$0.10 per Unit - GOLDINVEST.de

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. The securities offered hereby have not been and will not be registered under the United States
Securities Act of 1933, as amended (the “1933 Act”) or any state securities laws. Accordingly, these securities may not be offered or sold within
the United States except in compliance with the registration requirements of the 1933 Act and applicable state securities laws or under exception
from those laws. See “Plan of Distribution”.
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 the Chief
Financial Officer of Kilo Goldmines Ltd. at Suite 1200, 141 Adelaide Street West, Toronto, Ontario, M5H 3L5, Telephone (416) 360-3415, and
are also available electronically at www.sedar.com.
SHORT FORM PROSPECTUS
March 8, 2013
New Issue
Minimum Offering: $10,000,000 (100,000,000 Units)
Maximum Offering: $12,000,000 (120,000,000 Units)
This short form prospectus qualifies the distribution (the “Offering”) of a minimum (the “Minimum Offering”) of
100,000,000 and a maximum (the “Maximum Offering”) of 120,000,000 units (each, a “Unit”, and collectively,
the “Units”) of Kilo Goldmines Ltd. (the “Corporation” or “Kilo”) at a price per Unit of $0.10 (the “Offering
Price”). Each Unit will be comprised of one Common Share (as defined below) (a “Unit Share”) and one Common
Share purchase warrant (a “Warrant”). Each Warrant entitles the holder thereof to purchase one additional
Common Share (a “Warrant Share”) at a price of $0.15 for a period of 36 months from the date of closing of the
Offering, subject to adjustment in certain events. The Offering is made on a best efforts basis pursuant to an agency
agreement (the “Agency Agreement”) dated March 8, 2013 between the Corporation and GMP Securities L.P.,
Clarus Securities Inc. and Byron Capital Markets Ltd. (collectively, the “Agents”). The Offering Price has been
determined by negotiation between the Corporation and the Agents. See “Plan of Distribution”.
$0.10 per Unit
Price to the Public
Per Units ...............................................................
$0.10
Minimum Offering ...............................................
$10,000,000
Maximum Offering(4) ............................................
$12,000,000
Agents’ Fee(1),(2)
$0.006
$600,000
$720,000
Net Proceeds to the
Corporation(1),(3)
$0.094
$9,400,000
$11,280,000
Notes:
(1)
(2)
(3)
(4)
In consideration of the services rendered by the Agents in connection with the Offering, the Corporation has agreed to pay a cash fee (the
“Agents’ Fee”) equal to 6.0% of the gross proceeds of the Offering. The Corporation has also agreed to reimburse the Agents for certain
expenses incurred in connection with the Offering. The Agents have waived the Agents’ Fee in connection with up to $800,000 of
subscriptions for Units from the president’s list.
The Corporation has also agreed to grant to the Agents such number of non-transferrable warrants (the “Agents’ Warrants”) as is equal to
3.0% of the aggregate number of Units and Additional Units (as defined below) sold under the Offering. Each Agents’ Warrant will be
exercisable to purchase one Common Share (each, an “Agents’ Share”) at a price equal to the Offering Price for a period of two years after
the Closing Date. The Agents have waived the Agents’ Warrants in connection with up to $800,000 of subscriptions for Units from the
president’s list. This short form prospectus also qualifies the distribution of the Agents’ Warrants. See “Plan of Distribution”.
Before deducting expenses of the Offering (estimated at $250,000) that, together with the Agents’ Fee, will be paid from the proceeds of the
Offering.
The Corporation has granted the Agents an option (the “Over-Allotment Option”), exercisable in whole or in part and at any time up to the
30th day following the Closing Date, to arrange for the purchase from the Corporation of up to an additional 15% of Units (the “Additional
Units”) to cover the Agents’ over-allocation position, if any, and for market stabilization purposes. The purchase price of one Additional
Unit pursuant to the Over-Allotment Option will be equal to the Offering Price. This short form prospectus also qualifies the grant of the
Over-Allotment Option and the distribution of Additional Units that may be issued upon exercise of the Over-Allotment Option. If the
- ii Maximum Offering is completed and if the Over-Allotment Option is exercised in full, the total price to the public, Agents’ Fee and net
proceeds to the Corporation will be $13,800,000, $828,000 and $12,972,000, respectively. A purchaser who acquires securities forming part
of the Agents’ over-allocation position acquires such securities under this short form prospectus regardless of whether the over-allocation
position is ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases. Unless specifically stated
otherwise, the term “Units” includes the Additional Units. See “Plan of Distribution”.
The common shares of the Corporation (the “Common Shares”) are listed and posted for trading on the TSX
Venture Exchange (the “TSXV”) under the trading symbol “KGL”. The Common Shares are also listed on the
Regulated Unofficial Market of the Frankfurt Stock Exchange under the trading symbol “02K”. On March 7, 2013,
the last trading day prior to the filing of this short form prospectus, the closing price of the Common Shares on the
TSXV was $0.09. The TSXV has conditionally accepted the listing of the Unit Shares and Warrants qualified by
this short form prospectus as well as any Warrant Shares and Agents’ Shares issuable upon the exercise of the
Warrants and Agents’ Warrants, respectively. Listing will be subject to the Corporation fulfilling the listing
requirements of the TSXV, including, in the case of the Warrants, distribution to a minimum number of holders.
There is currently no market through which the Warrants may be sold.
The following table sets out the number of additional Common Shares and Warrants that may be distributed by the
Corporation under this short form prospectus:
Agents’ Position
Over-Allotment Option
Agents’ Warrants
Total Common Shares
and Warrants under
options issuable to the
Agents
Maximum Size or
Number of Securities
Available(1)
18,000,000 Common
Shares and 18,000,000
Warrants(2)
4,140,000 Common Shares
Exercise Period
Exercise Price
Until 30 days following
the Closing Date
$0.10 per Unit
Until two years
following the Closing
Date
$0.10 per Common Share
22,140,000 Common Shares
and 18,000.000 Warrants
Notes:
(1)
(2)
Assumes completion of the Maximum Offering.
Agents’ Warrants to acquire up to an additional 540,000 Common Shares will be distributed if the Over-Allotment Option is exercised in
full.
The Offering is not underwritten or guaranteed by any person. The Agents conditionally offer the Units, on a best
efforts basis, if, as and when issued, sold and delivered by the Corporation and accepted by the Agents in
accordance with the conditions contained in the Agency Agreement referred to under “Plan of Distribution” and
subject to the approval of certain legal matters on behalf of the Corporation by Kirsh Securities Law Professional
Corporation (member of Acuity Corporate Securities Lawyers), and on behalf of the Agents by Borden Ladner
Gervais LLP. Subject to applicable laws, in connection with the Offering, the Agents may effect transactions
intended to stabilize or maintain the market price for the Common Shares at levels above that which might otherwise
prevail in the open market. Such transactions, if commenced, may be discontinued at any time. See “Plan of
Distribution”.
Subscriptions for the Units 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. Provided the Minimum Offering has been
achieved, it is expected that the closing date will occur on or about March 20, 2013, or such earlier or later date as
may mutually be agreed to by the Corporation and the Agents (the “Closing Date”). Notwithstanding the foregoing,
the distribution of the Units will not continue for a period of more than 90 days after the date of the final receipt for
this short form prospectus if subscriptions for the Minimum Offering are not obtained within that period or such
later date as the Corporation and the Agents may agree and the securities regulatory authorities may approve
- iii (subject to the filing of any required amendment to this short form prospectus and the regulator issuing a receipt for
such amendment). See “Plan of Distribution”.
Until such time as a closing has occurred in respect of the Minimum Offering, all subscription funds received by the
Agents will be held in trust, pending closing of the Minimum Offering. If the Minimum Offering has not been
completed prior to the expiry of the 90-day period or such later date as the Corporation and the Agents may agree
and the securities regulatory authorities may approve (subject to the filing of any required amendment to this short
form prospectus and the regulator issuing a receipt for such amendment), the Agents shall promptly return the
proceeds of the subscriptions to the subscribers without interest or deduction. See “Plan of Distribution”.
