Element 29 Resources Inc.
Headnote
Relief from the requirements otherwise applicable to the Filer as a reporting issuer who is not a venture issuer -- Filer is cross listed on the TSX Venture Exchange and the Venture Capital segment (Segmento de Capital de Riesgo) of the Bolsa de Valores de Lima -- The Venture Capital segment (Segmento de Capital de Riesgo) of the Bolsa de Valores de Lima imposes the requirements of the TSXV on the Filer -- Relief granted subject to conditions, including that the Filer complies with the requirements of Canadian securities legislation applicable to a venture issuer and remains listed on the TSX Venture Exchange and the Venture Capital segment (Segmento de Capital de Riesgo) of the Bolsa de Valores de Lima.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.
National Instrument 41-101 General Prospectus Requirements, s. 19.1.
National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1.
National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, s. 5.1.
National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, s. 8.6.
National Instrument 52-110 Audit Committees, s. 8.1.
National Instrument 58-101 Disclosure of Corporate Governance Practices, s. 3.1.
Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, s. 9.1.
March 28, 2023
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 ELEMENT 29 RESOURCES INC. (the "Filer")
DECISION
Background
The principal regulator in the jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation") for relief from:
(a) the requirements otherwise applicable to the Filer as a reporting issuer who is not a venture issuer in each of the following instruments, including the forms thereof (collectively, the "Instruments"):
(i) National Instrument 41-101 General Prospectus Requirements;
(ii) National Instrument 51-102 Continuous Disclosure Obligations;
(iii) National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;
(iv) National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings;
(v) National Instrument 52-110 Audit Committees; and
(vi) National Instrument 58-101 Disclosure of Corporate Governance Practices;
in connection with the listing of the Filer's common shares on the Bolsa de Valores de Lima (the "Lima Exchange") (the "Disclosure Relief");
(b) the formal valuation requirements in sections 4.3 and 5.4 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") (the "Valuation Relief"); and
(c) the minority approval requirement in section 5.6 of MI 61-101 (the "Minority Approval Relief" and collectively with the Disclosure Relief and the Valuation Relief, the "Exemption Sought").
Securities legislation imposes obligations for all reporting issuers. There are different obligations applicable to reporting issuers who are venture issuers and to those that are non-venture issuers. The Exemption Sought, if granted, would permit the Filer to comply with the obligations applicable to venture issuers notwithstanding that the Filer does not meet the criteria in the definition of "venture issuer".
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator (the "Principal Regulator"); 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 British Columbia and Alberta.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is incorporated under the Business Corporations Act (British Columbia) and its registered and head office is in Vancouver, British Columbia. The Filer is a mining company. The Filer's principal assets, the Elida and Flor de Cobre projects, are located in Peru.
2. The Filer is a reporting issuer in British Columbia, Ontario and Alberta.
3. The Filer is authorized to issue an unlimited number of common shares without par value; as of March 22, 2023, the Filer has 87,203,360 common shares issued and outstanding.
4. The Filer's common shares (the "Shares") trade on the TSX Venture Exchange (the "TSXV") under the trading symbol "ECU".
5. The Shares have also been listed on the Lima Exchange since November 16, 2022. No Shares have been traded on the Lima Exchange as of the date of this decision. The Filer sought a listing on the Lima Exchange to increase the opportunity for South American investors to invest in the Filer.
6. In the Instruments, the definition of "venture issuer" excludes a reporting issuer who, at the relevant time, has "any of its securities listed or quoted on any of the Toronto Stock Exchange, Aequitas NEO Exchange Inc., a U.S. marketplace or a marketplace outside of Canada and the United States of America other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc" ("Venture Issuer Definition").
7. As the Lima Exchange is a marketplace and hence a "marketplace outside of Canada", the Filer does not, subsequent to November 16, 2022, meet the criteria in the Venture Issuer Definition.
8. The Filer is not in default of any applicable securities legislation in any jurisdiction, except that from November 16, 2022 to the date of this decision, the Filer has been in default of any applicable securities legislation requirements in Ontario, British Columbia and Alberta that apply to reporting issuers that are not venture issuers by virtue of its listing on the Lima Exchange.
9. The Filer acknowledges that any right of action, remedy, penalty or sanction available to any person or company or to a securities regulatory authority against the Filer from November 16, 2022 until the date of this decision are not terminated or altered as a result of this decision.
