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Oct 05, 2020

   

Industry News

Industry, investors divided on proposed Ontario capital market reforms

2  Lecture minimum

Institutional investors, industry groups and experts are divided on a set of substantial capital markets reforms being proposed by Ontario’s capital markets modernization taskforce.

The taskforce, set up in February by Ontario Finance Minister Rod Phillips, released a set of 47 proposed reforms over the summer that could impact mining issuers if they were implemented. The suggestions included introducing the option to move to semi-annual reporting from quarterly reporting; creating an alternative offering model for reporting issuers; introducing a well-known seasoned issuer model such as in the United States; and giving public companies greater flexibility to gauge investor interest in a prospectus offering. The three-month comment period concluded in September.

Commenting on the proposed changes, James Brown, partner in Osler, Hoskin & Harcourt’s corporate group and co-chair of the firm’s mining group, said the impact will depend on the size of the mining issuer. “[For] larger issuers that are cross-border, some of the proposals are intended to make their lives easier.”

Brown pointed to the proposal to incorporate a well-known seasoned issuer model for capital-raising. The model would give certain public companies a less burdensome registration process for a shelf prospectus — a short-form prospectus that companies can file on SEDAR for a public offering when they have no intention to immediately sell all of the qualified securities. Qualifying companies would need to be above a certain free float or have issued debt securities above a set amount in a specific time period, with a strong disclosure record. “[That’s] a proposal we think is going to be helpful to reduce regulatory burden,” Brown said in an interview.

However, he noted, many junior miners won’t be able to take advantage of that system because they choose not to file annual information forms due to cost-constraints or other reasons, cutting them out of the short-form prospectus system.

In its submission to taskforce chair Walied Soliman, the Prospectors and Developers Association of Canada (PDAC) was supportive of several of the proposals that would seem to benefit junior mining companies, such as the suggestion to introduce an alternative offering model for reporting issuers.

While large public companies can absorb the cost of conducting a public offering, they present a barrier to small companies, the taskforce’s report noted. The alternative model would allow smaller companies to raise capital based on a short offering document and their continuous disclosure record, rather than a full prospectus filing. Companies would need to be reporting issuers for 12 months and be up to date with continuous disclosure to participate.

PDAC proposed a $10-million maximum capital-raising limit within a 12-month period for smaller issuers, and more than that for larger issuers. It suggested the limit should be proportional to issuers’ market capitalization so the alternative offering model couldn’t be used to finance a material acquisition or change of business.

“One of the principle concerns PDAC has for its members is ensuring a smooth, effective access to capital, given the nature of their businesses, and something like this alternative offering model could certainly add a new flexible way for companies to reach markets,” Jeff Killeen, the association’s director of policy and programs, finance and taxation, securities, geoscience and health and safety, said in an interview with The Northern Miner.

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