High Desert Gold Corporation (TSX VENTURE:HDG)(OTCQX:HDGCF)(FRANKFURT:7HD) is pleased to announce that it has entered into an arrangement agreement pursuant to which South American Silver Corp. will acquire all of the issued and outstanding shares of HDGC that it does not already own in an all-share transaction by way of a plan of arrangement under the Business Corporations Act (British Columbia). Each HDGC share will be exchanged for 0.275 of a SASC Class A Share. SASC currently owns 16,077,000 common shares of HDGC (18.5% on an undiluted basis). Upon completion of the Arrangement, SASC shareholders and HDGC shareholders will own approximately 85.6% and 14.4%, respectively, of Class A Shares of the post Arrangement entity

 
As part of the Arrangement, immediately prior to the acquisition of HDGC, SASC will spin out to its shareholders, Class B Shares which entitle the holders collectively to 85% of the net cash proceeds received from any award or settlement in connection with the ongoing dispute with Bolivia related to its expropriation of the Malku Khota Project. The remaining 15% of the net cash proceeds received from any award or settlement will be retained by the combined company.

Completion of the Arrangement is subject to a number of conditions, including the receipt of the requisite approval of the shareholders of HDGC and the shareholders of SASC, the approval of the Supreme Court of British Columbia and stock exchange approval. See “Details of the Arrangement” below.

In announcing the proposed merger, Phillip Brodie-Hall, President and CEO of South American Silver Corp., commented, “This is an excellent development for both companies. It puts South American Silver back into precious metals through the acquisition of the Gold Springs gold-silver project. Gold Springs straddles the border of Utah and Nevada, both of which are pro-development, safe, mining-friendly states. Gold Springs is an outcropping, near-surface gold-silver deposit which early metallurgical test-work suggests will produce material that is amenable to heap leaching. This all means that, should the Gold Springs deposit prove economic after further exploration and engineering studies, it could be brought into production relatively quickly with minimal technical risk and at reasonable capital costs. I am very excited about this opportunity.”

Ralph Fitch, President and CEO of High Desert Gold, went on to say, “I, too, am very excited about this opportunity and agree that this is an excellent development for both companies. It provides HDGC shareholders with the financial resources to have a continuing interest in this important, developing exploration property as well as exposure to the other major assets of SASC. Gold Springs’ exploration and development will be the immediate focus of the merged company and will be achievable through the availability of funding and the existing exploration team. This year’s drilling at Gold Springs has been very successful in expanding the footprint of mineralization in the Grey Eagle target to beyond the limits of the reported resource. Now with the additional funding we will be able to continue this expansion and move towards developing a PEA and an updated, expanded resource in the near term.”

The Arrangement will benefit HDGC shareholders by ensuring near-term funding from the financially sound SASC that had an estimated cash balance of US$13 million as of Sept. 30, 2013. This will allow for the continuing exploration and development of the Gold Springs project. It also provides further upside to share-value through the potential of SASC’s developing Escalones copper-gold porphyry project in Chile and the retention of 15% of the net cash proceeds (after costs, including applicable taxes, and the third party funder’s portion of any award or settlement) that is received from any arbitration award or settlement in favour of South American Silver Ltd. in connection with the Bolivian government’s expropriation of the Malku Khota silver-indium project. The present resource at Escalones includes 1.6 billion lbs of copper in the indicated resource category together with 4 billion lbs in the inferred category, together with 498,000 and 609,000 oz of gold in the same respective categories. Malku Khota in the most recent PEA published by SASC had an NPV at a 5% discount rate of $704 million using an $18 oz silver price.

Management of the combined company will be led by Ralph Fitch, as President and CEO, with a management team comprised of Matias Herrero (Chief Financial Officer), Randy Moore (EVP of Exploration – North America), and Felipe Malbran (EVP of Exploration – South America).

Details of the Arrangement

The proposed transactions will be carried out by way of a plan of arrangement under the Business
Corporations Act (British Columbia). Prior to implementing the Arrangement each of HDGC and SASC will become subject to the BCBCA via a continuance under corporate law, exporting from the Canada Business Corporations Act which currently governs each of HDGC and SASC.

Under the Arrangement, immediately prior to the exchange of the outstanding securities of HDGC for securities of SASC, each SASC shareholder will exchange each of its SASC common shares for one SASC Class A Share and one SASC Class B Share. The Class A Shares will carry voting, dividend and liquidation rights similar to SASC’s current common shares, while the Class B Shares will be non-voting and non-participating in regards to dividend and liquidation rights.

HDGC shareholders will be issued a total of 19.46 million SASC Class A shares representing approximately 14.4% of the Class A Shares outstanding after the Arrangement. All outstanding HDGC options and warrants will be replaced or assumed by SASC and be exercisable to acquire SASC Class A Shares, with the number of SASC shares and exercise price proportionately adjusted to reflect the consideration to be received by the HDGC shareholders pursuant to the Arrangement.

