Rambler Metals v. Mining Canada Limited, 2023 NLSC 67

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation: Rambler Metals and Mining Canada Limited, Re CCAA , 2023 NLSC 67 Date: April 28, 2023 Docket: 202301G0841 Between: Rambler Metals and Mining Canada Limited First Applicant And: Rambler Metals and Mining PLC Second Applicant And: Rambler Mines Limited Third Applicant And: 1948565 Ontario Inc. Fourth Applicant Before: Justice Alexander MacDonald Edited Reasons for Oral Decision Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: March 6 and 7, 2023 Place of Hearing: St. John’s, Newfoundland and Labrador Date of Oral Judgment: March 7, 2023

Appearances: Joseph J. Thorne Appearing on behalf of the Applicants Maeve A. Baird Appearing on behalf of Revenue Canada Agency J. Michael Collins Appearing on behalf of International Royalties Meghan M. King Appearing for Elemental Royalties Corporation Sean Collins Appearing for International Royalty Corporation Jason Kanji and Alex MacFarlane Appearing for Monitor Grant Thornton Sophie J.

Dupré Appearing for The Department of Justice Peter Fraser Appearing for DIP Lenders Diana Nicholls Mutter and Tim Ross Appearing for NewGen Lenders Authorities Cited: STATUTES CONSIDERED: Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 ; Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 REASONS FOR JUDGMENT macdonald j.

INTRODUCTION [ 1 ] Rambler Metals and Mining Canada Limited (Rambler Canada), Rambler Metals and Mining PLC (Rambler UK), Rambler Mines Limited (Rambler Mines), and 1948565 Ontario Inc. (1948) (collectively, the “Companies”), applied for creditor protection and other relief under the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 ( CCAA ). [ 2 ] On February 27, 2023, I granted the Initial Order now filed in this Court.

I set the comeback hearing for March 6, 2023, at which time I would consider the Rambler Group request for an Amended and Restated Initial Order (ARIO). [ 3 ] For the reasons that follow, I grant the ARIO described in

Schedule “A” that is attached to this decision. FACTS [ 4 ] I explained the background of this CCAA proceeding and the circumstances that gave rise to it in my February 27, 2023 decision. I will not repeat all of that background today. I have filed an edited written version of that decision. [ 5 ] Rambler Canada owns and operates the copper and gold Ming Mine, ancillary facilities, mineral leases, and other property near Baie Verte, Newfoundland and Labrador (Mine). It owns 50% of the Little Deer and Whaleback mines exploration project. 1948 owns the remaining 50% of the exploration project.

I will refer to Rambler Canada and 1948 as the Rambler Group. [ 6 ] Ming Mine opened in 2012 in its current form, operating as a small-scale operation targeting high-grade mineral zones.

While the Mine initially generated a positive cash flow, it became apparent that Rambler Canada needed more ore production to reduce unit production costs. [ 7 ] The Companies say, and the Monitor Grant Thornton Ltd. (GTL) agrees, that a weak balance sheet and lack of capital caused Rambler Canada to make cash-constrained decisions that resulted in poor long-term profitability after 2016. [ 8 ] In 2019, to address the high unit production costs, Rambler Canada increased production but then exhausted the available underground reserves.

This caused cash-flow deficiencies as the Rambler Group shifted from production of copper and gold to development of additional underground reserves. [ 9 ] The Rambler Group started to make improvements to mining efficiencies in 2020. However, the COVID-19 pandemic and declining copper prices negatively affected business operations.

[ 10 ] COVID-19 required Mine employees to social distance. Employees were more likely to remain on site because of the impacts of COVID-19. Employee social distancing contributed to insufficient ore production to feed processing operations. This in turn caused lowered revenue because of reduced copper recovery.

All of these factors caused yet higher unit production costs. [ 11 ] Thus, the Rambler Group experienced financial challenges for some time because of chronic undercapitalization exacerbated by the impacts of the COVID-19 pandemic. [ 12 ] As of March 4, 2022, the Rambler Group owes about US $36 million in secured debt. Counsel for NewGen clarified that the Companies owe it about US $17.9 million rather than US $11.2 million as sworn to by Toby Bradbury, referred to in my earlier decision.