The Unit Shares and Warrants when issued will not be certificated. It is expected that global certificates evidencing
the Unit Shares and Warrants distributed under this short form prospectus will be issued in registered form to CDS
Clearing and Depository Services Inc. (“CDS”) and will be deposited with CDS on the Closing Date. Except in
limited circumstances, no certificate evidencing the Unit Shares and Warrants comprising the Units will be issued,
unless requested, and registration will be made in the depository service of CDS. Purchasers of the Units will
receive only a customer confirmation from the Agents or other registered dealer who is a CDS participant (a “CDS
Participant”) and from or through whom a beneficial interest in the Units is purchased. Notwithstanding the
foregoing, any Unit Shares and Warrants issued in the United States or to, or for the account or benefit of, U.S.
persons, will be in the form of a definitive certificate delivered to the holders thereof.
Investors should rely only on the information contained or incorporated by reference in this short form
prospectus. The Corporation and the Agents have not authorized anyone to provide purchasers with
information different from that contained or incorporated by reference in this short form prospectus. The
Corporation 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. The Corporation does not undertake to update information
contained or incorporated by reference in this short form prospectus, except as required by applicable
securities laws.
Investing in the Units is highly speculative and involves a high degree of risk. The risk factors identified in
this short form prospectus and in the documents incorporated by reference herein should be carefully
reviewed and evaluated by prospective investors before purchasing the Units offered hereunder. See “Risk
Factors” and “Forward-Looking Statements”.
Potential investors are advised to consult their own legal counsel and other professional advisors in order to
assess income tax, legal and other aspects of their investment.
References to “Kilo” or the “Corporation” refer to Kilo Goldmines Ltd. and may include, collectively or
individually, one or more of the direct or indirect subsidiaries of the Corporation.
The Corporation’s head office and principal place of business is located at 141 Adelaide Street West, Suite 1200,
Toronto, Ontario, M5H 3L5.
Mr. Alex Van Hoeken, the Chief Executive Officer of the Corporation, and Mr. David Netherway, Chairman of the
Corporation, both reside outside of Canada. Although Messrs. Van Hoeken and Netherway have each appointed the
Corporation at 141 Adelaide Street West, Suite 1200, Toronto, Ontario, M5H 3L5 as his agent for service of process
in Canada, it may not be possible for investors to enforce judgments obtained in Canada against Messrs. Van
Hoeken and Netherway.
All dollar amounts in this short form prospectus are in Canadian dollars, unless otherwise indicated.
TABLE OF CONTENTS
DOCUMENTS INCORPORATED BY REFERENCE ................................................................................................1
FORWARD-LOOKING STATEMENTS .....................................................................................................................1
ELIGIBILITY FOR INVESTMENT.............................................................................................................................2
THE CORPORATION ..................................................................................................................................................3
CONSOLIDATED CAPITALIZATION ......................................................................................................................4
USE OF PROCEEDS ....................................................................................................................................................4
PLAN OF DISTRIBUTION ..........................................................................................................................................5
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS................................................................7
DESCRIPTION OF SECURITIES BEING DISTRIBUTED ..................................................................................... 10
PRIOR SALES ............................................................................................................................................................ 12
TRADING PRICE AND VOLUME ........................................................................................................................... 12
RISK FACTORS ......................................................................................................................................................... 12
INTERESTS OF EXPERTS ........................................................................................................................................ 16
AUDITORS, REGISTRAR AND TRANSFER AGENT............................................................................................ 16
STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION .......................................................................... 16
AUDITORS’ CONSENT ............................................................................................................................................ 17
CERTIFICATE OF THE CORPORATION.............................................................................................................. C-1
CERTIFICATE OF THE AGENTS .......................................................................................................................... C-2
DOCUMENTS INCORPORATED BY REFERENCE
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 the Chief Financial Officer of the Corporation at 141
Adelaide Street West, Suite 1200, Toronto, Ontario, M5H 3L5, Telephone (416) 360-3415, and are also available
electronically at www.sedar.com.
The following documents of the Corporation, filed with the securities commissions or similar authorities in certain
of the provinces of Canada, are specifically incorporated by reference in and form an integral part of this short form
prospectus:
(a)
annual information form of the Corporation dated January 31, 2013 (as amended February 15, 2013) for the
year ended September 30, 2012 (the “AIF”);
(b)
audited comparative consolidated financial statements of the Corporation and the notes thereto for the years
ended September 30, 2012 and September 30, 2011, together with the auditor’s report thereon;
(c)
management’s discussion and analysis of the financial condition and results of operations of the
Corporation for the years ended September 30, 2012 and September 30, 2011;
(d)
management information circular of the Corporation dated January 25, 2013 issued in connection with the
annual meeting of the shareholders of the Corporation held on March 7, 2013;
(e)
material change report of the Corporation dated February 1, 2013 announcing the Offering;
(f)
unaudited condensed interim consolidated financial statements of the Corporation for the three months
ended December 31, 2012; and
(g)
management’s discussion and analysis of the Corporation for the three months ended December 31, 2012.
Any document of the type referred to above (excluding confidential material change reports) or business acquisition
report filed by the Corporation with the securities commissions or similar authorities in Canada after the date of this
short form prospectus and prior to the completion or termination of the Offering shall be deemed to be incorporated
by reference into this short form prospectus.
Any statement contained herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded, for purposes of this short form prospectus, to the extent
that a statement contained herein or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes that statement. Any such 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 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 be
considered in its unmodified or superseded form to constitute part of this short form prospectus; rather only
such statement as so modified or superseded shall be considered to constitute part of this short form
prospectus.
FORWARD-LOOKING STATEMENTS
This short form prospectus and the documents incorporated by reference herein contain forward-looking statements
that involve various risks and uncertainties. When used herein and therein, the words “may”, “would”, “could”,
“will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect”, and similar expressions, as they relate to the
Corporation or its management, are intended to identify forward-looking statements. Such statements are subject to
known and unknown risks, uncertainties, assumptions and other factors outside of management’s control that could
cause actual results to differ materially from those expressed in the forward-looking statements. These risks and
-2uncertainties include, but are not restricted to: risks and uncertainties relating to the interpretation of drill results, the
geology, grade and continuity of mineral deposits and conclusions of economic evaluations; results of any initial
feasibility, pre-feasibility and feasibility studies, and the possibility that any future exploration, development or
mining results will not be consistent with our expectations; mining and development risks, including risks related to
accidents, equipment breakdowns, labour disputes (including work stoppages and strikes) or other unanticipated
difficulties with or interruptions in exploration and development; the potential for delays in exploration or
development activities or the completion of feasibility studies, if any; risks related to commodity price and foreign
exchange rate fluctuations; risks related to foreign operations; the uncertainty of profitability based upon the cyclical
nature of the industry in which we operate; risks related to failure to obtain adequate financing on a timely basis and
on acceptable terms or delays in obtaining governmental approvals or in the completion of development or
construction activities; risks related to environmental regulation and liability; political and regulatory risks
associated with mining and exploration; risks related to the certainty of title to our properties; risks related to the
uncertain global economic environment; and other risks and uncertainties related to our prospects, properties and
business strategy.
See “Risk Factors” and the factors identified under the heading “Risk Factors” in the AIF incorporated by reference
herein. Although the forward-looking statements contained in this short form prospectus and the documents
incorporated by reference are based upon what management believes to be reasonable assumptions, the Corporation
cannot assure prospective purchasers that actual results will be consistent with these forward-looking statements.
These forward-looking statements are made as of the date of the short form prospectus and, in the case of documents
incorporated by reference herein, as of the dates of such documents and, except in accordance with applicable law,
the Corporation undertakes no obligations to publicly revise these forward-looking statements to reflect subsequent
events or circumstances.
