Xali Gold closes Pico Machay project acquisition

Executive Summary

• Xali Gold Corp. has closed the acquisition of the Pico Machay gold project in Peru from Pan American Silver Corp. and Aquiline Resources Inc. via the purchase of Minera Calipuy SAC.
• The transaction involves an initial cash payment of $500,000 and up to $17.5 million in deferred and contingent payments, totaling up to $18 million.
• The project is an advanced-exploration-stage asset with a near-term production goal, featuring historical resources calculated at a low gold price of $700/oz, presenting significant upside potential.

Key Details

• Transaction Structure: Xali Gold acquired 100% of Minera Calipuy SAC, which wholly owns the Pico Machay project, from Pan American Silver Corp. and its subsidiary Aquiline Resources Inc.
• Initial Payment: $500,000 USD paid at closing.
• Deferred Payments: Up to $17,000 USD secured by promissory notes for each of five deferred payments. These notes are guaranteed by Calipuy and Candente Gold Peru SAC, are non-convertible, and accrue default interest at the federal funds rate plus 800 basis points upon failure to pay.
• Contingent Payment: An additional $2.5 million USD is payable if more than 1.25 million ounces of aggregate mineral reserves or resources (proven, probable, measured, or indicated per NI 43-101) are disclosed in a technical report.
• Total Consideration: Up to $15 million for the known historical gold resource (including the initial payment) plus the potential $2.5 million contingency, totaling up to $17.5 million USD.
• Security: Deferred and contingent payments are secured by a first-priority share pledge over 100% of Calipuy's shares and a first-priority mortgage over Pico Machay and the Las Brujas II property.
• Indemnity: Xali Gold provided Pan American with an unlimited, indefinite purchaser's special indemnity covering all existing and future environmental, tax, and labor liabilities.
• Royalties: An existing 1% Net Smelter Return (NSR) royalty covers the El Alcatraz 4 concession (center of historical resource). This perpetual royalty with no cap or buyback was originally granted to Maverix Metals Inc. and is now held by Triple Flag Precious Metals Corp.
• Mining Rights: Calipuy holds 100% interest in 17 mining rights, all in good standing, expiring in 2039 if production has not commenced.
• Reinfo Permits: Six valid Reinfo permits exist for artisanal mining activity (2020-2022). Xali Gold plans to work with permit holders to sample underground workings while awaiting surface drilling permits.
• Liability: Local counsel advises Xali Gold will not hold environmental liability for informal mining activity if reported to the Peruvian government upon ownership transfer.
• Strategic Focus: Management intends to update the historical resource estimate (calculated at $700/oz) and optimize previous engineering studies for a low-cost, low-strip-ratio open-pit heap-leach concept to advance toward near-term production.

Notable Quotes

• "With the acquisition of Pico Machay now closed, our full attention turns to advancing the asset and unlocking its value... Pico Machay offers both immediate value and substantial upside, particularly given that the historical resource was calculated using a long-term gold price of just $700 (U.S.) per ounce. In the current gold price environment, we see a compelling opportunity to aggressively move the project forward." — Joanne Freeze, President and CEO