MAG Silver to Acquire Gatling Exploration in All-Share Acquisition

Rhea-AI Summary

Gatling Exploration Inc. has announced an arrangement agreement with MAG Silver Corp. for an all-share acquisition, whereby Gatling shareholders will receive 0.0170627 shares of MAG for each Gatling share. This transaction offers a 49.1% premium over Gatling's last closing price and is expected to close by late May 2022, pending approvals. Additionally, MAG will provide a $3 million bridge loan to support Gatling during this transition. The deal is backed by significant shareholder support, aiming to enhance liquidity and value for Gatling's investors.

Positive

• Transaction offers a robust premium of approximately 49.1% relative to Gatling's closing price.
• Secured bridge loan of $3 million from MAG Silver to support operational continuity.
• Strong shareholder support, with approximately 15.19% of shares backed by agreements.
• Exposure to MAG's world-class Juanicipio project could boost shareholder value.

Negative

• Transaction requires multiple approvals, adding uncertainty to the completion timeline.
• Potential integration challenges with MAG Silver's operations post-acquisition.

VANCOUVER, BC / ACCESSWIRE / March 11, 2022 / GATLING EXPLORATION INC. (TSXV:GTR, OTCQB:GATGF) (the "Company" or "Gatling) is pleased to announce that it has entered into an arrangement agreement dated March 10, 2022 (the "Arrangement Agreement") with MAG Silver Corp. (MAG: TSX / NYSE A) ("MAG" or "MAG Silver").

The Arrangement Agreement contemplates that MAG will acquire all of the issued and outstanding common shares of Gatling pursuant to a court-approved plan of arrangement (the "Transaction"). Pursuant to the Arrangement Agreement, shareholders of Gatling will receive 0.0170627 of one common share of MAG for each Gatling share by way of plan of arrangement under the Business Corporations Act (British Columbia) (the "BCBCA"). This ratio reflects a premium of 49.1%, relative to the Company's last closing price on the TSX Venture Exchange ("TSXV") and a premium of 47.4%, relative to the Company's latest 5-day VWAP of $0.2708/sh.

Concurrent with the signing of the Arrangement Agreement and subject to TSXV approval, MAG has agreed to provide a bridge loan of up to $3,000,000 ("Bridge Loan") to Gatling, such Bridge Loan being evidenced by a promissory note and debenture, secured by a general security agreement. The loan will bear interest at a rate of 12% per annum and includes a conversion right whereby MAG may convert all or a portion of the outstanding principal amount and accrued interest into up to 19.9% of Gatling's issued and outstanding shares.

Jason Billan, President and CEO for Gatling, commented, "Today's announcement marks the culmination of several months' effort to evaluate financing alternatives at Gatling, which has led to an all-share acquisition by leading mid-tier miner, MAG Silver, at a highly robust premium. In combination with the premium delivered, this transaction offers our shareholders compelling upside potential in our acquirer, which is well-positioned to re-rate as its world-class Juanicipio Ag project (44% owned) advances towards commercial production. MAG Silver is also bolstered by a strong balance sheet and access to capital, mitigating risk of further dilution. Furthermore, Gatling's shareholders will continue to be exposed to further upside at Larder as well as MAG's highly prospective Deer Trail project in Utah.

Attracting a group with the technical capability and industry reputation of MAG both validates several years of quality technical work at the Larder project by our team and underscores the growth potential of the project. We would like to thank all key stakeholders, including the Matachewan and Wahgoshig First Nations, for their ongoing support and look forward to introducing these parties to their new partner shortly. We are targeting a close by late-May and plan to transition the Larder project into MAG's capable hands shortly thereafter."

