Court File and Parties

Court File No.: CV-16-00011351-00CL Date: 20160707 Superior Court of Justice - Ontario

Re: GOLD CANDLE LTD., Applicant And: GSR MINING CORPORATION and AJ PERRON GOLD CORP., Respondents

Before: HAINEY J.

Counsel: Gregory R. Azeff, for the Applicant Aubrey Kauffman and Dylan Chochla, for the Respondent GSR Mining Corporation Stewart D. Thom, for A. Farber & Partners, Proposed Receiver

Heard: July 6, 2016

Endorsement

[1] This is an application for the appointment of A. Farber & Partners Inc. (“Farber”) as the receiver over the respondents’ property which consists of the surface rights to the Kerr-Addison Mine near Virginiatown, Ontario (the “Mine”).

[2] The application is brought pursuant to s. 101 of the Courts of Justice Act which gives the court power to appoint a receiver where it appears to a judge of the court to be just or convenient to do so.

[3] In Degroote v. DC Entertainment Corp. et al., 2013 ONSC 7101, at paras. 52-53, Newbould J. stated as follows:

There are no pre-conditions for the exercise of a court’s discretion to appoint a receiver. Each case depends upon its own facts.

[4] The applicant, Gold Candle Ltd. (“Gold Candle”) has acquired the mining rights to the Mine and wishes to obtain the surface rights so that it can recommence operations at the Mine that has been inactive since 1996.

[5] According to the applicant, title to the surface rights to the Mine is unascertainable because of a complicated history of corporate ownership and significant encumbrances on title.

[6] Gold Candle, therefore, seeks the court’s assistance to “clean up” the title and determine the parties’ rights as they relate to the Mine.

[7] The receiver’s mandate, if appointed, will be to conduct a court-supervised sale of the Mine.

[8] The respondents oppose the appointment of a receiver on the grounds that they allege that Gold Candle is frustrating good faith negotiations that had been ongoing between the parties for the acquisition of the surface rights. The respondents maintain that the applicant does not have “clean hands” and should not be granted the equitable relief sought.

[9] I recognize that the appointment of an equitable receiver is an intrusive remedy that should be granted sparingly. In deciding whether a receiver should be appointed I must consider the circumstances of the case and balance the rights of the parties.

[10] In this case the Mine has not operated for 20 years. At its peak, more than 500,000 ounces of gold were extracted from the Mine each year. The Mine employed approximately 2,500 people and was the major employer in the area.

[11] The Mine’s closure severely affected the local economy. I accept the evidence that there are hazards and other environmental problems associated with the inactive Mine that have not been addressed for many years. These problems present a risk to the public. If the appointment of a receiver results in a sale of the Mine and its operation is recommenced, these problems will be remediated.

[12] In balancing the interests of the parties I have considered the following factors:

(a) There is currently a health and safety problem with the Mine; (b) The non-operation of the Mine has severely affected the local economy. Many people in the area are unemployed because of the closure of the Mine; (c) There are millions of dollars in municipal taxes owing by the Mine; (d) There are many trade creditors of the Mine who currently have no recourse due to the closure of the Mine; (e) The respondents have not actively operated the Mine for 20 years; and (f) There is no prospect for any economic development with respect to the Mine under the current circumstance.

[13] I am of the view that the following benefits could be achieved by the appointment of a receiver with a mandate to conduct a court-supervised sale of the Mine:

(a) The operation of the Mine could be recommenced; (b) The property could be remediated; (c) The operation of the Mine would result in increased direct and indirect employment which would have a significant beneficial impact on the local economy; (d) The municipal taxes could be paid; and (e) The Mine’s creditors may obtain at least partial payment of their debts.

[14] Balancing all of these factors and the possible benefits from a court-supervised sale of the Mine leads me to conclude that it would be just and convenient to appoint a receiver for the purpose of conducting a court-supervised sale.

[15] The application is, therefore, granted. Farber shall be appointed receiver of the Mine pursuant to s. 101 of the Courts of Justice Act for the purpose of conducting a court-supervised sale of the Mine.

[16] I request that counsel agree upon the terms of a draft order. If they cannot agree, they may attend before me at a 9:30 a.m. appointment to settle the terms of the order.

[17] I urge counsel to settle the issue of the costs of the application. If they cannot, they may file written submissions on costs of no longer than three double-spaced pages with costs outlines attached.

[18] I commend counsel for the efficient and professional manner in which they conducted this hearing.

HAINEY J. Date: July 7, 2016