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Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
Accessing Canadian Captial Markets: Mining and Oil & Gas Companies
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Accessing Canadian Captial Markets: Mining and Oil & Gas Companies

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Canada continues to be the world’s leading capital market for natural resource companies. During 2009, mining companies listed on the Toronto Stock Exchange (the “TSX”), Canada’s senior market, or on …

Canada continues to be the world’s leading capital market for natural resource companies. During 2009, mining companies listed on the Toronto Stock Exchange (the “TSX”), Canada’s senior market, or on the junior TSX Venture Exchange (the “TSX-V”), raised in excess over C$22 billion in equity financings. This represented about the same as the amount raised on the London Stock Exchange (“LSE”)/AIM, however 90% of the LSE/AIM figure was represented by two transactions (Rio Tinto $12.4 billion and Xstrata $7.2 billion). In addition, the oil and gas sector remained strong with TSX and TSX-V listed companies raising over C$9.2 billion in 2009. Notwithstanding the “challenging” first five months of 2010, TSX and TSX-V listed mining companies raised over C$6.2 billion and oil and gas companies C$4.3 billion.

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  • 1. MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* *Associated Office Blake, Cassels & Graydon LLP | blakes.com Accessing the Canadian Capital Markets Legal Considerations for Non-Canadian Mining and Oil & Gas Companies
  • 2. INDEX Accessing the Canadian Capital Markets 1 Listing Requirements 2 On-going Public Company Reporting Requirements 3 Technical Reports for Mining Companies – National Instrument 43-101 4 Reserve Reporting for Oil and Gas Companies – National Instrument 51-101 5
  • 3. ACCESSING THE CANADIAN CAPITAL MARKETS LEGAL CONSIDERATIONS FOR NON-CANADIAN MINING AND OIL & GAS COMPANIES Introduction – The TSX is a World Leader for the Resource Industry Canada continues to be the world’s leading capital market for natural resource companies. The Toronto Stock Exchange (the “TSX”), Canada’s senior capital market, and the junior TSX Venture Exchange (the “TSX-V”) are home to over half of the world’s public mining companies and one-third of the world’s public oil and gas companies. During 2011, mining companies listed on the TSX and TSX-V raised C$12.5 billion in equity financings. This represented about the same as the amount raised on the London Stock Exchange (“LSE”)/AIM, however, 80% of the amount raised on the LSE/AIM was represented by the C$9.5 billion initial public offering (“IPO”) of Glencore. In addition, the oil and gas sector remained strong with TSX and TSX-V listed companies raising over C$10 billion in 2011. Notwithstanding the challenging first half of 2012 as a result of various macroeconomic conditions, including the slowdown of the Chinese economy, TSX and TSX-V listed mining companies raised over C$4.3 billion of capital and oil and gas companies C$3.5 billion. At the end of 2011, the TSX and TSX-V had a combined total of 1,646 mining companies listed with an aggregate market capitalisation of approximately C$427 billion, a net increase of over 200 companies since the end of 2009. This compares favourably to the 700 mining companies listed on the Australian Stock Exchange (“ASX”), 191 LSE/AIM listed mining companies and 141 New York Stock Exchange (“NYSE”)/Amex listed mining companies. Similarly, in oil and gas, the TSX and TSX-V had 405 oil and gas issuers, the most in the world with an aggregate market capitalization of over C$378 billion, as compared to 212 on NYSE/Amex and Nasdaq combined, 224 on ASX and 142 on LSE/AIM. It is also worth noting that TSX/TSX-V was the only market in which there was a net increase in the number of listed mining companies since 2009. As a result, the TSX and TSX-V present not only a destination for foreign companies to raise capital, but also a significant source of acquisition targets and merger partners for international major and mid-cap resource companies. In 2011, TSX and TSX-V listed issuers completed 2,021 mining financings compared to 208 on the NYSE/Amex, LSE/AIM and ASX combined. In terms of new listings, the TSX and TSX-V facilitated 201 new mining listings and 49 new oil and gas listings in 2011. Again, this compares favourably with LSE/AIM, ASX and NYSE/Amex/Nasdaq which had a combined total of 117 new mining listings and 52 new oil and gas listings. Although the London and New York exchanges are homes to some of the largest global mining companies, the TSX and TSX-V dominate the mid-cap range to which most juniors aspire. Approximately half of the mining companies on the TSX/TSX-V are junior miners in the exploration stage while the rest are in advanced exploration, development and/or production stages. In addition, a growing number of the companies which started on the TSX or TSX-V as junior players in the industry have grown. A critical factor in the growth of the Canadian market has been the depth of liquidity, with 2011 seeing over C$460 billion mining shares and over
  • 4. C$300 billion oil and gas shares traded. The market is supported by a broad institutional and retail investor base (including many American investors) and a large, sophisticated analyst community covering companies of all sizes. Also, supporting these companies is a similarly sophisticated and experienced professional community of investment bankers, accountants and securities lawyers who specialize in advising mining companies. The Canadian securities regulators who administer National Instrument 43-101, the mineral project disclosure rule and National Instrument 51-101, the oil and gas disclosure rule discussed below, also have experienced geologists who understand the issues faced by resource companies and their projects. In the resources sector, Canadian investors have proven receptive to diverse commodities and geographical risks. Of the nearly 10,000 mining projects held by TSX and TSX-V companies, approximately half are outside of Canada and a third outside of North America, including Mexico and Central/South America, Africa, Asia, Australia and Europe. It is sometimes said that London is the “natural” home for companies with African- based projects. However, the numerous mineral projects in Africa by the 185 TSX and TSX-V companies and 684 mining projects active there tell a different story. In 2011, the TSX/TSX-V facilitated 21 new mining listings with projects in Africa and C$1 billion of equity capital was raised for mining projects in that continent. Of the TSX mining companies with market capitalizations in excess of C$1 billion, many have material assets in Africa, including Barrick Gold Corporation, First Quantum Minerals Limited, Centamin plc, Lundin Mining Corporation, Franco-Nevada Corporation, IAMGOLD Corporation, Kinross Gold Corporation, Perseus Mining, Royal Gold, Semafo, Teck Resources Limited, Uranium One, Paladin Energy Limited, Platmin Limited and Katanga Mining Limited. In the oil and gas arena, Canadian companies such as Suncor Energy, Ivanhoe Energy, Niko Resources, Nexen and Husky Energy, to mention just a few across the spectrum of companies, have significant assets outside of Canada and have developed strong local investor followings. Non-Canadian Companies Going to the TSX Both Canadian and non-Canadian companies of all sizes have successfully raised capital in Canada, ranging from small private placements through to large public offerings. Blakes have been involved for issuer or underwriter on nearly half of these transactions. Australian-based companies taking advantage of the Canadian public markets include the following: • Newcrest Mining Limited, with a market capitalisation of over C$20 billion, established a secondary listing on the TSX in 2012; • Elemental Minerals Limited raised over C$53 million in 2011 through an IPO on the TSX using a long form prospectus; similarly Sarama Resources raised approximately C$17 million in 2011 through an IPO; • Azumah Resources Limited and Lachlan Star Limited established secondary listings on the TSX in 2011 and subsequently raised approximately C$20 million each in Canada by way of a short form prospectus; • Aurora Oil & Gas Limited, whose shares have been listed on the TSX since early 2011, recently raised A$120 million through an issuance of 33.8 million ordinary shares (18 million shares were successfully placed pursuant to a short form prospectus in Canada);
  • 5. • Ratel Gold∗ spun out its African property interests into Ratel Group which became listed on the TSX in 2011; as part of the reorganization, Ratel Group* also undertook a C$10 million capital raising by way of subscription receipt to fund its future activities and to satisfy TSX original listing requirements; • Red Back Mining Capital NL∗ , which carried out a merger with the Canadian company Champion Resources to form the new Canadian public company Red Back Mining; in 2010 the company was acquired by the Canadian-based gold miner Kinross Gold Corporation for US$7.1 billion; • Equinox Minerals Limited*, Anvil Mining Corporation and OceanaGold Corporation, each of which chose the route of establishing a new Canadian holding company that became the public vehicle for their mining interests; both Equinox and Anvil Mining have recently been acquired by Barrick Gold and Minmetals Resources Limited, respectively; • Rugby Mining Limited and WCB Resources are the product of reverse take-overs; • Nustar Mining Corporation, which acquired Intrepid Minerals Corporation (an existing Canadian company with material assets) and under the new name Intrepid Mines Limited listed in Canada and Australia, and Talison Lithium Limited∗ , which acquired Canadian-based miner Salares Lithium and listed on the TSX as part of that transaction (raising C$40 million) and has subsequently raised C$80 million in a public offering; • Extract Resources Limited, Paladin Energy, Centamin plc∗ , Perseus Mining Limited, Western Areas NL*, Ivanhoe Australia Limited, Coalspur Mines Limited, CGA Mining Limited, Mineral Deposits Limited, Troy Resources Limited∗ , Allied Gold Mining Plc, Marengo Mining Limited, Mirabela Nickel Limited, Tiger Resources Limited, Orocobre Limited, Mawson West, Magma Metals Limited, Moly Mines Limited*, Macarthur Minerals Limited, Mariana Resources Limited, Chalice Gold Mines Limited*, Bannerman Resources Limited* , TriAusMin Limited, Minemakers, Nautilus Minerals, Cerro Resources NL and Strata Minerals, which undertook primary or secondary listings on the TSX or TSX-V but did not re- domicile. UK-listed mining companies listed on the TSX or TSX-V include: • Anglo Pacific Group plc∗ , Cluff Gold plc, Noventa plc*, Horizonte Minerals plc, Rambler Metals and Mining plc, Alexander Mining plc, Arian Silver Corporation, Hunter Bay Minerals plc, Samco Gold Limited, Serabi Gold plc and Verde Potash plc. In addition, Anglesey Mining plc spun out Labrador Mines Holdings Limited∗ in a C$52 million TSX IPO in 2007, which subsequently completed a C$40 million, a C$110 million and most recently a C$72 million equity offering of common and flow-through shares in 2010, 2011 and 2012, respectively. Equinox Minerals and Moly Mines Limited – two case studies Our long-time client Equinox is a good example of the benefits of a focused effort to take advantage of the strength of the Canadian market. With the large Lumwana copper project in Zambia to develop, Equinox took the view that it needed to look beyond the Australian market for the substantial amounts of capital it needed to raise. Equinox re-domiciled to Canada in July 2004 and raised an initial C$15.6 million on its Canadian IPO. Setting up an office in Canada and working hard at communicating its story to the Canadian investing community, ∗ Denotes a client of Blakes.
  • 6. Equinox subsequently raised over C$784 million in equity in a series of private placements and public offerings, enabling it to fund all of the equity required for the project. In 2010 it used its strong financial position to carry out a successful take-over of Australian Citadel Resources which had a large copper-gold project in Saudi Arabia at the development stage. In February of 2011, Equinox launched a C$4.8 billion hostile take-over bid for copper producer Lundin Mining Corporation but later aborted the take-over when Equinox itself became a hotly contested target. In April 2011, Equinox rejected an unsolicited cash offer by Minmetals but later accepted a bid by Barrick Gold for C$7.3 billion. Moly Mines took the simpler route of a secondary listing in the fall of 2006 with a small concurrent fund raising of A$20 million. Moly Mines spent the next several months raising awareness about the company in the North American markets and was able to more quickly to raise additional funds in Canada after its share price increased significantly in the spring of 2007. This gave it the springboard to undertake a major equity raising of A$88 million at the end of 2007, enabling it to take its project to the next stage of development. Other companies like Bannerman Resources*, Magma Metals+ and Allied Gold+ chose to list first and subsequently raised finance when a market window opened. Key Legal Considerations in Accessing the Canadian Capital Market This memorandum summarises some of the key legal considerations for a non-Canadian company contemplating the possibility of raising capital in Canada by way of a public or private offering. 1. Regulatory Overview Canada has a federal system of government, with power divided between the federal government and the provinces. Securities legislation is principally governed at the provincial level and each of the provinces and territories has its own securities legislation, although the rules in many areas have been standardised and cooperative systems established between the regulators (e.g., filing of a prospectus is done through a single lead jurisdiction, which coordinates the comments of the other regulators and provides a single point of contact). The securities laws determine whether or not a prospectus is required for a particular offering of securities and set out the forms and procedures which apply to different forms of offerings. These laws also establish the disclosure standards for mining and oil and gas companies. As discussed above, there are two principal stock exchanges in Canada: the TSX, for senior companies; and the TSX-V, for companies that are at a junior stage of development. These exchanges (collectively, the “Canadian Exchanges”) have an ongoing role in regulating the conduct of listed companies, but (unlike in some other countries) do not generally play the principal role in vetting prospectuses. This role is undertaken by the provincial securities regulators. In addition to securities laws and stock exchange requirements, a foreign company which is contemplating a re-domicile to Canada (as opposed to a secondary listing or placement of its shares) will also need to take into account Canadian corporate laws. Companies can be incorporated in Canada either at the federal level (under the Canada Business Corporations Act, the “CBCA”) or under one of the provincial statutes. Again, there is substantial consistency between the requirements of the different statutes, although there are certain differences which may influence the choice of statute under which to incorporate.
