AuRico/Alamos/AuRico Metals -- summary under Shares for Shares and Nominal Cash

Overview

Under an Ontario Plan of Arrangement, AuRico will acquire all the shares of Alamos ("Alamos Shares") in consideration for AuRico common shares ("AuRico Shares") and nominal cash (so that a s. 85 election is required for rollover treatment), and then amalgamate with Alamos. Former AuRico and Alamos Shareholders are anticipated to own 50.1% and 49.9% of Amalco, respectively. 95.1% of the shares of a newly-incorporated subsidiary, namely, AuRico Metals, holding the Kemess East development project, cash and royalty interests, will be spun-off to all the Amalco shareholders under a s. 86 reorg involving an exchange of Amalco common shares for Amalco Class A shares (with identical substantive attributes) and common shares of AuRico Metals ("AuRico Metals Shares"). The AuRico Metals distribution will be treated as a dividend for Code purposes based on current or accumulated E&P of Amalco; and the merger is intended by the parties to qualify as a Code s. 368(a) reorg. An acquisition of control of AuRico (which likely has significant Canadian resource pools) by Alamos under ITA s. 256(7)(c) will be avoided by having the AuRico Metals spin-off occur after the merger. There also is a preliminary transaction in which Alamos subscribes for 9.9% of the shares of AuRico.

AuRico

An Ontario corporation listed on the TSX and NYSE which has gold mines and projects in North America, and focuses on the Young Davidson Mine in northern Ontario, and the El Chanate Mine in Sonora State, Mexico. AuRico's project pipeline also includes the advanced-stage Kemess Project in northern B.C. Shareholders' equity at December 31, 2014 was US$2.0B after deduction of a deficit of U$285M, and its market cap is US$867M.

Alamos

A B.C. corporation listed on the TSX and NYSE. Its primary asset is the Mulatos Mine and concessions in the state of Sonora, Mexico. In addition, in 2010 Alamos acquired the development-stage Aği Daği Project and Kirazlı Project in the Biga district of northwestern Turkey.

AuRico Metals

. Was incorporated under the laws of the Province of Ontario for the sole purpose of participating in the Arrangement. It has applied for a TSX listing. Its carve out (i.e., pro forma) financial statements show owners' equity of US$125M as at December 31, 2014. The market cap of AuRico is US$867M, i.e., a significant discount to book. The "AuRico Metals Properties" (described below) currently are held by AuRico.

AuRico Metals Properties. Include: the Kemess Project; cash equal to $20 million less the Earn-In Committed Amount (see below); and royalties on the Young Davidson mine (i.e., a 1.5% NSR) and Australian properties.

Amalco Earn-In Interest

AuRico Metals will grant to Amalco a right to earn up to a 30% participating interest in the Kemess East Project by spending C$20 million on the Kemess East Project by December 31, 2016, of which C$9.5 million, subject to upward adjustment, is a committed amount (the "Earn-In Committed Amount"). The Earn-In Committed Amount is payable to AuRico Metals on the Effective Date of the Arrangement. AuRico Metals shall spend the Earn-In Committed Amount, on AuRico's behalf, at the Kemess East Project on exploration. Upon Amalco receiving the 30% interest, it and AuRico Metals shall enter into a joint venture agreement to form a special-purpose entity to hold the project.

Preliminary transactions. D

irectors and officers of AuRico and Alamos, representing approximately 3.1% and 4.5% of the outstanding AuRico Shares and Alamos Shares on a fully diluted basis, respectively, each entered into support agreements. Pursuant to the Arrangement Agreement, Alamos subscribed for approximately 27.9 million AuRico Shares on a private placement basis for total gross proceeds to AuRico of approximately $83.3 million. Alamos will be continued to Ontario.

