Securities Law & Instruments


Section 144 - variation of cease trade order to permit private placement.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 127, 144.

August 5, 2005









(Section 144)

WHEREAS the securities of Plata-Peru Resources Inc. (the Issuer) are subject to a cease trade order of the Director dated October 25, 1999 (the OSC Cease Trade Order), as made under section 127 of the Act directing that trading in securities of the Issuer cease until the OSC Cease Trade Order is revoked by a further order of revocation;

AND WHEREAS the Issuer has made an application to the Ontario Securities Commission for an order to vary the Cease Trade Order pursuant to section 144 of the Act with respect to two proposed transactions: (i) private placement to accredited investors of $1,923,077 by way of a secured convertible loan, convertible into equity of the Issuer, and (ii) conversion of $5,754,537 of debt into shares at a price of $0.25 per share, resulting in the issuance of 23,018,148 shares (the Debt Shares);

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

AND UPON the Issuer having represented to the Commission as follows:

1.1. The Issuer is a corporation existing under the Business Corporations Act (Ontario) with its head office and registered office in Ontario.

1.2. The Issuer is a reporting issuer in the Provinces of Alberta, British Columbia, and Ontario.

1.3. The authorized capital of the Issuer consists of an unlimited number of common shares (the Shares), of which 24,261,933 are issued and outstanding, and an unlimited number of preference shares issuable in series, none of which are currently issued or outstanding.

1.4. The OSC Cease Trade Order was issued following the issuance of a cease trade order on July 8, 1999 (the 1999 ASC Cease Trade Order) by the Alberta Securities Commission (the ASC) for failure to file the following documents with the ASC: annual audited financial statements for the year ended December 31, 1998 and first quarter interim unaudited financial statements for the period ended March 31, 1999. The 1999 ASC Cease Trade Order was revoked on March 5, 2002 when the Issuer remedied its financial statement default.

1.5. Subsequently, the ASC issued a second cease trade order dated September 13, 2002 (the 2002 ASC Cease Trade Order) due to the Issuer's failure to file and deliver its annual audited financial statements for the year ended December 31, 2001, and for the Issuer's failure to file and deliver its interim unaudited financial statements for the periods ending March 31, 2002 and June 30, 2002.

1.6. The Issuer concurrently applied to the Alberta Securities Commission for a partial revocation of the 2002 ASC Cease Trade Order. Staff of the Alberta Securities Commission has determined that the partial revocation is not needed in Alberta, because no trades in Shares will occur in Alberta.

1.7. The Issuer's failure to file financial statements was a result of financial distress. The Issuer believes that, without restructuring and recapitalization, its debt obligations exceed its ability to pay and would also likely exceed the liquidation value of its assets.

1.8. The primary asset of the Issuer is the Pachapaqui Mine (the Mine) located approximately 240 kilometers North of Lima, Peru. Since its acquisition of the Mine, the Issuer has had insufficient capital resources, and has only operated the Mine on an intermittent basis. The Mine is being sustained in a care and maintenance mode and is unable to go into production because the Issuer currently holds $16,382,318 in debt and was able to make the annual payment to retain ownership of the Mine through a $100,000 advance loan made by Haviland International Resources Limited (Haviland), a U.K. corporation.

1.9. Haviland understands that, if granted, the partial revocation will not entail a full lifting of the OSC Cease Trade Order. Haviland is aware that the partial revocation has been requested for the purpose of assisting with the Issuer's reorganization and restructuring.

1.10. The Issuer will be unable to prepare continuous disclosure documents for its shareholders or prepare a circular with respect to the proposed sale of its assets until the following pre-reorganization steps are completed:

(i) The Issuer has entered into an Agreement with Haviland to receive an investment of $1,923,077 (the Private Placement Transaction) for working capital to carry out the reorganization of the Issuer, by way of a secured convertible loan, convertible into 32,873,110 Shares (the Convertible Loan);

(ii) The Issuer has entered into debt conversion agreements to convert $7,370,610 of bona fide debt into Shares at a price of $.25 per share resulting in the issuance of 29,484,330 Shares (the Debt Shares) (the Debt Conversion Transaction); and

(iii) Haviland, or a designated affiliate (the Buyer) will purchase all of the assets of the Issuer valued at a price of $21,000,000 free and clear of all claims and encumbrances, with payment in Shares of a Buyer listed on a satisfactory stock exchange, such as the AIM Exchange in the United Kingdom (the Buyer Purchase).

1.11. The Issuer proposes to complete the Private Placement Transaction, Debt Conversion Transaction, and the Buyer Purchase prior to its reorganization.

1.12. Prior to the issuance of the Convertible Loan and the Debt Shares, the proposed recipients of securities of the Issuer will receive:

(i) the OSC Cease Trade Order;

(ii) this order; and

(iii) written notice from the Issuer that all securities of the Issuer, including the Debt Shares, and any Shares issued upon conversion of the secured convertible loan will remain subject to the Cease Trade Order following the completion of those transactions, until the Cease Trade Order is revoked by the commission.

UPON the Director being satisfied that to do so would not be contrary to the public interest;

IT IS ORDERED pursuant to section 144 of the Act that the Cease Trade Order be varied solely to permit the Private Placement and the Debt Settlements as described in paragraph 1.10 of this Order.

"Iva Vranic"
Manager, Corporate Finance