Implementation of the Arrangement is subject to a number of conditions, including approval by at least 66 2/3% of the votes cast, together with minority approval, by shareholders of HDG and approval by at least 66 2/3% of the votes cast by shareholders of SASC, in each case at separate special meetings of such shareholders that are expected to be held in December 2013, approval of the Supreme Court of British Columbia, approval of the Toronto Stock Exchange and the TSX Venture Exchange, completion of definitive closing documentation and such other conditions as are customary for a transaction of this nature. There can be no assurance that such conditions will be met and if they are not met or waived the Arrangement will not be implemented.

The Agreement also provides for, among other things, customary board support and non-solicitation covenants from HDGC (subject to “fiduciary out” provisions that entitle HDGC to consider and accept a superior proposal and a right in favour of SASC to match any superior proposal). The Agreement also provides for the payment of a termination fee to SASC of $250,000 should HDGC accept an unsolicited superior proposal and terminate the Agreement.

The special committee of the Board of Directors of HDGC has received an opinion from Haywood Securities Inc., its financial advisor, that as of the date of the Agreement, the consideration offered pursuant to the Arrangement is fair, from a financial point of view, to HDGC’s shareholders. The Board of Directors of HDGC, based on, among other things, the recommendations of its special committee, is unanimously recommending that HDGC shareholders vote in favour of the Arrangement.

Advisors

Haywood Securities Inc. is acting as financial advisor to HDGC. Dentons Canada LLP is acting as legal advisor to the special committee of the Board of Directors of HDGC.

Resource Information

The Gold Springs Resource dated March 28, 2013 (PR13-07):

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                                                           Gold Equivalent

Cut-off Grade                 Gold            Silver           AuEq(i)

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                          Grade     Troy  Grade      Troy    Grade     Troy

(AuEq(i)g/t)      Tonnes  (g/t)   Ounces  (g/t)    Ounces    (g/t)   Ounces

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0.3 g/t       19,373,085   0.48  301,756   10.4 6,476,149     0.67  415,254

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(i) (AuEq(i)) calculations reflect gross metal content using a metal price

ratio of 57.14 Au/Ag and have not been adjusted for metallurgical

recoveries.

The South American Silver Escalones Resource dated February 27, 2012 (SASC NR12-01):

Copper-gold resource:

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                  CuEq(ii)%     Tonnes             Cu lbs

Classification       Cutoff      1,000    Cu %      1,000  Au g/t      Au Oz

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Total Indicated        0.25    232,561   0.308  1,578,329   0.067    498,012

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Total Inferred         0.25    527,667   0.343  3,992,410   0.036    609,437

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Additional silver and molybdenum resource:

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Classifi-  CuEq%  Tonnes    Ag         Ag    Mo         Mo  CuEq%   CuEq lbs

 cation   Cutoff   1,000   g/t         oz     %        lbs    (1) (ii) 1,000

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Total

 Indicated  0.25 232,561 0.661  4,938,667 0.006 31,908,650  0.380  1,947,232

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Total

 Inferred   0.25 527,667 0.849 14,397,830 0.007 79,488,676  0.401  4,664,903

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(ii) Copper Equivalent (CuEq%) calculations reflect gross metal content

using approximate 3 year average metals prices as of June 25th, 2013 of

$3.71/lb copper (Cu), $1549/oz gold (Au), $30.29/oz silver (Ag), and

$14.02/lb molybdenum (Mo) and have not been adjusted for metallurgical

recoveries. An economic cut-off grade of 0.25% copper equivalent represents

a metal price of approximately $2.50/lb copper.

The SASC Malku Khota project was expropriated by the Bolivian Government in August 2012 and is now subject to international arbitration proceedings in which SASC’s subsidiary is seeking compensation under the bilateral investment treaty between the United Kingdom and Bolivia.

A PEA for Malku Khota published in 2011 reported pre-tax NPV at a 5% discount rate of $704 million and IRR of 37.7% at “base case” metal prices of $18.00/oz silver, and $500/kg indium, increasing to a NPV5% of $1.536 billion and IRR to 64.3% at “middle price case” of $25.00/oz silver.

About High Desert Gold Corporation

High Desert Gold Corporation is a mineral exploration company that acquires and explores mineral properties, primarily gold, copper and silver, in North America. The major properties held by HDG are the 100% owned Gold Springs gold project situated along the border between Utah and Nevada and the San Antonio project in Sonora, Mexico. The Company also has a 26.8% equity interest in Highvista Gold Inc that owns the Canasta Dorada property in Sonora, Mexico. There has been insufficient exploration to define a property-wide mineral resource at Gold Springs and it is uncertain if further exploration will result in the targets at Gold Springs being delineated as a mineral resource.