St Andrew Goldfields Ltd. - ss. 74(1)

Decision

IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")

AND

IN THE MATTER OF

ST ANDREW GOLDFIELDS LTD.

RULING

(Subsection 74(1))

UPON the application of St Andrew Goldfields Ltd. ("St Andrew") to the Ontario Securities Commission (the "Commission") for a ruling pursuant to subsection 74(1) of the Act, that certain issuances of common shares of St Andrew in satisfaction for indebtedness of St Andrew owing to secured and unsecured creditors (collectively the "Creditors") pursuant to a voluntary reorganization (the "Reorganization") are exempt from sections 25 and 53 of the Act, subject to certain conditions.

AND UPON considering the application and the recommendation of staff of the Commission;

AND UPON St Andrew having represented to the Commission as follows:

1. St Andrew is a gold mining and exploration company which was incorporated under the laws of the Province of Ontario on January 11, 1983.

2. St Andrew is a reporting issuer under the Act and to the best of its knowledge is not in default of any requirement of the Act or the Regulation or rules made thereunder.

3. The authorized capital of St Andrew currently consists of an unlimited number of common shares, of which there are currently 27,178,039 common shares issued and outstanding.

4. The common shares of St Andrew are listed and posted for trading on the Toronto Stock Exchange (the "TSE").

5. St Andrew's principal assets consist of gold properties and mining claims and a custom gold processing mill located in the Destor-Porcupine area near Timmins, Ontario. St Andrew carried on active mining operations on its properties until November 2000. In November 2000, St Andrew ceased mining operations including custom milling due to low grades in its open pit operation and lack of developed ore and custom mill feed to use mill capacity economically and in connection therewith laid off substantially all of its employees. St Andrew's long term business plan is to raise sufficient capital to bring its Taylor gold project into commercial production thereby generating cash flow and profits.

6. Since completion of the shutdown of its operations, St Andrew has had no cashflow. As a result, St Andrew is experiencing a major capital deficiency and is suffering from severe financial hardship.

7. In order to deal with St Andrew's financial difficulties and to advance to its properties including its Taylor gold project. St Andrew has signed a term sheet dated February 1, 2001 (the "Term Sheet") with Silverbridge Partners, Griffiths McBurney and Partners, 1346049 Ontario Limited and St Andrew providing for a refinancing of St Andrew (the "Financing"). The Financing involves:

(a) the private placement of up to 13,333,334 units at a price of $0.15 per unit, each unit consisting of one common share and one share purchase warrant. The warrant entitles the holder thereof to subscribe for St Andrew common shares at $0.20 per share and has a three year term. The gross proceeds from the private placement is $2,000,000 with the potential of raising a further $2,666,667 if all of the warrants are exercised; and

(b) the private placement of $4,000,000 aggregate principal amount of convertible secured debentures, with each $0.15 principal amount of debenture convertible into a unit consisting of one common shares and one half of a common share purchase warrant. Each whole warrant will entitle the holder to purchase one common share of St Andrew at a price of $0.20. If the debentures are converted and all of the warrants exercised, a further $2,666,667 would be raised.

8. As part of the Reorganization and in satisfaction of a condition to the Financing, trade creditors of St Andrew (the "Creditors") holding approximately $2.7 million of indebtedness are required to agree to a compromise (the "Trade Creditor Settlement") of trade payables owed to them by St Andrew by accepting in satisfaction thereof (a) the lesser of the amount owing to such creditor and $3,250 in cash or (b) 25% of the amount owing in cash plus five common shares to St Andrew for each one dollar amount owing or (c) seven common shares of St Andrew for each dollar amount owing. The number of shares of St Andrew proposed to be issued in connection with the Settlement is 12,675,385.

9. It is a condition of the Trade Creditor Settlement that the order requested by this application be obtained.

10. St Andrew has also leased certain equipment from an arm's length third party (the "Equipment Lessor") who holds security over this equipment. In connection with the Reorganization, the Equipment Lessor intends to realize upon its security and sell the equipment. The proceeds realized on the sale of the equipment may not be sufficient to satisfy the indebtedness of St Andrew to the Equipment Lessor with the result that there may be a deficiency for which St Andrew would remain liable to the Equipment Lessor, as an unsecured creditor. St Andrew and the Equipment Lessor have reached an agreement in principal (the "Equipment Lessor Settlement") that, subject to regulatory approval, the amount of the deficiency would be satisfied by St Andrew issuing to the Equipment Lessor common shares of St Andrew at an issue price based on a agreed to discount from the market price of St Andrew common shares at the time of the sale of the equipment.

11. It is a condition of the Equipment Lessor Settlement that the order requested by this application be obtained.

12. In addition, as part of the reorganization, the board of directors of St Andrew will be reconstituted to five directors.

13. The TSE has accepted notice of the Financing and the issue of shares to the Creditors by letter dated February 9, 2001 subject to obtaining the written consent of shareholders of St Andrew holding at least 50% plus one share of the issued and outstanding common shares of St Andrew.

14. In furtherance of the TSE requirements St Andrew has obtained consents from shareholders representing 52.11% of the issued and outstanding common shares of St Andrew.

15. Because the precise number of shares to be issued to the Equipment Lessor pursuant to the Equipment Lessor Settlement cannot be determined until the amount of the deficiency is quantified notice to the TSE of the proposed issuance of shares to the Equipment Lessor will be deferred until determination of the deficiency.

16. St Andrew does not have sufficient cash resources to satisfy the indebtedness to the Creditors or to the Equipment Lessor, if any, each of whom are arm's length to St Andrew.

17. Each of the Creditors and the Equipment Lessor is a bona fide creditor of St Andrew and none of the Creditors nor the Equipment Lessor provided loans or services on the basis that St Andrew would pay for same by way of an issuance of common shares.

18. There is no exemption from registration and prospectus requirements of the Act available in respect of the issuance of common shares to the Creditors or the Equipment Lessor.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS RULED , pursuant to subsection 74(1) of the Act, that the issuance by St Andrew of common shares to the Creditors pursuant to the Reorganization shall not be subject to sections 25 and 53 of the Act provided that:

1. the first trade in common shares issued to the Creditors pursuant to this ruling shall be a distribution unless such trade is made in compliance with the provisions of section 6.6 of Commission Rule 45-501 Exempt Distributions as if the securities had been acquired pursuant to an exemption referred to in that section; and

2. concurrently with the issuance of common shares pursuant to this ruling, St Andrew shall provide to each Creditor a copy of this ruling together with a statement which explains that, as a consequence of this ruling, certain protections, rights and remedies provided under the Act to purchasers of securities distributed by way of prospectus, including statutory rights of rescission and damages, are not available.

March 27, 2001.

"Howard I. Wetston"   "R. Stephen Paddon"