Sandy Lake Gold Provides Additional Information Regarding Strategic Guyana Acquisition

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TORONTO, Feb. 01, 2019 - Sandy Lake Gold Inc. (“Sandy Lake” or the “Corporation“) (TSXV:SLAU) wishes to provide supplemental disclosure to the Corporation's management information circular dated January 8, 2019, (the “Circular”) in respect of the Annual and Special Meeting of the Shareholders of the Corporation to be held on February 12, 2019. This release should be read in conjunction with the Circular as a whole. Capitalized terms not otherwise defined herein have the meaning ascribed to such terms in the Circular.

Description of the Acquisition

The Corporation entered into an agreement (the “Purchase Agreement”) dated effective January 2, 2019 with Patrick Sheridan, Violet Smith, Shawn Hopkinson, Aisha Jean-Baptiste and Ayanna Jean-Baptiste (the “Vendors”) providing for the acquisition (the “Acquisition”) by the Corporation from the Vendors of all of the issued and outstanding shares of Bartica Investments Ltd. (“Bartica”) in consideration of the issuance to the Vendors of an aggregate of 100,000,000 common shares of the Corporation (“Common Shares”) at a deemed price of $0.075 per share (the “Consideration”). At the time of closing of the Acquisition, Bartica will hold interests in a suite of mineral exploration properties totalling approximately 25,888 acres in Guyana, South America (collectively, the “Subject Properties”). More specifically, Bartica will hold a 100% beneficial interest in each of the Subject Properties, other than the properties known as the Oko properties in respect of which Bartica will hold an option (the “Oko Option”) to acquire a 100% interest, subject to a 2.5% net smelter return royalty. The Oko Option can be exercised by Bartica upon the following: (i) a cash payment of US$50,000 (which has previously been paid); (ii) additional aggregate cash payments of US$700,000 to be paid in tranches over a four year period (of which US$100,000 has previously been paid); and (iii) the identification of a gold resource on the Oko properties in excess of 250,000 ounces on the Oko properties and payment of advance net smelter return royalty of US$1,000,000.

Mr. Sheridan, one of the Vendors, is currently a director, officer and a “control person” of the Corporation for the purposes of applicable securities legislation, and beneficially owns or controls 30,878,148 Common Shares representing approximately 29.6% of the Common Shares issued and outstanding as of February 1, 2019. Pursuant to the Acquisition, Mr. Sheridan will acquire beneficial ownership and control over an additional 60,000,000 Common Shares which will result in Mr. Sheridan having beneficially ownership or control and direction overran aggregate of 90,878,148 Common Shares, or approximately 44.5% of the issued and outstanding Common Shares without reference to the Private Placement. See “Private Placement” below.

Background of the Transaction

The Vendors approached the Corporation to discuss the terms of the proposed Acquisition in October, 2018. As a result of Mr. Sheridan being a director, officer and significant shareholder of the Corporation as well as one of the Vendors, the board of directors of the Corporation (the “Board”) established an independent special committee (the “Committee”) in accordance with Multilateral Instrument 61-101 (“MI 61-101”) to review and provide recommendations to the Board regarding the Acquisition.

Special Committee Composition and Mandate

The mandate of the Committee included reviewing and assessing the Acquisition, considering potential alternatives and advising the Board accordingly. In addition, the Committee was vested with control over its processes respecting the holding of meetings, the quorum therefor, the timing and location thereof, the individuals present thereat and such other matters as the Committee considered necessary or desirable to discharge its mandate. The Committee was comprised of Mr. Jon Douglas and Ms. Michele McCarthy, each of whom were independent. No chair of the Committee was appointed.

