Chaparral Gold board unanimously recommends shareholders reject Waterton's revised hostile offer

SCOTTSDALE, AZ, July 23, 2014 /CNW Telbec/ - Chaparral Gold Corp. ("Chaparral" or "Company") (TSX: CHL) announces that its board of directors, after careful consideration with the assistance of its financial and legal advisors and on the recommendation of the independent Special Committee, voted unanimously to reject the revised hostile offer (the "Revised Offer") announced by Waterton Precious Metals Fund II Cayman, LP ("Waterton") to acquire all of the outstanding common shares of Chaparral at a price of $0.55 per Chaparral share in cash.

Chaparral's board of directors unanimously recommends that Chaparral shareholders REJECT Waterton's Revised Offer and NOT TENDER their common shares, and that any Chaparral shareholders who have previously tendered their shares into the Revised Offer WITHDRAW them immediately.

On behalf of Chaparral's board of directors, Michael Smith, Lead Independent Director and Chairman of the Special Committee stated, "After careful consideration with the assistance of Chaparral's financial and legal advisors, the Board has concluded that Waterton's Revised Offer still fails to provide adequate value for Chaparral shares. We continue to explore strategic alternatives to enhance the value of our company, including engaging in discussions with third parties regarding a potential transaction. Our Board remains committed to maximizing value for all our shareholders."

Nick Appleyard, CEO of Chaparral, added "After months of emphasizing the Eureka smelter issue with our shareholders, Waterton themselves no longer seem worried about the risk, seeing fit to increase their hostile offer for Chaparral. This comes after being fully briefed (under the confidentiality agreement entered into on May 9, 2014) as to our negotiations with the US Environmental Protection Agency ("EPA") regarding a potential "limited ability to pay" settlement. Waterton has remained coercive throughout this entire process and dropping their minimum tender condition is the latest tactic to try and expropriate shareholder value by securing a blocking position at a low price."

The reasons for the Board's rejection recommendation with respect to Waterton's hostile Revised Offer include, among other things, the Board's belief that:

  • The Revised Offer implies INSUFFICIENT value for the Company's mineral properties;
    • The Revised Offer is not credible as it implies that the Company's two open-pit, heap leach gold projects in Nevada are immaterial to the Company's value. The Revised Offer, net of the Company's estimated working capital, implies a value of only approximately US$4.8 million for Chaparral's mineral properties. Comparatively, the book value of Chaparral's mineral properties is approximately US$50 million (at March 31, 2014). Effectively Waterton is using Chaparral's cash and receivables to fund Waterton's proposed acquisition of Chaparral.
  • The timing of the Revised Offer is OPPORTUNISTIC;
    • Waterton is attempting to acquire Chaparral when Chaparral is negotiating for an acceptable "limited ability to pay" settlement with the EPA for the Eureka smelter issue. By minimizing the potential liability associated with this issue by way of such a settlement, it is expected that alternative higher value proposals for the Company will emerge.
  • The Revised Offer is highly COERCIVE;
    • After eight extensions and never having had more than 1.1% of the Common Shares tendered to its original offer, Waterton is dropping its minimum tender condition, which is highly coercive to shareholders and a clear attempt to secure, a minority blocking position to thwart Chaparral's strategic alternative process before Chaparral can reach a settlement with the EPA.
  • The Revised Offer fails to recognize the strategic value of the Company's asset base in mining friendly Nevada;
  • The Revised Offer is significantly below precedent multiples for similar-scale gold developers;
  • The Revised Offer represents an inadequate premium to the share price;
  • The Revised Offer is financially inadequate;
  • Rejection of the Revised Offer by the Company's directors and officers; and
  • The Revised Offer is highly conditional.

Additional details regarding the basis for the recommendation of the Chaparral board of directors are included in the section "Reasons for Rejection" of the Directors' Circular dated March 4, 2014, and in the Notice of Change to the Directors' Circular to be mailed to Chaparral shareholders, and filed on Sedar in the next few days. The board of directors of Chaparral urges its shareholders to read the information contained in both the Directors' Circular and the forthcoming Notice of Change to the Directors' Circular carefully.

Maxit Capital LP ("Maxit"), the financial advisor to the Company, has provided a verbal opinion to the board of directors that, as of July 23, 2014 the date of such opinion, the consideration offered to Chaparral shareholders pursuant to the Revised Offer is inadequate, from a financial point of view, to Chaparral shareholders other than Waterton and its affiliates. The full text of Maxit's updated opinion, which Chaparral shareholders are urged to read in its entirety, will be included in the forthcoming Notice of Change to the Directors' Circular.

About Chaparral Gold

Chaparral is a Nevada-focused precious metals company actively permitting the 100%-owned Gemfield deposit at the Goldfield property, in central Nevada. In addition, Chaparral holds a 100% interest in the advanced-stage Converse property, also located in Nevada.

Cautionary Statements:

Some of the statements contained in this release are "forward-looking statements" within the meaning of Canadian securities law requirements, including statements relating to the Eureka smelter site issue, in respect of potential higher value proposals for the Company and in respect of the Company's Goldfield property. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties such as: risks relating to a potential resolution of the Eureka smelter site issue and permitting activities at Goldfield. Except as required pursuant to applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE: Chaparral Gold Corp

For further information:

In North America:
Nick Appleyard
Tel: 1 480 483 9932

Robert Thaemlitz
Renmark Financial Communications
Tel: 1 514 939 3989

In Europe:
Oliver Holzer
Marketing Consultant
Tel: +41 44 853 00 47

Or email the Company at:
Web Site:

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