  • 7. It is possible for a foreign company to issue its shares to the public in Canada and become a “reporting issuer” under Canadian securities laws without becoming a “Canadian corporation”. There are a significant number of non-Canadian companies listed on the Canadian Exchanges and the Canadian securities commissions have certain special rules and exemptions which apply to companies whose primary market is on a foreign exchange. However, there may still be reasons why a company would wish to shift its corporate domicile to Canada. This may be to effect a business combination with a complementary company or because the company makes the decision that it wishes to be listed only in a single jurisdiction and decides that Canada offers better opportunities to enhance the value of its shares. The structuring of re- domicile transactions is further discussed in Section 3 below. 2. Public Offerings A marketed public offering will in most cases be necessary in order to establish a public market in Canada for securities of a foreign company or a new Canadian holding company. Over the past few years the practice has evolved from using a “long form” prospectus to create the Canadian market to more issuers initially carrying out a secondary listing on the TSX or TSX-V and subsequently filing a “short form” prospectus when the market window opens. 2.1 “Long Form” Prospectus Offering In order to carry out a long form prospectus public offering in Canada it is necessary to engage one or more registered dealers to act as agents or underwriters in connection with the offering. The process typically begins with preparatory tasks in which management is assisted by counsel, auditors, technical consultants and underwriters. Due diligence of the issuer is customarily conducted in conjunction with the preparation of a “preliminary prospectus”, which is filed with the Canadian securities authorities. The regulators review the document and, after their comments are resolved by the company and its advisers, a “final prospectus” is filed, which enables the securities to be sold to the public in Canada. It would typically take four to six weeks to clear a prospectus with the regulators and closing usually occurs within days following the date on which the final prospectus is filed. Depending on the nature of the offering, the securities may be sold on an agency or underwritten basis, and overall commissions payable to the registered dealers are comparable to those in London or Australia. The Canadian process for review and clearance of a prospectus is similar to the UK where the UKLA will pre-vet a full prospectus, but with the difference that in the UK the draft prospectus is not put on public file as a preliminary prospectus is in Canada. The Canadian preliminary prospectus is the marketing document which is used by the company and the underwriters to market the offering. The Canadian approach differs from Australia where there is no pre-clearance, but instead a seven day “exposure period” during which the Australian Securities and Investments Commission (ASIC) will “post-vet” and may require filing of a supplemental or replacement prospectus. AIM is different still, as review and approval is the responsibility of the NOMAD rather than a UK regulator. It is important to note that the cost of the NOMAD is borne by the issuer so the overall cost of raising capital on AIM could be raised significantly. In Canada, a prospectus must contain “full, true and plain disclosure of all material facts relating to the securities being issued” and must follow the detailed disclosure rules set out in the securities legislation (in contrast to Australia, for example, where there is no “check-list” for the content of a prospectus, which is similar to the approach adopted by LSE/AIM). Canadian securities laws also prescribe a specific form in which a prospectus should generally follow. In the case of mining companies, the technical information on properties material to the company contained in the prospectus must be based upon a “technical report” prepared by or under the supervision of a “qualified person” in accordance with National Instrument 43-101,
  • 8. the mining disclosure rule. In the case of oil and gas companies, reserves data prepared in accordance with National Instrument 51-101 must be provided and supported by a report of a qualified reserves evaluator or auditor. These are discussed in more detail under Section 5 below. Generally, financial statements must be provided for the three most recently completed financial years, together with interim financial statements if the offering takes place more than a fixed period after the end of the prior year. Certain relief is provided for interim financials if a foreign company was not required to prepare these under its local laws (e.g. if under the laws of the foreign company it only had to prepare semi-annual interim statements, rather than the quarterly statements generally required under Canadian and U.S. law). The annual statements will need to be audited in accordance with International Financial Reporting Standards (“IFRS”) or with acceptable foreign standards. Financial statements requirements are discussed in more detail under Section 2.6 below. Purchasers who acquire securities during the distribution period have a right of rescission or, alternatively, a right of action for damages against the issuer and its directors, any promoter, each underwriter or agent who signed the prospectus and all experts (in relation to the expertised portion of the document) where the prospectus contains a “misrepresentation”. Although the Canadian form requirements are more detailed than their UK or Australian counterparts, the general disclosure standard is substantially the same, and we understand that the UK and Australian rules equally impose liability upon the issuer and its directors (and in certain circumstances, underwriters and other persons) where the document contains misleading or deceptive statements. There are defences to liability in respect of a prospectus (except for the issuer itself) where the party carried out reasonable due diligence enquiries. The underwriters or agents of a Canadian prospectus offering and their legal counsel will need to carry out technical, business and legal due diligence to permit themselves to take advantage of this defence. The due diligence process in a typical Canadian prospectus offering is generally less formal, less complicated and less costly than a UK “verification” exercise or an Australian “due diligence committee”, and will in many cases derive in large part from the involvement of the brokers and their legal counsel in the drafting of the prospectus. Given the time differences between countries such as Australia and Canada, it is generally the practice to establish an electronic data room of key documents which all parties can access at convenient times. Legal opinions from the issuer’s and underwriter’s counsel will invariably be acquired, and on an initial offering local title opinions on material properties are customary. 2.2 “Short Form” Prospectus Once a company becomes a reporting issuer in Canada, through filing a long form prospectus or listing on a Canadian Exchange, it will be able to access the “short-form” or “prompt offering” (POP) system, which provides for an abbreviated form of prospectus (which incorporates the company’s existing disclosure record by reference) and an expedited review period by the securities regulators. To quality, the company must have filed an “annual information form” (see Section 2.4.2) or recent long-form prospectus and be in compliance with its continuous disclosure obligations prescribed by Canadian securities regulation. Because of the accelerated clearance process (which may be as little as a week and on average about eight days) most short-form offerings are underwritten on a “bought deal” basis. A “bought deal” involves a syndicate of investment dealers buying stock at a discount prior to canvassing investors and, subject to very limited “outs”, guarantees the success of the fundraising for the issuer. An increasing number of foreign issuers in the resource sectors are accessing the Canadian capital market initially by first carrying out a secondary listing on a Canadian Exchange
  • 9. and subsequently filing a “short form” prospectus when the market window opens (e.g. recent offerings by Azumah and Lachlan Star) . 2.3 Stock Exchange Listing The choice in Canada is generally between the TSX or the junior exchange, the TSX-V. This decision will depend in large part on the characteristics of the company and whether it can satisfy the listing criteria of the TSX. In part because of the problems experienced with some junior mining companies in Canada in the mid-90’s, the rules of the TSX-V were tightened considerably. As a result, compared to the rules imposed on more senior companies listed on the TSX, the TSX-V generally imposes considerably more controls upon business and financial transactions undertaken by companies listed on the TSX-V. Companies listed on the TSX, as the “main board” in Canada, also tend to attract greater investor interest. Accordingly, if a foreign company can meet the requirements of the TSX, it would, in most cases, be in its interest to list there rather than the TSX-V. Of course, for companies that are at a more junior stage of development, the TSX-V would be more appropriate. Attached at Tab 2 are materials from the TSX and TSX-V which outline their minimum listing requirements. The following are general comments with respect to these listing requirements based on our experience: • Both the TSX and the TSX-V are anxious to secure more listings from good companies. In our experience, the TSX, in particular, has shown itself to be willing to adapt its requirements to assist Australian, UK and other foreign companies to make the transition to Canada and (if the company is retaining its foreign exchange listing) to reconcile with the standards of the foreign exchange. Fundamentally, the TSX is interested to see that the company has a viable project with a meaningful resource and that it will be able to advance within a reasonable time frame and have sufficient funds to carry out its programme. If the TSX is convinced that the project has merit and its principals are capable and of good character, the TSX has shown itself to be flexible and keen to help facilitate the listing. • Both the TSX and the TSX-V have experienced mining and oil and gas listing managers who will follow the application process through from start to finish and are very responsive to questions. • There is no equivalent to the AIM “fast track” route for companies on a “Designated Market”, but in practice if a company is already listed on the ASX or the LSE, the TSX/TSX-V will take considerable comfort from the listing and expedite their review process. In addition, the TSX and TSX-V will typically relax the management and distribution requirements. • Both the TSX and the TSX-V will look for evidence that a satisfactory trading market will develop in Canada within a reasonable time frame, either through a concurrent public offering or marketing/market-making effort conducted by the company’s broker. • The TSX/TSX-V must be satisfied that the principals of the company are reputable and understand their obligations to the Canadian investing public. They consider the composition of the management and board an important factor in the consideration of a listing application. While it is no longer a requirement to have a particular number of Canadians on the board of the company (other than under certain corporate statutes if the
  • 10. company is re-domiciled in Canada), the TSX/TSX-V will generally look, at a minimum, to see that at least two of the members of the board have experience in the Canadian markets. In today’s environment, with a significant number of new public resource companies, enhanced responsibilities for directors and a limited pool of qualified directors, it may take some time to identify suitable candidates for the board. This should be addressed at an early stage in the planning process. More generally, the board and management must have relevant public company experience, there must be at least two independent directors, the company must have a qualified Chief Financial Officer and its corporate governance must be to an acceptable standard (e.g. independent audit committees). The latter requirements should not cause any problems for an Australian or UK public company. • Preparing personal information forms (PIFs) for directors/officers and conducting security checks can take some time and should be factored into the timetable at an early stage. • Sponsorship can be a significant factor in approval of a company for listing, although may not be required for senior companies. Typically, the broker involved in carrying out the financing associated with a listing will act as sponsor if necessary for limited additional fees. The sponsor is required to carry out thorough due diligence on the company (which it would in any event do in the context of a public offering) and prepare a report commenting on the project, management expertise and reasonableness of projected expenditures. However, in contrast to the “nomad” system under the AIM rules in the UK, the sponsor does not have any on-going responsibility for the company and it is not necessary to pay the very substantial on-going fees which nomads receive in the UK. • Although technical and reserve reports used as a basis for a prospectus will generally be reviewed by the analysts at the securities commissions, the Canadian Exchanges will review the reports to satisfy themselves that the project and work-plan are viable. In addition to the technical side, the Canadian Exchanges must be satisfied that the company has adequate funds to move the project forward. The TSX requires applicants to prepare an 18-month projection of sources and uses of funds (on a quarterly basis). This projection must detail all planned and required expenditures and must be certified by the CFO of the company prior to listing. • The Canadian Exchanges will pay close attention to title and tenement issues and will usually want to see that a mining company holds at least 50% of its main property (although a smaller percentage may be satisfactory if the JV partner is a party of substance). This is comparable to the LSE Main Board but differs from the ASX rules, where this is not a consideration. There is no similar rule for oil and gas companies. • The formal “listing application” will generally be based on (and incorporate by reference the relevant sections of) a prospectus or proxy circular for a shareholders’ meeting to approve a reverse take-over (an “RTO”). Virtually everything necessary for the review by the Canadian Exchanges would be found in the prospectus or proxy circular, so in most cases the listing application would not involve significant additional work. If a public offering is not being undertaken immediately, an Annual Information Form will need to be prepared to serve as the base document incorporated by
  • 11. reference into the listing application. Please see Section 2.4.2 for more information concerning the Annual Information Form. • For issues with projects in emerging markets, see Section 2.9 below for recent regulatory developments. 2.4 Reporting Obligations of Public Companies Tab 3 contains a chart which Blakes prepared in conjunction with the TSX summarising the reporting requirements of the exchange and of applicable securities laws. From the perspective of a foreign company considering a public offering in Canada, the key question is how its reporting standards would change if it became a public company in Canada (with or without a concurrent listing in a foreign stock exchange). Apart from the specific disclosure requirements triggered by filing a prospectus or other offering document, disclosure obligations fall into two broad categories: continuous disclosure and periodic disclosure. The following is a discussion of some important considerations based on our experience with foreign issuers. 2.4.1 Continuous Disclosure Continuous disclosure is fundamental to each of the Canadian, Australian and UK securities regimes. Canadian public companies are required to make prompt disclosure of any “material changes”. These are defined as changes in the issuer’s business, operations or capital that would reasonably be expected to have a significant effect on the market price or value of any of its securities, and includes a decision to implement such a change by the issuer’s board of directors or by senior management who believe that the board’s confirmation of the decision is probable. This is similar to the requirements under the rules of the ASX, which direct a company immediately to provide to the ASX for public release “information that a reasonable person would expect to have a material effect on the price or value of its securities” or under the AIM rules. Under each system, there is provision for a limited exception to the immediate disclosure requirement for confidential information where disclosure could be damaging to the issuer. Civil liability may be imposed for misrepresentations in continuous disclosure documents or failure to provide timely disclosure of material changes. These provisions have been influenced by the Sarbanes-Oxley rules in the United States, however there are a number of defences and procedural safeguards in the Canadian rules to avoid the frivolous and harassing law suits that are often found in the United States. 2.4.2 Periodic Disclosure The differences between Canada and other countries (apart from the United States) are more marked in the area of periodic disclosure. Public companies in Canada are required to produce not only annual financial statements and MD&A, but also quarterly financial statements and interim MD&A, each of which must be certified by the CEO and CFO of the company. In contrast, under the ASX rules, Australian companies are not required to prepare quarterly interim financial statements but only semi-annual statements, although they are required to provide quarterly activities reports and cashflow reports. UK companies are only required to prepare semi-annual statements. Canada also requires the preparation of certain other documents which are not used in Australia or the UK. In particular, an “annual information form” or “AIF” will generally have to be prepared. This is a base annual disclosure document (similar to a 10-K or 20-F in the United States), and enables eligible companies to issue securities by way of a short-form prospectus with abbreviated disclosure and review (the AIF and other continuous and periodic disclosure documents being incorporated by reference into the short-form prospectus). The AIF form requires annual disclosure regarding a mining company’s material properties, using the technical standards of National Instrument 43-101 discussed below (in the same way that ASX-listed companies must follow the JORC Code incorporated into Appendix
  • 12. 5A). Oil and gas companies must prepare an annual statement of reserves data supported by a report of an independent qualified reserves auditor or evaluator and a report of management and directors. The reserves report must generally be prepared in accordance with National Instrument 51-101, except for senior companies which are also reporting issuers in the United States, which may be able to obtain an exemption permitting disclosure in accordance with SEC standards. In an effort to streamline the periodic and continuous disclosure requirements, the Canadian Securities Administrators (the “CSA”) have recently proposed a set of sweeping changes that could potentially relax the disclosure obligations for junior issuers. One of the key proposals is to make quarterly reporting for interim financial statements and MD&A voluntary and to replace them with a more robust semi-annual reporting requirement. Other potential changes include a proposal to replace the AIF with an annual report that combines into a single document various existing disclosure requirements including business, governance and executive compensation disclosure, audited annual financial statements, MD&A and CEO/CFO certifications. The level of disclosure in Canadian interim and annual financial statements and MD&A tends to be somewhat greater in our experience than in many Australian or UK companies’ similar reports, and the regulators (and Canadian institutions) may have higher expectations regarding the substance of disclosure. In our experience, the foreign companies who have come to Canada have been able to adjust to the new environment and produce documents which satisfy the Canadian market requirements and expectations, but this is an area which requires some thought in the planning for a re-domicile or other public offering. Time periods for disclosure also vary somewhat. If a dual listing is maintained, this largely becomes an exercise in meeting the highest common denominator. 2.4.3 Exemptions for Foreign Companies with Limited Canadian Shareholding Under a rule adopted by all of the Canadian securities commissions to encourage foreign companies to access the Canadian capital markets, relief is granted from virtually all of the formal requirements of the Canadian continuous disclosure regime for “designated foreign issuers”. To qualify as a “designated foreign issuer”, a company must first of all be incorporated under the laws of a foreign jurisdiction and not be in substance a Canadian business (which for purposes of the definition will occur if more than 50% of the voting securities are held by Canadian residents and one of a number of other conditions, such as a majority of Canadian directors, is satisfied). The second branch of the “designated foreign issuer” test requires that the issuer: • does not have a class of securities registered under section 12 of the 1934 Act in the United States and is not required to file reports under section 15(d) of the 1934 Act; • is subject to the disclosure requirements under the laws of a designated foreign jurisdiction (which includes Australia and the UK); and • has a total number of equity securities owned, directly or indirectly, by residents of Canada that does not, as of the first day of its financial year, exceed 10% (on a fully diluted basis) of the total number of equity securities of the company. So long as a foreign company satisfies these tests, it can essentially comply with the Canadian financial reporting requirements, material change, shareholder meeting and proxy solicitation requirements and similar matters by complying with the rules of its home jurisdiction. Documents filed with the foreign regulators are required to be filed concurrently with the Canadian securities commissions and Canadian shareholders provided with the same
  • 13. information as other shareholders of the company. There are some additional formal requirements (such as inclusion of certain additional information regarding currencies and an annual statement in a public document relating to qualification for the company as a designated foreign issuer), but these would not impose any material additional burden on the company. The foreign company’s officers would not be required to comply with the Canadian CEO/CFO certification rules. We note that even if the company exceeds the 10% limit, there are a number of accommodations under Canadian securities legislation that may still be available to foreign issuers (such as the ability to utilise Australian/UK GAAP with a reconciliation to IFRS/Canadian GAAP in the notes to the financial statements). Of course, achieving a shareholder base in excess of 10% in Canada would indicate that the listing had in fact been a success for the company. 2.5 Halt Trading One practical issue we have encountered includes the divergence in practice between Australia, where trading halts of a day or more pending a material announcement are quite common, and Canada, where the TSX strongly encourages short halts with trading recommencing promptly with dissemination of the announcement. This is an issue that requires some balancing of the customary approaches (although the absence of overlap in the Australian and Canadian trading days can mitigate the problem to some extent). 2.6 Financial Statements and Auditing Issues The Canadian Accounting Standards Board adopted IFRS as Canadian GAAP for public companies for fiscal year beginning on or after January 1, 2011. However, the Canadian Exchanges and the Canadian securities regulators will generally accept financial statements prepared in accordance with U.S., UK, and Australian accounting standards, in some cases with a reconciliation to Canadian GAAP or U.S. GAAP. Financial statements themselves do not often in our experience raise significant issues. However, preparing Canadian-style MD&A can require greater effort from the financial team at an Australian or UK company. Three years of audited financials will generally be required and pro formas may be needed if a TSX listing is coupled with a spin off, merger or aggregation of properties. Other than the results of an economic analysis contained in a technical report prepared in accordance with National Instrument 43-101, forecasts are uncommon in Canadian mining financings. Recent changes proposed by the CSA, if approved, will reduce the historical financial statements to two years for TSX-V issuers in IPOs and prospectus offerings. In connection with the filing of a prospectus on an IPO, the auditors of the company will be required to produce consent letters and “comfort letters” to securities regulators and underwriters, both with respect to the statements themselves and to the preparation of any necessary Canadian restatements or reconciliations. However, there is a no requirement for inclusion of a “reporting accountants letter”, in contrast to the LSE and ASX. A Canadian listing will require a company to have its auditors registered with the Canadian Public Accountability Board. 2.7 Escrow Requirements Under the Canadian system (like that in Australia or under the AIM rules), securities held by directors, promoters and vendors of certain assets may be subject to escrow for a period of time. In the case of a re-domicile transaction or secondary listing, if securities of the predecessor had been subject to escrow for a prescribed period of time, it is unlikely that there will be any further Canadian escrow requirements as “credit” will generally be given for the time securities were in escrow in Australia or the UK. This may not be the case, of course, if the foreign company is either a private company or a recently-listed issuer. However, in any event, if the market capitalisation of the issuer is in excess of C$100 million upon listing, no escrow will be
  • 14. required by the regulators. The underwriters or agents may require contractual lock-ups for a limited time frame. 2.8 Settlement Issues A foreign company listing in Canada will need to establish a co-transfer agent in Canada for its securities to facilitate the movement of securities between each country’s clearing and settlement services. This creates relatively few complications in our experience for Australian companies taking on a secondary listing in Canada (or re-domiciling with a secondary listing on the ASX). Settlement for UK companies listing in Canada has proved somewhat more cumbersome, although initiatives are under way to overcome certain technical issues. 2.9 Emerging Markets Issuers As a result of some well-publicized problems relating to several companies set up to IPO Chinese businesses, the Ontario Securities Commission established a regulatory review of “emerging markets issuers” (“EM issuers”) which issued a report in March 2012. EM issuers for these purposes are companies whose mind and management are largely outside Canada and whose principal active operations are in developing areas such as Asia, Africa, South America and Eastern Europe. The focus of concern is on companies with headquarters in jurisdictions other than Canada, the US, UK, Western Europe, Australia and New Zealand, so would not apply to the Australian and UK companies have been the main foreign mining and oil and gas companies coming to Canada. However, for EM issuers the review is likely to result in tightened corporate governance, auditing and due diligence requirements and potentially stricter Exchange rules. 3. Structuring Issues – Re-Domicile Transactions There are a number of alternative mechanisms that can be used to effect a re- domicile of a company to Canada: • export – some jurisdictions, including Canada, permit a company to “export” to another jurisdiction, which involves the surrender of its existing corporate charter and “transfer” of the company to a foreign jurisdiction or to be “imported” into Canada. In this case, the company continues to exist and no new shares are issued or exchanged as a result of the export or import. This route is however not available for Australian or UK companies. • plan or scheme of arrangement – under this route, the foreign company enters into a “scheme of arrangement” under its corporate legislation, which generally involves the holding of a court-supervised shareholders’ meeting with detailed disclosure provided to shareholders regarding the transaction. There would typically be an “implementation/acquisition” agreement with a Canadian company (either an existing public company, in the event the transaction was structured as a RTO as discussed later in this section, or a new Canadian company incorporated to become the public vehicle). Upon completion of the scheme, shareholders of the foreign company exchange their shares for securities of the Canadian company, which becomes the sole shareholder of the foreign company. If the acquisition is made by an existing Canadian public company, it would be required to hold its own shareholders’ meeting to approve the transaction. The scheme of arrangement route has been used in Australia-to-Canada re-domicile transactions. • take-over bid – in countries where neither an export nor a plan or scheme of arrangement is available, and the company to be re-domiciled has a large number of shareholders, a take-over bid may be used to effect the re- domicile. This was the mechanism used by Kenor ASA (“Kenor”) in 2004 to
  • 15. shift its domicile from Norway to Canada into the new public company Guinor Gold Corporation. • private acquisition by share exchange – the last alternative is to simply provide for shares of the foreign company to be acquired by the Canadian entity, either by an existing public company or a new company which would carry out a financing in order to achieve the necessary public distribution, in consideration for shares of the Canadian company. This route may be suitable if the non-Canadian company is a private company, and there are a number of precedents for its use in Canada. It obviously has the advantage of avoiding the need for a local court procedure, but could raise other issues from a Canadian perspective (e.g., acquiror’s shareholders’ approval may be required). Each of the above alternatives has different legal, practical and cost implications, and the final decision depends upon the particular corporate regime of the company’s jurisdiction of incorporation and tax considerations. For an Australian or UK public company, the scheme of arrangement route would most likely be the way to re-domicile to Canada, while for a private company a negotiated share purchase would likely be the preferred choice. The second major structural issue for a foreign company wishing to re-domicile to Canada to consider is whether it would establish its Canadian presence and distribute its securities through an initial public offering of shares by a newly incorporated company (as was done by Anvil Mining, Equinox and OceanaGold) or carry out a “reverse take-over” of an existing Canadian public company or business combination (as was done in the Champion/Red Back, Ausam, Moto and UrAsia transactions). In a RTO the shares of the foreign company would be sold, or transferred under an arrangement or similar procedure, to a listed Canadian “shell” company, which typically will have ceased to carry on an active business (often a failed tech business) but remains listed or has a sufficient number of public shareholders to satisfy the distribution requirements of the Canadian Exchanges. This usually has the effect of giving control of the shell to the shareholders of the vendor company. The foreign company would continue as a subsidiary of the Canadian public company. In either case, it will likely be necessary to file a prospectus and carry out a public offering in Canada (or a large private placement) in order to achieve the required shareholder base/distribution to support a liquid market on the TSX or TSX-V and create investor interest in the company. There are advantages and disadvantages associated with each alternative. Adopting the RTO approach gives the foreign company an existing Canadian public vehicle with a reporting history and a measure of public distribution to assist in satisfying the listing requirements of the relevant exchange. Depending upon the company, it may also provide the foreign company with cash and/or management/director expertise. For example, in the case of the Champion/Red Back transaction, the Canadian company had material properties and management expertise and was able to raise additional cash by way of a private placement before the completion of the RTO. Its directors and senior management complemented those of Red Back and the combined company was therefore able to draw upon the resources of its two predecessors to turn the merged company into a potentially stronger vehicle. The Talison Lithium and Salares Lithium merger in 2010 has a number of the same features. At the junior end of the spectrum, the TSX-V has a class of companies known as “Capital Pool Companies” (“CPCs”), which are allowed to raise up to a maximum of C$4.75 million of capital and then undertake a “qualifying transaction”, such as the purchase of a mining property. The advantage of these shells is that they will be clean vehicles, but as they have limited funds and shareholders and the principals behind them look for a material return for their efforts in establishing the companies, the benefits may not outweigh the costs in going this route.
