Filed Pursuant to Rule 424(b)(2)
Registration
Statement No. 333-209921
PROSPECTUS SUPPLEMENT
(To Short Form Base Shelf
Prospectus dated March 30, 2016)
No securities regulatory
authority has expressed an opinion about these securities and it is an offence
to claim otherwise.
This prospectus supplement, together with the
accompanying short form base shelf prospectus dated March 30, 2016 to which it
relates, as amended or supplemented, and each document deemed to be incorporated
by reference into this prospectus supplement and the short form base shelf
prospectus, constitutes a public offering of these securities only in those
jurisdictions where they may be lawfully offered for sale and therein only by
persons permitted to sell such securities. See "Plan of Distribution".
Information has been
incorporated by reference in this prospectus supplement from documents filed
with securities commissions or similar authorities in Canada.
Copies
of the documents incorporated herein by reference may be obtained on request
without charge from Northern Dynasty Minerals Ltd.,
15
th
Floor, 1040 West Georgia Street, Vancouver,
British Columbia, V6E 4H1, Telephone: 604-684-6365 (attention: Corporate
Secretary), and are also available electronically at
www.sedar.com
.
$14,000,000
31,111,111 Units
Northern Dynasty Minerals Ltd.
(the
Company
or
Northern Dynasty
) hereby qualifies for
distribution an aggregate of 31,111,111 units (the
Units
) (the
Offering
), at a price of $0.45 per Unit (the
Offering Price
),
pursuant to an agency agreement dated May 26, 2016 (the
Agency
Agreement
) between the Company and Global Securities Corporation (the
Lead Agent
), together with Industrial Alliance Securities Inc.
(
IAS
and together with the Lead Agent, the
Agents
). Each Unit
consists of one common share of the Company (a
Unit Share
) and one
common share purchase warrant of the Company (a
Warrant
). Each Warrant
will entitle the holder thereof to purchase one common share of the Company (a
Warrant Share
) at an exercise price of $0.65 per Warrant Share for a
period of five years from the closing of the Offering. The Offering Price was
determined by negotiation between the Company and the Lead Agent with reference
to the market price of the Companys existing common shares. The Company also
qualifies for distribution the issuance of the Warrant Shares issuable upon
exercise of the Warrants by the United States purchasers of the Units.
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Price
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Agents
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Net Proceeds
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to the Public
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Fee
(1)
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to the Company
(2)
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Per Unit
(3)
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$
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0.45
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$
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0.009
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$
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0.441
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Total
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$
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14,000,000
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$
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280,000
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$
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13,720,000
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_________________________
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(1)
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Pursuant to the Agency Agreement, the Company has agreed
to pay to the Agents a fee equal to 2.0% of the gross proceeds of the
Offering (the
Agents Fee
) (including in respect of any
Over-Allotment Units (as defined herein) sold upon the exercise of any
portion of the Over-Allotment Option (as defined herein)). The Company
will also pay the Lead Agent a non-refundable work fee of $20,000 plus GST
($1,000) and the Agents reasonable expenses related to the Offering, up
to $50,000, excluding taxes. The Agents Fee may be increased to a maximum of 4.0% of the gross proceeds of certain Units in order to facilitate the payment of a concession fee to licensed broker-dealers, brokers or investment dealers who may be involved in introducing investors to the Company and the Agents, provided that the Agents Fee will equal 2.0% with respect to all sales to United States purchasers of the Units.
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(2)
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After deducting the Agents Fee and assuming an Agents Fee of 2.0% on all Units sold, but before deducting the expenses of the Offering, which are estimated to be up to $423,000, which, together with the Agents Fee, will be paid out of the gross proceeds of the Offering.
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S-2
(3)
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The Company has granted to the Agents an option (the
Over-Allotment Option
) to purchase up to an additional 4,666,667 Units (the
Over-Allotment Units
), representing 15% of the number of Units sold under the Offering. The Over-Allotment Option is exercisable in whole or in part at any time up to 30 days after the date of closing of the Offering. If the Over-Allotment Option is exercised in full, the total Price to the Public, Agents Fee (assuming an Agents Fee of 2% on all Over-Allotment Units sold) and Net Proceeds to the Company will be $16,100,000, $322,000 and $15,778,000, respectively. A purchaser who acquires Over-Allotment Units that form part of the Agents over-allocation position acquires those securities under this Prospectus Supplement, regardless of whether the over-allocation position is ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases. This Prospectus Supplement qualifies the grant of the Over-Allotment Option and the issuance of the Over-Allotment Units issuable upon any exercise of the Over-Allotment Option. See Plan of Distribution.
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References to Units in this
prospectus supplement (this
Prospectus Supplement
) shall include the
Over-Allotment Units, and references to Unit Shares, Warrants and Warrant
Shares shall include the securities issuable in connection with the
Over-Allotment Units, in each case as applicable in the context used.
The following table sets out the
number of options, if any, that have been issued or may be issued by the Company
to the Agents:
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Maximum Size or Number
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Exercise Period or
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Exercise Price or Average
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Agents Position
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of Securities Available
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Acquisition Date
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Acquisition Price
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Over-Allotment Option
(1)
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4,666,667 Over-Allotment
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Exercisable for a period of 30
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$0.45 per Over-Allotment
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Units
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days following the Closing
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Unit
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Date
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_________________________
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(1)
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This prospectus supplement qualifies the grant of the
Over-Allotment Option and the issuance of the Over-Allotment Units
issuable upon exercise of the Over-Allotment Option. See Plan of
Distribution.
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The outstanding common shares of
the Company (the
Common Shares
) are listed for trading on the Toronto
Stock Exchange (
TSX
) under the symbol NDM and on the NYSE MKT under
the symbol NAK. On May 25, 2016, the closing price of the Common Shares on the
TSX was $0.45 per Common Share, and the closing price of the Common Shares on
the NYSE MKT was US$0.35 per Common Share. The Company has applied to the TSX
and the NYSE MKT for approval of the listing of the Unit Shares and the Warrant
Shares offered hereunder. The Company has also applied to the TSX for approval
of the listing of the Warrants. The listing of the Unit Shares, the Warrant
Shares and the Warrants will be subject to the Company fulfilling the listing
requirements of the TSX.
The Agents propose to offer the
Units initially at the Offering Price. After the Agents have made a reasonable
effort to sell all of the Units at such price, the Offering Price may be
decreased and may be further changed from time to time to an amount not greater
than the Offering Price, subject to the limitations on discount market price in
accordance with the policies of the TSX, and the compensation realized by the
Agents will be decreased proportionately by the amount that the aggregate price
paid by purchasers for the Units is less than the proceeds paid by the Agents to
the Company.
This Offering is being conducted
concurrently with an offering of up to 2,222,222 Units (the
Concurrent
Offering Units
) at the Offering Price for additional gross proceeds of up
to $1,000,000 (the
Concurrent Offering
). There is no assurance that all
or any portion of the Concurrent Offering will be completed. The Concurrent
Offering is limited to investors with whom the directors and officers of the
Company have a pre-existing relationship and who are resident in the United
States that qualify as accredited investors as defined in Rule 501(a) of
Regulation D of the
United States Securities Act of 1933
, as amended (the
U.S. Securities Act
).
The Companys
business
and an investment in the Units involve significant risks. You should carefully
review the risks outlined in this Prospectus Supplement and in the documents
incorporated by reference in this Prospectus Supplement and consider such risks
in connection with an investment in the Units. See Cautionary Note Regarding
Forward-Looking Statements beginning on page S-9 of this Prospectus Supplement
and Risk Factors beginning on page 27 of the accompanying short form base
shelf prospectus (the Base Prospectus) and on page S-13 of this Prospectus
Supplement.
S-3
As at the date of this
Prospectus Supplement, (i) the aggregate market value worldwide of the voting
and non-voting common equity held by non-affiliates of the Company was
US$53,317,094, and (ii) the Company had not sold any of its securities on
reliance of instruction I.B.5 of Form F-3 during the prior 12 calendar month
period that ends on, and includes, the date of this Prospectus Supplement.
Purchasing the Units may
subject you to tax consequences both in Canada and in the United States. This
Prospectus Supplement may not describe these tax consequences fully. You should
read the tax discussion in this Prospectus Supplement fully and consult with
your own tax advisers.
There is no minimum amount of
funds that must be raised under the Offering. This means that the Company could
complete the Offering after raising only a small proportion of the offering
amount set out above.
We are a foreign private
issuer under United States securities laws. Our financial statements
incorporated herein by reference have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB) and accordingly may not be
comparable to financial statements of United States companies.
The enforcement by investors
of civil liabilities under United States federal securities laws may be affected
adversely by the fact that the Company is amalgamated and exists under the laws
of British Columbia, Canada, that the majority of its officers and directors are
residents of Canada, that all of the experts named in the registration statement
are not residents of the United States, and that a substantial portion of the
assets of the Companys officers and directors are located outside the United
States.
NEITHER THE SEC NOR ANY STATE OR ANY CANADIAN SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENCE.
Subscriptions will be received
subject to rejection or allotment in whole or in part and the right is reserved
to close the subscription books at any time without notice. The closing of the
Offering is expected to occur on or about June 10, 2016 or such later date as
may be agreed upon by the Company and the Lead Agent (the
Closing
Date
).
Other than in respect of the
Units sold to purchasers in the United States and to, or for the account or
benefit of, U.S. persons, which will be represented by individual certificates,
and other than pursuant to certain exceptions, one or more book entry-only
certificates representing the balance of the Units will be issued in registered
form to CDS Clearing and Depository Services Inc. (
CDS
) or its nominee
and deposited with CDS on the Closing Date. A purchaser of Units (other than a
purchaser of Units in the United States, a U.S. person or a purchaser for the
account or benefit of a U.S. person) will receive only a customer confirmation
from the registered dealer through which the Units are purchased. Subject to
applicable laws and in connection with the Offering, the Agents may effect
transactions which stabilize or maintain the market price of the Common Shares
at levels other than those which otherwise might prevail on the open market.
Such transactions, if commenced, may be discontinued at any time. See
Plan
of Distribution
.
This Prospectus Supplement also
qualifies the issuance of the Warrant Shares to the United States purchasers of
the Warrants upon exercise of the Warrants. See
Important Notice about this
Prospectus Supplement
and
Plan of Distribution
.
You should rely only on the
information contained or incorporated by reference in this Prospectus
Supplement, the Base Prospectus, and the documents incorporated by reference
herein and therein. Northern Dynasty and the Agents have not authorized anyone
to provide purchasers with information different from that contained or
incorporated by reference in this Prospectus Supplement, the Base Prospectus and
the documents incorporated herein and therein. Northern Dynasty is offering to
sell, and seeking offers to buy, the Units only in jurisdictions where, and to
persons to whom, offers and sales are lawfully permitted. Northern Dynasty does
not undertake to update information contained or incorporated by
reference in this Prospectus Supplement, except as required by applicable
securities laws.
S-4
The Companys head office is at
15
th
Floor, 1040 West Georgia Street, Vancouver, British Columbia V6E
4H1. The registered office of the Company is located at Suite 1500 1055 West
Georgia Street, Vancouver, British Columbia V6E 4N7.
S-5
TABLE OF CONTENTS
S-6
S-7
IMPORTANT NOTICE ABOUT THIS PROSPECTUS SUPPLEMENT
In this Prospectus Supplement
unless the context requires otherwise, Northern Dynasty, the Company, we,
us and our refer to Northern Dynasty Minerals Ltd. and its subsidiaries
through which it operates. Capitalized terms used but not defined herein have
the meanings given to those terms in the accompanying Base Prospectus.
This prospectus is in two parts.
The first part is this Prospectus Supplement, which describes the specific terms
of the securities being offered and also adds to and updates information
contained in the accompanying Base Prospectus and the documents incorporated by
reference herein and therein. The second part, the Base Prospectus, gives more
general information, some of which may not apply to the Offering. The Base
Prospectus is a base shelf prospectus that:
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we have filed with the securities commissions in the
Canadian provinces of British Columbia, Alberta and Ontario (the
Canadian Qualifying Jurisdictions
) in order to qualify the
offering of the securities described in the Base Prospectus (the
Canadian Base Prospectus
) in accordance with Canadian National
Instrument 44-102 -
Shelf Distributions
(
NI 44-102
). The
British Columbia Securities Commission issued a receipt dated March 7,
2016 in respect of the final Canadian Base Prospectus as the principal
regulatory authority under Multilateral Instrument 11-102
Passport
System
, and each of the other commissions in the Canadian Qualifying
Jurisdictions is deemed to have issued a receipt under National Policy
11-202
Process for Prospectus Review in Multiple Jurisdictions
. We
will file this Prospectus Supplement with the Canadian Qualifying
Jurisdictions in accordance with NI 44-102 (the
Canadian
Prospectus Supplement
). We refer to the Canadian Prospectus
Supplement together with the Canadian Base Prospectus as the
Canadian
Prospectus
; and
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forms part of a registration statement on Form F-3 (the
Registration Statement
) that we filed with the Securities and
Exchange Commission (
SEC
) under the U.S. Securities Act utilizing
a continuous offering shelf registration process under the U.S.
Securities Act. The shelf registration statement was declared effective by
the SEC on March 30, 2016. We filed the Base Prospectus in accordance with
Rule 424(b)(2) under the U.S. Securities Act on March 31, 2016 (the
U.S. Base Prospectus
). This Prospectus Supplement will be filed
by us with the SEC pursuant to Rule 424(b) of the U.S. Securities Act (the
U.S.
Prospectus Supplement
), and together with the U.S.
Base Prospectus, is referred to herein as the
U.S.
Prospectus
.
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This Prospectus Supplement is
deemed to be incorporated by reference into the Base Prospectus solely for the
purposes of the Offering. As used herein, (i) the term
Prospectus
Supplement
refers to each of the Canadian Prospectus Supplement and the
U.S. Prospectus Supplement, and (ii) the term
Prospectus
refers to each
of the Canadian Prospectus and the U.S. Prospectus and includes the Prospectus
Supplement which is incorporated into and forms a part of the Prospectus.
Sales of the Units to investors
in the Canadian Qualifying Jurisdictions and who are otherwise outside of the
United States will be made through the Canadian Prospectus, but will not be made
through or in reliance on the U.S. Prospectus.
Sales of the Units in the United
States will be made pursuant to both (i) the Canadian Prospectus, and (ii) the
U.S. Prospectus. In accordance with Instruction I.B.5. of Form F-3 (the form of
the Registration Statement), in no event will the aggregate market value of
securities sold by or on behalf of the Company pursuant to the U.S. Prospectus
in connection with the Offering (including the aggregate of the value of the
Units sold in the Offering and the value of the Warrant Shares issuable upon
exercise of the Warrants) during the period of 12 calendar months immediately
prior to, and including, the sale exceed one-third of the aggregate market value
worldwide of the voting and non-voting common equity held by non-affiliates of
the Company. As at the date of this Prospectus Supplement, (i) the aggregate
market value worldwide of the voting and non-voting common equity held by
non-affiliates of the Company was US$53,317,094, and (ii) the Company had not
sold any of its securities in reliance on instruction I.B.5 of Form F-3 during the prior 12 calendar
month period that ends on, and includes, the date of this Prospectus. This
Prospectus Supplement also qualifies the issuance of the Warrant Shares to the
United States purchasers of the Warrants upon exercise of the Warrants.
S-8
We file reports and other
information with the securities commissions in the Canadian Qualifying
Jurisdictions. These reports and information are available to the public free of
charge on SEDAR at www.sedar.com. In addition, we file reports and information
with the SEC under the Exchange Act in accordance with the Exchange Acts
reporting requirements for foreign private issuers. See below under
Where
You Can Find Additional Information
for a description of how U.S. investors
may obtain copies of these documents. As a foreign private issuer, we are exempt
from the rules under the Exchange Act prescribing the furnishing and content of
proxy statements, and our officers, directors and principal shareholders are
exempt from the reporting and short-swing profit recovery provisions contained
in Section 16 of the Exchange Act. In addition, we are not required to publish
financial statements as promptly as U.S. companies.
You should rely only on the
information contained in or incorporated by reference in this Prospectus
Supplement and the Base Prospectus. To the extent there is a conflict between
the information contained in this Prospectus Supplement and the Base Prospectus,
you should rely on the information in this Prospectus Supplement. Neither the
Company nor the Agents has authorized any other person to provide investors with
additional or different information. If anyone provides you with any additional,
different or inconsistent information, you should not rely on it. Neither the
Company nor the Agents is making an offer of the Units in any jurisdiction where
the offer is not permitted by law. You should not assume that the information
contained in or incorporated by reference in this Prospectus Supplement or the
Base Prospectus is accurate as of any date other than the date of the document
in which such information appears. The Companys business, financial condition,
results of operations and prospects may have changed since those dates.
Information in this Prospectus Supplement updates and modifies the information
in the accompanying Base Prospectus and information incorporated by reference
herein and therein.
This Prospectus Supplement does
not contain all of the information contained in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. You should refer to the Registration Statement and the exhibits to
the Registration Statement for further information with respect to us and our
securities.
In this Prospectus Supplement,
unless stated otherwise or the context requires, all dollar amounts are
expressed in Canadian dollars. All references to US$ are to the lawful
currency of the United States and all references to $ or C$ are to the
lawful currency of Canada. In this Prospectus Supplement, where applicable, and
unless otherwise indicated, amounts are converted from United States dollars to
Canadian dollars and vice versa by applying the noon rate of exchange of the
Bank of Canada on May 25, 2016. See
Exchange Rate Information
.
Some of the information contained
or incorporated by reference in this Prospectus Supplement and the accompanying
Base Prospectus concerning economic and industry trends is based upon or derived
from information provided by industry sources. The Company believes that such
information is accurate and that the sources from which it has been obtained are
reliable. However, the Company cannot guarantee the accuracy of such information
and the Company has not independently verified the assumptions upon which
projections of future trends are based.
Sales of any Unit Shares that
comprise part of the Units and the issuance of any Warrant Shares upon exercise
of the Warrants also includes the rights to purchase a number of Common Shares
on the terms and conditions set forth in the Companys Shareholder Rights Plan
Agreement (the
Rights
) that are attached to and trade with each of the
Common Shares. Prior to the occurrence of certain events, the Rights will not be
exercisable or evidenced separately from the Common Shares, and will have no
value, except as reflected in the market price of the Common Shares to which
they are attached. The Rights are described in detail in the Base Prospectus
under
Description of Common Shares Shareholder Rights
.
S-9
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus Supplement, the
Base Prospectus and the documents incorporated herein by reference contain
certain forward-looking information and forward-looking statements within the
meaning of applicable Canadian securities laws and forward-looking statements
within the meaning of the United States Private Securities Litigation Reform Act
of 1995.
Forward-looking statements
describe our future plans, strategies, expectations and objectives, and are
generally, but not always, identifiable by use of the words may, will,
should, continue, expect, anticipate, estimate, believe, intend,
plan or project or the negative of these words or other variations on these
words or comparable terminology. Forward-looking statements contained or
incorporated by reference into this Prospectus Supplement include, without
limitation, statements regarding:
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the outcome of our multi-dimensional strategy to address
the Environmental Protection Agencys (the
EPA
) pre-emptive
regulatory process under Section 404(c) of the Clean Water Act (the
CWA
) and prepare the Pebble Project to initiate federal and state
permitting under the National Environmental Policy Act (the
Multi-dimensional Strategy
);
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the outcome of legal proceedings in which we are engaged;
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our expectations regarding the potential for permitting
of a mine at the Pebble Project;
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our expected financial performance in future periods;
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our plan of operations, including our plans to carry out
and finance the Multi-dimensional Strategy activities, exploration and
development activities and legal proceedings;
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our ability to raise capital for the Multi-dimensional
Strategy activities, exploration and development activities;
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our expectations regarding the exploration and
development potential of the Pebble Project; and
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factors relating to our investment decisions.
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Forward-looking information is
based on the reasonable assumptions, estimates, analysis and opinions of
management made in light of its experience and its perception of trends, current
conditions and expected developments, as well as other factors that management
believes to be relevant and reasonable in the circumstances at the date that
such statements are made, but which may prove to be incorrect. We believe that
the assumptions and expectations reflected in such forward-looking information
are reasonable.
Key assumptions upon which the
Companys forward-looking information are based include:
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that we will be able to secure sufficient capital
necessary for the Multi-dimensional Strategy activities, litigation
against the EPA, continued environmental assessment and permitting
activities and engineering work which must be completed prior to any
potential development of the Pebble Project which would then require
engineering and financing in order to advance to ultimate construction;
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that the Company will ultimately be able to demonstrate
that a mine at the Pebble Project can be developed and operated in an
environmentally sound and socially responsible manner, meeting all
relevant federal, state and local regulatory requirements so that we will
be ultimately able to obtain permits authorizing construction of a mine at
the Pebble Project;
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S-10
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that the market prices of copper, gold,
molybdenum and silver will not further significantly decline or stay
depressed for a lengthy period of time;
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that key personnel will continue their
employment with us; and
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that we will continue to be able to secure
minimal adequate financing on acceptable terms.
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Readers are cautioned that the
foregoing list is not exhaustive of all factors and assumptions which may have
been used. Forward looking statements are also subject to risks and
uncertainties facing our business, any of which could have a material impact on
our outlook.
Some of the risks we face and the
uncertainties that could cause actual results to differ materially from those
expressed in the forward-looking statements include:
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a negative outcome of the Multi-dimensional
Strategy, including legal and political challenges with which we are
engaged regarding the Pebble Project, which would have a material adverse
effect on the Company;
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an inability to obtain permitting for a mine at
the Pebble Project;
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an inability to continue to fund exploration
and development activities and other operating costs;
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the highly cyclical nature of the mineral
resource exploration business;
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the pre-development stage economic and
technical uncertainties of the Pebble Project and the lack of known
reserves on the Pebble Project;
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an inability to establish that the Pebble
Project contains commercially viable deposits of ore;
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an inability to recover the financial statement
carrying values of the Pebble Project if the Company ceases to continue on
a going concern basis;
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the potential for loss of the services of key
executive officers;
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a history of, and expectation of further,
financial losses from operations impacting our ability to continue on a
going concern basis;
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the volatility of copper, gold, molybdenum and
silver prices and mining share prices;
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the inherent risk involved in the exploration,
development and production of minerals, and the presence of unknown
geological and other physical and environmental hazards at the Pebble
Project;
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the potential for changes in, or the
introduction of new, government regulations relating to mining, including
laws and regulations relating to the protection of the environment and
project legal titles;
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potential claims by third parties to titles or
rights involving the Pebble Project;
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the possible inability to insure our operations
against all risks;
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the highly competitive nature of the mining
business;
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the potential equity dilution to current
shareholders from future equity financings; and
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that we have never paid dividends and will not
do so in the foreseeable future.
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S-11
This list is not exhaustive of
the factors that may affect any of the Companys forward-looking statements or
information. Forward-looking statements or information are statements about the
future and are inherently uncertain, and actual achievements of the Company or
other future events or conditions may differ materially from those reflected in
the forward-looking statements or information due to a variety of risks,
uncertainties and other factors, including, without limitation, the risks and
uncertainties described above and otherwise contained herein and in the Base
Prospectus.
Our forward-looking statements
and risk factors are based on the reasonable beliefs, expectations and opinions
of management on the date of this Prospectus Supplement. Although we have
attempted to identify important factors that could cause actual results to
differ materially from those contained in forward-looking information, there may
be other factors that cause results not to be as anticipated, estimated or
intended. There is no assurance that such information will prove to be accurate,
as actual results and future events could differ materially from those
anticipated in such information. Accordingly, readers should not place undue
reliance on forward-looking information. We do not undertake to update any
forward-looking information, except as, and to the extent required by,
applicable securities laws.
We qualify all the forward
looking statements contained in this Prospectus Supplement, the Base Prospectus
and the documents incorporated by reference herein and therein by the foregoing
cautionary statements.
DOCUMENTS INCORPORATED BY REFERENCE
Information has been
incorporated by reference in this Prospectus Supplement from documents filed
with securities commissions or similar authorities in the provinces of British
Columbia, Alberta and Ontario.
Copies of the documents incorporated herein
by reference may also be obtained on request without charge from Northern
Dynasty Minerals Ltd., 15
th
Floor, 1040 West Georgia Street,
Vancouver, British Columbia V6E 4H1
(telephone 604-684-6365) (attention:
Corporate Secretary), or by accessing our disclosure documents available through
the Internet on the Canadian System for Electronic Document Analysis and
Retrieval (SEDAR) at
www.sedar.com
and on EDGAR at
www.sec.gov
.
The following documents that we
have filed with the securities regulatory authorities in the jurisdictions in
Canada in which the Company is a reporting issuer are specifically incorporated
by reference into, and form an integral part of, this Prospectus Supplement:
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our annual information form for the year ended December
31, 2015, dated March 28, 2016, as filed on SEDAR on March 30, 2016 and
incorporated into our report of foreign issuer on Form 6-K furnished to
the SEC on April 12, 2016;
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our audited consolidated financial statements together
with the notes thereto for the financial years ended December 31, 2015,
2014 and 2013, together with the report of the independent registered
public accounting firm thereon, as filed on SEDAR on March 29, 2016 and
incorporated into our report of foreign issuer on Form 6-K furnished to
the SEC on April 5, 2016;
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our annual managements discussion and analysis of
financial condition and operations for the financial year ended December
31, 2015 , as filed on SEDAR on March 29, 2016 and incorporated into our
report of foreign issuer on Form 6-K furnished to the SEC on April 5,
2016;
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our unaudited interim consolidated financial statements
for the three months ended March 31, 2016 and 2015 and interim
managements discussion and analysis of financial condition and operations
for the three months ended March 31, 2016, as filed on SEDAR on May 16,
2016 and incorporated into our report of foreign issuer on Form 6-K
furnished to the SEC on May 19, 2016;
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our management information circular dated May 18, 2016
distributed in connection with the annual meeting of shareholders of the
Company to be held on June 16, 2016, as filed on SEDAR on May 18,
2016 and incorporated into our report of foreign issuer
on Form 6-K furnished to the SEC on May 25, 2016;
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S-12
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our material change report dated January 29, 2016
regarding the closing of the acquisition of Mission Gold Ltd., as filed on
SEDAR on January 29, 2016 and incorporated into our report of foreign
issuer on Form 6-K furnished to the SEC on February 12, 2016;
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our material change report dated February 25, 2016
regarding the restructuring of the board of directors, as filed on SEDAR
on February 25, 2016 and incorporated into our report of foreign issuer on
Form 6-K furnished to the SEC on February 26, 2016; and
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our annual report on Form 20-F for the fiscal year ended
December 31, 2015 filed with the SEC (the
2015 Form 20-F
) on May
2, 2016 and filed on SEDAR on May 20, 2016.
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All documents of the type
referred to in section 11.1 of Form 44-101F1 of National Instrument 44-101
-
Short Form Prospectus Distributions
filed by the Company with the
securities commissions or similar regulatory authorities in the applicable
provinces of Canada after the date of this Prospectus Supplement, and before the
termination of the Offering, are deemed to be incorporated by reference into
this Prospectus Supplement.
In addition, this Prospectus
Supplement shall also be deemed to incorporate by reference the following
information that is filed or furnished to the SEC by us under the Exchange Act
after (i) the earlier of the date of the Registration Statement and the date of
this Prospectus Supplement, until (ii) the termination of any offering made
pursuant to this Prospectus Supplement:
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all subsequent annual reports on Form 20-F, Form 40-F or
Form 10-K that we may file with the SEC under the Exchange Act;
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any Form 10-Q or Form 8-K that we may file with the SEC
under the Exchange Act; and
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any Form 6-K that we furnish to the SEC under the
Exchange Act where we have identified in such form that it is being
incorporated by reference into the Registration Statement of which this
Prospectus Supplement forms a part.
