Filed Pursuant to Rule 424(b)(3)

Registration No. 333-217231 

 

MERGER PROPOSED - YOUR VOTE IS IMPORTANT

Li3 Energy Inc.

Matias Cousiño 82, Of 806

Santiago de Chile, 8320269

Chile

 

You are cordially invited to attend a Special Meeting of the stockholders of Li3 Energy Inc., a Nevada corporation (referred to as “Li3,” “we,” “our” or “us”), which we will hold on September 28, 2017, at 409 - 221 W. Esplanade, North Vancouver, British Columbia, Canada V7M 3J3 , at 9:00 A.M., local time (P.S.T.).

 

As previously announced, Li3 and Bearing Lithium Corp. (formerly Bearing Resources Ltd.), a corporation organized under the laws of British Columbia, Canada, which we refer to as Bearing, have entered into an Agreement and Plan of Merger, dated as of January 27, 2017, as may be amended from time to time, which we refer to collectively as the merger agreement. Pursuant to the terms of the merger agreement, LI Acquisition Corporation, a wholly owned subsidiary of Bearing, which we refer to as Sub, will merge with and into Li3, with Li3 surviving the merger as a wholly owned subsidiary of Bearing. We refer to the foregoing transaction as the merger.

 

If the merger is completed, holders of Li3 common stock, par value $0.001 per share, which we refer to as Li3 common stock, will be entitled to receive, in the aggregate, on a pro-rata basis, approximately 16,000,000 Bearing common shares, no par value, which we refer to as Bearing common shares. At the effective time of the merger and after giving effect to the other transactions described in this proxy statement/prospectus, the former stockholders of Li3 will receive Bearing common shares which, together with options and warrants to purchase shares of Li3 common stock that will be converted into options and warrants to purchase Bearing common shares (and will be assumed by Bearing at the effective time of the merger pursuant to the merger agreement), will represent approximately 35.12% of the Bearing common shares on a non-diluted basis (without regard to outstanding warrants or stock options of Bearing) after the merger, subject to adjustment as provided in the merger agreement.

 

At the Special Meeting of Li3 stockholders, Li3 stockholders will be asked to vote on (i) a proposal to approve the merger and adopt the merger agreement, and (ii) a proposal to adjourn the Special Meeting, if necessary, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the Special Meeting to approve the merger and adopt the merger agreement. The affirmative vote of the holders of a majority of the voting power outstanding on the record date (assuming a quorum is present in person or by proxy) is required to approve and adopt the merger agreement and approve the merger.

 

Bearing’s common shares are traded in Canada on the TSX Venture Exchange, or the TSXV, under the symbol “BRZ”. Bearing’s common shares are also traded in the United States on OTCQB under the symbol “BRGRF”, and in Germany on the Frankfurt Stock Exchange under the symbol “B6K1”.

 

The Li3 board of directors, referred to as the Li3 Board, has determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, is advisable, fair to, and in the best interest of, Li3 and its stockholders. The Li3 Board recommends that Li3 stockholders vote “FOR” the proposal to approve the merger and adopt the merger agreement and “FOR” the proposal to adjourn the Special Meeting, if necessary.

 

The enclosed proxy statement/prospectus describes the merger agreement, the merger and related transactions and provides specific information concerning the Special Meeting. In addition, you may obtain information about us from documents we file with the Securities and Exchange Commission. You should read the entire proxy statement/prospectus carefully, including the appendices, because it sets forth the details of the merger agreement and other important information related to the merger.

 

YOUR VOTE IS IMPORTANT. IF YOU DO NOT WISH TO VOTE BY INTERNET, PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON. IF YOU ATTEND THE MEETING, YOU MAY CONTINUE TO HAVE YOUR SHARES VOTED AS INSTRUCTED IN THE PROXY OR YOU MAY WITHDRAW YOUR PROXY AT THE MEETING AND VOTE YOUR SHARES IN PERSON.

 
 
 
 

 

On behalf of the Li3 Board, I thank you for your support and appreciate your consideration of this matter.

 

 

Sincerely,

 

/s/ Luis Saenz

 

Luis Saenz, Chief Executive Officer

 

You should read this entire proxy statement/prospectus carefully because it contains important information about the merger. In particular, you should read carefully the information under the section entitled “Risk Factors,” beginning on page 26.

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

 

This proxy statement/prospectus and the form of the proxy are first being sent to Li3 stockholders on or about September 14, 2017.

 
 
 
 

 

PROPOSED MERGER - YOUR VOTE IS IMPORTANT

Matias Cousiño 82, Of 806

Santiago de Chile, 8320269

Chile

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

NOTICE IS HEREBY GIVEN that a Special Meeting of the stockholders of Li3 Energy, Inc., a Nevada corporation (“Li3,” the “Company,” “we,” “our” or “us”), will be held on September 28, 2017, at 409 - 221 W. Esplanade, North Vancouver, British Columbia, Canada V7M 3J3 , at 9:00 A.M., local time (P.S.T.), for the following purposes:

 

1. to consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger dated as of January 27, 2017, referred as the merger agreement, among Li3, Bearing Lithium Corp. (formerly Bearing Resources Ltd.), referred to as Bearing, and LI Acquisition Corporation, a Nevada corporation, referred to as Sub, and the merger and other transactions contemplated thereby, referred to as the merger, which proposal we refer to as the merger proposal; and

 

2. to consider and vote upon a proposal to adjourn the Special Meeting to a later date, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the merger proposal, which proposal we refer to as the adjournment proposal.

 

The holders of record of Li3 common stock at the close of business on August 21, 2017, which we refer to as the record date, are entitled to notice of and to vote at the Special Meeting or at any adjournment thereof.

 

The Li3 board of directors, referred to as the Li3 Board, has determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, is advisable, fair to, and in the best interest of, Li3 and its stockholders. The Li3 Board recommends that Li3 stockholders vote “FOR” the proposal to approve the merger and adopt the merger agreement, and “FOR” the proposal to adjourn the Special Meeting, if necessary.

 

Your vote is important. Whether or not you expect to attend the Special Meeting, please sign and return the enclosed proxy card promptly in the envelope provided or promptly submit your proxy over the Internet following the instructions on the proxy card. You may revoke your proxy and vote in person at the Special Meeting if you desire. All stockholders of Li3 as of the record date are cordially invited to attend the Special Meeting.

 

 

By Order of the Board of Directors,

 

/s/ Luis Saenz

 

Luis Saenz

 

Chief Executive Officer

 

 
 
 

 

ADDITIONAL INFORMATION

 

This proxy statement/prospectus includes important business and financial information about Li3 Energy Inc., referred to as “Li3,” “we,” “our” or “us,” and Bearing Lithium Corp. (formerly Bearing Resources Ltd.), referred to as “Bearing”, unless otherwise specified, from documents that are not included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain a copy of the registration statement of which this proxy statement/prospectus forms a part, including the documents filed as exhibits to such registration statement, by requesting them in writing or by telephone from the appropriate company at the following addresses:

 

Bearing Lithium Corp.

c/o Macdonald Tuskey

409 - 221 W. Esplanade

North Vancouver, BC

Canada V7M 3J3

Attention: William MacDonald, Esq.

Tel: (604) 973-0588

 

Li3 Energy Inc.

Matias Cousiño 82, Oficina 806

Santiago, Chile

F3 00000

Attn: Luiz Saenz

Telephone: +(56) 2-2206 5252

 

If you would like to request documents, please do so by September 22, 2017, in order to receive them before the Special Meeting of Li3 stockholders. For a more detailed description of the information incorporated by reference in the proxy statement/prospectus and how you may obtain it, see “Where You Can Find More Information” beginning on page 153 of this proxy statement/prospectus.

 

ABOUT THIS PROXY STATEMENT/PROSPECTUS

 

This proxy statement/prospectus, which forms part of a registration statement on Form F-4 (Registration No. 333-217231) filed with the Securities and Exchange Commission, or the SEC, by Bearing, constitutes a prospectus under the Securities Act of 1933, as amended, which we refer to as the Securities Act, with respect to the Bearing common shares to be issued to Li3 stockholders in connection with the merger. This proxy statement/prospectus also constitutes a proxy statement for Li3 under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. It also constitutes a notice of meeting with respect to the Special Meeting of Li3 stockholders.

 

You should rely only on the information contained in this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in this proxy statement/prospectus. This proxy statement/prospectus is dated September 11, 2017, and you should assume that the information contained in this proxy statement/prospectus is accurate only as of such date.

 

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this proxy statement/prospectus regarding Bearing has been provided by Bearing, and information contained in this proxy statement/prospectus regarding Li3 has been provided by Li3.

 

 
 
 

 

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

1

 

SUMMARY

9

 

Special Meeting of Stockholders

9

 

Risk Factors

10

 

Parties to the Merger

10

 

The Agreement and Plan of Merger

11

 

Completion of the Merger

11

 

Reasons for the Merger and Recommendation of the Li3 Board

11

 

Merger Consideration - Treatment of Li3 Capital Stock in the Merger

11

 

Treatment of Li3 Warrants and Stock Options in the Merger

11

 

Conditions to the Completion of the Merger

11

 

Restrictions on Solicitation

12

 

Termination of the Merger Agreement

12

 

Merger Expenses

14

 

Interests of Certain Persons in the Merger

14

 

Accounting Treatment of the Merger

14

 

Regulatory Clearances Required for the Merger

14

 

Material U.S. Federal Income Tax Consequences of the Merger

14

 

Material Canadian Federal Income Tax Consequences of the Merger

15

 

Dissenters’ Rights of Appraisal

15

 

Comparison of the Rights of Bearing Shareholders and Li3 Stockholders

15

 

Bearing’s Board of Directors and Management following the Merger

15

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF BEARING

16

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF Li3

18

 

COMPARATIVE PER SHARE MARKET PRICE DATA AND DIVIDEND INFORMATION

19

 

SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

22

 

COMPARATIVE HISTORICAL PER SHARE DATA

23

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

25

 

RISK FACTORS

26

 

Risk Factors Related to the Merger

26

 

Risk Factors Relating to the business of the Combined Company Following the Merger

32

 

Risk Factors Relating to the Mineral Exploration and Development by Li3 or the Combined Company

36

 

Risks Relating to the Financial Conditions of Li3 or the Combined Company, and to Stock Ownership in Li3 or the Combined Company.

40

 

THE SPECIAL MEETING

45

 

General

45

 

Date, Time and Place

45

 

Purpose of Special Meeting

45

 

Record Date; Shares Entitled to Vote

45

 
 

i

 
 

 

Voting by Holders of Common Stock

45

 

Voting Rights of Li3’s Directors and Executive Officers

45

 

Quorum; Broker Non-Votes

45

 

Voting Agreements

46

 

Required Vote

46

 

How to Vote Your Shares

46

 

Revocation of Proxies

47

 

PROPOSAL ONE - THE MERGER

47

 

The Parties to the Merger

48

 

Li3 Energy Inc.

48

 

Bearing Lithium Corp.

48

 

LI Acquisition Corporation

48

 

Background of the Merger

48

 

Li3’s Reasons for the Merger and the Recommendation of the Li3 Board

49

 

Bearing’s Reasons for the Merger and the Recommendation of the Bearing Board

51

 

Accounting Treatment of the Merger

53

 

Ownership of Bearing After the Merger

53

 

Interests of Certain Persons in the Merger

53

 

Regulatory Clearances Required for the Merger

54

 

Conditional TSXV Approval

54

 

Delisting of Li3 Common Stock

54

 

Dissenters’ Rights of Appraisal

54

 

The Combined Company’s Board of Directors and Management Following the Merger

55

 

Governing Documents Following the Merger

55

 

Exchange of Li3 Stock Certificates Following the Merger

55

 

THE AGREEMENT AND PLAN OF MERGER

56

 

Terms of the Merger

56

 

Completion of the Merger

56

 

Merger Consideration

56

 

Treatment of Warrants and Stock Options

57

 

Exchange Procedures

58

 

Representations and Warranties

59

 

Certain Covenants of the Parties

62

 

Certain Notifications

66

 

Preparation of Proxy Statement/Prospectus and Registration Statement on Form F-4

67

 

Li3 Stockholder Meeting and Bearing Shareholder Meeting

67

 

Restrictions on Solicitation

67

 

Recommendation of Li3’s and Bearing’s Respective Boards of Directors

68

 

Efforts to Complete the Merger and Regulatory Approvals

68

 

Indemnification and Insurance for Directors and Officers

68

 

Employee Benefits

69

 

Conditions to Completion of the Merger

69

 

Termination of the Merger Agreement

70

 

Merger Expenses

72

 

Governing Law

72

 

Amendment

72

 

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

72

 

MATERIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

83

 
 

ii

 
 

 

BEARING MANAGEMENT FOLLOWING THE MERGER

87

 

BEARING EXECUTIVE AND DIRECTOR COMPENSATION

89

 

Summary Compensation Table

89

 

Director Compensation

90

 

Incentive Plan Awards

90

 

Termination and Change of Control Benefits

90

 

Li3 EXECUTIVE AND DIRECTOR COMPENSATION

90

 

Summary Compensation Table

90

 

Outstanding Equity Awards

91

 

Employment Contracts and Termination of Employment and Change-in-Control Arrangements

92

 

Director Compensation

93

 

Director Compensation Program

94

 

Equity Compensation Plan Information

94

 

BEARING’s COMMON SHARES

96

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

96

 

PROPOSAL TWO - ADJOURNMENT OF THE SPECIAL MEETING

98

 

Li3’S BUSINESS

98

 

Corporate Summary

98

 

Strategic Plan

102

 

Strategic Partners

103

 

Project Overview

105

 

Lithium Exploitation Permitting in Chile

 

Other permits

 

Competition

115

 

Compliance with Government Regulation

115

 

Employees

115

 

Subsidiaries

115

 

Intellectual Property

116

 

Legal Proceedings

116

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF Li3’s FINANCIAL CONDITION AND RESULTS OF OPERATIONS

116

 

 

 

 

 

Plan of Operations and Cash Requirements

116

 

Results of Operations

117

 

Liquidity, Capital Resources and Financial Condition

123

 

Common Stock Subject to Rescission

124

 

Off-Balance Sheet Arrangements

124

 

Critical Accounting Policies

124

 

Certain Relationships And Related Transactions

125

 

BEARING’s BUSINESS

126

 

Corporate Structure

126

 

Description of the Business

126

 

Recent Developments

127

 

Strategy

 
 

iii

 
 

 

Current Properties

128

 

Recent Transactions

129

 

Competitive Overview

130

 

Government Regulation

130

 

Legal Proceedings

130

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF BEARING’s FINANCIAL CONDITION AND RESULTS OF OPERATIONS

131

 

Overview

 

Plan of Operation & Cash Requirements

131

 

Liquidity & Capital Resources

132

 

Commitments

133

 

Results of Operations and Select Financial Data

133

 

Certain Relationships and Related Party Transactions

135

 

Off-Balance Sheet Arrangements

135

 

Proposed Transactions

135

 

Significant Accounting Policies

135

 

New Accounting Standards Not Yet Effective

138

 

OUTSTANDING SECURITIES OF BEARING AND Li3

139

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

139

 

COMPARISON OF THE RIGHTS OF BEARING SHAREHOLDERS AND Li3 STOCKHOLDERS

142

 

HOUSEHOLDING OF SPECIAL MEETING MATERIALS

152

 

LEGAL MATTERS

152

 

EXPERTS

152

 

Bearing

152

 

Li3

152

 

FUTURE STOCKHOLDER PROPOSALS

152

 

WHERE YOU CAN FIND MORE INFORMATION

153

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

154

 

ANNEX A - Agreement and Plan of Merger

A-1

 

ANNEX B - Opinion of Dale Matheson Carr-Hilton Labonte LLP

B-1

 

ANNEX C - Nevada Dissenters Rights Provisions

C-1

 
 

iv

 
 

 

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

 

The following questions and answers briefly address some commonly asked questions regarding the Special Meeting, the merger agreement and the merger. These questions and answers may not address all of the questions that may be important to you. Please refer to the more detailed information contained elsewhere in this proxy statement/prospectus, the appendices to this proxy statement/prospectus and the other documents we refer to in this proxy statement/prospectus.

 

Q:

Why am I receiving this proxy statement/prospectus, and why am I being asked to vote on the merger proposal?

 

A:

Bearing, Sub and Li3 have agreed to consummate the merger under the terms of the merger agreement that is described in this proxy statement/prospectus. A copy of the merger agreement is attached to this proxy statement/prospectus as Annex A and incorporated herein by this reference.

 

 

 

In order to complete the merger, Li3’s stockholders must vote to approve the merger and the merger agreement, as required by Chapter 92A, Section 120 of the Nevada Revised Statutes, which we refer to as the NRS. Li3 is holding a Special Meeting of its stockholders to obtain this vote. You are receiving this proxy statement/prospectus in connection with the solicitation of proxies to be voted at the Special Meeting or at any adjournments or postponements thereof.

 

 

 

You should carefully read this proxy statement/prospectus, including its annexes and the other documents we refer to in this proxy statement/prospectus, because they contain important information about the merger, the merger agreement and the Special Meeting. The enclosed voting materials allow you to vote your shares without attending the Special Meeting. Your vote is very important. We encourage you to vote as soon as possible.

        

Q: What am I being asked to vote on?

 

A:

You are being asked to vote upon (i) a proposal to approve and adopt the merger agreement and approve the merger, (ii) a proposal to adjourn the Special Meeting, if necessary, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the Special Meeting to approve and adopt the merger agreement and approve the merger.

 

The Merger and Related Transactions

 

Q:

Why are Bearing and Li3 proposing to effect the merger?

 

A:

Bearing and Li3 expect that the merger will create a corporation with international reach, and the consolidated resources and expertise necessary to advance the Maricunga lithium brine project (the “Maricunga Project”).. For Bearing, Li3 provides an interest in the Maricunga Project, and extensive operational experience and expertise in Chile, and Latin America, generally. For Li3, Bearing provides access to financial expertise, and to the extensive financing opportunities available for mineral exploration companies in Canadian capital markets. Both Bearing and Li3 expect the merger to result in further diversification of their respective portfolios. Bearing and Li3 expect to leverage their respective companies’ significant knowledge relating to mineral exploration, development, and project financing. For a more complete description of the reasons for the merger, see “The Merger-Li3’s Reasons for the Merger and the Recommendation of the Li3 Board,” beginning on page 49 of this proxy statement/prospectus.

 

Q:

How will Li3’s stockholders be affected by the merger?

 

A:

Following the merger, Li3’s stockholders will become shareholders of Bearing. We anticipate that, following the merger, Li3’s stockholders will beneficially own approximately 35.12% of the issued and outstanding Bearing common shares on a non-diluted basis, or 28.14% on a fully diluted basis, assuming the exercise of all Bearing options and warrants outstanding as at September 8, 2017.


 
1
 
Table of Contents

 

Q:

As a Li3 stockholder, what will I receive in the merger?

 

A:

At the effective time of the merger, each share of issued and outstanding Li3 common stock (excluding shares cancelled pursuant to the merger agreement) shall cease to be outstanding and shall be exchanged for the right to receive a proportionate share of the 16,000,000 Bearing common shares to be issued pursuant to the acquisition agreement. Based on the number of Li3 common shares outstanding as at the date of the registration statement, each Li3 common share may be exchanged for the right to receive 0.0287705448370321 Bearing common shares, which is referred to in this proxy statement/prospectus as the exchange ratio. The exchange ratio is therefore subject to change in the event that additional Li3 common shares are issued prior to the closing of the acquisition agreement. No fractional shares will be issued in connection with the merger. In the event that a Li3’s stockholder’s holdings of Bearing common shares resulting from the merger would result in the issuance of a fractional share, the number of Bearing common shares to be received by such holder will be rounded down to the nearest whole share. Please see “Summary-Treatment of Li3 Capital Stock in the Merger” on page 11 of this proxy statement/prospectus and “The Agreement and Plan of Merger-Merger Consideration” on page 56 of this proxy statement/prospectus.

 

Q:

What will the holders of Li3 options and warrants receive in the merger?

 

A:

At the effective time of the merger, each outstanding option or warrant to purchase a share of Li3 common stock, whether vested or unvested or exercisable or un-exercisable, and so long as such option or warrant has not, prior to the effective time of the merger, been exercised, cancelled, terminated or expired, will be deemed to constitute an option or warrant to purchase, on the same terms and conditions, a number of Bearing common shares (rounded down to the nearest whole share) equal to the product of (i) the number of shares of Li3 common stock subject to such option or warrant multiplied by (ii) the exchange ratio of 0.0287705448370321, at an exercise price per share computed by dividing the per share exercise price under each such option or warrant by the exchange ratio and rounding up to the nearest cent. Please see “Summary-Treatment of Li3 Warrants and Stock Options in the merger” on page 11 of this proxy statement/prospectus and “The Agreement and Plan of Merger- Treatment of Warrants and Stock Options” on page 57 of this proxy statement/prospectus.

 

Q:

Is the exchange ratio subject to adjustment based on changes in the prices of Bearing common shares or Li3 common stock? Can it be adjusted for any other reason?

 

A:

The exchange ratio is not subject to adjustment based on changes in the prices of Bearing common shares or Li3 common stock. The number of Bearing common shares to be issued pursuant to the acquisition agreement is fixed at 16,000,000 shares. The exchange ratio reflects the dividend of 16,000,000 divided by the number of Li3 common shares issued and outstanding upon completion of the acquisition. Therefore the exchange ratio may only be adjusted to account for the issuance of additional Li3 common shares prior to the closing of the acquisition. No adjustments to the exchange ratio will be made based on changes in the price of either Bearing common shares or Li3 common stock prior to the completion of the merger. As a result of any such changes in stock price, the aggregate market value of the Bearing common shares that a Li3 stockholder is entitled to receive at the time that the merger is completed could vary significantly from the value of such shares on the date of this proxy statement/prospectus, the date of the Li3 Special Meeting or the date on which such Li3 stockholder actually receives its Bearing common shares.

 

If prior to consummation of the merger, the outstanding Bearing common shares or shares of Li3 common stock or preferred stock have been changed into, or exchanged for, a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, reorganization, recapitalization, split, combination, contribution or exchange of shares, the exchange ratio and any adjustments or payments to be made pursuant to the merger agreement that are based on the number of Bearing common shares or shares of Li3 common stock or preferred stock will be correspondingly adjusted to provide the holders of Li3 common stock, Li3 options and Li3 warrants the same economic effect as contemplated by the merger agreement prior to such event.

 

Q:

How will I receive the per share merger consideration to which I am entitled?

 

A:

After receiving the proper documentation from you, following the effective time, the exchange agent will forward to you the Bearing common shares to which you are entitled. You will be restricted from selling your securities for 4 months from the effective date of the merger. More information on the documentation you are required to deliver to the exchange agent may be found under the caption “The Merger-Exchange of Li3 Stock Certificates Following the Merger” beginning on page 55 of this proxy statement/prospectus.


 
2
 
Table of Contents

 

Q:

Are there any risks that I should consider in deciding whether to vote for the proposal to approve and adopt the merger agreement and approve the merger?

 

A:

Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 26 of this proxy statement/prospectus.

 

Q:

Do any of Li3’s directors or officers have interests in the merger that may differ from or be in addition to my interests as a stockholder?

 

A:

Yes. In conjunction with the merger, certain executive officers and directors of Li3 will receive employment with Bearing and equity incentive awards. Please see the section of this proxy statement/prospectus titled “Interests of Certain Executive Officers and Directors in the Merger.”

 

Q:

What are the conditions to completion of the merger?

 

A:

In addition to approval and adoption of the merger agreement by Li3 stockholders, as described above, completion of the merger depends upon a number of conditions being satisfied or, to the extent permitted by applicable law, waived, including (i) approval of the issuance of the merger consideration to Li3’s securities holders; (ii) the absence of any legal restraints or prohibitions on the consummation of the merger, (iii) the effectiveness of the registration statement on Form F-4 of which this proxy statement/prospectus is a part; and (iv) conditional approval from the TSXV. Please see the section entitled “The Agreement and Plan of Merger-Conditions to the Completion of the Merger” beginning on page 69 of this proxy statement/prospectus.

 

Q:

Is Li3 prohibited from soliciting other Offers?

 

A:

The merger agreement contains detailed provisions pursuant to which Li3 is not permitted to solicit, initiate or knowingly encourage or otherwise take any action to facilitate from any third party a competing proposal to acquire the assets of, equity interest in, or business of Li3 and its subsidiaries, taken as a whole, any of which we refer to as a company acquisition proposal. Please see “The Agreement and Plan of Merger-Restrictions on Solicitation” and “The Agreement and Plan of Merger-Recommendation of Li3’s and Bearing’s Respective Boards of Directors”, beginning on page 68 of this proxy statement/prospectus.

 

Q:

Will the merger agreement and the transactions contemplated thereby be taxable to me as a Li3 stockholder?

