Securities Law & Instruments

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption from the extension take-up requirements in subsection 98.3(4) of the Securities Act (Ontario) -- an issuer conducting an issuer bid under a modified Dutch auction procedure requires relief from the requirement to not extend its issuer bid if all terms and conditions are met unless issuer first takes up all common shares validly deposited and not withdrawn under the issuer bid -- the issuer will comply with the U.S. regime in connection with the issuer bid -- requested relief granted, subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 98.3(4), 104(2)(c).

January 18, 2013

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

AURICO GOLD INC.

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that, in connection with the proposed purchase by the Filer of a portion of its outstanding common shares (the Shares) pursuant to an issuer bid (the Offer), the Filer be exempt from the requirement in the Legislation that the Offer not be extended if all the terms and conditions of the Offer have been complied with or waived unless the Filer first takes up all Shares deposited under the Offer and not withdrawn (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in the Yukon Territory the Northwest Territories and Nunavut and the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Newfoundland and Labrador and Prince Edward Island.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation validly existing under the Business Corporations Act (Ontario) and has its head office in Toronto, Ontario.

2. The authorized capital of the Filer consists of an unlimited number of Shares of which 282,291,947 Shares were issued and outstanding as at December 14, 2012 (the last full trading day prior to the date of the announcement of the Offer).

3. The Shares are listed and posted for trading on the Toronto Stock Exchange (the TSX) and on the New York Stock Exchange (the NYSE) under the symbol "AUQ". On December 14, 2012, the closing price of the Shares on the TSX was C$8.29 per Share and on the NYSE was US$8.25 per Share.

4. The Filer is a reporting issuer in each of the territories and provinces of Canada and, to its knowledge, is not in default of any requirement of the securities legislation of any of the jurisdictions in which it is a reporting issuer.

5. To the knowledge of the Filer, after reasonable enquiry, no shareholder of the Filer holds, or exercises control and direction over, more then 10% of the outstanding Shares.

6. The Offer is subject to Rule 13e-4 adopted under the United States Securities Exchange Act 1934, as amended (the Exchange Act) and is not exempt therefrom. At least 50% of the Shares are beneficially owned by persons resident in the United States. During the six month period ended November 30, 2012, more than 55% trading volume and trading value the Shares took place over exchange facilities in the United States including the NYSE.

7. Under the terms of the Offer, a tendering shareholder is permitted to select a price between US$8.30 per share and US$9.30 per share (the Price Range) at which the shareholder is willing to sell his, her or its Shares. The Filer intends to purchase up to US$300,000,000 worth of its Shares. The maximum of 36,144,578 Shares that the Filer is offering to purchase under the Offer represents approximately 12.8% of the total number of Shares issued and outstanding as at December 14, 2012. If the Offer is fully subscribed at the high end of the Price Range (US$9.30), the Filer will purchase 32,258,064 Shares (representing 11.4% of the total number of Shares issued and outstanding as at December 14, 2012).

8. The Filer has made the Offer pursuant to a modified "Dutch Auction" procedure as follows:

(a) The issuer bid circular mailed to shareholders (the Circular) specifies that the Filer intends to purchase up to a maximum aggregate amount of US$300,000,000 worth of its Shares under the Offer.

(b) The Circular specifies that the Price Range will be US$8.30 per share to US$9.30 per share.

(c) The Filer will fund the purchase of Shares for cancellation pursuant to the Offer, together with the fees and expenses of the Offer, from available cash on hand.

(d) Any shareholder who beneficially owns fewer than 100 Shares and tenders all of such shareholder's Shares pursuant to an Auction Tender at a price at or below the Purchase Price (as defined below), or pursuant to a Purchase Price Tender, will be considered to have made an "odd lot tender".

(e) A shareholder may elect to tender Shares to the Offer pursuant to either: (i) an auction tender (Auction Tender), whereby a shareholder tendering Shares to the Offer may specify a price within the Price Range at which he, she or it is willing to sell all or a portion of the tendered Shares; or (ii) a purchase price tender (Purchase Price Tender), whereby a shareholder tendering Shares to the Offer agrees to have all or a portion of the tendered Shares purchased by the Filer at the purchase price (the Purchase Price) determined by the Filer.

(f) Shareholders may make multiple Auction Tenders but not in respect of the same Shares (i.e., shareholders may tender different Shares at different prices but cannot tender the same Shares at more than one price).

(g) Shareholders may make both an Auction Tender and a Purchase Price Tender; however, they may not be in respect of the same Shares.

(h) Shareholders who desire to tender Shares under an Auction Tender at different prices or who desire to tender certain Shares under an Auction Tender and other Shares under a Purchase Price Tender must complete a separate Letter of Transmittal for each tendered lot of Shares.

(i) All Shares tendered by a shareholder who fails to indicate whether the tendered Shares have been tendered pursuant to an Auction Tender or a Purchase Price Tender or fails to indicate any Auction Tender price for his, her or its Shares will be deemed to have been tendered pursuant to a Purchase Price Tender.

(j) For the purpose of determining the Purchase Price, Shares tendered pursuant to a Purchase Price Tender will be considered to have been tendered at US$8.30 (which is the minimum Purchase Price under the Offer).

(k) The Purchase Price will be the lowest price per Share of not more than US$9.30, and not less than US$8.30 per Share at which shares have been tendered or have been deemed to be tendered under the Offer that will enable the Applicant to purchase the maximum number of Shares tendered pursuant to the Offer, having an aggregate purchase price not exceeding US$300,000,000.

