Securities Law & Instruments


National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – exemption granted from requirement to include historical financial statements in a business acquisition report for acquisition of entities holding dormant mining claims with existing liabilities – historical financial statements for mining claims not previously prepared – filer granted relief to include alternative financial information.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.4, 13.1.

June 19, 2018

(the Jurisdiction)




(the Filer)



The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for a decision, pursuant to section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), that the requirements of section 8.4 of NI 51-102 and Item 3 of Form 51-102F4 Business Acquisition Report (Form 51-102F4) not apply to Filer, in so far it would require the Filer to provide certain historical financial statements in respect of its acquisition of the Entities (defined below) holding the Properties (defined below) that constitutes a significant acquisition, together with an auditor’s report on such financial statements (the Requested Relief).

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

(i)            the Ontario Securities Commission is the principal regulator for this application (the Principal Regulator); and

(ii)           the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of Alberta and British Columbia (together with Ontario, the Jurisdictions).


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


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

1.             The Filer was incorporated on March 29, 1987. The Filer is a corporation, the common shares of which (Shares) are listed on the TSX Venture Exchange. The principal business of the Filer is the acquisition and exploration of properties which are prospective for mineral resources.

2.             The head office of the Filer is located 82 Richmond Street East, Toronto, Ontario.

3.             The Filer is a reporting issuer under the Legislation in each of Ontario, Alberta and British Columbia.

4.             On June 14, 2017 (the Closing Date), the Filer completed the acquisition (the Acquisition) of entities (Entities) holding an aggregate of 4,280 mineral claims known as the White Gold, Black Fox, JP Ross, Yellow and Battle properties located in the White Gold District of the Yukon Territory (collectively, the Properties) from Kinross Gold Corporation (Kinross), for aggregate consideration of $10,000,000 in cash, the issuance of 17,500,000 Shares to Kinross and up to $15,000,000 in deferred payments specifically related to the advancement of the Properties. Certain of the Properties are subject to two annual advance royalty payments in the amounts of $100,000 and $30,000, respectively, that are payable each year until the commencement of commercial production (the Advance Royalty Payments) and three pre-existing net smelter returns royalties equal to 4%, 2% and 2%, respectively, each relating to different claims and each subject to different reduction options. The Filer’s acquisition of the Properties from Kinross was conducted at arm’s length.

5.             In connection with the issuance of the 17,500,000 Shares to Kinross pursuant to the Acquisition, Kinross and the Filer entered into an investor rights agreement pursuant to which, and subject to certain conditions, Kinross has the right to participate in any future equity offerings by the Filer in order to maintain its proportionate interest in the Filer, and to nominate one person to the board of directors of the Filer. Until such time as Kinross beneficially owns less than 10% of the Shares for the first time following completion of the Acquisition, the Filer will have a right to designate a purchaser of first instance in the event that Kinross wishes to sell a block of more than 5% of the issued and outstanding Shares. Kinross is also subject to a standstill restriction until December 13, 2018 which prohibits Kinross from taking certain actions, including acquiring more than 19.99% of the issued and outstanding Shares, subject to certain exceptions.

6.             Previous exploration work on the Properties was conducted by (i) Underworld Resources Inc. (Underworld), a prior owner of such properties; and (ii) Kinross.

7.             In 2010, Underworld reported an historical Mineral Resource estimate of 1,004,570 ounces contained in 9.80 Mt at a grade of 3.19 g/t Au in an Indicated category with an additional 407,410 ounces contained in 5.02 Mt at a grade of 2.5 g/t Au in an Inferred category on the Golden Saddle zone of the White Gold property comprising part of the Properties. At the Arc zone of the White Gold property, the initial Mineral Resource included 170,470 ounces contained within 4.37 Mt at a grade of 1.21 g/t Au in the Inferred category.

8.             Kinross purchased Underworld shortly after the above-noted historical Mineral Resource on the White Gold property was released in 2010, and explored the Properties from 2010 to 2012. In 2013, Kinross released the results of a further historical Mineral Resource estimate on the Golden Saddle zone of the White Gold property, reporting a Mineral Resource of 840,000 ounces within 9.79 Mt at a grade of 2.67 g/t Au in the Indicated category, with an additional 125,000 ounces within 2.17 Mt at a grade of 1.8 g/t Au in the Inferred category.