ELIGIBILITY FOR INVESTMENT
In the opinion of Kirsh Securities Law Professional Corporation, counsel to the Corporation, and Borden Ladner
Gervais LLP, counsel to the Agents, based on the current provisions of the Income Tax Act (Canada) and the
regulations thereunder (collectively, the “Tax Act”), provided the Unit Shares are listed on a designated stock
exchange for the purposes of the Tax Act (including Tier 1 and Tier 2 of the TSXV), the Unit Shares and Warrants
will, on the date of closing of the Offering, be qualified investments under the Tax Act for trusts governed by a
registered retirement savings plan (a “RRSP”), registered retirement income fund (a “RRIF”), deferred profit
sharing plan, registered education savings plan, registered disability savings plan and tax-free savings account (a
“TFSA”) (collectively “Deferred Income Plans”), provided that, in the case of the Warrants, the Corporation is not
an annuitant, a beneficiary, an employer or a subscriber under, or a holder of, such a Deferred Income Plan, and the
Corporation deals at arm’s length (within the meaning of the Tax Act) with each person that is an annuitant, a
beneficiary, an employer or a subscriber under, or a holder of, such a Deferred Income Plan.
Notwithstanding the foregoing, if the Unit Shares or Warrants are “prohibited investments” for a particular TFSA,
RRSP or RRIF for purposes of the Tax Act, the holder of the TFSA or annuitant of the RRSP or RRIF will be
subject to a penalty tax under the Tax Act. The Unit Shares and Warrants will generally not be a “prohibited
investment” for these purposes unless the holder of the TFSA or the annuitant under the RRSP or RRIF, as
applicable, (i) does not deal at arm’s length with the Corporation for purposes of the Tax Act, (ii) has a “significant
interest” as defined in the Tax Act in the Corporation, or (iii) has a “significant interest” as defined in the Tax Act in
a corporation, partnership or trust with which the Corporation does not deal at arm’s length for purposes of the Tax
Act. Proposed amendments to the Tax Act released on December 21, 2012 (the “December 2012 Proposals”)
propose to delete the condition in (iii) above. In addition, pursuant to the December 2012 Proposals, the Unit Shares
or Warrants will generally not be a “prohibited investment” if the Unit Shares or Warrants are “excluded property”
as defined in the December 2012 Proposals for TFSAs, RRSPs or RRIFs. There can be no assurance that the
December 2012 Proposals will be enacted in their current form or at all.
Holders or annuitants should consult their own tax advisors with respect to whether the Unit Shares or Warrants
would be prohibited investments, including with respect to whether the Unit Shares or Warrants would be “excluded
property” as defined in the December 2012 Proposals.
-3THE CORPORATION
The Corporation was incorporated on September 12, 2006 under the Business Corporations Act (Ontario) as “Blue
Ribbon Capital Corporation”. The name of the Corporation was changed to “Kilo Goldmines Ltd.” by the filing of
Articles of Amendment under the Business Corporations Act (Ontario) effective on March 20, 2009 in connection
with the acquisition of Kilo Goldmines Inc. through amalgamation with a wholly-owned subsidiary of the
Corporation, which constituted the Corporation’s “Qualifying Transaction” under the policies of the TSXV.
The Corporation is a reporting issuer in the provinces of Ontario, Alberta and British Columbia and its Common
Shares are listed on the TSXV under the trading symbol “KGL” and the Regulated Unofficial Market of the
Frankfurt Stock Exchange under the trading symbol “0K2”. The registered and head office of the Corporation is
located at 141 Adelaide Street West, Suite 1200, Toronto, Ontario, M5H 3L5.
The following table illustrates the Corporation’s current corporate structure and material inter-corporate
relationships and sets out the jurisdictions of incorporation of each relevant entity and the percentage of each such
entity’s voting securities beneficially owned, or controlled or directed, directly or indirectly, by Kilo.
Summary Description of the Business and Properties
The Corporation is a mineral exploration company focused on the exploration for gold and other minerals on its
properties in Oriental Province of the Democratic Republic of Congo (“DRC”). The Corporation, through its DRC
subsidiaries, holds mineral exploitation licences covering an aggregate of 606 square kilometers and mineral
exploration licences covering an aggregate of 2,544 square kilometers.
The Corporation’s principal property is the Somituri Property, which consists of eight separate exploitation licences
covering an aggregate of 606 square kilometers, located in the Territories of Mambasa and Wamba in the District of
the Ituri and Haut-Uele of Oriental Province in the northeast part of the DRC, approximately 400 kilometers west of
the Ugandan border. A full description of the Somituri Property and the Corporation’s other mineral properties is
included in the AIF, which is incorporated herein by reference.
In order to conduct business in the DRC, following incorporation and registration with the registrar of companies, a
DRC company is required to obtain a national identity number, an employer identification number, a tax number, a
value added tax number and other identification numbers as are usually required in the normal course of business in
any country. Mining permits are required to conduct mineral exploration and development in the DRC. The permits
issued in the name of the Corporation’s subsidiaries are subject to on-going monitoring by local staff and local legal
counsel of the Corporation to ensure that fees and taxes are paid and reports filed on a timely basis. Restrictions or
conditions can be imposed by DRC authorities on mineral exploration and development activities, however none
have been imposed on the activities of the Corporation’s DRC subsidiaries to date.
None of the Corporation’s DRC subsidiaries produce cash flows. The DRC subsidiaries are funded, as needed, by
the Corporation with funds obtained through capital raising activities. As each of the Corporation’s subsidiaries is
majority-owned, the Corporation effectively controls each subsidiary and its assets through the Corporation’s ability
to appoint and/or remove management of each subsidiary. Senior managers of the DRC subsidiaries are ultimately
-4accountable to the Corporation’s board of directors and senior management. Senior managers of the DRC
subsidiaries are typically expatriates familiar with Canadian and/or other jurisdictions having similar reporting
standards to Canada.
The Corporation relies on title opinions it receives from its DRC counsel as well as legal advice from its Canadian
and DRC counsel to satisfy itself as to its ownership of its property interests. In addition, the Corporation has
satisfied itself as to the required permits, licenses and other regulatory approvals required to carry out its business in
the DRC by obtaining advice from its DRC counsel. As well, the Corporation’s management team and board of
directors have extensive experience in operating mineral exploration companies in the DRC.
CONSOLIDATED CAPITALIZATION
There have been no material changes in the Corporation’s share or loan capital on a consolidated basis since
December 31, 2012, the date of Kilo’s most recently filed financial statements.
As at the date of this short form prospectus, 219,049,978 Common Shares were outstanding. Assuming completion
of the Minimum Offering and the exercise of the Over-Allotment Option in full, there will be 334,049,978
Common Shares issued and outstanding. If the Corporation completes the Maximum Offering and the OverAllotment Option is exercised in full, there will be 357,049,978 Common Shares issued and outstanding.
USE OF PROCEEDS
The net proceeds to be received by the Corporation from the Minimum Offering and the Maximum Offering,
respectively, after deducting the Agents’ Fee and the estimated expenses of the Offering of $250,000, will be
approximately $9,150,000 and $11,030,000, respectively. If the Over-Allotment Option is exercised in full, the net
proceeds of the Minimum Offering and the Maximum Offering, respectively, after deducting the Agents’ Fee and
the estimated expenses of the Offering, are estimated to be approximately $10,560,000 and $12,722,000,
respectively. The Offering is subject to a minimum subscription of $10,000,000 being received by the
Corporation on or before the 90th day following the date of this prospectus. Until the Closing Date, all
subscription funds received by the Agents will be held by the Agents pending closing of the Minimum Offering. If
the Minimum Offering has not been subscribed for on or prior to the 90th day following the date of this prospectus,
the Agents shall promptly return the proceeds of subscriptions to the subscribers without interest or deduction unless
such subscribers have otherwise instructed the Agents.
The Corporation intends to use the net proceeds of the Offering as follows:
Description of Expenditure
Net Proceeds Realized
Minimum Offering
Maximum Offering
Somituri Property
Phase 1
Drilling
Sampling
Modeling, Geology & Metallurgy
Technical Advisory & Environmental
Total
$2,562,000
$900,000
$340,000
$320,000
$4,122,000
$2,562,000
$900,000
$340,000
$320,000
$4,122,000
Phase 2
Drilling
Sampling
Modeling, Geology & Metallurgy
Technical Advisory & Environmental
Total
Working Capital
Total
$1,800,000
$900,000
$500,000
$428,000
$3,628,000
$1,400,000
$9,150,000
$1,800,000
$900,000
$500,000
$428,000
$3,628,000
$3,280,000
$11,030,000
The objectives of the exploration programs described in the table above are to define additional drill targets,
establish additional mineral resources on the Somituri Property and to convert existing mineral resources into higher
categories of mineral resources or mineral reserves. The Phase 2 exploration program in the table above will be
contingent upon successful completion of the corresponding Phase 1 exploration program. Mr. Stanley D. Robinson,
-5M.Sc. P.Geo., a consultant to the Corporation and “qualified person” under National Instrument 43-101 – Standards
of Disclosure for Mineral Projects, has reviewed the exploration budgets disclosed above and believes them to be
reasonable.
