Non-Brokered Private Placement - Gold Royalty Tokens

2018-02-02 / @thenewswire

(TheNewswire)

Vancouver, British Columbia / The Newswire / 2nd February 2018 – Canamex Gold Corp. (the “Company”) (TSX-V: CSQ) (OTCBB: CNMXF) (FSE: CX6) is pleased to announce a non-brokered private placement of Gold Royalty Tokens (the “Offering”), to accredited investors. Further details are provided below.

Offering

- 1,000,000 Gold Royalty Tokens at 0.005oz per Unit for 5,000 ounces gold

- Each Gold Royalty Token offered at $USD 5.00 ($CAD 6.25)

- Minimum subscription: 200 Gold Royalty Tokens for $USD 1000 ($CAD 1250)

The total Offering will raise up to $CAD 6,250,000 for the Company. There is no minimum offering. The Gold Royalty Tokens are redeemable in lots of 200 Gold Royalty Tokens, for one fine ounce gold bar, fineness 99.99%, which is LBMA good delivery certified from a nominated LBMA accredited bullion house, at any time after the bullion delivery event, as defined in the Offering. The Gold Royalty Tokens, have a term of 13 years, are not-transferable and will not be listed for trading on any traditional stock exchange.

As this Offering is effectively a royalty arrangement, it is an obligation that is attached to the Bruner Gold Project (“Bruner”) itself. The royalty obligation will be registered against the Bruner property. The Gold Royalty Tokens will only pay out, if there is production from Bruner. If the Company, (or its successors, or trustees etc.) fail to place Bruner into production, within the next 13 years, the Gold Royalty Tokens may have little or no value. The Gold Royalty Tokens are illiquid as they cannot be resold, traded on a traditional stock exchange, or otherwise distributed or transferred by participants in this Offering. This Offering may result in a dilution of common shareholder’s investment, as the Company will have a legal obligation to deliver all gold required, pursuant to this Offering, to participants in this Offering, prior to any claim by common shareholders. The Gold Royalty Tokens will have no voting rights, nor do they have a right to participate in any residual equity of the Company.

Value Proposition1

One Gold Royalty Token Market Value = $US 6.75 ($CAD 8.43)

One Gold Royalty Token Offer Price = $US 5.00 ($CAD 6.25)

Value premium = $6.75 - $5.00 = $ US1.75 per Gold Royalty Token or 35% premium to offer price

----------------------------------------------- |SUMMARY OF THE VALUE PROPOSITION | |---------------------------------------------| |Gold |0.005 ounces|Market Premium|35% | |Royalty |9999 gold |to Offering | | |Token |bullion |Price | | -----------------------------------------------

Use of the Proceeds

The net proceeds of the Offering will be used by the Company to carry out the following:

1.Initial Crypto-Token Offering (ITO) Development Work: ITO development work, including developing the regulatory documentation, the ITO landing platform, the logistics and the processes to initiate and complete a planned ITO of gold and/or silver backed Crypto-Tokens, with smart contracts, deployed on the Ethereum blockchain during 2018. Proceeds budgeted 10%.

2.Bruner Gold Development Project: Development work in 2018 to the mine financing stage, including finalizing engineering design, optimizing mining plan, complete environmental permitting, and various associated permitting work, based on the 2018 updated PEA recommendations. Proceeds budgeted 70%.

3.Silverton Gold Exploration Project: Complete geochemistry and geophysics work, leading to defining and executing a drilling campaign in 2018. Proceeds budgeted 20%.

Bruner Gold Development Project

As the Company is still in the development phase with its Bruner Gold Project, in Nevada, it has yet to produce any gold or other resources. The Company has not yet made a production decision, and is raising capital to advance the project through permitting and feasibility, the results of which are anticipated to support a production decision upon completion. Whilst the 2018 updated PEA is positive, and recommends advancing the project through permitting and feasibility, it is based upon mineral resources only, and not mineral reserves. The results of a feasibility study may differ from the results of the PEA. Therefore, a Gold Royalty Token linked to the production of such mineral resources is speculative, as there is no definitive time horizon in which commercial production of such resources could commence; given that there is no definitive feasibility study demonstrating economic production.

Initial Crypto-Token Offering (ITO) Considerations

Gold Royalty Token holders may be offered a priority allocation into any ITO, where any is conducted by the Company in 2018, by offering the Gold Royalty Token holders conversion of their Gold Royalty Tokens to Crypto-Tokens deployed on the Ethereum blockchain, with a priority allocation in the ITO.

The Company is not undertaking any current ITO right now. If, as and when the Company wishes to undertake an ITO, it will disclose such details at that time, including any priority allocation in any ITO, to the holders of the Gold Royalty Tokens.

