MIDAS GOLD, INC.
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of proxies by the board of directors of
MIDAS GOLD, INC., a Washington corporation (“Midas”), for the special meeting of Midas shareholders to be held at
10:00 a.m., local time, on Friday, April 1, 2011, and any adjournment(s) or postponement(s) thereof (the “Special
Meeting”). The Special Meeting will be held at Midas‟ executive offices, 15920 East Indiana Avenue, Suite 101,
Spokane Valley, Washington. This Proxy Statement was first mailed or delivered to Midas‟ shareholders on March 7,
2011.
Terms such as “we,” “us,” “our” and the “company” are sometimes used generically in this Proxy Statement to refer
to Midas Gold, Inc. and its wholly-owned subsidiary, MGI Acquisition Corporation subsidiary (“MGI”), its board of directors
(the “Midas Board”) and its management. Unless otherwise defined, capitalized terms used throughout this Proxy Statement
have the meanings set forth at pages 5 through 7 of this Proxy Statement, in the section entitled “Definitions of Certain
Terms.”
PURPOSE OF THE SPECIAL MEETING
The purpose of the Special Meeting is to consider and approve a plan of share exchange (the “Plan of Share
Exchange”) between Midas and Midas Gold Corp. (“Midas Canada”), a newly organized British Columbia corporation,
pursuant to which Midas‟ outstanding shares of common stock (the “Midas Shares”) and outstanding options (the “Midas
Options”), other than Midas Shares held by Dissenting Shareholders, will be exchanged for common shares and options of
Midas Canada (the “Midas Canada Shares” and “Midas Canada Options”, respectively), with the result that Midas will
become a wholly-owned subsidiary of Midas Canada.
The Plan of Share Exchange is part of a broader, integrated transaction undertaken pursuant to the terms of a
combination agreement dated February 22, 2011, by and among: Midas; Midas Canada; Vista Gold U.S., Inc. (“Vista
US”), a Delaware corporation; and Idaho Gold Resources, LLC (“Idaho Gold”), an Idaho limited liability company
wholly-owned by Vista US (the “Combination Agreement”), pursuant to which, if the Plan of Share Exchange is approved
at the Special Meeting and the other conditions to closing specified in the Combination Agreement are satisfied or
waived:
Vista US will: (a) contribute all of the equity interests in Idaho Gold to Idaho Gold Holding Company ("Idaho
Gold Holdco"), an Idaho corporation; and (b) contribute all of the outstanding shares of common stock of Idaho
Gold Holdco to Midas Canada as a capital contribution, in exchange for that number of Midas Canada Shares
equal to, on a Fully Diluted Basis, thirty-five percent (35%) of the Midas Canada Shares that are issued and
outstanding at the time the transactions specified in the Combination Agreement and the Plan of Exchange are
completed;
the Midas Shareholders, other than the Dissenting Shareholders, will contribute their Midas Shares to Midas
Canada in exchange for that number of Midas Canada Shares equal to, on a Fully Diluted Basis, sixty-five percent
(65%) of the Midas Canada Shares that are issued and outstanding at the time the transactions specified in the
Combination Agreement and the Plan of Exchange are completed; and
the Midas Optionholders will exchange their Midas Options for Midas Canada Options of like tenor.
The Midas-related combination transactions specified in the Combination Agreement, including the Plan of Share
Exchange, are sometimes generically referred to in this Proxy Statement as the “Reorganization.”
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TABLE OF CONTENTS
Page
Forward Looking Information ...................................................................................................................... 2
Voting Rights and Solicitations .................................................................................................................... 3
Costs of Solicitation ...................................................................................................................................... 3
Security Ownership of Certain Beneficial Owners and Management......................................................... 4
Definitions of Certain Terms ........................................................................................................................ 5
The Reorganization ....................................................................................................................................... 7
Certain United States Federal Income Tax Considerations ....................................................................... 20
Certain Canadian Federal Income Tax Considerations ............................................................................. 28
Restrictions on Resale ................................................................................................................................. 34
Comparison of Rights of Shareholders....................................................................................................... 35
Description of Midas Canada Securities .................................................................................................... 39
Management of Midas Canada ................................................................................................................... 40
Summary Information Concerning the District and the Mineral Properties ............................................. 43
Related Party Transactions ......................................................................................................................... 46
Legal Proceedings ....................................................................................................................................... 47
Legal Matters .............................................................................................................................................. 47
Experts ......................................................................................................................................................... 47
Conclusion................................................................................................................................................... 48
Appendices:
A. Statutory Dissenters Rights ................................................................................................................. A-1
B. Historical and Pro Forma Financial Information, and Management‟
Discussion and Analysis ............................................................................................................... B-1
FORWARD LOOKING INFORMATION
This Proxy Statement may contain “forward-looking information” within the meaning of Canadian securities
legislation and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform
Act of 1995 (collectively, “forward-looking statements”). These forward-looking statements are made as of the date of this
Proxy Statement and Midas does not intend, and does not assume any obligation, to update these forward-looking statements
except as may be required by law.
Forward-looking statements relate to future events or future performance and reflect management‟s expectations or
beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral
reserves and mineral resources, the realization of mineral reserve estimates, the timing and amount of estimated future
production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated
reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking
statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”,
“scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such
words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”,
“occur” or “be achieved” or the negative of these terms or comparable terminology. By their very nature forward-looking
statements involve known and unknown risks, uncertainties and other factors which may cause Midas‟ or Midas Canada‟s
actual results, performance or achievements to be materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such factors include, among others, risks related to the completion
of the Reorganization, the ability to integrate the operations of Midas and Idaho Gold, actual results of current exploration
activities; changes in project parameters as plans continue to be refined; future prices of mineral resources; possible
variations in ore reserves, grade or recovery rates; accidents, labor disputes and other risks of the mining industry; delays in
obtaining governmental approvals or financing or in the completion of development or construction activities. Although
Midas has attempted to identify important factors that could cause actual actions, events or results to differ materially from
those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as
anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those anticipated in such statements. Shareholders should not
place undue reliance on forward-looking statements.
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VOTING RIGHTS AND SOLICITATIONS
The Midas Shares are the only type of security entitled to vote at the Special Meeting. If you were a Midas
Shareholder of record at the close of business on February 22, 2011 (the “record date”), you may vote at the Special
Meeting. On all matters requiring a shareholder vote at the Special Meeting, each Midas Shareholder is entitled to one
vote, in person or by proxy, for each Midas Share recorded in his or her name. On the record date, 43,862,000 Midas
Shares were outstanding. All of such shares are eligible to be voted at the Special Meeting.
Pursuant to the WBCA and Midas‟ bylaws, the holders of a majority of the Midas Shares present at the Special
Meeting in person or by proxy is required for a quorum, and the affirmative vote of the holders of two-thirds of the Midas
Shares present at the Special Meeting in person or by proxy is required to approve the Reorganization. Abstentions and
broker non-votes will be treated as present for purposes of obtaining a quorum with respect to all matters to be considered
at the Special Meeting, but will not be counted for or against the Reorganization proposal.
If you are unable to attend the Special Meeting, you may vote by proxy. The enclosed proxy card is solicited by
the Midas Board and when returned, properly completed, will be voted as directed on the proxy card. If the proxy card is
returned with no instructions on how your Midas Shares are to be voted, they will be voted FOR approval of the
Reorganization.
You may revoke or change your proxy at any time before it is exercised at the Special Meeting. To do this, you
must send a written or electronic notice of revocation or another signed proxy bearing a later date to Heather Ennis at
Midas‟ principal executive office. Midas‟ mailing address is Midas Gold, Inc., 15920 East Indiana Avenue, Suite 101,
Spokane Valley, Washington 99216, and its fax number at that address is (509) 924-1582. Ms. Ennis‟ email address is
ennis@midasgoldinc.com. You may also revoke your proxy by giving notice and voting in person at the Special Meeting.
COSTS OF SOLICITATION
The total cost of soliciting proxies for the Special Meeting (including legal fees and expenses incurred in connection
with the preparation of the Combination Agreement, the exhibits thereto and this Proxy Statement) is estimated to be $300,000
and will be borne by Midas.
[The balance of this page has been intentionally left blank.]
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the record date of the Special Meeting concerning the names of, and
number of Midas Shares beneficially owned by persons known to Midas to own more than five percent (5%) of such shares;
the names of and number of Midas Shares beneficially owned by each of Midas‟ directors and executive officers; and the
number of Midas Shares beneficially owned by of all of Midas‟ directors and executive officers as a group. As of the record
date, 43,862,000 Midas Shares were outstanding and an additional 12,600,000 Midas Shares were deemed outstanding
pursuant to presently exercisable Midas Options.
Name of Owner
Amount and Nature of
Beneficial Ownership
(all direct unless
otherwise noted)
Percent
of Class (1)
Frank Duval and Janice Duval
Tom Henricksen
Heather Ennis
Peter Tegart
Stephen Quin
All directors and executive officers
as a group (5 persons) (1) through (5)
7,150,000 (2)
500,000 (3)
1,023,000 (4)
750,000 (5)
2,333,332 (6)
14.80%
1.13%
2.33%
1.70%
5.05%
11,756,335 (2) through (6)
23.32%
David Elliott
7,175,000 (7)
15.04%
(1)
Pursuant to the SEC‟s rules, percent of class is determined with reference to each named person or group by
dividing the number of Midas Shares owned beneficially or of record by the named person or group, including shares that
are deemed to be issued to such named person or group pursuant to presently exercisable Midas Options, by the number of
Midas Shares that are outstanding, including those shares that are deemed to be issued to the named person or group
pursuant to presently exercisable Midas Options.
(2)
Mr. Duval is Midas‟ founder and its former chairman, president and chief executive officer. He now serves as a
consultant to Midas. Mrs. Duval is Midas‟ secretary. The Midas Shares shown for Mr. and Mrs. Duval comprise 500,000
shares held individually by Mr. Duval, 700,000 shares held individually by Mrs. Duval and 1,500,000 shares held by the
Frank and Janice Duval Revocable Living Trust. The Midas Shares shown for Mr. and Mrs. Duval also include 4,450,000
shares that are issuable to Mr. Duval pursuant to presently exercisable Midas Options.
(3)
Mr. Henricksen is a director of Midas. The Midas Shares shown for him include 250,000 shares that are issuable
to him pursuant to presently exercisable Midas Options.
(4)
Ms. Ennis is a director of Midas and its treasurer. The Midas Shares shown for her include 100,000 shares that
are issuable to her pursuant to presently exercisable Midas Options.
(5)
Mr. Tegart is a director of Midas. The Midas Shares shown for him comprise 250,000 shares held individually,
250,000 shares held by a company that Mr. Tegart controls and 250,000 shares that are issuable to Mr. Tegart pursuant to
presently exercisable Midas Options.
(6)
Mr. Quin is Midas‟ president and chief executive officer. The Midas Shares shown for him consist entirely of
shares that are issuable to him pursuant to presently exercisable Midas Options. Mr. Quin also holds an additional
666,667 Midas Options that have not yet vested and are not presently exercisable.
(7)
The Midas Shares shown for Mr. Elliott includes 250,000 shares held by his spouse, 2,650,000 shares held
individually, 425,000 shares held in three different companies that Mr. Elliott is a partner of and 3,850,000 shares that are
issuable to Mr. Elliott pursuant to presently exercisable Midas Options.
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DEFINITIONS OF CERTAIN TERMS
Capitalized terms used in this Proxy Statement to describe the Reorganization are defined below.
BCBCA means the Business Corporations Act (British Columbia).
Code means the United States Internal Revenue Code of 1986, as amended.
Combination Agreement means that certain combination agreement dated February 22, 2011 by and among:
Midas, Midas Canada, Vista US and Idaho Gold LLC, and any amendment to or modification thereof that is approved in
writing by all of the parties thereto.
Dissenting Shareholders means holders of Midas Shares who have duly and validly exercised their dissenters'
appraisal rights in accordance with the Plan of Share Exchange.
District means the Stibnite-Yellow Pine mining district located in Valley County, Idaho.
Effective Date means the date articles of exchange are filed with Secretary of State of the State of Washington
pursuant to the Plan of Share Exchange.
Effective Time means 12:01 a.m. (Mountain Time) on the Effective Date.
Eligible Holder means a beneficial owner of Midas Shares immediately prior to the Effective Time who is a
resident of Canada for purposes of the Tax Act (other than a person who is exempt from tax under Part I of the Tax Act),
or a partnership any member of which is a resident of Canada for the purposes of the Tax Act (other than a person who is
exempt from tax under Part I of the Tax Act).
FIRPTA means the Foreign Investment in Real Property Tax Act, a provision of the Code.
FIRPTA Certification means the forms included with this Proxy Statement (printed on yellow paper) or obtained
from Midas‟ website at www.midasgoldinc.com with respect to:
(a)
a certification that such person is not a “foreign person” fulfilling the requirements specified under
Treasury Regulation 1.1445-2(b), and
(b)
a statement of non-recognition fulfilling the requirements specified under Treasury Regulation 1.14452(d)(2)(iii),
Fully Diluted Basis means the number or percentage of Midas Canada Shares issued and outstanding after giving
effect to the exercise of issued and outstanding Midas Canada Options, or other convertible securities of Midas Canada
without regard to the payment of consideration for the underlying Midas Canada Shares.
Idaho Gold means Idaho Gold Resources LLC, an Idaho limited liability company and a wholly-owned subsidiary
of Vista US.
Idaho Gold Holdco means Idaho Gold Holding Company, an Idaho corporation to be formed for the purpose of
holding all of the equity interests in Idaho Gold.
Letter of Transmittal means the letter of transmittal in the form included with this Proxy Statement (printed on
green paper) or obtained from Midas‟ website at www.midasgoldinc.com.
Lock Up Agreements means the lock up agreements between Midas Canada, on the one hand, and Vista US and
the Midas Affiliates, on the other hand, the forms of which appear as Appendices III-A and III-B to the Combination
Agreement.
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Midas means Midas Gold, Inc., a Washington corporation.
Midas Affiliates means those persons who are identified in the Combination Agreement as being affiliates of
Midas, comprising Frank Duval and Janice Duval, Tom Henricksen, Heather Ennis, Peter Tegart, Stephen Quin and David
Elliott.
Midas Board means the board of directors of Midas.
Midas Canada means Midas Gold Corp, a British Columbia corporation.
Midas Canada Board means the board of directors of Midas Canada.
Midas Canada Options means stock options entitling the holders thereof to purchase Midas Canada Shares under
the Midas Canada Plan.
Midas Canada Plan means the Midas Gold Corp. 2011 Stock Option Plan to be adopted by Midas Canada.
Midas Canada Shares means the common shares, without par value, in the capital of Midas Canada.
Midas Options means compensatory options to purchase Midas Shares granted under the Midas Plan.
Midas Optionholders means holders of Midas Options.
Midas Option In-The-Money Amount, in respect of a Midas Option, means the amount, if any, by which the total
fair market value (determined immediately before the Effective Time) of the Midas Shares that a Holder is entitled to
acquire on exercise of the Midas Option immediately before the Effective Time exceeds the amount payable to acquire
such shares.
Midas Canada Option In-The-Money Amount, in respect of a Midas Option, means the amount, if any, by which
the total fair market value (determined immediately after the Effective Time) of the Midas Canada Shares that a holder is
entitled to acquire on exercise of the Midas Canada Option at and from the Effective Time exceeds the amount payable to
acquire such shares.
Midas Plan means the Midas Gold, Inc. 2009 Equity Incentive Plan.
Midas Shares means the shares of common stock in the capital of Midas.
Midas Shareholders means the holders of Midas Shares.
Mineral Properties means, with respect to a party to the Combination Agreement, the natural or mineral resource
or exploration properties of the party or its subsidiaries, and for greater certainty includes any mines or development
projects in which the party or its subsidiaries has an interest and only includes in the case of Vista US natural or mineral
resource or exploration properties of Idaho Gold.
MGI means MGI Acquisition Corporation, an Idaho corporation and wholly-owned subsidiary of Midas.
Non-Resident Holder has the meaning that is ascribed to such term in the section of this Proxy Statement entitled
“Certain Canadian Federal Income Tax Considerations.”
Plan of Share Exchange means the Plan of Share Exchange under Section 23B.11.020 of the WBCA, the form of
which appears as Appendix I to the Combination Agreement.
Registered Shareholder means a registered holder of Midas Shares as recorded in the register of shareholders
maintained by Midas.
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Regulation D means Regulation D under the U.S. Securities Act as adopted by the SEC.
Regulation S means Regulation S under the U.S. Securities Act as adopted by the SEC.
Reorganization means the transaction by which Midas will become a wholly-owned subsidiary of Midas Canada
if the Plan of Share Exchange is approved.
Resident Holder has the meaning that is ascribed to such term in the section of this Proxy Statement entitled
“Certain Canadian Federal Income Tax Considerations.”
SEC means the United States Securities and Exchange Commission.
Tax Act means the Income Tax Act (Canada) R.S.C. 1985 (5th Supp.) c.1, and the regulations promulgated
thereunder, as now in effect and as it may be amended from time to time prior to the Effective Date.
U.S. Exchange Act means the Securities Exchange Act of 1934, as amended, of the United States.
U.S. Holder means a holder of Midas Shares or Midas Options that is: a citizen or resident of the United States; a
corporation, partnership or other entity created or organized in or under the laws of the United States or any political
subdivision thereof; or an estate or trust, the income of which is subject to U.S. federal income taxation regardless of its
source.
U.S. Securities Act means the Securities Act of 1933, as amended, of the United States.
Vista Gold Corp. means Vista Gold Corp., a Yukon Territory corporation and the parent of Vista US.
Vista US means Vista Gold US, Inc., a Delaware corporation and wholly-owned subsidiary of Vista Gold Corp.
Vista US Board means the board of directors of Vista US.
Voting Support Agreements means the voting support agreements between Midas Canada, on the one hand, and
Vista US and the Midas Affiliates, on the other hand, the forms of which appear as Appendices II-A and II-B to the
Combination Agreement.
WBCA means the Washington Business Corporation Act, as amended.
ITEM NO. 1 – APPROVAL OF THE REORGANIZATION
THE REORGANIZATION
Overview
The practical effect of the Reorganization is to consolidate Midas‟ and Idaho Gold‟s respective Mineral Properties
in the District into one entity, Midas Canada, which will then explore corporate development strategies that may include a
possible initial public offering in Canada, potential merger or acquisition transactions, financing opportunities, project
development plans, and other initiatives.
Midas is undertaking the Reorganization for the following reasons:
Midas‟ and Idaho Gold‟s Mineral Properties constitute the major mining claims in the District and are contiguous
to each other, with Midas‟ mining claims surrounding those of Idaho Gold. Based on historical development
records and the results of Midas‟ more recent exploration activities, Midas reasonably believes the consolidated
Mineral Properties could contain measured, indicated and inferred gold resources of sufficient magnitude and
grade sufficient to support an economically viable mining operation.
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Consolidating Midas‟ and Idaho Gold‟s Mineral Properties into Midas Canada should result in significant
economies of scale and operating efficiencies that might not have been attainable by Midas or Idaho Gold alone.
Consolidating Midas‟ and Idaho Gold‟s Mineral Properties should enable Midas Canada to pursue corporate
development and financing strategies and opportunities that might not have been available to Midas or Idaho Gold
absent the Reorganization. This is particularly important, since substantial additional financing will be needed to
fund additional mineral exploration and environmental permitting studies in the District to determine more fully
the mineral potential of the District and whether the combined Mineral Properties can be profitably developed.
Consolidating Midas‟ and Idaho Gold‟s Mineral Properties may make Midas Canada attractive to any larger
mining company that may become interested in acquiring the consolidated Mineral Properties or entering into
joint development or other arrangements with Midas Canada to develop the properties.
The Constituent Companies
Midas. Midas Gold, Inc. is an exploration-stage mining company engaged in exploring and acquiring mining
properties with the intention of placing them into production. Its Mineral Properties and other mining assets comprise 15
patented lode mining claims, 30 patented mill site claims, 477 unpatented mining claims, royalty interests, and associated
surface and water rights located in the District. Midas acquired these assets in three inter-related transactions in 2009:
On April 3, 2009, Frank Duval, who is Midas‟ founder and a Midas Affiliate, entered an Amended and Restated
Asset Purchase Agreement with Gold Crest Mines, Inc., (“Gold Crest”), a Nevada corporation, pertaining to the
assignment of Gold Crest‟s unpatented mining claims in the District. In addition, on March 13, 2009, Mr. Duval
entered into an Assignment of Contractual Rights and Interests with Niagara Mining and Development Co., Inc.,
(“Niagara”) an Idaho corporation and an affiliate of Gold Crest (the “Duval-Niagara-Gold Crest Agreement”),
through which Mr. Duval acquired an assignment of all of Niagara‟s and Gold Crest‟s right, title and interest in
and to certain lease, option and purchase agreements covering various mining claims and interests located in the
District. Among the agreements assigned to Mr. Duval pursuant to the Duval-Niagara-Gold Crest Agreement was
a lease and option to purchase agreement dated March 31, 2008 by and between Niagara, as successor lessee and
optionee to Gold Crest, and Bradley Mining Company, as lessor and optionor, pertaining to nine patented lode
mining claims, and associated surface and water rights located in the District (the “Bradley Mining Agreement”).
On April 28, 2009, Mr. Duval assigned his interest in the Bradley Mining Agreement to MGI. MGI subsequently
exercised its option under the Bradley Mining Agreement, and the claims and interests identified therein were
conveyed to MGI by warranty deed at a closing held on June 11, 2009. The purchase price of such claims and
interests was $225,000, $125,000 of which was paid prior to closing and the balance of which was paid at closing.
The patented mining claims conveyed by Bradley Mining Company are subject to a 5% net smelter royalty
interest owed to the heirs and beneficiaries of J.J. Oberbillig. As is described below, Midas acquired this royalty
interest in June 2009.
The Duval-Niagara-Gold Crest Agreement also assigned to Mr. Duval all of Niagara‟s and Gold Crest‟s right,
title and interest in and to a real property sales agreement and instructions dated January 24, 2008, by and between
Gold Crest and JJO, LLC, an Idaho limited liability company, in its capacity as Personal Representative of the
Estate of J.J. Oberbillig pertaining to Gold Crest‟s proposed acquisition of 6 patented lode mining claims, 30
patented mill site claims and associated surface and water rights in the District (the “Gold Crest-Oberbillig
Agreement”). On April 28, 2009, Mr. Duval assigned his interest in this agreement to Midas. On June 2, 2009,
Midas entered into a revised Real Property Sales Agreement and Escrow Instructions with JJO, LLC as Personal
Representative of the Estate of J.J. Oberbillig pertaining to the proposed acquisition of the patented lode mining
claims, patented mill site claims and associated surface and water rights in the District identified in the Gold
Crest-Oberbillig Agreement, but on slightly different terms (the “Oberbillig Land Agreement”). The closing of
the transaction specified in the Oberbillig Land Agreement closed on or about June 2, 2009. In conjunction with
the closing, Midas executed and delivered a promissory note and a mortgage, security agreements and fixture
filing, and JJO, LLC conveyed title to the claims and interests specified therein. The purchase price of the claims
and interests acquired pursuant to the Oberbillig Land Agreement was $256,690, $40,000 of which was paid prior
to closing and $216,690 of which was paid at closing by Midas‟ execution and delivery of the promissory note
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and mortgage. The note bears interest at the rate of 3.0% per annum and is payable in six equal installments. As
of the date of this Proxy Statement, Midas owes JJO, LLC $200,000 pursuant to the note and mortgage.
Finally, the Duval-Niagara-Gold Crest Agreement assigned to Mr. Duval all of Niagara‟s and Gold Crest‟s right,
title and interest in and to a royalty sales agreement and instructions dated January 24, 2008, by and between Gold
Crest and the heirs and beneficiaries of J.J. Oberbillig identified therein pertaining to Gold Crest‟s proposed
acquisition of a 5% net smelter royalty burdening 26 patented lode mining claims in the District. On April 28,
2009, Mr. Duval assigned his interest in this agreement to Midas, and Midas assigned to Mr. Duval a portion of the
net smelter royalty interest represented by the Gold Crest-Oberbillig Agreement, which assignment was later
canceled by Mr. Duval. On June 2, 2009, Midas entered into a revised Royalty Sales Agreement and Escrow
Instructions with the Oberbillig heirs and beneficiaries identified therein pertaining to the proposed acquisition of
the 5% net smelter royalty interest identified in the Gold Crest-Oberbillig Agreement, but on slightly different
terms (the “Oberbillig Royalty Agreement”). The closing of the transaction specified in the Oberbillig Royalty
Agreement closed on or about June 2, 2009. In conjunction with the closing, Midas executed and delivered a
promissory note and a mortgage, security agreements and fixture filing, and the Oberbillig heirs and beneficiaries
conveyed title to the royalty interest specified therein. The purchase price of the acquired interest was
$1,026,750, $160,000 of which was paid prior to closing and $866,750 of which was paid at closing by Midas‟
execution and delivery of the promissory note and mortgage. The note bears interest at the rate of 3.0 % per
annum and is payable in six equal installments. As of the date of this Proxy Statement, Midas owes the heirs and
beneficiaries of J.J. Oberbillig $800,000 pursuant to the note and mortgage.
In connection with these transaction, Midas issued Midas Shares and granted Midas Options to Frank Duval and David
Elliott, each of whom is a Midas Affiliate. Additional information concerning these matters is set forth in the section of
this Proxy Statement entitled “Related Party Transactions,” at page 46.
Idaho Gold. Idaho Gold Resources, LLC is an Idaho limited liability company, all of whose outstanding
membership interests are owned by Vista US. According to information filed by Vista US in its periodic reports pursuant to
the U.S. Exchange Act or otherwise provided to Midas in the Combination Agreement, Idaho Gold is an exploration-stage
mining enterprise engaged in exploring and acquiring mining properties with the intention of placing them into
production. Its Mineral Properties and other mining assets comprise seventeen lode mining claims (which claims are
currently owned by Bradley Mining Company), eight unpatented mining claims, and associated surface and water rights
located in the District. On November 7, 2003, Idaho Gold entered into an Option to Purchase Agreement with Bradley
Mining Company for a nine year option to purchase 100% of the 17 patented mining claims at Yellow Pine for
$1,000,000 (the “Idaho Gold Option Agreement”). Idaho Gold made an option payment of $100,000 upon execution of
the Idaho Gold Option Agreement. The Idaho Gold Option Agreement called for Idaho Gold to make nine yearly
payments of $100,000 on or before each anniversary date of the agreement, for a total option payment price of
$1,000,000, and annual payments of $100,000 each were made in 2004, 2005, 2006, 2007, 2008, 2009, and 2010. As of
December 31, 2010, $200,000 remained to be paid under the Idaho Gold Option Agreement. If Idaho Gold exercises its
option to purchase the Yellow Pine project, all option payments shall be applied as a credit against the purchase price of
$1,000,000. Idaho Gold has the right to terminate the agreement at any time without penalty. The 17 patented mining
claims are subject to an underlying 5% net smelter returns royalty; which is being purchased by Midas. Water rights
associated with the purchase of the patented mining claims from Bradley Mining Company are nominal in quantity and
additional water rights will be needed to support mining and processing operations.
Idaho Gold Holdco. Idaho Gold Holding Company is an Idaho corporation organized for the purpose of holding all
of the equity interests in Idaho Gold. Idaho Gold Holdco has only nominal assets and has not engaged in any business or
prior activities other than in connection with the Reorganization.
Midas Canada. Midas Gold Corp. is a newly formed British Columbia corporation incorporated under the
BCBCA for the purpose of effecting the Reorganization. Midas Canada has only nominal assets and has not engaged in
any business or prior activities other than in connection with the Reorganization.
9
Vista US. Vista Gold US, Inc. is a Delaware corporation and a subsidiary of Vista Gold Corp., a publicly held
Canadian corporation. According to information filed by Vista US in its periodic reports pursuant to the U.S. Exchange Act
or otherwise provided to Midas in the Combination Agreement, Vista US is a holding company for Vista Gold Corp.‟s
United States subsidiaries, which include Idaho Gold.
Effect of the Reorganization
Overview. Straightforward as it may seem, the Reorganization contains some provisions that you should carefully
note:
As a result of the Reorganization, Midas Canada will become the parent company of Midas and Idaho Gold
Holdco. Midas Canada is a new corporation organized under the BCBCA and has only nominal assets.
Following the Reorganization, Midas‟ Mineral Properties and other assets will continue to be held directly by
Midas and only indirectly by Midas Canada. Similarly, Idaho Gold Holdco‟s Mineral Properties and other assets
will continue to be held directly by Idaho Gold Holdco and only indirectly by Midas Canada.
If you are a holder of Midas Shares, you will receive one Midas Canada Share in the Reorganization in exchange
for each Midas Share that you own.
If you are a Midas Optionholder, you will receive Midas Canada Options in the Reorganization, in exchange for
your Midas Options. The exercise price and term of the Midas Canada Options will be the same as the exercise
price of your Midas Options.
If you are a U.S. Holder of Midas Shares, you should not recognize any taxable gain or loss for U.S. tax purposes
upon the receipt of Midas Canada Shares in exchange for your Midas Shares in the Reorganization.
