what is driving delisting in the mining and metals sector ... · 4 | what is driving delisting in...

What is driving delisting in the mining and metals sector in Canada?

An EY perspective

ContentsExecutive summary ....................................1

Introduction ...............................................2

Index overview ...........................................3

Delisted overview........................................4

Reasons for delisting ...................................7

Failure to meet listing requirements .........8

Mergers and acquisitions .........................9

Voluntary delisting ................................13

Formal insolvency proceedings ..............15

Appendices..............................................17

About the survey ......................................24

Glossary of terms .....................................24

EY Mining & Metals team ...........................25

What is driving delisting in the mining and metals sector in Canada? An EY perspective | 1

Executive summaryIt’s not a secret that resource equities were the worst-performing asset class from 2011 to 2014. In 2014, 149 mining and metals companies delisted from the Toronto Stock Exchange (TSX) and Toronto Venture Exchange (TSXV) and in 2015 an additional 172 companies delisted. This represents in excess of 10% of the total population of mining and metals listed companies on these two exchanges.

EY decided to study the data to help answer some thought-provoking questions:

• Were these companies formed to take advantage of the commodities boom?

• What was the reason for the delisting?

− Were companies going private, taking advantage of M&A opportunities in a down cycle, cutting costs?

• Are Canadian stock exchanges still viewed as the preeminent place for junior mining investment?

EY’s analysis reveals the following:

• The majority of companies that delisted in 2015 were listed for 5 to 14 years. It would appear that there is a direct correlation between the commodities boom and the listing of these companies.

• Companies cited their reasons for delisting for the following reasons:

− 40% due to M&A activity

− 37% on a voluntary basis

− 14% for a failure to meet continuous listing requirements;

− 9% due to formal insolvency proceedings

• In 2015, M&A activity was the most common reason for delisting. There was a 25% increase in delisting from M&A activity when comparing 2014 to 2015. Several of the deals involved multiple listed companies joining together under one new public vehicle and most of the deals involved companies focused on gold.

• When delisting on a voluntary basis, the majority of companies determined that an alternative Canadian exchange was more appropriate for their needs (CSE or the TSXV-NEX). This suggests that Canadian stock exchanges are still viewed as an important place for junior miners to raise capital, but the listing requirements under the TSX and TSXV may be too onerous for these companies in the short term.

• In the majority of circumstances a failure to meet continuous listing requirements was a result of companies failing to file financial statement or management disclosure documents on time.

• Formal insolvency proceedings doubled from 2014 to 2015, but this represented only 16 companies in total. This is likely due to the capital structure of most junior mining companies (they are typically financed with equity) and the difficulty dealing with fixed assets in various jurisdictions and remote locations.

2 | What is driving delisting in the mining and metals sector in Canada? An EY perspective

In 2014 the TSX and TSXV were home to 57% of the world’s publicly listed mining and metals companies.1 Together, the two exchanges handled 48% of global mining equity transactions in 2013, and accounted for 46% of global mining equity capital that year.2 As of 31 December 2015 approximately 1,300 mining and metals companies were listed on these two exchanges, representing 40% of the total number of listed companies.3 Mining has a rich history in Canada, with approximately 1,300 metal and non-metal mining companies in the country. Toronto is recognized as a global hub for mining finance and Vancouver is recognized as a global hub for mining exploration companies.4

With a backdrop of resource equities as the worst-performing asset class for four years running,5 EY undertook an analysis of mining companies that delisted from the TSX and TSXV in 2015. The goal of our study was to uncover some new insights to determine whether there were common themes or characteristics of these companies that led to a delisting.

Approximately 12% of the total number of mining and metals companies that were listed on both of Canada’s stock exchanges delisted in 2015. The majority of companies delisted on a voluntary basis, most choosing to list on an alternative exchange. This decision was likely implemented by junior mining companies to cut costs, while still having access to capital markets.

Our study starts out by providing a demographic breakdown of the delisted companies under the following parameters:• Resource or commodity• Head office location• Regions in which the company operates

We then focus on the rationale for delisting:• Failure to meet listing requirements• M&A activity• Voluntary delisting• Formal insolvency proceedings

Throughout the study, we have incorporated information about the mining and metals sector in Canada, information about the listing environment in Canada and insights from several thought leadership pieces EY has published in the mining and metals sector. We have also provided comparative data for 2014 and 2015 where this information adds to our insights.

We hope you find the unique perspective offered by our study both insightful and thought provoking.

Introduction

Study AuthorMichelle GrantSenior Vice President, BC Mining & Metals, Transaction Advisory Services Leader, Ernst & Young Inc., Canada

1. Mining Association of Canada. Facts & Figures of the Canadian Mining Industry 2014. Pg. 6.2. Ibid, Pg. 6.3. STSX and TSXV Market Intelligence Group, December 2014 Report.4. Mining Association of Canada. Facts & Figures of the Canadian Mining Industry 2014. Pg. 6.5. John Kemp, “What went wrong with the Great Commodity Boom?”, Financial Post, 9 January 2015.

* Unless otherwise indicated, all dollar figures are in CDN$.


The study focused on the 1,318 companies listed in the mining and metals sector at the end of 2015 on both the TSX and TSXV. The relative breakdown between these two exchanges by number of issuers and market capitalization was as follows:

Digging into the data6

Mining and metals companies represented 40% by number of the TSX and TSXV listed companies at 31 December 2015. The total market capitalization of these companies was CDN$180 billion, which equates to approximately 8% of the total market cap of these two exchanges. The 1,072 companies listed on the TSXV had a total market cap of approximately CDN$7.8 billion, while the 246 companies listed on the TSX had a market cap of approximately CDN$172 billion. In 2011, the market capitalization of mining and metals companies listed on the TSX and TSXV was CDN$426 billion. From 2011 to 2015, the market capitalization of these companies dropped by over 40%.7

20%

80%

TSXTSXV

4%

96%

TSXTSXV

Index overview

6. The MiG Report, TSX and TSXV Market Intelligence Group, December 2015.7. TSX and TSXV Market Intelligence Group, December 2011 Report.

