QUEEN'S ROAD CAPITAL INVESTMENT LTD. QUEEN'S ROAD CAPITAL INVESTMENT LTD.
ANNUAL INFORMATION FORM For the year ended August 31, 2023
Cheung Kong Center
Suite 2006, 2 Queen's Road Central
Hong Kong
November 20, 2023
QUEEN'S ROAD CAPITAL INVESTMENT LTD. | |
ANNUAL INFORMATION FORM | |
TABLE OF CONTENTS | |
Significant Acquisitions | 9 |
DESCRIPTION OF THE BUSINESS | 10 |
Summary of the Business | 10 |
Competitive Conditions | 14 |
Key Personnel | 14 |
Lending | 15 |
Social and Environmental Policies | 16 |
RISK FACTORS | 16 |
Risks Related to the Business of the Company | 16 |
Risks Related to the Company's Securities | 23 |
DIVIDENDS | 24 |
DESCRIPTION OF CAPITAL STRUCTURE | 24 |
Common Shares | 24 |
Stock Options | 25 |
MARKET FOR SECURITIES | 25 |
Market | 25 |
Trading Price and Volume | 25 |
Prior Sales | 25 |
ESCROWED SECURITIES AND SECURITIES | |
SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER | 26 |
DIRECTORS AND OFFICERS | 26 |
Cease Trade Orders, Bankruptcies, Penalties or Sanctions | 27 |
Conflicts of Interest | 27 |
LEGAL PROCEEDINGS AND REGULATORY ACTIONS | 28 |
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 28 |
TRANSFER AGENT AND REGISTRAR | 29 |
INTEREST OF EXPERTS | 29 |
ADDITIONAL INFORMATION | 29 |
AUDIT COMMITTEE | 30 |
SCHEDULE A | A-1 |
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ANNUAL INFORMATION FORM
QUEEN'S ROAD CAPITAL INVESTMENT LTD.
PRELIMINARY NOTES
Effective Date of Information
The information contained in Queen's Road Capital Investment Ltd.'s annual information form ("AIF" or "Annual Information Form") is presented as of August 31, 2023 unless otherwise stated herein. Unless the context otherwise requires, all references to the "Company", "QRC", "we" or "us" shall mean Queen's Road Capital Investment Ltd.
Currency
Unless specified otherwise, all references in the AIF to "C$" are to Canadian dollars, all references to "$" are to United States of America dollars, all references to "A$" are to Australian dollars, and all references to "£" are to British pounds.
Non-GAAP Measures
The AIF includes the non-International Financial Reporting Standards ("IFRS") management measure of estimated market value of investments, which differs from the standardized measurement prescribed under IFRS and used for the purposes of the Company's financial statements. Management's measurement may not be comparable to similar measures presented by other entities. This non-Generally Accepted Accounting Practice ("GAAP") measure should not be considered to be more meaningful than GAAP measures, which are determined in accordance with IFRS. The reconciliation of management's estimated market value of investments to the estimated fair value of investments, pursuant to IFRS 13 Fair Value Measurement in the consolidated financial statements, is set out under "Investments at Estimated Fair Value".
Special Note Regarding Forward-Looking Information
Certain statements in this AIF which are not historical in nature constitute "forward looking statements" within the meaning of that phrase under applicable Canadian securities law. These statements include, but are not limited to, statements or information concerning the Company's investments, statements or information concerning the Company's growth strategy and the Company's future performance and business prospects and opportunities. These statements reflect management's current assumptions and expectations and by their nature are subject to certain underlying assumptions, known and unknown risks and uncertainties and other factors which may cause actual results, performance or events to be materially different from those expressed or implied by such forward looking statements.
Forward-looking information can often 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 state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Forward-looking information is necessarily based on the Company's assumptions as to certain factors such as future currency exchange rates, future interest rates, and while the Company's believes that its assumptions regarding these factors are reasonable, the assumptions may nonetheless prove to be incorrect. Forward looking information also involves known and unknown risks and uncertainties which may cause the actual results,
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performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. There can be no assurance that such risk factors will not cause actual results to differ materially from those anticipated.
