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TORONTO, ON / ACCESSWIRE / October 5, 2023 / Montauk Metals Inc. (TSXV:MTK) (the "Company" or "Montauk") wishes to announce further updates on the ongoing arbitration brought by the Company against the Republic of Colombia (the "Arbitration") to enforce the Company's rights to compensation under the Canada-Colombia Free Trade Agreement (the "FTA"), as previously described in its news releases of March 27, 2018, February 25, 2019, February 10, 2020, November 23, 2021, and September 1, 2023. Additionally, the Company would also like to announce the terms of a non-brokered private placement financing, open to all existing shareholders of the Company, which is expected to fund the Arbitration.

Update on Arbitration

Montauk contends that Colombia breached its obligations owed to the Company, including specific obligations under the FTA. The claims include Colombia's refusal or failure to compensate the Company for the losses incurred as a consequence of Colombia's prohibition of mining in the pramos (high altitude eco-systems). On March 21, 2018, Galway Gold filed a Request for Arbitration against the Republic of Colombia before the International Centre for Settlement of Investment Disputes ("ICSID").

The Arbitration is being conducted in two phases. Phase One will determine whether the FTA has jurisdiction over this case and whether Colombia has breached its obligations under the FTA and is liable for compensation to the Company. Assuming that Montauk is successful in Phase 1, Phase 2 will involve determining the quantum of damages awarded to Montauk to compensate it for losses incurred. The Company has suffered more than USD $16 million in sunk costs and total loss of the value of up to USD $180 million in the Reina de Oro project, as well as legal and arbitration fees. Typically, an arbitral award will include an award of costs payable by the unsuccessful party to the successful party to reimburse it for its legal and arbitration fees.

Certain costs of the proceedings, including legal and arbitration fees, have exceeded the original estimates and the Company has also had to pay Colombia's 50% share of the arbitration fees. The Company must make an additional payment of US $200,000 to ICSID before a ruling on Phase One is rendered. As of October 5, 2023 the Company had a cash balance of approximately CAD $95,000 and a working capital of approximately CAD $(500,000) (unaudited). If the Company fails to pay the required amount of US$ 200,000 to obtain a ruling, the Arbitration will be dismissed on November 9, 2023.

The $200,000 payment to the ICSID Tribunal (the "Tribunal") could result in a favourable judgement. Assuming a successful Minimum Offering at approximately $0.02 per share as described further below, the potential USD $16.6M judgement for sunk costs alone can potentially equate to USD $0.28 per share as of today's date, and the total judgement may be up to USD $3.04 per share (see further details on the Minimum Offering below).

Eco Oro Minerals Corp. ("Eco Oro") also has an arbitration ongoing against the Government of Colombia under the FTA pending before the Tribunal. In its arbitration, Eco Oro has alleged that Colombia breached its obligations under the FTA in failing to compensate Eco Oro for the losses incurred as a consequence of Colombia's prohibition of mining in the pramos. The prohibition on mining is based upon the same FTA and legislative changes and Colombian Court decisions that Montauk's arbitration claims against Colombia are based on. As such, Montauk management believes that Eco Oro's claims against Colombia may be sufficiently similar to Montauk's claims against Colombia. On September 9, 2021 the Tribunal in the Eco Oro arbitration issued its "Decision on Jurisdiction, Liability and Directions on Quantum" (the "Decision"). According to a procedural order issue by the Tribunal, the Tribunal ruled that it had jurisdiction over the claims raised by Eco Oro, and that Colombia acted in breach of Article 805 of the FTA, entitling Eco Oro to damages. The Procedural Order also ordered the parties to file additional submissions in response to certain questions regarding the quantum of Eco Doro's damages. Those questions were directed to be answered within 120 days, although depending on the parties' position, there was the possibility that deadline could be extended, including for an additional 120 days briefing period. After the matter is fully briefed, the Tribunal in the Eco Oro arbitration is expected to render a decision on the amount of damages. The Tribunal's website currently lists the decision on damages as" pending".

