OTGO O2Gold Inc

O2Gold Inc. (TSX-V: OTGO) (“O2Gold” or the “Company”) announced today that it has entered into a settlement agreement dated June 13, 2022 (“Settlement Agreement”) with, among others, one of its largest shareholders, Bullet Holding Corp. (“Bullet”), and Magnolia Capital LLC (“Magnolia”), pursuant to which O2Gold has agreed to return all of the issued and outstanding shares (the “Buenaventura Shares”) of Buenaventura Gold, Inc., a Panamanian company (“Buenaventura”). The Company initially acquired Buenaventura from Bullet and Magnolia pursuant to a share purchase agreement (the “SPA”) dated as of October 26, 2020 (the “Signing Date”), as amended on November 30, 2020 (the “First Amendment”), March 25, 2021, and April 5, 2021 (the “Settlement”). Buenaventura indirectly owns, or has been irrevocably transferred, 26 mining claim titles and applications in the Segovia/Zaragoza regions of Antioquia in Colombia (the “Project”). For more information about the Company’s acquisition of Buenaventura (the “Acquisition”) and the SPA, please see the Company’s press release dated April 23, 2021, which is available under the Company’s SEDAR profile at www.sedar.com.

About the Settlement

Pursuant to the SPA, the Company agreed to pay consideration for the Acquisition of US$9 million (approximately C$11.6 million) in three installments, with the first installment of US$4 million having been paid in cash and securities of the Company on the closing date, the second installment of US$2.5 million (the “Second Installment”) having been paid in common shares of the Company (“Common Shares”) on the first anniversary of the Signing Date, and the third installment of US$2.5 million (the “Third Installment” and together with the Second Installment, the “Installments”) being payable on the second anniversary of the Signing Date, being October 26, 2022.

The SPA had initially contemplated the Third Installment being payable solely in Common Shares, calculated based on the 30-day volume weighted average price (“VWAP”) of the shares on the TSX Venture Exchange (“TSXV”) at such issuance date. However, to satisfy certain conditions imposed by the TSXV, the Company agreed with the vendors to cap the deemed price at which the Common Shares could be issued for the Installments at $0.18 per share. In addition, pursuant to the First Amendment, the Company agreed to pay a top-up amount in cash at the time of each Installment to the extent the 30-day VWAP of the Common Shares at such time was less than $0.18 (each, a “Top-up Payment”). For more information about the First Amendment, please see the Company’s press release dated November 30, 2020, which is also available under the Company’s SEDAR profile at www.sedar.com.

Beginning shortly before the date on which the Second Installment was scheduled to be paid, the price of the Common Shares began to experience significant downward pressure. The downward price trend has continued to the date hereof and, while no Top-up Payment was required to satisfy the Second Installment, management anticipates that a significant Top-up Payment (estimated at C$2.7 million) will be required to satisfy the Third Installment. If the Top-up Payment is not made at the time of the Third Installment, the SPA entitles Bullet and Magnolia to the return of the Buenaventura Shares (the “Reversion Right”).

As of the date of this press release, the Company does not have sufficient cash reserves to satisfy the estimated Top-up Payment, nor does it have sufficient resources to maintain the Project in good standing, which is at risk of being lost prior to the Reversion Right vesting. Furthermore, notwithstanding management’s extensive efforts aimed at securing additional funding, as well as several pursuits of potential strategic alternatives, management does not anticipate being able to raise additional capital, particularly as a result of the Company’s depressed share price.

In light of the Company’s financial difficulties, as well as the imminent risk of all or a portion of the Project being lost prior to the Reversion right vesting, and to avoid and resolve any potential conflicts with Bullet and Magnolia, the Company has entered into the Settlement Agreement, pursuant to which the parties thereto agree to terminate the SPA, and all of their rights and obligations relating or arising out of the SPA (including, for certainty, Bullet’s and Magnolia’s entitlements to the Third Installment), in exchange for the return by the Company to Bullet and Magnolia of all of the Buenaventura Shares.