Not all totals may add to 100% due to rounding.

Number of issuers

Market capitalization


Delisted overview

In total, 172 mining and metals companies were delisted in 2015. This represents approximately 12% of the total population of mining and metals companies listed on the two principal Canadian stock exchanges. The following chart provides a breakdown of the number of delisted companies by stock exchange:

The majority of the companies that delisted in 2015 were focused on the production, development or exploration of gold.

In 2014, over one-third of the delisted companies were focused on the production, development or exploration of more than one commodity. In 2015 only 25% had a multiple commodity focus.

EconomicsFrom 1 January 2013 through 31 December 2015, gold prices reached a high of US$1,696 per ounce and a low of US$1,056 per ounce.8 This volatility directly impacted the junior miners listed on the TSXV. Many were unable to raise equity as they had done in the past, leading to the delisting of the company.

29%

71%TSXTSXV

43%

6%20%

18%

GoldSilverOtherBase MetalsUranium

15%

8. http://goldprice.org/gold-price-history.html.


DemographicsThe study reveals that the majority of the companies that delisted in 2014 and 2015 had been listed on the relevant exchange for 5 to 14 years.

One could infer from the data that some of these companies were created simply to take advantage of the commodities super cycle (which peaked in 2011).

The majority of the companies that were delisted in 2014 and 2015 were headquartered in British Columbia (BC). This is not surprising as 50% of mining and metals companies currently listed on the TSXV are headquartered in British Columbia.9

Head office location

0

10

20

30

40

50

60

70

80

0-4 years 5-9 years 10-14 years 15-19 years 20 years or more

0 20 40 60 80 100

British Columbia

Ontario

US

Quebec

Australia

Alberta

Nova Scotia

Other

2014

2015

Attraction of TSX/TSXV10

A unique market structure with a feeder system giving junior companies an opportunity to access the equity markets.

Major players enjoy access to a sophisticated investor base (more than 200 Canadian institutional investors and more than 500 international institutional investors) looking for commodity exposure.

See Appendix B for listing requirements.

Why are the majority of companies delisting headquartered in BC?BC has a rich history in mining, from both a resource base and a capital markets perspective.

Many successful junior mining companies grew up in BC and went on to be sold to foreign buyers.

Prior to 1999, BC was home to the Vancouver Stock Exchange, which featured many small cap mining companies.

9. The MiG Report, TSX and TSXV Market Intelligence Group, December 2015.10. TMX Group - mining presentation.

Data for this chart is limited to information provided in TSX/TSXV listing report and does not include the full list of companies. Approximately 1/3 of the companies are excluded from this analysis.

Delisted overview (cont’d)


Delisted overview (cont’d)

While the delisted companies were primarily headquartered in Canada, only 36% had operations or development-stage properties in Canada. EY Insight

The Canadian stock exchanges are viewed as a place for prospective management teams to raise capital with more tolerance for risk. This capital tends to be targeted toward emerging markets, which is consistent with the data, as over 40% of the companies listed on these exchanges have properties in emerging markets.

36%

11%

5%

2%

25%

17%

3%1%

AfricaAus/NZ/Papua New GuineaCanadaChina & AsiaLatin AmericaOtherUK/EuropeUSA

The property location data is based on information from the TMX Group. Some companies did not disclose any property information to the TMX Group.

11. Mining Association of Canada Facts and Figures 2015, pg. 35.

EY InsightThe TSXV’s unique ability to handle financings in the CDN$1 million to CDN$5 million range makes that exchange attractive to exploration-stage companies.11


Reasons for delisting

What is an informal restructuring?While few companies obtained protection from creditors under formal insolvency proceedings (discussed in detail later in this study), several companies opted to restructure on an informal basis. This refers to an out-of-court restructuring, which could incorporate:

• Direct negotiations with secured and unsecured creditors. This is typically done in circumstances where the creditor pool is very small, making the negotiations manageable from a cost and timing perspective. This could include deferral of principal payments, capitalizing interest costs, extending loan maturity dates or offering a payment plan to creditors.

• Operational restructuring initiatives, including negotiations with unions or employees for wage concessions, renegotiating supply contracts and reducing discretionary spending.

• Balance sheet restructuring through a plan of arrangement under the Canada Business Corporations Act or the Business Corporations Act.

The majority of companies delisted due to M&A activity, while only 9% delisted due to formal insolvency proceedings.

While the sector has been in decline for several years, our study shows that companies are not turning to formal insolvency proceedings to deal with the decline. Instead companies are moving to less prominent exchanges (to preserve the ability to access the public markets), merging with other entities to bolster balance sheets or going through an informal restructuring. Many of these companies are pre-production and don’t have debt, which reduces the probability of insolvency proceedings as there are no lenders to act as a catalyst.

14%

37%

9%

40%

Failure to meet listingrequirementsM&A/plan of arrangementFormal insolvency proceedingsVoluntary delisting


Reasons for delisting (cont’d)

Overview of Tier 2 listing requirements13

• At least 50% ownership in a qualifying property or, at the discretion of the exchange, a right to earn a significant interest; sufficient evidence of no less than $100,000 of exploration expenditures on the qualifying property in the past three years

• Work program — $200,000 on the qualifying property as recommended by geological report

• Adequate working capital and financial resources to carry out stated work program or execute business plan for 12 months following listing; $100,000 in unallocated funds

• No requirements for net tangible assets, earnings or revenue

• Management, including board of directors, should have adequate experience and technical expertise relevant to the company’s business and industry as well as adequate public company experience. Companies are required to have at least two independent directors

• Public float of 500,000 shares; 200 public shareholders each holding a board lot and having no resale restrictions on their shares; 20% of issued and outstanding shares in the hands of public shareholders

Crowdfunding12

With the traditional equity markets effectively closed to junior miners, some are turning to crowdfunding to source additional financing.

