Securities Law & Instruments


Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – National Instrument 62-104 Take-Over Bids and Issuer Bids, ss. 2.17 and 6.1 – A target requires relief from the requirement to mail a directors’ circular within the prescribed period after the date of the bid – The filer is the target of a bid; the outcome of a commission hearing relating to the bid will have a significant effect on the target and will impact the recommendation in the directors’ circular; the target will deliver the directors’ circular within a reasonable period of time after orders are granted in the hearing; the target’s shareholders will still have sufficient time to consider the bid and the directors’ recommendation with respect to the bid.

Applicable Legislative Provisions

National Instrument 62-104 Take-Over Bids and Issuer Bids, ss. 2.17, 6.1.

July 21, 2016

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA AND ONTARIO
(the Jurisdictions)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
DOLLY VARDEN SILVER CORPORATION
(the Filer)

DECISION

Background

1              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) exempting the Filer from the requirements under section 2.17(1) of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104) to deliver a directors’ circular not later than fifteen (15) days after the date of the bid, by extending the deadline for delivery until the later of:

(i)            five (5) business days after the orders are granted pursuant to related hearings at the British Columbia Securities Commission (the BCSC) and the Ontario Securities Commission (the OSC) (collectively, the Commissions); and

(ii)           fifteen (15) days after a formal valuation has been delivered to shareholders of the Filer (Shareholders) as an addendum to the Hecla Circular (as defined below), if the Commissions issue an order pertaining to such in the Joint Hearing (as defined below).

(the Exemption Sought).

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

(a)           the BCSC is the principal regulator for this application,

(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 Alberta, and

(c)           the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

2              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

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

The Filer

1.             the Filer was created by the amalgamation of Dolly Varden Silver Ltd. and Twin Glacier Resources Ltd. on January 30, 2012 in British Columbia, and is governed under the laws of the Province of British Columbia;

2.             the Filer’s principal and head office is located at 970 – 800 West Pender Street, Vancouver, British Columbia, V6C 2V6 with its registered and records office located at 1200 Waterfront Centre, 200 Burrard Street, PO Box 48600, Vancouver, British Columbia, V7X 1T2;

3.             the Filer is a junior mineral exploration company focused on the exploration of the Filer’s only property, the Dolly Varden silver property, located in Northwestern British Columbia; the entire Dolly Varden silver property is considered to be highly prospective for hosting high-grade precious metal deposits, since it comprises the same structural and stratigraphic setting that host numerous other, on-trend, high-grade deposits;

4.             the authorized capital of the Filer consists of an unlimited number of common shares (Shares), without par value; as of the date hereof, there are 18,268,963 Shares outstanding;

5.             the Shares are listed and posted for trading on the TSX Venture Exchange (the TSX-V) under the symbol “DV” and on the over-the-counter US market under the symbol “DOLLF”;

6.             the Filer is a reporting issuer in each of the Jurisdictions, and is not in default of the securities legislation in any of the Jurisdictions;

The Offer

7.             on June 27, 2016, Hecla Mining Company (HMC) announced its intention to make an unsolicited bid for all the Shares not already owned by HMC and its affiliates (collectively, Hecla) for a price of $0.69 per Share (the Offer);

8.             on July 4, 2016, the Filer’s board of directors announced the appointment of a special committee comprised solely of independent directors to review and evaluate the Offer and to assess whether the Offer is fair to Shareholders and in the best interests of the Filer as a whole;

9.             on July 8, 2016, HMC, through its wholly owned indirect subsidiary, 1080980 B.C. Ltd. (the Offeror), formally launched the Offer by way of a takeover bid circular dated July 8, 2016 (the Hecla Circular);

10.          Hecla Canada Ltd., an affiliate of both HMC and the Offeror, is an insider of the Filer by virtue of holding more than 10% of the voting rights attached to the Filer’s outstanding voting securities; as a result of these holdings and affiliations, the Offer constitutes an “insider bid” by the Offeror for the purposes of Multilateral Instrument 61-101 Protection of Minority Securityholders in Special Transactions (MI 61-101);

11.          the Offer is conditional on the Private Placement (as defined below) not proceeding and no securities of the Filer being issued during the term of the Offer;

The Private Placement

12.          on July 5, 2016, the Filer announced its intention to undertake a private placement financing to raise gross proceeds of up to $6 million from the sale of up to 7,258,064 Shares at a price of $0.62 per share and of up to 2,142,857 Shares that qualify as “flow-through shares” as defined in Canada’s Income Tax Act at a price of $0.70 per flow-through share (the Private Placement);

The Private Placement Application

13.          in a letter from Hecla to the BCSC dated July 8, 2016, Hecla requested an order pursuant to section 161(1) of the Securities Act (British Columbia) (BC Securities Act) in connection with the Offer and the Private Placement, seeking (i) a permanent order pursuant to section 161(1)(b) of the BC Securities Act cease trading the Private Placement and any securities issued, or that may be issued, under or in connection with the Private Placement, (ii) in the alternative, an order pursuant to section 161(1)(b) of the BC Securities Act cease trading the Private Placement, unless and until the Filer obtains a simple majority of the votes cast by Shareholders entitled to vote at a duly convened meeting of Shareholders in favour of the Private Placement; (iii) an order pursuant to section 28 of the BC Securities Act setting aside the TSX-V decision regarding the Private Placement, if such decision fails to require Shareholder approval of the Private Placement and has been issued by the time of the hearing, and (iv) such further and other relief as counsel may advise and the BCSC may deem appropriate (the Private Placement Application);

The MI 61-101 Application

14.          in a letter dated July 11, 2016 from Borden Ladner Gervais LLP, the Filer’s counsel, to the OSC, the Filer requested an order pursuant to sections 104 and 127 of the Securities Act (Ontario), in connection with the Offer to seek (i) a permanent order cease trading the Offer or in the alternative an order cease trading the Offer until 105 days after a formal valuation as required by MI 61-101 has been delivered to Shareholders as an addendum to the Hecla Circular, (ii) an extension of the directors’ circular delivery date, as set out in Item 2.17(1) of NI 62-104, to 15 days after the formal valuation has been delivered to Shareholders as an addendum to the Hecla Circular, and (iii) such further and other relief as may be requested by counsel (the MI 61-101 Application);

Joint Hearing

15.          after hearing from the parties, the Commissions determined that the Private Placement Application and the MI 61-101 Application should be heard together; the simultaneous hearings for the Private Placement Application and the MI 61-101 Application were heard on July 20 and 21, 2016 (the Joint Hearing), which was one day prior to the deadline for the Filer to finalize its directors’ circular to meet the deadline set out in NI 62-104;

16.          the results of the Private Placement Application and the MI 61-101 Application resulting from the Joint Hearing may have significant impacts on the recommendation to be made to the Shareholders; granting an extension to the mailing deadline will allow the Filer to provide a complete analysis of the offer when making its recommendation; and

Additional Matters

17.          the Filer will issue and file a news release informing Shareholders that it will not be filing and delivering its directors’ circular on July 25, 2016 and will do so by deadlines set out in this decision, depending on the result of the MI 61-101 Application at the Joint Hearing.

Decision

4              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, and grant the Exemption Sought.

“Nigel P. Cave”
Vice-Chair

British Columbia Securities Commission