Canada: Capital Markets Bulletin - January 27-31, 2014


News and Notices

"Publish What You Pay" - Mining Industry Proposes Mandatory Disclosure of All Payments Made to Foreign Governments
By: France Tenaille and Erik Goldsilver

On January 16, 2014, the Resource Revenue Transparency Working Group, which includes mining industry groups such as the PDAC and the Mining Association of Canada as well as civil organizations such as Publish What you Pay Canada and the Revenue Watch Institute, released the final version of their "Recommendations on Mandatory Disclosure of Payments from Canadian Mining Companies to Governments". This document presents a framework to ensure greater transparency surrounding the collection of resource revenues in order to help improve the development outcomes of resource extraction in oil, gas and mineral producing countries. For further details click here.

Changes Proposed for Exempt Offerings of Short-Term Debt and Securitized Products
By: Brian Koscak, Alexandra Iliopoulos and Afzal Hasan

The CSA has published for comment proposed amendments to National Instrument 45-106 Prospectus and Registration Exemptions with respect to exempt distributions of short-term debt and securitized products.

Under the current prospectus exempt distribution rules, both short-term debt and short-term securitized products can be distributed via the "short-term debt prospectus exemption" provided that certain requirements are met. Once issued under this exemption, such securities can be issued to any investor without any resale restrictions under securities law.

The proposed amendments would amend various instruments and forms to achieve the following:

Short Term Debt Securitized Products
  • Modify the short-term debt prospectus exemption to address issues commonly experienced by issuers with multiple credit ratings
  • Prevent ABCP from being issued under various prospectus exemptions, including the short-term debt prospectus exemption.
  • Introduce a new prospectus exemption tailored specifically to ABCP.
  • Subject distributions issued pursuant to the new ABCP exemption to certain initial offering and ongoing disclosure requirements.

The CSA's comment period will run until April 23, 2014.

Please click here to view the full article.

OSC Requests Members for Small and Medium Enterprises Committee

The Ontario Securities Commission ("OSC") is inviting applications for membership on its Small and Medium Enterprises Committee ("SMEC"). The purpose of the SMEC is to advise OSC staff on matters related to small and medium enterprises ("SMEs"), including the challenges they face in operating their businesses and raising capital. The SMEC members will be asked to provide input on regulatory approaches to the capital raising segment of the exempt market, including the impact on SMEs of possible new prospectus exemptions under consideration by the OSC. The SMEC will also discuss the development, implementation and communication of policies and practices to address issues affecting SMEs, in the pursuit of capital market efficiency, investor protection and economic growth. Interested parties should submit their application, indicating their relevant experience by February 10, 2014. For more information, a copy of the OSC news release can be found here.

Relief Order of the Month

MJDS Northbound Prospectuses: In the Matter of Catchmark Timber Trust, (2014) OSCB 988
By: Greg Hogan

The new marketing rules are not available to MJDS northbound offerings. Relief was granted retrospectively) for marketing activities that otherwise complied with the marketing rules available for offerings made primarily in the United Sates.

This may be one of the first relief orders related to the new public offering marketing rules. This was a decision on an application made by a US REIT that had conducted marketing activities in Canada in connection with an initial public offering (in Canada) of its securities. The activities appear to have consisted of utilizing road show materials in Canada and making those road show materials available on a password protected website. The issuer complied with the conditions to make use of an exemption from certain of the marketing provisions of National Instrument 41-101 General Prospectus Requirements ("NI 41-101"). The issuer conducted the offering under the "northbound" multijurisdictional disclosure system ("MJDS") in National Instrument 71-101 ("NI 71-101"), which makes NI 41-101 inapplicable to an MJDS offering under NI 71-101. As a result, the issuer did not have an exemption from the prospectus requirements for its marketing activities under securities laws. The issuer argued that there was no policy reason for excluding MJDS prospectus offerings from the new marketing rules and that no explicit statements from the regulators had been made that this was the intention. The issuer was ultimately granted an exemption from the prospectus requirements for the marketing activities that it had already conducted.


Tips and guidelines to assist our clients in understanding the law and becoming better drafters.

Drafting Tip of the Month: Recitals
By: Corporate Counsel Bulletin Board

Including Recitals in an agreement is only necessary if it serves a purpose (or may later serve a purpose) in explaining the nature of the deal. Recitals should provide factual background to the transaction or relationship of the parties.

However, since Recitals may be used by a court as an aid to interpret the substantive provisions, their drafting should not be taken lightly. In more complex transactions, Recitals are particularly useful to someone who was not a party to the contract negotiations, and who would otherwise be unaware of certain subtleties when subsequently reviewing the agreement.

The format of the paragraphs should be "A," "B," "C," etc., so as not to create any confusion with the numbering in the agreement itself.

Avoid using the "WHEREAS" formulation for Recitals, as this is archaic. See also this blog posting on why it is preferable not to define terms in the Recitals.

You should not include as matter of course in every agreement a blanket statement that the parties represent the truth of the Recitals. There may, however, be circumstances where it will be important to have one of the parties make that representation.


Information and intelligence about what public companies are doing in the market.

