Avion Gold Corporation and Endeavour Mining Corporation (Re), 2012 CanLII 67460

Headnote National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – application from subsidiary (Subco) of parent company (Parent) for a decision under section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) exempting Subco from the requirements of NI 51-102; for a decision under section 8.6 of National Instrument 52-109Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109) exempting Subco from the requirements of NI 52-109; for a decision under section 121(2)(a)(ii) of the Securities Act (Ontario) exempting the insiders of Subco from the insider reporting requirements of the Act; and for a decision under section 6.1 of National Instrument 55-102 System for Electronic Disclosure by Insiders exempting the insiders of Subco from the requirement to file an insider profile – Subco is a wholly-owned subsidiary of Parent – Subco is a reporting issuer and has options outstanding – Options entitle holder to acquire common shares of Parent – Options do not qualify as “designated exchangeable securities” under exemption in section 13.3 of NI 51-102 – relief granted on conditions substantially similar to the conditions contained in section 13.3 of NI 51-102.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c.S.5, as am., ss. 107 and 121(2)(a)(ii) National Instrument 51-102 Continuous Disclosure Obligations, ss. 13.1 and 13.3 National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings s. 8.6 National Instrument 55-102 System for Electronic Disclosure by Insiders, s. 6.1

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 Avion Gold Corporation (the “Filer”) and Endeavour Mining Corporation (“Endeavour”)

DECISION

Background

1. 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”) that:

(a) the Filer be exempt from the requirements of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”) and related Legislation (the “Continuous Disclosure Requirements”);

(b) the Filer be exempt from the requirements of National Instrument 52-109 – Certification of Disclosure in Issuers' Annual and Interim Filings (“NI 52-109”) (the “Certification Requirements”); and

(c) the insiders of the Filer be exempt from insider reporting requirements under Part XXI of the Legislation and the requirement to file an insider profile under National Instrument 55-102 - System for Electronic Disclosure by Insiders (“NI 55-102”) (together, the “Insider Reporting Requirements”) in respect of the securities of the Filer.

(Collectively, the “Exemption Sought”)

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

(a) the Ontario Securities Commission (the “OSC”) is the principal regulator for this 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 British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador (together with Ontario, the “Reporting Jurisdictions”).

Interpretation

3. 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

4. This decision is based on the following facts represented by the Filer and Endeavour:

(a) The Filer is a corporation existing under the laws of Ontario with a head office located in Toronto, Ontario and is a reporting issuer in each of the Reporting Jurisdictions. As at October 27, 2012, the authorized capital of the Filer consisted of an unlimited number of common shares (“Avion Shares”). As at October 4, 2012, 443,988,093 Avion Shares were issued and outstanding, and stock options to acquire an additional 35,063,600 Avion Shares (“Avion Options”) were also outstanding. As at October 17, 2012, the Avion Shares were listed on the Toronto Stock Exchange (the “TSX”) under the symbol "AVR".

(b) Endeavour is an exempted company with limited liability existing under the laws of the Cayman Islands and is a reporting issuer in each of the Reporting Jurisdictions. The authorized capital of Endeavour is US$20,000,000 divided into 1,000,000,000 ordinary shares (“Endeavour Shares”) and 1,000,000,000 undesignated shares with a par value of $0.01 each (undesignated shares). As at October 17, 2012, no undesignated shares and 245,091,769 Endeavour Shares were issued and outstanding. The Endeavour Shares are listed on the TSX under the symbol "EDV" and CHESS Depositary Interests in respect of Endeavour Shares are listed for trading on the Australian Securities Exchange under the symbol "EVR".

(c) Effective October 18, 2012, Endeavour, through its wholly-owned subsidiary, Endeavour Gold Corporation, acquired all of the issued and outstanding voting securities of the Filer by way of a plan of arrangement under section 182 of the Business Corporations Act (Ontario), as amended (the “OBCA”).

(d) Pursuant to the Arrangement, former holders of Avion Shares received either: (i) Endeavour Shares or (ii) non-voting redeemable preferred shares in the capital of the Filer (“Exchangeable Shares”), which are exchangeable for Endeavour Shares. All outstanding Avion Options were adjusted such that they are exercisable only for Endeavour Shares (“Adjusted Options”).

