Dawson Gold Updates on Proposed Acquisition of FluidOil Limited

Source Press Release
Company Dawson Gold Corp.FluidOil Limited 
Tags Corporate Deals, Deals, Oil Services
Date October 17, 2018

Dawson Gold Corp. has provided an update on its previously announced transaction to acquire 100 per cent of the issued share capital of FluidOil Ltd.

FluidOil is an independent, international oil services technology company that is commercializing its "Viscositor Heavy to Light" ("VHTL") oil upgrading technology. VHTL is a proprietary and patented technology that provides a cost efficient and environmentally sympathetic way to increase the economic viability of heavy oil production by upgrading close to source.

Corporate Update

Customer Testing

FluidOil is undertaking a new series of customer tests at its Feedstock Test Facility ("FTF") in San Antonio, Texas, starting in late October. These tests are being conducted for FluidOil's existing major customers in Canada and Mexico. Data from these tests will inform decision making ahead of the planned funding and construction of 1,000 barrels per day Commercial Demonstration Plant in Canada and Mexico.

Mexico Joint Venture

In April 2018, FluidOil concluded an agreement to extend its existing joint venture in Mexico, bringing in a new local partner, Petrofusion S.A de C.V., to join FluidOil's existing partner in Mexico, Mr. Americo Leal Rios to allow FluidOil to advance the commercialisation of VHTL in the country. The joint venture, trading as FOMEX, will provide testing and heavy oil upgrading services to Pemex, the state oil company, and other third parties, as well as improving techniques and processes associated with producing, processing and refining heavy oil in Mexico.

Other international opportunities

FluidOil continues to receive interest in its VHTL technology from heavy oil producers, including national and international oil companies, as well as field service providers and engineering contractors, globally. In addition to Canada and Mexico, FluidOil is negotiating commercial opportunities currently with partners in Iraq and Kuwait.

Transaction Update

As previously announced, Dawson entered into a letter of intent on March 31, 2017 to issue common shares to FluidOil equal in value to C$25 million at a deemed price of C$0.25 per share. Dawson agreed to pay to FluidOil a refundable deposit of US$200,000 in cash to be secured against the assets of FluidOil. The deposit is refundable in the event the transaction does not complete.

In connection with the proposed Transaction, Dawson proposed to undertake a private placement of its common shares for gross minimum proceeds of C$5 million and gross maximum proceeds of C$10 million, at a price of C$0.25 per share. The net proceeds from the private placement will be used to provide additional capital to support the ongoing commercialization of VHTL.

On April 4, 2018, Dawson and FluidOil amended the letter of intent to reflect updates to the FluidOil business since March 2017. The parties agreed that Dawson would issue common shares to FluidOil equal in value to C$35 million at a deemed price of C$0.25 per share. There were no changes to the proposed private placement of Dawson common shares.

The proposed Transaction has been negotiated at arm's length and will on closing constitute a reverse takeover of Dawson by FluidOil.

The terms of the Transaction will be included in a definitive agreement to be entered into among the parties that will replace the letter of intent.

The parties have agreed to delist from the TSX Venture Exchange and pursue a listing on the Canadian Securities Exchange ("CSE" or the "Exchange"), subject to approval of the Exchange. The CSE is increasingly popular with investors focused on emerging companies and technologies as it benefits from a more streamlined regulatory regime and lower maintenance costs.

The parties have also agreed to amend the terms of the private placement. Dawson is now proposing to issue common shares for gross minimum proceeds of C$3 million and gross maximum proceeds of C$3.5 million, at a price of C$0.25 per share.

The net proceeds are expected to provide sufficient capital to support a full year of operations, including the completion of customer testing at FluidOil's FTF in San Antonio, Texas.

John Anderson, Interim Chief Executive Officer of Dawson Gold, said: "With FluidOil, we look forward to having a significant technology stake in upgrading heavy oil. The worldwide production of heavy oil has been constrained because conventional methods of extraction, transportation and refining are expensive. VHTL is a unique solution to this heavy oil challenge because it is designed to be deployed at commercial scales. This transformative technology, under the leadership of Charles Parker, will add significant value for all Dawson shareholders."

Charles Parker, Chief Executive Officer of FluidOil, commented: "This transaction provides the necessary access to the public market and capital to allow us to complete the development of VHTL, through the engineering and construction of a commercial-scale demonstration plant. Funding also allows us to execute on the next stage of our strategy, which is to partner with heavy oil projects globally that will benefit from VHTL technology."