If the Minimum Offering is completed and the Agents exercise the Over-Allotment Option in full, the Corporation
will receive an additional $1,410,000 in net proceeds after deducting the Agents’ Fee. The Corporation intends to
apply any such additional proceeds towards general working capital.
The Corporation intends to use the funds as stated in this short form prospectus; however, there may be
circumstances where, on the basis of results obtained or for other sound business reasons, a reallocation of funds
may be necessary. Accordingly, management of the Corporation will have broad discretion in the application of the
proceeds of the Offering. See “Risk Factors – Uncertainty of Application of Net Proceeds”.
Since the Units are being offered on a “best efforts” marketed basis, the precise amount of proceeds to be raised in
excess of the Minimum Offering cannot be determined at this time. Regardless, the Corporation believes that the net
proceeds of the Minimum Offering, together with other resources available to the Corporation, will be sufficient to
meet its short-term liquidity requirements.
In the year ended September 30, 2012 and in the three months ended December 31, 2012, the Corporation had
negative cash flow from operations of $1,358,003 and $517,306, respectively. To the extent required, the net
proceeds from the Offering will be used to fund negative operating cash flow in future periods.
The unexpended net proceeds from the Offering will be invested in short-term government securities, certificates of
deposits or guaranteed investment certificates issued by banks or trust companies or similar investments until such
time as expenditures are required to be incurred. The Corporation does not have a formal investment policy.
PLAN OF DISTRIBUTION
The Corporation has engaged the Agents, on a best efforts basis, without underwriter liability, to offer a minimum of
100,000,000 Units and a maximum of 120,000,000 Units for sale at a price of $0.10 per Unit for aggregate gross
proceeds of a minimum of $10,000,000 and a maximum of $12,000,000. Pursuant to the Agency Agreement, the
Corporation has agreed to pay the Agents the Agents’ Fee equal to 6.0% of the aggregate gross proceeds of the
Offering. The Agents have waived the Agents’ Fee in connection with up to $800,000 of subscriptions for Units
from the president’s list. The Corporation has also agreed to grant to the Agents such number of Agents’ Warrants
as is equal to 3.0% of the aggregate number of Units and Additional Units sold under the Offering. Each Agents’
Warrant will be exercisable to purchase one Agents’ Share at a price equal to the Offering Price for a period of two
years after the Closing Date. The Agents have waived the Agents’ Warrants in connection with up to $800,000 of
subscriptions for Units from the president’s list. This short form prospectus qualifies the distribution of the Agents’
Warrants.
The price per Unit was determined based upon arm’s length negotiations between the Corporation and the Agents.
The obligations of the Agents under the Agency Agreement are several and may be terminated at their discretion
upon the occurrence of certain stated events, as set out in the Agency Agreement. The Agents are not obligated,
directly or indirectly, to advance their own funds to purchase any Units.
The Corporation has granted the Agents the Over-Allotment Option, exercisable in whole or in part at the sole
discretion of the Agents, until the 30th day following the Closing Date, to purchase up to an additional 15% of the
Units to cover the Agents’ over-allocation position, if any, and for market stabilization purposes. The purchase price
of one Additional Unit pursuant to the Over-Allotment Option will be equal to the Offering Price. The grant of the
Over-Allotment Option and the distribution of Additional Units issued upon the exercise of the Over-Allotment
Option are qualified for distribution under this short form prospectus. A purchaser who acquires Additional Units
forming part of the Agents’ over-allocation position acquires those securities under this short form prospectus
regardless of whether the over-allocation position is ultimately filled through the exercise of the Over-Allotment
Option or secondary market purchases.
Under the Agency Agreement, the Corporation has agreed to indemnify and hold harmless the Agents and their
affiliates and their respective officers, directors, employees, agents and shareholders against certain liabilities,
-6including civil liabilities under Canadian provincial securities legislation, or to contribute to any payments the
Agents may be required to make in respect thereof. The Corporation has agreed to pay all of the expenses of the
Offering, together with the Agents’ Fee, and the reasonable out-of-pocket expenses of the Agents, subject to a cap in
the case of the legal counsel fees of the Agents.
Regardless of the size of the Offering, the sale of Units will be completed in accordance with the Agency
Agreement. Subscriptions for the Units 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. Provided the Minimum Offering has
been achieved, it is expected that the closing date will occur on or about March 20, 2013 or such earlier or later date
as may mutually be agreed to by the Corporation and the Agents (i.e., the Closing Date). Notwithstanding the
foregoing, the distribution of the Units will not continue for a period of more than 90 days after the date of the final
receipt for this short form prospectus if subscriptions for the Minimum Offering are not obtained within that period
or such later date as the Corporation and the Agents may agree and the securities regulatory authorities may approve
(subject to the filing of any required amendment to this short form prospectus and the regulator issuing a receipt for
such amendment).
Until such time as the closing has occurred in respect of the Minimum Offering, all subscription funds received by
the Agents will be held in trust, pending closing of the Minimum Offering. If the Minimum Offering has not been
completed prior to the expiry of the 90-day period or such later date as the Corporation and the Agents may agree
and the securities regulatory authorities may approve (subject to the filing of any required amendment to this short
form prospectus and the regulator issuing a receipt for such amendment), the Agents shall promptly return the
proceeds of the subscription to the subscribers without interest or deduction.
Registrations and transfers of Unit Shares and Warrants will be effected only through the book-based system
administered by CDS. Purchasers of Units will receive only a customer confirmation from the Agents or other
registered dealer who is a CDS Participant and from or through whom a beneficial interest in the Units is purchased.
Beneficial owners of Units will not, except in certain limited circumstances, be entitled to receive physical
certificates evidencing their ownership of such securities. Notwithstanding the foregoing, any Unit Shares and
Warrants issued in the United States or to, or for the account or benefit of, U.S. persons, will be in the form of a
definitive certificate delivered to the holders thereof.
The Offering is not underwritten or guaranteed by any person. The Agents have agreed to conditionally offer the
Units for sale on a best efforts basis, without underwriter liability, subject to prior sale, if, as and when issued by the
Corporation and accepted by the Agents in accordance with the conditions contained in the Agency Agreement and
subject to the approval of certain legal matters on behalf of the Corporation by Kirsh Securities Law Professional
Corporation (member of Acuity Corporate Securities Lawyers) and on behalf of the Agents by Borden Ladner
Gervais LLP. The Corporation reserves the right to accept or refuse subscriptions in whole or in part. The Agents
have reserved the right to form a selling group of appropriately registered dealers and brokers with compensation to
be negotiated between the Agents and such selling group participants, but at no additional cost to the Corporation.
Pursuant to rules and policy statements of certain securities regulators, the Agents may not, at any time during the
period of distribution of the Units, 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. Such exceptions include a bid or purchase
permitted under the by-laws and rules of applicable regulatory authorities and stock exchanges, including the
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 and on behalf of a customer where the order was not solicited during the period of distribution. The Agents
may engage in market stabilization or market balancing activities on the TSXV where the bid for or purchase of the
Common Shares is for the purpose of maintaining a fair and orderly market in the Common Shares, subject to price
limitations applicable to such bids or purchases. Such transactions, if commenced, may be interrupted or
discontinued at any time.
The TSXV has conditionally accepted the listing of the Unit Shares and Warrants (including the Unit Shares and
Warrants to be issued upon the exercise of the Over-Allotment Option) distributed under this short form prospectus
as well as any Warrant Shares and Agents’ Shares issuable upon the exercise of the Warrants and Agents’ Warrants,
respectively. Listing will be subject to the Corporation fulfilling all of the listing requirements of the TSXV,
including, in the case of the Warrants, distribution to a minimum number of holders. There is currently no market
-7through which the Warrants may be sold.
