GoldON Resources Ltd. – s. 9.1 of MI 61-101 Protection of Minority Security Holders in Special Transactions and s. 6.1 of NI 62-104 Take-Over Bids and Issuer Bids
Section 6.1 of NI 62-104 and section 9.1 of MI 61-101 – Issuer bid – relief from the requirements applicable to issuer bids in Part 2 of NI 62-104 and Part 3 of MI 61-101 – issuer proposes to acquire its own shares and receive other consideration in connection with a negotiated commercial agreement – issuer held an annual and special meeting of shareholders at which the transaction was submitted to, and approved by, 99.9% of minority shareholders – selling shareholder not receiving cash in exchange for subject shares – shares repurchased at a deemed value below the volume weighted average price for the 20 day period prior to announcement of the transaction – repurchase not designed to give preferential treatment to the selling shareholder – transaction is in the best interests of the issuer and its shareholders and will not adversely affect the financial position of the issuer or shareholders to whom the bid was not extended – share repurchase will not materially affect control of the issuer.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.
Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, Part 3 and s. 9.1.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
AND
IN THE MATTER OF
GOLDON RESOURCES LTD.
ORDER
(Section 9.1 of Multilateral Instrument 61-101 and
Section 6.1 of National Instrument 62-104)
UPON the application (the “Application”) of GoldON Resources Ltd. (the “Issuer”) to the Ontario Securities Commission (the “Commission”) for an order pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids (“NI 62-104”) and section 9.1 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”) exempting the Issuer from the requirements applicable to issuer bids in Part 2 of NI 62-104 and Part 3 of MI 61-101 (collectively, the “Issuer Bid Requirements”) in respect of the proposed purchase by the Issuer of 1,170,544 common shares of the Issuer (the “Subject Shares”) owned by Trelawney Mining and Exploration Inc. (“Trelawney”);
AND UPON considering the Application and the recommendation of Staff of the Commission;
AND UPON the Issuer (and Trelawney in respect of paragraphs 5, 6, 7, 9 and 15, as they relate to Trelawney) having represented to the Commission that:
1. The Issuer is a corporation governed by the Business Corporations Act (British Columbia).
2. The head and registered office of the Issuer is located at 108 – 800 Kelly Road, Suite 416, Victoria, British Columbia, V9B 6J9.
3. The Issuer is a reporting issuer in the Provinces of British Columbia and Alberta and the common shares of the Issuer (the “Common Shares”) are listed for trading on the TSX Venture Exchange (the “TSXV”) under the symbol “GLD”. The Issuer is not in default of any requirement of the securities legislation in the jurisdictions in which it is a reporting issuer.
4. The authorized share capital of the Issuer consists of an unlimited number of Common Shares. As of November 21, 2016, there were 10,074,913 Common Shares issued and outstanding.
5. The corporate headquarters of Trelawney are located in the Province of Ontario. Trelawney is a wholly-owned subsidiary of IAMGOLD Corp.
6. Trelawney is the beneficial owner of the Subject Shares, which, as of November 21, 2016, represented approximately 11.6% of the issued and outstanding Common Shares.
7. On September 28, 2016, the Issuer executed a definitive agreement (the “Definitive Agreement”) with Trelawney, pursuant to which the Issuer would sell, and Trelawney would acquire, a 100% interest in the Issuer’s Swayze Gold Project mining claims, which are located in the District of Sudbury in Northeastern Ontario and include the Chester, Mollie River and Neville-Potier claim blocks (the “Swayze Gold Project”), in exchange for:
(a) $300,000 in cash;
(b) forgiveness of a $125,000 promissory note issued by the Issuer to Trelawney;
(c) the return of the Subject Shares to the Issuer for cancellation (the “Share Repurchase”); and
(d) an additional $800,000, if a storage facility or pond of any nature is constructed on the Swayze Gold Project for the purpose of storage of tailings derived from Trelawney’s Cote Gold Project (collectively, the “Sale Trans-action”).