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Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus Supplement will be deemed to be modified or superseded for the
purposes of this Prospectus Supplement to the extent that a statement contained
in this Prospectus Supplement or in any other subsequently filed document that
is also incorporated or is deemed to be incorporated by reference in this
Prospectus Supplement modifies or supersedes such statement. The modifying or
superseding statement need not state that it has modified or superseded a prior
statement or include any other information set forth in the document that it
modifies or supersedes. The making of a modifying or superseding statement will
not be deemed an admission for any purpose that the modified or superseded
statement, when made, constituted a misrepresentation, an untrue statement of a
material fact or an omission to state a material fact that is required to be
stated or that is necessary to make a statement not misleading in light of the
circumstances in which it was made. Any statement so modified or superseded will
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus Supplement.
ELIGIBILITY FOR INVESTMENT
In the opinion of McMillan LLP,
counsel to the Company, based on the provisions of the
Income Tax Act
(Canada) and the regulations thereunder (the
Tax Act
) currently in
force as of the date hereof, the Unit Shares, Warrants and the Warrant Shares
would, if issued on the date hereof, be qualified investments for trusts
governed by registered retirement savings plans (
RRSP
), registered
education savings plans, registered retirement income funds (
RRIF
),
registered disability savings plans, deferred profit sharing plans and tax-free
savings accounts (
TFSA
), all within the meaning of the Tax Act
(collectively,
Plans
) provided that (i) the Unit Shares and Warrant Shares are listed on a designated stock exchange as
defined in the Tax Act (which currently includes the TSX), and (ii) in the case
of the Warrants, neither the Company, nor any person with whom the Company does
not deal at arms length for the purposes of the Tax Act, is an annuitant, a
beneficiary, an employer or a subscriber under, or a holder of, the particular
Plan.
S-13
Notwithstanding the foregoing, if
the Unit Shares, Warrants and Warrant Shares held by a TFSA, RRSP or RRIF are
prohibited investments for purposes of the Tax Act, the holder of the TFSA or
the annuitant of the RRSP or RRIF, as the case may be, will be subject to a
penalty tax as set out in the Tax Act. The Unit Shares, Warrants and Warrant
Shares will generally be a prohibited investment if the holder of a TFSA or
the annuitant of a RRSP or RRIF, as the case may be: (i) does not deal at arms
length with the Company for purposes of the Tax Act; or (ii) has a significant
interest (within the meaning of the Tax Act) in the Company. In addition, the
Unit Shares, and Warrant Shares will not be a prohibited investment if such
securities are excluded property, as defined in the Tax Act, for a TFSA, RRSP
or RRIF. Holders who intend to invest through one or more of the Plans should
consult their own tax advisors with respect to whether the Unit Shares, Warrants
and Warrant Shares would be a prohibited investment having regard to their
particular circumstances.
NORTHERN DYNASTY
This summary does not contain all
the information about the Company that may be important to you. You should read
the more detailed information and financial statements and related notes that
are incorporated by reference into and are considered to be a part of this
Prospectus Supplement and accompanying Base Prospectus.
Northern Dynasty is a mineral
exploration company existing under the
Business Corporations Act
(British
Columbia) focused on developing the Pebble copper-gold-molybdenum-silver mineral
project located in the state of Alaska, U.S. (the
Pebble Project
). The
Pebble Project is located in southwest Alaska, 19 miles (30 kilometers) from the
village of Iliamna, and approximately 200 miles (320 kilometers) southwest of
the city of Anchorage.
Our Alaska mineral resource
exploration business is operated through an Alaskan registered limited
partnership, the Pebble Limited Partnership (the
Pebble Partnership
),
in which we own a 100% interest through an Alaskan general partnership, the
Northern Dynasty Partnership. Pebble Mines Corp., a 100% indirectly owned
subsidiary of the Company, is the general partner of the Pebble Partnership and
responsible for its day-to-day operations.
Appointment of New Directors
On May 12, 2016 the Company
appointed David C. Laing and Christian Milau to the board of directors of the
Company. Biographical information for Mr. Laing and Mr. Milau and their
respective reporting issuer experience is included in the Companys information
circular for its June 16, 2016 annual meeting that is incorporated by reference
herein.
RISK FACTORS
Investing in the Units is
speculative and involves a high degree of risk due to the nature of our business
and the present stage of its development. The following risk factors, as well as
risks currently unknown to us, could materially adversely affect our future
business, operations and financial condition and could cause them to differ
materially from the estimates described in forward-looking information relating
to the Company, or our business, property or financial results, each of which
could cause purchasers of Units to lose part or all of their investment. In
addition to the other information contained in this Prospectus Supplement and
the documents incorporated by reference herein, prospective investors should
carefully consider the factors described below and set out under Risk Factors
in the accompanying Base Prospectus in evaluating the Company and its business
before making an investment in the Units.
S-14
In the event that we are unsuccessful in our litigation
against the EPA, the EPA withdraws its regulatory action or we are otherwise
unable to reach a settlement with the EPA, we may never be able to proceed with
permitting with respect to the Pebble Project.
The principal risk currently
facing the Company is that we may be unable to resolve our ongoing issues with
the EPA with respect to its regulatory action under Section 404(c) of the CWA.
While we believe our position has merit, the proceedings have been lengthy and
have required us to expend substantial funds and time. As stated in the Use of
Proceeds section of this Prospectus Supplement, approximately $4.4 million of
the proceeds of the Offering have been allocated to funding our strategy against
the EPA. There can be no assurance that the funds allocated for combating the
EPA action will be sufficient to bring our strategy to completion and we may be
unable to raise additional funds, causing us to abandon our strategy. Further,
even if we are able to raise sufficient funds to bring our strategy to
completion, there is no assurance that we will ultimately be successful. In the
event that we are unsuccessful, and the EPAs regulatory action is upheld, we
may be unable to proceed with permitting of the Pebble Project and the Company
will be materially adversely affected. Finally, as noted in the Use of
Proceeds section, the funds allocated for our strategy do not include the
payment of contingent legal liabilities that we will be required to pay in the
event we are successful. In the event that we are successful, we will need to
raise additional funds to make such payments or renegotiate the amount and/or
due date of such payments.
Inability to Achieve Mine Permitting of the Pebble
Project
In addition to the foregoing,
another significant risk facing the Company is that it will ultimately be
unable to secure the necessary permits under United States Federal and Alaskan
State laws to build a mine at Pebble. There are prominent and well organized
opponents of the Pebble Project and the Company may be unable, despite
developing solid scientific and technical evidence of risk mitigation, to
overcome such opposition and convince mining regulatory authorities that a mine
should be permitted at Pebble. If we are unable to secure the necessary permits
to build a mine at the Pebble Project, we may be unable to achieve revenues from
operations and/or recover our investment in the Pebble Project.
Negative Operating Cash Flow
The Company currently has a
negative operating cash flow and will continue to have that for the foreseeable
future. Accordingly, the Company will require substantial additional capital in
order to fund its future exploration and development activities. The Company
does not have any arrangements in place for this funding and there is no
assurance that such funding will be achieved when required. Any failure to
obtain additional financing or failure to achieve profitability and positive
operating cash flows will have a material adverse effect on its financial
condition and results of operations.
The Pebble Project is Subject to Political and
Environmental Regulatory Opposition
As is typical for a large scale
mining project, the Pebble Project faces concerted opposition from many
individuals and organizations who are motivated to preclude any possible mining
in the Bristol Bay Watershed ("
BBW
"). The BBW is an important wildlife
and salmon habitat area. The EPA has gone so far as to suggest that it may
peremptorily prevent the Pebble Project from proceeding even before a mine
permitting application is filed. Accordingly one of the greatest risks to the
Pebble Project is seen to be political/permitting risk which may ultimately
preclude construction of a mine at Pebble.
Northern Dynasty Will Require Additional Funding to Meet
the Development Objectives of the Pebble Project.
Northern Dynasty will need to
raise additional financing (share issuances, debt or asset level partnering) to
achieve permitting and development of the Pebble Project. In addition, a
positive production decision at the Pebble Project would require significant
capital for project engineering and construction. Accordingly, the continuing
development of the Pebble Project will depend upon Northern Dynastys ability to
obtain financing through debt financing, equity financing, the joint venturing
of the project, or other means. There can be no assurance that Northern Dynasty
will be successful in obtaining the required financing, or that it will be able
to raise the funds on terms that do not result in high levels of dilution to
shareholders.
S-15
The Pebble Partnerships Mineral Property Interests Do
Not Contain Any Ore Reserves or Any Known Body of Economic
Mineralization.
Although there are known bodies
of mineralization on the Pebble Project, and the Pebble Partnership has
completed core drilling programs within, and adjacent to, the deposits to
determine measured and indicated resources, there are currently no known
reserves or body of commercially viable ore and the Pebble Project must be
considered an exploration prospect only. Extensive additional work is required
before Northern Dynasty or the Pebble Partnership can ascertain if any
mineralization may be economic and hence constitute "ore".
Mineral Resources Disclosed by Northern Dynasty or the
Pebble Partnership for the Pebble Project are Estimates Only.
Northern Dynasty has included
mineral resource estimates that have been made in accordance with NI 43-101.
These resource estimates are classified as measured resources, indicated
resources and inferred resources. Northern Dynasty advises investors that
while these terms are mandated by Canadian securities administrators, the SEC
does not recognize these terms. Investors are cautioned not to assume that any
part or all of mineral deposits classified as "measured resources" or "indicated
resources" will ever be converted into ore reserves. Further, "inferred
resources" have a great amount of uncertainty as to their existence, and
economic and legal feasibility. It cannot be assumed that all or any part of an
inferred mineral resource will ever be upgraded to a higher category. Under
Canadian rules, estimates of inferred mineral resources may not form the basis
of feasibility or prefeasibility studies, except in rare cases. Investors are
cautioned not to assume that part or all of an inferred resource exists, or is
economically or legally mineable.
All amounts of mineral resources
are estimates only, and Northern Dynasty cannot be certain that any specified
level of recovery of metals from the mineralized material will in fact be
realized or that the Pebble Project or any other identified mineral deposit will
ever qualify as a commercially mineable (or viable) ore body that can be
economically exploited. Mineralized material which is not mineral reserves does
not have demonstrated economic viability. In addition, the quantity of mineral
reserves and mineral resources may vary depending on, among other things, metal
prices and actual results of mining. There can be no assurance that any future
economic or technical assessments undertaken by the Company with respect to the
Pebble Project will demonstrate positive economics or feasibility.
We will have broad discretion in the use of the net
proceeds of the Offering and may not use them to
effectively
manage our business.
We currently intend to allocate
the net proceeds received from the Offering as described herein under the
heading, Use of Proceeds. However, we will have broad discretion over the use
of the actual application of the net proceeds of the Offering. Because of the
number and variability of factors that will determine our use of such proceeds,
our ultimate use might vary substantially from our planned use. You may not
agree with how we allocate or spend the proceeds from the Offering.
The Offering Price may not be indicative of the price at
which the Common Shares will trade following the completion of the Offering.
The Offering Price was
established with reference to the market price of our Common Shares and other
factors, and may not be indicative of the price at which the Common Shares will
trade following the completion of the Offering.
The market price for Common Shares may be volatile and
subject to wide fluctuations in response to numerous factors, many of which are
beyond our control.
Financial markets have recently
experienced significant price and volume fluctuations that have particularly
affected the market prices of equity securities of public entities. Accordingly,
the market price of the Common Shares may decline even if our asset values or
prospects have not changed. Additionally, these factors, as well as other
related factors, may cause decreases in asset values that are deemed to be other
than temporary, which may result in impairment losses. As well, certain
institutional investors may base their investment decisions on consideration of our environmental, governance and social
practices and performance against such institutions respective investment
guidelines and criteria, and failure to meet such criteria may result in a
limited or no investment in the Common Shares by those institutions, which could
materially adversely affect the trading price of the Common Shares. There can be
no assurance that continuing fluctuations in price and volume will not occur. If
such increased levels of volatility and market turmoil continue for a protracted
period of time, the trading price of the Common Shares may be materially
adversely affected.
S-16
You may lose your entire investment.
An investment in the Units is
speculative and may result in the loss of your entire investment. Only potential
investors who are experienced in high-risk investments and who can afford to
lose their entire investment should consider purchasing the Units.
Likely PFIC status has possible adverse U.S. federal
income tax consequences for U.S. investors.
The Company was likely a passive
foreign investment company (a
PFIC
) within the meaning of the U.S.
Internal Revenue Code in one or more prior tax years, expects to be a PFIC for
the current tax year, and may also be a PFIC in subsequent years. A non-U.S.
corporation is a PFIC for any tax year in which (i) 75% or more of its gross
income is passive income (as defined for U.S. federal income tax purposes) or
(ii) on average for such tax year, 50% or more (by value) of its assets either
produces or is held for the production of passive income, and thereafter unless
certain elections are made.
If the Company is a PFIC for any
year during a U.S. taxpayers holding period for Unit Shares, Warrants or
Warrant Shares, such taxpayer may be required to treat any gain recognized upon
a sale or disposition of the Unit Shares, Warrants or Warrant Shares as ordinary
income (rather than capital gain), and any resulting U.S. federal income tax may
be increased by an interest charge. Rules similar to those applicable to
dispositions will generally apply to certain excess distributions in respect
of the Unit Shares and Warrant Shares. A U.S. taxpayer may generally avoid these
unfavorable tax consequences by making a timely and effective qualified
electing fund (
QEF
) election or mark-to-market election with respect
to the Unit Shares and Warrant Shares, but such elections are limited with
respect to Warrants. A U.S. taxpayer who makes a timely and effective QEF
election must generally report on a current basis its share of the Companys net
capital gain and ordinary earnings for any year in which the Company is a PFIC,
whether or not the Company makes any distributions to shareholders in such year.
A U.S. taxpayer who makes a timely and effective mark-to-market election must,
in general, include as ordinary income, in each year in which the Company is a
PFIC, the excess of the fair market value of the Unit Shares or Warrant Shares
over the taxpayers adjusted cost basis in such shares.
EXCHANGE RATE INFORMATION
In this Prospectus Supplement,
unless otherwise specified or the context otherwise requires, all dollar amounts
are expressed in Canadian dollars.
The following table sets forth: (i) the
rates of exchange for Canadian dollars, expressed in US dollars, in effect at
the end of the periods indicated; (ii) the average exchange rates in effect
during such periods; (iii) the high rate of exchange in effect during such
periods; and (iv) the low rate of exchange in effect during such periods, such
rates, in each case, based on the noon rates of exchange for conversion of one
Canadian dollar to US dollars as reported by the Bank of Canada.
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Three Months
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Years Ended
December 31
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Ended
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2015
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2014
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2013
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March 31, 2016
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Low
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0.7148
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0.8589
|
0.9348
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0.6854
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High
|
0.8527
|
0.9422
|
1.0164
|
0.7715
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Average
|
0.7820
|
0.9054
|
0.9710
|
0.7282
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End
|
0.7225
|
0.8620
|
0.9402
|
0.7710
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S-17
On May 25, 2016, the noon
exchange rate quoted by the Bank of Canada for conversion of Canadian dollars to
U.S. dollars was C$1.00 = US$0.7639.
CAPITALIZATION AND INDEBTEDNESS
The following table sets forth
our capitalization and indebtedness as of March 31, 2016. The information
presented should be read in conjunction with our unaudited consolidated interim
financial statements as at and for the three months ended March 31, 2016 and
2015 which are incorporated by reference in this Prospectus Supplement.
Description
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As at March 31, 2016
($ thousands)
Before Giving Effect to
the
Offering
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As at March 31, 2016
($ thousands)
After Giving Effect to the
Offering
(1)
(2)
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Liabilities
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Total Current Liabilities
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4,540
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4,540
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Total Liabilities
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4,540
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4,540
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Equity
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Share
Capital
(Common Shares
Authorized: unlimited)
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435,172
(222,150,876)
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444,268
(255,484,209)
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Warrants
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5,176
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Reserves
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90,384
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90,384
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Deficit
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(387,387)
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(387,387)
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Total Equity
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138,169
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152,441
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(1)
|
Assuming the Over-Allotment Option is not exercised, but
includes the Concurrent Offering.
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(2)
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If the Over-Allotment Option is exercised, the effect on
the share and loan capitalization will be as follows: an increase of
$1,312 to Share Capital (4,666,667 Common Shares and 4,666,667 Warrants)
and $746 to Warrants (includes the Concurrent
Offering).
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There have been no material
changes in our share and debt capital, on a consolidated basis, since March 31,
2016, being the date of the Companys most recently filed unaudited consolidated
interim financial statements incorporated by reference in this Prospectus
Supplement.
TRADING PRICE AND VOLUME
The Companys Common Shares are
listed on the TSX under the trading symbol NDM and on the NYSE MKT under the
trading symbol NAK.
The following table sets forth
the reported high and low sale prices in Canadian dollars for the Common Shares
on the TSX for the monthly periods indicated.
S-18
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TSX Price Range ($)
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Month
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|
High
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Low
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|
Total Volume
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May 2015
|
|
0.54
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|
0.40
|
|
440,149
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June 2015
|
|
0.50
|
|
0.38
|
|
760,592
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July 2015
|
|
0.46
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|
0.37
|
|
377,747
|
August 2015
|
|
0.60
|
|
0.38
|
|
872,978
|
September 2015
|
|
0.67
|
|
0.40
|
|
923,473
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October 2015
|
|
0.58
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|
0.40
|
|
845,766
|
November 2015
|
|
0.58
|
|
0.38
|
|
2,689,947
|
December 2015
|
|
0.425
|
|
0.38
|
|
1,391,898
|
January 2016
|
|
0.44
|
|
0.28
|
|
2,140,916
|
February 2016
|
|
0.51
|
|
0.36
|
|
4,675,143
|
March 2016
|
|
0.52
|
|
0.405
|
|
6,202,804
|
April 2016
|
|
0.57
|
|
0.38
|
|
7,757,825
|
May 2 - 25, 2016
|
|
0.55
|
|
0.425
|
|
5,705,820
|
The following table sets forth
the reported high and low sale prices in United States dollars for the Common
Shares on the NYSE MKT for the monthly periods indicated.
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NYSE MKT Price Range (US$)
|
|
|
Month
|
|
High (US$)
|
|
Low (US$)
|
|
Total Volume
|
May 2015
|
|
0.45
|
|
0.32
|
|
2,178,315
|
June 2015
|
|
0.44
|
|
0.30
|
|
3,407,967
|
July 2015
|
|
0.37
|
|
0.28
|
|
1,506,893
|
August 2015
|
|
0.52
|
|
0.29
|
|
2,305,097
|
September 2015
|
|
0.50
|
|
0.30
|
|
2,199,312
|
October 2015
|
|
0.44
|
|
0.30
|
|
2,167,616
|
November 2015
|
|
0.44
|
|
0.28
|
|
2,718,633
|
December 2015
|
|
0.32
|
|
0.28
|
|
1,986,884
|
January 2016
|
|
0.32
|
|
0.20
|
|
2,761,974
|
February 2016
|
|
0.38
|
|
0.26
|
|
2,586,923
|
March 2016
|
|
0.39
|
|
0.31
|
|
4,384,548
|
April 2016
|
|
0.48
|
|
0.29
|
|
7,103,653
|
May 2 - 25, 2016
|
|
0.45
|
|
0.32
|
|
3,367,139
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On May 25, 2016, the closing
price of the Common Shares as reported on the NYSE MKT was US$0.35 per share
and on the TSX was $0.45 per share.
S-19
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering, after deducting the Agents Fee (assuming an Agents Fee of 2.0% on all Units sold) and estimated expenses of the Offering, will be approximately $13,297,000. If the Over-Allotment Option is exercised in full, the net proceeds to be received by the Company from the Offering, after deducting the Agents Fee (assuming an Agents Fee of 2.0% on all Over-Allotment Units sold) and estimated expenses of the Offering, will be approximately $15,355,000.
The Company intends to use the
net proceeds from the Offering (assuming no exercise of the Over-Allotment
Option) as follows, which includes certain expenditures incurred in the past
months, to fund the Companys operational expenditures to February 2017:
Use of Proceeds
|
Amount
($ millions)
|
To continue to fund the Multi-dimensional Strategy to
address the EPA pre-emptive regulatory action under Section 404(c) of the
CWA and prepare the Pebble Project to initiate federal and state
permitting under the
National Environmental Policy Act
(
NEPA
). This includes litigation as set out in the Prospectus
related to the EPAs statutory authority to act pre-emptively under the
CWA, potential violations of the
Federal Advisory Committee Act
and
Freedom of Information Act
, as well as facilitation of various
third-party investigations of EPA actions with respect to the Pebble
Project.
(1)
|
$4.4
|
Support outreach, education and lobbying with political
and regulatory offices in the Alaskan and U.S. Federal government, Alaska
Native partners and broader area community stakeholder groups.
|
$2.6
|
Environmental monitoring, Alaskan corporate and tenure
maintenance.
|
$2.8
|
Costs to advance a potential partner(s) transaction.
|
$1.0
|
General and administration costs to maintain the Company
in good standing.
|
$2.5
|
Total
|
$13.3
|
(1)
|
The Multi-dimensional Strategy costs do not include the
payment of a success-contingent deferred legal obligation in the event
that the Company achieves a court win or an out-of-court settlement,
which, in either case, prevents any pre-emptive regulatory action by the
EPA under Section 404(c) of the CWA. If this happens the Company will have
to raise additional funds to pay the fees or renegotiate the amount and/or
due date of such payments. However, the Company is unable to estimate or
determine the length of time that it will take to advance to specific
milestone events or final conclusion. As of March 31, 2016, if there was a
favourable outcome or settlement, the Company estimates there would
potentially be additional legal fees of $13.2 million (US$10.2 million at
closing Bank of Canada rate on March 31, 2016 of $1.2987 per US$) payable
by the Company.
|
Although the Company intends to
use the proceeds from the Offering as set forth above, the actual allocation of
the net proceeds may vary depending on future developments, especially the
outcome of the Multidimensional Strategy (including legal and political
outcomes) at the discretion of the Companys board of directors and management.
Holders of the Companys securities must appreciate that a portion of the
Companys use of proceeds is for professional services, especially legal
counsel, which due to the nature of legal and political opposition are driven by
forces beyond the Companys control. In the event the litigation process is more
drawn out than estimated, the costs of the Multi-dimensional Strategy set out
above may increase substantially. Investors who are not prepared to afford the
Companys management broad discretion in the application of these funds should
not be holders of the Companys securities.
S-20
Pending the use of proceeds
outlined above, the Company intends to invest the net proceeds of the Offering
in short-term, interest bearing deposits. The Chief Financial Officer of the
Company is responsible for executing the investment policies of the Company.
In the event that the
Over-Allotment Option is exercised, any additional net proceeds will be
allocated to general working capital.
Business Objectives and Milestones
The Companys business objectives
for 2016 are to:
|
|
continue to advance the Multi-dimensional Strategy to
address the EPAs pre-emptive CWA regulatory action to ensure the Pebble
Project can initiate federal and state permitting under the NEPA
unencumbered by any extraordinary development restrictions imposed by the
EPA;
|
|
|
|
|
|
maintain an active corporate presence in Alaska to
advance relationships with political and regulatory offices of government
(both in Alaska and Washington, D.C.), Alaska Native partners and broader
stakeholder relationships;
|
|
|
|
|
|
maintain the Pebble Project and Pebble claims in good
standing;
|
|
|
|
|
|
continue to work toward securing a transaction with
potential partner(s) to further advance the Pebble Project; and
|
|
|
|
|
|
continue general and administrative activities to
maintain the Company in good standing.
|
DESCRIPTION OF SECURITIES BEING DISTRIBUTED
Common Shares
The authorized share capital of
the Company consists of an unlimited number of Common Shares without par value,
of which 222,150,876 were issued and outstanding as at May 25, 2016.
The holders of Common Shares are
entitled to receive notice of any meeting of the shareholders of the Company and
to attend and vote thereat, except those meetings at which only the holders of
shares of another class or of a particular series are entitled to vote. Each
Common Share entitles its holder to one vote. The holders of Common Shares are
entitled to receive on a pro-rata basis such dividends as the board of directors
may declare out of funds legally available therefor. In the event of the
dissolution, liquidation, winding-up or other distribution of our assets, such
holders are entitled to receive on a pro-rata basis all of assets of the Company
remaining after payment of all of liabilities. The Common Shares carry no
pre-emptive or conversion rights.
Warrants
Each Warrant will entitle the
holder thereof to purchase one Warrant Share at a price of $0.65 per Warrant
Share at any time for a period of five years following the Closing Date. The
Warrants will be issued under an indenture (the
Warrant Indenture
), to
be dated as of the Closing Date, between the Company and Computershare Trust
Company of Canada (the
Warrant Agent
), as trustee. The Warrant
Indenture requires the Company to cause to be delivered to the holders of
Warrants, upon the due exercise thereof, that number of Warrant Shares to which
such holders are entitled. The following summary of certain anticipated
provisions of the Warrant Indenture does not purport to be complete and is
subject in its entirety to the detailed provisions of the Warrant Indenture.
Reference is made to the Warrant Indenture for the full text of the attributes
of the Warrants, which will be filed by the Company under its corporate profile
on SEDAR following the closing of the Offering. A register of holders will be
maintained at the principal offices of the Warrant Agent in Vancouver, British
Columbia.
S-21
The Warrant Indenture will
contain provisions to the effect that in the event of any subdivision,
consolidation, change, reclassification or alteration of the Common Shares or in
the event of the consolidation, amalgamation or merger of the Company with
another corporation, a proportionate adjustment or change will be made in the
number and kind of securities issuable on the exercise of the Warrants.
The Warrant Indenture will also
provide that the exercise price per Warrant Share is subject to adjustment in
certain events including:
(a) the subdivision or
consolidation of the Common Shares or the issue of Common Shares to all or
substantially all of the holders of Common Shares by way of a stock dividend,
other than an issue of Common Shares to such holders as a dividend paid in the
ordinary course (as defined in the Warrant Indenture);
(b) the issue of rights, options
or warrants to all or substantially all of the holders of Common Shares
entitling them within a period of no longer than 45 days after such date of
issue to acquire Common Shares at less than 95% of the current market price
(as defined in the Warrant Indenture) of the Common Shares; or securities
convertible into Common Shares where the conversion price at the date of issue
of such convertible securities is less than 95% of the current market price of
the Common Shares; and
(c) the distribution to all or
substantially all of the holders of Common Shares or of shares of any other
class of (i) rights, options, or warrants (other than those referred to above);
(ii) evidences of indebtedness or (iii) assets, excluding dividends paid in the
ordinary course of business (as defined in the Warrant Indenture).
No adjustment in the exercise
price of the Warrants will be required to be made unless the cumulative effect
of such adjustment or adjustments would change the exercise price of the
Warrants by at least one percent (1%).
Current market price will be
defined in the Warrant Indenture to mean at any date the weighted average
trading price per Common Share for the 20 trading days ending not more than
three trading days before such date on the principal stock exchange on which the
Common Shares are then listed.
To the extent that the holder of
a Warrant would otherwise be entitled to purchase a fraction of a Warrant Share,
such right may be exercised only in combination with other rights which, in the
aggregate, entitle the holder to purchase a whole number of Warrant Shares. No
adjustments as to dividends will be made upon any exercise of Warrants. Holders
of Warrants do not have any voting or pre-emptive rights or any other rights as
shareholders of the Company.
