IMZ/Chaparral/Hochschild -- summary under Shares for Shares and Nominal Cash

Overview

HOC, which is listed in the U.K. and headquartered in Peru, is interested in the 40% minority interest of IMZ in their Peruvian mining and development joint venture company, but not in IMZ's Nevada and Ecuadorian development properties (held through non-resident subsidiaries). IMZ, a Yukon corporation, with 118M common shares outstanding, is listed on the TSX and the Swiss Stock Exchange. IMZ will transfer its non-Peruvian assets and $58M of cash to a newly-incorporated Yukon subsidiary Chaparral Gold. Pursuant to a Yukon Plan of Arrangement, the shares of Chaparral Gold (which are expected to be listed on the TSX and are anticipated by Paradigm Capital Inc. to become worth between $0.58 and $0.85 each) will then be distributed to the IMZ common shareholders on a s. 86 reorganization, and the IMZ shares will be transferred to HOC Canada for $2.38 per share in cash.

Plan of Arrangement

1. The IMZ option plan will be cancelled.
2. Common shares of IMZ held by dissenting shareholders will be transferred to HOC Canada.
3. Under a s. 86 reorganization, each IMZ common share will be exchanged for one Class A share (i.e., a common share bearing two votes) and one Chaparral Gold share, with the stated capital of the Class A shares being equal to the paid-up capital of the IMZ common shares minus the fair market value of the Chaparral Gold shares.
4. HOC will cause its indirect wholly-owned Peruvian subsidiary, Inmaculada Holdings S.A.C. ("Inmaculada"), to transfer the Class A shares which it received in 3. to HOC Canada in consideration for the issuance of HOC Canada common shares having full stated capital (i.e., valued based on the cash consideration in 5. below).
5. All Class A shares not already held by HOC Canada will be transferred to it in exchange for $2.38 per share in cash.

Securities law

The Class A and Chaparral Gold share issuances and distributions will be exempted under the 3(a)(10) rule. Shareholder approval is required by a 2/3 majority together with simple majority approval by the shareholders other than HOC/HOC Canada and the CEO (holding in total approx. 5M IMZ common shares).

Canadian tax consequences

S. 86 exchange. The fair market value of the distributed Chaparral Gold shares is not expected to exceed the paid-up capital of the IMZ common shares, so that no deemed dividend should arise on the exchange of the IMZ common shares for Class A shares and Chaparral Gold shares. S. 86 will apply to such exchange so that a holder of IMZ common shares will be considered to have disposed of its shares for the greater of their adjusted cost base and the fair market value of the Chaparral Gold shares received on the exchange.

Exchange of IMZ Class A shares for cash

Occurs on non-rollover basis.

Dissenters

Disposition give rise to proceeds except re any interest award.

Qualified Investments

The Class A shares of IMZ will be qualified investments notwithstanding they will not be listed. Although the Chaparral Gold shares are anticipated to be listed, they nonetheless could retroactively become qualified investments if Chaparral Gold satisfies the public corporation conditions by the filing due date for its first taxation year and makes a retroactive election under the postamble to the s. 89(1) "public corporation" definition.

Non-residents

Although the IMZ Class A shares will not be listed on a designated stock exchange, IMZ believes they will not constitute taxable Canadian property given the foreign asset base. As per above, no deemed dividend anticipated.

U.S. tax consequences

Exchange. The exchange by a U.S. holder of IMZ common shares for IMZ Class A shares and Chaparral Gold shares (the "Spin-off") is not anticipated to qualify as a tax free spin-off under Code s. 355. The Spin-off and the exchange of Class A shares for cash should be treated as steps of a single integrated transaction in which U.S. holders will be treated as having disposed of their IMZ common shares (and their indirect interest in IMZ subsidiaries if special PFIC rules apply) in exchange for Chaparral Gold shares and the cash consideration (with the acquisition and disposition of their Class A shares being disregarded). On this basis, the Chaparral Gold shares and the cash will be treated as an amount received in exchange for the holder's IMZ common shares, and the holder will realize a gain based or loss equal to the difference between the aggregate fair market value of such consideration and the holder's adjusted basis in the IMZ common shares. Consequences would be modified if IMZ was a PFIC for any holding period for its shares.

PFIC status

IMZ believes that it was not a PFIC for its 2008 to 2012 (calendar) tax years, and does not expect to be a PFIC for its 2013 tax year. It believes it was a PFIC for its 2005 to 2007 tax years. It expects Chaparral Gold to be a PFIC for its current tax year and that it may be a PFIC for subsequent years.