Shandong Gold Mining (HongKong) Co., Limited and Cardinal Resources
Headnote
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Section 6.1 of NI 62-104 -- take-over bid -- relief from requirements applicable to take-over bids in Part 2 and Part 3 of NI 62-104 -- take-over bid for issuer not resident in Canada that is a reporting issuer in Canada and publicly listed in Australia and Ontario -- offeror to acquire all outstanding ordinary shares of target issuer that it does not already own -- would be eligible for foreign take-over bid exemption but for the fact that ownership by security holders resident in Canada exceeds 10% -- bid subject to laws of Australia -- competing take-over bid outstanding for target issuer's ordinary shares -- published market on which the greatest volume of trading in securities of target issuer occurred during the 12 months immediately preceding the commencement of the bid was not in Canada -- security holders in Canada entitled to participate on terms at least as favourable as the terms that apply to all other holders of target securities -- offer is exempt from requirements applicable to take-over bids in Part 2 and Part 3 of NI 62-104, subject to conditions, including that the offeror satisfy the conditions set out in subsections 4.4(e), (f) and (g) of NI 62-104.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, s. 6.1, Parts 2 and 3.
September 3, 2020
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF SHANDONG GOLD MINING (HONGKONG) CO., LIMITED (the Filer) AND CARDINAL RESOURCES LIMITED (the Issuer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104), exempting the all-cash off-market take-over bid commenced by the Filer to purchase all of the issued and outstanding ordinary shares (the Issuer Shares) of the Issuer, as such bid may be amended, supplemented or replaced (the Foreign Off-Market Bid) from the requirements applicable to take-over bids in Part 2 and Part 3 of NI 62-104 (the Take-Over Bid Requirements) (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this Application; and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon by the Filer in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut.
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
This decision is based on the following facts represented by the Filer:
Shandong Gold Mining (HongKong) Co., Limited
1. The Filer is an entity incorporated in Hong Kong as a limited liability company, and is a wholly-owned subsidiary of Shandong Gold Mining Co., Ltd. (the Parent).
2. The Parent is a leading Chinese gold mining company with a complete industry chain integrating exploration, mining, beneficiation and smelting of ores and deep processing and sales of gold products, as well as gold mining and processing related research and development. The Parent is listed on the main board of both the Shanghai and the Hong Kong Stock Exchanges.
3. As at the date of the bidder's statement (the Bidder's Statement) which describes the details of the Foreign Off-Market Bid, the Filer held 4.94% of the Issuer Shares. The Filer's interest in the Issuer was acquired on July 7, 2020, by way of an interim funding transaction in which the Filer subscribed for 26 million Issuer Shares at a price of AUD$0.46 per Issuer Share. The funds raised through this interim funding transaction were to be used by the Issuer to continue advancing the Issuer's Namdini Gold Project towards development and as working capital prior to the closing of the Foreign Off-Market Bid.
4. The Filer is not a reporting issuer in, and is not in default of any requirement of the securities legislation of, any jurisdiction in Canada.
Cardinal Resources Limited
5. The Issuer is an Australian Corporation registered under the Australian Corporations Act 2001 (Cth).
6. The Issuer's registered office is at Suite 1, 28 Ord Street, West Perth, WA 6005.
7. The Issuer is a reporting issuer in all of the provinces of Canada, excluding Québec, and, to the knowledge of the Filer, is not in default of any requirement of the securities legislation of any of the jurisdictions in Canada in which it is a reporting issuer.
8. The principal activity of the Issuer is gold exploration and mine development in Ghana. The Issuer holds tenements prospective for gold mineralisation in Ghana in relation to two projects located in northeast Ghana and one project located in southwest Ghana.
9. The Issuer Shares are posted and listed for trading on the Australian Securities Exchange (the ASX) and on the Toronto Stock Exchange (the TSX) under the symbol "CDV".
10. In the 12 months ending August 10, 2020, based on public trading reports, approximately 78% and 22% of trading in the Issuer Shares occurred on the ASX and the TSX, respectively.
11. As of August 14, 2020 (according to the registered list provided by Computershare Investor Services), 526,024,522 Issuer Shares were issued and outstanding, of which 12.1% are held by The Canadian Depositary for Securities Limited (CDS). As of the same date, the CDS List prepared by Computershare Investor Services, indicated CDS Participants in Ontario held 11.18% of the Issuer Shares.
