Clean Elements Ltd.
Headnote
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 62-104 Take-Over Bids and Issuer Bids -- Relief from the take-over bid requirements in Part 2 of NI 62-104 in connection with proposed normal course purchase of issuer's common shares -- Filer acquired a large block of securities under a private placement -- Due to fluctuations in the exchange rate, the Filer was unable to acquire as many common shares as it raised funds for and has additional funds remaining -- Filer granted relief to acquire common shares in the normal course provided that it only acquire as many common shares as can be purchased with the additional funds.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.
Citation: Re Clean Elements Ltd., 2025 ABASC 22
March 12, 2025
IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF CLEAN ELEMENTS LTD. (the Filer)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption (the Requested Relief) pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104) from the take-over bid requirements under the Legislation in connection with certain normal course market purchases of the issued and outstanding shares of NOA Lithium Brines Inc. (the Issuer) by the Filer.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each province of Canada other than Ontario; and
(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
The decision is based on the following facts represented by the Filer:
1. The Filer is a corporation existing under the laws of the Republic of Cyprus. The Filer is a special purpose vehicle that was created for the purpose of making investments in the critical minerals sector. The Private Placement (as defined below) represents its initial investment. The Filer is not a reporting issuer in any jurisdiction and is not in default of applicable securities legislation in any jurisdiction.
2. The Issuer is a corporation incorporated under the laws of Alberta. The Issuer is a mining company that is primarily engaged in the exploration and evaluation of mining assets in Argentina.
3. The Issuer is a reporting issuer in each jurisdiction of Canada.
4. The Issuer is authorized to issue an unlimited number of Class A common shares (the Class A Shares), of which 229 012 251 are issued and outstanding, an unlimited number of Class B common shares, of which none are issued and outstanding, and an unlimited number of preferred shares, of which none are issued and outstanding. The Class A Shares are listed on the TSX Venture Exchange (the Exchange) under the symbol NOAL.
5. On October 14, 2024, the Issuer and the Filer entered into a subscription agreement (the Subscription Agreement) in respect of a strategic non-brokered private placement (the Private Placement) of 79 411 764 units (the Units) of the Issuer at a price of $0.17 per Unit for aggregate gross proceeds of $13 500 000 (the Purchase Price), with each Unit being comprised of one Class A Share and one warrant (each a Warrant). Each Warrant is exercisable to acquire one Class A Share (each a Warrant Share) at a price of $0.221 per Warrant Share for a period of 30 months from the date of issuance.
6. Concurrent with the entering into of the Subscription Agreement, on October 14, 2024, the Issuer and the Filer entered into an investor rights agreement (the Investor Rights Agreement). Pursuant to the Investor Rights Agreement the Filer has, among other things, agreed, for a period of 12 months from the closing of the Private Placement, not to acquire or agree to acquire, directly or indirectly, from any third-party any securities of the Issuer or any of its affiliates that would exceed 50% or more of the issued and outstanding securities of the Issuer (the Standstill).
7. Pursuant to the Investor Rights Agreement, the Filer was granted the right to appoint half of the board members of the Issuer's board of directors (the Board) so long as the Filer holds greater than 30% of the issued and outstanding Class A Shares on a non-diluted basis, or one third of the board members of the Board if the Filer holds between 15% and 30% of the issued and outstanding Class A Shares on a non-diluted basis.
8. On October 29, 2024, the Issuer received conditional acceptance from the Exchange for the issuance of the Units pursuant to the Private Placement (the Conditional Acceptance).
9. As the completion of the Private Placement would result in the Filer becoming a new "Control Person" of the Issuer, as defined in the Exchange Corporate Finance Manual, the Conditional Acceptance required that the Issuer obtain approval from its shareholders for the creation of a new Control Person that would result from the completion of the Private Placement.
10. On December 4, 2024, the Issuer held an annual general and special meeting of its shareholders (the Meeting). At the Meeting, the resolution to approve the creation of a new Control Person was approved by a majority of the disinterested votes cast thereon. More specifically, Class A Shares representing 59.102% of those outstanding were voted at the Meeting. Approximately 91.10% of such Class A Shares were voted in a manner so as to approve the creation of a new Control Person.
11. On December 9, 2024, the Issuer received final approval from the Exchange. The Private Placement was completed on December 9, 2024 (the Private Placement Closing Date).