Strategic Rationale for the Transaction and Benefits to Gatling's Shareholders

• Robust Premium - All-share consideration of C$0.40 per share which represents a strong premium of approximately 49.1% relative to the closing price of Gatling common shares on the TSXV on March 10, 2022 and a 47.4% premium relative to the Company's 5-day VWAP;
• Board and Shareholder Support - Strong shareholder support via voting support agreements from Sprott Asset Management and the officers and directors of Gatling, for the common shares, options and warrants held by such parties which collectively represent approximately 15.19% of Gatling's issued and outstanding common shares.
• Re-rate Potential - Exposure to MAG Silver and its world-class, 44%-owned Juanicipio project in Mexico which is scheduled to reach 85 - 90% design capacity by YE2022, as well as retaining optionality to further growth at the Larder project;
• Tier I Miner - MAG Silver is run by an exceptional, technically-inclined team, with a strong balance sheet and access to capital, providing our shareholders with increased liquidity and asset diversification; and
• Crystallization of Value - The Transaction provides certainty of value while limiting future dilution risk.

Transaction Details

Pursuant to the Transaction, Gatling shareholders will receive 0.0170627 of a common share of MAG for each Gatling common share held. Optionholders of Gatling will receive replacement options of MAG, entitling them to receive, on exercise, common shares of MAG, subject to an adjustment to reflect the Transaction. Holders of outstanding common share purchase warrants of Gatling will have their warrants adjusted in accordance with their respective contractual terms.

The Transaction will be effected by way of a court-approved plan of arrangement under the BCBCA, requiring the approval of (i) 66⅔% of the votes cast by Gatling shareholders and optionholders (the "Securityholders"), voting together as a single class, present in person or represented by proxy; (ii) 66⅔% of the votes cast by shareholders of Gatling present in person or represented by proxy; and (iii) a simple majority of the votes cast by shareholders of Gatling excluding for this purpose the votes of "related parties" and "interested parties" and other votes required to be excluded under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, all at a special meeting of Gatling's shareholders to consider the Transaction, and (iii) the approval of the Supreme Court of British Columbia.

The Transaction is also subject to the approval of the TSXV, and the satisfaction of certain other closing conditions customary in transactions of this nature. The Arrangement Agreement contains customary provisions including non-solicitation and a right to match superior proposals in favour of MAG, as well as a $1 million termination fee or a $600,000 expense reimbursement payable to MAG under certain circumstances.

Full details of the Transaction will be included in the Company's management information circular expected to be mailed to Securityholders in mid-April 2022. The Company's Securityholder meeting and closing of the Transaction are expected to occur in late-May 2022.

Board Approvals and Special Committee Recommendation

The Board of Directors of Gatling unanimously approved the Arrangement Agreement, following the unanimous recommendation of a special committee of independent directors of Gatling. The Board of Directors recommends that its Securityholders vote in favour of the Transaction.

Sprott Capital Partners LP is acting as financial advisor to Gatling and has provided a fairness opinion to the special committee of Gatling stating that, as of the date of such opinion, and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the consideration received by the holders of common shares of Gatling pursuant to the Transaction is fair, from a financial point of view, to the holders of common shares of Gatling. The full text of the fairness opinion, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations and qualifications on the review undertaken, and the terms and conditions of the Transaction, will be included in the Company's management information circular relating to the Transaction.

Advisor and Counsel

Sprott Capital Partners LP is acting as financial advisor to the Company. Miller Thomson LLP and Cozen O'Connor LLP are acting as legal advisors to the Company.

About Gatling Exploration Inc.

Gatling Exploration is a Canadian gold exploration company focused on advancing the Larder Gold Project, located in the prolific Abitibi greenstone belt in Northern Ontario. The Larder project hosts three high-grade gold deposits along the Cadillac-Larder Lake Break, 35 km east of Kirkland Lake. The Larder property has a global Mineral Resource Estimate (2021) of 388,000 oz Au Indicated and 933,000 oz Au Inferred gold ounces from both open pit and underground resources. The project is 100% owned by Gatling and is comprised of patented and unpatented claims, leases and mining licenses of occupation within the McVittie and McGarry Townships. The 3,370 ha project area is positioned 7 km west of the Kerr Addison Mine, which produced 11 million ounces of gold. All parts of the Larder property are accessible by truck or all-terrain vehicles on non-serviced roads and trails.