Midas is a United States Real Property Holding Company for U.S. federal income tax purposes and the Midas
Shares are United States Real Property Interests. If you are a non-U.S. holder and the receipt of Midas Canada
Shares in exchange for your Midas Shares results in the recognition of taxable gain for U.S. tax purposes, then
Midas may be required to withhold and remit ten percent of the fair market value of your Midas Canada Shares in
conjunction with the Reorganization to the Internal Revenue Service (“IRS”) pursuant to FIRPTA‟s withholding
requirements. Generally, this withholding can be avoided if non-U.S. holders provide a notice of non-recognition
as described in the section of this Proxy Statement entitled “Exchange of Share and Option Certificates” and the
FIRPTA certification materials enclosed herewith.
For Canadian federal income tax purposes, a Midas Shareholder who is resident in Canada for the purpose of the
Tax Act, all of whose Midas Shares are held as capital property and who is an Eligible Holder generally should be
able to exchange the shareholder‟s Midas Shares for Midas Canada Shares pursuant to the Reorganization on a
tax-deferred rollover basis by making an appropriate Section 85 Election jointly with Midas Canada. A Midas
Shareholder who is a resident of Canada for purposes of the Tax Act and who does not make such a Section 85
Election generally will realize a capital gain (or a capital loss) equal to the amount by which the fair market value
of the Midas Canada Shares received by the shareholder on the exchange exceeds (or is less than) the
shareholder's adjusted cost base of the Midas Shares and any reasonable costs of disposition. A Midas
Shareholder who is not resident in Canada for the purpose of the Tax Act should not be subject to tax under the
Tax Act on any capital gain realized on the exchange of such shareholder's Midas Shares for Midas Canada
Shares pursuant to the Reorganization. The foregoing summary is qualified in its entirety by the more detailed
discussion of the Canadian tax consequences of the Reorganization set forth in the section of this Proxy Statement
entitled “Certain Canadian Federal Income Tax Considerations.”
Immediately following the Reorganization, Midas will continue in existence, but will be owned by Midas Canada,
which will have acquired all of the outstanding Midas Shares and Midas Options in exchange for the Midas
Canada Shares and Midas Canada Options it will issue. Your voting rights as a holder of Midas Canada Shares
will be substantially similar to your rights as a holder of Midas Shares, however those voting rights will be
diminished, due to the fact that you and the other Midas Shareholders will own 65% of Midas Canada and due to
the further fact that Vista US will have certain contractual corporate governance rights once the Reorganization is
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completed. You will own an interest in a parent company with subsidiaries that, in the aggregate, are engaged in
the same business that Midas and its subsidiary were engaged in before the Reorganization. If you were a holder
of Midas Options, the Midas Canada Options you will receive in exchange will have substantially similar terms
and conditions.
There will be no public market for the Midas Canada Shares or the Midas Canada Options immediately following
the Reorganization. Moreover, your ability to resell these securities will be restricted by United States and
Canadian securities laws. These restrictions are significant, particularly if you were an affiliate of Midas or will
become an affiliate of Midas Canada in the Reorganization. Although it is anticipated that Midas Canada will
seek to complete an initial public offering in Canada some time after the Reorganization, there is no assurance
that this will happen or when it might happen. These resale restrictions are more fully described elsewhere in this
Proxy Statement, in the section entitled “Restrictions on Resale.”
Summary of the Combination Agreement
In General. The Reorganization will be effected pursuant to the Combination Agreement among Midas, Midas
Canada, Vista US and Idaho Gold, assuming the Plan of Share Exchange is approved by the Midas Shareholders at the
Special Meeting and all of the other conditions to the closing of the Reorganization have been satisfied or waived.
The Combination Agreement provides that:
Vista US will: (a) organize Idaho Gold Holdco; (b) contribute its equity interests in Idaho Gold to Idaho Gold
Holdco; and (c) at closing, contribute all of the issued and outstanding shares of Idaho Gold Holdco to Midas
Canada as a capital contribution, in exchange for that number of Midas Canada Shares equal to, on a Fully
Diluted Basis, thirty-five percent (35%) of the Midas Canada Shares that are issued and outstanding at the time
that the transactions specified in the Combination Agreement and the Plan of Share Exchange are completed;
the Midas Shareholders, other than the Dissenting Shareholders, will contribute their Midas Shares to Midas
Canada in exchange for that number of Midas Canada Shares equal to, on a Fully Diluted Basis, sixty-five percent
(65%) of the Midas Canada Shares that are issued and outstanding at the time that the transactions specified in the
Combination Agreement and the Plan of Share Exchange are completed; and
the Midas Optionholders will exchange their Midas Options for Midas Canada Options of like tenor.
In addition, the Combination Agreement includes numerous other provisions that are customary to these types of
agreements, including:
extensive representations and warranties of Midas, Idaho Gold and Vista US concerning their respective
businesses, the Mineral Properties, their capitalization and financial condition, their compliance with the contracts
and agreements by which they or their Mineral Properties are bound, and their compliance with applicable laws,
rules and regulations pertaining to their businesses and assets;
the conditions that must be satisfied in order to consummate the Reorganization;
the covenants that must be adhered to by the parties pending consummation of the Reorganization and thereafter;
Midas‟ and Vista US‟ respective duties and obligations in the event either of them receives a competing bid for
their Mineral Properties or assets pending consummation of the Reorganization, including the payment of break
fees in such event;
the designation of those persons who will serve as the initial members of the Midas Canada Board;
a mediation and arbitration mechanism for resolving any disputes that may arise between or among the parties
concerning the interpretation or operation of the Combination Agreement and the implementation of the
Reorganization;
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indemnification provisions designed to compensate non-offending parties for damages in the event the
Combination Agreement is breached; and
provisions governing when and how the Combination Agreement may be terminated.
The Plan of Share Exchange. The exchange of Midas Shares and Midas Options for Midas Canada Shares and
Midas Canada Options specified in the Combination Agreement will be effected pursuant to the Plan of Share Exchange
between Midas and Midas Canada. The Plan of Share Exchange appears as Appendix I to the Combination Agreement.
The Plan of Share Exchange provides for the exchange of Midas Shares and Midas Options for Midas Canada
Shares and Midas Canada Options. It also sets forth the conditions to the closing of the Reorganization and addresses
various miscellaneous matters pertaining to the Reorganization, including the resolution of any disputes that may arise
between Midas and Midas Canada concerning the interpretation or operation of the Plan of Share Exchange and the
implementation of the Reorganization.
The Voting Support Agreements. The Midas Affiliates and Vista US have each executed a Voting Support
Agreement in conjunction with the execution of the Combination Agreement. The Voting Support Agreement executed
by the Midas Affiliates appears as Appendix II-A to the Combination Agreement. The Voting Support Agreement
executed by Vista US appears as Appendix II-B.
The Voting Support Agreement executed by each Midas Affiliate obligates such affiliate: (a) to vote in favor of
the Reorganization at the Special Meeting and against any action or agreement that would result in a breach in any
material respect of any covenant, representation, warranty or any other agreement of Midas under the Combination
Agreement, and any agreement that would impede, interfere with, postpone or attempt to discourage the Reorganization;
and (b) once the Reorganization is consummated and such Midas Affiliate becomes a holder of Midas Canada Shares, to
vote for approval of Midas Canada‟s stock incentive plan, for the nominees to the Midas Canada Board designated by
Vista US in the Combination Agreement and for the nominees to the Midas Canada Board thereafter designated by the
Midas Canada corporate governance and nominating committee. The Voting Support Agreement executed by Vista US
obligates Vista US, once the Reorganization is approved and Vista US becomes a holder of Midas Canada Shares, to vote
for approval of Midas Canada‟s stock incentive plan, for the nominees to the Midas Canada Board designated by the
Midas Canada corporate governance and nominating committee, and for all matters recommended by the Midas Canada
Board.
In addition, the Voting Support Agreements obligate the Midas Affiliates and Vista US to vote or cause the Midas
Canada Shares that will be issued to them in the Reorganization to be voted for approval of Midas Canada‟s proposed
equity incentive plan and for the nominees to the Midas Canada Board designated by the Midas Affiliates and Vista US
pursuant to the Combination Agreement.
The Midas Affiliates and Vista US have each delivered irrevocable proxies in connection with their execution of
the Voting Support Agreements appointing certain representatives of Midas and Vista US to vote their Midas Shares or
their Midas Canada Shares, as the case may be, in accordance with their contractual obligations under such agreements.
The voting provisions of the Voting Support Agreements and the irrevocable proxies terminate twelve months following
the effective date of the Reorganization, unless the Combination Agreement is earlier terminated or either the Midas
Affiliates or Vista US are no longer entitled to nominate members of the Midas Canada Board as provided in the
Combination Agreement.
The Lock Up Agreements. The Midas Affiliates and Vista US have each also executed a Lock Up Agreement in
conjunction with the execution of the Combination Agreement. The Lock Up Agreement executed by the Midas
Affiliates appears as Appendix III-A to the Combination Agreement. The Lock Up Agreement executed by Vista US
appears as Appendix III-B. The overall purpose of the Lock Up Agreements is to limit or restrict the subsequent resale,
transfer or other disposition of the Midas Canada Shares by the Midas Affiliates and Vista US.
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The Lock Up Agreement executed by each Midas Affiliate:
prohibits such Midas Affiliate from selling, transferring or otherwise disposing of any of his or her Midas Canada
Shares without the consent or approval of the Vista US Board for a period of twelve months following the later of
the consummation of the Reorganization or the listing of the Midas Canada Shares on a recognized stock
exchange in Canada, the United States or such other jurisdiction as may be approved by the Midas Canada Board;
allows the Vista US Board to withhold consent if such sale, transfer or other disposition is to be made to an entity
that is in the business of exploration, development or operation of mineral properties, or would result in an entity
or entities acting jointly or in concert holding more than ten percent of Midas Canada‟s issued shares, except in
the case of a sale, transfer or disposition that is made pursuant to an offer made to every holder of Midas Canada
Shares on the same basis and recommended by the Midas Canada Board;
provides that, for a period of twelve months after the completion of any initial public offering by Midas Canada or
the date required by any recognized stock exchange in Canada, the United States or such other jurisdiction on
which the Midas Canada Shares are listed, whichever is later, each Midas Affiliate (together with any other
person with whom the Midas Affiliate acts jointly or in concert) will not sell, transfer, or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, or other
disposition of any of the Midas Canada Shares if such sale, transfer, or other disposition: (a) would involve more
than the Midas Affiliate‟s pro rata percentage of ten percent of the average daily trading volume of the Midas
Canada Shares on the stock exchange or exchanges on which the Midas Canada Shares are then traded during the
20 trading days immediately preceding the date that Holder proposes to make such sale, transfer, or other
disposition; or (b) would result in an entity or entities acting jointly or in concert holding more than ten percent of
Midas Canada‟s the issued shares; or (c) if such sale, transfer or other disposition occurs in a private transaction,
would be at a discount in excess of ten percent of the closing price for Midas Canada shares on the principal
exchange on which such shares are traded. Excepted from this prohibition is any sale, transfer or disposition of
such Midas Affiliate‟s Midas Canada Shares made pursuant to an offer made to every holder of Midas Canada
Shares on the same basis that is recommended by the Midas Canada Board;
requires such Midas Affiliate to agree to the required terms of any underwriters‟ lock up agreement that is
negotiated and approved by the Midas Canada Board in connection with any initial public offering by Midas
Canada;
allows such Midas Affiliate to transfer his or her Midas Canada Shares to an affiliate of the Midas Affiliate, by
will or intestate succession following the death of such Midas Affiliate, to a tax trust, for the purposes of estate
planning, or pursuant to a court order or similar decree, provided, in each instance, that any such transferee enters
into a written agreement and agrees to be bound by the restrictions of the Lock Up Agreement;
prohibits such Midas Affiliate from granting any proxies, depositing any Midas Canada Shares into a voting trust,
enter into any voting support agreement or taking any other action that would adversely affect the voting power of
any of the Midas Canada Shares, make any representation or warranty of such Midas Affiliate untrue or incorrect,
or have the effect of preventing or disabling such Midas Affiliate from performing his or her obligations under the
Lock Up Agreement; and
does not limit nor restrict the ability of a Midas Affiliate to sell, transfer, or dispose of any and all of its Midas
Canada Shares pursuant to an offer (a) made to every holder of Midas Canada Shares on the same basis, and (b)
recommended by the board of directors of Midas Canada.
The Lock Up Agreement executed by each Midas Affiliate also provides that it will terminate and be of no further
force and effect if the Lock Up Agreement executed by Vista US is terminated for any reason.
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The Lock Up Agreement executed by Vista US:
prohibits Vista US from selling, transferring or otherwise disposing of any of its Midas Canada Shares without
the consent or approval of the Midas Board for a period of twelve months following the later of the
consummation of the Reorganization or the listing of the Midas Canada Shares on a recognized stock exchange
in Canada, the United States or such other jurisdiction as may be approved by the Midas Canada Board;
allows the Midas Board to withhold consent if such sale, transfer or other disposition is to be made to an entity
that is in the business of exploration, development or operation of mineral properties, involves more than five
percent of Vista US‟ Midas Canada Shares and would result in the buyer (together with any person acting
jointly or in concert with the buyer) holding more than 10 percent of Midas Canada‟s issued shares, or would
result in an entity or entities acting jointly or in concert holding more than ten percent of Midas Canada‟s issued
shares, except in the case of a sale, transfer or disposition that is made pursuant to an offer made to every holder
of Midas Canada Shares on the same basis and recommended by the Midas Canada Board;
provides that, (a) for a period of twelve months after the completion of any initial public offering by Midas
Canada or the date required by any recognized stock exchange in Canada, the United States or such other
jurisdiction on which the Midas Canada Shares are listed, whichever is later, and (b) for so long as Vista US
owns 20 percent or more of the issued and outstanding Midas Canada Shares, Vista US (together with any other
person with whom Vista US acts jointly or in concert) will not sell, transfer, or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to the sale, transfer, or other
disposition of any of the Midas Canada Shares if such sale, transfer, or other disposition: (i) would involve
more than ten percent of the average daily trading volume of the Midas Canada Shares on the stock exchange or
exchanges on which the Midas Canada Shares are then traded during the 20 trading days immediately preceding
the date that Holder proposes to make such sale, transfer, or other disposition; or (ii) would involve more than
five percent of Vista US‟ Midas Canada Shares and would result in the buyer (together with any person acting
jointly or in concert with the buyer) holding more than 10 percent of Midas Canada‟s issued shares; or (iii)
would result in an entity or entities acting jointly or in concert holding more than ten percent of Midas Canada‟s
the issued shares. Excepted from this prohibition is any sale, transfer or disposition of Vista US‟ Midas Canada
Shares made pursuant to an offer made to every holder of Midas Canada Shares on the same basis that is
recommended by the Midas Canada Board;
requires Vista US to agree to the required terms of any underwriters‟ lock up agreement that is negotiated and
approved by the Midas Canada Board in connection with any initial public offering by Midas Canada;
prohibits Vista US, for so long as it owns 20 percent or more of the issued and outstanding Midas Canada
Shares, from granting any proxies, depositing any Midas Canada Shares into a voting trust, enter into any voting
support agreement, or taking any other action that would adversely affect the voting power of any of the Midas
Canada Shares, make any representation or warranty of Vista US untrue or incorrect, or have the effect of
preventing or disabling Vista US from performing his or her obligations under the Lock Up Agreement;
for so long as it owns 20 percent or more of the issued and outstanding Midas Canada Shares, grants Vista US
equity participation rights to participate in any future equity financing of Midas Canada to retain the greater of
its then percentage interest in Midas Canada or 25 percent of Midas Canada‟s outstanding equity securities; and
does not limit nor restrict the ability of Vista US to sell, transfer, or dispose of any and all of its Midas Canada
Shares pursuant to an offer (i) made to every holder of Midas Canada Shares on the same basis, and (ii)
recommended by the board of directors of Midas Canada.
Where You Can Obtain Copies of these Agreements. The Combination Agreement and the appendices, exhibits
and schedules thereto can be found on Midas‟ website at www.midasgoldinc.com. Midas Shareholders can also obtain a
copy of the Combination Agreement at no charge by contacting Midas by telephone at (509) 927-4653 or by facsimile at
(509) 924-1582, or by sending an email to Heather Ennis of Midas at ennis@midasgoldinc.com.
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Conditions to Consummation of the Reorganization; Termination
All Parties' Conditions to Consummation. The obligations of Midas, Midas Canada, Vista US and Idaho Gold to
complete the Reorganization are subject to the following conditions, unless waived in writing:
Midas Shareholders holding at least two-thirds of the outstanding Midas Shares entitled to vote at the Special
Meeting shall have approved the Reorganization;
all other consents, orders, regulations and approvals, including regulatory and judicial approvals and orders,
necessary for the completion of Reorganization shall have been obtained or received from the persons, authorities
or bodies having jurisdiction in the circumstances;
the absence of any order or decree restraining or enjoining the consummation of the transactions contemplated by
the Combination Agreement or the Reorganization;
the absence of any judgment, order or decree that restrains or enjoins or otherwise prohibits the consummation of
the Reorganization or the transactions contemplated by the Combination Agreement; and
the absence of any pending or threatened suit, action or proceeding by any governmental entity or other person, in
each case that has a reasonable likelihood of success: (a) seeking to prohibit or restrict the Plan of Share
Exchange, or seeking to restrain or prohibit the consummation of the Reorganization; (b) seeking to prohibit or
materially limit the ownership or operation by any party to the Combination Agreement or any of its subsidiaries
of any material portion of the business or assets of such party, or to compel any party or any of its subsidiaries to
dispose of or hold separate any material portion of the business or assets of such party or any of its subsidiaries as
a result of the Reorganization and Plan of Share Exchange; or (c) imposing any condition or restriction that, in the
reasonable opinion of the party seeking to invoke this condition, would be materially burdensome to the future
operations of Vista US or Midas after the Reorganization has been completed.
Vista US’ and Idaho Gold’s Conditions to Consummation. The obligations of Vista US and Idaho Gold to
complete the Reorganization are subject to the following conditions, unless waived in writing:
no material adverse change will have occurred in the business, affairs, financial condition or operations of Midas;
Dissenting Shareholders holding in the aggregate no more than 5% of the Midas Shares shall have exercised their
dissenters‟ appraisal rights to the Plan of Share Exchange;
the issue of Midas Canada Shares and Midas Canada Options pursuant to the Plan of Share Exchange will have
been exempt from the registration requirements of the U.S. Securities Act, the registration and prospectus
requirements of applicable Canadian securities legislation in each of the provinces and territories of Canada in
which Midas Shareholders or Midas Optionholders are resident, and the registration or prospectus requirements
(or equivalent) of any other jurisdiction in which Midas Shareholders are resident;
each of the representations and warranties of Midas in the Combination Agreement shall be true and correct in all
material respects as of the date of the Combination Agreement and as of the date the Reorganization is completed;
Vista US shall have received a certificate of a senior officer of Midas confirming that the representations and
warranties of Midas set out in the Combination Agreement are true and correct in all material respects and that the
covenants of Midas set out in the Combination Agreement have been completed;
Midas shall have performed or complied with, in all material respects, each of its obligations, covenants and
agreements in the Combination Agreement;
the officers of Midas Canada shall consist of Stephen Quin as chief executive officer and president, and the
persons determined by the Midas Canada Board as chief financial officer and secretary;
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each of the Midas Affiliates shall have executed and delivered a Lock Up Agreement;
the Midas Canada Board will initially be comprised of four directors, one of whom will be nominated by Vista
US; and
each of the Midas Affiliates shall have executed a Voting Support Agreement.
Midas’ Conditions to Consummation. The obligations of Midas to complete the Reorganization are subject to the
following conditions, unless waived in writing:
no material adverse change will have occurred in the business, affairs, financial condition or operations of Vista
US or Idaho Gold;
each of the representations and warranties of Vista US and Idaho Gold under the Combination Agreement shall be
true and correct in all material respects as of the date of the Combination Agreement and as of the date the
Reorganization is completed;
Midas shall have received a certificate of a senior officer of Vista US confirming that the representations and
warranties of Vista US and Idaho Gold set out in the Combination Agreement are true and correct in all material
respects and that the covenants of Vista US and Idaho Gold set out in the Combination Agreement have been
completed;
Vista US and Idaho Gold shall have performed or complied with, in all material respects, each of their
obligations, covenants and agreements in the Combination Agreement;
the officers of Midas Canada shall consist of Stephen Quin as chief executive officer and president, and the
persons determined by the Midas Canada Board as chief financial officer, treasurer and secretary;
Vista US shall have executed and delivered a Lock Up Agreement;
the Midas Canada Board will initially be comprised of four directors, three of whom will be nominated by Midas;
Vista US shall have executed a Voting Support Agreement;
Midas shall have received from Vista US either a certification of non-foreigner status or a notice of nonrecognition, fulfilling the requirements specified under Treasury Regulation 1.1445-2; and
Midas shall have received a resignation from each director and officer of Idaho Gold and Idaho Gold Holdco.
Termination. The Combination Agreement may be terminated and the Reorganization abandoned, at any time
before or after Midas Shareholder approval is obtained at the Special Meeting (but not after the Plan of Share Exchange
has been accepted for filing by the Washington Secretary of State) as follows:
if the Midas Board and the Vista US Board mutually consent to the termination;
by either Midas or Vista US if the Reorganization shall not have been consummated for any reason by April 30,
2011;
by either Midas or Vista US if any law makes the Reorganization illegal or if a governmental entity shall have
issued an order, decree or ruling, or taken any other action, restraining, enjoining or otherwise prohibiting the
Reorganization;
by either Midas or Vista US if the Midas Shareholders have not approved the Reorganization at the Special
Meeting;
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by Midas, if Vista US is in breach of any of its covenants in the Combination Agreement and such breach causes
or would reasonably be expected to have a material adverse effect on Midas or would reasonably impede the
completion of the Reorganization;
by Vista US, if Midas is in breach of any of its covenants in the Combination Agreement and such breach causes
or would reasonably be expected to have a material adverse effect on Vista US or would reasonably impede the
completion of the Reorganization;
by Vista US, if the Midas Board shall for any reason have withheld, withdrawn, amended or modified its
recommendation in favor of the Reorganization, or adopted or accepted a Midas Acquisition Proposal, as such
term is defined in the Combination Agreement, to acquire Midas, its Mineral Properties or its assets;
by Midas, if the Midas Board concludes that a competing proposal to acquire it, its Mineral Properties or its assets
constitutes a Superior Proposal, as such term is defined in the Combination Agreement;
by Midas, if the Vista US Board shall, for any reason, have withheld, withdrawn, amended or modified its
recommendation in favor of the Reorganization, or adopted or accepted a Vista Acquisition Proposal, as such
term is defined in the Combination Agreement, to acquire Vista US, its Mineral Properties or its assets; and
by Vista US, if the Vista US Board concludes that a competing proposal to acquire it, its Mineral Properties or its
assets constitutes a Superior Proposal, as such term is defined in the Combination Agreement.
Effective Time
The Reorganization will be consummated at the Effective Time, which is that point in time that articles of share
exchange have been accepted for filing by the Washington Secretary of State as required by the Plan of Share Exchange
and the WBCA. Midas anticipates the Reorganization will become effective promptly following the Special Meeting.
Procedure and Terms for Exchange of Shares and Options
Procedure for Exchange of Midas Shares. Subject to receipt by Midas Canada of a completed FIRPTA
Certification (as described below under the heading "Requirement for FIRPTA Certification"):
(a)
following the later of (i) the Effective Date or (ii) the surrender to the Depositary of a certificate which
immediately prior to the Effective Time represented the outstanding Midas Shares that were exchanged under the Plan of
Share Exchange, together with a duly completed and executed Letter of Transmittal and such additional documents and
instruments as the Depositary may reasonably require, the holder of such surrendered certificate will be entitled to receive
in exchange therefor, the Midas Canada Shares, less any amounts withheld (see "Requirement for FIRPTA Certification"
below) and any Midas Share certificate so surrendered will forthwith be cancelled. As soon as practicable following the
later of the Effective Date and the date of deposit with the Depositary of a duly completed Letter of Transmittal and the
certificates representing the Midas Shares or other documentation as provided in the Letter of Transmittal, Midas Canada
shall cause the Depositary to:
(i)
forward or cause to be forwarded by registered mail (postage prepaid) or courier to the Holder at the
address specified in the Letter of Transmittal; or
(ii)
if requested by the Holder in the Letter of Transmittal, make available at the Depositary for pick up by the
Holder; or
(iii)
if the Letter of Transmittal neither specifies an address nor contains a request as described in (b), forward
or cause to be forwarded by first class mail (postage prepaid) to the Holder at the address of such Holder as shown
on the share register maintained by Midas as at the Effective Time,
certificates representing the number of Midas Canada Shares, if any, issuable to such Midas Shareholder as determined in
accordance with the provisions hereof, subject to any withholding obligation under applicable tax laws;
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(b)
no holder shall be entitled to receive any consideration with respect to the Midas Shares other than the
certificates representing the Midas Canada Shares, if any, which they are entitled to receive in accordance with the Plan of
Share Exchange and, for greater certainty, no holder will be entitled to receive any interest, dividends, premium or other
payment in connection therewith; and
(c)
any certificate formerly representing Midas Shares not duly surrendered on or prior to the sixth
anniversary of the Effective Date shall cease to represent a claim or interest of any kind or nature against Midas or Midas
Canada by a former holder. On such date, all Midas Canada Shares to which the former holder of such certificates was
entitled shall be deemed to have been surrendered to Midas Canada.
Letter of Transmittal. Included with this Proxy Statement is a Letter of Transmittal (printed on green paper). In
order to receive the Midas Canada Shares for their Midas Shares, a Registered Shareholder must complete and sign the
Letter of Transmittal and deliver it, together with certificates representing their Midas Shares (in the case of Registered
Shareholders) and the other required documents, to the Depositary in accordance with the instructions contained in the
Letter of Transmittal. (See also "Requirement for FIRPTA Certification" below).
Copies of the Letter of Transmittal may be obtained by contacting the Depositary. The Letter of Transmittal is
also available on Midas' website at www.midasgoldinc.com.
The Letter of Transmittal contains procedural information relating to the Exchange and should be reviewed
carefully. The deposit of Midas Shares pursuant to the procedures in the Letter of Transmittal will constitute a binding
agreement among the depositing Midas Shareholder, Midas Canada and Midas upon the terms and subject to the
conditions of the Plan of Share Exchange.
In all cases, Midas Canada Shares will be exchanged for Midas Shares only after timely receipt by the Depositary
of a properly completed and duly executed Letter of Transmittal, or a manually executed facsimile thereof, relating to
such Midas Shares together with certificates representing the Midas Shares, with signatures guaranteed if so required in
accordance with the instructions in the Letter of Transmittal, and any other required documents specified therein.
Midas and Midas Canada reserve the right to waive or not to waive any and all errors or other deficiencies in any
Letter of Transmittal or other document and any such waiver or non-waiver will be binding upon the affected Midas
Shareholder. The granting of a waiver to one or more Midas Shareholders does not constitute a waiver for any other
Midas Shareholder. Midas and Midas Canada reserve the right to demand strict compliance with the terms of the Letters
of Transmittal and the Plan of Share Exchange. The method used to deliver the Letters of Transmittal and any
accompanying certificates representing Midas Shares is at the option and risk of the holder surrendering them, and
delivery will be deemed effective only when such documents are actually received by the Depositary. Midas recommends
that the necessary documentation be hand delivered to the Depositary, and a receipt obtained therefor; otherwise the use of
registered mail with return receipt requested, and with proper insurance obtained, is recommended.
Midas Shareholders whose Midas Shares are registered in the name of a broker, investment dealer, bank, trust
company, trustee or other nominee should contact that nominee for assistance in depositing those Midas Shares and
should follow the instructions of such nominee in order to deposit their Midas Shares.
Cancellation of Rights after Six Years. Any certificate which immediately before the Effective Date represented
Midas Shares and which has not been duly surrendered, with all other documents required by the Depositary, on or before
the sixth anniversary of the Effective Date, will cease to represent any claim against or interest of any kind or nature in
Midas, Midas Canada or the Depositary. On such date, all Midas Canada Shares to which the former holder of such
certificates was entitled shall be deemed to have been surrendered to Midas Canada. Accordingly, persons who tender
certificates for Midas Shares after the sixth anniversary of the Effective Date will not receive Midas Canada
Shares, will not own any interest in Midas or Midas Canada, and will not be paid any cash or other compensation.
Procedure for Exchange of Midas Options. Each outstanding Midas Option shall be exchanged for one Midas
Canada Option at the same exercise price and having terms substantially similar to the Midas Option for which it was
exchanged, provided that, in the event that the Midas Canada Option In-The-Money Amount in respect of a Midas Option
exceeds the Midas Option In-The-Money Amount in respect of such Midas Option, the number of Midas Canada Shares
18
which may be acquired on exercise of the Midas Canada Option at and after the Effective Time will be adjusted
accordingly, with effect at and from the Effective Time, to ensure that the Midas Canada Option In-The-Money Amount
in respect of the Midas Option does not exceed the Midas Option-In The Money Amount in respect of the Midas Option
and the ratio of the amount payable to acquire such Midas Canada Shares to the value of the Midas Canada Shares to be
so acquired shall be unchanged.