Whilst the Company is not conducting a ITO now it may decide to do so in the future. If the Company decides to do so, it will determine the terms of such offering and such ITO may be deemed to be a securities offering, for the purposes of the Securities Act (British Columbia) and therefore require either a prospectus or an exemption from the prospectus requirement to issue the Crypto-Tokens deployed on the Ethereum blockchain. The Company may utilize the accredited investors exemption, the offering memorandum exemption or such other exemptions from the prospectus requirement that are detailed in National Instrument 45-106 – Prospectus Exemptions. However, in certain instances the issuance of a Crypto-Tokens may be determined to be a derivative if the underlying asset of the crypto-token is a commodity, which is not an investment contract. Until the Company finalizes any terms of any ITO it will be unable to definitively determine if the Crypto-Token is a security or a derivative. Crypto-Tokens may be tradeable on the Ethereum blockchain. If such Crypto-Tokens are a security then the Company will need to file a prospectus to permit the secondary market trading of the Crypto-Token or alternatively apply for an exemption from the prospectus requirement for secondary market trading, and there are no assurances that such exemptions will be granted.

Gold Royalty Token Considerations and Risks

Important considerations regarding this Offering and main risk disclosures, are summarized at Annex A.

1.Assumptions

Gold Royalty Token Purchase price = $US 5.00 ($CAD 6.25)

One Gold Royalty Token = 0.005 ounces 9999 gold bullion by weight

Exchange Rate $CAD 1.25 = $US 1.00

Spot Gold price = $US 1350 per ounce ($ CAD 1,687)

One Gold Royalty Token Market Value = $US 1350 x 0.005oz = $US 6.75 ($CAD 8.43)

Gold Royalty Token expiry date 30th December 2030 (about 13 years)

About the Company

Canamex Gold Corp. (TSX-V: CSQ) (OTCBB: CNMXF) (FSE: CX6) is engaged in fast-tracking toward development of the Bruner Gold Development Project in the prolific gold jurisdiction of Nye County, Nevada. The region is home to several producing and past-producing mines along the Walker Lane Trend. Canamex completed a positive Preliminary Economic Assessment (PEA) on the Bruner Gold Development Project in 2016. Based on additional drilling conducted on the property, the company completed an updated PEA in 2018. Canamex cautions that the PEA is preliminary in nature, in that it includes Inferred Mineral Resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Canamex is now moving the Bruner Gold Project forward into permitting and feasibility on the strength of this positive updated PEA and the rising gold price environment. The second asset is the Silverton Gold property, a gold exploration project, in Nevada, which has geological similarities to the Long Canyon gold deposit in Nevada, being mined by Newmont Mining. Canamex has signed Agreements with Harmonychain AS, for Ethereum Blockchain Smart Contract Crypto-Tokens for Gold and Silver, as an alternative means of raising capital, potentially without equity dilution. The Agreements secure the exclusive rights to 6 (Six) Ethereum Crypto-Token domain names, ticker codes, and associated smart contracts, for Gold and Silver, if any of them have been successfully completed by 31st December 2018. Further information is available at http://canamexgold.com

Greg Hahn (CPG#7122), President & COO of the Company is the qualified person who has reviewed and approved all technical disclosures in this release.

ON BEHALF OF THE BOARD

David Vincent
Chief Executive Officer and Director

david.vincent@canamexgold.com

Mike Stark
Chairman of the Board
Contact: (604) 833-4278
mike.stark@canamexgold.com

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

FORWARD LOOKING INFORMATION This news release contains forward-looking statements. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. These statements speak only as of the date of this press release. Actual results could differ materially from those currently anticipated due to a number of factors and various risk factors discussed in the Company's Management's Discussion and Analysis under the Company's profile on www.sedar.com While the Company may elect to, it does not undertake to update this information at any particular time.

Annex

A.Gold Royalty Token - Considerations and Risks

Annex A

Gold Royalty Token - Considerations and Risks

Equity Interest

The Gold Royalty Tokens do not give the Gold Royalty Token holder any equity or other interest in the Company equivalent to a holder of common shares including, for greater certainty, a right to participate in the profits or the distribution of assets of the Company, nor any voting rights in any meeting of the security holders of the Company. A holder of a Gold Royalty Token is only entitled to delivery of gold, on request, pursuant to the terms of the Gold Royalty Token Offering. The Company will receive cash for this Gold Royalty Token offering, and will have an obligation to meet gold delivery requests, but only when commercial production is achieved.

The Gold Royalty Token effectively will be a long-term royalty interest on the Bruner Gold Project, which will require the delivery of gold if or when commercial production is achieved. Investors of Common Shares of the Company should be aware that a Gold Royalty Token holder will receive gold, if or when commercial production is achieved and after redemptions of gold are satisfied, the Company could sell any remaining resources available.

