Securities Law & Instruments

Headnote

Subsection 1(10) of the Securities Act -- Application by a reporting issuer for an order that it is not a reporting issuer -- To the knowledge of the reporting issuer, and based on diligent enquiry, residents of Canada (i) do not directly or indirectly beneficially own more than 2% of each class or series of outstanding securities of the reporting issuer worldwide, and (ii) do not directly or indirectly comprise more than 2% of the total number of shareholders of the Filer worldwide -- Issuer is subject to U.K. securities law and requirements of the AIM -- Issuer has provided notice through a press release that it has submitted an application to cease to be a reporting issuer in Ontario.

Applicable Legislative Provisions

Securities Act (Ontario), s. 1(10)(a)(ii).

IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED
(THE “ACT”)

AND

IN THE MATTER OF
PATAGONIA GOLD PLC
(THE “APPLICANT”)
ORDER

UPON the Director having received an application from the Applicant for an order under subparagraph 1(10)(a)(ii) of the Act that the Applicant is not a reporting issuer in Ontario (the "Requested Order");

AND UPON considering the application and the recommendation of the staff of the Ontario Securities Commission (the "Commission");

AND UPON the Applicant representing to the Commission as follows:

1. Patagonia is a company established under The Companies Acts 1985, 1989 and 2006 (as amended) in England and Wales with registered number 3994744.

2. Patagonia's head and registered office is located at 15 Upper Grosvenor Street, London W1K 7PJ, United Kingdom.

3. Patagonia is an advanced gold and silver exploration and development company operating in Argentina with a focus in the southern Patagonian province of Santa Cruz. Management is based in Buenos Aires, Argentina, and London, United Kingdom, and the principal exploration office is located in Perito Moreno, Santa Cruz, Argentina. The Company's principal business is to hold investments in mineral exploration companies involved in identifying, acquiring and developing technically and economically sound mineral projects, either on its own or with joint-venture partners.

4. Patagonia's issued capital is 855,477,565 Ordinary Shares (the "Ordinary Shares"), and shareholder resolutions were passed at the Annual General Meeting of the Company held on June 14, 2013 granting the Directors authority to issue new Ordinary Shares up to an aggregate nominal value of £2,846,091.88, representing approximately 33.33% of the Company's issued share capital as at the date of the Notice of that Annual General Meeting (such authority expiring on the earlier of June 30, 2014 or the next Annual General Meeting) and a disapplication of statutory pre-emption rights in respect of up to an aggregate nominal value of £853,827.56 (such authority expiring on the earlier of June 30, 2014 or the next Annual General Meeting). The Applicant had no debt obligations other than a USD $2,000,000.00 overdraft loan facility held by its Argentinean subsidiary Patagonia Gold S.A.

5. The Ordinary Shares have been listed on AIM since March 2003.

6. On December 7, 2011, the Ordinary Shares were listed on the TSX.

7. Patagonia is not a reporting issuer in any other jurisdiction in Canada other than Ontario.

8. Patagonia had discussions with the TSX regarding a voluntary delisting of its Ordinary Shares from the TSX and the TSX delisted the Ordinary Shares at the close of trading on July 12, 2013.

9. None of Patagonia's securities are listed, traded or quoted on a marketplace in Canada as defined in National Instrument 21-101 -- Marketplace Operation and Patagonia does not intend to have its securities listed, traded or quoted on such a marketplace in Canada.

10. Patagonia is not in default of any reporting or other requirement of AIM.

11. Patagonia is not in default of any of its obligations under the Act as a reporting issuer.

12. To the knowledge of the Applicant, residents of Canada do not directly or indirectly beneficially own more than 2% of each class or series of outstanding securities of the Applicant worldwide. The due diligence conducted by the Applicant in support of the foregoing representation is as follows:

a. Using a record date of July 17, 2013, the Applicant caused Computershare Trust Company of Canada ("Computershare CA") to conduct a search to confirm the residency of the beneficial holders of the Ordinary Shares held through intermediaries who are clients of Computershare CA. The search found that 17 shareholders beneficially own an aggregate of 186,800 Ordinary Shares, broken down by province as follows:

i. Alberta -- 0 securityholders holding 0 Ordinary Shares;

ii. British Columbia -- 4 securityholders holding 50,000 Ordinary Shares;

iii. Manitoba -- 0 securityholders holding 0 Ordinary Shares;

iv. New Brunswick -- 0 securityholders holding 0 Ordinary Shares;

v. Newfoundland -- 0 securityholders holding 0 Ordinary Shares;

vi. Northwest Territories -- 0 securityholders holding 0 Ordinary Shares;

vii. Nova Scotia -- 0 securityholders holding 0 Ordinary Shares;

viii. Ontario -- 8 securityholders holding 98,300 Ordinary Shares;

ix. Prince Edward Island -- 0 securityholders holding 0 Ordinary Shares;

x. Quebec -- 1 securityholders holding 6,000 Ordinary Shares;

xi. Saskatchewan -- 4 securityholders holding 32,500 Ordinary Shares; and

xii. Yukon -- 0 securityholders holding 0 Ordinary Shares.