Important assumptions and risks that could cause actual results to differ materially from the Company's expectations are described in the Company's documents filed from time to time with the applicable regulatory authorities and such factors include, but are not limited to:
- the following assumptions:
- Share prices: changes in the share price of an investee company may impact the value of the Company's investments which are generally linked to a positive share price performance during the term of the investment;
- Commodity prices: changes in the relevant commodity prices to an investee company's material assets may impact the value of the Company's investments as it may impact the value of an investee company's assets;
- Exchange rates: changes in the exchange rates of the functional currencies of investee companies may impact the value of the Company's investments;
- Interest rates: changes in underlying risk-free interest rates may impact the value of the Company's investments as the underlying discount rate is linked to the investee companies' country's interest rate;
- Balance sheet strength: changes in an investee company's financial strength may impact the value of the Company's investments as it is important to ensure that an investee company can meet its obligations under the terms of the Company's investments; and
- Operating assets: material changes at the asset level (operating, permitting or other) of an investee company's may impact the value of the Company's investments if it changes the investee company's ability to meet its obligations under the terms of the Company's investments.
- the following risks:
- Portfolio exposure and sensitivity to macro-economic conditions: given the nature of the Company's proposed investment activities, the results of operations and financial condition of the Company will be dependent upon the market value of the securities that will comprise the Company's investment portfolio, macro factors such as fluctuations in global political and economic conditions could negatively affect the Company's portfolio of investments;
- Changes in commodity prices: as an investor in companies in the resource sector, the price of QRC's Common Shares may be indirectly but significantly affected by declines in commodity prices;
- Natural resource sector risks: investing in natural resource corporations can be speculative in nature and the value of the Company's investments may be subject to significant fluctuations;
- The Company has no control over exploration, development or mining operations: The inability of the Company to control the activities of the resource issuers in which it has invested may result in a material adverse effect on the results of operations of the Company and its financial condition;
- Dependence on key personnel: the Company is dependent on the services of a small number of key management personnel. The ability of the Company to manage its activities and its business will depend in large part on the efforts of these individuals, in particular, Warren Gilman, the Company's Chief Executive Officer and a director, whose industry relationships and experience are critical to the Company's success;
- Cash flow and revenue: the Company's revenue and cash flow will be generated primarily from financing activities, interest payments, dividends, royalty payments on investment and proceeds from the disposition of investments. The availability of these sources of income and the amounts generated from these sources are dependent upon various factors, many of which are outside of the Company's direct control;
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- Private issuers and illiquid securities: the Company may invest in securities of private issuers, illiquid securities of public issuers and publicly-traded securities that have low trading volumes. This may impair the Company's ability to react quickly to market conditions or negotiate the most favourable terms for exiting such investments; and
- Available opportunities and competition for investments: the Company competes with other companies for investments. Other companies may have greater resources than the Company. Any such competition may prevent the Company from being able to secure new investments;
and other risks and uncertainties referred to under the heading "Risk Factors" in this AIF.
Although the Company has attempted to identify important risk factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, 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 information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward- looking statements. The forward-looking information is made as of the date of this AIF.
With regard to all information included herein relating to companies in the Company's investment portfolio, the Company has relied on information provided by the investee companies and on publicly available information disclosed by the respective companies.
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GLOSSARY
In this AIF, unless otherwise defined or unless there is something in the subject matter or context inconsistent therewith, the following terms have the meanings set forth herein or therein:
"AIF" or "Annual Information Form" means this annual information form and any appendices, schedules or attachments hereto;
"BCBCA" means the Business Corporations Act (British Columbia), C-57, as amended; "Common Share" means a share in the capital of the Company;
"Companies Law" means the Companies Law of the Cayman Islands; "Company" means Queen's Road Capital Investment Ltd.; "GAAP" means Generally Accepted Accounting Practices
"IFRS" means International Financial Reporting Standards as issued by the International Accounting Standard Board;
"QRC" means the Company;
"TSX" or "Exchange" means the Toronto Stock Exchange;
"U.S." or "United States" means the United States of America, any state thereof, and the District of Columbia;
Words importing the singular number, where the context requires, include the plural and vice versa and words importing any gender include all genders.
