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News

Letter to Shareholders

Jun 10, 2013

June 10, 2013

Dear Fellow Shareholder:

We are writing to seek your support for our company, Teranga Gold Corporation, at a time when a 16% shareholder is seeking to seize control of your Board without paying you a premium during a critical stage in our evolution.

Teranga on the Right Path to Realize Shareholder Value
We are at a critical juncture in our short history as we endeavour to increase shareholder value and fulfill our vision of becoming a mid-tier gold producer in West Africa. We are proud of the work we have done to increase production and reserves, eliminate the hedge book, strengthen our balance sheet and position the Company for strategic growth. Unfortunately, throughout this transformational time, our share price has declined consistent with our peers in a difficult market and does not yet reflect the strides we have made to date.

The new relationship that your Board and Management have established with the Government of Senegal has positioned the Company to pursue the long awaited acquisition of our neighbour – Oromin Explorations Ltd (Oromin).

An Opportunistic Attempt to Seize Control without Paying Shareholders
Mineral Deposits Limited (MDL), a 16% shareholder of Teranga, is seeking through underhanded methods, to take control of the Company without paying YOU, the shareholder, a premium. At the Initial Public Offering of Teranga, MDL appointed one director, and just a month and a half ago MDL requested the appointment of a second director, a current advisor and former Managing Director of MDL. Now MDL wants to appoint three additional nominees to the Board in order to gain five of seven board seats and seize control of the Board and your Company.

MDL has proposed NO plan to run your Company. MDL, by its own admission has consistently stated that it does not intend to be a long-term shareholder of Teranga. Why do they now want to take control of Teranga? Their motives are self-serving. We view this opportunistic attempt by MDL for what it really is – an attempt to take-over your company without paying a premium for your shares.

MDL’s Motivations Linked to MDL’s Own Poor Stock Performance
There appears to be no credible rationale for MDL’s actions other than the fact that MDL is currently under significant pressure from its own shareholders over its persistent failure to deliver on its mineral sands project on time and on budget and its poor stock performance. MDL’s attempt to seize control of Teranga is at best diversionary and at worst predatory -- it offers no benefit to Teranga shareholders!

Replacement of Independent Directors with MDL Associates
MDL is seeking to replace your independent directors with individuals associated with MDL who do not bring added skills to our existing Board. The primary selection criteria MDL seems to be using for director nominees is association with MDL, including its current Executive Chairman and Managing Director. Teranga’s existing independent directors each possess a demonstrated and specific skill set (technical, legal and accounting) and the depth of experience essential to good governance and mandatory for the composition of a competent board. With the removal of these independent directors, we lose these important skills. MDL’s proposal demonstrates a complete disregard for corporate governance principles established by the TSX and ASX.

MDL’s Tactics Put the Oromin Transaction at Risk
MDL’s predatory tactics come at a time when Teranga is in the midst of negotiating a transformational and long-awaited deal to acquire its neighbour, Oromin. If MDL is successful in its opportunistic attempt, it could derail the completion of this critical transaction.

The Government of Senegal strongly supports Teranga’s current Management team and has endorsed its efforts to acquire Oromin. On the signing of the global agreement between Senegal and Teranga in May 2013, President Macky Sall committed his government to work “toward growing domestic gold production as quickly as possible.” President Sall, at that time also praised the “partnership and trust established between the Canadian Management team of Teranga and this government.”

Teranga’s Share Price Performance Consistent with Peers
MDL has charged that the Company’s share price has under-performed. The fact is that Teranga has performed in line with its peer group of West African gold companies. Teranga has delivered on its guidance and the objectives within its control. Teranga, like all gold companies, has seen its share price decline due to the fall in gold prices over the past several years. In particular companies in West Africa have also been impacted by geopolitical events in the region which have caused Teranga and its entire peer group to underperform when compared to gold companies in other parts of the world. MDL’s criticism is unjustified and misleading.

MDL Not Interested in Realizing Full Value for Teranga Shareholders
MDL, by its own admission has consistently stated that it does not intend to be a long-term shareholder of Teranga and intends to dispose of its 16% interest by the end of 2013. A sale this year by MDL could potentially be at a price materially lower than investment dealers research coverage targets.

With NO plan, NO rationale, NO compelling credentials and NO control premium offered to shareholders, MDL’s nominations are NOT in the best interest of all shareholders.

In conclusion, this attack on the Board threatens to disrupt Teranga’s progress and ability to deliver shareholder value. It jeopardizes the completion of the important Oromin transaction and severs the carefully built relationship between the Board and Management with the Government of Senegal.