Engagement of Advisors

On or about November 16, 2018, the Committee concluded that it should retain an independent financial advisor to provide a fairness opinion in respect of the Acquisition. After discussions with management, the Committee considered and discussed retaining Farber Corporate Finance (“Farber”) to provide a fairness opinion in this regard. The Committee examined and discussed the qualifications, experience and independence of Farber and its expertise in advising special committees in respect of related party transactions. Mr. Douglas, with input from Ms. McCarthy, held detailed discussions with Glenn Bowman of Farber, negotiated an engagement letter with Farber, and subsequently recommended to the Committee that it engage Farber to advise the Committee in respect of the fairness of the Acquisition from a financial point of view, to the shareholders of the Corporation. Farber was not engaged to prepare a Formal Valuation, as that term is defined in MI 61-101. Farber was retained on November 22, 2018, and subsequently met several times with management in order to gather information required for its review. Farber was compensated on the basis of a fixed fee, agreed upon in advance of its engagement and was not provided any form of contingent compensation tied to success or completion or approval of the Acquisition. Farber and the Committee believed that a fixed fee compensation arrangement without any amounts contingent on approval or completion of the Acquisition would ensure that the fee structure would not compromise Farber’s independence in its evaluation of the fairness of the Acquisition. There existed no economic or personal relationship between Farber and the Committee or any of the parties to the Acquisition. The fee payable to Farber was not contingent on the completion of the Acquisition and such fee was payable to Farber in respect of the Fairness Opinion (as defined below) irrespective of the substance or conclusions of the Fairness Opinion.

On or about December 10, 2018, the Committee requested and was provided with a memorandum from legal counsel to the Corporation detailing obligations in the context of the proposed Acquisition, and setting forth the related party nature of the Acquisition and applicable legal considerations.

Deliberations

The Committee considered the initial terms of the proposed Acquisition and as part of the initial consultations with management, the members of the Committee received a management presentation regarding the geology and geologic model of the deposits underlying the Subject Properties on November 1, 2018. The Committee met with members of the Corporation’s management team on several occasions to better understand the rationale and benefits of the proposed Acquisition. The Consideration for the Acquisition which was proposed by the Vendors was considered to be reasonable due to the high prospectivity of the Subject Properties proposed to be acquired combined with what appeared to be a very reasonable cost to acquire the Subject Properties, which represented a compelling opportunity for the Corporation to enter the exploration business in a mining friendly jurisdiction such as Guyana and the cash payments which had been or were required to be made by Bartica prior to closing in connection with the Oko Option.

The Committee also considered and reviewed with the Corporation’s management the status of the Corporation’s existing Sandy Lake project and the alternative of maintaining the status quo in lieu of proceeding with the Acquisition. The Corporation had previously declared events of force majeure in respect of the Sandy Lake project under the terms of an existing option agreement with Goldeye Exploration Limited. The events of force majeure resulted from the positions taken by local First Nations and discussions with the Government of Ontario, which rendered it necessary for Sandy Lake Gold to cease all work on the Sandy Lake project until such time as appropriate consultation with the First Nations Bands in the region could be completed. Matters related to this disruption in operations are still continuing. After thoroughly reviewing these matters with management, the Committee determined that the Acquisition would be beneficial as it would provide the Corporation with an alternative to explore additional properties in a mining friendly jurisdiction.

On November 16, 2018, the Committee inquired as to potential tax consequences of the Acquisition and reviewed and provided comments on a revised version of a non-binding letter of intent setting out the terms of the proposed Acquisition, and the Corporation subsequently entered into such non-binding letter of intent on November 19, 2018. A press release announcing the terms of the proposed Acquisition was disseminated by the Corporation on November 21, 2018.

Prior to entering into any binding obligations in respect of the Acquisition, the Committee undertook a comprehensive review of the Subject Properties, considered potential tax consequences of the Acquisition and convened a meeting with Farber on December 5, 2018 to discuss the progress being made by Farber on its fairness opinion. The Committee subsequently met with Farber on December 20, 2018 to discuss Farber’s initial impressions of value. The Committee also reviewed the proposed definitive agreement and provided detailed comments thereon, including adding the requirement for delivery of a title opinion at closing and the addition of additional robust representations and warranties from the Vendors.

In connection with its deliberations, the Committee also reviewed the contents of draft and final versions of a technical report on the Aremu and Oro properties comprising, in part, the Subject Properties, entitled “NI 43-101 Technical Report for the Aremu-Oro Gold Property, Cooperative Republic of Guyana, South America” dated November 23, 2018 and prepared by Tania Ilieva (the “Technical Report”), concerning the prospectivity of certain of the Subject Properties and the proposed recommended program thereon. The Committee considered additional incentives supporting the Acquisition, such as the relatively unexplored nature of the Subject Properties, the potential for the discovery of economic mineralization along the lateral extensions of the Aremu, Powerhouse, Oko 1 and Oko 2 north-south and west-northwest structures, and the low cost of the recommended program thereon all as set forth in the Technical Report.