b. Computershare CA also stated that there are 47,800 additional Ordinary Shares registered to CDS Clearing and Depository Services Inc. held by intermediaries that do not report information about beneficial ownership (the "Additional CDS Shares").

c. An additional search of the U.K. share registers by the Applicant's transfer agent, Computershare Investor Services PLC ("Computershare UK"), indicated there were zero additional registered nominees/brokers and zero registered shareholders with a Canadian address as of July 17, 2013.

d. As of July 17, 2013, there were 855,477,565 Ordinary Shares issued and outstanding. Even if we assume that all the Additional CDS Shares are beneficially owned by Canadians, based on the information provided by Computershare CA and Computershare UK and assuming Canadian registered nominees/brokers hold Ordinary Shares only on behalf of Canadian resident beneficial shareholders, Canadian residents beneficially owned no more than 0.027% (233,800/ 855,477,565) of the total outstanding Ordinary Shares.

13. To the knowledge of the Applicant, residents of Canada do not directly or indirectly comprise more than 2% of the total number of shareholders of the Applicant worldwide. The due diligence conducted by the Applicant in support of the foregoing representation is as follows:

a. According to the UK share registers, as of July 17, 2013, there were 1450 registered holders, 443 of which were nominees/brokers. According to Computershare UK, the only way to obtain information about beneficial holders indirectly holding Ordinary Shares worldwide is to contact each nominee/broker directly by mailing an inquiry letter to each of the nominee/brokers. The Applicant believes that the majority of nominees/brokers would likely not respond. As such, information concerning the total number of shareholders holding Ordinary Shares indirectly worldwide is practically impossible to obtain.

b. However, even if each UK nominee/broker held Ordinary Shares for only one individual shareholder, Canadian securityholders would still not make up more than 2% of the total number of shareholders of the Applicant worldwide. According to Computershare CA and Computershare UK, there are 17 known Canadian shareholders holding 186,800 Ordinary Shares, meaning on average each known Canadian shareholder owns approximately 10,988 shares. Therefore, we can extrapolate that the Additional CDS Shares are likely owned by 4.35 beneficial shareholders (47,800/10,988). If the approximated number of Canadian beneficial shareholders (21.35) is divided by the total number of worldwide shareholders (given the assumption about the UK nominee registered holders described above), then Canadian shareholders make up 1.15% of the total number of shareholders of the Applicant worldwide (21.35 Canadian beneficial shareholders/ 1007 directly registered UK shareholders + 443 nominee registered shareholders each holding Ordinary Shares for just one beneficial holder + 3 shareholders in the US + 3 foreign shareholders + 17 known Canadian shareholders + 4.35 extrapolated Canadian shareholders = 1.445%).

14. In the past 12 months, Patagonia has not taken steps to create a market in Canada for the Ordinary Shares and, in particular, never offered securities to the public in Ontario or in any other jurisdiction in Canada by way of a prospectus offering. Patagonia only attracted a de minimis number of Canadian investors and the daily average volume of trading of the Ordinary Shares in the 12 months prior to delisting from the TSX was approximately 890 shares, which accounted for approximately 0.08% of Patagonia's worldwide daily trading volumes. In contrast, the average daily volume on AIM for the same period represented approximately 1,112,316 shares.

15. Patagonia files continuous disclosure reports under U.K. securities laws and follows the exchange requirements of AIM.

16. Patagonia qualifies as a "Designated Foreign Issuer" under National Instrument 71-102 -- Continuous Disclosure and Other Exemptions Relating to Foreign Issuers ("NI 71-102") and has relied on and complied with the exemptions from Canadian disclosure requirements afforded to Designated Foreign Issuers under Part 5 of NI 71-102.

17. Patagonia has provided advance notice to Canadian-resident securityholders in a press release dated August 15, 2013 that it has applied to the Commission for a decision that it is not a reporting issuer in Ontario, and if that decision is made, Patagonia will no longer be a reporting issuer in any jurisdiction in Canada.

18. Patagonia undertakes to concurrently deliver to its Canadian securityholders all disclosure it would be required under U.K. securities law or exchange requirements to deliver to U.K. resident securityholders.

19. Patagonia will not be a reporting issuer or the equivalent in any jurisdiction in Canada immediately following a decision from the Commission granting the relief requested.

AND UPON the Commission being satisfied that it would not be prejudicial to the public interest.

IT IS HEREBY ORDERED pursuant to subparagraph 1(10)(a)(ii) of the Act that, for the purposes of Ontario securities law, the Applicant is not a reporting issuer.

DATED this 21st day of August, 2013.

"Christopher Portner"
Commissioner
Ontario Securities Commission
 
"Vern Krishna"
Commissioner
Ontario Securities Commission