 

A:

The merger is intended to be non-taxable to our stockholders, provided it qualifies as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, referred to as the Code, and Section 367(a) of the Code does not cause the recognition of gain. See “Material U.S. Federal Income Tax Consequences of the Merger” on page 72 of this proxy statement/prospectus.

 

Q:

When do Bearing and Li3 expect to complete the merger?

 

A:

Bearing and Li3 are working to complete the merger as quickly as practicable. However, we cannot predict the exact timing of the completion of the merger because it is subject to certain conditions. See “The Agreement and Plan of Merger-Conditions to Completion of the Merger” on page 69 of this proxy statement/prospectus. We hope to complete the merger prior to December 31, 2017.


 
3
 
Table of Contents

 

Q:

Who will be Bearing’s directors and executive officers following the merger?

 

A:

Following the merger, it is anticipated that the Bearing Board of Directors, referred to as the Bearing Board, and its management, will be composed of the following individuals mutually designated by Bearing and Li3 pursuant to the merger agreement:

  

 

Title

Jeremy Poirier

 

President, Chief Executive Officer, Director

Patrick Cussen

 

Director

Timothy Heenan 

 

Independent Director 

Amar Balaggan

 

Independent Director

Kirk Shaw

 

Independent Director

Ann Fehr

 

Chief Financial Officer, Corporate Secretary

Luis Saenz

 

President, South American Operations

Benjamin Asuncion

 

Vice-President, Business Development

    

 

Prior to completion of the merger, Bearing and Li3 intend to designate an additional independent director.

 

For more information about the directors and executive officers following the merger and related corporate governance matters, see “Bearing Management Following the Merger” on page 87 of this proxy statement/prospectus.

 

  

Q:

What will happen to Li3 if, for any reason, the merger does not close?

 

A:

If the merger is not approved by Li3 stockholders, or if the merger is not completed for any other reason, there will be no exchange of Li3 common stock for Bearing common shares, and Li3 will not become a wholly owned subsidiary of Bearing. Instead, Li3 will continue to be independently owned by its stockholders and will remain as a public company and its common stock will continue to be registered under the Exchange Act. If the merger agreement is terminated by mutual agreement, or for reasons outside the control of the parties, then each Bearing and Li3 will be responsible for their own expenses incurred in relation to the transaction. If the merger agreement is terminated by reason of a party’s failure to fulfill an obligation, then that party will be responsible for its own expenses, and may be responsible for the expenses of the other party. Currently, Li3 has nominal cash on hand, and Bearing is advancing funds to Li3 on an as-needed basis to satisfy Li3’s expenses incurred in relation to the merger agreement, among other expenses. If the merger agreement is terminated, any funds advanced by Bearing to Li3 will become payable on demand. Additionally, if the merger does not close, then the Li3 Board will, among other things, continue to evaluate and review Li3’s business operations, properties and capitalization, make such changes as are deemed appropriate, and continue to seek to identify strategic alternatives intended to enhance stockholder value. However, if the merger is not completed, Li3 does not anticipate that it will have sufficient working capital to maintain its operations or to fulfill its public disclosure obligations without additional financing.

 

Q:

Will I be entitled to dissenter’s rights or appraisal rights as a result of the merger agreement and the merger?

 

A:

Yes. Because Li3’s common stock is not listed on a national securities exchange Li3 stockholders will have appraisal rights and rights of dissenters with respect to the merger.


 
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Q:

Should I send in my share certificates now?

 

A:

No, please do NOT return your share certificate(s) with your proxy. If the proposal to approve and adopt the merger agreement and approve the merger is approved by Li3 stockholders and the merger is completed, then you will be sent a letter of transmittal as promptly as reasonably practicable after the completion of the merger describing how you may exchange your shares of Li3 common stock for Bearing common shares. If your shares of Li3 common stock are held in “street name” through a bank, brokerage firm or other nominee, you will receive instructions from your bank, brokerage firm or other nominee as to how to effect the surrender of your “street name” shares of Li3 common stock in exchange for Bearing common shares.

 

The Special Meeting

 

Q:

When and where is the Special Meeting?

 

A:

The Special Meeting will be held on September 28, 2017, at 409 - 221 W. Esplanade, North Vancouver, British Columbia, Canada V7M 3J3 , at 9:00 A.M., local time (P.S.T.).

 

Q:

Who may attend the Special Meeting?

 

A:

All Li3 stockholders who owned shares of Li3 common stock at the close of business on August 21, 2017, the record date for the Special Meeting, may attend.

 

Q.

Why am I being asked to approve adjourning the Special Meeting to a later date, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the merger proposal?

 

A:

We are asking you to vote on a proposal to adjourn the Special Meeting, if necessary or appropriate, in order to allow for the solicitation of additional proxies if there are insufficient votes at the time of the Special Meeting to approve the merger proposal or if necessary to achieve a quorum. If the proposal to adjourn the Special Meeting is not approved and there are insufficient votes at the time of the Special Meeting to approve the merger proposal or achieve a quorum, we may be required to incur additional time and expense in order to hold an effective stockholder meeting for the merger proposal to be considered and approved.

 

Q:

Who may vote at the Special Meeting?

 

A.

Only holders of record of Li3 common stock as of the close of business on the record date may vote at the Special Meeting. As of the record date, Li3 will have 556,124,331 outstanding shares of Li3’s common stock entitled to vote at the Special Meeting.

 

Q:

How many votes do I have?

 

A:

Each Li3 stockholder is entitled to one vote for each share of Li3 common stock held of record as of the close of business on the record date.

 

Q:

How does the Li3 Board recommend that I vote?

 

A:

The Li3 Board unanimously recommends that you vote “FOR” each of the proposals presented in this proxy statement/prospectus.

 

Q:

Who is soliciting my proxy?

 

A:

Your proxy is being solicited by the Li3 Board.


 
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Q:

If a stockholder gives a proxy, how are the shares of Li3 common stock voted?

 

A:

Regardless of the method by which you choose to vote, the individuals named on the enclosed proxy card will vote your shares of Li3 common stock in the way that you indicate. When completing the Internet processes or the proxy card, you may specify whether your shares of Li3 common stock should be voted for or against, or abstain from voting on, all, some or none of the specific items of business to come before the Special Meeting.

 

 

 

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted “FOR” the proposal to approve and adopt the merger agreement and approve the merger and “FOR” the proposal to adjourn the Special Meeting, if necessary.

 

Q:

Will my shares be voted if I do not provide my proxy?

 

A:

Under stock market rules currently in effect, brokerage firms and nominees have the authority to vote their customers’ unvoted shares on certain “routine” matters if the customers have not furnished voting instructions within a specified period prior to the Special Meeting. However, the merger proposal is not considered a “routine” matter, therefore brokerage firms and nominees will not be able to vote the shares of customers from whom they have not received voting instructions. If you hold your shares directly in your own name, they will not be counted as shares present for the purposes of determining the presence of a quorum or be voted if you do not provide a proxy or attend the Special Meeting and vote the shares yourself.

 

Q:

What vote is required to approve the proposals?

 

A:

The affirmative vote of the holders of a majority of the voting power outstanding on the record date (assuming a quorum is present in person or by proxy) is required for approval of the merger proposal. If you vote to abstain, or if you fail to vote or fail to instruct your bank, broker, custodian or other record holder how to vote, it will have the same effect as voting “AGAINST” this proposal.

 

 

 

The adjournment proposal must be approved by a majority of the votes cast at the Special Meeting (assuming a quorum is present in person or by proxy). If you fail to vote or to instruct your bank, broker, custodian or other record holder how to vote, it will have no effect on the voting outcome of this proposal. If you abstain, it will have the effect of a vote “AGAINST” the proposal.

 

Q:

How will Li3’s directors and executive officers vote on the merger proposal?

 

A:

Our directors and executive officers have informed us that, as of the date of this proxy statement/prospectus, they intend to vote all of their shares of Li3 common stock and all of the shares of Li3 common stock over which they have voting control in favor of the merger proposal, and the adjournment proposal. As of August 21, 2017, the record date for the Special Meeting, our directors and executive officers owned, in the aggregate, 76,471,072 shares of Li3 common stock, or collectively, approximately 15.21% of the outstanding shares of Li3 common stock.

 

Q:

What is a “quorum”?

 

A:

Under our bylaws, the holders of a majority of the outstanding shares of Li3 stock entitled to vote constitutes a “quorum” at a meeting of stockholders for the transaction of any business. If a quorum is not present at the Special Meeting, Li3 expects that the Special Meeting will be adjourned or postponed to solicit additional proxies. In general, shares of Li3 common stock represented by a properly signed and returned proxy card will be counted as shares present and entitled to vote at the Special Meeting for purposes of determining a quorum, including shares represented by proxies marked “ABSTAIN” or not marked at all. In addition, a “broker non-vote,” as described below, is counted in determining whether a quorum is present.


 
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Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A:

If your shares of Li3 common stock are registered directly in your name with the transfer agent of Li3, then you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote, or to grant a proxy for your vote directly to Li3 or to a third party to vote, at the Special Meeting.

 

 

 

If your shares are held by a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares held in “street name,” and your bank, brokerage firm or other nominee is considered the stockholder of record with respect to those shares. Your bank, brokerage firm or other nominee will send you, as the beneficial owner, a package describing the procedure for voting your shares. You should follow the instructions provided by them to vote your shares. You are invited to attend the Special Meeting; however, you may not vote these shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, brokerage firm or other nominee that holds your shares, giving you the right to vote the shares at the Special Meeting.

 

Q:

What are broker non-votes and what is their effect?

 

A:

Broker non-votes occur when shares held by a broker are not voted with respect to a proposal because (i) the broker has not received voting instructions from the beneficial owner of the shares and (ii) the broker lacks the authority to vote the shares at the broker’s discretion. Broker non-votes will be counted as shares present and entitled to vote for the purposes of determining the presence of a quorum on each of the proposals to be voted on at the Special Meeting and will have the effect of a vote AGAINST the merger proposal, but they will not be counted as votes FOR or AGAINST the other proposals.

 

Q:

If my shares are held in “street name” by my broker, can my broker vote my shares for me?

 

A:

Yes, but, as described above, your broker will be permitted to vote your shares only if you instruct your broker how to vote. You should follow the procedures provided to you by your broker regarding how to instruct your broker to vote your shares.

 

Q:

What does it mean if I get more than one proxy card?

 

A:

If your shares are registered in multiple accounts with one or more brokers and/or our transfer agent, you will receive more than one proxy card. If you are submitting your proxy by completing and returning your proxy card, please complete and return each of the proxy cards you receive to ensure that all of your shares are voted.

 

Q:

What should I do now?

 

A:

After carefully reading and considering the information contained in this proxy statement/prospectus, including the appendices, we encourage you to vote by proxy as soon as possible, whether or not you plan to attend the Special Meeting. All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed by you via the Internet. You may specify whether your shares should be voted “FOR,” “AGAINST” or “ABSTAIN” with respect to each of the proposals. If you properly submit a proxy without giving specific voting instructions, your shares will be voted in accordance with the Li3 Board’s recommendations, as noted above. Voting by proxy will not affect your right to attend the Special Meeting.

 

 

 

If your shares are registered directly in your name through our stock transfer agent, or you have stock certificates registered in your name, you may vote as follows:

 

·

Voting on the Internet . You may vote on the Internet by accessing the website www.cstproxy.com/li3energy/2017 and following the instructions printed on your proxy card. The deadline for voting on the Internet is September 27, 2017, at 11:59 p.m. Eastern Time. If you vote on the Internet, you do not need to return your proxy card.


 
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·

Voting by Proxy Card . You may vote by completing, signing and returning your proxy card by mail. To vote in this manner, please mark, date and sign the enclosed proxy card and return it by mail in the accompanying postage-prepaid envelope. You should mail your signed proxy card as promptly as possible so that your shares will be voted at the Special Meeting.

 

·

Voting in Person . Even if you have voted by one of the methods described above, you may still attend the Special Meeting and vote your shares in person. If you do attend and vote your shares in person at the Special Meeting after having voted by any of the methods described above, only your last vote will be counted. However, attendance at the Special Meeting alone will not result in a revocation of any previously submitted proxy cards.

 

  

 

 

If your shares are held in “street name” (held in the name of a bank, broker or other holder of record), you will receive voting instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Internet voting also will be offered to stockholders owning shares through banks and brokers. If your shares are not registered in your own name and you plan to vote your shares in person at the Special Meeting, you should contact your broker or agent to obtain a legal proxy or broker’s proxy card and bring it to the Special Meeting in order to vote.

 

Q:

If I have given a proxy, may I subsequently change my vote?

 

A:

Yes. If you give us your proxy, you may change or revoke it at any time before the Special Meeting. You may change or revoke your proxy in any one of the following ways:

 

·

by re-voting by Internet;

 

·

by signing a new proxy card with a date later than your previously delivered proxy and submitting it as instructed above; provided that it is received prior to the deadline date of the Special Meeting;

 

·

by notifying our Secretary in writing at  Matias Cousiño 82, Oficina 806 Santiago, Chile F3 00000 Attn: Luiz Saenz, before the Special Meeting that you have revoked your proxy; or

 

·

by attending the Special Meeting in person and voting in person in accordance with the instructions above. Attending the meeting in person will not in and of itself revoke a previously submitted proxy unless you specifically request revocation by notifying the Inspector of Elections at the Special Meeting.

 

 

Your most recent vote, whether by Internet, proxy card or in person at the Special Meeting, is the one that will be counted.

 

 

 

If you have instructed a broker or other nominee to vote your shares, you must follow the procedures provided by your broker or nominee to subsequently change those voting instructions.

 

 

Q.

After the Special Meeting, how can I determine whether the merger proposal was approved by Li3’s stockholders?

 

A.

Promptly after the Special Meeting, Li3 will issue a press release announcing whether the merger proposal has been approved by Li3’s stockholders. In addition, within four business days following the Special Meeting, Li3 will file a Current Report on Form 8-K with the SEC to report the results of the voting on the proposals presented to our stockholders at the Special Meeting.

 

Q.

Who is paying for the solicitation of proxies?

 

A:

Li3 will bear the cost of solicitation of proxies by us. In addition to soliciting stockholders by mail, Li3 directors, officers and employees, without additional remuneration, may solicit proxies in person or by telephone or by means of electronic communication. Li3 will not pay these individuals for their solicitation activities but will reimburse them for their reasonable out-of-pocket expenses. Brokers and other custodians, nominees and fiduciaries will be requested to forward proxy-soliciting material to the owners of stock held in their names, and Li3 will reimburse such brokers and other custodians, nominees and fiduciaries for their reasonable out-of-pocket costs. Solicitation by our directors, officers and employees may also be made of some stockholders in person or by mail, telephone or other means of electronic communication following the original solicitation. In addition, we may retain the services of a proxy solicitor to assist in the solicitation of proxies. If we determine that the services of a proxy solicitor are necessary, we anticipate that we will pay the proxy solicitor compensation for its services and will reimburse it for its approved out-of-pocket expenses.

 

 
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Q:

Who can help answer my questions?

 

A:

If you have questions about the Special Meeting or the merger after reading this proxy statement/prospectus, you should contact us at the following address or phone number: Li3 Energy Inc., info@li3energy.com, Attn: Investor Relations, +56 2 2206 5252.

 

SUMMARY

 

This summary discusses selected information contained in this proxy statement/prospectus, including with respect to the merger agreement, the merger and the other transactions and agreements contemplated in connection with the merger. You should carefully read this entire proxy statement/prospectus, its annexes and the documents referred to in this proxy statement/prospectus, as this summary may not contain all of the information that may be important to you. Certain items in this summary include page references directing you to a more complete description of that topic in this proxy statement/prospectus.

 

Special Meeting of Stockholders

 

A Special Meeting of Li3’s stockholders will be held on September 28, 2017, at 409 - 221 W. Esplanade, North Vancouver, British Columbia, Canada V7M 3J3 , at 9:00 A.M., local time (P.S.T.), for the following purposes:

 

1. to consider and vote upon a proposal to approve and adopt the merger agreement and the merger and other transactions contemplated thereby, which proposal we refer to as the “merger proposal”; and

 

2. to consider and vote upon a proposal to adjourn the Special Meeting to a later date, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the merger proposal, which proposal we refer to as the adjournment proposal.

 

Record Date and Voting Power. You are entitled to vote at the Special Meeting if you held shares of Li3 common stock at the close of business on August 21, 2017, the record date for the Special Meeting. Holders of Li3 common stock will have one vote at the Special Meeting for each share of Li3 common stock owned at the close of business on the record date. As of the record date, a total of 556,124,331 shares of Li3 common stock will be entitled to be voted at the Special Meeting.

 

Vote Required to Approve the Merger Proposal . The affirmative vote of the holders of a majority of the voting power outstanding on the record date (assuming a quorum is present in person or by proxy) is required for approval of the merger proposal. If you vote to abstain, or if you fail to vote or fail to instruct your bank, broker, custodian or other record holder how to vote, it will have the same effect as voting AGAINST this proposal.

 

Voting Agreements. As a condition of the merger agreement, Li3 agreed to use commercially reasonable efforts to cause certain stockholders of Li3, who hold in the aggregate 59.3% of Li3’s common shares, to enter into voting agreements with Bearing prior to the Special Meeting. Pursuant to the voting agreements, among other things, each such stockholder shall agree to vote (or cause to be voted) all shares of Li3 common stock owned, indirectly or directly, whether beneficially or of record, by it in favor of the merger proposal. As at the date of this registration statement Li3 shareholders holding 58.6% in the aggregate have entered into voting agreements, including all officers and directors of Li3. (See “The Special Meeting-Voting and Support Agreements” at page 46).

 

Percentage of Outstanding Shares Entitled to Vote Held by Directors, Executive Officers and Their Affiliates . The number of shares of Li3 common stock held by Li3’s directors, executive officers and their affiliates is 259,951,389, representing 48% of the number of shares of Li3 common stock issued and outstanding on the record date. None of Bearing’s directors, executive officers or affiliates hold Li3 common stock.

 

Vote Required to Approve the Adjournment Proposal . The adjournment proposal must be approved by a majority of the votes cast at the Special Meeting (assuming a quorum is present in person or by proxy). If you fail to vote or to instruct your bank, broker, custodian or other record holder how to vote, it will have no effect on the voting outcome of these proposals. If you abstain, it will have the effect of a vote “AGAINST” the proposal.

  
 
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Risk Factors (Page 26)

 

In evaluating the proposals set forth in this proxy statement/prospectus, you should carefully read this proxy statement/prospectus, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors” on page 26.

 

Parties to the Merger (Page 48)

 

Li3 Energy Inc., a Nevada corporation, is an exploration company in the lithium and potassium mining sector, based in South America. Li3’s common stock is currently quoted on the OTCQB. Li3 aims to acquire and develop a unique portfolio of lithium and potassium brine projects in the Americas. Li3 has been focused on further exploring, developing and commercializing its interest in the Maricunga Project, located in the northeast section of the Salar de Maricunga in Region III of Atacama in northern Chile, as well as increasing its portfolio of projects. Li3 is headquartered in Santiago, Chile. See “The Parties to the Merger-Li3 Energy Inc.” on page 48 and “Li3’s Business,” beginning on page 98. Li3’s principal executive office is located at:

 

Matias Cousiño 82, Oficina 806

Santiago, Chile

F3 00000

Telephone: +(56) 2-2206 5252

 

Bearing Lithium Corp. (formerly Bearing Resources Ltd.), headquartered in Vancouver, British Columbia, Canada, is a corporation organized under the laws of British Columbia, Canada. Bearing has been focused on exploration for precious and base metals in North America, and on the evaluation and acquisition of mineral property interest, and namely lithium exploration interest. See “The Parties to the Merger-Bearing Lithium Corp.” on page 48 and “Bearing’s Business” beginning on page 126. Bearing’s principal executive office is located at:

  

1400-1111 W Georgia St.
Vancouver, BC

Canada V6E 4G2

Telephone: 1 604 262 8835 ex101

 

LI Acquisition Corporation, referred to as Sub, is a Nevada corporation and is a wholly owned subsidiary of Bearing that was formed solely for the purpose of entering into the merger agreement and completing the merger. Upon the consummation of the merger, Sub will be merged with and into Li3 and will cease to exist. Although the proposed transaction is described and constituted as a merger, the result will be the acquisition of Li3 by Bearing as a directly owned and wholly controlled subsidiary. See “The Parties to the Merger-LI Acquisition Corporation” on page 48. The contact information for Sub is:

 

c/o Bearing Lithium Corp.

409 - 221 W. Esplanade

North Vancouver BC

Canada V7M 3J3

Telephone: 1 604 262 8835 ex101


 
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The Agreement and Plan of Merger (Page 56)

  

Bearing, Sub and Li3 agreed to consummate a merger under the terms of the merger agreement that is described in this proxy statement/prospectus. Pursuant to the merger agreement, Sub will merge with and into Li3, with Li3 surviving the merger and continuing as a wholly owned subsidiary of Bearing. At the effective time of the merger, the stockholders of Li3 will become entitled to receive Bearing common shares which, together with options and warrants to purchase shares of Li3 common stock that will be converted into options or warrants to purchase Bearing common shares (and will be assumed by Bearing at the effective time of the merger pursuant to the terms of the merger agreement), will represent approximately 35.12% of the Bearing common shares on a non-diluted basis after the merger, or 28.14% of the Bearing common shares on a fully diluted basis after the merger, assuming the exercise of all Bearing options and warrants outstanding as at September 8, 2017.

  

A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus. We encourage you to carefully read the merger agreement in its entirety because it is the legal document governing the merger.

 

Completion of the Merger (Page 56)

 

Unless the merger agreement is terminated prior to such time, the closing of the merger will occur on the earlier of the third business day following the satisfaction or waiver of all of the conditions set forth in the merger agreement or such other date as the parties may mutually agree. As of the date of this proxy statement/prospectus, the parties expect to complete the merger prior to December 31, 2017.

 

Reasons for the Merger and Recommendation of the Li3 Board (Page 49)

 

In the course of reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the merger, the Li3 Board considered a number of factors. The Li3 Board has approved and adopted the merger agreement and the transactions contemplated thereby, including the merger, and recommended approval and adoption of the merger agreement by Li3’s stockholders, which we refer to as the Li3 board recommendation. Similarly, the Bearing Board has determined that the merger is fair to and in the best interests of Bearing and its shareholders and has declared it advisable to enter into the merger agreement and consummate the transactions contemplated thereby, including the merger, which we refer to as the Bearing board recommendation.

 

A detailed discussion of the background of, and reasons for, the merger are described in “The Merger- Background of the Merger” and “Li3’s Reasons for the Merger and the Recommendation of the Li3 Board,” beginning on page 49.

 

Merger Consideration-Treatment of Li3 Capital Stock in the Merger (Page 56)

   

The number of Bearing common shares to be issued pursuant to the acquisition agreement is fixed at 16,000,000 shares, and there are currently 556,124,331 issued and outstanding shares of Li3 Common Stock. Based on those amounts, at the effective time of the merger, each share of issued and outstanding Li3 common stock shall cease to be outstanding and shall be exchanged for the right to receive Bearing common shares in the ratio of  0.0287705448370321 Bearing common shares for each share of Li3 common stock, which is referred to in this proxy statement/prospectus as the exchange ratio. The exchange ratio reflects the dividend of 16,000,000 Bearing common shares divided by the number of Li3 common shares issued and outstanding upon completion of the acquisition. Therefore the exchange ratio may be adjusted to account for the issuance of additional Li3 common shares prior to the completion of the acquisition. No fractional shares will be issued in connection with the merger. In the event that a Li3’s stockholder’s holdings of Bearing common shares resulting from the merger would result in the issuance of a fractional share, the number of Bearing common shares to be received by such holder will be rounded down to the nearest whole share. From and after the effective time of the merger, all shares of Li3’s common stock will no longer be outstanding and will automatically be cancelled and retired, and each holder of a certificate or book-entry share will cease to have any rights with respect thereto, except the right to receive Bearing common shares. These newly issued shares will represent approximately 35.12% of the Bearing common shares on a non- diluted basis after the effective time of the merger, or approximately 28.14% of the Bearing common shares on a fully diluted basis, assuming the exercise of all Bearing options and warrants outstanding as at September 8, 2017. 

  

Treatment of Li3 Warrants and Stock Options in the Merger (Page 57)

 

At the effective time of the merger, each outstanding option or warrant to purchase a share of Li3 common stock, whether vested or unvested or exercisable or unexercisable, and so long as such option or warrant has not, prior to the effective time of the merger, been exercised, cancelled, terminated or expired, will be deemed to constitute an option or warrant to purchase, on the same terms and conditions, a number of Bearing common shares (rounded down to the nearest whole share) equal to the product of (i) the number of shares of Li3 common stock subject to such option or warrant multiplied by (ii) the exchange ratio of 0.0287705448370321 (which may be reduced by the issuance of additional Li3 common shares), at an exercise price per share computed by dividing the per share exercise price under each such option or warrant by the exchange ratio and rounding up to the nearest cent.

