Baru Gold Corp. announce to shareholders that mining contractor CV. Mahamu Hebat Sejahtera (the "Contractor") has signed a legally binding contract to operate and produce gold on Sangihe Island. There were no substantial changes between this contract signed August 4, 2023 and the intent of the Memorandum of Understanding, announced on August 3, 2023. However, in the interest of shareholders, the Company has decided to allocate the 65 ha in multiple phases. In the Company's estimation, exclusive operations within the entire mining concession was too significant a risk. The Company will award subsequent land allocations in a competitive process that will include other interested parties. This allocation method gives the Company greater control, assurance of the Contractor's legal and environmental compliance, and also the option for the Company to develop their own operation. This first phase with the Contractor involves only 15 ha of the 65 ha area. The Contractor will use their own capital to operate and expand an existing mining operation. For the exclusive contracting right within the prescribed area, the Contractor will pay the Company approximately CAD 670,000. The payment is based on both the land area and estimated gold content. The payment will be as follows: IDR 1,000,000,000 (CAD 88,000)(1) as the first payment to be paid at the time of signing of the agreement as a non-refundable deposit; IDR 3,250,000,000 (CAD 286,000)(1) as the second payment to be paid when the Contractor starts carrying activities on the land area. IDR 3,250,000,000 (CAD 286,000)(1) as the third payment to be paid 30 days after the second payment. At the conversion rate of the Bank of Canada on August 4, 2023 of IDR 0.000088 to CAD 1.00. The Contractor will immediately begin operations by restarting a recently producing gold mine within the contracted 15 ha. With all the equipment already on site, land cleared, and construction complete, operations will start immediately. The Contractor anticipates the operation will begin generating cash flow within two months. The Contractor is responsible for all operational, production and site remediation expenses. As the result of their responsibility for operational expenses, they will receive 65% of the total gross receipts from the sale of gold recovered. Under the terms of the agreement, the Company will receive 35% of the total gross receipts from the sale of gold recovered. The Company will supervise all activities and co-process the gold. The Company will be responsible for refining the gold and distributing the resulting funds. The Contractor must abide by the same environmental and reclamation standards required of the Company by Indonesian law, including mercury prohibition. The Company negotiated the phased allocation of land with the Contractor. The $670,000 will be used for the Company's near-term obligations. In addition, the area reduction has no impact on near-
term cash flow as the Contractor can operate at maximum production capacity on 15 ha for the next 12 months. This contract for 15 ha does not prevent the Company from opening or contracting out additional worksites.
The Company retains complete control of the Sangihe Project. The Company's Contract of Work includes an area of 42,000 ha, of which 23,000 ha is gold bearing. In the event of a regulatory cessation of work occurring prior to the due date for the second payment, the agreement shall be automatically terminated. In such an instance, both the second and third payments specified within the agreement will be deemed non-payable. The Company is fully permitted and legally entitled to operate, hire contractors and produce gold on Sangihe Island.