As filed with the Securities and Exchange Commission on May
23, 2013
File No.
333-187853
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM F-10
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POLYMET MINING CORP.
(Exact name of Registrant as specified in its charter)
British Columbia, Canada
|
-------------------
|
Not Applicable
|
(State or other jurisdiction of
|
|
|
incorporation or
|
(Primary Standard Industrial
|
(I.R.S. Employer
|
organization)
|
Classification Code Number)
|
Identification Number)
|
First Canadian Place
100 King Street West, Suite 5700
Toronto, Ontario Canada M5X 1C7
Telephone: (416) 915-4149
(Address and telephone number of Registrants principal executive
offices)
Douglas Newby
Poly Met Mining, Inc.
444 Cedar
Street, Suite 2060
St Paul, Minnesota 55101
Telephone: (651) 389-4100
(Name, address, and telephone number of agent for service)
Copies to:
Henry I. Rothman
|
Mitchell G. Gropper
|
Joseph Walsh
|
Denise C. Nawata
|
Troutman Sanders LLP
|
Farris, Vaughan, Wills and Murphy
|
The Chrysler Building
|
LLP
|
405 Lexington Avenue
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PO Box 10026, Pacific Centre South
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New York, NY 10174
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25th Floor, 700 W Georgia Street
|
Tel: 212.704.6000
|
Vancouver, BC
|
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Canada V7Y 1B3
|
|
Tel: 604.684.9151
|
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after this registration statement becomes
effective.
British Columbia, Canada
(Principal jurisdiction
regulating this offering)
It is proposed that this filing shall become effective (check
appropriate box below):
A. [ x ] upon filing with the Commission, pursuant to Rule
467(a) (if in connection with an offering being made contemporaneously in the
United States and Canada).
B. [ ] at some future date (check the
appropriate box below)
1. [ ] pursuant
to Rule 467(b) on ( ) at ( ) (designate a time not sooner than 7 calendar days
after filing).
2. [ ] pursuant
to Rule 467(b) on ( ) at ( ) (designate a time 7 calendar days or sooner after
filing) because the securities regulatory authority in the review jurisdiction
has issued a receipt or notification of clearance on ( ).
3. [ ] pursuant
to Rule 467(b) as soon as practicable after notification of the Commission by
the Registrant or the Canadian securities regulatory authority of the review
jurisdiction that a receipt or notification of clearance has been issued with
respect hereto.
4. [ ] after the filing of the next
amendment to this Form (if preliminary material is being filed).
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to the home jurisdictions
shelf prospectus offering procedures, check the following box.
CALCULATION OF REGISTRATION FEE
Title of each class of
securities
to be registered
|
Amount to be
registered
|
Proposed
maximum
offering price
per unit
|
Proposed
maximum
aggregate offering
price
(1)
|
Amount
of registration
fee
(1)
|
Rights
|
|
|
U.S. $60,480,000
|
U.S. $8,250
|
Common Shares
|
|
|
|
|
(1)
|
$8,124 of the fee was previously paid. Estimated solely for the purpose of
calculating the amount of the registration fee pursuant to Rule 457 of the
Securities Act of 1933, as amended (the Securities Act of 1933). If, as
a result of stock splits, stock dividends or similar transactions, the
number of securities purported to be registered on this registration
statement changes, the provisions of Rule 416 shall apply to this
registration statement.
|
PART I
INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR
PURCHASERS
This short form prospectus constitutes a public offering of
these securities only in those jurisdictions where they may be lawfully offered
for sale and therein only by persons permitted to sell such securities. No
securities regulatory authority has expressed an opinion about these securities
and it is an offence to claim otherwise.
The enforcement by investors of civil liabilities under
United States federal securities laws may be affected adversely by the fact that
the issuer is organized under the laws of British Columbia, Canada, that many of
its directors and officers, and some or all of the experts named in this short
form prospectus, are residents of Canada or otherwise reside outside the United
States, and that a substantial portion of the assets of said persons are located
outside the United States. See ENFORCEABILITY OF CIVIL LIABILITIES.
THE SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE SEC) OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
This offering is made by a Canadian issuer that is
permitted, under a multijurisdictional disclosure system adopted by the United
States and Canada, to prepare this short form prospectus in accordance with the
disclosure requirements of Canada. You should be aware that those requirements
are different from those of the United States. Financial statements incorporated
by reference into this prospectus have been prepared in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board and may not be comparable to financial statements
prepared in accordance with United States generally accepted accounting
principles.
Shareholders in the United States should be aware that the
ownership and disposition of the Rights and Common Shares issuable upon the
exercise of Rights by them as described herein may have tax consequences both in
the United States and Canada. Such shareholders are encouraged to consult their
tax advisors in that regard.
Information has been incorporated by reference in this
prospectus from documents filed with securities commissions or similar
authorities in Canada.
Copies of the documents incorporated herein by
reference may be obtained on request without charge from the Corporate Secretary
of PolyMet Mining Corp. at First Canadian Place, 100 King Street West, Suite
5700, Toronto, Ontario, M5X 1C7, telephone (416) 915-4149 and are also available
electronically at
www.sedar.com
.
Short Form Prospectus
Rights Offering
|
May 23, 2013
|
POLYMET MINING CORP.
US$60,480,000
Offering of
Rights to Subscribe for up to 91,636,202 Common Shares
at a Price of US$0.66
per Common Share
PolyMet Mining Corp. (the
Corporation
) is distributing
to the holders of its outstanding common shares (the
Common Shares
) of
record (
Shareholders
) at 5:00 p.m. (Eastern time) on June 4, 2013 (the
Record Date
) one right (the
Right
) for each Common Share held
which will entitle the Shareholders to subscribe for up to an aggregate of
91,636,202 Common Shares for gross proceeds to the Corporation of approximately
US$60,480,000
(the
Rights Offering
), assuming exercise of all
Rights.
- 2 -
The Rights are evidenced by transferable certificates in
registered form (the
Rights Certificates
). Each Shareholder (other than
an Ineligible Holder as defined herein) is entitled to one Right for each Common
Share held on the Record Date. For each two Rights held, the holder
thereof (other than an Ineligible Holder) is entitled to purchase one Common
Share (the
Basic Subscription Privilege
) at a price of US$0.66
per Common Share (the
Subscription Price
) prior to 5:00 p.m.
(Eastern time) (the
Expiry Time
) on July 3, 2013 (the
Expiry
Date
). No fractional Common Shares will be issued.
RIGHTS NOT EXERCISED
BEFORE THE EXPIRY TIME WILL BE VOID AND OF NO VALUE.
Shareholders who
exercise in full the Basic Subscription Privilege for their Rights are also
entitled to subscribe for additional Common Shares (the
Additional
Shares
), if available, pursuant to an additional subscription privilege (the
Additional Subscription Privilege
). See DESCRIPTION OF OFFERED
SECURITIES -- Additional Subscription Privilege. Any subscription for Common
Shares will be irrevocable once submitted.
|
Offering Price
|
Proceeds to the
Corporation
(1)
|
Per Common Share
|
US$0.66
|
US$0.64
|
Total
|
US$60,480,000
|
US$58,850,000
|
______________________________
|
Note:
|
(1)
|
After deducting the expenses of the Rights Offering,
estimated to be approximately US$568,737, and the Standby Fee (as defined
herein) equal to 2.00% of the Maximum Investment (as defined herein),
regardless of how many Standby Shares (as defined herein) the Standby Purchaser (as defined herein) purchases,
being US$1,061,263 pursuant to the Standby Commitment (as defined herein),
which Standby Fee is payable in cash upon closing of the Rights Offering.
|
This prospectus qualifies the distribution of the Rights as
well as the Common Shares issuable upon exercise of the Rights and the Standby
Shares (as defined herein) (collectively, the
Offered Securities
) in
the provinces of British Columbia, Alberta and Ontario. This prospectus also
covers the offer and sale of the Offered Securities in the United States
(together with British Columbia, Alberta and Ontario, the
Eligible
Jurisdictions
) under the U.S. Securities Act of 1933, as amended (the
U.S. Securities Act
). The Toronto Stock Exchange (the
TSX
) has
conditionally approved the listing of the Rights and Common Shares issuable upon
the exercise of the Rights. The listing is subject to the Corporation fulfilling
all of the requirements of the TSX on or before noon on the seventh trading day
preceding the record date for the Rights Offering. The Corporation has applied
to list the Rights and Common Shares issuable upon the exercise of the Rights on
the NYSE MKT LLC (
NYSE MKT
). The approval of such listing will be
subject to the Corporation fulfilling all of the listing requirements of the
NYSE MKT. It is expected that the Rights will cease trading on the TSX at noon
(Eastern time) on the Expiry Date and on the NYSE MKT at the close of trading
(Eastern time) on the business day immediately preceding the Expiry Date.
There is currently no market through which the Rights may be sold and
t
here can be no assurance that an active trading market will develop in the
Rights. Holders of Rights may not be able to sell the Rights qualified by this
prospectus. To the extent an active trading market does not develop, the pricing
of the Rights in the secondary market, the transparency and availability of
trading prices, the liquidity of the securities and the extent of issuer
regulation may be adversely affected. See RISK FACTORS.
The currently
outstanding Common Shares are listed and posted for trading on the TSX under the
symbol POM and on the NYSE MKT under the symbol PLM. On May 23,
2013, the closing price for the Common Shares on the TSX was $1.18 per Common Share and on the NYSE MKT US$1.15 per Common Share.
Prospective investors should be aware that the acquisition
or disposition of the securities described in this Prospectus and the expiry of
an unexercised Right may have tax consequences in Canada, the United States, or
elsewhere, depending on each particular prospective investors specific
circumstances. Such consequences may not be described fully herein. Prospective
investors should consult their own tax advisors with respect to such tax
considerations.
Computershare Investor Services Inc. (the
Subscription
Agent
), at its principal office in the city of Toronto (the
Subscription Office
), is the subscription agent for this Rights
Offering. See DESCRIPTION OF OFFERED SECURITIES -- Subscription and Transfer
Agent.
For Common Shares held through a securities broker or dealer,
bank or trust company or other participant (a
Participant
) in the book
based system administered by CDS Clearing and Depository Services Inc.
(
CDS
) or in the book-based system administered by the Depository Trust
Company (
DTC
), a subscriber may subscribe for Common Shares by
instructing the Participant holding the subscribers Rights to exercise all or a
specified number of such Rights and forwarding the Subscription Price for each
Common Share subscribed for to such Participant in accordance with the terms of
this Rights Offering. A subscriber wishing to subscribe for Additional Shares
pursuant to the Additional Subscription Privilege must forward its request to
the Participant that holds the subscribers Rights and such request must be
received by the Subscription Agent prior to the Expiry Time on the Expiry Date,
along with payment for the number of Additional Shares requested. Any excess
funds will be returned by mail or credited to the subscribers account with its
Participant without interest or deduction. Subscriptions for Common Shares made
through a Participant will be irrevocable and subscribers will be unable to
withdraw their subscriptions for Common Shares once submitted. See DESCRIPTION
OF OFFERED SECURITIES -- Rights Certificate -- Common Shares Held Through CDS
and -- Rights Certificate -- Common Shares Held Through DTC. We refer to
Participants in CDS as
CDS Participants
and to Participants in DTC as
DTC Participants
.
- 3 -
For Common Shares held in registered form, a Rights Certificate
evidencing the number of Rights to which a holder is entitled will be mailed
with a copy of this prospectus to each registered Shareholder as of 5:00 p.m.
(Eastern time) on the Record Date. In order to exercise the Rights represented
by the Rights Certificate, the holder of Rights must complete and deliver the
Rights Certificate to the Subscription Agent in the manner and upon the terms
set out in this prospectus. All exercises of Rights are irrevocable once
submitted. See DESCRIPTION OF OFFERED SECURITIES -- Rights Certificate --
Common Shares Held in Registered Form.
If a Shareholder does not exercise, or sells or otherwise
transfers, its Rights, then such Shareholders current percentage ownership in
the Corporation will be diluted as a result of the exercise of Rights by other
Shareholders.
This prospectus qualifies the distribution of the Offered
Securities in the Eligible Jurisdictions. The Offered Securities are not being
distributed or offered to Shareholders in any jurisdiction other than the
Eligible Jurisdictions (an
Ineligible Jurisdiction
) and, except under
the circumstances described herein, Rights may not be exercised by or on behalf
of a holder of Rights resident in an Ineligible Jurisdiction (an
Ineligible
Holder
). This prospectus is not, and under no circumstances is to be
construed as, an offering of any Rights or Common Shares for sale in any
Ineligible Jurisdiction or a solicitation therein of an offer to buy any
securities. Rights Certificates will not be sent to Shareholders with addresses
of record in any Ineligible Jurisdiction. Instead, such Ineligible Holders will
be sent a letter advising them that their Rights Certificates will be held by
the Subscription Agent, who will hold such Rights as agent for the benefit of
all such Ineligible Holders. See DESCRIPTION OF OFFERED SECURITIES --
Ineligible Holders.
Under a standby purchase agreement dated April 10, 2013 (the
Standby Purchase Agreement
), Glencore AG (the
Standby
Purchaser
), the Corporations largest shareholder, which owns approximately
25.6% of the outstanding Common Shares, has agreed, subject to certain terms,
conditions and limitations, including but not limited to the Maximum Investment
(as defined herein) to purchase at the Subscription Price, any Common Shares
offered under the Rights Offering not otherwise subscribed for by holders of
Rights pursuant to their Basic Subscription Privilege and Additional
Subscription Privilege (such Common Shares being the
Standby Shares
).
Under the Basic Subscription Privilege, the Additional Subscription Privilege
and the Standby Purchase Agreement, the Standby Purchaser may acquire up to
80,398,727 Offered Securities (the
Standby Commitment
). See STANDBY
COMMITMENT. This prospectus also qualifies the issuance of the Standby Shares.
Pursuant to the Standby Purchase Agreement, the maximum number
of Offered Securities that the Standby Purchaser can acquire pursuant to its
Basic Subscription Privilege, Additional Subscription Privilege and/or Standby
Commitment (the
Maximum Investment
) is the lesser of: (a) the Market
Capitalization Limit (as defined herein); and (b) the HSR Act Limit (as defined
herein).
The market capitalization limit (the
Market Capitalization
Limit
) is equal to
80,398,727
Common Shares, calculated by dividing
(x) by (y), where (x) is US$53,063,160 (which is 24.99% of the Corporation's
market capitalization as of the date of execution of the Standby Purchase
Agreement less (A) the Standby Fee and (B) the fair market value of all other
transactions contemplated by the Rights Offering, the Standby Purchase Agreement
and related transactions in so far as they relate to the Standby Purchaser (other than the
Bridge Loan (as defined herein)) as determined by the Board acting reasonably) and (y) is the
Subscription Price.
Under the Standby Purchase Agreement, the Standby Purchaser's
ultimate parent entity (within the meaning of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the
HSR Act
)) can hold (within
the meaning of the HSR Act) not more than 49.99% of the Corporations
outstanding Common Shares following allocation of the Offered Securities to the
holders of Rights (the
HSR Act Limit
). Assuming no Market Capitalization Limit, and if no holder of Rights, other
than the Standby Purchaser, exercises any Rights, no additional securities are
issued by the Corporation and no additional securities are acquired by the
Standby Purchaser prior to the Expiry Time, the HSR Act would limit the Standby
Purchaser to purchasing
89,282,209
Common Shares under its Basic
Subscription Privilege, Additional Subscription Privilege and/or Standby
Commitment.
The Standby Purchase Agreement may be terminated by the Standby
Purchaser prior to the Expiry Time in certain circumstances. In consideration of
the agreement of the Standby Purchaser to purchase the Standby Shares as
provided above, the Standby Purchaser will be entitled to a fee at the closing
of the Rights Offering equal to 2.00% of the Maximum Investment being
US$1,061,263, regardless of how many Standby Shares the Standby Purchaser purchases (the
Standby Fee
). The Standby Fee will be
payable in cash in immediately available funds by wire transfer to the account
designated by the Standby Purchaser. See STANDBY COMMITMENT.
- 4 -
The Corporation and the Standby Purchaser have agreed to enter
into a corporate governance agreement in connection with any closing of the
Rights Offering under which, effective January 1, 2014, the Standby Purchaser
may nominate for election that number of the directors of the Corporation which
is proportionate to the Standby Purchaser's holdings of issued and outstanding
Common Shares (on a fully diluted basis) relative to all the issued and
outstanding Common Shares (on a fully diluted basis) subject to certain
limitations including that the Standby Purchaser may not nominate for election
more than 49% (rounding down) of the board of directors of the Corporation (the
Board
). The Corporation shall make a written recommendation to
Shareholders prior to any meeting where directors are to be elected in favour of
the election of the Standby Purchasers nominees to the Board.
Certain legal matters relating to Canadian law in connection
with the Rights Offering will be passed upon on our behalf by Farris, Vaughan,
Wills & Murphy LLP (“
Farris
”), British Columbia, Canada and certain legal matters
relating to United States laws will be passed upon on our behalf by Troutman
Sanders LLP, New York, New York.
The Standby Purchaser is not engaged as an underwriter in
connection with the Rights Offering and has not been involved in the preparation
of, or performed any review of, this prospectus in the capacity of an
underwriter. No underwriter has been involved in the preparation of this
prospectus or performed any review of the contents of this prospectus.
Investments in Rights and the Common Shares underlying such
Rights are subject to a number of risks. See RISK FACTORS for a discussion of
factors that should be considered by prospective investors and their advisors in
assessing the appropriateness of an investment in the Rights or the Common
Shares underlying such Rights.
The Corporation's registered office is located at Suite 2500,
700 West Georgia Street, Vancouver, British Columbia, V7Y 1B3 and the
Corporation's head office is located at 444 Cedar Street, Suite 2060, Saint
Paul, Minnesota, 55101.
Certain persons signing a certificate under Part 5 of National
Instrument 41-101-
General Prospectus Requirements
, reside outside of
Canada. Although these individuals, Messrs. Jonathan Cherry and Douglas Newby,
have appointed Farris as their agent for
service of process in British Columbia, it may not be possible for investors to
enforce judgments obtained in Canada against Messrs. Cherry and Newby.
EXCHANGE RATE INFORMATION
The following table reflects the high and low rates of exchange
for one United States dollar, expressed in Canadian dollars, during the periods
noted, the rates of exchange at the end of such periods and the average of such
rates of exchange for each period, based on the Bank of Canada noon spot rate of
exchange. On May 23, 2013, the Bank of Canada noon spot rate of
exchange was US$1.00 equals C$1.031.
Annual Data
|
|
|
|
|
|
High
|
Low
|
End
|
Average
|
Year Ended
|
($)
|
($)
|
($)
|
($)
|
January 31, 2013
|
1.0418
|
0.9710
|
0.9992
|
0.9978
|
January 31, 2012
|
1.0604
|
0.9449
|
1.0052
|
0.9907
|
January 31, 2011
|
1.0778
|
0.9862
|
1.0022
|
1.0260
|
TABLE OF CONTENTS
GENERAL MATTERS
In this prospectus,
PolyMet
,
we
,
us
and
our
refer
collectively to the Corporation and its consolidated subsidiaries, unless the
context otherwise requires. All references in this prospectus to
dollars
or
$
are to Canadian dollars unless otherwise noted.
All references to
U.S. dollars
or
US$
are to United States
dollars. The Corporations financial statements incorporated herein by reference
have been prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board. The
Corporation prepares its financial statements in United States dollars.
You should rely only on the
information contained in this prospectus. We have not authorized anyone to
provide you with information different from that contained in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC under
the U.S. Securities Act a registration statement on Form F-10 relating to the
Offered Securities being offered hereunder and of which this prospectus forms a
part. This prospectus, which constitutes part of the registration statement,
does not contain all of the information set forth in such registration
statement, certain items of which are contained in the exhibits to the
registration statement as permitted or required by the rules and regulations of
the SEC. Items of information omitted from this prospectus but contained in the
registration statement will be available on the SECs website at
www.sec.gov
.
We file with the securities
commissions or similar authorities in each of the provinces of British Columbia,
Alberta and Ontario (the
Canadian Securities Authorities
) material
change reports, annual and quarterly reports and other information. We are
subject to the informational requirements of the U.S. Securities Exchange Act of
1934, as amended (the
Exchange Act
), and, in accordance with the
Exchange Act, we also file certain reports with and furnish other information to
the SEC. You may read any document we file with or furnish to the SEC at the
SECs public reference room at Room 1580, 100 F Street N.E., Washington, D.C.
20549. You may also obtain copies of the same documents from the public
reference room of the SEC at 100 F Street, N.E., Washington, D.C. 20549 by
paying a fee. Please call the SEC at 1-800-SEC-0330 or contact them at
www.sec.gov
for further information on the public reference rooms.
You may also access our
disclosure documents and any reports, statements or other information that we
file with the Canadian Securities Authorities through the Internet on the
Canadian System for Electronic Document Analysis and Retrieval, which is
commonly known by the acronym SEDAR and which may be accessed at
www.sedar.com
. SEDAR is the Canadian equivalent of the SECs Electronic
Document Gathering Analysis and Retrieval System, which is commonly known by the
acronym EDGAR and which may be accessed at
www.sec.gov
.
CAUTIONARY STATEMENT WITH REGARD TO FORWARD-LOOKING
STATEMENTS
Certain statements contained in
this prospectus and in the documents incorporated by reference in this
prospectus, constitute forward-looking statements within the meaning of the
safe harbor provisions of the United States Private Securities Litigation
Reform Act of 1995 and forward-looking information under the provisions of
Canadian provincial securities laws. Forward-looking statements are frequently
characterized by words such as expects, anticipates, believes, intends,
estimates, potential, possible, projects, plans, and similar
expressions, or statements that events, conditions or results will, may,
could, or should occur or be achieved or their negatives or other comparable
words. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements that may be expressed or implied by such forward-looking
statements. In making the forward-looking statements in this prospectus, we have
applied several material assumptions, including, but not limited to, the
assumption that: (1) market fundamentals will result in copper, nickel and
precious metals being sustained at sufficient levels to enable the NorthMet
Project (as defined herein), once completed, to be able to sell its products and
operate economically; (2) the operations of the NorthMet Project, once
completed, will be viable operationally; (3) the project financing, equipment
financing and any other financing that may be needed for the NorthMet Project
will be available on commercially reasonable terms; (4) the Corporation will be
able to pay back the Bridge Loan; (5) the Standby Purchase
Agreement will not be terminated; (6) the Corporation will be able to obtain the
necessary permits; and (7) the Rights Offering will close. The statements,
including the statements contained in our Annual Report on Form 20-F under Item
3D Risk Factors, Item 4B Business Overview, Item 5 Operating and
Financial Review and Prospects, and Item 11 Quantitative and Qualitative
Disclosures About Market Risk, are inherently subject to a variety of risks and
uncertainties that could cause actual results, performance or achievements to
differ significantly. Statements relating to mineral reserves or mineral
resources are deemed to be forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions that the mineral
reserves and mineral resources described can be profitably produced in the
future. Forward-looking statements are based on the opinions and estimates of
management at the date the statements are made, and are subject to a variety of
risks and uncertainties and other factors that could cause actual events or
results to differ materially from those projected in the forward-looking
statements. Forward-looking statements include statements regarding the outlook
for our future operations, plans and timing for our exploration and development
programs, statements about future market conditions, supply and demand
conditions, forecasts of future costs and expenditures, the outcome of legal
proceedings, and other expectations, intentions and plans that are not
historical fact. You are cautioned that any such forward-looking statements are
not guarantees and may involve risks and uncertainties. Our actual results may
differ materially from those in the forward-looking statements due to risks
facing us or due to actual facts differing from the assumptions underlying our
predictions. Some of these risks and assumptions include:
- 2 -
-
completion of environmental review;
-
inability to finance project development;
-
obtaining permits on a timely basis;
-
general economic and business conditions, including changes in interest
rates and exchange rates;
-
prices of natural resources, costs associated with mineral exploration and
development, and other economic conditions;
-
natural phenomena;
-
actions by government authorities, including changes in government
regulation;
-
uncertainties associated with legal proceedings;
-
changes in the resources market;
-
future decisions by management in response to changing conditions;
-
our ability to execute prospective business plans; and
-
misjudgments in the course of preparing forward-looking statements.
