Yamana/Brio Gold

Overview

Yamana Gold is proposing to distribute a part interest in a gold-mining subsidiary (Brio Gold) to its shareholders through a dividend-in-kind of rights to purchase common shares of Brio Gold from Yamana for a specified per-share price. These Purchase Rights will trade on the TSX. Yamana will be providing its shareholders with its estimate of the value of this dividend.

Purchase Rights

Yamana is distributing to Yamana Shareholders of record on the Record Date, of a Purchase Right for each Yamana Share held. Each whole Purchase Right will entitle the Yamana Shareholder to acquire one Common Share upon payment of the Exercise Price therefor of C$3.25 per Common Share.

Additional Subscription Privilege

Holders who exercise in full the Basic Subscription Right for their Purchase Rights are also entitled to purchase on a pro rata basis additional Common Shares, if any, not otherwise purchased pursuant to the Basic Subscription Right.

Transfer of Purchase Rights

It is a condition of the Offering that the Purchase Rights and the (Brio Gold) Common Shares be listed on the TSX. Holders who do not wish to exercise their Purchase Rights may sell or transfer their Purchase Rights through investment channels, including through investment dealers and brokers or privately, at the expense of the Holder. The transfer of the Purchase Rights or the Common Shares to or within Ineligible Jurisdictions is restricted.

Eligible Holders

The "Eligible Jurisdictions" for the Offering are (i) the provinces and territories of Canada and (ii) the United States. The Purchase Rights may only be exercised in the United States by qualified institutional buyers. Persons located in certain Ineligible Jurisdictions may be able to exercise the Purchase Rights and purchase Common Shares provided that they furnish evidence reasonably satisfactory to the Company that they are permitted under applicable laws to participate in the Offering ("Approved Ineligible Holders"), or may be able to sell their Purchase Rights. Ineligible Holders (other than Approved Ineligible Holders) and persons in the United States (other than QIBs) will not be eligible to exercise the Purchase Rights.

The Company

The Company is currently an Ontario-incorporated wholly-owned subsidiary of Yamana.

Yamana

Yamana is a CBCA Canadian-based gold producer whose common shares are listed on the NYSE and the TSX. Yamana has significant gold production, gold development stage properties, exploration properties and land positions in Brazil, Chile, Argentina and Canada. In December 2014, Yamana announced that it had made significant progress in separating its core and non-core portfolios, and announced that it had advanced in the process of structuring its intercorporate holdings to form a new subsidiary company, Brio Gold, that would hold the Fazenda Brasileiro Mine, the Pilar Operation and the Santa Luz Project, as well as some related exploration concessions, all of which were held as non-core assets within Yamana.

Use of proceeds/result of offering

The Company will not receive any proceeds from the Offering. Yamana intends to use the net proceeds of the Offering for net debt reduction. Upon completion of the Offering, it is anticipated Yamana will hold approximately 46.3% of the Company's issued and outstanding Common Shares, or approximately 44% on a fully diluted basis assuming full exercise of the Purchase Rights. It is Yamana's intention to continue to provide sponsorship and support to Brio Gold and to retain a residual equity interest in the Company.

Canadian tax consequences

Distribution

A Resident Holder will be required to include in income as a taxable dividend an amount equal to the fair market value of the Purchase Rights distributed to such Resident Holder by Yamana, determined at the time of receipt of such Purchase Rights by the Resident Holder. Holders will be advised following the record date for the dividend in-kind of Yamana's determination of the fair market value of the Purchase Rights and the resulting amount of the dividend in-kind. There is a risk that the distribution would instead be treated as a taxable benefit.

Exercise

The exercise of Purchase Rights is not a disposition for purposes of computing income under the Tax Act and consequently, no gain or loss will be realized on the exercise of Purchase Rights.

U.S. tax consequences

Distribution

Assuming no application of the PFIC rules, U.S. Holders that acquire the Purchase Rights pursuant to the Plan of Distribution will be treated as receiving a distribution equal to the fair market value of the Purchase Rights at the date of the distribution. Such distribution generally will be taxable as dividend to the extent of Yamana's current or accumulated earnings and profits (as determined for U.S. federal income tax purposes).

PFIC status

Based on the nature of their income, assets and activities, neither Yamana nor the Company believe that it was a PFIC for the taxable year ended December 31, 2015 and neither expects that it will be a PFIC for the current taxable year.

Overview

Yamana Gold is proposing to distribute a part interest in a gold-mining subsidiary (Brio Gold) to its shareholders through a dividend-in-kind of rights to purchase common shares of Brio Gold from Yamana for a specified per-share price. These Purchase Rights will trade on the TSX. Yamana will be providing its shareholders with its estimate of the value of this dividend.

See detailed summary under Spin-offs and Distributions - Taxable rights offerings.