(l) The Purchase Price and the aggregate number of Shares that the Filer will purchase under the Offer will not be determined until after the Offer expires provided that the aggregate amount that the Filer will pay for Shares under the Offer will not exceed US$300,000,000.

(m) Subject to the conditions of the Offer, if the number of Shares validly tendered and not withdrawn prior to expiry of the Offer pursuant to Auction Tenders at a price equal to or less than the Purchase Price or pursuant to Purchase Price Tenders would result in an aggregate purchase price in excess of US$300,000,000, then such tendered Shares will be purchased on a pro rata basis according to the number of Shares tendered or deemed to be tendered at a price equal to or less than the Purchase Price by the tendering shareholders (with adjustments to avoid the purchase of fractional Shares), except that odd lot tenders will not be subject to pro-ration.

(n) All Shares purchased by the Filer pursuant to the Offer (including Shares tendered pursuant to Auction Tenders at a price at or below the Purchase Price) will be purchased at the Purchase Price; shareholders will receive the Purchase Price in cash; all Auction Tenders and Purchase Price Tenders will be subject to adjustment to avoid the purchase of fractional Shares; all payments to shareholders will be subject to deduction of applicable withholding taxes.

(o) Certificates for all Shares not purchased, including all Shares tendered pursuant to Auction Tenders at prices in excess of the Purchase Price, Shares not purchased due to pro-ration and Shares not accepted for purchase, will be returned as soon a practicable after the expiry of the Offer or termination of the Offer without expense to the tendering shareholder.

(p) Shareholders validly tendering Shares pursuant to Auction Tenders at US$8.30 per Share (the minimum purchase price under the Offer) and shareholders validly tendering Shares pursuant to Purchase Price Tenders can reasonably expect to have such Shares purchased at the Purchase Price if any Shares are purchased under the Offer (subject to the pro-ration provisions and the preferential acceptance of odd lots).

9. Shareholders who do not tender to the Offer will continue to hold the number of Shares owned before the Offer and their proportionate Share ownership will increase following completion of the Offer subject to the Filer's right to issue additional Shares and other equity securities in the future.

10. Under the Legislation, an issuer may not extend an issuer bid if all the terms and conditions of the issuer bid have been complied with or waived unless the issuer first takes up all the securities deposited under the issuer bid and not withdrawn (the Extension Take-Up Requirements). Rule 13e-4 of the Exchange Act requires an issuer to take up all securities tendered under an issuer bid concurrently and, as a consequence, prohibits an issuer from taking up securities prior to the expiry of an issuer bid.

11. There is a "liquid market" in the Shares, as such term is defined in Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101), because:

(a) there is a published market for the Shares (the TSX and NYSE);

(b) during the period of twelve months before December 17, 2012, the date the Offer was publicly announced:

(i) the number of outstanding Shares was at all times not less than 5,000,000, excluding Shares beneficially owned, directly or indirectly, or over which control or direction was exercised, by related parties and Shares that were not freely tradable;

(ii) the aggregate trading volume of the Shares on the TSX, being the published market on which the Shares are principally traded, was at least 1,000,000 Shares;

(iii) there were at least 1,000 trades in Shares on the TSX;

(iv) the aggregate value of the trades in Shares on the TSX was at least C$15,000,000; and

(c) the market value of the Shares on the TSX, as determined in accordance with MI 61-101, was at least C$75,000,000 for November 2012, being the calendar month preceding the calendar month in which the Offer was publicly announced.

12. Based on the facts set forth in paragraph 10 and the maximum number of Shares that may be purchased under the Offer, the Filer has determined that there is a liquid market for the Shares and that it is reasonable to conclude that, following the completion of the Offer, there will be a market for holders of Shares who do not tender all of their Shares to the Offer that is not materially less liquid than the market that existed at the time the Offer was announced.

13. Based on the facts set forth in paragraphs 10 and 11, the Filer intends to rely upon the "liquid market" exemption (the Liquid Market Exemption) from the formal valuation requirements otherwise applicable to issuer bids under MI 61-101.

14. The Circular:

(a) discloses the mechanics for the take up of and payment for or, where applicable, the return of Shares tendered to the Offer as described in paragraph 8 above;

(b) explains that by tendering Shares pursuant to Purchase Price Tenders, shareholders can reasonably expect that the Shares so tendered will be purchased at the Purchase Price, if any Shares are purchased under the Offer (subject to pro-ration and the preferential treatment of odd lots);

(c) discloses the fact that the Filer has filed for an exemption from the Extension Take-Up Requirements;

(d) discloses the facts supporting the Filer's reliance on the Liquid Market Exemption; and

(e) except to the extent exemptive relief is granted by this Decision, contains the disclosure prescribed by the Legislation for issuer bids.

15. Prior to the expiry of the Offer, all information regarding the number of Shares tendered and the prices at which such Shares are tendered shall be kept confidential, and the Filer's depository for the Offer will be directed by the Filer to maintain such confidentiality until the Purchase Price has been determined.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) Shares deposited under the Offer and not withdrawn are taken up and paid for, or dealt with, in the manner described in paragraph 8;

(b) the Filer is eligible to rely on the Liquid Market Exemption and complies with paragraph 11 of this Decision; and

(c) the Filer complies with the requirements of Rule 13e-4 of the Exchange Act in respect of the conduct of the Offer.

"Judith Robertson"
Commissioner
Ontario Securities Commission
 
"Paulette Kennedy"
Commissioner
Ontario Securities Commission