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CORPORATE STRUCTURE
Name, Address and Incorporation
The Company was incorporated under the name "Barisan Gold Corporation" in British Columbia, Canada pursuant to the provisions of the BCBCA on January 25, 2011 with an authorized capital of an unlimited number of Common Shares without par value. On January 28, 2020, the Company changed its name to "Queen's Road Capital Investment Ltd."
On January 29, 2020, the Company continued out of British Columbia, Canada and was registered by way of continuation as an exempted company limited by shares in the Cayman Islands pursuant to the Companies Law, having a current authorized share capital of 5,000,000,000 shares of par value of C$0.001 each (the "Common Shares").
The Common Shares are listed on the TSX under the trading symbol "QRC". The Company's head office is located at Cheung Kong Center, Suite 2006, 2 Queen's Road Central, Hong Kong. The registered office of the Company is located at the offices of Conyers Trust Company (Cayman) Limited, SIX, 2nd Floor, Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.
Inter-corporate Relationships
The Company has a wholly-owned subsidiary, QRC NexGen Investment Ltd., registered in the Cayman Islands on July 12, 2021.
DESCRIPTION AND GENERAL DEVELOPMENT OF THE BUSINESS
Three Year History
The Company is a dividend paying resource-focused investment company, making investments in privately held and publicly- traded resource companies. The Company acquires and holds securities for long-term capital appreciation, with a focus on convertible debt securities of issuers having resource projects in advanced development or production located in safe jurisdictions.
Significant business, operations and management developments for the Company over the three most recently completed fiscal years are as follows.
Year Ended August 31, 2021
$20 Million Investment in Adriatic Metals Plc (ASX-ADT)
On December 1, 2020, the Company completed the purchase of a $20 million convertible debenture issued by Adriatic Metals Plc ("Adriatic") having the following principal terms:
- 8.5% interest payable quarterly in cash;
- 4-yearmaturity; and
- principal amount of $20 million convertible into Adriatic common shares at a price of A$2.7976 per share (using prevailing $ - A$ exchange rates at the time of conversion).
QRC earned a 3% establishment fee on the principal amount of the Adriatic debenture, paid in cash. QRC's investment in the Adriatic convertible debenture was made concurrently with a £6.2 million equity investment in Adriatic by the European Bank for Reconstruction & Development.
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$5 Million Investment in Los Andes Copper Ltd. (TSXV-LA)
On June 2, 2021, the Company completed the purchase of a $5 million convertible debenture in Los Andes Copper Ltd. ("Los Andes"). Key terms of the Los Andes investment include:
- 8.0% interest payable quarterly - 5% in cash and 3% in Los Andes common shares;
- 5-yearmaturity; and
- Debenture convertible into Los Andes common shares at C$10.82 per share.
QRC earned a 3% establishment fee on the Los Andes debenture, which was paid in shares.
Year Ended August 31, 2022
C$21 Million Investment in Osisko Green Acquisition Ltd. (TSX-GOGR)
On September 8, 2021, the Company completed a C$21 million investment in Osisko Green Acquisition Ltd. ("Osisko Green"). Key terms of the Osisko Green investment include:
- Purchase of 597,158 Class B Shares;
- Purchase of 2,000,000 Class A Restricted Voting Units (each comprising one Class A Restricted Voting Share and one-half of one share purchase warrant); and
- Purchase of 931,988 Funding Warrants.
On September 8, 2023 the Class A Restricted Voting Shares were redeemed at par for C$20 million and a dividend was paid on the winding up of Osisko Green.
Declaration & Payment of Maiden Dividend
On October 18, 2021, the Company announced its maiden dividend of C$0.015 per share to all shareholders on record as of November 15, 2021. The dividend was paid on November 19, 2021.