 

Conditions to the Completion of the Merger (Page 69)

 

As more fully described in this proxy statement/prospectus and as fully set forth in the merger agreement attached as Annex A to this proxy statement/prospectus, the completion of the merger depends upon a number of conditions being satisfied or, to the extent permitted by applicable law, waived, including, among other things, (i) adoption of the merger agreement by Li3’s stockholders, (ii) approval of the issuance of the merger consideration to Li3’s securities holders, adoption of a new equity incentive plan by Bearing’s shareholders (iii) the absence of any legal restraints or prohibitions on the consummation of the merger, (iv) the effectiveness of the registration statement on Form F-4 of which this proxy statement/prospectus is a part, and (v) conditional approval from the TSXV.

 
 
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Restrictions on Solicitation (Page 67)

 

Pursuant to the merger agreement, neither Li3 nor Bearing is permitted to solicit, initiate or knowingly encourage or otherwise take any action to facilitate from any third party a competing proposal to acquire the assets of, equity interest in, or business of Li3 and its subsidiaries, taken as a whole, or Bearing and its subsidiaries, taken as a whole, any of which we refer to as a company acquisition proposal.

 

In addition, except as permitted pursuant to the merger agreement as set forth below, neither Li3 nor Bearing is permitted to:

 

 

·

conduct or engage in any discussions or negotiations with, or disclose any non-public information relating to it or any of its subsidiaries to, or knowingly assist, participate in, facilitate or encourage any effort by, any third party that is seeking to make, or has made, any company acquisition proposal;

 

 

·

endorse or recommend any company acquisition proposal;

 

 

·

enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other similar contract (in each case, whether or not binding) relating to any company acquisition proposal; or

 

·

grant any waiver, amendment or release under any standstill or confidentiality agreement or any anti-takeover laws or otherwise fail to enforce any of the foregoing.

 

Termination of the Merger Agreement (Page 70)

 

Generally and except as specified below, the merger agreement may be terminated and the merger may be abandoned at any time prior to the completion of the merger, including after the required approval of the Li3 stockholders or the Bearing shareholders (if required):

 

 

·

without further action by the parties, if the merger has not been consummated on or prior to December 31, 2017;

 

 

·

by mutual written consent of Bearing and Li3, by action of their respective boards of directors;


 
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·

by either Li3 or Bearing if:

 

 

·

a court of competent jurisdiction or other governmental entity (including but not limited to the TSXV) issues a final and non-appealable order, or has taken any other action having the effect of permanently restraining, enjoining or otherwise prohibiting or making illegal the transactions contemplated by the merger agreement, provided that the party seeking to terminate the merger agreement for such reason must have first used its reasonable best efforts to resist, remove or resolve such restraint or prohibition as required by the merger agreement and provided further that such termination right will not be available to a party whose material breach of any provision of the merger agreement results in the imposition of such order, decree or ruling or the failure of such order, decree or ruling to be resisted, resolved or lifted;

 

 

·

the required approval by Li3’s stockholders of the merger agreement, the merger and the other transactions contemplated by the merger agreement has not been obtained at the Li3 stockholder meeting;

 

 

·

the required approval of Bearing shareholders has not been obtained at the Bearing shareholder meeting, if required; or


 

·

by Bearing if:


 

·

Li3 has breached or failed to perform in any respect any of its representations, warranties, covenants or agreements contained in the merger agreement, and such breach or failure to perform (A) is not cured by Li3 within 30 days following written notice by Bearing of such breach or failure to perform and (B) would result in a failure of any condition of Bearing or Sub to consummate the merger; provided, that such termination right will not be available if either Bearing or Sub is in material breach of any of its representations, warranties, covenants or agreements under the merger agreement that would result in the failure of any conditions to the obligations of Li3 to consummate the merger;

 

·

the Li3 Board fails to include the Li3 board recommendation in this proxy statement/prospectus, or the Li3 Board shall have changed its recommendation not to support the merger;

 

·

all of the conditions to the obligations of Li3 to complete the merger have been satisfied or waived by Li3 and Li3 fails to complete the closing within three business days.

 

 

·

by Li3 if:

 

 

·

Bearing or Sub has breached or failed to perform in any respect any of its representations, warranties, covenants or agreements contained in the merger agreement, and such breach or failure to perform (A) is not cured by Bearing or Sub within 30 days following written notice by Li3 of such breach or failure to perform and (B) would result in a failure of any condition of Li3 to consummate the merger; provided, that such termination right will not be available if Li3 is in material breach of any of its representations, warranties, covenants or agreements under the merger agreement that would result in the failure of any conditions to the obligations of Bearing or Sub to consummate the merger;

 

 

·

the Bearing Board fails to include the Bearing board recommendation in a proxy statement, to the Bearing Shareholders (if required), or Board shall have changed its recommendation not to support the merger;

 

 

 

 

·

all of the conditions to the obligations of Bearing and Sub to complete the merger have been satisfied or waived by Bearing or Sub and Bearing and Sub fail to complete the closing within three business days.


 
13
 
Table of Contents

 

Merger Expenses (Page 72)

 

Pursuant to the merger agreement, Bearing and Li3 have agreed that they will each generally bear their own expenses under the merger agreement. However, if Bearing terminates the merger agreement due to an uncured breach by Li3, as described above, or if Li3 terminates the merger agreement due to an uncured breach by Bearing, as described above, then the non-terminating party may be responsible to pay to the terminating party an amount equal to the terminating party’s actual expenses incurred in connection with the merger agreement and the transactions contemplated thereby. Currently, Li3 has nominal cash on hand, and Bearing is advancing funds to Li3 on an as-needed basis to satisfy Li3’s expenses incurred in relation to the merger agreement, among other expenses. If the merger agreement is terminated, any funds advanced by Bearing to Li3 will become payable on demand.

 

Interests of Certain Persons in the Merger (Page 53)

 

In considering the recommendation of the Li3 Board and Bearing Board with respect to the merger, you should be aware that certain of Li3’s and Bearing’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of Li3’s (or Bearing) stockholders generally. These interests include, but are not limited to, the grant of equity awards consisting of Bearing common shares or other executive compensation that are expected to be provided to the directors and the executive officers upon consummation of the merger.

 

Accounting Treatment of the Merger (Page 53)

 

Although the proposed transaction is described and constituted as a merger, it will result in the acquisition of Li3 by Bearing as a directly owned and wholly controlled subsidiary. We expect the merger will be accounted for as an acquisition of net assets rather than a business combination under international financial reporting standards (“IFRS”), with Bearing considered the acquirer of Li3’s assets. This accounting is made on the basis that Bearing’s management has determined that Li3 does not have the inputs and processes capable of producing outputs that are necessary to meet the definition of a business as defined by IFRS 3.

 

Regulatory Clearances Required for the Merger (Page 54)

 

Bearing and Li3 have each agreed to take certain actions in order to obtain regulatory clearance required to consummate the merger. Bearing and Li3 intend to make all required filings under the Securities Act and the Exchange Act in connection with the merger as well as all filings required by the TSXV relating to the listing of Bearing’s common shares to be issued in the merger. It is a condition to the completion of the merger that the TSXV has conditionally approved the listing of Bearing’s common shares to be issued pursuant to the merger agreement on the TSXV. Final approval of the TSXV will be subject to the satisfaction of certain customary filing requirements of the TSXV, and may be subject to receipt of Bearing shareholder approval.

 

Material U.S. Federal Income Tax Consequences of the Merger (Page 72)

 

The merger is intended to constitute a reorganization within the meaning of Section 368(a) of the Code, with no recognition of gain or loss to the holders of Li3 common stock (other than with respect to any holder of Li3 common stock that would be a “five-percent transferee shareholder” of Bearing (within the meaning of U.S. Treasury Regulations Section 1.367(a)-3(c)(5)(ii)) following the merger and that does not enter into a five-year gain recognition agreement in the form provided in U.S. Treasury Regulations Section 1.367(a)-8(c)). Li3, Bearing and Sub adopted the merger agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations. Li3, Bearing and Sub have agreed, for U.S. federal income tax purposes, to report the merger as reorganization within the meaning of Section 368 of the Code.

 

This intended treatment is not free from doubt, as there are significant factual and legal uncertainties concerning such treatment. For additional information, see “Material U.S. Federal Income Tax Consequences” beginning on page 72 of this proxy statement/prospectus.

 

Tax matters are very complicated, and the tax consequences of the merger to each holder of Li3 common stock may depend on such holder’s particular facts and circumstances. Holders of Li3 common stock are urged to consult their tax advisors to understand fully the tax consequences to them of the merger.


 
14
 
Table of Contents

 

Material Canadian Federal Income Tax Consequences of the Merger (Page 83)

 

A Canadian Holder who disposes of his, her or its Li3 common stock and receives Bearing common shares pursuant to the merger agreement will generally realize a capital gain (or capital loss) equal to the amount by which the fair market value of the Li3 common stock, determined at the time of the merger, exceeds (or is exceeded by) the adjusted cost base, referred to as ACB, of the Canadian Holder’s Li3 common stock determined immediately before the merger and reasonable costs of disposition.

 

A Non-Canadian Holder will not be subject to tax under the Tax Act on any capital gain realized on a disposition of Li3 common stock pursuant to the merger, or on a subsequent disposition of Bearing common shares acquired on the merger, unless the relevant share

 

 

·

is “taxable Canadian property”, and

 

·

is not “treaty-protected property” (as those terms are defined in the Tax Act) of the Non-Canadian Holder,

 

at the time of the disposition.

 

See “Material Canadian Federal Income Tax Consequences of the Merger” on page 83.

 

Dissenters’ Rights of Appraisal (Page 54)

 

Under the NRS, Li3 stockholders will have dissenters’ and appraisal rights with respect to the merger.

 

Comparison of the Rights of Bearing Shareholders and Li3 Stockholders (Page 142)

 

As a result of the merger, holders of Li3 common stock will become holders of Bearing common shares, and their rights will be governed by British Columbia law (instead of the NRS) and Bearing’s notice of articles (instead of Li3’s certificate of incorporation and bylaws). Following the merger, former Li3 stockholders will have different rights as Bearing shareholders than they did as Li3 stockholders. For a summary of the material differences between the rights of Li3 stockholders and Bearing shareholders, see “Comparison of Rights of Bearing Shareholders and Li3 Stockholders” beginning on page 142 of this proxy statement/prospectus.

 

Bearing’s Board of Directors and Management following the Merger (Page 87)

 

Following the merger, it is anticipated that the Bearing Board of Directors, and its management, will be composed of the following individuals:

 

 

Title

Jeremy Poirier

 

President, Chief Executive Officer, Director

Patrick Cussen

 

Director

Timothy Heenan

 

Independent Director 

Amar Balaggan

 

Independent Director

Kirk Shaw

 

Independent Director

Ann Fehr

 

Chief Financial Officer, Corporate Secretary

Luis Saenz

 

President, South American Operations

Benjamin Asuncion

 

Vice-President, Business Development

 

Prior to completion of the merger, Bearing and Li3 intend to designate an additional independent director, and may designate a fifth director.


 
15
 
Table of Contents

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF BEARING

 

Historical Exchange Rates

 

Bearing’s operating currency in the Canadian Dollar, and the consolidated financial information of Bearing contained in this prospectus are prepared in Canadian Dollars. The below tables detail the exchange rates between the Canadian Dollar and U.S. Dollar for the periods indicated:

  

Period

 

Average

Exchange Rate (CAD to USD)

 

August 1, 2017 to September 8, 2017

 

$

0.798017858

(1)

Nine Months Ended July 31, 2017

 

$

0.756064222

(2)

Year Ended October 30, 2016

 

$

0.830464583

(2)

Year Ended October 30, 2015

 

$

0.980912333

(2)

Year Ended October 30, 2014

 

$

0.917641916

(2)

Year Ended October 30, 2013

 

$

0.805488583

(2)

Year Ended October 30, 2012

 

$

0.75418425

(2)

 

(1)

Calculated using the average of the exchange rates (daily average) on each day during the period.

(2) Calculated using the average of the exchange rates (daily average) on the last day of each month during the period.
 

 

Exchange Rate (CAD to USD)

 

Period

 

High

 

Low

 

September 1, 2017 to September 8, 2017

 

0.82414

 

0.80592

 

August 2017

 

0.80185

 

0.78379

 

July 2017

 

0.80427

0.76894

 

June 2017

 

0.76979

 

0.73965

 

May 2017

 

0.74397

 

0.72765

 

April 2017

 

0.75315

 

0.73213

 

March 2017

 

$

0.75070

 

$

0.73932

 

February 2017

 

$

0.76775

 

$

0.75839

 

January 2017

 

$

0.76663

 

$

0.74361

 

 
16
 
Table of Contents

 

The following tables summarize Bearing’s financial data as of and for the fiscal years ended October 31, 2016, 2015, and 2014 and as of and for the six months ended April 30, 2017 and 2016. The statement of income data for the six months ended April 30, 2017 and 2016, and the balance sheet data as of April 30, 2017, which were prepared in accordance with International Financial Reporting Standards, as adopted by the International Accounting Standards Board, or IFRS, have been derived from Bearing’s unaudited financial statements and related notes, which are included elsewhere in this proxy statement/prospectus. The statements of income data for the fiscal years ended October 31, 2016, 2015, and 2014, and the balance sheet data as of October 31, 2016, 2015, and 2014, which were prepared in accordance with IFRS, have been derived from Bearing’s audited financial statements and related notes, which are included elsewhere in this proxy statement/prospectus. Historical results are not indicative of the results that should be expected in the future.

 

Balance Sheet Data:

(Expressed in Canadian dollars)

 

 

 

April 30,

2017

(unaudited)

(CA$)

 

 

October 31,

2016

(CA$)

 

 

October 31,

2015

(CA$)

 

 

October 31,

2014

(CA$)

 

Cash

 

 

2,143,760

 

 

 

1,856,756

 

 

 

573,816

 

 

 

728,975

 

Accounts receivable

 

 

23,442

 

 

 

18,032

 

 

 

4,790

 

 

 

4,819

 

Prepaid expense

 

 

19,701

 

 

 

24,337

 

 

 

-

 

 

 

-

 

Investments

 

 

581,285

 

 

 

600,001

 

 

 

1

 

 

 

7,201

 

Current Assets

 

 

2,768,188

 

 

 

2,499,126

 

 

 

578,607

 

 

 

740,995

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclamation bonds and deposits

 

 

21,993

 

 

 

21,993

 

 

 

21,942

 

 

 

21,867

 

Mineral property interests

 

 

1,677,904

 

 

 

4

 

 

 

248,329

 

 

 

593,386

 

Total Assets

 

 

4,468,085

 

 

2,521,123

 

 

 

848,878

 

 

 

1,356,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

287,575

 

 

 

45,779

 

 

 

22,419

 

 

 

17,491

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Capital

 

 

2,480,613

 

 

 

2,453,347

 

 

 

556,188

 

 

 

723,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

12,687,096

 

 

 

9,677,738

 

 

 

8,677,789

 

 

 

8,677,789

 

Contributed surplus

 

 

6,320,030

 

 

 

5,770,948

 

 

 

5,023,092

 

 

 

5,023,092

 

Accumulated and other income

 

 

12,500

 

 

 

-

 

 

 

3,267

 

 

 

5,286

 

Deficit

 

 

(14,839,116 )

 

 

(12,973,342 )

 

 

(12,877,689 )

 

 

(12,367,410 )

Shareholders’ Equity

 

 

4,180,510

 

 

 

2,475,344

 

 

 

826,459

 

 

 

1,338,757

 

Total Liabilities and Shareholders’ Equity

 

 

4,468,085

 

 

 

2,521,123

 

 

 

848,878

 

 

 

1,356,248

 

 

Statement of Income Data:

(Expressed in Canadian dollars)  

 

 

Six Months

Ended

April 30,

 

Year

Ended

October 31,

 

2017

(unaudited)

(CA$)

 

2016

(unaudited)

(CA$)

 

2016

(CA$)

 

2015

(CA$)

 

2014

(CA$)

 

Total Revenue

 

-

 

-

 

-

 

-

 

-

 

Operating expenses

 

1,819,338

 

52,054

 

445,137

 

178,050

 

238,501

 

Exploration Related costs

 

-

 

16,531

 

22,442

 

346,702

 

17,551

 

Other income (expense)

 

46,436

 

3,035

 

371,926

 

14,473

 

-

 

Net loss

 

1,865,774

 

71,620

 

95,653

 

510,279

 

256,052

 

Total Comprehensive loss

 

1,865,774

 

71,620

 

98,920

 

512,298

 

255,277

 

Basic and diluted loss per common share

 

0.09

 

0.01

 

0.01

 

0.08

 

0.01

 

Weighted average number of shares outstanding

 

21,770,121

 

6,472,418

 

6,801,179

 

6,472,412

 

25,889,648

   

 
17
 
Table of Contents

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF Li3

 

The following tables summarize Li3’s financial data as of and for the fiscal years ended June 30, 2016, 2015, and 2014 and as of and for the three and nine months ended March 31, 2017 and 2016. The statement of income data for the three and nine months ended March 31, 2017 and 2016 and the balance sheet data as of December 30, 2016, which were prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, have been derived from Li3’s unaudited interim financial statements and related notes, which are included elsewhere in this proxy statement/prospectus. The statements of income data for the fiscal years ended June 30, 2016, 2015, and 2014, and the balance sheet data as of June 30, 2016, 2015, and 2014 which were prepared in accordance with U.S. GAAP, have been derived from Li3’s audited financial statements and related notes, which are included elsewhere in this proxy statement/prospectus. Historical results are not indicative of the results that should be expected in the future.

  

Balance Sheet Data:

(Expressed in U.S. dollars)

 

 

 

March 31, 2017

(unaudited)

(US$)

 

 

Year Ended

June 30, 2016

(US$)

 

 

Year Ended

June 30, 2015

(US$)

 

 

Year Ended

June 30, 2014

(US$)

 

Cash

 

 

1,631

 

 

 

382,054

 

 

 

6,217

 

 

 

38,490

 

Prepaid expenses and advances

 

 

68,043

 

 

 

9,169

 

 

 

51,760

 

 

 

35,781

 

Receivable from MSB for sale of controlling interest in Minera Li

 

 

-

 

 

 

-

 

 

 

997,796

 

 

 

-

 

Current Assets

 

 

69,674

 

 

 

391,223

 

 

 

1,055,773

 

 

 

74,271

 

Receivable from MSB for sale of controlling interest in Minera Li

 

 

-

 

 

 

-

 

 

 

-

 

 

 

994,017

 

Equity investment in Minera Li

 

 

6,160,771

 

 

 

6,779,337

 

 

 

7,336,375

 

 

 

7,572,425

 

Property and equipment, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

322

 

Total Assets

 

 

6,230,445

 

 

 

7,170,560

 

 

 

8,392,148

 

 

 

8,641,035

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

1,971,233

 

 

 

1,280,437

 

 

 

1,937,240

 

 

 

2,091,793

 

Total Liabilities

 

 

1,971,233

 

 

 

1,735,338

 

 

 

2,137,240

 

 

 

4,038,783

 

Working Deficit

 

 

(1,901,559 )

 

 

(889,214 )

 

 

(881,467 )

 

 

(2,017,522 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock subject to rescission

 

 

3,041

 

 

 

3,041

 

 

 

3,041

 

 

 

3,041

 

Common stock

 

 

502,829

 

 

 

495,153

 

 

 

477,120

 

 

 

435,006

 

Additional paid-in capital

 

 

72,697,881

 

 

 

72,511,626

 

 

 

71,808,625

 

 

 

70,610,958

 

Accumulated deficit

 

 

(68,944,539 )

 

 

(67,574,598 )

 

 

(66,033,878 )

 

 

(66,446,753 )

Shareholders’ Equity

 

 

4,256,171

 

 

 

5,432,181

 

 

 

6,251,867

 

 

 

4,599,211

 

Total Liabilities and Shareholders’ Equity

 

 

6,230,445

 

 

 

7,170,560

 

 

 

8,392,148

 

 

 

8,641,035

 

 

 
18
 
Table of Contents

 

Statement of Income Data:

(Expressed in U.S. dollars)
 

 

 

Three Months

Ended

March 31,

 

 

Nine Months

Ended

March 31,

 

 

Year Ended

June 30,

 

 

 

2017

(unaudited)

(US$)

 

 

2016

(unaudited)

(US$)

 

 

2017

(unaudited)

(US$)

 

 

2016

(unaudited)

(US$)

 

 

2016

(US$)

 

 

2015

(US$)

 

 

2014

(US$)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Loss from Minera Li equity investment

 

 

(546,629 )

 

 

(186,996 )

 

 

(618,566 )

 

 

(562,228 )

 

 

(557,038 )

 

 

(236,050 )

 

 

(106,589 )

General and administrative expenses

 

 

(182,906 )

 

 

(161,195 )

 

 

(528,318 )

 

 

(532,193 )

 

 

(839,446 )

 

 

(1,390,428 )

 

 

(2,012,850 )

Loss on settlement of related party payables

 

 

(55,796 )

 

 

-

 

 

 

(55,796 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total Operating Expenses

 

 

(785,331 )

 

 

(348,191 )

 

 

(1,202,680 )

 

 

(1,094,421 )

 

 

(1,396,484 )

 

 

(1,626,478 )

 

 

(7,295,295 )

Other income (expense)

 

 

(119,898 )

 

 

(47,951 )

 

 

(167,261 )

 

 

(153,188 )

 

 

(144,236 )

 

 

(2,039,353 )

 

 

865,760

 

Net Income (Loss)

 

 

(905,229 )

 

 

(396,142 )

 

 

(1,369,941 )

 

 

(1,274,609 )

 

 

(1,540,720 )

 

 

412,875

 

 

 

(6,429,565 )

Basic and diluted income (loss) per common share

 

 

(0.00 )

 

 

(0.00 )

 

 

(0.00 )

 

 

(0.00 )

 

 

(0.00 )

 

 

(0.00 )

 

 

(0.01 )

Weighted average number of shares outstanding

 

 

501,401,032

 

 

 

485,672,173

 

 

 

498,769,424

 

 

 

482,983,853

 

 

 

484,766,399

 

 

 

447,583,953

 

 

 

414,294,512

 

 

COMPARATIVE PER SHARE MARKET PRICE DATA AND DIVIDEND INFORMATION

 

Comparative Per Share Market Price Information

 

The following table shows the closing prices of Bearing common shares as reported by the TSXV and by OTCQB, and Li3 common stock as reported by OTCQB on January 30, 2017, the last trading day before the announcement of the acquisition agreement, and September 8, 2017, the last practicable day before the filing of this proxy statement/prospectus with the SEC. This table also shows the equivalent value of the consideration per share of Li3 common stock, which was calculated by multiplying the closing price of Bearing common shares as reported by OTCQB as of the specified date by the current exchange ratio of 0.0287705448370321.

 

 

Bearing Common Shares

 

Li3 Common Stock

 

Equivalent

Value of Merger Consideration per Li3 Share

 

OTCQB

(US$)

 

TSX

(CA$)

 

OTCQB

( US$)

 

OTCQB

(US$)

 

January 31, 2017

 

$

0.70

 

$

0.85

 

$

0.02

 

$

0.02

 

September 8, 2017

 

$

0.63

 

$

0.78

 

$

0.019

 

$

0.018

 

Comparative Stock Prices and Dividends

 

Bearing’s common shares are traded in Canada on the TSXV under the symbol “BRZ” and in the United States on the OTCQB under the symbol “BRGRF.” Bearing’s common shares are also traded in Germany on the Frankfurt Stock Exchange under the symbol “B6K1”.

 

The bid quotations reported reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.


 
19
 
Table of Contents

 

Li3’s common stock is traded on the OTCQB Capital Market under the symbol “ LIEG .”

 

For the periods indicated, the following tables set forth the high and low bid prices of Bearing’s common shares, as reported by the TSXV and the OTCQB, and the high and low sales prices of Li3’s common stock, as reported by the OTCQB. The prices shown for Bearing common shares, as reported by the TSXV, are shown in Canadian dollars. The prices shown for Bearing common shares, as reported by the OTCQB, are shown in U.S. dollars. Neither Bearing nor Li3 has declared or paid dividends on its common shares and common stock, respectively, and neither Bearing nor Li3 anticipates paying any cash dividends in the foreseeable future.