In May 2015, six provincial securities regulators, including the British Columbia Securities Commission, announced harmonized equity crowdfunding exemptions through Multilateral CSA Notice 45-316 – Start-up Crowdfunding Registration and Prospectus Exemptions.

While fewer than 20% of the companies that delisted in 2014 and 2015 were delisted due to failure to meet continued listing requirements, it is interesting that the majority of the companies that fell into this category failed to submit financial statements and/or Management Discussion & Analysis Reports (MDRs) as required by the exchanges. With the majority of companies delisting from the TSXV, it is quite likely that these companies simply couldn’t raise sufficient funds to file the financial statements required by the exchanges, and therefore by default were delisted. The majority of these companies were transferred to the TSXV-NEX exchange, which has been designed to provide a forum for the trading of publicly listed shell companies while they seek and undertake transactions in furtherance of their reactivation as companies that will carry on an active business.

71%

29%

Failure to submitfinancials/MDRsFailure to meet Tier 2 requirements

Failure to meet listing requirements

Failure to meet listing

requirements

Insolvencyproceedings

Voluntarydelisting

M&A/plan of

arrangement>>>

12. http://www.securitiesregulationcanada.com/2015/06/six-provinces-introduce-start-up-crowdfunding-exemptions-for-non-reporting-issuers-ontario-expects-to-publish-new-rule-this-fall/

13. TMX Group listing requirements pdf.



requirements


Voluntarydelisting

M&A/plan of

arrangement>>>

Mergers and acquisitions

M&A activity and plans of arrangement were a significant contributor to the number of delistings, with 68 companies delisting for this reason. See Appendix C for a complete list.

The majority of the M&A activity was completed through an acquisition of shares, structured through plans of arrangement under the applicable corporations act.

EY Insight With limited debt financing available in this sector, junior miners turn to the TSXV as an avenue to raise equity to support exploration initiatives. When capital dries up, restructuring under the Canada Business Corporations Act or the Business Corporations Act is a tool available to these companies as an acquisition mechanism or to effectuate a takeover bid, to allow for share capital reorganizations and to restructure security holder relationships.

49%

16%

15%

21%

Share acquisitionReverse takeover MergerAmalgamation

Overview



In total, 33 delisted companies were acquired. Two buyers were private equity firms, Waterton Precious Metals and Whitebox Advisors. A complete list of the acquisitions is included in Appendix C.

In the majority of share acquisitions, the buyer offered shares in the acquirer, reflecting the capital-constrained nature of the sector at this time.

In 2015, 12 transactions included some form of cash consideration, with six transactions including all-cash offers. This is improved over 2014, when only six transactions included any cash consideration and only one transaction was a straight cash offer.

EY Insight With scarce cash resources, companies were creative in structuring transactions that would entice investors to accept the terms of a proposed share acquisition, using a combination of shares and limited cash contributions to sweeten proposals.

More cash was on the table in 2015. In 2014, purchasers were sweetening deals with options and warrants.

Share acquisitions — consideration

77%

4%

8%

11%

Share capital, options,warrants, etc.CashShare capitalor cashShare capitaland cash

61%12%

24%

Shares in acquirerCash and sharesCash onlyOther

3%

Reasons for delisting (cont’d)Failure to

meet listingrequirements


Voluntarydelisting

M&A/plan of

arrangement>>>

Consideration for share acquisitions 2014 Consideration for share acquisitions 2015



requirements


Voluntarydelisting

M&A/plan of

arrangement>>>

Of the 33 companies that were acquired, 27 were acquired by a strategic buyer in the mining industry, and 6 were acquired by a financial buyer (including two private equity players, Waterton Precious Metals and Whitebox Advisors Ltd.).

For the 33 companies acquired through share acquisition, the majority of buyers had corporate head offices located in Canada.

Share acquisitions — buyer type

Share acquisitions — locality of the buyer

EY Insight These findings are consistent with our report Mergers, acquisitions and capital raising in mining and metals — 2015 trends and 2016 outlook, which noted that sector buyers continue to dominate. Interest in the mining and metals sector came largely from within during 2015, with 73% of deal volumes undertaken by industry acquirers. Those already operating in the sector are better placed to understand and manage deal risks and take a longer-term view of market conditions during a downturn.79%

21%

StrategicFinancial

18%

82%

ForeignDomestic



Eleven delisted companies completed reverse takeover (RTO) transactions, mainly to facilitate a change of business. In 2014, a similar number of RTO transactions were completed, but only 50% resulted in a change to the business.

The following chart shows the industries that companies were changing to in 2015:

Reverse takeovers — target’s industry

Reverse takeovers

Looking to list on the TSX or TSXV?14

A reverse takeover is one of six recognized ways in which a company can gain a listing on the TSX or TSXV. The other pathways include:

• Direct listing (dual listing)

• Capital pool company

• Initial public offering

• Special-purpose acquisition corporation

• Graduation from another exchange

18%

45%

TechnologyHealth careSame industryOther

27%

9%

Reasons for delisting (cont’d)Failure to

meet listingrequirements


Voluntarydelisting

M&A/plan of

arrangement>>>

14 From TMX Group website.


Voluntary delisting

In 2014 and 2015, approximately 40% of the companies that delisted from the TSX and the TSXV did so on a voluntary basis.

Most often companies cited that another exchange in Canada was more appropriate for the listing. Foreign exchanges were also considered more appropriate in some circumstances.

Overview

EY Insight When choosing the appropriate stock exchange to raise capital, consider the following questions:

• Where are the majority of your peers listed?

• What kind of valuations are they receiving?

• How much analyst coverage do they typically attract?

• How liquid are their shares?

• How have their shares performed on a relative basis?

EY Peer Comparison Platform, our analytics tool, can help guide you through the selection of an exchange.

