I-80 Gold Corp.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted from the requirement to file a BAR for an acquisition that is not significant to the Filer from a practical, commercial, business, or financial perspective.
Applicable Legislative Provisions
National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.4 and 13.1.
June 25, 2021
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 I-80 GOLD CORP. (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") exempting the Filer from the requirement in Part 8 of National Instrument 51-102 -- Continuous Disclosure Obligations ("NI 51-102") that a business acquisition report (a "BAR") be prepared and filed with the applicable Canadian securities regulatory authorities in connection with the acquisition (the "Acquisition") of Osgood Mining Company, LLC ("Osgood") by the Filer (the "Requested Exemptive Relief").
Under National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions ("NP 11-203"):
(a) the Ontario Securities Commission is the principal regulator for the Application; and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 -- Passport System ("MI 11-102") is intended to be relied upon in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia, New Brunswick, Newfoundland, Prince Edward Island and Newfoundland and Labrador.
Terms defined in National Instrument 14-101 -- Definitions, MI 11-102 or NI 51-102 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 is a corporation governed by the Business Corporations Act (British Columbia) (the "BCBCA") and was incorporated on November 10, 2020.
2. The financial year-end of the Filer is December 31.
3. The Filer is a reporting issuer in each of the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador (the "Jurisdictions") and is not in default of the securities legislation thereof.
4. The Filer's head office is located at 1100 Russell Street, Thunder Bay, Ontario, P7B 5N2. Its registered office is located at Suite 2500 Park Place, 666 Burrard Street, Vancouver, British Columbia, V6B 2X8.
5. The common shares of the Filer are listed and posted for trading on the Toronto Stock Exchange under the symbol "IAU".
6. The Filer is a mining company engaged in the exploration, development and production of gold and silver mineral deposits in the United States, with a particular focus on the State of Nevada.
7. On December 16, 2020, Premier Gold Mines Limited ("Premier"), Equinox Gold Corp. ("Equinox Gold") and the Filer entered into a definitive arrangement agreement (the "Arrangement Agreement") whereby Equinox Gold agreed to acquire all of the outstanding shares of Premier by way of a plan of arrangement (the "Arrangement").
8. As part of the Arrangement, Premier transferred its ownership interest in its 100% wholly-owned subsidiary Premier USA to the Filer in consideration for common shares of the Filer, so that the Filer would become the indirect owner of the U.S. gold projects then owned by Premier through Premier USA (the "Premier USA Ownership Interests").
9. The Arrangement was completed on April 7, 2021. Pursuant to the Arrangement, Equinox Gold acquired all of the issued and outstanding common shares of Premier and Premier transferred the Premier USA Ownership Interests to the Filer. Under the terms of the Arrangement, Premier shareholders received for each Premier share: (i) 0.1967 of a common share of Equinox Gold, plus (ii) 0.4 of a common share of the Filer. In connection with the Arrangement, Premier distributed 70% of the issued and outstanding common shares of the Filer to Premier shareholders, while Equinox Gold (through its 100% ownership in Premier) held approximately 30% of the issued and outstanding common shares of the Filer upon the completion of the Arrangement.
10. The principal mineral projects comprising the Premier USA Ownership Interests included: (i) a 40% interest in South Arturo mine located in Elko County, Nevada, and (ii) a 100% interest in the McCoy-Cove gold properties located on the Eureka-Battle Mountain Trend in Nevada. As of March 31, 2021, the Premier USA Ownership Interests have a total asset value of approximately US$161 million.
11. The Filer became a reporting issuer in the Jurisdictions on April 7, 2021, as a result of the Arrangement.
12. On August 10, 2020, Premier and Premier USA entered into a definitive purchase agreement (the "Getchell Agreement") with affiliates of Waterton Global Resource Management ("Waterton") for the acquisition of all of the outstanding membership interests of Osgood, the 100% owner of the Getchell project located in the Getchell gold belt near Winnemucca, Nevada (the "Getchell Project"). The Getchell Agreement was amended on December 15, 2020 to, among other things, include the Filer as a party following its incorporation. The Acquisition was completed by the Filer and Premier USA on April 14, 2021, following which Osgood became an indirect, wholly-owned subsidiary of the Filer through Premier USA.
13. The possibility of the Acquisition was contemplated at the time a management information circular of Premier dated as of January 25, 2021, was prepared and filed on SEDAR in connection with the Arrangement (the "Arrangement Circular"). As such, historical audited annual financial statements and unaudited interim financial statements and a pro forma financial statement as detailed in paragraph 15 contemplating the Acquisition were included in the Arrangement Circular.