From time to time, the Company
and the Warrant Agent, without the consent of the holders of the Warrants, may
amend or supplement the Warrant Indenture for certain purposes, including curing
effects or inconsistencies or making any change that, in the opinion of the
Warrant Agent, does not adversely affect the rights of the Warrant Agent or the
holders of the Warrants. Any amendment or supplement to the Warrant Indenture
that would adversely affect the interests of the holders of the Warrants may
only be made by extraordinary resolution of the Warrant holders, which will be
defined in the Warrant Indenture as a resolution either (i) passed at a meeting
of the holders of the Warrants at which there are holders of Warrants present in
person or represented by proxy representing at least 25% of the then outstanding
Warrants, or such lesser percentage constituting a quorum as set out in the
Warrant Indenture, and passed by the affirmative vote of holders of Warrants
representing not less than 662⁄3% of the then outstanding Warrants that are
represented and voted at the meeting; or (ii) adopted by an instrument in
writing signed by the holders of Warrants representing not less than 662⁄3% of
the then outstanding Warrants.
There is currently no market
through which the Warrants may be sold. Purchasers may not be able to sell the
Warrants. The Company has applied to list the Warrants on the TSX. Listing of
the Warrants will be subject to the Company fulfilling all of the listing
requirements of the TSX, including distribution of the Warrants to the minimum
number (i.e. 100) of public securityholders.
S-22
Shareholder Rights
Sales of any Unit Shares
comprising a part of the Units and any Warrant Shares issued upon exercise of
the Warrants also includes the rights to purchase a number of Common Shares on
the terms and conditions set forth in the Companys Shareholder Rights Plan
Agreement (the
Rights
) that are attached to and trade with each of the
Common Shares. Prior to the occurrence of certain events, the Rights will not be
exercisable or evidenced separately from the Common Shares, and will have no
value, except as reflected in the market price of the Common Shares to which
they are attached. The Rights are described in detail in the Base Prospectus
under
Description of Common Shares Shareholder Rights
.
PLAN OF DISTRIBUTION
Agency Agreement
Pursuant to the Agency Agreement,
the Agents have agreed to sell, on a commercially reasonable efforts basis, up
to 31,111,111 Units at a price of $0.45 per Unit, subject to compliance with all
necessary legal requirements and the terms and conditions of the Agency
Agreement. The obligations of the Agents under the Agency Agreement may be
terminated at the Agents discretion on the basis of their assessment of the
state of the financial markets and may also be terminated upon the occurrence of
certain stated events. While the Agents have agreed to use commercially
reasonable efforts to sell the Units offered under this Prospectus Supplement,
the Agents will not be obligated to purchase any Units which are not sold.
Pursuant to the Agency Agreement,
the Company has granted the Agents the Over-Allotment Option, exercisable no
later than 30 days after the Closing Date, to purchase the Over-Allotment Units
at the Offering Price on the same terms and conditions as apply to the purchase
of the Units thereunder. The Agents may exercise the Over-Allotment Option only
to the extent required to cover over-allotments made in connection with the sale
of the Units under this Prospectus Supplement. The distribution of the
Over-Allotment Units is qualified under this Prospectus Supplement.
Sales to investors in the United
States will be limited under the Agency Agreement to investors that qualify as
Qualified Institutional Investors as defined in Rule 144A of the U.S. Securities
Act (
QIBs
). Sales to QIBs will be made pursuant to the U.S.
Prospectus and will be limited to an aggregate of 18,000,000 Units, or such
lesser amount as may be permitted under the instructions to SEC Form F-3
All sales of Units under this
Prospectus Supplement will be deemed to be qualified and made pursuant to the
Canadian Prospectus. All sales of Units to QIBs in the United States under the
Agency Agreement will be deemed to have been sold pursuant to each of (i) the
Canadian Prospectus, and (ii) the U.S. Prospectus. Sales of Units to persons
outside of the United States will not be sold pursuant to the U.S. Prospectus or
qualified by the Registration Statement. This Prospectus Supplement also
qualifies the issuance of the Warrant Shares upon exercise of the Warrants by
the United States purchasers of the Units.
Subject to applicable law, the Agents may offer to sell the Units outside of Canada and the United States. Pursuant to the Agency Agreement, the Company has agreed to pay to the Agents the Agents Fee which is equal to 2% of the gross proceeds from the issue and sale of the Units and the Over-Allotment Units, if any, for various services rendered to the Company in connection with the Offering. The Agents Fee may be increased to a maximum of 4.0% of the gross proceeds from the sale of certain Units in order to facilitate the payment of a concession fee to licensed broker-dealers, brokers or investment dealers who may be involved in introducing investors to the Company and the Agents, provided that the Agents Fee will equal 2.0% of gross proceeds with respect to all sales of Units to United States purchasers in all circumstances. Notwithstanding the foregoing, because the Agents are not registered broker-dealers in the United States, IA Securities (USA) Inc. (the U.S. Selected Dealer), has been appointed by the Lead Agent as the exclusive United States selected dealer in respect of any Units to be offered or sold in the Offering to, or for the account or benefit of, persons in the United States (as defined under Regulation S under the United States Securities Act of 1933, as amended). The U.S. Selected Dealer will not receive any other fee or reimbursement of fees or expenses for its services as the selected dealer, other than the 2.0% Agents Fee with respect to sales effected through the U.S. Selected Dealer.
S-23
The U.S. Selected Dealer shall
offer Units for sale only in the jurisdictions in the United States where they
may be lawfully offered for sale in accordance with applicable United States
federal and state securities laws. The U.S. Selected Dealer is under no
obligation nor has it informed any persons that it will sell any Offered Units.
The U.S. Selected Dealer will use its commercially reasonable efforts to attempt
to sell the Offered Units. The U.S. Selected Dealer will have no liability for
failure to sell any Units.
The Company has also agreed to
reimburse the Lead Agent for its reasonable out-of-pocket fees and expenses,
including the fees and expenses of its legal counsel, whether or not the
Offering is completed. The Company has paid the Lead Agent a non-refundable work
fee of $20,000 plus GST ($1,000). Such work fee may be increased by up to 30% if
extraordinary time and effort is required to be expended by the Lead Agent in
connection with the Offering. All amounts payable to the Lead Agent will be paid
from the proceeds of the Offering.
The Agents reserve the right to
offer selling group participation, in the normal course of the brokerage
business, to selling groups of other licensed broker-dealers, brokers or
investment dealers, who may or may not be offered part of the Agents Fee.
Pursuant to policies of certain
Canadian securities regulatory authorities, the Agents may not, throughout the
period of distribution under the Offering, bid for or purchase Common Shares.
The foregoing restriction is subject to certain exceptions, on the condition
that the bid or purchase not be engaged in for the purpose of creating actual or
apparent active trading in or raising the price of the Common Shares. These
exceptions include a bid or purchase permitted under Universal Market Integrity
Rules for Canadian marketplaces administered by the Investment Industry
Regulatory Organization of Canada relating to market stabilization and passive
market making activities, and a bid or purchase made for or on behalf of a
customer where the order was not solicited during the period of distribution.
Subject to the foregoing, the Agents may effect transactions which stabilize or
maintain the market price of the Common Shares at levels other than those which
otherwise might prevail on the open market. Such transactions, if commenced, may
be discontinued at any time.
These stabilizing transactions,
syndicate covering transactions and penalty bids may have the effect of
preventing or mitigating a decline in the market price of the Common Shares, and
may cause the price of the Common Shares to be higher than would otherwise exist
in the open market absent such stabilizing activities. As a result, the price of
the Units may be higher than the price that might otherwise exist in the open
market. These transactions, if commenced, may be discontinued at any time.
The Company has agreed, pursuant
to the Agency Agreement, to indemnify the Agents and their respective directors,
officers, shareholders, agents and employees against certain liabilities,
including liabilities under Canadian securities legislation in certain
circumstances or to contribute to payments the Agents may have to make because
of such liabilities.
The Company has applied to the
TSX and NYSE MKT for the listing of the Unit Shares and Warrant Shares, and to
the TSX for the listing of the Warrants. The Warrants will not be listed on any
exchange in the United States. Listing will be subject to the Company fulfilling
all the listing requirements of the TSX and the NYSE MKT, as applicable.
The Agents propose to offer
the Units initially at the Offering Price. After the Agents have made a
reasonable effort to sell all of the Units at such price, the Offering Price may
be decreased and may be further changed from time to time to an amount not
greater than the Offering Price, subject to the limitations on discount market
price in accordance with the policies of the TSX, and the compensation realized
by the Agents will be decreased proportionately by the amount that the aggregate
price paid by purchasers for the Units is less than the proceeds paid by the
Agents to the Company.
Concurrent Offering
This Offering is being completed
concurrently with a Concurrent Offering. There is no assurance that all or any
portion of the Concurrent Offering will be completed. The Concurrent Offering is
limited to investors with whom the directors and officers of the Company have a
pre-existing relationship and who are resident in the United States that qualify
as accredited investors as defined in Rule 501(a) of Regulation D of the U.S.
Securities Act.
S-24
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
General
In the opinion of McMillan LLP,
counsel to the Company, and Clark Wilson LLP, counsel to the Agents, the
following summary describes, as of the date hereof, the principal Canadian
federal income tax considerations under the Tax Act generally applicable to a
holder who acquires, as beneficial owner, Unit Shares and Warrants pursuant to
the Offering, and Warrant Shares upon exercise of the Warrants, and who, for
purposes of the Tax Act and at all relevant times, holds Unit Shares, Warrant
Shares and Warrants as capital property and deals at arms length with the
Company, the Agents and any subsequent purchaser of such securities. A holder
who meets all of the foregoing requirements is referred to as a
Holder
herein, and this summary only addresses such Holders.
This summary is not applicable to
a Holder (i) that is a financial institution, as defined in the Tax Act for
purposes of the mark-to-market rules in the Tax Act, (ii) that is a specified
financial institution, as defined in the Tax Act, (iii) an interest in which is
a tax shelter investment as defined in the Tax Act, (iv) that makes or has
made a functional currency reporting election for purposes of the Tax Act, (v)
that has entered into or will enter into a derivative forward agreement, as
that term is defined in the Tax Act, with respect to the Unit Shares, Warrants
or Warrant Shares, or (vi) that is otherwise of special status or in special
circumstances. Any such Holders should consult their own tax advisors.
Additional considerations, not
discussed herein, may be applicable to a Holder that is a corporation resident
in Canada and is, or becomes, controlled by a non-resident corporation for
purposes of the foreign affiliate dumping rules in section 212.3 of the Tax
Act. Such Holders should consult their own tax advisors with respect to the
consequences of acquiring the Units.
This summary is based on the
provisions of the Tax Act in force as of the date hereof, all specific proposals
to amend the Tax Act that have been publicly and officially announced by or on
behalf of the Minister of Finance (Canada) prior to the date hereof (the
Proposed Amendments
) and our understanding of the current
administrative and assessing policies and practices of the Canada Revenue Agency
(the
CRA
) published in writing prior to the date hereof. This summary
assumes the Proposed Amendments will be enacted in the form proposed. However,
no assurance can be given that the Proposed Amendments will be enacted in their
current form, or at all. This summary is not exhaustive of all possible Canadian
federal income tax considerations and, except for the Proposed Amendments, does
not take into account or anticipate any changes in the law or any changes in the
CRAs administrative and assessing policies or practices, whether by
legislative, governmental or judicial action or decision, nor does it take into
account or anticipate any other federal or any provincial, territorial or
foreign tax considerations, which may differ significantly from those discussed
herein. Any particular Holder should consult their own tax advisors with respect
to provincial, territorial or foreign tax considerations.
This summary is not
intended to be, nor should it be construed to be, legal or tax advice to any
particular Holder, and no representations with respect to the income tax
consequences to any Holder are made. Consequently, Holders should consult their
own tax advisors with respect to the tax consequences applicable to them, having
regard to their own particular circumstances. The discussion below is qualified
accordingly.
Allocation of Cost
Holders will be required to
allocate the aggregate cost of a Unit between the Unit Share and the Warrant on
a reasonable basis in order to determine their respective costs for purposes of
the Tax Act. The Company intends to allocate as consideration for their issue
$0.44 to each Unit Share and $0.01 to each Warrant acquired as part of a Unit.
The Company believes that such allocation is reasonable but such allocation will
not be binding on the CRA or a Holder and the Company expresses no opinion with
respect to such allocation. The adjusted cost base to a Holder of a Unit Share
acquired as part of a Unit will be determined by averaging the cost of such Unit
Share with the adjusted cost base of all Common Shares of the Company held by
the Holder as capital property immediately before such acquisition.
S-25
Exercise of Warrants
No gain or loss will be realized
by a Holder on the exercise of a Warrant to acquire a Warrant Share. When a
Warrant is exercised, the Holders cost of the Warrant Share acquired thereby
will be equal to the aggregate of the Holders adjusted cost base of such
Warrant and the exercise price paid for the Warrant Share. The Holders adjusted
cost base of the Warrant Share so acquired will be determined by averaging the
cost of the Warrant Share with the adjusted cost base to the Holder of all
Common Shares of the Company held as capital property immediately before the
acquisition of the Warrant Share.
Taxation of Resident Holders
The following portion of this
summary applies to Holders (as defined above) who, for the purposes of the Tax
Act, are or are deemed to be resident in Canada at all relevant times (herein,
Resident Holders
) and this portion of the summary only addresses such
Resident Holders.
Expiry of Warrants
The expiry of an unexercised
Warrant generally will result in a capital loss to the Resident Holder equal to
the adjusted cost base of the Warrant to the Resident Holder immediately before
its expiry. See discussion below under the heading
Capital Gains and Capital
Losses
.
Taxation of Dividends
A Resident Holder will be
required to include in computing income for a taxation year any dividends
received, or deemed to be received, in the year by the Resident Holder on the
Unit Shares or Warrant Shares. In the case of a Resident Holder that is an
individual (other than certain trusts), such dividends will be subject to the
gross-up and dividend tax credit rules normally applicable under the Tax Act to
taxable dividends received from taxable Canadian corporations, including the
enhanced gross-up and dividend tax credit provisions where the Company
designates the dividend as an eligible dividend in accordance with the
provisions of the Tax Act. There may be restrictions on the ability of the
Company to designate any dividend as an eligible dividend, and the Company has
made no commitments in this regard.
A dividend received or deemed to
be received by a Resident Holder that is a corporation must be included in
computing its income but will generally be deductible in computing the
corporations taxable income, subject to all of the rules and restrictions under
the Tax Act in that regard. In certain circumstances, subsection 55(2) of the
Tax Act (as proposed to be amended by Proposed Amendments released on July 31,
2015) will treat a taxable dividend received by a Resident Holder that is a
corporation as proceeds of disposition or a capital gain. A corporation that is
a private corporation (as defined in the Tax Act) or any other corporation
controlled (whether because of a beneficial interest in one or more trusts or
otherwise) by or for the benefit of an individual (other than a trust) or a
related group of individuals (other than trusts), generally will be liable to
pay an additional tax (refundable under certain circumstances) under Part IV of
the Tax Act at the rate of 38⅓% on dividends received or deemed to be received
on the Unit Shares or Warrant Shares in a year to the extent such dividends are
deductible in computing taxable income for the year.
Disposition of Unit Shares, Warrants and Warrant
Shares
A Resident Holder who disposes,
or is deemed to dispose of, a Unit Share, a Warrant (other than on the exercise
thereof) or a Warrant Share generally will realize a capital gain (or capital
loss) equal to the amount, if any, by which the proceeds of disposition, net of
any reasonable costs of disposition, are greater (or are less) than the adjusted
cost base to the Resident Holder of such Unit Shares, Warrants or Warrant
Shares, as the case may be, immediately before the disposition or deemed
disposition. The taxation of capital gains and losses is generally described
below under the heading Capital Gains and Capital Losses.
S-26
Capital Gains and Capital Losses
Generally, a Resident Holder is
required to include in computing income for a taxation year one-half of the
amount of any capital gain (a
taxable capital gain
) realized by the
Resident Holder in such taxation year. Subject to and in accordance with the
rules contained in the Tax Act, a Resident Holder is required to deduct one-half
of the amount of any capital loss (an
allowable capital loss
) realized
in a particular taxation year against taxable capital gains realized by the
Resident Holder in the year. Allowable capital losses not so deductible in a
particular taxation year may be carried back and deducted in any of the three
preceding taxation years or carried forward and deducted in any subsequent
taxation year against net taxable capital gains realized in such years, to the
extent and under the circumstances described in the Tax Act.
The amount of any capital loss
realized by a Resident Holder that is a corporation on the disposition or deemed
disposition of a Unit Share or Warrant Share may be reduced by the amount of any
dividends received or deemed to have been received by such Resident Holder on
such shares, to the extent and under the circumstances described in the Tax Act.
Similar rules apply where a corporation is a member of a partnership or a
beneficiary of a trust that owns Unit Shares or Warrant Shares, directly or
indirectly. Corporations to whom these rules may be relevant should consult
their own tax advisors.
A Resident Holder that is
throughout the relevant taxation year a Canadian-controlled private
corporation (as defined in the Tax Act) may be liable to pay an additional tax
(refundable in certain circumstances) on certain investment income, including
taxable capital gains. Such Resident Holders should consult their own tax
advisors.
Alternative Minimum Tax
Capital gains realized and
dividends received or deemed to be received by a Resident Holder that is an
individual or a trust, other than certain specified trusts, may give rise to
alternative minimum tax under the Tax Act. Resident Holders should consult their
own tax advisors in this regard.
Taxation of Non-Resident Holders
The following portion of this
summary is generally applicable to Holders (as defined above) who, for the
purposes of the Tax Act and at all relevant times: (i) are not resident or
deemed to be resident in Canada, and (ii) do not use or hold Unit Shares,
Warrants or Warrant Shares in carrying on a business in Canada. Holders who meet
all of the foregoing requirements are referred to herein as
Non-Resident
Holders
, and this portion of the summary only addresses such Non-Resident
Holders. Special rules, which are not discussed in this summary, may apply to a
Non-Resident Holder that is an insurer carrying on business in Canada and
elsewhere. Such Non-Resident Holders should consult their own tax advisors.
Receipt of Dividends
Dividends paid or credited or
deemed to be paid or credited to a Non-Resident Holder by the Company are
subject to Canadian withholding tax at the rate of 25% of the gross amount of
the dividend unless reduced by the terms of an applicable tax treaty between
Canada and the Non-Resident Holders jurisdiction of residence. NonResident
Holders should consult their own tax advisors in this regard.
Disposition of Unit Shares, Warrants and Warrant
Shares
A Non-Resident Holder generally
will not be subject to tax under the Tax Act in respect of a capital gain
realized on the disposition or deemed disposition of a Unit Share, a Warrant or
a Warrant Share unless such Unit Share, Warrant Share or Warrant, as the case
may be, constitutes taxable Canadian property (as defined in the Tax Act) to
the Non-Resident Holder at the time of disposition and the gain is not exempt
from tax pursuant to the terms of an applicable tax treaty between Canada and
the Non-Resident Holders jurisdiction of residence.
Provided the Unit Shares and
Warrant Shares are listed on a designated stock exchange, as defined in the
Tax Act (which currently includes the TSX) at the time of disposition, the Unit
Shares, Warrants, and Warrant Shares will generally not constitute taxable Canadian property
of a Non-Resident Holder at that time, unless at any time during the 60-month
period immediately preceding the disposition the following two conditions are
satisfied concurrently: (i) (a) the Non-Resident Holder; (b) persons with whom
the Non-Resident Holder did not deal at arms length; (c) partnerships in which
the Non-Resident Holder or a person described in (b) holds a membership interest
directly or indirectly through one or more partnerships; or (d) any combination
of the persons and partnerships described in (a) through (c), owned 25% or more
of the issued shares of any class or series of shares of the Company; AND (ii)
more than 50% of the fair market value of the Common Shares, Unit Shares and
Warrant Shares was derived directly or indirectly from one or any combination
of: real or immovable property situated in Canada, Canadian resource
properties, timber resource properties (each as defined in the Tax Act), and
options in respect of, or interests in or for civil law rights in, such
properties. Notwithstanding the foregoing, in certain circumstances set out in
the Tax Act, the Unit Shares, Warrants, and Warrant Shares could also be deemed
to be taxable Canadian property.
S-27
Non-Resident Holders who may hold
Unit Shares, Warrants or Warrant Shares as taxable Canadian property should
consult their own tax advisors.
THE ABOVE SUMMARY IS NOT
INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL CANADIAN TAX CONSIDERATIONS
APPLICABLE TO HOLDERS WITH RESPECT TO THE OWNERSHIP, EXERCISE OR DISPOSITION OF
WARRANTS AND COMMON SHARES. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO
THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR CIRCUMSTANCES.
CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS
The following is a general
summary of certain material U.S. federal income tax considerations applicable to
a U.S. Holder (as defined below) arising from the acquisition of Units pursuant
to the Offering and the ownership and disposition of the Unit Shares, Warrants
and Warrant Shares. This summary applies only to U.S. Holders who acquire Units
at their original issuance pursuant to the Offering, and does not apply to any
subsequent U.S. Holder of a Unit Share, Warrant or Warrant Share.
This summary is for general
information purposes only and does not purport to be a complete analysis or
listing of all potential U.S. federal income tax considerations that may apply
to a U.S. Holder as a result of the ownership and disposition of Unit Shares,
Warrants and Warrant Shares. In addition, this summary does not take into
account the individual facts and circumstances of any particular U.S. Holder
that may affect the U.S. federal income tax consequences to such U.S. Holder,
including specific tax consequences to a U.S. Holder under an applicable tax
treaty.
Accordingly, this summary is not intended to be, and should not be
construed as, legal or U.S. federal income tax advice with respect to any
particular U.S. Holder.
In addition, this summary does not address the U.S.
federal alternative minimum, U.S. federal estate and gift, U.S. Medicare
contribution, U.S. state and local, or non-U.S. tax consequences of the
ownership, exercise or disposition of Unit Shares, Warrants or Warrant Shares.
Except as specifically set forth below, this summary does not discuss applicable
tax reporting requirements.
Each U.S. Holder should consult its own tax
advisor regarding all U.S. federal, U.S. state and local and non-U.S. tax
consequences of the ownership, exercise or disposition of Unit Shares, Warrants
or Warrant Shares.
No opinion from U.S. legal
counsel or ruling from the Internal Revenue Service (the
IRS
) has been
requested, or will be obtained, regarding the U.S. federal income tax
consequences of the ownership, exercise or disposition of Unit Shares, Warrants
or Warrant Shares. This summary is not binding on the IRS, and the IRS is not
precluded from taking a position that is different from, and contrary to, any
position taken in this summary. In addition, because the authorities upon which
this summary is based are subject to various interpretations, the IRS and the
U.S. courts could disagree with one or more of the positions taken in this
summary.
S-28
Scope of This Disclosure
Authorities
This summary is based on the
Internal Revenue Code of 1986, as amended (the
Code
), Treasury
Regulations (whether final, temporary, or proposed), published rulings of the
IRS, published administrative positions of the IRS, the Convention Between
Canada and the United States of America with Respect to Taxes on Income and on
Capital, signed September 26, 1980, as amended (the Canada-U.S. Tax
Convention), and U.S. court decisions that are applicable and, in each case, as
in effect and available, as of the date hereof. Any of the authorities on which
this summary is based could be changed in a material and adverse manner at any
time, and any such change could be applied on a retroactive or prospective basis
which could affect the U.S. federal income tax considerations described in this
summary. This summary does not discuss the potential effects, whether adverse or
beneficial, of any proposed legislation that, if enacted, could be applied on a
retroactive or prospective basis.
U.S. Holders
For purposes of this summary, the
term U.S. Holder means a beneficial owner of Unit Shares, Warrants or Warrant
Shares that is for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the U.S.;
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a corporation (or other entity taxable as a corporation
for U.S. federal income tax purposes) created or organized in or under the
laws of the U.S., any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust that (a) is subject to the primary supervision of
a court within the U.S. and the control of one or more U.S. persons for
all substantial decisions or (b) has a valid election in effect under
applicable Treasury Regulations to be treated as a U.S. person.
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Non-U.S. Holders
For purposes of this summary, a
non-U.S. Holder
is a beneficial owner of Unit Shares, Warrants or
Warrant Shares that is not a partnership (or other
pass-through
entity)
for U.S. federal income tax purposes and is not a U.S. Holder. This summary does
not address the U.S. federal income tax considerations applicable to non-U.S.
Holders arising from the ownership, exercise or disposition of Unit Shares,
Warrants or Warrant Shares. Accordingly, a non-U.S. Holder should consult its
own tax advisor regarding all U.S. federal, U.S. state and local, and non-U.S.
tax consequences (including the potential application of and operation of any
income tax treaties) relating to the purchase of the Units pursuant to the
Offering and the ownership, exercise or disposition of Unit Shares, Warrants or
Warrant Shares.
Transactions Not Addressed
This summary does not address the
tax consequences of transactions effected prior or subsequent to, or
concurrently with, any purchase of the Units pursuant to the Offering (whether
or not any such transactions are undertaken in connection with the purchase of
the Units pursuant to the Offering).
U.S. Holders Subject to Special U.S. Federal Income Tax
Rules Not Addressed
This summary does not address the
U.S. federal income tax considerations of the ownership, exercise or disposition
of Unit Shares, Warrants or Warrant Shares by U.S. Holders that are subject to
special provisions under the Code, including, but not limited to, the following:
(a) tax-exempt organizations, qualified retirement plans, individual retirement
accounts, or other tax-deferred accounts; (b) financial institutions,
underwriters, insurance companies, real estate investment trusts, or regulated
investment companies; (c) broker-dealers, dealers, or traders in securities or
currencies that elect to apply a mark-to-market accounting method; (d) U.S.
Holders that have a functional currency other than the U.S. dollar; (e) U.S.
Holders that own Unit Shares, Warrants or Warrant Shares as part of a straddle,
hedging transaction, conversion transaction, constructive sale, or other
arrangement involving more than one position; (f) U.S. Holders that acquire
Common Shares in connection with the exercise of employee stock options or
otherwise as compensation for services; (g) U.S. Holders that hold Unit Shares,
Warrants or Warrant Shares other than as a capital asset within the meaning of
Section 1221 of the Code (generally, property held for investment purposes); and
(h) U.S. Holders that own directly, indirectly, or by attribution, 10% or more,
by voting power, of the outstanding stock of the Company. This summary also does
not address the U.S. federal income tax considerations applicable to U.S.
Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.;
(b) persons that have been, are, or will be a resident or deemed to be a
resident in Canada for purposes of the Income Tax Act (Canada); (c) persons that
use or hold, will use or hold, or that are or will be deemed to use or hold Unit
Shares, Warrants or Warrant Shares in connection with carrying on a business in
Canada; (d) persons whose Unit Shares, Warrants or Warrant Shares constitute
taxable Canadian property under the Income Tax Act (Canada); or (e) persons
that have a permanent establishment in Canada for purposes of the Canada-U.S.
Tax Convention. U.S. Holders that are subject to special provisions under the
Code, including U.S. Holders described immediately above, should consult their
own tax advisors regarding all U.S. federal, U.S. state and local, and non-U.S.
tax consequences (including the potential application and operation of any
income tax treaties) relating to the ownership, exercise or disposition of Unit
Shares, Warrants or Warrant Shares.
S-29
If an entity or arrangement that
is classified as a partnership (or other pass-through entity) for U.S. federal
income tax purposes holds Unit Shares, Warrants or Warrant Shares, the U.S.
federal income tax consequences to such partnership and the partners (or other
owners) of such partnership of the ownership, exercise or disposition of the
Unit Shares, Warrants or Warrant Shares generally will depend on the activities
of the partnership and the status of such partners (or other owners). This
summary does not address the U.S. federal income tax consequences for any such
partner or partnership (or other pass-through entity or its owners). Owners of
entities and arrangements that are classified as partnerships (or other
pass-through entities) for U.S. federal income tax purposes should consult
their own tax advisors regarding the U.S. federal income tax consequences of the
ownership, exercise or disposition of Unit Shares, Warrants or Warrant Shares.
