Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Take-over bid by Australian corporation that is not a reporting issuer in any jurisdiction of Canada -- meets de minimis exemption from the takeover bid requirements but Australia is not recognized by the Commission for the purposes of this exemption -- bid made in compliance with applicable Australian laws -- All shareholders treated identically -- corporation exempted from the take-over bid requirements, subject to conditions.

Applicable Ontario Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 93(1)(e), 95-100, 104(2)(c).

August 8, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA AND ONTARIO (the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

EMERSON EXPLORATION INC. (the Filer)

AND TERRA GOLD MINING LIMITED (Terra)

 

MRRS DECISION DOCUMENT

Background

1. The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the requirements in the Legislation relating to take-over bids (the Take-over Bid Requirements) in respect of an offer (the Offer) to be made by the Filer to acquire all of the outstanding shares (the Terra Shares) and options to subscribe for shares (the Terra Options) of Terra (the Requested Relief).

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the British Columbia Securities Commission is the principal regulator for this application; and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

2. Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

3. This decision is based on the following facts represented by the Filer and Terra:

1. the Filer is a corporation incorporated under the laws of the Province of British Columbia;

2. the Filer is a reporting issuer in British Columbia and Alberta and is not on the list of defaulting reporting issuers maintained in these jurisdictions;

3. the Filer's registered office and corporate head office are in Vancouver, British Columbia and its authorized capital consists of an unlimited number of common shares without par value;

4. the Filer's common shares are listed for trading on the TSX Venture Exchange;

5. Terra is a corporation formed under the laws of Western Australia whose shares are listed on the Australian Stock Exchange and whose head office is in West Perth, Western Australia;

6. Terra is not a reporting issuer in any province or territory of Canada and its securities are not listed for trading on any Canadian stock exchange;

7. the Filer intends to make an offer (the Offer) through its wholly-owned Australian subsidiary, Emerson Exploration Australia Pty Ltd (Emerson Australia), to acquire all of the outstanding Terra Shares and Terra Options (collectively, the Terra Securities) in exchange for shares (the Emerson Shares) and warrants (the Emerson Warrants) of the Filer;

8. as at July 4, 2005, there were issued and outstanding

(a) 421,230,884 Terra Shares,

(b) an aggregate of 39,035,552 Terra Options broken down as follows:

(i) 30,035,552 options, each option entitling the holder thereof to purchase one additional Terra Share at an exercise price of AU$0.10 until February 18, 2009 (the February 18, 2009 Terra Options),

(ii) 6,000,000 options, each option entitling the holder thereof to purchase one additional Terra Share at an exercise price of AU$0.10 until either February 27, 2009 or August 27, 2009 (the February 27, 2009 Terra Options and August 27, 2009 Terra Options), and

(iii) 3,000,000 options, each option entitling the holder thereof to purchase one additional Terra Share at an exercise price of AU$0.039 until December 20, 2007(the December 20, 2007 Terra Options);

9. under the Offer, each tendering securityholder of Terra will receive

(a) one Emerson Share for every 12 Terra Shares,

(b) one Emerson Warrant (the $1.00 Emerson Warrants) entitling the holder to purchase one Emerson Share at CDN$1.00 for a period of two years for every 12 February 18, 2009 Terra Options,

(c) one Emerson Warrant (the $0.92 Emerson Warrants) entitling the holder to purchase one Emerson Share at CDN$0.92 for a period of two years for every 12 February 27, 2009 Terra Options or every 12 August 27, 2009 Terra Options, and

(d) one Emerson Warrant (the $0.39 Emerson Warrants) entitling the holder to purchase one Emerson Share at CDN$0.39 for a period of one year for every 12 December 20, 2007 Terra Options;

10. the Offer is being made, and the Filer and Emerson Australia will prepare an offer document reflecting the terms of the Offer (the Offer Materials), in accordance with the corporate and securities laws of Australia;

11. the Offer will be made to Canadian holders of Terra Securities on the same basis, including extending to such Canadian holders identical rights and identical consideration, as to the holders of Terra Securities resident in Australia;

12. it is a condition of the Offer that a minimum of 50.1% of the Terra Shares, together with the Terra Options, be tendered pursuant to the Offer;

13. if the minimum number of Terra Shares is tendered, the Filer would issue approximately 17,526,000 Emerson Shares;

14. if 100% of the Terra Shares are tendered, the Filer would issue approximately 35,103,000 Emerson Shares;

15. if 100% of the Terra Options are tendered, the Filer would be required to issue the following:

(a) 2,502,963 $1.00 Emerson Warrants,

(b) 500,000 $0.92 Emerson Warrants, and

(c) 250,000 $0.39 Emerson Warrants;

16. if completed, the offer would constitute a "Reverse Take-Over" as defined in Policy 5.2 of the TSX Venture Exchange Policies;

17. based on the list of registered shareholders of Terra, as at July 1, 2005, Terra had 8 shareholders resident in Canada holding an aggregate of 0.77% of the outstanding Terra shares, of which, one is resident in British Columbia and seven are resident in Ontario; and

18. the Filer cannot rely on the de minimis exemption from the Take-over Bid Requirements because Australia is not a recognized jurisdiction for the purpose of this exemption.

Decision

4. Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted, provided that

(a) the Offer, and any amendments to the Offer, is made in compliance with the laws of Australia; and

(b) the Offer Materials, and any amendments to the Offer Materials, which are sent by or on behalf of the Filer to the holders of Terra Shares resident in Australia are concurrently sent to Canadian holders of Terra Shares whose addresses are known to the Filer and copies of those materials are filed concurrently with the Decision Maker in each Jurisdiction.

Martin Eady, CA
Director, Corporate Finance
British Columbia Securities Commission