Securities Law & Instruments


Partial revocation of cease trade order pursuant to section 144 of the Act granted to permit trades solely for the purpose of establishing a tax loss for income tax purposes, in accordance with OSC Policy 57-602.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 6(3), 127 and 144.

Policies Citied

OSC Policy 57-602 Cease Trading Orders -- Applications of Partial Revocation to Permit a Securityholder to Establish a Tax Loss.



R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")








(Section 144 of the Act)

WHEREAS the securities of McWatters Mining Inc. ("McWatters") are currently subject to a cease trade order of the Ontario Securities Commission (the "Commission") effective July 29, 2004 (the "Cease Trade Order") pursuant to section 127 of the Act, ordering that trading in any securities of McWatters cease;

AND WHEREAS Sprott Asset Management Inc. ("Sprott") has made an application to the Commission pursuant to section 144 of the Act (the "Application") for an order varying the Cease Trade Order in order to allow for the disposition by Sprott for and on behalf of 38 accounts fully managed by it (the "Managed Accounts") of an aggregate of 14,931,888 common shares of McWatters (the "Shares") solely for the purpose of establishing tax losses for such accounts;

AND WHEREAS Ontario Securities Commission Policy 57-602 -- Cease Trading Orders -- Applications of Partial Revocation to Permit a Securityholder to Establish a Tax Loss provides that the Commission is prepared to vary an outstanding cease trade order to permit the disposition of securities subject to the cease trade order for the purposes of establishing a tax loss where the Commission is satisfied that the disposition is being made, so far as the securityholder is concerned, solely for the purpose of that securityholder establishing a tax loss and provided that the securityholder provides the purchaser with a copy of the cease trade order and the variation order;

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON Sprott having represented to the Commission that:

1. McWatters is a Quebec corporation incorporated November 15, 1994.

2. McWatters is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.

3. Sprott is a dealer registered with the Commission as a broker and an investment dealer permitted to manage accounts.

4. The securities of McWatters are currently subject to the Cease Trade Order for failure to file audited annual financial statements for the fiscal year ended December 31, 2003 and interim financial statements for the three-month period ended March 31, 2004. A management cease trade order with respect to the management and insiders of McWatters has been in effect since May 26, 2004.

5. The Shares were acquired by the Managed Accounts prior to the effective date of the Cease Trade Order.

6. As a result of the Cease Trade Order, there is no market for the Shares and Sprott has determined that the Shares have no value.

7. Sprott will effect the proposed disposition of the Shares (the "Disposition") solely for the purpose of enabling the beneficial owners of the Shares to establish a tax loss in respect of such Disposition.

8. The proposed purchaser of the Shares, Sprott Securities Inc. (the "Purchaser") is a registered broker and investment dealer. Accordingly, the Purchaser is a sophisticated purchaser and understands the Shares have no market value, the nature of the Cease Trade Order and the purpose of the proposed trade.

9. The Purchaser will pay Sprott a nominal purchase price of one dollar for the Shares.

10. The Purchaser will purchase and hold the Shares as principal.

11. The Purchaser has been provided with a copy of the Cease Trade Order and, prior to completing the trade, will be provided with a copy of this order.

AND UPON the Commission being of the opinion that to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to section 144 of the Act that the Cease Trade Order be and is hereby varied in order to permit the Disposition.

November 16, 2004.

"Charlie MacCready"