In the Matter of Lipari Diamond Mines Ltd., 2024 CanLII 115295

Ontario Commission des 22nd Floor 22e étage Securities valeurs mobilières 20 Queen Street West 20, rue queen ouest Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8

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 LIPARI DIAMOND MINES LTD. (the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) for an exemption from the requirements of subparagraph 4.10(2)(a)(ii) of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) and item 5.2 of Form 51-102F3 Material Change Report (Form 51-102F3), to file all of the financial statements of Mineração Montes Claros Ltda. (MMC), a subsidiary of the Filer (being, the reverse takeover acquirer (as such term is defined in NI 51-102)) that would be required to be included in the form of prospectus that the reverse takeover acquirer was eligible to use prior to the reverse takeover for a distribution of securities in the Jurisdictions (as defined below) (collectively, the Requested Relief).

Under National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission 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 Alberta, British Columbia, New Brunswick, Nova Scotia, Quebec, Newfoundland, Prince Edward Island, Manitoba and Saskatchewan (collectively with Ontario, the Jurisdictions).

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 was incorporated under the laws of the Province of British Columbia on December 6, 2021, for the purpose of acquiring interests in certain mining properties. These property interests were held by three separate entities: Sopemi – Sociedade de Pesquisa E Exploração Mineira, S.A. (Sopemi), a corporation organized under the laws of Angola, Lipari Mineração Ltda. (LML), a corporation organized under the laws of Brazil and MMC, a corporation organized under the laws of Brazil.
2. On January 26, 2022, the Filer, Sopemi, LML and MMC entered into a share exchange agreement (that was later amended on December 19, 2022) resulting in the shareholders of Sopemi, LML and MMC holding approximately 38%, 58%, and 4% of the outstanding common shares of the Filer, respectively.
3. The Filer's principal business is the acquisition, exploration and development of resource properties for the mining of diamonds. The Filer has two material properties for the purposes of National Instrument 43-101 Standards of Disclosure for Mineral Projects, namely, the Tchitengo Project located in Angola, and the Braúna Project located in Brazil (collectively, the Filer Properties). The Tchitengo Project is held by the Filer's wholly-owned subsidiary Sopemi, and the Braúna Project is held by the Filer's wholly-owned subsidiary LML.
4. The registered office of the Resulting Issuer (as defined below) will be located at 77 King Street West, Suite 3000, Toronto, Ontario M5K 1G8.
5. The Filer is not a reporting issuer in any province or territory of Canada and no securities of the Filer are listed or posted for trading on any stock exchange.
6. The Filer is not in default of securities legislation in any jurisdiction.
7. The Filer's financial year end is December 31.

Golden Share Resources Corporation

8. Golden Share Resources Corporation (GSR) was incorporated on August 7, 2007 under the Canada Business Corporations Act, and has its head office located at 145 Riviera Dr., Unit 7 Markham, ON L3R 5J6.
9. GSR is a Canadian-based junior mining company focused on its mineral exploration projects in Northern Ontario. GSR's portfolio comprises active exploration projects, namely, the Ogoki and Band-Ore properties, which are being explored for their diamond potential. These properties are held directly by GSR.
10. GSR is a reporting issuer in each of the Jurisdictions and is not in default of securities legislation in any Jurisdiction.
11. GSR is listed on the TSX Venture Exchange, and its common shares are listed for trading under the trading symbol "GSH".
12. GSR's financial year end is December 31.

The Reverse Takeover Transaction

13. On March 15, 2023 the Filer entered into a share exchange agreement with GSR (which agreement was later amended on October 10, 2023, March 29, 2024, June 19, 2024 and July 31, 2024), which, among other things, contemplates that GSR will acquire 100% of the issued and outstanding securities of the Filer, which will become a wholly-owned subsidiary of GSR and, together, form the resulting issuer (the Resulting Issuer). Following the closing of the reverse takeover transaction between the Filer and GSR (the RTO), the Resulting Issuer will be engaged in the current business of the Filer, and it intends to list its common shares on CBOE Canada Inc. (CBOE). To facilitate this, the Filer and GSR are required to complete a listing statement (the Listing Statement) in accordance with the policies set out in the CBOE listing manual (the Listing Manual). CBOE has advised GSR and the Filer that a Listing Statement containing the disclosures required in section 14.2 of Form 51-102F5 Information Circular and Form 41-101F1 Information Required in a Prospectus (Form 41-101F1) will meet CBOE's listing requirements. In addition to applying to the principal regulator for the exemptive relief requested herein, the Filer has also applied to CBOE for a waiver from the equivalent financial statement requirements in Form 41-101F1.

