Securities Law & Instruments

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Take-over Bids -- Identical consideration -- Issuer needs relief from the requirement in subsection 97(1) of the Securities Act (Ontario) and section 2.23 of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids that all holders of the same class of securities must be offered identical consideration -- Under the bid, Canadian resident shareholders will receive shares of the offeror; shareholders who are residents of the U.S. or other foreign jurisdictions will receive substantially the same value as Canadian shareholders in the form of cash paid to such shareholders based on the proceeds from the sale of their shares.

Applicable Legislative Provisions

Securities Act , R.S.O. 1990, c. S.5, as am., ss. 97(1), 104(2)(c).

November 3, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

AGL (ASG) PTY LTD (the Offeror)

AND

ALLIED GOLD LIMITED (Allied Gold)

(collectively, the Filers)

DECISION

Background

The principal regulator in the Jurisdiction (the Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Filers from the requirement under the Legislation to offer identical consideration to all the holders of the same class of securities that are subject to a take-over bid in connection with the Filers' offer to purchase all of the issued and outstanding ordinary shares of Australian Solomons Gold Limited (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filers have provided notice that s. 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Newfoundland, Prince Edward Island, Nunavut, Yukon Territory and the Northwest Territories.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meanings if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

1. each of Allied Gold and the Offeror is a corporation existing under the Corporations Act 2001 (Commonwealth of Australia) (the Australian Act);

2. Allied Gold's registered office is located in Subiaco, Perth, Western Australia, Australia and Allied Gold's head office is located in Milton, Brisbane, Queensland, Australia;

3. the Offeror's registered and head office is located in Subiaco, Perth, Western Australia, Australia;

4. Allied Gold is a public company within the meaning of the Australian Act;

5. the Offeror is a proprietary company within the meaning of the Australian Act. The Offeror was incorporated on September 3, 2009 for the purpose of the Offer. All of the issued and outstanding shares of the Offeror are held by Allied Gold;

6. Allied Gold is an Australian company and has, pursuant to the Australian Act, no limit to the number of ordinary shares it may issue. As of September 29, 2009, there were 472,643,276 ordinary shares of Allied Gold (the Allied Gold Shares) issued and outstanding;

7. the Allied Gold Shares are listed on the Australian Securities Exchange and on the Alternative Investment Market of the London Stock Exchange;

8. on September 16, 2009, the Filers announced their intention to make an offer (the Offer) to acquire all of the outstanding ordinary shares (ASG Shares) of Australian Solomons Gold Limited (ASG);

9. ASG is a public company existing under the Australian Act;

10. ASG's head office and registered and records office is located in Albion, Brisbane, Queensland, Australia;

11. to the knowledge of the Filers, ASG is a reporting issuer in British Columbia, Manitoba, Alberta and Ontario and is not in default of any of the requirements of the applicable securities legislation of any such jurisdiction in which it is a reporting issuer;

12. the authorized capital of ASG consists of an unlimited number of ASG Shares. As of September 29, 2009, there were 129,784,650 ASG Shares outstanding;

13. the ASG Shares are listed and posted for trading on the Toronto Stock Exchange;

14. under the terms of the Offer, each holder of one ASG Share (other than Non-Exempt ASG Shareholders, as defined below) will receive consideration per ASG Share of 0.85 of an Allied Gold Share;

15. the offer of Allied Gold Shares to the holders of ASG Shares resident in a jurisdiction of Canada pursuant to the Offer will be exempt from the prospectus and registration requirements of the Legislation pursuant to Section 2.16 of National Instrument 45-106 Prospectus and Registration Exemptions;