The Tribunal considers each case before it on its own facts. The Tribunal in Montauk's arbitration is not bound by any decision made by the Tribunal in Eco Oro's arbitration. Nonetheless, Montauk management believes that the recent Decision issued by the Tribunal in the Eco Oro arbitration finding jurisdiction and liability by Colombia (in an amount to be determined) provides useful guidance in Montauk's arbitration.

Montauk's management is pleased with how the Arbitration has proceeded to date, which has been consistent with Montauk's expectations. The Company cannot guarantee that it will be successful at the Arbitration, or that the estimated amounts will not be revised as the Arbitration proceeds. The Company also cannot guarantee that it will be able to recover all or part of its legal and arbitration costs from the Government of Colombia even if it is successful at the Arbitration. The Company continues to actively seek litigation financing, but cannot guarantee success in this regard, and has thus decided to proceed with a private placement financing to raise the necessary funds, the terms of which are outlined in the section below. Assuming the Company is able to raise the necessary funds for a ruling on Phase One, the ruling from the Arbitral Tribunal would be expected on or about the first quarter of 2024. Assuming success at Phase One, further funding will likely be required at Phase Two, and the Company will attempt to seek litigation funding for this purpose, but cannot guarantee success in this regard. The final outcome of the Phase One Arbitration, and the eventual outcome of the Phase Two Arbitration, cannot be predicted at this time. Management of the Company will continue to provide updates on material developments of the status of the Arbitration.

RISK DISCLOSURE STATEMENT: At the present time, the Company's payment obligations are substantially in excess of its cash balances and it has no other assets. The Company is not solvent and cannot continue as a going concern. Trading in shares of the Company and any investment in the Company is highly speculative. No trading in securities of the Company or investment should be made without being able to lose the entire amount of such funds. See below, "Cautionary Note Regarding Forward-Looking Statements". Investors are advised to seek professional advice before making any decision to trade in or invest in the securities of the Company.

Non-Brokered Private Placement Financing

The Company intends to complete a non-brokered private placement financing (the "Offering") of between 17,500,000 (the "Minimum Offering") and 37,500,000 (the "Maximum Offering") common shares in the capital stock of the Company (the "Common Shares") at a price of CAD$0.02 per Common Share for aggregate gross proceeds of between CAD$350,000 and CAD$750,000 for the Minimum Offering and the Maximum Offering, respectively. As of October 5, 2023, the Company has 41,627,979 Common Shares issued and outstanding. In the event of a Minimum Offering, the Company is expected to have 59,127,979 Common Shares issued and outstanding, representing an increase of 42%. In the event of a Maximum Offering, the Company is expected to have 79,127,979 Common Shares issued and outstanding, representing an increase of 90%. The Company continues to actively seek litigation financing concurrently with the private placement.

The Offering is open to shareholders of the Company. The offering to shareholders is subject to the exemption for existing shareholders (the "Existing Shareholder Exemption" as described in Section 2.9 of Ontario Securities Commission Rule 45-501 - Distributions to Existing Security Holders). The Company will also offer securities under the ‘accredited investor' exemption and other exemptions available to the Company. The Existing Shareholder Exemption is available to shareholders residing in all Canadian provinces. Subscriptions may be accepted from shareholders outside of Canada with evidence that there is a comparable or otherwise applicable exemption permitting the subscription in that jurisdiction.

Shareholders of the Company as at October 4, 2023 (the "Record Date") are eligible to participate in the Offering under the Existing Shareholder Exemption. Any person who becomes a shareholder of the Company after the Record Date is not permitted to participate in the Offering using the Existing Shareholder Exemption, but may still participate under other exemptions available to them. Shareholders who became shareholders after the Record Date should consult their professional advisors when completing their subscription form to ensure that they use the correct exemption.