8. Assuming completion of the Sale Transaction, 8,904,369 Common Shares would be issued and outstanding.
9. Trelawney is a “related party” of the Issuer as such term is defined in MI 61-101 by virtue of the fact that Trelawney owns 11.6% of the Issuer’s Common Shares. Therefore, the Sale Transaction is a “related party transaction” as such term is defined in MI 61-101.
10. But for the fact that Trelawney is deemed not to deal at arm’s length with the Issuer under MI 61-101 because of its ownership of the Subject Shares, the Issuer and Trelawney are otherwise arm’s length from each other. None of Trelawney or its affiliates have any representatives on the board of directors of the Issuer, nor do they have the right to appoint any such representatives. The Issuer does not have any representatives on the board of directors of Trelawney or any of its affiliates, nor does it have the right to appoint any such representatives.
11. On October 6, 2016, the TSXV provided conditional acceptance to the Issuer for the Sale Transaction, subject to, among other conditions, requiring that the Issuer provide the TSXV with evidence of shareholders’ approval of the Sale Transaction (together, the “TSXV Conditions”).
12. In accordance with the requirements of MI 61-101 and TSXV Policy 5.9, and in satisfaction of the TSXV Conditions, the Issuer held an annual and special meeting of shareholders on November 8, 2016 (the “Shareholder Meeting”) at which the Sale Transaction was submitted to a vote of shareholders, excluding the votes attached to Common Shares owned, or over which control or direction is exercised by, Trelawney (the “Minority Shareholders”).
13. At the Shareholder Meeting, the Sale Transaction was approved by 99.9% of the Minority Shareholders that voted on the Sale Transaction.
14. The Share Repurchase by the Issuer pursuant to the Sale Transaction will constitute an “issuer bid” for the purposes of NI 62-104 and MI 61-101, to which the applicable Issuer Bid Requirements would apply. The Share Repurchase cannot be made in reliance upon exemptions from the Issuer Bid Requirements contained in Part 4 of NI 62-104 and section 3.4 of MI 61-101.
15. The Share Repurchase is an integral part of the Sale Transaction and Trelawney is not receiving any cash in exchange for the Subject Shares.
16. The Subject Shares are being returned to the Issuer for cancellation at a deemed value of less than $0.20 per share, which is at a discount to the 20-day volume weighted average price on the TSXV as at September 27, 2016, being the date before the execution of the Definitive Agreement.
17. As a result of the fact no shareholder other than Trelawney is a party to the Sale Transaction, it is impossible for the Issuer to offer to acquire Common Shares from all shareholders on the same terms and conditions as those contemplated by the Sale Transaction.
18. The terms of the Sale Transaction were not agreed to in order to give preferential treatment to Trelawney or to provide a method for the Issuer to purchase the Subject Shares, but rather to facilitate the sale of the Swayze Gold Project and realize the value of such interest for the benefit of the Issuer and its shareholders.
19. For the purposes of the Sale Transaction, all of the members of the board of directors of the Issuer are independent directors within the meaning of MI 61-101.
20. The board of directors of the Issuer unanimously resolved that:
(a) the Sale Transaction is in the best interests of the Issuer and its shareholders;
(b) the consideration deemed to be paid for the Subject Shares will not be greater than the market price, determined in accordance with section 1.11 of NI 62-104, of the Common Shares on the TSXV;
(c) the acquisition of the Subject Shares will not adversely affect the financial position of the Issuer and, upon cancellation, it is expected to increase the value of the equity ownership positions of its other shareholders; and
(d) the Share Repurchase will not materially affect control of the Issuer.
21. The shareholders of the Issuer not offered the opportunity to sell their shares to the Issuer under the proposed transaction are otherwise entitled to sell their shares into the market for cash proceeds.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED pursuant to section 6.1 of NI 62-104 and section 9.1 of MI 61-101 that the Issuer be exempt from the Issuer Bid Requirements in connection with the Share Repurchase, provided that the Issuer issue and file a
press release on SEDAR disclosing that the Issuer has been granted exemptive relief from the Issuer Bid Requirements in connection with the Share Repurchase.
DATED at Toronto this 23rd day of December, 2016.
“Naizam Kanji”
Director, Office of Mergers & Acquisitions
Ontario Securities Commission