 

BEARING COMMON SHARES

 

Period:

 

Bearing/TSXV

(Canadian Dollars)

 

 

Bearing/OTCQB

(U.S. Dollars)

 

 

Li3/OTCQB

(U.S. Dollars)

 

Annual

 

High

 

 

Low

 

 

High

 

 

Low

 

 

High

 

 

Low

 

2016

 

 

0.41

 

 

 

0.00

 

 

 

n/a

 

 

 

n/a

 

 

 

0.03

 

 

 

0.00

 

2015

 

 

0.07

 

 

 

0.02

 

 

 

n/a

 

 

 

n/a

 

 

 

0.04

 

 

 

0.01

 

2014

 

 

0.09

 

 

 

0.03

 

 

 

n/a

 

 

 

n/a

 

 

 

0.06

 

 

 

0.01

 

2013

 

 

0.17

 

 

 

0.03

 

 

 

n/a

 

 

 

n/a

 

 

 

0.06

 

 

 

0.01

 

2012

 

 

0.50

 

 

 

0.08

 

 

 

n/a

 

 

 

n/a

 

 

 

0.15

 

 

 

0.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Last Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 1, 2017 to September 8, 2017

 

 

0.79

 

 

 

0.71

 

 

 

0.63

 

 

 

0.58

 

 

 

0.019

 

 

 

0.017

 

August

 

 

0.90

 

 

 

0.70

 

 

 

0.72

 

 

 

0.56

 

 

 

0.02

 

 

 

0.01

 

July

 

 

1.03

 

 

 

0.81

 

 

 

0.80

 

 

 

0.64

 

 

 

0.02

 

 

 

0.01

 

June

 

 

1.06

 

 

 

0.67

 

 

 

0.79

 

 

 

0.50

 

 

 

0.03

 

 

 

0.02

 

May

 

 

0.95

 

 

 

0.79

 

 

 

0.68

 

 

 

0.59

 

 

 

0.02

 

 

 

0.02

 

April

 

 

0.96

 

 

 

0.81

 

 

 

0.72

 

 

 

0.60

 

 

 

0.03

 

 

 

0.02

 

March

 

 

1.25

 

 

 

1.14

 

 

 

0.93

 

 

 

0.87

 

 

 

0.04

 

 

 

0.02

 

 

The Bearing common shares began trading on the TSXV on June 10, 2011. The Bearing common shares were first quoted on the OTCQB on November 10, 2016.

 

For the quarterly period:

 

Bearing/TSXV (Canadian Dollars)

 

 

Bearing/OTCQB (U.S. Dollars)

 

 

 

High

 

 

Low

 

 

High

 

 

Low

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

 

$ 1.83

 

 

 

0.55

 

 

$ 0.69

 

 

 

0.32

 

Second Quarter

 

 

1.83

 

 

 

0.88

 

 

 

1.41

 

 

 

0.60

 

Third Quarter

 

 

1.06

 

 

 

0.67

 

 

 

0.80

 

 

 

0.50

 

Fourth Quarter (through September 8, 2017)

 

 

0.90

 

 

 

0.70

 

 

 

0.72

 

 

 

0.56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

 

$ 0.03

 

 

$ 0.00

 

 

$ n/a

 

 

 

n/a

 

Second Quarter

 

 

0.03

 

 

 

0.00

 

 

 

n/a

 

 

 

n/a

 

Third Quarter

 

 

0.23

 

 

 

0.04

 

 

 

n/a

 

 

 

n/a

 

Fourth Quarter

 

 

0.65

 

 

 

0.17

 

 

 

0.37

 

 

 

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

 

$ 0.04

 

 

 

0.02

 

 

$ n/a

 

 

 

n/a

 

Second Quarter

 

 

0.05

 

 

 

0.02

 

 

 

n/a

 

 

 

n/a

 

Third Quarter

 

 

0.03

 

 

 

0.03

 

 

 

n/a

 

 

 

n/a

 

Fourth Quarter

 

 

0.03

 

 

 

0.03

 

 

 

n/a

 

 

 

n/a

 

 

 
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Li3 COMMON STOCK

 

 

 

Li3/OTCQB (U.S. Dollars)

 

For the quarterly period:

 

High

 

 

Low

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

First Quarter (through September 8, 2017)

 

$ 0.02

 

 

$ 0.01

 

 

 

 

 

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

First Quarter

 

$ 0.03

 

 

$ 0.01

 

Second Quarter

 

 

0.06

 

 

 

0.02

 

Third Quarter

 

 

0.05

 

 

 

0.01

 

Fourth Quarter

 

 

0.03

 

 

 

0.02

 

 

 

 

 

 

 

 

 

 

2016

 

 

 

 

 

 

 

 

First Quarter

 

$ 0.04

 

 

 

0.02

 

Second Quarter

 

 

0.03

 

 

 

0.01

 

Third Quarter

 

 

0.03

 

 

 

0.01

 

Fourth Quarter

 

 

0.03

 

 

 

0.01

 

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

First Quarter

 

$ 0.02

 

 

$ 0.01

 

Second Quarter

 

 

0.02

 

 

 

0.01

 

Third Quarter

 

 

0.02

 

 

 

0.01

 

Fourth Quarter

 

 

0.04

 

 

 

0.01

 

 

The last reported sale price of Bearing’s common shares on September 8, 2017 on the TSXV was CA$0.78, and on the OTCQB was US$0.638. The last reported sale price of Li3’s common stock on September 8, 2017 on the OTCQB was US$0.195.

 

As of September 8, 2017, there were 76 registered holders of Bearing common shares. As of September 8, 2017, there were 201 holders of record of Li3 common stock.

 

 
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SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The following selected unaudited pro forma condensed consolidated financial data was prepared as an acquisition of Li3's assets and liabilities by Bearing under IFRS, with Bearing being the accounting and legal acquirer. The following information should be read in conjunction with the respective audited consolidated financial statements of Bearing for the year ended October 31, 2016 and Li3 for the year ended June 30, 2016, including the respective notes thereto, and the respective unaudited consolidated financial statements of Bearing and Li3, which are included elsewhere in this proxy statement/prospectus. See “Unaudited Pro Forma Condensed Consolidated Financial Statements” on page 96 of this proxy statement/prospectus.

 

Pro Forma Balance Sheet Data:

(Unaudited - Expressed in Canadian dollars)

(IFRS)  

  

 

 

Bearing Lithium Corp.

(unaudited)

 

 

Li3

Energy, Inc.

(unaudited)

 

 

  Pro

 

 

Pro

Forma

 

As of

 

April 30,

2017

 

 

March 31,

2017

 

 

Forma

Adjustments 

 

 

April 30,

2017

 

Current Assets

 

$ 2,768,188

 

 

$ 92,820

 

 

$ (61,493 )

 

$ 2,799,515

 

Non-Current Assets

 

 

1,699,897

 

 

 

8,207,379

 

 

 

7,937,474

 

 

 

17,844,750

 

Total Assets

 

$ 4,468,085

 

 

$ 8,300,199

 

 

$ 7,875,981

 

 

$ 20,644,265

 

Current Liabilities

 

 

287,575

 

 

 

2,087,298

 

 

 

(958,677 )

 

 

1,416,196

 

Non-Current Liabilities

 

 

-

 

 

 

606,019

 

 

 

-

 

 

 

606,019

 

Total Liabilities

 

 

287,575

 

 

 

2,693,317

 

 

 

(958,677 )

 

 

2,022,215

 

Total Shareholders' Equity  

 

 

4,180,510

 

 

 

5,602,831

 

 

 

8,838,709

 

 

 

18,622,050

 

Total Liabilities And Shareholders' Equity

 

 

4,468,085

 

 

 

8,300,199

 

 

 

7,875,981

 

 

 

20,644,265

 

 

 
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Statement of Loss and Comprehensive Loss Data:

(Unaudited - Expressed in Canadian. dollars)

(IFRS)

 

 

 

Bearing Lithium Corp.

(audited)

 

 

Li3

Energy, Inc.

(unaudited)

 

 

 

 

 

Pro Forma

 

 

 

For the

Year

Ended

October 31,

2016

 

 

For the

Twelve Months

Ended

September 30,

2016

 

 

Pro

Forma

Adjustments

 

 

For the

Year

Ended

October 31,

2016

 

Total Expenses

 

$ (467,579 )

 

$ (1,709,977 )

 

$ 541,688

 

 

$ (1,635,868 )

Total Other Income (Expenses)

 

 

371,926

 

 

 

(85,471 )

 

 

98,118

 

 

 

384,573

 

Net Loss

 

 

(95,653 )

 

 

(1,795,448 )

 

 

639,806

 

 

 

(1,251,295 )

Net loss per share - basic and diluted

 

 

(0.01 )

 

 

 

 

 

 

 

 

 

 

(0.05 )

Weighted average number of shares outstanding - Basic and diluted

 

 

6,801,179

 

 

 

 

 

 

 

 

 

 

 

24,486,747

 

 

 

 

Bearing Lithium Corp.

(unaudited)

 

 

Li3

Energy, Inc.

(unaudited)

 

 

 

 

 

Pro Forma

 

 

 

For the

Six Months

Ended

April 30,

2017

 

 

For the

Six Months

Ended

March 31,

2017

 

 

Pro

Forma

Adjustments

 

 

Six

Months

Ended

April 30,

2017

 

Total Expenses

 

$ (1,819,338 )

 

$ (1,146,887 )

 

$ 735,469

 

 

$ (2,230,756 )

Total Other Income (Expenses)

 

 

(46,436 )

 

 

116,190

 

 

 

96,558

 

 

 

166,312

 

Net and Comprehensive Loss

 

 

(1,865,774 )

 

 

(1,030,697 )

 

 

832,027

 

 

 

(2,064,444 )

Net loss per share - basic and diluted

 

 

(0.09 )

 

 

 

 

 

 

 

 

 

 

(0.05 )

Weighted average number of shares outstanding - Basic and diluted

 

 

21,770,121

 

 

 

 

 

 

 

 

 

 

 

41,204,253

 

  

COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA

 

The following tables set forth certain historical, pro forma and pro forma equivalent per share financial information for Bearing common shares and shares of Li3 common stock.

 

The following information should be read in conjunction with (i) the audited and unaudited consolidated financial statements of Bearing that are included in this proxy statement/prospectus, (ii) the audited and unaudited consolidated financial statements of Li3 that are included in this proxy statement/prospectus and (iii) the financial information contained in the “Unaudited Pro Forma Condensed Consolidated Financial Statements,” sections of this proxy statement/prospectus. The unaudited pro forma information below is presented for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the acquisition had been completed as of the periods presented, nor is it necessarily indicative of the future operating results or financial position of the combined company. In addition, the unaudited pro forma information does not purport to indicate balance sheet data or results of operations data as of any future date or for any future period.

 

 
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Historical and Pro Forma per share data (IFRS)

(Expressed in Canadian Dollars)

 

The following tables assume the issuance of 16,000,000 Bearing common shares in connection with the Merger. The pro forma data in the table reflects the financial position had the merger occurred as at April 30, 2017, and the financial performance of the merged company had the proposed transactions occurred at the beginning of the year ended October 31, 2016 or the six month period ended April 30, 2017. The Merger is being accounted for as an acquisition of the net assets of Li3 rather than as a business combination on the basis that management has determined that Li3 does not have the inputs and processes capable of producing outputs that are necessary to meet the definition of a business as defined by IFRS 3.

 

 

As of and for

the Year

Ended

October 31,

2016

 

As of and for

the Six Months Ended

April 30,

2017

 

Bearing

 

Basic and diluted earnings (loss) per share

 

Historical

 

$

(0.01

)

 

$

(0.09

)

Pro forma combined

 

(0.05

)

 

(0.05

)

Dividends declared per common share

 

Historical

 

-

 

-

 

Pro forma combined

 

-

 

-

 

Book value per share

 

Historical

 

0.13

 

0.17

 

Pro forma combined

 

0.45

 

0.44

 

The unaudited equivalent pro forma per share combined information for Li3 set forth below shows the effect of the Merger from the perspective of a holder of Li3 common shares. The information for the twelve month period ended September 30, 2016 and the six month period ended March 31, 2017 were calculated by multiplying the unaudited pro forma combined per share data for Bearing common shares for the twelve month period ended October 31, 2016 and the six month period ended April 30, 2017, respectively, by the exchange ratio of 0.0287705448370321.

 

 

 

As of and for

the Twelve Months Ended

September 30,

2016

 

 

As of and for

the Six Months Ended

March 31,

2017

 

Li3

 

 

 

 

 

 

Basic and diluted earnings per share

 

 

 

 

 

 

Historical

 

$ (0.00

 

$ (0.00 )

Equivalent pro forma combined

 

 

(0.00

 

 

(0.00 )

Dividends declared per common share

 

 

 

 

 

 

 

 

Historical

 

 

-

 

 

 

-

 

Equivalent pro forma combined

 

 

-

 

 

 

-

 

Book value per share

 

 

 

 

 

 

 

 

Historical

 

 

0.01

 

 

 

0.01

 

Equivalent pro forma combined

 

 

0.01

0.01

 

 

 
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This proxy statement/prospectus contains forward-looking statements, as that herein is defined in Section 27A of the United States Securities Act of 1933 and Section 21E of the United States Securities Exchange Act of 1934 and may be forward-looking information as defined under applicable Canadian securities legislation (collectively referred to as forward-looking statements).

 

These forward-looking statements are often identified by the words “believe,” “expect,” “anticipate,” “should,” “planned,” “will,” “may,” “intend,” “estimated,” “aim,” “on track,” “target,” “opportunity,” “tentative,” “positioning,” “designed,” “create,” “predict,” “hope,” “project,” “seek,” “would,” “could,” “potential,” “continue,” “ongoing,” “upside,” “increases,” “potential,” and the negative of these terms or other comparable or similar terminology or expressions. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

  

Although each of Bearing and Li3 believes its forward-looking statements are reasonable, they are subject to important risks and uncertainties. Those include, without limitation:

 

With respect to the operations of Bearing and Li3:

 

 

·

general economic conditions and conditions affecting the industries in which Bearing and Li3 operate;

 

·

the commercial success of mineral properties under development by Bearing and/or Li3;

 

·

Bearing’s ability to successfully integrate Li3’s operations and employees with Bearing’s existing business; and

 

With respect to the merger:

 

 

·

expectations regarding whether the merger will be consummated, including whether conditions to the consummation of the merger will be satisfied;

 

 

·

expected synergies and other benefits, including financial and strategic benefits, to the combined company, the current Li3 stockholders and the current Bearing shareholders of the merger;

 

 

·

expectations for other economic, business, and/or competitive factors;

 

 

·

difficulties related to the integration of Li3 and Bearing operations;

 

 

·

the ability of the combined company to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners; and

 

 

·

other adverse events, changes in applicable laws or regulations, competition from other mineral exploration companies, any or all of which could cause actual results to differ materially from future results expressed, projected or implied by the forward-looking statements.

 

These forward-looking statements may be affected by risks and uncertainties in the respective businesses of Li3 and Bearing and market conditions, including that the assumptions upon which the forward-looking statements in this proxy statement/prospectus are based may be incorrect in whole or in part. These forward-looking statements are qualified in their entirety by cautionary statements and risk factor disclosure contained in this proxy statement/prospectus under the section captioned “Risk Factors.” Both Bearing and Li3 wish to caution readers that certain important factors may have affected and could in the future affect their actual results and could cause their actual results for subsequent periods to differ materially from those expressed in or implied by any forward-looking statement made by or on behalf of Bearing or Li3, including that the merger may not be consummated on the timeline anticipated by Bearing and Li3 or at all. The forward-looking information is made as of the date hereof and, except as required by law, neither Bearing nor Li3 undertakes any obligation to update forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus.


 
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RISK FACTORS

 

In addition to the other information included in this proxy statement/prospectus, including the matters addressed in the summary section of the proxy statement/prospectus under the heading “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the following risk factors before deciding how to vote on the merger. In addition to the risks set forth below, new risks may emerge from time to time, and it is not possible to predict all risk factors, nor can Bearing or Li3 assess the impact of all factors on the merger and the combined company following the merger or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in or implied by any forward-looking statements. If any of the risks described below or in the documents included in this proxy statement/prospectus actually materialize, the businesses, financial condition, results of operations, prospects or stock prices of Bearing, Li3 and/or the combined company could be materially and adversely affected. See “Where You Can Find More Information” beginning on page 153 of this proxy statement/prospectus.

 

Risk Factors Related to the Merger

 

The number of Bearing common shares to be issued in the acquisition is fixed and will not be adjusted in the event of any change in either Li3’s stock price or Bearing’s stock price.

 

In the merger, each outstanding share of Li3 common stock (except for Li3 common stock issued and outstanding immediately prior to the effective time that is owned or held in treasury by Li3 or owned by Bearing, Sub or any other direct or indirect subsidiary of Bearing, or any shares owned or held by any direct or indirect subsidiary of Li3) by virtue of the merger and without any action on the part of the parties to the merger agreement or the holders of shares of Li3 common stock, will be converted into the right to receive a proportionate share of 16,000,000 validly issued, fully paid and non-assessable common shares of Bearing. Based on the current number of Li3 common shares eligible for exchange, being 556,124,331, the resulting exchange ratio will be 0.0287705448370321 Bearing common shares per Li3 common share. The exchange ratio is therefore subject to change in the event that additional Li3 common shares are issued prior to the closing of the merger agreement. However, the exchange ratio will not be adjusted for changes in the market price of either Li3 common stock or Bearing common shares. Changes in the price of Bearing common shares prior to completion of the merger will affect the market value that Li3 stockholders will receive on the date of the merger. Share price changes may result from a variety of factors (many of which are beyond Bearing’s or Li3’s control), including the following:

  

·

changes in Li3’s and Bearing’s respective businesses, operations and prospects, or the market assessments thereof;

 

·

market assessments of the likelihood that the merger will be completed; and

 

·

general market and economic conditions and other factors generally affecting the price of Bearing’s common shares.

  

The price of Bearing common shares at the closing of the merger may vary from the price on the date the merger agreement was executed, the date of this proxy statement/prospectus and the date of the Special Meeting. As a result, the market value of the merger consideration will also vary. For example, based on the US$0.638 closing price of Bearing common shares as quoted on the OTCQB on September 8, 2017, and 556,124,331 Li3 common shares currently outstanding, the exchange ratio represented a market value of US$0.0183 for each share of Li3 common stock. Conversely based on the US$0.0195 closing price of Li3 common shares as quote on the OTCQB on September 8, 2017, and 556,124,331 Li3 common shares currently outstanding, the exchange ratio represented a market value of US$0.677 for each share of Bearing common stock issued in the transaction.

 

Subject to the satisfaction of the conditions to the merger described elsewhere in this proxy statement/prospectus, the merger will be completed and the Bearing common shares distributed after the date of the Special Meeting; therefore, you will not know, at the time of the Special Meeting, the market value of the Bearing common shares that Li3 stockholders will receive upon completion of the merger.

 

If the price of Bearing common shares increases between the time of the Special Meeting and the time at which the Bearing common shares are distributed to Li3 stockholders following completion of the merger, Li3 stockholders will receive Bearing common shares that have a market value that is greater than the market value of such shares at the time of the Special Meeting. If the price of Bearing common shares decreases between the time of the Special Meeting and the time at which the Bearing common shares are distributed to Li3 stockholders following completion of the merger, Li3 stockholders will receive Bearing common shares that have a market value that is less than the market value of such shares at the time of the Special Meeting. Therefore, because the exchange ratio is fixed, stockholders of Li3 will not have certainty at the time of the Special Meeting of the market value of the consideration actually received in the merger. Li3 shareholders may obtain the most recent trading price of the Bearing (Symbol: BRGRF) and Li3 (Symbol: LIEG) common shares at www.otcmarkets.com.


 
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Neither the Bearing Board nor the Li3 Board has obtained a fairness opinion regarding the terms of the merger, which may adversely impact their assessments of the merger and recommendations to their shareholders.

  

In transactions such as the merger, the board of directors of a participating company may (but is not required to) obtain a fairness opinion from an independent financial advisor to assist in its evaluation of the transaction. A fairness opinion involves a comprehensive review of a transaction from a financial point of view, including asset valuation, pricing, terms, conditions, and consideration received, in the context of the market for similar companies. The advisor then opines whether the transaction is fair to the shareholders, including the minority shareholders. Although the Bearing Board and the Li3 Board believe that they are acting in the best interest of their respective shareholders, neither board has obtained a fairness opinion with respect to the merger. Therefore, the Bearing Board and the Li3 Board may not possess sufficient market information, or impartial and objective professional analysis, to accurately assess the fairness of the transaction, or ensure that the terms, conditions, or consideration of the transaction are fair, reasonable, or in the best interest of the shareholders. In assessing the recommendation of their respective boards of directors, the Bearing shareholders and Li3 must keep in mind that such recommendations may be the result of insufficient market knowledge, analysis, or inherent bias.


Failure to complete the merger could negatively impact the stock prices and the future business and financial results of Li3.

 

If the merger is not completed, the ongoing business of Li3 may be adversely affected. In addition, Li3 has already incurred significant transaction expenses in connection with the merger. The foregoing risks, or other risks arising in connection with the failure of the merger, including the diversion of management attention from conducting the business of Li3 and pursuing other opportunities during the pendency of the merger, may have an adverse effect on the business, operations, financial results and stock price of Li3. In addition, Li3 could be subject to litigation related to any failure to consummate the merger transaction or any related action that could be brought to enforce Li3’s obligation under the merger agreement.

 

The merger agreement contains provisions that will discourage a potential competing acquirer of Li3.

 

The merger agreement contains “no shop” provisions, and does not contain “superior proposal” that will restrict Li3’s ability to solicit, encourage, facilitate or discuss competing third-party proposals to acquire shares or assets of Li3.

 

These provisions will discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Li3 from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the merger.

 

If the merger agreement is terminated and Li3 determines to seek another business combination, it may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the merger agreement.

 

Lawsuits may be filed against Li3, Bearing, Sub and/or the board of directors of either company challenging the merger, and an adverse judgment in any such lawsuit may prevent the merger from becoming effective or from becoming effective within the expected timeframe.

 

Complaints challenging the merger may be filed against Li3, Bearing, Sub and/or the board of directors of either company in connection with the merger in an effort to enjoin the proposed merger or seek monetary relief from Li3, Bearing or Sub. An unfavorable resolution of any such litigation surrounding the proposed merger could delay or prevent the consummation of the merger. In addition, the cost of defending the litigation, even if resolved favorably to Li3 and Bearing, could be substantial. Such litigation could also substantially divert the attention of the management of Li3 and Bearing and their resources in general. There can also be no assurance that Li3, Bearing or Sub would prevail in their defense of any such lawsuits, even in an event where any such company believes that the claims made in the lawsuits are without merit and defends the claims vigorously.

 

 
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One of the conditions to the closing of the merger is that no statute, rule, regulation, executive order, decree or ruling, shall have been adopted or promulgated, and no temporary restraining order, preliminary or permanent injunction or other order issued by a court or other entity of competent jurisdiction shall be in effect which would have the effect of making the merger illegal or otherwise prohibiting consummation of the merger. Therefore, if the plaintiffs in any lawsuit that may be filed secure injunctive relief or other relief prohibiting, delaying or otherwise adversely affecting the ability of Li3, Bearing and Sub to complete the merger, then such injunctive or other relief may prevent the merger from becoming effective within the expected timeframe or at all.

 

The exercise of dissent and appraisal rights by Li3 shareholders may adversely impact the combined company.

 

Pursuant to the Dissenters Rights Provisions of Nevada corporate law, if the merger is completed, former Li3 stockholders who did not vote in favor of the merger may elect to have the combined company purchase their shares for a cash price that is equal to the “fair value” of such shares, as determined in a judicial proceeding. The fair value means the value of such shares immediately before the effectuation of the merger, excluding any appreciation or depreciation in anticipation of the merger, unless exclusion of any appreciation or depreciation would be inequitable. If sufficient Li3 shareholders elect to have Li3 purchase their shares, the liability resulting from the fair value of those shares will adversely impact the financial condition of the combined company, cause significant volatility in the price of the combined company’s common shares, or materially impair the ability of the combined company to execute its plan of operation.

 

If the merger does not qualify as a reorganization under Section 368(a) of the Code or is otherwise taxable to U.S. holders of Li3 common stock, then such holders may be required to pay substantial U.S. federal income taxes.

 

The receipt by U.S. holders (as defined in the section entitled “Material U.S. Federal Income Tax Consequences” beginning on page 72) of Bearing common shares pursuant to the merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes. In general, assuming the merger is so treated, it is expected that U.S. holders of Li3 common stock should not be subject to U.S. federal income taxation on the exchange of Li3 common stock for Bearing common shares in the merger. However, it is not a condition to the closing of the merger that the merger qualify for such treatment for U.S. tax purposes, and none of the parties to the merger intends to request a ruling from the Internal Revenue Service, referred to as the IRS, regarding the U.S. federal income tax consequences of the merger. Consequently there is no guarantee that the IRS will treat the merger in the manner described above. If the IRS successfully challenges the treatment of the merger, adverse U.S. federal income tax consequences may result.