We advise you that these
cautionary remarks expressly qualify in their entirety all forward-looking
statements attributable to us or persons acting on our behalf. Except as
required by law, we are not under any obligation, and expressly disclaim any
obligation, to update or alter any forward-looking statements, whether as a
result of new information, future events or otherwise. You should carefully
review the cautionary statements and risk factors contained in this prospectus
and other documents that we file from time to time with the Canadian Securities
Authorities and the SEC and which are incorporated by reference herein.
All subsequent forward-looking
statements attributable to us or any person acting on our behalf are expressly
qualified in their entirety by the cautionary statements contained or referred
to in this section and the RISK FACTORS section of this prospectus.
ENFORCEABILITY OF CIVIL LIABILITIES
The Corporation is a corporation
incorporated under the
Business Corporations Act
(British Columbia)
(
BCBCA
). Certain of the Corporations directors, and some of the
experts named in this prospectus, are residents of Canada or otherwise reside
outside the United States. Concurrent with the filing of this prospectus, the
Corporation has appointed an agent for service of process in the United States
(described below), but it may be difficult for Shareholders that reside in the United States to
effect service within the United States upon those directors and experts that
are not resident in the United States. It may also be difficult for Shareholders
that reside in the United States to realize in the United States upon judgments
of courts of the United States predicated upon the Corporations civil liability
and the civil liability of its directors, officers and experts under the U.S.
federal securities laws. The Corporation has been advised by its Canadian
counsel, Farris, that a
judgment of a U.S. court predicated solely upon civil liability under U.S.
federal securities laws or the securities or blue sky laws of any state within
the United States, would probably be enforceable in Canada if the U.S. court in
which the judgment was obtained assumed jurisdiction on the same basis that a
court in Canada would assume jurisdiction. The Corporation has also been advised
by Farris, however, that there is substantial doubt whether an action could be
maintained in Canada in the first instance on the basis of liability predicated
solely upon U.S. federal securities laws.
- 3 -
The Corporation has filed with
the SEC, concurrently with its registration statement on Form F-10 of which this
prospectus is a part, an appointment of agent for service of process on Form
F-X. Under the Form F-X, the Corporation has appointed Douglas J. Newby as its
agent for service of process in the United States in connection with any
investigation or administrative proceeding conducted by the SEC, and any civil
suit or action brought against or involving the Corporation in a U.S. court
arising out of or related to or concerning the offering of the securities under
this prospectus.
CAUTIONARY NOTE TO UNITED STATES INVESTORS
This prospectus has been prepared
in accordance with the requirements of Canadian securities laws, which differ
from the requirements of United States securities laws. Unless otherwise
indicated, all reserve and resource estimates included or incorporated by
reference in this prospectus have been prepared in accordance with Canadian
National Instrument 43-101 -
Standards of Disclosure for Mineral Projects
(
NI 43-101
), and the Canadian Institute of Mining, Metallurgy and
Petroleum Definition Standards for Mineral Resources and Mineral Reserves
(
CIM Definition Standards
). NI 43-101 is a rule developed by the
Canadian Securities Administrators that establishes standards for public
disclosure an issuer makes of scientific and technical information concerning
mineral projects.
Canadian standards, including NI
43-101, differ significantly from the requirements of the SEC, and reserve and
resource information contained or incorporated by reference in this prospectus
may not be comparable to similar information disclosed by U.S. companies. In
particular, and without limiting the generality of the foregoing, the term
resource does not equate to the term reserves. Under U.S. standards,
mineralization may not be classified as a reserve unless the determination has
been made that the mineralization could be economically and legally produced or
extracted at the time the reserve determination is made. The SECs disclosure
standards normally do not permit the inclusion of information concerning
measured mineral resources, indicated mineral resources or inferred mineral
resources or other descriptions of the amount of mineralization in mineral
deposits that do not constitute reserves by U.S. standards in documents filed
with the SEC. U.S. investors should also understand that inferred mineral
resources have a great amount of uncertainty as to their existence and great
uncertainty as to their economic and legal feasibility. It cannot be assumed
that all or any part of an inferred mineral resource will ever be upgraded to
a higher category. Under Canadian rules, estimated inferred mineral resources
may not form the basis of feasibility or pre-feasibility studies except in rare
cases. Investors are cautioned not to assume that all or any part of an
inferred mineral resource exists or is economically or legally mineable.
Disclosure of contained ounces in a resource is permitted disclosure under
Canadian regulations; however, the SEC normally only permits issuers to report
mineralization that does not constitute reserves by SEC standards as in-place
tonnage and grade without reference to unit measures. The requirements of NI
43-101 for identification of reserves are also not the same as those of the
SEC, and reserves reported by the Corporation in compliance with NI 43-101 may
not qualify as reserves under SEC standards. Accordingly, information
concerning mineral deposits set forth herein and in the documents incorporated
herein by reference may not be comparable with information made public by
companies that report in accordance with U.S. standards.
See page 23 of the Corporations
annual information form filed on April 22, 2013 on Form 20-F, for the year ended
January 31, 2013 (the
2013 AIF
) and filed on EDGAR at
www.sec.gov
, for a description of certain mining terms used in this
prospectus and the documents incorporated by reference herein.
- 4 -
DOCUMENTS INCORPORATED BY REFERENCE
Information has been
incorporated by reference in this prospectus from documents filed with the
Canadian Securities Administrators.
Information that is incorporated by
reference is an important part of this prospectus. We incorporate by reference
the documents listed below, which were filed with the Canadian Securities
Authorities under applicable Canadian securities laws and, subject to certain
exceptions, with the SEC.
The following documents of the
Corporation are specifically incorporated by reference into and form an integral
part of this prospectus:
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1.
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our 2013 AIF, filed on SEDAR on April 22, 2013;
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2.
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our audited consolidated financial statements, filed on
SEDAR on April 22, 2013, including notes thereto, as at January 31, 2013
and January 31, 2012 and for the years ended January 31, 2013, 2012 and
2011, together with the auditors report thereon, and the managements
discussion and analysis relating thereto (the
Annual MD&A
)
(collectively, the
Annual Financial Statements
);
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3.
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our management information circular dated June 7, 2012 in
connection with our annual and special meeting of shareholders held on
July 10, 2012 (the
2012 Circular
);
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4.
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our material change report dated October 15, 2012
announcing that pursuant to a subscription agreement entered into November
12, 2010, the Corporation and the Standby Purchaser completed the final
tranche of a three tranche distribution;
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5.
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our material change report dated April 17, 2013
announcing the filing of the preliminary short form prospectus in
connection with the Rights Offering and the entering into of the Standby
Purchase Agreement; and
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6.
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our material change report dated May 14, 2013 announcing
the completion of the drafting of the preliminary supplemental draft
Environmental Impact Statement.
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Any documents of the Corporation
of the type described in section 11.1 of Form 44-101F1
Short Form
Prospectus
filed by the Corporation with any securities regulatory
authorities after the date of this prospectus and prior to the termination of
this distribution will be deemed to be incorporated by reference into this
prospectus. In addition, to the extent that any document or information
incorporated by reference in this prospectus is included in any report on Form
6-K, Form 40-F, Form 20-F, Form 10-K, Form 10-Q or Form 8-K (or any respective
successor form) that is filed with or furnished to the SEC after the date of
this prospectus, such document or information shall be deemed to be incorporated
by reference as an exhibit to the registration statement of which this
prospectus forms a part. In addition, we may incorporate by reference into this
prospectus information from documents that we file with or furnish to the SEC
pursuant to Section 13(a) or 15(d) of the Exchange Act.
Any statement contained in
this prospectus or in a document incorporated or deemed to be incorporated by
reference herein will be deemed to be modified or superseded, for purposes of
this prospectus, to the extent that a statement contained in this prospectus or
in any other subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. The
modifying or superseding statement need not state that it has modified or
superseded a prior statement or include any other information set forth in the
document that it modifies or supersedes. The making of a modifying or
superseding statement will not be deemed an admission for any purposes that the
modified or superseded statement, when made, constituted a misrepresentation, an
untrue statement of a material fact or an omission to state a material fact that
is required to be stated or that is necessary to make a statement not misleading
in light of the circumstances in which it was made. Any statement so modified or
superseded will not, except as so modified or superseded, be deemed to
constitute a part of this prospectus.
- 5 -
SUMMARY
The following is a summary of
the principal features of the Rights Offering and should be read together with,
and is qualified in its entirety by, the more detailed information and financial
data and statements contained elsewhere or incorporated by reference in this
prospectus. Certain terms used in this summary and in the prospectus are defined
elsewhere herein.
Issuer:
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PolyMet Mining Corp.
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The Rights Offering:
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Rights to subscribe for up to an aggregate of 91,636,202
Common Shares. If additional Common Shares are issued prior to the Record
Date pursuant to the exercise or exchange of outstanding warrants or
options, additional Rights will be issued. Each Shareholder on the Record
Date will receive one Right for each Common Share held.
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Record Date:
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June 4, 2013.
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Commencement Date:
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June 6, 2013.
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Expiry Date:
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July 3, 2013.
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Expiry Time:
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5:00 p.m. (Eastern time) on the Expiry Date.
Rights
not exercised before
the Expiry Time on the Expiry Date will be
void and have no value and
will no longer be exercisable for any
Common Shares.
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Subscription Price:
|
US$0.66 per Common Share.
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Net Proceeds:
|
Assuming exercise in full of the Rights, approximately
US$58,850,000, after deducting the estimated expenses of the Rights
Offering of approximately US$568,737 and the Standby Fee equal to 2.00% of
the Maximum Investment being US$1,061,263, regardless of how many Standby
Shares the Standby Purchaser purchases.
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Basic Subscription Privilege:
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Each two Rights entitle the holder thereof (other than an
Ineligible Holder) to subscribe for one Common Share
upon payment of the Subscription Price. Where the exercise of Rights would
appear to entitle a holder of Rights to receive fractional Common Shares,
the holders entitlement will be reduced to the next lowest whole number
of Common Shares. The Corporation will not be required to issue fractional
Common Shares or pay cash in lieu thereof. See DESCRIPTION OF OFFERED
SECURITIES -- Basic Subscription Privilege.
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Additional Subscription Privilege:
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Holders of Rights who exercise in full the Basic
Subscription Privilege for their Rights are also entitled to subscribe
pro rata
for additional Common Shares, if any, not otherwise
purchased pursuant to the Basic Subscription Privilege. See DESCRIPTION
OF OFFERED SECURITIES -- Additional Subscription Privilege.
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Exercise of Rights:
|
For all Shareholders whose Common Shares are held in
registered form with an address of record in an Eligible Jurisdiction, a
Rights Certificate representing the total number of Rights to which such
Shareholder is entitled as at the Record Date will be mailed with a copy
of this prospectus to each such Shareholder. In order to exercise the
Rights represented by the Rights Certificate, such holder of Rights must
complete and deliver the Rights Certificate in accordance with the
instructions set out under DESCRIPTION OF OFFERED SECURITIES -- How to
Complete the Rights Certificate.
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For Common Shares held through a Participant in the
book-based system administered by CDS or in the book-based system
administered by DTC, a Shareholder in an Eligible Jurisdiction or an
Approved Eligible Holder (as defined herein) may exercise the Rights
issued in respect of such Common Shares (under either the Basic
Subscription Privilege or the Additional Subscription Privilege) by: (a) instructing the
Participant holding such Rights to exercise all or a specified number of
such Rights pursuant to the Basic Subscription Privilege, and if desired
by such holder, pursuant to the Additional Subscription Privilege; and (b)
forwarding to such Participant the Subscription Price for each Common
Share that such holder wishes to subscribe for in accordance with the
terms of this Rights Offering.
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- 6 -
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Holders that wish to exercise Rights issued in respect of
Common Shares held through a Participant should contact such Participant
to determine how Rights may be exercised. The entire Subscription Price
for any Common Shares purchased must be paid at the time of subscription
and must be received by the Subscription Agent at the Subscription Office
prior to the Expiry Time on the Expiry Date. Accordingly, subscribers must
provide the Participant holding their Rights with instructions and the
required payment sufficiently in advance of the Expiry Date to permit
proper exercise of their Rights. Participants will have an earlier
deadline for receipt of instructions and payment. See DESCRIPTION OF
OFFERED SECURITIES -- Rights Certificate -- Common Shares Held Through
CDS.
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If your Rights are held of record through DTC, you may
exercise your Basic Subscription Privilege or your Additional Subscription
Privilege through the DTCs PSOP function by instructing DTC to charge
your applicable DTC account for the Subscription Price for the Common
Shares and deliver such amount to the Subscription Agent. The Subscription
Agent must receive the required subscription documents and the
Subscription Price for any Common Shares sufficiently in advance of the
Expiry Time on the Expiry Date to permit proper exercise of the Rights.
See DESCRIPTION OF OFFERED SECURITIES -- Rights Certificate -- Common
Shares Held Through DTC.
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Subscriptions for Common Shares will be irrevocable and
subscribers will be unable to withdraw their subscriptions for Common
Shares once submitted. See CANADIAN PURCHASERS STATUTORY RIGHTS OF
WITHDRAWAL AND RESCISSION.
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If the delivered Subscription Price is greater than the
amount you owe for your subscription, the Subscription Agent will return
the excess amount to you by mail, without interest or deduction, promptly
after the closing of the Offering, which is anticipated to occur on or
about July 5, 2013. If the Rights Offering does not proceed, the
Subscription Price made pursuant to the Basic Subscription Privilege and
Additional Subscription Privilege will be returned promptly to the
Subscribers by the Subscription Agent without interest or deduction. See
DESCRIPTION OF OFFERED SECURITIES -- Basic Subscription Privilege and
-- Additional Subscription Privilege.
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Shareholders in Ineligible
Jurisdictions:
|
This Rights Offering is made in all of the Eligible
Jurisdictions. No subscription under the Basic Subscription Privilege nor
under the Additional Subscription Privilege will be accepted from any
person, or such persons agent, who appears to be, or who the Corporation
has reason to believe is, an Ineligible Holder, except that the
Corporation may accept subscriptions in certain circumstances from persons
in such jurisdictions if the Corporation determines that such offering to
and subscription by such person or agent is lawful and in compliance with
all securities and other laws applicable in the jurisdiction where such
person or agent is resident (each, an
Approved
Eligible
Holder
). No Rights Certificates will be mailed to Ineligible Holders
and Ineligible Holders will not be permitted to exercise their Rights.
Holders of Common Shares who have not received Rights Certificates but are
resident in an Eligible Jurisdiction or wish to be recognized as Approved
Eligible Holders should contact the Subscription Agent at the earliest
possible time. Rights of Ineligible Holders will be held by the
Subscription Agent until 5:00 p.m. (Eastern time) on June 26, 2013 in
order to provide the beneficial holders outside the Eligible Jurisdictions
an opportunity to claim the Rights Certificate by satisfying the
Corporation that the exercise of their Rights will not be in violation of
the laws of the applicable jurisdiction. After such time, the Subscription
Agent will attempt to sell the Rights of such registered Ineligible
Holders on such date or dates and at such price or prices as the
Subscription Agent will determine in its sole discretion. See DESCRIPTION
OF OFFERED SECURITIES -- Ineligible Holders.
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- 7 -
Standby Commitment:
|
Under the Standby Purchase Agreement, the Standby
Purchaser has agreed subject to, among other things, the Maximum
Investment to purchase, at the Subscription Price, as principal and not
with a view to resale or distribution, the Standby Shares. The Standby
Purchaser is not engaged as an underwriter in connection with the Rights
Offering and has not been involved in the preparation of, or performed any
review of, this prospectus in the capacity of an underwriter. The Standby
Purchase Agreement may be terminated by the Standby Purchaser prior to the
Expiry Time in certain circumstances. In consideration of the agreement of
the Standby Purchaser to purchase the Standby Shares as provided in the
Standby Purchase Agreement, the Standby Purchaser will be entitled to a
fee equal to 2.00% of the Maximum Investment being US$1,061,263,
regardless of how many Standby Shares the Standby Purchaser purchases,
payable in cash in immediately available funds by wire transfer to the
account designated by the Standby Purchaser, upon closing of the Rights
Offering. See STANDBY COMMITMENT. The Corporation and the Standby
Purchaser have agreed to enter into a corporate governance agreement in
connection with any closing of the Rights Offering under which, effective
January 1, 2014, the Standby Purchaser may nominate for election that
number of the directors of the Corporation which is proportionate to the
Standby Purchaser's holdings of issued and outstanding common shares (on a
fully diluted basis) relative to all the issued and outstanding common
shares (on a fully diluted basis) subject to certain limitations including
that the Standby Purchaser may not nominate for election more than 49%
(rounding down) of the directors to the Board. The Corporation shall make
a written recommendation to Shareholders prior to any meeting where
directors are to be elected in favour of the election of the Standby
Purchasers nominees to the Board.
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Use of Proceeds:
|
The Corporation intends to use the net proceeds of this
Rights Offering to repay the Bridge Loan and for
permitting and other costs associated with the development of the NorthMet
Project in St. Louis County, Minnesota (the
NorthMet Project
),
and general corporate purposes.
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Listing and Trading:
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The TSX has conditionally approved the listing of the
Rights and Common Shares issuable upon the exercise of the Rights. The
listing is subject to the Corporation fulfilling all of the requirements
of the TSX on or before noon on the seventh trading day preceding the
record date for the Rights Offering. The Corporation has applied to list
the Rights and Common Shares issuable upon the exercise of the Rights on
the NYSE MKT. The approval of such listing will be subject to the
Corporation fulfilling all of the listing requirements of the NYSE MKT. It
is expected that the Rights will cease trading on the TSX at noon (Eastern
time) on the Expiry Date and on the NYSE MKT at the close of trading
(Eastern time) on the business day immediately preceding the Expiry Date.
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Risk Factors:
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The receipt of Rights and an investment in Common Shares
are subject to a number of risk factors. See RISK FACTORS.
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- 8 -
THE CORPORATION
PolyMet was incorporated under
the predecessor to the BCBCA on March 4, 1981 under the name Fleck Resources
Ltd., which we changed to PolyMet Mining Corp. on June 10, 1998. The Corporation
is a development stage company engaged in the exploration and development of
natural resource properties. Currently our sole mineral property is the NorthMet
Project.
Our Business
In the fiscal years ended January
31, 2013, 2012, and 2011 and to date, the Corporation conducted exploration,
development and acquisition activities only and did not conduct any operations
that generated revenues. Thus, we rely principally on equity or debt convertible
into equity financings to fund our projects and expenditures.
Since 2003, the Corporation has
focused on commencing commercial production on our NorthMet Project. We have
focused our efforts on four main areas:
Acquisition of the Erie
Plant.
The Erie Plant is a large processing facility and associated
infrastructure located approximately six miles west of our NorthMet ore body. On
November 15, 2005 and December 20, 2006, the Corporation entered into a total of
three Contracts for Deed with Cliffs Erie LLC, a subsidiary of Cliffs Natural
Resources Inc. (formerly Cleveland Cliffs, Inc.) (
Cliffs
), under which
the Corporation now owns a 100,000 ton-per-day crushing and milling facility, a
railroad and railroad access rights connecting the Erie Plant to the NorthMet
ore body, tailings facilities, 120 railcars, locomotive fueling and maintenance
facilities, water rights and pipelines, large administrative offices on site and
approximately 6,000 acres to the east and west of and contiguous to the existing
tailing facilities. As part of the consideration, the Corporation indemnified
Cliffs for the liability related to final reclamation and closure of the
acquired property.
Environmental review and
permitting.
To commence commercial production at our NorthMet Project,
various regulatory approvals are needed. In October 2005, the Minnesota
Department of Natural Resources (
MDNR
) published its Environmental
Assessment Worksheet Decision Document establishing the MDNR as the lead state
agency and the United States Army Corps of Engineers (
USACE
) as the
lead federal agency (together, the
Lead Agencies
) for preparation of an
Environmental Impact Statement (
EIS
) for our NorthMet Project. In 2006,
the Lead Agencies retained Environmental Resource Management as the independent
contractor (
EIS Contractor
) to prepare the EIS.
In November 2009, the Lead
Agencies published the PolyMet draft EIS, which marked the start of a period for
public review and comment that ended on February 3, 2010. During this period,
the Lead Agencies held two public meetings and received more than 3,700
submissions containing approximately 22,000 separate comments, including an
extensive comment letter from the United States Environmental Protection Agency
(
EPA
) in its role as reviewer of projects that could impact the
environment.
On June 25, 2010, the Lead
Agencies announced that they intended to complete the EIS process by preparing a
supplemental draft EIS that incorporates a proposed land exchange with the
United States Forest Service (
USFS
) and expands government agency
cooperation. The USFS joined the USACE as a federal co-lead agency (together,
with the MDNR, the
Co-Lead Agencies
) through the completion of the EIS
process. In addition, the EPA has joined the effort as a cooperating agency. The
MDNR remains the state co-lead agency.
On October 13, 2010, the USACE
and the USFS published a Notice of Intent to complete the supplemental draft
EIS, which will:
-
Supplement and supersede the draft EIS and respond to concerns identified
by the EPA and other comments on the draft EIS, and
-
Incorporate potential effects from the proposed land exchange between the
USFS and the Corporation.
PolyMet has undertaken an
extensive review of all aspects of the NorthMet Project which has resulted in
numerous improvements and reduced environmental impacts.
- 9 -
The Corporation partnered with GE
Water & Process Technologies (
GE
) and Barr Engineering to design
and operate a pilot water treatment plant using reverse osmosis membrane
technology developed by GE. The reverse osmosis pilot plant has successfully
treated approximately two million gallons of water, demonstrating the technical
and regulatory viability that will enable PolyMet to meet state and federal
water quality standards. The Corporation has completed engineering control
designs as well as the design of and inputs to groundwater, surface water and
air dispersion models to assess potential environmental impacts from the
NorthMet Project. Following extensive quality assurance/quality control review
by Foth Infrastructure & Environment and Barr Engineering, PolyMet delivered
these results to the state regulatory agencies and the EIS Contractor for
review, which is largely complete.