Redemption

For every 200 Gold Royalty Tokens held, such Gold Royalty Tokens are redeemable for one 1-ounce gold bar having a fineness of 99.99% which are London Bullion Marker Association (“LBMA”) good delivery certified. The redemption period commences 180 days from the date that the Company declares commercial production of gold from the Bruner Gold Project. The Company must satisfy the redemption notice within 30 days from receipt from the holder.

Accounting Considerations

Companies continue to look to alternative sources of finance and creative deal structures for growth and funding. These have included joint arrangements, divestments, mergers, streaming, royalty deals and offtake-linked pre-financing. New investment vehicles have emerged in this alternative finance space to take advantage of investor demand for commodity exposures and the Company demand for funding. Alternative finance, by its nature innovative and deal specific, does not find a natural ‘home’ in the IFRS accounting standards. Each arrangement is unique and there is no ‘one size fits all’. There is no ‘industry guidance’ in IFRS that sets out the accounting for these structures.

The legal form of this Gold Royalty Token offering, is a contract to buy a non-financial item, the specified commodity, in this case gold. Contracts to buy or sell non-financial items are normally considered executory contracts and are outside the scope of the financial instruments guidance.

The settlement is in gold bullion, but contingent on successful commercial production from the Bruner Gold project, and there is no compensation if development is unsuccessful. Therefore, this is like a Royalty model, but different in that there is no percentage of production acquired via a royalty arrangement, but a fixed volume of production that is acquired, via the Gold Royalty Tokens. Gold Royalty Token holder’s right to delivery is dependent on successful development of the mine and extraction of minerals specific to the property, like a royalty.

The Company in such an arrangement does not record an obligation for future payments. Since there is no unconditional obligation to deliver cash or other monetary payment, no financial obligation arises.

The Company can be deemed to sell a proportion of resources, because a defined quantity of resources will be transferred to Gold Royalty Token holder from the Bruner Gold project. Settlement is based on gold bullion delivery and not net income, so Gold Royalty Token holder’s entitlement basically represents a portion of volume of production.

Gold Royalty Token holder has no contractual right to enforce development of the mine. Gold Royalty Token holder has no contractual rights if the other party fails to develop the mine and does not start production. Therefore, Gold Royalty Token holder is exposed to risks that would not be typical in a financial instrument.

Gold Price

The value of the Gold Royalty Tokens relates directly to the value of gold, and fluctuations in the price of gold could materially affect an investment in the Gold Royalty Tokens. Gold bullion is traded internationally and its price is generally quoted in U.S. dollars. The price of the Gold Royalty Tokens will depend on, and typically fluctuate with, the price fluctuations of gold. The price of gold may be affected at any time by many international, economic, monetary and political factors, many of which are unpredictable.

Even if the Gold Royalty Tokens are held for the long-term, that may not result in a profit, since gold markets have historically experienced extended periods of flat or declining prices, in addition to sharp fluctuations. If the price of gold declines, the Company expects the value of the Gold Royalty Tokens to decline.

Changing tax, royalty, land and mineral ownership and leasing regulations in gold producing countries can have an impact on market functions and expectations for future gold supply. This can affect both share prices of gold mining companies and the relative prices of other commodities, which are competitive factors that may affect investor decisions in respect of investing in gold and the Gold Royalty Tokens.

Suitability

Prospective purchasers need to independently determine the suitability of investing in Gold Royalty Tokens.

Prospective purchasers should determine whether an investment in Gold Royalty Tokens is appropriate in their circumstances and should consult with their legal, business and tax advisors in evaluating the consequences of an investment in the Gold Royalty Tokens. An investment in Gold Royalty Tokens is only suitable for investors who: (i) have the requisite knowledge and experience in financial and business matters to evaluate the merits and risks of an investment in Gold Royalty Tokens; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate such merits and risks in the context of their financial situation; and (iii) can bear the potential economic risks associated with any investment in the Gold Royalty Tokens.

Exchange Acceptance

Subject to the Policies of the TSX Venture Exchange, all issuances of securities must be approved by the Exchange. The Company has applied for conditional acceptance of this private placement but has yet to receive final acceptance of in respect of this offering. The Company has determined the Gold Royalty Token to be a security that it will be issuing, however, unlike a common share or any other share in the capital of the Company, this Gold Royalty Token will not entitle any holder to the rights of a shareholder in the Company. A Gold Royalty Token holder is not a shareholder in the capital of the Company. The Company is still negotiating the final form the Gold Royalty Token and will notify any subscribers and the market of any changes to material terms relating thereto.