The Committee met several times with Farber and on December 30, 2018, the Committee had the opportunity to review with Farber its views as to the fairness of the Acquisition. The Committee was provided with the opportunity of questioning Farber, including with respect to matters relating to the assumptions underlying Farber’s opinion, and the other relevant industry and economic factors considered by Farber in connection with its review. Farber advised, amongst other matters, that in making its determinations, it had accounted for applicable Guyanese royalty and other payments relating to the Subject Properties. Following discussion between the Committee and Farber, Farber provided a verbal opinion to the Committee that as of such date, the Acquisition was fair, from a financial point of view, to the securityholders of the Corporation.

Farber delivered a written fairness opinion dated effective December 30, 2018 (the “Fairness Opinion”) to the Committee. In preparing the Fairness Opinion for the proposed Acquisition, Farber considered the proposed terms of the transaction, relevant industry and economic factors, background information relating to both the Corporation and Bartica and the draft Technical Report, and conducted research into recent market transactions involving mineral properties somewhat comparable to those owned by Bartica and trading multiples of public companies with mineral assets somewhat comparable to certain of the Subject Properties. The foregoing summary of the Fairness Opinion is qualified in its entirely by the full text of the Fairness Opinion, and the assumptions and limitations set forth therein, a copy of which is available on SEDAR at www.sedar.com.

In preparing the Fairness Opinion, Farber considered the following matters related to Sandy Lake:

1. General background information on the business and operations of Sandy Lake;
2. Interim financial statements for Sandy Lake for the three months ended August 31 ,2018;
3. An option agreement between GPM Metals Inc. and Goldeye Explorations Ltd. relating to the Sandy Lake Gold project;
4. Royalty agreements relating to the Sandy Lake Gold project;
5. An analysis of exploration and development costs incurred in recent years on the Sandy Lake Gold project;
6. Research into recent market transactions involving mineral properties somewhat comparable to the Sandy Lake Gold project;
7. Research into recent trading multiples of public companies with mineral assets somewhat comparable to Sandy Lake;
8. Historical trading prices and volumes for the shares of Sandy Lake; and
9. Information pertaining to various private placements of Common Shares that occurred between June 2016 and September 2018.

In addition, Farber considered the following matters relating to Bartica:

1. General background information on the business and operations of Bartica;
2. A technical report entitled “Peters Mine Project – Guyana” authored by Dr. George Cargill, PhD, P. Eng, and dated January 20, 2004”;
3. A presentation entitled “Structural Investigations Peters Mine Gold Project Guyana” prepared by SRK Consulting (Canada) Inc. and dated August 2007;
4. A draft of the Technical Report;
5. Details relating to Bartica’s March 2015 acquisition of the mineral rights of the Peters Mine and Aremu properties from GPM Metals Inc.;
6. A mining option agreement dated December 22, 2017 between Michael Vieira and Violet Smith relating to certain of the Subject Properties;
7. An analysis of certain exploration and development costs incurred on the properties owned by Bartica;
8. Research into recent market transactions involving mineral properties somewhat comparable to those owned by Bartica;and
9. Research into recent trading multiples of public companies with mineral assets somewhat comparable to Aremu-Oko and Peters Mine properties.

The Committee was comfortable that Farber had conducted a thorough review of available valuation methodologies and had exercised its professional expertise in applying these valuation matters.

The Committee considered various advantages of the proposed Acquisition including the prospective nature of the Subject Properties, the benefit of acquiring additional properties and the conclusions of the Fairness Opinion, as well as the fact that the Acquisition remained subject to the approval of minority shareholders pursuant to MI 61-101 and that Mr. Sheridan was required to abstain from voting as a director with respect to the Acquisition pursuant to applicable corporate law. The Committee also considered the following:

In addition, the Committee considered that pursuant to the Acquisition, Mr. Sheridan would increase his percentage ownership in the Corporation, as a result of which Mr. Sheridan will have significant influence over most matters that require approval by the Corporation’s shareholders, including the election of directors and the approval of significant corporate transactions, even if other shareholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of the Corporation that other shareholders may view as beneficial. The existing shareholdings of Mr. Sheridan already represented approximately 29.6% of the outstanding Common Shares, although it was acknowledged by the Committee that his percentage interest in the Common Shares and therefore the degree of concentration risk, would each increase as a result of the Acquisition.