 
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In particular, Section 367(a) of the Code and the applicable U.S. Treasury regulations promulgated thereunder provide that when a U.S. shareholder exchanges stock in a U.S. corporation for stock in a non-U.S. corporation in a transaction that would otherwise qualify as a “reorganization” within the meaning of Section 368(a) of the Code, the U.S. shareholder is required to recognize gain, but not loss, realized on such exchange unless certain requirements are met, including that the fair market value of the foreign acquiring corporation equals or exceeds that of the domestic target corporation at the time of the transaction. The determination of fair market value for purposes of Section 367(a) of the Code is complex and, with respect to the merger, subject to factual and legal uncertainties, and therefore no assurance can be given that the IRS will not challenge the conclusions reflected in the opinions rendered by tax counsel with respect to the merger or that a court would not sustain such a challenge. Furthermore, fluctuations in the value of Li3 and Bearing stock between the time of the execution of the merger agreement and the effective time may affect this determination. See “Material U.S. Federal Income Tax Consequences-Taxation under Section 367(a) of the Code” beginning on page 72 of this proxy statement/prospectus. If at the effective time the fair market value of Li3 were found to exceed that of Bearing for purposes of Section 367(a) of the Code, or other requirements under Section 367(a) of the Code are not met, a U.S. holder of Li3 common stock would recognize gain (but not loss) based on the amount such U.S. holder realizes in the merger, calculated separately for each block of Li3 common stock held by such U.S. Holder.

 

In addition, the IRS has announced an intention to issue regulations effective prior to the anticipated date of the merger whereby, for purposes of determining the value of Li3, certain “non-ordinary course distributions” made by Li3 during the 36 months preceding the merger will be added back to the value of Li3 for purposes of this requirement. As defined by the IRS, the “non-ordinary course distributions” paid by Li3 will generally be equal to the excess of all distributions, including dividends and stock repurchases (as applicable), made during a taxable year by Li3 with respect to the Li3 common stock 110% of the average of such distributions during the 36 month-period immediately preceding such taxable year. The amount of any such excess would then increase the value of Li3 for purposes of the fair market value determination under Section 367(a) of the Code. Regulations addressing the specific method for determining the amount that would be added back for this purpose have not been issued.

 

The IRS may not agree that Bearing (or the combined company) should be treated as a foreign corporation for U.S. federal tax purposes, and Bearing may be required to pay substantial U.S. federal income taxes.

 

Although Bearing is incorporated in Canada, the IRS may assert that it should be treated as a U.S. corporation for U.S. federal tax purposes pursuant to Section 7874 of the Code. For U.S. federal tax purposes, a corporation generally is classified as either a U.S. corporation or a foreign corporation by reference to the jurisdiction of its organization or incorporation. Because Bearing is a Canadian incorporated entity, it would generally be classified as a foreign corporation under these rules. However, Section 7874 of the Code provides an exception under which a foreign incorporated entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal tax purposes.

 

Under Section 7874 of the Code, a corporation created or organized outside the United States (i.e., a foreign corporation) will nevertheless be treated as a U.S. corporation for U.S. federal tax purposes when (i) the foreign corporation directly or indirectly acquires substantially all of the assets held directly or indirectly by a U.S. corporation (including the indirect acquisition of assets of the U.S. corporation by acquiring all the outstanding shares of the U.S. corporation), (ii) the shareholders of the acquired U.S. corporation hold at least 80% (by either vote or value) of the shares of the foreign acquiring corporation after the acquisition by reason of holding shares in the U.S. acquired corporation (including the receipt of the foreign corporation’s shares in exchange for the U.S. corporation’s shares), and (iii) the foreign corporation’s “expanded affiliated group” does not have substantial business activities in the foreign corporation’s country of organization or incorporation relative to such expanded affiliated group’s worldwide activities. For purposes of Section 7874 of the Code, in general, “expanded affiliated group,” which we refer to as an EAG, means a foreign corporation and all subsidiaries in which the foreign corporation, directly or indirectly, owns more than 50% of the shares by vote and value.


 
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Although Bearing and its EAG may not have substantial business activities in Canada within the meaning of the relevant provisions of Section 7874, immediately after the merger effective time, the Li3 stockholders are expected to own less than 80% of Bearing common shares (by both vote and value) by reason of their ownership of shares of Li3 common stock taking into account the computational rules discussed below, many of which are uncertain. However, fluctuations in the value of Li3 and Bearing stock between the time of the execution of the merger agreement and the effective time, along with certain other factors, may affect the percentage of the Bearing common shares deemed held by former holders of Li3 common stock by reason of being former holders of Li3 common stock solely for purposes of the calculation under Section 7874, which we refer to as the Section 7874 Percentage. Under Section 7874 and Treasury and IRS rules, the Section 7874 Percentage may vary from the actual percentage of stock received in the Li3 merger by former holders of Li3 common stock. The Section 7874 Percentage is also affected by relatively new and untested Treasury and IRS rules and guidance on certain factors including the determination of the relative fair market values of Li3 and Bearing at the effective times, such that there are significant factual and legal uncertainties concerning the determination of the Section 7874 Percentage for this purpose.

 

In addition, the IRS has announced an intention to issue regulations effective prior to the anticipated date of the merger whereby, for purposes of determining the value of Li3, certain “non-ordinary course distributions” made by Li3 during the 36 months preceding the merger will be added back to the value of Li3 for purposes of Section 7874 of the Code. As defined by the IRS, the “non-ordinary course distributions” paid by Li3 will generally be equal to the excess of all distributions, including dividends and stock repurchases, made during a taxable year by Li3 with respect to the Li3 common stock over 110% of the average of such distributions during the 36 month-period immediately preceding such taxable year. The amount of any such excess would then increase the value of Li3 for purposes of the Section 7874 Percentage and the applicable U.S. Treasury Regulations promulgated thereunder. Regulations addressing the specific method for determining the amount that would be added back for this purpose have not been issued.

 

After applying Section 7874 of the Code and the IRS rules described above, the Li3 stockholders are still expected to receive less than 80% (by both vote and value) of the shares in Bearing by reason of their ownership of Li3 common stock. As a result, Bearing is expected to be treated as a foreign corporation for U.S. federal tax purposes under Section 7874 of the Code, and the remainder of this disclosure assumes such treatment. However, the IRS may disagree with the calculation of the Section 7874 Percentage.

 

Although the holders of Li3 common stock are expected to receive less than 60% (by both vote and value) of the Bearing common shares, if f the Section 7874 Percentage were determined to be at least 60% (but less than 80%), several limitations could apply to Li3. For example, Li3 would be prohibited from using its net operating losses, foreign tax credits or other tax attributes to offset the income or gain recognized by reason of the transfer of property to a foreign related person during the 10-year period following the merger or any income received or accrued during such period by reason of a license of any property by Li3 to a foreign related person. Moreover, in such case, Section 4985 of the Code and rules related thereto would impose an excise tax on the value of certain Li3 stock compensation held directly or indirectly by certain “disqualified individuals” (including officers and directors of Li3), but only if gain is otherwise recognized by Li3 stockholders as a result of the merger.

 

Bearing’s status (or the status of the combined company) as a foreign corporation for U.S. federal income tax purposes could be affected by a change in law.

 

It is expected that, under current law, the combined company should be treated as a foreign corporation for U.S. federal income tax purposes following the mergers. However, changes to the inversion rules in Section 7874 of the Code or the U.S. Treasury Regulations or IRS guidance promulgated thereunder could adversely affect Bearing’s status as a foreign corporation for U.S. federal tax purposes, and any such changes could have prospective or retroactive application to Bearing.

 

If Bearing (or the combined company) were to be treated as a U.S. corporation for U.S. federal income tax purposes, it could be subject to materially greater U.S. tax liability than currently contemplated as a non-U.S. corporation. Specifically, if Bearing were to be treated as a U.S. corporation for U.S. federal income tax purposes, Bearing would be subject to U.S. corporate income tax on its worldwide income, and the income of its non-U.S. subsidiaries would be subject to U.S. tax when repatriated or when deemed recognized under the U.S. federal income tax rules for controlled foreign subsidiaries. Moreover, in such a case, a non-U.S. holder of Bearing common shares would be subject to U.S. withholding tax on the gross amount of any dividends paid by Bearing to such shareholder.


 
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In addition, recent legislative proposals and IRS guidance have aimed to expand the scope of U.S. corporate tax residence, including by reducing the Section 7874 Percentage threshold or by determining a corporation’s U.S. corporate tax residence based on the location of the management and control of the corporation and its affiliates. Any such changes to Section 7874 or other such legislation, if passed and if applicable to Bearing, could have a significant adverse effect on Bearing’s financial results.

 

Bearing (or the combined company) may be treated as a “passive foreign investment company.”

 

Bearing would be a “passive foreign investment company”, referred to as a PFIC, for U.S. federal income tax purposes with respect to a U.S. holder if for any taxable year in which such U.S. holder held Bearing common shares, after the application of applicable “look-through rules” (i) 75% or more of Bearing’s gross income for the taxable year consists of “passive income,” or (ii) at least 50% of its assets for the taxable year (averaged over the year and determined based upon value) produce or are held for the production of “passive income.” U.S. persons who own shares of a PFIC are subject to an adverse U.S. federal income tax regime with respect to the income derived by the PFIC, the dividends they receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC. These adverse consequences include, without limitation, having gains realized on the sale of Bearing common shares classified as ordinary income, rather than as favorably-taxed long-term capital gain income, the loss of the preferential rate applicable to dividends received on Bearing common shares by individuals who are U.S. holders, and having interest charges apply to distributions by Bearing and the proceeds of share sales, whether or not Bearing continues to be characterized as a PFIC.

 

While it is expected, based on Bearing’s current business plan and financial expectations, that Bearing’s common shares will not be classified as stock of a PFIC for U.S. federal income tax purposes upon closing of the merger, this conclusion is a factual determination made annually and thus is not certain and may be subject to change. Moreover, Bearing may become a PFIC in future taxable years if there were to be changes in Bearing’s assets, income or operations. In addition, because the determination of whether a foreign corporation is a PFIC is primarily factual and because there is little administrative or judicial authority on which to rely to make a determination, the IRS may take the position that Bearing is a PFIC. See “Material U.S. Federal Income Tax Consequences-Material U.S. Federal Income Tax Consequences to U.S. Holders of Owning Bearing Common Shares-Passive Foreign Investment Company Rules” for a further discussion.

 

Future changes to U.S. and foreign tax laws or to the interpretation of these laws by the governmental authorities could adversely affect Bearing (or the combined company) and its subsidiaries.

 

The U.S. Congress, the Organization for Economic Co-operation and Development and other government agencies in jurisdictions where Bearing and its affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. One example is in the area of “base erosion and profit shifting,” where profits are claimed to be earned for tax purposes in low-tax jurisdictions, or payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. Thus, the tax laws in the United States, Canada and other countries in which Bearing and its affiliates do business could change on a prospective or retroactive basis, and any such changes could adversely affect Bearing and its affiliates (including Li3 and its affiliates after the merger). Furthermore, the interpretation and application of domestic or international laws made by Bearing and its affiliates could differ from that of the relevant governmental authority, which could result in administrative or judicial procedures, actions or sanctions, which could be material.

 

The rights of Li3 stockholders who become Bearing shareholders in the merger will be governed by the Business Corporations Act (British Columbia), referred to as the BCA, and the Bearing articles of incorporation, referred to as Bearing’s articles, and the British Columbia Securities Act.

 

Li3 stockholders who receive Bearing common shares in the merger will become Bearing shareholders. Bearing is incorporated under the laws of British Columbia and, accordingly, the rights of Bearing shareholders are governed by the BCA and the Bearing articles. Li3 is incorporated under the laws of the State of Nevada and, accordingly, the rights of Li3 stockholders are currently governed by the NRS, Li3’s certificate of incorporation, as amended, referred to as Li3’s certificate of incorporation, and Li3’s restated bylaws, referred to as Li3’s bylaws. Upon completion of the merger, the rights of the former Li3 stockholders will be governed by the BCA and by Bearing’s articles. There are material differences between the current rights of Li3 stockholders, as compared to the rights they will have as Bearing shareholders.


 
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These material differences may include, but are not limited to, the following:

 

 

· Bearing has only one class of authorized shares, common shares, and Bearing is authorized to issue an unlimited number of common shares;

 

 

  

 

·

The distribution of the Bearing Shares pursuant to the merger will constitute a distribution of securities which is exempt from the prospectus requirements of Canadian Securities Laws. The Bearing Shares issued to former Li3 Shareholders pursuant to the acquisition will not bear any restrictive legend under Canadian Securities Laws and may be immediately resold in Canada or in the United States without additional action by the Canadian or the United States shareholders. The Bearing Shares may be resold in Canada through a registered investment dealer provided that (i) Bearing is and has been a reporting issuer in a jurisdiction in Canada for the four months immediately preceding the trade; (ii) the trade is not a “control distribution” as defined in National Instrument 45-102 (Resale of Securities); (iii) no unusual effort is made to prepare the market or to create a demand for the Bearing Shares; (iv) no extraordinary commission or consideration is paid to a Person in respect of such sale; and (v) if the selling stockholder is an insider or officer of Bearing the selling stockholder has no reasonable grounds to believe that Bearing is in default of applicable Canadian Securities Laws. As at the date of this registration statement Bearing complies with all applicable Canadian Securities Law Requirements to allow the resale of its shares without a hold period in Canada, and it is anticipated that Bearing will be similarly compliant upon and immediately following the distribution of the Bearing Shares pursuant to the merger.

 

 

  

 

· Dividends paid by Bearing to a person who is a non-resident of Canada for the purposes of the Income Tax Act (Canada) will generally be subject to Canadian withholding tax;

 

 

  

 

· Li3 board members are elected pursuant to a plurality vote; however, pursuant to the TSX Company Manual, Bearing adopted a majority voting policy on August 28, 2015, which provides that at a meeting for an election where the number of nominees for directors is not greater than the number of directors to be elected, each director must be elected by the vote of a majority of votes of the shares, represented in person or by proxy, at such meeting;

  

·

 

Under Article 14, Section 14.10 of Bearing’s articles, shareholders of Bearing may remove any director before the expiration of his or her term of office by a special resolution of shareholders, whereas, under Li3’s bylaws, stockholders may remove a director only for cause;

 

 

  

 

·

 

Under Li3’s certificate of incorporation, special meetings of Li3’s stockholders may be called by the board of directors or by any officer instructed by the board of directors to call the meeting or by stockholders owning not less than 75% of the voting stock of the corporation, whereas Bearing’s articles permit the board of directors to call a meeting of shareholders, and the BCA permits shareholders who hold in the aggregate at least 5% of issued Bearing common shares that carry the right to vote at general meetings to requisition a meeting of shareholders.

 

 

  

 

·

 

At each meeting of Li3 stockholders, except where otherwise provided by the NRS, the holders of a majority in voting power of the outstanding shares of Li3 stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum, whereas, under Bearing’s articles, the quorum for the transaction of business at a meeting of shareholders is two shareholders or one or more proxyholders representing two members or one member and one proxyholder representing another member;

 

 

  

 

·

 

Li3’s certificate of incorporation provides that the power to make, alter, or repeal the bylaws, and to adopt any new bylaw, is vested in the board of directors; however, British Columbia companies, such as Bearing, do not have bylaws. The equivalent document is a company’s articles. Pursuant to the BCA and Article 9 of Bearing’s articles, alteration of Bearing’s articles generally requires an ordinary or special resolution of shareholders;

 

 

  

 

·

 

Although Li3 stockholders are entitled to remedies for violation of a director’s fiduciary duties under Nevada common law, the NRS does not provide for an oppression remedy. Under the BCA, however, a court may make any order, whether interim or final, to rectify matters that are oppressive or unfairly prejudicial to, or that unfairly disregard the interests of, any beneficial owner of a share of the corporation or any person whom the court considers to be an appropriate person.

 

For more information, see “Comparison of the Rights of Bearing Shareholders and Li3 Stockholders” beginning on page 142 of this proxy statement/prospectus.

 

Risk Factors Relating to the business of the Combined Company

 

In this section, “Risk Factors Relating to the Combined Company and the Combined Company’s Common Shares Following the Merger”, the term “combined company” refers to the combined businesses of Bearing and Li3 following the merger.


 
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The failure to successfully integrate the businesses of Li3 and Bearing would adversely affect the combined company’s future results.

 

The combined company’s ability to successfully integrate the operations of Bearing and Li3 will depend, in part, on the combined company’s ability to realize anticipated benefits and synergies from the merger. If the combined company is not able to achieve these objectives within a reasonable time frame, or at all, the anticipated benefits and synergies of the merger may not be realized fully, or at all, or may take longer to realize than expected, and the value of the combined company’s common shares may be adversely affected. In addition, the integration of the respective businesses of Bearing and Li3 will be a time-consuming and expensive process. Proper planning and effective and timely implementation will be critical to avoid any significant disruption to the combined company’s operations. The integration process could result in the loss of key employees, the disruption of its ongoing business or the identification of inconsistencies in standards, controls, procedures and policies that adversely affect its ability to maintain relationships with customers, suppliers, distributors, creditors, lessors, clinical trial investigators or managers or to achieve the anticipated benefits of the merger. Delays encountered in the integration process could have a material adverse effect on the combined company’s revenues, expenses, operating results and financial condition, including the value of its common shares.

 

Risks in integrating the operations of Bearing and Li3 in order to realize the anticipated benefits and synergies of the merger include, among other factors, the combined company’s ability to effectively:

 

·

coordinate standards, compliance programs, additional regulatory filings, controls, procedures and policies, business cultures and compensation structures;

  

·

integrate and harmonize financial reporting and information technology systems of the two companies;

  

·

integrate and manage operations;

  

·

transition all facilities to a compatible information technology and financial reporting and controls environment;

   

·

manage inefficiencies associated with integrating the operations of the companies in different countries and jurisdictions;

  

·

identify and eliminate redundant or underperforming personnel, operations and assets;

 

·

manage the diversion of management’s attention from business matters to integration issues;

 

·

control additional costs and expenses in connection with, and as a result of, the merger;

 

·

conduct successful clinical development programs for key strategic products and achieve regulatory approval for those products in major geographic areas;

 

·

define and develop successful commercial strategies for key strategic products in major geographic areas;

 

·

raise capital through equity or debt financing on attractive terms to support the development and commercialization of key strategic projects.

 

In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. Actual synergies, if achieved at all, may be lower than the companies expect and may take longer to achieve than anticipated. If the combined company is not able to adequately address these challenges, it may be unable to successfully integrate the operations of the businesses of Bearing and Li3, or to realize the anticipated benefits and synergies of the merger. The anticipated benefits and synergies assume a successful integration and are based on various assumptions, which are inherently uncertain. Even if integration is successful, anticipated benefits and synergies may not be as expected.


 
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The combined company’s future results will suffer if the combined company does not effectively manage its expanded operations.

 

As a result of the merger, the combined company will become a larger company than either Li3 or Bearing on a stand-alone basis prior to the merger, and the combined company’s business will become more complex. There can be no assurance that the combined company will effectively manage the increased complexity without experiencing operating inefficiencies or control deficiencies. The combined company’s failure to successfully manage itself could have a material adverse effect on its business, financial condition, results of operations and growth prospects.

 

The market price of the combined company’s common stock after the merger may be affected by factors different from those currently affecting the shares of Li3 or Bearing.

 

Upon completion of the merger, holders of Li3 common stock will become holders of Bearing common shares. The business of Li3 differs from that of Bearing in important respects and, accordingly, the results of operations of the combined company and the market price of the combined company’s common shares following the merger may be affected by factors different from those currently affecting the independent results of operations of Li3 and Bearing. See “Risks Relating to Bearing’s Business and Stock Ownership in Bearing”, below.

 

The combined company’s actual financial performance may differ materially from the pro forma financial information included in this proxy statement/prospectus.

 

The assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may adversely affect the combined company’s financial condition or results of operations following the completion of the merger and related transactions. Any potential decline in the combined company’s financial condition or results of operations may cause significant volatility in the price of the combined company’s common shares.

 

The combined company is expected to incur substantial expenses related to the integration of Li3 and Bearing.

 

The combined company is expected to incur substantial expenses in connection with the merger and the integration of Li3 and Bearing. There is a large number of processes, policies, procedures, and operations that must be integrated, including accounting and finance, corporate records, securities compliance, payroll, and mineral exploration and development activities. Both Li3 and Bearing have incurred significant transaction expenses in connection with the drafting and negotiation of the merger agreement and pursuing the transactions contemplated thereby, including the merger. In addition, the on-going operation of locations in Chile, Canada and in the U.S. could result in inefficiencies, creating additional expenses for the combined company. While Li3 and Bearing have assumed that a certain level of expenses will be incurred, there are many factors beyond their control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These integration expenses could result in the combined company reporting significant increases in operating and net losses.

 

Bearing is, and the combined company immediately following the merger is expected to remain, a “foreign private issuer” under the Exchange Act, and the combined company’s disclosure and reporting requirements are different than those of a U.S. domestic reporting company, such as Li3 prior to the merger.

 

Bearing is considered a “foreign private issuer” under the Exchange Act and the rules of the SEC promulgated thereunder and expects that, immediately following completion of the merger, the combined company will maintain such status. As a result, the combined company will be subject to the reporting requirements under the Exchange Act applicable to foreign private issuers, meaning that, among other things, the combined company will be required to file its annual report Form 20-F with the SEC within four months of its fiscal year end. In addition, the combined company must furnish to the SEC reports on Form 6-K regarding certain information required to be publicly disclosed by the combined company in Canada or filed with, and made public by, the TSXV or regarding information distributed or required to be distributed by the combined company to its shareholders.

 

Additionally, Bearing is not, and the combined company immediately following the merger will not be, required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies (such as Li3 prior to the merger) whose securities are registered under the Exchange Act. The combined company will not be required to file financial statements prepared in accordance with U.S. generally accepted accounting principles and will not be required to comply with Regulation FD, which addresses certain restrictions on the selective disclosure of material non-public information. Also, the combined company’s officers, directors and principal shareholders will be exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of the combined company’s common shares. If the combined company loses its status as a foreign private issuer, it will no longer be exempt from such rules and, among other things, will be required to file periodic reports and financial statements as if it were a company incorporated in the United States.


 
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The combined company is expected have international operations, which will subject it to risks inherent with operations outside of the United States.

 

The combined company will have international operations and it may seek to obtain market clearances in foreign markets that it deems to generate significant opportunities. However, even with the cooperation of a commercialization partner, conducting mineral exploration in foreign countries involves inherent risks, including, but not limited to: difficulties in staffing, funding and managing foreign operations; different and unexpected changes in regulatory requirements; export restrictions; tariffs and other trade barriers; different reimbursement systems; economic weaknesses or political instability in particular foreign economies and markets; compliance with tax, employment, immigration and labor laws for employees living or travelling abroad; supply chain and raw materials management; difficulties in protecting, acquiring, enforcing and litigating mineral exploration rights; fluctuations in currency exchange rates; and potentially adverse tax consequences.

 

If the combined company were to experience any of the difficulties listed above, or any other difficulties, its international development activities and its overall financial condition may suffer and cause the combined company to reduce or discontinue its international development and registration efforts.

 

Because the primary assets and operations of the combined company will be located in Canada and Chile, you may have difficulty enforcing any civil liabilities against the combined company under U.S. federal or state securities laws.

 

With the exception of Bearing’s Fish Lake Valley property, which is located in Nevada and in the process of being acquired, all of the combined company’s assets are anticipated to be located in Chile or Canada. In addition, the directors and officers of the combined company will be non-residents of the United States, and all or a substantial portion of the assets of these non-residents will be located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon these non-residents, or to enforce against them judgments obtained in United States courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state.

 

Numerous Canadian provinces have enacted legislation implementing treaties or agreements between Canada and the United States (or certain U.S. states) respecting the reciprocal enforcement of judgments, and although Chilean law will accommodate the enforcement of foreign judgements in certain circumstances where reciprocity exists between the foreign jurisdiction and Chile, there is considerable uncertainty as to whether courts of Canada or Chile would enforce:

  

 

· Judgments of United States courts obtained against us or these non-residents based on the civil liability provisions of the securities laws of the United States or any state; or

 

 

 

· In original actions brought in Canada or the United States, liabilities against the combined company or non-residents predicated upon the securities laws of the United States or any state.

 

Enforcement of a foreign judgment in Canada or Chile also may be limited or otherwise affected by public policy, applicable bankruptcy, insolvency, liquidation, arrangement, moratorium or similar laws relating to or affecting creditors' rights generally, and will be subject to statutory limitations of time within which proceedings may be brought.

 

Business interruptions could limit the combined company’s ability to operate its business.

 

The combined company’s operations as well as those of its collaborators on which it depends are vulnerable to damage or interruption from computer viruses, human error, natural disasters, electrical and telecommunication failures, international acts of terror and similar events. The combined company may not establish a formal disaster recovery plan and its back-up operations and its business interruption insurance may not be adequate to compensate the combined company for losses it may suffer. A significant business interruption could result in losses or damages incurred by the combined company and require it to cease or curtail its operations.