The Corporation has agreed with the Agents not to issue any Common Shares or securities convertible, exercisable
or exchangeable into Common Shares, or announce any intention to do so, other than pursuant to: (a) the Offering;
(b) the grant or exercise of stock options pursuant to the stock option plan of the Corporation; (c) warrants or other
convertible securities currently outstanding; (d) obligations in respect of existing agreements; and (e) property or
share acquisitions in the normal course for a period of 90 days following the closing of the Offering without the
prior written consent of the Agents, such consent not to be unreasonably withheld or delayed.
This short form prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of the Units in
the United States. The Units are being offered on behalf of the Corporation by the Agents in the provinces of
Ontario, Albert and British Columbia. The Units have not been and will not be registered under the U.S. Securities
Act or any state securities laws and may not be offered or sold in the United States or to, or for the account or
benefit of, U.S. persons, except in transactions exempt from the registration requirements of the U.S. Securities Act
and applicable state securities laws. The terms “United States” and “U.S. person” are as defined in Regulation S
under the U.S. Securities Act. The Agency Agreement also provides that the Agents may offer and sell the Units
outside the United States to non-U.S. persons only in accordance with all applicable securities and other laws and
regulations and in a manner which will not require the Corporation to comply with the registration, prospectus,
filing, continuous disclosure or other similar requirements under the applicable securities laws of such other
jurisdictions or pay any additional governmental filing fees which relate to such other jurisdictions. The Agents have
agreed that they will not offer or sell any Units within the United States except as permitted in the Agency
Agreement. Until 40 days after the Closing Date, an offer or sale of the Units within the United States by any dealer
(whether or not participating in this offering) may violate the registration requirements of the U.S. Securities Act if
such offer or sale is made otherwise than in accordance with an available exemption under the U.S. Securities Act.
This short form prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the Units in
the United States.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Kirsh Securities Law Professional Corporation, counsel to the Corporation, and Borden Ladner
Gervais LLP, counsel to the Agents, the following summary describes the principal Canadian federal income tax
considerations under the Tax Act generally applicable to a holder (a “Holder”) who acquires Units pursuant to the
Offering, and who, for purposes of the Tax Act and at all relevant times, holds such securities as capital property and
deals at arm’s length with and is not affiliated with the Corporation or the Agents. Generally, the Unit Shares,
Warrants and Common Shares would be considered to be capital property to a Holder provided that the Holder does
not hold the Unit Shares, Warrants or Common Shares in the course of carrying on a business of trading or dealing
in securities and has not acquired them in one or more transactions considered to be an adventure in the nature of
trade.
This summary is not applicable to a Holder (i) that is a “financial institution”, as defined in the Tax Act for purposes
of certain rules referred to as the mark-to-market rules, (ii), that is a “specified financial institution”, as defined in
the Tax Act, (iii) an interest in which would be a “tax shelter investment” as defined in the Tax Act, or (iv) that has
made a functional currency reporting election for purposes of the Tax Act. 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 the purposes of the “foreign affiliate
dumping” rules in section 212.3 of the Tax Act. Such Holders should consult their tax advisors with respect to the
consequences of acquiring Units.
This summary is based upon the current provisions of the Tax Act and the Regulations thereunder and counsel’s
understanding of the current published administrative policies and assessing practices of the Canada Revenue
Agency (the “CRA”). This summary takes into account all specific proposals to amend the Tax Act and the
Regulations publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the
“Proposed Amendments”) and assumes that all Proposed Amendments will be enacted in the form proposed.
However, there can be no assurance that the Proposed Amendments will be enacted in their current form or at all.
This summary does not otherwise take into account or anticipate any changes in the law or administrative or
assessing practice or policy of the CRA whether by legislative, regulatory, administrative, or judicial action, nor
-8does it take into account tax legislation or considerations of any province, territory, or foreign jurisdiction, which
may differ significantly from those discussed herein.
This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any
particular Holder.
This summary is not exhaustive of all federal income tax considerations. Accordingly, Holders should consult
their own tax advisors having regard to their own particular circumstances.
Allocation of Purchase Price
A purchaser of a Unit offered by this prospectus will be required to allocate the price paid for a Unit (together with
any reasonable acquisition costs) on a reasonable basis between the Unit Share and the Warrant in order to
determine their respective costs to the purchaser for purposes of the Tax Act. The Corporation will allocate $0.089
of the issue price of each Unit as consideration for the issue of each Unit Share and $0.011 for the issue of each
Warrant. Although the Corporation believes this allocation to be reasonable, it is not binding upon the CRA or a
Holder, and counsel expresses no opinion as to such allocation. A successful challenge by the CRA of this allocation
will affect the adjusted cost base calculations accordingly.
Taxation of Resident Holders
The following section of this summary applies to Holders (“Resident Holders”) who, for the purposes of the Tax
Act, are or are deemed to be resident in Canada at all relevant times. Certain Resident Holders whose Unit Shares
might not otherwise be capital property, may, in certain circumstances, be entitled to have the Unit Shares and every
other “Canadian security”, as defined in the Tax Act, owned by such Resident Holder in the taxation year of the
election and in all subsequent taxation years deemed to be capital property by making the irrevocable election
permitted by subsection 39(4) of the Tax Act.
Taxation of Dividends
A Resident Holder will be required to include in computing its income for a taxation year any dividends received, or
deemed to be received, in the year by the Resident Holder on the Unit Shares and any other Common Shares. In the
case of a Resident Holder that is an individual (other than certain trusts), such dividends will be subject to the grossup and dividend tax credit rules normally applicable to taxable dividends received from taxable Canadian
corporations, including the enhanced gross-up and dividend tax credit provisions where the Corporation designates
the dividend as an “eligible dividend” in accordance with the provisions of the Tax Act. A dividend received or
deemed to be received by a Resident Holder that is a corporation will generally be deductible in computing the
corporation’s taxable income.
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 a refundable tax under Part
IV of the Tax Act at the rate of 331⁄3% on dividends received or deemed to be received on the Unit Shares and any
other Common Shares in a year to the extent such dividends are deductible in computing taxable income for the
year.
Exercise of Warrants
No gain or loss will be realized by a Resident Holder upon exercise of a Warrant to acquire a Warrant Share. When
a Warrant is exercised, the cost to the Resident Holder of the Warrant Share so acquired will be the aggregate of the
adjusted cost base, for that Resident Holder, of the Warrant and the price paid for the Warrant Share upon exercise
of the Warrant. The cost to a Resident Holder of a Warrant Share acquired upon the exercise of a Warrant must be
averaged with the adjusted cost base (determined immediately before the acquisition of the Warrant Share upon the
exercise of the Warrant) with all other Unit Shares, Warrant Shares and Common Shares held by the Resident
Holder as capital property at the time of the exercise of the Warrant to determine the adjusted cost base of such
share.
-9Disposition or Expiry of Warrants
The disposition of a Warrant (other than a disposition arising on the exercise or expiry of a Warrant), will generally
result in a capital gain (or capital loss) to the Resident Holder to the extent that the proceeds of disposition, net of
any reasonable costs of disposition, exceed (or are less than) the adjusted cost base of the Warrant to the Resident
Holder.
The expiry of an unexercised Warrant will generally result in a capital loss equal to the Resident Holder’s adjusted
cost base of the Warrant.
See the discussion of capital gains and losses generally under “Capital Gains and Capital Losses” below.
Dispositions of Unit Shares and Warrant Shares
The cost to a Resident Holder of an Unit Share will be the initial acquisition cost thereof. The Resident Holder’s
adjusted cost base of an Unit Share at any time will be determined by averaging the adjusted cost base to the
Resident Holder of any other Common Shares owned by the Resident Holder at that time.
A Resident Holder who disposes, or is deemed to dispose, of a Unit Share, Warrant Share or Common 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 shares immediately before the disposition or deemed disposition. The taxation of capital
gains and losses is described below under the heading “Capital Gains and Capital Losses”.
Capital Gains and Capital Losses
Generally, a Resident Holder is required to include in computing its 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 provisions of 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 deducted 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 of a Unit Share,
Warrant Share or Common Share may be reduced by the amount of any dividends received by such Resident Holder
of such shares subject to and in accordance with the provisions of the Tax Act. Similar rules may apply to a
partnership or trust of which a corporation, trust or partnership is a member or beneficiary.