10. The Lima Exchange has two main segments on which securities may be traded. The Shares are listed on the junior segment of the Lima Exchange -- the Venture Capital segment (Segmento de Capital de Riesgo) ("Venture Capital Segment"). The Venture Capital Segment is a junior segment and is a specialized market implemented by the Lima Exchange to provide junior mining companies the opportunity to obtain funding through the Peruvian capital markets. The listing of a security of an issuer on this segment is automatic (subject to submission and acceptance of the required application forms and sponsorship) if that issuer is already listed on certain stock exchanges, including the TSXV ("Dual Listing Program").
11. The Lima Exchange defers to the requirements of the issuer's primary stock exchange for issuer's that list on the Venture Capital Segment through the Dual Listing Program. The Venture Capital Segment of the Lima Exchange is junior or equivalent to the TSXV in terms of its requirements and does not have any minimum listing, listing maintenance or continuous disclosure requirements for TSXV-listed issuers that are more onerous as compared with the TSXV as it defers to the requirements of the TSXV with respect to TSXV-listed issuers, including the Filer. For a listing application, a TSXV-listed issuer must file a sponsorship report by a local broker dealer acting as sponsor for the listing. In addition, an issuer must file all public disclosure documents filed in its home jurisdiction with the Lima Exchange. The Lima Exchange does not have any requirements for a mining issuer to hold a significant interest in a qualifying property, expenditure requirements or work program or exploration work limits.
12. The Lima Exchange requires the Filer to comply with applicable laws and regulations of the Filer's home jurisdiction, including the policies of the TSXV. The Filer will comply with all applicable laws and regulations of the Filer's home jurisdiction, including the policies of the TSXV.
13. The information that the Filer has provided regarding the Venture Capital Segment of the Lima Exchange and its status as a junior market for the purposes of review by staff of the Principal Regulator is accurate as at the date of this decision.
14. The Filer monitors the requirements of the Venture Capital Segment of the Lima Exchange on an ongoing basis, through both its Peruvian sponsor, Kallpa Securities SAB, and its Peru Country Manager. The Filer's Peru Country Manager is designated as the Filer's representative with the Lima Exchange.
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 the Exemption Sought is granted provided that:
1. the Filer complies with all the conditions and requirements of Canadian securities legislation applicable to a reporting issuer that satisfies the Venture Issuer Definition, including the rules and policies of the TSXV;
2. the representations listed in paragraphs 10 to 13 above continue to be true;
3. the Filer will monitor the representations made in paragraphs 10 to 13 above on an ongoing basis through both its Peruvian sponsor, Kallpa Securities SAB, and its Peru Country Manager, including periodic reviews of the requirements of the Venture Capital Segment of the Lima Exchange and its status as a junior market, and inform the Principal Regulator of any material change affecting the truth of said representations;
4. the Filer will inform the Principal Regulator of any material change regarding the Venture Capital Segment of the Lima Exchange in terms of its requirements, the minimum listing requirements, the listing maintenance requirements or any other changes which relate to its status as a junior market and inform the Principal Regulator of whether any such change impacts its status as a junior market;
5. the Venture Capital Segment of the Lima Exchange is not restructured in a manner that makes it unreasonable to conclude that it is still a junior market and that the representations listed in paragraphs 10 to 13 above continue to be true;
6. the Filer continues to have the Shares listed on the TSXV;
7. the Filer does not graduate from the Venture Capital Segment of the Lima Exchange to a more senior segment of the Lima Exchange;
8. the Filer does not have any of its securities listed or quoted on any of the Toronto Stock Exchange, Aequitas NEO Exchange Inc., a U.S. marketplace, or a marketplace outside of Canada and the United States of America other than the Lima Exchange, the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc;
9. in the event an exemption under Canadian securities legislation applies to a requirement in the Instruments applicable to the Filer, and a condition to the exemption requires the issuer to be a venture issuer, the Filer may invoke the benefit of that exemption if the Filer meets the conditions required by the exemption except for the condition that the Filer be a venture issuer;
10. in the event an exemption under Canadian securities legislation applies to a requirement applicable to the Filer as a reporting issuer who is not a venture issuer in the Instruments, and a condition to the exemption requires the issuer to not be a venture issuer, the Filer does not invoke the benefit of the exemption; and
11. for the purposes of the Minority Approval Relief, in addition to conditions 1 through 10 above, the Filer would be entitled to rely on the exemption from the requirement to obtain minority approval set out in subsection 5.7(1)(b) of MI 61-101, but for the fact that the Filer does not satisfy the requirements of subsection 5.7(1)(b)(i) of MI 61-101.