Protect Your Investment
All of Teranga shareholders, not just MDL, should be the ones to realize the significant long-term potential value from the successful completion of the Oromin transaction, the continued expansion of Sabodala and strengthening of your company’s dominant position on an emerging gold belt.

As a fellow shareholder, we ask you to support our efforts to grow this company and not be distracted by the predatory tactics undertaken by MDL. Regardless of how many shares you own it is imperative that you vote your BLUE proxy in order to stop the cashless take-over attempt by MDL. Re-elect your current Board at the upcoming annual and special meeting originally scheduled for June 26, 2013 which will now be held on July 18, 2013 to allow shareholders to also approve the Oromin transaction at the same meeting.

We look forward to your vote as we move forward to a bright and exciting future. For more information on Teranga’s progress, please refer to the attached Fact Sheet.

Sincerely,


Alan R. Hill
Executive Chairman Richard Young
President and CEO

Note:

If you have any questions or need assistance in voting your BLUE proxy, please call Kingsdale Shareholder Services Inc. at 1-866-229-8651 (toll free within North America) or 1-416-867-2271 (collect calls accepted), or by email at contactus@kingsdaleshareholder.com.

Shareholders who hold their shares in the form of CHESS Depository Interests (CDIs) can contact Radar either by mail at Radar Shareholder Engagement, Level 7, 107 Pitt Street, SYDNEY, NSW, Australia, 2000, by toll-free telephone in Australia at 1-800-850-191 or collect call outside Australia at +61-2-8256-3365, or by e-mail at teranga@shareholderupdate.com.au.


TERANGA GOLD CORPORATION
FACT SHEET

Teranga is On the Right Track

Teranga started its journey with its Initial Public Offering (IPO) in November 2010. Since that time, the Board has mapped out a clear strategy towards becoming a mid-tier gold producer. With an aggressive exploration campaign and the goal of becoming a mid-tier gold producer in Senegal with 250,000 to 350,000 ounces of annual gold production, we are well positioned to increase value for all shareholders and leverage-off existing infrastructure. Despite a challenging environment for the gold industry, Teranga has not lost its focus on creating shareholder value.

The following outlines the milestones we have achieved since the IPO:

  • Successful expansion of the mill at Sabadola (increasing production from 130,000 ounces annually to over 200,000 ounces) while reducing operating costs and solidifying our dominant position on an emerging gold belt. 
  • Prudent elimination of the hedge book and strengthening our balance sheet.
  • Significant expansion of our reserves with the addition of approximately 750,000 ounces to open pit reserves, leading to an extension of our mine life .
  • Successful negotiation of definitive agreements with the Republic of Senegal to create a predictable and stable operating framework and praise for our management team by the President of the Republic of Senegal for “the level of partnership and trust” that we have created.
  • Recognition from the responsible Minister of the Republic of Senegal for “the considerable improvement in relations between the population of the village of Sabadola and the company since Teranga acquired control of the Project.”
  • Establishment of a significant regional exploration program and drill testing over 50 targets, allowing for a better pipeline of prospective targets.
  • Working diligently on the Oromin transaction consistent with the enhancement and protection of shareholder value.

If completed, the Oromin transaction is expected to increase earnings by 300% (based on an assumed gold price of US$1,400 per ounce). It is expected to also increase our full life free cash flow by 50% and our net asset value per share by 50%. The transaction has received strong support from Teranga and Oromin’s shareholders, independent financial analysts, the Government of Senegal and prospective shareholders.

Vote your BLUE proxy to keep the momentum going.

The Board and Management of Teranga need to maintain their focus on the core business of the company, producing gold, as well as successfully completing the Oromin transaction. Maintaining the integrity of our business and its essential social license to operate must remain the critical imperatives of management and the board.

Unlike MDL, your current Board and Management represent the interests of all shareholders. With the Oromin transaction, we can continue to build Teranga into a mid-tier gold producer with an ongoing commitment to all stakeholders and deep abiding relationships with the government and people of Senegal. Maintaining the integrity of its business and its essential social license to operate must remain the critical imperatives of management and the board.

Regardless of how many shares you own it is imperative that you vote your Blue proxy in order to stop this cashless take-over attempt by MDL. If you have any questions or need assistance in voting your BLUE proxy, please call Kingsdale Shareholder Services Inc. at 1-866-229-8651 (toll free within North America) or 1-416-867-2271 (collect calls accepted), or by email at contactus@kingsdaleshareholder.com.