Plan of Arrangement

1. Alamos shall subscribe for a number of AuRico Shares to be agreed by AuRico and Alamos.
2. AuRico shall transfer the AuRico Metals Property to AuRico Metals, AuRico Metals shall assume liabilities and the Earn-In Covenants shall become effective. [No mention of share consideration or of when the AuRico Metals Shares are issued.]
3. Each Alamos or AuRico Share held by a dissenting shareholder shall be deemed to have been transferred Alamos or AuRico , as the case may be, in consideration for a debt claim against that corporation.
4. Each Alamos Share shall be transferred to AuRico in exchange for (i) the issuance to the holder of 1.9818 of an AuRico Share (subject to adjustment) and (ii) $0.0001. The aggregate stated capital of such AuRico Share shall be equal to the fair market value of such Alamos Shares minus the cash consideration.
5. Each Alamos Option outstanding immediately prior to the Effective Time shall be exchanged for an option granted by AuRico to acquire AuRico Shares.
6. Alamos SARs shall be exchanged for a replacement award by AuRico.
7. Alamos shall make a non-interest bearing loan payable on demand to AuRico.
8. The aggregate stated capital of the Alamos Shares shall be reduced to C$1.00.
9. AuRico and Alamos shall be amalgamated under the OBCA to continue as Alamos Gold Inc. ("Amalco"), with the common shares of AuRico and Alamos in each other being cancelled. The aggregate stated capital of the Amalco common shares (carrying one vote per share) shall be equal to the aggregate stated capital of the AuRico Shares and the Alamos Shares immediately prior to the amalgamation, less the amount of any stated capital attributable to the AuRico Shares or the Alamos Shares that are cancelled on the amalgamation.
10. The articles of Amalco shall be amended to add "Class A Common Shares" (with the same substantive attributes as the Amalco common shares).
11. Each issued and outstanding Amalco Share shall be exchanged with Amalco for 0.5046 of a Class A Share and a pro rata portion of 95.1% of the outstanding AuRico Metals Shares.

Canadian tax consequences

Continuance. The Alamos continuance will not result in a disposition of Alamos Shares.

Exchange of

Alamos Shares for AuRico Shares and nominal cash This exchange will occur on a taxable basis unless a s. 85 election is made by an "Eligible Holder," being (i) a taxable resident, (ii) a non-resident whose Alamos Shares are "taxable Canadian property" and who is not Treaty-exempt, or (iii) a partnership any member of which is described in (i) or (ii) and is not Treaty-exempt. Tax election information must be provided to the AuRico representative by the 60th day following the Effective Date of the Arrangement.

Amalgamation

Shareholder rollover.

S. 86 reorg

Management of AuRico advised counsel that it expects the paid-up capital in respect of the Amalco common shares immediately prior to the distribution of the AuRico Metals Shares pursuant to the Arrangement to be substantially in excess of the aggregate fair market value of the AuRico Metals Shares so distributed, so that no deemed dividend is anticipated. Resident Shareholder will realize a capital gain only to the extent that the fair market value of the AuRico Metals Shares received exceeds the adjusted cost base of such Shareholder's Amalco common shares.

U.S. tax consequences

Continuance. The continuance of Alamos should qualify as a tax-deferred reorganization under Code s. 368(a)(1)(F).

Exchange

The exchange of Alamos Shares for AuRico Shares followed by the amalgamation of Alamos into Amalco and the conversion of Amalco Shares into Class A Shares pursuant to the Arrangement is intended to qualify as a tax-deferred reorganization under Code s. 368(a) (a "Reorganization"); the amalgamation of AuRico into Amalco and the conversion of Amalco Shares into Class A Shares pursuant to the Arrangement is also intended to qualify as a Reorganization. Because Alamos Shareholders will be receiving cash of $0.0001 per Alamos Share in addition to AuRico Shares, any gain realized by such holder must be recognized to the extent of such cash received.

PFIC exception

However, in the case of an Alamos Shareholder who owned Alamos Shares during any year (i.e., prior to 2006) in which Alamos was a passive foreign investment company, the foregoing tax consequences do not apply. AuRico, Alamos and Amalco (but not AuRico Metals) are not expected to be PFICs for the current year. No disclosure of the PFIC status of AuRico for prior years.

Distribution of

AuRico Metals. The receipt of AuRico Metals Shares pursuant to the Arrangement will be treated as a distribution by Amalco in an amount equal to the fair market value of the AuRico Metals Shares. The distribution will be treated as a dividend to the extent such distribution is made out of current or accumulated earnings and profits of Amalco. As for the excess, it will be treated as a non-taxable return of capital to the extent of the U.S. Holder's adjusted basis in the Amalco Shares on which the distribution is made and as a capital gain to the extent it exceeds that basis.