(e) As at the close of trading on October 22, 2012, the Avion Shares were de-listed from the TSX. No other securities of the Filer are listed on a marketplace as defined in National Instrument 21-101 – Certain Capital Market Participants).

(f) In accordance with the rights and restrictions attaching to the Exchangeable Shares and certain contractual arrangements, the Exchangeable Shares have been designed to provide the holders thereof with economic and voting rights which are, as nearly as possible, equivalent to the Endeavour Shares.

(g) Pursuant to an exchangeable loan agreement dated August 7, 2012 between a subsidiary of Endeavour (“Endeavour Sub”), the Filer and certain of its subsidiaries (the “Exchangeable Loan Agreement”), Endeavour Sub extended a US$20 million non-revolving exchangeable term loan, which loan is exchangeable for Avion Shares in accordance with the terms thereof. Any securities of the Filer issued in connection with such loan will be (indirectly) beneficially owned by Endeavour.

(h) The Filer also has certain contractual obligations (the “Contractual Obligations”) pursuant to a mineral property acquisition agreement (“Mineral Property Acquisition Agreement”) in which Avion Shares were (subject to the terms thereof) issuable in exchange for the acquisition of interests in certain properties. On October 19, 2012, the Mineral Property Acquisition Agreement was amended to have Endeavour guarantee the Contractual Obligations as primary obligor and to satisfy such obligations through the issuance of Endeavour Shares (as opposed to Avion Shares).

(i) The Exchangeable Shares and the Adjusted Options will be the only other outstanding securities of the Filer other than the Contractual Obligations, which obligations will be satisfied by the issuance of Endeavour Shares. The Filer will remain a reporting issuer in each of the Reporting Jurisdictions.

(j) The Filer is not entitled to rely on the exemptions in Section 13.3 of NI 51-102 for issuers of exchangeable securities because the Adjusted Options do not qualify as "designated exchangeable securities" as defined in NI 51-102 since none of the holders of the Adjusted Options will have voting rights in respect of Endeavour in their capacity as optionholders.

(k) The exemptions available to exchangeable security issuers in NI 52-109 and NI 55-102 are not available to the Filer because these exemptions require exchangeable security issuers to comply with Section 13.3 of NI 51-102.

(l) Neither the Filer nor Endeavour is in default of any requirements under securities legislation in the Reporting Jurisdictions.

(m) The Filer has no intention of accessing the capital markets by issuing any further securities to the public and no intention of issuing securities to the public other than those that will be outstanding on completion of the Arrangement.

(n) Continuous disclosure about Endeavour will be of greater relevance to holders of Exchangeable Shares and Adjusted Options than continuous disclosure about the Filer because the economic value of the Exchangeable Shares and Adjusted Options is ultimately determined by the operational and financial performance of Endeavour and not the Filer, and because the Exchangeable Shares and Adjusted Options are only exchangeable or exercisable for Endeavour Shares. In addition, the Filer, as a wholly-owned subsidiary of Endeavour will be consolidated with Endeavour for the purposes of financial and operational reporting.

Decision

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

6. The decision of the principal regulator under the Legislation is that the Continuous Disclosure Requirements do not apply to the Filer provided that:

(a) Endeavour is the beneficial owner of all of the issued and outstanding voting securities of the Filer;

(b) Endeavour is a reporting issuer in a designated Canadian jurisdiction (as defined in NI 51-102) and has filed all documents it is required to file under NI 51-102;

(c) the Filer does not issue any securities, and does not have any securities outstanding, other than:

(i) the Exchangeable Shares;

(ii) the Adjusted Options;

(iii) the securities issued to and held by Endeavour or an affiliate of Endeavour;

(iv) the Contractual Obligations;

(v) debt securities issued to and held by banks, loan corporations, loan and investment corporations, savings companies, trust corporations, treasury branches, savings or credit unions, financial services cooperatives, insurance companies or other financial institutions; or

(vi) securities issued under exemptions from the prospectus requirement in Section 2.35 and registration requirement in Section 3.35 of NI 45-106;

(d) the Filer files in electronic format under its SEDAR profile either:

(i) if the Filer is a reporting issuer in the local jurisdiction, a notice indicating that the Filer is relying on the continuous disclosure documents filed by Endeavour and setting out where those documents can be found in electronic format, or

(ii) copies of all documents Endeavour is required to file under securities legislation, other than in connection with a distribution, at the same time as the filing by Endeavour of those documents with a securities regulatory authority or regulator;