On May 13, 2013, the EIS Contractor completed drafting of the preliminary supplemental draft EIS which is currently being reviewed by the Co-Lead Agencies. When the Co-Lead Agencies complete their review and their comments have been incorporated, the preliminary supplemental draft EIS will be reviewed by the EPA and the Bois Forte, Fond du Lac, and Grand Portage tribal governments prior to publication of the supplemental draft EIS for public review, which the Corporation expects to commence during the summer of 2013.
Completion of the final EIS,
incorporating appropriate responses to public comments, and a subsequent
adequacy decision by the MDNR and Record of Decision by the federal agencies are
necessary before the land exchange can occur and various permits required to
construct and operate the NorthMet Project can be issued.
Prior to receipt of these
permits, we intend to secure production debt financing that would be available
upon receipt of key permits, with construction slated to start upon receipt of
permits and availability of construction finance.
Engineering and
feasibility.
The Corporation retained Bateman Engineering Pty. of Brisbane,
Australia (
Bateman
) as the coordinating consultant to prepare a
Definitive Feasibility Study (the
DFS
). In September 2006, the
Corporation disclosed that the DFS confirmed the economic and technical
viability of the NorthMet Project.
Bateman was responsible for
completing the process design and detail engineering and cost estimates for the
plant and infrastructure. This work was supported by other firms that provided
geo-statistical reviews of the ore body, mine planning and scheduling of ore and
waste, and assessment of the market for the metals and intermediate products
planned to be produced.
Since September 2006, the
Corporation has completed additional drilling and expanded the mineral reserves.
In May 2008, the Corporation completed an internal update of the DFS (the
DFS Update
) which contemplates an initial stage in which the
Corporation would sell concentrate during completion of construction and
commissioning of the hydrometallurgical plant that was contemplated in the DFS.
This approach has the advantage of staging capital costs so that the
hydrometallurgical plant can be funded in part from cash flow from sales of
concentrate, and reduces the Corporations reliance on delivery of long
lead-time equipment before commencing commercial production.
In February 2011, the Corporation
announced that it plans to build the NorthMet Project in two phases, the first
to produce and market concentrates containing copper, nickel, cobalt and
precious metals, and the second to process the nickel concentrate through a
single autoclave, resulting in production and sale of high grade copper
concentrate, value added nickel-cobalt hydroxide, and precious metals
precipitate products.
The results of the 2007 drill
program, the DFS Update and the February 2011 revisions are described in the
technical report under NI 43-101 filed on SEDAR on January 23, 2013 (the
Technical Report
).
In February 2013, the Corporation
announced improvements to the NorthMet Project and further progress in the
environmental review that will reduce the NorthMet Projects environmental
impacts. The reduced environmental impacts include: reductions in sulfur
dioxide, mercury and greenhouse gas emissions at the plant site, capture of
groundwater and surface seepage with the construction of an in ground
containment system to the north and west of the existing tailings basin, and all
contact water discharged from the NorthMet Project will be treated through
reverse osmosis plants.
Financing and corporate
development.
Since 2003, the Corporation raised approximately US$155 million
from equity private placement financings and the exercise of warrants issued as
part of those financings. We have also issued US$45 million initial principal debentures
(including the Bridge Loan) and have a loan of US$4 million secured by land
acquired with proceeds from the loan.
- 10 -
Since October 31, 2008, the
Corporation and the Standby Purchaser have entered into a series of financing
agreements and a marketing agreement (the
2008 Financing Agreements
)
whereby the Standby Purchaser committed to purchase all of the Corporations
production of concentrates, metal, or intermediate products on market terms at
the time of delivery, for at least the first five years of production. PolyMet
agreed to propose to shareholders the election of Stephen Rowland, a senior
executive of the Standby Purchaser, as a director and also appointed a senior
member of The Standby Purchaser's technical team to PolyMet's Technical Steering
Committee. As a result of the series of financing transactions and the purchase
by The Standby Purchaser of Common Shares previously owned by Cliffs, the
Standby Purchaser's current and potential ownership of PolyMet comprises:
-
46,967,842 Common Shares representing 25.6% of PolyMet's issued and
outstanding Common Shares.
-
US$25,000,000 initial principal floating rate secured debentures due September 30, 2014. Including capitalized interest as at March 31, 2013, these debentures are exchangeable at US$1.50 per Common Share, subject to conventional anti-dilution provisions, into 20,500,756 Common Shares. Upon PolyMet giving the Standby Purchaser notice that it has received permits necessary to start construction of the NorthMet Project and availability of senior construction financing in a form reasonably acceptable to the Standby Purchaser, the Standby Purchaser will be required to exchange the debentures for Common Shares. The debentures bear interest at 12-month US dollar LIBOR plus 4%, compounded quarterly. Interest is payable in cash or by increasing the principal amount of the debentures at the Standby Purchaser’s option. At March 31, 2013, US$5,751,134 of interest had been added to the principal amount of the debentures since inception. The Corporation has provided security on the debentures covering all of the assets of PolyMet and Poly Met Mining, Inc. (“PMI”), including a pledge of PolyMet’s 100% shareholding in PMI. The debentures contain certain customary affirmative and negative covenants, including, among other things, with respect to the incurrence of debt and the grant of guarantees by the Corporation and its subsidiaries.
-
the Standby Purchaser holds warrants to purchase 5,600,000 Common Shares at
US$1.50 per Common Share (the
Warrants
), subject to conventional
anti-dilution provisions, at any time until December 31, 2015, subject to
mandatory exercise if the 20-day volume weighted average price of PolyMet
Common Shares is equal to or greater than 150% of the exercise price and
PolyMet provides notice to the Standby Purchaser that it has received permits necessary to
start construction of the North Met Project and availability of senior
construction finance, in a form reasonably acceptable to the Standby
Purchaser.
If the Standby Purchaser were to exercise all of its rights and obligations under the above-noted agreements, prior to the Rights Offering, it would own 73,068,598 Common Shares of PolyMet, representing 34.9% on a partially diluted basis. Each of these agreements contain customary anti-dilution provisions that are triggered upon the occurrence of certain financing events, including the Rights Offering. Assuming exercise in full of the Rights, the debentures will become exchangeable following the Rights Offering at approximately US$1.30 per Common Share into 23,717,410 Common Shares, and the Warrants will become exchangeable at approximately US$1.30 per Common Share into 6,470,847 Common Shares. If the Standby Purchaser subscribes for the maximum number of Common Shares subject to the Maximum Investment, and no other holders of Rights exercise their Rights, and if the Standby Purchaser were to exchange its debentures and the Warrants for Common Shares, subject to the adjustments described above, the Standby Purchaser would own 157,157,159 Common Shares representing 53.6% on a partially diluted basis.
The Standby Purchaser was
previously granted a right of first refusal to provide material financings other
than certain forms of equity financing, subject to regulatory approval, as long
as it owns 10% or more of the issued and outstanding Common Shares of PolyMet.
As long as the Standby Purchaser owns more than 5% of the issued and outstanding
Common Shares of PolyMet, it has the right to participate pro rata in any
equity-related financing by the Corporation to maintain its ownership interest
on a fully diluted basis (currently
32.3
% on a fully diluted basis). The
Standby Purchaser has waived its right of first refusal with respect to the
Rights Offering and the issuance of the Rights Offering securities subject to
revocation upon termination of the Standby Purchase Agreement and material
breach by the Corporation under the Standby Purchase Agreement.
On April 10, 2013, PMI
and the Standby Purchaser entered into an amendment to that certain purchase
agreement dated as of October 31, 2008, as further amended, whereby the Standby
Purchaser has provided a US$20,000,000 bridge loan (the
Bridge Loan
) to
PMI. The obligations of PMI under the Bridge Loan are guaranteed by the
Corporation, and the Corporation will use US$20,000,000 of the proceeds from the
Rights Offering to repay the Bridge Loan in full.
- 11 -
The Bridge Loan was made
available to PMI pursuant to the issuance to the Standby Purchaser of a fifth
debenture, the amended Tranche E Debenture. The amended Tranche E Debenture will
mature on the earlier to occur of: (a) the completion of the Rights Offering,
and (b) May 1, 2014. Interest will be payable on the amended Tranche E Debenture
at a fixed rate of 4.721%.
Among other things, if the Rights
Offering is not completed by July 9, 2013, the Standby Purchaser has the right
to declare all of the then outstanding principal and interest under the Bridge
Loan and all other debentures held by the Standby Purchaser to be due and
payable.
On April 10, 2013, the
Corporation and the Standby Purchaser entered into the Standby Purchase
Agreement whereby the Standby Purchaser has agreed, subject to certain terms,
conditions and limitations, to purchase, at the Subscription Price, as fully
paid and non-assessable Common Shares, the Standby Shares.
Our registered and records office
is located at our legal counsels offices situated at 2500 700 West Georgia
Street, Vancouver, British Columbia, V7Y 1B3. Our executive headquarters are
located at Poly Met Mining, Inc., 444 Cedar Street, Suite 2060, St Paul,
Minnesota 55101. Our principal office is situated at First Canadian Place, 100
King Street West, Suite 5700, Toronto, Ontario, M5X 1C7. Our phone number is
(416) 915-4149.
BACKGROUND TO THE RIGHTS OFFERING
The Rights Offering is the result
of discussions and negotiations among representatives of the Corporation, an
independent committee of the Board of the Corporation and the Standby Purchaser,
and their respective advisors. The following is a summary of the principal
events leading up to and following the Corporations announcement of the Rights Offering on
April 10, 2013.
At a Board meeting in early
November 2012, management presented to the Board a range of expenditure
alternatives through anticipated completion of the NorthMet Project
environmental review and permitting process, including discretionary expenditure
on additional engineering and design and down payments to secure deliverability
of long lead time equipment in order to meet the Corporation's plan to construct
the NorthMet Project in 15 months from the official start of construction once
necessary permits have been received.
The Board considered possible
financing alternatives taking into account market conditions at the time, the
Corporation's financing needs and timing of those needs, and expected progress
on the environmental review process between then and filing of the January 31,
2013 financial statements due no later than May 1, 2013.
The Standby Purchaser indicated
to the Board in mid-January 2013 that it intended to
exercise its right of first refusal on any material financing, other than
equity-related financings, and that it suggested the Corporation consider
conducting a rights offering backstopped exclusively by the Standby Purchaser
with a Bridge Loan to address the Corporations liquidity requirements while a
rights offering was being completed.
As part of the Corporations
ongoing review of various alternatives to enhance its liquidity, including a
refinancing or repayment of debt and issuance of new debt and equity, and in
light of the Standby Purchasers intentions mentioned above, the Board
established an ad hoc committee of independent directors (the
Special
Committee
) on February 8, 2013 comprised of four independent directors,
Messrs. Ian Forrest, Al Hodnik, William Murray and Frank Sims (as chair), each
of whom was determined to not have any direct or indirect material relationship
with the Standby Purchaser. The mandate of the Special Committee was to
consider, review and evaluate the terms of any financing involving the Standby
Purchaser and any transactions for the financing of the Corporation without the
involvement of the Standby Purchaser, and to consider, review and evaluate the
Corporations liquidity and capital structure alternatives in light of the
Corporations timely needs for capital resources due to the stage of development
of the NorthMet Project.
On February 18, 2013, the Special
Committee met for the first time to discuss a range of alternatives with the
Standby Purchaser in respect of the Corporations overall liquidity and its
capital structure including a review of the proposal presented by the Standby
Purchaser at such time. The Special Committee considered potential independent
financial advisors to assist in considering the proposal.
- 12 -
On February 22, 2013, the Special
Committee met to review in detail the existing right of first refusal and
pre-emptive right that the Standby Purchaser currently has and to review the
proposed term sheet that the Corporation intended to present to the Standby
Purchaser which included the terms of the Bridge Loan. The Special Committee
determined that the Board should approve the counter-proposal
approved by the Special Committee in the revised term sheet and present such
counter-proposal to the Standby Purchaser and to invite the Standby Purchaser to
indicate what support it would be willing to provide in respect of the various
potential alternatives being considered. The Special Committee met a number of
times following its formation and reported the results of its discussions and
considerations to the Board.
Members of the Special Committee,
along with its legal advisors, also engaged in a number of discussions and
negotiations with representatives of the Standby Purchaser and the Corporations
management to obtain additional information required by the Special Committee in
its consideration of the proposal.
During meetings of the full Board
held in Toronto on March 6 and March 7, 2013, the Special Committee held
separate meetings at which it was briefed on the state of the financing markets
for mining companies in general and reviewed the Corporation's anticipated
financing needs through completion of permitting for the NorthMet Project, and
the likely timeline and reportable milestones to completion of permitting. As
part of these discussions, the Board considered the progress made in completing
the technical review of the NorthMet Project within the environmental review
process and the degree of confidence that the supplemental draft EIS will be
issued for public review before the summer of 2013. As a result, the Special
Committee recommended to the Board that the Corporation negotiate with the
Standby Purchaser regarding the terms of the proposed Rights Offering.
Between March 25, 2013 and April
8, 2013, the Corporation and the Standby Purchaser and their respective legal
advisors prepared and circulated documentation with respect to the Bridge Loan
as well as the Standby Purchase Agreement.
On April 5, 2013, members of the
Special Committee met to review and consider that, under Multilateral Instrument
61-101 -
Protection of Minority Security Holders in Special Transactions
(
MI 61-101
), the transactions contemplated pursuant to the Standby
Purchase Agreement and the Bridge Loan are related party transactions insofar
as the Standby Purchaser is, by reason of the securities currently held in the
Corporation (being greater than 10% of the voting rights of the securities of
the Corporation), a related party of the Corporation. Pursuant to MI 61-101,
related party transactions are, with certain limited exceptions, subject to
formal valuation and minority shareholder approval requirements unless an
exemption is available from those requirements.
The Special Committee concluded
that the commitments under the Standby Purchase Agreement, including the Standby
Fee, and Bridge Loan, were not subject to the formal valuation requirement and
were exempt from the minority approval requirement of MI 61-101 for the
following reasons: (a) the Standby Fee will only be payable in cash, no
securities will be issuable in lieu, (b) the Standby Commitment contemplated by
the Standby Purchase Agreement, as the maximum amount of the commitment by the
Standby Purchaser and all other transactions contemplated under the Standby
Purchase Agreement (other than the Bridge Loan), is not to exceed 24.99% of the
market capitalization (as defined in MI 61-101) of the Corporation, and (c)
the terms and conditions of the Bridge Loan are reasonable commercial terms that
are not less advantageous to the Corporation than if the Bridge Loan was
obtained from a person dealing at arms length with the Corporation and is not
convertible directly or indirectly into equity or voting securities of the
Corporation or a subsidiary of the Corporation or otherwise participating in
nature or repayable as to principal or interest, directly or indirectly, in
equity or voting securities of the Corporation or a subsidiary of the
Corporation.
The Special Committee further
deliberated upon the advantages and disadvantages to the Corporation of the
transactions contemplated by the Standby Purchase Agreement and Bridge Loan and
concluded that entering into the Standby Purchase Agreement and Bridge Loan was
in the best interests of the Corporation.
On April 8, 2013, the Special
Committee met to consider the final terms of the Bridge Loan, the preliminary
prospectus, the Standby Purchase Agreement and the waiver of the Shareholder
Rights Plan of the Corporation dated December 4, 2003, as amended and restated
on May 25, 2007 and January 16, 2008 (the
Rights Plan
) in connection
with (i) all transactions contemplated by the Standby Purchase Agreement
including the Standby Purchaser's acquisition and beneficial ownership of the
Standby Shares; (ii) the acquisition and beneficial ownership by the Standby
Purchaser of the additional Common Shares issuable upon the anti-dilution
provisions being triggered in connection with the Rights Offering under the
terms of the convertible securities; and (iii) for greater certainty, the issuance of the Rights to the Standby
Purchaser and the Standby Purchasers acquisition and beneficial ownership of
the Common Shares issuable upon exercise of the Rights and all transactions
contemplated in connection with the Rights Offering, and the issue of the Rights
and the Common Shares issuable upon exercise of the Rights to the Standby
Purchaser and the final draft of a press release announcing the Rights Offering.
After a detailed review of the terms of the Bridge Loan and the Standby Purchase
Agreement, the Special Committee unanimously recommended that the Board approve the Bridge Loan, the Standby Purchase Agreement and the Rights
Offering.
- 13 -
Following the meeting of the
Special Committee, the Board met to review the draft Bridge Loan documents, the
draft preliminary prospectus, the Standby Purchase Agreement, the waiver of the
Rights Plan and the draft press release announcing the Rights Offering and to
receive the report and recommendation of the Special Committee. The Board,
having received the unanimous recommendation of the Special Committee,
unanimously approved the Bridge Loan, the Rights Offering, the Standby Purchase
Agreement and the press release announcing the Rights Offering and related
material change report.
On May 1, 2013, the Board met to
discuss, among other things, the communication plan with shareholders related to
the Rights Offering and the timing of pricing the Rights Offering; the exercise
period of the Rights Offering.
On May 21, 2013, the Special Committee met to discuss the terms of the Rights Offering and received independent financial and legal advice. The Special Committee considered the pricing of other comparable rights offering transactions and the regulatory requirements within an overall objective of determining terms that are in the best interests of the Corporation, fair to all shareholders regardless of their ownership level, and simple to explain and for the market to understand. There was extensive discussion to confirm that a Rights Offering does not dilute the ownership of shareholders who exercise their Rights regardless of what the Subscription Price is set at and that a lower Subscription Price should result in greater intrinsic value of the Rights while they are trading, which may offer Shareholders increased flexibility to finance the exercise of their Rights.
On May 22, 2013, following
consultation with the Standby Purchaser, the Special Committee made its
recommendation regarding the terms of the Rights Offering to the Board. After
further deliberation, the Board approved the final prospectus and the price of
the Rights Offering.
USE OF PROCEEDS
The net proceeds (assuming full exercise of the Rights) to be received by the Corporation from the Rights Offering are estimated to be approximately US$58,850,000, after deducting the estimated expenses of the Rights Offering of approximately US$568,737 and the Standby Fee equal to 2.00% of the Maximum Investment, regardless of whether or not the Standby Purchaser makes the Maximum Investment, being US$1,061,263. On April 10, 2013, the Corporation entered into an amendment to the 2008 Financing Agreements with the Standby Purchaser whereby the Standby Purchaser provided PMI US$20,000,000 to be repaid from the proceeds of the Rights Offering on the closing of the Rights Offering or May 1, 2014. The Bridge Loan will provide funding for the Corporation's ongoing expenses until the Rights Offering is completed, if necessary.
If the Rights Offering is
completed by July 9, 2013, the Corporation expects that it will have used up to
US$5,000,000 from the proceeds of the Bridge Loan and will have approximately
US$15,000,000 cash on hand reflecting cash on hand prior to the drawdown of the
Bridge Loan plus the unused proceeds from the Bridge Loan.
The Corporation intends to use
the net proceeds of US$58,850,000
from this Rights Offering together with
the cash on hand of approximately US$15,000,000 prior to closing of the Rights
Offering as follows:
Repayment of Bridge Loan (principal):
|
|
US$20,000,000
|
|
Environmental Review & Permitting:
|
|
US$17,000,000
|
|
Maintaining existing infrastructure:
|
|
US$5,000,000
|
|
Engineering:
|
|
US$10,000,000
|
|
Procurement (of long lead time equipment):
|
|
US$10,000,000
|
|
General corporate purposes:
|
|
US$11,850,000
|
|
- 14 -
The budget for environmental
review and permitting includes anticipated payments to compensate the MDNR for
the cost of staff time and external consultants as well as the Corporation's own
engineering, legal and public relations team. Maintenance of existing
infrastructure includes the Erie Plant facilities and continuing environmental
compliance measures. Engineering and procurement includes completion of front
end engineering and design work, updated construction budget, down payments
against the start of equipment fabrication and deposits on long lead time
equipment.
As at January 31, 2013, the
Corporation has negative cash flow from operating activities. The Corporation
cannot predict if or when it will generate positive cash flows. The Corporation
intends to use proceeds raised from the Rights Offering primarily for
construction engineering financing with respect to the development of the
NorthMet Project. See RISK FACTORS -- Negative Cash Flow from Operations.
The key business objectives that
the Corporation expects to accomplish with the proceeds of the Rights Offering
are: (a) repayment of the Bridge Loan upon closing of the Rights Offering at a
cost of US$20,000,000, (b) completion of the environmental review that is
necessary for the issuance of permits required to construct and operate the
NorthMet Project (which the Corporation expects to occur within approximately 12
months at a cost of approximately US$17,000,000), (c) maintaining existing
infrastructure (which the Corporation expects to cost approximately
US$5,000,000), (d) completion of engineering needed to commence construction
shortly after receipt of permits (which the Corporation expects to complete
within the next 15 months at a cost of approximately US$10,000,000), and (e)
initial procurement of long lead time equipment at a cost of approximately
US$10,000,000.
The key events for completion of
the environmental review are: (a) publication of the supplemental draft EIS
(which the Corporation expects to take approximately three months from the date
hereof), (b) completion of the public comment period (which the Corporation
expects to take approximately three months following publication of the
supplemental draft EIS), (c) review and analysis of any comments received during
the public review period and incorporation of that analysis into the final EIS
(which the Corporation expects to take three to six months following completion
of the public review period), and (d) publication of the final EIS leading to
the issuance of an Adequacy Decision by the MDNR and a Record of Decision by the
USACE and USFS. Issuance of the Adequacy Decision is the legal basis for
construction and operating permits to be issued by the State of Minnesota.