About MAG Silver Corp. (www.magsilver.com )

MAG Silver Corp. is a Canadian development and exploration company focused on becoming a top-tier primary precious metals mining company by exploring and advancing high-grade, district scale, silver-gold dominant projects in the Americas. Its principal focus and asset is the Juanicipio Project (44%), being developed with Fresnillo Plc (56%), the operator. The Project is located in the Fresnillo Silver Trend in Mexico, the world's premier silver mining camp, where the operator is currently developing an underground mine and constructing a 4,000 tonnes per day processing plant. Underground mine production of mineralized development material commenced in Q3 2020 and is being processed through adjacent Fresnillo-operated plants. An expanded exploration program is in place targeting multiple highly prospective targets at Juanicipio. MAG is also executing a multi-phase exploration program at the Deer Trail 100% earn-in project in Utah.

ON BEHALF OF THE BOARD OF DIRECTORS,

Jason Billan, President and CEO

Gatling Exploration Inc.

For further information on Gatling, contact Investor Relations

Telephone: 1-888-316-1050
Email: ir@gatlingexploration.com

Forward Looking Statements:

This news release includes certain "forward-looking information" and "forward-looking statements" (collectively "forward-looking statements") within the meaning of applicable Canadian securities legislation, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities and operating performance. All statements in this news release that address events or developments that the Company expects to occur in the future are forward-looking statements. Forward-looking statements are statements that are not historical facts and are often identified by words such as "expect", "plan", "anticipate", "project", "target", "potential", "schedule", "forecast", "budget", "estimate", "intend" or "believe" and similar expressions or their negative connotations, or that events or conditions "will", "would", "may", "could", "should" or "might" occur, and include information regarding: (i) expectations regarding whether the proposed Transaction will be consummated, including whether conditions to the consummation of the Transaction will be satisfied, or the timing for completing the Transaction and receiving the required securityholder, regulatory and court approvals, (ii) the anticipated timing of the securityholder meeting of the Company and the mailing of the information circular in respect of the meeting; (iii) expectations regarding the potential benefits of the Transaction and the ability of the combined company to successfully achieve business objectives; and (iv) expectations for other economic, business, and/or competitive factors.

Forward-looking statements necessarily involve assumptions, risks and uncertainties, certain of which are beyond the Company's control. These forward-looking statements are qualified in their entirety by cautionary statements and risk factor disclosure contained in filings made by the Company with the Canadian securities regulators, including the Company's financial statements and related MD&A for the financial year ended March 31, 2021 and its interim financial statements and related MD&A for the nine months ended December 31 2021, all filedwith the securities regulatory authorities in certain provinces of Canada and available under the Company's profile at www.sedar.com. The risk factors are not exhaustive of the factors that may affect the Company's forward-looking statements.

The Company's forward-looking statements are based on the applicable assumptions and factors management considers reasonable as of the date hereof, based on the information available to management of the Company at such time. The Company does not assume any obligation to update forward-looking statements if circumstances or management's beliefs, expectations or opinions should change other than as required by applicable securities laws. There can be no assurance that forward-looking statements will prove to be accurate, and actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. Accordingly, undue reliance should not be placed on forward-looking statements.

Neither 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.

SOURCE: Gatling Exploration Inc.

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FAQ

What is the acquisition ratio for GATGF shareholders?

Gatling shareholders will receive 0.0170627 of one MAG Silver share for each Gatling share held.

What is the premium offered in the Gatling and MAG Silver acquisition?

The premium is approximately 49.1% relative to Gatling's last closing price.

When is the expected closing date for the MAG Silver acquisition of Gatling?

The transaction is expected to close by late May 2022.

What financial support is MAG providing to Gatling during the acquisition?

MAG has agreed to provide a bridge loan of up to $3 million.

What are the key benefits of the acquisition for Gatling's shareholders?

Shareholders gain exposure to MAG Silver's strong balance sheet and the potential upside from the Juanicipio project.