Mutual Reliance Review System for Exemptive Relief Applications -- Relief granted from the requirement to file financial statements with a business acquisition report that have been audited in accordance with either Canadian or United States generally accepted auditing standards; financial statements audited in accordance with Australian generally accepted auditing standards.
National Instrument 52-107 -- Acceptable Accounting Principles, Auditing Standards and Foreign Currency.
National Instrument 51-102 -- Continuous Disclosure Obligations.
Citation: Sargold Resource Corporation, 2005 ABASC 808
October 4, 2005
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA, SASKATCHEWAN, ONTARIO
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
SARGOLD RESOURCE CORPORATION
MRRS DECISION DOCUMENT
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) in connection with the preparation and filing of a business acquisition report relating to a significant acquisition recently completed by the Filer (the Acquisition) that the Filer not be required to re-audit, in accordance with Canadian Generally Accepted Auditing Standards (GAAS) the annual financial statements for the acquired business, which are presently audited in accordance with Australian GAAS (the Requested Relief).
Under the Mutual Reliance Review System for Exemptive Relief Applications:
(a) the Alberta Securities Commission is the principal regulator for this application; and
(b) this MRRS decision document evidences the decision of each Decision Maker.
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
This decision is based upon the following facts represented by the Filer:
1. The Filer was incorporated under the laws of Canada on May 25, 1998 and its head office is located at Suite 400 -- 837 West Hastings Street, Vancouver, British Columbia, Canada, V6C 3N6. The Filer's registered office is located at Suite 2300 -- 1055 Dunsmuir Street, Vancouver, British Columbia, Canada V7X 1J1. The Filer's financial year-end is December 31. The Filer is a "venture issuer" within the meaning of National Instrument 51-102 (NI 51-102).
2. The Filer is engaged in the acquisition, exploration and development of mineral resources, primarily on the Island of Sardinia, Italy.
3. The authorized capital of the Filer at the date hereof consists of an unlimited number of Class A Common Shares, an unlimited number of Class B Common Shares, and an unlimited number of Preferred Shares, of which 34,394,296 Class A Common Shares are issued and outstanding. The Class A Common Shares of the Filer are listed and posted for trading on the TSX Venture Exchange, Inc. (TSXV).
4. The Filer is a reporting issuer in the provinces of British Columbia, Alberta, Saskatchewan, Ontario and Quebec and is not currently in default of the securities legislation in any of these jurisdictions other than with respect to the requirement to file a business acquisition report under section 8.2 of NI 51-102 on or before January 3, 2005 in the provinces of Alberta, Saskatchewan, Ontario and Quebec.
5, Gold Mines of Sardinia Plc is a public corporation limited by shares and formed under the laws of England and Wales on July 5, 2000 (GMS PLC). The shares of GMS PLC trade on the Alternative Investment Market of the London Stock Exchange.
6. Prior to March 2, 2004, GMS PLC held:
(a) all of the outstanding shares of Medoro Resources Ltd. (MRL), a corporation incorporated under the laws of the Yukon Territory on November 14, 2003;and
(b) all of the ordinary shares of Gold Mines of Sardinia Pty. Limited (GMS), a proprietary company limited by shares and formed under the laws of Australia on May 8, 1987.
7. GMS indirectly holds 90% of the shares of Sardinia Gold Mining S.p.A. ("SGM"), a corporation formed under the laws of Italy. SGM holds a former operating mine and certain mineral tenures and associated rights located on the island of Sardinia, Italy.
8. Prior to March 2, 2004, Full Riches Investments Ltd. (Full Riches) was a public company incorporated under the laws of British Columbia on December 1, 1980 and was listed on the NEX board of the TSXV.
9. On March 2, 2004, Full Riches, MRL and GMC PLC underwent a corporate reorganization and business combination pursuant to which, inter alia:
(a) GMS PLC transferred all of the shares of GMS to MRL;
(b) Full Riches and MRL amalgamated to form Medoro Resources Ltd. (Medoro), a corporation subsisting under the laws of the Yukon Territory;
(c) the former shareholders of Full Riches (as a group) received approximately 50% of the shares of Medoro and the shareholders of GMS PLC (as a group) received approximately 50% of the shares of Medoro; and
(d) the common shares of Medoro were listed and posted for trading on the TSXV.
10. On September 8, 2004, the Filer announced an agreement to acquire of all of the issued and outstanding shares of GMS from Medoro. The Acquisition of the shares of GMS closed on October 20, 2004.
11. At the time of its acquisition by the Filer, GMS was not a reporting issuer in any jurisdiction and its securities were not listed on any stock exchange, although it was wholly owned by Medoro, whose common shares are listed and posted for trading on the TSXV.
12. The financial year-end of both Medoro and GMS is December 31. On November 15, 2004, Medoro filed its interim financial statements for the three and eleven month periods ended September 30, 2004 which include, on a consolidated basis, the accounts of GMS and SGM, expressed in Canadian dollars and under Canadian GAAP;
13. GMS is a "foreign issuer", as defined in NI 52-107, as it is incorporated under the laws of a foreign jurisdiction (Australia) and, although in excess of 50% of its voting securities are owned by a resident of Canada (initially Medoro, and now the Filer), its directors, officers and assets are outside of Canada and it is not administered principally in Canada. However, GMS is also not a "designated foreign issuer" as defined in NI 52-107, as in excess of 10% of its equity securities are owned by residents of Canada (initially Medoro, and now the Filer).
14. The financial statements of GMS to date have been prepared and audited according to generally accepted accounting principles (GAAP) and GAAS in Australia.
15. The Acquisition constitutes a "significant acquisition" of the Filer for the purposes of NI 51-102 requiring the Filer to file a business acquisition report on or before January 3, 2005 pursuant to section 8.2 of NI 51-102.
16. Pursuant to section 8.4 of NI 51-102, the business acquisition report must be accompanied by certain financial statements of GMS. NI 52-107 sets out the GAAP and GAAS permitted to be used in the preparation and auditing of financial statements required top be filed under NI 51-102. The GAAP and GAAS used in the preparation and auditing of GMS's financial statements do not comply with the standards set out in NI 52-107.
17. The Filer has obtained an auditors' report from Ernst & Young Australia (the Auditors' Report), the auditors of GMS, which is accompanied by a statement by the auditor (the Statement) that:
(a) describes the material differences in the form and content of the Auditors' Report prepared in accordance with Australian GAAS as compared to an auditors' report prepared in accordance with Canadian GAAS (Canadian GAAS); and
(b) indicates that the Auditors' Report prepared in accordance with Canadian GAAS would not contain a reservation.
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 be granted, provided that:
(a) the Filer otherwise files a business acquisition report in respect of the Acquisition in accordance with Part 8 of NI 51-102, including the financial statements required thereunder; and
(b) the Filer files financial statements of GMS audited in accordance with Australian GAAS, which financial statements will include the Auditors' Report, the Statement and a reconciliation to Canadian GAAP of the statements for the most recently completed year end and for the most recently completed interim period of GMS, as required by subsections 6.1(4) of NI 52-107.