CONSOLIDATED CAPITALIZATION
The following table sets forth
the consolidated capitalization of the Corporation as at January 31, 2013,
before and after giving effect to this Rights Offering, assuming net proceeds to
the Corporation of US$58,850,000 assuming exercise of all of the Rights. This
table should be read in conjunction with the Corporations audited consolidated
financial statements as at and for the year ended January 31, 2013, as well as
the Annual MD&A, all of which are incorporated herein by reference. Other
than the Bridge Loan entered into on April 10, 2013 with the Standby Purchaser whereby the Standby Purchaser provided US$20,000,000 to PMI, there have been no material changes in the share and loan
capital of the Corporation since January 31, 2013.
|
|
As at
|
|
|
As at January
|
|
|
|
January 31,
|
|
|
31, 2013
|
|
In millions of US dollars
|
|
2013
|
|
|
(as Adjusted)
|
|
Indebtedness, principal value
|
|
(Actual)
|
|
|
|
|
Senior Secured
Term Loan
|
|
34,458
|
|
|
34,458
|
|
New Debt Financing
(1)
|
|
-0-
|
|
|
-0-
|
|
Total Indebtedness, principal value
|
|
34,458
|
|
|
34,458
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
|
|
|
|
|
Capital Stock
|
|
184,222
|
|
|
243,072
|
|
Contributed
Surplus
|
|
47,106
|
|
|
47,106
|
|
Deficit
|
|
(88,416
|
)
|
|
(88,416
|
)
|
Total Shareholders Equity
|
|
142,912
|
|
|
201,762
|
|
|
|
|
|
|
|
|
Total Capitalization
|
|
177,370
|
|
|
236,220
|
|
- 15 -
Note:
|
|
(1)
|
The Bridge Loan was provided on April 11, 2013 and is
expected to be repaid out of the proceeds of the Offering. It therefore
does not appear in this entry.
|
RELATED PARTY TRANSACTIONS
The Corporation conducted
transactions with senior management, directors and persons or companies related
to these individuals, and paid or accrued amounts during the years ended January
31, 2013, 2012, and 2011, as follows:
|
|
Year ended January 31,
|
|
|
|
2013
|
(1)
|
|
2012
|
(2)
|
|
2011
|
(3)
|
Salaries and other short-term
benefits
|
|
US$ 1,468
|
|
|
US$ 950
|
|
|
US$ 825
|
|
Other long-term benefits
|
|
54
|
|
|
32
|
|
|
21
|
|
Termination benefits
|
|
279
|
|
|
-
|
|
|
-
|
|
Share-based payment
|
|
2,102
|
|
|
738
|
|
|
-
|
|
Consulting fees paid
|
|
-
|
|
|
-
|
|
|
59
|
|
Commission on sale of used drill
|
|
-
|
|
|
200
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
US$
3,903
|
|
|
US$
1,920
|
|
|
US$
905
|
|
Notes:
|
|
|
|
(1)
|
Year ended January 31, 2013 includes Directors
(Jonathan Cherry, David Dreisinger, W. Ian L. Forrest, Alan Hodnik,
William Murray, Stephen Rowland, Michael Sill, and Frank Sims) and senior
management (Jonathan Cherry, Douglas Newby, Joseph Scipioni, Bradley
Moore, Niall Moore, Ryan Vogt, and Stephanie Hunter).
|
(2)
|
Year ended January 31, 2012 includes Directors
(David Dreisinger, W. Ian L. Forrest, Alan Hodnik, William Murray, Stephen
Rowland, Joseph Scipioni, Michael Sill, and Frank Sims) and senior
management (Joseph Scipioni, Douglas Newby, Bradley Moore, and Niall
Moore).
|
(3)
|
Year ended January 31, 2011 includes Directors
(William Corneliuson, David Dreisinger, W. Ian L. Forrest, George
Molyviatis, William Murray, Stephen Rowland, Joseph Scipioni, Frank Sims,
and James Swearingen) and senior management (Joseph Scipioni, Douglas
Newby and Niall Moore).
|
The amounts charged to the
Corporation for the services provided have been determined by negotiation among
the parties. These transactions were in the normal course of operations.
During the year ended January 31,
2013, the Corporation granted 4,375,000 options to directors and senior
management. This compares with 750,000 options granted during the year ended
January 31, 2012. Share-based payment represents the fair value determined at
grant date to be expensed over the vesting period.
None of PolyMets directors has a
service contract with the Corporation providing for benefits upon termination of
his employment. There are agreements with key employees (Jonathan Cherry,
Douglas Newby, Joseph Scipioni, and Brad Moore) that contain severance
provisions for termination without cause or in the event of a take-over bid.
During the quarter ended January
31, 2012, PolyMet sold a used drill for US$3.68 million. A company controlled by
one of PolyMets directors, Michael Sill, received a commission of US$200,000
related to this sale. The agreement was approved by Mr. Joseph Scipioni. It was
discussed with the Board who did not consider that
formal approval and a written contract necessary at that time. The Corporation
believes that the commission was negotiated on terms at least as good as could
be obtained from third parties.
During the year ended January 31, 2011, the Corporation paid US$59,000 to one of PolyMet’s directors, Dr. David Dreisinger, for consulting fees primarily in connection with activities related to the processing / technical side of the NorthMet Project and related expenses (the latter were supported by invoices and receipts). The consulting fees were based on a monthly fee of US$5,500 plus general sales tax. Throughout the term of his engagement, Dr. Dreisinger conducted in-person and telephonic meetings with Mr. William Murray, the Corporation’s then Executive Chairman and formerly its President and Chief Executive Officer, and other members of management at which he provided both verbal and written updates on the status of test work and made recommendations for future activities. These meetings occurred approximately every two to three weeks for six years. The agreement with Dr. Dreisinger was entered into at a time when our current business plans were being formulated and were month to month and oral in nature. The agreement was approved by Mr. Murray. It was discussed with the Board who did not consider that formal approval and a written contract was necessary at that time. The Corporation believes that the contract was negotiated on terms at least as good as could be obtained from third parties. The agreement with Dr. Dreisinger was terminated effective January 31, 2011.
- 16 -
DESCRIPTION OF SHARE CAPITAL
The authorized capital of the
Corporation consists of an unlimited number of common shares without par value.
On the date of this prospectus, 183,272,404 Common Shares were outstanding,
including 709,882 restricted shares. In addition, as of May 23, 2013, there were
options outstanding to acquire 15,120,000 Common Shares and restricted stock
units to acquire 76,000 Common Shares pursuant to the Corporations 2007 Omnibus
Share Compensation Plan, as amended and restated (the
Omnibus Plan
). In
addition, as of May 23, 2013, there were bonus shares to acquire 3,640,000
Common Shares issuable pursuant to the Corporations bonus share incentive plan
for certain directors, key employees and consultants, and convertible debentures
and warrants to acquire 27,584,089 Common Shares. For further details regarding
the authorized capital of the Corporation, see the 2013 AIF, which is
incorporated herein by reference.
Common Shares
Shareholders are entitled to one vote per Common Share at all meetings of Shareholders except meetings at which only holders of another specified class or series of shares of the Corporation are entitled to vote separately as a class or series. The holders of Common Shares are entitled to receive dividends as and when declared by the Board, and to receive a pro rata share of the remaining property and assets of the Corporation in the event of liquidation, dissolution or winding up of the Corporation. The Common Shares carry no pre-emptive, redemption, purchase or conversion rights. Pursuant to the terms of prior financings, the Standby Purchaser has certain anti-dilution rights that permit it to acquire additional securities so as to maintain its proportional equity interest in the Corporation. Neither the BCBCA nor the constating documents of the Corporation impose restrictions on the transfer of Common Shares on the register of the Corporation, provided that the Corporation receives the certificate representing the Common Shares to be transferred together with a duly endorsed instrument of transfer and payment of any fees and taxes which may be prescribed by the Board from time to time. There are no sinking fund provisions in relation to the Common Shares and they are not liable to further calls or to assessment by the Corporation. The BCBCA provides that the rights and provisions attached to any class of shares may not be modified, amended or varied unless consented to by special resolution passed by a majority of not less than two-thirds of the votes cast in person or by proxy by holders of shares of that class.
Options to Purchase Common Shares
The Rights Offering is a
corporate transaction that will affect the Corporations issued share capital
and its outstanding equity securities that are convertible into, exchangeable
for or exercisable to acquire unissued share capital (
Convertible
Securities
). Some, but not all, of the Corporations outstanding
Convertible Securities contain certain anti-dilution adjustment provisions that
are intended to ensure that a holder of Convertible Securities is entitled to
acquire equivalent share capital after the occurrence of a relevant corporate
transaction, such as the Rights Offering. The outstanding Warrants held by the
Standby Purchaser and the warrants held by AG for Waterfowl, LLP (the
AG
Waterfowl Warrants
) are subject to certain specific anti-dilution
adjustment provisions that are intended to ensure that a holder is entitled to
acquire equivalent share capital after the occurrence of a relevant corporate
transaction, such as the Rights Offering.
There are currently 1,083,333 AG
Waterfowl Warrants outstanding that are each exercisable into one Common Share
at a price of US$1.50 per Common Share and which expire on December 31, 2015.
Pursuant to the terms of the AG Waterfowl Warrants, the number of Common Shares
purchasable pursuant to the AG Waterfowl Warrants will be adjusted effective
immediately after the Record Date to the number of Common Shares that is the
product of (1) the number of Common Shares purchasable under the AG Waterfowl
Warrants on the Record Date and (2) a fraction (a) the numerator of which shall
be the sum of (i) the number of Common Shares outstanding on the Record Date
plus (ii) the number of Common Shares offered pursuant to the Rights Offering;
and (b) the denominator of which is the sum of (i) the number of Common Shares
outstanding on the Record Date; and (ii) the number arrived at when (1) the
number of Common Shares offered pursuant to the Rights Offering and (2) the
Subscription Price is divided by the 20-day weighted average price per Common
Share on the TSX on the Record Date. The exercise price for the AG Waterfowl
Warrants will be correspondingly adjusted to an exercise price that is the
product of (i) US$1.50 and (ii) a fraction the numerator of which is the number
of Common Shares purchasable under the AG Waterfowl Warrants on the Record Date,
and the denominator of which is the adjusted number of Common Shares purchasable
under the AG Waterfowl Warrants following the Rights Offering.
- 17 -
The Corporation has also issued
warrants to purchase 400,000 Common Shares at a price of US$2.50 to Iron Range
Resources and Rehabilitation Board (
IRRRB Warrants
) and which expire on
the earlier of (i) the one-year anniversary of the date that the Corporation
receives all necessary permits to start construction of the NorthMet Project,
and (ii) June 30, 2016. At the Board meeting held on May 22, 2013, the Board
determined that it will adjust the terms of the IRRRB Warrants using the same
formula as the arms length anti-dilution agreement for the AG Waterfowl
Warrants.
Currently granted incentive stock options (“
Stock Options
”), restricted stock units and restricted stock (collectively, “
RSUs
”) issued under the Omnibus Plan are not subject to specific anti-dilution adjustment provisions. Instead, the Omnibus Plan authorizes the Board to make appropriate adjustments to the terms of outstanding Stock Options and RSUs to reflect changes to the Common Shares resulting from corporate transactions such as the Rights Offering. At the Board meeting held on May 22, 2013, the Board determined that it will adjust the exercise price (but not the number of Common Shares purchasable) of its outstanding Stock Options and the number (but not the price) of RSUs. Information provided elsewhere in this prospectus with respect to the number of Convertible Securities issued and outstanding is given without giving effect to any anti-dilution adjustment provisions described above. If additional Common Shares are issued prior to the Record Date pursuant to the exercise or exchange of outstanding warrants or options, additional Rights will be issued.
Assuming that the Rights Offering is fully subscribed, the number of Common Shares issuable upon the exercise of all outstanding Warrants (including the AG Waterfowl Warrants and IRRRB Warrants) will increase from 27,584,089 Common Shares to 31,904,331 Common Shares and the number of Common Shares issuable upon the exercise of all outstanding Stock Options and RSUs will increase from 15,120,000 Common Shares to 15,207,925 Common Shares.
INTENTION OF INSIDERS AND OTHERS TO EXERCISE RIGHTS
Pursuant to the Standby Purchase
Agreement, the Standby Purchaser has agreed to exercise its Basic Subscription
Privilege in full and intends to fully exercise its Additional Subscription
Privilege and to purchase such Standby Shares as are available at the Expiry
Time, pursuant to the Standby Commitment, subject to the Maximum Investment.
The Corporation, after reasonable
inquiry, believes that the directors and officers of the Corporation who can
participate directly or indirectly in the Rights Offering (being Jon Cherry,
David Dreisinger, W. Ian L. Forrest, William Murray, Douglas Newby and Frank
Sims) intend to exercise or cause to be exercised approximately 5,537,400 Rights
to purchase approximately
2,768,700
Common Shares, representing
3.0
% of the Rights Offering.
The information as to the
intentions of our insiders is not within our knowledge and has been furnished by
the respective insiders. No assurance can be given by us that the respective
insiders will subscribe for Common Shares in the amounts set out above or at
all.
PRIOR SALES
During the 12-month period prior
to the date of this prospectus, the Corporation issued Common Shares or
securities convertible into Common Shares as follows:
- 18 -
|
Number and Type of
|
|
|
Date
|
Security Issued
|
Issue/Exercise Price
|
Type of Issuance
|
April 22, 2013
|
22,322 Common Shares
|
US$1.12 per Common Share
|
Extension of option agreement
for land purchase
(1)
|
January 21, 2013
|
27,174 Common Shares
|
US$0.92 per Common Share
|
Extension of option agreement for land
purchase
(1)
|
January 8, 2013
|
182,706 Common Shares
|
US$0.88 per Common Share
|
Restricted Stock Awards
|
January 7, 2013
|
268,176 Common Shares
|
US$0.92 per Common Share
|
Restricted Stock Awards
|
October 15, 2012
|
5,000,000 Common Shares
|
US$2.00 per Common Share
|
Private
Placement
(2)
|
October 1, 2012
|
20,000 Common Shares
|
US$1.14 per Common Share
|
Extension of option agreement for land
purchase
(1)
|
July 4, 2012
|
20,000 Common Shares
|
US$0.83 per Common Share
|
Extension of option agreement
for land purchase
(1)
|
Notes:
|
|
(1)
|
Through its wholly-owned U.S. subsidiary, PMI, PolyMet
entered into agreements with Burns Enterprise, LLC (
Burns
) and
Leonard Land Company, LLC (
Leonard
) for the extension of the
option to purchase certain land in Minnesota and as further consideration
for the extension, granted to Burns a maximum of US$25,000 in Common
Shares every three months, pending the extension of the option. Through
PMI, PolyMet entered into an agreement with AG for Waterfowl, LLP to
acquire control of land that is planned to be converted into wetlands.
|
(2)
|
The Common Shares were issued pursuant to a subscription
agreement entered into November 12, 2010 between the Corporation and
Glencore, which was the final tranche of a three tranche distribution.
|
PRICE RANGE AND TRADING VOLUME
The Common Shares are listed for
trading on the TSX under the symbol POM and on the NYSE MKT under the symbol
PLM. The following table sets forth the market price range and trading volumes
of the Common Shares on the TSX and the NYSE MKT for the periods indicated.
Month
Ended
|
Toronto Stock Exchange
|
NYSE MKT
|
High
|
Low
|
Total Volume
|
High
|
Low
|
Total Volume
|
(CDN$)
|
(CDN$)
|
(#)
|
(US$)
|
(US$)
|
(#)
|
May 1 - 23, 2013
|
1.21
|
1.08
|
178,644
|
1.19
|
1.06
|
1,671,980
|
April 30, 2013
|
1.21
|
1.00
|
415,000
|
1.20
|
0.99
|
3,754,500
|
March 31, 2013
|
1.26
|
1.16
|
601,100
|
1.23
|
1.13
|
2,699,100
|
February 28, 2013
|
1.27
|
1.07
|
1,058,600
|
1.25
|
1.07
|
4,623,800
|
January 31, 2013
|
1.12
|
0.77
|
2,331,800
|
1.13
|
0.90
|
4,545,800
|
December 31, 2012
|
0.92
|
0.84
|
370,500
|
0.96
|
0.85
|
3,181,800
|
November 30, 2012
|
1.11
|
0.90
|
476,900
|
1.14
|
0.90
|
2,979,100
|
October 31, 2012
|
1.15
|
0.99
|
1,586,100
|
1.17
|
0.99
|
3,201,700
|
September 30, 2012
|
1.16
|
1.05
|
504,900
|
1.20
|
1.07
|
2,322,200
|
August 31, 2012
|
1.20
|
1.00
|
339,800
|
1.21
|
0.99
|
3,079,000
|
July 31, 2012
|
1.15
|
0.82
|
314,300
|
1.17
|
0.79
|
3,360,100
|
June 30, 2012
|
0.98
|
0.72
|
882,400
|
0.98
|
0.68
|
4,126,800
|
May 31, 2012
|
1.09
|
0.70
|
751,900
|
1.10
|
0.68
|
4,651,300
|
- 19 -
DESCRIPTION OF OFFERED SECURITIES
Issue of Rights and Record Date
Shareholders of record at 5:00
p.m. (Eastern time) on the Record Date will receive Rights on the basis of one
Right for each Common Share held at that time. The Rights permit the holders
thereof (provided that such holders are in an Eligible Jurisdiction or are
Approved Eligible Holders) to subscribe for and purchase from the Corporation up
to an aggregate of 91,636,202 Common Shares, assuming exercise in full of the
Rights issued hereunder. The Rights are transferable in Canada and in the United
States by the holders thereof. See Sale or Transfer of Rights.
The Rights will be represented by
the Rights Certificates that will be issued in registered form. For Shareholders
who hold their Common Shares in registered form, a Rights Certificate evidencing
the number of Rights to which a holder is entitled as at the Record Date and the
number of Common Shares which may be obtained on exercise of those Rights will
be mailed with a copy of this prospectus to each Shareholder as of 5:00 p.m.
(Eastern time) on the Record Date. See Rights Certificate -- Common Shares Held
in Registered Form.
Shareholders that hold their
Common Shares through a CDS Participant or DTC Participant will not receive
physical certificates evidencing their ownership of Rights. On the Record Date,
a global certificate representing such Rights will be issued electronically to,
and in the name of, CDS and will be issued in certificated form to DTC, or its
nominee. See Rights Certificate -- Common Shares Held Through CDS and Rights
Certificates -- Common Shares Held Through DTC.
Subscription Basis
For every two
Rights held,
the holder thereof (other than an Ineligible Holder) is entitled to subscribe
for one Common Share at the Subscription Price of US$0.66 per Common Share. This
Subscription Price was determined by the Corporation in accordance with the
rules of the TSX. Subject to statutory rescission rights, any exercise of Rights
for Common Shares will be irrevocable once submitted.
Where the exercise of Rights
would appear to entitle a holder of Rights to receive fractional Common Shares,
the holders entitlement will be reduced to the next lowest whole number of
Common Shares. The Corporation will not be required to issue fractional Common
Shares or pay cash in lieu thereof. CDS Participants or DTC Participants that
hold Rights for more than one beneficial holder may, upon providing evidence
satisfactory to the Corporation, exercise Rights on behalf of its accounts on
the same basis as if the beneficial owners of Common Shares were holders of
record on the Record Date.
Commencement Date and Expiry Date
The Rights will be eligible for
exercise following June 6, 2013 (the
Commencement Date
). The Rights
will expire at the Expiry Time on the Expiry Date. Shareholders who exercise the
Rights will become holders of Common Shares issued through the exercise of the
Rights on the completion of the Rights Offering, which is expected to occur on
or before the second business day following the Expiry Date.
RIGHTS NOT
EXERCISED PRIOR TO THE EXPIRY TIME ON THE EXPIRY DATE WILL BE VOID AND OF NO
VALUE.
Basic Subscription Privilege
Each Shareholder at 5:00 p.m.
(Eastern time) on the Record Date is entitled to receive one Right for each
Common Share held. For every two Rights held, the holder (other than an Ineligible
Holder) is entitled to acquire one Common Share under the Basic Subscription
Privilege at the Subscription Price by subscribing and making payment in the
manner described herein prior to the Expiry Time on the Expiry Date. A holder of
Rights that subscribes for some, but not all, of the Common Shares pursuant to
the Basic Subscription Privilege will be deemed to have elected to waive the
unexercised balance of such Rights and such unexercised balance of Rights will
be void and of no value unless the Subscription Agent is otherwise specifically
advised by such holder at the time the Rights Certificate is surrendered that
the Rights are to be transferred to a third party or are to be retained by the
holder. Holders of Rights who exercise in full the Basic Subscription Privilege
for their Rights are also entitled to subscribe for the Additional Shares, if
any, that are not otherwise subscribed for under the Rights Offering on a
pro
rata
basis, prior to the Expiry Time on the Expiry Date pursuant to the
Additional Subscription Privilege. See Additional Subscription Privilege.
- 20 -
For Rights held in registered
form, in order to exercise the Rights represented by a Rights Certificate, the
holder of Rights must complete and deliver the Rights Certificate to the
Subscription Agent in accordance with the terms of this Rights Offering in the
manner and upon the terms set out in this prospectus and pay the aggregate
Subscription Price. Any exercises of Rights for Common Shares are irrevocable
once submitted.
For Rights held through a CDS
Participant, a holder may subscribe for Common Shares by instructing the CDS
Participant holding the subscribers Rights to exercise all or a specified
number of such Rights and forwarding the Subscription Price for each Common
Share subscribed for in accordance with the terms of this Rights Offering to
such CDS Participant. Any exercise of Rights for Common Shares made in
connection with the Rights Offering through a CDS Participant will be
irrevocable and subscribers will be unable to withdraw their subscriptions for
Common Shares once submitted.
For Rights held through a DTC
Participant, a holder may subscribe for Common Shares by instructing the DTC
Participant holding the subscribers Rights to exercise all or a specified
number of such Rights and forwarding the Subscription Price for each Common
Share subscribed for in accordance with the terms of this Rights Offering to
such DTC Participant. Any exercise of Rights for Common Shares made in
connection with the Rights Offering through a DTC Participant will be
irrevocable and subscribers will be unable to withdraw their subscriptions for
Common Shares once submitted.
The Subscription Price is payable
in U.S. funds by certified cheque, bank draft or money order drawn to the order
of the Subscription Agent. In the case of subscription through a CDS Participant
or DTC Participant, the Subscription Price is payable by certified cheque, bank
draft or money order drawn to the order of such CDS Participant or DTC
Participant, by direct debit from the subscribers brokerage account or by
electronic funds transfer or other similar payment mechanism. The entire
Subscription Price for Common Shares subscribed for must be paid at the time of
subscription and must be received by the Subscription Agent at the Subscription
Office prior to the Expiry Time on the Expiry Date. Accordingly, a subscriber
subscribing through a CDS Participant or DTC Participant must deliver its
payment and instructions sufficiently in advance of the Expiry Date to allow the
CDS Participant or DTC Participant to properly exercise the Rights on its
behalf.
Payment of the Subscription Price
will constitute a representation to the Corporation and, if applicable, to the
CDS Participant or DTC Participant, by the subscriber (including by its agents)
that: (a) either the subscriber is not a citizen or resident of an Ineligible
Jurisdiction or the subscriber is an Approved Eligible Holder; and (b) the
subscriber is not purchasing the Common Shares for resale to any person who is a
citizen or resident of an Ineligible Jurisdiction.
Additional Subscription Privilege
Each holder of Rights who has
exercised in full the Basic Subscription Privilege for its Rights may subscribe
for Additional Shares, if available, at a price equal to the Subscription Price
for each Additional Share. The number of Additional Shares will be the
difference, if any, between the total number of Common Shares issuable upon the
exercise of all Rights offered under the Rights Offering and the total number of
Common Shares subscribed and paid for pursuant to the Basic Subscription
Privilege at the Expiry Time on the Expiry Date. Subscriptions for Additional
Shares will be received subject to allotment only and the number of Additional
Shares, if any, that may be allotted to each subscriber will be equal to the
lesser of: (a) the number of Additional Shares that such subscriber has
subscribed for; and (b) the product (disregarding fractions) obtained by
multiplying the number of Additional Shares available to be issued by a
fraction, the numerator of which is the number of Rights previously exercised by
the subscriber and the denominator of which is the aggregate number of Rights
previously exercised under the Rights Offering by all holders of Rights that
have subscribed for Additional Shares. If any holder of Rights has subscribed
for fewer Additional Shares than such holders
pro rata
allotment of
Additional Shares, the excess Additional Shares will be allotted in a similar
manner among the holders who were allotted fewer Additional Shares than they
subscribed for.
