Gran Colombia Gold Corp. (TSX: GCM) and Medoro Resources Ltd. (TSX:
MRS) (together, the "Companies") have re-affirmed their strong
commitment to completing a friendly combination of the Companies,
and have rejected the recommendations contained in two separate
reports from Glass, Lewis & Co., LLC ("Glass Lewis"), a
professional services firm that provides proxy research and voting
recommendations to institutional investors. The Glass Lewis reports
are in contrast to the positive recommendation of Institutional
Shareholder Services Inc. ("ISS").
The Companies believe the approach used by Glass Lewis to
analyze the combination is fundamentally flawed in several respects
and does not adequately assess the rationale of the transaction. In
its analysis, Glass Lewis failed to address several key factors,
including: (1) the structure of the transaction; (2) the rationale
and process of the transaction; and (3) the Colombia-specific
considerations. Furthermore, the basis for its recommendations has
been founded on erroneous facts.
It is inconceivable that the Glass Lewis analyst who authored
the two separate reports came to conclusions totally at odds to
each other. The Medoro shareholders are being told that they are
being offered too little consideration, while Gran Colombia
shareholders are being told that they are offering too much
consideration. This analysis is at best counter intuitive and at
worst fundamentally flawed. It defies logic to think that the same
analyst could publish two separate recommendations in respect of
the same transaction with opposite conclusions in terms of the
adequacy of the consideration.
In addition, the original Glass Lewis report to Medoro
shareholders did not take into consideration or assign value to the
warrant component of the offer price. Failing to include the value
of the warrants brings the conclusion of the original report's
analysis into serious doubt. The joint circular clearly states that
the consideration warrants will be issued under the existing Gran
Colombia indenture and that such consideration warrants will be the
same warrants currently traded on the Toronto Stock Exchange (under
the ticker symbol "GCM.WT"). The fact that this was not properly
addressed suggests that Glass Lewis did not fully review the
contents of the joint circular and/or did not understand the basic
terms of the transaction. Glass Lewis has since revised their
reports to take into consideration and assign value to the warrant
component of the offer price - however, this omission nonetheless
remains prima facie evidence that the precise details of the
transaction have not been properly reviewed or considered.
The following sets outs in greater detail the Companies'
position with respect to the transaction:
1) Structure: The Glass Lewis reports question this transaction
as being a true "merger of equals", which suggests that Glass Lewis
is unable to properly comprehend this type of transaction. The
combination of the Companies is a true "merger of equals". This is
clearly demonstrated by the following features: (a) following the
transaction, current Gran Colombia shareholders and former Medoro
shareholders are anticipated to each own approximately 50% of the
combined entity on a fully-diluted basis; (b) the board of the
combined company will be composed of all the current directors of
Gran Colombia and Medoro; and (c) the management teams of each
company will also be combined.
Of particular note, which supports the view that Glass Lewis
does not understand the merger of equals concept, the Glass Lewis
reports analyze the transaction on the basis of premiums paid. This
is not a metric that is used in a merger of equals approach.
2) Rationale and Process: Glass Lewis' analysis appears
one-dimensional and largely overlooks the persuasive rationales for
the transaction, including, that the combination of the Companies:
(a) provides immediate increased scale, better liquidity and
operational synergies; (b) creates Colombia's leading gold producer
with a 42% cumulative average growth rate between 2011 and 2016;
(c) assembles a team capable of addressing critical issues relating
to operating in Colombia; (d) provides a balanced and sustainable
project and development pipeline; and (e) positions the Companies
well for long-term regional consolidation, amongst several other
benefits. Although Glass Lewis refers to some of the benefits in
their reports under the heading entitled "Board Rationale", they
quickly dismiss these highly positive attributes and instead refer
back to one-dimensional arguments. By overlooking these highlights,
which are significant catalysts to create value, the Glass Lewis
analyst illustrates that he has not properly considered all the
factors in his conclusion.
The Glass Lewis report also questions the strategic review
process in addressing alternative transactions and states "(...) we
fail to see compelling reason for shareholders to believe the
proposed acquisition represented the most attractive means by which
the Company could address its "desire to expand rapidly".(i) The
Companies followed a standard exhaustive process to reach this
combination, which is clearly stated in the joint circular. It is
important to note that the merger between Medoro and Gran Colombia
was sparked by numerous overtures from substantial, sophisticated,
resource-focused investors/shareholders in both Companies, who view
this combination as an opportunity to merge two relatively
undervalued companies into a stronger entity that will be better
able to create lasting and long-term shareholder value.
Mr. Frank Holmes, Chief Executive Officer and Chief Investment
Officer of U.S. Global Investors, states: "The merger of these two
companies represents an opportunity for shareholders to benefit
from a re-positioning of the combined entity as the leading gold
producer in Colombia. Based on our analysis, this merger should
drive sustainable growth in resources, cash flow and production and
based on our analysis this merger should drive momentum in relative
value for the combined company."