A Resident Holder that is a “Canadian-controlled private corporation” as defined in the Tax Act may be liable to pay
an additional 62⁄3% refundable tax on its aggregate investment income, (as defined in the Tax Act) including taxable
capital gains.
Alternative Minimum Tax
Capital gains realized and dividends 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.
Taxation of Non-Resident Holders
The following section of this summary is generally applicable to Holders (“Non-Resident Holders”) who (i) for the
purposes of the Tax Act and any applicable income tax treaty or convention, have not been and will not be deemed
to be resident in Canada at any time while they hold Unit Shares, Warrants or Common Shares; and (ii) do not use or
hold the Unit Shares, Warrants or Common Shares in carrying on a business in Canada. 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.
- 10 Dividends
Dividends paid or credited or deemed to be paid or credited to a Non-Resident Holder by the Corporation are subject
to Canadian withholding tax at the rate of 25% unless reduced by the terms of an applicable tax treaty or convention
between Canada and the Non-Resident Holder’s country of residence. Under the Canada-United States Income Tax
Convention (1980) (the “Treaty”) as amended, the rate of withholding tax on dividends paid or credited to a NonResident Holder who is resident in the U.S. for purposes of the Treaty and entitled to benefits under the Treaty (a
“U.S. Holder”) is generally limited to 15% of the gross amount of the dividend (or 5% in the case of a U.S. Holder
that is a Corporation beneficially owning at least 10% of the Corporation’s voting shares). Non-Resident Holders
should consult their own tax advisors.
Exercise of Warrants
No gain or loss will be realized by a Non-Resident Holder upon the exercise of a Warrant to acquire a Warrant
Share.
Dispositions 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, Warrant, Warrant Share or a Common Share, nor will capital
losses arising therefrom be recognized under the Tax Act, unless the Unit Share, Warrant, Warrant Share or
Common Share constitutes “taxable Canadian property” to the Non-Resident Holder thereof for purposes of the Tax
Act, and the gain is not exempt from tax pursuant to the terms of an applicable tax treaty.
As long as the Common Shares are listed a designated stock exchange (which includes Tier 1 and Tier 2 of the
TSXV) at the time of disposition, the Unit Shares, Warrants, Warrant Shares and Common Shares generally will not
constitute taxable Canadian property of a Non-Resident Holder, unless at any time during the 60 month period
immediately preceding the disposition: (i) the Non-Resident Holder, persons with whom the Non-Resident Holder
did not deal at arm’s length, or the Non-Resident Holder together with all such persons, owned 25% or more of the
issued shares of any class or series of shares of the Corporation; and (ii) more than 50% of the fair market value of
the shares of the Corporation was derived directly or indirectly from one or any combination of real or immovable
property situated in Canada, Canadian resource properties (as defined in the Tax Act), timber resource properties (as
defined in the Tax Act) or an option in respect of, or an interest in, or for civil law a right in, such property.
A Non-Resident Holder’s capital gain (or capital loss) in respect of Unit Shares, Warrants, Warrant Shares and
Common Shares that constitute or are deemed to constitute taxable Canadian property (and are not “treaty-protected
property” as defined for purposes of the Tax Act) will generally be computed in the manner described above under
the heading “Taxation of Resident Holders—Dispositions of Unit Shares and Warrant Shares”.
Non-Resident Holders whose Unit Shares, Warrants, Warrant Shares and Common Shares are taxable Canadian
property should consult their own tax advisors.
DESCRIPTION OF SECURITIES BEING DISTRIBUTED
Common Shares
The authorized capital of the Corporation consists of an unlimited number of Common Shares. As at the date of this
short form prospectus, 219,049,978 Common Shares are issued and outstanding. The holders of Common Shares are
entitled to receive notice of and to attend and vote at all meetings of the shareholders of the Corporation and each
Common Share confers the right to one vote in person or by proxy at all meetings of the shareholders of the
Corporation. The holders of the Common Shares are entitled to receive such dividends in any financial year as the
board of directors of the Corporation may by resolution determine. In the event of the liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, the holders of the Common Shares are entitled to
receive the remaining property and assets of the Corporation.
The Corporation has adopted a shareholder rights plan which has been confirmed by shareholders (the “Rights
Plan”). Reference is made to the summary of the terms of the Rights Plan provided in the AIF under the section
heading “Description of Capital Structure” which are incorporated herein by reference.
- 11 Warrants
The Warrants will be created and issued pursuant to the terms of a warrant indenture (the “Warrant Indenture”) to
be entered into between the Corporation and Equity Financial Trust Company (the “Warrant Agent”), as warrant
agent, on the closing of the Offering. The principal transfer offices of the Warrant Agent in Toronto, Ontario will be
the location at which Warrants may be surrendered for exercise or transfer.
The following is a summary of the material attributes and characteristics of the Warrants. This summary does not,
however, include a description of all of the terms of the Warrants. Reference should be made to the Warrant
Indenture for a complete description of the terms of the Warrants.
Each Warrant will entitle the holder to purchase one Common Share at a price of $0.15 per Common Share at any
time before 4:00 p.m. (Toronto time) on the date that is 36 months after the Closing Date, after which time the
Warrants will expire.
The Warrants will be transferable by the holder. However, there is currently no market through which the Warrants
may be sold. See “Plan of Distribution”.
Neither the Warrants nor the Common Shares issuable upon exercise of the Warrants have been or will be registered
under the U.S. Securities Act or any state securities laws, and the Warrants may not be exercised in the United States
or by, or for the account or benefit of, a U.S. person unless an exemption from such registration requirements is
available. Certificates evidencing the Warrants and the Common Shares issuable upon exercise of the Warrants,
which are issued in the United States or to, or for the account or benefit of, a U.S. person will bear a legend to this
effect.
The Warrant Indenture will contain customary provisions designed to protect the holders of Warrants against
dilution upon the happening of certain stated events, including standard adjustments in the number of Common
Shares issuable upon the exercise of the Warrants and/or the exercise price per Common Share.
No fractional Common Shares will be issuable upon the exercise of Warrants, and no cash or other consideration
will be paid in lieu of fractional shares. Holders of Warrants will not have any voting or pre-emptive rights or any
other rights which a holder of Common Shares would have.
From time to time, the Corporation and the Warrant Agent, without the consent of the holders of Warrants, may
amend or supplement the Warrant Indenture for certain purposes, including curing defects or inconsistencies or
making any change that does not adversely affect the rights of any holder of Warrants. Any amendment or
supplement to the Warrant Indenture that adversely affects the interests of the holders of Warrants may only be
made by “extraordinary resolution”, which will be defined in the Warrant Indenture as a resolution either: (a) passed
at a meeting of the holders of Warrants (at which there are holders of Warrants present in person or represented by
proxy representing at least 50% of the aggregate number of the then outstanding Warrants) by the affirmative vote
of holders of Warrants representing not less than 66 2/3% of the aggregate number of then outstanding Warrants
represented at the meeting and voted on such resolution; or (b) adopted by an instrument in writing signed by the
holders of Warrants representing not less than 66 2/3% of the aggregate number of then outstanding Warrants.
No fee or commission is payable to the Agents with respect to the exercise of Warrants.
Holders of Units will be required to allocate on a reasonable basis their cost of the Unit between the Common Share
and Warrant in order to determine their respective costs for purposes of the Tax Act. The Corporation intends to
allocate $0.089 to each Common Share and $0.011 to each Warrant forming a Unit for purposes of the Tax Act.
Although the Corporation believes that this allocation is reasonable, it is not binding on the Canada Revenue
Agency or the holder.
Agents’ Warrants
The Corporation has also agreed to grant to the Agents such number of Agents’ Warrants as is equal to 3.0% of the
aggregate number of Units sold under the Offering (including the Units to be issued upon the exercise of the OverAllotment Option). Each Agents’ Warrant will be exercisable to purchase one Agents’ Share at a price equal to the
Offering Price for a period of two years after the Closing Date. This short form prospectus qualifies the distribution
- 12 of the Agents’ Warrants.
