San Gold and Kerr Mines Sign Definitive Merger Agreement

WINNIPEG, MANITOBA and TORONTO, ONTARIO--(Marketwired - Aug. 19, 2014) -

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San Gold Corporation (TSX:SGR)(OTCQX:SGRCF) ("San Gold") and Kerr Mines Inc. (TSX:KER) ("Kerr Mines") are pleased to announce that, further to their joint press release of July 21, 2014, the companies have entered into a definitive agreement (the "Arrangement Agreement") to merge their respective businesses pursuant to a plan of arrangement (the "Transaction").

"I am very pleased with the deal we have structured. We've fixed a lot of problems over the past few months at Rice Lake. We're looking forward to continuing improvement as well as leveraging the entire team at the Copperstone opportunity and at other projects," said San Gold's President, Gestur Kristjansson.

"Combining the Rice Lake and Copperstone assets is an important step in creating the next North American mid-tier gold producer. Once this transaction has been completed, the combined entity will have a much stronger market presence than either company could achieve on its own," said Kerr Mines' Chairman, Stephen McIntyre.

Under the terms of the Arrangement Agreement between San Gold and Kerr Mines, each Kerr Mines shareholder will be entitled to an exchange ratio (the "Exchange Ratio") of three (3) common shares of San Gold (each, a "San Gold Share") for every one (1) common share of Kerr Mines (each, a "Kerr Mines Share") held by such Kerr Mines shareholder. The Board of Directors of both companies have each been provided with separate fairness opinions.

Currently, San Gold and Kerr Mines have approximately 373 million and 95 million shares outstanding, respectively. Closing share prices on Monday, August 18, 2014, were $0.125 for San Gold Shares and $0.345 for Kerr Mines Shares.

In addition, each holder of outstanding stock options and common share purchase warrants of Kerr Mines will receive such number of replacement options or warrants of San Gold based upon the Exchange Ratio. A break fee of $1,000,000 is payable by either San Gold or Kerr Mines in the event that either party proceeds with an alternative transaction during a specified period while the parties pursue completion of the Transaction.

The Transaction remains subject to certain conditions including, without limitation: (a) receipt of shareholder approval of the Transaction by the shareholders of San Gold and Kerr Mines; and (b) receipt of all necessary consents, waivers, permits, exemptions, orders and approvals, including court approval of the plan of arrangement and the approval of the Toronto Stock Exchange (the "TSX").