9.             Both Underworld’s and Kinross’ above-noted Mineral Resource estimates on the White Gold property (collectively, the Mineral Resources) are considered historical estimates and the Filer is not treating them as current Mineral Resources, and only as potential indications of mineralization in the region.

10.          The Filer is advised that no exploration work has been conducted on the Properties during the two years immediately preceding the date of this application. All funds expended in connection with the Properties during such period have been spent on maintaining ownership of the Properties and making the Advance Royalty Payments.

11.          The Filer has disclosed the historic Mineral Resources in a press release dated May 18, 2017 as filed on SEDAR, together with all additional available material scientific and technical information concerning the Properties, which disclosure has been prepared in compliance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101).

12.          Although the Acquisition constitutes the acquisition of a “business” for the purpose of Part 8 of NI 51-102, the only acquired assets are mining claims. The Acquisition would constitute a “significant acquisition” by the Filer as determined in accordance with section 8.3 of NI 51-102. As a result, the Filer will be required to file a business acquisition report (BAR) in respect of the Acquisition, including financial statements of the acquired business in accordance with such instrument.

13.          Section 8.4 of NI 51-102 requires that the Filer include in the BAR the following financial statements for the Entities:

(a)           comparative annual financial statements, including:

(i)            a statement of comprehensive income, a statement of changes in equity and a statement of cash flows for (i) the audited annual period ended December 31, 2016; and (ii) the annual period ended December 31, 2015;

(ii)           an audited statement of financial position as at December 31, 2016;

(iii)           a statement of financial position as at December 31, 2015; and

(iv)          notes to the annual financial statements; and

(b)           an interim financial report for March 31, 2017 and 2016.

14.          Kinross has advised the Filer that the Entities did not constitute a material component of its operations for accounting purposes, and, as a result, Kinross did not prepare or maintain audited stand-alone financial statements specific to the Entities.

15.          The Filer has been further advised by Kinross that it is impracticable to prepare full or “carve-out” financial statements for the Entities in accordance with the requirements under section 8.4 of NI 51-102 for the following reasons:

(a)           Kinross did not maintain sufficiently detailed records for the Entities necessary to prepare the full financial statements for the Entities;

(b)           the Entities represented an inconsequential part of the operations of Kinross. The Filer understands that the estimated value attributable to the Entities for the year ended December 31, 2016 comprised less than 1% of Kinross’ total assets for such year of approximately US$7,979,300,000;

(c)           the Entities were integrated into other businesses of Kinross and did not represent a separate reporting or operating segment of Kinross. Accordingly, Kinross is unable to systematically isolate discrete financial information or objectively allocate certain corporate expenses to the Entities and, as a result, any allocation would be subjective; and

(d)           due to frequent personnel turnover at Kinross, the current staff is unable to adequately provide any more information concerning the Entities than what is already contained in the insufficient financial records noted above.

16.          The records are insufficiently detailed to extract information specific to the Entities as would be required to produce the financial statements as set out in Part 8 of NI 51-102 and, in the Filer’s view, it is impracticable to do so. As a result of the factors set out above, the assumptions and estimates required for the Filer to “carve-out” a complete set of financial statements for the Entities would by necessity be arbitrary and speculative and undermine the reliability of those statements. Any such statements would not reflect the true nature of the Entities or be useful to shareholders or investors.

17.          The Filer proposes to include in the BAR the consolidated audited financial statements of the Filer for the years ended December 31, 2017 and 2016 which incorporate the Properties and Entities as “exploration and evaluation assets” of the Filer for such period, and which contain a summary of the Acquisition as further detailed in Note 5 thereto, all as prepared in accordance with International Financial Reporting Standards and as accompanied by a duly executed audit opinion (the 2017 Financial Statements).

18.          The Filer believes that the 2017 Financial Statements will provide investors with sufficient information material to their understanding of the Properties and Entities.


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 Request Relief is granted.

“Sonny Randhawa”
Deputy Director, Corporate Finance
Ontario Securities Commission