There are conditions and restrictions when relying upon the Existing Shareholder Exemption, namely, the subscriber must: a) be the Company's shareholder on the Record Date, b) be purchasing the Common Shares as a principal and for their own account and not for any other party, and c) not subscribe for more than $15,000 of securities from the Company in any twelve-month period. In the event that a subscriber wants to subscribe to more than the $15,000 value of securities then they may do so provided they have first received 'suitability advice' from a registered investment dealer. In this case subscribers will be asked to confirm the registered investment dealer's identity and employer.

The Offering will remain open until 4:30 PM (Toronto time) on October 26, 2023, subject to earlier cut-off if the Offering is over-subscribed or in the event of a material change in the affairs of the Company. Subscriptions will be accepted by the Company on a 'first come, first served' basis. Therefore, if the Offering is over-subscribed, it is possible that a shareholder's subscription may not be accepted by the Company even though it is received within the Offering period. Additionally, in the event of an imbalance of large subscriptions compared to smaller subscriptions, management reserves the right in its discretion to reduce large subscriptions in favour of smaller shareholder subscriptions. A subscription will be deemed to be received by the Company when a completed subscription form, together with payment of the subscription price in prescribed form, has been received by the Company. The Offering may be closed in one or more tranches as subscriptions are received. Commissions and/or finder's fees may be paid in respect of this Offering. The securities issued pursuant to the Offering will be subject to a statutory hold period of four months and one day.

The Company intends to use the net proceeds from the Offering to fund the Arbitration, and for general working capital purposes. The net proceeds received from the Minimum Offering are expected to be used for the following corporate purposes:

  1. to fund the ongoing Arbitration, in particular by paying to ICSID the arbitration fee advance requested by ICSID of USD $200,000 (as of October 5, 2023, approximately CAD$274,200) necessary to render a ruling on Phase One of the Arbitration, with a buffer of approximately $6,000 to account for fluctuations in currency exchange rates between the closing of the Offering and the payment of the fees to Colombian authorities; and
  2. for working capital purposes, including the general and administrative deficit of approximately $500,000.

The net proceeds received from the Maximum Offering after payment of issue costs and finder's fees/commissions, if any, are expected to be used for the following corporate purposes:

  1. to fund the ongoing Arbitration, in particular by paying to ICSID the arbitration fee advance requested by ICSID of USD $200,000 (as of October 5, 2023, approximately CAD $274,200) necessary to render a ruling on Phase One of the Arbitration, with a buffer of approximately $6,000 to account for fluctuations in currency exchange rates between the closing of the Offering and the payment of the fees to Colombian authorities;
  2. for working capital purposes, including the general and administrative deficit of approximately $500,000; and
  3. to fund Phase Two of the Arbitration, by paying future legal costs which cannot be determined at this time, and for general corporate and working capital purposes.

If the Offering is not fully subscribed then management of the Company will determine the allocation of net proceeds in excess of the Minimum Offering to be in the best interests of the Company.

How to Participate in the Private Placement

To participate in this private placement shareholders and interested investors must complete a subscription form and return the completed subscription form plus payment in prescribed form for the total purchase price payable to Montauk Metals Inc. to the offices of its legal representatives Peterson McVicar LLP. Funds will be held in trust by Peterson McVicar LLP until the closing date and the issuance of securities to investors.

Subscription forms are available from Peterson McVicar LLP, Solicitors to the Company at 110 Yonge Street, Suite 1601, Toronto, ON M5C 1T4, by email request to alunyov@petelaw.com or directly by contacting the Company at 1-800-761-2770 or at mdoren@galwayinc.com.

The Offering is subject to certain conditions including, but not limited to, the receipt of all necessary approvals, including the approval of the TSX Venture Exchange ("TSXV") and applicable securities regulatory authorities. The Company intends to close the Offering on or around October 26, 2023.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended, (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to or for the account or benefit of a U.S. person (as defined in Regulation S under the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Montauk Metals Inc.