Requirement for FIRPTA Certification. Included with this Proxy Statement is the FIRPTA Certification (printed
on yellow paper) which contains forms with respect to:
(a)
a certification that such person is not a “foreign person” fulfilling the requirements specified under
Treasury Regulation 1.1445-2(b), and
(b)
a statement of non-recognition fulfilling the requirements specified under Treasury Regulation 1.14452(d)(2)(iii).
Also included in the FIRPTA Certification is a cover letter containing instructions regarding the FIRPTA
Certification and requesting that each Midas Shareholder return to Midas Canada either the duly completed certification
of non-foreign status or a duly completed notice of non-recognition as described in paragraphs (a) and (b) above on or
before the Effective Date.
It is anticipated that the Effective Date will be on or about April 6, 2011. If Midas Canada does not receive
from a Midas Shareholder either a certification of non-foreign status or a notice of non-recognition as described
above and included in the FIRPTA Certification on or before the Effective Date, Midas Canada shall be permitted
to withhold all of the Midas Canada Shares and Midas Canada Options that would otherwise be transferred to
such Midas Shareholder pursuant to the Plan of Share Exchange on the basis that the Midas Shareholder will be
deemed to have granted Midas and Midas Canada a lien and security interest in such Midas Canada Shares and
Midas Canada Options and will be deemed to have granted Midas and Midas Canada a right to sell such Midas
Canada Shares and Midas Canada Options as provided below.
In such event, such Midas Canada Shares and Midas Canada Options will only be released when such Midas
Shareholder either (a) provides a certification of non-foreign status as described above, or (b) pays the amount of the
withholding tax, as determined by Midas Canada pursuant to the Treasury Regulations under Section 1445 of the Code.
In addition, in the event that a Midas Shareholder does not comply with the requirement to provide a FIRPTA
Certification in accordance with the terms of the Plan of Share Exchange, and the Midas Canada Shares become listed on
an established securities market, Midas Canada shall have the right to sell an amount of Midas Canada Shares to
reimburse itself for the withholding taxes under Section 1445 plus reasonable fees and expenses and thereafter shall
release the remaining Midas Canada Shares or Midas Canada Options that would otherwise be transferred to such holder
pursuant to the Exchange.
No Public Trading Market for Midas Canada Shares or Midas Canada Options
There is currently no public trading market for the Midas Shares or the Midas Options, and there will be no public
trading market for the Midas Canada Shares or the Midas Canada Options immediately following the Reorganization.
Assuming market conditions, gold prices and other determinants are then favorable, Midas Canada may seek to publicly
offer its shares in Canada. We cannot assure you that this will happen or when it might happen.
Accounting Treatment of the Reorganization
The Reorganization will be accounted for as a reverse takeover business combination. The recorded assets (but
not the liabilities) of Midas, and those of Idaho Gold, will be carried forward to Midas Canada at their recorded amounts
because the combination will be accomplished without an effective change in ownership. The resources and activities of
Midas and those of Idaho Gold will not be affected by the Reorganization.
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Dissenters’ Appraisal Rights
The Midas Shareholders have statutory rights of appraisal under the WBCA with respect to the proposed
Reorganization, meaning that if they vote against the Reorganization and take other steps to perfect their rights, summarized
below, they will be entitled to receive the fair value of their Midas Shares in cash. The procedures for exercising and
perfecting these appraisal rights are complicated, and for this reason you are urged to read the relevant provisions of the
WBCA, which are included in Appendix A to this Proxy Statement. The following is only a summary of these procedures
and is not intended to be inclusive:
A Midas Shareholder wishing to exercise these rights (a “Dissenting Shareholder”) must vote against approving the
Reorganization, and prior to the taking of such vote, must also deliver written notice to Midas that the Dissenting
Shareholder intends to demand written payment for his or her Midas Shares if the Reorganization is approved.
If the Reorganization is approved, then the Midas Shares owned by the Dissenting Shareholder will be deemed to
have been deposited with Midas Canada until such time as the appraisal rights process has been completed.
If the Reorganization is approved, Midas must within ten days send written notice to the Dissenting Shareholder,
accompanied by a form for demanding payment and related information. The Dissenting Shareholder must
thereafter return the form to Midas, accompanied by the Dissenting Shareholder‟s stock certificates, within the time
prescribed by the form, which may not be less than 30 nor more than 60 days. Pursuant to the Plan of Share
Exchange, the Midas Shares owned by the Dissenting Shareholder will be deemed to have been deposited with
Midas Canada once the Reorganization is approved. The Dissenting Shareholder‟s stock certificates will be deemed
to have been similarly deposited.
Upon receipt of the form and the Dissenting Shareholder's stock certificates, Midas will offer to pay the Dissenting
Shareholder the fair value of the shareholder‟s Midas Shares, accompanied by financial information and a statement
of how the fair value was determined.
Should the Dissenting Shareholder disagree with Midas‟ fair value determination, the Dissenting Shareholder must
reject the payment, following which Midas or the Dissenting Shareholder may initiate a court proceeding in
Washington to adjudicate such value. The costs of any such proceeding, including the costs of any appraisers or
other experts, must be borne by Midas but in the court's discretion may also be assessed against the Dissenting
Shareholder.
Board of Directors Recommendation
The Midas Board recommends that you vote to approve the Reorganization. The Midas Board has concluded that
consolidating its Mineral Properties and those of Idaho Gold in to Midas Canada is in the best interests of Midas, the
Midas Shareholders and the Midas Optionholders; that the terms and conditions of the Reorganization are fair and
reasonable to the Midas Shareholders and the Midas Optionholders; and that the Reorganization affords significant
opportunities and strategies for funding the continued exploration and, if warranted, development of the consolidated
Mineral Properties.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain U.S. federal income tax considerations applicable to Midas
Shareholders regarding the exchange of Midas Shares for Midas Canada Shares pursuant to the Reorganization and the
ownership and disposition of such shares. This summary does not describe the tax consequences that are applicable to the
holders of Midas Options.
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 Midas Shareholder. For example, it does not take
into account the individual facts and circumstances of any particular Midas Shareholder that may affect the U.S. federal
income tax considerations applicable to such holder, nor does it address the state and local, federal estate and gift, federal
alternative minimum tax or foreign tax consequences to a Midas Shareholder relating to the Reorganization and the
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ownership and disposition of Midas Canada Shares acquired thereby. 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 Midas Shareholder. Each
Midas Shareholder is urged to consult its own tax advisor regarding the Reorganization and the ownership and disposition
of Midas Canada Shares acquired thereby.
No legal 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 to Midas Shareholders as a result of
the of the Reorganization or ownership and disposition of Midas Canada 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, the positions taken in this
summary. In addition, because the authorities on 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.
Scope of this Summary
Authority. 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 of this information memorandum. 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. Holder Defined. As used in this summary, the term "U.S. Holder" means a beneficial owner of Midas Shares
(or, after the Reorganization has been consummated, a beneficial owner of Midas Canada Shares) that is for U.S. federal
income tax purposes:
(a)
an individual who is a citizen or resident of the U.S.;
(b)
a corporation, or other entity classified as a corporation that is created or organized in or under the laws of
the U.S. or any state in the U.S., including the District of Columbia;
(c)
an estate if the income of such estate is subject to U.S. federal income tax regardless of the source of such
income; or
(d)
a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal income tax more
U.S. persons have the authority to control all substantial decisions of such trust.
Non-U.S. Holder Defined. For purposes of this summary, a “Non-U.S. Holder” is a beneficial owner of Midas
Shares (or, after the Reorganization is consummated, a beneficial owner of Midas Canada Shares) that is neither a U.S.
Holder nor a partnership.
Matters Not Addressed by this Summary. This summary does not address the U.S. federal income tax
considerations of the Reorganization to Midas Shareholders that are subject to special provisions under the Code,
including: (a) Midas Shareholders that are tax-exempt organizations, qualified retirement plans, individual retirement
accounts, or other tax-deferred accounts; (b) Midas Shareholders that are financial institutions, underwriters, insurance
companies, real estate investment trusts, or regulated investment companies; (c) Midas Shareholders that are brokerdealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) Midas
Shareholders that have a “functional currency” other than the U.S. dollar; (e) Midas Shareholders that own Midas Shares
(or after the Reorganization is consummated, Midas Canada Shares) as part of a straddle, hedging transaction, conversion
transaction, constructive sale, or other arrangement involving more than one position; (f) Midas Shareholders that
acquired Midas Shares (or after the Reorganization is consummated, Midas Canada Shares) in connection with the
exercise of employee stock options or otherwise as compensation for services; (g) Midas Shareholders that hold Midas
Shares (or after the Reorganization is consummated, Midas Canada Shares) other than as a capital asset within the
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meaning of Section 1221 of the Code (generally, property held for investment purposes); and (h) partnerships and other
pass-through entities (and investors in such partnerships and entities).
This summary also does not address the U.S. federal income tax considerations applicable to Midas Shareholders
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 Tax Act); (c) persons that use or hold, will use or hold, or that
are or will be deemed to use or hold Midas Shares (or after the Reorganization is consummated, Midas Canada Shares) in
connection with carrying on a business in Canada; (d) persons whose Midas Shares (or after the Reorganization is
consummated, Midas Canada Shares) constitute “taxable Canadian property” under the Tax Act; or (e) persons that have a
permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention. Midas Shareholders that are
subject to special provisions under the Code, including Midas Shareholders described immediately above, should consult
their own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state
and local, and foreign tax consequences relating to the Reorganization and the ownership and disposition of Midas
Canada Shares received pursuant to the Reorganization. Midas Shareholders who have been, are, or will be a resident or
deemed to be a resident in Canada for purposes of the Tax Act should also consult the section of this Proxy Statement
entitled “Certain Canadian Federal Income Tax Considerations.”
Finally, this summary does not address the U.S. federal income tax consequences of transactions effected prior or
subsequent to, or concurrently with, the Reorganization (whether or not any such transactions are undertaken in
connection with the Reorganization), including, without limitation: any vesting, conversion, assumption, disposition,
exercise, exchange or other transaction involving any rights to acquire Midas Shares or Midas Canada Shares, including
the Midas Options; and any transaction, other than the Reorganization, in which securities of Midas or Midas Canada are
acquired.
Partnerships and Other Pass-Through Entities. If an entity that is classified as a partnership (or “pass-through”
entity) for U.S. federal income tax purposes holds Midas Shares (or after the Reorganization is consummated, Midas
Canada Shares), the U.S. federal income tax consequences to such partnership and the partners of such partnership of
participating in the Reorganization and the ownership of Midas Canada Shares received pursuant to the Reorganization
generally will depend on the activities of the partnership and the status of such partners. Partners of entities that are
classified as partnerships for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S.
federal income tax consequences of the Reorganization and the ownership and disposition of Midas Canada Shares
received thereby.
Treatment of Midas Canada as a U.S. Corporation
Midas believes that, pursuant to Section 7874 of the Code, even though Midas Canada is organized as a British
Columbia corporation under the BDBCA, Midas Canada should be treated as a U.S. domestic corporation for all purposes
under the Code. The balance of this discussion assumes that Midas Canada is taxed as a U.S. domestic corporation for
U.S. federal income tax purposes.
No ruling from the IRS concerning the U.S. federal income tax characterization of Midas Canada has been
obtained and none will be requested. Thus, there can be no assurance that the IRS will not challenge the characterization
of Midas Canada as a domestic corporation, or that if challenged, a U.S. court would not agree with the IRS.
If Midas Canada were not treated as a U.S. domestic corporation, then the Reorganization would result in a
taxable event for U.S. Holders of Midas Shares. No loss would be recognized. Each Midas Shareholder should consult
its own tax advisor regarding the U.S. federal income tax characterization of Midas Canada and how such characterization
will affect the tax consequences of the Reorganization.
Characterization of the Reorganization
Subject to the discussion below, the exchange by Midas Shareholders of Midas Shares for Midas Canada Shares
pursuant to the Reorganization should qualify for tax-free treatment either as a tax-free reorganization under Section
368(a)(1)(B) of the Code and as a tax-free contribution to capital under Section 351 of the Code.
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In order for the Reorganization to qualify as a tax-free reorganization under Section 368(a)(1)(B) of the Code, the
following requirements, among others, must be satisfied: (a) the Midas Shares must be exchanged solely for voting stock
of Midas Canada in the Reorganization; and (b) immediately after the Reorganization is consummated, Midas Canada
must hold stock in Midas representing “control” of Midas as determined under Section 368(a)(1)(B) of the Code and the
regulations issued thereunder. For this purpose, “control” is defined as the ownership of stock of Midas Canada
possessing at least eighty percent (80%) of the total combined voting power of all classes of stock of Midas Canada
entitled to vote and (b) at least eighty percent (80%) of the total number of shares of each other class of stock of Midas
Canada.
In order for the Reorganization to qualify as a tax-free contribution to capital under Section 351 of the Code, the
following requirements, among others, must be satisfied: (a) the Midas Shareholders contributing their Midas Shares to
Midas Canada pursuant to the Reorganization and Vista US contributing property (all of the outstanding common stock of
Idaho Holdco) to Midas Canada in connection with the Reorganization must be considered to have participated in a single
integrated transaction pursuant to the step transaction doctrine, and thus constitute members of the same “control group”
for purposes of Section 351 of the Code; and (b) the Midas Shareholders and Vista US comprising such “control group”
must acquire “control” of Midas Canada as determined under Section 351 of the Code and the regulations issued
thereunder. For this purpose, “control” has the same definition that is applied in determining “control” for purposes of a
tax-free reorganization pursuant to Section 368(a)(1)(B) of the Code.
No ruling from the IRS or legal opinion concerning the U.S. federal income tax consequences of the
Reorganization has been obtained and none will be requested. Thus, there can be no assurance that the IRS will not
challenge the qualification of the Reorganization as a tax-free reorganization under Section 368(a)(1)(B) of the Code or
as a tax-free contribution to capital under Section 351 of the Code, or that, if challenged, a U.S. court would not agree
with the IRS.
Tax Consequences of the Reorganization to U.S. Holders
Tax Consequences to U.S. Holders if the Reorganization Qualifies either as a Tax-Free Reorganization under
Section 368(a)(1)(B) of the Code or as a Tax-Free Contribution to Capital under Section 351 of the Code. If the
Reorganization qualifies either as a tax-free reorganization under Section 368(a)(1)(B) of the Code or as a tax-free
contribution to capital under Section 351 of the Code, then the following U.S. federal income tax consequences will result
for U.S. Holders:
(a)
no gain or loss will be recognized by a U.S. Holder on the exchange of Midas Shares for Midas Canada
Shares pursuant to the Reorganization;
(b)
the tax basis of a U.S. Holder in the Midas Canada Shares acquired in exchange for Midas Shares
pursuant to the Reorganization will be equal to such U.S. Holder‟s tax basis in Midas Shares exchanged;
(c)
the holding period of a U.S. Holder with respect to the Midas Canada Shares acquired in exchange for
Midas Shares pursuant to the Reorganization will include such U.S. Holder‟s holding period for Midas Shares;
and
(d)
U.S. Holders who exchange Midas Shares for Midas Canada Shares pursuant to the Reorganization
generally will be required to report certain information to the IRS on their U.S. federal income tax returns for the
tax year in which the Reorganization occurs, and to retain certain records related to the Reorganization.
The IRS could challenge a U.S. Holder‟s treatment of the Reorganization as a tax-free reorganization under
Section 368(a)(1)(B) of the Code or as a tax-free contribution to capital under Section 351 of the Code. If this treatment
were successfully challenged, then the Reorganization would be treated as a taxable transaction, with the consequences
discussed immediately below (including the recognition of any realized gain).
Tax Consequences to U.S. Holders if the Reorganization Fails to Qualify either as a Tax-Free Reorganization
under Section 368(a)(1)(B) of the Code or as a Tax-Free Contribution to Capital under Section 351 of the Code. If the
Reorganization fails to qualify either as a tax-free reorganization under Section 368(a)(1)(B) of the Code or as a tax-free
23
contribution to capital under Section 351 of the Code, then the Reorganization would constitute a taxable disposition of
the Midas Shares by a U.S. Holder and would result in the following U.S. federal income tax consequences:
(a)
a U.S. Holder of Midas Shares would recognize gain or loss equal to the difference between (i) the fair
market value of Midas Canada Shares received, determined as of the time of receipt by such U.S. Holder
and (ii) the U.S. Holder‟s adjusted tax basis in the Midas Shares;
(b)
the aggregate tax basis of Midas Canada Shares received by a U.S. Holder of Midas Shares in the
Reorganization would be equal to the aggregate fair market value of Midas Canada Shares received,
determined as of the time of receipt; and
(c)
the holding period of Midas Canada Shares received by a U.S. Holder in the Reorganization would begin
on the day after receipt.
Any gain or loss recognized under subsection (a) above generally will be capital gain or loss if the Midas Shares
were held as capital assets at the time of the Reorganization and will be long-term capital gain or loss if the U.S. Holder‟s
holding period for the Midas Shares is more than one year at the time of the Reorganization. Preferential tax rates for
long-term capital gains are applicable to a U.S. Holder that is an individual, estate or trust. There are currently no
preferential tax rates for long-term capital gains for a U.S. Holder that is a corporation. Deductions for capital losses are
subject to significant limitations.
Dissenting U.S. Holders. A U.S. Holder that exercises dissenters‟ appraisal rights in the Reorganization and is
paid cash in exchange for all of such U.S. Holder‟s Midas Shares generally will recognize gain or loss in an amount equal
to the difference, if any, between (a) the amount of cash received by such U.S. Holder (other than amounts, if any, that are
or are deemed to be interest for U.S. federal income tax purposes, which amounts will be taxed as ordinary income) and
(b) the tax basis of such U.S. Holder in the surrendered Midas Shares surrendered. Such gain or loss generally will be
capital gain or loss, which will be long-term capital gain or loss if such Midas Shares are held for more than one year.
Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust. Deductions
for capital losses are subject to complex limitations under the Code.
Tax Consequences of the Reorganization to Non-U.S. Holders
Tax Consequences to Non-U.S. Holders if the Reorganization Qualifies either as a Tax-Free Reorganization
under Section 368(a)(1)(B) of the Code or as a Tax-Free Contribution to Capital under Section 351 of the Code.
Midas believes it is a “U.S. real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes.
Even if the Reorganization otherwise qualifies either as a tax-free reorganization under Section 368(a)(1)(B) of the Code
or as a tax-free contribution to capital under Section 351 of the Code, each Non-U.S. Holder will be required to submit a
FIRPTA Certification of non-recognition fulfilling the requirements specified under Treasury Regulation 1.14452(d)(2)(iii), failing which the Reorganization will be a fully taxable transaction and such holder will be required to
recognize gain or loss on the disposition of Midas Shares as if it were effectively connected with the conduct by the NonU.S. Holder of a trade or business within the United States, and such holder will also be subject to the payment of a
withholding tax equal to ten percent of the value of the Midas Canada Shares received in exchange for such holder‟s
Midas Shares in the Reorganization. See the section of this Proxy Statement entitled “Procedure and Terms for Exchange
of Shares and Options—Requirement for FIRPTA Certification.”
Tax Consequences to Non-U.S. Holders if the Reorganization Fails to Qualify either as a Tax-Free
Reorganization under Section 368(a)(1)(B) of the Code or as a Tax-Free Contribution to Capital under Section 351 of the
Code.
In general, if the Reorganization is considered a taxable transaction, a Non-U.S. Holder of Midas Shares will not
be subject to U.S. federal income tax on gain as a result of the exchange of Midas Shares for Midas Canada Shares
pursuant to the Reorganization, unless:
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(a)
the Company is or has been a USRPHC for U.S. federal income tax purposes at any time during the
shorter of the Non-U.S. Holder‟s holding period or the five-year period ending on the date of disposition of
common stock;
(b)
such gain is effectively connected with a U.S. trade or business carried on by the Non-U.S. Holder (and,
where an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Holder); or
(c)
such gain is effectively connected with a U.S. trade or business carried on by the Non-U.S. Holder (and,
where an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Holder).
With respect to subparagraph (a) above, Midas believes that it currently is a USRPHC. If a Non-U.S. Holder
were subject to U.S. federal income tax as a result of Midas‟ status as a USRPHC, any gain or loss on the disposition of
Midas Shares would be taken into account as if it were effectively connected with the conduct by the Non-U.S. Holder of
a trade or business within the United States. Any such gain generally would be taxable to the Non-U.S. holder at U.S.
federal income tax rates applicable to capital gains.
If a Non-U.S. Holder is an individual described in to subparagraph (b) above, above, he or she will be subject to
tax on the net gain derived from the sale or other taxable disposition of Midas Shares under regular graduated U.S. federal
income tax rates. If a Non-U.S. Holder is a foreign corporation described in to subparagraph (b) above, above, it will be
subject to tax on its net gain from such a sale or other taxable disposition generally in the same manner as if it were a U.S.
person as defined under the Code and, in addition, it may be subject to the branch profits tax at a gross rate equal to 30%
of its effectively connected earnings and profits for that taxable year, subject to any exemption or lower rate as may be
specified by an applicable income tax treaty.
If a Non-U.S. Holder is an individual described in to subparagraph (c) above, above, such holder will be subject to
tax at a rate of 30% (or subject to any exemption or lower rate as may be specified by an applicable income tax treaty) on
the gain derived from the sale or other taxable disposition of Midas Shares even though such holder is not considered a
resident of the U.S. The amount of such gain may be offset by the Non-U.S. Holder‟s U.S. source capital losses.
Dissenting Non-U.S. Holders. A Non-U.S. Holder who exercises dissenters‟ appraisal rights pursuant to the
Reorganization and is paid cash in exchange for all of such Non-U.S. Holder‟s Midas Shares generally will be considered
to have disposed of his or her Midas Shares for proceeds of disposition equal to a the amount received.
Tax Consequences to U.S. Holders Arising from the Ownership and Disposition of Midas Canada Shares
Distributions on Midas Canada Shares. A U.S. Holder that receives a distribution, including a constructive
distribution, with respect to a Midas Canada Share 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 Midas Canada, as computed for U.S. federal income tax purposes. To
the extent that a distribution exceeds the current and accumulated "earnings and profits" of Midas Canada, such
distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder's tax basis in the Midas Canada
Shares and thereafter as gain from the sale or exchange of such shares taxable as described below under the heading "Sale
or Other Taxable Disposition of Midas Canada Shares". Subject to applicable limitations and requirements, dividends
received on the Midas Canada Shares generally should be eligible for the "dividends received deduction" available to
corporate shareholders.
For taxable years beginning before January 1, 2013, a dividend paid to a U.S. Holder who is an individual, estate
or trust by Midas Canada generally will be taxed at the preferential tax rates applicable to long-term capital gains if
certain holding period requirements are met. A dividend paid in a taxable year beginning on or after January 1, 2013 will
generally be taxed at ordinary income tax rates.
To the extent that Canadian tax is also payable on the distribution by Midas Canada Shares to a U.S. Holder, a
foreign tax credit to offset U.S. tax liability is likely unavailable. However, a deduction may be available for such
amounts. See discussion below under the heading "Unavailability of Foreign Tax Credit".
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Sale or Other Disposition of Midas Canada Shares. Upon the sale or other taxable disposition of Midas Canada
Shares received in the Reorganization, a U.S. Holder generally will recognize a capital gain or loss in an amount equal to
the difference between (a) the amount of cash plus the fair market value of any property received and (b) such U.S.
Holder's tax basis in the shares sold or otherwise disposed of. Gain or loss recognized on such sale or other disposition
generally will be long-term capital gain or loss if, at the time of the sale or other disposition, the shares have been held for
more than one year.
Preferential rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust. 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.
Receipt of Foreign Currency. Amounts paid to a U.S. Holder in foreign currency generally will be equal to the
U.S. dollar value of such distribution based on the exchange rate applicable on the date of receipt. A U.S. Holder that
does not convert foreign currency received into U.S. dollars on the date of receipt generally will have a tax basis in such
foreign currency equal to the U.S. dollar value of such foreign currency on the date of receipt. Such a U.S. Holder
generally will recognize ordinary income or loss on the subsequent sale or other taxable disposition of such foreign
currency (including an exchange for U.S. dollars) which generally would be treated as U.S. source ordinary income for
foreign tax credit purposes.
Unavailability of Foreign Tax Credit. Because Midas Canada is taxable both as a U.S. corporation and as a
Canadian domestic corporation, a U.S. Holder may be required to pay (either directly or through withholding) both
Canadian and U.S. federal income tax with respect to dividends paid on its Midas Canada Shares. While a U.S. Holder
can potentially elect to receive either a credit or deduction on its U.S. income tax return to reduce U.S. federal income tax
liability for foreign income tax paid, complex limitations apply to the foreign tax credit, including the general limitation
that the credit cannot exceed the proportionate share of a U.S. Holder's U.S. federal income tax liability that such U.S.
Holder's "foreign source" taxable income bears to such U.S. Holder's worldwide taxable income. In applying this
limitation, a U.S. Holder's various items of income and deduction must be classified, under complex rules, as either
"foreign source" or "U.S. source." In addition, this limitation is calculated separately with respect to specific categories of
income. The status of Midas Canada as a U.S. corporation for U.S. federal income tax purposes will cause dividends paid
to be treated as "U.S. source" rather than "foreign source" for this purpose. As a result, the foreign credit, which would
generally reduce a U.S. Holder's U.S. federal income tax liability on a dollar-for-dollar basis, is likely to be unavailable
with respect to Canadian tax paid on dividends received from Midas Canada. A U.S. Holder would, however, be able to
take a deduction for Canadian tax paid to reduce the amount of such U.S. Holder's income subject to U.S. federal income
tax. To the extent a sale or disposition of the Midas Canada Shares by a U.S. Holder results in Canadian tax liability (e.g.
if the Midas Canada Shares constitute taxable Canadian property within the meaning of the Tax Act, as discussed under
"Certain Canadian Federal Income Tax Considerations—Non-Resident Shareholders"), a foreign tax credit is similarly
expected to be unavailable. However, the U.S. Holder would be able to take a deduction on its U.S. federal income tax
return for Canadian tax paid. The foreign tax credit rules are complex, and each U.S. Holder should consult its own tax
advisor regarding the foreign tax credit rules.
Tax Consequences of the Ownership and Disposition of Midas Canada Shares to Non-U.S. Holders
Distributions on Midas Canada Shares. The gross amount of any distributions paid by Midas Canada to its NonU.S. Holders with respect to the Midas Canada Shares will be treated first as dividends, to the extent that Midas Canada
has current or accumulated earnings and profits (determined under U.S. federal income tax principles); then by the holder
as return of capital, to the extent of the shareholder‟s adjusted basis in its Midas Canada Shares; and thereafter as gain
from the sale or exchange of the holder‟s Midas Canada Shares.
Except to the extent such dividends are effectively connected with the conduct of a trade or business in the United
States, any dividends paid to a Non-U.S. Holder with respect to the Midas Canada Shares will be subject to withholding
tax at a 30% gross rate, subject to any exemption or lower rate under the Canada-U.S. Tax Convention if the Non-U.S.
Holder provides Midas Canada with a properly executed IRS Form W-8BEN (or other applicable form). For persons
eligible for benefits under the Canada-U.S. Tax Convention, the current rate applicable to dividend income is 15%
(reduced to 5% where a corporate recipient owns 10% or more of the paying corporation‟s voting stock). If the Non-U.S.
Holder provides Midas Canada with a properly executed IRS Form W-8ECI, dividends that are effectively connected with
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the conduct of a trade or business within the U.S. and includible in the Non-U.S. Holder‟s gross income will not be
subject to the withholding tax, but instead will be subject to U.S. federal income tax on a net income basis at applicable
graduated individual or corporate rates.
Any such effectively connected income received by a foreign corporation may, under certain circumstances, be
subject to an additional branch profits tax at a 30% rate, subject to any exemption or lower rate as may be specified by the
Canada-U.S. Tax Convention.
A Non-U.S. Holder of Midas Canada Shares who wishes to claim the benefit of the applicable treaty rate or
exemption is required to satisfy certain certification and other requirements. If the Non-U.S. Holder is eligible for an
exemption from, or a reduced rate of U.S. withholding tax pursuant to an income tax treaty, it may be eligible to obtain a
refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
Sale or Other Disposition of Midas Canada Shares. In general, a Non-U.S. Holder of Midas Canada Shares will not be
subject to U.S. federal income tax on gain recognized from a sale, exchange, or other taxable disposition of such shares,
unless:
(a)
the gain is effectively connected with a U.S. trade or business carried on by the Non-U.S. Holder (and,
where an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Holder);
(b)
the Non-U.S. Holder is an individual who is present in the U.S. for 183 days or more in the taxable year
of disposition and certain other conditions are met; or
(c)
Midas Canada is or has been a USRPHC for U.S. federal income tax purposes at any time during the
shorter of the Non-U.S. Holder‟s holding period or the five-year period ending on the date of disposition of the
Midas Canada Shares; provided, if the Midas Canada Shares in the future become “regularly traded on an
established securities market” as described in the Treasury regulations (the “Regularly Traded Condition”), a
Non-U.S. Holder would not be subject to taxation under this rule if the Non-U.S. Holder has not owned (taking
into account certain attribution rules) more than 5% of the outstanding Midas Canada Shares at any time during
such five-year or shorter period.