  • 16. If a “qualifying transaction” proves unsuccessful, the former CPC may be useful for a RTO, as was the case for Rugby and WCB. A CPC was used to create a new public company (Palmarejo Silver and Gold Corporation) to spin out certain assets of the Australian Bolnisi Gold NL. The principal drawback of the RTO route, of course, is that it involves another party in the process, with which negotiations must be carried out and which frequently will try to extract a price for its involvement in the proposal that may or may not be proportionate to the value of the shell. Each party will need to conduct due diligence on the other’s properties and business and, unless the shell is “clean”, potential liabilities will need to be addressed. The Canadian public company will generally need to hold a shareholders’ meeting to approve the transaction with prospectus level disclosure regarding the foreign target provided in an information circular. This adds a further level of cost and complexity to the transaction. Each of the Canadian Exchanges imposes controls on RTOs, including the review and acceptance by the Canadian Exchange of the disclosure documents provided to the shareholders. Taking the route of forming a newly incorporated company avoids these complications, but does mean that as a practical matter the company will likely need to carry out a public offering concurrently with or shortly after the re-domicile to build its Canadian shareholder base and satisfy the minimum distribution requirements of the Canadian Exchanges. (This may not always be necessary as evidence in the Kenor/Guinor transaction where Kenor already had a very significant percentage of its shareholder base in Canada, although it still chose to carry out a C$34 million fundraising to solidify that base.) The requirement of public distribution is a significant difference between the Canadian Exchanges and AIM in London (although AIM is re-thinking its position in this area). However, without a liquid market there is little point in undertaking the expense of a listing, so the distribution requirements of the Canadian Exchanges may not be a practical concern. For foreign companies at the junior end of the spectrum, which do not have existing Canadian shareholders, a RTO will likely be the preferred alternative. For a larger company, establishing a new vehicle may be preferable unless it can find a merger candidate which would bring additional value to the combined entity. If a foreign company undertakes a re-domicile transaction using a new Canadian company, it will be necessary to incorporate and organise this company. In a RTO transaction, the existing board would likely be replaced or restructured and changes made to the corporate documents. In either case, the company will have to establish or update its internal corporate governance regime (board committees, insider trading policies, stock option plans, etc.). Many of these agreements, such as stock option plans, now follow a fairly standard format in Canada, although in our experience some modest adjustments will need to be made if the company wishes to retain a concurrent listing in Australia or London. Irrespective of the route followed, the composition of the board of directors will need to be considered. Although it is possible to incorporate in some provincial corporate jurisdictions in Canada (such as British Columbia, New Brunswick or the Yukon) which do not require Canadian directors, for both “prestige” and “optical” reasons (to show commitment to Canada) it will be desirable to include a number of Canadians on the board. Certain provincial corporate statutes, such as the federal CBCA and the Ontario OBCA, require the company to have at least 25 per cent of its directors as Canadian residents. This permits a reasonable balance to be established between Canadian names and international directors. One or more Canadian directors may also assist in raising awareness of the company and its project to achieve strong liquidity. This may be of particular significance where the Canadian listing has not been accompanied by a marketed public offering. In developing the slate for the board, it is also necessary to take into account the rules under Canadian securities regulation requiring independent directors both on the board and on various committees, and specifying (in the case of the audit committee) that those nominees have appropriate financial expertise.
  • 17. 4. Private Placement As is the case in countries like the U.S., the UK and Australia, exemptions from the Canadian prospectus requirements are available for distributions to certain buyers, generally insurance companies, pension and mutual funds and high net worth individuals. These distributions are generally known as “private placements”. An offering made by way of private placement will not subject the issuer to on-going reporting requirements. Buyers of securities of a foreign company that is not listed in Canada will be subject to resale restrictions in Canada, but so long as the Canadian shareholding is less than 10% at the date of issue, the purchaser is able to freely resell on a foreign exchange such as the ASX or AIM. The Canadian provinces have adopted a uniform exemption regime to largely standardise exemptions across the country. The exemptions include sales to “accredited investors”, which are defined in a way very similar to the corresponding exemption from U.S. securities laws and to the Australian exemptions for “sophisticated investors” and “professional investors”. Exemptions are also available for distributions made in an aggregate amount of at least C$150,000 (known as the minimum amount exemption), on the premise that purchasers who can afford to make such investments should be able to protect themselves. However, the CSA have recently announced that they are reviewing the criteria for the accredited investors and the minimum amount exemption. There are concerns that the size of the investment alone does not assure investor sophistication or access to information and that the current thresholds may be too low, allowing unsophisticated, retail investors to participate in the exempt market. Private placements can be effected very quickly in Canada and there are minimal formal requirements. If an offering memorandum is used to market the securities, it must generally be filed with the securities commissions in the province in which the private placements are made, and in certain provinces there may be statutory rights of action granted in a case of misrepresentations (similar to those given in respect of prospectuses). However, there is no mandatory form for offering memoranda under the accredited investor or C$150,000 exemptions and it is possible to make a private placement without using an offering memorandum at all (for example, using simply the existing public disclosure documents of the foreign company plus a standard Canadian “wrapper”). A private placement is usually made through a broker which will enter into an engagement or agency letter and may require some due diligence to satisfy itself of the accuracy of the offering memorandum or public disclosure record. A report of the trades must generally be filed and modest fees paid to the securities regulators. For mining companies, technical information contained in an offering memorandum regarding a material property previously had to be made on the basis of a technical report in compliance with National Instrument 43-101 (see Section 5.1 for more details). This requirement was removed in 2005 and a technical report is no longer required so long as sales are only made to “accredited investors” (however, technical information disclosed in the offering memorandum must still comply with the standards prescribed under National Instrument 43-101 and may for reporting issuers trigger a requirement to file a new technical report within a presentation period if it contains first time disclosure or a change in mineral resources, mineral reserves or a preliminary economic assessment representing a material change to the issuer). For oil and gas companies, the technical disclosure standard is National Instrument 51-101. However, National Instrument 51-101 only applies to “reporting issuers” in Canada, so private placements by foreign oil and gas companies which have not listed or otherwise became a public company in Canada (e.g. by filing a prospectus) do not trigger the need for a separate reserves report (see Section 5.2 for more details).
  • 18. 5. Technical Standards 5.1 National Instrument 43-101 – Standards for Disclosure for Mineral Projects Where a foreign company raises capital by way of an initial listing on the TSX or TSX-V, a RTO transaction requiring approval of the shareholders of the Canadian public company, or a public offering by way of prospectus, it will need to prepare and file technical reports on its material properties in compliance with the Canadian rules on mining disclosure standards. These standards are set out in National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). Tab 4 includes an article prepared by Blakes for the Mining Journal at the time of the introduction of the rule which summarises its key elements. Also enclosed are articles we prepared for the Mining Journal summarising subsequent reforms to the Instrument, and the latest amendments made on June 30, 2011. Technical reports under NI 43-101 must be prepared for all material properties of the company. The materiality of a property is determined on both a qualitative and quantitative test. Materiality is determined by the issuer and the Companion Policy to NI 43-101 provides the following guidance: “Materiality – An issuer should determine materiality in the context of the issuer’s overall business and financial condition taking into account qualitative and quantitative factors, assessed in respect of the issuer as a whole. In making materiality judgements, an issuer should consider a number of factors that cannot be captured in a simple bright-line standard or test, including the potential effect on both the market price and value of the issuer’s securities in light of the current market activity. An assessment of materiality depends on the context. Information that is immaterial today could be material tomorrow; an item of information that is immaterial alone could be material if it is aggregated with other items. Property Material to the Issuer – An actively trading mining issuer, in most circumstances, will have at least one material property. We will generally assess an issuer’s view of the materiality of a property based on the issuer’s disclosure record, its deployment of resources, and other indicators. For example, we will likely conclude that a property is material if: (a) the issuer’s disclosure record is focused on the property; (b) the issuer’s disclosure indicates or suggests the results are significant or important; (c) the cumulative and projected acquisition costs or proposed exploration expenditures are significant compared to the issuer’s other material properties; or (d) the issuer is raising significant money or devoting significant resources to the exploration and development of the property. In determining if a property is material, the issuer should consider how important or significant the property is to the issuer’s overall business and in comparison to its other properties. For example: (e) more advanced stage properties will, in most cases, be more material than earlier stage properties; (f) historical expenditures or book value might not be a good indicator of materiality for an inactive property if the issuer is focussing its resources on new properties;
  • 19. (g) a small interest in a sizeable property might, in the circumstances, not be material to the issuer; (h) a royalty or similar interest in an advanced property could be material to the issuer in comparison to its active projects; or (i) several non-material properties in an area or region, when taken as a whole, could be material to the issuer. “ Until December 31, 2005, the Companion Policy to NI 43-101 did provide a “bright-line” test as to materiality. It provided that a property would not be material if the value of the consideration paid or required to be paid for the property, including exploration expenditures required to be made during the next 12 months, was less than 10 percent of the book value of the total of the issuer’s mineral properties and related property, plant and equipment. While this test has been specifically abandoned by the CSA, it may still be useful guidance. Generally, an issuer has an obligation to file a technical report (1) upon becoming a reporting issuer in Canada or (2) if scientific or technical information that relates to a mineral project on a property material to the issuer is filed or made available to the public in Canada. The technical report must be prepared by or under the supervision of a “qualified person”. In most cases, the qualified person must also be independent of the issuer. However, a “producing issuer” is generally exempt from the independent requirement unless its obligation to file a technical report arises upon becoming a reporting issuer in Canada (and, in this case, an exemption is available if its securities trade on a “specified exchange” – ASX, LSE (main board), Nasdaq, NYSE, HKSE or Johannesburg Stock Exchange). Most technical consultants providing advice to Australian or UK companies will satisfy the requirements for being a qualified person by virtue of their education, work experience, and their membership in a professional association, such as the Australiasian Institute of Mining and Metallurgy (AusIMM) or the Australasian Institute of Geo Scientists (AIG). The technical report must be prepared in compliance with NI 43-101, and disclosure of reserves and resources must conform to the definitions adopted by the Canadian Institute of Mining and Metallurgy (CIM) or certain permitted foreign standards, including the JORC Code, the SAMREC Code and SEC Industry Guide 7 (provided a reconciliation to the CIM standards is provided). NI 43-101 contains a specific form for the technical report which must be followed, regardless of whether the resources and reserves are classified in accordance with the NI 43-101 standards or other foreign standards, and preparation of an appropriate technical report will be in most cases the first critical path item for a foreign company considering a Canadian transaction. There are also certain differences between different standards in the approach to resource reporting and the preparation of economic models which need to be considered in contemplating a Canadian offering. In our experience, if the company has recently completed a feasibility study or similar exercise the process should be significantly easier, although even in this case there will be a reasonable amount of work required to adapt the existing information to the format of a NI 43-101 report. Having said that, NI 43-101 is highly regarded worldwide and most international mining consulting firms have been involved in transactions in Canada and are familiar with this reporting standard. In comparing the Canadian requirements in NI 43-101 and the Australian requirements of the ASX listing rules and the JORC Code (2004 revision), the following points should be noted: • the substantive reserve and resource definitions are very similar, one (perhaps theoretical) difference being that NI 43-101 requires you to have at least a preliminary feasibility study in place to put an ore body into the reserve category, while this is still not required even under the 2004
  • 20. revisions to the JORC Code. In our experience, NI 43-101 and JORC will almost invariably produce the same reserve and resource figures; • The definitions of “qualified person” under NI 43-101 and “competent person” under JORC are very similar as well, particularly now that the 2004 revisions to JORC have come into force, which formally recognised foreign qualifications on the same basis as NI 43-101. However, a critical distinction between the two regimes is that in many cases NI 43-101 requires a technical report to be prepared by or under the supervision of an “independent” qualified person. This contrasts with JORC, where the information may be prepared under the supervision of a “competent person” employed by the company. Thus it may be necessary for an Australian company to have technical information on its material properties “expertised” by an outside consultant to comply with the Canadian rules; • NI 43-101 also goes beyond the JORC and the ASX rules to require the delivery of a formal technical report in a variety of particular situations and to prescribe its content; and • NI 43-101 establishes specific rules for the use of technical information which are not addressed specifically in the JORC Code or ASX requirements (e.g. restrictions on the use of “inferred resources” in an economic analysis). We understand that the ASX is considering certain changes to its listing rules which could eliminate some of these differences, although we note that the ASX appears to have rejected the notion of requiring Canadian-style technical reports. 5.2 National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities If a foreign oil and gas company intends to become listed in Canada or issue securities to the public by way of a prospectus, it will need to comply with National Instrument 51- 101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) of the CSA. This Instrument was introduced in late 2003 and substantially amended the Canadian disclosure regime for oil and gas companies and subsequently updated again on December 28, 2007 and December 30, 2010. In addition to NI 51-101, the CSA have issued certain administrative notices dealing with the disclosure of resources, which supplement the requirements contained in NI 51-101. A summary of the Instrument is included at Tab 5 and below is a highlight of some practical considerations. NI 51-101 requires the company to disclose estimated oil and gas reserves data and other relevant information as at its most recent financial year-end in a prescribed form in connection with the filing of annual financial statements or (on an IPO) the filing of a prospectus. The estimates must be prepared or audited in accordance with the standards of the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”). The statement must be supported by a report on reserves data prepared by a qualified reserves evaluator or auditor (each of whom is independent of the issuer), who must in aggregate have evaluated or audited at least 75% of the future net revenue attributable to proved plus probable reserves and reviewed the balance. The evaluator or auditor must possess appropriate professional qualifications and experience and be a member in good standing of a recognised professional organisation (i.e. APEGGA or other provincial equivalent). Only Canadian professional organisations were initially recognised and foreign evaluators need to apply for recognition. Orders have subsequently been granted recognising a number of US and UK associations as acceptable professional organisations. Several orders have been issued
  • 21. permitting use of European evaluators and we should not expect any problems in recognising Australian or UK qualified evaluators. Lastly, management and directors must prepare a report which acknowledges their responsibility in relation to the preparation and disclosure of information and the review of the procedures relating to the evaluation. This report must be signed by the issuer’s Chief Executive Officer and one other senior officer, together with any two directors. NI 51-101 contemplates the possibility of discretionary exemption orders being granted from certain of its requirements. In particular, exemptions from some of the requirements may be available for issuers which have securities registered in the United States and comply with the requirements of the SEC. Exemptions may also be available from the requirement to use independent qualified reserves evaluators in the case of senior producing issuers (i.e. those producing more than 100,000 BOEs per day), which can demonstrate their capability to estimate their own reserves and future net revenues in accordance with the COGE Handbook. Several orders have been granted exempting U.S. listed companies (including Burlington Resources Canada, Southern Petroleum Limited, Ivanhoe Energy, Ecopetrol S.A., Nexen, Ultra Petroleum Corp. and BG Group plc) which had a very small percentage of their shareholders in Canada from some or all of NI 51-101, so long as the Canadian shareholding was less than a prescribed level (generally, 10% for full exemption) and they complied with US securities disclosure requirements. A similar exemption from the requirements of NI 51-101 has been granted to two UK issuers (Salamander Energy plc and EnQuest plc) listed on the main board of the LSE where the Canadian shareholding was less than 10%. 6. Planning If a foreign company is contemplating raising funds in Canada, the first step is to familiarise itself with the Canadian market and to start building relationships with brokers and institutional investors who will take an interest in its securities. While a private placement of securities can be effected in Canada relatively quickly and with limited formalities, a public offering or re-domicile will be a significantly more substantial exercise. If this is to be undertaken, the next priority will be to assess the company’s properties and the technical and reserve reporting requirements, and to start the process of converting technical and reserve reports into ones which meet the Canadian standards where required. In most cases, financial statement preparation will not be a major issue for an Australian or UK company, but it will be important to determine from the company’s auditors and financial/tax advisers that preparation of the required statements will not produce any significant problems and that any re-domicile will not trigger any tax complications for the issuer or its securities. If a RTO transaction is contemplated, the process of identifying the Canadian target and conducting negotiations for the business combination and mutual due diligence can take more time than one might expect. It will obviously be critical to the success of a public offering as well to obtain the commitment of one or more Canadian investment dealers who can advise as to the appetite in Canada for securities of the company and assist in developing a business plan to raise the necessary capital and effect the desired listing in Canada. The support of well-regarded investment dealers will also be critical to the development of a strong after-market in the company’s securities. David Glennie (London)/John Wilkin (Toronto)/Bob Wooder (Vancouver) Blake, Cassels & Graydon LLP