Purchase of Units; Allocation of Purchase Price
There is no authority directly
addressing the U.S. federal income tax treatment of the purchase of securities
with terms substantially similar to the Units. While not free from doubt, the
purchase of each Unit should be treated for U.S. federal income tax purposes as
the purchase of an investment unit comprised of one Unit Share and one
Warrant, with the purchase price of the Unit allocated between the Unit Share
and the Warrant based on the relative fair market values of the Unit Share and
Warrant at the time of purchase. A U.S. Holders initial tax basis in the Unit
Share and Warrant should therefore equal the portion of the U.S. dollar cost of
the Unit allocated thereto. The IRS may take the position that any allocation of
the purchase price between a Unit Share and a Warrant that we make will be
binding on a U.S. Holder unless the U.S. Holder explicitly discloses in a
statement attached to the U.S. Holders timely filed U.S. federal income tax
return for the taxable year that includes the purchase of the Unit that the U.S.
Holders allocation of the purchase price is different from our allocation. Any
such allocation, however, is not binding on the IRS. U.S. Holders should consult
their own tax advisors regarding the characterization of the Units and the
allocation of the purchase price for a Unit between the Unit Share and the
Warrant. The remainder of this summary assumes that the characterization of the
Units described above is respected for U.S. federal income tax purposes.
Ownership, Disposition and Exercise of Warrants
Exercise of Warrants
A U.S. Holder generally will not
recognize gain or loss upon the acquisition of a Warrant Share on the exercise
of a Warrant for cash. A U.S. Holders initial tax basis in the Warrant Share
received on exercise of a Warrant will be equal to the sum of (i) the U.S.
Holders tax basis in the Warrant plus (ii) the exercise price paid by the U.S.
Holder on the exercise of the Warrant. A U.S. Holders holding period for the
Warrant Share received on the exercise of a Warrant will begin on the day after
the Warrant is exercised.
S-30
Disposition of Warrants
Subject to the PFIC rules
discussed below, upon the sale or other taxable disposition of a Warrant, a U.S.
Holder generally will recognize capital gain or loss in an amount equal to the
difference between the amount of cash plus the fair market value of any property
received and such U.S. Holders tax basis in the Warrant sold or otherwise
disposed of. Such capital gain or loss will be long-term capital gain or loss
if, at the time of the sale or other taxable disposition, the U.S. Holders
holding period for the Warrant is more than one year. Preferential tax rates
apply to long-term capital gains of non-corporate U.S. Holders. There are
currently no preferential tax rates for long-term capital gains of a U.S. Holder
that is a corporation. Deductions for capital losses are subject to significant
limitations under the Code.
Expiration of Warrants Without Exercise
Subject to the PFIC rules
discussed below, upon the lapse or expiration of a Warrant, a U.S. Holder will
recognize a loss in an amount equal to such U.S. Holders tax basis in the
Warrant. Any such loss generally will be a capital loss and will be a long-term
capital loss if, at the time of the lapse or expiration, the U.S. Holders
holding period for the Warrant is more than one year. Deductions for capital
losses are subject to significant limitations under the Code.
Adjustments to the Warrants
The Warrant Indenture provides
for an adjustment to the number of Warrant Shares for which a Warrant may be
exercised or to the exercise price of a Warrant upon certain events. Subject to
the PFIC rules discussed below, an adjustment that has the effect of preventing
dilution of the interest of the Warrant holders generally will not be taxable to
a U.S. Holder. However, an adjustment may be treated as a constructive
distribution to a U.S. Holder if and to the extent that such adjustment has the
effect of increasing such U.S. Holders proportionate interest in our assets or
earnings and profits. Subject to the PFIC rules discussed below, any such
constructive distribution would be taxable under the rules described below under
the heading Distributions on Common Shares.
Ownership and Disposition of Unit Shares and Warrant Shares
Distributions on Common Shares
Subject to the passive foreign
investment company (
PFIC
) rules discussed below (see Tax Consequences
if the Company is a PFIC), a U.S. Holder that receives a distribution,
including a constructive distribution, with respect to Unit Shares or Warrant
Shares (which are referred to in the remainder of this summary as
common
shares
) will be required to include the amount of such distribution in
gross income as a dividend (without reduction for any Canadian income tax
withheld from such distribution) to the extent of the current or accumulated
earnings and profits of the Company, as computed for U.S. federal income tax
purposes. To the extent that a distribution exceeds the current and accumulated
earnings and profits of the Company, such distribution will be treated first
as a tax-free return of capital to the extent of a U.S. Holders tax basis in
the common shares and thereafter as gain from the sale or exchange of such
common shares (see Sale or Other Taxable Disposition of Common Shares below).
However, the Company may not maintain calculations of earnings and profits in
accordance with U.S. federal income tax principles, and each U.S. Holder should
therefore assume that any distribution by the Company with respect to the common
shares will constitute a dividend. Dividends received on the common shares
generally will not be eligible for the dividends received deduction available
to U.S. corporate shareholders receiving dividends from U.S. corporations. If
the Company is eligible for the benefits of the Canada-U.S. Tax Convention or
its shares are readily tradable on an established securities market in the U.S.,
dividends paid by the Company to non-corporate U.S. Holders generally will be
eligible for the preferential tax rates applicable to long-term capital gains,
provided certain holding period and other conditions are satisfied, including
that the Company not be classified as a PFIC in the tax year of distribution or
in the preceding tax year. The dividend rules are complex, and each U.S. Holder
should consult its own tax advisor regarding the application of such rules.
S-31
Sale or Other Taxable Disposition of Common Shares
Subject to the PFIC rules
discussed below, upon the sale or other taxable disposition of common shares, a
U.S. Holder generally will recognize capital gain or loss in an amount equal to
the difference between the amount of cash plus the fair market value of any
property received and such U.S. Holders tax basis in the common shares sold or
otherwise disposed of. Such capital gain or loss will be long-term capital gain
or loss if, at the time of the sale or other taxable disposition, the U.S.
Holders holding period for the common shares is more than one year.
Preferential tax rates apply to long-term capital gains of non-corporate U.S.
Holders. There are currently no preferential tax rates for long-term capital
gains of a U.S. Holder that is a corporation. Deductions for capital losses are
subject to significant limitations under the Code. A U.S. Holders tax basis in
common shares generally will be such U.S. Holders U.S. dollar cost for such
common shares.
PFIC Status of the Company
If the Company is or becomes a
PFIC, the preceding sections of this summary may not describe the U.S. federal
income tax consequences to U.S. Holders of the ownership and disposition of
common shares and Warrants. The U.S. federal income tax consequences of owning
and disposing of common shares and Warrants if the Company is or becomes a PFIC
are described below under the heading Tax Consequences if the Company is a
PFIC.
A non-U.S. corporation is a PFIC
for each tax year in which (i) 75% or more of its gross income is passive income
(as defined for U.S. federal income tax purposes) (the
income test
) or
(ii) on average for such tax year, 50% or more (by value) of its assets either
produces or is held for the production of passive income (the asset test). For
purposes of the PFIC provisions, gross income generally includes sales
revenues less cost of goods sold, plus income from investments and from
incidental or outside operations or sources, and passive income generally
includes dividends, interest, certain rents and royalties, and certain gains
from commodities or securities transactions. In determining whether or not it is
a PFIC, a non-U.S. corporation is required to take into account its pro rata
portion of the income and assets of each corporation in which it owns, directly
or indirectly, at least a 25% interest (by value).
Under certain attribution and
indirect ownership rules, if the Company is a PFIC, U.S. Holders will generally
be deemed to own their proportionate share of the Company's direct or indirect
equity interest in any company that is also a PFIC (a
Subsidiary PFIC
),
and will be subject to U.S. federal income tax on their proportionate share of
(a) any "excess distributions," as described below, on the stock of a Subsidiary
PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary
PFIC by the Company or another Subsidiary PFIC, both as if such U.S. Holders
directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may
be subject to U.S. federal income tax on any indirect gain realized on the stock
of a Subsidiary PFIC on the sale or disposition of common shares or Warrants.
Accordingly, U.S. Holders should be aware that they could be subject to tax even
if no distributions are received and no redemptions or other dispositions of the
Companys common shares or Warrants are made.
The Company believes it was a
PFIC in one or more prior tax years and, based on current business plans and
financial projections, expects to be a PFIC in the current tax year and possibly
in subsequent tax years. The determination of PFIC status is inherently factual,
is subject to a number of uncertainties, and can be determined only annually at
the close of the tax year in question. Additionally, the analysis depends, in
part, on the application of complex U.S. federal income tax rules, which are
subject to differing interpretations. There can be no assurance that the Company
will or will not be determined to be a PFIC for the current tax year or any
prior or future tax year, and no opinion of legal counsel or ruling from the IRS
concerning the status of the Company as a PFIC has been obtained or will be
requested. U.S. Holders should consult their own U.S. tax advisors regarding the
PFIC status of the Company.
Tax Consequences if the Company is a PFIC
If the Company is a PFIC for any
tax year during which a U.S. Holder holds common shares or Warrants, special
rules may increase such U.S. Holders U.S. federal income tax liability with
respect to the ownership and disposition of such common shares and Warrants. If
the Company meets the income test or the asset test for any tax year during
which a U.S. Holder owns common shares or Warrants, the Company will be treated
as a PFIC with respect to such U.S. Holder for that tax year and for all
subsequent tax years, regardless of whether the Company meets the income test or
the asset test for such subsequent tax years, unless the U.S. Holder elects to
recognize any unrealized gain in the common shares and Warrants or makes a
timely and effective QEF Election or, if applicable, Mark-to-Market Election.
S-32
Under the default PFIC rules:
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any gain realized on the sale or other disposition
(including dispositions and certain other events that would not otherwise
be treated as taxable events, but not including the exercise of a Warrant)
of common shares or Warrants (including an indirect disposition of the
stock of any Subsidiary PFIC) and any excess distribution (defined as a
distribution to the extent it (together with all other distributions
received in the relevant tax year) exceeds 125% of the average annual
distribution received during the preceding three years) received on common
shares or with respect to the stock of a Subsidiary PFIC will be allocated
ratably to each day of such U.S. Holders holding period for the common
shares or Warrants;
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the amount allocated to the current tax year and any year
prior to the first year in which the Company was a PFIC will be taxed as
ordinary income in the current year;
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the amount allocated to each of the other tax years (the
Prior PFIC Years
) will be subject to tax at the highest ordinary
income tax rate in effect for the applicable class of taxpayer for that
year;
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an interest charge will be imposed with respect to the
resulting tax attributable to each Prior PFIC Year, which interest charge
is not deductible by non-corporate U.S. Holders; and
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any loss realized on the disposition of the common shares
generally will not be recognized.
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A U.S. Holder that makes a timely
and effective mark-to-market election under Section 1296 of the Code (a
Mark-to-Market Election
) or a timely and effective election to treat
the Company and each Subsidiary PFIC as a qualified electing fund (a
QEF
) under Section 1295 of the Code (a
QEF Election
) may
generally mitigate or avoid the PFIC consequences described above with respect
to common shares, but a mark-to-market election is not available for Warrants.
In light of adverse consequences of PFIC characterization and the uncertainty
as to the Companys PFIC status, the Company will undertake to provide to any
U.S. Holder, upon written request, the information the Company determines is
necessary for United States income tax reporting purposes for such investor to
make a QEF Election. The Company may elect to provide such information on its
website. U.S. Holders should be aware that there can be no assurance that the
Company has satisfied or will satisfy the recordkeeping requirements that apply
to a QEF or that the Company has supplied or will supply U.S. Holders with
information such U.S. Holders require to report under the QEF rules in the event
that the Company is a PFIC for any tax year.
A timely and effective QEF
Election requires a U.S. Holder to include currently in gross income each year
its pro rata share of the Companys ordinary earnings and net capital gains,
regardless of whether such earnings and gains are actually distributed. Thus, a
U.S. Holder could have a tax liability with respect to such ordinary earnings or
gains without a corresponding receipt of cash from the Company. If the Company
is a QEF with respect to a U.S. Holder, the U.S. Holders basis in the common
shares will be increased to reflect the amount of the taxed but undistributed
income. Distributions of income that had previously been taxed will result in a
corresponding reduction of basis in the common shares and will not be taxed
again as a distribution to a U.S. Holder. Taxable gains on the disposition of
common shares or Warrants by a U.S. Holder that has made a timely and effective
QEF Election are generally capital gains. A U.S. Holder must make a QEF Election
for the Company and each Subsidiary PFIC if it wishes to have this treatment. To
make a QEF Election, a U.S. Holder will need to have an annual information
statement from the Company setting forth the ordinary earnings and net capital
gains for the year. In general, a U.S. Holder must make a QEF Election on or
before the due date for filing its income tax return for the first year to which
the QEF Election will apply. Under applicable Treasury Regulations, a U.S.
Holder will be permitted to make retroactive elections in particular
circumstances, including if it had a reasonable belief that the Company was not
a PFIC and filed a protective election. If a U.S. Holder owns PFIC stock
indirectly through another PFIC, separate QEF Elections must be made for the PFIC
in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the
QEF rules to apply to both PFICs.
S-33
Each U.S. Holder should consult
its own tax advisor regarding the availability and desirability of, and
procedure for, making a timely and effective QEF Election for the Company and
any Subsidiary PFIC.
A Mark-to-Market Election may be
made with respect to stock in a PFIC if such stock is regularly traded on a
qualified exchange or other market (within the meaning of the Code and the
applicable U.S. Treasury Regulations). A class of stock that is traded on one or
more qualified exchanges or other markets is considered to be regularly traded
for any calendar year during which such class of stock is traded in other than
de minimis quantities on at least 15 days during each calendar quarter. If the
common shares are considered to be regularly traded within this meaning, then
a U.S. Holder generally will be eligible to make a Mark-to-Market Election with
respect to its common shares. However, there is no assurance that the common
shares will be or remain regularly traded for this purpose. A Mark-to-Market
Election may not be made with respect to the stock of any Subsidiary PFIC
because such stock is not marketable, and also may not be made with respect to
Warrants. Hence, a Mark-to-Market Election will not be effective to eliminate
the application of the default rules of Section 1291 of the Code, described
above, with respect to deemed dispositions of Subsidiary PFIC stock,
dispositions of Warrants or excess distributions with respect to a Subsidiary
PFIC.
A U.S. Holder that makes a timely
and effective Mark-to-Market Election with respect to common shares generally
will be required to recognize as ordinary income in each tax year in which the
Company is a PFIC an amount equal to the excess, if any, of the fair market
value of such shares as of the close of such taxable year over the U.S. Holders
adjusted tax basis in such shares as of the close of such taxable year. A U.S.
Holders adjusted tax basis in the common shares generally will be increased by
the amount of ordinary income recognized with respect to such shares. If the
U.S. Holders adjusted tax basis in the common shares as of the close of a tax
year exceeds the fair market value of such shares as of the close of such
taxable year, the U.S. Holder generally will recognize an ordinary loss, but
only to the extent of net mark-to-market income recognized with respect to such
shares for all prior taxable years. A U.S. Holders adjusted tax basis in its
common shares generally will be decreased by the amount of ordinary loss
recognized with respect to such shares. Any gain recognized upon a disposition
of the common shares generally will be treated as ordinary income, and any loss
recognized upon a disposition generally will be treated as an ordinary loss to
the extent of net mark-to-market income recognized for all prior taxable years.
Any loss recognized in excess thereof will be taxed as a capital loss. Capital
losses are subject to significant limitations under the Code.
Each U.S. Holder should consult
its own tax advisor regarding the availability and desirability of, and
procedure for, making a timely and effective Mark-to-Market Election with
respect to the common shares.
Foreign Tax Credit
A U.S. Holder that pays (whether
directly or through withholding) Canadian income tax in connection with the
ownership, exercise or disposition of common shares or Warrants may be entitled,
at the election of such U.S. Holder, to receive either a deduction or a credit
for such Canadian income tax paid. Generally, a credit will reduce a U.S.
Holders U.S. federal income tax liability on a dollar-for-dollar basis, whereas
a deduction will reduce a U.S. Holders income subject to U.S. federal income
tax. This election is made on a year-by-year basis and applies to all creditable
foreign taxes paid (whether directly or through withholding) by a U.S. Holder
during a year.
Complex limitations apply to the
foreign tax credit, including the general limitation that the credit cannot
exceed the proportionate share of a U.S. Holders U.S. federal income tax
liability that such U.S. Holders foreign source taxable income bears to such
U.S. Holders worldwide taxable income. In applying this limitation, a U.S.
Holders various items of income and deduction must be classified, under complex
rules, as either foreign source or U.S. source. Generally, dividends paid by
a non-U.S. corporation should be treated as foreign source for this purpose, and
gains recognized on the sale of securities of a non-U.S. corporation by a U.S.
Holder should be treated as U.S. source for this purpose, except as otherwise
provided in an applicable income tax treaty, and if an election is properly made
under the Code. However, the amount of a distribution with respect to the common
shares that is treated as a dividend may be lower for U.S. federal income tax
purposes than it is for Canadian federal income tax purposes, resulting in a
reduced foreign tax credit allowance to a U.S. Holder. In addition, this
limitation is calculated separately with respect to specific categories of
income. The foreign tax credit rules are complex, and each U.S. Holder should
consult its own U.S. tax advisor regarding the foreign tax credit rules.
S-34
Special rules apply to the amount
of foreign tax credit that a U.S. Holder may claim on a distribution, including
a constructive distribution, from a PFIC. Subject to such special rules,
non-U.S. taxes paid with respect to any distribution in respect of stock in a
PFIC are generally eligible for the foreign tax credit. The rules relating to
distributions by a PFIC and their eligibility for the foreign tax credit are
complicated, and a U.S. Holder should consult its own tax advisor regarding
their application to the U.S. Holder.
Receipt of Foreign Currency
The amount of any distribution or
proceeds paid in Canadian dollars to a U.S. Holder in connection with the
ownership of common shares, or on the sale or other taxable disposition of
common shares or Warrants, will be included in the gross income of a U.S. Holder
as translated into U.S. dollars calculated by reference to the exchange rate
prevailing on the date of actual or constructive receipt of the payment,
regardless of whether the Canadian dollars are converted into U.S. dollars at
that time. If the Canadian dollars received are not converted into U.S. dollars
on the date of receipt, a U.S. Holder will have a basis in the Canadian dollars
equal to their U.S. dollar value on the date of receipt. Any U.S. Holder who
receives payment in Canadian dollars and engages in a subsequent conversion or
other disposition of the Canadian dollars may have a foreign currency exchange
gain or loss that would be treated as ordinary income or loss, and generally
will be U.S. source income or loss for foreign tax credit purposes. Different
rules apply to U.S. Holders who use the accrual method with respect to foreign
currency.
Each U.S. Holder should consult
its own U.S. tax advisor regarding the U.S. federal income tax consequences of
receiving, owning, and disposing of Canadian dollars.
Information Reporting; Backup Withholding
Under U.S. federal income tax
law, certain categories of U.S. Holders must file information returns with
respect to their investment in, or involvement in, a non-U.S. corporation. For
example, U.S. return disclosure obligations (and related penalties) are imposed
on individuals who are U.S. Holders that hold certain specified foreign
financial assets in excess of certain threshold amounts. The definition of
specified foreign financial assets includes not only financial accounts
maintained in non-U.S. financial institutions, but also, if held for investment
and not in an account maintained by certain financial institutions, any stock or
security issued by a non-U.S. person, any financial instrument or contract that
has an issuer or counterparty other than a U.S. person and any interest in a
non-U.S. entity. A U.S. Holder may be subject to these reporting requirements
unless such U.S. Holders common shares or Warrants are held in an account at
certain financial institutions. Penalties for failure to file certain of these
information returns are substantial. U.S. Holders should consult with their own
tax advisors regarding the requirements of filing information returns on IRS
Form 8938, and, if applicable, filing obligations relating to the PFIC rules,
including possible reporting on an IRS Form 8621.
Payments made within the U.S. or
by a U.S. payor or U.S. middleman of (a) distributions on the common shares, and
(b) proceeds arising from the sale or other taxable disposition of common shares
or Warrants generally will be subject to information reporting. In addition,
backup withholding, currently at a rate of 28%, may apply to such payments if a
U.S. Holder (a) fails to furnish such U.S. Holders correct U.S. taxpayer
identification number (generally on IRS Form W-9), (b) furnishes an incorrect
U.S. taxpayer identification number, (c) is notified by the IRS that such U.S.
Holder has previously failed to properly report items subject to backup
withholding, or (d) fails to certify, under penalty of perjury, that such U.S.
Holder has furnished its correct U.S. taxpayer identification number and that
the IRS has not notified such U.S. Holder that it is subject to backup
withholding. Certain exempt persons generally are excluded from these
information reporting and backup withholding rules. Backup withholding is not an
additional tax. Any amounts withheld under the U.S. backup withholding rules
will be allowed as a credit against a U.S. Holders U.S. federal income tax
liability, if any, or will be refunded, if such U.S. Holder furnishes required
information to the IRS in a timely manner. The information reporting and backup
withholding rules may apply even if, under the Canada-U.S. Tax Convention,
payments are exempt from the dividend withholding tax or otherwise eligible for
a reduced withholding rate.
S-35
The discussion of reporting
requirements set forth above is not intended to constitute an exhaustive
description of all reporting requirements that may apply to a U.S. Holder. A
failure to satisfy certain reporting requirements may result in an extension of
the time period during which the IRS can assess a tax, and, under certain
circumstances, such an extension may apply to assessments of amount unrelated to
any unsatisfied reporting requirement. Each U.S. Holder should consult its own
tax advisor regarding the information reporting and backup withholding rules.
THE ABOVE SUMMARY IS NOT
INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL U.S. TAX CONSIDERATIONS
APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE OWNERSHIP, EXERCISE OR
DISPOSITION OF WARRANTS AND COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR
CIRCUMSTANCES.
WHERE YOU CAN FIND MORE INFORMATION
Northern Dynasty is a public
company and files annual, quarterly and other information with the Canadian
securities regulatory authorities and the SEC. You may read and copy, for a fee,
any document that we file with or furnish to the SEC at the SECs public
reference room in Washington, D.C. at 100 F Street, N.E., Washington, D.C.
20549. You should call the SEC at 1-800-SEC-0330 or access its website at
www.sec.gov for further information about the public reference room. You may
read and download the documents we have filed at
www.sec.gov
. You may
read and download any public document that the Company has filed with the
securities commissions or similar regulatory authorities in Canada at
www.sedar.com
.
LEGAL MATTERS
Certain legal matters relating to
the Offering will be passed upon for us by McMillan LLP, Vancouver, B.C. and
Clark Wilson LLP, Vancouver, B.C. The partners and associates of McMillan LLP
beneficially own, directly or indirectly, less than 1% of any class of
securities issued by us. As at the date hereof, the partners and associates of
Clark Wilson LLP, beneficially own, directly or indirectly, less than 1% of our
outstanding Common Shares.
EXPERTS AND INTERESTS OF EXPERTS
Information relating to the
Companys mineral properties incorporated by reference in this Prospectus has
been derived from the
2014 Technical Report on the Pebble Project, Southwest
Alaska, USA
, effective date December 31, 2014 (the
Pebble Project
Report
), which has been prepared by the Qualified Persons named below and
this information has been included in reliance on the expertise of these
Qualified Persons:
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J. David Gaunt, P.Geo., a non-independent
Qualified Person, who co-authored the Pebble Project Report;
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James Lang, P.Geo., a non-independent Qualified
Person, who co-authored the Pebble Project Report;
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Eric Titley, P.Geo., a non-independent
Qualified Person, who co-authored the Pebble Project Report; and
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Ting Lu, P.Eng., an independent Qualified
Person, who co-authored the Pebble Project Report.
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Based on information provided by
the relevant persons, and except as otherwise disclosed in this Prospectus
Supplement, none of the persons or companies referred to above or below has
received or will receive any direct or indirect interests in the Companys
property or the property of an associated party or an affiliate of the Company
or have any beneficial ownership, direct or indirect, of the Companys
securities or of an associated party or an affiliate of the Company. The Company understands that,
after reasonable inquiry and as at the date hereof, the experts listed above as
a group, beneficially own, directly or indirectly, less than one percent of the
outstanding Common Shares of the Company.
S-36
The Companys audited
consolidated financial statements for the financial years ended December 31,
2015, 2014 and 2013 incorporated in this Prospectus by reference have been
audited by Deloitte LLP, an independent registered public accounting firm.
Deloitte LLP, is independent of the Company within the meaning of the Rules of
Professional Conduct of the Chartered Professional Accountants of British
Columbia and the rules and standards of the Public Company Accounting Oversight
Board and the securities laws and regulations administered by the SEC. The
report of Deloitte LLP is incorporated herein by reference (which report
expresses an unqualified opinion on the financial statements and includes an
explanatory paragraph referring to a material uncertainty that casts substantial
doubt about the Companys ability to continue as a going concern). Such
financial statements have been so incorporated in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
The financial statements of the
Pebble Partnership and its subsidiaries incorporated in this Prospectus by
reference from the Companys Annual Report on Form 20-F for the year ended
December 31, 2015 have been audited by Deloitte & Touche LLP. Deloitte &
Touche LLP was the independent auditor for the period ended December 10, 2013
and as of May 15, 2015, and throughout the period covered by the consolidated
financial statements of Pebble Partnership on which they reported, were
independent with respect to the Pebble Partnership and its subsidiaries within
the meaning of the Code of Professional Conduct of the American Institute of
Certified Public Accountants. The report of Deloitte & Touche LLP dated May
15, 2015, is incorporated herein by reference, (which report expresses an
unqualified opinion on the financial statements and includes an explanatory
paragraph referring to a material uncertainty which raises substantial doubt
about the Pebble Partnerships ability to continue as a going concern). Such
financial statements have been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
CAUTIONARY NOTES TO UNITED STATES INVESTORS CONCERNING
MINERAL RESERVE AND RESOURCE ESTIMATES
This Prospectus, including the
documents incorporated by reference herein, uses terms that comply with
reporting standards in Canada and certain estimates are made in accordance with
Canadian National Instrument 43-101
Standards of Disclosure for Mineral
Projects
(
NI 43-101
). NI 43-101 is a rule developed by the Canadian
Securities Administrators that establishes standards for all public disclosure
an issuer makes of scientific and technical information concerning mineral
projects. Unless otherwise indicated, all resource estimates contained in or
incorporated by reference in this Prospectus have been prepared in accordance
with NI 43-101. These standards differ significantly from the requirements of
the SEC, and resource information contained herein and incorporated by reference
herein may not be comparable to similar information disclosed by companies in
the United States (
US companies
).
In addition, this Prospectus uses
the terms measured mineral resources, indicated mineral resources and
inferred mineral resources to comply with the reporting standards in Canada.
These classifications adhere to the mineral resource and mineral reserve
definitions and classification criteria developed by the Canadian Institute of
Mining and are more particularly described in our 2015 Form 20-F and amendment
thereto. We advise United States investors that while the terms measured
mineral resources, indicated mineral resources and inferred mineral
resources are recognized and required by Canadian regulations, the SEC does not
recognize them. United States investors are cautioned not to assume that any
part or all of the mineral deposits in these categories will ever be converted
into mineral reserves. These terms have a great amount of uncertainty as to
their existence, and great uncertainty as to their economic and legal
feasibility.
Further, inferred resources
have a great amount of uncertainty as to their existence and as to whether they
can be mined legally or economically. Therefore, United States investors are
also cautioned not to assume that all or any part of the inferred resources
exist. In accordance with Canadian rules, estimates of inferred mineral
resources cannot form the basis of feasibility or other economic studies,
except in limited circumstances where permitted under NI 43-101.