A USRPHC is defined as a domestic corporation in which the fair market value of the U.S. real property interests
(“USRPI”) owned by such corporation equals or exceeds fifty percent of the sum of the fair market values of (a) the
USRPIs owned by such corporation, (b) the foreign real estate owned by such corporation, and (c) the other trade or
business assets used or held by such corporation. A “USRPI” is defined broadly as any interest, other than solely as a
creditor, in either real property located in the U.S. or a corporation that meets the definition of a USRPHC. Midas
believes that it is currently a USRPHC and has been during one or more of the past five years. Midas further believes
that, once the Reorganization is consummated, Midas will continue to be treated as a USRPHC for U.S. federal income
tax purposes. The Midas Shares do not presently meet the Regularly Traded Condition nor will they meet such condition
at the time the Reorganization is consummated.
Because Midas is a USRPHC, a Non-U.S. Holder will be taxed as if the gain or loss were effectively connected
with the conduct of a U.S. trade or business, taxable under regular graduated U.S. federal income tax rates in the event
such holder owns more than 5% of the outstanding Midas Canada Shares at any time during the relevant period if the
Regulatory Traded Condition is not satisfied during such period. Non-U.S. Holders are urged to consult with their own
tax advisors regarding the consequences if we have been, are or will be a USRPHC.
If a Non-U.S. Holder is an individual described in subsection (a) above, he or she will be subject to tax on the net
gain derived from the sale or other taxable disposition of our common stock under regular graduated U.S. federal income
tax rates. If a Non-U.S. Holder is a foreign corporation described in subsection (a) above, it will be subject to tax on its
net gain from such a sale or other taxable disposition generally in the same manner as if it were a U.S. person as defined
under the Code and, in addition, it may be subject to the branch profits tax at a gross rate equal to 30% of its effectively
connected earnings and profits for that taxable year, subject to any exemption or lower rate as may be specified by an
applicable income tax treaty. If a Non-U.S. Holder is an individual described in subsection (b) above, such holder will be
subject to tax at a rate of 30% (or subject to any exemption or lower rate as may be specified by an applicable income tax
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treaty) on the gain derived from the sale or other taxable disposition of our common stock even though such holder is not
considered a resident of the U.S. The amount of such gain may be offset by the Non-U.S. Holder‟s U.S. source capital
losses.
Information Reporting; Backup Withholding Tax
Midas Canada will generally be required to report annually to the IRS and to its shareholders the amount of
dividends paid on its Midas Canada Shares and the amount of tax, if any, withheld with respect to those payments. Copies
of the information returns reporting such dividends and withholding may also be made available to the tax authorities in
the country in which a Non-U.S. Holder resides under the provisions of an applicable income tax treaty.
In general, a Non-U.S. Holder will not be subject to backup withholding (currently at a rate of 28% and expected
to increase for payments made after December 31, 2012) with respect to payments of dividends by Midas Canada,
provided Midas Canada receives a statement from such Non-U.S. Holder to the effect that the Non-U.S. Holder is not a
U.S. person and Midas Canada does not have actual knowledge or reason to know that the holder is a U.S. person, as
defined under the Code, that is not an exempt recipient. The requirements for the statement will be met if (a) the NonU.S. Holder provides its name and address and certifies, under penalty of perjury, that it is not a U.S. person (which
certification may be made on IRS Form W-8BEN) or (b) a financial institution holding the certificates evidencing such
Non-U.S. Holder‟s Midas Canada Shares certifies under penalties of perjury that such statement has been received by it
and furnishes Midas Canada or its paying agent with a copy of the statement. In addition, a Non-U.S. Holder will be
subject to information reporting and, depending on the circumstances, backup withholding with respect to payments of the
proceeds of a sale of Midas Canada Shares within the U.S. or conducted through certain U.S.-related financial
intermediaries, unless the statement described above has been received, and Midas Canada does not have actual
knowledge or reason to know that the Non-U.S. holder is a U.S. person, as defined under the Code, that is not an exempt
recipient, or the Non-U.S. Holder otherwise establishes an exemption. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against a Non-U.S. Holder‟s U.S. federal income tax liability
provided the required information is furnished timely to the IRS.
Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, or proceeds arising from
the sale or other taxable disposition of, Midas Shares or Midas Canada Shares generally will be subject to information
reporting and backup withholding tax, (currently at a rate of 28% and expected to increase to 31% in 2012) if a U.S.
Holder (a) fails to furnish such U.S. Holder's correct U.S. taxpayer identification number (generally on 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 tax, 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 tax. However, U.S. Holders that are corporations generally are excluded
from these information reporting and backup withholding tax rules. Any amounts withheld under the U.S. backup
withholding tax rules will be allowed as a credit against a U.S. Holder's U.S. federal income tax liability, if any, or will be
refunded, if such U.S. Holder furnishes required information to the IRS. Each U.S. Holder should consult its own tax
advisor regarding the information reporting and backup withholding rules.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal Canadian federal income tax considerations relating to the
Reorganization generally applicable to a beneficial owner of Midas Shares who, at all relevant times, for the purposes of
the Tax Act: (a) deals at arm‟s length with Midas and Midas Canada; (b) is not affiliated with Midas or Midas Canada;
and (c) holds all Midas Shares, and will hold all Midas Canada Shares, as capital property (each such shareholder in this
section, a “Holder”).
This summary is based on the current provisions of the Tax Act, the regulations thereunder and the current
published administrative practices and policies of the Canada Revenue Agency (the “CRA”) publicly available prior to the
date hereof. This summary also takes into account all specific proposals to amend the Tax Act and the regulations
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, although no assurances can be given in this
regard. Except for the Proposed Amendments, this summary does not take into account or anticipate any changes in law,
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whether by legislative, governmental, regulatory, or judicial action or decision, or changes in the administrative practices
of the CRA, nor does it take into account provincial, territorial or foreign income tax considerations, which may differ
from the Canadian federal income tax considerations discussed below.
This summary is not applicable to a Holder that is a “financial institution” as defined in the Tax Act for the
purposes of the “mark-to-market property” rules or a “specified financial institution” as defined in the Tax Act, nor does it
apply to a Holder an interest in which is a “tax shelter investment” as defined in the Tax Act or to a Holder that has made
a functional currency reporting election for purposes of the Tax Act. In addition, this summary does not address all issues
relevant to a Holder who acquired Midas Shares on the exercise of an employee stock option. Such Holders should
consult their own tax advisors.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT, AND 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 TAX CONSEQUENCES TO ANY
PARTICULAR HOLDER ARE MADE. THIS SUMMARY IS NOT EXHAUSTIVE OF ALL CANADIAN
FEDERAL INCOME TAX CONSIDERATIONS. ACCORDINGLY, HOLDERS SHOULD CONSULT THEIR
OWN TAX ADVISORS HAVING REGARD TO THEIR OWN PARTICULAR CIRCUMSTANCES.
Holders Resident in Canada
This portion of the summary applies to a Holder who, at all relevant times, for purposes of the Tax Act and any
applicable income tax treaty, is, or is deemed to be resident in Canada (a “Resident Holder”).
Midas Shares and Midas Canada Shares will generally constitute capital property to a Resident Holder unless the
Resident Holder holds the shares in the course of carrying on a business of buying and selling securities or acquired the
shares in a transaction considered to be an adventure in the nature of trade. Certain Resident Holders whose Midas Shares
or Midas Canada Shares might not otherwise be capital property may, in certain circumstances, be entitled to make an
irrevocable election under subsection 39(4) of the Tax Act to have such shares and every other “Canadian security” (as
defined in the Tax Act) owned by such Resident Holder in the taxation year in which the election is made and in all
subsequent taxation years deemed to be capital property. A subsection 39(4) election does not apply to a disposition of
Midas Canada Shares which are acquired in exchange for Midas Shares if a tax election under Section 85 of the Tax Act
(and any corresponding election for Quebec income tax purposes) (a “Section 85 Election”) (discussed below) is filed in
respect of such exchange. Resident Holders should consult their own tax advisors regarding whether an election
under subsection 39(4) is available and advisable in their particular circumstances.
Exchange of Midas Shares under the Reorganization - No Section 85 Election
Unless a Resident Holder whose Midas Shares are exchanged for Midas Canada Shares as part of the
Reorganization makes a joint Section 85 Election with Midas Canada (as discussed below under “Exchange of Midas
Shares under the Reorganization — With a Section 85 Election”), the Resident Holder will be considered to have disposed
of the Midas Shares for proceeds of disposition equal to the fair market value at the Effective Time of the Midas Canada
Shares received on the exchange. As a result, the Resident Holder will, in general, realize a capital gain (or a capital loss)
to the extent that such proceeds of disposition exceed (or are less than) the aggregate of the Resident Holder‟s adjusted
cost base of the Midas Shares immediately before the exchange and any reasonable costs of disposition. See “Taxation of
Capital Gains and Capital Losses” below.
The cost to the Resident Holder of the Midas Canada Shares acquired on the exchange will equal the fair market
value of those shares at the Effective Time and will, for the purpose of determining the Resident Holder‟s adjusted cost
base of those shares, be averaged with the adjusted cost base to the Resident Holder of any other Midas Canada Shares
held at the Effective Time as capital property.
Exchange of Midas Shares under the Reorganization - With a Section 85 Election
An Eligible Holder is entitled to make a Section 85 Election jointly with Midas Canada and thereby obtain a full
or partial tax deferral for purposes of the Tax Act in respect of the capital gain that would otherwise be realized on the
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exchange of Midas Shares for Midas Canada Shares as part of the Reorganization, depending on the Elected Amount (as
defined below) and the Eligible Holder‟s adjusted cost base of the Midas Shares at the time of the exchange.
An Eligible Holder making a Section 85 Election will be required to designate an amount (the “Elected Amount”)
in the election form that will be deemed to be the proceeds of disposition of the Eligible Holder‟s Shares. By designating
an appropriate Elected Amount, an Eligible Holder may, for purposes of the Tax Act, defer realizing all or any portion of
the capital gain that the Eligible Holder would otherwise realize on the exchange.
In general, the Elected Amount may not be:
(a)
less than the lesser of (i) the Eligible Holder‟s adjusted cost base of the Midas Shares and (ii) the fair
market value of the Midas Shares, in each case determined at the time of the exchange, nor
(b)
greater than the fair market value of the Midas Shares at the time of the exchange.
The tax treatment to an Eligible Holder who properly makes a valid Section 85 Election jointly with Midas Canada
generally will be as follows:
(a)
the Eligible Holder will be deemed to have disposed of the Eligible Holder‟s Midas Shares for proceeds
of disposition equal to the Elected Amount;
(b)
the Eligible Holder will not realize a capital gain or capital loss if the Elected Amount equals the
aggregate of the Eligible Holder‟s adjusted cost base of the Midas Shares determined immediately before
the exchange and any reasonable costs of disposition;
(c)
the Eligible Holder will realize a capital gain (or a capital loss) to the extent that the Elected Amount
exceeds (or is less than) the aggregate of the Eligible Holder‟s adjusted cost base of the Midas Shares and
any reasonable costs of disposition; and
(d)
the aggregate cost to the Eligible Holder of the Midas Canada Shares acquired on the exchange will equal
the Elected Amount, and for the purpose of determining the Eligible Holder‟s adjusted cost base of those
shares, such cost will be averaged with the Eligible Holder‟s adjusted cost base of any other Midas
Canada Shares held at the Effective Time by the Eligible Holder as capital property.
An Eligible Holder who intends to make a Section 85 Election should indicate that intention by checking
the appropriate box in the Letter of Transmittal. A tax instruction letter, together with the relevant tax election
forms, will be available on Midas Canada’s website at www.midasgoldinc.com and on request made by checking
the appropriate box on the Letter of Transmittal will be separately distributed to Eligible Holders.
The relevant federal tax election form is CRA form T2057 (or, if the Eligible Holder is a partnership, CRA form
T2058). For Eligible Holders required to file in Québec, Québec form TP-518-V (or, if the Eligible Holder is a
partnership, Québec form TP-529-V) will also be required. Certain other provincial jurisdictions may require that a
separate joint election be filed for provincial income tax purposes. Eligible Holders should consult their own tax advisors
to determine whether they must file separate election forms with any provincial taxing jurisdiction. It is the responsibility
of each Eligible Holder who wishes to make an election for provincial income tax purposes to obtain any other necessary
provincial election forms.
Where the Midas Shares are held in joint ownership and two or more of the co-owners wish to elect, one of the
co-owners designated for such purpose must file one copy of Form T2057 (and where applicable, the corresponding
provincial forms) on behalf of each co-owner with a list of all co-owners electing under Section 85 of the Tax Act, and
their addresses and social insurance or business numbers. Where the Midas Shares are held as partnership property, a
partner designated by the partnership must file one copy of Form T2058 (and, where applicable, the corresponding
provincial forms) on behalf of all members of the partnership. Form T2058 must be accompanied by a list containing the
name, address, social insurance number or business number of each partner and written authorization signed by each
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partner authorizing the designated partner to complete and file the form. Eligible Holders should consult their own tax
advisors to determine which filing requirements, if any, there are under applicable provincial legislation.
To make a Section 85 Election, an Eligible Holder must ensure that the election form is first executed by Midas
Canada, then must also ensure that it is filed with the CRA by the required submission deadline (discussed below). To
have the form executed by Midas Canada, an Eligible Holder must return two signed copies of the necessary election
forms to Midas Canada in accordance with the procedures set out in the tax instruction letter on or before ninety (90) days
after the Effective Date (although, as discussed below, an Eligible Holder may be required to return the forms to Midas
Canada by an earlier date), duly completed with the details of the number of Midas Shares exchanged, the number of
Midas Canada Shares received and the applicable Elected Amount. In accordance with the terms of the Plan of Share
Exchange and subject to the election forms being correct and complete and complying with the provisions of the Tax Act
(and of any applicable provincial income tax law), one copy of such forms will be signed by Midas Canada and returned
to the Eligible Holder for filing by the Eligible Holder with the CRA (or applicable provincial tax authority).
Under the Combination Agreement, Midas Canada has agreed to make a Section 85 Election (and any
corresponding election under any applicable provincial tax legislation) only with an Eligible Holder, and only at the
Elected Amount selected by the Eligible Holder (subject to the limitations set out in the Tax Act and any applicable
provincial tax legislation). None of Midas, Midas Canada or any successor corporation will be responsible for the proper
completion or filing of any Section 85 Election and the Eligible Holder will be solely responsible for the payment of any
late filing penalty. Midas Canada has agreed only to execute any properly completed Section 85 Election forms which it
receives within ninety (90) days after the Effective Time, and to mail the election forms to the Eligible Holder within
ninety (90) days after Midas Canada‟s receipt thereof. With the exception of Midas Canada’s execution and mailing
of the Section 85 Election, each Eligible Holder will be solely responsible for complying with all applicable
requirements relating to the making and filing of the Holder’s Section 85 Election. Accordingly, none of Midas,
Midas Canada or any successor corporation will be responsible or liable for taxes, interest, penalties, damages or expenses
resulting from the failure by anyone to deliver a Section 85 Election in accordance with the procedures set out in the tax
instruction letter, nor for the proper completion or filing of any Section 85 Election within the time and in the form
prescribed under the Tax Act (or the corresponding provisions of any applicable provincial tax legislation).
To avoid late filing penalties imposed under the Tax Act, each Eligible Holder who makes a Section 85 Election
must ensure that the Eligible Holder‟s election is received by the appropriate revenue authorities on or before the day by
which either Midas Canada or the Eligible Holder is required to file an income tax return (whichever is earlier) for the
taxation year in which the exchange occurs. Midas Canada‟s 2011 taxation year is scheduled to end on December 31,
2011, but it could end earlier as a result of an event such as an amalgamation. Each Eligible Holder is urged to consult the
Eligible Holder‟s own advisors as soon as possible respecting the deadlines applicable to the Eligible Holder‟s particular
circumstances. Regardless of such deadlines, Midas Canada must receive the tax election forms of an Eligible
Holder in accordance with the procedures set out in the tax instruction letter no later than ninety (90) days after
the Effective Date. Midas Canada has agreed to execute and return a Section 85 Election to the Eligible Holder making
the election within ninety (90) days after Midas Canada receives the election in accordance with the procedures set out in
the tax instruction letter, however, Eligible Holders may be required to forward their tax election forms to Midas Canada
earlier than ninety (90) days after the Effective Date in order to avoid late filing penalties. While Midas Canada may
choose, in its sole discretion, to sign a Section 85 Election received by it more than ninety (90) days after the Effective
Date, it has no obligation to do so.
If Midas Canada does not receive the Eligible Holder‟s duly completed election forms in accordance with the
procedures set out in the tax instruction letter within ninety (90) days after the Effective Date, the Eligible Holder may not
be able to benefit from the rollover provisions in the Tax Act (or corresponding provisions of any applicable provincial
tax legislation). Accordingly, all Eligible Holders who wish to make a Section 85 Election should give immediate
attention to this matter and in particular should consult their own tax advisors without delay. The instructions for
requesting a tax instruction letter will be set out in the Letter of Transmittal.
Eligible Holders are referred to CRA Information Circular 76-19R3 and CRA Interpretation Bulletin IT-291R3
for further information respecting the Section 85 Election. Eligible Holders wishing to make the election should consult
their own tax advisors. An Eligible Holder who does not make a valid Section 85 Election (or corresponding provincial
election, if applicable) may realize a taxable capital gain under the Tax Act (or under applicable provincial tax
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legislation). The comments herein with respect to such elections are provided for general assistance only. The law in this
area is complex and contains numerous technical requirements.
Taxation of Capital Gains and Capital Losses
Generally, a Resident Holder will be 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 it in that year. A Resident Holder will generally be
required to deduct one-half of the amount of any capital loss (an “allowable capital loss”) realized in a taxation year from
taxable capital gains realized by the Resident Holder in that year. Allowable capital losses in excess of taxable capital
gains for a taxation year may be carried back to any of the three preceding taxation years or carried forward to any
subsequent taxation year and deducted against net taxable capital gains realized in such years, subject to the detailed rules
contained in the Tax Act.
A capital loss realized on the disposition of a Midas Share or a Midas Canada Share by a Resident Holder that is a
corporation may, to the extent and under the circumstances specified by the Tax Act, be reduced by the amount of
dividends received or deemed to have been received by the corporation on such shares (or on a share for which such share
is substituted or exchanged). Similar rules may apply where shares are owned by a partnership or trust of which a
corporation, trust or partnership is a member or beneficiary. Resident Holders to whom these rules may be relevant
should consult their own advisors.
Dividends on Midas Canada Shares
A Resident Holder who is an individual will be required to include in income any dividends received or deemed
to be received on the holder‟s Midas Canada Shares, and will be subject to the gross-up and dividend tax credit rules
applicable to taxable dividends received from taxable Canadian corporations, including the enhanced gross-up and
dividend tax credit rules applicable to any dividends designated by Midas Canada as “eligible dividends” as defined in the
Tax Act.
A Resident Holder that is a corporation will be required to include in income any dividend received or deemed to
be received on its Midas Canada Shares, and generally will be entitled to deduct an equivalent amount in computing its
taxable income. A “private corporation” (as defined in the Tax Act) or a “subject corporation” (as defined in the Tax
Act), may be liable under Part IV of the Tax Act to pay a refundable tax of 33-1/3% on any dividend that it receives or is
deemed to receive on its Midas Canada Shares to the extent that the dividend is deductible in computing the corporation‟s
taxable income.
Disposition of Midas Canada Shares
A Resident Holder that disposes or is deemed to dispose of a Midas Canada Share in a taxation year will realize a
capital gain (or a capital loss) equal to the amount by which the proceeds of disposition of the Midas Canada Share exceed
(or are exceeded by) the aggregate of the Resident Holder‟s adjusted cost base of such Midas Canada Share, determined
immediately before the disposition, and any reasonable costs of disposition. The Resident Holder will be required to
include any resulting taxable capital gain in income, or be entitled to deduct any resulting allowable capital loss, in
accordance with the usual rules applicable to capital gains and capital losses. See “Taxation of Capital Gains and Capital
Losses”.
Alternative Minimum Tax
A capital gain realized, or a dividend received, by a Resident Holder who is an individual (including certain
trusts) may give rise to liability for alternative minimum tax under the Tax Act.
Additional Refundable Tax on Canadian-Controlled Private Corporations
A Resident Holder that is a „„Canadian-controlled private corporation‟‟ (as defined in the Tax Act) may be
required to pay an additional 62⁄3% refundable tax on certain investment income, which includes taxable capital gains and
dividends or deemed dividends not deductible in computing taxable income.
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Eligibility for Investment of Midas Canada Shares
It is expected that the Midas Canada Shares will not be qualified investments under the Tax Act for a trust
governed by a registered retirement savings plan, registered retirement income fund, deferred profit sharing plan,
registered education savings plan, registered disability savings plan or a tax-free savings account ("TFSA") (collectively,
the “Deferred Plans”), at the Effective Time. Midas Canada Shares may become qualified investments under the Tax Act
for Deferred Plans at a particular time if, at that time, the Midas Canada Shares are listed on a “designated stock
exchange” (which currently includes the TSX and the TSX-V) or Midas Canada is a “public corporation” as defined in the
Tax Act. Resident Holders should consult their own tax advisors regarding whether the Midas Canada Shares are
qualified investments under the Tax Act for Deferred Plans at a particular time.
Notwithstanding that Midas Canada Shares may become a qualified investment for a TFSA, a holder of a TFSA
will be subject to a penalty tax with respect to Midas Canada Shares held in the TFSA if such shares are a “prohibited
investment” for the TFSA (within the meaning of the Tax Act). Midas Canada Shares will not be a prohibited investment
for a TFSA provided the holder of the TFSA deals at arm‟s length with Midas Canada for purposes of the Tax Act and
does not have a “significant interest” (within the meaning of the Tax Act) in Midas Canada or in any corporation,
partnership or trust with which Midas Canada does not deal at arm‟s length for purposes of the Tax Act.
Dissenting Resident Holders
A Resident Holder who is a Dissenting Shareholder and consequently is paid the fair value of its Midas Shares by
Midas in accordance with the Combination Agreement will realize a capital gain (or a capital loss) equal to the amount by
which the payment (other than interest) exceeds (or is exceeded by) the aggregate of the Resident Holder‟s adjusted cost
base of the Midas Shares determined immediately before the Effective Time and any reasonable costs of disposition. A
Resident Holder who is a Dissenting Shareholder will be required to include any resulting taxable capital gain in income,
or be entitled to deduct any resulting allowable capital loss, in accordance with the usual rules applicable to capital gains
and losses. See “Taxation of Capital Gains and Capital Losses” above.
A Resident Holder who is a Dissenting Shareholder must include in computing its income any interest awarded to it by a
court.
Holders Not Resident in Canada
This portion of the summary applies to a Holder who, at all relevant times, for the purposes of the Tax Act and
any applicable income tax treaty, is not, and is not deemed to be, resident in Canada and does not use or hold, and is not
deemed to use or hold, Midas Shares or Midas Canada Shares in connection with carrying on a business in Canada (a
“Non-Resident Holder”). This portion of the summary is not applicable to a Non-Resident Holder that is: (a) an insurer
carrying on an insurance business in Canada and elsewhere; (b) a “financial institution” (as defined in the Tax Act); or (c)
an “authorized foreign bank” (as defined in the Tax Act).
Exchange of Midas Shares under the Reorganization and Subsequent Dispositions of Midas Canada Shares
A Non-Resident Holder whose Midas Shares are exchanged for Midas Canada Shares under the
Reorganization should not be subject to tax under the Tax Act on any capital gain realized on such exchange.
A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain realized on a
disposition, or a deemed disposition, of a Midas Canada Share unless such share is or is deemed to be “taxable Canadian
property” (as defined in the Tax Act) at the time of the disposition and the Non-Resident Holder is not entitled to relief
under an applicable tax treaty.
Generally, a Midas Canada Share will not be “taxable Canadian property” to a Non-Resident Holder at a
particular time provided no more than 50% of the fair market value of the share was, at any time during the sixty (60)
month period immediately preceding that time, 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) and options in respect of, or interests in, or for civil law rights in, any such
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properties (whether or not such property exists). Notwithstanding the foregoing, in certain circumstances set out in the
Tax Act, Midas Canada Shares could be deemed to be taxable Canadian property to the Non-Resident Holder.
Non-Resident Holders whose Midas Canada Shares may constitute taxable Canadian property should
consult their own tax advisors for advice having regard to their particular circumstances. Even if the Midas Canada
Shares are taxable Canadian property to a Non-Resident Holder at the time of disposition, a taxable capital gain or an
allowable capital loss resulting from the disposition of the Midas Canada Shares will not be included in computing the
Non-Resident Holder‟s income for purposes of the Tax Act provided that the Midas Canada Shares constitute “treaty
protected property”, as defined in the Tax Act. Midas Canada Shares owned by a Non-Resident Holder will generally be
treaty-protected property if the gain from the disposition of such shares would, because of an applicable income tax treaty
to which Canada is a signatory, be exempt from tax under the Tax Act.
Dividends on Midas Canada Common Shares
Dividends paid or credited on Midas Canada Shares to a Non-Resident Holder generally will be subject to
Canadian withholding tax at a rate of 25% of the gross amount of the dividend, unless the rate is reduced under the
provisions of an applicable income tax convention. The rate of withholding tax under the Canada-U.S. Income Tax
Convention (1980) (the „„U.S. Treaty‟‟) applicable to a Non-Resident Holder who is a resident of the United States for the
purposes of the U.S. Treaty, entitled to benefits under the U.S. Treaty, and who holds less than 10% of the voting stock of
Midas Canada, generally will be 15%. Midas Canada will be required to withhold the required amount of withholding tax
from the dividend, and to remit it to CRA for the account of the Non-Resident Holder.
Dissenting Non-Resident Holders
A Non-Resident Holder that is a Dissenting Shareholder and consequently is paid the fair value for its Midas
Shares by Midas may realize a capital gain or capital loss as discussed above under “Holders Resident in Canada Dissenting Resident Holders”. As discussed above under “Holders Not Resident in Canada - Exchange of Shares under
the Reorganization and Subsequent Dispositions of Midas Canada Shares”, any resulting capital gain should not be
subject to tax under the Tax Act.
RESTRICTIONS ON RESALE
The following section of this Proxy Statement contains information concerning the resale restrictions that will
apply to the Midas Canada Shares and Midas Canada Options that will be issued in the Reorganization, if it is approved.
It also contains information about prospective resale restrictions that may apply in the event Midas Canada undertakes a
going public transaction in Canada.
United States and Canadian securities laws impose significant restrictions on the resale of the Midas Canada
Shares and Midas Canada Options that will be issued in the Reorganization, if it is approved. These resale restrictions,
particularly those arising under United States securities law, are complex and their application to the Midas Canada
Shares and Midas Canada Options will be determined by several factors. The following is only a brief summary of these
restrictions and their likely effect. We encourage you to consult with your own financial advisor or securities law
professional regarding these resale limitations and their effect on the liquidity of the securities you receive in the
Reorganization.
The Midas Canada Shares and Midas Canada Options that will be issued in the Reorganization are being offered
and sold in the United States in reliance on the exemption from the registration requirements of the U.S.
Securities Act afforded by Section 4(2) thereof and Rule 506 of Regulation D promulgated thereunder, and in
reliance on comparable exemptions from state securities or “blue sky” laws in the jurisdictions in which Midas‟
U.S. shareholders reside. The Midas Canada Shares and Midas Canada Options will be “restricted securities” as
defined in Rule 144 of the U.S. Securities Act and may not be transferred or sold for value to a “U.S. person”
(defined in Rule 902(k) of the U.S. Securities Act to include, among others, any natural person resident in the
United States, regardless of citizenship; any partnership or corporation organized or incorporated under the laws
of the United States; any foreign partnership or corporation formed by a U.S. person principally for the purpose of
investing in securities not registered under the U.S. Securities Act; any trust of which any trustee is a U.S. person;
34
and any estate of which any executor or administrator is a U.S. person) unless the securities are included in an
effective registration statement under the U.S. Securities Act or the transfer or sale is made pursuant to an
exemption from the registration requirement, such as Section 4(1) and Rule 144 promulgated thereunder.
In general, under Rule 144 as currently in effect, a person who has beneficially owned his or her Midas Canada
Shares for a prescribed period (generally one year unless Midas Canada is then subject to the reporting
requirements of the U.S. Exchange Act, in which case the period is six months) would be entitled to sell, within a
three-month period, a number of shares that does not exceed the greater of one percent of the then outstanding
Midas Canada Shares or the average weekly trading volume of the common stock during the four calendar weeks
preceding the date on which notice of the sale is filed with the SEC. Sales under Rule 144 are also subject to manner
of sale provisions, notice requirements and the availability of current public information about Midas Canada.
Persons who are not affiliates of Midas Canada and who have held their Midas Canada Shares for a period of twelve
months will generally not be subject to the foregoing volume limitations.
Midas Shareholders will not be able to include or “tack” the holding periods of their Midas Shares or Midas
Options for purposes of complying with the holding period requirement of Rule 144. The holding periods for the
Midas Canada Shares and Midas Canada Options they receive in the Reorganization will, instead, commence as
of the Effective Time. The holding periods with respect to Midas Canada Shares issued upon the exercise of their
Midas Canada Options will commence as of the date the exercise price is fully paid and such shares are issued.