  • 22. David is the Office Managing Partner of our European office. His practice focuses on international mergers and acquisitions and corporate finance, with particular expertise in natural resource transactions, including numerous domestic and international public and private financings and acquisitions. Recent transactions include advising: • Acron JSC and Devonian Potash on the C$260-million sale of potash permits in Saskatchewan to Yanzhou Coal, and acting for Acron JSC on a separate joint venture over other potash permits with Rio Tinto • Solway Group on the C$170-million purchase of the Fenix ferro-nickel project in Guatemala • Equinox Minerals on its A$1.2-billion take-over of Citadel Resource Group • Orange-Nassau Energie on its C$102-million take-over of Cirrus Energy • Initial public offerings on the Toronto Stock Exchange (TSX) of Frontier Rare Earths and Talison Lithium • Randgold Resources on its US$578-million take-over of Moto Goldmines • Secondary listings on the TSX of U.K.-listed Anglo Pacific Group and Noventa and Australian Securities Exchange-listed Chalice Gold, Western Areas, Bannerman and Moly Mines • Schneider Electric Industries on its C$500-million acquisition of Xantrex Technology • Lonmin in its US$263-million take-over of the Canada-listed Southern Platinum and C$475- million take-over of AfriOre Awards and Recognition • David has been recognized as a leading Canadian lawyer in the following publications: • Law Business Research's The International Who's Who of Mining Lawyers 2011 • Law Business Research's The International Who's Who of Oil and Gas Lawyers 2011 • Chambers Global: The World's Leading Lawyers for Business 2011 (Corporate: Leading Foreign Firms in London: Leading Individuals (U.K.)) Professional Activities David writes and speaks on numerous financial, tax and acquisition-related topics and is also a former president of the Financial Services Commission of the Union Internationale des Avocats. Publications • Co-author - "License to Explore", Mining Journal, January 2012. • Author - "Investing in Africa - Joint Ventures", Presented at IBA Africa Regional Forum, Nairobi, December 2011. David G. Glennie Office Managing Partner, London Blake, Cassels & Graydon LLP Canadian Barristers & Solicitors 5th Floor 23 College Hill London EC4R 2RP United Kingdom Tel: +44(0)20 7429 3555 Email: david.glennie@blakes.com Areas of Practice Securities Mergers and Acquisitions Mining Oil & Gas International
  • 23. • Co-author - "The Saudi Arabian Mining Code", Blakes Bulletin on Gulf Practice/Mining, November 2011. • Co-author - "Amendments to Rules Regarding Standards of Disclosure for Mineral Projects Set to Come into Force", Blakes Bulletin on Securities Regulation, May 2011. • Co-author - "NI 43-101 Regulation Update", Mining Journal, April 28, 2011. • Co-author - "A More Flexible Regime", Mining Journal, April 2011. Education Admitted to the Ontario Bar - 1982 LL.B., University of Toronto - 1980 M.A., University of Toronto - 1977 B.A., University of Toronto - 1976
  • 24. John D. Wilkin Partner, Toronto Blake, Cassels & Graydon LLP 199 Bay Street Suite 4000, Commerce Court West Toronto ON M5L 1A9 Canada Tel: +(416) 863-2785 Email: john.wilkin@blakes.com Areas of Practice Corporate Finance & Securities Regulation, Mergers & Acquisitions, Business, Mining John’s practice focuses on domestic and cross-border mergers and acquisitions and corporate finance transactions for public companies. He also advises Canadian and international companies on a wide range of corporate governance and securities law compliance matters. John has significant transactional experience in the mining, telecommunications, financial services and manufacturing sectors. He regularly advises purchasers, vendors and target companies in connection with public and private mergers and acquisitions transactions, and acts for both issuers and underwriters on public offerings and private placements. From 2002 to 2004, John worked in the Firm's London office, where his practice was exclusively devoted to advising on international mergers and acquisitions, and acting for underwriters and issuers in connection with international financings by Canadian companies, the distribution of foreign company securities in Canada and Euro note offerings. His practice continues to have a strong international focus, and he regularly acts for clients and on transactions in Australia, Europe, the United States and Africa. Recent transactions include advising: Mergers & Acquisitions and Reorganization Transactions • Equinox Minerals Limited on its A$1.2-billion acquisition of Citadel Resource Group Limited • Talison Lithium Limited on its C$47.9-million acquisition and related C$40-million financing of Salares Lithium Inc. and concurrent C$327.4-million listing on the Toronto Stock Exchange • Bell Aliant Regional Communications Income Fund on its conversion to a corporation to form Bell Aliant Inc. • GrainCorp Limited on its A$757-million acquisition of United Malt Holdings, including Canada Malting Co. Limited • Mineralogy Pty Ltd. on its C$100-million unsolicited bid for Waratah Coal Inc. • Kazakhmys PLC on its C$290-million acquisition of Eurasia Gold Inc. • Crescent Gold Limited in connection with the A$122-million acquisition of control by Deutsche Bank AG • Financial advisers to boards of directors in connection with the provision of fairness opinions on various M&A transactions Corporate Finance • Underwriters in connection with the initial public offering (IPO) of Labrador Iron Mines Holdings Limited and its two subsequent public offerings of common shares and flow-through shares aggregating approximately C$215-million • Talison Lithium Limited on its C$80-million public offering of ordinary shares • Northland Resources S.A. on its C$256-million global public offering of shares • Equinox Minerals Limited on its IPO and four subsequent public equity offerings aggregating approximately C$675-million • Avnel Gold Mining Limited on its IPO and subsequent rights offering and private placements aggregating approximately C$40-million • Issuers and underwriters in connection with Canadian and cross-border private placements
  • 25. Advisory Various public companies, including Bell Aliant Inc., BHP Billiton plc, CI Financial Corp., Equinox Minerals Limited, Kazakhmys PLC, Talison Lithium Limited, Northland Resources S.A., HudBay Minerals Ltd., Crescent Gold Limited and Avnel Gold Mining Limited on strategic advisory and securities compliance matters, including corporate governance, continuous disclosure obligations and shareholder meetings Awards and Recognition • Chambers Global: The World's Leading Lawyers for Business 2012 as a leading individual in Projects & Energy: Mining & Minerals (Projects: Global-wide) 2012 • Lexpert magazine’s “Rising Stars: Leading Lawyers Under 40" 2011 John has taught a range of international and corporate law subjects at law schools in Canada and the U.K. In 2002/03, he was an adjunct faculty member of the University of King's College London School of Law, where he taught private international law. He has also delivered lectures and seminars at Osgoode Hall Law School on international transactions, mining transactions, securities law and income trusts. John has written several articles and chapters for publications on M&A, corporate governance and securities law topics. He holds a master's degree in law from the University of Oxford. Publications • Co-author - "Multijurisdictional M&A Transactions Involving Canadian Resource Companies - Challenges And Best Practices For Effectively Managing Legal Roles And Responsibilities", American Bar Association International Mergers & Acquisitions Sub-committee, Toronto, August 5, 2011. • Co-author - "Amendments to Rules Regarding Standards of Disclosure for Mineral Projects Set to Come into Force", Blakes Bulletin on Securities Regulation, May 2011. • Co-author - "Amendments Proposed to Rules Regarding Standards of Disclosure for Mineral Projects", Blakes Bulletin on Securities Regulation, April 2010. Education B.C.L. (with Distinction), University of Oxford - 2001 Admitted to the Ontario Bar - 1999 LL.B., Dalhousie Law School - 1997 B.Com. (Hons.), Queen's University - 1994 B.A. (with Distinction), Queen's University - 1994
  • 26. Bob Wooder Partner, Vancouver Blake, Cassels & GraydonLLP 595 Burrard Street P.O. Box 49314 Suite 2600, Three Bentall Centre Vancouver, BC V7X 1L3 Canada Tel: +(604) 631-3330 Email: bob.wooder@blakes.com Areas of Practice Corporate Finance & Securities Regulation Business Mining Bob Wooder is a Partner in the Securities Group. His practice focuses on corporate finance and mergers and acquisitions. Bob practised in the Firm's office in London, England, for four years, where he advised exclusively on international equity and debt financings, acquisitions and divestitures. Recently, Bob has advised on the following transactions: • Capstone Mining in connection with its C$710-million acquisition of Far West Mining and its simultaneous strategic alliance with Korea Resources Corporation • The Special Committee of Hathor Exploration in connection with the hostile take-over bid by Cameco, which, after an auction, resulted in a friendly acquisition by Rio Tinto for C$654- million • The Special Committee of Extorre Gold Mines in connection with its purchase by Yamana Gold for C$414-million • The Underwriters in connection with offerings by Silver Wheaton totalling US$575-million • Brazauro Resources in connection with its acquisition by Eldorado Gold for C$122-million • Silverstone Resources in connection with its purchase by Silver Wheaton for C$205-million • Lithium One Inc. in connection with its acquisition by Galaxy Resources for C$112-million in exchangeable shares • The Underwriters in connection with block trade of C$500-million of shares of Osisko Resources by Goldcorp Inc. • Capstone Mining Corp. with respect to its C$300-million business combination with Sherwood Copper Corporation • The Underwriters in connection with a C$265-million initial public offering of Pretium Resources, a subsequent secondary offering raising proceeds of C$115-million and a follow- on offering of C$80-million • The Underwriters in connection with a C$300-million financing by Primero Mining Corp., the proceeds of which were used to fund its C$500-million acquisition of the San Dimas mine from Goldcorp • Valley High in connection with its acquisition by Levon Resources for C$118-million • The Underwriters in connection with C$213-million financing by Keegan Resources • The Underwriters in connection with the C$130-million financing by Bear Creek Mining • The Underwriters in connection with a C$184-million bought deal financing of Baja Mining • The Special Committee of Brett Resources in connection with its acquisition by Osisko by way of take-over bid for C$308-million • The Special Committee of Aura Minerals in connection with purchase of the San Andres Mine, the Sao Francisco Mine and the Sao Vicente Mine for C$240-million
  • 27. • Northern Orion in connection with its C$10-billion combination with Yamana Gold and Meridian • Lundin Mining in connection with its C$1.7-billion acquisition of Tenke Mining • Centenario Copper in connection with its purchase by Quadra Mining for C$106-million • Red Back Mining in connection with its C$375-million financing and acquisition of Tasiast assets • The Special Committee of Cumberland Resources in connection with its purchase by Agnico- Eagle of Cumberland for C$710-million Awards and Recognition • The Lexpert/American Lawyer Guide to the Leading 500 Lawyers in Canada 2012 • Chambers Global: The World's Leading Lawyers for Business • The Canadian Legal Lexpert Directory 2012 • The Best Lawyers in Canada 2012 • Law Business Research's The International Who's Who of Mergers and Acquisitions Lawyers 2012 • The 2012 Lexpert Guide to the Leading US/Canada Cross-border Corporate Lawyers in Canada • Lexpert magazine’s “Rising Stars: Leading Lawyers Under 40" 2008 Publications • Co-author - "Amendments to Rules Regarding Standards of Disclosure for Mineral Projects Set to Come into Force", Blakes Bulletin on Securities Regulation, May 2011. Education Admitted to the Bar of British Columbia - 1995 LL.B., Osgoode Hall Law School - 1994
  • 28. Global Leader in Mining Benefit from TMX Expertise in Mining • Best access in the world for capital for junior explorers • Alternative IPO routes using Capital Pool Company (CPC) Program and Special Purpose Acquisition Corporation (SPAC) • 86 billion mining shares traded on Toronto Stock Exchange and TSX Venture Exchange • Over 200 analysts cover TSX and TSXV listed mining companies Mining Markets at a Glance - 2011 $12.5 $11.9 Glencore IPO $9.5 billion $3.4 $1.8 $1.4 Number of Financings 2,021 TSX/TSXV LSE/AIM ASX HKEx NYSE 142 63 7 3 $0.723 Other 15 Source: Gamah International, compiled by TMX Group. TSX & NYSE/NYSE TSX TSXV TSXV LSE AIM ASX JSE HKEx Amex Number of Mining Issuers Listed 371 1275 1646 44 147 700 56 69 141 Quoted Market Cap. (C$ Billions) 398.4 28.4 426.8 413.6 25.4 464.4 324.5 247.6 1,137.1 New Mining Listings 49 152 201 3 17 79 2 12 8 Source: Exchange Websites, World Federation of Exchanges, Capital IQ Unless otherwise noted, all stats are as at or YTD December 31, 2011 Equities Toronto Stock Exchange TSX Venture Exchange TMX Select Equicom TMX Group Derivatives Montréal Exchange CDCC Montréal Climate Exchange Fixed Income Shorcan Energy NGX Data TMX Datalinx TMX Atrium PC Bond Toronto Stock Exchange and TSX Venture Exchange are home to 58% of the world's public mining companies • 201 new mining listings • $12.5 billion in equity capital raised Mining Equity Financings (C$B) - 2011 90% of all global equity financings were done on TSX and TSXV in 2011, making up nearly 40% of the world's mining equity capital
  • 29. Africa: TSXV: 105 Companies TSX: 80 Companies Australia/NZ/PNG: TSXV: 26 Companies TSX: 46 Companies UK/Europe: TSXV: 56 Companies TSX: 33 Companies Russia & CIS Countries: TSXV: 12 Companies TSX: 14 Companies US: TSXV: 246 Companies TSX: 117 Companies India/Asia: TSXV: 63 Companies TSX: 43 Companies Mexico: TSXV: 152 Companies TSX: 59 Companies South America: TSXV: 188 Companies TSX: 99 Companies Central America & Caribbean: TSXV: 32 Companies TSX: 19 Companies Source: InfoMine, Compiled by TMX, December 2011 Canada: TSXV: 775 Companies TSX: 180 Companies TMX Mining Companies Have a Global Reach Nearly 50% of the 9,300 mineral exploration projects held by TSX & TSXV companies are outside of Canada Your next mining project is only a click away MinesOnline.com provides an online platform for companies looking to buy and sell mining projects from around the world. Discover your next project at minesonline.com Register online to review currently posted projects or contact Carlos Espinosa at carlos.espinosa@tsx.com or 416 814-8861 The document and the information contained herein are provided “as is” for information purposes only. You should not rely on this information for any trading, business or financial purposes. Neither TMX Group, Inc., nor any of its affiliated companies or entities, guarantees the completeness of the information contained in this document and we are not responsible for any errors or omissions in or your and MinesOnline use of, or reliance on, the information. ©2012 TSX Inc. All rights reserved. Do not reproduce or modify this document without TSX Inc. prior written consent. Toronto Stock Exchange, TSX Venture Exchange are trademarks of TSX Inc. MinesOnline is a trademark of PCF Mines Online.com Pty Ltd. Not a securities marketplace. Business Development Contacts www.tmx.com/mining Mining Orlee Wertheim 416 947-4477 orlee.wertheim@tsx.com Diversified Industries Justin Canivet 416 947-4710 justin.canivet@tsx.com Oil & Gas Cindy Gray 403 218-2822 cindy.gray@tsx.com Clean Technology Robert Peterman 416 947-4305 robert.peterman@tsx.com United States Colleen Chambers 604 643-6524 colleen.chambers@tsx.com China Edward Cheung 416 947-4273 edward.cheung@tsx.com Toll Free North America: 1 888 873-8392 China: 00 800 258 99999 Europe: 00 800 5600 5700
  • 30. (1) “G&A” means general and administrative expenses. (2) “advanced exploration property” refers to one on which a zone of mineralization has been demonstrated in three dimensions with reasonable continuity indicated. The mineralization identified has economically interesting grades. (3) A company must hold or have the right to earn and maintain a 50% interest in the property. Companies holding less than a 50% interest will be considered on a case- by-case basis looking at program size stage of advancement of the property and strategic alliances. (4) “Tier 1 property” means a property that has substantial geological merit and is: (a) a property in which the Issuer holds a material interest; and (b) a property on which previous exploration, including detailed surface geological, geophysical and/or geochemical surveying and at least an initial phase of drilling or other detailed sampling (such as trench or underground opening sampling), has been completed; (c) a property on which drilling or other detailed sampling on the property has identified potentially economic or economic materialization; and (d) an independent geological report recommends a minimum $500,000 Phase 1drilling (or other form of detailed sampling) program based on the merits of previous exploration results; or an independent, positive, feasibility study demonstrates that the property is capable of generating positive cash flow from ongoing operations. (5) “significant interest” means at least 50% interest (6) “geological report” or “technical report”, in the case of a mining property, is a report prepared in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects or any successor instrument. * Mining Disclosure Standards National Instrument 43-101 is the Canadian Securities Administrators’ (“CSA”) policy that governs the scientific and technical disclosure for mineral projects made by mineral exploration and mining companies, including the preparation of technical reports. The instrument covers oral statements as well as written documents and websites. NI 43-101 requires that all technical disclosure be prepared by or under the supervision of a “qualified person.” Issuers are required to make disclosure of reserves and resources using definitions approved by the Canadian Institute of Mining, Metallurgy and Petroleum. NI 43-101 is available at: http://www.osc.gov.on.ca/en/SecuritiesLaw_rule_20051223_43-101_mineral-projects.jsp Frequently Asked Questions at http://www.osc.gov.on.ca/en/Regulation/Rulemaking/Notices/csanotices/2003/csan_43-302_faq-43_101_20030124.htm#faq LISTING REQUIREMENTS FOR EXPLORATION & MINING COMPANIES Property Requirements TSX Venture Tier 2 Significant interest5 in a qualifying property or, at discretion of the Exchange, a right to earn a significant interest5 in a qualifying property; sufficient evidence of no less than $100,000 of exploration expenditures on the qualifying property in the past three years Material interest in a Tier 1 property 4 Advanced Exploration Property2 Minimum 50% ownership in the property3 Three years proven and probable reserves as estimated by an independent qualified person (if not in production, a production decision made) Three years proven and probable reserves as estimated by an independent qualified person Recommended Work Program $200,000 on the qualifying property as recommended by geological report6 $500,000 on the Tier 1 property4 as recommended by geological report $750,000 on advanced exploration property2 as recommended in independent technical report6 Bringing the mine into commercial production Commercial level mining operations TSX Venture Tier 1 TSX Non-exempt Exploration and Development Stage TSX Non-exempt Producer TSX Exempt Working Capital and Financial Resources Adequate working capital and financial resources to carry out stated work program or execute business plan for 12 months following listing; $100,000 in unallocated funds Adequate working capital and financial resources to carry out stated work program or execute business plan for 18 months following listing; $200,000 in unallocated funds Minimum $2.0 million working capital, but sufficient to complete recommended programs, plus 18 months G&A, anticipated property payments and capital expenditures. Appropriate capital structure Adequate funds to bring the property into commercial production; plus adequate working capital for all budgeted capital expenditures and to carry on the business. Appropriate capital structure Net Tangible Assets, Earnings or Revenue No requirement$2,000,000 net tangible assets $3,000,000 net tangible assets $4,000,000 net tangible assets; evidence indicating a reasonable likelihood of future profitability supported by a feasibility study or historical production and financial performance $7,500,000 net tangible assets; pre-tax profitability from ongoing operations in last fiscal year; pre-tax cash flow of $700,000 in last fiscal year and average of $500,000 for past two fiscal years Other Criteria Geological report6 recommending completion of work program Up-to-date, comprehensive technical report6 prepared by independent qualified person Distribution, Market Capitalization and Public Float Public float of 500,000 shares; 200 public shareholders each holding a board lot and having no resale restrictions on their shares; 20% of issued and outstanding shares in the hands of public shareholders Public float of 1,000,000 shares; 250 public shareholders each holding a board lot and having no resale restrictions on their shares; 20% of issued and outstanding shares in the hands of public shareholders $4,000,000 publicly held 1,000,000 free trading public shares; 300 public holders with board lots Sponsorship Sponsor report may be required Required (may be waived if sufficient previous 3rd party due diligence) Not required Up-to-date, comprehensive technical report6 prepared by independent qualified person and 18 month projection (by quarter) of sources and uses of funds, signed by CFO Adequate working capital to carry on the business. Appropriate capital structure. Management and Board of Directors Management, including board of directors, should have adequate experience and technical expertise relevant to the company's business and industry as well as adequate public company experience. Companies are required to have at least two independent directors. All amounts are expressed in Canadian dollars. The foregoing is a summary of the applicable listing requirements only. For detailed listing requirements, refer ro the TSX Venture Exchange Corporate Finance Manual and the Toronto Stock Exchange Manual, both of which are available at go to www.tmx.com
