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Wednesday, 08/09/2006 10:33:40 AM

Wednesday, August 09, 2006 10:33:40 AM

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Chesapeake Gold Corp.: Update on Business Combination
Wednesday August 9, 9:00 am ET

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 9, 2006) - Chesapeake Gold Corp. (TSX VENTURE:CKG - News; "Chesapeake") and American Gold Capital Corporation (TSX VENTURE:AAU - News; "American Gold"), wish to provide an update on the status of the proposed business combination of the two companies, previously announced March 3, 2006.

Both companies are continuing in their efforts to complete, and expect to be in a position to execute the definitive combination agreement between the companies in late August 2006. The delay in executing the definitive agreement results from the efforts made in evaluating and structuring the proposed transaction to achieve an optimal fiscal outcome from the perspective of both parties and their shareholders.

Once the definitive agreement is executed, American Gold will finalize the information circular for mailing to its shareholders in connection with the holding of a Special Meeting to approve the proposed business combination. It is expected that the meeting materials will be mailed to American Gold shareholders in September for a Special Meeting to be held in October. If the proposed business combination is approved by American Gold's shareholders, the business combination should close in early November, 2006.

Pursuant to the proposed business combination, Chesapeake will issue for every (1) outstanding share of American Gold (i) 0.29 Chesapeake common shares ("shares"), (ii) 0.145 Chesapeake common shares purchase warrants ("warrants") and (iii) 0.29 Chesapeake rights ("rights"). American Gold has 30,855,525 common shares issued and outstanding which will result in the issue of 8,948,102 shares, 4,474,051 warrants and 8,948,102 Rights.

Each Warrant shall entitle the holder to purchase one (1) Chesapeake common share at $8.00 for a term of five (5) years.

The original structure of the transaction will be amended with the issuance of a preferred share instead of a Right. Each Right, which will be received in the form of a Chesapeake Preferred Share, shall be exercisable, for no additional consideration and for a period of five (5) years, into one (1) Chesapeake common share in the event that the average London PM fix closing trading price of gold is equal to or greater than US$850 per ounce on such market during any 90 consecutive day period during the five year term.

Both companies will continue to seek a listing for the Warrants and Preferred Shares. In the event a stock exchange listing is obtained for the Preferred Share, the Preferred Share will be exercisable for one Chesapeake common share at $1.00 for a term of five years which will be extended by one year if the trading price for gold has been at or above US $850 per ounce on any day during the last six months of the five year term.

If the proposed transaction is completed, it is anticipated that Chesapeake will have a total of 28,685 897 shares issued and outstanding. Of these shares approximately 68.8% will be held by the existing Chesapeake shareholders and 31.2% will be held by the existing American Gold shareholders. In addition, it is anticipated that the American Gold shareholders will hold warrants to acquire approximately 4.5 million additional shares and preferred shares to acquire a further approximately 9.1 million shares which if fully vested would represent approximately 53.4% of the then outstanding shares.

The proposed transaction is subject to the execution of the definitive agreement and conditional on American Gold shareholder and regulatory approvals.

Forward looking statements

This press release contains certain forward looking statements that may involve a number of risks and uncertainties. Actual events or results could differ materially from the company's expectations and projections.

The TSX has neither approved nor disapproved the information contained in this press release.

P. Randy Reifel
Chesapeake Gold Corp.
(604) 731-1094

Chris K. Falck
American Gold Capital Corporation
(604) 689-1765 Extension.1

Source: Chesapeake Gold Corp.