U.S Silver & Gold Inc.

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -- Application for an order than the issuer is not a reporting issuer under applicable securities laws -- issuer has outstanding warrants exercisable into securities of parent and restricted share units that are redeemable for cash based on the fair market value of the parent's shares -- warrant holders and restricted share unit holders no longer require public disclosure in respect of the issuer -- relief granted.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c.S.5, as am., ss. 1(10)(a)(ii).

March 27, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO, ALBERTA AND BRITISH COLUMBIA (The Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF U.S. SILVER & GOLD INC. (The Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that the Filer is not a reporting issuer in the Jurisdictions (the Exemptive Relief Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a coordinated review application),

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

(b) the decision is the decision of the principal regulator and evidences the decision of each other Decision Maker.

Interpretation

Terms defined in National Instrument 14-101 Definitions 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 existing under the laws of Ontario and was formed by the amalgamation (the Amalgamation) of U.S. Silver & Gold Inc. (Target) and 2441996 Ontario Inc. (Amalgamation Sub) pursuant to a plan of arrangement (the Arrangement) under section 182 of the Business Corporations Act (Ontario) (the OBCA), which became effective at 12:01 a.m. (the Effective Time) on December 23, 2014 (the Effective Date). The Filer's head office is located at Suite 2870, 145 King Street West, Toronto, Ontario, M5H 1J8.

2. Scorpio Mining Corporation (Acquiror) is a corporation existing under the laws of Canada. The authorized capital of Acquiror consists of an unlimited number of common shares (Acquiror Shares). The Acquiror Shares are listed on the Toronto Stock Exchange (the TSX) under the symbol "SPM". Acquiror is a reporting issuer in the Provinces of Alberta, British Columbia, Ontario and Québec.

3. Immediately prior to the Effective Time, Target was a corporation existing under the laws of Ontario and had the following outstanding securities: (i) 81,826,629 common shares (Target Shares); (ii) 6,588,608 options to purchase Target Shares (Target Options); and (iii) 23,069,867 warrants to purchase Target Shares (Target Warrants). The Target Shares were listed on the TSX under the symbol "USA". The Target Warrants were not listed on any exchange. Target also had restricted share units (Target RSUs) outstanding in respect of 841,481 Target Shares, each of which upon redemption in accordance with the terms of the restricted share unit plan of Target (the Target RSU Plan) entitled the holder thereof to a cash payment from Target based on the fair market value of the Target Shares. Pursuant to the terms of the Target RSU Plan, the Target RSUs were non-transferrable. Target was a reporting issuer in each of the Jurisdictions.

4. The authorized capital of the Filer, being the successor to Target following the Amalgamation, consists of an unlimited number of common shares (Common Shares). As of the date hereof, all of the outstanding Common Shares are held by Acquiror. The Filer has 23,069,867 warrants (Warrants) outstanding, each of which is exercisable for Acquiror Shares, as described below. The Filer also has restricted share units (RSUs) outstanding in respect of 1,843,410 Acquiror Shares, each of which upon redemption in accordance with the terms of the restricted share unit plan of the Filer (the RSU Plan) entitles the holder thereof to a cash payment from the Filer based on the fair market value of the Acquiror Shares. The Filer does not have any debt securities outstanding.

5. Immediately prior to the Effective Time, Amalgamation Sub was a corporation existing under the laws of Ontario and was wholly-owned by Acquiror.

6. The holders of Target Warrants, Target Options and Target RSUs received notice of the meeting of the holders of Target Shares to consider the Arrangement.

7. Pursuant to the Arrangement, among other things, the following occurred as of the Effective Time:

(a) Target and Amalgamation Sub amalgamated to form the Filer. On the Amalgamation:

(i) each outstanding common share of Amalgamation Sub held by Acquiror was exchanged for a Common Share;

(ii) each outstanding Target Share was exchanged for 1.68 Acquiror Shares (the Exchange Ratio);

(iii) the Filer issued additional Common Shares to Acquiror; and

(iv) each outstanding Target Option was exchanged for an option to purchase Acquiror Shares (an Acquiror Option) based on the Exchange Ratio; and

(b) the Target RSU Plan was amended to provide that the value of each Target RSU outstanding immediately prior to the Effective Time was adjusted based on the Exchange Ratio and the obligation to make a payment in respect of each Target RSU was adjusted such that following the Effective Time any payments to be made on the redemption of the Target RSUs would be based on the fair market value of the Acquiror Shares.