2%

16%

3%

11%

67%

Other Canadian exchangeGraduated to TSXMove to TSXVOther Foreign exchangeTaken privateNo longer listed

2%


requirements


Voluntarydelisting

M&A/plan of

arrangement

>>>


In total, 64 companies delisted for voluntary reasons and 61 of those companies continued listing on another exchange. Ten companies that were previously listed on the TSX moved to the TSXV. The majority moved to the NEX. In 2014, 60 companies also voluntarily delisted, but the majority moved to the CSE. In general, it appears that companies moved to the CSE to reduce costs or to facilitate a change of business (that could not be achieved with a listing on a TMX Group exchange).

In 2015, the TMX Group changed certain policies, making it easier for companies to move to the TSXV-NEX. This has likely contributed to the change in exchange preference for companies delisting on a voluntary basis.

Alternative exchanges

Did you know?15

As of 31 December 2015, over 200 companies listed on the TSX and the TSXV were also listed on another exchange.

12

18

107

2 3

TSXV CSE TSXV-NEX ASX NYSE Other

0

5

10

15

20

25

30

35

TSXV CSE TSXV-NEX ASX NYSE AIM TSX OTCQX Other

2014

2015



requirements


Voluntarydelisting

M&A/plan of

arrangement

>>>

Exchanges where delisted companies continued listing

Move from TSX to TSXV

• Stockport Exploration Inc. • Orezone Gold Corporation • Buffalo Coal Corp. • Candente Gold Corp. • IDM Mining Ltd. • Jayden Resources Inc. • Lupaka Gold Corp. • Macarthur Minerals Limited • Oracle Mining Corp. • Renaissance Gold Inc.

Listing movements

• Pancontinental Uranium Corporation

• Sacre-Coeur Minerals, Ltd.

• Ardonblue Ventures Inc. • Zincore Metals Inc. • Jiulian Resources Inc.• Mainstream Minerals

Corporation • Cogitore Resources Inc. • Pinestar Gold Inc. • Cassius Ventures Ltd.• Metropolitan Energy

Corp.

• Vatic Ventures Corp.• Delrand Resources

Limited • Amato Exploration Ltd. • Sendero Mining Corp.• Windfire Capital Corp.• Hunter Bay Minerals PLC • Santa Barbara Resources

Limited • Tiller Resources Ltd. • NSX Silver Inc. • Signal Exploration Inc. • Guyana Frontier Mining

Corp.

• Hellix Ventures Inc. • Navasota Resources Inc. • Sedex Mining Corp. • Tyhee Gold Corp. • Victory Mountain

Ventures Ltd. • Bell Copper Corporation • Global Minerals Ltd. • Golconda Resources Ltd. • Goldstream Minerals Inc. • Infinito Gold Ltd.• Karoo Exploration Corp. • Monster Uranium Corp.

Move from TSXV to TSXV NEX

15. http://www.tsx.com/resource/en/193. Pg. 12 of the pdf.


Formal restructuring

As stated previously, 9% of companies that delisted in 2015 were involved in formal insolvency proceedings. This represents an 100% increase from 2014. The majority of the insolvency filings were initiated by the company. In 2014, all of the proceedings were initiated in Canada, whereas in 2015 several proceedings were initiated in a foreign jurisdiction.

When considering a formal insolvency filing a company has several options (depending on the quantum of liabilities that are outstanding). The options include:

• File a Notice of Intention to file a Proposal under the Bankruptcy and Insolvency Act (BIA) with a licensed trustee. The company remains in possession of its assets and in control of the business. A proposal trustee is appointed to monitor the company. There is an initial 30-day stay of proceedings (provided certain required material is filed on time) and further extensions are available by court order for a stay period that can extend for six months in total. Ultimately the company must file a proposal to its creditors within the allotted time or it will be deemed to have made an assignment in bankruptcy.

• File a Proposal under the BIA with a licensed trustee. The company remains in possession of its assets and in control of the business. A Proposal Trustee is appointed to monitor the company. A Proposal is an offer to creditors to compromise debt. The Proposal is ultimately voted on by the creditors and majority in number and 2/3 of the value of creditor claims voted at the meeting must approve the Proposal for it to be successful. Once approved by the creditors a Proposal is presented to the Court for approval and if approved is implemented as outlined in the Proposal document.

• File for protection under the Companies’ Creditors Arrangement Act (CCAA). A company must have debts that exceed $5 million to be eligible to file under the CCAA. The company remains in possession of its assets and in control of the business. There is an initial 30-day stay of proceedings that can be extended by further court order (with no limit on the

number of extensions or the length of subsequent extensions provided that the company continues to act in good faith and with due diligence in carrying out its restructuring). The CCAA provides companies with an opportunity to restructure its financial and operational affairs with the goal of ultimately offering creditors a compromise or arrangement to be voted upon at a meeting of creditors. Recently, the statute has been used more commonly to sell a business as a going concern or in some cases to simply liquidate under the supervision of a court-appointed monitor.

• File an assignment in bankruptcy with a licensed trustee. The assets of the company vest in the trustee, who may sell the business or liquidate the assets for the benefit of the creditors. The company relinquishes control of its assets and decisions around recovery to the trustee.

A secured creditor can also take steps to protect its security by appointing a receiver either through a private appointment or by court order. If through private appointment, the receiver would take possession and control of the assets governed by its appointment letter. If by court order, the receiver would then take possession and control of the assets and or business operations as outlined in the court order. In either scenario the company would lose control.

A creditor can also petition a company into bankruptcy, appointing a trustee to take possession and control of the assets.

Overview of the options in Canada

>>>

EY InsightEY’s report Mergers, acquisitions and capital raising in mining and metals — 2015 trends and 2016 outlook comment on the widespread signs of distress in the sector. In 2015, a high proportion of corporate credits were downgraded and 46 companies entered formal insolvency proceedings.

Formal insolvency

proceedings


The following is a summary of the outcomes for the companies that were delisted as a result of initiating formal insolvency proceedings in 2014 and 2015.