The Committee ultimately determined that the benefits of the Acquisition outweighed the disadvantages, and recommended the approval of the Acquisition to the Board. A definitive agreement setting forth the final terms of the Acquisition was subsequently authorized by the Board and executed effective January 2, 2019. The Committee relied upon its business judgement which was confirmed by the advice of Farber as set forth in the Fairness Opinion.

Dissenting Views of the Special Committee

Throughout their review of the Acquisition, the members of the Committee retained the view that the Acquisition remained desirable and relying upon Farber’s fairness opinion, that the agreed upon final pricing terms were fair, from a financial point of view, to securityholders of the Corporation.

Consideration of Alternatives

Given the unique nature of the Acquisition, the alternative consideration was to maintain the status quo and undertake no transaction with the Vendors. This option was a consideration throughout the Committee’s deliberations, however it was determined that it would be most advantageous to proceed with the Acquisition as it provided significant advantages to the Corporation over the long term as compared to maintaining the status quo.

Private Placement

As a condition to the completion of the Acquisition, the Corporation is required to obtain the approval of the TSX Venture Exchange (the “TSXV”). The TSXV has in turn stipulated, amongst other conditions, that the Corporation must complete a private placement prior to closing of the Acquisition (the “Private Placement”) to raise minimum gross proceeds of $450,000. The terms of the Private Placement have not yet been determined by the Corporation, and are expected to result in additional dilution to the holdings of the shareholders of the Corporation. It is anticipated that Mr. Sheridan will subscribe for $150,000 of the Private Placement, however in no circumstances will the shareholdings of Mr. Sheridan exceed 44.5% of the issued and outstanding Common Shares upon closing of the Acquisition and Private Placement. In addition, the other Vendors or their associates may participate in the Private Placement. Further details of the Private Placement will be announced as soon as they become available.

Votes Excluded

To the knowledge of the Corporation, after reasonable inquiry, votes attached to a total of 31,075,668 Common Shares (representing in the aggregate approximately 29.8% of the currently issued and outstanding Common Shares) will be excluded in determining whether minority approval for the proposed related party transaction is obtained. The Common Shares to be excluded are held as follows:

For further information please contact:

Patrick Sheridan
Executive Chairman & CEO
(416) 628-5904
Email: info@sandylakegold.com

Forward Looking Statements

This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “might”, “will”, “project”, “should”, “believe”, “plans”, “intends” and similar expressions are intended to identify forward-looking information and/or statements. Forward-looking statements and/or information are based on a number of material factors, expectations and/or assumptions of Sandy Lake which have been used to develop such statements and/or information but which may prove to be incorrect. Although Sandy Lake believes that the expectations reflected in such forward-looking statements and/or information are reasonable, undue reliance should not be placed on forward-looking statements as Sandy Lake can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: receipt of all applicable regulatory and shareholder approvals to complete the Acquisition; results from planned exploration and drilling activities; future plans for operational expenditures; the accuracy of the interpretations of exploration and drilling activity results; availability of financing (including with respect to the Private Placement) to fund current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which Sandy Lake has property interests; the general continuance of current industry conditions; aboriginal matters; the timely receipt of any required regulatory approvals; the ability of Sandy Lake to obtain qualified staff, equipment and/or services in a timely and cost efficient manner; the ability of the operator of each project in which Sandy Lake has property interests to operate in a safe, efficient and/or effective manner and to fulfill its respective obligations and current plans; future commodity prices; currency, exchange and/or interest rates; and the regulatory framework regarding royalties, taxes and/or environmental matters in the jurisdictions in which Sandy Lake has property interests. The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and/or statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results and/or events to differ materially from those anticipated in such forward-looking information and/or statements including, without limitation: risks associated with the uncertainty of exploration results and estimates, currency fluctuations, the uncertainty of conducting operations under a foreign regime, exploration risk, the uncertainty of obtaining all applicable regulatory approvals, the availability of labour and/or equipment, the fluctuating prices of commodities, the availability of financing and dependence on the management personnel of the Corporation, other participants in the property areas and/or certain other risks detailed from time-to-time in Sandy Lake’s public disclosure documents (including, without limitation, those risks identified in this news release and Sandy Lake’s current management’s discussion and analysis). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Corporation does not undertake any obligations to publicly update and/or revise any of the included forward-looking statements, whether as a result of additional information, future events and/or otherwise, except as may be required by applicable securities laws.

Neither the 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 and / or accuracy of this release