The Midas Canada Shares and Midas Canada Options that will be issued in the Reorganization are being offered
and sold in Canada pursuant to Regulation S under the U.S. Securities Act and pursuant to exemptions from the
prospectus and registration requirements of applicable provincial securities laws , which imposes an indefinite
hold period for so long as Midas Canada has not completed a public offering by prospectus and thereby become a
reporting issuer in any jurisdiction in Canada (unless an exemption from prospectus and registration requirements
is available). Holders of these securities should consult their own legal advisors with respect to trading in the
Midas Canada Shares and Midas Canada Options and the Midas Canada Shares issuable upon exercise of such
options.
The Midas Canada Shares and Midas Canada Options that will be issued in the Reorganization are being offered
and sold in jurisdictions outside of the United States and Canada pursuant to Regulation S under the U.S.
Securities Act.
In addition to the foregoing United States securities law restrictions, you will be subject to applicable Canadian
securities law restrictions which generally provides that, if Midas Canada or its successor completes a public offering by
prospectus and thereby becomes a reporting issuer in any jurisdictions in Canada, the Midas Canada Shares and Midas
Canada Options may be resold so long as: (a) at least four (4) months have elapsed since the completion of the
Reorganization; (b) the trade is not a control distribution; (c) no unusual effort is made to prepare the market or to create a
demand for the security that is the subject of the trade; (d) no extraordinary commission or consideration is paid to a
person or company in respect of the trade; and (e) if the selling security holder is an insider or officer of Midas Canada,
the selling security holder has no reasonable grounds to believe that Midas Canada is in default of securities legislation.
Midas Canada's affiliates and certain others may also be subject to escrow requirements with respect to the disposition of
their Midas Canada Shares and Midas Canada Options if Midas Canada undertakes a public offering in Canada. Holders
of these securities should consult their own legal advisors with respect to trading in the Midas Canada Shares, the Midas
Canada Options and the Midas Canada Shares issuable upon exercise of such options.
COMPARISON OF RIGHTS OF SHAREHOLDERS
The rights of Midas‟ shareholders are currently governed by the WBCA and Midas‟ articles of incorporation and
bylaws. After the Reorganization, Midas‟ shareholders will become shareholders of Midas Canada and their rights as
holders of Midas Shares will be governed by Midas Canada's notice of articles, articles, and the BCBCA.
Although the rights and privileges of shareholders of a Washington corporation are comparable in many instances
to those of shareholders of a British Columbia corporation, there are differences. The following is a summary discussion
of the most significant differences in these shareholder rights. The purpose of the summary discussion is to describe
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generally the material changes in the statutory rights of holders of Midas Shares and holders of Midas Canada Shares
resulting from the Reorganization. The summary discussion is not intended to be comprehensive or complete, and is
qualified in its entirety by reference to the WBCA, the BCBCA, and the governing corporate instruments of Midas and
Midas Canada.
Vote Required for Extraordinary Transactions. The BCBCA provides that certain extraordinary corporate
actions, such as certain amalgamations (other than with a direct or indirect wholly-owned subsidiary), continuances, sales,
leases or exchanges of all or substantially all the property of a corporation other than in the ordinary course of business,
and other extraordinary corporate actions such as liquidations (winding-ups) and arrangements, require approval by
special resolution. In certain cases, a special resolution to approve an extraordinary corporate action is also required to be
approved separately by the holders of a class or series of shares, including, in certain cases, a class or series of shares not
otherwise carrying voting rights. Under the BCBCA, a resolution passed by a special majority at a general meeting for
which proper notice has been provided constitutes a special resolution. A special majority is a majority of votes, as
specified by the corporation‟s articles, that is not less than 66-2/3% and not more than 75% of the votes cast on the
resolution (or not less than 66-2/3% if the corporation‟s articles do not specify the requisite majority of votes). A
resolution consented to in writing by all of the shareholders holding shares that carry the right to vote at general meetings
also constitutes a special resolution. The BCBCA permits a corporation to alter its articles to require certain actions to be
passed by an exceptional resolution, which would require a majority of votes greater than a special majority. A special
resolution at a general meeting of Midas Canada must be passed by at least 66-2/3% of the votes cast on the resolution.
Under the WBCA, the affirmative vote of the holders of two-thirds of the outstanding stock entitled to vote
thereon (or the affirmative vote of the holders of a majority of such outstanding stock, if a statement to that effect was
included in the articles at the time they were initially filed or is included in an amendment to the articles approved by the
affirmative vote of the holders of two-thirds of the then outstanding stock entitled to vote thereon) is required to authorize
any merger, share exchange, consolidation, dissolution or sale of all or substantially all of the assets of the corporation,
except that, unless required by its certificate of incorporation, no authorizing shareholder vote is required to approve a
plan of merger or share exchange if: (a) the articles of incorporation of the surviving corporation will not differ from the
corporation‟s articles (other than certain inconsequential differences); (b) each shareholder of the surviving corporation
whose shares were outstanding immediately before the effective date of the transaction will hold the same number of
shares, with identical designations, preferences, limitations, and relative rights, immediately after the transaction; (c) the
number of voting shares outstanding immediately after the transaction plus the number of voting shares issuable as a
result of the transaction, either by conversion or upon the exercise of rights and warrants issued pursuant to the
transaction, will not exceed by more than 20 percent the total number of voting shares of the surviving corporation
outstanding immediately before the transaction; and (d) the number of participating shares (defined to mean shares that
entitled their shareholders to participate without limitation in dividends) outstanding immediately after the transaction
plus the number of participating shares issuable as a result of the transaction, either by the conversion or upon the exercise
of rights and warrants issued pursuant to the transaction, will not exceed by more than 20 percent the total number of
participating shares outstanding immediately before the transaction. In certain cases, a plan of merger or share exchange
is also required to be approved separately by the holders of a class or series of shares.
Amendment to Charter Documents. Under the BCBCA, except where otherwise specified in the BCBCA, a
corporation may alter its articles by the type of resolution (special resolution or otherwise) specified by its articles. In
circumstances where neither the BCBCA nor the corporation‟s articles specify the type of resolution required for the
specific alteration the corporation wishes to make to its articles, the BCBCA states that the articles may be altered by
special resolution.
Under the WBCA, the board of directors must first recommend the amendment to the shareholders unless the
board determines that, because of conflict of interest or other special circumstances, it should make no recommendation.
Unless a greater level of approval is required by the articles or by the board (which can condition its submission of a
proposed amendment on any basis), the amendment must be approved by: (a) a majority of the votes entitled to be cast on
the amendment by any voting group with respect to which the amendment would create dissenters‟ appraisal rights; and
(b) a majority of the votes cast by any other voting group entitled to vote on the amendment.
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The WBCA also provides that the board of directors may amend or repeal a corporation‟s bylaws unless the
articles of incorporation reserve the power exclusively to the shareholders in whole or in part or unless the shareholders,
in amending, adding or repealing a particular bylaw, provide expressly that the board may not amend or repeal that bylaw.
The foregoing notwithstanding, the shareholders may amend or repeal a corporation‟s bylaws even though the bylaws
may also be amended or repealed by the board of directors.
Dissenters’ Appraisal Rights. The BCBCA provides that shareholders entitled to vote on certain matters are also
entitled to exercise dissent rights and be paid the fair value of their shares in connection therewith. Such matters include:
an alteration to the corporation‟s articles to alter restrictions on the powers of the corporation or on the business it is
permitted to carry on; certain amalgamations including trans-border amalgamations that would result in a foreign
amalgamated corporation; a plan of arrangement if the terms of the arrangement permit dissent; the sale, lease or other
disposition of all or substantially all of a corporation‟s undertaking; the continuation of the corporation into a jurisdiction
other than British Columbia; any court order that permits dissent; and any matter, if the resolution to be voted on by the
shareholders in respect of such matter provides for dissent rights.
The WBCA grants the holder of any class or series of shares to dissent from and obtain payment of the fair value
of his shares with respect to any plan of merger to which the corporation is a party (other than mergers with certain
subsidiary corporations) requiring shareholder approval; any plan of share exchange to which the corporation is a party as
the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan; the sale or exchange of all
or substantially all of the property of the corporation other than in the normal course of business, if the shareholder is
entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or a
sale for cash pursuant to a plan through which all of the net proceeds of sale will be distributed to the shareholders within
one year; an amendment to the articles that materially and adversely affects the dissenting shareholder because it: (a)
alters or abolishes a preferential right; (b) creates, alters or abolishes a right in respect of redemption; (c) alters or
abolishes a preemptive right; (d) excludes or limits the right of shares to be voted on any matter or to accumulate votes; or
(e) reduces the number of shares owned by a shareholder to a fractional share if the fractional share so created is to be
acquired for cash; and any corporate action taken pursuant to a shareholder vote to the extent the articles, bylaws or a
resolution of the board provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
Oppression Remedy. Under the BCBCA, a shareholder has the right to apply to court on the ground (a) that the
affairs of the corporation are being or have been conducted, or that the powers of the directors are being or have been
exercised, in a manner oppressive to one or more shareholders, or (b) an act of the corporation has been done or is
threatened, or that a resolution of shareholders has been passed or is proposed, that is unfairly prejudicial to one or more
shareholders of the corporation. Upon such an application, the court may make such order as it sees fit, including but not
limited to an order to: (i) prohibit any act proposed by the corporation; (ii) remove any director of the corporation; or (iii)
appoint directors in place of, or in addition to, the directors of the corporation in office at the time of the court application.
The WBCA does not contain a similar remedy, although causes of action seeking to obtain comparable remedies
can be asserted against a corporation and its affiliates under any of several common law theories.
Derivative Actions. Under the BCBCA, a shareholder or director of a corporation may, with leave of the court,
prosecute a legal proceeding in the name and on behalf of the corporation to (a) enforce a legal right, duty or obligation
owed to the corporation that could be enforced by the corporation itself or (b) obtain damages for any breach of such legal
right, duty or obligation.
Derivative actions are also permitted under the WBCA. They may be commenced or maintained only by a
shareholder who: (a) was a shareholder at the time of the act or omission complained of or who became a shareholder
through transfer by operation of law from one who was a shareholder at that time; and (b) fairly and adequately represents
the interests of the corporation in enforcing the rights of the corporation. In addition, the complaining shareholder may
not commence suit until 90 days have elapsed from the date he or she made written demand on the corporation to take
suitable action, unless the shareholder has been earlier notified that the demand has been rejected by the corporation or
unless irreparable injury to the corporation would result during such period.
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Fiduciary Duties of Directors. Directors of corporations governed by the BCBCA have fiduciary obligations to
the corporation. They must act honestly and in good faith with a view to the best interests of the corporation, and must
exercise the care, diligence and skill that a reasonably prudent individual would exercise in comparable circumstances.
Directors of corporations incorporated or organized under the WBCA also have fiduciary obligations, not just to
the corporation but to the corporation‟s shareholders. These obligations fall into two broad categories—a duty of care and
a duty of loyalty. The duty of care requires a director to act in good faith, with the care an ordinarily prudent person in a
like position would exercise under similar circumstances, and in a manner he or she believes to be in the best interests of
the corporation. It is qualified by the business judgment rule, which protects a disinterested director from personal
liability to the corporation and its shareholders if the director acted in good faith, was reasonably informed and rationally
believed the action taken was in the best interests of the corporation. The duty of loyalty requires directors to exercise
their powers in the interests of the corporation and not in the directors own interest or in the interest of another person
(including a family member) or organization. Stated more simply, the duty of loyalty precludes directors from using their
corporate position to make a personal profit or gain, or for other personal advantage.
Director Conflicting Interest Transactions. A “conflicting interest transaction” is defined by the WBCA as a
transaction effected or proposed to be effected by a corporation or a subsidiary or any other entity in which the
corporation has a controlling interest, in which a director of the corporation has a conflicting interest. A “conflicting
interest” arises when: (a) the director or a related person is either a party to the transaction, has a beneficial interest in the
transaction or is so closely linked to the transaction, and the transaction is of such financial significance to the director or
related person that the interest would reasonably be expected to exert an influence on the director‟s judgment were the
director called upon to vote on the transaction; or (b) the transaction is brought, or is of a character or significance to the
corporation that it would in the normal course be brought, before the board of directors and the director knows that any of
other specified persons (such as an entity other than the corporation in which the director is a director, general partner,
agent or employee; a person who controls, is controlled by, or is under common control with any of the entities just
mentioned; an individual who is a general partner, principal or employer of the director; or a related person, defined to
include spouses, parents, siblings, any of their children or grandchildren, an individual having the same residence as the
director, a trust or estate of any of the foregoing, or any person or entity for whom the director is acting as a fiduciary) has
a beneficial interest in the transaction or is so closely linked to the transaction, and the transaction is of such financial
significance to the director or related person that the interest would reasonably be expected to exert an influence on the
director‟s judgment were the director called upon to vote on the transaction.
A conflicting interest transaction is not void under the WBCA, only voidable. The transaction may be enjoined,
set aside or give rise to an award of damages or other sanctions unless action is undertaken to immunize it from collateral
attack. This action includes: (a) qualified director approval, pursuant to which the transaction is approved by a majority
but not fewer than two of the corporation‟s “qualified directors” (defined to be directors who do not have either a
conflicting interest respecting the transaction or a familial, financial, professional or employment relationship with a
second director who does have a conflicting interest) following disclosure by the director of the conflicting interest of the
existence and nature of the conflict and such director plays no part, directly or indirectly, in the board‟s deliberations or
vote; and (b) shareholder action, pursuant to which, following disclosure of the existence and nature of the conflict, the
transaction is approved by the holders of a majority of the corporation‟s “qualified shares” (defined to be shares owned or
controlled by holders other than the director having the conflicting interest or any related person of such director). In
addition, a conflicting interest transaction will be immunized from collateral attack under the WBCA if the transaction,
judged according to the circumstances at the time of commitment, is established to have been fair to the corporation.
The BCBCA contains analogous provisions dealing with director conflicts of interest. Further, rules and policies
of certain Canadian securities regulatory authorities contain provisions that may affect related party transactions, which
are generally defined to mean any transaction by which an issuer, directly or indirectly, acquires or transfers an asset, or
acquires or issues treasury securities, or assumes or transfers a liability from or to, as the case may be, a related party by
any means in any one or any combination of transactions. The term “related party” is generally defined to include
directors, senior officers and holders of at least ten percent of the voting securities of the issuer. These rules and policies
typically require more detailed disclosure in the proxy materials sent to shareholders in respect of the related party
transaction and, subject to certain exceptions, the preparation of formal valuations and the inclusion of the valuations or
summaries thereof in the proxy materials. The rules and policies typically also require that the related party transaction be
approved by a majority of the corporation‟s minority shareholders.
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Director Liability. The WBCA provides that a corporation may include a provision in its articles of incorporation
that limits or eliminates the liability of directors to the corporation or its shareholders for money damages for action taken
as a director (or for the failure to take action), provided such liability does not arise from certain proscribed conduct,
including the receipt of a financial benefit to which the director was not entitled, the intentional infliction of harm on the
corporation or its shareholders, the payment of unlawful dividends or expenditure of funds for unlawful stock purchases
or redemptions, transactions for which such director received an improper personal benefit, or violations of criminal law.
Midas Canada's articles do not contain such a provision and the BCBCA does not permit any such limitation of a
director‟s liability.
Indemnification of Directors and Officers. Under the BCBCA, current or former directors or officers of a
corporation or an associated corporation, or any of their heirs and personal or other legal representatives, are eligible to be
indemnified by the corporation (each an "eligible party"). A corporation may indemnify an eligible party against a
judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, proceedings incurred in connection
with certain eligible proceedings and certain associated reasonable expenses related thereto. In certain circumstances, a
corporation may pay for such expenses in advance. A corporation must not indemnify an eligible party in certain
circumstances, including where the eligible party did not act honestly and in good faith with a view to the best interests of
the corporation or the associated corporation, or where, in proceedings other than civil proceedings, the eligible party did
not have reasonable grounds for believing that his or her conduct was lawful. In addition, a corporation must not
indemnify an eligible party in proceedings brought against the eligible party by or on behalf of the corporation or an
associated corporation.
The WBCA also provides for indemnification. A corporation may indemnify its present and former directors,
officers, employees and agents under the WBCA against liability and reasonable expenses, including attorneys fees,
incurred in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal, to which the indemnitee is a party by reason of being or having been a
director, officer, employer or agent if: (a) he or she conducted himself or herself in good faith; (b) in the case of conduct
in his or her official capacity with the corporation, he or she reasonably believed such conduct was not opposed to
corporation‟s best interests; (c) in all other cases except criminal proceedings, he or she reasonably believed that the
conduct was at least not opposed to the corporation‟s best interests; and (d) in the case of criminal proceedings, he or she
had no reasonable cause to believe the conduct was unlawful. Indemnification is not permitted, however, where the
indemnitee is adjudged liable to the corporation, where the indemnitee is adjudged to have improperly received a personal
benefit from the corporation. The WBCA further provides that, unless limited by its articles of incorporation, a
corporation shall indemnify a director or officer who was wholly successful, on the merits or otherwise, in the defense of
any proceeding to which such person was a party because he or she was a director or officer, and provides that similar
mandatory indemnification may be afforded to employees and agents of the corporation. It further provides that a
corporation may pay for or reimburse the reasonable expenses incurred by an indemnitee in advance of a final
determination of the indemnitee‟s liability, under certain circumstances. Midas‟ articles of incorporation do not contain
any provisions limiting the corporation‟s ability to indemnify its present or former directors, officers, employees or
agents.
Quorum for Meetings of Shareholders. Midas Canada's articles provide that a quorum for the transaction of
business at a general meeting of shareholders is one person present in person or by proxy. Under the WBCA, the holders
of ten percent or more of the votes entitled to be cast can call a special meeting of the shareholders.
DESCRIPTION OF MIDAS CANADA SECURITIES
Midas Canada‟s authorized capital consists of an unlimited number of Midas Canada Shares, an unlimited number
of first preferred shares without par value and an unlimited number of second preferred shares without par value. As of
the date of this Proxy Statement, one Midas Canada Share was issued and outstanding. No first preferred shares or second
preferred shares were issued and outstanding at such date.
Holders of Midas Canada Shares are entitled to one vote per share at all meetings of shareholders. Holders of
Midas Canada Shares are also entitled to receive dividends, if, as and when declared by the Midas Canada Board, subject
to the right of the holders of any first preferred shares or second preferred shares to receive preferred dividends. In the
event of the liquidation, dissolution, winding-up of Midas Canada or other distribution of assets, holders of Midas Canada
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Shares are entitled to receive all of the property and assets of Midas Canada, subject to the right of holders of any first
preferred shares or second preferred shares to receive any liquidation preference.
MANAGEMENT OF MIDAS CANADA
Directors and Executive Officers
Upon completion of the Reorganization, the Midas Canada Board will be comprised of four directors. Its day to day
operations will be administered from Midas‟ Spokane Valley, Washington offices, utilizing the services of Midas‟ existing
employees. Midas Canada‟s president and chief executive officer, Stephen Quin, will also maintain an administrative office in
Vancouver, British Columbia.
The names, ages, business experience for at least the past five years and positions of Midas Canada‟s directors and
those of its executive officers who have been retained as of the date of this Proxy Statement are set out below. Midas
Canada‟s directors were selected and appointed by Midas and Vista US pursuant to the terms of the Combination
Agreement, and serve until their successors are elected and qualified. The Midas Canada Board appoints the company‟s
executive officers.
Name
Age
Stephen Quin
Heather Ennis (1)
David Elliott
Peter Tegart
Michael Richings
51
45
63
67
66
Position
president and chief executive officer of the company, and a director
secretary, treasurer and chief financial officer
a director of the company
a director of the company
a director of the company
(1)
Ms. Ennis has agreed to serve as secretary, treasurer and chief financial officer of Midas Canada on an
interim basis following the Reorganization, following which the Midas Canada Board is expected to appoint her
successor(s).
Biographies of Directors and Executive Officers
Stephen Quin was appointed president and chief executive officer and a director of Midas effective January 1,
2011, and was appointed a director of Midas Canada in conjunction with its organization in February 2011. Prior to
joining Midas, he served as president and chief executive officer of Capstone Mining Corp. (“Capstone”) and, before that,
as president and chief executive officer of Sherwood Copper Corporation (“Sherwood”), which was amalgamated into
Capstone in November 2008. As president and chief executive officer of Sherwood, he lead the company through the
exploration, feasibility, permitting, mine financing and construction of its Minto Mine and Minto's subsequent operations,
resource increases and production expansions. During this period, he also successfully led Sherwood through its
acquisition of Western Keltic Mines, Inc. and its high-grade Kutcho copper project in British Columbia, and Sherwood‟s
amalgamation with Capstone. Mr. Quin is a graduate of the Royal School of Mines, London, with a B.Sc. (Honours) in
Mining Geology and has over 30 years of experience in exploration, feasibility, mine development, financing and
operations, as well as corporate development and general corporate affairs. He is a Professional Geoscientist registered
with the Association of Professional Engineers and Geoscientists of BC, a Fellow of the Geologic Association of Canada
and the Society of Economic Geologists, and a member of the Canadian Institute of Mining & Metallurgy and the Society
of the Institution of Materials, Minerals & Mining (UK). In addition to being a director of Midas, Mr. Quin is a nonexecutive member of the board of directors of Capstone, Mercator Minerals Ltd., Troon Ventures, Rare Element
Resources Ltd., Bear Lake Gold and Kimber Resources, and serves as a non-executive director of Chalice Gold Mines.
Heather Ennis has served as the treasurer and chief financial officer of Midas since April 2009 and has been a
director since September 2010. She was appointed to serve as the interim secretary, treasurer and chief financial officer of
Midas Canada in conjunction with its organization in February 2011. From 1999 to 2008, Ms. Ennis served as director of
corporate affairs for Revett Minerals Inc., where she was responsible for, among other things, the company‟s mine
concentrate invoicing, general ledger accounting and employee communications. She has also held administration
positions with Echo Bay Exploration, Star Phoenix Mining Company and Pegasus Gold Inc. Ms. Ennis received her
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Bachelor of Arts degree in Business Administration from Eastern Washington University in 1995 and is a licensed
certified public accountant in the state of Washington.
David Elliott has been instrumental in providing or arranging financing for Midas since its inception in 2009 and
was appointed a director of Midas Canada in conjunction with its organization in February 2011. In 1986, he and three
partners acquired Haywood Securities Inc, where he holds the positions of director and vice-president of trading
operations. Mr. Elliott has over 30 years‟ experience in providing start-up and development capital for private and public
mining companies. He is a member of the Prospectors and Developers Association and the Canadian Institute of Mining
and Metallurgy, and currently serves as a non-executive director of HTX Minerals Corp and Globetrotter Resources Inc.,
and as vice chairman of Nunavut Resource Corp.
Peter Tegart was appointed a director of Midas in April of 2009. He has maintained a 50 year career in the
mining business, starting out as an underground miner, followed by many years exploring and mapping in the Yukon and
Northern BC and in later years acquiring and developing prospects to feasibility and in some cases production. In 1991,
he formed Manhattan Minerals Corp. ("Manhattan"), a TSX listed company, which then acquired the Morris oxide gold
prospect in Chihuahua Mexico bringing it into production in 1995 as a heap leach operation. Through his efforts with
Manhattan, Manhattan acquired all the rights to the Tambo Grande massive sulphide district in Northern Peru from
Normandy Mining. As a result of Mr. Tegart‟s exploration efforts in this district, three of the biggest massive
(Cu,Pb,Zn,Au,Ag) sulphide deposits in the world were found, each of the three deposits contain over 100 million tons. In
2002, he joined Frontier Pacific Mining Corp. ("Frontier"), a TSX listed company, as president and chief executive
officer. Frontier acquired the Perama Hill prospect in Northern Greece from Newmont Mining Corp. As a result of
completing the feasibility on Perama Hill prospect, Eldorado Gold Corp. successfully acquired Frontier in a take-over bid.
Mr. Tegart earned his B.Sc. in geology from the University of British Columbia in 1971.
Michael Richings, M.Sc., was appointed a director of Midas Canada in conjunction with its organization in
February 2011. He is also currently a director of Vista Gold Corp., a position he has held since May 1, 1995, and has
served as Vista Gold Corp.‟s executive chairman and chief executive officer since November 2007. Previously, Mr.
Richings was a director of Allied Nevada Gold Corp. (from September 2006 to June 2009), a director of Zaruma
Resources Inc. (from November 2005 to June 2009) and a director of Triumph Gold Corp. (from January 2004 to
November 2006). In addition, Mr. Richings served as chief executive officer of Vista Gold Corp from August 2007 to
November 2007, and as president and chief executive officer of Vista Gold Corp. from May 2004 until July 2007. From
June 1995 to September 2000, he also served as president and chief executive officer of Vista Gold Corp., and during the
period from September 2000 to May 2004, Mr. Richings retired from his position as chief executive officer of Vista Gold
Corp. (but continued as a director of Vista Gold Corp. and served as a consultant to the mining industry). He was
awarded an Associateship of the Camborne School of Mines in 1969, and he earned his Master of Science Degree from
Queen‟s University in 1971.
Committees of the Board of Directors
There are no committees of the Midas Canada Board as of the date of this Proxy Statement. Following the
Reorganization, the Midas Canada Board anticipates forming an audit committee, a compensation committee, an
environmental and safety committee, and a corporate governance committee.
Compensation of Directors and Executive Officers
Midas Canada’s Proposed Compensation Policy. Midas Canada‟s compensation policy is not anticipated to be
appreciably different from Midas‟ following the Reorganization. The key elements of the policy will likely comprise salary
and incentive awards, such as stock options and stock appreciation rights. Salaries will likely be based on the responsibilities
and experience of the individual, and by reference to the market for executive talent, the latter of which will enable the Midas
Canada Board or a compensation committee of the board to compare salaries for comparable positions at other mining
companies. Specific individual performance and overall corporate performance will likely also be reviewed in determining
the compensation level of each individual officer. In addition, the Midas Canada Board or compensation committee will
likely also consider other performance measures, such as tangible progress in meeting the company‟s longer-term objective
of developing its Mineral Properties in the District. Where appropriate, the Midas Canada Board or compensation committee
41
is expected to also consider other performance measures, such as safety, environmental awareness and improvements in
relations with Midas Canada‟s shareholders, employees, the public and regulatory agencies.
Midas Canada‟s executive compensation policy is expected to have the following objectives: to attract and retain
the best possible executive talent; to provide an economic framework to motivate these executives to achieve goals
consistent with Midas Canada‟s business strategy; to provide an identity between executive and stockholder interests through
stock option plans; and to provide a compensation package that recognizes an executive's individual results and contributions
to the company's overall business objectives.
Incentive Compensation Plans. Midas presently maintains an equity incentive compensation plan, known as the
Midas Gold, Inc. 2009 Equity Incentive Plan (the “Midas Plan”). The Midas Plan provides for the issuance of the
following securities: incentive stock options intended to qualify under Section 422A of the Code; options that do not
qualify under the Code; stock appreciation rights; and awards of restricted common stock. Key individuals, including
officers and directors who are also employees, and officers and directors of Midas‟ MGI subsidiary are eligible to receive
grants under the plan. All incentive options are exercisable at prices equivalent to the fair market value of the Midas
Shares as of the date of grant.
Midas Canada will adopt a stock option plan that is substantially similar to the Midas Plan (the “Midas Canada
Plan”). If the Reorganization is consummated, the Midas Canada Plan will take effect and the Midas Plan will terminate.
Coincident with this, persons holding Midas Options issued or granted under the Midas Plan will be deemed to have
surrendered them in exchange for Midas Canada Options of like tenor under the Midas Canada Plan. As of the date of
this Proxy Statement, Midas had granted 12,600,000 Midas Options under the Midas Plan, exercisable at prices ranging
from $0.20 to $0.50 per share. As of the date of this Proxy Statement, options for the purchase of an additional 2,400,000
Midas Shares were available for grant under the Midas Plan. It is presently anticipated that up to Midas Canada Shares
will be authorized for issuance under the Midas Canada Plan. Options for the purchase of 12,600,000 Midas Canada
Shares (being the same number of options that have been granted under the Midas Plan) will be issued under the Midas
Canada Plan promptly following the Reorganization.
Consulting Agreements. Midas has entered into an interim consulting agreement with Stephen Quin, its president
and chief executive officer, which will be assumed by Midas Canada once the Reorganization is completed. The agreement
provides for: (a) the payment of an annual consulting fee of $150,000 to Mr. Quin; (b) the transfer and assignment from
Frank Duval and David Elliott to Mr. Quin of an aggregate 1,000,000 five-year Midas Options exercisable at $0.22 per
share; (c) the award of 2,000,000 five year Midas Options exercisable at $0.50 per share, one-third of which vested upon
execution of the consulting agreement, and one-third of which will vest upon each anniversary of Mr. Quin‟s continued
affiliation with Midas or Midas Canada as a consultant or employee; (d) bonus provisions equal to 65 percent of Mr. Quin‟s
salary in the event certain milestones are achieved; (e) indemnification provisions; and (f) severance payments ranging from
one year to two year‟s salary in the event Mr. Quin‟s arrangement is terminated without cause or other than for good reason.
Midas Canada anticipates entering into a formal employment agreement with Mr. Quin after the Reorganization has been
approved. The formal employment agreement will embody essentially the same terms and conditions as the interim
consulting agreement, which will thereafter be cancelled.