  • 31. Discover TMX, a World Leading Marketplace for Oil & Gas UK/Europe: TSX: 15 Companies TSXV: 30 Companies South America: TSX: 12 Companies TSXV: 28 Companies Russia & CIS Countries: TSX: 5 Companies TSXV: 2 Companies Africa: TSX: 14 Companies TSXV: 19 Companies Middle East: TSX: 7 Companies TSXV: 17 Companies India/Asia: TSX: 9 Companies TSXV: 9 Companies Australia/NZ/PNG: TSX: 3 Companies TSXV: 11 Companies US: TSX: 22 Companies TSXV: 55 Companies Mexico, Central America & Caribbean: TSX: 2 Companies TSXV: 6 Companies TMX Group is an integrated, multi-asset class exchange group, which owns and operates equities, derivatives, fixed income and energy markets. TMX’s equity exchanges, Toronto Stock Exchange and TSX Venture Exchange, are world-class markets that provide access to financings from under $1 million to over $1 billion and everything in between. With more oil and gas companies listed on Toronto Stock Exchange and TSX Venture Exchange than any other public marketplace, TMX is a global leader in the energy sector. • Largest stock exchange in North America by number of listings • 1st in the world for oil & gas and home to more of the world’s public oil & gas companies than any other exchange • 8th largest stock exchange in the world by equity capital raised; 7th by issuer market capitalization • Proven track record of graduations from TSX Venture Exchange up to Toronto Stock Exchange As at December 31, 2011: TMX Oil & Gas Issuers with Global Operations Global Properties • Global Investments • Global Visibility Canada: TSX: 92 Companies TSXV: 175 Companies Equities Toronto Stock Exchange TSX Venture Exchange TMX Select Equicom TMX Group Derivatives Montréal Exchange CDCC Montréal Climate Exchange Fixed Income Shorcan Energy NGX Data TMX Datalinx TMX Atrium PC Bond $10.1B Oil & Gas Equity Raised 405 Oil & Gas Issuers 49 New Oil & Gas Listings $304B Value Traded Source: TSX Market Intelligence Group analysis of Company Websites as at December 31, 2011 Note: A single company may have operations or assets in multiple countries
  • 32. TSX/TSXV ASX LSE-AIM 405 224 142 49 10 NASDAQ 14 Oslo Børs 36 NYSE Amex HKExNYSE 127 $50 - $150 Million AIM ASX $150 - $500 Million $500 - $1 000 Million >$1 000 Million 13 11 8 6 33 5 4 8 4 11 TMX The document and the information contained herein are provided “as is” for information purposes only. You should not rely on this information for any trading, business or financial purposes. Neither TMX Group, Inc., nor any of its affiliated companies or entities, guarantees the completeness of the information contained in this document and we are not responsible for any errors or omissions in or your use of, or reliance on, the information. ©2012 TSX Inc. All rights reserved. Do not reproduce or modify this document without TSX Inc. prior written consent. Toronto Stock Exchange and TSX Venture Exchange are trademarks of TSX Inc. and/or its affiliates. Source: Capital IQ and Exchange websites, as at December 31, 2011 Benefits of TMX Listing for Oil & Gas Issuers • Access to Capital – Oil & Gas issuers raised $10.1 billion in 2011 through 453 financings • Listing & Trading – Companies range from juniors to seniors; $304 billion traded in Oil & Gas issuer stocks • Global Visibility – Analyst coverage comes sooner • Graduation Potential for TSX Venture Exchange Issuers – Can move to senior board as company grows • Tailored and Flexible Listing Criteria – Better accomodates junior issuers, including exploration-stage companies • Experienced Exchange Staff – Relevant Oil & Gas business experience Analysts Cover Juniors and Seniors Source: Capital IQ, as at December 31, 2011 Large Analyst Community with Extensive Oil & Gas Sector Experience TMX: Largest Oil & Gas Public Market More Oil & Gas issuers than any other exchange Analyst Coverage Comes at Earlier Stages Business Development Contacts www.tmx.com/energy Oil & Gas Cindy Gray +1 403 218-2822 cindy.gray@tsx.com Mining Orlee Wertheim +1 416 947-4477 orlee.wertheim@tsx.com Clean Technology Robert Peterman +1 416 947-4305 robert.peterman@tsx.com Diversified Industries Justin Canivet +1 416 947-4710 justin.canivet@tsx.com United States Colleen Chambers +1 604 643-6524 colleen.chambers@tsx.com China Edward Cheung +1 416 947-4273 edward.cheung@tsx.com Toll Free North America: 1 888 873-8392 China: 00 800 258 99999 Europe: 00 800 5600 5700
  • 33. (1) “Proved development reserves” are defined as those reserves that are expected to be recovered from existing wells and installed facilities, or, if facilities have not been installed, that would involve low expenditure, when compared to the cost of drilling a well, to put the reserves on production. All amounts are expressed in Canadian dollars. For detailed listing requirements, go to www.tmx.com. LISTING REQUIREMENTS FOR OIL & GAS (EXPLORATION OR PRODUCING) COMPANIES Net Tangible Assets, Earnings or Revenue TSX Venture Tier 1 TSX Venture Tier 2 Working Capital and Financial Resources Adequate working capital and financial resources to carry out stated work program or execute business plan for 18 mo. following listing; $200,000 unallocated funds Distribution, Market Capitalization and Public Float Public float of 1,000,000 shares; 250 Public Shareholders each holding a Board Lot and having no Resale Restrictions on their shares; 20% of issued and outstanding shares in the hands of Public Shareholders Sponsorship Property Requirements Recommended Work Program Other Criteria Geological Report recommending completion of work program No Requirement Management and Board of Directors Management, including board of directors, should have adequate experience and technical expertise relevant to the company's business and industry as well as adequate public company experience. Companies are required to have at least two independent directors. Adequate working capital and financial resources to carry out stated work program or execute business plan for 12 mo. following listing; $100,000 unallocated funds Public float of 500,000 shares; 200 Public Shareholders each holding a Board Lot and having no Resale Restrictions on their shares; 20% of issued and outstanding shares in the hands of Public Shareholders Exploration – either (i) Issuer has an unproven property with prospects or (ii) Issuer has joint venture interest and $5,000,000 raised by Prospectus offering Reserves – either (i) $500,000 in proved developed producing reserves or (ii) $750,000 in proved plus probable reserves Exploration - $3,000,000 in reserves of which a minimum of $1,000,000 must be proved developed reserves1 and the balance probable reserves Producing - $2,000,000 in proved developed reserves1 Exploration – minimum of $1,500,000 allocated by Issuer to a work program as recommended in a Geological Report except where Issuer has a joint venture interest and has raised $5,000,000 in Prospectus offering Reserves – (i) satisfactory work program and (ii) in an amount of no less than $300,000 if proved developed producing reserves have a value of less than $500,000 as recommended in Geological Report Exploration - satisfactory work program (i) of no less than $500,000 and (ii) which can reasonably be expected to increase reserves, as recommended in a Geological Report Producing - No requirement Sponsor report may be required
  • 34. (1) “G&A” means general and administrative expenses. (2) “Proved developed reserves” are defined as those reserves that are expected to be recovered from existing wells and installed facilities, or, if facilities have not been installed, that would involve low expenditure, when compared to the cost of drilling a well, to put the reserves on production. (3) “NI 51-101” National Instrument 51-101 – Standards of Disclosure for Oil & Gas Activities – available at: http://www.osc.gov.on.ca/ (4) Exceptional circumstances may justify the granting of Exempt status notwithstanding the minimum requirements – generally an affiliation with an established business and/or exceptionally strong financial position is required. (5) Reserve value of pre-tax net present value of future cash flows using a 10% discount rate: forecast pricing assumptions are used. (6) This projection must also include actual financial results for the most recently completed quarter; (7) "Contingent resources" are defined in accordance with Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101, however the Exchange in its discretion may exclude certain resources classified as contingent resources after taking into consideration the nature of the contingency. The Exchange will use the best-case estimate for contingent resources, prepared in accordance with National Instrument 51-101. (8) The Company must submit a technical report prepared by an independent technical consultant that conforms to National Instrument 51-101 and be acceptable to the Exchange. Reports prepared in conformity with other reporting systems deemed by the Exchange to be the equivalent of National Instrument 51-101 will normally be acceptable also. The value of the resources should be calculated as the best-case estimate of the net present value of future cash flows before income taxes, prepared on a forecast basis, and discounted at a rate of 10%. The Exchange may, at its discretion, also require the provision of a price sensitivity analysis. (9) The Exchange strongly recommends pre-consultation with the Exchange for any applicant applying under this listing category. Generally, this category will be limited to issuers with unconventional oil & gas assets, such as oil sands All amounts are expressed in Canadian dollars. For detailed listing requirements, go to www.tmx.com. LISTING REQUIREMENTS FOR OIL & GAS (EXPLORATION OR PRODUCING) COMPANIES Net Tangible Assets, Earnings or Revenue TSX Non-Exempt Oil & Gas Development Stage Issuers9 TSX Exempt Oil & Gas Issuers4 Pre-tax profitability from ongoing operations in last fiscal year. Pre-tax cash flow from ongoing operations of $700,000 in last fiscal year and average pre-tax cash flow from ongoing operations of $500,000 for the past two fiscal years. Working Capital and Financial Resources Adequate funds to execute the program and cover all other capital expenditures & G&A1 + debt service expenses for 18 months with a contingency allowance; 18 month projection of sources and uses of funds signed by CFO; appropriate capital structure Adequate funds to either: (a) execute the development plan and cover all other capital expenditures & G&A1 + debt service expenses, for 18 months with a contingency allowance; OR (b) bring the property into commercial production, & adequate working capital to fund all budgeted capital expenditures + carry on the business. 18 month projection of sources & uses of funds signed by CFO6; appropriate capital structure At least 1,000,000 freely tradable shares with an aggregate market value of $4,000,000; 300 public holders, each with one board lot or more Minimum market value of the issued securities that are to be listed of at least $200,000,000 Contingent resources 7 of $500,000,000 8 Clearly defined development plan, satisfactory to the Exchange, which can reasonably be expected to advance the property Distribution, Market Capitalization and Public Float At least 1,000,000 freely tradable shares with an aggregate market value of $4,000,000; 300 public holders, each with one board lot or more Sponsorship Not required Property Requirements $3,000,000 proved developed reserves 2,5 $7,500,000 proved developed reserves 2, 5 Recommended Work Program Clearly defined program to increase reserves Other Criteria Up-to-date technical report prepared by an independent technical consultant (NI 51-101 3) No requirements Management and Board of Directors Management, including the board of directors, should have adequate experience and technical expertise relevant to the company’s business and industry as well as adequate public company experience. Companies are required to have at least two independent directors. Adequate working capital to carry on the business. Appropriate capital structure. Sponsor report may be required (generally not required for IPOs or TSX Venture Graduates) TSX Non-Exempt Oil & Gas Exploration and Development Issuers
  • 35. *TMX Group of businesses includes TSX, TSXV, Montréal Exchange, Natural Gas Exchange, Montréal Climate Exchange, Boston Options Exchange, Canadian Derivatives Clearing Corporation, TMX Datalinx, Equicom, PC Bond, Shorcan. TSX Venture Exchange (TSXV) has developed this summary guide to help listed issuers meet the filing and reporting requirements of TSXV and the principal requirements of Canadian securities law. This guide has been prepared for information purposes only and is a summary of the principal filing obligations (which are subject to change from time to time) imposed upon reporting issuers listed on TSXV. When making a filing, an Issuer must consult the TSXV Corporate Finance Manual as the information in this Guide is in summary form only and important filing obligations may not be highlighted. This guide is not intended to constitute an exhaustive review of all reporting requirements. Additionally, except as otherwise indicated, the principal filing obligations outlined in this guide are those in existence as of the date hereof. All capitalized terms used in connection with TSXV requirements, but not otherwise defined in this guide, have the meanings set out in the TSXV Corporate Finance Manual (which can be accessed at www.tmx.com/tsxvmanual). Each listed issuer on TSXV ("Issuer") automatically becomes a reporting issuer under the securities laws of Alberta and British Columbia. Issuers may also be required to report under the laws of other jurisdictions in addition to those covered in this guide or comply with the regulations of other stock markets. Issuers should refer to the TSXV Corporate Finance Manual, the Securi- ties Act (Alberta), the Securities Act (British Columbia), and all other relevant provincial securities acts for specific reporting requirements. This guide has been prepared to address the requirements of "venture issuers" 1 within the meaning of applicable Securities Laws. This is representative of the vast majority of Issuers. However, certain Issuers are not "venture issuers" within the meaning of applicable Securities Laws and are accordingly subject to additional and in many cases more onerous requirements including but not limited to accelerated financial reporting deadlines, additional and more detailed disclosure requirements including mandatory AIF filing and the disclosure of shareholder voting results for certain matters. Filing with the System for Electronic Document Analysis and Retrieval ("SEDAR") is mandatory for Canadian public companies with respect to Canadian Security Administrators' ("CSA") filings. CSA is an umbrella organization of the provincial and territorial securities commissions or regulatory authorities, primarily responsible for developing a harmonized approach to securities regulation across Canada. Most disclosure documents required by TSXV and CSA must be filed through the SEDAR electronic filing system. If CSA documents that are also required by TSXV are posted on SEDAR's public website within the required timeframe, the TSXV filing requirements will have been met. Any paper documents to be filed with TSXV must be sent to the address (in some cases a fax number) noted in this guide and directed to the appropriate department. Non-refundable fees, plus applicable taxes, may apply and must be submitted by the issuer with the initial documentation prior to TSXV commencing review of a submission. Market Surveillance, a division of the Investment Industry Regulatory Organization of Canada ("IIROC"), should be called with any questions concerning distributing material news releases. TSXV Compliance and Disclosure can also answer questions on other disclosure matters. The following is a list of entities which may be of assistance: • TSXV Listed Issuer Services creates and administers TSXV's original listing and transaction standards. TSXV Compliance and Disclosure creates and administers TSXV's standards for the disclosure of Issuer information and continued listing standards. Both teams educate Issuers about, and help them comply with, these standards. These standards seek to bolster investor confidence and strengthen market quality. • TMX Datalinx supplies real-time and historical financial infor- mation about Issuers to provide the market with the necessary information to make informed investment decisions. This group delivers trade, price and corporate action information to market data vendors and investment professionals around the world. • Market Surveillance, a division of IIROC, monitors trading for compliance with market integrity for all participants. Market Surveillance also administers TSXV's Timely Disclosure Policy, which requires Issuers to immediately disclose material informa- tion via news release. For contact information at the securities commissions or other regulatory authorities referred to in this guide, see: • Alberta Securities Commission: www.albertasecurities.com • British Columbia Securities Commission: www.bcsc.bc.ca • Ontario Securities Commission: www.osc.gov.on.ca • Québec's Autorité des marchés financiers ("l'Autorité"): www.lautorite.qc.ca • Investment Industry Regulatory Organization of Canada (IIROC) : www.iiroc.ca
  • 36. Quarterly financial statements and interim MD&A 2 • Within 60 days of the end of 1st , 2nd and 3rd financial quarter, except investment funds. 3 •Ifaregisteredholderorbeneficial ownerrequestsinterimfinancialstate- ments,theymustbesentbythelater of(a)10calendardaysafterthefiling deadline,or(b)10calendardaysafter theIssuerreceivestherequest. Securities Commissions Securityholders 5 > SEDAR® 4 > Mail or electronic delivery Annual report While not required by legislation, many companies prepare and distribute an annual report, principally for investor relations purposes. Should the Issuer produce an annual report it must be filed on SEDAR. TSXV listed issuers are not subject to any deadlines with respect to filing an annual report. As a practical matter, the Issuer would most likely file an annual report with its annual financial statements. Securityholders 5 > SEDAR® 4 or Mail Annual Information Form (AIF)6 TSXV listed issuers are not required to file an AIF. However, if the Issuer wishes to issue additional securities to the public using the short-form prospectus rules or TSX Venture's short form offering document (SFOD), it will have to voluntarily file an AIF. The short form and SFOD rules permet a distribution of freely tradable shares from treasury in reliance upon previously filed disclosure documents, which typically reduce review time (accelerating timing to market) and in some cases reducing expenses associated with preparing a long-form prospectus. 7 TSXV listed issuers are not subject to any deadlines with respect to filing an AIF. As a practical matter, the Issuer would most likely file an AIF with its annual financial statements. Securities Commissions Securityholders 5 > SEDAR® 4 > Upon request Notice of record date and meeting date At least 25 days before record date (Record date must be set 30 to 60 days before the meeting) Securities Commissions TMX Datalinx Canadian Depository for Securities > SEDAR® 4 > SEDAR® 4 or > F (416) 947-4708 > Via transfer agent, or > F (514) 848-6039 Corporate governance disclosure 13 Annually Securityholders 5 > In Issuer's information circular Security based compensation arrangement disclosure Annually Securityholders 5 TSXV Listed Issuer Services > In Issuer's information circular Mailing of notice of securityholder meetings and management proxy solicitation information circular 8 Filing and Notice deadlines are governed by NI 54 -101 Communication with Beneficial Owners of Securities of a Reporting Issuer TSXV Listed Issuer Services Securities Commissions Securityholders 5 > SEDAR® 4 or F (403) 262-1143 or Mail > SEDAR® 4 > Mail or electronic delivery Dividend or distribution declaration (cash and stock) (Form 3E) File Dividend/Distribution Declaration (Form 3E) 9 or a news release containing the same informa- tion that is prescribed by Form 3E Prompt notification to TSXV after declaration of the dividend and at least 7 trading days before dividend record date. TSXV Listed Issuer Services IIROC Market Surveillance 10 News Service 12 > e-mail: dividends.venture@tsx.com or > F (416) 947-4547 > Follow-up immediately with a telephone call to (416) 947-4663 > T (604) 643-2792 11 or > F (604) 643-2799 or e-mailed as attachments to surveillancewest@iiroc.ca CEO and CFO Certification Pursuant to National Instrument 52-109 – Certifica- tion of Disclosure in Issuer's Annual and Interim Filings ("NI 52-109"), the Issuer must file a separate certificate in the prescribed form (Form 52-109FV1) and (Form 52-109FV2) personally signed by the chief executive officer and the chief financial officer of the Issuer for each annual filing and each interim period filing, which must be filed on SEDAR concurrently with such financial statements. Concurrently with filing Annual Financials and interim filings. Securities Commissions > SEDAR® 4 Annual financial statements and annual MD&A Within 120 days of financial year-end. If a registered holder or beneficial owner requests annual financial statements, they must be sent by the later of (a) 10 calendar days after the filing deadline or (b) 10 calendar days after the Issuer receives the request. Securities Commissions Securityholders 5 > SEDAR® 4 > Mail or electronic delivery WHAT WHEN TO WHOM HOW FILED Periodic Filing If the information in the event-driven filing is "material", notify IIROC in addition to the areas listed below.