S-37
It cannot be assumed that all or
any part of measured mineral resources, indicated mineral resources, or
inferred mineral resources will ever be upgraded to a higher category.
Investors are cautioned not to assume that any part of the reported measured
mineral resources, indicated mineral resources, or inferred mineral
resources in this Prospectus is economically or legally mineable.
In addition, disclosure of
contained ounces is permitted disclosure under Canadian regulations; however,
the SEC only permits issuers to report mineralization as in place tonnage and
grade without reference to unit measures.
For the above reasons,
information contained in this Prospectus and the documents incorporated by
reference herein containing descriptions of our mineral deposits may not be
comparable to similar information made public by US companies subject to the
reporting and disclosure requirements under the United States federal securities
laws and the rules and regulations thereunder.
NOTE TO UNITED STATES READERS REGARDING DIFFERENCES
BETWEEN UNITED STATES AND CANADIAN REPORTING PRACTICES
The Company prepares its
financial statements, which are incorporated by reference into this Prospectus,
in accordance with International Financial Reporting Standards, as issued by the
International Accounting Standards Board. Accordingly, the Companys financial
statements are not comparable to financial statements of United States
companies.
STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION
Securities legislation in certain
of the provinces of Canada provides purchasers with the right to withdraw from
an agreement to purchase securities. This right may be exercised within two
business days after receipt or deemed receipt of a prospectus and any amendment.
In several of the provinces of Canada, the securities legislation further
provides a purchaser with remedies for rescission or, in some jurisdictions,
revision of the price or damages if the prospectus and any amendment contains a
misrepresentation or is not delivered to the purchaser, provided that the
remedies for rescission, revision of the price or damages are exercised by the
purchaser within the time limit prescribed by the securities legislation of the
purchaser's province. The purchaser should refer to any applicable provisions of
the securities legislation of the purchaser's province for the particulars of
these rights or consult with a legal adviser.
Investors are cautioned that the
statutory right of action for damages for a misrepresentation contained in this
Prospectus Supplement, the Base Prospectus or any amendment hereto or thereto is
limited, in certain provincial securities legislation, to the price at which the
Units are offered to the public. This means that, with respect to the Warrants,
under the securities legislation of certain provinces, if the purchaser pays
additional amounts upon conversion, exchange or exercise of the security, those
amounts may not be recoverable under the statutory right of action for damages
that applies in those provinces. The purchaser should refer to any applicable
provisions of the securities legislation of the purchasers province for the
particulars of this right of action for damages or consult with a legal adviser.
No securities regulatory authority has expressed an
opinion about these securities and it is an offence to claim
otherwise
. This short form prospectus constitutes a public offering
of these securities only in those jurisdictions where they may be lawfully
offered for sale and therein only by persons permitted to sell such securities.
Information has been incorporated by reference in this
short form prospectus from documents filed with securities commissions or
similar authorities in Canada
. Copies of the documents incorporated
herein by reference may be obtained on request without charge from Northern
Dynasty Minerals Ltd., 15
th
Floor, 1040 West Georgia
Street, Vancouver, British Columbia, V6E 4H1, Telephone: 604-684-6365
(attention: Corporate Secretary), and are also available electronically at
www.sedar.com
.
References in this Prospectus and any Prospectus Supplement
to $ are to Canadian dollars and to US$ are to United States dollars.
NORTHERN DYNASTY MINERALS LTD.
$20,000,000
Common Shares
Warrants
Subscription Receipts
Units
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Northern Dynasty Minerals Ltd. (the
Company
or
Northern Dynasty
) may offer and issue from time to time (i) common
shares (the
Common Shares
), (ii) warrants (the
Warrants
) to
purchase Common Shares or other Securities (as defined below), (iii)
subscription receipts (
Subscription Receipts
) which entitle the holder
to receive upon satisfaction of certain release conditions, and for no
additional consideration, Common Shares or Warrants of the Company or any
combination thereof, or (iv) units (
Units
) consisting of two or more of
the foregoing (all of the foregoing, collectively, the
Securities
) or
any combination thereof up to an aggregate initial offering price of $20,000,000
(or its equivalent in any other currency used to denominate the Securities at
the time of the offering) during the 25-month period that this short form base
shelf prospectus (the
Prospectus
), including any amendments thereto,
remains effective. Securities may be offered separately or together, in amounts,
at prices and on terms to be determined based on market conditions at the time
of sale and set forth in an accompanying shelf prospectus supplement (a
Prospectus Supplement
). In addition, Securities may be offered and
issued in consideration for the acquisition of other businesses, assets or
securities by the Company or a subsidiary of the Company. The consideration for
any such acquisition may consist of any of the Securities separately, a
combination of Securities or any combination of, among other things, Securities,
cash and assumption of liabilities.
The aggregate market value of Securities sold by or on behalf of the Company pursuant to this prospectus during the period of 12 calendar months immediately prior to, and including, the sale is limited pursuant to Instruction I.B.5. of Form S-3 (the form of the registration statement of which this prospectus forms a part) to no more than one-third of the aggregate market value worldwide of the voting and non-voting common equity held by non-affiliates of the Company. As at the date of this prospectus, (i) aggregate market value worldwide of the voting and non-voting common equity held by non-affiliates of the Company was US$56,274,160, and (ii) the Company had not sold any of its securities in reliance of instruction I.B.5 of Form S-3 during the prior 12 calendar month period that ends on, and includes, the date of this prospectus.
Investing in Securities of the Company involves a high
degree of risk. You should carefully review the risks outlined in this
Prospectus and in the documents incorporated by reference in this Prospectus and
consider such risks in connection with an investment in such Securities. See
Risk Factors.
We are a foreign private issuer under United States
securities laws. Our financial statements incorporated herein by reference have
been prepared in accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards
Board (IASB) and accordingly may not be comparable to financial statements of
United States companies.
Prospective investors should be aware that the acquisition
of the securities described herein may have tax consequences both in the United
States and in Canada. Such consequences for investors who are resident in, or
citizens of, the United States may not be described fully herein. Prospective
investors should read the tax discussion contained in the applicable Prospectus
Supplement with respect to a particular offering of Securities.
The enforcement by investors of civil liabilities under the
United States federal securities laws may be affected adversely by the fact that
the Company is amalgamated and exists under the laws of British Columbia,
Canada, that the majority of its officers and directors are residents of Canada,
that all of the experts named in the registration statement are not residents of
the United States, and that a substantial portion of the assets of the Companys
officers and directors are located outside the United States.
NEITHER THE SEC NOR ANY STATE OR CANADIAN SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENCE.
The specific terms of the Securities with respect to a
particular offering will be set out in the applicable Prospectus Supplement and
may include, where applicable: (i) in the case of Common Shares, the number of
Common Shares offered, the issue price, and any other terms specific to the
Common Shares being offered; (ii) in the case of Warrants, the designation,
number and terms of the Common Shares or other Securities issuable upon exercise
of the Warrants, any procedures that will result in the adjustment of these
numbers, the exercise price, dates and periods of exercise, the currency in
which the Warrants are issued and any other specific terms; (iii) in the case of
Subscription Receipts, the designation, number and terms of the Common Shares or
Warrants receivable upon satisfaction of certain release conditions, any
procedures that will result in the adjustment of those numbers, any additional
payments to be made to holders of Subscription Receipts upon satisfaction of the
release conditions, the terms of the release conditions, terms governing the
escrow of all or a portion of the gross proceeds from the sale of the
Subscription Receipts, terms for the refund of all or a portion of the purchase
price for Subscription Receipts in the event the release conditions are not met
and any other specific terms; and (iv) in the case of Units, the terms of the
component Securities and any other specific terms. A Prospectus Supplement may
include specific variable terms pertaining to the Securities that are not within
the alternatives and parameters described in this Prospectus. Where required by
statute, regulation or policy, and where Securities are offered in currencies
other than Canadian dollars, appropriate disclosure of foreign exchange rates
applicable to such Securities will be included in the Prospectus Supplement
describing such Securities.
Warrants will not be offered for sale separately or to any
member of the public in Canada unless the offering is in connection with, and
forms part of, the consideration for an acquisition or merger transaction.
All information permitted under applicable laws to be omitted
from this Prospectus will be contained in one or more Prospectus Supplements
that will be delivered to purchasers together with this Prospectus, such
delivery to be effected in the case of United States purchasers through the
filing of such Prospectus Supplement or Prospectus Supplements with the SEC.
Each Prospectus Supplement will be incorporated by reference into this
Prospectus for the purposes of securities legislation as of the date of the
Prospectus Supplement and only for the purposes of the distribution of the
Securities to which the Prospectus Supplement pertains.
This Prospectus constitutes a public offering of these
Securities only in those jurisdictions where they may be lawfully offered for
sale and therein only by persons permitted to sell such Securities. The Company
may offer and sell Securities to or through underwriters or dealers and also may
offer and sell certain Securities directly to purchasers or through agents
pursuant to exemptions from registration or qualification under applicable
securities laws. A Prospectus Supplement relating to each issue of Securities
offered thereby will set forth the names of any underwriters, dealers or agents
involved in the offering and sale of such Securities and will set forth the
terms of the offering of such Securities, the method of distribution of such
Securities including, to the extent applicable, the proceeds to the Company and
any fees, discounts or any other compensation payable to underwriters, dealers
or agents and any other material terms of the plan of distribution.
The outstanding Common Shares of the Company are listed for
trading on Toronto Stock Exchange (
TSX
) under the symbol NDM and on
the NYSE MKT under the symbol NAK. Unless otherwise specified in the
applicable Prospectus Supplement, Securities other than the Common Shares of the
Company will not be listed on any securities exchange. On March 18, 2016, the
closing price of the Common Shares on TSX was $0.45 per share, and the closing
price of the Common Shares on NYSE MKT was US$0.36 per share.
There is
currently no market through which Securities, other than the Common Shares, may
be sold and purchasers may not be able to resell such Securities purchased under
this Prospectus. This may affect the pricing of the Securities, other
than the Common Shares, in the secondary market, the
transparency and availability of trading prices, the liquidity of these
Securities and the extent of issuer regulation. See Risk Factors.
2
The offering of Securities hereunder is subject to approval of
certain legal matters on behalf of the Company by McMillan LLP with respect to
Canadian and United States legal matters.
In connection with any offering of Securities (unless otherwise
specified in a Prospectus Supplement), other than an at-the-market
distribution, the underwriters may over-allot or effect transactions which
stabilize or maintain the market price of the Securities offered at a level
above that which might otherwise prevail in the open market. Such transactions,
if commenced, may be discontinued at any time. See
Plan of
Distribution
.
The Companys head office is at 15
th
Floor, 1040
West Georgia Street, Vancouver, British Columbia V6E 4H1. The registered office
of the Company is located at Suite 1500 1055 West Georgia Street, Vancouver,
British Columbia V6E 4N7.
No underwriter has been involved in the preparation of this
Prospectus or performed any review of the contents of this Prospectus.
THE DATE OF
THIS PROSPECTUS IS MARCH 30, 2016.
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TABLE OF CONTENTS
4
ABOUT THIS PROSPECTUS
We are a British Columbia company
that is a reporting issuer under Canadian securities laws in the provinces of
British Columbia, Alberta and Ontario. In addition, our common shares are
registered under Section 12(b) of the United States Securities Exchange Act of
1934, as amended (the
Exchange Act
). Our common shares are traded in
Canada on the TSX under the symbol NDM and in the United States on the NYSE
MKT under the symbol NAK.
This Prospectus is a base shelf
prospectus that:
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we have filed with the securities commissions in the Canadian provinces of
British Columbia, Alberta and Ontario (the
Canadian Qualifying
Jurisdictions
) in order to qualify the offering of the Securities
described in this Prospectus in accordance with Canadian National Instrument
44-102Shelf Distributions (
NI 44-102
); and
-
forms part of a registration statement on Form F-3 (the
Registration
Statement
) that we filed with the Securities and Exchange Commission
(
SEC
) under the
Securities Act of 1933
, as amended (the
U.S.
Securities Act
) utilizing a continuous offering shelf
registration process under the U.S. Securities Act.
Under this shelf registration
process, we may sell any combination of the Securities described in this
Prospectus in one or more offerings up to a total aggregate initial offering
price of $20,000,000. This Prospectus provides you with a general description of
the Securities that we may offer. Each time we sell Securities under this shelf
registration we will provide a Prospectus Supplement that will contain specific
information about the terms of that specific offering. The specific terms of the
Securities in respect of which this Prospectus is being delivered will be set
forth in the Prospectus Supplement and may include, where applicable:
-
in the case of common shares, the number of common shares offered, the
offering price and any other specific terms of the offering;
-
in the case of warrants, the designation, number and terms of the common
shares purchasable upon exercise of the warrants, any procedures that will
result in the adjustment of those numbers, the exercise price, dates and
periods of exercise, and the currency or the currency unit in which the
exercise price must be paid and any other specific terms;
-
in the case of subscription receipts, the designation, number and terms of
the common shares or warrants receivable upon satisfaction of certain release
conditions, any procedures that will result in the adjustment of those
numbers, any additional payments to be made to holders of subscription
receipts upon satisfaction of the release conditions, the terms of the release
conditions, terms governing the escrow of all or a portion of the gross
proceeds from the sale of the subscription receipts, terms for the refund of
all or a portion of the purchase price for subscription receipts in the event
the release conditions are not met and any other specific terms; and
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in the case of units, the designation, number and terms of the common
shares, warrants or subscription receipts comprising the units.
In addition, a Prospectus
Supplement may include specific variable terms pertaining to the Securities that
are not within the alternatives and parameters set forth in this Prospectus.
We file reports and other
information with the securities commissions in the Canadian Qualifying
Jurisdictions. These reports and information are available to the public free of
charge on SEDAR at www.sedar.com. In addition, we file reports and information
with the SEC under the Exchange Act in accordance with the Exchange Acts
reporting requirements for foreign private issuers. See below under
Additional Information for U.S. Investors
for a description of how U.S.
investors may obtain copies of these documents. As a foreign private issuer, we
are exempt from the rules under the Exchange Act prescribing the furnishing and
content of proxy statements, and our officers, directors and principal shareholders are exempt from
the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act. In addition, we are not required to publish financial
statements as promptly as U.S. companies.
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You should rely only on the
information contained in or incorporated by reference into this Prospectus or
contained in any applicable Prospectus Supplement. We have not authorized anyone
to provide you with different information. We are not making an offer of these
Securities in any jurisdiction where the offer is not permitted. You should not
assume that the information contained in this Prospectus and any Prospectus
Supplement is accurate as of any date other than the date on the front of those
documents or that any information contained in any document incorporated by
reference is accurate as of any date other than the date of that document.
Sales of any common shares
pursuant to this Prospectus also includes the rights to purchase a number of
common shares on the terms and conditions set forth in the Companys Shareholder
Rights Plan Agreement (the
Rights
) that are attached to and trade with
each of the common shares. Prior to the occurrence of certain events, the Rights
will not be exercisable or evidenced separately from the common shares, and will
have no value, except as reflected in the market price of the common shares to
which they are attached. The Rights are described in detail below under
Description of Common Shares Shareholder Rights
).
References in this Prospectus and
any Prospectus Supplement to $ are to Canadian dollars and to US$ are to
United States dollars.
References in this Prospectus and
any Prospectus Supplement to we, our, us, Northern Dynasty or the
Company refer to Northern Dynasty Minerals Ltd. and each of its material
subsidiaries, unless the context otherwise requires.
DOCUMENTS INCORPORATED BY REFERENCE
Information has been
incorporated by reference in this Prospectus from documents filed with
securities commissions or similar authorities in the Canadian Qualifying
Jurisdictions, which have also been filed with, or furnished to, the SEC.
Copies of the documents incorporated herein by reference may also be
obtained on request without charge from Northern Dynasty Minerals Ltd.,
15
th
Floor, 1040 West Georgia Street, Vancouver, British Columbia V6E
4H1
(telephone 604-684-6365) (attention: Corporate Secretary), or by
accessing our disclosure documents available through the Internet on the
Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com
and on EDGAR at
www.sec.gov
.
The following documents that we
have (i) filed with the securities regulatory authorities in the jurisdictions
in Canada in which the Company is a reporting issuer, and (ii) filed with or
furnished to the SEC, are specifically incorporated by reference into, and form
an integral part of, this Prospectus:
-
our annual information form for the year ended December 31, 2014, dated
March 30, 2015 (the
2014
AIF
), as filed on SEDAR on March 31,
2015 and incorporated into our report of foreign issuer on Form 6-K furnished
to the SEC on February 12, 2016;
-
our annual report on Form 20-F for the fiscal year ended December 31, 2014
filed with the SEC (the 2014 20-F) on May 15, 2015 and filed on SEDAR on
February 19, 2016;
-
our Amendment No. 1 to annual report on Form 20-F filed with the SEC on May
22, 2015 and filed on SEDAR on February 19, 2016;
-
our notice of meeting and management information circular dated June 8,
2015 distributed in connection with the annual and special meeting of
shareholders of the Company held on July 7, 2015, as filed on SEDAR on June
10, 2015 and incorporated into our report of foreign issuer on Form 6-K
furnished to the SEC on September 14, 2015;
6
-
our unaudited condensed consolidated interim financial statements and the
notes thereto for the three month period ended March 31, 2015 and our
associated managements discussion and analysis for the three month period
ended March 31, 2015, as filed on SEDAR on May 15, 2015 and incorporated into
our report of foreign issuer on Form 6-K furnished to the SEC on May 26, 2015;
-
our unaudited condensed consolidated interim financial statements and the
notes thereto for the three and six month periods ended June 30, 2015 and our
associated managements discussion and analysis for the six month period ended
June 30, 2015, as filed on SEDAR on August 14, 2015 and incorporated into our
report of foreign issuer on Form 6-K furnished to the SEC on August 19, 2015;
-
our unaudited condensed consolidated interim financial statements and the
notes thereto for the three and nine month periods ended September 30, 2015
and our associated managements discussion and analysis for the nine month
period ended September 30, 2015, as filed on SEDAR on November 16, 2015 and
incorporated into our report of foreign issuer on Form 6-K furnished to the
SEC on November 19, 2015;
-
our material change report dated January 19, 2015 regarding the closing of
the special warrant offering completed in December 2014 and January 2015, as
filed on SEDAR on January 19, 2015 and incorporated into our report of foreign
issuer on Form 6-K furnished to the SEC on February 3, 2015;
-
our material change report dated September 21, 2015 regarding the closing
of the special warrant offering completed in August and September 2015, as
filed on SEDAR on September 21, 2015 and incorporated into our report of
foreign issuer on Form 6-K furnished to the SEC on October 8, 2015;
-
our material change report dated January 29, 2016 regarding the closing of
the acquisition of Mission Gold Ltd., as filed on SEDAR on January 29, 2016
and incorporated into our report of foreign issuer on Form 6-K furnished to
the SEC on February 12, 2016; and
-
our material change report dated February 25, 2016 regarding the
restructuring of the board of directors, as filed on SEDAR on February 25,
2016 and in corporate into our report of foreign issuer on Form 6-K furnished
to the SEC on February 26, 2016.
All documents of the type
referred to in section 11.1 of Form 44-101F1 of National Instrument 44-101Short
Form Prospectus Distributions filed by the Company with the securities
commissions or similar regulatory authorities in the applicable provinces of
Canada after the date of this Prospectus, and before the termination of the
Offering, are deemed to be incorporated by reference into this Prospectus.
Any template version of any
marketing materials (as such term is defined in NI 44-101) filed after the
date of a Prospectus Supplement and before the termination of the distribution
of the Securities offered pursuant to such Prospectus Supplement (together with
this Prospectus) is deemed to be incorporated by reference in such Prospectus
Supplement.
In addition, this Prospectus
shall also be deemed to incorporate by reference the following information that
is filed or furnished to the SEC by us under the Exchange Act after (i) the
earlier of the date of the Registration Statement and the date of this
Prospectus, until (ii) the termination of any offering made pursuant to this
Prospectus:
-
all subsequent annual reports on Form 20-F, Form 40-F or Form 10-K that we
may file with the SEC under Exchange Act
-
any Form 10-Q or Form 8-K that we may file with the SEC under the Exchange
Act, and
-
any Form 6-K that we furnish to the SEC under the Exchange Act where we
have identified in such form that it is being incorporated by reference into
the Registration Statement of which this prospectus forms a part.
7
The documents incorporated or
deemed to be incorporated herein by reference contain meaningful and material
information relating to us and the readers should review all information
contained in this Prospectus and the documents incorporated or deemed to be
incorporated herein by reference.
Upon a new annual information
form and related annual financial statements being filed by us with, and where
required, accepted by, the applicable securities regulatory authority during the
currency of this Prospectus, the previous annual information form, the previous
annual financial statements and all interim financial statements, material
change reports and information circulars and all Prospectus Supplements filed
prior to the commencement of the Companys financial year in which a new annual
information form is filed shall be deemed no longer to be incorporated into this
Prospectus for purposes of future offers and sales of Securities hereunder.
A Prospectus Supplement
containing the specific terms of an offering of Securities will be delivered to
purchasers of such Securities together with this Prospectus and will be deemed
to be incorporated by reference into this Prospectus as of the date of such
Prospectus Supplement, but only for the purposes of the offering of Securities
covered by that Prospectus Supplement.
Any statement contained in
this Prospectus or in a document incorporated or deemed to be incorporated by
reference in this Prospectus shall be deemed to be modified or superseded for
the purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. The
modifying or superseding statement need not state that it has modified or
superseded a prior statement or include any other information set forth in the
document that contains the statement that it modifies or supersedes. The making
of such a modifying or superseding statement shall not be deemed an admission
for any purposes that the modified or superseded statement, when made,
constituted a misrepresentation, an untrue statement of a material fact or an
omission to state a material fact that is required to be stated or that is
necessary to make a statement not misleading in light of the circumstances in
which it was made. Any statement so modified or superseded shall not constitute
a part of this Prospectus, except as so modified or superseded.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus and the documents
incorporated herein by reference contain certain forward-looking information and
forward-looking statements within the meaning of applicable Canadian securities
laws and forward-looking statements within the meaning of the United States
Private Securities Litigation Reform Act of 1995.
Forward-looking statements
describe our future plans, strategies, expectations and objectives, and are
generally, but not always, identifiable by use of the words may, will,
should, continue, expect, anticipate, estimate, believe, intend,
plan or project or the negative of these words or other variations on these
words or comparable terminology. Forward-looking statements contained or
incorporated by reference into this Prospectus include, without limitation,
statements regarding:
-
our expectations regarding the potential for permitting of a mine at the
Pebble Project;
-
the outcome of legal proceedings in which we are engaged;
-
our expected financial performance in future periods;
-
our plan of operations, including our plans to carry out and finance
exploration and development activities;
-
our ability to raise capital for exploration and development activities;
-
our expectations regarding the exploration and development potential of the
Pebble Project; and
-
factors relating to our investment decisions.
8
Forward-looking information is
based on the reasonable assumptions, estimates, analysis and opinions of
management made in light of its experience and its perception of trends, current
conditions and expected developments, as well as other factors that management
believes to be relevant and reasonable in the circumstances at the date that
such statements are made, but which may prove to be incorrect. We believe that
the assumptions and expectations reflected in such forward-looking information
are reasonable.
Key assumptions upon which the
Companys forward-looking information are based include:
-
that the Company will ultimately be able to demonstrate that a mine at the
Pebble Project can be developed and operated in an environmentally sound and
socially responsible manner, meeting all relevant federal, state and local
regulatory requirements so that we will be ultimately able to obtain permits
authorizing construction of a mine at the Pebble Project;
-
that the market prices of copper, gold, molybdenum and silver will not
further significantly decline or stay depressed for a lengthy period of time;
-
that we will be able to secure sufficient capital necessary for the
litigation, continued environmental assessment and permitting activities and
engineering work which must be completed prior to any potential development of
the Pebble Project which would then require engineering and financing in order
to advance to ultimate construction;
-
that key personnel will continue their employment with us; and
-
we will continue to be able to secure minimal adequate financing on
acceptable terms.
Readers are cautioned that the
foregoing list is not exhaustive of all factors and assumptions which may have
been used.
Some of the risks and
uncertainties that could cause actual results to differ materially from those
expressed in the forward-looking statements include:
-
the outcome of legal and political challenges with which we are engaged
regarding the Pebble Project;
-
ability to obtain permitting for a mine at the Pebble Project;
-
ability to continue to fund the exploration and development activities;
-
the highly cyclical nature of the mineral resource exploration business;
-
the exploration stage of the Pebble Project and the lack of known reserves
on the Pebble Project;
-
ability to establish that the Pebble Project contains commercially viable
deposits of ore;
-
ability to recover the financial statement carrying values of the Pebble
Project if the Company ceases to continue on a going concern basis;
-
the potential for loss of the services of key executive officers;
-
a history of, and expectation of further, financial losses from operations
impacting our ability to continue on a going concern basis;
-
the volatility of copper, gold, molybdenum and silver prices and mining
share prices;
9
-
the inherent risk involved in the exploration, development and production
of minerals, the presence of unknown geological and other physical and
environmental hazards at the Pebble Project;
-
the potential for changes in, or the introduction of new, government
regulations relating to mining, including laws and regulations relating to the
protection of the environment and project legal titles;
-
potential claims by third parties to titles or rights involving the Pebble
Project;
-
the possible inability to insure our operations against all risks;
-
the highly competitive nature of the mining business; and
-
the dilution to current shareholders from future equity financings is
currently uncertain.
This list is not exhaustive of
the factors that may affect any of the Companys forward-looking statements or
information. Forward-looking statements or information are statements about the
future and are inherently uncertain, and actual achievements of the Company or
other future events or conditions may differ materially from those reflected in
the forward-looking statements or information due to a variety of risks,
uncertainties and other factors, including, without limitation, the risks and
uncertainties described above. See Risk Factors.
Our forward-looking statements
are based on the reasonable beliefs, expectations and opinions of management on
the date of this Prospectus. Although we have attempted to identify important
factors that could cause actual results to differ materially from those
contained in forward-looking information, there may be other factors that cause
results not to be as anticipated, estimated or intended. There is no assurance
that such information will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such information.
Accordingly, readers should not place undue reliance on forward-looking
information. We do not undertake to update any forward-looking information,
except as, and to the extent required by, applicable securities laws.
We qualify all the
forward-looking statements contained in this Prospectus and the documents
incorporated by reference herein and therein by the foregoing cautionary
statements.
CAUTIONARY NOTES TO UNITED STATES INVESTORS CONCERNING
MINERAL RESERVE AND RESOURCE ESTIMATES
This Prospectus, including the
documents incorporated by reference herein, uses terms that comply with
reporting standards in Canada and certain estimates are made in accordance with
Canadian National Instrument 43-101
Standards of Disclosure for Mineral
Projects
(
NI 43-101
). NI 43-101 is a rule developed by the Canadian
Securities Administrators that establishes standards for all public disclosure
an issuer makes of scientific and technical information concerning mineral
projects. Unless otherwise indicated, all resource estimates contained in or
incorporated by reference in this Prospectus have been prepared in accordance
with NI 43-101. These standards differ significantly from the requirements of
the SEC, and resource information contained herein and incorporated by reference
herein may not be comparable to similar information disclosed by companies in
the United States (
US companies
).
In addition, this Prospectus uses
the terms measured mineral resources, indicated mineral resources and
inferred mineral resources to comply with the reporting standards in Canada.
These classifications adhere to the mineral resource and mineral reserve
definitions and classification criteria developed by the Canadian Institute of
Mining and are more particularly described in our 2014 Form 20-F and amendment
thereto. We advise United States investors that while the terms measured
mineral resources, indicated mineral resources and inferred mineral
resources are recognized and required by Canadian regulations, the SEC does not
recognize them. United States investors are cautioned not to assume that any
part or all of the mineral deposits in these categories will ever be converted
into mineral reserves. These terms have a great amount of uncertainty as to
their existence, and great uncertainty as to their economic and legal
feasibility.