Counsel says this was the amount then due. [ 13 ] Rambler Canada owe about US $1.7 million to Canada Revenue Agency (CRA) for source deductions. I refer to the other creditors in my earlier decision. [ 14 ] In my Initial Order, I approved a stay until March 6, 2023. On March 6, 2023, I extended the stay until March 7, 2023. In the Initial Order I ordered priority: (

a) Administration charge to a maximum of CAN $185,000; (

b) Debtor in Place Financing (“DIP”), to a maximum of US $1.87 million; and (

c) Directors charge of US $675,000. [ 15 ] In my Initial Order, I limited the DIP to the lenders’ projected advances during the initial stay period. [ 16 ] In addition to the orders I made in the Initial Order, the Companies have now asked me to approve: (

a) increases in the priority DIP to a maximum of US $5 million and to the priority administration charge to a maximum of CAN $1.35 million; (

b) continuation of the stay of proceedings; and (

c) certain other changes to the Initial Order. CRA Amendment Request [ 17 ] On March 3, 2023, CRA wrote counsel for the Companies indicating it wanted an amendment to the Initial Order as is set out in their letter. It seeks to preserve its right to argue for potential priority over the DIP.

International Royalty Corporation Request [ 18 ] On March 3, 2023, International Royalty Corporation filed an application seeking an amendment to the Initial Order that “any Charge created by this Order does not affect any royalty interest owned by a third-party constituting an interest in land.” No one filed a brief in response to this request. ISSUES [ 19 ] I am to decide if the Court should exercise its discretion to order: (

a) continuation of the stay of proceedings; (

b) certain other changes to the Initial Order; (

c) the CRA amendment; and (

d) the International Royalty Corporation amendment. ANALYSIS Should the Court exercise its discretion to order Continuation of the Stay of Proceedings? [ 20 ] I have broad powers under s. 11 of the CCAA . I may make any order on any terms that I may impose. Under s. 11.02(2) I may make an order: (

a) staying, until otherwise ordered by the Court, for any period that the Court considers necessary, all proceedings taken or that might be taken in respect of the Companies under the Act referred to in paragraph (1)(a); (

b) restraining, until otherwise ordered by the Court, further proceedings in any action, suit, or proceeding against the Companies; and (

c) prohibiting, until otherwise ordered by the Court, the commencement of any action, suit, or proceeding against the Companies . [ 21 ] Pursuant to s. 11.2(3), I cannot make the order under s. 11.2(2) unless the Rambler Group satisfies me that : (

a) circumstances exist that make the order appropriate; and (

b) it has acted, and is acting, in good faith and with due diligence.

[ 22 ] The Monitor told me that in its opinion: (

a) the Companies continue to act in good faith and with due diligence; and (

b) it would not be more beneficial to the Rambler Group’s creditors if creditors took proceedings under the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 . [ 23 ] Furthermore, none of the parties attending the hearing opposed the extension of the stay. [ 24 ] I will continue the stay of proceedings until March 15, 2023, or until further order of this Court. I now turn to whether the Court should exercise its discretion to order certain other changes to the Initial Order.

Should the Court exercise its discretion to Order certain other Changes to the Initial Order? [ 25 ] I also order certain other changes to the Initial Order. I will first deal with changes to the priority charges. [ 26 ] Under s. 11.2(4), in deciding whether to make an order, I have considered: (

a) the period during which the Rambler Group is expected to be subject to proceedings under this Act ; (

b) how the Rambler Group business and financial affairs are to be managed during the proceedings; (

c) whether the Rambler Group management has the confidence of its major creditors; (

d) whether the loan would enhance the prospects of a viable compromise or arrangement being made in respect of the Rambler Group; (

e) the nature and value of the Rambler Group property; (

f) whether any creditor would be materially prejudiced as a result of the security or charge; and (

g) the Monitor’s Reports. [ 27 ] All of these factors except s. 11.2(4)(f), support my increasing the DIP and the Administration Charge. In particular: (

a) the Rambler Group will likely be in CCAA restructuring proceedings until at least the end of May 2023; (

b) the Mine is a complex operation employing more than 400 people; (

c) the Companies currently enjoy the support of its secured creditors. Some are supporting the Rambler Group through the DIP; (

d) the increase in the DIP to a maximum amount of US $2.87 million and the Administration Fee to a maximum of CAN $1.35 is consistent with the Rambler Group’s needs up to the week of May 15, 2023, as projected in the current cash flow. The CRA consents to these amendments even though its request to amend the ARIO is still outstanding; (