Financial Statement Requirements

14. With respect to reverse takeover transactions, section 4.10(2)(a)(ii) of NI 51-102 and item 5.2 of Form 51-102F3 require that a reporting issuer file, within specified periods, the financial statements as prescribed by the appropriate prospectus form for the reverse takeover acquirer, being Form 41-101F1. The reverse takeover acquirer (as such term is defined in NI 51-102) in respect of the RTO is the Filer.
15. In addition to the required financial statements and management’s discussion and analysis of GSR, in accordance with the requirements in Form 41-101F1, the Listing Statement will include the following financial statements (the Financial Statements) and management's discussion and analysis (the MD&A) of the Filer:

(a) the audited financial statements of the Filer for the financial periods ended December 31, 2023, 2022, and 2021, and interim reviewed financial statements for the period ended June 30, 2024 (or September 30, 2024, depending on the date the Listing Statement is filed), and Sopemi and LML's audited financial statements for the periods ended December 31, 2022 and 2021; and

(b) the MD&A of the Filer for the financial periods ended December 31, 2023 and 2022, and the interim period ended June 30, 2024 (or September 30, 2024, depending on the date the Listing Statement is filed), as well as the MD&A for Sopemi and LML for the year ended December 31, 2022.

16. The Financial Statements and MD&A contain financial information in respect of the Filer Properties. In addition, the Financial Statements and MD&A, together with the other disclosures prescribed by the policies set out in the Listing Manual, will provide disclosure of all material facts relating to the Filer, GSR, and the Filer Properties and will contain sufficient information to permit investors to make a reasoned assessment of the Resulting Issuer's business following completion of the RTO.
17. The financial statement requirements for a prospectus (which the Listing Manual references and relies upon) are found in National Instrument 41-101 General Prospectus Requirements (NI 41-101) and Form 41-101F1. Item 32.1 of Form 41-101F1 includes the following requirements:

The financial statements of an issuer required under this item to be included in a prospectus must include:

(a) the financial statements of any predecessor entity that formed, or will form, the basis of the business of the issuer, even though the predecessor entity is, or may have been, a different legal entity, if the issuer has not existed for three years,

(b) the financial statements of a business or businesses acquired by the issuer within three years before the date of the prospectus or proposed to be acquired, if a reasonable investor reading the prospectus would regard the primary business of the issuer to be the business or businesses acquired, or proposed to be acquired, by the issuer, and

(c) the restated combined financial statements of the issuer and any other entity with which the issuer completed a transaction within three years before the date of the prospectus or proposes to complete a transaction, if the issuer accounted for or will account for the transaction as a combination in which all of the combining entities or businesses ultimately are controlled by the same party or parties both before and after the combination, and that control is not temporary.

18. Subsection 5.3(1) of the Companion Policy to NI 41-101 notes that a reverse takeover is an example of when a reasonable investor might regard the primary business of the issuer to be the acquired business.
19. Accordingly, to the extent any of Sopemi, LML and MMC are deemed to constitute the primary business of the Filer, the Listing Statement would also have to include, in addition to the Financial Statements and MD&A, audited financial statements and management's discussion and analysis of MMC for the years ended December 31, 2022 and 2021 (collectively, the MMC Financials).
20. Subsection 4.10(2)(a) of NI 51-102 provides that if a reporting issuer completes a reverse takeover, it must file the following financial statements for the reverse takeover acquirer, unless the financial statements have already been filed:

(i) financial statements for all annual and interim periods ending before the date of the reverse takeover and after the date of the financial statements included in an information circular or similar document, or under item 5.2 of the Form 51-102F3, prepared in connection with the transaction; or

(ii) if the reporting issuer did not file a document referred to in subparagraph (i), or the document does not include the financial statements for the reverse takeover acquirer that would be required to be included in a prospectus, the financial statements prescribed under securities legislation and described in the form of prospectus that the reverse takeover acquirer was eligible to use prior to the reverse takeover for a distribution of securities in the jurisdiction. [emphasis added.]

21. Item 5.2 of Form 51-102F3 requires that a material change report filed in respect of the closing of a reverse takeover transaction includes, for each entity that results from the reverse takeover transaction, disclosure (including financial statements) prescribed under securities legislation and described in the form of prospectus that the entity would be eligible to use.
22. Provided the Requested Relief is granted, the Listing Statement will not include the MMC Financials.

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 Requested Relief is granted provided that:

(a) the Listing Statement includes the Financial Statements and MD&A; and

(b) the Listing Statement is filed on SEDAR+ forthwith following acceptance by CBOE.

DATED at Toronto, Ontario on this 21st day of November, 2024.

"Lina Creta"

Lina Creta Manager, Corporate Finance Ontario Securities Commission OSC File #: 2024/0615