March 7, 2013

CIBG/OPG Letter of Agreement Questions and Answers

Dan Forbush, President and CEO of Cibolan Gold Corporation answers a number of questions for stockholders regarding the recent CIBG /Open Gold Corporation (OPG) announcement.

 

1.       Why is CIBG doing this deal with OPG?

Cibolan Gold Corporation had three goals in mind with the Open Gold deal: (1) Raise new capital for the Independence Project (let’s keep it consistent- “Project”) so additional drilling and permitting work can take place, (2) create a vehicle the at enables us to access the Canadian capital markets, (3) Increase shareholder value by ultimately proving more silver and gold reserves as well as finishing the permitting process prior to production.

2.       What’s the CIBG and Open Gold deal include?

At closing CIBG will receive 64% of the issued and outstanding shares of OPG In addition approximately $2 million of the new capital will be allocated to The Independence Project and to company working capital, CIBG gets two (2) of five (5) OPG director positions, and the Independence project gets critical exposure on the Canadian TSX Venture  Exchange (“TSX-V”). The Independence project does not get transferred to OPG until the capital is raised and all conditions of the transaction are met.

 

3.       How will the Cibolan Gold shares in OPG be distributed to CIBG shareholders and why is there a potential of a 20-month waiting period?

Cibolan Gold must distribute 90% of the shares received to the shareholders of Cibolan Gold within 20 months of the closing of the transaction. The shares will be issued on a pro rata basis to all shareholders of CIBG as of the record date, including warrant holders who may have exercised their warrants. These holding periods are set by the TSX-V in order to meet their requirements for transactions of this nature.

 

4.       How do you explain CIBG shareholders having 64% ownership of OPG but only 14% voting privileges?

Again, this is a requirement set by the TSX-V. Please note this 14% limit is only in place until the shares are distributed to CIBG shareholders. Thereafter voting is unrestricted. The transaction has built-in safeguards to protect the interests of CIBG shareholders throughout this holding period.

 

5.       When will the deal be done?

The target date is the end of April, 2013.

 

6.       What has to be done between now and April?

Each company will conduct its own due diligence which includes verifying all of the information each presents on its financials, assets, liabilities, management, etc.

 

7.       Who will make up the new OPG board of directors?

As part of the deal, Cibolan Gold will appoint two (2) directors who will join with two (2) directors appointed by Open Gold. A fifth director, mutually agreeable to both companies will also be selected.

 

8.       Will CIBG shareholders see their stock adjusted in anyway?

There are no changes to the CIBG share structure as a result of this transaction.

 

9.       How will the new capital be used?

Approximately 85% of the $2.35 million (net $2 million) will be dedicated to improve and increase the Independence Project’s resource base, complete additional drilling to increase the size and quality of the gold and silver resource in the initial pit area, position the Project to complete all permitting, identify, if possible, additional gold and silver mineralization on other areas of the property that are unexplored or underexplored and provide general working capital.

 

10.   What is the potential, immediate and long term of the Mitchell Project?

At this stage it is difficult to know what the long term potential of the Mitchell Project is and we really have not had the opportunity to look at it in detail. More information about its potential will come out in the course of our due diligence.

 

11.   How do I get my new Open Gold stock certificates?

We will be notifying all shareholders of the plans for distribution of the OPG once the process is cleared through the TSX-V. Please note that CIBG shareholders are not giving up any of their CIBG holdings in the course of this Transaction. Those holdings remain the same after the Transaction closes. They will have OPG shares distributed to them and thus will be shareholders of both companies.

 

12.   Will CIBG need to raise more capital downstream?

The Company plans to stay active in the mining business and will seek to raise new capital for projects as appropriate.

 

13.   OPG will raise additional capital to complete the transaction with CIBG. Where is the cash coming from?

OPG has asserted , and their previous experience with other junior gold mining companies lends credence to this, that they will be able to raise the required capital from existing or new shareholders.

 

14.   What other provisions are being made to protect CIBG shareholders?

We believe for CIBG, at this time and in this market environment, this transaction is an excellent way for us to bring additional value to our shareholders. Our Canadian counsel has reviewed the Letter of Intent (LOI) and believes completing a transaction based on the terms of the LOI is in the Company’s best interest. During the course of our due diligence on OPG we will insure that shareholder interests are fully protected.