12. The Issuer has also provided to the Filer a report from Broadridge dated July 27,2020 indicating beneficial holders of Issuer Shares in Canada held approximately 1.74% of the Issuer Shares.
13. An alternatively monthly report filed by MM Asset Management Inc. on August 10, 2020 indicated that it exercises control or direction over 9.68% of the issued Issuer Shares.
14. To the knowledge of the Filer, after reasonable inquiry and based on publicly filed reports, only Nord Gold S.E. (Nordgold) holds more than 10% of the outstanding Issuer Shares.
15. On July 30, 2020, Nordgold commenced a "market bid" under the Australian Corporations Act 2001 (Cth) for all of the issued Issuer Shares.
The Foreign Off-Market Bid
16. On June 18, 2020, Shandong Gold Mining Co., Ltd., the Filer and the Issuer entered into a Bid Implementation Agreement, which was amended by a letter deed dated July 29, 2020, in connection with the Foreign Off-Market Bid.
17. The Foreign Off-Market Bid was commenced by the Filer on August 11, 2020 and will expire at 7:00 p.m. Sydney, Australia time (5:00 a.m. Toronto, Canada time) on October 13, 2020, unless extended or withdrawn in accordance with the Australian Corporations Act, 2001 (Cth).
18. Under the terms of the Foreign Off-Market Bid, Shareholders will receive AUD$0.70 in cash for each Issuer Share that they deposit to the Foreign Off-Market Bid.
19. The Foreign Off-Market Bid is an "off-market bid" for the purposes of the Australian Corporations Act 2001 (Cth).
20. The Foreign Off-Market Bid has been made by the Filer in compliance with the requirements of the Australian Corporations Act 2001 (Cth), the operating rules of the ASX, and the applicable requirements of the Australian Securities and Investments Commission.
21. The Foreign Off-Market Bid constitutes a "take-over bid" for the purposes of NI 62-104. The Foreign Off-Market Bid is therefore subject to the formal bid requirements set out in the Take-Over Bid Requirements, unless otherwise exempted.
22. The Foreign Off-Market Bid is currently structured such that it is substantially compliant with the Take-Over Bid Requirements.
23. Section 4.4 of NI 62-104 provides an exemption (the Foreign Take-Over Bid Exemption) from the Take-Over Bid Requirements where, among other things, the following conditions are satisfied:
a. security holders whose last address as shown on the books of the offeree issuer is in Canada hold less than 10% of the outstanding securities of the class subject to the bid at the commencement of the bid; and
b. the offeror reasonably believes that security holders in Canada beneficially own less than 10% of the outstanding securities of the class subject to the bid at the commencement of the bid.
24. The Filer determined that the Foreign Off-Market Bid could not be made in reliance upon the Foreign Take-Over Bid Exemption because Canadian beneficial and registered Shareholder ownership was not less than 10% of the issued and outstanding Issuer Shares at the commencement of the Foreign Off-Market Bid.
25. The published market on which the greatest volume of trading in Issuer Shares occurred during the 12 months immediately preceding the commencement of the Foreign Off-Market Bid was not in Canada.
26. The Foreign Off-Market Bid is capable of being accepted by Shareholders resident in Canada who hold their Issuer Shares on the Canadian branch register (through CDS) where such Shareholders deposit their Issuer Shares to the Foreign Off-Market Bid using the CDSX system. As such, Shareholders in Canada are entitled to participate in the Foreign Off-Market Bid on terms at least as favourable as the terms that apply to the general body of Shareholders.
27. The Filer has filed the Bidder's Statement, which describes the details of the Foreign Off-Market Bid, under the profile of the Issuer on SEDAR. The Filer has mailed the Bidder's Statement and intends to mail any other material relating to the Foreign Off-Market Bid to Shareholders, including those whose last address as shown on the books of the Issuer is in Canada, in compliance with applicable Australian law.
28. The Bidder's Statement contains information advising Shareholders resident in Canada as to how they may participate in the Foreign Off-Market Bid.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the Filer satisfies the conditions set out in subsections 4.4(e), (f), and (g), as may be applicable, of NI 62-104.
"Jason Koskela"
Manager, Office of Mergers & Acquisitions
Ontario Securities Commission