Directors & Officers

The following is a brief description of the names and backgrounds of the individuals who are anticipated to be the directors and senior officers of the Company post-Transaction:

Charles Parker - Mr. Parker has been Chief Executive Officer of FluidOil since founding the business in 2012. Mr. Parker has been instrumental in the growth and financing of the company, drawing on significant international experience in strategic consultancy, venture capital and corporate finance. Prior to FluidOil, Mr. Parker spent three years in Private Equity before co-founding a renewable energy focused advisory business, Wellstone Partners. He has also worked as a strategy consultant for Boston Consulting Group and The Parthenon Group, advising FTSE 100 and Fortune 500 companies with a specialisation in Renewable Energy, Engineering, Financial Services, Fast Moving Consumer Goods, Software and Telecoms. Mr. Parker has a master's degree in engineering from Oxford University.

Olav Ellingsen - Mr. Ellingsen is a founder of FluidOil and the inventor of the original technology behind VHTL. He has served as the Chief Technology Officer since 2012. With a background as an inventor and technical expert, Mr. Ellingsen has over 40 years of international experience in the oil industry. Prior to FluidOil, Mr. Ellingsen founded Thermtech A/S, an oil technology company, based in Norway, which developed an award-winning technology to clean oil-polluted drill cuttings. In 2007, Thermtech was ranked number one in Deloitte's Fast Track list of fastest growing revenue technology companies in Norway and in 1994, Mr. Ellingsen received Norway's NITO Technology Prize. He has participated in the Norwegian government's "Forum for Value Creation" under the leadership of the former prime minister Gro Harlem Brundtland, together with the ministers of oil, energy and finance.

Gerald Malone - Mr. Malone brings significant executive and investment expertise. A solicitor by profession, Mr. Malone served two terms as a Member of Parliament from 1983 to 1987 and 1992 to 1997, including time as a member of the House of Commons Energy Select Committee, a Parliamentary Private Secretary (PPS) at the Department of Energy, PPS to the Secretary of State for Trade and Industry, a Government whip from 1986 to 1987 in Margaret Thatcher's government and Minister for Health in John Major's government. He has been Scottish editor of The Sunday Times, a presenter of business and current affairs programmes on the BBC and commercial radio and from 1988 to 1991 he was Director of European Affairs at the Energy and Environmental Policy Center at the John F Kennedy School of Government, Harvard. Mr. Malone is currently Chairman of Aberdeen Global Income Fund, Inc. (FCO), Aberdeen Asia-Pacific Income Fund, Inc. (FAX), and the "Aberdeen Funds". He is on the board of Aberdeen Australia Equity Fund, Inc. (IAF) and Aberdeen Asia-Pacific Income Investment Co. Ltd. He is also on the board of Rejuvenan Global Health, a US healthcare company and Crescent Pharma Ltd, a UK generic drug supplier.

John D. Anderson - Mr. Anderson is Interim Chief Executive Officer & Director at Dawson Gold Corp. Mr. Anderson has over 20 years of capital market experience specializing in the resource sector. He has been a founder and financier of many start-up companies with experience on the TSX, NYSE, NASDAQ, London AIM and Swiss Stock Exchange. He was a founder of Deep 6 PLC, American Eagle Oil and Gas as well a founding general partner in Aquastone Capital LLC, a New York based gold fund. Mr. Anderson is the Executive Chairman of Triumph Gold Corp.

Bijay R. Singh - Mr. Singh is an independent director at Dawson Gold Corp. He has extensive experience working with both public and private companies helping with capital raising, corporate finance, go public strategies and business development.

Simon Anderson - Mr Anderson has been Dawson Gold Corp.'s Chief Financial Officer since 2010. He has extensive experience with public companies, having been a director or senior officer of companies listed on the TSX Venture Exchange, TSX and Nasdaq stock market. He is a member of the Chartered Professional Accountants of British Columbia, having qualified as a Chartered Accountant in 1986. Mr. Anderson currently serves on the boards of IBC Advanced Alloys Corp., which manufactures and processes alloys and Sinovac Biotech Ltd., a Beijing-based vaccine manufacturer.

Trading Halt

In accordance with TSX Venture Exchange policy, the Company's shares will remain halted from trading until such time as the shares are delisted from the TSX Venture Exchange.

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