Sun Valley Gold Master Fund, Ltd. and McWatters Mining Inc. - s. 144

Order

Headnote

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, 144.

Policies Citied

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

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5,

AS AMENDED (the "Act")

AND

IN THE MATTER OF

SUN VALLEY GOLD MASTER FUND, LTD.

AND

MCWATTERS MINING INC.

 

ORDER

(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 and extended effective August 10, 2004 (the "Cease Trade Order") pursuant to section 127 of the Act, ordering that trading in any securities of McWatters cease;

AND WHEREAS Sun Valley Gold Master Fund, Ltd. ("Sun Valley Gold Master Fund") 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 Sun Valley Gold Master Fund of an aggregate of up to $1,830,000 principal amount of gold-linked senior (unsecured) convertible debentures (the principal amount of the dentures to be disposed is herein referred to as the "Debentures") solely for the purpose of establishing a tax loss;

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 Sun Valley Gold Master Fund having represented to the Commission that:

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

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

3. 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;

4. Sun Valley Gold Master Fund is a master feeder fund, organized under the laws of the British Virgin Islands, for the investors in Sun Valley Gold International, Ltd. (of which Sun Valley Gold LLC is the Investment Manager) and Sun Valley Gold, L.P. (of which Sun Valley Gold LLC is the General Partner). Sun Valley Gold LLC has discretionary trading authority over the securities beneficially owned by Sun Valley Gold Master Fund. Sun Valley Gold LLC is an investment manager registered in the United States;

5. Sun Valley Gold Master Fund acquired the Debentures prior to the effective date of the Cease Trade Order;

6. As a result of the Cease Trade Order and other circumstances of McWatters, there is no market for the Debentures and Sun Valley Gold Master Fund has determined that the Debentures have no value;

7. Sun Valley Gold Master Fund will effect the proposed disposition of the Debentures (the "Disposition") solely for the purpose of enabling it to establish a tax loss in respect of such Disposition;

8. GMP Securities L.P. (the "Purchaser") is a broker and investment dealer registered with the Commission and accordingly is a sophisticated purchaser and understands the Debentures have no market value, the nature of the Cease Trade Order and the purpose of the proposed trade;

9. The Purchaser has agreed to purchase the Debentures for a nominal purchase price of $183 (representing $.0001 per one dollar nominal face value per Debenture);

10. The Purchaser will purchase and hold the Debentures as principal; an

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.

Dated 30th December, 2005

"Charlie MacCready"