To apply for Additional Shares
under the Additional Subscription Privilege, each holder of Rights must forward
their request to the Subscription Agent at the Subscription Office or their CDS
Participant or DTC Participant, as applicable, prior to the Expiry Time on the
Expiry Date. Payment for Additional Shares, in the same manner as required upon exercise of the Basic Subscription
Privilege, must accompany the request when it is delivered to the Subscription
Agent or a CDS Participant or a DTC Participant, as applicable. Any excess funds
will be returned by mail by the Subscription Agent or credited to a subscribers
account with its CDS Participant or DTC Participant, as applicable, without
interest or deduction. Payment of such price must be received by the
Subscription Agent prior to the Expiry Time on the Expiry Date, failing which
the subscribers entitlement to such Additional Shares will terminate.
Accordingly, a subscriber subscribing through a CDS Participant or a DTC
Participant must deliver its payment and instructions to its CDS Participant or
DTC Participant sufficiently in advance of the Expiry Time on the Expiry Date to
allow the CDS Participant or DTC Participant to properly exercise the Additional
Subscription Privilege on its behalf.
- 21 -
Subscription and Transfer Agent
The Subscription Agent has been
appointed the agent of the Corporation to receive subscriptions and payments
from holders of Rights Certificates, to act as registrar and transfer agent for
the Common Shares and to perform certain services relating to the exercise and
transfer of Rights. The Corporation will pay for the services of the
Subscription Agent. Subscriptions and payments under the Rights Offering should
be sent to the Subscription Agent at:
By Registered
Mail, Hand or Courier
|
|
By
Mail
|
|
|
|
Computershare Investor Services Inc.
|
|
Computershare Investor Services Inc.
|
9th Floor
|
|
P.O. Box 7021
|
100 University Avenue
|
|
31 Adelaide Street East
|
Toronto, Ontario M5J 2Y1
|
|
Toronto, Ontario M5C 3H2
|
|
|
|
Attention: Corporate Actions
|
|
Attention: Corporation Actions
|
Enquiries relating to the Rights
Offering should be addressed to the Subscription Agent by telephone at
1-800-564-6253.
Rights Certificate - Common Shares Held in Registered Form
For all Shareholders with an
address of record in an Eligible Jurisdiction whose Common Shares are held in
registered form, a Rights Certificate representing the total number of Rights to
which each such Shareholder is entitled as at the Record Date and the number of
Common Shares which may be obtained on exercise of those Rights will be mailed
with a copy of this prospectus to each such Shareholder. In order to exercise
the Rights represented by the Rights Certificate, such holder of Rights must
complete and deliver the Rights Certificate in accordance with the instructions
set out under How to Complete the Rights Certificate. Rights not exercised by
the Expiry Time on the Expiry Date will be void and of no value.
Rights Certificate - Common Shares Held Through CDS
For all Shareholders who hold
their Common Shares through a securities broker or dealer, bank or trust company
or other CDS Participant with an address of record in an Eligible Jurisdiction
in the book based system administered by CDS, a global certificate representing
the total number of Rights to which all such Shareholders as at the Record Date
are entitled will be issued in registered form to CDS and will be deposited with
CDS on the Commencement Date. The Corporation expects that each beneficial
Shareholder will receive a confirmation of the number of Rights issued to it
from its CDS Participant in accordance with the practices and procedures of that
CDS Participant. CDS will be responsible for establishing and maintaining
book-entry accounts for CDS Participants holding Rights.
Neither the Corporation nor the
Subscription Agent will have any liability for: (a) the records maintained by
CDS or CDS Participants relating to the Rights or the book-entry accounts
maintained by them; (b) maintaining, supervising or reviewing any records
relating to such Rights; or (c) any advice or representations made or given by
CDS or CDS Participants with respect to the rules and regulations of CDS or any
action to be taken by CDS or CDS Participants.
- 22 -
The ability of a person having an
interest in Rights held through a CDS Participant to pledge such interest or
otherwise take action with respect to such interest (other than through a CDS
Participant) may be limited due to the lack of a physical certificate.
Shareholders who hold their
Common Shares through a CDS Participant must arrange purchases or transfers of
Rights through their CDS Participant. It is anticipated by the Corporation that
each such purchaser of a Common Share or Right will receive a customer
confirmation of issuance or purchase, as applicable, from the CDS Participant
through which such Right is issued or such Common Share is purchased in
accordance with the practices and policies of such CDS Participant.
Rights Certificate - Common Shares Held Through DTC
For all Shareholders who hold
their Common Shares through a securities broker or dealer, bank or trust company
or other DTC Participant with an address of record in an Eligible Jurisdiction
in the book based system administered by DTC, a global certificate representing
the total number of Rights to which all such Shareholders as at the Record Date
are entitled will be issued in registered form to DTC and will be deposited with
DTC on the Commencement Date. The Corporation expects that each beneficial
Shareholder will receive a confirmation of the number of Rights issued to it
from its DTC Participant in accordance with the practices and procedures of that
DTC Participant. DTC will be responsible for establishing and maintaining
book-entry accounts for DTC Participants holding Rights.
Neither the Corporation nor the
Subscription Agent will have any liability for: (a) the records maintained by
DTC or DTC Participants relating to the Rights or the book-entry accounts
maintained by them; (b) maintaining, supervising or reviewing any records
relating to such Rights; or (c) any advice or representations made or given by
DTC or DTC Participants with respect to the rules and regulations of DTC or any
action to be taken by DTC or DTC Participants.
The ability of a person having an
interest in Rights held through a DTC Participant to pledge such interest or
otherwise take action with respect to such interest (other than through a DTC
Participant) may be limited due to the lack of a physical certificate.
Shareholders who hold their
Common Shares through a DTC Participant must arrange purchases or transfers of
Rights through their DTC Participant. It is anticipated by the Corporation that
each such purchaser of a Common Share or Right will receive a customer
confirmation of issuance or purchase, as applicable, from the DTC Participant
through which such Right is issued or such Common Share is purchased in
accordance with the practices and policies of such DTC Participant.
How to Complete the Rights Certificate
1.
|
Form 1 Basic Subscription Privilege.
The maximum
number of Rights that may be exercised pursuant to the Basic Subscription
Privilege is shown in the box on the upper right hand corner of the face
of the Rights Certificate. Form 1 must be completed and signed to exercise
all or some of the Rights represented by the Rights Certificate pursuant
to the Basic Subscription Privilege. If Form 1 is completed so as to
exercise some but not all of the Rights represented by the Rights
Certificate, the holder of the Rights Certificate will be deemed to have
waived the unexercised balance of such Rights, unless the Subscription
Agent is otherwise specifically advised by such holder at the time the
Rights Certificate is surrendered that the Rights are to be transferred to
a third party or are to be retained by the holder.
|
|
|
2.
|
Form 2 Additional Subscription Privilege.
Complete and sign Form 2 on the Rights Certificate only if you also
wish to participate in the Additional Subscription Privilege. See
Additional Subscription Privilege.
|
|
|
3.
|
Form 3 Transfer of Rights.
Complete and sign
Form 3 on the Rights Certificate only if you wish to transfer the Rights.
Your signature must be guaranteed by a Schedule I bank, a major trust
company in Canada, or a member of an acceptable Medallion Signature
Guarantee Program, including STAMP, SEMP, and MSP (for Canadian
Shareholders). Members of STAMP are usually members of a recognized stock
exchange in Canada or members of the Investment Industry Regulatory
Organization of Canada. The guarantor must affix a stamp bearing the
actual words Signature Guaranteed. In the United States,
your signature must be guaranteed by a member of an acceptable
Medallion Signature Guarantee Program only. It is not necessary for a
transferee to obtain a new Rights Certificate to exercise the Rights, but
the signatures of the transferee on Forms 1 and 2 must correspond in every
particular with the name of the transferee (or the bearer if no transferee
is specified) as the absolute owner of the Rights Certificate for all
purposes. If Form 3 is completed, the Subscription Agent will treat the
transferee as the absolute owner of the Rights Certificate for all
purposes and will not be affected by notice to the contrary.
|
- 23 -
4.
|
Form 4 Dividing or Combining.
Complete and sign
Form 4 on the Rights Certificate only if you wish to divide or combine the
Rights Certificate, and surrender it to the Subscription Agent at the
Subscription Office. Rights Certificates need not be endorsed if the new
Rights Certificate(s) are issued in the same name. The Subscription Agent
will then issue a new Rights Certificate in such denominations (totalling
the same number of Rights as represented by the Right(s) Certificates
being divided or combined) as are required by the Rights Certificate
holder. Rights Certificates must be surrendered for division or
combination in sufficient time prior to the Expiry Time to permit the new
Rights Certificates to be issued to and used by the Rights Certificate
holder.
|
|
|
5.
|
Payment.
Enclose payment in U.S. funds by
certified cheque, bank draft or money order payable to the order of
Computershare Investor Services Inc.. The amount of payment will be
US$0.66 per Common Share. Payment must also be included for any
Additional Shares subscribed for under the Additional Subscription
Privilege.
|
|
|
6.
|
Deposit.
Deliver or mail the completed Rights
Certificate and payment in the enclosed return envelope addressed to the
Subscription Agent so that it is received by the Subscription Office
listed above before the Expiry Time on the Expiry Date. If mailing,
registered mail is recommended. Please allow sufficient time to avoid late
delivery. The signature of the Rights Certificate holder must correspond
in every particular with the name that appears on the face of the Rights
Certificate.
|
Signatures by a trustee,
executor, administrator, guardian, attorney, officer of a corporation or any
person acting in a fiduciary or representative capacity should be accompanied by
evidence of authority satisfactory to the Subscription Agent. All questions as
to the validity, form, eligibility (including time of receipt) and acceptance of
any subscription will be determined by the Corporation in its sole discretion,
and any determination by the Corporation will be final and binding on the
Corporation and its security holders. Upon delivery or mailing of the completed
Rights Certificate to the Subscription Agent, the exercise of the Rights and the
subscription for Common Shares is irrevocable. The Corporation reserves the
right to reject any subscription if it is not in proper form or if the
acceptance thereof or the issuance of Common Shares pursuant thereto could be
unlawful. The Corporation also reserves the right to waive any defect in respect
of any particular subscription. Neither the Corporation nor the Subscription
Agent is under any duty to give any notice of any defect or irregularity in any
subscription, nor will they be liable for the failure to give any such notice.
Any holder of Rights that fails to complete their subscription in accordance
with the foregoing instructions prior to the Expiry Time on the Expiry Date will
forfeit their Rights under the Basic Subscription Privilege and the Additional
Subscription Privilege attaching to those Rights.
Undeliverable Rights
Rights Certificates returned to
the Subscription Agent as undeliverable will not be sold by the Subscription
Agent and no proceeds of sale will be credited to such holders.
Sale or Transfer of Rights
Holders of Rights in registered
form in Canada or the United States may, instead of exercising their Rights to
subscribe for Common Shares, sell or transfer their Rights to any person that is
not an Ineligible Holder by completing Form 3 on the Rights Certificate and
delivering the Rights Certificate to the transferee. See -- How to Complete the
Rights Certificate - 3.
Form 3 - Transfer of Rights
. A permitted
transferee of the Rights of a registered holder of a Rights Certificate may
exercise the Rights transferred to such permitted transferee without obtaining a
new Rights Certificate. If a Rights Certificate is transferred in blank, the
Corporation and the Subscription Agent may thereafter treat the bearer as the
absolute owner of the Rights Certificate for all purposes and neither the
Corporation nor the Subscription Agent will be affected by any notice to the
contrary.
- 24 -
The TSX has conditionally approved the listing of the Rights, the Common Shares issuable upon the exercise of the Rights, the Common Shares issuable upon the exercise of the Additional Subscription Privilege and the Standby Shares. The listing is subject to the Corporation fulfilling all the requirements of the TSX on or before noon on the seventh trading day preceding the record date for the Rights Offering. An application has been made with NYSE MKT to admit the Rights for trading and list the Common Shares issuable upon the exercise of the Rights and the Standby Shares. Provided the Corporation obtains such approval and fulfills all such requirements, the Rights will be listed or admitted for trading, as applicable, on each of the TSX and NYSE MKT on May 31, 2013. Holders that do not wish to exercise their Rights may sell or transfer their Rights through usual investment channels, such as investment dealers and brokers, at the holder’s own expense. It is expected that the Rights will cease trading on the TSX at noon (Eastern time) on the Expiry Date, and on the NYSE MKT at the close of trading (Eastern time) on the day immediately preceding the Expiry Date. The Corporation has filed with the SEC a registration statement on Form F-10 under the U.S. Securities Act, and expects to make other certain filings with the SEC and the NYSE MKT so that the Rights and the Common Shares issuable upon the exercise of the Rights issued to Shareholders that are U.S. residents and are not affiliates of the Corporation will not be subject to transfer restrictions under U.S. securities law.
Holders of Rights through CDS or
DTC Participants in Canada who wish to sell or transfer their Rights must do so
in the same manner in which they sell or transfer Common Shares. See -- Rights
Certificate -- Common Shares Held Through CDS and Rights Certificate -- Common
Shares Held Through DTC.
Dividing or Combining Rights Certificates
A Rights Certificate may be
divided, exchanged or combined. See -- How to Complete the Rights Certificate -
4.
Form 4 - Dividing or Combining
.
Reservation of Common Shares
The Corporation will, at all
times, reserve sufficient unissued Common Shares as will permit the exchange of
all the outstanding Rights for Common Shares during the period beginning on the
Commencement Date and ending on the Expiry Date at the Expiry Time.
Dilution to Existing Shareholders
If a Shareholder does not
exercise all of its Rights pursuant to the Basic Subscription Privilege, the
Shareholders current percentage ownership in the Corporation will be diluted by
the issuance of Common Shares upon the exercise of Rights by other Shareholders,
as well as the purchase of Standby Shares by the Standby Purchaser and the
triggering of the anti-dilution adjustments of the Corporations outstanding
Warrants issued in connection with the debentures to the Standby Purchaser. Shareholders
should be aware that the Standby Purchaser has agreed, subject to certain terms,
conditions and limitations, to exercise its Rights under the Basic Subscription
Privilege in full pursuant to the Standby Purchase Agreement and to purchase the
Standby Shares. See STANDBY COMMITMENT.
Ineligible Holders
This Rights Offering is made only
in the Eligible Jurisdictions. Accordingly, neither a subscription under the
Basic Subscription Privilege nor under the Additional Subscription Privilege
will be accepted from any person, or such persons agent, who appears to be, or
who the Corporation has reason to believe is an Ineligible Holder, except that
the Corporation may accept subscriptions in certain circumstances from an
Approved Eligible Holder.
Rights Certificates will not be
issued and forwarded by the Corporation to Ineligible Holders who are not
Approved Eligible Holders. Ineligible Holders will be presumed to be resident in
the place of their registered address unless the contrary is shown to the
satisfaction of the Corporation. Ineligible Holders will be sent a letter
advising them that their Rights Certificates will be issued to and held on their
behalf by the Subscription Agent. The letter will also set out the conditions
required to be met, and procedures that must be followed, by Ineligible Holders
wishing to participate in the Rights Offering. Rights Certificates in respect of
Rights issued to Ineligible Holders will be issued to and held by the
Subscription Agent as agent for the benefit of Ineligible Holders. The
Subscription Agent will hold the Rights until 5:00 p.m. (Eastern time) on June
26, 2013 in order to provide Ineligible Holders an opportunity to claim a Rights
Certificate by satisfying the Corporation that the issue of Common Shares
pursuant to the exercise of Rights will not be in violation of the laws of the
applicable jurisdiction. Following such date, the Subscription Agent, for the account of registered Ineligible
Holders (including Ineligible Holders with an address of record in the United
States), will, prior to the Expiry Time on the Expiry Date, attempt to sell the
Rights of such registered Ineligible Holders represented by Rights Certificates
in the possession of the Subscription Agent on such date or dates and at such
price or prices as the Subscription Agent determines in its sole discretion.
- 25 -
Beneficial owners of Common
Shares registered in the name of a resident of an Ineligible Jurisdiction, who
are not themselves resident in an Ineligible Jurisdiction, who wish to be
recognized as an Approved Eligible Holder and who believe that their Rights
Certificates may have been delivered to the Subscription Agent, should advise
their broker if they wish to subscribe and the broker may contact the
Subscription Agent at the earliest opportunity and in any case in advance of
5:00 p.m. (Eastern time) on June 26, 2013 to request to have their Rights
Certificates mailed to them.
The Rights and the Common Shares
issuable on the exercise of the Rights and the Standby Shares have not been
qualified for distribution in any Ineligible Jurisdiction and, accordingly, may
only be offered, sold, acquired, exercised or transferred in transactions not
prohibited by applicable laws in Ineligible Jurisdictions. Notwithstanding the
foregoing, persons located in such Ineligible Jurisdictions may be able to
exercise the Rights and purchase Common Shares provided that they furnish an
investor letter satisfactory to the Corporation on or before June 26, 2013. The
form of investor letter will be available from the Corporation or the
Subscription Agent upon request. A holder of Rights in an Ineligible
Jurisdiction holding on behalf of a person resident in an Eligible Jurisdiction
may be able to exercise the Rights provided the holder certifies in the investor
letter that the beneficial purchaser is resident in an Eligible Jurisdiction and
satisfies the Corporation that such subscription is lawful and in compliance
with all securities and other applicable laws.
No charge will be made for the
sale of Rights by the Subscription Agent except for a proportionate share of any
brokerage commissions incurred by the Subscription Agent and the costs of or
incurred by the Subscription Agent in connection with the sale of the Rights.
Registered Ineligible Holders will not be entitled to instruct the Subscription
Agent in respect of the price or the time at which the Rights are to be sold.
The Subscription Agent will endeavour to effect sales of Rights on the open
market and any proceeds received by the Subscription Agent with respect to the
sale of Rights net of brokerage fees and costs incurred and, if applicable, the
Canadian tax required to be withheld, will be divided on a pro rata basis among
such registered Ineligible Holders and delivered by mailing cheques (in Canadian
funds) of the Subscription Agent therefor as soon as practicable to such
registered Ineligible Holders at their addresses recorded on the books of the
Corporation. Amounts of less than US$10.00 will not be remitted. The
Subscription Agent will act in its capacity as agent of the registered
Ineligible Holders on a best efforts basis only and the Corporation and the
Subscription Agent do not accept responsibility for the price obtained on the
sale of, or the inability to sell, the Rights on behalf of any registered
Ineligible Holder. Neither the Corporation nor the Subscription Agent will be
subject to any liability for the failure to sell any Rights of registered
Ineligible Holders or as a result of the sale of any Rights at a particular
price or on a particular day.
There is a risk that the proceeds received from
the sale of Rights will not exceed the costs of or incurred by the Subscription
Agent in connection with the sale of such Rights and, if applicable, the
Canadian tax required to be withheld. In such event, no proceeds will be
remitted.
Holders of Rights who are not
resident in Canada or the United States should be aware that the acquisition and
disposition of Rights or Common Shares may have tax consequences in the
jurisdiction where they reside, which are not described herein. Accordingly,
such holders should consult their own tax advisors about the specific tax
consequences in the jurisdiction where they reside of acquiring, holding and
disposing of Rights or Common Shares.
PLAN OF DISTRIBUTION
Each Shareholder on the Record
Date will receive one Right for each Common Share held.
The Subscription Price for this
Rights Offering was determined by the Special Committee of the Board, consisting
of the independent members of the Board. In determining the Subscription Price,
the Special Committee used the required formula under TSX rules. The
Subscription Price does not bear any relationship to the book value of the
Corporations assets or the Corporations past operations, cash flow, losses,
financial condition, net worth or any other established criteria to value
securities. Accordingly, holders of Rights should not consider the Subscription
Price as an indication of the value of the Corporation or of the Common Shares
to be offered in this Rights Offering.
- 26 -
This prospectus qualifies the
distribution of the Rights as well as the Common Shares issuable upon exercise
of the Rights and the Standby Shares in each of the Eligible Jurisdictions. The
Rights as well as the Common Shares issuable upon the exercise of the Rights and
the Standby Shares are not qualified under the securities laws of, or being
distributed or offered in, any Ineligible Jurisdiction and, except under the
circumstances described herein, Rights may not be exercised by or on behalf of
an Ineligible Holder. This prospectus is not, and under no circumstances is to
be construed as, an offering of any Rights or Common Shares for sale in any
Ineligible Jurisdiction or a solicitation therein of an offer to buy any
securities. Rights Certificates will not be sent to Shareholders with addresses
of record in any Ineligible Jurisdiction. Instead, such Ineligible Holders will
be sent a letter advising them that their Rights Certificates will be held by
the Subscription Agent, who will hold such Rights as agent for the benefit of
all such Ineligible Holders. See DESCRIPTION OF OFFERED SECURITIES --
Ineligible Holders.
No action has been or will be
taken in any jurisdiction other than in the Eligible Jurisdictions, where action
for that purpose is required, which would permit a public offering of the
Offered Securities or the possession, circulation or distribution of this
prospectus or any material relating to this Rights Offering except as set forth
herein. Accordingly, the Offered Securities may not be offered, sold or
delivered, directly or indirectly, and neither this prospectus nor any other
offering material or advertisements in connection with this Rights Offering may
be distributed or published, in or from any country or jurisdiction, except
under circumstances that will result in compliance with any applicable rules and
regulations of any such country or jurisdiction.
European Economic Area
In relation to each Member State
of the European Economic Area which has implemented the Prospectus Directive
(defined below) (each, a
Relevant Member State
) with effect from and
including the date on which the Prospectus Directive is implemented in that
Relevant Member State (the
Relevant Implementation Date
) no offer of
rights may be made to the public in that Relevant Member State other than:
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(a)
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to any legal entity which is a qualified investor as
defined in the Prospectus Directive;
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(b)
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to fewer than 100 or, if the Relevant Member State has
implemented the relevant provision of the 2010 PD Amending Directive, 150,
natural or legal persons (other than qualified investors as defined in the
Prospectus Directive) as permitted under the Prospectus Directive;
or
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(c)
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in any other circumstances falling within Article 3(2) of
the Prospectus Directive,
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provided that no such offer of Rights shall require the
Corporation to publish a prospectus pursuant to Article 3 of the Prospectus
Directive or supplement a prospectus pursuant to Article 16 of the Prospectus
Directive.
For the purposes of this
provision, the expression an offer to the public in relation to any Offered
Securities in any Relevant Member State means the communication in any form and
by any means of sufficient information on the terms of the Rights Offering and
any Rights to be offered so as to enable an investor to decide to purchase any
Rights, as the same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State, and the expression
Prospectus Directive
means Directive 2003/71/EC (including the 2010 PD
Amending Directive, to the extent implemented in the Relevant Member State) and
includes any relevant implementing measure in each Relevant Member State. The
expression 2010 PD Amending Directive means Directive 2010/73/EU.