10
Further, inferred resources
have a great amount of uncertainty as to their existence and as to whether they
can be mined legally or economically. Therefore, United States investors are
also cautioned not to assume that all or any part of the inferred resources
exist. In accordance with Canadian rules, estimates of inferred mineral
resources cannot form the basis of feasibility or other economic studies,
except in limited circumstances where permitted under NI 43-101.
It cannot be assumed that all or
any part of measured mineral resources, indicated mineral resources, or
inferred mineral resources will ever be upgraded to a higher category.
Investors are cautioned not to assume that any part of the reported measured
mineral resources, indicated mineral resources, or inferred mineral
resources in this Prospectus is economically or legally mineable.
In addition, disclosure of
contained ounces is permitted disclosure under Canadian regulations; however,
the SEC only permits issuers to report mineralization as in place tonnage and
grade without reference to unit measures.
For the above reasons,
information contained in this Prospectus and the documents incorporated by
reference herein containing descriptions of our mineral deposits may not be
comparable to similar information made public by US companies subject to the
reporting and disclosure requirements under the United States federal securities
laws and the rules and regulations thereunder.
GLOSSARY
In this Prospectus the following
terms mean:
AIF
|
means Northern Dynastys annual information form for the
year ended December 31, 2014, which is dated March 30, 2015.
|
|
|
EPA
|
means United States Environmental Protection Agency.
|
|
|
Pebble Project
|
the Companys only material mineral project which is a
large copper-gold-molybdenum- silver mineral project located in the
southwest part of the State of Alaska, USA.
|
|
|
2014 Pebble
Technical
Report
|
the 43-101 technical report entitled 2014 Technical
Report on the Pebble Project, Southwest Alaska, USA by J. David Gaunt,
P.Geo., James Lang, P.Geo, Eric Titley, P.Geo. and Ting Lu, P. Eng.,
effective date December 31, 2014.
|
|
|
SEC
|
means the United States Securities and Exchange
Commission.
|
|
|
SEDAR
|
means the System for Electronic Document Analysis and
Retrieval of the Canadian Securities Administrators.
|
|
|
TSX
|
means the Toronto Stock Exchange.
|
|
|
U.S. Securities Act
|
means United States
Securities Act of 1933
, as
amended.
|
NORTHERN DYNASTY MINERALS LTD.
This summary highlights
information contained elsewhere or incorporated by reference in this document.
You should read this entire document carefully, including the section entitled
Risk Factors and our financial statements and the related notes included
elsewhere in this document or incorporated by reference herein.
11
Overview
Northern Dynasty is a mineral
exploration company existing under the
British Columbia Corporations Act
focused on developing the Pebble copper-gold-molybdenum-silver mineral
project located in the state of Alaska, U.S. (the
Pebble Project
). The
Pebble Project is located in southwest Alaska, 19 miles (30 kilometers) from the
village of Iliamna, and approximately 200 miles (320 kilometers) southwest of
the city of Anchorage.
Our Alaska mineral resource
exploration business is operated through an Alaskan registered limited
partnership, the Pebble Limited Partnership (the
Pebble Partnership
or
PLP
), in which we own a 100% interest through an Alaskan general
partnership, the Northern Dynasty Partnership. Pebble Mines Corp., a 100%
indirectly owned subsidiary of the Company, is the general partner of the Pebble
Partnership and responsible for its day-to-day operations.
We currently have negative
operating cash flow because we currently have no revenues. In addition, as a
result of our business plans for development of the Pebble Project, we expect
cash flow from operations to be negative until revenues from production at the
Pebble Project begin to offset our operating expenditures. In addition, our cash
flow from operations will be affected in the future by expenses that we incur in
connection with the Pebble Project. We will require substantial additional
capital in order to fund our planned exploration and development activities. See
Risk Factors.
RECENT DEVELOPMENTS
Recent Financings and Acquisitions
2015 Special Warrant Financing
We completed the offer and sale
of an aggregate of 37,600,000 Special Warrants at a price of $0.399 per Special
Warrant for gross proceeds of approximately $15.0 million as follows:
-
an initial 25,624,408 Special Warrants were issued and sold on August 28,
2015 for gross proceeds of $10.2 million; and
-
a subsequent 11,975,592 Special
Warrants were issued and sold on September 9, 2015 for gross proceeds of $4.8
million.
All Special Warrants have
subsequently been converted into common shares on a one-for-one basis effective
November 13, 2015.
The net proceeds of the offering
of approximately $14.4 million were used to continue to fund a multidimensional
strategy, including certain expenditures to address the Environmental Protection
Agencys (
EPA
) preemptive regulatory process under Section 404(c) of
the Clean Water Act and prepare the Pebble Project to initiate federal and state
permitting under NEPA. Over the past few months, our focus has been on
litigation related to potential violations of the FACA. Funds were also spent on
litigation relating to the EPAs statutory authority to act pre-emptively under
the Clean Water Act, potential violations of FOIA, as well as facilitation of
various third-party investigations of EPA actions with respect to the Pebble
Project. Additionally, funds were used to maintain an active corporate presence
in Alaska to advance relationships with political and regulatory offices of
government, Alaska Native partners and broader stakeholder groups, maintain the
Pebble Project, the Pebble Site and Pebble claims in good standing and continue
environmental monitoring, and for general and administration costs to maintain
the Company in good standing and advance a potential partner(s) transaction.
Acquisition of dormant listed issuer with $4.7 million in
cash
On August 31, 2015, we entered
into an arrangement agreement (the
Arrangement Agreement
) with TSX
Venture Exchange-listed
Cannon Point Resources Ltd. (
Cannon
Point
) whereby we agreed to acquire 100% of the issued and outstanding
Cannon Point shares for approximately 12.9 million common shares of the Company
(the
Arrangement
). The purpose of acquiring Cannon Point
was for the cash held by Cannon Point that will be used to advance the Companys
objectives. Under the Arrangement, Cannon Point shareholders (other than
dissenting shareholders) received the certain Arrangement consideration, being
0.376 of a common share of the Company (the
Exchange Ratio
), subject to
adjustment in accordance with the terms of the Arrangement Agreement. Upon
completion of the transactions contemplated by the Arrangement Agreement, Cannon
Point shareholders (other than dissenting shareholders) became shareholders of
Northern Dynasty. All outstanding Cannon Point options and Cannon Point warrants
were converted to replacement options and replacement warrants, as the case may
be, to acquire Northern Dynasty common shares after giving effect to the
Exchange Ratio. All such replacement options, with the exception of those
options granted to charities, Fiore Management & Advisory Corp. and any
optionees of Cannon Point who are continuing as directors of Northern Dynasty
which will have the same expiry date as the original Cannon Point options, will
under the Arrangements terms, expire 90 days after the effective date of the
Arrangement. All such replacement warrants will expire in accordance with their
original terms.
12
Gordon Keep was nominated by
Cannon Point as its nominee to the Companys board on completion. Holders of
approximately 21% of Cannon Point common shares agreed to support the
Arrangement, including shareholders associated with Fiore Management &
Advisory Corp., a mining advisory company in which Mr. Keep is an executive.
Cannon Point has no currently active operations or assets other than cash.
We have applied the significance
tests set forth in National Instrument 51-102 -
Continuous Disclosure
Obligations
(
NI 51-102
) and Item 11 of Regulation S-X and has
concluded, based on a comparative analysis of the assets, investments and profit
or less relating to Cannon Point, that the acquisition of Cannon Point is not be
a significant acquisition for the Company under either (i) NI 51-102, or (ii)
Item 11 of Regulation S-X. Accordingly, we will not be filing financial
statements of Cannon Point in connection with the acquisition and have not
included any financial statements of Cannon Point with this Prospectus.
We completed the acquisition of
Cannon Point on October 29, 2015. Pursuant to the Arrangement, we issued an
aggregate of 12,881,344 common shares to the former shareholders of Cannon Point
in accordance with the Exchange Ratio. In addition, an aggregate of 8,375,000
share purchase warrants of Cannon Point were exchanged for an aggregate of
3,149,000 share purchase warrants of Northern Dynasty exercisable at a price of
$2.13 per share on or before December 17, 2015, and an aggregate of 3,312,500
stock options of Cannon Point were exchanged for an aggregate of 1,245,500 stock
options of Northern Dynasty with exercise prices ranging from $0.29 to $0.43 per
share. All such options expired on January 29, 2016, with the exception of an
aggregate of 676,800 options which will retain their original expiry date.
Acquisition of Mission Gold Ltd.
On October 8, 2015, we entered
into a binding letter of intent to acquire 100% of the TSX Venture
Exchange-listed Mission Gold Ltd. (
Mission
); and on October 30, 2015,
we and Mission entered into a definitive arrangement agreement in respect of the
acquisition. Missions primary assets are approximately $9 million in cash and a
100% interest in the Alto Parana titanium project. It was a condition of closing
that Mission enter into a binding agreement with a third party acceptable to the
Company for the sale of its wholly owned subsidiary, CIC Resources Inc., which
indirectly holds the Alto Parana titanium project. The purpose of acquiring
Mission is for the cash and cash equivalents held by Mission that will be used
to advance the Companys objectives.
The transaction completed on
December 24, 2015 by way of a statutory plan of arrangement whereby each share
of Mission was exchanged for 0.55 of a Northern Dynasty common share resulting
in Northern Dynasty issuing 27,593,341 Northern Dynasty common shares to Mission
shareholders, subject to adjustment if adjusted net working capital is below a
certain threshold. The outstanding Mission warrants were exchanged for
16,673,348 warrants of Northern Dynasty having a weighted average exercise price
of $0.97.
Northern Dynasty has appointed
Mr. Marcel de Groot, as a nominee of Mission, to its board of directors in
connection with the closing of the acquisition.
We have applied the significance
tests set forth in National Instrument 51-102 -
Continuous Disclosure
Obligations
(
NI 51-102
) and Item 11 of Regulation S-X and has
concluded, based on a comparative analysis of the assets, investments and profit or less relating to Mission,
that the acquisition of Mission is not be a significant acquisition for the
Company under either (i) NI 51-102, or (ii) Item 11 of Regulation S-X.
Accordingly, we will not be filing financial statements of Mission in connection
with the acquisition and have not included any financial statements of Mission
with this Prospectus.
13
December 2015 Common Share Financing
On December 23, 2015, we
announced the completion of the offer and sale of an aggregate of 12,573,292
common shares at a price of $0.412 per share on a private placement basis for
gross proceeds of approximately $5.28 million.
Northern Dynasty has appointed
Mr. Desmond Balakrishnan to its board of directors on December 15, 2015.
2014 $15.5 million Special Warrant Financing
On December 31, 2014 and January
13, 2015, we completed the offer and sale of an aggregate of 35,962,735 special
warrants at a price of $0.431 per Special Warrant for gross proceeds of
approximately $15.5 million (the
December 2014 Offering
). All special
warrants have subsequently been exercised and a total of 35,962,735 common
shares have been issued.
The proceeds of the December 2014
Offering were used to implement a multi-pronged strategy to address the EPAs
pre-emptive CWA 404(c) regulatory action, to maintain relationships with
governments, Alaska Native groups and other stakeholders, and corporate costs.
The intended use of proceeds was predicated on a 12-month period and
contemplated significant curtailing of certain operations. Due to the initial
success of the EPA strategy (and the inherent uncertainty as to timing and costs
associated with that strategy), the Company elected not to curtail its
operations as originally envisaged, but rather pursued additional financing to
carry out its stated strategy. Accordingly, the funds raised were effectively
depleted at the end of May 2015 rather than December 2015 as budgeted.
Update on Environmental Protection Agency and Bristol Bay
Watershed Assessment
Counsel for Northern Dynasty and
the Pebble Partnership submitted numerous letters to the independent Office of
the EPA Inspector General ("
OIG
") since January 2014, raising concerns of
apprehension of bias, process irregularities and undue influence by
environmental organizations in the EPA's preparation of the Bristol Bay
Watershed Assessment. In response to Congressional and other requests, on May 2,
2014, the OIGs office announced that it would investigate the EPAs conduct in
preparing
An Assessment of Potential Mining Impacts on Salmon Ecosystems of
Bristol Bay, Alaska
, "to determine whether the EPA adhered to laws,
regulations, policies and procedures in developing its assessment of potential
mining impacts in Bristol Bay, Alaska." On January 13, 2016, the OIG published
its report (the
OIG Report
). While acknowledging significant scope
limitations in its review and subsequent OIG Report, the OIG concluded that:
we found no evidence of bias in how the EPA conducted its assessment of the
Bristol Bay watershed, or that the EPA pre-determined the assessment outcome,
but that an EPA Region 10 employee may have been guilty of a possible misuse of
position.
Several other investigations of
EPA conduct at Pebble contradict the OIG Report. The US Congress House
Committee on Oversight and Government Reform found that EPA employees had
inappropriate contact with outside groups and failed to conduct an impartial,
fact-based review of the proposed Pebble mine. Former United States Senator and
Defense Secretary William S. Cohen
1
said his investigation raise(s)
serious concerns as to whether EPA orchestrated the process to reach a
pre-determined outcome; had inappropriately close relationships with anti-mine
advocates; and was candid about its decision-making process.
The findings of the OIG Report
are not expected to materially affect the Pebble Partnership strategy for
addressing the EPAs CWA 404(c) regulatory action. The Company remains confident
that the Pebble Project will ultimately enter federal and state permitting
unencumbered by any extraordinary development restrictions.
_______________________________________
1
October
2015 Report by The Cohen Group, retained by the Pebble Partnership to conduct an
independent review of whether the EPA acted fairly in connection with its
evaluation of potential mining in the Bristol Bay watershed.
14
Changes to the Board of Directors
On February 25, 2016, the Company
announced that Gordon Fretwell, Marchand Snyman, Wayne Kirk, Russell Hallbauer,
Peter Mitchell and Scott Cousens resigned as directors of the Company. The
Company further announced that Mr. David De Witt has been appointed to the board
of directors. The board of directors is now comprised of seven members: David De
Witt, Desmond Balakrishnan, Ronald Thiessen, Robert Dickinson, Ken Pickering,
Marcel de Groot and Gordon Keep.
USE OF PROCEEDS
Unless otherwise specified in a
Prospectus Supplement, the net proceeds from the sale of the Securities will be
used for general corporate purposes, including funding working capital,
potential future acquisitions and capital expenditures. Each Prospectus
Supplement will contain specific information concerning the use of proceeds from
that sale of Securities.
All expenses relating to an
offering of Securities and any compensation paid to underwriters, dealers or
agents, as the case may be, will be paid out of the Companys general funds,
unless otherwise stated in the applicable Prospectus Supplement.
CAPITALIZATION AND INDEBTEDNESS
The following table sets forth
our capitalization and indebtedness as of September 30, 2015. The information
presented should be read in conjunction with our audited consolidated financial
statements as at and for the years ended December 31, 2014 and 2013 and our
unaudited interim consolidated financial statements as at and for the nine
months ended September 30, 2015, which are incorporated by reference in this
Prospectus.
Description
|
As at September 30, 2015
($
thousands)
|
Liabilities
|
|
Total Current Liabilities
|
13,933
|
Total Liabilities
|
13,933
|
Equity
|
|
Share Capital
|
404,154
|
Reserves
|
105,242
|
Deficit
|
(366,716)
|
Total Equity
|
142,680
|
There have been no material
changes in our share and debt capital, on a consolidated basis, since September
30, 2015, being the date of the Companys most recently filed unaudited
condensed consolidated interim financial statements incorporated by reference in
this Prospectus, other than the issuance of the following securities:
|
(i)
|
37,600,000 common shares of the Company upon the exercise
of 37,600,000 Special Warrants;
|
|
|
|
|
(ii)
|
3,657,500 stock options of the Company with an exercise
price of $0.50;
|
|
|
|
|
(iii)
|
1,245,000 stock options of the Company issued in
connection with the acquisition of Cannon Point;
|
15
|
(iv)
|
12,881,344 common shares of the Company issued in
connection with the acquisition of Cannon Point;
|
|
|
|
|
(v)
|
12,573,292 common shares issued in connection with a
private placement;
|
|
|
|
|
(vi)
|
27,593,341 common shares and 16,673,348 warrants issued
in connection with the acquisition of Mission; and
|
|
|
|
|
(v)
|
155,100 common shares of the Company issued upon exercise
of stock options
|
PLAN OF DISTRIBUTION
The Company may sell the
Securities to or through underwriters or dealers, and also may sell Securities
to one or more other purchasers directly or through agents, including sales
pursuant to ordinary brokerage transactions and transactions in which a
broker-dealer solicits purchasers. Underwriters may sell Securities to or
through dealers. Each Prospectus Supplement will set forth the terms of the
offering, including the name or names of any underwriters, dealers or agents and
any fees or compensation payable to them in connection with the offering and
sale of a particular series or issue of Securities, the public offering price or
prices of the Securities and the proceeds to the Company from the sale of the
Securities.
The Securities may be sold, from
time to time in one or more transactions at a fixed price or prices which may be
changed or be at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices, including sales in
transactions that are deemed to be at-the-market distributions as defined in
National Instrument 44-102Shelf Distributions, including sales made directly on
the TSX, NYSE MKT or other existing trading markets for the Securities. The
prices at which the Securities may be offered may vary as between purchasers and
during the period of distribution. If, in connection with the offering of
Securities at a fixed price or prices, the underwriters have made a bona fide
effort to sell all of the Securities at the initial offering price fixed in the
applicable Prospectus Supplement, the public offering price may be decreased and
thereafter further changed, from time to time, to an amount not greater than the
initial public offering price fixed in such Prospectus Supplement, in which case
the compensation realized by the underwriters will be decreased by the amount
that the aggregate price paid by purchasers for the Securities is less than the
gross proceeds paid by the underwriters to the Company.
Underwriters, dealers and agents
who participate in the distribution of the Securities may be entitled under
agreements to be entered into with the Company to indemnification by the Company
against certain liabilities, including liabilities under the U.S. Securities Act
and Canadian securities legislation, or to contribution with respect to payments
which such underwriters, dealers or agents may be required to make in respect
thereof. Such underwriters, dealers and agents may be customers of, engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
In connection with any offering
of Securities, other than an at-the-market distribution, the underwriters may
over-allot or effect transactions which stabilize or maintain the market price
of the Securities offered at a level above that which might otherwise prevail in
the open market. Such transactions, if commenced, may be discontinued at any
time.
Unless otherwise specified in the
applicable Prospectus Supplement, the Company does not intend to list any of the
Securities other than the Common Shares on any securities exchange. Any
underwriters, dealers or agents to or through which Securities other than the
Common Shares are sold by the Company for public offering and sale may make a
market in such Securities, but such underwriters, dealers or agents will not be
obligated to do so and may discontinue any such market making at any time and
without notice. No assurance can be given that a market for trading in
Securities of any series or issue will develop or as to the liquidity of any
such market, whether or not the Securities are listed on a securities exchange.
16
DIVIDEND POLICY
The Company has not declared or
paid any dividends on its Common Shares since the date of its incorporation. The
Company intends to retain its earnings, if any, to finance the growth and
development of its business and does not expect to pay dividends or to make any
other distributions in the near future. The Companys board of directors will
review this policy from time to time having regard to the Companys financing
requirements, financial condition and other factors considered to be relevant.
DESCRIPTION OF COMMON SHARES
Authorized Capital
The Companys authorized capital
consists of an unlimited number of common shares without par value.
Common Shares
As of March 7, 2016, there
were 222,150,876 common shares outstanding.
Information regarding the number
of common shares outstanding as at December 31, 2014 is provided in our 2014
Form 20-F and information regarding the number of common shares outstanding as
at September 30, 2015 is provided in our unaudited condensed consolidated
interim financial statements for the nine months ended September 30, 2015 (our
2015 Q3 FS
). Our 2014 Form 20-F and our 2015 Q3 FS are each
incorporated by reference herein.
All of our common shares rank
equally as to dividends, voting rights and as to any distribution of our assets,
or on us being wound-up or liquidated. There are no indentures or agreements
limiting the payment of dividends and there are no conversion rights, special
liquidation rights, pre-emptive rights or subscription rights attached to our
common shares. None of our currently outstanding common shares are subject to
any call or assessment.
Options to Purchase Common Shares
Information regarding the number
of common share purchase options outstanding as at December 31, 2014 is provided
in our 2014 Form 20-F and information regarding the number of common share
purchase options outstanding as at September 30, 2015 is provided in our 2015 Q3
FS.
Our Articles
Information regarding certain material provisions of (i) our
Notice of Articles and Articles, and (ii) certain provisions of the British
Columbia
Business Corporations Act
(the
Business Corporations
Act
) applicable to the Company is included in our 2014 Form 20-F.
Shareholder Rights
Attached to and trading with each
of the Companys common shares registered hereunder is a right (the
Right
) to purchase a number of common shares on the terms and
conditions set forth in the Shareholder Rights Plan Agreement between the
Company and Computershare Investor Services Inc. dated May 17, 2013 (the
Shareholder Rights Plan
) as described below under Shareholder Rights
Plan.
The terms of the Rights granted
under the Shareholders Rights Plan are summarized as follows:
Term
The Shareholder Rights Plan
(unless terminated earlier) will remain in effect until termination of the
annual meeting of shareholders of the Company in 2016 unless the term of the
Shareholder Rights Plan is extended beyond such date by resolution of
shareholders at such meeting.
17
Issuance of Rights
Under the Shareholder Rights
Plan, one Right was issued by the Company in respect of each common share (a
Voting Share
) outstanding as of the close of business (Vancouver time)
(the
Record Time
) on the effective date of May 17, 2013 (the
Effective Date
). Voting Shares include the common shares and any
other shares of the Company entitled to vote generally in the election of all
directors. One Right has been and will also be issued for each additional Voting
Share issued after the Record Time and prior to the earlier of the Separation
Time and the Expiration Time, subject to the earlier termination or expiration
of the Rights as set out in the Shareholder Rights Plan.
As of the Effective Date and the
date hereof, the only Voting Shares outstanding were the common shares.
Certificates and Transferability
Prior to the Separation Time, the
Rights will be evidenced by a legend imprinted on certificates for common shares
issued after the Record Time. Rights are also attached to common shares
outstanding on the Effective Date, although share certificates issued prior to
the Effective Date will not bear such a legend. Shareholders are not required to
return their certificates in order to have the benefit of the Rights. Prior to
the Separation Time, Rights will trade together with the common shares and will
not be exercisable or transferable separately from the common shares. From and
after the Separation Time, the Rights will become exercisable, will be evidenced
by Rights Certificates and will be transferable separately from the common
shares.
Separation of Rights
The Rights will become
exercisable and begin to trade separately from the associated common shares at
the
Separation Time
which is generally (subject to the ability of the
Board to defer the Separation Time) the close of business on the tenth trading
day after the earliest to occur of:
-
a public announcement that a person or group of affiliated or associated
persons or persons acting jointly or in concert has become an
Acquiring
Person
, meaning that such person or group has acquired Beneficial
Ownership (as defined in the Rights Plan) of 20% or more of the outstanding
Voting Shares other than as a result of: (i) a reduction in the number of
Voting Shares outstanding; (ii) a
Permitted Bid
or
Competing
Permitted Bid
(as defined below); (iii) acquisitions of Voting Shares
in respect of which the Board has waived the application of the Rights
Agreement; (iv) other specified exempt acquisitions and pro rata acquisitions
in which shareholders participate on a pro rata basis; or (v) an acquisition
by a person of Voting Shares upon the exercise, conversion or exchange of a
security convertible, exercisable or exchangeable into a Voting Share received
by a person in the circumstances described in (ii), (iii) or (iv) above;
-
the date of commencement of, or the first public announcement of an
intention of any person (other than the Company or any of its subsidiaries) to
commence a takeover bid (other than a Permitted Bid or a Competing Permitted
Bid) where the Voting Shares subject to the bid owned by that person
(including affiliates, associates and others acting jointly or in concert
therewith) would constitute 20% of more of the outstanding Voting Shares; and
-
the date upon which a Permitted Bid or Competing Permitted Bid ceases to
qualify as such. Promptly following the Separation Time, separate certificates
evidencing rights (
Rights Certificates
) will be mailed to the holders
of record of the Voting Shares as of the Separation Time and the Rights
Certificates alone will evidence the Rights.
Rights Exercise Privilege
After the Separation Time, each
Right entitles the holder thereof to purchase one common share at an initial
Exercise Price
equal to three times the
Market Price
at the
Separation Time. The Market Price is defined as the average of the daily closing
prices per share of such securities on each of the 20 consecutive trading days
through and including the trading day immediately preceding the Separation Time.
Following a transaction which results in a person becoming an Acquiring Person (a
Flip-In Event
),
the Rights entitle the holder thereof to receive, upon exercise, such number of
common shares which have an aggregate Market Price (as of the date of the
Flip-In Event) equal to twice the then Exercise Price of the Rights for an
amount in cash equal to the Exercise Price. Essentially, following a Flip-In
Event, the Rights entitle the holder thereof to purchase two times the number of
common shares that the holder could have otherwise acquired for the same
purchase price. In such event, however, any Rights beneficially owned by an
Acquiring Person (including affiliates, associates and other acting jointly or
in concert therewith), or a transferee of any such person, will be null and
void. A Flip-In Event does not include acquisitions approved by the Board or
acquisitions pursuant to a Permitted Bid or Competing Permitted Bid.
18
Permitted Bid Requirements
A bidder can make a takeover bid
and acquire Voting Shares without triggering a Flip-In Event under the Rights
Plan if the takeover bid qualifies as a Permitted Bid. The requirements of a
Permitted Bid
include the following:
-
the takeover bid must be made by means of a takeover bid circular;
-
the takeover bid is made to all holders of Voting Shares on the books of
the Company, other than the offeror;
-
no Voting Shares are taken up or paid for pursuant to the takeover bid
unless more than 50% of the Voting Shares held by independent shareholders
(as defined): (i) shall have been deposited or tendered pursuant to the
take-over bid and not withdrawn; and (ii) have previously been or are taken up
at the same time;
-
the takeover bid contains an irrevocable and unqualified provision that, no
Voting Shares will be taken up or paid for pursuant to the takeover bid prior
to the close of business on the date which is not less than 60 days following
the date of the takeover bid;
-
the takeover bid contains an irrevocable and unqualified provision that,
Voting Shares may be deposited pursuant to such takeover bid at any time
during the period of time between the date of the takeover bid and the date on
which Voting Shares may be taken up and paid for and any Voting Shares
deposited pursuant to the takeover bid may be withdrawn until taken up and
paid for; and
-
the takeover bid contains an irrevocable and unqualified provision that, if
on the date on which Voting Shares may be taken up and paid for under the
takeover bid, more than 50% of the Voting Shares held by Independent
Shareholders have been deposited pursuant to the takeover bid and not
withdrawn, the offeror will make public announcement of that fact and the
takeover bid will remain open for deposits and tenders of Voting Shares for
not less than 10 business days from the date of such public announcement.
The Shareholder Rights Plan also
allows for a competing Permitted Bid (a
Competing Permitted Bid
) to be
made while a Permitted Bid is in existence. A Competing Permitted Bid must
satisfy all of the requirements of a Permitted Bid except that it may expire on
the same date as the Permitted Bid, subject to the requirement that it be
outstanding for a minimum period of 35 days (the minimum period required under
Canadian securities laws).
