Securities Law & Instruments

Headnote

Rule 61-501 -- related party transactions --relief from valuation requirement in connection with a proposedrelated party transaction -- related party and its affiliateto purchase units from the issuer under a private placement-- the related party currently owns 19.1% of the issued andoutstanding shares of the issuer -- following the transaction,the related party and its affiliate will own 24.6% of the issuedand outstanding shares of the issuer -- neither the issuer northe related party has knowledge of any material informationconcerning the issuer or its securities that has not been generallydisclosed and the disclosure document will include a statementto that effect -- the disclosure document includes a descriptionof the effect of the distribution of the units on the directand indirect voting interest of the related party -- issuerwill comply with all other requirements of Rule 61-501 includingobtaining majority of minority approval -- transaction has receivedthe approval of the issuer's board of directors-issuer exemptfrom valuation requirements.

Ontario Rule Cited

Rule 61-501--Insider Bids, Issuer Bids, GoingPrivate Transactions and Related Party Transactions, ss. 5.5and 9.1.

IN THE MATTER OF

ONTARIO SECURITIES COMMISSION

RULE 61-501

AND

IN THE MATTER OF

GENERAL MINERALS CORPORATION

 

RULING

(Section 9.1)

UPON the application (the "Application")of General Minerals Corporation ("GMC") to the Directorof the Ontario Securities Commission pursuant to section 9.1of Rule 61-501 for a decision exempting GMC from the valuationrequirements in section 5.5 of Rule 61-501 (the "ValuationRequirements") in connection with a proposed related partytransaction with, among others, Exploration Capital Partners2000 Limited Partnership ("Exploration");

AND UPON considering the Applicationand the recommendation of staff of the Commission;

AND UPON GMC having represented to theDirector as follows:

1. GMC is a corporation existing under thelaws of Canada. GMC is a reporting issuer under the applicablesecurities legislation of each of the provinces of Canada,other than Quebec.

2. The authorized capital of GMC consistsof an unlimited number of common shares (the "Shares")and an unlimited number of special shares of which there arecurrently 43,205,768 Shares and no special shares outstanding.The Shares are listed on The Toronto Stock Exchange.

3. As of May 15, 2003, Exploration owns 8,270,000Shares, representing approximately 19.1% of the issued andoutstanding Shares. Therefore, Exploration is a "relatedparty" of GMC within the meaning of Rule 61-501.

4. At the annual and special meeting of theshareholders of GMC to be held on June 16, 2003 (the "Meeting"),GMC will be asking its shareholders (the "Shareholders")to approve a share consolidation (the "Consolidation")on the basis of one post-Consolidation Share for ten pre-ConsolidationShares. GMC will also be asking the Shareholders to approvethe Transaction (as described in paragraph 5 below).

5. GMC intends to issue up to 25,000,000 units(the "Units") at a price of $0.11 per Unit pursuantto a private placement financing transaction (the "Transaction").Each Unit is comprised of one Share and one common share purchasewarrant ("Warrant"). Each Warrant is exercisablefor one Share for a period of five years at a price which,assuming the completion of the Consolidation, ranges between$1.40 and $2.05 depending on how long the Warrant is outstandingbefore it is exercised. The Warrants are redeemable by GMCat any time after the first anniversary of their issue ifthe closing price of the Shares for 20 consecutive tradingdays is equal to or greater than 125% of the then exerciseprice, provided that notice of such redemption is deliveredto Warrant holders within 20 business days after the lastof such 20 consecutive trading days.

6. GMC has reached an agreement with Explorationpursuant to which Exploration will purchase 6,250,000 Unitsunder the Transaction. In addition, an affiliate of Explorationhas agreed to purchase 2,272,727 of the Units under the Transaction.Following the completion of the Transaction, Exploration andits affiliates will own 16,792,727 Shares, representing 24.6%of the issued and outstanding Shares, and 8,522,727 Warrants.

7. By virtue of Exploration being a relatedparty of GMC, the Transaction, as a whole, is a related partytransaction under Rule 61-501. GMC is therefore required,absent exemption or discretionary relief, to comply with,among other things, the Valuation Requirements in order tocomplete the Transaction.

8. The Transaction is subject to a numberof conditions including, without limitation, the approvalof all applicable regulatory authorities and the approvalof a majority of the Shareholders other than insiders or relatedparties participating in the Transaction and their associatesand affiliates. GMC has received conditional approval forthe Transaction from The Toronto Stock Exchange. The boardof directors of GMC unanimously approved the Transaction ata meeting held May 15, 2003.

9. GMC will deliver an information circular(the "Circular") to Shareholders disclosing thedetails of the Transaction. The details of the Transactionwill also be disclosed by GMC in a press release and a materialchange report.

10. Neither GMC nor, to the knowledge of GMCafter reasonable inquiry, Exploration has any knowledge ofany material information concerning GMC or its securitiesthat has not been generally disclosed. The Circular will includea statement to this effect.

11. The Circular will also include a descriptionof the effect of the distribution of Units on the direct andindirect voting interest of Exploration.

AND UPON the Director being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS DECIDED pursuant to section 9.1of Rule 61-501 that GMC shall not be subject to the ValuationRequirements in connection with the Transaction provided that:

(1) the Circular contain the disclosure setout in paragraphs 10 and 11 above; and

(2) GMC complies with the other applicableprovisions of Rule 61-501.

May 16, 2003.

"Ralph Shay"