Midas has also entered into a consulting agreement with Frank Duval, its former president and chief executive
officer, which will also be assumed by Midas Canada once the Reorganization is completed. The consulting agreement
obligates Mr. Duval to assist Midas (and later, Midas Canada) in: maintaining and furthering good relations with the
various property owners and former property owners in the District; securing or obtaining, where possible,
additional mineral, surface or other rights in the District and surrounding areas identified as being of interest; and
providing such other advisory services as the president and chief executive officer may from time to time request. The
agreement provides for the payment of a consulting fee of $180,000 to Mr. Duval and reimbursement of his
automobile and cell phone expenses not to exceed $1,000 per month. The agreement also contains provisions
restricting Mr. Duval‟s use of proprietary and confidential information, and prohibiting him from competing
against the company. The agreement took effect as of January 1, 2011 and terminates on December 31, 2011
unless extended by Midas or Midas Canada, or earlier terminated for cause or in the event of Mr. Duval‟s death or
disability.
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Finally, Midas is a party to a consulting agreement with Chris Dail dated April 1, 2010 for the provision of
geological services, which will also be assumed by Midas Canada once the Reorganization is completed. The agreement
provides for the payment of an annual consulting fee of $90,000 to Mr. Dail and the grant of 100,000 Midas Options upon
each annual renewal of the agreement, beginning in 2011. If granted, such options will have a term of four years from the
date of grant and will be exercisable at a price equal to the fair market value of the Midas Shares as of the grant date. In
addition, Mr. Dail has the right to receive an additional 500,000 Midas Options at such time as Midas shall have received
a technical report prepared by a nationally recognized mining engineering firm in accordance with Canadian National
Instrument 43-101 to the effect that Midas‟ Mineral Properties located in the District, including future acquisitions of claims
and interests, contain 2,500,000 or more ounces of measured, indicated and inferred gold resources. If granted, such
options will have a term of four years from the date of grant and will be exercisable at a price equal to the fair market
value of Midas Shares as of the grant date.
Compensation of Directors. Midas Canada does not anticipate paying additional compensation to those of its
directors who are also executive officers of the company. Directors who are not also executive officers are expected to be
compensated for their services through grants of incentive stock options under the Midas Canada Plan, on terms to be
established by the compensation committee of the Midas Canada Board
SUMMARY INFORMATION CONCERNING THE DISTRICT AND THE MINERAL PROPERTIES
The District
General. The Yellow Pine-Stibnite Mining District is situated in a remote, mountainous region in the Salmon
River Mountains of south-central Idaho. The District lies about 150 kilometers northeast of Boise, 65 kilometers east of
McCall, and about 16 kilometers southeast of the small town of Yellow Pine. Land ownership is a mix of public lands
managed by the United States Forest Service and private lands controlled by various parties. Elevations range from
around 1,900 meters in the valleys rising up to about 2,700 meters in nearby mountains.
There is limited infrastructure remaining in the District today, although at one time it had over 1,500 full-time
residents and full services including a hospital in the former town of Stibnite. The area is accessed by a number of
improved gravel roads and two airstrips.
Exploration and prospecting in the District started during the early 1900s Thunder Mountain Gold rush and the
first recorded production was reported in 1925. There were two main pulses of development and production in the
district. The first period was from 1925 through 1952, when antimony and tungsten bearing sulfide ores were milled.
Significant quantities of gold and silver were produced as by-products of the antimony-tungsten operations. For a long
period during this era the District was the largest producer of gold and antimony and tungsten in the United States. From
the late 1970s through the late 1990‟s the district once again was a major producer of gold and silver from seasonal
cyanide heap leach operations exploiting oxidized ores. Historic, recorded metal production in the District is estimated to
have amounted to over 900,000 troy ounces of gold, over 2,000,000 troy ounces of silver, and tens of thousands of tons of
both tungsten and antimony.
Geology of the District. Bedrock in the District consists of granitic rocks of the Cretaceous-age Idaho Batholith
and a roof pendant of metasedimentary rocks dominated by carbonates and quartzites. Much of the District‟s valley area
is covered with unconsolidated alluvial and glacial deposits.
Widespread precious metal and antimony mineralization are related to igneous activity and mineralization is
localized along north and northeast trending structures, which are believed to be related to the nearby Tertiary-age
Thunder Mountain caldera complex. Much of this mineralization has been extensively drilled by previous operators
during early stage exploration and development as well as part of past mining operations focused on the previously
exploited leachable oxide ores. Past work includes over 151,000 meters of percussion, rotary, reverse circulation and core
drilling in over 2140 holes. Recent exploration in the district by Midas has discovered significant quantities of gold and
silver mineralization.
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The largest currently known single sulfide occurrence in the District is the Yellow Pine prospect currently under
option by Vista U.S. As is disclosed elsewhere in this Proxy Statement, Midas has acquired an option to acquire a 5% net
smelter returns royalty interest on any future production from the main Yellow Pine deposit and any additional production
from the Vista US-controlled patented claim block. As part of the royalty and land acquisition, Midas has acquired a
large amount of historical data from the district dating back as early as the 1920s, when the District‟s first major
development occurred. Large areas underlain by oxidized gold-bearing mineralized rock were identified and drilled
during the early 1990s, but were never mined by previous operators and are now under Midas‟ control.
Midas’ Mineral Properties
Midas‟ land position consists of over 4,500 hectares of land. The land package consists of approximately 181
hectares of patented lands, 1,366 hectares of unpatented federal lode mining claims and 93 hectares of federal mill site
claims located on and within lands administered by the Krassel Ranger District of the Boise National Forest.
Midas‟ Golden Meadows project area consists of approximately 3,292 hectares of unpatented federal lode claims,
93 hectares of unpatented millsite claims, 127 hectares of patented federal lode claims and 60 hectares of patented mill
site claims. Portions of the patented lands, known as the Bradley patented lands were purchased directly from the
previous property owner in 2009 and are subject to a 5% net smelter return royalty interest owed to the heirs and
beneficiaries of the estate of J.J. Oberbillig. As is disclosed elsewhere in this Proxy Statement, Midas acquired this royal
interest in 2009, together with 30 patented federal mill site claims totaling approximately 60 hectares, and 6 patented
federal mining claims totaling approximately 50 hectares. The surface estate of portions of six of the patented federal mill
site claims was granted to Hecla Mining Company, however the access, use, mineral rights and right to explore and mine
were retained by the Oberbillig estate and is now controlled by Midas. As part of these transactions, Midas also
Idaho Gold’s Mineral Properties
Idaho Gold‟s Yellow Pine gold project consists of 17 patented mining claims covering about 300 acres and 8
unpatented lode mining claims covering about 165 acres. In 2003, Vista Gold Corp. staked certain unpatented lode
mining claims. Upon exercising Idaho Gold‟s option with Bradley Mining Company, Idaho Gold will have fee simple
ownership of the surface and mineral estates of the patented mining claims, subject to exceptions and reservations of
record. Surface rights associated with the unpatented mining claims are limited to prospecting, mining and processing
operations and uses reasonably incident thereto. There may not be sufficient space on these lands for all necessary
facilities including processing plant, tailings disposal and waste dump areas, and future studies will determine what
additional lands, if any, are required for future operations.
Environmental and Other Matters Pertaining to the Mineral Properties
Overview. Like other mining companies doing business in the United States, Midas and Idaho Gold are subject (and
Midas Canada will be subject) to a variety of federal, state and local statutes and rules and regulations designed to protect the
quality of the air and water and threatened or endangered species in the vicinity of its mining operations. These include
"permitting" or pre-operating approval requirements designed to ensure the environmental integrity of a proposed mining
facility, operating requirements designed to mitigate the effects of discharges into the environment during mining operations,
and reclamation or post-operation requirements designed to remediate the lands effected by a mining facility once
commercial mining operations have ceased.
Federal legislation and implementing regulations adopted and administered by the Environmental Protection
Agency, the Forest Service, the Bureau of Land Management, the Fish and Wildlife Service, the Army Corps of Engineers
and other agencies—in particular, legislation such as the federal Clean Water Act, the Clean Air Act, the National
Environmental Policy Act, the Endangered Species Act, the National Forest Management Act, the Wilderness Act, and the
Comprehensive Environmental Response, Compensation and Liability Act—have a direct bearing on domestic mining
operations. These federal initiatives are often administered and enforced through state agencies operating under parallel state
statutes and regulations.
Midas‟ and Idaho Gold‟s Mineral Properties are located in central Idaho, which, despite its history as a major mining
area, has in the last three decades gradually limited mine development as tourism and environmental concerns have assumed
44
greater economic and political importance. Although there is some evidence that this trend is reversing and that more mines
are being approved for development, the cost and uncertainty associated with the permitting process have generally resulted
in fewer mining applications and higher operating costs for those mining companies seeking to do business in the state.
These laws are briefly discussed below.
The Clean Water Act. The federal Clean Water Act is the principal federal environmental protection law regulating
mining operations. The Act imposes limitations on water discharges into waters of the United States, including discharges
from point sources such as mine facilities. If we conduct mining and processing operations in the future, we may be required
to obtain permits for effluent discharges.
The Clean Air Act. The federal Clean Air Act limits the ambient air discharge of certain materials deemed to be
hazardous and establishes a federal air quality permitting program for such discharges. Hazardous materials are defined in
enabling regulations adopted under the Act to include various metals. The Act also imposes limitations on the level of
particulate matter generated from mining operations. If we conduct mining and processing operations in the future, we may
be required to adopt dust control techniques in order to comply with these limitations.
National Environmental Policy Act. The National Environmental Policy Act (“NEPA”) requires all governmental
agencies to consider the impact on the human environment of major federal actions as therein defined. Midas‟ and Idaho
Gold‟s Mineral Properties are located on federal lands. Should they or Midas Canada conduct mining operations in the
future, they will be obligated to prepare and file an environmental impact statement, or EIS, outlining in detail the
environmental effects of any proposed mining or processing operations, and their efforts to ameliorate the effects of those
operations.
Endangered Species Act. The Endangered Species Act (“ESA”) requires federal agencies to ensure that any action
authorized, funded or carried out by such agency is not likely to jeopardize the continued existence of any endangered
species or threatened species. The ESA‟s definition of “species” includes any distinct population segment of any vertebrate
fish or wildlife that interbreeds when mature. In order to facilitate the conservation of imperiled species, the ESA establishes
an interagency consultation process. When a federal agency proposes an action that “may affect” a listed species, it must
provide the United States Fish and Wildlife Service (“USFWS”) with a “biological assessment” of the effects of the
proposed action. Unless USFWS determines that the proposed action will have no adverse effect on listed species, it must
review all of the information provided by the action agency, as well as any other relevant information, and prepare a
“biological opinion” setting forth the effects of the proposed action. In preparing such an opinion, USFWS must use the best
available scientific and commercial data to determine whether the proposed action is likely to jeopardize the species, the
amount and extent of any incidental “taking” or harm to the species that may result from the action, and whether it should
identify any conservation measures to promote the recovery of the listed species. The ESA also provides that, once the
interagency consultation process has been initiated, neither the federal agency nor the permit or license applicant (in this
case, Midas, Idaho Gold or Midas Canada) may make any irreversible commitment of resources with respect to the proposed
agency action that would have the effect of foreclosing the formulation or implementation of any reasonable or prudent
measures to avoid jeopardizing the listed species.
National Forest Management Act. The National Forest Management Act of 1974 amends the Forest and Rangeland
Renewable Resources Planning Act of 1974. It requires the Secretary of Agriculture to adopt regulations under the
principles of the Multiple-Use Sustained-Yield Act of 1960 (“MUSYA”), which set out the process for developing and
revising land and resource management plans. MUSYA requires national forest lands to be administered in ways that
promote outdoor recreation, range, timber, watershed and wildlife and fish values. It also directs the Secretary of Agriculture
to develop and administer the multiple use of these resources, at the same time promoting the concept of sustainability,
which requires a balancing of the needs of current and future generations.
The Comprehensive Environmental Response, Compensation and Liability Act. The federal Comprehensive
Environmental, Response, Compensation and Liability Act (“CERCLA”) imposes clean-up and reclamation responsibilities
with respect to unlawful discharges into the environment, and establishes significant criminal and civil penalties against
those persons who are primarily responsible for such discharges.
45
The Resource Conservation and Recovery Act. The federal Resource Conservation and Recovery Act (RCRA) was
designed and implemented to regulate the disposal of hazardous wastes. It mandates that such wastes be treated, disposed of
or stored, and requires those doing so to obtain permits from the Environmental Protection Agency or the authorized state
regulatory authority. Like the Clean Water Act, RCRA provides for citizens‟ suits to enforce the provisions of the law.
Idaho Environmental Laws and Regulations. Idaho has adopted counterparts to NEPA and CERCLA, both of which
are administered by the Idaho Department of Environmental Quality. The state has also adopted statutes that parallel to a
large extent the provisions of the Clean Air Act and Clean Water Act; these statutes are administered through various
bureaus of the Department of Environmental Quality.
RELATED PARTY TRANSACTIONS
Midas has engaged in several significant transactions with its affiliates and other related parties since its inception.
These transactions are summarized below:
On April 28, 2009, Frank Duval assigned his rights and interests in and to the Duval-Niagara-Gold Crest
Agreement (including the Bradley Mining Company Agreement, the Oberbillig Land Agreement and the
Oberbillig Royalty Agreement that either arose out of or were subsumed in such agreement) to Midas or MGI, in
exchange for 5,000,000 Midas Shares, valued at $0.005 per share, and Midas‟ assumption of Mr. Duval‟s
obligation to pay Gold Crest the remaining $25,000 due under the Duval-Niagara-Gold Crest Agreement. Mr.
Duval was a director of Midas and its president and chief executive officer as of the date of the assignment.
On July 23, 2009, Midas and MGI assigned Frank Duval the following net smelter royalty interests in and to
Midas‟ mining claims and interests in the District: (a) a one percent net smelter royalty interest in and to the
unpatented mining claims that Midas acquired from Gold Crest; (b) a one percent net smelter royalty interest in
and to the mining claims that Midas acquired pursuant to the Oberbillig Land Agreement; and (c) a twenty
percent net smelter royalty interest in and to the five percent net smelter royalty interest that Midas acquired
pursuant to the Oberbillig Royalty Agreement. Such net smelter royalty interests were assigned to Mr. Duval in
partial consideration of his assignment of the Duval-Niagara-Gold Crest Agreement (including the Bradley
Mining Company Agreement, the Oberbillig Land Agreement and the Oberbillig Royalty Agreement that either
arose out of or were subsumed in such agreement) to Midas and MGI. Mr. Duval subsequently canceled these
royalty interests.
On July 23, 2009, Midas granted Tom Henricksen, a Midas Affiliate, 250,000 Midas Options, exercisable at $0.20
per share, as consideration for services rendered by him in his capacity as a director of the company.
On July 23, 2009, Midas granted Heather Ennis, a Midas Affiliate, 100,000 Midas Options, exercisable at $0.20
per share, as consideration for services rendered by her in her capacity as a director and executive officer of the
company.
On July 23, 2009, Midas granted Peter Tegart, a Midas Affiliate, 250,000 Midas Options, exercisable at $0.20 per
share, as consideration for services rendered by him in his capacity as a director of the company.
On July 23, 2009, Midas granted Frank Duval 5,000,000 Midas Options, exercisable at $0.22 per share. The
Midas Options were granted to Mr. Duval in partial consideration for the cancellation of the net smelter royalty
interests described above and vested in February 2011 upon Midas‟ receipt of a technical report prepared by a
nationally recognized mining engineering firm in accordance with Canadian National Instrument 43-101 to the
effect that Midas‟ Mineral Properties located in the District, Idaho, including future acquisitions of claims and
interests in such district, contain 2,500,000 or more ounces of measured, indicated and inferred gold resources.
On July 23, 2009, Midas granted David Elliott, a Midas Affiliate, 5,000,000 Midas Options, exercisable at $0.22
per share. The Midas Options were granted to Mr. Elliott as partial consideration for his services in capitalizing
Midas and vested in February 2011 upon Midas‟ receipt of a technical report prepared by a nationally recognized
mining engineering firm in accordance with Canadian National Instrument 43-101 to the effect that Midas‟
46
Mineral Properties located in the District, Idaho, including future acquisitions of claims and interests in such district,
contain 2,500,000 or more ounces of measured, indicated and inferred gold resources.
On February 15, 2011, Midas granted Stephen Quin, a Midas Affiliate, 2,000,000 Midas Options, exercisable at
$0.50 per share, as consideration for prospective services to be rendered by him in his capacity as a director and
executive officer of the company.
LEGAL PROCEEDINGS
The Idaho Gold Mineral Properties and that portion of the Midas Mineral Properties acquired from Bradley
Mining Co. are subject to a consent decree entered in two United States District Court cases (United States v. Bradley
Mining Co., et al, Case No. 3:08-CV-03986 TEH [N.D. Cal.] and United States v. Bradley Mining Co., Case No. 3:08CV-05501 THE [N.D. Cal]) involving or pertaining to environmental liability and remediation responsibilities with
respect to the affected properties described therein. In addition, the United States Environmental Protection Agency, the
United States Forest Service, and the State of Idaho have jointly identified certain required environmental remediation
measures for the affected Mineral Properties, some of which comprised a portion of the historical Stibnite Mine site,
pursuant to the Comprehensive Environmental Response, Compensation and Liability Act. The consent decree and the
required remediation measures specified by these agencies will be binding on Midas Canada if the Reorganization is
consummated.
Idaho Gold and Midas were each recently advised of a proposed notice of environmental conditions pertaining to
the affected Mineral Properties, which, if executed in its current form as part of the consent decree, could have a material
adverse effect on Idaho Gold and Midas (and on Midas Canada, if the Reorganization is consummated) insofar as it would
limit or constrain their use of the Mineral Properties and their ability to transfer the Mineral Properties to a third party for
value. Idaho Gold and Midas are currently investigating the proposed notice to determine its likely effect on Midas‟ and
Idaho Gold‟s continuing and proposed operations on their Mineral Properties.
LEGAL MATTERS
The validity under the BCBCA of the authorization and issuance of the Midas Canada Shares and Midas Canada
Options to be issued in the Reorganization will be passed upon by Midas Canada‟s Canadian attorneys, DuMoulin Black
LLP, Vancouver, British Columbia.
EXPERTS
Midas‟ consolidated balance sheet as at December 31, 2010 and 2009 and its statements of operations, cash flows
and changes in shareholders‟ equity (deficit) for the years then ended, and related notes included in Appendix B to this Proxy
Statement have been audited by DeCoria Maichel & Teague, Spokane, Washington, independent chartered accountants, and
are included in reliance upon the report given upon the authority of said firm as experts in accounting and auditing. DeCoria
Maichel & Teague also prepared Midas Canada‟s pro forma consolidated financial statements at December 31, 2010, which
are also included in Appendix B to this Proxy Statement.
Idaho Gold‟s consolidated balance sheet as at December 31, 2010 and 2009 and its statements of operations, cash
flows and changes in shareholders‟ equity (deficit) for the years then ended, and related notes included in this Proxy
Statement have not been audited, but in the opinion of Idaho Gold‟s management contain all adjustments, consisting of only
normally recurring adjustments, necessary for a fair presentation of the financial information contained therein.
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CONCLUSION
It is important that proxies be returned promptly. Shareholders are requested to vote, sign, date and promptly
return their proxy in the enclosed self-addressed envelope, or by faxing it to us at (509) 924-1582, or by scanning
and emailing it to us at ennis@midasgoldinc.com.
The board of directors knows of no other matters which may be presented for shareholder action at the Special Meeting.
If other matters do properly come before the meeting, it is intended that the persons named in the proxies will vote on
such proposals according to their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Janice Duval
Janice Duval, Secretary
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Appendix A to Proxy Statement
(Statutory Dissenters’ Appraisal Rights under the WBCA)
A- 1
STATUTORY DISSENTERS’ APPRAISAL RIGHTS
The material provisions of sections RCW 23B.13.010 through RCW 23B.13.310 of the Washington Business
Corporation Act, which establish dissenters' rights of appraisal and the procedures to be followed in
exercising them, are reproduced below.
§ 23B.13.010. Definitions
As used in this chapter:
(1)
"Corporation" means the issuer of the shares held by a dissenter before the corporate action, or
the surviving or acquiring corporation by merger or share exchange of that issuer.
(2)
"Dissenter" means a shareholder who is entitled to dissent from corporate action under RCW
23B.13.020 who exercises that right when and in the manner required by RCW 23B.13.200 through
23B.13.280
(3)
"Fair value," with respect to a dissenter's shares, means the value of the shares immediately
before the effective date of the corporate action to which the dissenter objects, excluding any appreciation
or depreciation in anticipation of the corporate action unless exclusion would be inequitable.
(4)
"Interest" means interest from the effective date of the corporate action until the date of payment,
at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all the circumstances.
(5)
"Record shareholder" means the person in whose name shares are registered in the records of a
corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate
on file with a corporation.
(6)
"Beneficial shareholder" means the person who is a beneficial owner of shares held in a voting
trust or by a nominee as the record shareholder.
(7)
"Shareholder" means the record shareholder or the beneficial shareholder.
§ 23B.13.020. Right to dissent
(1)
A shareholder is entitled to dissent from, and obtain payment of the fair value of the shareholder's
shares in the event of, any of the following corporate actions:
(a)
A plan of merger, which has become effective, to which the corporation is a party (i) if
shareholder approval was required for the merger by RCW 23B.11.030. 23B.11.080 or the articles of
incorporation, and the shareholder was entitled to vote on the merger, or (ii) if the corporation was a
subsidiary that has been merged with its parent under RCW 23B.11.040;
(b)
A plan of share exchange, which has become effective, to which the corporation is a party as the
corporation whose shares have been acquired, if the shareholder was entitled to vote on the plan;
(c)
A sale or exchange, which has become effective, of all, or substantially all, of the property of the
corporation other than in the usual and regular course of business, if the shareholder was entitled to vote
on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or
A- 2
a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(d)
An amendment of the articles of incorporation, whether or not the shareholder was entitled to
vote on the amendment, if the amendment effects a redemption or cancellation of all of the shareholder's
shares in exchange for cash or other consideration other than shares of the corporation; or
(e)
Any corporate action approved pursuant to a shareholder vote to the extent the articles of
incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their shares.
(2)
A shareholder entitled to dissent and obtain payment for the shareholder's shares under this
chapter may not challenge the corporate action creating the shareholder's entitlement unless the action
fails to comply with the procedural requirements imposed by this title, RCW 25.10.831 through
25.10.886, the articles of incorporation, or the bylaws, or is fraudulent with respect to the shareholder or
the corporation.
(3)
The right of a dissenting shareholder to obtain payment of the fair value of the shareholder's
shares shall terminate upon the occurrence of any one of the following events:
(a)
The proposed corporate action is abandoned or rescinded;
(b)
A court having jurisdiction permanently enjoins or sets aside the corporate action; or
(c)
The shareholder's demand for payment is withdrawn with the written consent of the corporation.
§ 23B.13.030. Dissent by nominees and beneficial owners
(1)
A record shareholder may assert dissenters' rights as to fewer than all the shares registered in the
shareholder's name only if the shareholder dissents with respect to all shares beneficially owned by any
one person and delivers to the corporation a notice of the name and address of each person on whose
behalf the shareholder asserts dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which the dissenter dissents and the dissenter's other shares were
registered in the names of different shareholders.
(2)
A beneficial shareholder may assert dissenters' rights as to shares held on the beneficial
shareholder's behalf only if:
(a)
The beneficial shareholder submits to the corporation the record shareholder's consent to the
dissent not later than the time the beneficial shareholder asserts dissenters' rights, which consent shall be
set forth either (i) in a record or (ii) if the corporation has designated an address, location, or system to
which the consent may be electronically transmitted and the consent is electronically transmitted to the
designated address, location, or system, in an electronically transmitted record; and
(b)
The beneficial shareholder does so with respect to all shares of which such shareholder is the
beneficial shareholder or over which such shareholder has power to direct the vote.
A- 3
§ 23B.13.200. Notice of dissenters' rights
(1)
If proposed corporate action creating dissenters' rights under RCW 23B.13.020 is submitted for
approval by a vote at a shareholders' meeting, the meeting notice must state that shareholders are or may
be entitled to assert dissenters' rights under this chapter and be accompanied by a copy of this chapter.
(2)
If corporate action creating dissenters' rights under RCW 23B.13.020 is submitted for approval
without a vote of shareholders in accordance with RCW 23B.07.040, the shareholder consent described in
RCW 23B.07.040(1)(b) and the notice described in RCW 23B.07.040(3)(a) must include a statement that
shareholders are or may be entitled to assert dissenters' rights under this chapter and be accompanied by a
copy of this chapter.
§ 23B.13.210. Notice of intent to demand payment
(1)
If proposed corporate action creating dissenters' rights under RCW 23B.13.020 is submitted to a
vote at a shareholders' meeting, a shareholder who wishes to assert dissenters' rights must (a) deliver to
the corporation before the vote is taken notice of the shareholder's intent to demand payment for the
shareholder's shares if the proposed corporate action is effected, and (b) not vote such shares in favor of
the proposed corporate action.
(2)
If proposed corporate action creating dissenters' rights under RCW 23B.13.020 is submitted for
approval without a vote of shareholders in accordance with RCW 23B.07.040, a shareholder who wishes
to assert dissenters' rights must not execute the consent or otherwise vote such shares in favor of the
proposed corporate action.
(3)
A shareholder who does not satisfy the requirements of subsection (1) or (2) of this section is not
entitled to payment for the shareholder's shares under this chapter.
§ 23B.13.220. Dissenters' rights - Notice
(1)
If proposed corporate action creating dissenters' rights under RCW 23B.13.020 is approved at a
shareholders' meeting, the corporation shall within ten days after the effective date of the corporate action
deliver to all shareholders who satisfied the requirements of RCW 23B.13.210(1) a notice in compliance
with subsection (3) of this section.
(2)
If proposed corporate action creating dissenters' rights under RCW 23B.13.020 is approved
without a vote of shareholders in accordance with RCW 23B.07.040, the notice delivered pursuant to
RCW 23B.07.040(3)(b) to shareholders who satisfied the requirements of RCW 23B.13.210(2) shall
comply with subsection (3) of this section.
(3)
Any notice under subsection (1) or (2) of this section must:
(a)
State where the payment demand must be sent and where and when certificates for certificated
shares must be deposited;
(b)
Inform holders of uncertificated shares to what extent transfer of the shares will be restricted after
the payment demand is received;
A- 4
(c)
Supply a form for demanding payment that includes the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action and requires that the person
asserting dissenters' rights certify whether or not the person acquired beneficial ownership of the shares
before that date;
(d)
Set a date by which the corporation must receive the payment demand, which date may not be
fewer than thirty nor more than sixty days after the date the notice in subsection (1) or (2) of this section
is delivered; and
(e)
Be accompanied by a copy of this chapter.
§ 23B.13.230. Duty to demand payment
(1)
A shareholder sent a notice described in RCW 23B.13.220 must demand payment, certify
whether the shareholder acquired beneficial ownership of the shares before the date required to be set
forth in the notice pursuant to RCW 23B.13.220.(2)(c), and deposit the shareholder's certificates, all in
accordance with the terms of the notice.
(2)
The shareholder who demands payment and deposits the shareholder's share certificates under
subsection (1) of this section retains all other rights of a shareholder until the proposed corporate action is
effected.
(3)
A shareholder who does not demand payment or deposit the shareholder's share certificates where
required, each by the date set in the notice, is not entitled to payment for the shareholder's shares under
this chapter.
§ 23B.13.240. Share restrictions
(1)
The corporation may restrict the transfer of uncertificated shares from the date the demand for
payment under RCW 23B.13.230 is received until the proposed corporate action is effected or the
restriction is released under RCW 23B.13.260.
(2)
The person for whom dissenters' rights are asserted as to uncertificated shares retains all other
rights of a shareholder until the effective date of the proposed corporate action.
§ 23B.13.250. Payment
(1)
Except as provided in RCW 23B.13.270, within thirty days of the later of the effective date of the
proposed corporate action, or the date the payment demand is received, the corporation shall pay each
dissenter who complied with RCW 23B.13.230 the amount the corporation estimates to be the fair value
of the shareholder's shares, plus accrued interest.
(2)
The payment must be accompanied by:
(a)
The corporation's balance sheet as of the end of a fiscal year ending not more than sixteen months
before the date of payment, an income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial statements, if any;
(b)
An explanation of how the corporation estimated the fair value of the shares;
A- 5
(c)
An explanation of how the interest was calculated;
(d)
A statement of the dissenter's right to demand payment under RCW 23B.13.280; and
(e) A copy of this chapter.
§ 23B.13.260. Failure to take corporate action
(1)
If the corporation does not effect the proposed corporate action within sixty days after the date set
for demanding payment and depositing share certificates, the corporation shall return the deposited
certificates and release any transfer restrictions imposed on uncertificated shares.
(2)
If after returning deposited certificates and releasing transfer restrictions, the corporation wishes
to effect the proposed corporate action, it must send a new dissenters' notice under RCW 23B.13.220 and
repeat the payment demand procedure.
§ 23B.13.270. After-acquired shares
(1)
A corporation may elect to withhold payment required by RCW 23B.13.250 from a dissenter
unless the dissenter was the beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of the terms of the proposed
corporate action.