The Corporation has not
authorized, nor does it authorize, the making of any offer of Rights through any
financial intermediary on its behalf. Accordingly, no purchaser of Rights is
authorized to make any further offer of the Rights on behalf of the Corporation.
The European Economic Area
selling restriction is in addition to any other selling restrictions set out in
this prospectus.
Stock Exchange Approvals
An application was submitted to
the TSX to approve the listing of the Rights, the Common Shares issuable upon
the exercise of the Rights, and the Standby Shares. A similar application was
made with NYSE MKT to admit the Rights for trading and list the Common Shares
issuable upon the exercise of Rights and the Standby Shares. Conditional approval for the listing of the Rights on the TSX
was obtained on May 3, 2013. For the listing of the Rights, the Common Shares
underlying the Rights, and the Standby Shares from the TSX and NYSE MKT, the
Corporation must fulfill all of the listing requirements of the TSX and NYSE
MKT, respectively. Provided the Corporation fulfills all such requirements, the
Rights will be listed for trading on the TSX and admitted for trading on the
NYSE MKT on May 31, 2013. If approved for listing or admitted for trading, as
applicable, it is expected that the Rights will cease trading on the TSX at noon
(Eastern time) on the Expiry Date, and on the NYSE MKT at the close of trading
(Eastern time) on the day immediately preceding the Expiry Date.
- 27 -
STANDBY COMMITMENT
Under the Standby Purchase
Agreement, the Standby Purchaser has agreed, subject to certain terms,
conditions and limitations, including but not limited to the Maximum Investment,
to purchase at the Subscription Price, pursuant to the Basic Subscription
Privilege, the Additional Subscription Privilege and the Standby Purchase
Agreement, up to 80,398,727 Offered Securities.
The Maximum Investment limits the
number of Offered Securities that the Standby Purchaser can acquire pursuant to
its Basic Subscription Privilege, Additional Subscription Privilege and/or
Standby Commitment to the lesser of: (a) the Market Capitalization Limit; and
(b) the HSR Act Limit. See description of the Maximum Investment on page 3 of
the cover page of this prospectus.
The Standby Purchaser is not
required or permitted to subscribe for any Rights Offering Shares and/or Standby
Shares pursuant to its Basic Subscription Privilege, Additional Subscription
Privilege and/or Standby Commitment if the subscription for such Common Shares
would exceed the Maximum Investment.
In consideration for the Standby
Commitment, the Standby Purchaser will be entitled to the Standby Fee upon the
successful completion of the Rights Offering in the amount equal to 2.00% of the
Maximum Investment being US$1,061,263, regardless of how many Standby Shares the
Standby Purchaser purchases. The Standby Fee will be payable in cash without set
off against any amount payable by the Standby Purchaser on account of the Common
Shares in immediately available funds by wire transfer to the account designated
by the Standby Purchaser.
The obligation of the Standby
Purchaser to complete the subscription under the Rights Offering is subject to
the following conditions, among others, being satisfied in full: (i) the
Corporation and the Standby Purchaser shall have entered into a corporate
governance agreement under which, effective January 1, 2014, the Standby
Purchaser may nominate for election that number of the directors of the
Corporation which is proportionate to the Standby Purchaser's holdings of issued
and outstanding common shares (on a fully diluted basis) relative to all the
issued and outstanding common shares (on a fully diluted basis) subject to
certain limitations including that the Standby Purchaser may not nominate for
election more than 49% (rounding down) of the directors to the Board; (ii) the
Corporation and the Standby Purchaser having entered into a registration rights
agreement; (iii) the closing of the Rights Offering having occurred within 90
days from the date of the Standby Purchase Agreement; and (iv) certain other
customary closing conditions.
The Corporation has provided
certain representations, warranties and covenants under the Standby Purchase
Agreement including corporate authority, authorized capitalization, no
undisclosed material changes, tax and tax filings, use and title to owned and
leased real property, proper permits, pension plans, environmental and mineral
rights, intellectual property, financial reporting, and securities law matters,
amongst others.
The Standby Purchaser has
provided certain representations, warranties and covenants under the Standby
Purchase Agreement including corporate authority, amongst others.
The obligations of the Standby
Purchaser under the Standby Purchase Agreement may be terminated at the
discretion of the Standby Purchaser in certain circumstances, including, without
limitation:
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(a)
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by giving written notice to the Corporation at any time
prior to, but not after, the date on which the final prospectus and
registration statement is mailed to the holders in the Eligible
Jurisdictions if:
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(i)
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the Corporation has committed a material breach of the
Standby Purchase Agreement (which shall include, for the avoidance of
doubt, any material breach of any representations or warranties set out in the Standby
Purchase Agreement) and, if capable of cure, has not cured it within a
reasonable time; or
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- 28 -
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(ii)
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any of the following has occurred and is continuing under
the debentures issued by PMI to the Standby Purchaser;
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(A)
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a default in payment of any principal amount due under
any debenture issued to the Standby Purchaser;
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(B)
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a default in payment of any interest or other amount due
under any debenture issued to the Standby Purchaser which default
continues for more than five business days after the due date
thereof;
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(C)
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a default in the timely issuance of common shares into
which the Warrants issued to the Standby Purchaser upon and in accordance
with the terms of the Warrants, which default continues for five business
days after the Corporation has received written notice informing the
Corporation that it has failed to issue shares or deliver share
certificates within the fifth day following the exercise date;
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(D)
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failure by PMI or the Corporation for 15 days after written notice has been received by PMI or the Corporation, as applicable, to comply with any material provision of any of the 2008 Financing Agreements (including the failure of PMI to make a change in control offer), the Standby Purchase Agreement or the Confirmation of Secured Obligations Agreement (the “
Confirmation of Secured Obligations Agreement
”) entered into among PMI, the Corporation and the Standby Purchaser dated April 10, 2013;
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(E)
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a material breach by PMI or the Corporation of its covenants, representations or warranties in any of the 2008 Financing Agreements, the Standby Purchase Agreement or the Confirmation of Secured Obligations Agreement;
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(F)
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any default after any cure period under, or acceleration
prior to maturity of, any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the PMI or the Corporation for in
excess of US$1,000,000 or for money borrowed the repayment of which is
guaranteed by PMI or the Corporation for in excess of US$1,000,000,
whether such indebtedness or guarantee now exists or shall be created
hereafter;
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(G)
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if PMI or the Corporation is subject to any the following
events: (a) PMI or the Corporation commences a case or other proceeding or
proposal under any bankruptcy, reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, winding-up, insolvency or
liquidation or similar law of any jurisdiction (including the
Bankruptcy Act
(Canada) or the
Companies Creditors Arrangement
Act
(Canada)) relating to PMI or the Corporation; (b) there is
commenced against PMI or the Corporation any such case or proceeding or
proposal that is not dismissed within 30 days after commencement; (c) PMI
or the Corporation is adjudicated insolvent or bankrupt or any order of
relief or other order approving any such case or proceeding is entered;
(d) PMI or the Corporation suffers any appointment of any trustee,
receiver, receiver and manager, interim receiver, custodian or the like
for it or any substantial part of its property that is not discharged or
stayed within 30 days; (e) PMI or the Corporation makes a general
assignment for the benefit of creditors; (f) PMI or the Corporation fails
to pay, or states that it is unable to pay or is unable to pay, its debts
generally as they become due; (g) PMI or the Corporation calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) PMI or the Corporation, by any act or
failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for the
purpose of effecting any of the foregoing;
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- 29 -
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(H)
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if a judgment or order is obtained against PMI or the
Corporation which has or would have a material adverse effect, and, if
such judgment or order is for the payment of money, the judgment or order
has not been dismissed, stayed or satisfied within 20 days of the date
that such judgment or order is issued;
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(I)
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if any material permit or license or material agreement
of PMI or the Corporation expires or is withdrawn, cancelled, terminated,
or modified (and such expiry, withdrawal, cancellation, termination or
modification would have a material adverse effect) and is not reinstated
or replaced within 30 days thereafter without material impairment of the
property or business of PMI or the Corporation;
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(J)
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a final judgment, writ of execution, garnishment or
attachment or similar process is issued or levied against any property of
PMI or the Corporation having a fair market value in excess of
US$1,000,000 and such judgment, writ, execution, garnishment, attachment
or similar process is not released, bonded, satisfied, discharged, vacated
or stayed within 45 days after its entry, commencement or levy;
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(K)
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solely with respect to principal amounts held by the
Standby Purchaser, a material breach by the Corporation of its covenants,
representations or warranties in the marketing agreement, the copper
offtake agreement or nickel offtake agreement that were entered into with
the Standby Purchaser at the time the 2008 Financing Agreements were
executed; or
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(L)
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the termination of the Standby Purchase Agreement prior
to the completion of the Rights Offering; or
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(iii)
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the Corporation has committed a material breach of any
other material agreement between the Corporation and/or its Affiliates (as
defined in the Standby Purchase Agreement) on the one hand and the Standby
Purchaser and/or its Affiliates (as defined in the Standby Purchase
Agreement) on the other hand and if capable of cure, has not been cured in
the time permitted under the applicable agreement.
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(b)
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the Corporation fails to:
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(i)
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obtain final listing approval from the TSX and the NYSE
MKT for the Rights at least two days prior to the date named as the Record
Date in this prospectus;
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(ii)
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obtain conditional listing approval from the TSX and NYSE
MKT in respect of the Common Shares issuable upon exercise of the Rights
and the Standby Shares, prior to or on the completion of the Rights
Offering, subject to receipt of customary final documentation;
and
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(iii)
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satisfy any of the applicable conditions set out in the
Standby Purchase Agreement on or before the completion of the Rights
Offering, including that the Rights Offering closing occurs within 90 days
of the execution of the Standby Purchase Agreement;
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(c)
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the Common Shares are de-listed or suspended or halted
for trading for a period greater than one business day for any reason by
the TSX or NYSE MKT at any time; or
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(d)
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if the Rights Offering is otherwise terminated or
cancelled.
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The Corporation has agreed to
indemnify the Standby Purchaser for certain matters including any and all,
direct or indirect losses, claims, damages, demands, costs, and expenses and
other liabilities of any kind caused or incurred by reason of any
misrepresentations or alleged misrepresentations in the prospectus or
registration statement, any order made or any inquiry, investigation or
proceeding instituted, threatened or announced based upon a misrepresentation in
the prospectus or registration statement, noncompliance or alleged
non-compliance with securities laws by the Corporation and any breach or default
of the Corporation under the Standby Purchase Agreement.
- 30 -
The Standby Purchaser, together with its affiliates, currently owns 46,967,842 Common Shares, representing approximately 25.6% of the outstanding Common Shares. If no Rights are exercised by persons other than the Standby Purchaser, and the Standby Purchaser exercises all of its Rights and its Standby Commitment, following the closing of the Rights Offering, the Standby Purchaser, together with its affiliates, could own up to 127,366,569 Common Shares, representing up to approximately 48.3% of the issued and outstanding Common Shares.
The Standby Purchaser is not
engaged as an underwriter in connection with the Rights Offering and has not
been involved in the preparation of, or performed any review of, this prospectus
in the capacity of an underwriter. No underwriter has been involved in the
preparation of this prospectus or performed any review of the contents of this
prospectus.
RISK FACTORS
The receipt of Rights and an
investment in the Common Shares is subject to a number of risks. A prospective
purchaser of such securities should carefully consider the information and risks
faced by the Corporation described in this prospectus and the documents
incorporated by reference including, without limitation, the risk factors set
out under the heading Risks Factors in the 2013 AIF and Risks and
Uncertainties in the Annual MD&A.
Dilution
If a Shareholder does not
exercise all of its Rights pursuant to the Basic Subscription Privilege, the
Shareholders current percentage ownership in the Corporation will be diluted by
the issuance of Common Shares upon the exercise of Rights by other Shareholders,
as well as the purchase of Standby Shares by the Standby Purchaser, and the
triggering of the anti-dilution adjustments of the Corporations outstanding
Warrants issued in connection with the debentures to Glencore.
Trading market for Rights
Although the Corporation expects
that the Rights will be listed on the TSX and admitted for trading on the NYSE
MKT, the Corporation cannot provide any assurance that an active or any trading
market in the Rights will develop or that Rights can be sold on the TSX or NYSE
MKT at any time. To the extent an active trading market does not develop, the
pricing of the Rights in the secondary market, the transparency and availability
of trading prices and liquidity of the Rights, would be adversely affected which
may have a material impact on the Corporation and its share price.
Market price of securities of the Corporation may be subject
to significant fluctuations which may be based on factors unrelated to its
financial performance or prospects
The trading price of the
securities of the Corporation have been and may continue to be subject to
significant fluctuations which may be based on factors unrelated to its
financial performance or prospects. These factors include macroeconomic
developments in North America and globally, and market perceptions of the
attractiveness of particular industries.
Standby Purchase Agreement may be terminated under certain
circumstances
Under the terms of the Standby
Purchase Agreement, the Standby Purchaser has the right to terminate the Standby
Commitment in certain circumstances, as set out under the heading STANDBY
COMMITMENT. If the Standby Purchaser becomes entitled to and does terminate its
Standby Commitment, the application for the Rights Offering Securities shall be
withdrawn and the Corporation shall procure that the listing does not become
effective (except to the extent such listing has already become effective), the
Standby Purchase Agreement shall terminate and the parties obligations under the
Standby Purchase Agreement shall cease immediately and neither party will have
any claim against any other party except, provided however that such limitation
will not apply in the event of fraud or a material breach of the Standby Purchase Agreement
and the anticipated proceeds of the Rights Offering will not be realized. If the
Standby Commitment is terminated, the Corporation may need to seek other
alternate sources of financing for the NorthMet Project.
The failure to
complete the Rights Offering and to receive the anticipated US$60,480,000 gross
proceeds (assuming full exercise of the Rights) will have a material adverse
effect on the Corporation as it does not currently have sufficient cash or
alternate sources of financing available.
- 31 -
Future sales may affect the market price of the Common
Shares
In order to finance future
operations, the Corporation may raise funds through the issuance of Common
Shares or the issuance of debt instruments or other securities convertible into
Common Shares. The Corporation cannot predict the size of future issuances of
Common Shares or the issuance of debt instruments or other securities
convertible into shares or the effect, if any, that future issuances and sales
of the Corporations securities will have on the market price of the Common
Shares.
Exercises of Rights may not be revoked
Subject to certain statutory
withdrawal and rescission rights available to Canadian subscribers, if the
Common Share trading price declines below the Subscription Price for the Common
Shares, resulting in a loss of some or all of the Shareholders Subscription
Price, the Shareholders may not revoke or change the exercise of Rights after
they send in their subscription forms and payment.
A large number of Common Shares may be issued and
subsequently sold upon the exercise of Rights
To the extent that Shareholders
who exercise Rights sell the Common Shares underlying such Rights, the market
price of the Corporations Common Shares may decrease due to the additional
selling pressure in the market. The risk of dilution from issuances of Common
Shares underlying the Rights may cause Shareholders to sell their Common Shares,
which may have a material adverse impact on the Corporation and its share price.
The sale of Common Shares issued upon exercise of the Rights
could encourage short sales by third parties which could depress the price of
the Common Shares
Any downward pressure on the
price of Common Shares caused by the sale of Common Shares underlying the Rights
could encourage short sales by third parties. In a short sale, a prospective
seller borrows Common Shares from a Shareholder or broker and sells the borrowed
Common Shares. The prospective seller hopes that the Common Share price will
decline, at which time the seller can purchase Common Shares at a lower price
for delivery back to the lender. The seller profits when the Common Share price
declines because it is purchasing Common Shares at a price lower than the sale
price of the borrowed Common Shares. Such sales could place downward pressure on
the price of the Corporations Common Shares by increasing the number of Common
Shares being sold, which may have a material adverse impact on the Corporation
and its share price.
The Subscription Price is not necessarily an indication of
value
The Subscription Price was
determined by the Corporation in accordance with the rules of the TSX. The
Corporations objective in determining the Subscription Price is to encourage
holders of Rights to exercise their Rights. The Subscription Price does not
necessarily bear any relationship to the book value of the Corporations assets,
past operations, cash flows, losses, financial condition or any other
established criteria for value. Holders of Rights should not consider the
Subscription Price to be an indication of the Corporations value and the Common
Shares may trade at prices above or below the Subscription Price.
Subscribers outside of the United States are subject to
exchange rate risk
The Subscription Price is payable
in United States dollars. Accordingly, any Subscriber outside of the United
States is subject to adverse movements in their local currency against the
United States dollar.
Because we believe that we will
be classified as a passive foreign investment company (a
PFIC
) for U.S.
federal income tax purposes, U.S. Holders (as defined in CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSIDERATIONS) of our Common Shares may be subject to U.S.
federal income tax consequences that are worse than those that would apply if we
were not a PFIC, such as ordinary income treatment plus a charge in lieu of interest upon a sale or disposition of our Common Shares even
if the shares were held as a capital asset. See CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS.
- 32 -
Negative Cash Flow from Operating Activities
As a development stage company
with no holdings in any producing mines, the Corporation continues to incur
losses and expects to incur losses in the future. As at January 31, 2013,
PolyMet had an accumulated deficit of US$88,416,000. The Corporation may not be
able to achieve or sustain profitability in the future. If PolyMet does not
begin to generate revenues, the Corporation may either have to suspend or cease
operations.
The Corporation has prepared the
consolidated financial statements on a going concern basis which contemplates
the realization of assets and the settlement of liabilities in the normal course
of operations.
The Corporation currently has
negative cash flow from operating activities. The Corporation cannot predict if
or when it will operate profitably and generate positive cash flows. The
Corporation intends to use proceeds raised primarily for construction
engineering financing with respect to the development of the NorthMet
Project..
The Corporation has taken steps
to fund its operations through the issuance of equity and debt. The Corporation
plans to meet its financial obligations to the point at which all regulatory
approvals for the NorthMet Project have been obtained, which will allow the
Corporation to raise capital to construct the mine and commence commercial
production.
Since January 1, 2007, PolyMet
has raised US$118,000,000 in equity, US$25,000,000 in initial principal debt
exchangeable into equity upon receipt of permits necessary to build and operate
the NorthMet Project, and US$20,000,000 in initial principal debt that is not
exchangeable into equity.
The Corporation will need to raise sufficient funds to fund ongoing development, capital expenditures and administration expenses, in accordance with spending plans. While in the past the Corporation has been successful in closing financing agreements with the Standby Purchaser and other parties and the Corporation expects the Rights Offering to be completed, there can be no assurance the Rights Offering will be completed or that the Corporation will be able to secure financing again in the future. Factors that could affect the availability of financing include the state of international debt and equity markets, investor perceptions and expectations and the global metals markets.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Farris,
Vaughan, Wills & Murphy LLP, Canadian tax counsel to the Corporation, the
following is, as of the date of this prospectus, a summary of the principal
Canadian federal income tax considerations under the
Income Tax Act
(Canada) and the regulations thereunder (collectively, the
Tax Act
)
generally applicable to a holder of Rights acquired pursuant to the Rights
Offering and of Common Shares acquired on the exercise of such Rights that, for
the purposes of the Tax Act and at all relevant times, holds such Rights and
Common Shares as capital property, is not affiliated with the Corporation, and
deals with the Corporation at arms length (a
Holder
). A Right or
Common Share generally will be capital property to a Holder unless it is held in
the course of carrying on a business of trading in or dealing in securities, or
it has been acquired in a transaction or transactions considered to be an
adventure or concern in the nature of trade.
This summary is based on the
current provisions of the Tax Act, all specific proposals to amend the Tax Act
publicly announced by or on behalf of the Minister of Finance (Canada) (
Tax
Proposals
) before the date of this Prospectus, and the current published
administrative policies and assessing practices of the Canada Revenue Agency
(
CRA
). No assurance can be given that the Tax Proposals will be enacted
in the form proposed or at all. This summary is not exhaustive of all possible
Canadian federal income tax considerations and, except as mentioned above, does
not take into account or anticipate any changes in law, whether by legislative,
administrative or judicial decision or action, nor does it take into account
provincial, territorial or foreign income tax legislation or considerations,
which may differ significantly from the Canadian federal income tax
considerations discussed herein.
This summary is of a general
nature only and is not intended to be, nor should it be construed to be, legal
or tax advice to any particular Holder. Accordingly, Holders should consult
their own tax advisors about the specific tax consequences to them of acquiring,
holding and disposing of Rights or Common Shares.
- 33 -
Generally, for purposes of the
Tax Act, all amounts relating to the acquisition, holding or disposition of
Rights and Common Shares must be expressed in Canadian dollars (including
adjusted cost base, proceeds of disposition and dividends). For purposes of the
Tax Act, amounts denominated in a foreign currency generally must be converted
into Canadian dollars using the rate of exchange quoted by the Bank of Canada at
noon on the date such amounts arose, or such other rate of exchange as is
acceptable to the CRA.
Residents of Canada
The following portion of the
summary is generally applicable to a Holder that, at all relevant times for
purposes of the Tax Act, is or is deemed to be resident in Canada (a
Resident Holder
). Certain Resident Holders that might not otherwise be
considered to hold their Common Shares as capital property may, in certain
circumstances, be entitled to have their Common Shares and all other Canadian
securities (as defined in the Tax Act) owned in the taxation year of the
election and all subsequent taxation years deemed to be capital property by
making the irrevocable election permitted by subsection 39(4) of the Tax Act.
Rights are not Canadian securities for these purposes; accordingly, the
characterization of Rights as capital property is unaffected by a Resident
Holders making an election pursuant to subsection 39(4) of the Tax Act.
The following portion of the
summary does not apply to a Resident Holder: (i) that is a financial
institution for purposes of section 142.2 of the Tax Act, (ii) that is a
specified financial institution as defined for purposes of the Tax Act, (iii)
that is a corporation that is, or becomes as part of a transaction or event or
series of transactions or events that includes the acquisition of the Rights or
Common Shares, controlled by a non-resident corporation for the purposes of the
rules in proposed section 212.3 of the Tax Act, (iv) to which the functional
currency reporting rules in section 261 of the Tax Act apply, or (v) an
interest in which is a tax shelter investment for purposes of the Tax Act.
Such Holders should consult their own tax advisors.
Acquisition of Rights
A Resident Holder that receives a
Right pursuant to the Rights Offering will not be required to include the value
of such Right in computing the Resident Holders income for purposes of the Tax
Act. Rights received by a Resident Holder pursuant to this Rights Offering will
have an adjusted cost base of nil. The cost of Rights acquired by a Resident
Holder otherwise than pursuant to this Rights Offering will be averaged with the
adjusted cost base of all other Rights held by that Resident Holder as capital
property immediately prior to such acquisition for the purposes of determining
the adjusted cost base to that Resident Holder of each Right so held.
Exercise of Rights
The exercise of a Right will not
constitute a disposition of that Right for purposes of the Tax Act and,
accordingly, a Resident Holder will not realize a gain or loss on such exercise.