 

The public market for Li3 common stock and Bearing common shares has been, and may continue to be, volatile. This may affect the ability of the combined company’s investors to sell their shares as well as the price at which they sell their shares.

 

Due to the volatility of the market for Li3 common stock and Bearing common shares, the market price for the shares of the combined company may be volatile and significantly affected by factors such as variations in quarterly and yearly operating results, general trends in the mineral exploration industry, or changes in state or federal regulations affecting the combined company and its industry. Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies. Such broad market fluctuations may adversely affect the market price of the shares of the combined company.

 

 
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Neither Bearing nor Li3 has paid dividends in the past and it is not expected that the combined company will pay dividends to its shareholders in the foreseeable future.

 

It is expected that the combined company will reinvest all of its earnings, to the extent it has earnings, in order to market its products and to cover operating costs and to otherwise become and remain competitive. It is expected that the combined company will not pay any cash dividends with respect to its securities in the foreseeable future. There can be no assurance that the combined company would, at any time, generate sufficient surplus cash that would be available for distribution to its shareholders as a dividend. Therefore, shareholders of the combined company should not expect to receive cash dividends.

 

Risks Factors Related to Mineral Exploration and Development by Li3 or the Combined Company

 

Each Bearing and Li3 is engaged in the business of mineral exploration and development. If the merger is completed, the combined company will adopt the mineral exploration and development operations of Bearing and Li3.Except where otherwise noted, the following risk factors relate to the mineral exploration and development activities of Li3 or, if the merger is completed, to the combined company resulting from the merger, as applicable:

  

Bearing’s and Li3’s mineral properties are in the exploration stage. Although the presence of lithium and potassium resources has been established at Li3’s SLM Litio 1-6 mining concessions (which form a part of the Maricunga Project), there is no assurance that either Li3 or the combined company can obtain the requisite permits to extract all of those resources, or that they can be extracted economically. Furthermore, neither Li3 not Bearing has established the existence of mineral resources on any of their other properties in commercially exploitable quantities. Until Li3 or the combined company can establish the existence of any economically recoverable resources on their properties (or, in the case of the SLM Litio 1-6 concessions, obtain the requisite extraction permits) they cannot earn any revenues from operations which may cause their businesses to fail.

 

Although the presence of lithium and potassium resources has been established on Li3’s SLM Litio 1-6 mining concessions (which form a part of the Maricunga Project), a feasibility study to determine whether those resources are economically recoverable has yet to be completed. Furthermore, Li3 or the combined company will require additional permits to exploit the lithium resources present on the SLM Litio 1-6 concessions, which may not be granted by the relevant authorities. Meanwhile, despite exploration work on their other mineral properties, Bearing and Li3 have not established that any of those properties contain mineral reserves, and there cannot be any assurance that mineral reserves will be established. If Li3 or the combined company fail to establish the feasibility, or secure permission, required to extract the mineral resources on the SLM Litio 1-6 concessions, or fail to establish mineral reserves on their other properties, they may be unable to recoup the losses incurred in the exploration activities, and their businesses could fail.

 

A mineral reserve is defined by the Securities and Exchange Commission in its Industry Guide 7 (which can be viewed over the Internet at http://www.sec.gov/about/forms/industryguides.pdf) as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a “reserve” that meets the requirements of the Securities and Exchange Commission’s Industry Guide 7 is extremely remote; in all probability Bearing’s or Li3’s mineral resource properties do not contain any “reserve” and any funds that Li3 or the combined company spend on exploration will probably be lost.

 

Even if Li3 or the combined company do eventually discover a mineral reserve on one or more of their properties, or establish the feasibility of production from the SLM Litio 1-6 concessions, there can be no assurance that they will be able to develop those properties into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines.

 

The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond Li3’s or the combined company’s control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.

 

Mineral operations are subject to applicable law and government regulation. Even if Li3 or the combined company discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If Li3 or the combined company cannot exploit any mineral resource that they might discover on their properties, their businesses may fail.

 

Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that Li3 or the combined company will be able to obtain or maintain any of the permits required for the continued exploration of their mineral properties or for the construction and operation of a mine on their properties at economically viable costs. If Li3 or the combined company cannot accomplish these objectives, their businesses could fail.

 

Bearing and Li3 believe that they are in compliance with all material laws and regulations that currently apply to their activities but there can be no assurance that they can continue to remain in compliance. Current laws and regulations could be amended and Bearing or Li3 may not be able to comply with those amended laws. Further, there can be no assurance that Li3 or the combined company will be able to obtain or maintain all permits necessary for their future operations, or that Li3 or the combined company will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, Li3 or the combined company may be delayed or prohibited from proceeding with planned exploration or development of their mineral properties.


 
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Where Li3 or the combined company establishes the existence of a mineral resource in a commercially exploitable quantity, they will require additional capital in order to develop that resource into a producing mine. If Li3 or the combined company fail to raise this additional capital, they will not be able to exploit the resource, and their business could fail.

 

Where Li3 or the combined company discover mineral resources in commercially exploitable quantities on any of their properties, (as in the case of Li3’s SLM Litio 1-6 concessions, where lithium and potassium resources have been established) they will be required to expend substantial sums of money to establish the extent of the resource, secure requisite permits, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although Li3 or the combined company may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that Li3 or the combined company will be able to raise the funds required for development on a timely basis. If Li3 or the combined company cannot raise the necessary capital or complete the necessary facilities and infrastructure, their businesses may fail.

 

Mineral exploration and development is subject to extraordinary operating risks. Bearing or Li3 do not currently insure against these risks. In the event of a cave-in or similar occurrence, Li3’s or the combined company’s liability may exceed their resources, which would have an adverse impact on their businesses.

 

Mineral exploration, development and production involves many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Li3’s or the combined company’s operations will be subject to all the hazards and risks inherent in the exploration for mineral resources and, if Li3 or the combined company discovers a mineral resource in commercially exploitable quantity, their operations could be subject to all of the hazards and risks inherent in the development and production of resources, including liability for pollution, cave-ins or similar hazards against which their cannot insure, or against which they may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. Bearing or Li3 do not currently maintain any insurance coverage against these operating hazards and it is not anticipated that the combined company will maintain such insurance coverage. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on Li3 or the combined company.

 

Mineral prices are subject to dramatic and unpredictable fluctuations.

 

Bearing or Li3 expect to derive revenues, if any, either from the sale of their mineral resource properties or from the extraction and sale of lithium and/or associated byproducts. The price of those commodities has fluctuated widely in recent years, and is affected by numerous factors beyond Bearing’s or Li3’s control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of base and precious metals, and therefore the economic viability of any of Bearing’s or Li3’s exploration properties and projects, cannot accurately be predicted.

 

Title to properties in which Li3 or Bearing retain an ownership interest may be challenged, impugned or revoked or be subject to undetected defects, which may result in the loss of all or a portion of Li3’s or the combined company’s rights or interests.

 

Although Bearing and Li3 have each exercised customary due diligence with respect to determining title to their respective properties, there can be no assurance that their rights or interests will not be challenged, impugned or revoked. Their properties may be subject to prior unregistered agreements or transfers or indigenous land claims and title may be affected by undetected defects. If a title defect exists, it is possible that they may lose all or a portion of their interest in the applicable property(ies). Until any competing rights or interest to their properties have been determined, there is no assurance as to the validity of their rights or interest to any properties. In addition, they may be unable to operate their properties as permitted, or to enforce their rights with respect to their properties, and the title to their mineral properties (which shall be held by the combined company is the merger is completed) may also be impacted by state action.

 
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The mining industry is highly competitive and there is no assurance that Li3 or the combined company will continue to be successful in acquiring mineral claims. If Li3 or the combined company cannot continue to acquire properties to explore for mineral resources, they may be required to reduce or cease operations.

 

The mineral exploration, development, and production industry is largely un-integrated. Bearing or Li3 compete with other exploration companies looking for mineral resource properties. While Bearing or Li3 compete with other exploration companies in the effort to locate and acquire mineral resource properties, Bearing or Li3 will not compete with them for the removal or sales of mineral products from their properties if Li3 or the combined company should eventually discover the presence of them in quantities sufficient to make production economically feasible. Readily available markets exist worldwide for the sale of mineral products. Therefore, Li3 or the combined company will likely be able to sell any mineral products that they identify and produce.

 

In identifying and acquiring mineral resource properties, Bearing or Li3 compete with many companies possessing greater financial resources and technical facilities. This competition could adversely affect the combined company’s or Li3’s abilities to acquire suitable prospects for exploration in the future. Accordingly, there can be no assurance that Li3 or the combined company will acquire any interest in additional mineral resource properties that might yield reserves or result in commercial mining operations.

 

Li3’s Mineral operations are subject to applicable Chilean law and government regulation, which could restrict or prohibit the exploitation of any mineral resources which Li3 may discover on its Chilean properties.

 

Both mineral exploration and extraction in Chile require obtaining mining concessions as well as permits from various foreign, federal, state, provincial and local governmental authorities, as the case may be, and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that Li3 or the Combined Company will be able to obtain or maintain any of the mining rights and permits required for the continued exploration of mineral properties or for the construction and operation of a mine on its properties (especially but not limited to extracting lithium) nor that they will be able to obtain or maintain any of such rights and permits at economically viable costs.

 

The Chilean Organic Constitutional Law on Mining Concessions, and the Chilean Mining Code provide that lithium may not be granted in a mining concession initiated after January 1, 1979. As a result, only mining exploitation concessions initiated before January 1, 1979 are authorized for the exploitation of lithium. For all other cases, the Mining Code expressly provides that the exploration or exploitation of “non-concessible” substances (including lithium) can be performed only directly by the State of Chile, or its companies, or by means of administrative concessions or special operation contracts (known as Special Lithium Operations Contracts) fulfilling the requirements and conditions set forth by the President of Chile for each case. Additionally, Law 16,319, which created the Chilean Nuclear Energy Commission ( NEC), provides in its article 8 that, for reasons of national interest, any act or contract in connection with lithium will require the previous authorization of NEC (or have NEC as a party thereto). Once any such authorization is granted to an applicant, NEC is not authorized to amend it or terminate it, nor the applicant to assign it, for reasons other than those set forth in the resolution granting it. The Chilean government is currently reviewing this law to allow private companies to exploit lithium.

 

 
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Because the constitution process of the Cocina, San Francisco, Despreciada, and Salamina Mining Concessions was initiated before January 1, 1979, the Maricunga Joint Venture, as the owner of those Concessions, is authorized to exploit lithium in the area covered by those concession. However, because the constitution process of the SLM Litio 1-6 mining concessions was initiated in 2000, the Maricunga Joint Venture are not authorized to exploit lithium in the area covered by such concessions, unless they also obtain a Special Lithium Operations Contract authorizing such exploitation. At the date of this report there is no assurance that the Chilean Government will begin another Special Lithium Operations Contract application process. If the Maricunga Joint Venture is not successful in obtaining a Special Lithium Operations Contract for the SLM Litio 1-6 mining concessions, we will be prohibited from extracting lithium from those concessions (although we may extract potash from the concessions), which will have an adverse effect on our plan of operations and potential profitability.

  

Li3’s option on the Alfredo Property has expired, and it may have a continuing obligation in the event that it develops future iodine nitrate properties in Chile.

 

On August 3, 2010, Li3 signed an agreement to acquire Alfredo Holdings, Ltd. which held an option to acquire six mining concessions in Pozo Almonte, Chile. Li3 allowed the option to expire because Li3 determined that the project was not economically viable. Pursuant to an amendment to Li3’s agreement with the Alfredo Sellers, if and when certain milestones are achieved with respect to any future Li3 Energy iodine nitrate project in Chile, Li3 must make additional payments to the Alfredo Sellers in an aggregate amount of up to $5.5 million. There can be no assurance that financing sufficient to make such payments will be available to Li3 or to the Combined Company when needed. Li3 is not currently planning to explore, exploit or develop any iodine nitrate project in Chile.

  

Li3 will require additional capital in order to finance the development of the Maricunga Project into a producing mine. If Li3 is unable to finance its approximately 17.7% share of development expenses for the project once permits are obtained, its ownership interest in the project will be diluted.

  

On July 20, 2016, Minera Salar Blanco S.A (MSB) entered into an agreement in principle with Lithium Power International Limited (“LPI”), an Australian company, regarding a joint venture to explore and develop the Maricunga Project in accordance with a term sheet dated July 14, 2016. On August 30, 2016, Li3 entered into an agreement with MSB, pursuant to which, Li3 and MSB, as the current shareholders of Minera Li, agreed to proceed with the transactions contemplated by the term sheet (the “Transaction”), resulting in a restructuring of the parties respective positions in the Maricunga project.

 

As part of the Transaction, Mineral Li and MSB agreed to contribute their Maricunga lithium brine assets to a new joint venture (the “Maricunga JV”) and LPI agreed to contribute $27.5 million in cash to the Maricunga JV to cover exploration and development costs for the next 2.5 years until the completion of a definitive feasibility study in late 2018. Following the completion of the Transaction, Li3 will own a direct 17.67% equity interest of the Maricunga JV, with LPI and MSB owning 50.0% and 32.33%, respectively. Li3 will be entitled to appoint one director of the Maricunga JV (so long as it holds at least 10% of the equity interests of the joint venture), with LPI and MSB holding three and two director seats, respectively.  The ownership interest of parties in the Maricunga JV are outlined in the following figure:

 

 

 

Pursuant to the Shareholders Agreement, LPI has agreed to provide funding for Li3’s share of the development of the Maricunga Project until construction permits are in place. To continue developing the property from the permit stage into a producing mine, Li3 will need to fund its 17.7% share of the development costs or risk dilution of its 17.7% ownership interest. Li3 currently does not have any contracts or firm commitments for additional financing. There can be no assurance that additional financing will be available in amounts or on terms acceptable to Li3, (or to the Combined Company) in order to prevent dilution of its ownership interest.

 

Newer battery and/or fuel cell technologies could decrease demand for lithium over time, which could significantly Li3’s prospects and future revenues.

 

Many materials and technologies are being researched and developed with the goal of making batteries lighter, more efficient, faster charging and less expensive. Some of these technologies could be successful and could impact demand for lithium batteries in personal electronics, electric and hybrid vehicles and other applications. Advances in nanotechnology, in particular, offer the prospect of significantly better batteries in the future. For example, researchers at Stanford University have recently demonstrated ultra-lightweight, bendable batteries and super capacitors made from paper coated with ink made of carbon nanotubes and silver nanowires; the material charges and discharges very quickly, making it potentially useful in hybrid and electric vehicles, which need rapid power for acceleration and would benefit from quicker charging than is available with current technologies. Li3 cannot predict which new technologies may ultimately prove to be commercially viable and on what time horizon. While lithium battery technology is currently among the best available for electronics, vehicles and other applications, commercialized battery technologies that offer superior weight, capacity, charging time and/or cost could significantly adversely affect the demand for lithium in the future and thus could significantly adversely impact Li3’s (or the Combined Company’s) prospects and future revenues.

 

Lithium and potash prices are subject to unpredictable fluctuations, making it difficult to predict the economic viability of the exploration properties and projects in which Li3 retains an ownership interest.

 

Li3 may derive revenues, if any, from income or loss from its equity investment in Minera Li or from the sale of its equity interest in Minera Li. Minera Li will derive its revenues, if any, either from the extraction and sale of lithium and potash, as well as other potentially economic salts produced from the lithium salar brines, or from the sale of its mineral resource properties. The price of these commodities may fluctuate widely, and is affected by numerous factors beyond Li3’s control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities, increased production due to new extraction developments and improved extraction and production methods and technological changes in the markets for the end products. The effect of these factors on the price of these minerals, and therefore the economic viability of any of Minera Li´s exploration properties and projects, cannot accurately be predicted.


 
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Compliance with environmental and other government regulations could be costly and could negatively impact development and exploitation of the Maricunga Project, and adversely affect Li3’s operating results.

 

The Maricunga Project requires, as a condition precedent for commencing any extracting activity, the submission of an environmental impact study for approval by the Chilean environmental authorities. The process to obtain the approval of an environmental impact study includes, among other things, the opinion and approval of all relevant environmental authorities having jurisdiction over the project. Once the environmental impact study is approved, no sectional environmental permit can be denied. The developer of the Maricunga Project also needs to obtain all non-environmental permits necessary to carry out exploration and exploitation mining activities in the area. The environmental impact assessment system regulated in law 19 300 considers the inclusion of the mitigation measures to protect the habitat of vulnerable animals in the area which should be included by Li3 in the environmental impact study or statement, as applicable. There is no guarantee that the requite environmental and non-environmental approvals to commence production at the Maricunga Project will be obtained, or, if obtained, that the environmental mitigation requirements or other conditions of such approval will allow for economic production, either of which would adversely affect Li3’s operating results.

 

Li3 may be unable to amend the salt mining claims that it is seeking to acquire for the purposes of lithium extraction.

 

Li3’s business plan includes acquisition, exploration and development of lithium and potassium brine properties. However, Li3 may pursue this goal by acquiring salt-mining claims and/or options or other interests in salt-mining claims or other types of claims, which Li3 intends to seek to have amended to permit lithium extraction. There can be no assurance that Li3 will be successful in amending any such claims in a timely or profitable, if at all.

 

Li3 may not be able to acquire additional mineral properties.

 

Li3’s most significant asset is our 49% ownership interest in Minera Li (pending its dissolution under the terms of the Maricunga JV), which owns 36.05% of the Maricunga Project. If Li3 loses, abandons or otherwise dispose of its interest in Minera Li, there is no assurance that Li3 will be able to acquire any additional mineral properties of merit.

  

MSB, which holds the controlling interest in Minera Li, may decide that it does not wish to continue with the development of Minera Li´s assets.

 

If MSB decides that it does not wish to continue with the development of Minera Li´s assets, Li3 may be unable to execute its business plan for developing the Maricunga Project, which could significantly adversely impact Li3’s prospects and future revenues.

 

Risk Factors Relating to the Businesses of Li3 or the Combined Company, and to Stock Ownership in Li3 or the Combined Company.

 

Except where otherwise noted, the following risk factors relate to the businesses of, and stock ownership in, each Bearing and Li3, and to the combined companies of Bearing and Li3, as applicable.


 
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Each Bearing and Li3 has a history of losses and they may never achieve or sustain profitability.

 

Each Bearing and Li3 has incurred substantial losses since its inception, and they may not achieve profitability in the foreseeable future, if at all. For the period from inception (January 31, 2011) to January 31, 2017, Bearing incurred an accumulated deficit of approximately $13,746,408. For the period from June 24, 2005 (inception) to March 31, 2016, Li3 incurred an accumulated deficit of approximately $68,944,539. As at January 31, 2017, assuming completion of the merger, the combined company would have a consolidated accumulated deficit of $67,811,644. Even if Li3 or the combined company succeed in developing and commercializing one or more of their mineral projects, the expect to incur substantial net losses and negative cash flows for the foreseeable future due in part to increasing exploration and development expenses. As a result, Li3 or the combined will need to generate significant revenues in order to achieve and maintain profitability. Li3 or the combined company may not be able to generate these revenues or achieve profitability in the future. Even if they achieve profitability, Li3 or the combined company may not be able to sustain or increase profitability.

  

If Li3 or the combined company fail to obtain the capital necessary to fund their operations, they will be unable to continue or complete their exploration plans.

Li3 or the combined company will need to continue to seek capital from time to time to continue the exploration and development of their mineral property interest, and to acquire and develop other mineral properties. Li3 or the combined company believe that they will need to raise substantial additional capital to fund their continuing operations, and the development and, if recommended, commercialization of their mineral properties. Li3’s or the combined company’s businesses or operations may change in a manner that could consume available funds more rapidly than anticipated and substantial additional funding may be required to maintain operations, fund exploration activities, evaluate, acquire or develop new properties, acquire complementary businesses or technologies, or otherwise respond to competitive pressures and opportunities, such as a change in the regulatory environment, or a change in the commodities industry. If Li3 or the combined company cannot raise adequate funds to satisfy its capital requirements, they will have to delay, scale-back or eliminate their exploration activities or future operations. They may also be required to obtain funds through arrangements with collaborators, which arrangements may require Li3 or the combined company to relinquish rights to certain properties that they otherwise would not consider relinquishing, including rights to future mineral production. Li3 or the combined company may further have to license their properties to others. This could result in sharing revenues which they might otherwise retain for themselves. Any of these actions may harm Bearing’s or Li3’s businesses, financial condition and results of operations.

 

The amount of capital Li3 or the combined company may need depends on many factors, including the progress, timing and scope of their exploration programs, the time and cost necessary to obtain regulatory approvals; their ability to enter into and maintain collaborative relationships; and their partners’ commitment of time and resources to the development and commercialization of their mineral property interests.

  

Li3 or the combined company have limited access to the capital markets, and, even if they can raise additional funding, they may be required to do so on terms that are dilutive to their stockholders.

 

Li3 or the combined company have limited access to the capital markets to raise capital. The capital markets have been unpredictable in the recent past for other mineral exploration companies, and unprofitable companies such as Li3 or the combined company. In addition, it is generally difficult for early exploration-stage companies to raise capital. The amount of capital that a company such as Li3 or the combined company is able to raise often depends on variables that are beyond their control. As a result, Li3 or the combined company may not be able to secure financing on terms attractive to them, or at all. If Li3 or the combined company is able to consummate a financing arrangement, the amount raised may not be sufficient to meet their future needs. If adequate funds are not available on acceptable terms, or at all, Li3’s or the combined company’s businesses, results of operations, financial conditions, and their continued viability will be materially adversely affected.

 

 
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Trading on the OTC Markets may be volatile and sporadic, which could depress the market price of Li3’s or the combined company’s common stock and make it difficult for its stockholders to resell their shares.
 

Li3’s common stock is traded on the OTCQB service operated by OTC Markets Group Inc. under the symbol “LIEG.” On November 10, 2016 Bearing’s common stock also became quoted on the OTCQB under the symbol “BRGRF”. Trading in stock quoted on the OTCQB is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with a company’s operations or business prospects. This volatility could depress the market price of Li3’s or the combined company’s common stock for reasons unrelated to operating performance. Moreover, the OTCQB is not a stock exchange, and trading of securities on the OTCQB is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like Amex. Accordingly, shareholders may have difficulty reselling any of their shares.

 

Bearing’s and Li3’s stocks are a penny stocks. Trading of the combined company’s or Li3’s stocks may be restricted by the Securities and Exchange Commission’s penny stock regulations and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell Bearing stock or Li3 Stock.

 

Bearing’s stock and Li3’s stock are a penny stocks. The Securities and Exchange Commission (“SEC”) has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Bearing and Li3 securities are covered (and the combined company’s securities will be covered) by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade securities of Li3 or the combined company. Bearing and Li3 believe that the penny stock rules discourage investor interest in, and limit the marketability of, their common stock.

  

In addition to the “penny stock” rules promulgated by the SEC, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA’s requirements make it more difficult for broker-dealers to recommend that their customers buy Li3’s or the combined company’s common stock, which may limit your ability to buy and sell Li3’s or the combined company’s stock in the United States.

 

Bearing’s or Li3’s officers or directors may have conflicts of interest, which may decrease the effectiveness of their management or boards of directors.

  

Li3’s directors or officers, and the director or officers of the combined company, may serve as directors or officers of other companies or have significant shareholdings in other resource companies and, to the extent that such other companies may participate in ventures in which the combined company or Li3 may participate, the directors of the combined company or Li3 may have conflicts of interest in negotiating and concluding terms respecting the extent of such participation. While both companies currently share directors and officers (Luis Saenz, is President, CEO and Director of Li3 and President of South American Operations of Bearing, and Patrick Cussen is Chairman of Li3 and a Director of Bearing), there are no other specific current conflicts of interest. In the event that such a conflict of interest arises at a meeting of the combined company’s or Li3’s directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. For example, to date, Patrick Cussen, as a director of both Li3 and Bearing, and Luis Saenz, as a director of Li3 and an officer of Bearing, abstained from voting as directors to approve the Merger Agreement between Bearing and Li3. In accordance with the laws of British Columbia, where Bearing is (and the combined company will be) incorporated, or the laws of Nevada, where Li3 is incorporated, the directors of Bearing and Li3 are required to act honestly, in good faith and in the best interests of their respective companies. In determining whether or not the combined or Li3 will participate in a particular work program and the interest therein to be acquired by them, the directors will primarily consider the degree of risk to which the combined company or Li3 may be exposed and their financial position at that time.

 

 
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Compliance with U.S. securities laws, including the Sarbanes-Oxley Act, and Canadian securities laws, will be costly and time-consuming.