The Company intends to call a meeting of shareholders to be held in late July 2022 to, among other things, seek shareholder approval for the Settlement (the “Meeting”). Since Bob Allen, a director of the Company, is the majority shareholder of Bullet, the Settlement is a “related party transaction” pursuant to Canadian securities laws and must therefore be approved by the affirmative vote of (i) 66 2/3% of the votes cast by holders of Common Shares represented at the Meeting, and (ii) a simple majority of the votes cast by holders of Common Shares at the Meeting (excluding shareholders whose votes are required to be excluded, including Bullet and Magnolia, pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI 61-101”)). The Settlement is exempt from the formal valuation requirement set out in MI 61-101 pursuant to section 4.4(a) of MI 61-101.

Completion of the Settlement is subject to regulatory approvals and other customary conditions. The Settlement is expected to close in early-August 2022, subject to the satisfaction of all conditions to closing set out in the Settlement Agreement.

Jaime Lalinde, President & CEO of O2Gold, commented, “Despite our significant marketing efforts, liquidity and access to capital have been challenging. Given the long-term nature of these projects and the capital required to truly create value for shareholders and stakeholders, the share price of O2Gold made further financing prohibitive. Our attempts to sell this asset to companies nearby were also unsuccessful. It is unfortunate that returning the Otú Centro project—pending regulatory and shareholder approval—is the least objectionable solution.”

Special Committee

The Settlement Agreement was negotiated and entered into following several previous pursuits of potential strategic alternatives by management of O2Gold. In connection with a strategic review process of the Project, and prior to preliminary discussions beginning with Bullet and Magnolia respecting the return of the Buenaventura Shares, the board of directors of the Company (the “Board”) established a special committee comprised of directors independent from the Settlement (the “Special Committee”) to review any proposed settlement with Bullet and Magnolia. The Special Committee considered engaging a financial advisor to provide a fairness opinion with respect to the Settlement, as well as external legal advisors; however, given the difficult financial condition of the Company it was determined that there were insufficient resources to retain such advisors. Nevertheless, since its establishment, the Special Committee has met regularly to receive updates from, and provide guidance to, management about potential strategic alternatives, as well as financing initiatives.

Following its review, and in consideration of, amongst other things, the results of management’s attempts to secure funding and pursue strategic alternatives, the Special Committee has unanimously recommended that the Board approve the Settlement. The Board (with Bob Allen abstaining as an interested director), following the receipt and review of recommendations from the Special Committee, has approved the Settlement Agreement and the Settlement and has determined that the Settlement is fair to shareholders of O2Gold (other than Bullet and Magnolia or their affiliates) and is in the best interests of O2Gold, and recommends to shareholders that they vote in favour of the Settlement.

Additional Information

Full details of the Settlement are set out in the Settlement Agreement, which will be filed by O2Gold under its profile on SEDAR at www.sedar.com. In addition, further information regarding the Settlement will be contained in a management information circular to be prepared in connection with the Meeting and filed on www.sedar.com at the time that it is mailed to shareholders. All shareholders are urged to read the management information circular once it becomes available as it will contain additional important information concerning the Settlement.

About O2Gold

O2Gold is a mineral exploration company with activities in Colombia. The Company’s contiguous 30,000-ha land package includes several brownfields and largely under-explored greenfields.

For additional information, please contact:

Jaime Lalinde, President and CEOPhone: (57) 312 350 5864Email: jlalinde@fmresources.ca

Cautionary Notes

Certain of the information contained in this news release constitutes ‘forward-looking statements’ within the meaning of securities laws. Such forward-looking statements, including but not limited to statements relating to the proposed Settlement under the Settlement Agreement; the ability of the parties to satisfy the conditions to closing of the Settlement; the mailing of the management information circular in connection with the Meeting and anticipated timing thereof; and the anticipated timing of the completion of the Settlement, each of which involve risks, uncertainties and other factors which may cause the actual results to be materially different from those expressed or implied by such forward-looking statements. Such factors include, among others, obtaining required shareholder and regulatory approvals, and meeting other conditions in the Settlement Agreement. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws.

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