  • 37. M & A WHAT WHEN TO WHOM HOW FILED TSXV POLICIES & FORMS Qualifying transaction 14 A Capital Pool Company (CPC) must issue a comprehensive news release as soon as the CPC reaches an agreement in principle and regarding a Qualifying Transaction. Promptly within 75 days after the public announcement of the agreement in principle. Qualifying transactions are treated similar to RTOs, the news release requires prior TSXV Listed issuer Services approval and the stock is halted upon issuance of the news release. The CPC FIling Statement must be filed on SEDAR at least seven business days prior to the closing of the Qualifying Transaction. The CPC Information Circular must be sent to securityholders and filed on SEDAR. TSXV Listed Issuer Services Securities Commissions Securityholders if a CPC Information Circular is required. IIROC Market Surveillance News Service > Mail > SEDAR® 4 > Mail > T (604) 643-2792 11 or > F (604) 643-2799 or e-mailed as attachments to surveillancewest@iiroc.ca Policy 2.4 – Capital Pool Companies Form 2A Form 2C1 (if applicable) Form 2J Form 3B1 - 3B2 Form 5D Changes of business ("COB") and reverse takeovers ("RTO") An Issuer must issue a comprehensive news release as soon as it reaches an agreement in principle regarding a COB or RTO. • Immediatenewsrelease:(a)every timethereismaterialchangerelatingto theCOBorRTOandinaccordancewith applicableSecuritiesLaws;(b)identifying theSponsor;(c)every30daysfollowing theinitialnewsreleasetoupdatethe statusoftheCOBandRTO;(d)whenan Issuerintendstocontinueatradinghalt. (thenewsreleasemustdisclosethe Issuer’sintentiontoremainhalted);and (e)whentheCOBorRTOhasclosed. • Immediate notice to TSXV of proposed change, prior acceptance by TSXV required. • Must obtain acceptance of the draft Disclosure Document (a Filing State- ment or Information Circular) by TSXV prior to mailing to securityholders. TSXV Listed Issuer Services IIROC Market Surveillance Securityholders 5 News Service > Mail > T (604) 643-2792 11 or > F (604) 643-2799 or e-mailed as attachments to surveillancewest@iiroc.ca > Mail Policy 5.2 – Changes of Business and Reverse Takeovers Form 2A Form 2C1 (if applicable) Form 2J Form 3D1 - 3D2 Form 5D Acquisitions and dispositions of non-cash assets Expedited (for final acceptance) Reviewable (for conditional acceptance) • Form 5B must be filed promptly following the issuance of the news release and on or before the closing of an acquisition that qualifies as an Expedited acquisition. • Form 5C must be filed promptly following the issuance of the news release. • Transaction must receive final Exchange acceptance prior to closing. • Final documents are due within 30 days after the Exchange’s conditional approval. TSXV Listed Issuer Services > Mail Policy 5.3 – Acquisitions and Dispositions of Non-Cash Assets Form 5B Form 5C Business acquisition report ("BAR") 15 Within 75 days after the date of acquisition (or 90 days if acquired within 45 days of year-end). Securities Commissions > SEDAR® 4 Policy 3.2 – Filing Requirements and Continuous Disclosure Capital reorganization Issue of securities upon exchange of securities, amalgamation or reorganization • Immediate notice to TSXV of proposed change, prior acceptance by TSXV required. • It is recommended that the draft circular be filed with TSXV prior to mailing to securityholders. TSXV Listed Issuer Services Securities Commission Securityholders 5 > Mail > SEDAR® 4 > Mail Policy 5.3 – Acquisitions and Dispositions of Non-Cash Assets Normal course issuer bids Promptly, before commencement of bid Prior acceptance by TSXV is required TSXV Listed Issuer Services IIROC Market Surveillance News Service > Mail > T (604) 643-2792 11 or > F (604) 643-2799 or e-mailed as attachments to surveillancewest@iiroc.ca Policy 5.6 – Normal Course Issuer Bids Form 5G Event-Driven Filing If the information in the event-driven filing is "material", notify IIROC in addition to the areas listed below.
  • 38. FINANCING WHAT WHEN TO WHOM HOW FILED TSXV POLICIES & FORMS Private placements Initial Notice and Conditional Acceptance Within 30 calendar days after the earlier of the date of issuance of the news release announcing the private placement or the filing of the price reservation form. TSXV Listed Issuer Services > Mail Policy 4.1 – Private Placements Form 4A Form 4B Form 4C Final Notice Within the greater of 15 days from the date TSXV has issued conditional acceptance of the private placement, or 45 days from the price reservation date; or for a brokered private placement, within the greater of 30 days from the date TSXV has issued conditional acceptance of the private placement or 60 days from the price reservation date. A news release disclosing the material details of the private placement must be issued on the earlier of 30 days from the price reservation or the agreement date. TSXV Listed Issuer Services IIROC Market Surveillance News Service > Mail > T (604) 643-2792 11 or > F (604) 643-2799 or e-mailed as attachments to surveillancewest@iiroc.ca Form 2A Form 2C1 Form 4B Form 4C Expedited private placements 16 • Within 45 days after the earlier of either the filing of price reservation form or date of issuance of the news release. • News release required within 30 days of price reservation if done by Form 4A TSXV Listed Issuer Services IIROC Market Surveillance News Service > Mail > T (604) 643-2792 11 or > F (604) 643-2799 or e-mailed as attachments to surveillancewest@iiroc.ca Form 2A Form 2C1 Form 4B Form 4C Prospectus offerings A Prospectus must be filed with TSXV to obtain TSXV’s consent to the issuance of securities and the additional listing of the securities offered under the Prospectus. Promptly TSXV Listed Issuer Services Securities Commissions > Mail > SEDAR® 4 Policy 4.2 – Prospectus Offerings Rights offering Immediate notice to TSXV and Securities Commissions of proposed offering with draft circular. Record date must be at least 7 trading days after final acceptance. TSXV Listed Issuer Services Securities Commissions > Mail > SEDAR® 4 Policy 4.5 – Rights Offerings Public offering by short form offering document Within 2 days of the issuance of news release TSXV Listed Issuer Services > Mail Policy 4.6 – Public Offering by Short Form Offering Document Form 4H Event-Driven Filing continued
  • 39. OTHER WHAT WHEN TO WHOM HOW FILED TSXV POLICIES & FORMS Material information/changes 17 • news release Immediate dissemination Pre-notification to IIROC Market Surveillance, if applicable, prior to issuance of news release. 18 IIROC Market Surveillance News Services Securities Commissions > T (604) 643-2792 18 or > F (604) 643-2799 or e-mailed as attachments to surveillancewest@iiroc.ca > SEDAR® 4 Policy 3.3 – Timely Disclosure • general TSXV listed issuers are required by National Instrument 51-102 – Continuous Disclosure Obligations ("NI 51-102") to file a number of other documents and reports via SEDAR. Must be filed: (i) no later than the time of filing of a material change report if the making of the document constitutes a material change; or (ii) no later than the time the Issuer files an AIF under NI 51-102; or (iii) if the Issuer does not file an AIF, within 120 days after the Issuer's most recently completed financial year. Securities Commissions > SEDAR® 4 Policy 3.3 – Timely Disclosure Material agreements Notice by letter of any material agree- ment to be entered into or terminated and, if requested by TSXV, must provide a copy of the agreement and other requested documents or information. If the agreement or termination of the agreement constitutes a material change, the Issuer must issue a news release pursuant to applicable Securities Laws and Policy 3.3 - Timely Disclosure. Prompt notification TSXV Listed Issuer Services > Mail Policy 3.2 – Filing Requirements and Continuous Disclosure Policy 3.3 – Timely Disclosure Material change report 19 Within 10 days of material change Securities Commissions > SEDAR® 4 Investor relations, promotional and market- making activities An Issuer which grants stock options to employees or consultants as compensa- tion for Investor Relations Activities must file the appropriate documents in accordance with Policy 4.4 –Incentive Stock Options. Promptly TSXV Listed Issuer Services > Mail Policy 3.3 – Timely Disclosure Policy 3.4 – Investor Relations, Promotional and Market-Making Activities Form 2A Form 2C1 Form 3C Proposed new director, officer, other insider or person providing investor relations activities Promptly If there is a change in the directors or officers of an Issuer, the Issuer must issue a news release as required by Policy 3.3 – Timely Disclosure. TSXV Compliance & Disclosure IIROC Market Surveillance News Service > Mail > Form 2A, Form 2C1 and applicable fee must be filed using the interactive forms at www.tmx.com. > T (604) 643-2792 11 or > F (604) 643-2799 or e-mailed as attachments to surveillancewest@iiroc.ca Policy 3.1 – Directors, Officers, Other Insiders & Personnel and Corporate Governance Form 2A Form 2C1 Change in management or control An Issuer must not agree to be party to a Change of Control or any transaction that may reasonably be expected to result in a Change of Control unless the agreement is made subject to TSXV acceptance. Promptly TSXV Listed Issuer Services > Mail Policy 3.2 – Filing Require- ments and Continuous Disclosure Insider reports 20 • initial insider report • report of insider trade • issuer event report • Within 10 days of becoming an insider • Within 5 days of transaction • Within 1 business day Securities Commissions Securities Commissions Securities Commissions > SEDI 21 > SEDI 21 > SEDI 21 Event-Driven Filing continued
  • 40. OTHER (continued) WHAT WHEN TO WHOM HOW FILED TSXV POLICIES & FORMS Stock Option Plan Prior to granting incentive stock options, an Issuer must adopt a plan in accordance with Policy 4.4 and such plan must be accepted by TSXV. Promptly upon the adoption of a new plan or amendment of an existing plan. In addition, in the case of a "rolling" plan, the plan must be filed annually. TSXV Listed Issuer Services > Mail Copy of the plan, copy of the information circular for the meeting at which the plan was approved or is to be approved must be filed. Policy 4.4 - Incentive Stock Options Incentive stock options If stock options are granted to officers, directors or Investor Relations employee/consultant, a news release is required to be filed on the date of the grant At the end of each calendar month in which stock options are granted: (a) Summary Form - Incentive Stock Options (Form 4G) and (b) Certification and Undertaking Required from a Company Granted an Incentive Stock Option (Form 4F), if the optionee is not an individual. TSXV Listed Issuer Services > Mail Policy 4.4 – Incentive Stock Options Form 4G Form 4F Amendment to stock option grant Must qualify pursuant to Policy 4.4, Sec. 5 End of any calendar month during which stock options have been amended: a Summary Form - Incentive Stock Options (Form 4G) TSXV Listed Issuer Services > Mail Policy 4.4 – Incentive Stock Options Form 4G Amending Warrants Terms Must qualify pursuant to Policy 4.1, Sec. 4 Promptly and within two weeks from expiry date of warrants. Prior acceptance by TSXV is required TSXV Listed Issuer Services > Mail Policy 4.1 – Private Placements Form 4D Shares for debt Issuer must issue a news release on the date that an agreement, commitment, or undertaking is reached to issue shares for debt, as well as upon closing. Application to TSXV for acceptance of Shares for Debt transaction, within 30 days of the Agreement Date. Prior acceptance by TSXV is required TSXV Listed Issuer Services > Mail Policy 4.3 – Shares for Debt Form 4E Shares for services Promptly Prior acceptance by TSXV is required TSXV Listed Issuer Services > Mail Policy 4.3 – Shares for Debt Redemption, cancellation or retirement of listed securities Must notify TSXV promptly of any corporate or other action which results or may result in the redemption, cancellation or retirement of any listed securities or any securities convertible into listed securities. Immediate notice to TSXV at time of sending notices to securityholders. TSXV Listed Issuer Services Securities Commissions Securityholders5 > Mail > SEDAR® 4 > Mail Policy 3.2 – Filing Requirements and Continuous Disclosure Corporate information and securityholder communications Issuer must file with TSXV a copy of any materials of any kind, which are sent to the Issuer's securityholders or the public, except for annual and in- terim financial statements and MD&A and annual reports. At the same time those materials are delivered to the securityholders or the public. TSXV Listed Issuer Services > Mail Policy 3.2 – Filing Require- ments and Continuous Disclosure Changes in constating documents and security reclassifications (other than name changes, stock splits and consolidations) Issuer must file an opinion of counsel, new definitive specimen(s) or over- printed share certificate(s) with ISIN or CUSIP number imprinted thereon and a copy of letter of transmittal sent to securityholders. Prior aceptance by TSXV is required. TSXV Listed Issuer Services > Mail Policy 3.2 – Filing Require- ments and Continuous Disclosure Event-Driven Filing continued
  • 41. OTHER (continued) WHAT WHEN TO WHOM HOW FILED TSXV POLICIES & FORMS Supplemental listing Promptly TSXV Listed Issuer Services Securities Commissions > Mail > SEDAR® 4 Policy 2.8 – Supplemental Listings Form 2E Change to security certificate Promptly Prior acceptance by TSXV is required TSXV Listed Issuer Services > Mail Policy 3.2 – Filing Requirements and Continuous Disclosure Documents affecting rights of securityholders and other material contracts 22 No later than filing of (i) related material change report, or (ii) the next AIF. Securities Commissions > SEDAR® 4 , or paper format in certain instances Loans to issuers Notice to Exchange, if required pursuant to Policy 5.1 - Loans Bonuses, Finders Fees and Commissions Promptly TSXV Listed Issuer Services > Mail Policy 5.1 – Loans, Bonuses, Finder's Fees and Commissions Bonuses, finder's fees and commissions Promptly TSXV Listed Issuer Services IIROC Market Surveillance News Service > Mail > T (604) 643-2792 11 or > F (604) 643-2799 or e-mailed as attachments to surveillancewest@iiroc.ca Policy 5.1 – Loans, Bonuses, Finder's Fees and Commissions Name changes TSXV deems a name change to be Material Information for any Issuer. Accordingly, an Issuer must obtain TSXV acceptance and disclose the proposed name change in accordance with Policy 3.3 - Timely Disclosure. Promptly TSXV Listed Issuer Services > Mail Policy 5.8 – Issuer Names, Issuer Name Changes, Share Consolidations and Splits Form 5H Share consolidations Promptly Prior acceptance by TSXV is required TSXV Listed Issuer Services > Mail Policy 5.8 – Issuer Names, Issuer Name Changes, Share Consolidations and Splits Form 5I Security splits Promptly Prior acceptance by TSXV is required TSXV Listed Issuer Services > Mail Policy 5.8 – Issuer Names, Issuer Name Changes, Share Consolidations and Splits Form 5I Event-Driven Filing continued