(e) Endeavour concurrently sends to all holders of Exchangeable Shares all disclosure materials that would be required to be sent to holders of Endeavour Shares in the manner and at the time required by securities legislation;

(f) Endeavour concurrently sends to all holders of Adjusted Options all disclosure materials that would be required to be sent to holders of similar options of Endeavour in the manner and at the time required by securities legislation;

(g) Endeavour complies with securities legislation in respect of making public disclosure of material information on a timely basis;

(h) Endeavour immediately issues in Canada and files any news release that discloses a material change in its affairs;

(i) the Filer issues in Canada a news release and files a material change report in accordance with NI 51-102 for all material changes in respect of the affairs of the Filer that are not also material changes in the affairs of Endeavour; and

(j) Endeavour includes in all mailings of proxy solicitation materials to holders of Exchangeable Shares and, if applicable, Adjusted Options, a clear and concise statement that:

(i) explains the reason the mailed material relate solely to Endeavour;

(ii) indicates that Exchangeable Shares are the economic equivalent of the Endeavour Shares, and, if applicable, that the Adjusted Options are exercisable for Endeavour Shares; and

(iii) describes the voting rights associated with the Exchangeable Shares.

2. The further decision of the principal regulator under the Legislation is that the Certification Requirements do not apply to the Filer provided that:

(a) the Filer is not required to, and does not, file its own Interim Filings and Annual Filings (as those terms are defined under NI 52-109);

(b) the Filer files in electronic format under its SEDAR profile either:

(i) copies of Endeavour's annual certificates and interim certificates at the same time as Endeavour is required under NI 52-109 to file such documents; or

(ii) a notice indicating that it is relying on Endeavour's annual certificates and interim certificates and setting out where those documents can be found for viewing on SEDAR; and

(c) the Filer is exempt from or otherwise not subject to the Continuous Disclosure Requirements and the Filer and Endeavour are in compliance with the conditions set out in paragraph 1 above.

3. The further decision of the principal regulator under the Legislation is that the Insider Reporting Requirements do not apply to any insider of the Filer in respect of securities of the Filer provided that:

(a) if the insider is not Endeavour:

(i) the insider does not receive, in the ordinary course, information as to material facts or material changes concerning Endeavour before the material facts or material changes are generally disclosed; and

(ii) the insider is not an insider of Endeavour in any capacity other than by virtue of being an insider of the Filer;

(b) Endeavour is the beneficial owner of all of the issued and outstanding voting securities of the Filer;

(c) if the insider is Endeavour, the insider does not beneficially own any Exchangeable Shares other than securities acquired through the redemption, retraction or purchase of the Exchangeable Shares and not subsequently traded by the insider;

(d) if the insider is Endeavour, the insider does not beneficially own any Adjusted Options other than securities acquired through the exercise of the Adjusted Options and not subsequently traded by the insider;

(e) Endeavour is a reporting issuer in a designated Canadian jurisdiction;

(f) the Filer does not issue any securities, and does not have any securities outstanding, other than:

(i) the Exchangeable Shares;

(ii) the Adjusted Options;

(iii) the securities issued to and held by Endeavour or an affiliate of Endeavour;

(iv) the Contractual Obligations;

(v) debt securities issued to and held by banks, loan corporations, loan and investment corporations, savings companies, trust corporations, treasury branches, savings or credit unions, financial services cooperatives, insurance companies or other financial institutions; or

(vi) securities issued under exemptions from the prospectus requirement in Section 2.35 and registration requirement in Section 3.35 of NI 45-106; and

(g) the Filer is exempt from or otherwise not subject to the Continuous Disclosure Requirements and the Filer and Endeavour are in compliance with the conditions set out in paragraph 1 above.

As to the Exemption Sought (other than from the Insider Reporting Requirements under Part XXI of the Legislation):

Dated this 7th day of November, 2012.

“Shannon O’Hearn”

Manager, Corporate Finance Branch

Ontario Securities Commission

As to the Exemption Sought from the Insider Reporting Requirements under Part XXI of the Legislation:

Dated this 7th day of November, 2012.

“Christopher Portner” “Sarah B. Kavanagh”

Commissioner

Ontario Securities Commission

Commissioner

Ontario Securities Commission