Year delisted

Company name Location of assets

Type of resource

Type of insolvency proceedings

Outcome Summary comments

2015 Advanced Explorations Inc. Canada Iron ore BIA (NOI) Unknown Unable to obtain information from public records.

2015 Allied Nevada Gold Corp. US Gold Chapter 11 Restructured Emerged from Chapter 11 proceedings on October 22, 2015.

2014 Andover Mining Corp US Copper BIA (NOI) Liquidated NOI was unsuccessful. Trustee in Bankruptcy sold the assets to Enirgi Group Corporation.

2015 Appalaches Resources Inc. Canada Gold and uranium

Receivership In progress Assets are being marketed for sale

2015 Asia Now Resources Corp. China Gold, silver, copper and lead

Receivership Assets sold Sale transaction approved by Court Order dated December 23, 2015.

2015 Atna Resources Ltd. Canada, US Gold Chapter 11 In progress Marketing assets for sale through the Chapter 11 process.

2015 Banks Island Gold Ltd Canada Gold Assignment in bankruptcy

In progress Trustee is liquidating assets.

2015 CanAm Coal Corp US Coal Chapter 11 In progress US Subsidiaries in Chapter 11 process.

2014 Colossus Minerals Inc. Brazil Gold BIA proposal Unknown Defaulted on performance of proposal. No creditor action has been taken to date.

2014 EastCoal Inc Ukraine Coal BIA proposal Restructured Completed BIA Proposal in August 2014.

2015 First Nickel Inc. Canada Nickel Receivership Assets sold Sale transaction approved by Court Order dated January 21, 2016.

2015 Great Western Minerals Group Ltd.

South Africa

Rare earth metals

CCAA/bankruptcy Assets sold Several transactions were completed for asset sales during the course of the CCAA.

2014 Jaguar Mining Inc. Brazil Gold CCAA Restructured Implemented a Plan of Arrangement in April 2014

2015 Labrador Iron Mines Holdings Limited

Canada Iron ore CCAA In progress Pursuing a restructuring plan

2015 Lachlan Star Limited Chile Gold Administration Unknown Unable to obtain information from public records.

2015 Midway Gold Corp. US Gold Chapter 11/ CCAA recognition

In progress Marketing assets for sale through the Chapter 11 process.

2014 RB Energy Inc. Brazil, Canada and Chile

Lithium CCAA/receivership In progress Started as a CCAA proceeding. Receiver was appointed in May 2015.

2015 San Gold Corporation Canada Gold BIA (NOI) Lender purchase

Credit bid transaction closed in June 2015. Assets were subsequently sold to Klondex in December 2015.

2015 Seafield Resources Ltd Columbia Gold Receivership/ bankruptcy

Unknown Sales process during the Receivership did not result in any qualified offers.

2015 Strateco Resources Inc. Canada Uranium CCAA In progress Involved in litigation.

2014 Tamerlane Ventures Inc. Canada, Peru

Zinc, lead, copper

CCAA/receivership Assets sold CCAA proceedings were dismissed and a Receiver was appointed in January 2014. Receiver completed two asset sale transactions.

2014 United Silver Corp. US Silver Receivership Lender purchase

Lender took steps to foreclose on collateral

2014 Veris Gold Corp. Canada, US Gold CCAA/Chapter 15 Lender purchase

Credit bid transaction closed in June 2015

2015 Xinergy Ltd US Coal Chapter 11/ CCAA recognition

In progress Emerged from Chapter 11 proceedings on February 11, 2016

Summary of the outcomes16

Reasons for delisting (cont’d) >>>

16. This summary is based on information available through April 2016.

Formal insolvency

proceedings


Appendices

Why so few formal insolvencies?• Many of the companies listed on these exchanges are pre-production and don’t have any debt, which reduces

the probability of insolvency proceedings, as there are no lenders to act as a catalyst. There is also limited opportunity for a company to benefit from a formal insolvency proceeding with minimal debt levels.

• For those companies that are financed with debt, it is hard to extract value in a restructuring process as most of the assets are fixed to foreign land. Faced with this situation lenders tend to pursue informal work-outs directly with companies under forbearance agreements. In 2015, several of the companies initiated proceedings in a foreign jurisdiction, which likely occurred after the lenders exhausted informal work-out opportunities.

• For the companies that did pursue a formal proceeding, it is interesting to note that only two of the companies were initially put into a proceeding by its creditor and several ended up in a liquidation because the restructuring process was not successful.


Appendix A

Abzu Gold Ltd. ABS Adanac Molybdenum Corporation AUA Advanced Explorations Inc. AXI Aegean Metals Group Inc. AGN Afri-Can Marine Minerals Corporation AFA Alder Resources Ltd. ALR Allana Potash Corp AAA Allied Nevada Gold Corp. ANV Alpha Exploration Inc. AEX Amato Exploration Ltd. AMT Amerix Precious Metals Corporation APM Angus Mining Inc. ANA Anthem Resources Inc. AYN Appalaches Resources Inc. APP Ardonblue Ventures Inc. ARB Argonaut Exploration Inc. AGA Arian Silver Corporation AGQ Artha Resources Corporation AHC Asia Now Resources Corp. NOW Atna Resources Ltd. ATN AuRico Gold Inc. AUQ Banks Island Gold Ltd. BOZ Bayfield Ventures Corp. BYV Bell Copper Corporation BCU Black Panther Mining Corp. BPC Boss Power Corp. BPU Buffalo Coal Corp. BUF Canadian Imperial Venture Corp. CQV Canadian Orebodies Inc. CO CanAm Coal Corp. COE Candente Gold Corp. CDG Cannon Point Resources Ltd. CNP Carrie Arran Resources Inc. SCO Cassius Ventures Ltd. CZ Challenger Deep Resources Corp. CDE Chaparral Gold Corp. CHL Coalspur Mines Limited CPT Coastal Gold Corp. COD Cogitore Resources Inc. WOO Columbus Copper Corporation CCU Columbus Exploration Corporation CLX Corona Gold Corporation CRG Cortez Gold Corp. CUT Crocodile Gold Corp CRK