(2)
To the extent the corporation elects to withhold payment under subsection (1) of this section, after
the effective date of the proposed corporate action, it shall estimate the fair value of the shares, plus
accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of
the dissenter's demand. The corporation shall send with its offer an explanation of how it estimated the
fair value of the shares, an explanation of how the interest was calculated, and a statement of the
dissenter's right to demand payment under RCW 23B.13.280.
§ 23B.13.280. Procedure if shareholder dissatisfied with payment or offer
(1)
A dissenter may deliver a notice to the corporation informing the corporation of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest due, and demand payment
of the dissenter's estimate, less any payment under RCW 23B.13.250, or reject the corporation's offer
under RCW 23B.13.270 and demand payment of the dissenter's estimate of the fair value of the
dissenter's shares and interest due, if:
(a)
The dissenter believes that the amount paid under RCW 23B.13.250 or offered under RCW
23B.13.270 is less than the fair value of the dissenter's shares or that the interest due is incorrectly
calculated;
(b)
The corporation fails to make payment under RCW 23B.13.250 within sixty days after the date
set for demanding payment; or
(c)
The corporation does not effect the proposed corporate action and does not return the deposited
certificates or release the transfer restrictions imposed on uncertificated shares within sixty days after the
date set for demanding payment.
A- 6
(2)
A dissenter waives the right to demand payment under this section unless the dissenter notifies
the corporation of the dissenter's demand under subsection (1) of this section within thirty days after the
corporation made or offered payment for the dissenter's shares.
§ 23B.13.300. Court action
(1)
If a demand for payment under RCW 23B.13.280 remains unsettled, the corporation shall
commence a proceeding within sixty days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation does not commence the
proceeding within the sixty-day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded.
(2)
The corporation shall commence the proceeding in the superior court of the county where a
corporation's principal office, or, if none in this state, its registered office, is located. If the corporation is
a foreign corporation without a registered office in this state, it shall commence the proceeding in the
county in this state where the registered office of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located.
(3)
The corporation shall make all dissenters, whether or not residents of this state, whose demands
remain unsettled, parties to the proceeding as in an action against their shares and all parties must be
served with a copy of the petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4)
The corporation may join as a party to the proceeding any shareholder who claims to be a
dissenter but who has not, in the opinion of the corporation, complied with the provisions of this chapter.
If the court determines that such shareholder has not complied with the provisions of this chapter, the
shareholder shall be dismissed as a party.
(5)
The jurisdiction of the court in which the proceeding is commenced under subsection (2) of this
section is plenary and exclusive. The court may appoint one or more persons as appraisers to receive
evidence and recommend decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are entitled to the same discovery
rights as parties in other civil proceedings.
(6)
Each dissenter made a party to the proceeding is entitled to judgment (a) for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus interest, exceeds the amount paid by
the corporation, or (b) for the fair value, plus accrued interest, of the dissenter's after-acquired shares for
which the corporation elected to withhold payment under RCW 23B.13.270.
§ 23B.13.310. Court costs and counsel fees
(1)
The court in a proceeding commenced under RCW 23B.13.300 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers appointed by the court.
The court shall assess the costs against the corporation, except that the court may assess the costs against
all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under RCW
23B.13.280.
(2)
The court may also assess the fees and expenses of counsel and experts for the respective parties,
in amounts the court finds equitable:
A- 7
(a)
Against the corporation and in favor of any or all dissenters if the court finds the corporation did
not substantially comply with the requirements of RCW 23B.13.200 through 23B.13.280; or
(b)
Against either the corporation or a dissenter, in favor of any other party, if the court finds that the
party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by chapter 23B.13 RCW.
(3)
If the court finds that the services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated, and that the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited.
A- 8
Appendix B to Proxy Statement
(Historical and Pro Forma Financial Information, and Management’s Discussion and Analysis)
B-1
Report of Independent Auditors
Board of Directors
Midas Gold, Inc.
We have audited the accompanying consolidated balance sheets of Midas Gold, Inc. (“the
Company”) as of December 31, 2010 and 2009, and the related consolidated statements of
operations, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2010,
the period April 2, 2009 (inception) to December 31, 2009 and the period April 2, 2009
(inception) to December 31, 2010. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of Midas Gold, Inc. as of December 31, 2010 and 2009, and the results of
its operations and its cash flows for the year ended December 31, 2010, the period April 2, 2009
(inception) to December 31, 2009 and the period April 2, 2009 (inception) to December 31,
2010, in conformity with accounting principles generally accepted in the United States of
America.
DeCoria, Maichel & Teague, PS
Spokane, Washington
February 8, 2011
Midas Gold, Inc.
TABLE OF CONTENTS
Report of Independent Auditors.............................................................................................1
Table of Contents ...................................................................................................................2
Consolidated Balance Sheets at December 31, 2010
and December 31, 2009 .............................................................................................3
Consolidated Statements of Operations for the year ended
December 31, 2010, the period April 2, 2009
(inception) to December 31, 2009 and the period
April 2, 2009 (inception) to December 31, 2010 .......................................................4
Consolidated Statements of Changes in Stockholders’ Equity
for the year ended December 31, 2010 and the period
April 2, 2009 (inception) to December 31, 2009 .......................................................5
Consolidated Statements of Cash Flows for the year ended
December 31, 2010, the period April 2, 2009
(inception) to December 31, 2009 and the period
April 2, 2009 (inception) to December 31, 2010 .......................................................6
Notes to the Consolidated Financial Statements ....................................................................7-19
2
Midas Gold, Inc.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31,
2010
December 31,
2009
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Prepaid expenses
Receivable
Total Current Assets
$
BUILDINGS, EQUIPMENT and MINERAL PROPERTIES
Buildings and equipment, net
Mineral properties
Total Buildings, Equipment and Mineral Properties, net
$
309,621
1,550,510
1,860,131
LONG-TERM ASSETS
Reclamation bond
Total Long-Term Assets
TOTAL ASSETS
4,805,707
58,567
19,975
4,884,249
1,554,745
33,592
1,588,337
46,775
1,550,510
1,597,286
18,000
18,000
-
$
6,762,380
$
3,185,623
$
107,747
172,521
16,027
296,295
$
29,489
188,668
11,332
45,000
274,489
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Current portion of note payable
Accrued interest payable
Accrued salary to related party
Total Current Liabilities
LONG-TERM LIABILITIES
Non-current portion of note payable
Total Liabilities
743,421
1,039,716
894,772
1,169,261
12,691,816
(6,969,152)
5,722,664
(1,757,638)
2,016,362
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY
Common stock, no par value; 100,000,000 and 50,000,000 shares
authorized, respectively; 43,812,000 and 27,345,000 shares issued
and outstanding; respectively
Deficit accumulated during exploration stage
Total Stockholders' Equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
6,762,380
3,774,000
$
3,185,623
3
See accompanying notes to consolidated financial statements.
Midas Gold, Inc.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the
Year ended
December 31, 2010
EXPENSES
Exploration expense
General and administrative expense
Total Expenses
$
OTHER (INCOME) EXPENSE
Interest expense
Interest income
Total Other (Income) Expense
4,586,123 $
611,026
5,197,149
1,483,820 $
228,796
1,712,616
37,196
(22,832)
14,365
50,503
(5,481)
45,022
1,757,638 $
NET LOSS
$
5,211,514 $
NET LOSS PER COMMON SHARE,
BASIC AND DILUTED
$
0.14 $
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING,
BASIC AND DILUTED
For the period
April 2, 2009
(inception) through
December 31, 2009
38,247,405
For the period
April 2, 2009
(inception) through
December 31, 2010
6,069,943
839,822
6,909,765
87,699
(28,313)
59,387
6,969,152
0.13
13,094,151
4
See accompanying notes to consolidated financial statements.
Midas Gold, Inc.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Deficit
Accumulated
During
Exploration
Stage
Common Stock
Shares
BALANCE, April 2, 2009 (inception)
Amount
0 $
0 $
Total
Stockholders'
Equity
0$
0
Shares sold to founder for cash ($0.05 per share)
5,000,000
250,000
250,000
Issuance of shares to founder for property rights
($0.005 per share)
5,000,000
25,000
25,000
16,745,000
3,349,000
3,349,000
600,000
30,000
30,000
120,000
120,000
Shares sold in private placement ($0.20 per share)
Stock based compensation ($0.05 per share)
Vested stock options
Net loss
BALANCE, December 31, 2009
Shares sold in private placement ($0.20 per share)
Stock based compensation ($0.20 per share)
Shares sold in private placement ($1.00 per share)
net of offering costs ($536,684)
(1,757,638)
(1,757,638)
2,016,362
27,345,000
3,774,000
8,500,000
1,700,000
1,700,000
277,500
55,500
55,500
9,500
9,500
35,000
35,000
35,000
7,654,500
7,117,816
7,117,816
Vested stock options
Stock based compensation ($1.00 per share)
(1,757,638)
Net loss
(5,211,514)
BALANCE, December 31, 2010
43,812,000 $
12,691,816 $
(6,969,152) $
(5,211,514)
5,722,664
5
See accompanying notes to consolidated financial statements.
Midas Gold, Inc.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period
April 2, 2009
(inception) through
December 31, 2009
For the
Year ended
December 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock based compensation
Depreciation
Changes in
Prepaid expense
Receivable
Accounts payable
Accrued salaries to related party
For the period
April 2, 2009
(inception) through
December 31, 2010
(5,211,514) $
(1,757,638) $
100,000
45,623
150,000
4,229
(6,969,152)
250,000
49,852
(24,975)
(19,975)
78,258
(45,000)
4,695
(5,072,888)
(33,592)
29,489
45,000
11,332
(1,551,180)
(58,567)
(19,975)
107,747
16,027
(6,624,068)
(135,805)
(92,369)
(64,585)
(18,000)
(15,710)
(326,469)
(26,790)
(6,785)
(257,070)
(17,430)
(160,000)
(468,075)
(162,595)
(92,369)
(71,370)
(18,000)
(257,070)
(33,140)
(160,000)
(794,544)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net of offering costs
Payment on note payable to Oberbillig
Proceeds from notes payable to founders
Payment of notes payable to founders
Payment of obligation to pay Gold Crest
Net cash provided by financing activities
8,817,816
(167,497)
8,650,319
3,599,000
561,060
(561,060)
(25,000)
3,574,000
12,416,816
(167,497)
561,060
(561,060)
(25,000)
12,224,319
Net increase in cash
Cash beginning of period
Cash end of period
3,250,962
1,554,745
4,805,707
1,554,745
1,554,745
$
4,805,707
4,805,707
39,171
$
71,672
25,000 $
25,000 $
216,690 $
866,750 $
25,000
25,000
216,690
866,750
Accrued interest payable
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment
Purchase of vehicles
Purchase of computers and software
Purchase of reclamation bond
Purchase of mining claims
Purchase of buildings and improvements
Purchase of royalty interest
Net cash used in investing activities
$
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid
$
Non-cash financing and investing activities
Shares issued for mining claims
Assumption of obligation to pay Gold Crest for mining claims
Mining claims purchased with note payable
Royalty interest purchased with note payable
32,501 $
$
$
$
$
6
See accompanying notes to consolidated financial statements.
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
1.
Description of Business
Midas Gold, Inc. (“the Company”) was formed on April 2, 2009 in the State of Washington. The
Company was organized to locate and develop mineral properties located principally in the
Stibnite-Yellow Pine Mining District in Valley County, Idaho (the “District”). The Company is an
exploration stage company and has incurred losses since inception (April 2, 2009). Due to losses
incurred in the exploration stage, the Company has relied on related party advances and sales of
its unregistered common stock to fund operations.
Letter of Intent signed with Vista Gold Corporation
In December of 2010, the Company entered into a letter of intent (“LOI”) with Vista Gold
Corporation (“Vista”) for the combination of the respective holdings of each in the StibniteYellow Pine Mining District. The LOI provides for the contribution by the Company and Vista
of their mining claims, interests and other assets in the District to a newly formed U.S.
corporation (“Newco”). Following the combination, Newco will be held 65% by Midas
shareholders and 35% by Vista. The combination will extinguish the Company’s Oberbillig
Royalty interest on Vista’s Yellow Pine property. Management expects the combination to close
by March 10, 2011, subject to all necessary shareholder and regulatory approvals.
2.
Summary of Significant Accounting Policies
Exploration Stage Enterprise
The Company’s Consolidated Financial Statements are prepared in accordance with accounting
principles governing development and exploration stage enterprises, as it devotes substantially
all its efforts to exploring for mining interests and developing opportunities that will eventually
provide sufficient net profits to sustain the Company’s existence. Until such interests and
opportunities are engaged in commercial production, the Company will continue to prepare its
consolidated financial statements in accordance with entities in the exploration stage.
Principles of Consolidation
The Company’s Consolidated Financial Statements have been prepared in accordance with
accounting principles generally accepted in the United States of America, and include the
Company’s accounts and those of its wholly-owned subsidiary, MGI Acquisition Corporation, an
Idaho corporation (“MGI”). All significant intercompany balances and transactions have been
eliminated in consolidation.
Cash and Cash Equivalents
For the purpose of the balance sheet and statement of cash flows, the Company considers all
highly liquid investments purchased, with an original maturity when purchased of three months
or less, to be a cash equivalent. Deposits on hand in individual banks in excess of Federal
Deposit Insurance Corporation (“FDIC”) limits ($250,000) are not insured by the FDIC.
7
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
2.
Summary of Significant Accounting Policies, continued:
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying
notes. Examples of areas requiring the use of estimates include the recoverability of mineral
properties, assumptions used in determining the fair value of stock based compensation and the
expected economic lives and rates for depreciation. Actual results could differ from those
estimates.
Exploration Costs
Exploration costs are expensed in the period in which they occur.
Net Loss Per Share
Basic and diluted loss per share are computed based on the weighted average number of shares
outstanding during the year ended December 31, 2010, and the period ended December 31, 2009.
Diluted net loss per share for the Company is the same as basic net loss per share, as the
inclusion of common stock equivalents would be anti-dilutive. At December 31, 2010, the
Company had 650,000 common stock options and 10,000,000 contingent common stock options
(see Note 7) that could dilute future periods’ earnings per share if net income was reported.
Income Taxes
Income taxes are recognized using the liability method whereby deferred income tax liabilities or
assets at the end of each period are determined using the tax rate expected to be in effect when
the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax
assets when it is more likely than not that some or all of these deferred tax assets will not be
realized.
Stock Based Compensation
The Company accounts for stock based compensation by measuring the cost of employee
services received in exchange for an award of equity instruments based on the estimated grantdate fair value of the award. The cost is recognized over the period during which an employee is
required to provide service in exchange for the award. Compensation costs for awards with
vesting conditions that are contingent on a performance condition are recognized when
management concludes that it is probable that the performance condition will be achieved.
8
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
2.
Summary of Significant Accounting Policies, continued:
Reclamation and Remediation
The Company’s properties have been and are subject to, standards for mine reclamation that
have been established by various governmental agencies. The Company accounts for asset
retirement obligations based on the fair value of the retirement obligation liability in the period
in which the Company incurs a legal obligation for the retirement of tangible long-lived assets. A
corresponding asset is also recorded and depreciated over the life of the asset. After the initial
measurement of the asset retirement obligation, the liability is adjusted at the end of each
reporting period to reflect changes in the estimated future cash flows underlying the obligation.
Determination of any amounts recognized upon adoption is based upon numerous estimates and
assumptions, including future retirement costs, future inflation rates and the credit-adjusted riskfree interest rates.
Environmental costs relating to properties put into production will be estimated based primarily
upon environmental and regulatory requirements, and are accrued and charged to expense over
the expected economic life of the operation using the units-of-production method. The liability
for reclamation is classified as current or long-term based on the expected timing of the
expenditures.
The Company accrues costs associated with environmental remediation obligations when it is
probable that such costs will be incurred and they are reasonably estimable. Such costs will be
based on management’s estimate of amounts expected to be incurred when remediation work is
performed. To date, management is unaware of any environmental proceedings or action pending
against the Company.
Buildings and Equipment
The Company’s buildings, vehicles and equipment are stated at cost, net of accumulated
depreciation. Depreciation is calculated using the straight-line method over the estimated useful
lives of the related assets. Equipment is depreciated over a 3 to 7 year life and vehicles are
deprecated over a 3 to 5 year life. The buildings are depreciated over a 7 to 10 year life. Major
replacements and improvements are capitalized while maintenance and repairs, which do not
improve or extend the useful lives of the respective assets, are charged to operations. The asset
and related accumulated depreciation accounts are adjusted for asset retirements and disposals
with the resulting gain or loss, if any, recorded in the consolidated statements of operations at the
time of disposal.
9
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
2.
Summary of Significant Accounting Policies, continued:
Mineral Properties
The Company capitalizes costs incurred in connection with acquiring mineral properties, mining
claims, royalty interests, and other mineral rights, while costs to maintain mineral rights and
leases are expensed as incurred. Should a property reach the production stage, these capitalized
costs would be amortized using the units-of-production method on the basis of periodic estimates
of ore reserves. Mineral properties are periodically assessed for impairment of value, and any
subsequent losses are charged to operations at the time of impairment. If a property is abandoned
or sold, its capitalized costs are charged to operations.
Fair Value Measurements
For other than stock based compensation, when required by accounting principles, the Company
determines fair value as the price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. Accounting standards provide
for three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets and liabilities.
Level 2 — observable inputs other than quoted prices in active markets for identical assets
and liabilities.
Level 3 — unobservable inputs in which there is little or no market data available, which
require the reporting entity to develop its own assumptions.
At December 31, 2010 and 2009, the Company has no assets or liabilities measured at fair value
on a recurring basis.
Fair Values of Financial Instruments
The carrying amounts of financial instruments including cash and notes payable approximated
their fair values using Level 1 inputs as of December 31, 2010 and 2009.
10
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
3.
Buildings and Equipment
At December 31, 2010 and 2009, the Company’s buildings and equipment were as follows:
2010
Vehicles
Buildings
Building Improvements
Computers and Software
Equipment
Accumulated Depreciation
Total Buildings and Equipment, net
4.
$
92,370
16,208
16,931
71,370
162,594
(49,852)
309,621
$
2009
$
$
7,930
9,500
6,785
26,789
(4,229)
46,775
Mineral Properties
At December 31, 2010 and 2009, the Company’s mineral properties were as follows:
Assignment of Gold Crest Rights
Oberbillig Property
Bradley Property (MGI)
Royalty Interest
Total Mineral Properties
$
50,000
248,760
225,000
1,026,750
$ 1,550,510
Assignment of Gold Crest Rights
On April 3, 2009, Gold Crest Mines, Inc. a Nevada corporation, (“Gold Crest”) entered into an
Amended and Restated Asset Purchase Agreement by and between Gold Crest, as seller, and
Frank Duval (one of the Company’s founders and a director), as buyer, pertaining to the
assignment of Gold Crest’s unpatented mining claims in the District. In addition, on March 13,
2009, Frank Duval and Gold Crest also entered into 1) an Assignment of Contractual Rights and
Interests Agreement whereby Gold Crest assigned its interests in a Mining Lease and Option to
Purchase Agreement pertaining to patented claims in the District owned by Bradley Mining Co.,
a California corporation, 2) a Real Property Sales Agreement and Escrow Instructions with JLO,
LLC, an Idaho limited liability company, pertaining to rights relating to patented mining lode
and mill site mining claims in the District, and 3) assignment of the rights to a certain Royalty
Sales Agreement and Escrow Instructions with the relatives and heirs of J.J. Oberbillig
(deceased) and other associated individuals and Idaho limited liability companies (the
“Oberbillig Group”).
11
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
4.
Mineral Properties, continued:
As consideration for the aforementioned agreements with Gold Crest, Mr. Duval paid $50,000;
$25,000 of this amount was paid in cash at the time of closing and Mr. Duval agreed to pay the
remaining $25,000 on or before October 1, 2009.
On April 28, 2009, Mr. Duval assigned his rights and interests in the aforementioned agreements
with Gold Crest to the Company, in exchange for 5,000,000 shares of the Company’s common
stock (valued at $0.005 per share) and the Company’s assumption of Mr. Duval’s obligation to
pay Gold Crest the $25,000 due on or before October 1, 2009. The Company recorded $50,000
in its mineral property asset accounts as a result of the assignment.
Royalty Interest
In May of 2009, the Company purchased a royalty interest (“the Oberbillig Royalty”) from the
Oberbillig Group. The Oberbillig Royalty interest included the rights, title and interests of
United Mercury Company, an Idaho Corporation, to five-percent of the net smelter returns, net
revenues, and net mint returns received from potential future mining operations on certain real
property located in the District. The purchase price was $1,026,750, of which $160,000 was paid
in cash and the balance of which ($866,750) was paid by a promissory note (see Note 5).
Oberbillig Property
Concurrent with the Oberbillig Royalty purchase, the Company also purchased certain patented
milling and lode mining claims and a storage building located in the District from the Estate of
J.J. Oberbillig and an Idaho limited liability company associated with the Estate of J.J.
Oberbillig. The total purchase price was $256,690, of which $40,000 was paid in cash and the
balance of which ($216,690) was paid by delivery of a promissory note (see Note 5). Of the total
purchase price, $7,930 was allocated to the storage building based on management’s estimate of
its fair value on the acquisition date. The remaining balance of $248,760 was allocated to
mineral properties.
Bradley Claims
In April of 2009, the Company’s wholly owned subsidiary, MGI, purchased nine patented
mining claims located in the District from Bradley Mining Company, a California corporation,
for $225,000 cash.
12
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
5.
Notes Payable
Notes payable at December 31, 2010 and 2009, are as follows:
2010
Note payable to Oberbillig group, bearing interest at 3%;
principal and interest payable in annual installments of
$160,000; maturing June 2, 2015; collateralized by a
mortgage to a royalty interest
$
Note payable to JJO, LLC (The Estate of J.J. Oberbillig)
bearing interest at 3%; principal and interest payable in
annual installments of $40,000; maturing June 2, 2015;
collateralized by a mortgage to certain mining properties
Less: Current Portion
Total
2009
732,752
$
183,190
915,942
(172,521)
$ 743,421
866,750
216,690
1,083,440
(188,668)
$ 894,772
At December 31, 2010, principle payments on the notes are due as follows:
Year Ending
December 31,
2011
2012
2013
2014
2015
$
$
6.
172,521
177,697
183,028
188,519
194,177
915,942
Income Taxes
At December 31, 2010 and 2009, the Company did not recognize an income tax expense or
benefit.
The components of the deferred tax assets as of December 31, 2010 and 2009 are as follows:
2010
Deferred tax assets
Compensation expense
Exploration expense
Depreciation
Net operating loss carryforwards
Total deferred tax asset
Valuation allowance
Deferred tax asset
$
$
40,800
2,053,700
500
493,800
2,588,800
(2,588,800)
-0-
2009
$
$
37,400
484,800
127,900
650,100
(650,100)
-013
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
6.
Income Taxes, continued:
The Company believes that it is more likely than not that the deferred tax assets will not be
realized and therefore established a valuation allowance against the net deferred tax asset.
The Company has incurred a federal net operating loss of approximately $1,322,000, and an
Idaho state net operating loss of approximately $623,600. The net operating losses will expire in
2029 and 2030.
The Company’s significant reconciling items between the statutory tax rate and the effective tax
rate are meals and entertainment, and the change to the valuation allowance for the year.
The Company has analyzed its filing positions in all jurisdictions where it is required to file
income tax returns, and found no positions that would require a liability for unrecognized income
tax benefits to be recognized. The Company has established that it will deduct any interest and
penalties assessed as interest deductions in its financial statements. The Company is subject to
tax examinations for the years 2010 and 2009.
7.
Stock Based Compensation
In July of 2009, the Company’s Board of Directors resolved to adopt the Midas Gold, Inc. 2009
Equity Incentive Plan, (“the Plan”). The Plan provides for the grant of qualified incentive stock
options, non-qualified incentive stock options, restricted stock awards, and stock appreciation
rights to officers, directors, employees and other parties as approved by the Board of Directors.
The maximum aggregate numbers of shares which may be awarded and delivered under the Plan
shall not exceed 15,000,000 shares. Options under this Plan shall not exceed 15,000,000 shares.
Capitalization Adjustment
If any change is made to the shares by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the outstanding shares as a
class without the Company’s receipt of consideration, appropriate adjustments shall be made to
(i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or
class of securities and/or the price per share covered by outstanding awards under the Plan and
(iii) the maximum number of shares which may be granted as incentive stock options under the
Plan, among other adjustments as determined by the Board of Directors.
Designation
Each option shall be designated in an award agreement as either an incentive stock option or a
nonqualified stock option. However, notwithstanding the foregoing, if an option is not
designated as an incentive stock option, such option will be deemed to be a nonqualified stock
option. To the extent that the aggregate fair market value (determined at the time of grant) of the
shares with respect to which options designated as incentive stock options are exercisable for the
first time by any employee during any calendar year exceeds $100,000, such excess options shall
be treated as nonqualified stock options.
14
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
7.
Stock Based Compensation, continued:
Method of Payment
The consideration to be paid for any shares to be issued upon exercise or other required
settlement of an award, including a method of payment, shall be determined by the appropriate
officer of the Company at the time of settlement, and which forms may include: (i) check; (ii)
wire transfer; (iii) payroll deductions (accumulated without any increase for interest); and (iv)
tender of shares of common stock owned by the participant in accordance with rules established
by the Board of Directors.
A summary of stock option activity within the Company’s stock based compensation plans for
the year ended December 31, 2010 is as follows:
Outstanding at December 31, 2009
Granted
Outstanding at December 31, 2010
Vested and exercisable at
December 31, 2010
Options
Price
10,600,000
(a)
$ 0.219
Life
(Years)
(b)
4
50,000
$ 0.200
2
10,650,000
$ 0.219
4
650,000
$ 0.200
4
(a) Weighted average exercise price per share.
(b) Weighted average remaining contractual life.
The weighted average grant-date fair value of stock option awards granted and the key
assumptions used in the Black-Scholes valuation model to calculate the fair value are as follows
for the year ended December 31, 2010 and the period ended December 31, 2009. For the period
ended December 31, 2009, the Company recognized $120,000 in stock based compensation in
the form of non-qualified stock options. The stock based compensation expense was recognized
in connection with exploration and general and administrative services provided by consultants
to the Company. For the year ended December 31, 2010, the Company recognized $9,500 in
stock based compensation in the form of a non-qualified stock option. The stock based
compensation expense was recognized in connection with exploration services provided by a
consultant to the Company.
15
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
7.
Stock Based Compensation, continued:
Weighted average fair value options granted
Key assumptions used in determining fair value
Risk-free interest rate
Expected term (in years)
Expected stock price volatility
Expected dividend yield
2010
$ 0.20
1.05%
2.0
200% - 600%
0.00%
2009
$ 0.20
1.35%
2.5
200% - 600%
0.00%
The aggregate intrinsic value of options vested and exercisable during the year ended December
31, 2010 and period ended December 31, 2009, was $520,000 and $480,000 respectively.
The grant-date fair value was determined using the Black-Scholes option valuation model which
was developed for use in estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price volatility. In connection with
estimating stock price volatility the Company considered its limited historical price volatility and
the stock price volatility of companies within its peer group. Expected term is based on the
estimated time the options will be exercised. The risk-free interest rate is based on the U.S.
treasury security rate with the equivalent term in effect as of the date of grant. Although the
Company is using the Black-Scholes option valuation model, management believes that because
changes in the subjective input assumptions can materially affect the fair value estimate, this
valuation model does not necessarily provide a reliable single measure of the fair value of its
stock options.
Contingent Stock Based Compensation
In 2009, the Company’s Board of Directors granted the Company’s founders, Frank Duval and
David Elliott, options to purchase the Company’s common stock (“the Contingent Options”)
contingent upon the Company establishing or acquiring 2.5 million ounces of gold resources
(“the Contingency”). The resources must be documented by a technical report prepared by a
nationally recognized engineering firm and in accordance with Canadian National Instrument 43101 and may be discovered on the Company’s existing mineral properties or acquired in a future
business transaction. The Contingent Options are summarized as follows:
Founder
Frank Duval
David Elliott
Exercise Price
$0.22
$0.22
Number of Options
5,000,000
5,000,000
Term
5 years
5 years
16
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
7.
Stock Based Compensation, continued:
The fair value of the Contingent Options was determined to be $2,000,000 and was estimated on
the date of grant using the same valuation model and assumptions used for non-contingent
options described above. No compensation costs were recognized for the Contingent Options
during the year ended December 31, 2010, and the period ended December 31, 2009. When it
becomes probable that the Contingency will be satisfied, the Company will recognize
compensation expense based upon the grant date fair value. The Company anticipates that the
contingency will be satisfied sometime in 2011 when the combination of Vista Gold
Corporation’s Yellow Pine holdings occurs.
8.
Stockholders’ Equity
Shares Issued for Mineral Properties
On April 28, 2009, Frank Duval, one of the Company’s founders and a director, assigned his
rights in various mining properties and interests in the District (see Note 4) to the Company in
exchange for 5,000,000 shares of the Company’s common stock deemed to have a fair value of
$25,000 or $0.005 per share.
Shares Issued for Compensation
On July 1, 2009, the Company issued 600,000 shares of its common stock to reward the efforts
of certain geological consultants who had made significant contributions in furtherance of the
Company’s project and business interests. The shares were valued at $0.05 per share based upon
management’s estimate of the fair value of the shares at the date of issuance.
