Gold Corp.

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 14, 2007) - Peter Palmedo, Sun Valley Gold Company and Sun Valley Gold LLC announce that, as a result of the completion of a plan of arrangement (the "Plan of Arrangement") involving American Gold Capital Corporation ("American Gold") and its shareholders and Chesapeake Gold Corp. ("Chesapeake") and a wholly-owned subsidiary of Chesapeake, Mr. Palmedo and Sun Valley Gold Company, a company which Mr. Palmedo controls, acquired beneficial ownership of, and an affiliate of Mr. Palmedo, Sun Valley Gold LLC, acquired control or direction over, a total of (a) 1,474,649 common shares ("Chesapeake Common Shares") of Chesapeake, representing approximately 5.11% of the issued and outstanding Chesapeake Common Shares, (b) 737,325 common share purchase warrants ("Chesapeake Warrants") of Chesapeake to purchase 737,324 Chesapeake Common Shares, which underlying shares would represent approximately 2.49% of the issued and outstanding Chesapeake Common Shares after giving effect to the exercise of such warrants, and (c) 147,464 Class A, Series 1 Restricted Voting shares ("Chesapeake Series 1 Class A Shares") of Chesapeake, which provide rights of conversion into Chesapeake Common Shares on certain conditions, representing approximately 16.35% of the issued and outstanding Chesapeake Series 1 Class A Shares.

Under applicable Canadian securities laws, Mr. Palmedo is deemed to beneficially own securities which are held by Sun Valley Gold Company, a corporation controlled by him. On January 15, 2007, Sun Valley Gold Company acquired common shares of American Gold which were exchanged for shares of Chesapeake pursuant to the Plan of Arrangement, from Sun Valley Gold LLC, a limited liability company of which Sun Valley Gold Company is the managing member.

Following completion of the Plan of Arrangement, Mr. Palmedo and Sun Valley Gold Company beneficially own, and Sun Valley Gold LLC exercises control or direction over, in total, the Chesapeake securities described above. Each Chesapeake Warrant entitles the holder to purchase one Chesapeake Common Share at an exercise price of $8.00 for a term of five years expiring on February 23, 2012. Each Chesapeake Series 1 Class A Share will be automatically convertible, under certain conditions as more fully described in the early warning report being filed concurrently with this press release, into Chesapeake Common Shares.

Given various factors that will have to be taken into consideration in determining whether the Chesapeake Series 1 Class A Shares will be converted into Chesapeake Common Shares and the basis for such conversion, at this time it cannot be determined if any Chesapeake Common Shares will be issued on conversion of Chesapeake Series 1 Class A Shares beneficially owned, or over which control or direction is exercised, by Mr. Palmedo, Sun Valley Gold Company and Sun Valley Gold LLC and, if so, how many Chesapeake Common Shares. The Chesapeake Common Shares which Mr. Palmedo and Sun Valley Gold Company may be entitled to acquire, and over which Sun Valley Gold LLC may be entitled to exercise control or direction, on conversion of the Chesapeake Series 1 Class A Shares, and the Chesapeake Common Shares which Mr. Palmedo and Sun Valley Gold are entitled to acquire, and over which Sun Valley Gold LLC would exercise control or direction, on exercise of the Chesapeake Warrants, together with Chesapeake Common Shares beneficially owned, or over which control or direction is exercised by them, may be more than 10% of the outstanding Chesapeake Common Shares, after giving effect to the conversion and exercise of only the Chesapeake securities beneficially owned by Mr. Palmedo and Sun Valley Gold Company, and over which Sun Valley Gold LLC exercises control or direction.

The Chesapeake securities were acquired from treasury pursuant to the Plan of Arrangement on February 23, 2007. Mr. Palmedo, Sun Valley Gold Company and Sun Valley Gold LLC may increase or decrease direct or indirect beneficial ownership of, or control or direction over, securities of Chesapeake depending upon future market conditions.

For further information, or to obtain a copy of the early warning report filed pursuant to applicable securities legislation in respect of this matter, please see contact information below.

Contact Information

  • Sun Valley Gold Company
    Mr. Peter F. Palmedo
    President
    Managing Member, Sun Valley Gold LLC
    (208) 726-2327
    (208) 726-2469