Declan Resources Inc. LAN Delrand Resources Limited DRN Delta Gold Corporation DLT DOT Resources Ltd. DOT Duluth Metals Limited DM Dundarave Resources Inc. DDX Eagle Hill Exploration Corporation EAG El Tigre Silver Corp. ELS Estrella Gold Corporation EST Explorex Resources Inc. EX First Nickel Inc. FNI Four River Ventures Ltd. FFC Frontier Rare Earths Limited FRO Global Minerals Ltd. CTG Golconda Resources Ltd. GA Gold Canyon Resources Inc. GCU Gold Royalties Corporation GRO Goldstream Minerals Inc. GSX Great Western Minerals Group Ltd. GWG Guyana Frontier Mining Corp. GYG Hellix Ventures Inc. HEL Hunter Bay Minerals PLC HBY IDM Mining Ltd. IDM IMX Resources Limited IXR Infinito Gold Ltd. IG Inform Resources Corp. IRR Infrastructure Materials Corp. IFM International Tower Hill Mines Ltd ITH Iron Tank Resources Corp. TNK Jayden Resources Inc. JDN Jiulian Resources Inc. JLR Jourdan Resources Inc. JOR Karoo Exploration Corp. KE Kettle River Resources Ltd. KRR KWG Resources Inc. KWG Labrador Iron Mines Holdings Limited LIM Lachlan Star Limited LSA Lakeland Resources Inc. LK Lithium Americas Corp LAC Lupaka Gold Corp. LPK Macarthur Minerals Limited MMS MagIndustries Corp MAA Mainstream Minerals Corporation MJO Mega Precious Metals Inc. MGP

Name RootTicker Name RootTicker

Complete list of delisted companies (2015)


Name RootTicker Name RootTicker

Metropolitan Energy Corp. MOE Midlands Minerals Corporation MEX Midway Gold Corp. MDW Minera IRL Limited IRL Monster Uranium Corp. MU Murgor Resources Inc. MGR Nanton Nickel Corp. NAC Navasota Resources Inc. NAV Nevada Iron Ltd. NVR Newstrike Capital Inc. NES NMC Resource Corporation NRC North Country Gold Corp. NCG Northaven Resources Corp. NTV Northcore Resources Inc. NCR Northern Gold Mining Inc. NGM NSX Silver Inc. NSY Nuinsco Resources Limited NWI NWM Mining Corporation NWM Oceanside Capital Corp. OCC Oracle Mining Corp. OMN Orezone Gold Corporation ORE Pacific Wildcat Resources Corp. PAW Palladon Ventures Ltd. PLL Pancontinental Uranium Corporation PUC Paramount Gold and Silver Corp. PZG Parkside Resources Corporation PKS Passport Potash Inc. PPI PC Gold Inc. PKL Petaquilla Minerals Ltd. PTQ PhosCan Chemical Corp FOS Pinestar Gold Inc. PNS Porvidence Resources Corp. PV Probe Mines Limited PRB Quia Resources Inc. QIA Rare Element Resources Ltd. RES Regulus Resources Inc. REG Renaissance Gold Inc. REN Revett Mining Company RVM Rio Alto Mining Limited RIO Rockcliff Resources Inc. RCR Romarco Minerals Inc R Ryan Gold Corp. RYG Sabre Graphite Corp. SAG Sacre-Coeur Minerals, Ltd. SCM

San Gold Corporation SGR Santa Barbara Resources Limited SBL Scorpio Mining Corporation SPM Seafield Resources Ltd. SFF Sedex Mining Corp. SDN Sendero Mining Corp. SM Sierra Madre Developments Inc. SMG Signal Exploration Inc. SNL SilverCrest Mines Inc. SVL Simba Gold Corp. SGD Soltoro Ltd. SOL Solvista Gold Corporation SVV Sonoma Resources Inc. SRQ St. Elias Mines Ltd. SLI Stikine Gold Corp. SKY Stina Resources Ltd. SQA Stockport Exploration Inc. SPT Strateco Resources Inc. RSC Sunward Resources Ltd. SWD Surrey Capital Corporation SYC Taku Gold Corp. TAK Tarsis Resources Ltd. TCC Temex Resources Corp. TME Teslin River Resources Corp. TLR Tiller Resources Ltd. TIR Toro Resources Corp. TRK Tosca Resources Corp. TSQ Troy Resources Limited TRY Tyhee Gold Corp. TDC U.S. Silver & Gold Inc. USA Unique Resources Corp. UQ Uranerz Energy Corporation URZ Uranium One Inc. UUU Vatic Ventures Corp. VCV Victory Mountain Ventures Ltd. VMV Weststar Resources Corp. WER Windfire Capital Corp. WIF Xinergy Ltd XRG Zinco Mining Corp. ZIM Zincore Metals Inc. ZNC


Appendix B

Listing requirements

TSXV Tier 1 TSXV Tier 2 TSX non-exempt exploration and development stage

TSX non-exempt producer

TSX exempt

Property requirements Material interest in a Tier 1 property4

Significant interest5 in a qualifying property or, at discretion of the Exchange, a right to earn a significant interest5 in a qualifying property; sufficient evidence of no less than $100,000 of exploration expenditures on the qualifying property in the past three years

Advanced exploration property2 minimum 50% ownership in the property3

Three years proven and probable reserve as estimated by an independent qualified person (if not in production, a production decision made)

Three years proven and probable reserves as estimated by an independent qualified person

Recommended work program

$500,000 on the Tier 1 property4 as recommended by geological report6

$200,000 on the qualifying property as recommended by geological report6

$750,000 on advanced exploration property2 as recommended in independent technical report6

Bringing the mine into commercial production

Commercial level mining operations

Working capital and financial resources

Adequate working capital and financial resources to carry out stated work program or execute business plan for 18 months following listing; $200,000 in unallocated funds

Adequate working capital and financial resources to carry out stated work program or execute business plan for 12 months following listing; $100,000 in unallocated funds

Minimum $2.0 million working capital, but sufficient to complete recommended programs, plus 18 months G&A1, anticipated property payments and capital expenditures. Appropriate capital structure.