  • 42. 1. "venture issuer" is defined in National Instrument 51-102 – Continuous Disclosure Obligations ("NI 51-102"), which definition excludes reporting issuers who have any of their securities listed or quoted on certain markets at the applicable time. Accordingly, reporting issuers will not be "venture issuers" if at the applicable time any of their securities are listed or quoted on any of the Toronto Stock Exchange, a U.S. marketplace, or a marketplace outside of Canada or the U.S. other than the Alternative Investment Market of the London Stock Exchange (AIM) or the PLUS markets operated by PLUS Markets Group plc. 2. For the first financial year reporting in Québec, l'Autorité will determine which financial statements must be filed. 3. Investment funds are subject to National Instrument 81-106 – Investment Fund Continuous Disclosure. This guide does not discuss reporting requirements for investment funds. 4. In effecting a filing with TSXV through SEDAR, filers must select "TSX Venture Exchange" as a recipient. For information regarding SEDAR, contact the SEDAR helpdesk at 1-800-219-5381 or access their website at www.sedar.com. 5. A supplemental list for shareholders who have requested annual or interim financial statements must be established annually under National Instrument 51-102 – Continuous Disclosure Obligations ("NI 51-102"). 6. Oil and gas reporting issuers are required to comply with National Instrument51-101–StandardsofDisclosureforOilandGasActivities. Issuers with mining operations will have to comply with the require- ments of National Instrument 43-101 – Standards of Disclosure for Mineral Projects and the Mining Standard Guidelines as outlined in Appendix 3F of the TSXV Corporate Finance Manual with respect to timely and continuous disclosure obligations. 7. In addition to having an AIF on file, to complete a short-form prospectus offering, the Issuer will have to file notice of intention to be qualified to file a short form prospectus at least 10 business days prior to filing such prospectus (National Instrument 44-101 – Short Form Prospectus Distribution). 8. Submit a draft circular for review if required by TSXV. For non-regis- tered securityholders, see National Instrument 54-101- Communica- tion With Beneficial Owners of Securities of a Reporting Issuer. In connection with the Issuer's annual meeting of securityholders to be held once a year, Issuers are required to file on SEDAR, and provide toall securityholders,amanagement information circular in accordance with Form 51-102F5 as prescribed by NI 51-102. 9. Copies of the Forms can be found at www.tmx.com/tsxventureforms. A list of the principal filing forms for TSXV listed issuers with respect toperiodicandevent-drivenfilingsisattachedtothissummaryguide as Appendix "A". 10. IIROC Market Surveillance must be notified in advance of issuing the press release if there is a material change to the issuer's dividend policy (e.g., an initial dividend, a special dividend, ceasing regular dividends or a material increase/decrease in dividend amount). 11. If an announcement is ready to be made between 8am and 4pm EST, IIROC Market Surveillance must be advised in advance by telephone at (604) 643-2792. Where an announcement is to be released after 4pm EST, or before 8am EST, Issuers must leave IIROC Market Surveillanceamessagesummarizingthependingannouncementat the time the announcement is ready to be made. 12. See Appendix 3C of the TSXV Corporate Finance Manual for an infor- mational list of commercial news disseminators in the marketplace. 13. SeeNationalInstrument58-101–DisclosureofCorporateGovernance Practices ("NI 58-101"), Form NI 58-101F2 – Corporate Governance Disclosure (Venture Issuers), NI 51-102 – Continuous Disclosure Obligations, Form 52-110F2 – Disclosure by Venture Issuers, TSXV Policy3.1–Directors,OfficersandCorporateGovernanceandNational Policy 58-201 – Corporate Governance Guidelines ("NP 58-201"). 14. TSXV recommends that a pre-filing conference, as contemplated by Policy2.7–Pre-FilingConferences,beheldbyaCPCparticularlywhere the agreement in principle or proposed qualifying transaction may involve unique or unusual circumstances. 15. Pursuant to NI 51-102, a BAR must be filed if the Issuer completes a significant acquisition. Whether the acquisition is "significant" is determinedbytwotests:(i)theassettestand(ii)theinvestmenttest. If either of these tests is met at the prescribed level, the acquisition is considered a "significant acquisition" and a BAR must be filed describing the acquisition. 16. TheExpeditedPrivatePlacementFilingSystempermitseligibleIssuers to obtain acceptance of certain smaller transactions without TSXV staff review, by filing a simple form which outlines the terms of the transaction and confirms compliance with Policy 4.1 (Private Placements). TheIssuermustissueacomprehensivenewsrelease, or file a Price Reservation Form followed by a comprehensive news release in accordance with the time requirements set out in section 1.1 of Policy 4.1, announcing the Private Placement in order to set the Discounted Market Price. A Private Placement Notice Form must be filed within 45 calendar days after the earlier of the date of the issuance of the news release or the filing of the Price Reservation Form.TheTSXVwillissueanExchangeBulletingenerallythebusiness day after the Notice is filed. 17. National Policy 51-201 – Disclosure Standards ("NP 51-201") describes timely disclosure requirements and provides guidance on timely disclosure, materiality, selective disclosure and best practices that reporting issuers should be adopting to ensure compliance with securities legislation.
  • 43. 18. As the agent for TSXV for the purposes of market regulation, IIROC reviews the news releases issued by TSXV listed issuers, which are requiredtobepre-filedpursuanttoPolicy3.3,Section4.2. Issuersare encouragedtocontactIIROCastowhetheranannouncementshould be released and whether trading in the issuer’s shares should be halted pending an announcement. Where an issuer's security is halted pending the issuance of a news release, trading is typically reinstatedwithinanhourafterthenewsreleaseisdisseminatedover oneormoreoftheacceptablenewswireservices. Regardlessofwhen an announcement is made, a copy of such announcement must be filed with IIROC. The rules requiring immediate disclosure of material information frequently require that media releases be issued during trading hours. When this is so, the issuer must notify IIROCbytelephonepriortoissuingthenewsrelease. IIROCmaythen determine whether a trading halt is required. Further, Part 4 of TSXV Policy3.3requiresthepre-filingwithIIROCofcertaintypesofnewsre- leases prior to public dissemination (e.g., for reverse takeovers, changesofbusiness,changesofcontrol,disclosureoffutureoriented financialinformationordisclosureofmineralreserves/resourcesoroil &gasreserves). Anewsreleasemustbetransmittedtothemediaby the quickest possible method, and by one that provides the widest dissemination possible. The wire service which is used must provide nationalandsimultaneousdisseminationandmustcarrythefulltext of the news release. Typically the wire service will arrange for the SEDAR filing of the news release. 19. Both NI 51-102 and the TSXV Corporate Finance Manual allow the Issuer to delay the disclosure of material information concerning the business and affairs of the Issuer temporarily where immediate release of the information would be unduly detrimental to the interests of the Issuer. In such circumstances the Issuer is still required to file a confidential Material Change Report with the Com- missions and TSXV, together with written reasons for non-disclosure. Whereamaterialchangeisbeingkeptconfidential,theIssuerisunder a duty to make sure that persons with knowledge of the material change have not made use of such information in purchasing or sell- ing its securities. Such information should not be disclosed to any person or company, except in the necessary course of business. 20. Filing of insider reports is the obligation of the insider and not the issuer itself and is a securities law requirement. Most securities acts provide a definition of "insider" that is substantially similar. Under theASA,"Insider"-meansadirectororofficerofanissuer;directoror officer of a person or company that is itself an insider or subsidiary of an issuer; a person or company that has beneficial ownership of, or control or direction over, directly or indirectly, or a combination of beneficial ownership of an control or direction over, directly or indi- rectly, more than 10% of the voting rights attached to all the issuer's outstanding voting securities, excluding any securities held by the person or company as underwriter in the course of a distribution; an issuerthathaspurchased,redeemedorotherwiseacquiredasecurity of its own issue, for so long as it continues to hold that security; a person designated as an insider in an order; a person that is in a prescribed class of persons. 21. SEDI is the System for Electronic Disclosure by Insiders established by CSA. Insider reports must be filed through the SEDI website at www.sedi.ca. 22. See part 12 of NI 51-102.
  • 44. The following is a list of certain of the principal filing forms for TSXV listed Issuers for periodic and event-driven filings: FORM 2A Personal Information Form– A PIF must be submitted by every individual who (i) becomes an officer, director or insider of the Corporation; (ii) is a promoter of the Corporation or providing investor relations; (iii) beneficially owns, directly or indirectly, 10% or more of the Corporation's voting securities; (iv) any officer of director of a person in (iii); or (v) is asked by TSXV. May be filed using the interactive form on the www.tmx.com website. FORM 2C1 Declaration – For individuals who have filed a PIF within the previous 36 months, he or she may file a Declaration stating that the information contained in the PIF remains valid. May be filed using the interactive form on the www.tmx.com website. FORM 2J Securityholder Information – This Form, used in the context of Initial Listings (other than a CPC), Qualifying Transactions, Changes of Business and Reverse Takeovers, provides detailed information about the securityholders of an issuer or a target company, as applicable, including the identities of securityholders, number of securities held, issuance date of securities, and consideration for the securities.” FORM3B1-3B2 Information required in an information circular (3B1) or Filing Statement (3B2) for the qualifying transaction of a CPC. FORM 3C Certified Filing Regarding Person Conducting Investor Relations, Promotional and Market-Making Activities – In this Form, a director or senior officer certifies certain information relating to any person that the Corporation has retained to provide promotional services. FORM3D1-3D2 Information required in an information circular (3D1) or Filing Statement (3D2) for a RTO or COB. FORM 3E Dividend/Distribution Declaration Form – Form is filed upon the declaration of a dividend by the Corporation. FORM 4A Price Reservation Form – This Form is filed with the exchange in anticipation of a private placement of its securities. The Form sets out the insider placees, the number of securities, and the proposed price. FORM 4B Private Placement Notice Form – This Form must be filed within 30 days of the earlier of the filing of a Price Reservation Form or the filing of a comprehensive news release reserving the price. FORM 4C Corporate Placee Registration Form – A Form filed by the Corporation on behalf of subscribers to a private placement who are not individuals. FORM 4D Warrant Amendment Summary Form and Certification FORM 4E Shares for Debt Filing Form FORM 4F Certification and Undertaking Required from a Company Granting an Incentive Stock Option – A certificate of a company granted stock options by the Corporation. Form must be filed at the end of the calendar month in which the options are granted. FORM 4G Summary Form – Incentive Stock Options – Form must be filed at the end of the calendar month in which options are granted. FORM 4H Short Form Offering Document – If the Corporation has filed an AIF, it may take advantage of a prospectus exemption by filing this Form. There are a number of restrictions on the use of this Form, including a maximum gross proceeds of $2,000,000. AlthoughthisexemptionisnotavailableinOntario,itisavailabletoaCorporationtocarryoutadistributioninotherprovincesand territories of Canada. FORM 5B Expedited Acquisition Filing Form FORM 5C Transaction Summary Form FORM 5D TSXV Escrow Agreement Form FORM 5G Notice of Intention to Make a Normal Course Issuer Bid – Form filed in anticipation of the Corporation purchasing back its shares. FORM 5H Name Change Without Consolidation or Split Filing Form – Form filed to change the name of the Corporation. It must be filed no later than the date on which the shareholders' meeting to approve the name change is held. FORM 5I Name Change and Consolidation/Split Filing For Appendix A
  • 45. This document and the information contained herein are provided "as is" for information purposes only, and are not intended to be a substitute for competent professional advice. Neither TMX Group Inc., Bennett Jones LLP, nor any of their affiliated companies or entities guarantee the completeness, currency or accuracy of the information contained in this document and expressly disclaim any and all express or implied representations or warranties regarding this document or the information contained herein. Those who use this document do so at their own risk and assume full responsibility and risk of loss resulting from the use of or reliance on this document or information. TSX Venture Exchange offices: TheExchangeTower,130KingStreetWest Toronto,Ontario,M5X1J2 877-421-2369 TourdelaBourse,800VictoriaSquare Montréal,Quebec,H4Z1A9 866-881-2369 300-5thAvenueSW,10thFloor Calgary,Alberta,T2P3C4 877-884-2369 650WestGeorgiaStreet,#2700 Vancouver,BritishColumbia,V6B4N9 877-883-2369 This filing guide is a complimentary service for TSX Venture Exchange issuers. It will be updated periodically and can be downloaded and printed at www.tmx.com. This filing guide is produced by TSX Venture Exchange with co-operation from Bennett Jones LLP. Listed issuers are reminded that the prior approval of TSXV may be required for various corporate actions as described in the TSXV Corporate Finance Manual. Ce guide de dépôt est offert en français.