 

Li3 is a reporting company under U.S. securities laws and is obliged to comply with the provisions of applicable U.S. laws and regulations, including the Securities Act of 1933 (the “Securities Act”), the Exchange Act, and the Sarbanes-Oxley Act of 2002 and the related rules of the SEC, and the rules and regulations of the relevant U.S. market, in each case, as amended from time to time. Similarly, Bearing is a reporting company under Canadian securities laws, and is obliged to comply with the provisions of applicable Canadian laws and regulations, including national and provincial securities regulations, and the policies of the TSXV. The combined company will therefore be subject to both US and Canadian securities laws and reporting requirements (until such time as the combined company ceases to be a reporting company in the United States, which is uncertain). Preparing and filing annual and quarterly reports and other information with the SEC, applicable provincial securities regulators, and the TSXV, furnishing audited reports to stockholders and other compliance with these rules and regulations will involve a material increase in regulatory, legal and accounting expenses, and the attention of management, and there can be no assurance that we will be able to comply with the applicable regulations in a timely manner, if at all.

 

Neither Li3 nor the combined company anticipates dividends to be paid on their common stock, and investors may lose the entire amount of their investment.

 

Cash dividends have never been declared or paid on Li3’s common stock, and neither Li3 (with respect to its common stock) nor Bearing and Li3 (with respect to the common stock of the combined company) anticipate such a declaration or payment for the foreseeable future. Each Li3 and the Bearing expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares. Li3 cannot assure stockholders of a positive return on their investment when they sell their Li3 shares, nor can Li3 assure that stockholders will not lose the entire amount of their investment in Li3. Similarly, Li3 and Bearing cannot assure stockholders of a positive return on their investment if the agree to receive common shares of Bearing in the merger. Stockholders in the combined company may lose the entire amount of their investment in the combined company.

 

If securities analysts do not initiate coverage or continue to cover the common stock of Li3 or the combined company, or to publish unfavorable research or reports about Li3 or the combined company, this may have a negative impact on the market price of Li3’s or the combined company’s common stock.

 

The trading market for the common stock of Li3 or the combined company may be affected by, among other things, the research and reports that securities analysts publish about the respective businesses of Li3 or the combined company. Li3 does not, and the combined company will not, have any control over these analysts. There is no guarantee that securities analysts will cover the common stock of either Li3 or the combined company. If securities analysts do not cover the common stock of Li3 or, if the merger is completed, the combined company, the lack of research coverage may adversely affect the market price of the applicable stock. If the stock is covered by securities analysts, and becomes the subject of an unfavorable report, the stock price and trading volume would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on the stock, then Li3 or the combined company (as applicable) could lose visibility in the financial markets, which could cause their stock price or trading volume to decline.

  

State Blue Sky registration - potential limitations on resale of the shares.

 

The holders of the shares of Li3’s or the combined company’s common stock, and persons who desire to purchase the shares in any trading market that might develop in the future, should be aware that there may be significant state law restrictions upon the ability of investors to resell the securities. Accordingly, investors should consider the secondary market for the securities to be a limited one. The combined company’s management may seek coverage and publication of information regarding us in an accepted publication which permits a “manuals exemption.” This manuals exemption permits a security to be sold by shareholders in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by that state. The listing entry must contain (i) the names of issuers, officers, and directors, (ii) an issuer’s balance sheet, and (iii) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. The principal accepted manuals are those published by Standard and Poor’s, and Mergent, Inc. Many states expressly recognize these manuals. A smaller number of states declare that they recognize securities manuals, but do not specify the recognized manuals. Among others, the following states do not have any provisions and, therefore, do not expressly recognize the manuals exemption: Alabama, California, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont, and Wisconsin. Importantly, there is no guarantee that the management of the combined company will take the steps necessary to obtain a manuals exemption, or that a manuals exemption will be available to the combined company.

 
 
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Stockholders of Li3 or of the combined company may experience dilution of their ownership interests because of the future issuance of additional shares.

 

In the future, either Li3 or the combined company may issue authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of their then current stockholders. Li3 is currently authorized to issue an aggregate of 1,000,000,000 shares of capital stock consisting of 990,000,000 shares of common stock and 10,000,000 shares of preferred stock with preferences and rights to be determined by Li3’s Board of Directors. As of March 31, 2017, there are 502,829,707 shares of Li3 common stock and no shares of Li3 preferred stock outstanding. There are 1,550,000 shares of our common stock reserved for issuance under Li3’s 2009 Equity Incentive Plan (the “2009 Plan”), of which Li3 has 333,333 nonqualified stock options outstanding. Li3 also has share purchase warrants outstanding exercisable for the purchase of 2,380, 950 common shares, and has committed to grant Restricted Stock Units with respect to an aggregate of 600,000 shares. However, Li3 does not currently have enough shares authorized for issuance under its 2009 Plan to satisfy all of these obligations. Meanwhile, Bearing is, and the combined company will be, authorized to issue an unlimited number of common shares.

 

Any future issuance of equity or equity-backed securities may dilute then-current stockholders’ ownership percentages and could also result in a decrease in the fair market value of the equity securities, because the assets would be owned by a larger pool of outstanding equity. As described above, either Li3 or (if the merger is completed) the combined company may need to raise additional capital through public or private offerings of their common or preferred stock or other securities that are convertible into or exercisable for common or preferred stock. They may also issue such securities in connection with hiring or retaining employees and consultants (including stock options issued under equity incentive plans), as payment to providers of goods and services, in connection with future acquisitions or for other business purposes. The Board of Directors of Li3 or the combined company may at any time authorize the issuance of additional common or preferred stock without common stockholder approval, subject only to the total number of authorized common and (in the case of Li3) preferred shares set forth in their certificate of incorporation. The terms of equity securities issued by Li3 or the combined company in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the future issuance of any such additional shares of common or preferred stock or other securities may create downward pressure on the trading price of the common stock. There can be no assurance that any such future issuances will not be at a price (or exercise prices) below the price at which shares of the common stock are then traded.

 

Li3 may obtain additional capital through the issuance of preferred stock, which may limit your rights as a holder of our common stock.

 

Without any stockholder vote or action, Li3’s Board of Directors may designate and approve for issuance shares of our preferred stock. The terms of any preferred stock may include priority claims to assets and dividends and special voting rights which could limit the rights of the holders of Li3’s common stock. The designation and issuance of preferred stock favorable to current management or stockholders of Li3 could make any possible takeover of us or the removal of Li3’s management more difficult. The combined company will not be authorized to issue any shares of preferred stock unless such authorization is sought and obtained by a special majority (66.66% or more) of the then current shareholders of Bearing or the combined company.


 

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THE SPECIAL MEETING

 

General

 

This proxy statement/prospectus is being furnished to Li3 stockholders in connection with the solicitation of proxies by the Li3 Board to be used at the Special Meeting. This proxy statement/prospectus is first being mailed to Li3 stockholders on or about September 14, 2017.

 

Date, Time and Place

 

The Special Meeting will be held at on September 28, 2017, at 409 - 221 W. Esplanade, North Vancouver, British Columbia, Canada V7M 3J3 , at 9:00 A.M., local time (P.S.T.), local time.

 

Purpose of Special Meeting

 

At the Special Meeting, Li3 stockholders will be asked to consider and vote upon:

 

 

·

a proposal to approve and adopt the merger agreement and the merger and other transactions contemplated thereby, which proposal we refer to as the merger proposal; and

 

·

a proposal to adjourn the Special Meeting, if necessary, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the Special Meeting to approve and adopt the merger agreement and approve the merger, which we refer to as the adjournment proposal.

 

Recommendation of the Li3 Board

 

The Li3 Board unanimously recommends that you vote “FOR” each of the proposals presented in this proxy statement/prospectus.

 

Record Date; Shares Entitled to Vote

 

The holders of record of Li3 common stock and, subject to certain limitations at the close of business on the record date are entitled to notice of and to vote at the Special Meeting or at any adjournment thereof.

 

Voting by Holders of Common Stock

Each holder of Li3 common stock is entitled to one vote for each share of Li3 common stock held of record as of the close of business on the record date. A total of 556,124,331shares of Li3 common stock will be entitled to be voted at the Special Meeting.

   

Voting Rights of Li3’s Directors and Executive Officers

 

As of the date of this proxy statement/prospectus, Li3’s directors and executive officers intend to vote all of their shares of Li3 common stock and all of the shares of Li3 common stock over which they have voting control in favor of the merger proposal, and the adjournment proposal. As of the record date for the Special Meeting, Li3’s directors and executive officers beneficially owned, in the aggregate, 82,436,798 shares of Li3 common stock, or collectively approximately 15% of the outstanding shares of Li3 common stock.

  

Quorum; Broker Non-Votes

 

Under Li3’s bylaws, the holders of a majority of the outstanding shares of Li3 stock entitled to vote constitutes a “quorum” at a meeting of stockholders for the transaction of any business. If a quorum is not present at the Special Meeting, Li3 expects that the Special Meeting will be adjourned or postponed to solicit additional proxies. In general, shares of Li3 common stock represented by a properly signed and returned proxy card will be counted as shares present and entitled to vote at the Special Meeting for purposes of determining a quorum, including shares represented by proxies marked “ABSTAIN” or not marked at all. In addition, a “broker non-vote,” is counted in determining whether a quorum is present. Broker non-votes occur when shares held by a broker are not voted with respect to a proposal because (i) the broker has not received voting instructions from the beneficial owner of the shares and (ii) the broker lacks the authority to vote the shares at the broker’s discretion.


 
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Voting Agreements

 

As a condition of the merger agreement, Li3 agreed to use commercially reasonable efforts to cause certain stockholders of Li3 to enter into voting agreements with Bearing prior to the Special Meeting. Pursuant to the voting agreements, among other things, each such stockholder shall agree to vote (or cause to be voted) all shares of Li3 common stock owned, indirectly or directly, whether beneficially or of record, by it in favor of the merger proposal. As at the record date Li3 shareholders holding 58.6% in the aggregate have entered into voting agreements, including all officers and directors of Li3.

 

Required Vote

 

Merger Proposal : The affirmative vote of the holders of a majority of the voting power outstanding on the record date (assuming a quorum is present in person or by proxy) is required for approval of the merger proposal. If you vote to abstain, or if you fail to vote or fail to instruct your bank, broker, custodian or other record holder how to vote, it will have the same effect as voting AGAINST this proposal.

 

Adjournment Proposal : The adjournment proposal must be approved by a majority of the votes cast at the Special Meeting (assuming a quorum is present in person or by proxy). If you fail to vote or to instruct your bank, broker, custodian or other record holder how to vote, it will have no effect on the voting outcome of this proposal. If you abstain, it will have the effect of a vote AGAINST the proposal.

 

How to Vote Your Shares

 

After carefully reading and considering the information contained in this proxy statement/prospectus, including the appendices, we encourage you to vote by proxy as soon as possible, whether or not you plan to attend the Special Meeting. All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed by you via the Internet. You may specify whether your shares should be voted “FOR,” “AGAINST” or “ABSTAIN” with respect to each of the proposals. If you properly submit a proxy without giving specific voting instructions, your shares will be voted in accordance with the Li3 Board’s recommendations, as noted above. Voting by proxy will not affect your right to attend the Special Meeting. If your shares are registered directly in your name through our stock transfer agent, or you have stock certificates registered in your name, you may vote as follows:

 

Voting on the Internet . You may vote on the Internet by accessing the website www.cstproxy.com/li3energy/2017 and following the instructions printed on your proxy card. The deadline for voting on the Internet is September 26, 2017, at 11:59 p.m. Eastern Time. If you vote on the Internet, you do not need to return your proxy card.

 

Voting by Proxy Card . You may vote by completing, signing and returning your proxy card by mail. To vote in this manner, please mark, date and sign the enclosed proxy card and return it by mail in the accompanying postage-prepaid envelope. You should mail your signed proxy card as promptly as possible so that your shares will be voted at the Special Meeting.

 

Voting in Person . Even if you have voted by one of the methods described above, you may still attend the Special Meeting and vote your shares in person. If you do attend and vote your shares in person at the Special Meeting after having voted by any of the methods described above, only your last vote will be counted. However, attendance at the Special Meeting alone will not result in a revocation of any previously submitted proxy cards.

 
 
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If your shares are held in “street name” (held in the name of a bank, broker or other holder of record), you will receive voting instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Internet voting also will be offered to stockholders owning shares through banks and brokers. If your shares are not registered in your own name and you plan to vote your shares in person at the Special Meeting, you should contact your broker or agent to obtain a legal proxy or broker’s proxy card and bring it to the Special Meeting in order to vote.

 

Revocation of Proxies

 

If you give us your proxy, you may change or revoke it at any time before the Special Meeting. You may change or revoke your proxy in any one of the following ways:

 

·

by re-voting by Internet;

 

·

by signing a new proxy card with a date later than your previously delivered proxy and submitting it as instructed above; provided that it is received prior to the date of the Special Meeting;

 

·

by notifying our Secretary in writing at Matias Cousiño 82, Oficina 806 Santiago, Chile F3 00000 Attn: Luiz Saenz before the Special Meeting that you have revoked your proxy; or

 

·

by attending the Special Meeting in person and voting in person in accordance with the instructions above. Attending the meeting in person will not in and of itself revoke a previously submitted proxy unless you specifically request it by notifying the Inspector of Elections at the Special Meeting.

 

Your most recent vote, whether Internet, proxy card or in person at the Special Meeting, is the one that will be counted.

 

If you have instructed a broker or other nominee to vote your shares, you must follow the procedures provided by your broker or nominee to change those instructions.

 

PROPOSAL ONE - THE MERGER

 

This section of the proxy statement/prospectus describes the material terms of the proposed merger and the merger agreement. This section may not contain all of the information that is important to you. You should carefully read this entire proxy statement/prospectus, including the full text of the merger agreement, which is attached as Annex A and incorporated by reference into this proxy statement/prospectus. The merger agreement contains information, representations and warranties of the parties as of specific dates, and has not been updated to reflect developments occurring after the date of the merger agreement. Furthermore, pursuant to the terms of the merger agreement, the information, representations and warranties contained in the merger agreement are qualified in their entirety by certain information filed prior to the date of the merger agreement by Li3 with the SEC, or by Bearing with the Canadian Securities Administrators, as well as by confidential disclosure schedules that Li3 and Bearing delivered to each other in connection with the execution of the merger agreement. As a result, the merger agreement may omit certain information required to make the statements therein not misleading to someone unfamiliar with Bearing or Li3. For the foregoing reasons, the statements contained in the merger agreement must be read in the context of, and are qualified by, the information set forth elsewhere in this proxy statement/prospectus.

 

Notwithstanding the foregoing cautionary language, each of Bearing and Li3 acknowledges that it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this proxy statement/prospectus not misleading.

 

 
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The Parties to the Merger

 

Li3 Energy Inc.

  

Li3 Energy Inc., a Nevada corporation, is an exploration company in the lithium and potassium mining sector, based in South America. Li3’s common stock is currently quoted on the OTCQB. Li3 aims to acquire and develop a unique portfolio of lithium and potassium brine projects in the Americas. Li3 is focused on further exploring, developing and commercializing our 17.67% interest in the Maricunga Project, located in the northeast section of the Salar de Maricunga in Region III of Atacama in northern Chile, as well as increasing its portfolio of projects. Li3 is headquartered in Santiago, Chile.

  

Please see “Li3’s Business,” beginning on page 98 of this proxy statement/prospectus.

 

Bearing Lithium Corp.

  

Bearing was incorporated on January 13, 2011 as 0900353 B.C. LTD, a wholly owned subsidiary of Valley High Ventures Ltd. (“Valley High”). On March 25, 2011, Levon Resources Ltd. (“Levon”) acquired Valley High, the predecessor corporation to Bearing, by way of a court-approved plan of arrangement (the “Arrangement”), at which time Bearing began operating as a standalone entity. Bearing shares commenced trading on the TSX Venture Exchange on June 10, 2011 under the symbol BRZ.V. Effective May 11, 2017, Bearing changed its name to Bearing Lithium Corp.

  

On September 23, 2016 Commander Resources Ltd. (“Commander”) acquired all of Bearing’s mineral assets in Mexico and Canada with the exception of four 100% owned properties (HY-Jay, VBA, VM and Big), all in the Yukon,, in exchange for 12 million common shares of Commander and a cash payment of $15,000.

 

Effective August 22, 2016, Bearing consolidated its issued and outstanding common shares and stock options on the basis of one post-consolidation common share for every four pre-consolidation common shares. As a result of the share consolidations, the number of shares and options presented in the MD&A and condensed consolidated interim financial statements and the exercise price for each option, the calculated weighted average number of common shares issued and outstanding for the purpose of loss per share calculation are based on the post consolidation shares for all years presented.

 

See “Bearing’s Business” on page 126 of this proxy statement/prospectus.

 

LI Acquisition Corporation

 

LI Acquisition Corporation, or Sub, is a Nevada corporation and is a wholly owned subsidiary of Bearing that was formed solely for the purpose of entering into the merger agreement and completing the merger. Upon the consummation of the merger, Sub will be merged with and into Li3 and will cease to exist.

 

Background of the Merger

 

Both the Li3 Board and the Bearing Board have regularly reviewed their respective companies’ results of operations and competitive positions, as well as their strategic respective alternatives. From time to time, both the Li3 Board and the Bearing Board have evaluated potential strategic transactions, including business combinations, such as the merger, that could potentially benefit their respective companies.

 

Initial discussion between Li3’s and Bearing’s respective management, consisting of Jeremy Poirier and Luis Saenz, commenced in the fall of 2016, and Li3 and Bearing Ltd., entered into a confidential, non-binding Letter of Intent on November 23, 2016 with respect to the potential acquisition by Bearing of Li3’s subsidiary, Minera Li Energy SpA. Following the execution of the Letter of Intent, Bearing’s and Li3’s respective legal advisors began mutual due diligence efforts and discussions with a view to structuring the proposed acquisition of Minera Li Energy SpA. Although no particular transaction or strategic alliance was initially contemplated by the parties, these discussions and due diligence efforts led to the evaluation of potential synergies between Li3 and Bearing.

 

 
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Thereafter, Bearing, represented by Jeremy Poirier, and its legal advisors, Macdonald Tuskey, and Li3, represented by Luis Saenz and Patrick Cussen, and its legal advisors at the time, Ellenoff Grossman & Schole LLP held discussions regarding the basic terms upon which a transaction between the two companies could be completed. Following those discussion, the November 23, 2016 Letter of Intent was replaced by a binding Letter of Intent between the parties on December 9, 2016, pursuant to which Li3 agreed to sell its 49% equity interest in Minera Li Energy S.p.A., which represents a 17.7% interest in Minera Salar Blanco S.A., in exchange for 16,000,000 common shares of Bearing and Bearing’s assumption of up to $2.2 million of the debts and liabilities of the Company. Upon further consideration and investigation at the time, the direct acquisition of Mineral Li Energy S.p.A. would not be feasible due to the consents that would have to be obtained from third parties, specifically the other shareholders/joint venture participants. As a consequence, thereafter, the parties commenced the negotiation of a definitive agreement for the acquisition of Li3 itself by way of merger as opposed the acquisition of Minera Li Energy S.p.A., and continued mutual due diligence, which continued until the execution of the merger agreement on January 27, 2017.

   

On January 5, 2017, Macdonald Tuskey circulated to Bearing’s and Li3’s respective business (Messrs. Cussen and Saenz in regards to Li3 and Mr. Poirier in regards to Bearing) and legal teams an initial draft of the merger agreement. The parties subsequently exchanged approximately three iterative drafts of the merger agreement during the approximately three week period following the initial draft, with each such draft followed by discussion and negotiation among the parties with respect to the specific terms thereof. During this period the material terms did not change, being the amount of the share consideration payable (0.0287705448370321 Bearing common shares for each share of Li3 common stock) and the amount of the Li3 debts to be assumed and settled. In that regard, the exchange ratio was determined solely by virtue of the fixed number (16,000,000) of Bearing shares issuable in consideration for the merger shares, and as such is subject to change in the event that the number of Li3 outstanding shares changes prior to closing.

The main points of discussion during this period in the drafts circulated were in regards to non-solicitation issues, shareholder approval and dissent requirements, superior proposal terms and material adverse effect determinations.

 

On January 24, 2017, the Li3 Board held a meeting at which all members were in attendance telephonically. At this meeting, the Li3 Board discussed the merger agreement, and discussed with its legal advisors the Li3 Board’s fiduciary duties under Nevada law and the fairness of the merger, from a financial perspective, to Li3’s stockholders. Following such presentations and ensuing discussions the Li3 Board unanimously adopted a resolution approving the merger agreement and declaring it advisable. Li3 Board members Patrick Cussen and Luis Saenz, who were respectively appointed director and President of South American Operations of Bearing, on January 4, 2017, abstained from voting.

 

During all times relevant to the consideration of a potential collaboration or transaction between Bearing and Li3, in between scheduled meetings of the Li3 Board, Mr. Saenz provided the Li3 Board with regular updates on the status of such collaboration or transaction. Messrs. Cussen and Saenz did not participate in any negotiations on behalf of Bearing in any capacity. They solely represented Li3 in this regard. Their respective appointments as director and officer of Bearing are conditional upon the successful completion of the merger, failing which they will resign from all positions with Bearing.

 

Also on January 24, 2017, the Bearing Board held a meeting at which all members were in attendance telephonically. At this meeting, the Bearing Board discussed the material terms and conditions of the merger agreement. Following such presentations and ensuing discussions the Bearing Board unanimously adopted a resolution approving the merger agreement. Mr. Cussen abstained from voting at the meeting.

 

On January 27, 2017, Bearing and Li3 executed the merger agreement, following which Li3 and Bearing issued press releases, announcing the transaction, and filed applicable disclosure documents with the SEC and the Canadian Securities Administrators.

 

Li3’s Reasons for the Merger and the Recommendation of the Li3 Board

 

At a meeting of the Li3 Board held on January 24 , 2017, following questions from and discussions among the directors regarding the merger, the directors unanimously determined that it was fair to and in the best interests of Li3 and its stockholders to enter into the merger agreement, substantially in the form presented to the Li3 Board, and to consummate the merger and the other transactions contemplated thereby, and the directors unanimously approved and adopted the merger agreement, substantially in the form presented, the merger and the other transactions contemplated thereby. The Li3 Board recommends that the Li3 stockholders vote “FOR” the approval and adoption of the merger agreement and the approval of the merger.

 

In evaluating the merger agreement and the transactions contemplated thereby, the Li3 Board consulted with Li3’s senior management and legal counsel, reviewed a significant amount of information and considered a number of factors, including, among others, the following (not in any order of importance):

  

·

Li3’s estimated near- and long-term operations and performance on an independent, stand-alone basis;

 

·

the substantial additional financing that would be needed to achieve the desired performance and the risk that such additional financing may not be obtained on terms favorable to Li3 or at all;

 

·

the competitive industry in which Li3 operates, including the fact that many competitors have greater resources, financial and otherwise, than Li3;

 

 

 

 

·

the objective of preventing or limiting further dilution of Li3’s economic interest in, and influence over, the Maricunga project, which would result from Li3’s inability to make significant economic contributions to the Maricunga joint venture;

 


 
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·

 

historical and current information concerning Bearing’s business and management; its financial performance, condition, and prospects as presented by Bearing to the Li3 Board, management team, and advisors, and results of a due diligence investigation of Bearing conducted by Li3’s management and advisors;

 

·

 

the process undertaken to explore strategic alternatives available to Li3 to maximize stockholder value and the review and assessment of the possible outcomes of such alternatives, including the possibility of remaining independent, combinations with other merger partners, the possibility of being acquired, and the possibility of equity or debt being issued in public or private offerings;

 

·

the number of Bearing common shares to be issued to Li3’s stockholders pursuant to the merger agreement;

 

·

 

the fact that the merger consideration on the date of the meeting represented a premium of 32% over the closing price per share of the Li3 common stock on January 24, 2017 based on the value of a Bearing common share (although the price of Bearing common shares will continue to fluctuate);

 

·

the fact that the merger consideration will be in the form of registered and transferable Bearing common shares, which are expected to be tradeable on the TSXV;

 

·

the fact that the combination of Li3 with Bearing will allow existing Li3 stockholders the opportunity to participate in the growth of the combined company;

 

·

the Li3 Board’s consideration of potential alternative transactions and its view, in consultation with its legal and financial advisors, that it was not probable that any alternative transaction reasonably available to Li3 within a reasonable timeframe would generate value to Li3 stockholders in excess of the value from the merger with Bearing, and that the merger agreement provided sufficient flexibility for the Li3 Board to change its recommendation and for Li3 stockholders to vote against the merger in the case of a superior proposal, or otherwise;

 

 

·

the Li3 Board’s belief that the terms of the merger agreement, including the parties’ respective representations, warranties and covenants, and the conditions to the parties’ respective obligations, are reasonable;

 

·

the fact that Patrick Cussen, one of Li3’s directors will be a member of the combined company’s board of directors following completion of the merger and that Luis Saenz, the CEO and a Director of Li3, will become the President of South American Operations of the combined company, and the possibility that other key executives or directors of Li3 will become part of the management team of the combined company following completion of the merger;

 

·

the fact that the deal protections set forth in the merger agreement do not preclude a third party from making an acquisition proposal that is superior to the terms of the merger with Bearing, that Li3 may, subject to the requirements of the merger agreement, provide information to and participate in discussions with qualifying unsolicited third-party proposals and that, in the event of such a superior proposal, the Li3 Board may, subject to the terms and conditions of the merger agreement, change its recommendation in favor of the proposal to adopt and approve the merger agreement with Bearing, and that the amount of and triggering conditions for the termination fee are reasonable under the circumstances;

 

·

the fact that the fixed exchange ratio provides certainty to Li3 stockholders as to their approximate aggregate pro forma percentage ownership of the combined company; and

 

 

 

 

·

the belief that the combined company has or will have sufficient cash, access to additional investment, management expertise, and technical and strategic resources, to meaningfully participate in the Maricunga Project joint venture, thereby preventing or limiting the dilution of Li3’s current 17.67% joint venture interest, which would likely result from Li3’s continued financial and strategic non-participation due to its lack of working capital and inability to attract significant equity investment.

