Question
From: (redacted)
Sent: Saturday, July 28, 2007 4:58 PM
To: Verne,B. Michael
Subject: 802.50
Dear Mike:
I am writing to confirm your advicethrough our exchange of voicemails this past week. In this transaction,Acquiring Person has made a tender offer for all of the voting securities ofAcquired Issuer. Both companies are incorporated outside the U.S., but Acquired Issuer has itsprincipal place of business inside the U.S., so the 802.51 "foreign issuer" exemptionis not available. Nevertheless, the bulk of the Acquired Issuer's assets arelocated outside the U.S.,and its non-exempt U.S.assets have a fair market value of less than $59.8 million. We thereforeconsidered whether the direct acquisition of these non-U.S. assets would be exempt,because if so, then 802.4, if the non-U.S. assets qualify
The issue under 802.50 is whetherthe non-U.S. assets generated sales into the U.S. in excess of $59.8 million. The non-U.S. assets areprecious-metal mines, mining equipment, and other mining/exploration assets.The Acquired Issuer mines the metals, melts the metal into bars, and ships thebars to a refiner, who separates the metals to produce pure-metal bars (e.g.,pure gold). According to its annual report, during its most recent fiscal yearthe Acquired Issuer did not deliver any metal bars to a refiner in the U.S. The refiner works on atoll-refining basis and does not take title. The Acquired Issuer sells itsmetals to or through trading desks, including one located in the U.S. The Acquired Issuer does notnecessarily know the identity or the location of the actual buyer of the metal.We believe that when the trading desk has made a sale or group of sales, itnotifies the Acquiring Issuer, who in turn notifies the refiner to releasespecified amounts of specified metals to the order of the trader. (It ispossible that the Acquired Issuer has less involvement, and that it simplyinstructs the refiner to release up to a certain amount as directed by thetrader, with the Acquiring Issuer not learning or transmitting the identitiesof the recipients.) As between the Acquired Issuer and the trader, the metalsare sold FOB the refinery.
I understand from your voicemailthat you agree with our conclusion that the activity described above does notconstitute sales into the U.S. by the Acquired Issuer. Please let me know if thisis not correct. Many thanks.