e) the cash flow statements reflect a reasonable estimate of these charges. I order the Monitor to provide me with a revised cash flow and an update on amounts so advanced on March 15, 2023. I ask the Monitor to notify me immediately if the timing of any advances under the DIP and the Administration Charge materially vary from the current cash flow estimate; and (

f) the amounts ordered enhance the prospect of the Rambler Group formulating a successful plan of arrangement. I have allowed certain fees to investment bankers and to the DIP legal team but only to the extent that they are for fees for the DIP lenders assisting the Companies’ formulation of their restructuring proposal. [ 28 ] The Rambler Group and the Monitor shall not pay any fees from the Administration Charge incurred by counsel acting for lenders on the DIP agreements. [ 29 ] Rambler Group did not ask me nor have I made any change to the Directors’ Charge. I now turn to other changes to the Initial Order. [ 30 ] I also: (

a) order that the Rambler Group may terminate leases as is provided for in paragraphs 12 and 13 of the ARIO. Counsel tells me that these are mostly residential leases for company employees; (

b) order that the Rambler Group may undertake restructuring efforts and the Monitor may assist them in doing so as I provide for in paragraph 11; (

c) enhance the stay protection given to Rambler UK and to the Rambler UK assets as I provide for in paragraph 18; (

d) extend the obligation to cooperate with the Monitor to Rambler UK as I provide for in paragraph 34; and (

e) ask for the aid and recognition of any Court or other such body in the United States, Canada, and the United Kingdom to give effect to this order as I provide for in paragraph 53. [ 31 ] The increase in the DIP financing and Administration Charge may prejudice CRA and International Royalty Corporation. I will first deal with the proposed CRA amendment.

Should I grant the CRA Amendment? [ 32 ] CRA asked me to add the following clause to the order: [ 33 ] The DIP Lenders Charge, granted in paragraph 38, and the priority granted to the DIP Lender’s Charge in paragraphs 44 and 46, are granted on a without prejudice basis and are not determinative of the priority in respect of any valid deemed trust claim of the Canada Revenue Agency.

The Canada Revenue Agency can file an application to determine the priority of the DIP Lender’s Charge and the Canada Revenue Agency’s deemed trust claim at any time prior to the court sanction of a compromise or arrangement in respect of this matter. [ 34 ] CRA made no application, filed no evidence, and provided me with no brief.

However, I will consider its request because I made the Initial Order on the Rambler Group’s application without notice to CRA. [ 35 ] I must balance the lack of any evidence from CRA to the extent of this prejudice or any argument why they would be entitled to the CRA amendment with the statement of counsel of Rambler Group that the CRA amendment could jeopardize the DIP, which in turn could cause immediate collapse of the CCAA process. [ 36 ] Furthermore, counsel for the Monitor says the CRA amendment runs a risk of derailing restructuring proceedings.

I should assess the risks and benefits of an immediate enactment of the CRA amendment. Counsel submits I should favour the option that will allow the Companies to attempt to restructure as is consistent with the objectives of the CCAA . [ 37 ] In the absence of evidence and argument, I will not grant the CRA amendment at this hearing. However, I will entertain any CRA application on March 13. CRA, the Companies, and the Monitor shall all file briefs before close of business on March 10, 2023. [ 38 ] I now turn to the International Royalty Corporation amendment.

It seeks an amendment to the Initial Order as follows: “This Court Orders that any Charge created by this Order does not affect any royalty interest owned by a third party constituting an interest in land.” [ 39 ] International Royalty Corporation delivered the application just before the hearing. No party had an opportunity to respond to this application. Counsel for International Royalty Corporation said the Rambler Group owes it over CAN $43,000. [ 40 ] I will not grant this amendment because of the late filing. However, I will hear this application on March 15, 2023.

Any party opposing the application will file any evidence and briefs on or before close of business March 13, 2023. The Monitor shall provide the Court with a list of any other known royalty holders not yet disclosed. [ 41 ] I will hear from the parties on extension of the stay beyond March 15, 2023, further increases, any priority charges, approval of any Solicitation and Investment Sales Process (SISP) and the International Royalty Corporation Application on March 15, 2023. DISPOSITION [ 42 ] I grant the Amended and Restated Initial Order as described in

Schedule “A”. _____________________________ Alexander MacDonald Justice

Schedule “A”