16. the Allied Gold Shares issuable under the Offer have not been and will not be registered or otherwise qualified for distribution under the securities legislation of any jurisdiction outside of Australia, including the United States Securities Act of 1933, as amended (the 1933 Act) and U.S. state securities laws. Accordingly, the delivery of Allied Gold Shares to holders of ASG Shares who: (i) are either U.S. Persons (as that term is defined in Regulation S under the 1933 Act) or resident in the United States or any territory or possession thereof (U.S. Residents); and (ii) are not "accredited investors" (as that term is defined in Regulation D under the 1933 Act) (the Non-Exempt ASG US Shareholders), or to holders of ASG Shares who are citizens or residents of any other jurisdiction outside of Canada (other than Australia and New Zealand) where delivery of Allied Gold Shares may not be effected without further action by the Filers (ASG Foreign Shareholders, and together with Non-Exempt ASG US Shareholders, the Non-Exempt ASG Shareholders) may constitute a violation of the laws of such jurisdictions;

17. Allied Gold has entered into a pre-bid agreement (the Pre-Bid Agreement) with Resource Capital Fund III L.P., the largest shareholder of ASG (RCF), a U.S. organized and based entity which owns approximately 50% of the issued and outstanding ASG Shares. Pursuant to the Pre-Bid Agreement, RCF agreed, subject to customary exceptions, including in the event of a superior proposal: (i) to deposit under the Offer that number of ASG Shares equal to 19.9% of the total issued and outstanding ASG Shares (the Acceptance Shares); and (ii) to publicly announce its intention to deposit under the Offer all of the ASG Shares that it owns other than the Acceptance Shares. The Australian Act prohibits an offeror from acquiring a "relevant interest" in 20% or more of an issuer's securities, and these provisions of the Pre-Bid Agreement reflect customary Australian practice. The Pre-Bid Agreement does not require the Filers to make the Offer. RCF is an "accredited investor" for the purpose of the 1933 Act and is not a Non-Exempt ASG US Shareholder. Accordingly, Allied Gold Shares will be issued to RCF as consideration under the Offer pursuant to an exemption from the registration requirements under U.S. securities laws;

18. Rule 802 under the 1933 Act (Rule 802) provides an exemption from the registration requirements of the 1933 Act for offers and sales in any exchange offer for a class of securities of a foreign private issuer (as defined for purposes of the 1933 Act and the rules and regulations issued by the U.S. Securities and Exchange Commission thereunder) or in any exchange of securities for the securities of a foreign private issuer in any business combination if the holders of the foreign subject company resident in the United States hold no more than 10% of the securities that are the subject of the exchange offer or business combination. The holders of ASG Shares resident in the United States hold more than 10% of the issued and outstanding ASG Shares. Accordingly, the Filers cannot rely on the registration exemption in Rule 802 in connection with the Offer;

19. to the knowledge of the Filers, and based on the most recent registered shareholder list of ASG provided to the Filers on September 15, 2009 and the most recent geographic reports delivered to the Filers on October 13, 2009 and October 20, 2009, no more than 14,577,809 ASG Shares (representing approximately 11.2% of the issued and outstanding ASG Shares) are held by Non-Exempt ASG Shareholders

20. the take-over bid rules of the Australian Act apply to the Offer;

21. the Australian Act provides that where the consideration for a bid includes an offer of securities, the securities do not need to be offered to foreign holders of the target's securities if under the terms of the bid: (i) the bidder must appoint a nominee for foreign holders of the target's securities who is approved by the Australian Securities and Investments Commission; (ii) the bidder must transfer to the nominee the securities that would otherwise be transferred to the foreign holders who accept the bid for that consideration or the right to acquire those securities; and (iii) the nominee must sell the securities, or those rights, and distribute to each of those foreign holders their proportion of the proceeds of the sale net of expenses;

22. in lieu of delivering Allied Gold Shares to Non-Exempt ASG Shareholders, the Filers intend to use a mechanism, the details and procedures of which are described in paragraph 23 below (the Vendor Placement), as permitted under the Australian Act. As a result of the Vendor Placement, the registration requirements of the 1933 Act, in addition to the applicable laws of certain U.S. states and the requirements of any other jurisdictions which may otherwise require registration or qualification of the Allied Gold Shares (the Other Foreign Jurisdictions), will not apply to the Filers and/or the Offer because the Allied Gold Shares will not be delivered in the United States or the Other Foreign Jurisdictions to Non-Exempt ASG Shareholders;