C$100 Million Capital Raising
On February 25, 2022, the Company completed a private placement of 156,250,000 shares at a price of C$0.64 for gross proceeds of C$100 million. The Company's existing largest shareholders representing over 80% of the share capital of QRC participated in the private placement, as below:
Investor | Common Shares Acquired |
Corom Pty Ltd (controlled by Mr. Jack Cowin) | 39,062,500 |
Wyloo Metals Pty Ltd (controlled by Mr. Andrew Forrest) | 39,062,500 |
BBRC International Pte Ltd (controlled by Mr. Brett Blundy) | 23,437,500 |
Directors & Officers | 11,028,263 |
The funds raised in the private placement have been used by the Company for investment and general corporate purposes.
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$4 Million Follow-On Investment in Los Andes Copper Ltd. (TSXV-LA)
On April 4, 2022, the Company completed the purchase of an additional $4 million convertible debenture in Los Andes. Key terms of the Los Andes investment include:
- 8.0% interest payable quarterly - 5% in cash and 3% in Los Andes common shares;
- 5-yearmaturity; and
- Debenture convertible into Los Andes common shares at C$19.67 per share.
QRC earned a 3% establishment fee on the Los Andes debenture, which was paid in shares.
$20 Million Investment in Contango ORE, Inc. (NYSE American-CTGO)
On April 27, 2022, the Company completed the purchase of a $20 million convertible debenture in Contango ORE, Inc. ("CORE"). Key terms of the CORE investment include:
- 8.0% interest payable quarterly - 6% in cash and 2% in CORE common shares;
- 4-yearmaturity; and
- Debenture convertible into CORE common shares at $30.50 per share.
QRC earned a 3% establishment fee on the CORE debenture, which was paid in shares.
Graduation to Toronto Stock Exchange
On July 6, 2022, the Company's Common Shares were delisted from the TSX Venture Exchange and began trading on the TSX under the ticker "QRC".
Year ended August 31, 2023
$5 Million Follow-On Investment in Los Andes Copper Ltd. (TSXV-LA)
On September 4, 2022, the Company completed the purchase of an additional $5 million convertible debenture in Los Andes. Key terms of the Los Andes investment include:
- 8.0% interest payable quarterly - 5% in cash and 3% in Los Andes common shares;
- 5-yearmaturity; and
- Debenture convertible into Los Andes common shares at C$16.75 per share.
QRC earned a 3% establishment fee on the Los Andes debenture, which was paid in cash.
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$15 Million Investment in Challenger Gold Ltd. (ASX-CEL)
On September 12, 2022, the Company completed the purchase of a $15 million convertible debenture in Challenger Gold Ltd. (previously Challenger Exploration Ltd.) ("Challenger"). Key terms of the Challenger investment include:
- 9.0% interest payable quarterly - 7% in cash and 2% in Challenger common shares;
- 4-yearmaturity; and
- Debenture convertible into Challenger common shares at A$0.25 per share.
QRC earned a 3% establishment fee on the Challenger debenture, which was paid in shares.
Declaration & Payment of Dividend
On October 18, 2022, the Company declared its second annual dividend of C$0.017 per share to all shareholders on record as of November 7, 2022. The dividend was paid on November 17, 2022.
$4 Million Follow-On Investment in IsoEnergy Ltd. (TSXV-ISO)
On December 6, 2022, the Company announced a $4 million follow-on investment in IsoEnergy. Key terms of the IsoEnergy investment include:
- 10.0% interest payable semi-annually - 7.5% in cash and 2.5% in IsoEnergy shares;
- 5-yearmaturity; and
- Debenture convertible into IsoEnergy common shares at C$4.33 per share.
QRC earned a 3% establishment fee on the IsoEnergy debenture, which was paid in cash.
Developments Subsequent to August 31, 2023
$70 Million Investment in NexGen Energy Ltd.
On September 22, 2023, the Company completed the purchase of a new $70 million convertible debenture issued by NexGen Energy Ltd. ("NexGen") having the following principal terms:
- 9.0% interest payable semi-annually - 6.0% in cash and 3.0% in NexGen common shares;
- 5-yearmaturity; and
- Debenture convertible into NexGen common shares at $6.76 per share.
QRC earned a 3% establishment fee on the principal amount of the NexGen debenture, which was settled in NexGen common shares.
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Queen's Road Capital Investment Ltd. published this content on 21 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 November 2023 12:40:24 UTC.