Permitted Lock-Up Agreements
A person will not become an
Acquiring Person by virtue of having entered into an agreement (a
Permitted
Lock-Up Agreement
) with a Shareholder whereby the Shareholder agrees to
deposit or tender Voting Shares to a takeover bid (the
Lock-Up Bid
)
made by such person, provided that the agreement meets certain requirements
including:
-
the terms of the agreement are publicly disclosed and a copy of the
agreement is publicly available not later than the date of the Lock-Up Bid or,
if the Lock-Up Bid has not been made prior to the date on which such agreement
is entered into, not later than the first business day following the date of
such agreement;
19
-
the holder who has agreed to tender Voting Shares to the Lock-Up Bid made
by the other party to the agreement is permitted to terminate its obligation
under the agreement, and to terminate any obligation with respect to the
voting of such Voting Shares, in order to tender Voting Shares to another
takeover bid or to support another transaction where: (i) the offer price or
value of the consideration payable under the other takeover bid or transaction
is greater than the price or value of the consideration per share at which the
holder has agreed to deposit or tender Voting Shares to the Lock-Up Bid, or is
greater than a specified minimum which is not more than 7% higher than the
price or value of the consideration per share at which the holder has agreed
to deposit or tender Voting Shares under the Lock-Up Bid; and (ii) if the
number of Voting Shares offered to be purchased under the Lock-Up Bid is less
than all of the Voting Shares held by Shareholders (excluding Voting Shares
held by the offeror), the number of Voting Shares offered to be purchased
under the other takeover bid or transaction (at an offer price not lower than
in the Lock-Up Bid) is greater than the number of Voting Shares offered to be
purchased under the Lock-Up Bid or is greater than a specified number which is
not more than 7% higher than the number of Voting Shares offered to be
purchased under the Lock-Up Bid; and
-
no break-up fees, top-up fees, or other penalties that exceed in the
aggregate the greater of 2.5% of the price or value of the consideration
payable under the Lock-Up Bid and 50% of the increase in consideration
resulting from another takeover bid or transaction shall be payable by the
holder if the holder fails to deposit or tender Voting Shares to the Lock-Up
Bid.
Waiver and Redemption
If a potential offeror does not
desire to make a Permitted Bid, it can negotiate with, and obtain the prior
approval of, the Board to make a takeover bid by way of a takeover bid circular
sent to all holders of Voting Shares on terms which the Board considers fair to
all Shareholders. In such circumstances, the Board may waive the application of
the Shareholder Rights Plan thereby allowing such bid to proceed without
dilution to the offeror. Any waiver of the application of the Shareholder Rights
Plan in respect of a particular takeover bid shall also constitute a waiver of
any other takeover bid which is made by means of a takeover bid circular to all
holders of Voting Shares while the initial takeover bid is outstanding. The
Board may also waive the application of the Shareholder Rights Plan in respect
of a particular Flip-in Event that has occurred through inadvertence, provided
that the Acquiring Person that inadvertently triggered such Flip-in Event
reduces its beneficial holdings to less than 20% of the outstanding Voting
Shares within 14 days or such earlier or later date as may be specified by the
Board. With the prior consent of the holders of Voting Shares, the Board may,
prior to the occurrence of a Flip-in Event that would occur by reason of an
acquisition of Voting Shares otherwise than pursuant to the foregoing, waive the
application of the Shareholder Rights Plan to such Flip-in Event. The Board may,
with the prior consent of the holders of Voting Shares, at any time prior to the
occurrence of a Flip-in Event, elect to redeem all but not less than all of the
then outstanding Rights at a redemption price of $0.00001 per Right. Rights are
deemed to be redeemed following completion of a Permitted Bid, a Competing
Permitted Bid or a takeover bid in respect of which the Board has waived the
application of the Rights Plan.
Protection against Dilution
The Exercise Price, the number
and nature of securities which may be purchased upon the exercise of Rights and
the number of Rights outstanding are subject to adjustment from time to time to
prevent dilution in the event of dividends, subdivisions, consolidations,
reclassifications or other changes in the outstanding common shares, pro rata
distributions to holders of common shares and other circumstances where
adjustments are required to appropriately protect the interests of the holders
of Rights.
Exemptions for Investment Advisors
Investment advisors (for client
accounts), trust companies (acting in their capacity as trustees or
administrators), statutory bodies whose business includes the management of
funds (for employee benefit plans, pension plans, or insurance plans of various
public bodies) and administrators or trustees of registered pension plans or
funds acquiring greater than 20% of the Voting Shares are exempted from
triggering a Flip-In Event, provided they are not making, either alone or
jointly or in concert with any other person, a takeover bid.
20
Duties of the Board
The adoption of the Shareholder
Rights Plan will not in any way lessen or affect the duty of our board of
directors to act honestly and in good faith with a view to the best interests of
the Company. Our board, when a takeover bid or similar offer is made, will
continue to have the duty and power to take such actions and make such
recommendations to shareholders as are considered appropriate.
Amendment
We may make amendments to the
Shareholder Rights Plan at any time to correct any clerical or typographical
error and may make amendments which are required to maintain the validity of the
Shareholder Rights Plan due to changes in any applicable legislation,
regulations or rules. The Company may, with the prior approval of Shareholders
(or the holders of Rights if the Separation Time has occurred), supplement,
amend, vary, rescind or delete any of the provisions of the Shareholder Rights
Plan.
DESCRIPTION OF WARRANTS
The following description, together with the additional
information the Company may include in any Prospectus Supplements, summarizes
the material terms and provisions of the Warrants that the Company may offer
under this Prospectus, which may consist of Warrants to purchase Common Shares
or other Securities and may be issued in one or more series. Warrants may be
offered independently or together with Common Shares or other Securities offered
by any Prospectus Supplement, and may be attached to or separate from those
Securities. Warrants will not, however, be offered for sale separately or to any
member of the public in Canada unless the offering is in connection with, and
forms part of, the consideration for an acquisition or merger transaction. While
the terms summarized below will apply generally to any Warrants that the Company
may offer under this Prospectus, the Company will describe the particular terms
of any series of Warrants that it may offer in more detail in the applicable
Prospectus Supplement. The terms of any Warrants offered under a Prospectus
Supplement may differ from the terms described below.
General
Any Warrants issued will be
issued under and governed by the terms of one or more warrant indentures or
agreement (each a
Warrant Indenture
) between the Company and a warrant
trustee or warrant agent (a
Warrant Trustee
) that the Company will name
in the relevant Prospectus Supplement. Each Warrant Trustee will be a financial
institution organized under the laws of Canada or any province thereof and
authorized to carry on business as a trustee. If applicable, the Company will
file with the SEC as exhibits to the registration statement of which this
Prospectus is a part, or will incorporate by reference from a Report of Foreign
Private Issuer on Form 6-K that the Company files with the SEC, any Warrant
Indenture describing the terms and conditions of such Warrants that the Company
is offering before the issuance of such Warrants.
This summary of some of the
provisions of the Warrants is not complete. The statements made in this
Prospectus relating to any Warrant Indenture and Warrants to be issued under
this Prospectus are summaries of certain anticipated provisions thereof and do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all provisions of the applicable Warrant Indenture.
Prospective investors should refer to the Warrant Indenture relating to the
specific Warrants being offered for the complete terms of the Warrants. The
applicable Prospectus Supplement relating to any Warrants offered by the Company
will describe the particular terms of those Warrants and include specific terms
relating to the offering.
The particular terms of each
issue of Warrants will be described in the applicable Prospectus Supplement.
This description will include, where applicable:
-
the designation and aggregate number of Warrants;
-
the price at which the Warrants will be offered;
-
the currency or currencies in which the Warrants will be offered;
21
-
the date on which the right to exercise the Warrants will commence and the
date on which the right will expire;
-
the number of Common Shares or other Securities that may be purchased upon
exercise of each Warrant and the price at which and currency or currencies in
which the Common Shares or other Securities may be purchased upon exercise of
each Warrant;
-
the designation and terms of any Securities with which the Warrants will be
offered, if any, and the number of the Warrants that will be offered with each
Security;
-
the date or dates, if any, on or after which the Warrants and the other
Securities with which the Warrants will be offered will be transferable
separately;
-
any minimum or maximum number of Warrants that may be exercised at any one
time;
-
whether the Warrants will be subject to redemption and, if so, the terms of
such redemption provisions;
-
whether the Company will issue the Warrants as global securities and, if
so, the identity of the depositary of the global securities;
-
whether the Warrants will be listed on an exchange;
-
material Canadian federal income tax consequences and, if applicable,
material United States federal income tax consequences of owning the Warrants;
and
-
any other material terms or conditions of the Warrants.
Rights of Holders Prior to Exercise
Prior to the exercise of
Warrants, holders of Warrants will not have any of the rights of holders of the
Common Shares or other Securities issuable upon exercise of the Warrants.
Exercise of Warrants
Each Warrant will entitle the
holder to purchase the Securities that the Company specifies in the applicable
Prospectus Supplement at the exercise price described therein. Unless the
Company otherwise specifies in the applicable Prospectus Supplement, holders of
the Warrants may exercise the Warrants at any time up to the specified time on
the expiration date set forth in the applicable Prospectus Supplement. After the
close of business on the expiration date, unexercised Warrants will become void.
Holders of the Warrants may
exercise the Warrants by delivering the Warrant Certificate representing the
Warrants to be exercised together with specified information, and paying the
required amount to the Warrant Trustee in immediately available funds, as
provided in the applicable Prospectus Supplement. The Company will set forth on
the Warrant Certificate and in the applicable Prospectus Supplement the
information that the holder of the Warrant will be required to deliver to the
Warrant Trustee.
Upon receipt of the required
payment and the Warrant Certificate properly completed and duly executed at the
corporate trust office of the Warrant Trustee or any other office indicated in
the applicable Prospectus Supplement, the Company will issue and deliver the
Securities purchasable upon such exercise. If fewer than all of the Warrants
represented by the Warrant Certificate are exercised, then the Company will
issue a new Warrant Certificate for the remaining amount of Warrants. If the
Company so indicates in the applicable Prospectus Supplement, holders of the
Warrants may surrender Securities as all or part of the exercise price for
Warrants.
22
Anti-Dilution
The Warrant Indenture will
specify that, upon the subdivision, consolidation, reclassification or other
material change of the Common Shares or any other reorganization, amalgamation,
arrangement, merger or sale of all or substantially all of the Companys assets,
Warrants exercisable for Common Shares will thereafter evidence the right of the
holder to receive the securities, property or cash deliverable in exchange for
or on the conversion of or in respect of the Common Shares to which the holder
of a Common Share would have been entitled immediately after such event.
Similarly, any distribution to all or substantially all of the holders of Common
Shares of rights, options, warrants, evidences of indebtedness or assets will
result in an adjustment in the number of Common Shares to be issued to holders
of Warrants that are exercisable for Common Shares.
Global Securities
The Company may issue Warrants in
whole or in part in the form of one or more global securities, which will be
registered in the name of and be deposited with a depositary, or its nominee,
each of which will be identified in the applicable Prospectus Supplement. The
global securities may be in temporary or permanent form. The applicable
Prospectus Supplement will describe the terms of any depositary arrangement and
the rights and limitations of owners of beneficial interests in any global
security. The applicable Prospectus Supplement will describe the exchange,
registration and transfer rights relating to any global security.
Modifications
The Warrant Indenture will
provide for modifications and alterations to the Warrants issued thereunder by
way of a resolution of holders of Warrants at a meeting of such holders or
consent in writing from such holders. The number of holders of Warrants required
to pass such a resolution or execute such a written consent will be specified in
the Warrant Indenture.
The Company may amend any Warrant
Indenture and the Warrants, without the consent of the holders of the Warrants,
to cure any ambiguity, to cure, correct or supplement any defective or
inconsistent provision, or in any other manner that will not materially and
adversely affect the interests of holders of outstanding Warrants.
DESCRIPTION OF SUBSCRIPTION RECEIPTS
The Company may issue
Subscription Receipts, which will entitle holders to receive upon satisfaction
of certain release conditions and for no additional consideration, Common
Shares, Warrants or any combination thereof. Subscription Receipts will be
issued pursuant to one or more subscription receipt agreements (each, a
Subscription Receipt Agreement
), each to be entered into between the
Company and an escrow agent (the
Escrow Agent
), which will establish
the terms and conditions of the Subscription Receipts. A copy of the form of
Subscription Receipt Agreement will be filed with Canadian securities regulatory
authorities and, if applicable, the Company will file with the SEC as exhibits
to the registration statement of which this Prospectus is a part, or will
incorporate by reference from a Report of Foreign Private Issuer on Form 6-K
that the Company files with the SEC, any Subscription Receipt Agreement
describing the terms and conditions of such Subscription Receipts that the
Company is offering before the issuance of such Subscription Receipts.
The following description sets
forth certain general terms and provisions of Subscription Receipts and is not
intended to be complete. The statements made in this Prospectus relating to any
Subscription Receipt Agreement and Subscription Receipts to be issued thereunder
are summaries of certain anticipated provisions thereof and are subject to, and
are qualified in their entirety by reference to, all provisions of the
applicable Subscription Receipt Agreement and the Prospectus Supplement
describing such Subscription Receipt Agreement.
The Prospectus Supplement
relating to any Subscription Receipts the Company offers will describe the
Subscription Receipts and include specific terms relating to their offering. All
such terms will comply with the requirements of the TSX and NYSE MKT relating to
Subscription Receipts. If underwriters or agents are used in the sale of
Subscription Receipts, one or more of such underwriters or agents may also be
parties to the Subscription Receipt Agreement governing the Subscription
Receipts sold to or through such underwriters or agents.
23
General
The Prospectus Supplement and the
Subscription Receipt Agreement for any Subscription Receipts the Company offers
will describe the specific terms of the Subscription Receipts and may include,
but are not limited to, any of the following:
-
the designation and aggregate number of Subscription Receipts offered;
-
the price at which the Subscription Receipts will be offered;
-
the currency or currencies in which the Subscription Receipts will be
offered;
-
the designation, number and terms of the Common Shares, Warrants or
combination thereof to be received by holders of Subscription Receipts upon
satisfaction of the release conditions, and the procedures that will result in
the adjustment of those numbers;
-
the conditions (the
Release Conditions
) that must be met in order
for holders of Subscription Receipts to receive for no additional
consideration Common Shares, Warrants or a combination thereof;
-
the procedures for the issuance and delivery of Common Shares, Warrants or
a combination thereof to holders of Subscription Receipts upon satisfaction of
the Release Conditions;
-
whether any payments will be made to holders of Subscription Receipts upon
delivery of the Common Shares, Warrants or a combination thereof upon
satisfaction of the Release Conditions (e.g. an amount equal to dividends
declared on Common Shares by the Company to holders of record during the
period from the date of issuance of the Subscription Receipts to the date of
issuance of any Common Shares pursuant to the terms of the Subscription
Receipt Agreement);
-
the identity of the Escrow Agent;
-
the terms and conditions under which the Escrow Agent will hold all or a
portion of the gross proceeds from the sale of Subscription Receipts, together
with interest and income earned thereon (collectively, the
Escrowed
Funds
), pending satisfaction of the Release Conditions;
-
the terms and conditions pursuant to which the Escrow Agent will hold
Common Shares, Warrants or a combination thereof pending satisfaction of the
Release Conditions;
-
the terms and conditions under which the Escrow Agent will release all or a
portion of the Escrowed Funds to the Company upon satisfaction of the Release
Conditions;
-
if the Subscription Receipts are sold to or through underwriters or agents,
the terms and conditions under which the Escrow Agent will release a portion
of the Escrowed Funds to such underwriters or agents in payment of all or a
portion of their fees or commission in connection with the sale of the
Subscription Receipts;
-
procedures for the refund by the Escrow Agent to holders of Subscription
Receipts of all or a portion of the subscription price for their Subscription
Receipts, plus any pro rata entitlement to interest earned or income generated
on such amount, if the Release Conditions are not satisfied;
-
any contractual right of rescission to be granted to initial purchasers of
Subscription Receipts in the event this Prospectus, the Prospectus Supplement
under which Subscription Receipts are issued or any amendment hereto or
thereto contains a misrepresentation;
24
-
any entitlement of the Company to purchase the Subscription Receipts in the
open market by private agreement or otherwise;
-
whether the Company will issue the Subscription Receipts as global
securities and, if so, the identity of the depositary for the global
securities;
-
whether the Company will issue the Subscription Receipts as bearer
securities, registered securities or both;
-
provisions as to modification, amendment or variation of the Subscription
Receipt Agreement or any rights or terms attaching to the Subscription
Receipts;
-
whether the Subscription Receipts will be listed on an exchange;
-
material Canadian federal income tax consequences and, if applicable,
material United States federal income tax consequences of owning the
Subscription Receipts; and
-
any other terms of the Subscription Receipts.
The holders of Subscription
Receipts will not be shareholders of the Company. Holders of Subscription
Receipts are entitled only to receive Common Shares, Warrants or a combination
thereof on exchange of their Subscription Receipts, plus any cash payments
provided for under the Subscription Receipt Agreement, if the Release Conditions
are satisfied. If the Release Conditions are not satisfied, Holders of
Subscription Receipts shall be entitled to a refund of all or a portion of the
subscription price therefor and all or a portion of the pro rata share of
interest earned or income generated thereon, as provided in the Subscription
Receipt Agreement.
Escrow
The Escrowed Funds will be held
in escrow by the Escrow Agent, and such Escrowed Funds will be released to the
Company (and, if the Subscription Receipts are sold to or through underwriters
or agents, a portion of the Escrowed Funds may be released to such underwriters
or agents in payment of all or a portion of their fees in connection with the
sale of the Subscription Receipts) at the time and under the terms specified by
the Subscription Receipt Agreement. If the Release Conditions are not satisfied,
holders of Subscription Receipts will receive a refund of all or a portion of
the subscription price for their Subscription Receipts plus their pro rata
entitlement to interest earned or income generated on such amount, in accordance
with the terms of the Subscription Receipt Agreement. Common Shares or Warrants
may be held in escrow by the Escrow Agent and will be released to the holders of
Subscription Receipts following satisfaction of the Release Conditions at the
time and under the terms specified in the Subscription Receipt Agreement.
Anti-Dilution
The Subscription Receipt
Agreement will specify that upon the subdivision, consolidation,
reclassification or other material change of Common Shares or Warrants
underlying the particular Subscription Receipts or any other reorganization,
amalgamation, arrangement, merger or sale of all or substantially all of the
Companys assets, the Subscription Receipts will thereafter evidence the right
of the holder to receive the securities, property or cash deliverable in
exchange for or on the conversion of or in respect of the Common Shares or
Warrants to which the holder of a Common Share or identical Warrant would have
been entitled immediately after such event. Similarly, any distribution to all
or substantially all of the holders of Common Shares of rights, options,
warrants, evidences of indebtedness or assets will result in an adjustment in
the number of Common Shares to be issued to holders of Subscription Receipts
whose Subscription Receipts entitle the holders thereof to receive Common
Shares. Alternatively, such securities, evidences of indebtedness or assets may,
at the option of the Company, be issued to the Escrow Agent and delivered to
holders of Subscription Receipts on exercise thereof. The Subscription Receipt
Agreement will also provide that if other actions of the Company affect the
Common Shares or Warrants, which, in the reasonable opinion of the directors of
the Company, would materially affect the rights of the holders of Subscription
Receipts and/or the rights attached to the Subscription Receipts, the number of
Common Shares or Warrants which are
25
to be received pursuant to the Subscription Receipts shall be
adjusted in such manner, if any, and at such time as the directors of the
Company may in their discretion reasonably determine to be equitable to the
holders of Subscription Receipts in such circumstances.
Rescission
The Subscription Receipt
Agreement will also provide that any misrepresentation in this Prospectus, the
Prospectus Supplement under which the Subscription Receipts are offered, or any
amendment hereto or thereto, will entitle each initial purchaser of Subscription
Receipts to a contractual right of rescission following the issuance of the
Common Shares or Warrants to such purchaser entitling such purchaser to receive
the amount paid for the Subscription Receipts upon surrender of the Common
Shares or Warrants, provided that such remedy for rescission is exercised in the
time stipulated in the Subscription Receipt Agreement. This right of rescission
does not extend to holders of Subscription Receipts who acquire such
Subscription Receipts from an initial purchaser, on the open market or
otherwise, or to initial purchasers who acquire Subscription Receipts in the
United States.
Global Securities
The Company may issue
Subscription Receipts in whole or in part in the form of one or more global
securities, which will be registered in the name of and be deposited with a
depositary, or its nominee, each of which will be identified in the applicable
Prospectus Supplement. The global securities may be in temporary or permanent
form. The applicable Prospectus Supplement will describe the terms of any
depositary arrangement and the rights and limitations of owners of beneficial
interests in any global security. The applicable Prospectus Supplement also will
describe the exchange, registration and transfer rights relating to any global
security.
Modifications
The Subscription Receipt
Agreement will provide for modifications and alterations to the Subscription
Receipts issued thereunder by way of a resolution of holders of Subscription
Receipts at a meeting of such holders or consent in writing from such holders.
The number of holders of Subscriptions Receipts required to pass such a
resolution or execute such a written consent will be specified in the
Subscription Receipt Agreement.
DESCRIPTION OF UNITS
The following description,
together with the additional information the Company may include in any
applicable Prospectus Supplements, summarizes the material terms and provisions
of the Units that the Company may offer under this Prospectus. While the terms
summarized below will apply generally to any Units that the Company may offer
under this Prospectus, the Company will describe the particular terms of any
issue of Units in more detail in the applicable Prospectus Supplement. The terms
of any Units offered under a Prospectus Supplement may differ from the terms
described below.
The Company will also add to
disclosure in any subsequent Prospectus Supplement whereby Units are offered the
form of any unit agreement (
Unit Agreement
) between the Company and a
unit agent (
Unit Agent
) that describes the terms and conditions of the
issue of Units being offered, and any supplemental agreements. The following
summaries of material terms and provisions of the Units are subject to, and
qualified in their entirety by reference to, all the provisions of any Unit
Agreement and any supplemental agreements applicable to a particular issue of
Units. The Company urges you to read the applicable Prospectus Supplements
relating to the particular issue of Units that the Company sells under this
Prospectus, as well as any Unit Agreement and any supplemental agreements that
contain the terms of the Units. If applicable, the Company will file with the
SEC as exhibits to the registration statement of which this Prospectus is a
part, or will incorporate by reference from a current report on Form 6-K that
the Company files with the SEC, any Unit Agreement describing the terms and
conditions of such Units that the Company is offering before the issuance of
such Units.
26
General
The Company may issue Units
comprising of any combination of Common Shares, Warrants, or Subscription
Receipts. Each Unit will be issued so that the holder of the Unit is also the
holder of each Security included in the Unit. Therefore, the holder of a Unit
will have the rights and obligations of a holder of each included Security. Any
Unit Agreement under which a Unit is issued may provide that the Securities
included in the Unit may not be held or transferred separately, at any time or
at any time before a specified date. The Company will describe in the applicable
Prospectus Supplement the terms of the issue of Units, including: the
designation and terms of the Units and of the securities comprising the Units,
including whether and under what circumstances those securities may be held or
transferred separately; any provisions of any governing Unit Agreement that
differ from those described below; and any provisions for the issuance, payment,
settlement, transfer or exchange of the Units or of the securities comprising
the Units. The provisions described in this section, as well as those described
under Description of Common Shares, Description of Warrants and Description
of Subscription Receipts, will apply to each Unit and to any Common Share,
Warrant or Subscription Receipt included in each Unit, respectively.
Issuance in Series
The Company may issue Units in
such amounts and in numerous distinct series as the Company may determine.
Enforceability of Rights by Holders of Units
Each Unit Agent will act solely
as the Companys agent under any applicable Unit Agreement and will not assume
any obligation or relationship of agency or trust with any holder of any Unit. A
single trust company may act as a Unit Agent for more than one series of Units.
A Unit Agent will have no duty or responsibility in case of any default by us
under any applicable Unit Agreement or Unit, including any duty or
responsibility to initiate any proceedings at law or otherwise, or to make any
demand upon us. Any holder of a Unit may, without the consent of any related
Unit Agent or the holder of any other Unit, enforce by appropriate legal action
its rights as holder under any security included in the Unit. The Company, any
Unit Agents, and any of the Companys or their agents may treat the registered
holder of any Unit certificate as an absolute owner of the Units evidenced by
that certificate for any purpose and as the person entitled to exercise the
rights attaching to the Units so requested, despite any notice to the contrary.
DENOMINATIONS, REGISTRATION AND TRANSFER
The Securities will be issued in
fully registered form without coupons attached in either global or definitive
form and in denominations and integral multiples as set out in the applicable
Prospectus Supplement. Other than in the case of book-entry-only Securities,
Securities may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed) in the city specified for such purpose
at the office of the registrar or transfer agent designated by the Company for
such purpose with respect to any issue of Securities referred to in the
Prospectus Supplement. No service charge will be made for any transfer,
conversion or exchange of the Securities but the Company may require payment of
a sum to cover any transfer tax or other governmental charge payable in
connection therewith. Such transfer, conversion or exchange will be effected
upon such registrar or transfer agent being satisfied with the documents of
title and the identity of the person making the request. If a Prospectus
Supplement refers to any registrar or transfer agent designated by the Company
with respect to any issue of Securities, the Company may at any time rescind the
designation of any such registrar or transfer agent and appoint another in its
place or approve any change in the location through which such registrar or
transfer agent acts.
BOOK-ENTRY ONLY SECURITIES
Securities issued in book-entry
only form must be purchased, transferred or redeemed through participants
(
CDS Participants
) in the depository service of CDS Clearing and
Depository Services Inc. or a successor (collectively,
CDS
). Each of
the underwriters, dealers or agents, as the case may be, named in a Prospectus
Supplement will be a CDS Participant or will have arrangements with a CDS
Participant. On the closing of a book-entry only offering, the Company may cause
a global certificate or certificates representing the aggregate number of Securities subscribed for under such offering to be delivered
to, and registered in the name of, CDS or its nominee. Except as described
below, no purchaser of Securities issued in book-entry-only form or
non-certificated form will be entitled to a certificate or other instrument from
the Company or CDS evidencing that purchasers ownership thereof, and no
purchaser will be shown on the records maintained by CDS except through a
book-entry account of a CDS Participant acting on behalf of such purchaser. Each
purchaser of Securities will receive a customer confirmation of purchase from
the registered dealer from which the Securities are purchased in accordance with
the practices and procedures of that registered dealer. The practices of
registered dealers may vary, but generally customer confirmations are issued
promptly after execution of a customer order. CDS will be responsible for
establishing and maintaining book-entry accounts for its CDS Participants having
interests in the Securities. Reference in this Prospectus to a holder of
Securities means, unless the context otherwise requires, the owner of the
beneficial interest in the Securities.
27
If the Company determines, or CDS
notifies the Company in writing, that CDS is no longer willing or able to
discharge properly its responsibilities as depository with respect to the
Securities and the Company is unable to locate a qualified successor, or if the
Company at its option elects, or is required by law, to terminate the book-entry
system, then the Securities will be issued in fully registered form to holders
or their nominees
Transfer, Conversion or Redemption of Securities
Transfer of ownership, conversion
or redemption of Securities will be effected through records maintained by CDS
or its nominee for such Securities with respect to interests of CDS
Participants, and on the records of CDS Participants with respect to interests
of persons other than CDS Participants. Holders who desire to purchase, sell or
otherwise transfer ownership of or other interests in the Securities may do so
only through CDS Participants.
The ability of a holder to pledge
a Security or otherwise take action with respect to such holders interest in a
Security (other than through a CDS Participant) may be limited due to the lack
of a physical certificate.
Payments and Notices
Payments of principal, redemption
price, if any, dividends and interest, as applicable, on each Security will be
made by the Company to CDS or its nominee, as the case may be, as the registered
holder of the Security and the Company understands that such payments will be
credited by CDS or its nominee in the appropriate amounts to the relevant CDS
Participants. Payments to holders of Securities of amounts so credited will be
the responsibility of the CDS Participants.
