Proceedings

IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED (THE "Act")

AND

IN THE MATTER OF
MACDONALD OIL EXPLORATION LTD., MACDONALD
TRADING CORPORATION, RUSSELL MARTEL
AND BRESEA RESOURCES LTD.

ORDER
(Subsections 104(1)(c), clauses (2) and (5) of subsection 127(1) and subsection 127(2))

 

WHEREAS on July 30, 1999, the Ontario Securities Commission (the "Commission") andthe Alberta Securities Commission the (the "ASC") issued Notices of Hearing and a related JointStatement of Allegations of Staff of the Commission and the ASC in connection with a joint hearing(the "Joint Hearing") to be held on August 9, 1999 to consider, inter alia, the application by staff ofthe Commission and the ASC that the Commission and the ASC make certain orders in connectionwith the offer, dated June 8, 1999, by MacDonald Oil Exploration Ltd. ("MacDonald Oil") to acquireall of the common shares (the "Bresea Shares") of Bresea Resources Ltd. ("Bresea");

AND WHEREAS it appears to the Commission that:

1. MacDonald Oil is a reporting issuer in Ontario. The common shares of MacDonald Oil arequoted on The Canadian Dealing Network Inc.

2. Bresea is a reporting issuer in British Columbia and Quebec but is not a reporting issuer inOntario.

3. Approximately 74% of the issued and outstanding Bresea Shares are held by residents ofOntario.

4. On June 8, 1999, MacDonald Oil commenced an offer to acquire all of the Bresea Shares onthe basis of one MacDonald Oil Convertible Preferred Share (a "Convertible PreferredShare") and one MacDonald Oil E-Warrant (an "E-Warrant" and, collectively with theConvertible Preferred Shares, the "Consideration") for each Bresea Share (the "Offer"). TheOffer expired at 5:00 p.m. (Toronto time) on July 12, 1999 (the "Expiry Time").

5. On July 12, 1999, staff of the Commission and the ASC requested that the Commission andthe ASC make temporary or interim orders that trading cease in Bresea Shares by MacDonaldOil and that trading in the Consideration cease (the "Initial Temporary Orders").

6. Later on the same day, the Commission and the ASC made the Initial Temporary Ordersspecified in the preceding paragraph after:

A. the Commission and the ASC heard submissions from staff of the Commission and theASC that it was in the public interest to make the Initial Temporary Orders becausethe Bresea Shareholders did not have sufficient information to make an informeddecision about whether or not to tender their Bresea Shares to the Offer; and

B. the Commission provided counsel for and representatives of MacDonald Oil with anopportunity to comment upon the submissions made by staff of the Commission andthe ASC, notwithstanding that the Commission had the jurisdiction to make atemporary order pursuant to subsection 127(5) of the Act without conducting ahearing.

7. On July 15, 1999, MacDonald Oil issued a news release stating, inter alia, that, at about 4:25p.m. on Monday, July 12, the Commission made the Initial Temporary Order and thatMacDonald Oil had taken up approximately 22 million Bresea Shares prior to the issuanceof the Initial Temporary Order.

8. On July 23, 1999, the Commission made an order:

A. pursuant to subsection 127(8) of the Act extending the Initial Temporary Order madeby the Commission until 11:59 p.m. (Toronto time) on August 11, 1999, unlessextended or varied by the Commission; and

B. pursuant to subsection 127(5) of the Act that trading cease in Bresea Shares byMacDonald Oil, any person that is a director, officer, affiliate or associate ofMacDonald Oil or acting jointly or in concert with any of the foregoing persons orcompanies, MacDonald Trading Corporation and Russell Martel (collectively, the"Respondents") for a period of fifteen days from the date of that order, unlessextended or varied by the Commission.

9. On the same day, the ASC made an order:

A. extending the Initial Temporary Order made by the ASC, and

B. that the Initial Temporary Order made by the ASC be varied to order that tradingcease in Bresea Shares by the Respondents,

until 9:59 p.m. (Mountain Daylight Time) on August 11, 1999, unless extended or varied bythe ASC.

10. On July 30, 1999, the Commission and the ASC issued the Notices of Hearing and a relatedJoint Statement of Allegations of Staff of the Commission and the ASC in connection withthe Offer and the orders referred to in paragraphs 5, 8 and 9.

11. On August 4, 1999, the Commission issued an order pursuant to subsection 127(8) of the Actextending the order referred to in paragraph 8(B) until 11:59 p.m. (Toronto time) on August11, 1999, unless extended or varied by the Commission.

12. On August 9, 1999, the Joint Hearing was held to consider, among other things: (i) the JointStatement of Allegations of Staff of the Commission and the ASC; and (ii) an application byPricewaterhouseCoopers Inc. ("PWC"), the Interim Receiver and Manager of Bresea, thatthe Commission and the ASC make certain orders.

13. At the Joint Hearing, Deloitte & Touche Inc., the trustee in bankruptcy of Bre-X MineralsLtd., which owns 8,000,000 Bresea Shares, was granted limited standing to make submissionsin respect of PWC's application.

AND WHEREAS the Commission has heard the joint submissions of staff of the Commissionand the ASC;

AND WHEREAS the Commission provided the Respondents with an opportunity to makesubmissions at the Joint Hearing;

AND WHEREAS the Commission is satisfied that the Offer has not been effected incompliance with Part XX of the Act and the regulations related to Part XX of the Act and that it isin the public interest to make this order;

AND WHEREAS written reasons in respect of this order will be issued in due course;

IT IS ORDERED:

1. pursuant to clause 2 of subsection 127(1) of the Act that trading cease by MacDonaldOil in the Bresea Shares tendered to the Offer;

2. pursuant to clause 2 of subsection 127(1) of the Act that trading cease in theConsideration to have been issued as consideration pursuant to the Offer;

3. pursuant to clause 5 of subsection 127(1) of the Act that MacDonald Oil shall:

(A) disseminate to the public a news release forthwith that: (i) advises holders ofBresea Shares that, as a result of this order, MacDonald Oil cannot acquirethe Bresea Shares or issue the Consideration in payment for such tenderedBresea Shares; (ii) specifies that withdrawal rights are exercisable andcontinue to be exercisable; and (iii) summarizes how Bresea Shareholders canexercise their rights of withdrawal pursuant to section 95 of the Act; and

(B) within ten days, deliver to every holder of Bresea Shares to whom the Offerwas sent a notice that contains the information specified in paragraph 3(A) ofthis order;

4. pursuant to clause 104(1)(c) of the Act that MacDonald Oil shall honour any validnotice of withdrawal made by or on behalf of any Bresea Shareholders pursuant to theexercise of withdrawal rights by Bresea Shareholders in respect of Bresea Sharestendered to the Offer;

5. pursuant to clause 104(1)(c) of the Act that the directors and senior officers ofMacDonald Oil shall cause MacDonald Oil to honour any valid notice of withdrawalmade by or on behalf of any Bresea Shareholders pursuant to the exercise ofwithdrawal rights by Bresea Shareholders in respect of Bresea Shares tendered to theOffer; and

6. pursuant to clause 2 of subsection 127(1) and subsection 127(2) of the Act thattrading cease in Bresea Shares by the Respondents unless and until they satisfy theExecutive Director of the Commission that: (i) there has been compliance with theorders referred to in paragraphs 3, 4 and 5 of this order; and (ii) that, with respect toall of the Bresea Shares tendered to the Offer, withdrawal rights have been exercisedor such Bresea Shares have been returned to the appropriate Bresea Shareholders.

August 12th, 1999.

"Howard I. Wetston"
"Robert W. Korthals"
"Stephen N. Adams"