Adequate funds to bring the property into commercial production; plus adequate working capital for all budgeted capital expenditures and to carry on the business. Appropriate capital structure.

Adequate working capital to carry on the business. Appropriate capital structure.

Net tangible assets, earnings or revenue

$2,000,000 net tangible assets

No requirement $3,000,000 net tangible assets

$4,000,000 net tangible assets; evidence indicating a reasonable likelihood of future profitability supported by a feasibility study or historical production and financial performance

$7,500,000 net tangible assets; pre-tax profitability from ongoing operations in last fiscal year; pre-tax cash flow of $700,000 in last fiscal year and average of $500,000 for past two fiscal years

Other criteria Geological report6 recommending completion of work program

Up-to-date, comprehensive technical report6 prepared by independent qualified person and 18 month projection (by quarter) of sources and uses of funds, signed by CFO

Up-to-date, comprehensive technical report6 prepared by independent qualified person

TSX Venture Exchange Toronto Stock Exchange


TSXV Tier 1 TSXV Tier 2 TSX non-exempt exploration and development stage

TSX non-exempt producer

TSX exempt

Management and board of directors

Management, including board of directors, should have adequate experience and technical expertise relevant to the company’s business and industry as well as adequate public company experience. Companies are required to have at least two independent directors.

Distribution, market capitalization and public float

Public float of 1,000,000 shares; 250 public shareholders each holding a board lot and having no resale restrictions on their shares; 20% of issued and outstanding shares in the hands of public shareholders

Public float of 500,000 shares; 200 public shareholders each holding a board lot and having no resale restrictions on their shares; 20% of issued and outstanding shares in the hands of public shareholders

$4,000,000 publicly held 1,000,000 free trading public shares; 300 public holders with board lots

Sponsorship Sponsor report may be required Required (may be waived if sufficient previous third party due diligence)

Not required

1. ”G&A” means general and administrative expenses.2. ”Advanced exploration property“ refers to one on which a zone of

mineralization has been demonstrated in three dimensions with reasonable continuity indicated. The mineralization identified has economically interesting grades.

3. A company must hold or have the right to earn and maintain a 50% interest in the property. Companies holding less than a 50% interest will be considered on a case-by-case basis looking at program size stage of advancement of the property and strategic alliances.

4. ”Tier 1” proper means a property that has substantial geological merit and is:

a) a property in which the Issuer holds a material interest; b) a property on which previous exploration, including detailed surface

geological, geophysical and/or geochemical surveying and at least an initial phase of drilling or other detailed sampling (such as trench or underground opening sampling), has been completed;

c) a property that has, at a minimum, a current inferred mineral resource; and

d) an independent geological report recommends a minimum $500,000 Phase 1 drilling (or other form of detailed sampling) program based on the merits of previous exploration results; or an independent, positive feasibility study demonstrates that the property is capable of generating positive cash flow from ongoing operations.

5. ”significant interest” means at least 50% interest.6. ”geological report” or ”technical report”, in the case of a mining property,

is a report prepared in accordance with National Instrument 43-101 — Standards of Disclosure for Mineral Projects or any successor instrument.

*Mining Disclosure StandardsNational Instrument 43-101 is the Canadian Securities Administrators’ (CSA) policy that governs the scientific and technical disclosure for mineral projects made by mineral exploration and mining companies, including the preparation of technical reports. The instrument covers oral statements as well as written documents and websites. NI 43-101 requires that all technical disclosure be prepared by or under the supervision of a ”qualified person.” Issuers are required to make disclosure of reserves and resources using definitions approved by the Canadian Institute of Mining, Metallurgy and Petroleum.

NI 43-101 is available at:http://www.osc.gov.on.ca/en/SecuritiesLaw_rule_20051223_43-101_mineral-projects.jsp

All amounts are expressed in Canadian dollars.

The foregoing is a summary of the applicable listing requirements only. For detailed listing requirements, refer to the TSX Venture Exchange Corporate Finance Manual and the Toronto Stock Exchange Company Manual, both of which are available at tmx.com.


Appendix C

Companies that delisted due to M&A activity

Delisted company Ticker Counterparty Ticker (if applicable)

Gold Canyon Resources Inc. GCU First Mining Finance Corp. FF

Crocodile Gold Corp. CRK Newmarket Gold Inc. NMI

Corona Gold Corporation CRG Oban Mining Corporation OBM

AuRico Gold Inc. AUQ Alamos Gold Inc. AGI

Aegean Metals Group Inc. AGN Mariana Resources Ltd. MARL (FTSE)

Revett Mining Company RVM Hecla Mining Company HL (NYSE)

Columbus Copper Corporation CCU EnerGulf Resources Inc. ENG

Soltoro Ltd. SOL Agnico Eagle Mines Limited AEM

Duluth Metals Limited DM Antofagasta Investment Co. ANTO (LON)

Scorpio Mining Corporation SPM U.S. Silver & Gold Inc. USA

Alder Resources Ltd. ALR Midlands Minerals Corporation MEX

Rockcliff Resources Inc. RCR Solvista Gold Corporation SVV

Paramount Gold and Silver Corp. PZG Coeur Mining Inc. CDE (NYSE)

Uranerz Energy Corporation URZ Energy Fuels Inc. EFR

Regulus Resources Inc. REG Southern Legacy Minerals Inc. LCY

Cortez Gold Corp. CUT Starcore International Mines Ltd. SAM

Eagle Hill Exploration Corporation EAG Oban Mining Corporation OBM

NMC Resource Corporation NRC Dong Won Corporation N/A

Northern Gold Mining Inc. NGM Oban Mining Corporation OBM

Porvidence Resources Corp. PV Desert Star Resources Ltd. DSR

Bayfield Ventures Corp. BYV New Gold Inc. NGD

El Tigre Silver Corp. ELS Oceanus Resources Corporation OCN

Oceanside Capital Corp. OCC Gaming Nation Inc. FAN

PhosCan Chemical Corp. FOS Petrus Resources Ltd. and Fox River Resources Corporation