23. Allied Gold proposes to deliver to a nominee under the Offer (the Nominee) the Allied Gold Shares which Non-Exempt ASG Shareholders would otherwise be entitled to receive under the Offer; the Nominee, through a registered broker, will sell those Allied Gold Shares by private sale or on any stock exchange on which the Allied Gold Shares are then listed after the payment date for the ASG Shares tendered by the Non-Exempt ASG Shareholders under the Offer and, as soon as possible after completion of the sale, the Nominee will remit the net proceeds of the sale to the Non-Exempt ASG Shareholders that tendered their ASG Shares under the Offer; such procedure to be modified as necessary to comply with the laws of the Other Foreign Jurisdictions;

24. any sale of Allied Gold Shares described in paragraph 23 above will be completed as soon as possible after the date on which the Offeror takes up the ASG Shares tendered by the Non-Exempt ASG Shareholders under the Offer and will be done in a manner intended to maximize the consideration to be received from the sale by the applicable Non-Exempt ASG Shareholders and minimize any adverse impact of the sale on the market for the Allied Gold Shares.

25. The Filers intend to use the Vendor Placement mechanism solely for the purchase of ASG Shares held by Non-Exempt ASG Shareholders;

26. the Offer to the Non-Exempt ASG Shareholders as amended by the Vendor Placement, and the sale of Allied Gold Shares for the benefit of the Non-Exempt ASG Shareholders pursuant to the Vendor Placement, will not constitute a violation of U.S. federal and state securities laws or the laws of the Other Foreign Jurisdictions;

27. based on the exchange ratio of the Offer and on the maximum number of ASG Shares that, to the knowledge of the Filers, are held by Non-Exempt ASG Shareholders, and assuming the Offeror acquires 100% of the ASG Shares, the Allied Gold Shares to be sold under the Vendor Placement would represent approximately 2.1% of the outstanding Allied Gold Shares upon the take-up and payment of the ASG Shares under the Offer;

28. registration under the securities laws of the U.S. or the Other Foreign Jurisdictions of the Allied Gold Shares deliverable to Non-Exempt ASG Shareholders pursuant to the Offer, and the resulting ongoing reporting requirements, would be costly and burdensome to Allied Gold;

29. pursuant to paragraph (f) of the definition of "reporting issuer" in subsection 1(1) of the Securities Act (British Columbia), Allied Gold will be deemed to be a reporting issuer in British Columbia upon the take-up and payment of ASG Shares under the Offer. As a result, Allied Gold will thereafter be subject to the continuous disclosure obligations set out in National Instrument 51-102 Continuous Disclosure Obligations which are applicable to all reporting issuers in Canada;

30. the take-over bid circular prepared by the Filers and sent to all shareholders of ASG discloses the Vendor Placement mechanism to be followed for Non-Exempt ASG Shareholders who tender their ASG Shares to the Offer;

31. the Offer is not being made to, nor will deposits be accepted from or on behalf of, holders of ASG Shares in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of such jurisdiction;

32. there is currently a liquid market (as such term is defined in Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions) for the Allied Gold Shares and Allied Gold has been advised by the registered broker who will sell the Allied Gold Shares in connection with the Vendor Placement that there would continue to be such a liquid market for the Allied Gold Shares following the completion of the Offer and the sale of the Allied Gold Shares on behalf of Non-Exempt ASG Shareholders as contemplated in the Offer; and

33. except to the extent that the Exemption Sought is granted, the Offer will comply with the requirements under applicable securities legislation concerning take-over bids.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that, in connection with the Offer, the Exemption Sought is granted, provided that Non-Exempt ASG Shareholders, who would otherwise receive Allied Gold Shares pursuant to the Offer, instead receive cash proceeds from the sale of Allied Gold Shares in accordance with the procedures set out in paragraph 23 above.

"David L. Knight"
Commissioner
Ontario Securities Commission
 
"Paulette Kennedy"
Commissioner
Ontario Securities Commission