  • 46. 14 Mining Journal April 29, 2011 SPECIAL REPORT: CANADIAN DISCLOSURE STANDARDS BY JOHN WILKIN, ALI NAUSHAHI, DAVID GLENNIE AND BOB WOODER O N APRIL 8, the Canadian Securities Administrators (CSA) published amendments to the rules regarding standards of disclosure for mineral projects, which represent the most substantial amendments to National Instrument 43-101 since it was adopted in 2001. According to the CSA, the changes are designed to “eliminate or reduce the scope of certain requirements, provide more flexibility to mining issuers and qualified persons in certain areas, provide more flexibility to accept new foreign professional associations, professional designations and reporting codes as they arise or evolve, reflect changes that have occurred in the mining industry and clarify or correct areas where the previous mining rule was not having the effect we intended”. The final amendments are substantially similar to those initially proposed by the CSA in April 2010. The most significant new development is the narrowing of the circumstances in which an issuer will be required to file a new technical report along with a preliminary short-form prospectus, which contains new scientific or technical information about its material mineral projects. Subject to obtaining all necessary ministerial approvals, the amendments are set to come into force on June 30, 2011. RESTRICTED PROSPECTS TRIGGER The CSA has narrowed the circumstances in which an issuer is required to file a new technical report to support scientific and technical information contained in a preliminary short-form prospectus. A‘short-form prospectus’is the document used by most public companies in Canada after their IPO to issue securities to the public. It had been recognised by the CSA that this requirement could impose extra costs and limit the ability of an issuer to complete a public offering on a timely basis. Under the restricted prospectus trigger, an issuer will only be required to file a new technical report to support scientific and technical information about a material mineral project in situations where the preliminary short-form prospectus discloses for the first time, or a change in, mineral resources, mineral reserves or the results of a preliminary economic assessment that constitute a material change in relation to the issuer. Under the current NI 43-101, an issuer must, except in limited circumstances, file a technical report to support all new scientific or technical information in a preliminary short-form prospectus no later than the time the preliminary short-form prospectus is filed, regardless of whether that information constitutes a material change to the issuer. Under the restricted-prospectus trigger, issuers will now be permitted to file a preliminary short-form prospectus without filing a new technical report in situations where the preliminary prospectus discloses new scientific and technical information on a property that is not a material change in relation to the issuer. Even if the new information in the preliminary prospectus does constitute a material change, a new technical report will not be required if the disclosure in the preliminary prospectus does not include first time disclosure of, or a change in, mineral resources, mineral reserves or the results of a preliminary economic assessment. It should be noted that, even under the amendments, new scientific or technical information will still need to be prepared under the supervision of a qualified person and otherwise meet the requirements applicable to all written disclosure on mineral projects material to the issuer. WRITTEN DISCLOSURE TRIGGER Under the current NI 43-101, an issuer is required to file a technical report where it has filed a“news release or directors’circular”containing first-time disclosure of, or a change in, a preliminary economic assessment or mineral resources or mineral reserves that constitutes a material change in respect of the affairs of the issuer. The amendments to NI 43-101 expand this requirement. An issuer will now be required to file a technical report where any written disclosure made by, or on behalf of, the issuer discloses for the first time, or a change in, mineral resources, reserves or the results of a preliminary economic assessment that constitutes a material change in relation to the issuer. This is other than written disclosure contained in a document whose filing would, independently of the written disclosure trigger, require the issuer to file a technical report. A more flexible regime AUTHOR OF A TECHNICAL REPORT Under the current NI 43-101, the author of a technical report filed by an issuer upon becoming a reporting issuer in Canada must be independent of the issuer. The amendments to NI 43-101 provide an exemption from this independence requirement for ‘producing issuers’whose securities trade on a specified exchange (which includes the Australian Stock Exchange, the London Stock Exchange Main Market, the Nasdaq Stock Market and the NewYork Stock Exchange). AIM is excluded. A‘producing issuer’is defined in the amendments to NI 43-101 as an issuer with annual audited financial statements that disclose gross revenues from mining operations of at least C$30 million (US$31.5 million) for the issuer’s most recently completed financial year or C$90 million in the aggregate for the issuer’s three most recently completed financial years. Photo:BloombergNews 14_16MJ110429.indd 14 27/04/2011 08:55
  • 47. April 29, 2011 Mining Journal 15www.mining-journal.comwww.mining-journal.comwww.mining-journal.com Under the new written disclosure trigger, an issuer will have 45 days from the date of the triggering disclosure to file a technical report supporting the written disclosure.This is unless the written disclosure is contained in a preliminary short-form prospectus, in which case the technical report must be filed by the earlier of 45 days from the date of the trigger or the date of the filing of the preliminary short-form prospectus. The other exception is if the disclosure is contained in a directors’circular, in which case the technical report must be filed by the earlier of 45 days from the date of the trigger or three business days before the expiry of the take-over bid to which the directors’circular relates. An issuer that files a technical report in reliance on the 45-day rule must issue a news release at the time the technical report is filed to alert the market to the filing of the technical report. The amendments to NI 43-101 provide an exemption from the 45-day rule if the mineral resources, mineral reserves or the results of the preliminary economic assessment disclosed by the written disclosure was, among other things, prepared by, or on behalf of, another issuer who holds or previously held an interest in the property and is supported by a technical report filed by the other issuer under NI 43-101. In these situations, the issuer has 180 days, rather than 45 days, to file a technical report supporting its disclosure of the mineral resources, mineral reserves or the results of the preliminary economic assessment unless such disclosure is also contained in a preliminary short-form prospectus, in which case the technical report must be filed by the earlier of 180 days from the date of the disclosure or the date of filing the preliminary short-form prospectus. This 180-day exemption will not help companies acquiring assets from companies that are not Canadian reporting issuers (for example ASX-listed sellers). EUROPEAN DISCLOSURE In Europe, meanwhile, the European Securities and Markets Authority (ESMA), the successor to the CESR, has backed off in its revised proposals for the regulation of mineral companies under the Prospectus Regulation (issued on March 23, 2011) from the original proposals made last year. The CESR proposals would have required a new competent person’s report in relation to certain material acquisitions of mineral properties, first time declarations of new reserves or significant (100%) changes in reserve levels. Instead, ESMA will only require‘overview disclosure’ on the new assets. As a result, the rules in this area will continue to diverge for Canadian-listed issuers from those in the UK, which is unfortunate given the general objective of converging the disclosure regimes. NEW FLEXIBILITY The CSA has made two changes to address the common problem of locating a particular qualified person in a timely manner to meet a filing deadline. Under the amendments to NI 43-101, reporting issuers will no longer be required to file updated qualified persons’consents and certificates for a previously filed technical report that is still current upon a triggering event. In addition, the CSA has made an amendment to the short-form prospectus rule, which will allow the consulting firm that employed the author to provide consent to the use of the technical report in the prospectus. The current rules only permit the individual author of the report to execute the consent, which can be problematic when that person is unavailable or has left the employ of the consulting firm retained to write the technical report. This aligns Canada more with the position in other markets, where it is usually the firm which provides the consent. The amendments also provide a number of exemptions that will ease reporting. Both the current version of NI 43-101 and the amendments provide an exemption from the restricted disclosure provisions for disclosure of‘historical estimates’in certain circumstances. Under the current NI 43-101, an historical estimate refers to a resource or reserve estimate prepared prior to February 1, 2001. The amendments to NI 43-101 introduce an expanded definition of‘historical estimate’as“an estimate of the quantity, grade or metal or mineral content of a deposit that an issuer has not verified as a current mineral resource or mineral reserve, and which was prepared before the issuer acquiring, or entering into an agreement to acquire, an interest in the property that contains the deposit.” The new definition will capture certain third-party estimates made after February 1, 2001, so will, for example, allow a Canadian company acquiring a Russian asset to disclose the Russian resource figures, which it can not do today unless these pre-dated 2001. The amendments to NI 43-101 also mandate additional disclosure, not required by the current NI 43-101, that must accompany the disclosure of a historical estimate, such as the key assumptions, parameters and methods used to prepare the historical estimate, to the extent known, and commentary on what work needs to be done to upgrade or verify the historical estimate as current resources or reserves. The amendments to NI 43-101 also provide an exemption to holders of royalty or similar interests from the requirement to file a technical report in respect of a mineral project material to the holder of the royalty or similar interest. Under the existing NI 43-101, the requirements to file a technical report are equally applicable to royalty holders.This can create real issues for the holder unless it has a right to compel the operator/ owner of the project to give access to the required information. However, under the amendments, the holder of the royalty or similar interest will be exempt from the technical report requirement where the operator/owner of the project is a reporting issuer in Canada or is a producing issuer whose securities trade on one of the specified exchanges and resources and reserves are reported under an“acceptable foreign code”. Furthermore, the amendments replace the prescribed list of acceptable foreign associations and designations for‘qualified persons’with a more flexible objective test. Under the new test, an individual in good standing with any professional association in a foreign jurisdiction will qualify as a‘qualified person’. This is provided, among other things, that they are an engineer or geoscientist with a university degree or equivalent accreditation in an area of geoscience or engineering relating to mineral exploration or mining, and that the individual’s membership designation requires attainment of a position of responsibility in their profession that requires the exercise of independent judgment and has certain peer evaluation and recommendation requirements. The existing prescribed list is preserved in the proposed companion policy to serve as guidance. EXPANDED CIRCUMSTANCES The amendments expand the circumstances where an issuer can report the results of an economic analysis of a project that includes inferred mineral resources. The current NI 43-101 prohibits an issuer from doing so except in connection with a‘preliminary assessment’, “Amendments to the rules regarding standards of disclosure are the most substantial amendments to NI 43-101 since it was adopted in 2001” 14_16MJ110429.indd 15 27/04/2011 08:55
  • 48. 16 Mining Journal April 29, 2011 SPECIAL REPORT: CANADIAN DISCLOSURE STANDARDS Mining JournalLondon, July 21, 2006 Mining Journal 1 All the mining industry information you need To find out more about subscribing to Mining Journal Call our hotline on +44 (0)20 8955 7050 • E-mail us at info@mining-journal.com • Visit www.mining-journal.com ■ 175 years as the leading source of industry information ■ International editorial team reporting on news from around the globe ■ Regular special reports and supplements focusing on specific countries or commodities ■ Weekly journal delivered direct to your door, regular eNewsletters, unrestricted online access ■ Complimentary subscriptions to Mining Magazine and Mining, People and the Environment John Wilkin and Ali Naushahi practice in the Toronto office of Blake, Cassels & Graydon LLP, David Glennie in Blakes London and Bob Wooder in Blakes Vancouver a study of a project taken at an early stage prior to a preliminary feasibility study. Under the amendments, the definition of preliminary assessment has been replaced and the exclusion to allow reporting of an economic analysis including inferred resources, is now expanded to include a preliminary economic assessment.This will include any study that includes an economic analysis of the potential viability of mineral resources that is not a prefeasibility or feasibility study. While the scope has been expanded, the amendments still do not allow inferred resources to be included in an economic analysis resulting from a prefeasibility or feasibility study. OTHER AMENDMENTS The CSA has made substantial amendments in order to make the technical report form less prescriptive and more adaptable for advanced stage and producing properties. In addition, they give more discretion to the author of a technical report to exercise judgement in determining the importance given to certain matters within the report. The new form is also designed to provide greater detail regarding disclosure for development stage companies and producers. Significantly, it will allow producers to exclude an economic analysis for projects in production unless the technical report includes a material expansion of the project. Under the amended short-form prospectus, a technical report may include a limited disclaimer of responsibility (currently prohibited) if the qualified person who prepared all or part of the report is relying on a report, opinion or statement of another expert who is not a qualified person or on information provided by the issuer regarding legal, political, environmental or tax matters relevant to the technical report. This is providing the qualified person identifies, among other things, prescribed information regarding the source of the information relied upon and the extent of the reliance. The CSA has retained existing restrictions on disclosure contained in the current NI 43-101, such as the prohibition on disclosure of a quantity, grade or metal/mineral content of a deposit that has not been categorised in accordance with the standards prescribed by the Canadian Institute of Mining, Metallurgy and Petroleum. However, the amendments to NI 43-101 add two additional categories of prohibited disclosure. These are the gross value of metal/mineral in a deposit, sampled interval or drill intersection, and, other than in certain circumstances, a metal/mineral equivalent grade for a multiple commodity deposit, sampled interval or drill intersection. According to the CSA, the inclusion of these additional items to the list of restricted disclosure is simply a clarification to reflect the CSA’s interpretation of the current NI 43-101.This is an area which can cause issues with commodities such as rare earths. The proposed changes are largely all positive steps and address many (if not all) of the common problems that have been encountered with the rule in recent years. They also reflect a further step in the convergence of international disclosure standards seen also in the ESMA proposals, which will introduce some aspects of the NI 43-101 regime for companies listed in regulated markets in the European Union. 14_16MJ110429.indd 16 27/04/2011 08:56
  • 49. CANADIAN OIL AND GAS DISCLOSURE STANDARDS NATIONAL INSTRUMENT 51-101 1. Introduction and Background National Instrument 51-101 “Standards of Disclosure for Oil and Gas Activities” (“NI 51-101”) was introduced in late 2003, and was subsequently amended on December 28, 2007 to address some inconsistencies and broaden the scope of permissible resources disclosure. The purpose of the Instrument is to enhance the quality, consistency, timeliness and comparability (among reporting issuers and over time) of public disclosure by reporting issuers concerning their upstream oil and gas reporting issuers concerning their upstream oil and gas activities. The effect is to create a “continuous disclosure” regime for oil and gas issuers. Under the former rules, disclosure requirements were largely limited to annual information forms, which were not filed by all reporting issuers (particularly junior companies) and were not usually required to be updated unless a prospectus was filed. The current rules result from the work of an industry taskforce established by the Alberta Securities Commission, which takes the lead in the regulation of oil and gas issues in Canada given the importance of Alberta to the industry. NI 51-101 was developed with the close involvement of the Petroleum Society of Canada (formerly the Canadian Institute of Mining, Metallurgy and Petroleum) and the Society of Petroleum Evaluation Engineers (“SPEE”). 2. Overview and Key Principles NI 51-101 starts from the premise that information about oil and gas reserves and activities may be as important as financial statement disclosure for investors making an investment decision concerning securities of an upstream oil and gas issuer. The Instrument was designed to establish disclosure standards similar to those that apply to on-going financial reporting, such as annual reporting of independently-verified estimates of reserves, volumes and related cash flow (“future net revenue”) and other information about a reporting issuer’s oil and gas activities. These reports are to be prepared on a consistent basis using professional and industry-developed evaluation standards and terminology. NI 51-101 applies to issuers which are “reporting issuers” in Canada, i.e. essentially companies which are listed on the Toronto Stock Exchange (the “TSX”) or the junior venture exchange (“TSX- V”) or have otherwise become a public company in Canada through the filing of a prospectus. Thus, in contrast to the current rules for mining companies under NI 43-101, it does not apply in the case of a private placement in Canada of securities of a non-reporting issuers using an offering memorandum. If a company is coming to the market for the first time through an IPO it will generally have to prepare NI 51-101 disclosure documents in conjunction with the filing of the prospectus and listing application. Additional information may need to be provided to the Exchanges. 3. Annual Disclosure Each reporting issuer is required to file annually on SEDAR, the on-line continuous disclosure system in Canada (equivalent to EDGAR in the United States), concurrently with its annual audited financial statements the following documents: Statement of Reserves Data and Other Oil and Gas Information (Form 51-101F1) – This is essentially a statement by an issuer of its reserves and anticipated future net revenues. Breakdowns must be provided by country (or foreign geographic area), by gross and net wells, by product type (heavy oil, light and medium oil, NGLs and natural gas) and by
  • 50. specified reserves sub-categories (proved – developed producing, developed non-producing, undeveloped; probable). The components of future net revenue (e.g., future revenue, royalties, operating costs, development costs, abandonment and reclamation costs and future income tax expenses) must be disclosed by country and in the aggregate for the current year. The rules also require disclosure of the net present value of the aggregate of each of development costs, abandonment and reclamation costs, future net revenue before income taxes and future net revenue after income taxes (the tax rate applicable to most income trusts would be zero given they are not generally in a tax-paying position). The prices used in estimating the reserves data must be disclosed and a reconciliation provided of year-over-year changes in estimated reserves and future net revenue. Report on Reserves Data by Independent Qualified Evaluator or Auditor (Form 51-101F2) – This is an opinion regarding the reliability of the company’s reserves data, provided by a qualified reserves evaluator or auditor (each of whom must generally be independent of the issuer), who must in aggregate have evaluated at least 75% of the future net revenue attributable to proved plus probable reserves and reviewed the balance. The opinion must state that the data evaluated or audited has been determined in accordance with the Canadian Oil and Gas Evaluation Handbook. The evaluator or auditor must possess appropriate professional qualifications and experience and be a member in good standing of a recognised professional association (i.e. APEGGA or other provincial equivalent). Although only Canadian professional organisations were initially recognised, foreign evaluators may apply for recognition. The American Institute of Professional Geologists (AIPG) has been recognized as an acceptable professional organization and several orders have already been granted allowing a qualified foreign professional to audit the reserves of a Canadian issuer. The evaluator or auditor must have appropriate training and experience and it is the Company’s responsibility to verify this before appointing them to audit the reserves data. They must also be considered independent, which under NI 51-101 means, amongst other criteria, that in the opinion of a reasonable person there is no circumstance that could interfere with the evaluator’s or auditor’s exercise of judgement regarding the information of the Company. The audit must cover 75% of the future net revenue of the proved plus probable reserves, not 75% of the Company’s reserve portfolio. If a company’s portfolio is dominated by a few large properties, it may only need to evaluate those properties each year, while companies with a large number of smaller properties may have to audit a greater percentage in order to achieve the required 75% level by value. The remainder of the reserves and future net revenue must be reviewed by the independent evaluator or auditor to confirm whether they appear reasonable. Report of Management and Directors on Oil and Gas Disclosure (Form 51-101F3) – This is a report which acknowledges the responsibility of management and directors in relation to the preparation and disclosure of information. The focus is on the internal procedures implemented by the company to ensure the accuracy of the reserves data. The report must be executed by the issuer’s Chief Executive Officer and one other senior officer, together with any two directors.
  • 51. 4. Disclosure Standards To ensure quality and consistency for all public disclosure of oil and gas information (including press releases, annual reports, web-site information etc.), NI 51-101 requires companies to use consistent definitions and methodology, particularly with respect to disclosure of “prospects” and “material changes”. In providing disclosure on reserves and oil and gas activities issuers need only disclose information that is “material”. For purposes of NI 51-101 the definition of “materiality” is different from that generally applied under Canadian securities laws. The test is whether or not the information would be “likely to influence a decision by a reasonable investor to buy, hold or sell a security”, and thus is more akin to the definition of materiality used for financial reporting in Canada in accordance with the rules of the Canadian Institute of Chartered Accountants. 5. Material Change Disclosure Where a company discloses a material change in its business, it must include a discussion of the effect of such change on the filed reserves data. Specifically, the issuer must disclose a material change that, had it occurred on or before the effective date of information included in the annual statement most recently filed by the reporting issuer, would have resulted in a significant change in the information contained in the statement. Accordingly, in addition to any other requirement of securities laws governing disclosure of material change, an oil and gas issuer must in its disclosure statement: • identify the statement in the original annual filing that contains the information subject to the change; • discuss the reporting issuer’s reasonable expectation of how the material change, had it occurred on or before the effective date of the annual report, would have affected the reserves data or other information contained in the annual report; and • include changes in the pricing assumptions used in the year-end reserves report (but the issuer is not required to re-run or discuss constant price estimates). 6. Possible Discretionary Exemptions NI 51-101 contemplates the possibility of discretionary exemption orders being granted from certain of its requirements. In particular, exemptions from some or all of the requirements have been granted for issuers with a de minimus Canadian shareholding (generally less than 10% for full exemption) which have securities registered in the United States and which comply with the requirements of the US Securities and Exchange Commission (“SEC”). Specifically, companies active in US capital markets may seek an exemption permitting them to report in accordance with the requirements of the SEC and the US Financial Accounting Standards Board (“FASB Standards”). The ASC has provided a similar exemption from the disclosure requirements of N1 51-101 on the main board of the London Stock Exchange where they had a de minimus (L10%) Canadian shareholding. The US rules differ from the Canadian ones principally in that the American standard only permits the disclosure of proved reserves on a forecast price basis and permits the disclosure of possible reserves and certain categories of resources, whereas the Canadian rules require the reporting of both proved and probable reserves on a constant price basis. If a company does obtain an exemption order allowing it to use US standards, it may still need to prepare annual filings for Canadian purposes and differences from NI 51-101 may need to be explained for the Canadian investing public.
  • 52. 7. Corporate Governance Procedures NI 51-101 imposes significant additional responsibilities on directors and management of an oil and gas company. The board of directors of the issuer must review the oil and gas disclosure and approve the annual filings. The board must meet with management and each of the reserves evaluators or auditors before approving the filing of these statements. Boards are encouraged to establish “reserves committees”, composed of a majority of independent directors, to oversee the reserves function. The board and the reserves committee will typically be responsible for appointing the independent experts and supervising the reporting process and development of internal systems to ensure the reliability of data. 8. Reserves Definitions The reserve definitions required for NI 51-101 reporting requires use of the CIM definitions, which establish the following degrees of certainty associated with the estimates for categorization of reserves: Proved Reserves – those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. Probable Reserves – those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probably reserves. Possible Reserves – those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves. Additionally, reported reserves should target the following levels of certainty under a specific set of economic conditions. 9. Other Issues NI 51-101 addresses a wide variety of other issues, including such matters as estimates of “fair value” of a property, net asset value calculations, the disclosure of BOEs, McFGEs or other units of equivalency. The disclosure of reserve replacements and disclosure concerning prospects and unproved property is also covered. NI 51-101 and certain administrative notices issued by the Canadian Securities Administrators, also deals with the disclosure of resources by issuers. The disclosure of resources by issuers is permissible under the Canadian regime but must comply with the disclosure requirements of NI 51-101 and the COGE Handbook. The COGE Handbook sets out certain categories of resources that may be disclosed (including “contingent” and “prospective” resources) and sets out certain cautionary language and other requirements that must be included in connection with the disclosure of such resources. July 2012 David Glennie Blake, Cassels & Graydon LLP
  • 53. MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* *Associated Office© 2012 Blake, Cassels & Graydon LLP | blakes.com

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