The aggregate cost to a Resident Holder of the Common Shares acquired on the
exercise of a Right will be equal to the aggregate amount of the Subscription
Price paid on exercise and the Resident Holders adjusted cost base of the
Right, if any, immediately before the exercise. The adjusted cost base to a
Resident Holder at any time of Common Shares received on an exercise of Rights
will be determined by averaging the cost of such Common Shares with the adjusted
cost base of any other Common Shares owned by the Resident Holder as capital
property at that time.
Disposition of Rights
A Resident Holder that disposes
of or is deemed to dispose of a Right (otherwise than by exercise of the Right)
generally will realize a capital gain (or a capital loss) equal to the amount by
which the proceeds of disposition of the Right exceed (or are exceeded by) the
aggregate of the Resident Holders adjusted cost base thereof and any reasonable
costs of disposition. The tax treatment of any capital gain (or capital loss)
realized on the disposition of a Right (otherwise than by the exercise of the
Right) is described below under the heading
Treatment of Capital Gains and
Capital Losses
.
Expiry of Rights
The expiry or termination of an
unexercised Right will result in a capital loss to a Resident Holder equal to
the adjusted cost base, if any, of the Right immediately before its expiry or
termination. Any such capital loss will be subject to the treatment described
below under the heading
Treatment of Capital Gains and Capital Losses
.
- 34 -
Receipt of Dividends on Common Shares
Dividends received or deemed to
be received on Common Shares by a Resident Holder that is an individual (other
than certain trusts) will be included in computing the individuals income and
will be subject to the gross-up and dividend tax credit rules normally
applicable to taxable dividends received by an individual from a taxable
Canadian corporation. Taxable dividends received or deemed to be received by
such individual which are designated by the Corporation as eligible dividends
in accordance with the Tax Act will be subject to enhanced gross-up and dividend
tax credit rules under the Tax Act.
Taxable dividends received by an
individual (including certain trusts) may give rise to a liability for
alternative minimum tax as calculated under the detailed rules set out in the
Tax Act.
Dividends received or deemed to
be received on Common Shares by a Resident Holder that is a corporation will be
included in computing the corporations income and generally will be deductible
in computing the taxable income of the corporation. A Resident Holder that is a
private corporation
or a
subject corporation
for purposes of
the Tax Act may be liable to pay a refundable tax of 33 1/3% on dividends
received or deemed to be received to the extent such dividends are deductible in
computing such Resident Holders taxable income.
Disposition of Common Shares
On a disposition or a deemed
disposition of a Common Share (other than to the Corporation, unless purchased
by the Corporation on the open market in the manner in which shares are normally
purchased by any member of the public in the open market), a Resident Holder
generally will realize a capital gain (or a capital loss) equal to the amount by
which the proceeds of disposition of the Common Share exceed (or are exceeded
by) the aggregate of the Resident Holders adjusted cost base thereof and any
reasonable costs of disposition. The tax treatment of any such capital gain (or
capital loss) is described under the heading
Treatment of Capital Gains and
Capital Loses
.
Treatment of Capital Gains and Capital Losses
Generally, one-half of the amount
of any capital gain (a
taxable capital gain
) realized by a Resident
Holder in a taxation year must be included in computing the Resident Holders
income in that year, and one-half of the amount of any capital loss (an
allowable capital loss
) realized by a Resident Holder in a taxation
year generally must be deducted from taxable capital gains realized by the
Resident Holder in that year. Allowable capital losses in excess of taxable
capital gains realized in a taxation year generally may be carried back and
deducted in any of the three preceding taxation years or carried forward and
deducted in any following taxation year against taxable capital gains realized
in such years to the extent and under the circumstances described in the Tax
Act.
The amount of any capital loss
realized on the disposition or deemed disposition of a Common Share by a
Resident Holder that is a corporation may be reduced by the amount of dividends
received or deemed to have been received by it on the Common Share (or on a
share for which such Common Share has been substituted) to the extent and in the
circumstances prescribed by the Tax Act. Similar rules may apply where a
corporation is a member of a partnership or a beneficiary of a trust that owns
Common Shares, directly, or indirectly through a partnership or a trust.
Resident Holders to which these rules may be relevant should consult their own
tax advisors.
A Resident Holder that is a
Canadian-controlled private corporation (as defined in the Tax Act) may be
liable for a refundable tax of 6 2/3% on its aggregate investment income,
which is defined in the Tax Act to include taxable capital gains.
Capital gains realized by an
individual (including certain trusts) may give rise to a liability for
alternative minimum tax as calculated under the detailed rules set out in the
Tax Act.
Non-Residents of Canada
The following portion of the
summary is generally applicable to a Holder that, at all relevant times for
purposes of the Tax Act, is neither resident nor deemed to be resident in Canada
(including as a consequence of an applicable income tax treaty or convention)
and does not use or hold, and is not deemed to use or hold Rights or Common
Shares in connection with carrying on a business in Canada (a
Non-Resident
Holder
). Special rules which are not discussed in this summary, may apply to a
non-resident insurer carrying on business in Canada and elsewhere. Such holders
should consult their own tax advisors.
- 35 -
Acquisition of Rights
The issuance of Rights to a
Non-Resident Holder pursuant to the Rights Offering will not be subject to
Canadian withholding tax and no other tax will be payable under the Tax Act by a
Non-Resident Holder in respect of the receipt of Rights pursuant to the Rights
Offering.
Exercise of Rights
The exercise of Rights by a
Non-Resident Holder will not constitute a disposition of Rights for purposes of
the
Tax Act
and, consequently, no gain or loss will be realized by the
Non-Resident Holder upon the exercise of the Rights.
Expiry of Rights
A Non-Resident Holder will not be
subject to tax under the Tax Act in respect of the expiry or termination of an
unexercised Right.
Dispositions of the Rights or Common Shares
A Non-Resident Holder will not be
subject to tax under the Tax Act in respect of any capital gain realized on a
disposition of Rights or Common Shares (including a disposition made on behalf
of Ineligible Holders) unless the Rights or Common Shares disposed of constitute
taxable Canadian property of the Non-Resident Holder and the Non-Resident
Holder is not entitled to relief under an applicable income tax treaty or
convention.
The Rights will only be taxable
Canadian property of a Non-Resident Holder if the Common Shares to be issued
upon the exercise of the Rights would be taxable Canadian property of the
Non-Resident Holder.
Generally, a Common Share will
not be taxable Canadian property (within the meaning of the Tax Act) of a
Non-Resident Holder at a particular time provided the Common Share is listed on
a designated stock exchange (which currently includes the TSX) unless, at any
time during the 60-month period preceding the particular time, (a) the Common
Share derived more than 50% of its fair market value directly or indirectly from
one or any combination of: (i) real or immovable properties situated in Canada,
(ii) Canadian resource properties, (iii) timber resource properties (as such
terms are defined in the Tax Act), and (iv) options in respect of, or interests
in, or for civil law rights in, property described in (i) to (iii), whether or
not the property exists; and (b) the NonResident Holder, persons not dealing at
arms length with such Non-Resident Holder or the Non- Resident Holder together
with all such persons, owned 25% or more of the issued shares of any class or
series of shares of the capital stock of the Corporation.
Notwithstanding the foregoing, in
certain circumstances the Rights would constitute taxable Canadian property by
virtue of certain deeming rules in the Tax Act. Non-Resident Holders for which
the Rights or Common Shares may constitute taxable Canadian property should
consult their own tax advisors for advice having regard to their particular
circumstances.
Receipt of Dividends on Common Shares
Dividends on Common Shares paid
or credited, or deemed to be paid or credited to a Non-Resident Holder will be
subject to a non-resident withholding tax under the Tax Act at a rate of 25%,
subject to reduction under the provisions of an applicable income tax treaty or
convention.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATION
The following summary describes
certain material U.S. federal income tax consequences to a U.S. Holder (as
defined below) of the receipt and exercise (or expiration) of the Rights
acquired through this Offering, and of owning and disposing of the Common Shares
received upon the exercise of the Rights.
- 36 -
This discussion is based upon the
provisions of the U.S. Internal Revenue Code of 1986, as amended (the
Code
), Treasury regulations promulgated thereunder, administrative
rulings and judicial decisions, in each case as of the date hereof. These
authorities are subject to differing interpretations and may be changed, perhaps
retroactively, resulting in U.S. federal income tax consequences different from
those discussed below. We have not sought any ruling from the U.S. Internal
Revenue Service (
IRS
) with respect to the statements made and the
conclusions reached in this discussion, and there can be no assurance that the
IRS will agree with such statements and conclusions.
For purposes of this discussion,
a
U.S. Holder
means a holder of Rights or Common Shares that is (i) a
citizen or an individual resident of the U.S., (ii) a corporation, or other
entity treated as a corporation for U.S. federal income tax purposes, created or
organized in or under the laws of the U.S., any state thereof or the District of
Columbia, (iii) an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or (iv) a trust if it (1) is subject to the
primary supervision of a court within the U.S. and one or more U.S. persons,
as defined in the Code, have the authority to control all substantial decisions
of the trust or (2) has a valid election in effect under applicable Treasury
regulations to be treated as a U.S. person. This summary does not apply to you
if you are not a U.S. Holder.
This summary applies to you only
if you are a U.S. Holder (i) that receives your Rights pursuant to this
Offering, and you hold your Rights or Common Shares issued to you upon exercise
of the Rights as capital assets for tax purposes, and (ii) (a) that is a
resident of the United States for purposes of the current Convention between the
United States and Canada signed on September 26, 1980 (as amended by the
Protocols, the
Treaty
), (b) whose Rights and Common Shares are not, for
purposes of the Treaty, effectively connected with a permanent establishment in
Canada and (c) that otherwise qualifies for the full benefits of the Treaty.
In addition, this discussion does
not address any U.S. federal alternative minimum tax, U.S. federal estate, gift,
or other non-income tax; or state, local or non-U.S. tax consequences of the
acquisition, ownership and disposition of a Right or Common Share. In addition,
this discussion does not address the U.S. federal income tax consequences to
certain categories of U.S. Holders subject to special rules, including U.S.
Holders that are (i) banks, financial institutions or insurance companies; (ii)
regulated investment companies or real estate investment trusts; (iii) brokers
or dealers in securities or currencies or traders in securities that elect to
use a mark-to-market method of accounting; (iv) tax-exempt organizations,
qualified retirement plans, individual retirement accounts or other tax-deferred
accounts; (v) holders that hold a Right or Common Share as part of a hedge,
straddle, conversion transaction or a synthetic security or other integrated
transaction; (vi) holders that have a functional currency other than the
United States dollar; (vii) holders that own directly, indirectly or
constructively 10 percent or more of the voting power of the Corporation; and
(viii) United States expatriates.
If a partnership (or any other
entity treated as a partnership for U.S. federal income tax purposes) holds
Rights or Common Shares, the tax treatment of a partner in such partnership will
generally depend on the status of the partner and the activities of the
partnership. Such a partner should consult its own tax advisors as to the U.S.
federal income tax consequences of being a partner in a partnership that holds
or disposes of Rights or Common Shares.
This discussion addresses only
certain aspects of U.S. federal income taxation to U.S. Holders. U.S. Holders
should consult their own tax advisors regarding the U.S. federal, state, local,
non-U.S. and other tax consequences of the ownership and disposition of Rights
or Common Shares.
ACCORDINGLY, EACH RECIPIENT OF
RIGHTS IN THE OFFERING SHOULD CONSULT THEIR OWN TAX ADVISOR WITH RESPECT TO THE
TAX CONSEQUENCES OF THE OFFERING AND THE RELATED COMMON SHARE ISSUANCES THAT MAY
RESULT FROM SUCH RECIPIENTS PARTICULAR CIRCUMSTANCES.
Taxation of Rights
Receipt of Rights
Your receipt of the Rights
pursuant to the Offering will not be treated as a taxable distribution with
respect to your existing Common Shares for U.S. federal income tax purposes.
Under Section 305 of the Code, a shareholder who receives a right to acquire
shares will, in certain circumstances, be treated as having received a taxable dividend in an amount equal to the value of such right.
A common shareholder who receives a right to acquire common shares generally
will be treated as having received a taxable dividend if such shareholders
proportionate interest in the earnings and profits or assets of the corporation
is increased and any other shareholder receives a distribution of cash or other
property. A common shareholder who receives a right to acquire common shares
will be treated as having received a taxable dividend if the distribution is
treated as part of a disproportionate distribution. A disproportionate
distribution of share or share rights occurs when a distribution (or series of
distributions) from a corporation results in (a) an increase in the
shareholders proportionate interest in the earnings and profits or assets of
the corporation and (b) the receipt by other stockholders of cash or other
property. For purposes of the above, shareholder includes holders of warrants,
options and convertible securities. Under the above principles, however, we do
not believe that a disproportionate distribution will occur and, therefore, the
receipt of the Rights will not be taxable to a U.S. Holder.
- 37 -
Tax Basis in Rights
If the fair market value of the
Rights you receive is less than 15% of the fair market value of your existing
Common Shares on the date you receive the Rights, the Rights will be allocated a
zero basis for U.S. federal income tax purposes, unless you elect to allocate
your basis in your existing Common Shares between your existing Common Shares
and the Rights in proportion to the relative fair market values of the existing
Common Shares and the Rights determined on the date of receipt of the Rights. If
you choose to allocate basis between your existing Common Shares and the Rights,
you must make this election on a statement included with your tax return for the
taxable year in which you receive the Rights. Such an election is
irrevocable.
However, if the fair market value
of the Rights you receive is 15% or more of the fair market value of your
existing Common Shares on the date you receive the Rights, then you must
allocate your basis in your existing Common Shares between your existing Common
Shares and the Rights you receive in proportion to their fair market values
determined on the date you receive the Rights. The fair market value of the
Rights on the date the Rights will be distributed is uncertain. In determining
the fair market value of the Rights, you should consider all relevant facts and
circumstances, including the trading price thereof.
Exercise of Rights
You will not recognize gain or
loss on the exercise of a Right. Your tax basis in a new Common Share acquired
when you exercise a Right will be equal to your adjusted tax basis in the Right,
if any, plus the Subscription Price. The holding period of a Common Share
acquired when you exercise your Rights will begin on the date of exercise.
Disposition of Rights
A U.S. Holder will recognize gain
or loss on the sale or other taxable disposition of a Right in an amount equal
to the difference, if any, between (a) the amount of cash plus the fair market
value of any property received and (b) such U.S. Holders tax basis, if any, in
the Right sold or otherwise disposed of. Subject to the discussion under
Taxation of Common Shares Acquired upon Exercise of Rights --
Passive
Foreign Investment Company
below, any such gain or loss generally will be
capital gain or loss, and will be short-term or long-term depending on whether
the Rights are treated as having been held for more than one year. Long-term
capital gains of a non-corporate taxpayer are generally subject to taxation at
preferential rates. The deductibility of capital losses is subject to various
limitations.
Expiration of Rights
If you allow Rights to expire,
you will not recognize any gain or loss for U.S. federal income tax purposes,
and you will re-allocate any portion of the tax basis in your existing Common
Shares previously allocated to the Rights that have expired to the existing
Common Shares.
Taxation of Common Shares Acquired upon Exercise of
Rights
Distributions on Our Common Shares
Subject to the discussion below
under
Passive Foreign Investment Company
, U.S. Holders receiving
dividend distributions (including constructive dividends) with respect to our
Common Shares generally are required to include in gross income for U.S. federal income tax purposes
the gross amount of such distributions (without reduction for any Canadian
income or other tax withheld from such distributions), equal to the U.S. dollar
value of such distributions on the date of receipt (based on the exchange rate
on such date), to the extent that we have current or accumulated earnings and
profits (as determined for U.S. federal income tax purposes). To the extent that
the amount of the distribution exceeds our current and accumulated earnings and
profits, it will be treated as a return of capital to the extent of a U.S.
Holders adjusted tax basis in our Common Shares and thereafter as capital gain
from the sale or exchange of such Common Shares. We do not intend to calculate
our earnings and profits under U.S. federal income tax principles. Therefore, a
U.S. Holder should expect that the full amount of a distribution with respect to
the Common Shares will be treated, and reported by us, as a dividend.
- 38 -
Dividends received by U.S.
Holders that are individuals, estates or trusts from a qualified foreign
corporation, as defined in the Code, generally are taxed at the same
preferential tax rates applicable to long-term capital gains. A corporation that
is a passive foreign investment company, as defined below under
Passive
Foreign Investment Company,
for its taxable year during which it pays a
dividend, or for its immediately preceding taxable year, however, is not a
qualified foreign corporation. Since we believe we will meet the definition of
a PFIC, dividends received by U.S. Holders that are individuals, estates or
trusts generally will be subject to U.S. federal income tax at ordinary income
tax rates (and not at the preferential tax rates applicable to long-term capital
gains). Dividends paid on our Common Shares will not be eligible for the
dividends received deduction provided to corporations receiving dividends from
certain U.S. corporations.
In the case of foreign currency
(such as Canadian dollars) received as a dividend that is not converted by the
recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a
tax basis in the foreign currency equal to its U.S. dollar value on the date of
receipt. Generally any gain or loss recognized upon a subsequent sale or other
disposition of the foreign currency, including the exchange for U.S. dollars,
will be ordinary income or loss.
The maximum rate of withholding
tax on dividends paid to you pursuant to the Treaty is 15 percent. You may be
required to properly demonstrate to the Corporation and the Canadian tax
authorities your entitlement to the reduced rate of withholding under the
Treaty.
Disposition of Our Common Shares
Subject to the discussion below
under
Passive Foreign Investment Company,
U.S. Holders will recognize
gain or loss upon the sale of our Common Shares equal to the difference, if any,
between (i) the amount of cash plus the fair market value of any property
received, and (ii) the U.S. Holders tax basis in our Common Shares. Any gain or
loss on disposition of our Common Shares generally will be U.S. source gain or
loss and will be capital gain or loss. If, at the time of the disposition, a
U.S. Holder is treated as holding the Common Shares for more than one year, such
gain or loss will be a long-term capital gain or loss. Long-term capital gain
recognized by a non-corporate U.S. Holder is currently subject to taxation at a
reduced rate. The deductibility of capital losses is subject to limitations.
Passive Foreign Investment Company
We believe that we will meet the
definition of passive foreign investment company under Section 1297 of the
Code. A U.S. holder that holds shares in a non-U.S. corporation during any year
in which such corporation is a PFIC is subject to numerous special U.S. federal
income tax rules. A non-U.S. corporation is considered to be a PFIC for any
taxable year if either: at least 75% of its gross income is passive income (the
income test
), or at least 50% of the value of its assets (based on an
average of the quarterly values of the assets during a taxable year) is
attributable to assets that produce or are held for the production of passive
income (the
asset test
).
For purposes of the income test
and the asset test, respectively, we will be treated as earning our
proportionate share of the income and owning our proportionate share of the
assets of any other corporation in which we own, directly or indirectly, 25% or
more (by value) of the shares. In addition, for purposes of the income test,
passive income does not include any interest, dividends, rents, or royalties
received or accrued by us from certain related persons, to the extent such items
are properly allocable to income of such related person that is not passive.
We must make a separate
determination each year as to whether or not we are a PFIC. As a result, our
PFIC status may change. In particular, because the total value of our assets for
purposes of the asset test will be calculated using the market price of our Common Shares (assuming that we
continue to be a publicly traded corporation for purposes of the PFIC rules),
our PFIC status will depend in large part on the market price of our Common
Shares. Accordingly, fluctuations in the market price of our Common Shares may
result in our being a PFIC for any year. If we are a PFIC for any year during
which a U.S. Holder holds our Rights or Common Shares, we generally will
continue to be treated as a PFIC for all succeeding years during which such U.S.
Holder holds the Rights or Common Shares, absent a special election. For
instance, if we cease to be a PFIC, a U.S. Holder may avoid some of the adverse
effects of the PFIC regime by making a deemed sale election with respect to its
Common Shares pursuant to which such U.S. Holder recognizes gain (which will be
taxed under the default PFIC tax rules discussed below) as if such Common Shares
had been sold on the last day of the last taxable year for which we were a PFIC.
If a non-U.S. corporation is a PFIC for any taxable year and any of its non-U.S.
subsidiaries is also a PFIC, a U.S. holder would be treated as owning a
proportionate amount (by value) of the shares of the lower-tier PFIC for
purposes of the application of these rules.
- 39 -
If we are a PFIC for any taxable
year during which a U.S. Holder holds our Rights or Common Shares, such U.S.
Holder will be subject to special tax rules with respect to any excess
distribution that it receives and any gain it realizes from a sale or other
disposition (including a pledge) of the Rights or Common Shares, unless the U.S.
Holder makes a mark-to-market election, as discussed below. Distributions
received by a U.S. Holder in a taxable year that are greater than 125% of the
average annual distributions such U.S. Holder received during the shorter of the
three preceding taxable years and its holding period for the Rights or Common
Shares will be treated as an excess distribution. Under these special tax rules,
(a) the excess distribution or gain will be allocated ratably over the U.S.
Holders holding period, (b) the amount allocated to the current taxable year
and any taxable year prior to the first taxable year in which we became a PFIC
will be treated as ordinary income, and (c) the amount allocated to each other
taxable year will be subject to the highest tax rate in effect for that year and
the interest charge generally applicable to underpayments of tax will be imposed
on the resulting tax attributable to each such year. You will be required to
file IRS Form 8621 if you hold our Rights or Common Shares in any year in which
we are classified as a PFIC.
The tax liability for amounts
allocated to taxable years prior to the year of disposition or excess
distribution cannot be offset by any net operating losses for such years, and
gains (but not losses) realized on the disposition of the Rights or Common
Shares cannot be treated as capital.
Alternatively, a U.S. Holder of
marketable stock (as defined below) in a PFIC may make a mark-to-market
election with respect to shares of a PFIC to elect out of the tax treatment
discussed above. If a U.S. Holder makes a valid mark-to-market election for the
Common Shares, the U.S. Holder will include in income each year an amount equal
to the excess, if any, of the fair market value of the Common Shares as of the
close of its taxable year over its adjusted basis in such Common Shares. The
U.S. Holder is allowed a deduction for the excess, if any, of the adjusted basis
of the Common Shares over their fair market value as of the close of the taxable
year. However, deductions are allowable only to the extent of any net
mark-to-market gains on the Common Shares included in the U.S. Holders income
for prior taxable years. Amounts included in a U.S. Holders income under a
mark-to-market election, as well as gain on the actual sale or other disposition
of the Common Shares, are treated as ordinary income. Ordinary loss treatment
also applies to the deductible portion of any mark-to-market loss on the Common
Shares, as well as to any loss realized on the actual sale or disposition of the
Common Shares, to the extent that the amount of such loss does not exceed the
net mark-to-market gains previously included for such Common Shares. A U.S.