PRIOR SALES
The following information outlines the Common Shares and other securities convertible into Common Shares issued
by Kilo during the 12-month period prior to the date of this short form prospectus:
On February 3, 2012, the Corporation issued 1,405,777 Common Shares at a deemed price of $0.20 per Common
Share in satisfaction of the assignment and registration of the KGL-Somituri exploitation licences.
On January 30, 2013, the Corporation issued 200,000 Common Shares at a deemed price of $0.115 per Common
Share as a first instalment under its option to purchase from its partner in the Isiro Project, its gold interest and
shares of KGL-ERW S.p.r.l.
From January 2012 to the date hereof, the Corporation has issued an aggregate of 2,150,000 stock options under the
Corporation’s stock option plan, each expiring three years from the date of grant and having exercise prices ranging
from $0.17 per Common Share to $0.22 per Common Share.
TRADING PRICE AND VOLUME
Kilo’s Common Shares are listed and posted for trading on the TSXV under the symbol “KGL” and on the
Regulated Unofficial Market of the Frankfurt Stock Exchange under the symbol “02K”.
The following table sets forth the reported high and low closing prices and the aggregate volume of trading of the
Common Shares on the TSXV for the periods indicated during the 12-month period before the date of this short
form prospectus:
Month
High
Low
Volume
April 2012
May 2012
June 2012
July 2012
August 2012
September 2012
October 2012
November 2012
December 2012
January 2013
February 2013
March 1 to 7, 2013
$0.20
$0.20
$0.19
$0.19
$0.16
$0.13
$0.16
$0.11
$0.13
$0.13
$0.125
$0.09
$0.16
$0.14
$0.13
$0.13
$0.12
$0.09
$0.08
$0.09
$0.10
$0.11
$0.075
$0.075
3,577,104
895,240
1,057,557
561,542
2,539,800
8,737,223
3,417,353
2,729,201
2,932,794
1,925,743
1,588,638
188,150
On March 7, 2013, the last trading day on the TSXV immediately prior to the filing of this short form prospectus,
the closing price of the Common Shares was $0.09.
RISK FACTORS
There are a number of risks that may have a material and adverse impact on the future operating and financial
performance of the Corporation and could cause the Corporation’s operating and financial performance to differ
materially from the estimates described in forward-looking information relating to the Corporation. These include
widespread risks associated with any form of business and specific risks associated with the Corporation’s business
and its involvement in the gold exploration and development industry.
An investment in the Units is considered speculative and involves a high degree of risk due to, among other things,
the nature of the Corporation’s business and the present stage of its development. Prospective purchasers should
carefully consider the risk factors set out below along with the other matters set out or incorporated by reference in
- 13 this short form prospectus. The operations of the Corporation are speculative due to the high risk nature of its
business which is the operation, exploration and development of mineral properties. The Corporation has identified
the following non-exhaustive list of risks that it considers to be relevant to its operations and business plans. In
addition to information set out elsewhere in this short form prospectus, investors should carefully consider the
following risk factors and the risk factors set out on pages 33 through 40 (entitled “Risk Factors”) in the AIF, which
is incorporated by reference herein. Such risk factors could materially affect the Corporation’s future operating
results and could cause actual events to differ materially from those described in forward-looking information
relating to the Corporation.
Risks Relating to the Corporation
Political and Economic Instability
The Corporation’s projects are located in the DRC. The DRC has a long history of political instability, significant
and unpredictable changes in government policies and laws, war and civil conflict, illegal mining activities, lack of
law enforcement and labour unrest. More recently, the DRC has undergone civil unrest and instability that could
have an impact on political, social or economic conditions. From time to time, governments have intervened in the
export of mineral concentrates in response to concerns about the validity of export rights and payment of duties.
These factors (which may include new or modified taxes or other government levies as well as other legislation)
may result in the curtailment or cessation of the Corporation’s activities, adversely affecting the value of its assets.
Development and Operating Risks
The marketability of natural resources that may be acquired or discovered by the Corporation will be affected by
numerous factors beyond its control. These factors include market fluctuations, the proximity and capacity of natural
resource markets and processing equipment, and government regulations, including regulations relating to prices,
taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact
effect of these factors cannot be accurately predicted, but the combination of these factors may result in the
Corporation not receiving an adequate return on invested capital.
Certain Assets are Held, and Certain Business is Conducted, By Subsidiaries
It is not uncommon for public companies with foreign operations to hold assets and to carry on business through
local subsidiary entities. The Corporation holds its mining assets and carries on its mining exploration and
development business through its majority-owned subsidiaries, KGL-Somituri Sprl, KGL-SIHU Sprl, KGL-ERW
Sprl, KWR-IRON Sprl, and KGL-EXPLORATION Sprl, each a company incorporated in the DRC. As each
subsidiary is a majority-owned subsidiary of the Corporation, the Corporation effectively controls each subsidiary
through the Corporation’s ability to elect and/or remove senior mangers of the subsidiaries whom are ultimately
accountable to the Corporation’s board of directors and senior management.
In addition, the Corporation believes it has mitigated any risks of its corporate structure through the adoption of an
effective system of corporate governance, internal controls over financial reporting, and disclosure controls and
procedures that apply at all levels of the Corporation, including the subsidiaries as set out below. These systems are
overseen by the Corporation’s board of directors, and implemented by the Corporation’s senior management.
(a)
Corporation’s Control Over Subsidiaries. The Corporation’s corporate structure has been designed
to ensure that the Corporation plays a dominant role in the operations of the subsidiaries. The
subsidiaries are majority-owned by the Corporation. Accordingly, the Corporation effectively
controls each subsidiary and its assets through the Corporation’s ability to appoint and/or remove
management so that senior managers of the DRC subsidiaries are ultimately accountable to the
Corporation’s board of directors and senior management. The Corporation has complete control
over and access to the books and records of the subsidiaries.
(b)
Risk Assessment. The Corporation’s board of directors is responsible for the overall stewardship
of the Corporation and, as such, supervises the management of the business and affairs of the
Corporation. More specifically, the board is responsible for reviewing the strategic business plans
and corporate objectives, and approving acquisitions, dispositions, investments, capital
- 14 expenditures and other transactions and matters that are thought to be material to the Corporation
including those of the subsidiaries.
(c)
Internal Control Over Financial Reporting. The Corporation prepares its consolidated financial
statements and management’s discussion & analysis (“MD&A”) on a quarterly and annual basis,
using International Financial Reporting Standards (“IFRS”), which require financial information
and disclosures from each subsidiary. The Corporation implements internal controls over the
preparation of its financial statements and other financial disclosures to provide reasonable
assurance that its financial reporting is reliable and that the quarterly and annual financial
statements and MD&A are being prepared in accordance with IFRS. These internal controls
include the following:
(i)
The Corporation has established a quarterly reporting package relating to subsidiaries that
standardizes the information required from each subsidiary in order to complete the
consolidated financial statements and MD&A. Management of the Corporation has direct
access to relevant financial management of each subsidiary in order to verify and clarify
all information required.
(ii)
Although not specifically a management control, the Corporation engages its external
auditor to perform an audit of the annual consolidated financial statements in accordance
with Canadian generally accepted auditing standards.
(iii)
All public documents and statements relating to the Corporation and each subsidiary
containing material information (including financial information) are reviewed by senior
management (including the Chief Executive Officer and Chief Financial Officer) of the
Corporation and legal counsel before such material information is disclosed, to make sure
that all material information has been considered by management of the Corporation and
properly disclosed.
(iv)
As more fully described in paragraph (e) below, the Corporation’s Audit Committee
obtains confirmation from the Chief Executive Officer and Chief Financial Officer of the
Corporation as to the matters addressed in the quarterly and annual certifications required
under National Instrument 52-109 - Certification of Disclosure in the Issuer’s Annual and
Interim Filings (“NI 52-109”).
(v)
The Corporation’s Audit Committee reviews and approves the Corporation’s quarterly
financial statements and MD&A and recommends to the Corporation’s board of directors
for the board’s approval the Corporation’s annual financial statements and MD&A, and
any other financial information requiring board approval, prior to their publication or
release.
(vi)
The Corporation’s Audit Committee assesses and evaluates the adequacy of the
procedures in place for the review of the Corporation’s public disclosure of financial
information extracted or derived from the Corporation’s financial statements, other than
annual and quarterly financial disclosure.