Public Offerings [lead underwriters noted]

Equity Offerings

  • On January 22, BSM Technologies Inc. filed a preliminary short form prospectus to qualify the distribution of 7,333,334 common shares for gross proceeds of $22,000,002. [Clarus Securities Inc. and Paradigm Capital Inc ]
  • On January 22, Canexus Corporation filed a preliminary short form prospectus to qualify the distribution of 26,800,000 common shares for gross proceeds of $150,080,000. [National Bank Financial Inc., CIBC World Markets Inc., Scotia Capital Inc. and BMO Nesbitt Burns Inc.]
  • On January 22, Dividend Growth Split Corp. filed a preliminary short form prospectus to qualify the distribution of Preferred Shares and Class A Shares. The number of securities and distribution amount are to be determined. [RBC Dominion Securities Inc., CIBC World Markets Inc., Scotia Capital Inc. and TD Securities Inc.]
  • On January 22, Peyto Exploration & Development Corp. filed a preliminary short form prospectus to qualify the distribution of 4,420,000 common shares for gross proceeds of $150,280,000. [BMO Nesbitt Burns Inc.]
  • On January 22, Uranium Participation Corporation filed a preliminary short form prospectus to qualify the distribution of 9,150,000 common shares for gross proceeds of $50,050,500.00. [Cormark Securities Inc.]
  • On January 27, Lomiko Metals Inc. filed a preliminary short form prospectus to qualify the distribution of (i) a minimum of 6,818,182 units and a maximum of 27,272,727 units at $0.11 per unit and (ii) a maximum of 7,692,308 flow-through units at $0.13 per Flow-Through Unit, for minimum total gross proceeds of $750,000 and maximum total gross proceeds of $4,000,000. [Secutor Capital Management Corporation]
  • On January 27, Opsens Inc. filed a preliminary short form prospectus to qualify the distribution of units for gross proceeds of $10,000,000. Number of units to be determined. [RBC Dominion Securities Inc.]
  • On January 27, Torex Gold Resources Inc. filed a preliminary short form prospectus to qualify the distribution of 104,200,000 units for gross proceeds of $125,040,000. [BMO Nesbitt Burns Inc.]
  • On January 27, Tourmaline Oil Corp. filed a preliminary short form prospectus to qualify the distribution of 4,000,000 common shares for gross proceeds of $190,000,000. [Peters & Co. Limited]
  • On January 28, Madalena Energy Inc. filed a preliminary short form prospectus to qualify the distribution of 28,571,500 common shares for gross proceeds of $20,000,050. [Haywood Securities Inc., Mackie Research Capital Corporation and RBC Dominion Securities Inc.]
  • On January 28, Sandvine Corporation filed a preliminary short form prospectus to qualify the distribution of 10,000,000 common shares for gross proceeds of $33,000,000. [Canaccord Genuity Corp.]
  • On January 28, Timmins Gold Corp. filed a preliminary short form prospectus to qualify the distribution of 16,670,000 common shares for gross proceeds of $25,005,000. [Borden Ladner Gervais LLP (Canada) and Shearman & Sterling LLP (USA) (U); RBC Dominion Securities Inc.]

Upcoming Shareholder Meetings

On January 23, a take-over bid circular was filed under the profile of Animas Resources Ltd. ("Animas") by GoGold Resources Inc. ("GoGold") offering to purchase (i) all of the issued and outstanding common shares of Animas and (ii) all of the issued and outstanding share purchase warrants of Animas on the basis of $0.07 in cash and 0.0851 of a GoGold Share for each Animas Share (for a deemed offer price of $0.15 for each Animas Share) and one GoGold Share for each $0.94 of cumulative in-the-money value of Animas Warrants.

On February 24, 2014, shareholders of Paladin Labs Inc. will be asked to vote to approve an arrangement among Paladin, Endo Health Solutions Inc., Endo International Limited (formerly Sportwell Limited) and various other entities, pursuant to which Paladin and Endo Health Solutions will be acquired by Endo International Limited, a newly formed Irish holding company.


Capital Markets

Research Paper: IPO Rewards to Tech Companies with "Slack"

Strategy + Business recently reported on a new study [subscription required] by Fariss-Terry Mousa and Richard Reed that finds markets give tech companies higher IPO valuations if they possess "slack", which is described as a significant difference between available resources and those being used. Beneficial slack included financial slack, innovation slack and managerial slack. The authors suggested that slack is a signal to investors that a company has "untapped potential", but warn that only moderate slack is of no benefit, being "mere window dressing".

Corporate Governance

In time for the 2014 proxy season, Institutional Shareholder Services (ISS) released their Canadian Corporate Governance Policy last November. At the same time, they launched a new consultation process as part of their consideration of certain longer term policy changes. Among the issues they are currently reviewing is that of director tenure.

In a backgrounder posted on their website, ISS notes that various academic studies have produced mixed results as to whether "long-serving directors" are more likely to be associated with governance problems, or whether such directors are considered to be more capable in monitoring and overseeing their firms than their less experience colleagues. ISS notes that investors are concerned with the length of directors' tenure, but that there is little appetite for a policy of opposing elections based solely on tenure.

The amount of service on a board that would be considered a "lengthy tenure" is left undefined in the document, and this issue does not form the basis of current ISS policy. However, ISS is soliciting feedback from stakeholders until February 14, 2014 on this and other issues.


Predicting the Next Hotspots in Toronto: Bacon & Shuffleboard

We all know that if it's hot in New York City, it will show up in Toronto soon enough. So, what can we expect to arrive in Toronto next? Well, Eater is reporting that NYC has (at long last) an all-bacon restaurant, BarBacon. One of the items on the menu is a bacon tasting flight – 2 strips of 5 varieties of bacon. It also reports that Brooklyn's first shuffleboard bar, the Royal Palms Shuffleboard Club, is opening within the week. Remember, we predicted it here first!


Recent Transactions

We acted for Wellgreen Platinum Ltd., a Canadian mining company focused on the acquisition and development of platinum group metals projects, in connection with a private placement equity financing which was completed in two tranches. Click here for more details.

We acted for NexGen Energy Ltd., a Canadian-based uranium exploration and development company, in connection with its private placement of flow-through shares. The proceeds of the financing will be used by the corporation for exploration at its project in the Athabasca Basin in Saskatchewan. Click here for more details.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Gregory Hogan
Joyce Lim
Sean Williamson
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