8. As a result of the Amalgamation (i) the Filer became liable for the obligations of Target in respect of each Target Warrant and each Target Warrant became a Warrant and (ii) the Filer became liable for the obligations of Target in respect of the Target RSU Plan and each Target RSU, the Target RSU Plan became the RSU Plan and each Target RSU became an RSU. Acquiror has guaranteed the obligations of the Filer to make payments on the redemption of the RSU.

9. Following the Effective Date, the Acquiror Shares issued under the Arrangement were listed on the TSX and additional Acquiror Shares were reserved for issuance upon exercise of the Acquiror Options and the Warrants.

10. The Common Shares (formerly Target Shares) were delisted from the TSX as of the close of business on December 31, 2014.

11. Following the Effective Date, pursuant to the terms of the Warrants, each holder of Warrants outstanding immediately prior to the Effective Date became entitled to receive, upon the exercise of such Warrants, in lieu of each Target Share to which such holder was previously entitled, 1.68 Acquiror Shares, subject to adjustment in accordance with the terms of such Warrants. As a party to the Arrangement, Acquiror is obligated to issue the number of Acquiror Shares required to meet the Filer's obligations upon exercise of the Warrants. The Filer is not required to remain a reporting issuer pursuant to the terms of the Warrants.

12. The only outstanding securities of the Filer held by persons other than Acquiror are the Warrants and the RSUs. The Filer has made diligent enquiry based on a review of its books and records to confirm the number of beneficial holders of the Warrants and the RSUs. To the best of the Filer's knowledge and belief, there are 60 beneficial holders of Warrants, 41 of which are in Ontario. To the best of the Filer's knowledge and belief, there are 20 beneficial holders of RSUs, five of whom are in Ontario and 15 of whom are in the United States. The RSUs were issued to employees and officers of Target. Pursuant to the terms of the RSU Plan, the RSUs are non-transferrable.

13. As a result of the Arrangement, the Filer became a reporting issuer in the Jurisdictions because Target, one of the amalgamating corporations, was a reporting issuer in the Jurisdictions for a period of at least 12 months prior to the Effective Date.

14. The Filer is not eligible to surrender its status as a reporting issuer in British Columbia pursuant to BC Instrument 11-502 -- Voluntary Surrender of Reporting Issuer Status because the Filer has more than 50 securityholders. As a result, and because the Filer's outstanding securities are beneficially held, directly or indirectly, by more than 15 securityholders in Ontario and more than 51 securityholders worldwide, the Filer is not eligible to apply to cease to be a reporting issuer under the simplified procedure in CSA Staff Notice 12-307 -- Applications for a Decision that an Issuer is not a Reporting Issuer.

15. No securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace as defined in National Instrument 21-101 -- Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported.

16. The Filer has no intention to seek public financing by way of an offering of securities.

17. The Filer has separately applied for an order pursuant to subsection 1(6) of the OBCA to be deemed to have ceased to be offering its securities to the public.

18. The Filer is not a reporting issuer in any jurisdiction of Canada other than the Jurisdictions. The Filer is applying for exemptive relief to cease to be a reporting issuer in each of the Jurisdictions.

19. Upon granting of the requested exemptive relief, the Filer will not be a reporting issuer or the equivalent in any jurisdiction of Canada.

20. Neither the Filer nor Acquiror is in default of any of its obligations under the Legislation as a reporting issuer.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemptive Relief Sought is granted.

"James D. Carnwath"

Ontario Securities Commission

 

"Deborah Leckman"

Ontario Securities Commission