As long as CDS or its nominee is
the registered holder of the Securities, CDS or its nominee, as the case may be,
will be considered the sole owner of the Securities for the purposes of
receiving notices or payments on the Securities. In such circumstances, the
responsibility and liability of the Company in respect of notices or payments on
the Securities is limited to giving or making payment of any principal,
redemption price, if any, dividends and interest due on the Securities to CDS or
its nominee.
Each holder must rely on the
procedures of CDS and, if such holder is not a CDS Participant, on the
procedures of the CDS Participant through which such holder owns its interest,
to exercise any rights with respect to the Securities. The Company understands
that under existing policies of CDS and industry practices, if the Company
requests any action of holders or if a holder desires to give any notice or take
any action which a registered holder is entitled to give or take with respect to
the Securities, CDS would authorize the CDS Participant acting on behalf of the
holder to give such notice or to take such action, in accordance with the
procedures established by CDS or agreed to from time to time by the Company, any
Trustee and CDS. Any holder that is not a CDS Participant must rely on the
contractual arrangement it has directly, or indirectly through its financial
intermediary, with its CDS Participant to give such notice or take such
action.
The Company, the underwriters,
dealers or agents and any Trustee identified in a Prospectus Supplement, as
applicable, will not have any liability or responsibility for: (i) records
maintained by CDS relating to beneficial ownership interest in the Securities
held by CDS or the book-entry accounts maintained by CDS; (ii) maintaining,
supervising or reviewing any records relating to any such beneficial ownership
interest; or (iii) any advice or representation made by or with respect to CDS and contained
herein or in any Trust Indenture with respect to the rules and regulations of
CDS or at the directions of the CDS Participants.
28
RISK FACTORS
An investment in the securities
of the Company is considered speculative and involves a high degree of risk due
to, among other things, the nature of the Companys business, the present stage
of its development and the permitting required for the Pebble Project. You
should carefully consider the risk factors set forth in (i) our 2014 Form 20-F,
as incorporated by reference herein, (ii) our subsequent filings under the
Exchange Act, and (iii) this Prospectus, any amendment or supplement to this
Prospectus or any free writing prospectus.
The operations of the Company are
speculative due to the high risk nature of its business which is the
exploration, permitting and development of mineral properties and ultimately the
operating of mineral properties as mines. If we do not successfully address any
of the risks described herein or therein, there could be a material adverse
effect on our financial condition, operating results and business, and the
trading price of the common shares may decline. In addition, our inability to
successfully address these risks could cause actual events to differ materially
from those described in forward-looking statements relating to the Company. We
can provide no assurance that we will successfully address these risks.
In addition to information set
out elsewhere in this Prospectus and contained in our 2014 Form 20-F, we face
the following risks:
Inability to achieve mine permitting of the Pebble
Project will have an adverse effect on our business and operations
The principal risk facing the
Company is that it will ultimately be unable to secure the necessary permits
under United States federal and Alaskan state laws to build and operate a mine
at the Pebble Project. There are prominent and well organized opponents of the
Pebble Project and the Company may be unable, even if we are able to demonstrate
solid scientific and technical evidence of risk mitigation, to overcome such
opposition and convince mining regulatory authorities that a mine should be
permitted at the Pebble Project. If we are unable to secure the necessary
permits to build a mine at the Pebble Project, we may be unable to achieve
revenues from operations and/or recover our investment in the Pebble Project.
The Company will be required to seek additional capital;
the Companys inability to obtain additional capital could have a material
adverse effect on its operations
While the Company has prioritized
the available resources in order to meet key corporate and Pebble Project
expenditure requirements, the Company will seek to source significant additional
financing. Such financing may include any of, or a combination of: debt, equity
and/or contributions from possible new Pebble Project participants. In light of
the recent significant depreciation of the Canadian dollar and that the vast
majority of the Companys expenditures are in United States dollars, that the
Pebble Project will require additional engineering and technical expenditures
beyond what is contemplated in the current budget, and the possibility that
legal expenditures may exceed current budget expectations, it is possible that
additional financing may well be required. There can be no assurances that the
Company will be successful in obtaining any such additional financing. If the
Company is unable to raise the necessary capital resources to meet obligations
as they come due, the Company will at some point have to further reduce or
curtail its operations.
We currently have a negative operating cash flow and
failure to achieve profitability and positive operating cash flow may have a
material adverse effect on our financial condition and results of operation
The Company currently has a
negative operating cash flow and is anticipated to continue to have that for the
foreseeable future. The Companys failure to achieve profitability and positive
operating cash flows could have a material adverse effect on its financial
condition and results of operations.
29
The common shares may experience price and volume
volatility and the market price for the common shares may drop below the price
you paid
In recent years, the securities
markets have experienced a high level of price and volume volatility, and the
market price of securities of many companies has experienced wide fluctuations,
which have not necessarily been related to the operating performance, underlying
asset values or prospects of such companies. There can be no assurance that such
fluctuations will not affect the price of the common shares, and the price may
decline below their acquisition cost. As a result of this volatility, investors
may not be able to sell the common shares at or above their acquisition cost.
Securities of mining companies
have experienced substantial volatility in the past, often based on factors
unrelated to the financial performance or prospects of the companies involved.
These factors include macroeconomic developments in the countries where we carry
on business and globally, and market perceptions of the attractiveness of
particular industries. The price of securities of the Company is also likely to
be significantly affected by short-term changes in commodity prices, other
precious metal prices or other mineral prices, currency exchange fluctuation and
the political environment in the countries in which we do business and globally.
In the past, following periods of
volatility in the market price of a companys securities, shareholders have
often instituted class action securities litigation against those companies.
Such litigation, if instituted, could result in substantial costs and diversion
of management attention and resources, which could significantly harm our
profitability and reputation.
Sales of substantial amounts of the common shares may
have an adverse effect on the market price of the common shares of the Company
Sales of substantial amounts of
the common shares of the Company, or the availability of such securities for
sale, could adversely affect the prevailing market prices for the common shares.
A decline in the market prices of the common shares of the Company could impair
our ability to raise additional capital through the sale of securities should it
desire to do so.
Likely PFIC status has possible adverse U.S. federal
income tax consequences for U.S. investors
The Company was likely a passive
foreign investment company (a
PFIC
) within the meaning of the U.S.
Internal Revenue Code in one or more prior tax years, expects to be a PFIC for
the current tax year, and may also be a PFIC in subsequent years. A non-U.S.
corporation is a PFIC for any tax year in which (i) 75% or more of its gross
income is passive income (as defined for U.S. federal income tax purposes) or
(ii) on average for such tax year, 50% or more (by value) of its assets either
produces or is held for the production of passive income, and thereafter unless
certain elections are made.
If the Company is a PFIC for any
year during a U.S. taxpayers holding period, such taxpayer may be required to
treat any gain recognized upon a sale or disposition of the common shares as
ordinary income (rather than capital gain), and any resulting U.S. federal
income tax may be increased by an interest charge. Rules similar to those
applicable to dispositions will generally apply to certain excess
distributions in respect of the common shares. A U.S. taxpayer may generally
avoid these unfavorable tax consequences by making a timely and effective
qualified electing fund (
QEF
) election or mark-to-market election
with respect to the common shares. A U.S. taxpayer who makes a timely and
effective QEF election must generally report on a current basis its share of the
Companys net capital gain and ordinary earnings for any year in which the
Company is a PFIC, whether or not the Company makes any distributions to
shareholders in such year. A U.S. taxpayer who makes a timely and effective
mark-to-market election must, in general, include as ordinary income, in each
year in which the Company is a PFIC, the excess of the fair market value of the
common shares over the taxpayers adjusted cost basis in such shares.
If any of the foregoing
events, or other risk factor events described in our 2014 AIF, 2014 Form 20-F
and any other document incorporated by reference herein or elsewhere herein
occur, our business, financial condition or results of operations could suffer.
In that event, the market price of our securities could decline and investors
could lose all or part of their investment.
30
PRIOR SALES
During the 12 month period before
the date of this Prospectus, we have issued Common Shares and securities
convertible into Common Shares as follows:
|
Aggregate Number and Type of
|
|
Date of
Issuance
|
Securities Issued
|
Price per Security
|
March 3, 2015
|
9,943,589 Common
Shares
(1)
|
N/A
|
April 16, 2015
|
65,000 Common Shares
(1)
|
N/A
|
June 3, 2015
|
7,180,000 Common
Shares
(1)
|
N/A
|
June 22, 2015
|
8,496,132 Common Shares
(1
|
N/A
|
July 3, 2015
|
10,278,014 Common
Shares
(1)
|
N/A
|
August 28, 2015
|
25,624,408 Special Warrants
(2)
|
$0.399
|
September 9, 2015
|
11,975,592 Special
Warrants
(2)
|
$0.399
|
October 20, 2015
|
3,657,500 Stock Options
|
$0.50
|
October 29, 2015
|
12,881,344 Common
Shares
(3)
|
$0.399
|
October 29, 2015
|
1,245,000 Stock Options
(3)
|
See Note
(4)
|
October 29, 2015
|
3,149,000
Warrants
(3)
|
$2.13
|
November 13, 2015
|
37,600,000 Common Shares
(1)
|
N/A
|
November 30, 2015
|
18,800 Common Shares
|
$0.37
|
December 23, 2015
|
12,573,292 Common Shares
|
$0.412
|
December 24, 2015
|
27,593,341 Common
Shares
(5)
|
$0.425
|
December 24, 2015
|
13,801,672 Warrants
(5)
|
$0.55
|
December 24, 2015
|
2,871,667
Warrants
(5)
|
$3.00
|
January 13, 2016
|
61,100 Common Shares
|
$0.37
|
January 13, 2016
|
37,600 Common Shares
|
$0.29
|
January 27, 2016
|
37,600 Common Shares
|
$0.29
|
Note:
|
(1)
|
The common shares were issued on exercise of
Special Warrants at no additional cost to the holder.
|
(2)
|
See Recent Developments Recent Financings and
Acquisitions Special Warrant Financing.
|
(3)
|
Issued in connection with the acquisition by the Company
of Cannon Point. (See Recent Developments Recent Financings and
Acquisitions Acquisition of dormant listed issuer with $4.7 million in
cash).
|
(4)
|
The exercise price of the stock options is determined by
adjusting the original exercise price by the exchange ratio. (See Recent
Developments Recent Financings and Acquisitions Acquisition of dormant
listed issuer with $4.7 million in cash).
|
(5)
|
Issued in connection with the acquisition by the Company
of Mission. (See Recent Developments Recent Financings and Acquisitions
Acquisition of Mission Gold Ltd.).
|
31
TRADING PRICE AND VOLUME
The Companys common shares are
listed on the TSX under the trading symbol NDM and on the NYSE MKT under the
trading symbol NAK.
The following table sets forth
the reported high and low sale prices in Canadian dollars for the common shares
on the TSX for the fiscal, quarterly and monthly periods indicated.
|
|
High
|
|
|
Low
|
|
Fiscal 2011
|
$
|
21.50
|
|
$
|
5.16
|
|
Fiscal 2012
|
$
|
8.13
|
|
$
|
2.23
|
|
Fiscal 2013
|
$
|
4.19
|
|
$
|
1.07
|
|
Fiscal 2014
|
$
|
1.85
|
|
$
|
0.38
|
|
Fiscal 2015
|
$
|
0.83
|
|
$
|
0.37
|
|
|
|
High
|
|
|
Low
|
|
Quarterly 2013
|
|
|
|
|
|
|
First Quarter
|
$
|
4.19
|
|
$
|
2.75
|
|
Second Quarter
|
$
|
3.28
|
|
$
|
1.94
|
|
Third Quarter
|
$
|
2.84
|
|
$
|
1.35
|
|
Fourth Quarter
|
$
|
1.98
|
|
$
|
1.07
|
|
Quarterly 2014
|
|
|
|
|
|
|
First Quarter
|
$
|
1.85
|
|
$
|
0.90
|
|
Second Quarter
|
$
|
1.13
|
|
$
|
0.67
|
|
Third Quarter
|
$
|
0.95
|
|
$
|
0.55
|
|
Fourth Quarter
|
$
|
0.65
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
Quarterly 2015
|
|
|
|
|
|
|
First Quarter
|
$
|
0.83
|
|
$
|
0.45
|
|
Second Quarter
|
$
|
0.54
|
|
$
|
0.38
|
|
Third Quarter
|
$
|
0.67
|
|
$
|
0.37
|
|
Fourth Quarter
|
$
|
0.58
|
|
$
|
0.38
|
|
32
|
|
TSX Price Range ($)
|
|
|
|
|
Month
|
|
High
|
|
|
Low
|
|
|
Total Volume
|
|
February 2015
|
|
0.83
|
|
|
0.53
|
|
|
528,814
|
|
March 2015
|
|
0.63
|
|
|
0.45
|
|
|
720,437
|
|
April 2015
|
|
0.53
|
|
|
0.44
|
|
|
404,068
|
|
May 2015
|
|
0.54
|
|
|
0.40
|
|
|
440,149
|
|
June 2015
|
|
0.50
|
|
|
0.38
|
|
|
760,592
|
|
July 2015
|
|
0.46
|
|
|
0.37
|
|
|
377,747
|
|
August 2015
|
|
0.60
|
|
|
0.38
|
|
|
872,978
|
|
September 2015
|
|
0.67
|
|
|
0.40
|
|
|
923,473
|
|
October 2015
|
|
0.58
|
|
|
0.40
|
|
|
845,766
|
|
November 2015
|
|
0.58
|
|
|
0.38
|
|
|
2,689,947
|
|
December 2015
|
|
0.425
|
|
|
0.38
|
|
|
1,391,898
|
|
January 2016
|
|
0.44
|
|
|
0.28
|
|
|
2,140,916
|
|
February 2016
|
|
0.51
|
|
|
0.36
|
|
|
4,675,143
|
|
March 1 – 18, 2016
|
|
0.52
|
|
|
0.42
|
|
|
4,618,058
|
|
The following table sets forth
the reported high and low sale prices in United States dollars for the common
shares on the NYSE MKT for the fiscal, quarterly and monthly periods
indicated.
|
|
High
(US$)
|
|
|
Low
(US$)
|
|
Fiscal 2011
|
$
|
21.76
|
|
$
|
5.48
|
|
Fiscal 2012
|
$
|
8.19
|
|
$
|
2.20
|
|
Fiscal 2013
|
$
|
3.78
|
|
$
|
1.00
|
|
Fiscal 2014
|
$
|
1.70
|
|
$
|
0.32
|
|
Fiscal 2015
|
$
|
0.72
|
|
$
|
0.28
|
|
|
|
High
(US$)
|
|
|
Low
(US$)
|
|
Quarterly 2013
|
|
|
|
|
|
|
First Quarter
|
$
|
3.78
|
|
$
|
2.67
|
|
Second Quarter
|
$
|
3.17
|
|
$
|
1.85
|
|
Third Quarter
|
$
|
2.73
|
|
$
|
1.31
|
|
Fourth Quarter
|
$
|
1.93
|
|
$
|
1.00
|
|
Quarterly 2014
|
|
|
|
|
|
|
First Quarter
|
$
|
1.70
|
|
$
|
0.80
|
|
Second Quarter
|
$
|
1.01
|
|
$
|
0.61
|
|
Third Quarter
|
$
|
0.89
|
|
$
|
0.52
|
|
Fourth Quarter
|
$
|
0.59
|
|
$
|
0.32
|
|
Quarterly 2015
|
|
|
|
|
|
|
33
|
|
High
(US$)
|
|
|
Low
(US$)
|
|
First Quarter
|
$
|
0.72
|
|
$
|
0.36
|
|
Second Quarter
|
$
|
0.45
|
|
$
|
0.30
|
|
Third Quarter
|
$
|
0.52
|
|
$
|
0.28
|
|
Fourth Quarter
|
$
|
0.44
|
|
$
|
0.28
|
|
|
|
NYSE MKT Price Range (US$)
|
|
|
|
|
Month
|
|
High (US$)
|
|
|
Low (US$)
|
|
|
Total Volume
|
|
February 2015
|
|
0.72
|
|
|
0.43
|
|
|
2,109,515
|
|
March 2015
|
|
0.51
|
|
|
0.36
|
|
|
2,378,849
|
|
April 2015
|
|
0.43
|
|
|
0.36
|
|
|
1,329,914
|
|
May 2015
|
|
0.45
|
|
|
0.32
|
|
|
2,178,315
|
|
June 2015
|
|
0.44
|
|
|
0.30
|
|
|
3,407,967
|
|
July 2015
|
|
0.37
|
|
|
0.28
|
|
|
1,506,893
|
|
August 2015
|
|
0.52
|
|
|
0.29
|
|
|
2,305,097
|
|
September 2015
|
|
0.50
|
|
|
0.30
|
|
|
2,199,312
|
|
October 2015
|
|
0.44
|
|
|
0.30
|
|
|
2,167,616
|
|
November 2015
|
|
0.44
|
|
|
0.28
|
|
|
2,718,633
|
|
December 2015
|
|
0.32
|
|
|
0.28
|
|
|
1,986,884
|
|
January 2016
|
|
0.32
|
|
|
0.20
|
|
|
2,761,974
|
|
February 2016
|
|
0.38
|
|
|
0.26
|
|
|
2,586,923
|
|
March 1 – 18, 2016
|
|
0.39
|
|
|
0.31
|
|
|
3,795,460
|
|
On March 18, 2016, the closing
price of our common shares as reported on the NYSE MKT was US$0.36 per share and
on the TSX was $0.45 per share.
CERTAIN INCOME TAX CONSIDERATIONS
The applicable Prospectus
Supplement will describe certain Canadian federal income tax consequences to
investors described therein of acquiring Securities.
The applicable Prospectus
Supplement will also describe certain United States federal income tax
consequences of the acquisition, ownership and disposition of Securities by an
initial investor who is a U.S. person (within the meaning of the United States
Internal Revenue Code), if applicable, including, to the extent applicable, any
such consequences relating to Securities payable in a currency other than the
United States dollar, issued at an original issue discount for United States
federal income tax purposes or other special terms.
LEGAL MATTERS
Certain legal matters in
connection with the Securities offered hereby will be passed upon on behalf of
the Company by McMillan LLP with respect to Canadian legal matters and with
respect to certain United States legal matters. As at the date hereof, the
partners and associates of McMillan LLP, as a group, beneficially own, directly
or indirectly, less than one percent of the outstanding common shares of the
Company.
34
EXPERTS AND INTERESTS OF EXPERTS
Information relating to the
Companys mineral properties incorporated by reference in this Prospectus has
been derived from the
2014 Technical Report on the Pebble Project, Southwest
Alaska, USA
effective date December 31, 2014 (the
Pebble Property
Report
) which has been prepared by the Qualified Persons named below and
this information has been included in reliance on the expertise of these
Qualified Persons:
-
J. David Gaunt, P.Geo., a non-independent Qualified Person, who co-authored
the Pebble Project Report;
-
James Lang, P.Geo., a non-independent Qualified Person, who co-authored the
Pebble Project Report;
-
Eric Titley, P.Geo., a non-independent Qualified Person, who co-authored
the Pebble Project Report; and
-
Ting Lu, P.Eng., an independent Qualified Person, who co-authored the
Pebble Project Report.
Based on information provided by
the relevant persons, and except as otherwise disclosed in this Prospectus, none
of the persons or companies referred to above has received or will receive any
direct or indirect interests in the Companys property or the property of an
associated party or an affiliate of the Company or have any beneficial
ownership, direct or indirect, of the Companys securities or of an associated
party or an affiliate of the Company. The Company understands that, after
reasonable inquiry and as at the date hereof, the experts listed above as a
group, beneficially own, directly or indirectly, less than one percent of the
outstanding common shares of the Company.
The Companys audited
consolidated financial statements for the years ended December 31, 2014, 2013
and 2012 incorporated in this Prospectus by reference and the effectiveness of
the Companys internal control over financial reporting have been audited by
Deloitte LLP (as included in the 2014 Form 20-F). Deloitte LLP is independent of
the Company within the meaning of the Rules of Professional Conduct of the
Chartered Professional Accountants of British Columbia and the rules and
standards of the Public Accounting Oversight Board and the securities laws and
regulations administered by the SEC. The reports of Deloitte LLP incorporated
herein by reference, (i) express an unqualified opinion on the financial
statements and includes an explanatory paragraph referring to a material
uncertainty that casts substantial doubt about the Companys ability to continue
as a going concern, and (ii) express an unqualified opinion on the effectiveness
of internal control over financial reporting. Such financial statements have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of
Pebble Partnership and its subsidiaries incorporated in this Prospectus by
reference from the Companys Annual Report on Form 20-F for the year ended
December 31, 2014 have been audited by Deloitte & Touche LLP. Deloitte &
Touche LLP was the independent auditors for the period ended December 10, 2013 and
as of May 15, 2015, and throughout the period covered by the consolidated
financial statements of Pebble Partnership on which they reported. The report of
Deloitte & Touche LLP, is incorporated herein by reference, (which report
expresses an unqualified opinion on the financial statements and includes an
explanatory paragraph referring to a material uncertainty which raises
substantial doubt about Pebble Partnerships ability to continue as a going
concern). Such financial statements have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
ADDITIONAL INFORMATION FOR U.S. INVESTORS
This Prospectus is part of the
Registration Statement on Form F-3 that we have filed with the SEC relating to
the Securities to be offered pursuant to this Prospectus. The following
documents have been or will be filed with the SEC as part of the Registration
Statement:
|
(i)
|
the documents set out under the heading Documents
Incorporated by Reference;
|
35
|
(ii)
|
the consents of the Companys auditor, legal counsel and
technical report authors; and
|
|
|
|
|
(iii)
|
the powers of attorney from the directors and certain
officers of the Company.
|
A copy of the form of any warrant
indenture, subscription receipt agreement or unit agreement relating to the
offering of any of the Securities described in this Prospectus, as applicable,
will be filed by post-effective amendment or by incorporation by reference to
documents filed or furnished with the SEC under the Exchange Act.
This document does not contain
all of the information in the registration statement and the exhibits and
financial statements included with the registration statement. References herein
to any of our contracts, agreements or other documents are not necessarily
complete, and you should refer to the exhibits attached to the registration
statement for copies of the actual contracts, agreements or documents. We also
file annual and other reports and other information with the SEC.
You may read and copy the
Registration Statement, including the documents incorporated by reference
herein, the related exhibits and other material we may file with the SEC, at the
SECs public reference room in Washington, D.C. at 100 F Street, N.E.,
Washington, D.C. 20549. You can also request copies of those documents, upon
payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. The SEC also maintains an internet site that contains reports, proxy and
information statements and other information regarding issuers that file with
the SEC. The website address is
http://www.sec.gov
.
Alternately, you may request a
copy of these filings, at no cost, by writing or telephoning us at Northern
Dynasty Minerals Ltd., Attention: Corporate Secretary, 15th Floor, 1040 West
Georgia Street, Vancouver, British Columbia V6E 4H1, Tel:(604) 684-6365.
NOTE TO UNITED STATES READERS REGARDING DIFFERENCES
BETWEEN UNITED STATES AND CANADIAN REPORTING PRACTICES
The Company prepares its
financial statements, which are incorporated by reference into this Prospectus,
in accordance with International Financial Reporting Standards, as issued by the
International Accounting Standards Board (
IFRS
). Accordingly, the
Companys financial statements are not comparable to financial statements of
United States companies.
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST NON-U.S. PERSONS
The Company is a corporation
existing under the
Business Corporations Act
(British Columbia). All but
two of the Companys directors and officers, and all of the experts named in
this Prospectus, are residents of Canada or otherwise reside outside the United
States, and all or a substantial portion of their assets, and substantially all
of the Companys assets, are located outside the United States. The Company has
appointed an agent for service of process in the United States, but it may be
difficult for holders of Common Shares who reside in the United States to effect
service within the United States upon those directors, officers and experts who
are not residents of the United States. It may also be difficult for holders of
Common Shares who reside in the United States to realize in the United States
upon judgments of courts of the United States predicated upon the Companys
civil liability and the civil liability of its directors, officers and experts
under the United States federal securities laws.
The Company filed with the SEC,
concurrently with its Registration Statement on Form F-3 of which this
Prospectus is a part, an appointment of agent for service of process on Form
F-X. Under the Form F-X, the Company appointed DL Services Inc. as its agent for
service of process in the United States in connection with any investigation or
administrative proceeding conducted by the SEC, and any civil suit or action
brought against or involving the Company in a United States court arising out of
or related to or concerning the offering of the Securities under this
Prospectus.
36
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR U.S.
SECURITIES ACT
LIABILITY
Insofar as indemnification for
liabilities arising under the U.S. Securities Act may be permitted to directors,
officers or persons controlling us pursuant to the foregoing provisions, we have
been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the U.S. Securities Act
and is therefore unenforceable.
STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION
Securities legislation in certain
of the provinces of Canada provides purchasers with the right to withdraw from
an agreement to purchase securities. This right may be exercised within two
business days after receipt or deemed receipt of a prospectus or a prospectus
supplement (including a pricing supplement) relating to the securities purchased
by a purchaser and any amendment thereto. In several of the provinces of Canada,
the securities legislation further provides a purchaser with remedies for
rescission or, in some jurisdictions, damages, if the prospectus or prospectus
supplement (including a pricing supplement) relating to the securities purchased
by a purchaser and any amendment thereto contains a misrepresentation or is not
delivered to the purchaser, provided that the remedies for rescission or damages
are exercised by the purchaser within the time limit prescribed by the
securities legislation of the purchasers province. The purchaser should refer
to any applicable provisions of the securities legislation of the purchasers
province for the particulars of these rights or consult with a legal adviser.
In an offering of convertible,
exchangeable or exercisable Securities, investors are cautioned that the
statutory right of action for damages for a misrepresentation contained in the
prospectus is limited, in certain provincial securities legislation, to the
price at which the convertible, exchangeable or exercisable Securities is
offered to the public under the prospectus offering. This means that, under the
securities legislation of certain provinces, if the purchaser pays additional
amounts upon conversion, exchange or exercise of the security, those amounts may
not be recoverable under the statutory right of action for damages that applies
in those provinces. The purchaser should refer to any applicable provisions of
the securities legislation of the purchasers province for the particulars of
this right of action for damages or consult with a legal adviser.
CONTRACTUAL RIGHTS OF RESCISSION
In addition to statutory
rights of withdrawal and rescission applicable under securities legislation in
certain Canadian provinces,
original purchasers of warrants (if offered
separately from other Securities) and subscription receipts will have a
contractual right of rescission against the Company in respect of the exercise
of such warrant or subscription receipt, as the case may be.
The contractual right of
rescission will entitle such original purchasers to receive, in addition to the
amount paid on original purchase of the warrant or subscription receipt (or
units comprised partly thereof), as the case may be, the amount paid upon
exercise upon surrender of the underlying securities gained thereby, in the
event that this prospectus (as supplemented or amended) contains a
misrepresentation, provided that: (i) the conversion, exchange or exercise takes
place within 180 days of the date of the purchase of the warrant or subscription
receipt under this prospectus; and (ii) the right of rescission is exercised
within 180 days of the date of purchase of the warrant or subscription receipt
under this prospectus.
Original purchasers are further
advised that in certain provinces the statutory right of action for damages in
connection with a prospectus misrepresentation is limited to the amount paid for
the security that was purchased under a prospectus, and therefore a further
payment at the time of exercise may not be recoverable in a statutory action for
damages. The purchaser should refer to any applicable provisions of the
securities legislation of the purchaser's province for the particulars of these
rights, or consult with a legal advisor
.
37
__________________________________
PROSPECTUS
__________________________________
NORTHERN DYNASTY MINERALS LTD.
$20,000,000
Common Shares
Warrants
Subscription
Receipts
Units
MARCH 30, 2016
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