14. As at the date of the Acquisition, the following are the relevant financial statements relating to the Filer and Premier USA (reflecting the value of the Premier USA Ownership Interests):
(a) the audited financial statements of the Filer for the 52 day period from incorporation (November 10, 2020) to December 31, 2020 (the "i-80 2020 Annual FS");
(b) the audited financial statements of Premier USA for the year ended December 31, 2020 (the "Premier USA 2020 Annual FS")
(c) the condensed interim financial statements of the Filer for the three-months ended March 31, 2021 (the "i-80 Q1 2021 Interim FS"); and
(d) the condensed consolidated interim financial statements of Premier USA for the three months ended March 31, 2021 (the "Premier USA Q1 2021 Interim FS").
15. In connection with the Acquisition, the Arrangement Circular included the following financial statements of Osgood along with certain pro forma financial statements, which reflect the pro forma financial position of the Filer after giving effect to: (i) the contribution and transfer of the Premier USA Ownership Interests, and (ii) the Acquisition, on the basis that the Getchell Project would be considered a material part of the business of the Filer following the Arrangement:
(a) the audited financial statements of Osgood for the years ended December 31, 2019, 2018 and 2017 (the "Osgood 2019 Annual FS");
(b) the unaudited interim financial statements of Osgood for the three months ended September 30, 2020 (the "Osgood Q3 2020 Interim FS"). and
(c) the pro forma financial statements of the Filer, after giving effect to the transfer of the Premier USA Ownership Interest, assuming the Acquisition is completed, which includes pro forma adjustments for the Acquisition: (i) consolidated statements of loss for the year ended December 31, 2019; (ii) consolidated statements of financial position as at September 30, 2020; and (iii) consolidated statements of income for the nine-months ended September 30 2020 (the "Consolidated Pro Forma").
16. Premier was a reporting issuer in each of the provinces of Canada. On May 4, 2021, Premier ceased to be a reporting issuer in all jurisdictions of Canada in which it was a reporting issuer.
17. A summary of the application of the required significance tests prescribed by Section 8.3(2) of NI 51-102 to the Acquisition is outlined below.
(a) Standalone basis: Based on the standalone nominal i-80 2020 Annual FS and the unaudited financial statements of Osgood for the year ended December 31, 2020, the Acquisition would constitute a "significant acquisition" based on the "asset test", "investment test" and "profit or loss test" pursuant to subsection 8.3(2) of NI 51-102, given that the i-80 2020 Annual FS demonstrated $1 in asset and nil profit or loss.
Given that the Filer is a newly incorporated entity, existing only for 52 days prior to the most recent year-end and was established for the purposes of the Arrangement and at no time during that period was the Filer a reporting issuer, the application of the significance test leads to an anomalous result in that the significance of the Acquisition is exaggerated out of proportion to its significance on an objective and substantive basis.
As at the date of the Acquisition, April 14, 2021, the Filer had received or held, among other things, the Premier USA Ownership Interests as part of its assets and operations. As the Arrangement was completed after March 31, 2021, the i-80 Q1 2021 Interim FS and the Premier USA Q1 2021 Interim FS were filed on a standalone basis. However, the Filer reports on a consolidated basis with Premier USA, as will be reflected in the unaudited interim financial statements of the Filer for the three and six months ended June 30, 2021. Accordingly, in order to accurately reflect the financial position of the Filer upon becoming a reporting issuer subsequent to the Arrangement and prior the Acquisition, the combined financial statements of the Filer and Premier USA should be utilized for the application of the significance tests, as this will be more reflective of the impact of the Acquisition from a practical, commercial, business or financial perspective.
(b) Combined Basis: Based on the combined i-80 2020 Annual FS and Premier USA 2020 Annual FS, which is a wholly-owned subsidiary of the Filer as at the date of the Acquisition, the Acquisition would constitute a "significant acquisition" based on the "investment test", representing 45.42% of the reporting issuer's assets (on a combined basis), and "profit or loss test", representing 57.06% of the reporting issuer's net loss (on a combined basis), pursuant to subsection 8.3(2) of NI 51-102. It would not constitute a "significant acquisition" based on the "asset test" as the Acquisition represents only 13.64% of the reporting issuer's assets (on a combined basis).
18. Pursuant to subsection 8.3(3) of NI 51-102, despite subsection 8.3(1) of NI 51-102, if an acquisition of a business or related business is significant based on the significance tests in subsection 8.3(2) of NI 51-102, a reporting issuer that is not a venture issuer may re-calculate the significance using the optional significance tests in subsection 8.3(4) of NI 51-102.
19. On the basis of a consolidation of the Filer and Premier USA, which had occurred at the time of the Acquisition but had not yet been reflected in any financial statements, the Acquisition would not constitute a "significant acquisition" pursuant to subsection 8.3(4) of NI 51-102 under two or more of the optional significance tests. The Acquisition is not a "significant acquisition" for the purposes of subsection 8.3(1) of NI 51-102, on a combined basis.
20. The combined approach correlates much more closely to the actual significance of the Acquisition to the Filer from a business, operational and financial perspective.
21. The Filer is of the view that the Acquisition is not a significant acquisition to it from a practical, commercial, business or financial perspective.
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 the Requested Exemptive Relief is granted.