Holders basis in the Common Shares will be adjusted to reflect any such income
or loss amounts. If a U.S. Holder makes such an election, the tax rules that
ordinarily apply to distributions by corporations that are not PFICs would apply
to distributions by us, except that the preferential tax rates applicable to
long-term capital gains on dividends received from a qualified foreign
corporation discussed above under Distributions on Our Common Shares would
not apply. The mark-to-market election is available only for marketable stock,
which is stock that is traded in other than de minimis quantities on at least 15
days during each calendar quarter on a qualified exchange, including the TSX
and the NYSE MKT, or other market, as defined in applicable U.S. Treasury
regulations. As provided under Plan of Distribution -- Stock Exchange
Approvals, we cannot provide any assurances that the Rights or Common Shares
will be listed on each of the TSX and the NYSE MKT on at least 15 days during
each calendar quarter and traded in other than de minimis quantities. You are
urged to consult your own tax advisor concerning the availability of the
mark-to-market election.
If a non-U.S. corporation is a
PFIC, a holder of shares in that corporation can avoid taxation under the rules
described above by making a qualified electing fund election to include the
holders share of the corporations income on a current basis in gross income.
However, a U.S. Holder can make a qualified electing fund election with respect to its Common Shares only if we furnish the U.S. Holder
annually with certain tax information, and we do not intend to prepare or
provide such information.
- 40 -
U.S. Holders should note that
neither the qualified electing fund nor the mark-to-market election is available
with respect to the Rights.
You are urged to consult your own
tax advisors concerning the U.S. federal income tax consequences of holding
Common Shares if we are considered a PFIC in any taxable year.
Foreign Tax Credits
Subject to certain conditions and
limitations, including potential limitations under the Treaty, Canadian taxes
paid on or withheld from distributions from us and not refundable to a U.S.
Holder may be, at the election of such U.S. Holder, either credited against such
U.S. Holders U.S. federal income tax liability or deducted from such U.S.
Holders taxable income. Generally, a credit will reduce a U.S. Holders U.S.
federal income tax liability on a dollar-for-dollar basis, whereas a deduction
will reduce a U.S. Holder s income subject to U.S. federal income tax. This
election is made on a year-by-year basis and applies to all foreign taxes paid
by or withheld from a U.S. Holder that year. Complex limitations apply to the
foreign tax credit, including the general limitation that the credit cannot
exceed the proportionate share of a U.S. Holders U.S. federal income tax
liability that such U.S. Holders foreign source taxable income bears to such
U.S. Holders worldwide taxable income. In applying this limitation, a U.S.
Holders various items of income and deduction must be classified, under complex
rules, as either foreign source or U.S. source. In addition, this limitation
is calculated separately with respect to specific categories of income.
Dividends paid by us generally will constitute foreign source income and
generally will be categorized as passive category income. Because the rules
governing foreign tax credits are complex, U.S. Holders should consult their own
tax advisors regarding the availability of foreign tax credits in their
particular circumstances.
Health Care and Reconciliation Act of 2010
On March 30, 2010, President
Obama signed into law the Health Care and Reconciliation Act of 2010, which
requires certain U.S. shareholders that are individuals, estates or trusts to
pay a 3.8% tax on, among other things, dividends on and capital gains from the
sale or other disposition of stock for taxable years beginning after December
31, 2012. U.S. Holders should consult their own tax advisors regarding the
effect, if any, of this legislation on their ownership and disposition of the
Rights and Common Shares.
Information Reporting; Backup Withholding
Certain U.S. Holders are required
to report information relating to their investment in, or involvement in, a
foreign corporation, by attaching a complete IRS Form 8938, Statement of
Specified Foreign Financial Assets, with their applicable tax return. Such
information reporting may apply to the Rights and/or Common Shares. U.S. Holders
should consult their own tax advisors regarding any such information reporting
requirements.
In general, payments made in the
U.S. or through certain U.S. related financial intermediaries with respect to
the ownership and disposition of the Rights and Common Shares will be required
to be reported to the IRS unless the U.S. Holder is a corporation or other
exempt recipient and, when required, demonstrates this fact. In addition, a U.S.
Holder may be subject to a backup withholding (currently at a rate of 28%) on
such payments unless the U.S. Holder (i) is a corporation or other exempt
recipient and when required, demonstrates this fact or (ii) provides a taxpayer
identification number and otherwise timely complies with applicable
certification requirements. U.S. Holders should consult their own tax advisors
regarding their qualification for an exemption from backup withholding and the
procedures for obtaining such an exemption, if applicable. Backup withholding is
not an additional tax. Amounts withheld as backup withholding may be credited
against a U.S. Holders U.S. federal income tax liability and such U.S. Holder
may obtain a refund of any excess amounts withheld by filing the appropriate
claim for refund with the IRS and furnishing any required information in a
timely manner.
THE U.S. FEDERAL INCOME TAX
DISCUSSION SET FORTH ABOVE IS FOR GENERAL INFORMATION PURPOSES ONLY, DOES NOT
PURPORT TO BE A COMPLETE DESCRIPTION OF THE POTENTIAL TAX CONSIDERATIONS
RELATING TO THE RIGHTS AND COMMON SHARES AND IS NOT TAX ADVICE. U.S. HOLDERS ARE
URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
OWNERSHIP AND DISPOSITION OF THE RIGHTS AND COMMON SHARES.
- 41 -
ELIGIBILITY FOR INVESTMENT
In the opinion of Farris, counsel
to the Corporation, provided that the Rights and Common Shares are listed on a
designated stock exchange under the Tax Act (which includes the TSX), the Rights
and the Common Shares issuable on the exercise of Rights, if issued on the date
hereof, would be qualified investments under the Tax Act for a trust governed by
a registered retirement savings plan (an
RRSP
), registered retirement
income fund (an
RRIF
), registered education savings plan, registered
disability savings plan, deferred profit sharing plan and a tax-free savings
account (a
TFSA
).
Notwithstanding that the Rights
and Common Shares may be qualified investments for a trust governed by a TFSA,
RRSP or RRIF, the holder of a TFSA or the annuitant of an RRSP or RRIF, as the
case may be, will be subject to a penalty tax in respect of the Rights and
Common Shares, if such Rights and Common Shares are a prohibited investment
(as defined in the Tax Act) for the TFSA, RRSP or RRIF. The Rights and Common
Shares will not be a prohibited investment for a trust governed by a TFSA,
RRSP or RRIF provided that the holder of the TFSA or the annuitant of an RRSP or
RRIF, as the case may be, deals at arms length with the Corporation for
purposes of the Tax Act and does not have a significant interest (within the
meaning of the Tax Act) in the Corporation or in any person or partnership with
which the Corporation does not deal at arms length for purposes of the Tax Act.
LEGAL MATTERS
Certain legal matters in
connection with the Rights Offering and to the Rights to be distributed pursuant
to this prospectus will be reviewed on behalf of the Corporation by Farris.
Certain legal matters relating to United States federal laws will be passed upon
by Troutman Sanders LLP, New York, New York. As of May 23, 2013, the partners
and associates of Farris and Troutman Sanders LLP, as a group, beneficially
owned, directly or indirectly, less than 1% of the outstanding Common Shares.
INTERESTS OF EXPERTS
PricewaterhouseCoopers LLP has
advised the Corporation that it is independent within the meaning and in
accordance with the Rules of Professional Conduct of the Institute of Chartered
Accountants of British Columbia.
The following qualified persons
(within the meaning of NI 43-101) participated in the preparation of the Technical Report:
|
1.
|
Pierre Desautels, P.Eng., AGP Mining Consultants Inc.
("
AGP
");
|
|
|
|
|
2.
|
Gordon Zurowski, P.Eng., AGP;
|
|
|
|
|
3.
|
Karl Everett, P.E., Foth Infrastructure &
Environment, LLC ("
Foth
");
|
|
|
|
|
4.
|
David Dreisinger, director of the Corporation;
and
|
|
|
|
|
5.
|
William Murray, director of the
Corporation.
|
Neither AGP nor Foth nor any
director, officer, employee or partner thereof, as applicable, (i) has received
a direct or indirect interest in the property of the Corporation or of any
associate or affiliate of the Corporation, or (ii) is currently expected to be
elected, appointed or employed as a director, officer or employee of the
Corporation or of any associates or affiliates of the Corporation.
As of the date hereof, Messrs.
Desautels, Zurowski, Everett and Dreisinger collectively beneficially own,
directly or indirectly, less than 1% of the Corporation's outstanding securities
of any class. As of the date hereof, Mr. Murray owns 2,196,976 Common Shares,
representing approximately 1.1% of the Corporation's outstanding securities.
- 42 -
AUDITOR, REGISTRAR TRANSFER AGENT AND REGISTRAR AND
SUBSCRIPTION AGENT
PricewaterhouseCoopers LLP of Vancouver, British Columbia is
the Corporations auditor.
Computershare Investor Services
Inc. is the Corporations registrar and transfer agent at its principal offices
in Vancouver, British Columbia. Computershare Investor Services Inc., with its
principal office in Toronto, is acting as the Subscription Agent for this Rights
Offering and as registrar and transfer agent with respect to any Common Shares
issued upon the exercise of Rights or pursuant to any Standby Shares issued
pursuant to the Standby Commitment.
CANADIAN PURCHASERS STATUTORY RIGHTS OF WITHDRAWAL AND
RESCISSION
Securities legislation in certain
provinces of Canada provides purchasers with the right to withdraw from an
agreement to purchase securities. This right may be exercised within two
business days after receipt or deemed receipt of a prospectus and any amendment.
In several of the provinces, the securities legislation further provides a
purchaser with remedies for rescission or, in some jurisdictions, revisions of
the price or damages if the prospectus and any amendment contains a
misrepresentation or is not delivered to the purchaser, provided that the
remedies for rescission, revisions of the price or damages are exercised by the
purchaser within the time limit prescribed by the securities legislation of the
purchasers province. You should refer to applicable provisions of the
securities legislation of the purchasers province for the particulars of these
rights or consult with a legal advisor.
DOCUMENTS FILED AS PART OF REGISTRATION STATEMENT
The following documents have been
or will be filed with the SEC as part of the registration statement of which
this prospectus forms a part: (i) the 2013 AIF; (ii) the Annual Financial
Statements; (iii) the material change report dated October 15, 2012; (iv) the
material change report dated April 17, 2013; (v) the material change report
dated May 14, 2013; (vi) the 2012 Circular; (vii) the Technical Report; (viii)
Consent of PricewaterhouseCoopers LLP; (ix) Consent of Farris; (x) Consent of
AGP Mining Consultants Inc.; (xi) Consent of Pierre Desaultels; (xii) Consent of
Gordon Zurowski; (xiii) Consent of David Dreisinger; (xiv) Consent of William
Murray; (xv) Consent of Karl Everett; and (xvi) Powers of Attorney.
C- 1
CERTIFICATE OF THE CORPORATION
May 23, 2013
This short form prospectus, together with the documents
incorporated by reference, constitutes full, true and plain disclosure of all
material facts relating to the securities offered by this short form prospectus
as required by the securities legislation of each of the provinces of British
Columbia, Alberta and Ontario.
P
OLY
M
ET
M
INING
C
ORP
.
By: (Signed) JONATHAN CHERRY
|
By: (Signed) DOUGLAS NEWBY
|
President and Chief Executive Officer
|
Chief Financial Officer
|
O
N
B
EHALF OF THE
B
OARD OF
D
IRECTORS
By: (Signed) WILLIAM MURRAY
|
By: (Signed) DAVID DREISINGER
|
Director
|
Director
|
PART II
INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR
PURCHASERS
Indemnification of Directors and Officers
The laws of British Columbia and
PolyMet Mining Corp.s articles permit indemnification of its directors and
officers against certain liabilities, which would include liabilities arising
under the Securities Act of 1933, as amended.
Under Sections 159 to 165 of the
Business Corporations Act
(British Columbia) (the BCBCA), we are
permitted to indemnify a past or present director or officer of us without
obtaining prior court approval in respect of an eligible proceeding. An
eligible proceeding includes any legal proceeding relating to the activities
of the individual as a director or officer of us. However, under the BCBCA, we
will be prohibited from paying an indemnity or making the payment of expenses
if:
(a) the indemnity or payment is
made under an earlier agreement to indemnify or pay expenses and, at the time
that the agreement was made, we were prohibited from giving the indemnity or
paying the expenses by our articles;
(b) the indemnity or payment is
made otherwise than under an earlier agreement to indemnity or pay expenses and,
at the time that the indemnity is made, we are prohibited from giving the
indemnity or paying the expenses by our articles;
(c) the party did not act honestly and
in good faith with a view to our best interests;
(d) the proceeding was not a
civil proceeding and the party did not have reasonable grounds for believing
that his or her conduct was lawful; and
(e) the proceeding is brought against
the party by us or an associated corporation.
Under Section 164 of the BCBCA,
the Supreme Court of British Columbia may, on our application or the applicable
of an eligible party:
(a) order us to indemnify an
eligible party against any liability incurred by the eligible party in respect
of an eligible proceeding;
(b) order us to pay some or all
of the expenses incurred by an eligible party in respect of an eligible
proceeding;
(c) order the enforcement of, or
payment under, an agreement of indemnification entered into by us;
(d) order us to pay some or all
of the expenses actually and reasonably incurred by any person in obtaining an
order under Section 164 of the BCBCAS; or
(e) make any other order the court
considers appropriate.
We may indemnify directors,
officers, employees and agents, subject to the limits imposed under the
BCBCA.
Section 165 of the BCBCA provides
that we may purchase and maintain insurance for the benefit of an eligible party
or the heirs and personal or other legal representatives of the eligible party
against any liability that may be incurred by reason of the eligible party being
or having been a director or officer of, or holding or having held a position
equivalent to that of a director or officer of, our company or an associated
corporation.
Under the BCBCA, the articles of
the company may affect our power or obligation to give an indemnity or pay
expenses to the extent that the articles prohibit giving the indemnity or paying
the expenses. As indicated above, this is subject to the overriding power of the
Supreme Court of British Columbia under Section 164 of the BCBCA.
Our articles provide that we will
indemnify any of our directors, former directors, alternate directors or senior
officers and his or her heirs and legal personal representative against all
eligible penalties to which such person is or may be liable, and we must after
the final disposition of an eligible proceeding, pay the expenses actually and
reasonably incurred by such person in respect of that proceeding.
Insofar as indemnification for
liabilities under the Securities Act of 1933 may be permitted to directors,
officers or persons controlling the Registrant pursuant to the foregoing
provisions, the Registrant has been informed that, in the opinion of the U.S.
Securities and Exchange Commission, such indemnification is against public
policy in the United States as expressed in the Securities Act of 1933 and is
therefore unenforceable.
Exhibits
Exhibit
|
|
Number
|
Description
|
4.1
|
Standby Purchase Agreement, dated as of April 10, 2013,
between the Registrant and Glencore AG (Filed herewith).
|
|
|
4.2
|
Annual Information Form of the Registrant for the year
ended January 31, 2013 (incorporated by reference to the Registrants
Annual Report on Form 20-F for the fiscal year ended January 31, 2013
filed with the Securities and Exchange Commission on April 22, 2013).
|
|
|
4.3
|
Audited consolidated financial statements, including
notes thereto, as at January 31, 2013 and January 31, 2012 and for each of
the years in the three-year period ended January 31, 2013, together with
the auditors report thereon, and the managements discussion and analysis
relating thereto (incorporated by reference to the Registrants Annual
Report on Form 20-F for the fiscal year ended January 31, 2013 filed with
the Securities and Exchange Commission on April 22, 2013).
|
|
|
4.4
|
Management Information Circular dated June 7, 2012 in
connection with the Registrant's annual and special meeting of
shareholders held on July 10, 2012 (incorporated by reference to the
Registrants Report on Form 6-K filed with the Securities and Exchange
Commission on June 15, 2012).
|
|
|
4.5
|
Technical Report entitled Updated NI 43-101 Technical
Report on the NorthMet Deposit, Minnesota, USA dated October 12, 2012 and
amended January 14, 2013 (incorporated by reference to the Registrants
Report on Form 6-K filed with the Securities and Exchange Commission on
April 5, 2013).
|
|
|
4.6
|
Material Change Report of the Registrant dated October
15, 2012 announcing that pursuant to a subscription agreement entered into
November 12, 2010, the Corporation and Glencore AG completed the final
tranche of a three tranche distribution (incorporated by reference to the
Registrants Report on Form 6-K filed with the Securities and Exchange
Commission on October 15, 2012).
|
|
|
4.7
|
Material Change Report of the Registrant dated May 14,
2013 announcing the completion of the drafting of the preliminary
supplemental draft Environmental Impact Statement (incorporated by reference to the Registrant’s Report on Form 6-K filed with the Securities and Exchange Commission on May 14, 2013).
|
|
|
5.1
|
Consent of PricewaterhouseCoopers LLP (Filed herewith).
|
|
|
5.2
|
Consent of Farris, Vaughan, Wills & Murphy LLP (Filed herewith).
|
|
|
5.3
|
Consent of AGP Mining Consultants Inc. (Filed herewith)
|
|
|
5.4
|
Consent of Pierre Desaultels (Filed herewith).
|
|
|
5.5
|
Consent of Gordon Zurowski (Filed herewith).
|
|
|
5.6
|
Consent of David Dreisinger (Filed herewith).
|
|
|
5.7
|
Consent William Murray (Filed herewith).
|
|
|
5.8
|
Consent of Karl Everett (Filed
herewith).
|
_________________________
* Previously filed
PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
The Registrant undertakes to make
available, in person or by telephone, representatives to respond to inquiries
made by the Commission staff, and to furnish promptly, when requested to do so
by the Commission staff, information relating to the securities registered
pursuant to Form F-10 or to transactions in said securities.
Item 2.
|
Consent to Service of Process
|
Concurrently with the initial
filing of this Registration Statement, the Registrant is filing with the
Commission a written irrevocable consent and power of attorney on Form F-X. Any
change to the name or address of the agent for service of the Registrant will be
communicated promptly to the Commission by amendment to Form F-X referencing the
file number of this Registration Statement.
SIGNATURES
Pursuant to the requirements of
the Securities Act of 1933, the registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form F-10
and has duly caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Toronto, Country of Canada, on May 23, 2013.
|
POLYMET MINING CORP
|
|
|
|
|
By:
|
/s/
Douglas J. Newby
|
|
Name:
|
Douglas J. Newby
|
|
Title:
|
Chief Financial Officer
|
Pursuant to the requirements of
the Securities Act of 1933, this Amendment No. 1 to the Registration Statement
has been signed below by the following persons in the capacities indicated on
the date indicated.
Signature
|
|
Title
|
Date
|
|
|
|
|
/s/ Jonathan
Cherry
|
|
President, Chief Executive Officer
|
May 23, 2013
|
Jonathan Cherry
|
|
(Principal Executive Officer) and
|
|
|
|
Director
|
|
|
|
|
|
/s/ Douglas J.
Newby
|
|
Chief Financial Officer (Principal
|
May 23, 2013
|
Douglas J. Newby
|
|
Financial and Accounting Officer)
|
|
|
|
|
|
*
|
|
Chairman and Director
|
May 23, 2013
|
W. Ian L. Forrest
|
|
|
|
|
|
|
|
*
|
|
Director
|
May 23, 2013
|
David Dreisinger
|
|
|
|
|
|
|
|
*
|
|
Director
|
May 23, 2013
|
Al Hodnik
|
|
|
|
|
|
|
|
*
|
|
Director
|
May 23, 2013
|
William Murray
|
|
|
|
|
|
|
|
*
|
|
Director
|
May 23, 2013
|
Stephen Rowland
|
|
|
|
|
|
|
|
*
|
|
Director
|
May 23, 2013
|
Frank Sims
|
|
|
|
|
|
|
|
*
|
|
Director
|
May 23, 2013
|
Michael Sill
|
|
|
|
|
|
|
|
* By: /s/ Douglas
J. Newby
|
|
|
May 23, 2013
|
Douglas J. Newby
|
|
|
|
Attorney-in-Fact
|
|
|
|
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of
Section 6(a) of the Securities Act of 1933, the undersigned has signed this
Amendment No.1 to the Registration Statement, in the capacity of the duly
authorized representative of the Registrant in the United States, on May 23,
2013
|
POLYMET MINING CORP
|
|
|
|
|
By:
|
/s/
Douglas J. Newby
|
|
Name:
|
Douglas J. Newby
|
|
Title:
|
Chief Financial Officer
|
Exhibit Index
Exhibit
|
|
Number
|
Description
|
4.1
|
Standby Purchase Agreement, dated as of April 10, 2013,
between the Registrant and Glencore AG (Filed herewith).
|
|
|
4.2
|
Annual Information Form of the Registrant for the year
ended January 31, 2013 (incorporated by reference to the Registrants
Annual Report on Form 20-F for the fiscal year ended January 31, 2013
filed with the Securities and Exchange Commission on April 22, 2013).
|
|
|
4.3
|
Audited consolidated financial statements, including
notes thereto, as at January 31, 2013 and January 31, 2012 and for each of
the years in the three-year period ended January 31, 2013, together with
the auditors report thereon, and the managements discussion and analysis
relating thereto (incorporated by reference to the Registrants Annual
Report on Form 20-F for the fiscal year ended January 31, 2013 filed with
the Securities and Exchange Commission on April 22, 2013).
|
|
|
4.4
|
Management Information Circular dated June 7, 2012 in
connection with the Registrant's annual and special meeting of
shareholders held on July 10, 2012 (incorporated by reference to the
Registrants Report on Form 6-K filed with the Securities and Exchange
Commission on June 15, 2012).
|
|
|
4.5
|
Technical Report entitled Updated NI 43-101 Technical
Report on the NorthMet Deposit, Minnesota, USA dated October 12, 2012 and
amended January 14, 2013 (incorporated by reference to the Registrants
Report on Form 6-K filed with the Securities and Exchange Commission on
April 5, 2013).
|
|
|
4.6
|
Material Change Report of the Registrant dated October
15, 2012 announcing that pursuant to a subscription agreement entered into
November 12, 2010, the Corporation and Glencore AG completed the final
tranche of a three tranche distribution (incorporated by reference to the
Registrants Report on Form 6-K filed with the Securities and Exchange
Commission on October 15, 2012).
|
|
|
4.7
|
Material Change Report of the Registrant dated May 14,
2013 announcing the completion of the drafting of the preliminary
supplemental draft Environmental Impact Statement (incorporated by reference to the Registrant’s Report on Form 6-K filed with the Securities and Exchange Commission on May 14, 2013).
|
|
|
5.1
|
Consent of PricewaterhouseCoopers LLP (Filed herewith).
|
|
|
5.2
|
Consent of Farris, Vaughan, Wills & Murphy LLP (Filed herewith).
|
|
|
5.3
|
Consent of AGP Mining Consultants Inc. (Filed herewith)
|
|
|
5.4
|
Consent of Pierre Desaultels (Filed herewith).
|
|
|
5.5
|
Consent of Gordon Zurowski (Filed herewith).
|
|
|
5.6
|
Consent of David Dreisinger (Filed herewith).
|
|
|
5.7
|
Consent William Murray (Filed herewith).
|
|
|
5.8
|
Consent of Karl Everett (Filed
herewith).
|
_________________________
* Previously Filed
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