PRQ

Coalspur Mines Limited CPT KC Euroholdings N/A

Lithium Americas Corp. LAC Western Lithium Corporation WLC

Romarco Minerals Inc. R OceanaGold Corporation OGC

North Country Gold Corp. NCG Auryn Resources Inc. AUG

Allana Potash Corp. AAA Israel Chemicals Ltd. ICL (TLV)

U.S. Silver & Gold Inc. USA Scorpio Mining Corporation SPM


Adanac Molybdenum Corporation AUA WBOX 2015-4 Ltd. N/A

Gold Royalties Corporation GRO Sandstorm Gold Ltd. SSL

Rio Alto Mining Limited RIO Tahoe Resources Inc. THO

Sunward Resources Ltd. SWD Nova Copper Inc. NCQ

Chaparral Gold Corp. CHL Waterton Precious Metals N/A

Alpha Exploration Inc. AEX ALX Uranium Corp. AL

Dundarave Resources Inc. DDX Perfect Lithium Corp. N/A

Lakeland Resources Inc LK ALX Uranium Corp. AL

Estrella Gold Corporation EST Tarsis Resources Ltd. TCC

SilverCrest Mines Inc. SVL First Majestic Silver Corp. FR

PC Gold Inc. PKL First Mining Finance Corp. FF

Anthem Resources Inc AYN Eros Resources Corp. ERC

Boss Power Corp. BPU Anthem Resources Inc. AYN

Cannon Point Resources Ltd CNP Northern Dynasty Minerals Ltd. NDM

Coastal Gold Corp. COD First Mining Finance Corp. FF

Delta Gold Corporation DLT CIC Resources Inc. N/A

Kettle River Resources Ltd. KRR New Nadina Explorations Limited NNA

Mega Precious Metals Inc MGP Yamana Gold Inc. YRI

Murgor Resources Inc. MGR Alexandria Minerals Corporation AZX

Newstrike Capital Inc. NES Timmins Gold Corporation TMM

NWM Mining Corporation NWM GFM Mineria, S.A.P.I. de C.V. N/A

Probe Mines Limited PRB Goldcorp Inc. G

Ryan Gold Corp. RYG Oban Mining Corporation OBM

Temex Resources Corp. TME Lakeshore Gold Corp. LSG

Delisted Company Ticker Counterparty Ticker (if applicable)


About the studyThis study is based on a review of data sourced from the TMX Group Market Intelligence archives, the System for Electronic Document Analysis and Retrieval (SEDAR) and other publicly available information. The data were compiled based on a comparison of companies that were listed on the TSX or TSXV at 31 December 2013 compared to a list of companies that were listed on the TSX or TSXV at 31 December 2014 and further compared to a list of companies that were listed on the TSX or TSXV at 31 December 2015. The data were further parsed for companies that were identified by the TMX Group as being in the mining and metals sector. Companies that were delisted solely due to a change in name were excluded from the analysis. A complete list of the companies included in the study can be found in Appendix A.

The commodity analysis is based on the primary commodity focus as identified by the company to the TMX Group.

Glossary of termsASX Australian Securities ExchangeBCCA British Columbia Corporations ActBCSC British Columbia Securities CommissionBIA Bankruptcy and Insolvency ActCBCA Canada Business Corporations ActCCAA Companies’ Creditors Arrangement ActCSE Canadian Securities ExchangeEY Ernst & Young LLPM&A Mergers and AcquisitionsMIG Market Intelligence GroupMDR Management Analysis & Discussion ReportsNOI Notice of Intention to file a ProposalNYSE New York Stock ExchangeRTO Reverse TakeoverSEDAR System for Electronic Document Analysis and RetrievalTSX Toronto Stock ExchangeTSXV Toronto Venture Exchange


Global Mining & Metals Leader Miguel Zweig +55 11 2573 3363 [email protected]

Oceania Scott Grimley +61 3 9655 2509 [email protected]

China and Mongolia Peter Markey +86 21 2228 2616 [email protected]

Japan Andrew Cowell +81 3 3503 3435 [email protected]

Africa Wickus Botha +27 11 772 3386 [email protected]

Commonwealth of Independent States Evgeni Khrustalev +7 495 648 9624 [email protected]

France, Luxemburg, Maghreb, MENA Christian Mion +33 1 46 93 65 47 [email protected]

India Anjani Agrawal +91 22 6192 0150 [email protected]

United Kingdom and Ireland Lee Downham +44 20 7951 2178 [email protected]

United States Andy Miller +1 314 290 1205 [email protected]

Canada Bruce Sprague +1 604 891 8415 [email protected]

Brazil Afonso Sartorio Tel: +551125733074 [email protected]

Chile María Javiera Contreras +562 2676 1492 [email protected]

Service line contactsGlobal Advisory Leader Paul Mitchell +61 2 9248 5110 [email protected]

Global Assurance Leader Alexei Ivanov +495 228 3661 [email protected]

Global IFRS Leader Tracey Waring +61 3 9288 8638 [email protected]

Global Tax Leader Andy Miller +1 314 290 1205 [email protected]

Global Transactions Leader Lee Downham +44 20 7951 2178 [email protected]

How EY’s Global Mining & Metals Network can help your businessWith a volatile outlook for mining and metals, the global mining and metals sector is focused on margin and productivity improvements, while poised for value-based growth opportunities as they arise. The sector also faces the increased challenges of maintaining its social license to operate, balancing its talent requirements, effectively managing its capital projects and engaging with government around revenue expectations.

EY’s Global Mining & Metals Network is where people and ideas come together to help mining and metals companies meet the issues of today and anticipate those of tomorrow by developing solutions to meet these challenges. It brings together a worldwide team of professionals to help you succeed — a team with deep technical experience in providing assurance, tax, transactions and advisory services to the mining and metals sector. Ultimately it enables us to help you meet your goals and compete more effectively.

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EYG No. 01613-164Gbl CSG No. 1763362 ED NoneThis material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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