12. Immediately prior to the completion of the Private Placement, the Filer did not have beneficial ownership of, or control and direction over, any of the issued and outstanding Class A Shares. Following the completion of the Private Placement, the Filer has beneficial ownership of, or control and direction over, 79 411 764 Class A Shares and 79 411 764 Warrants, representing approximately 34.7% of the issued and outstanding Class A Shares on a non-diluted basis and approximately 51.5% on a partially diluted basis, assuming the exercise in full of the Warrants but no other securities convertible into or exchangeable for Class A Shares.
13. In preparation for the Private Placement, the Filer raised US$10 000 000 (the Private Placement Funds) from investors with the intent to use these funds towards the Purchase Price upon the closing of the Private Placement. Due to a significant decline in the Canadian dollar relative to the U.S. dollar between the execution of the Subscription Agreement and the Private Placement Closing Date, the Filer delivered less than all of the Private Placement Funds to the Issuer in satisfaction of the Purchase Price (being denominated in Canadian dollars), having approximately US$500 000 remaining (the Remaining Funds) following the closing of the Private Placement. The Filer has no other business use for the Remaining Funds and wishes to avoid returning the Remaining Funds to the investors as the investors intended for all of the Private Placement Funds to be deployed to acquire securities of the Issuer. The Filer would like to use the Remaining Funds to purchase additional Class A Shares (the Additional Shares) over the facilities of the Exchange at the prevailing market prices and over a reasonable period of time having regard to the liquidity profile of the Class A Shares.
14. Immediately following the closing of the Private Placement, and upon realizing the existence of the Remaining Funds, the Filer informed the Issuer of its intention to use the Remaining Funds to acquire the Additional Shares over the facilities of the Exchange. The Issuer and the Filer have agreed that, considering both the average share price of the last 12 months and the current United States dollar to Canadian dollar foreign exchange rate, a waiver of the Standstill is not necessary to allow the Filer to acquire the Additional Shares over the facilities of the Exchange and therefore, the Issuer has informed the Filer that it is supportive of the Filer acquiring the Additional Shares. The Filer has agreed that, if any significant change in the share price or decline of the Canadian dollar relative to the United States dollar may lead the Filer to acquire securities in excess of the Standstill, it will notify the Issuer in advance of the purchase of the Additional Shares for the Issuer to submit the decision on whether to approve the purchase and the waiver of the Standstill to its Board of Directors. In such event, any Board member affiliated with the Filer will abstain from voting on said resolution.
15. Since the Filer exercises control or direction over more than 20% of the outstanding Class A Shares, the purchase of the Additional Shares by the Filer, or by persons acting jointly or in concert with the Filer, would constitute a take-over bid under NI 62-104, requiring a formal bid, unless an exemption is otherwise available.
16. The Filer wishes to purchase the Additional Shares pursuant to the normal course purchase exemption contained in subsection 4.1(b) of NI 62-104 (the Normal Course Purchase Exemption). However, since the Filer acquired 79 411 764 Class A Shares from treasury on the Private Placement Closing Date, pursuant to the Private Placement, the Filer is unable to acquire additional Class A Shares pursuant to the Normal Course Purchase Exemption until December 9, 2025 (being 12 months after the date that the Filer acquired the Class A Shares pursuant to the Private Placement) as the Normal Course Purchase Exemption requires the inclusion of securities acquired from treasury of the Issuer in the previous 12 months in calculating the 5% maximum.
17. At the market price of the Class A Shares as of March 6, 2025, the Additional Shares would represent approximately 1% of the outstanding Class A Shares. Other than the acquisition of the Additional Shares, the Filer does not have any current intention of making a take-over bid for the outstanding voting or equity securities of any class of securities of the Issuer or securities convertible into securities of the Issuer, or otherwise acquiring the Issuer by way of a plan of arrangement or other similar voting transaction.
18. The Filer will not purchase any Additional Shares when it has knowledge of any material fact or material change about the Issuer that has not been generally disclosed.
19. The Issuer is aware that an application has been submitted for the Requested Relief. The Issuer and the board members that are independent of the Filer are supportive of the Requested Relief.
Decision
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation to make the decision.
The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that the acquisition of the Additional Shares by the Filer over the facilities of the Exchange complies with the Normal Course Purchase Exemption, except that for the purpose of subsection (a) of the Normal Course Purchase Exemption, the bid is for only that number of Class A Shares that can be acquired with the Remaining Funds, and subsection (b) of the Normal Course Purchase Exemption shall not apply.
"Timothy Robson"
Manager, Legal
Corporate Finance
Alberta Securities Commission