During the year ended December 31, 2010, the Company issued 30,000 shares of its common
stock to a consultant for services rendered. Additionally the Company issued 277,500 shares of
its common stock to seven different consultants for services, and 5,000 shares of its common
stock to two different employees for services. In total, the Company recognized $90,500 of
compensation expense, based on management’s estimate of the fair value of the stock at each
issuance date.
Shares Sold for Cash in Private Placements
During the year ended December 31, 2010, the Company sold 8,500,000 shares of common stock
for $1,700,000 or $0.20 per share. Additionally, the Company sold 7,654,500 shares of its
common stock for $7,654,500 or $1.00 per share and paid or accrued a finder’s fee of $536,684;
$366,815 of which was paid to a company controlled by a major shareholder.
During July of 2009, the Company sold 5,000,000 shares of its common stock for $250,000 or
$0.05 per share to David Elliott and other parties associated with him. Mr. Elliott is one of the
Company’s founders and a significant shareholder. In addition, during 2009 the Company sold
16,745,000 shares of its common stock for $3,349,000 or $0.20 per share.
17
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
8.
Stockholders’ Equity, continued:
Increase in Capitalization
On February 16, 2010, the Company amended the Company’s Articles of Incorporation to
increase the Company’s authorized shares from 50,000,000 to 100,000,000.
9.
Related Party Transactions
In addition to the related party transactions described in Notes 4, 7 and 8, the following
transactions occurred during the year ended December 31, 2010 and the period ended December
31, 2009:
Relinquishment of Royalty Interest Rights
In 2009, and in connection with the Oberbillig Royalty purchase (see Note 4) the Company
agreed to assign Frank Duval, one of the Company’s founders and a director, a 20% interest in
the Oberbillig Royalty (amounting to an undivided one percent net smelter royalty interest to the
mining claims and interests covered by the Oberbillig Royalty), as compensation for his role in
acquiring the royalty interest and mineral properties. The assignment would become effective at
such time as the Company’s indebtedness to the Oberbillig Group and the Estate of J.J.
Oberbillig is paid.
On February 19, 2010, Mr. Duval, believing that it would benefit the Company, relinquished his
rights and interests in and to the 20% of the Oberbillig Royalty. Accordingly, the Company’s
financial statements as of December 31, 2009 and December 31, 2010 do not include
compensation expense related to its former obligation to assign Mr. Duval a 20% investment in
the Oberbillig Royalty.
Accrued Salary to Related Party
At December 31, 2009, the Company owed Frank Duval $45,000 in unpaid salary. In January of
2010 the accrued salary was paid in full to Mr. Duval.
10.
Commitments and Contingencies
Office Rent
The Company’s corporate offices are located in Spokane Valley, Washington and subject to
monthly rental payments of $2,830 until December 2011. The Company’s exploration office and
warehouse is located in McCall, Idaho and subject to monthly rental payments of $3,500 until
May 2011.
18
Midas Gold, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
10.
Commitments and Contingencies, continued:
Mining Claim Assessments
The Company currently holds 477 mining claims on which it has an annual assessment
obligation of $66,780 in order to maintain the claims in good standing.
Environmental Liabilities
The Company’s mineral properties are located in the Stibnite-Yellow Pine Mining District in
Valley County, Idaho. Historically, mining properties in the District and the former owners
associated with them have been the subject of environmental regulatory actions from federal and
state agencies. The Company’s management believes that the Company is currently in
substantial compliance with environmental regulatory requirements, including those associated
with its recent exploration activities. The Company recognizes, however, that in some cases
future environmental expenditures cannot be reliably determined due to the uncertainty of
specific remediation methods, conflicts between regulating agencies relating to remediation
methods and environmental law interpretations, and changes in environmental laws and
regulations. In addition, certain environmental regulations may inure financial liabilities to
successors in interests of properties where historical environmental damage has taken place.
Unanticipated future environmental regulatory actions would have an adverse affect on the
Company’s operations, the range of possible losses which cannot be reasonably estimated at this
time.
The Company was recently advised of a proposed notice of environmental conditions pertaining
to its mineral properties acquired from Bradley Mining Company which, if executed in its
current form, could have a material adverse effect on the Company’s ability to use its mineral
property and could limit its ability to transfer such properties to a third party. The Company is
currently investigating the proposed notice in order to determine whether it will have material
adverse effect on its continuing and proposed operations.
11.
Subsequent Events
Management evaluates, as of each reporting period, events or transactions that occur after the
balance sheet date through the date that the financial statements are issued or are available to be
issued. The Company has evaluated its financial statements as of December 31, 2010 for
subsequent events through February 8, 2011, the date the financial statements were available to
be issued, and determined that recognized subsequent events and nonrecognized subsequent
events existed. Recognized subsequent events provide additional evidence about conditions that
existed at the balance sheet date, including estimates and usually are reflected in the financial
statements at the balance sheet date. Nonrecognized subsequent events that did not exist as of the
balance sheet date but arose after that date, usually only require disclosure in the financial
statements rather than result in an adjustment to the financial statements.
19
Management’s Discussion and Analysis
Management’s discussion and analysis (“MD&A”) is intended to help the reader understand the
significant factors that have affected Midas’ performance and may affect its future performance. The
MD&A should be read in conjunction with the Midas’ audited consolidated financial statements for the
years ended December 31, 2010 and 2009 and the related notes contained therein, which appear
elsewhere in this Appendix B. These financial statements have been prepared in accordance with U.S.
generally accepted accounting principles.
Overview
Since inception on April 2, 2009, Midas has been engaged in the exploration and acquisition of mineral
properties within the Stibnite-Yellow Pine District in south-central Idaho (the “District”). Our principal
capital resources have been acquired through sales of unregistered common stock. Our objective is to
maximize value to our shareholders through a combination of market recognition of asset value and asset
growth. Our goals for 2011 include an escalated drilling and exploration campaign aimed at growing and
upgrading confidence levels of our existing mineral resource base, advancing economic studies and
advancing the regulatory process for future project activities.
Letter of Intent signed with Vista Gold Corp.
In December 2010, we entered into a letter of intent (“LOI”) with Vista Gold Corp. and its Idaho Gold
Resources LLC subsidiary (“Idaho Gold”) for the combination of their respective holdings in the District.
The LOI provides for the contribution by Midas and Idaho Gold of their mining claims, interests and
other assets in the district to a newly formed Canadian corporation, Midas Gold Corp. (“Midas Canada”).
Following the combination, Midas Canada will be owned 65% by Midas shareholders and 35% by Vista
on a fully diluted basis. Management expects the combination to close in early April 2011, subject to all
necessary shareholder and regulatory approvals.
The practical effect of the combination is to consolidate Midas’ and Idaho Gold’s respective mineral
properties in the District into one entity, which will then focus on the continued exploration of the mineral
properties.
Midas’ and Idaho Gold’s mineral properties constitute the majority of the mining claims in the District
and are contiguous to each other, with Midas’ mining claims surrounding those of Idaho Gold. Based on
historical development records and the results of Midas’ more recent exploration activities, management
reasonably believes the consolidated mineral properties could contain gold resources of a magnitude and
grade sufficient to support an economically viable mining operation (see “Subsequent Events” below).
Results of Operations
Cautionary Note: Midas cannot provide annual comparative operating results because the period from
the date of inception (April 2, 2009 to December 31, 2009) is less than a full year.
General and administrative costs increased by $382,230 in 2010 to $611,026 for the year ended December
31, 2010, compared to $228,796 for the period from April 2, 2009 (inception) to December 31, 2009.
These costs increased primary as a result of a full year of costs as opposed to a nine month period in 2009,
the increase in salaries related to the hiring of additional staff in January, 2010 and the accounting for a
MANAGEMENT’S DISCUSSION AND ANALYSIS - 1
full year salary for the president/chief executive officer, in comparison to three months salary expensed in
2009. The increase in general and administrative expenses is also attributable to increased legal, travel
and costs associated with the occupancy of Midas’ corporate office space.
Exploration expenses increased by $3.0 million, to $4.5 million, in 2010 compared to $1.5 million for the
period April 2, 2009 (inception) to December 31, 2009. The expenses recorded in 2010 represent the
costs associated with drilling and exploration activities at the Golden Meadows project in the District.
Exploration activities during 2010 included an airborne magnetic survey over the entire district, ground
geophysics, mapping and prospecting, drilling, and continued collection and compilation of historic data.
The following table provides a breakdown of the major expense categories of exploration costs for the
twelve months ended December 31, 2010 and the nine month period April 2, 2009 (inception) through
December 31, 2009.
Exploration Expense
Labor costs
Consulting
Geochemistry and Geophysics
Environmental
Road, Excavating
Drilling
Haulage-Helicopter
Field Supplies
Totals
Twelve months ended
December 31, 2010
$ 468,280
663,449
410,607
141,506
125,200
2,056,570
158,625
187,446
$4,211,683
April 2, 2009 (inception)
through December 31, 2009
$
38,901
428,708
262,852
49,774
11,228
464,426
9,244
45,167
$1,310,300
Liquidity, Capital Resources and Financial Condition
Midas’ cash balance at December 31, 2010, was $4.8 million, which was an increase of $3.3 million from
the balance at December 31, 2009. Its cash position at such date consisted primarily of cash and short
term investments. The increase in liquidity in 2010 was the result of two private placements of common
stock during the year, which resulted in proceeds of $8.8 million, net of offering cost.
It is management’s opinion that based on Midas’ current liquidity position and proceeds from planned
future sales of the Company’s shares in 2011, it will have sufficient assets to discharge its liabilities as
they become due, sustain its capital expenditures and fund its 2011 exploration program. However, no
assurance can be given that these efforts will prove to be successful.
Capital spending in 2010 totaled $308,469. Acquisitions included pickup trucks, a backhoe, an office
trailer, generators and other miscellaneous equipment for use at the project site, along with purchases of
computers and software for use at the corporate office.
Capital spending in 2009 totaled $51,005. Acquisitions included printers, software, furniture and a phone
system for use at the corporate office in addition to purchases of rock saws and two ATVs with a haul
trailer for use at the project site along with improvements made to our on-site metal building.
Long-term liabilities decreased by $151,351 to $743,421 during the current period, from $894,772 at
December 31, 2009. Our long-term liability consists of two promissory notes issued in connection with
the purchase of the Oberbillig Royalty Interest and patented milling and lode claims in 2009.
MANAGEMENT’S DISCUSSION AND ANALYSIS - 2
Stockholders’ equity at December 31, 2010 was $5.7 million. The Company issued 16,154,500 million
shares during the year in connection with two private placements. Shareholders’ equity was increased by
$100,000 for the issuance of 312,500 shares and an option for 50,000 shares to various consultants for
services rendered. During 2010, shareholders’ equity decreased as a result of a net loss of $5.2 million
for the year.
Equity Offerings
During the year ended December 31, 2010, Midas sold 8,500,000 shares of unregistered common stock in
a private placement at $0.20 per share, resulting in proceeds of $1.7 million. The Company also sold
7,654,500 shares of its common stock in an additional private placement during the year, at $1.00 per
share, resulting in net proceeds of $7.1 million. Proceeds from the offerings were used to fund the
Company’s exploration expenditures at its Golden Meadows project, general and administrative expenses,
land payments and capital acquisitions.
Contractual Obligations
Midas’ contractual obligations consist of two leases, annual claims fees and annual payments on two
promissory notes entered into in conjunction with the Oberbillig Land Agreement and the Oberbillig
Royalty Agreement described elsewhere in this Proxy Statement. Midas leases corporate office space in
Spokane Valley, Washington at a current monthly rental rate of $2,830 and leases an exploration office
and warehouse space at a current monthly rental rate of $3,500. The corporate office lease expires in
December 2011 and the exploration office and warehouse space lease expires in 2011. The Company
also currently holds 477 unpatented mining claims and pays annual assessment fees of $66,780 in order to
maintain the claims in good standing. The two promissory notes delivered pursuant to the Oberbillig
Land Agreement and the Oberbillig Royalty Agreement have a combined annual payment of $200,000,
bear interest at 3% and mature on June 2, 2015. The notes are secured by mortgages on the associated
mineral properties and royalty interest. Midas was current with all the above mentioned obligations at
December 31, 2010.
Fair Value of Financial Instruments
For other than stock based compensation, Midas determines fair value as the price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for
the asset or liability in an orderly transaction between market participants on the measurement date.
Accounting standards provide for three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets and liabilities.
Level 2 — observable inputs other than quoted prices in active markets for identical assets and
liabilities.
Level 3 — unobservable inputs in which there is little or no market data available, which require the
reporting entity to develop its own assumptions.
The carrying amounts of financial instruments including cash and notes payable approximated their fair
values using Level 1 inputs as of December 31, 2010 and 2009.
At December 31, 2010 and 2009, the Company has no assets or liabilities measured at fair value on a
recurring basis.
MANAGEMENT’S DISCUSSION AND ANALYSIS - 3
Related Party Transactions
Midas has engaged in several significant transactions with its affiliates and other related parties since its
inception. These transactions are summarized below:
On April 28, 2009, Frank Duval assigned his rights and interests in and to the Duval-NiagaraGold Crest Agreement (including the Bradley Mining Company Agreement, the Oberbillig Land
Agreement and the Oberbillig Royalty Agreement that either arose out of or were subsumed in
such agreement) to Midas or MGI, in exchange for 5,000,000 Midas Shares, valued at $0.005 per
share, and Midas’ assumption of Mr. Duval’s obligation to pay Gold Crest the remaining $25,000
due under the Duval-Niagara-Gold Crest Agreement defined the Company’s Proxy Statement.
Mr. Duval was a director of Midas and its president and chief executive officer as of the date of
the assignment.
On July 23, 2009, Midas and MGI assigned Frank Duval the following net smelter royalty
interests in and to Midas’ mining claims and interests in the District: (a) a one percent net smelter
royalty interest in and to the unpatented mining claims that Midas acquired from Gold Crest; (b) a
one percent net smelter royalty interest in and to the mining claims that Midas acquired pursuant
to the Oberbillig Land Agreement; and (c) a twenty percent net smelter royalty interest in and to
the five percent net smelter royalty interest that Midas acquired pursuant to the Oberbillig
Royalty Agreement. Such net smelter royalty interests were assigned to Mr. Duval in partial
consideration of his assignment of the Duval-Niagara-Gold Crest Agreement (including the
Bradley Mining Company Agreement, the Oberbillig Land Agreement and the Oberbillig Royalty
Agreement that either arose out of or were subsumed in such agreement) to Midas and MGI. Mr.
Duval subsequently canceled these royalty interests.
On July 23, 2009, Midas granted Tom Henricksen, a Midas affiliate, 250,000 Midas options,
exercisable at $0.20 per share, as consideration for services rendered by him in his capacity as a
director of the Company.
On July 23, 2009, Midas granted Heather Ennis, a Midas affiliate, 100,000 Midas options,
exercisable at $0.20 per share, as consideration for services rendered by her in her capacity as a
director and executive officer of the Company.
On July 23, 2009, Midas granted Peter Tegart, a Midas affiliate, 250,000 Midas options,
exercisable at $0.20 per share, as consideration for services rendered by him in his capacity as a
director of the Company.
On July 23, 2009, Midas granted Frank Duval 5,000,000 Midas options, exercisable at $0.22 per
share. The Midas options were granted to Mr. Duval in partial consideration for the cancellation
of the net smelter royalty interests described above and vested in February 2011 upon Midas’
receipt of a technical report prepared by a nationally recognized mining engineering firm in
accordance with Canadian National Instrument 43-101 to the effect that Midas’ mineral
properties located in the District, Idaho, including future acquisitions of claims and interests in the
District contain 2,500,000 or more ounces of measured, indicated and inferred gold resources.
On July 23, 2009, Midas granted David Elliott, a Midas affiliate, 5,000,000 Midas options,
exercisable at $0.22 per share. The Midas options were granted to Mr. Elliott as partial
consideration for his services in capitalizing Midas and vested in February 2011 upon Midas’
receipt of a technical report prepared by a nationally recognized mining engineering firm in
MANAGEMENT’S DISCUSSION AND ANALYSIS - 4
accordance with Canadian National Instrument 43-101 to the effect that Midas’ mineral
properties located in the District, Idaho, including future acquisitions of claims and interests in such
district, contain 2,500,000 or more ounces of measured, indicated and inferred gold resources.
On February 15, 2011, Midas granted Stephen Quin, a Midas affiliate, 2,000,000 Midas options,
exercisable at $0.50 per share, as consideration for prospective services to be rendered by him in
his capacity as a director and executive officer of the Company.
On February 15, 2011, the Board of Midas approved the transfer and assignment of 500,000 of
the options exercisable at $0.22 from each of David Elliott and Frank Duval to Stephen Quin and,
in addition, an additional 650,000 of David Elliott’s options exercisable to four unrelated parties.
The fair value of the $0.22 options granted to Mr. Duval and Mr. Elliott was determined to be $2,000,000
and was estimated on the date of grant using the Black-Scholes valuation model (see “Subsequent
Events”).
At December 31, 2009, Midas owed president and chief executive officer $45,000 in unpaid salary. This
accrued salary was paid in full in January 2010.
During the year ended December 31, 2010, the Company sold 7,654,500 shares of its common stock in
one of two private placements and paid a commission of $536,684, $366,815 of which was paid to a
company controlled by a major shareholder.
Off Balance Sheet Arrangements
Midas has no off balance sheet arrangements as of December 31, 2010.
Legal Proceedings
Midas was not a party to any legal proceedings as of December 31, 2010. However certain of its mineral
properties in the District were subject to such proceedings at such date, as is disclosed in the section of the
Company’s Proxy Statement entitled “Legal Proceedings.”
Risks and Uncertainties
Development Risk
As is described elsewhere in the Company’s Proxy Statement, in the section entitled “Summary
Information Concerning the District and the Mineral Properties,” any development of our mineral
properties in the District will require compliance with extensive permitting and approval requirements
administered by a variety of federal, state and local regulatory agencies and authorities. Obtaining such
permits and approvals is reasonably expected to take years. Even if such permits and approvals are
granted, any proposed development of our mineral properties will likely be challenged on environmental
grounds by regional and national environmental organizations. Some of these challenges could be
substantial and ongoing. Although our management has generally been successful in addressing
environmental challenges in other contexts, we cannot predict with any degree of certainty how any
threatened or pending challenge would be resolved. Continued court challenges would inevitably delay
us from proceeding with any planned development, and a successful challenge would prevent us from
developing our mineral properties in the District at all.
MANAGEMENT’S DISCUSSION AND ANALYSIS - 5
Liquidity Risk
There is the risk that Midas will not be able to meet its financial obligations. Since its inception Midas
has raised capital through sales of its common stock. If such funding is not available in the future, Midas’
operations would be adversely effected. The Company currently has no other source of capital. The
Company manages its liquidity risk by planning, budgeting, monitoring and making necessary
adjustments to cash flow to support its operating requirements.
Commodity Price Risk
Metal prices have shown extreme volatility in the past and are beyond Midas’ control. This volatility
could affect the amount of revenues, if any, derived from any future production of the Company’s mineral
reserves.
Governmental Regulation Risk
Midas’ activities are subject to extensive laws and regulations governing environmental protection and
employee health and safety. Although the Company believes it is currently in compliance with such laws
and regulations, there can be no assurance that it has been or will be at all times in complete compliance.
The cost and time involved with complying with such laws will not materially and adversely affect the
Company’s results of operations or financial condition.
Economic and Political Risk
The Company’s mineral exploration and development activities may be adversely affected by political
and economic instability in the countries it operates in. Such events may negatively impact Midas.
Mineral resource exploration and development is a speculative business. Mineral reserves and mineral
resource quantification is based on estimates and the Company provides no assurance that these estimates
will not vary in the future.
Title Risk
Despite the fact that the Company has conducted the usual due diligence in determining title to its mineral
properties, there can be no assurance that such title and its validity will not be disputed in the future by
others claiming title to all or parts of the Midas properties.
Concentration Risk
The Company maintains a significant cash balance with one financial institution. Deposits in individual
banks in excess of Federal Deposit Insurance Corporation (“FDIC”) limits ($250,000) are not insured by
the FDIC. To help alleviate this risk during the year, the Company purchased various certificates of
deposit (“CD’s”) with numerous financial institutions, in quantities of $250,000 or less and with
maturities between one and six months. At December 31, 2010, all certificates of deposit had reached
maturity and were not renewed.
Critical Accounting Policies
Our significant accounting policies are presented in Note 2 of our audited consolidated financial
statements for the years ended December 31, 2010 and 2009, which appear elsewhere in the Company’s
Proxy Statement. As described in Note 2, we are required to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Our estimates are based on our
MANAGEMENT’S DISCUSSION AND ANALYSIS - 6
experience and our interpretation of economic, political, regulatory and other factors that influence our
business. These estimates have a significant effect on the financial statements and actual results may
differ from our estimates. The major critical estimates include but are not limited to the following:




Mineral Resource and Mineral Reserves estimates;
Carrying Values of Mineral Properties, Plant and Equipment;
Valuation of Stock Based Compensation;
Valuation Allowances for future Income taxes.
Outstanding Share Data
On February 16, 2010 Midas increased the authorized number of its authorized no par common shares
from 50 million to 100 million. The following table sets out the common shares and options outstanding
as at December 31, 2010.
Outstanding as at December 31, 2010
Common shares issued and outstanding
43,812,000
Options outstanding
10,650,000
54,462,000
Total
As of December 31, 2010, the Company had 10,650,000 options outstanding at a weighted average
exercise price of $0.219 and a weighted average life of four years. Of the 10,650,000 outstanding
options, 650,000 were vested and exercisable at December 31, 2010. Subsequent to year end, an
additional 10,000,000 options were vested (see “Subsequent Events”).
Subsequent Events
On January 24, 2011, an option previously awarded to a consultant for 50,000 shares was exercised for
proceeds of $10,000. Additionally, an option to purchase 2,000,000 shares of the common stock of the
Company was granted on February 15, 2011 to Stephen Quin, Midas president and chief executive
officer. The option has an exercise price of $0.50 per share and an expiration date of February 14, 2016.
The option vests one-third upon date of grant, one-third on August 14, 2011 and one-third on February
14, 2012.
On February 15, 2011, the Board of Midas approved the transfer and assignment of 500,000 of the
options exercisable at $0.22 from each of David Elliott and Frank Duval to Stephen Quin and, in addition,
an additional 650,000 of David Elliott’s options exercisable to four unrelated parties.
On February 22, 2011, Midas announced mineral resource estimates for its Hanger Flats and West End
deposits which resulted in the vesting of the 10 million $0.22 options granted during 2009 to Frank Duval
and David Elliott. Midas recognized $2,000,000 of compensation expense in February 2011 upon the
vesting of these options.
On February 23, 2011, Midas announced that it had executed a combination agreement with Vista Gold
Corp., Midas and Vista will each contribute their respective Idaho gold assets through a share exchange
and contribution to Midas Gold Corp., a new Canadian private company. The plan of share exchange will
be voted by proxy at the special meeting of Midas shareholders to be held on April 1, 2011.
Compliance with National Instrument 43-101
The technical information in this MD&A has been prepared in accordance with Canadian regulatory
requirements set out in National Instrument 43-101 and reviewed by Stephen P. Quin, P. Geo., President
MANAGEMENT’S DISCUSSION AND ANALYSIS - 7
and CEO of Midas Gold, Inc. The exploration activities at the Golden Meadows Project were carried out
under the supervision of Christopher Dail, C.P.G., Qualified Person and Project Manager for the Golden
Meadows Project.
For readers to fully understand the information in this MD&A, they should read the technical reports
(available on www.midasgoldinc.com) in their entirety, including all qualifications, assumptions and
exclusions that relate to the information set out in this presentation which qualifies the technical
information. Readers are advised that mineral resources that are not mineral reserves do not have
demonstrated economic viability. The Technical Reports are each intended to be read as a whole, and
sections should not be read or relied upon out of context. The technical information in those reports is
subject to the assumptions and qualifications contained in the technical reports.
Cautionary Note to U.S. Investors – This MD&A and the mineral resource estimates referenced in this
MD&A use the terms “Measured Mineral Resources”, “Indicated Mineral Resources”, “Measured &
Indicated Mineral Resources” and “Inferred Mineral Resources.” We advise you that, while these terms
are defined in and required by Canadian regulations, they are not defined terms under the U.S. Securities
and Exchange Commission (“SEC”) Industry Guide 7 and are not permitted to be used in period reports
and other information filed with the SEC. “Inferred Mineral Resources” have a great amount of
uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. The
SEC normally only permits issuers to report mineralization that is compliant with Industry Guide 7,
generally comprising only proven or probably reserves which can be demonstrably and economically
mined. U.S. investors are cautioned not to assume that any part or all of mineral deposits in these
categories will ever be converted into reserves. Midas does not have a class of outstanding securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 and is not otherwise required to
file periodic and other reports and information with the SEC.
MANAGEMENT’S DISCUSSION AND ANALYSIS - 8
Idaho Gold’s Selected Financial Data
Idaho Gold’s fiscal year ends on December 31st of each year. The following table sets forth
selected historical financial data concerning the limited liability company as of and for the years ended
December 31, 2010 and 2009. The selected financial data is derived from Idaho Gold’s unaudited
financial statements for such years and should be read in conjunction with Idaho Gold’s financial
statements and the notes thereto.
For the Years Ended December 31,
2010
2009
Balance Sheet Data (at period end):
ASSETS
Mineral properties
800,000
700,000
$800,000
$700,000
Idaho Gold Resources, LLC (parent equity)
Deficit accumulated during exploration stage
Total stockholders’ Equity
1,440,809
(640,809)
800,000
985,695
(285,696)
700,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$800,000
$700,000
239,753
115,312
5,925
1,832
355,065
7,757
$355,065
$7,757
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
Statement of Operations Data:
Exploration expense
General and administrative expense
Total expenses
NET LOSS
Unaudited Pro Forma Combined Financial Statements
The unaudited pro forma consolidated financial statements below gives effect to Vista’s and Midas’s proposed
contributions in certain mining properties in the Yellow Pine Mining District in Valley County, Idaho. The pro
forma financial statements purport Midas’s consolidated balance sheet as of December 31, 2010 and its statement of
operations for the year ended December 31, 2010, combined with the balance sheet of Idaho Gold Resources, LLC
as if the combination of the Vista and Midas assets had occurred as of January 1, 2010. The following unaudited pro
forma combined statements of financial position and continuing operations have been prepared based on the audited
historical financial statements of Midas and the unaudited financial statements of Idaho Gold Resources, LLC to
assist shareholders in analyzing the potential financial results of the combined company.
The pro forma adjustments are based upon available information and assumptions that Midas’s management
believes are reasonable. The unaudited pro forma consolidated statements from continuing operations are presented
for illustrative purposes only. The companies might have performed differently had they always been combined.
You should not rely on this information as being indicative of the historical results that would have been achieved
had the companies always been combined or the future results that the combined company will experience after the
combination.
Midas Gold, Inc.
(An Exploration Stage Company)
CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 2010
Idaho Gold
Resources, LLC
Midas Gold, Inc,
EXPENSES
Exploration expense
General and administrative expense
Total Expenses
$
OTHER (INCOME) EXPENSE
Interest expense
Interest income
Total Other (Income) Expense
NET LOSS
4,586,123
611,026
5,197,149
$
37,196
(22,832)
14,365
$
5,211,514
239,753
115,312
355,065
Pro Forma
$
$
355,065
4,825,876
726,338
5,552,214
37,196
(22,832)
14,365
$
5,566,579
Midas Gold, Inc.
(An Exploration Stage Company)
CONSOLIDATED PRO FORMA BALANCE SHEET (UNAUDITED)
December 31, 2010
Historical
Pro Forma
Pro Forma
Adjustment
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Prepaid expenses
Receivable
Total Current Assets
$
BUILDINGS, EQUIPMENT and MINERAL PROPERTIES
Buildings and equipment, net
Mineral properties
Total Buildings, Equipment and Mineral Properties, net
$
309,621
1,550,510
1,860,131
LONG-TERM ASSETS
Reclamation bond
Total Long-Term Assets
TOTAL ASSETS
4,805,707
58,567
19,975
4,884,249
-
$
800,000
800,000
18,000
18,000
309,621
2,350,510
2,660,131
-
$
6,762,380
$
$
107,747
172,521
16,027
296,295
$
800,000
4,805,707
58,567
19,975
4,884,249
18,000
18,000
$
7,562,380
$
107,747
172,521
16,027
296,295
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Current portion of note payable
Accrued interest payable
Total Current Liabilities
LONG-TERM LIABILITIES
Non-current portion of note payable
Total Liabilities
743,421
1,039,716
-
-
743,421
1,039,716
1,440,809 a)
(640,809)
800,000
1,440,809
12,691,816
(7,609,961)
6,522,664
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY
Idaho Gold Resources, LLC parent equity
Common stock, no par value
Deficit accumulated during exploration stage
Total Stockholders' Equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
12,691,816 b)
(6,969,152)
5,722,664
$
6,762,380
a) Represents the equity of Vista Gold, US in Idaho Gold Resources, Inc.
b) Represents Midas's common stock equity (43,812,000 shares at December 31, 2010)
$
800,000
$
7,562,380