3) Colombia-Specific Considerations: The Glass Lewis reports
fail to address the specific leadership capabilities required to
build a mining company in Colombia. A considerable part of the
rationale for this merger is to create a management and leadership
team that can successfully navigate the political and social issues
in Colombia.
In Colombia, political, social and environment considerations
are as important as asset quality. Other companies with attractive
deposits operating in Colombia have failed or incurred material
costs and/or delays for not addressing these issues. The combined
leadership team has the required experience and proven track record
to develop these assets and to maximize shareholder value.
ISS, which is Glass Lewis' closest industry peer, recently
released a recommendation that they support the transaction and an
excerpt from their conclusion illustrates that, unlike Glass Lewis'
analysis, ISS has completed a full review and understands the
transaction. In its report, ISS stated: "The transaction is
structured as a merger of equals. The companies believe the
combined company's growth prospects are greater than either could
achieve on their own (42% compound annual growth rate in production
is expected from 2011 to 2016). The companies expect to realize
cost savings from a single human resources and community relations
program as well as production synergies and economies of scale from
more efficient use of facilities. The combined company will have
exposure to two large production and development projects and is
expected to be well positioned to take advantage of consolidation
opportunities. The combined management team is said to be
well-suited to dealing with potential political, social and
economic issues in Colombia."(i)
It is the view of the Companies that, in this case, Glass Lewis
grossly overlooked several crucial factors needed to make an
informed decision on this merger and that the merits of their
recommendation must be questioned.
Given the deficiencies identified in the Glass Lewis reports,
the Companies believe that shareholders should ignore these
inconsistent reports and vote FOR the arrangement resolution.
A joint management information circular, dated May 6, 2011, has
been mailed to applicable securityholders and filed on SEDAR
(www.sedar.com). The joint circular contains, among other items,
details regarding the arrangement resolution, the terms of the
acquisition, the business of Gran Colombia and Medoro and certain
historical and pro forma financial information relating to Gran
Colombia and Medoro.
Securityholders who require assistance voting their proxy should
contact Kingsdale Shareholder Services Inc., the Companies' proxy
solicitation and information agent, by: (i) telephone toll-free in
North America at 1-888-518-1563 or 416-867-2272 outside of North
America; or (ii) e-mail to contactus@kingsdaleshareholder.com.
(i)Permission to quote from either the Glass Lewis Reports or
the ISS Report was neither sought nor obtained.
About Gran Colombia Gold Corp.
Gran Colombia is a Canadian-based gold and silver exploration
and development company focused on acquiring, developing and
operating properties of merit in Colombia. Gran Colombia holds 95%
of the former Frontino Gold Mines Ltd. gold and silver assets,
including the largest underground gold and silver mining operation
in Colombia. It also owns four more exploration projects in
Colombia for total exploration acreage of approximately 21,400
hectares. Gran Colombia is committed to implementing its
exploration and development strategy with a comprehensive
environment, safety and community program, meeting international
standards of best practice.
Additional information on Gran Colombia can be found on its
website at www.grancolombiagold.com and by reviewing its profile on
SEDAR at www.sedar.com.
About Medoro Resources Ltd.
Medoro is a gold exploration, development and mining company
with its primary focus being the development of a large-scale,
open-pit mine at Marmato in Colombia. Medoro also has a 5% interest
in the Gran Colombia properties in Colombia with an option to
increase its interest to 50%. Medoro also holds a 100% interest in
the Lo Increible 4A and 4B concessions in Venezuela, as well as
interests in gold exploration properties in Mali.
Additional information on Medoro can be found on its website at
www.medororesources.com and by reviewing its profile on SEDAR at
www.sedar.com.
Cautionary Statement on Forward-looking Information
This news release contains "forward-looking information", which
may include, but is not limited to, statements with respect to the
future financial or operating performance of Medoro, Gran Colombia
and their respective projects. Often, but not always,
forward-looking statements can be identified by the use of words
such as "plans", "expects", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates", or "believes"
or variations (including negative variations) of such words and
phrases, or state that certain actions, events or results "may",
"could", "would", "might" or "will" be taken, occur or be achieved.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Medoro and Gran Colombia to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Forward-looking statements contained herein are made as
of the date of this press release based on current expectations and
beliefs and Medoro and Gran Colombia disclaim, other than as
required by law, any obligation to update any forward-looking
statements whether as a result of new information, results, future
events, circumstances, or if management's estimates or opinions
should change, or otherwise. There can be no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, the reader is
cautioned not to place undue reliance on forward-looking
statements.
Contacts: Gran Colombia Gold Corp. Belinda Labatte Investor
Relations (647) 436-2152 www.grancolombiagold.com Medoro Resources
Ltd. Robert Doyle Director (416) 603-4653
www.medororesources.com