(d)
Disclosure Controls and Procedures. The responsibilities of the Corporation’s Audit Committee
include oversight of the Corporation’s internal control systems including identifying, monitoring
and mitigating business risks as well as compliance with legal, ethical and regulatory
requirements.
(e)
CEO and CFO Certifications. In order for the Corporation’s Chief Executive Officer and Chief
Financial Officer to be in a position to attest to the matters addressed in the quarterly and annual
certifications required by NI 52-109, the Corporation has developed internal procedures and
responsibilities throughout the organization for its regular periodic and special situation reporting,
in order to provide assurances that information that may constitute material information will reach
the appropriate individuals who review public documents and statements relating to the
Corporation and the subsidiaries containing material information, is prepared with input from the
- 15 responsible officers and employees, and is available for review by the Chief Executive Officer and
Chief Financial Officer of the Corporation in a timely manner.
Future sales or issuances of equity securities could decrease the value of the Common Shares and dilute
purchasers’ voting power
The Corporation may sell additional equity securities in subsequent offerings (including through the sale of debt
securities or other securities convertible into equity securities) and may issue additional equity securities to finance
future acquisitions and other projects.
Sales or issuances of a substantial number of equity securities, or the perception that such sales could occur, may
adversely affect prevailing market prices for the Common Shares. With any additional sale or issuance of equity
securities, purchasers will suffer dilution of their voting power.
Risks Relating to the Offering
Market Price of Common Shares
Securities of small-cap resource 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 North America and globally, and market perceptions of the attractiveness of
particular industries. The price of the Common Shares is also likely to be significantly affected by short-term
changes in gold and other metal prices, foreign exchange rates, the political environment in the DRC, or in its
financial condition or results of operations as reflected in its quarterly earnings reports. Other factors unrelated to the
performance of the Corporation that may have an effect on the price of the Common Shares include the following:
the extent of analytical coverage available to investors concerning the business of the Corporation may be limited if
investment banks with research capabilities do not follow the Corporation’s securities; lessening in trading volume
and general market interest in the Corporation’s securities may affect an investor’s ability to trade significant
numbers of Common Shares; the size of the Corporation’s public float may limit the ability of some institutions to
invest in the Corporation’s securities; and a substantial decline in the price of the Common Shares that persists for a
significant period of time could cause the Corporation’s securities to be delisted from any exchange upon which they
trade, further reducing market liquidity. If an active market for the Common Shares cannot be sustained, the
liquidity of an investor’s investment may be limited and investors may lose their entire investment in Common
Shares. As a result of any of these factors, the market price of the Common Shares at any given point in time may
not accurately reflect the long-term value of the Corporation. Securities class-action litigation often has been
brought against companies following periods of volatility in the market price of their securities. The Corporation
may in the future be the target of similar litigation. Securities litigation could result in substantial costs and damages
and divert management’s attention and resources.
Uncertainty of Application of Net Proceeds
Although the Corporation has generally provided for the use of proceeds from its financing activities, it cannot
specify with certainty the amount of the net proceeds from its financing activities that will be allocated for each
purpose. Accordingly, the Corporation’s management will have broad discretion in the application of such proceeds.
Dividends
The Corporation does not anticipate that any dividends will be paid on the Common Shares in the foreseeable future.
No Guarantee on Investment
There is no guarantee that an investment in the Corporation will earn any positive return in the short or long term. In
fact, an investor could lose its, his or her entire investment in the Corporation.
No Pre-emptive Rights
The Corporation’s articles authorize the issuance of an unlimited number of Common Shares for the consideration
and on terms and conditions as shall be established by the board of directors without the approval of the
- 16 shareholders. Holders of Common Shares of the Corporation have no pre-emptive rights in connection with such
further issues.
Ability to Enforce Judgments
A substantial portion of the Corporation’s assets are located outside of Canada. The Corporation’s DRC subsidiaries
are also formed outside of Canada. In addition, a majority of the Corporation’s directors and officers and some of
the experts named in this short form prospectus reside outside of Canada and some or all of the assets of those
persons may be located outside of Canada. It may not be possible for purchasers to enforce judgments obtained in
Canadian courts predicated upon civil liability provisions of applicable Canadian securities laws against the
Corporation, and certain of its directors and officers and experts named in this short form prospectus. Moreover, it
may not be possible for purchasers to effect service of process within Canada upon such directors, officers and
experts. In the event of a dispute arising in connection with the Corporation’s operations in the DRC or any other
foreign jurisdiction, the Corporation may be subject to the exclusive jurisdiction of foreign courts or may not be
successful in subjecting foreign persons to the jurisdictions of the courts of Canada or enforcing Canadian
judgments in such other jurisdictions.
INTERESTS OF EXPERTS
Certain legal matters in connection with the Offering will be passed upon on behalf of the Corporation by Kirsh
Securities Law Professional Corporation (member of Acuity Corporate Securities Lawyers) and on behalf of the
Agents by Borden Ladner Gervais LLP. As of the date of this short form prospectus, the directors, officers and
shareholders of Kirsh Securities Law Professional Corporation, as a group, and the partners and associates of
Borden Ladner Gervais LLP, as a group, each beneficially owned, directly or indirectly, less than 1% of Kilo’s
outstanding Common Shares.
AUDITORS, REGISTRAR AND TRANSFER AGENT
The auditors of the Corporation are Collins Barrow Toronto LLP, Chartered Accountants, Toronto, Ontario who
advise that they are independent of the Corporation within the Rules of Professional Conduct of the Institute of
Chartered Accountants of Ontario.
The registrar and transfer agent for the Common Shares is Equity Financial Trust Company at its principal office at
200 University Avenue, Suite 400 Toronto, Ontario, M5H 4H1.
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, the securities legislation further provides a
purchaser with remedies for rescission or, in some jurisdictions, damages if the prospectus and any amendment
contains a misrepresentation or is not delivered to the purchaser, provided that such remedies for rescission 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.
- 17 AUDITORS’ CONSENT
We have read the short form prospectus of Kilo Goldmines Ltd. (the “Corporation”) dated March 8 2013,
qualifying the distribution of a minimum of 100,000,000 and a maximum of 12,000,000 Units of the Corporation.
We have complied with Canadian generally accepted standards for auditors’ involvement with offering documents.
We consent to being named and to the use through incorporation by reference in the above-mentioned short form
prospectus of our report to the shareholders of the Corporation on the consolidated statements of financial position
of the Corporation as at September 30, 2012 and 2011 and October 1, 2010 and the consolidated statements of
operations and comprehensive loss, changes in equity and cash flows for the years ended September 30, 2012 and
September 30, 2011. Our report is dated January 22, 2013.
(signed) “Collins Barrow Toronto LLP”
Licensed Public Accountants
Chartered Accountants
Toronto, Canada
March 8, 2013
-C- 1 CERTIFICATE OF THE CORPORATION
Dated: March 8, 2013
This short form prospectus, together with the documents incorporated herein by reference, constitutes full, true and
plain disclosure of all material facts relating to the securities offered by this short form prospectus as required by the
securities legislation of the provinces of Ontario, Alberta and British Columbia.
(signed) “Alex Van Hoeken”
Alex Van Hoeken
Chief Executive Officer
(signed) “Philip Gibbs”
Philip Gibbs
Chief Financial Officer
On behalf of the Board of Directors
(signed) “David Netherway”
David Netherway
Chairman of the Board
(signed) “James Mustard”
James Mustard
Director
-C- 2 -
CERTIFICATE OF THE AGENTS
Dated: March 8, 2013
To the best of our knowledge, information and belief, this short form prospectus, together with the documents
incorporated herein by reference, constitutes full, true and plain disclosure of all material facts relating to the
securities offered by this short form prospectus as required by the securities legislation of the provinces of Ontario,
Alberta and British Columbia.
GMP SECURITIES L.P.
CLARUS SECURITIES INC.
By: (signed) “Mark Wellings”
Managing Director
By: (signed) “John Jentz”
Managing Director
BYRON CAPITAL MARKETS LTD.
By: (signed) “Campbell Becher”
Chief Executive Officer