Chesapeake Gold Divests Tatatila Project to Mexican Gold for Equity and Royalty

• Chesapeake Gold has entered into a definitive agreement to sell its Tatatila gold-copper project in Veracruz State, Mexico, to Mexican Gold Mining Corp. for shares representing 14.99% of Mexican Gold's outstanding common shares at closing.
• The transaction includes a 1.5% net smelter returns royalty, with Mexican Gold holding the option to repurchase 0.5% of the royalty for US$500,000 within 10 years.
• Consideration shares are subject to a staged release schedule over two and a half years, with 25% released every six months starting from the one-year anniversary of issuance.
• The Tatatila property surrounds Mexican Gold's Las Minas Project, which has a reported mineral resource estimate and preliminary economic assessment.
• Transaction completion requires TSX Venture Exchange approval and customary closing conditions.

Chesapeake Gold Corp. (TSXV: CKG, OTCQX: CHPGF) is a mineral exploration and development company with operations in Mexico. The company's flagship asset is the Metates Project in Durango State, which contains over 16.77 million ounces of gold at 0.57 grams per tonne and 423.2 million ounces of silver at 14.3 grams per tonne within 921.2 million tonnes in the measured and indicated mineral resource category. An additional 2.13 million ounces of gold and 59.0 million ounces of silver are classified in the inferred mineral resource category. The company has developed proprietary sulphide leach technology for processing mineralisation at Metates.

Asset Sale Agreement and Transaction Terms

Chesapeake Gold has entered into a definitive agreement to sell its Tatatila gold-copper project to Mexican Gold Mining Corp. The Tatatila property, located in Veracruz State, Mexico, was identified by Chesapeake in 2007 and comprises a gold-copper skarn district. The property is positioned around Mexican Gold's Las Minas Project, which has an existing mineral resource estimate and preliminary economic assessment.

The transaction involves share-based consideration rather than cash payment. Chesapeake will receive common shares of Mexican Gold representing 14.99% of the outstanding shares at the time of closing. The specific number of shares to be issued will be determined based on Mexican Gold's share structure at closing.

Chesapeake's exploration work at Tatatila identified several skarn prospects, including possible extensions of the Las Minas existing resource. The consolidation of the properties under single ownership eliminates shared boundaries between the two projects. Transaction completion remains subject to TSX Venture Exchange approval and customary closing conditions for transactions of this nature.

Share Consideration and Lock-Up Arrangements

The consideration shares issued to Chesapeake will be subject to the statutory four-month-and-one-day hold period required under Canadian securities regulations for privately issued shares. Beyond this regulatory requirement, the shares will be subject to an additional contractual lock-up period.

The lock-up structure releases the consideration shares in four equal tranches. The first release of 25% occurs on the one-year anniversary of issuance, with subsequent 25% releases occurring every six months thereafter. The final release takes place two and a half years from the date of issuance, at which point all consideration shares will be free from the contractual lock-up.

During the two-and-a-half-year lock-up period, Chesapeake has agreed to vote the consideration shares in accordance with Mexican Gold management's instructions. This voting arrangement applies to all consideration shares until the conclusion of the lock-up period. The combination of the staged release schedule and voting arrangement structures the transaction over an extended timeframe.

NSR Royalty Structure and Buyback Option

Chesapeake has retained a 1.5% net smelter returns royalty on future production from the Tatatila property. A net smelter returns royalty entitles the holder to a percentage of gross revenue from metal sales after deducting processing and refining costs, but before accounting for operating expenses or capital costs. The royalty applies to all production from the property without time limitation.

Mexican Gold has the option to repurchase 0.5% of the 1.5% royalty for a payment of US$500,000, which would reduce Chesapeake's royalty interest to 1.0%. This buyback option is exercisable for 10 years from the date of the agreement's execution. If exercised, Chesapeake would receive the cash payment whilst retaining the remaining 1.0% royalty interest.

The royalty structure does not require ongoing capital investment or operational involvement from Chesapeake. Royalty payments, if production occurs, are based on revenue rather than operational performance. The buyback provision offers Mexican Gold the ability to reduce its royalty obligations at a fixed price during the 10-year option period.

Conclusion

The transaction allows Chesapeake to divest its Tatatila project whilst retaining exposure through equity ownership in Mexican Gold and royalty participation. Following TSX Venture Exchange approval and satisfaction of closing conditions, Chesapeake will complete the divestiture. The staged release of consideration shares occurs over two and a half years, with the first tranche becoming available on the one-year anniversary of issuance. The transaction enables Chesapeake to concentrate its resources on the Metates Project in Durango State.

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