Shareholders who hold their shares in the form of CHESS Depository Interests (CDIs) can contact Radar either by mail at Radar Shareholder Engagement, Level 7, 107 Pitt Street, SYDNEY, NSW, Australia, 2000, by toll-free telephone in Australia at 1-800-850-191 or collect call outside Australia at +61-2-8256-3365, or by e-mail at teranga@shareholderupdate.com.au.

These foregoing earnings, full life cash flow and net asset value financial metrics are based on the following assumptions:

• Oromin Joint Venture Group Ltd. (“OJVG”) open pit proven reserves and probable mineral reserves of 21,889,000 tonnes at a grade of 2.05 g/t (with an effective date of January 30, 2013 - NI 43-101 technical report entitled OJVG Golouma Gold Project Updated FS Technical Report, March 15, 2013, prepared for Oromin (the “Oromin 43-101 Report”)
• Operating cost assumptions based on Sabodala actual costs.
• No change in the operator of the OJVG, and mining, processing and site administrative costs charged to the OJVG based on actual costs plus on a nominal margin.
• Teranga charging the OJVG an equipment rental fee in line with Teranga’s depreciation cost per ounce and as a result OJVG would not be expected to incur any future capital costs.
Qualified Persons and Competent Persons Statement

The technical information contained herein is based on information compiled by Mr. Paul Chawrun P.Eng, using existing publicly available information provided by Oromin, including the NI 43-101 (as defined below) technical report entitled OJVG Golouma Gold Project Updated FS Technical Report, March 15, 2013, prepared for Oromin and available at www.oromin.com and at www.sedar.com. Mr. Chawrun is member of the Professional Engineers Ontario, which is currently included as a “Recognised Overseas Professional Organisation” in a list promulgated by the ASX from time to time.

Mr. Chawrun is a full-time employee of Teranga and is a “qualified person” as defined in NI 43-101 and a “competent person” as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Chawrun has sufficient experience relevant to the style of mineralization and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Chawrun has consented to the inclusion in the press release of the matters based on his compiled information in the form and context in which it appears.

Oromin’s disclosure of mineral reserve and mineral resource information is governed by National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as may be amended from time to time by the CIM (“CIM Standards”). CIM definitions of the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource”, are substantially similar to the JORC Code corresponding definitions of the terms “ore reserve”, “proved ore reserve”, “probable ore reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource”, respectively. Estimates of mineral resources and mineral reserves prepared in accordance with the JORC Code would not be materially different if prepared in accordance with the CIM definitions applicable under NI 43-101. There can be no assurance that those portions of mineral resources that are not mineral reserves will ultimately be converted into mineral reserves. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

CAUTIONARY NOTE TO U.S. INVESTORS REGARDING MINERAL REPORTING STANDARDS Teranga prepares its disclosure in accordance with the requirements of securities laws in effect in Canada, which differ from the requirements of US securities laws. Terms relating to mineral resources and mineral reserves in this press release are defined in accordance with NI 43-101. The SEC permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. Teranga uses certain terms, such as, "measured mineral resources", "indicated mineral resources", "inferred mineral resources" and "probable mineral reserves", that the SEC does not recognize.

For further information regarding the OJVG property, reference should be made to the NI 43-101 technical report entitled OJVG Golouma Gold Project Updated FS Technical Report, March 15, 2013, prepared for Oromin and available at www.oromin.com and at www.sedar.com.

Forward-Looking Statements

This news release contains certain statements that constitute forward-looking information and forward-looking statements within the meaning of applicable securities laws (collectively, “forward-looking statements”) and includes statements relating to the timing and the terms and benefits of the proposed Offer to be made. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Teranga, or developments in Teranga’s business or in its industry, or with respect to the proposed Offer to be made, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements include all disclosure regarding possible events, conditions or results of operations that is based on assumptions about, among other things, future economic conditions and courses of action, and assumptions related to government approvals, the co-operation of Bendon and Badr and anticipated costs and expenditures. The words “poised”, “gives”, “expect”, “its vision”, “plan”, “support”, “assist”, “commit to”, “will not”, “intend”, “intends to” and similar expressions identify forward looking statements. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. Teranga cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. There is no guarantee that the terms and conditions to the proposed Offer to be made will be met or that the anticipated benefits of the proposed Offer to be made will be achieved. The risks and uncertainties that may affect forward-looking statements include, among others: economic market conditions, anticipated costs and expenditures, government approvals, co-operation of Bendon and Badr; and other risks detailed from time to time in Teranga’s filings with Canadian provincial securities regulators. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and, except as required by law, Teranga does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change. Nothing in this news release should be construed as either an offer to sell or a solicitation to buy or sell Teranga securities.