 
 
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Although this discussion of the information and factors considered by the Li3 Board includes substantially all of the material factors it considered, it is not intended to be exhaustive and may not include all of the factors considered by the Li3 Board. The Li3 Board did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination that the merger agreement and the transactions contemplated thereby, including the merger, are fair to, advisable, and in the best interests of Li3 and its stockholders. The Li3 Board based its determination on the totality of the information presented to and factors considered by it. In addition, individual members of the Li3 Board may have given differing weights to different factors.

 

The Li3 Board also carefully considered and discussed a number of risks, uncertainties and other countervailing factors in its deliberations regarding entering into the merger agreement and consummating the merger, including, among others, the following:

 

·

the risks and substantial costs, including public company costs, and the difficulty of obtaining additional financing on terms favorable to Li3 or at all to cover such costs of Li3 remaining a stand-alone publicly-traded company, instead of entering into a transaction with Bearing;

 

·

the uncertainty of the trading price of Li3 common stock after announcing the merger and the bidding price of Bearing common shares after closing the merger;

 

·

the possibility that the anticipated benefits of the merger may not be realized or may be lower than expected;

 

·

the effect of the public announcement of the merger on Li3’s operations, stock price, customers, and employees;

 

·

the disruption that may be caused by failure to complete the merger;

 

·

the substantial fees and expenses incurred by Li3 in connection with the merger, which will be incurred whether or not the merger is completed; and

 

·

other risks described in the “Risk Factors” and “Cautionary Statements Regarding Forward-Looking Statements” sections of this proxy statement/prospectus.

 

The Li3 Board believes that, overall, the potential benefits to Li3 stockholders of the merger agreement and the transactions contemplated thereby, including the merger, outweigh the risks and uncertainties.

 

Bearing’s Reasons for the Merger and the Recommendation of the Bearing Board

 

In evaluating the merger and the merger agreement, the Bearing Board consulted with Bearing’s management and its legal advisors. In reaching its decision to approve the merger and enter into the merger agreement, the Bearing Board considered a number of factors, including the following factors, which the Bearing Board viewed as generally supporting its decision to approve the merger and the merger agreement.

  

·

The belief that the combination of Bearing’s and Li3’s respective businesses should result in significant strategic benefits to the combined company, which would benefit Bearing and its shareholders, including access to diversified exploration interests, professional resources, and financing opportunities.

 

·

The Bearing Board’s and management’s analyses and understanding of the business, operations, financial performance and condition, strategy and future prospects of Li3, as well as economic and market conditions and trends in the markets in which Li3 operates.

 

·

The belief that the seasoned management team at Li3 will bring valuable market intelligence to the combined operations of Li3 and Bearing.


 
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·

The belief that the merger will enable Bearing to benefit from Li3’s mineral exploration rights and existing contractual relationships.

 

·

The financial fairness of the exchange ratio to Bearing, as well as the fact that the exchange ratio is fixed and will not be adjusted for fluctuations in the market price of Bearing common shares or Li3 common stock.

 

·

The fact that senior executive officers of Li3 who have an in-depth knowledge of Li3, its business and who were responsible for overseeing Li3’s growth and development efforts, will continue in senior executive roles after the merger.

 

·

The structure of the merger and the terms and conditions of the merger agreement, including without limitation, the following:

 

·

the probability that the conditions to the merger will be satisfied; and

 

·

the provisions of the merger agreement that eliminate the ability of Li3 to solicit and respond to offers for alternative transactions.

 

The Bearing Board weighed the factors described above, which the Bearing Board viewed generally as supporting the decision to approve the merger and merger agreement, against a number of other factors identified in its deliberations that weighed negatively against the merger, including without limitation, the following:

 

·

 

the fact that the Bearing common shares to be issued in the merger together with the options and warrants to purchase shares of Li3 common stock that will be converted into options or warrants to purchase Bearing common shares (and will be assumed by Bearing at the effective time of the merger), will represent approximately 28.14% of the Bearing common shares on a fully diluted basis after the effective time of the merger, causing Bearing’s shareholders as of immediately prior to completion of the merger to experience immediate and significant dilution in their equity interests and voting power of Bearing upon completion of the merger;

 

·

 

the amount of time required to complete the merger, the possibility that the merger may not be completed, and the potential adverse consequences to Bearing if the merger is not completed, including the potential adverse effect on the reputation of Bearing;

 

·

 

the possible negative effect of the public announcement of the merger on the market price of Bearing common shares and the possible volatility in Bearing common shares that may occur during the pendency of the merger;

 

·

the possibility that the anticipated benefits of the merger may not be realized within the expected time period, or at all, or that they may be less significant than expected;

 

·

the risk that sales of substantial amounts of Bearing common shares immediately after the closing of the merger could adversely affect the market price for Bearing’s common shares;

 

·

the risk of stockholder lawsuits that may be filed against Bearing, Li3 or their respective boards of directors connection with the merger agreement;

 

·

 

the risk of diverting the attention of Bearing’s senior management from other strategic priorities to implement the merger and make arrangements for integration of each company’s operations and infrastructure following the merger;

 

·

the potential impact of the restrictions under the merger agreement on Bearing’s ability to take certain actions during the period prior to the completion of the merger (which may delay or prevent Bearing from undertaking business opportunities that may arise pending completion of the merger);

 

·

the fees and expenses associated with completing the merger; and

 

·

the risks described in the section titled “Risk Factors” beginning on page 26 of this proxy statement/prospectus.

 

The factors set forth above do not represent an exhaustive list of the factors given consideration by the Bearing Board. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Bearing Board did not find it useful, and did not attempt, to quantify, rank or otherwise assign any relative or specific weights to the factors that it considered in reaching its determination to approve the merger agreement and the transactions contemplated by the merger agreement, including the merger. In addition, individual members of the Bearing Board may have given differing weights to differing factors. The Bearing Board conducted an overall analysis of the factors described above as well as other factors, including through discussions with, and inquiry of, Bearing management and outside legal and financial advisors regarding certain of the matters above.

 

For the reasons set forth above, the Bearing Board determined that the issuance of shares of Bearing common shares to Li3’s stockholders in connection with the merger is fair to and in the best interests of Bearing and its shareholders. This explanation of Bearing’s reasons for the merger and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors described under “Cautionary Statement Regarding Forward-Looking Statements” on page 25 of this proxy statement/prospectus.

      
 
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Accounting Treatment of the Merger

 

Although described and constituted as a merger, we expect that the transaction set out in the merger agreement will be accounted for as an acquisition of the net assets of Li3 rather than as a business combination on the basis that management has determined that Li3 does not have the inputs and processes capable of producing outputs that are necessary to meet the definition of a business as defined by IFRS 3. The cost of the acquisition was determined based on the fair value of the consideration paid plus transaction costs that were directly attributable to the Merger. The cost of the acquisition will be allocated first to the monetary assets and liabilities with the excess allocated to Li3’s interest in Maricunga Project. The cost of the acquisition was determined based on the fair value of the consideration paid plus transaction costs that were directly attributable to the Merger as follows:

 

Fair value of 16,000,000 common shares of Bearing issuable to shareholders of Li3

 

$ 12,480,000

 

Fair value of replacement restricted stock units of Bearing issuable

 

 

13,121

 

Fair value of consideration paid to settle Li3 convertible notes :

 

 

 

 

Common shares

 

 

1,314,743

 

Warrants

 

 

446,446

 

Cash paid to settle legal fees

 

 

61,493

 

Potential common shares issuable

 

 

140,680

 

Acquisition related costs accrued

 

 

100,000

 

Total cost of acquisition

 

$ 14,556,483

 

     

The fair value of the 16,000,000 common shares of Bearing issuable to the shareholders of Li3 was determined based on the market value of Bearing’s common shares as at September 8, 2017 which was $0.78 per share.

 

Pursuant to the Merger Agreement, Bearing must issue replacement warrants, options and restricted stock units to the holders of the equivalent instruments in Li3. The instruments issued by Bearing will have the same terms except that the quantity and exercise price will be adjust to reflect the same share exchange ratio used to determine the 16,000,000 common share of Bearing issuable to the shareholders of Li3 (the “Exchange Ratio”). During August 2017 all of Li3’s outstanding options and warrants expired; therefore no corresponding Bearing options or warrants must be issued upon closing of the Merger. As a result, Bearing will issue 16,821 restricted stock units to the holders of Li3 restricted stock units. The fair value of the restricted stock units was determined based on the market value of Bearing’s common shares as at September 8, 2017 which was $0.78 per share.

 

Prior to entering into the Merger Agreement, Bearing entered into settlement agreements (the “Settlement Agreements”) with the four holders of the convertible notes of Li3 having an aggregate principal balance owing of USD525,000. The Settlement Agreements, which were subsequently amended and restated on July 10, 2017, are subject to the closing of the Merger. Pursuant to the Settlement Agreements, Bearing will repay the principal amount due, and all accrued interest.  In addition, Li3 has paid to the four note holders a 22% bonus (the “Bonus Payment”) pursuant to the Settlement Agreements through the issuance of 14,584,062 common shares, which shares were issued in July 13, 2017.  The number of Li3 shares received by the noteholders represents the equivalent value that would have been received had they been issued Bearing shares in accordance with the original debt agreements after applying foreign exchange rate of 1.351, a deemed market price of $0.40 and based upon the applicable Li3/Bearing exchange ratio. Bearing will also pay the legal expenses of the convertible note holders’ up to a maximum of USD15,000 and pay USD30,000 to compensate the convertible note holders’ representative. In addition, for its component of the Settlement Agreements, on July 11, 2017, Bearing issued the following to the note holders:

   

-  1,315,113 units (the “Initial Units”), with each unit consisting of one common share and ½ of one share purchase warrant (an “Initial Warrant”) issued at a deemed price of $0.40 per Initial Unit ($0.40 per share) with each whole Initial Warrant exercisable into one common share at an exercise price of $0.80. This Initial Unit issuance settled a total debt of USD389,375.

  

-  370,455 units (the “Subsequent Units”), with each unit consisting of one common share and ½ of one share purchase warrant (a “Subsequent Warrant”) issued at a deemed price of $0.71 per Subsequent Unit ($0.71 per share) with each whole Subsequent Warrant exercisable into one common share at an exercise price $0.88. The differing price from the Initial Units and Warrants is due to the fact that one of the note holders elected to exchange their debt for Bearing securities at a later date, rather than receive a cash payment, and as a result was subject to the higher price. This Subsequent Unit issuance settled a total debt of USD194,688.

      

As a result of the foregoing, the total debt under the Li3 convertible notes, including accrued and unpaid interest, to be settled through the issuance of the Bearing Units is USD584,063. The Initial and Subsequent Units are being held in escrow and will released concurrently with the closing of the Merger. If the Merger does not complete, the Initial and Subsequent Units will be cancelled. Therefore, the fair value of the common shares is based on the same market value of Bearing’s common shares as at September 8, 2017 which was $0.78 per share. The fair value of the Initial Warrants and Subsequent Warrants were calculated using the Black-Scholes Option Pricing Model with the following assumptions: stock price $0.78, exercise price of either $0.80 (Initial Warrants) or $0.88 (Subsequent Warrants), term of either 1 year (Initial Warrants) or 18 months (Subsequent Warrants), volatility of 192.111%, dividend yield of 0% and a risk-free interest rate of 0.63%.

     

Ownership of Bearing After the Merger  

  

Immediately following the merger, current Bearing shareholders will own approximately 64.88% of the issued and outstanding Bearing common shares and current holders of Li3 common stock immediately prior to the merger will own approximately 35.12% of the issued and outstanding Bearing common shares on a non-diluted basis. On a fully diluted basis, assuming the exercise of all outstanding options and warrants to purchase Bearing common shares and Li3 common shares, the current Li3 shareholders will own approximately 28.14%, and the Bearing shareholders will own approximately 71.86%, of the issued and outstanding Bearing common shares.

 

Interests of Certain Persons in the Merger

 

In considering the recommendation of the Li3 Board or the Bearing Board with respect to the merger, you should be aware that some of Li3’s and Bearing’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of Li3 (or Bearing) stockholders generally. For example, Patrick Cussen, the Chairman of the board of directors of Li3, also serves as a director of Bearing. Luis Saenz, the Chief Executive Officer and director of Li3, also serves as the President of South American Operations of Bearing. Each Messrs. The continuation of the appointments of Messrs. Cussen and Saenz as officers or directors of Bearing (and any executive compensation which may result from those appointments) are contingent on the completion of the merger. Messrs. Cussen and Saenz have a vested interest in the completion of the merger which may or may not be aligned with the interests of the Li3 stockholders

 

 
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Except as disclosed above and elsewhere in this prospectus, as at the date of this prospectus, none of the following persons has any substantial interest, direct or indirect, by security holdings or otherwise in any matter to be acted upon:

 

 

1.

any director or officer of Li3 or Bearing;

 

2.

any proposed nominee for election as a director of Li3 or Bearing; and

 

3.

any associate or affiliate of any of the foregoing persons.

 

The shareholdings of the directors and officers of Bearing and Li3 are listed on page 139 of this prospectus in the section entitled “Security Ownership of Certain Beneficial Owners and Management”. To our knowledge, no director or officer has advised that he or she intends to oppose the Merger, as more particularly described herein.

 

Regulatory Clearances Required for the Merger

 

Bearing and Li3 have each agreed to take certain actions in order to obtain regulatory clearance required to consummate the merger. The only material regulating approval required will be TSXV approval as described below.

  

Conditional TSXV Approval

 

It is a condition to the completion of the merger that the TSXV has conditionally approved the listing of Bearing’s common shares to be issued pursuant to the merger agreement on the TSXV, with final approval of the TSXV being subject to receipt of Bearing shareholder approval, if required, and satisfaction of certain customary filing requirements of the TSXV.

 

Delisting of Li3 Common Stock

 

Upon completion of the merger, shares of Li3 common stock currently listed on the OTC Markets electronic quotation system will cease to be listed on the OTC Markets and will subsequently be deregistered under the Exchange Act.

 

Dissenters’ Rights of Appraisal

 

Pursuant to the NRS §§ 78.3793, 92A.300 - 92A.500 (inclusive) (the “ Dissenters Rights Provisions ”) Li3 stockholders who do not wish to accept the Bearing Shares in consideration for their Li3 Stock, will have the right under Nevada law to seek an appraisal of the fair cash value of their Li3 Stock, exclusive of any element of value arising from the accomplishment or expectation of the merger.

 

In the context of the merger, the Dissenters’ Rights Provisions provides that the former stockholders may elect to have Li3 purchase the Shares held by the former stockholders for a cash price that is equal to the “fair value” of such Shares, as determined in a judicial proceeding in accordance with the Dissenters’ Rights Provisions. The fair value of the Shares of any former stockholder means the value of such Shares immediately before the effectuation of the merger, excluding any appreciation or depreciation in anticipation of the merger, unless exclusion of any appreciation or depreciation would be inequitable.

 

In order to exercise your dissenters’ rights, there are numerous conditions you must comply with.  An initial requirement is that you must provide written notice to Li3, before the shareholder vote at the Special Meeting, of your intention to demand payment for your shares if the merger is completed.  Proper notice will be considered given if (a) delivered personally, on the date of such delivery, (b) upon non-automated confirmation of receipt when transmitted via facsimile or electronic mail (but only if followed by transmittal by a nationally recognized overnight courier or by-hand delivery on the next business day), or (c) on receipt (or refusal to accept delivery) after dispatch by registered or certified mail (return receipt requested), postage prepaid, or by a nationally recognized overnight courier (with confirmation), addressed as follows:

 

Li3 Energy Inc.

Matias Cousino 82, Oficiña 86

Santiago, Chile

F3 00000

 

Attention: Luis Saenz

 

Email: luis.saenz@li3energy.com

 

Or

 

Li3 Energy Inc. c/o Vcorp Services, LLC

701 S. Carson Street, Suite 200

Carson City, Nevada

89701

  

A copy of the Dissenters’ Rights Provisions is attached as Annex C hereto. If you wish to exercise your dissenters’ rights or preserve the right to do so, you should carefully review Annex C hereto.

 

IF YOU FAIL TO COMPLY WITH THE PROCEDURES SPECIFIED IN THE DISSENTERS’ RIGHTS PROVISIONS IN A TIMELY MANNER, YOU MAY LOSE YOUR DISSENTERS’ RIGHTS. BECAUSE OF THE COMPLEXITY OF THOSE PROCEDURES, YOU SHOULD SEEK THE ADVICE OF COUNSEL IF YOU ARE CONSIDERING EXERCISING YOUR DISSENTERS’ RIGHTS. Former stockholders who perfect their dissenters’ rights by complying with the procedures set forth in the Dissenters’ Rights Provisions will have the fair value of their Shares determined by a Nevada state district court and will be entitled to receive a cash payment equal to such fair value. Any such judicial determination of the fair value of shares could be based upon any valuation method or combination of methods the court deems appropriate. The value so determined could be more or less than the merger price to be paid in connection with the merger. In addition, former stockholders who invoke dissenters’ rights may be entitled to receive payment of a fair rate of interest from the effective time of the merger on the amount determined to be the fair value of their shares. If you do NOT plan to seek an appraisal of all of your shares, please execute (or, if you are not the record holder of such shares, to arrange for such record holder or such holder’s duly authorized representative to execute) and mail postage paid the Letter of Transmittal (which will be sent to Li3’s stockholders following the effective time of the Merger) to the Paying Agent at the address set forth in the Letter of Transmittal. You should note that surrendering to Li3 certificates for your shares will constitute a waiver of your appraisal rights under the NRS.


 
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The Combined Company’s Board of Directors and Management Following the Merger

 

Following the merger, it is anticipated that the Board of Directors and management of the Combined Company will be composed of the following individuals mutually designated by Bearing and Li3 pursuant to the merger agreement:

 

 

Title

Jeremy Poirier

 

President, Chief Executive Officer, Director

Patrick Cussen

 

Director

Timothy Heenan

 

Independent Director

Amar Balaggan

 

Independent Director

Kirk Shaw 

 

Independent Director

Ann Fehr

 

Chief Financial Officer, Corporate Secretary

Luis Saenz

 

President, South American Operations

Benjamin Asuncion

 

Vice-President, Business Development

 

Prior to completion of the merger, Bearing and Li3 intend to designate an additional independent director, and may designate a fifth director.

 

For more information about the members of the board of directors and executive officers following the merger, see the section titled “Bearing Management Following the Merger”.

 

Governing Documents Following the Merger

 

At the effective time, Li3’s certificate of incorporation and bylaws will be amended and restated substantially in the forms attached to the merger agreement as Exhibit B and Exhibit C, respectively, which thereafter will be the certificate of incorporation and bylaws of the surviving corporation.

 

Exchange of Li3 Stock Certificates Following the Merger

 

Li3 stockholders should not return their certificates with the enclosed proxy card. Stock certificates should be returned with a letter of transmittal that will be sent to Li3’s stockholders following the effective time, validly executed in accordance with the instructions you will receive.

 

Upon surrender of a duly executed letter of transmittal and a certificate representing Li3 common stock or a book-entry share of Li3 common stock to the exchange agent, the holder of such certificate or book-entry share will be entitled to receive in exchange therefor the merger consideration into which the shares represented by such certificates or book-entry shares have been converted pursuant to the merger agreement. In accordance with Canadian securities legislation, the securities issued in consideration of the merger will not bear a restrictive legend and may be sold in the United States or Canada without additional action by the Canadian or United States stockholders.

 

See “Exchange Procedures” beginning on page 58 of this proxy statement/prospectus.

 

 
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THE AGREEMENT AND PLAN OF MERGER

 

The following is a summary of the material provisions of the merger agreement. This summary does not purport to describe all of the terms of the merger agreement and is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus and is incorporated by reference into this proxy statement/prospectus. This summary does not contain all of the information about the merger agreement that is important to you. You should refer to the full text of the merger agreement for details of the transaction and the terms and conditions of the merger agreement.

 

The merger agreement contains information, representations and warranties of the parties as of specific dates, and has not been updated to reflect developments occurring after the date of the merger agreement. Furthermore, pursuant to the terms of the merger agreement, certain information, representations and warranties contained in the merger agreement are qualified in their entirety by certain information filed prior to the date of the merger agreement by Li3 with the SEC, or filed by Bearing with the Canadian Securities Administrators, as well as by confidential disclosure schedules that Li3 and Bearing delivered to each other in connection with the execution of the merger agreement. As a result, the merger agreement may omit certain information required to make the statements therein not misleading to someone unfamiliar with Bearing or Li3. For the foregoing reasons, the statements contained in the merger agreement must be read in the context of, and are qualified by, the information set forth elsewhere in this proxy statement/prospectus.

 

Notwithstanding the foregoing cautionary language, each of Bearing and Li3 acknowledges that it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this proxy statement/prospectus not misleading.

   

Terms of the Merger

 

The merger agreement provides for the merger of the Sub, a wholly owned subsidiary of Bearing, with and into Li3, in accordance with provisions of the NRS. Li3 will survive the merger and will continue as a wholly owned subsidiary of Bearing, and, as such, is sometimes referred to as the surviving corporation.

 

Completion of the Merger

 

Bearing and Li3 will complete the merger no later than the third business day after the satisfaction or waiver of all of the conditions contained in the merger agreement, other than the conditions which by nature are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of such conditions. The conditions to the completion of the merger are described below under “-Conditions to Completion of the Merger” beginning on page 69. The merger will become effective upon the filing of the certificate of merger with the Secretary of State of the State of Nevada or at such later time as may be designated jointly by Bearing and Li3 and specified in such certificate of merger (but in no event more than 90 days after the date of filing the certificate of merger with the Secretary of State of the State of Nevada), which we refer to as the effective time.

 

Pursuant to the merger agreement, Bearing and Li3 currently expect to complete the merger in the second or third quarter of 2017; however, completion of the merger will be possible only if all conditions to the completion of the merger contained in the merger agreement (described below under “-Conditions to Completion of the Merger”) are satisfied or waived. Therefore, factors outside of either company’s control could delay or prevent the completion of the merger.

 

Merger Consideration-Treatment of Li3 Capital Stock in the Merger

 

At the effective time, each share of Li3 common stock issued and outstanding as of the effective time (other than shares of Li3 common stock held by Bearing, Sub, Li3 or any subsidiaries of Bearing or Li3, which will be cancelled and retired at the effective time) will be automatically converted into and exchanged for the right to receive Bearing common shares in the ratio of 0.0287705448370321 Bearing common shares for such share of Li3 common stock, which we refer to as the exchange ratio. From and after the effective time, all such shares of Li3 common stock will no longer be outstanding and will automatically be cancelled and retired and will cease to exist, and each holder of a certificate or book-entry share representing any such shares of Li3 common stock will cease to have any rights with respect thereto, except the right to receive the merger consideration therefor, without interest thereon.

 

 
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If prior to consummation of the merger, the outstanding Bearing common shares or shares of Li3 common stock or preferred stock have been changed into, or exchanged for, a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, reorganization, recapitalization, split, combination, contribution or exchange of shares, the exchange ratio and any adjustments or payments to be made pursuant to the merger agreement that are based on the number of Bearing common shares or shares of Li3 common stock or preferred stock will be correspondingly adjusted to provide the holders of Li3 common stock, Li3 options and Li3 warrants the same economic effect as contemplated by the merger agreement prior to such event.

 

No fractional Bearing common shares will be issued to Li3 stockholders in connection with the merger. Instead, a Li3 stockholder who would otherwise be entitled to a fractional share (after taking into account all certificates and book-entry shares delivered by such stockholder) will receive a number of Bearing common shares rounded down to the nearest whole Bearing common share.

 

The distribution of the Bearing Shares pursuant to the merger will constitute a distribution of securities which is exempt from the prospectus requirements of Canadian Securities Laws. The Bearing Shares issued to former Li3 Shareholders pursuant to the merger will not bear any restrictive legend under Canadian Securities Laws and may be immediately resold in Canada or in the United States without additional action by the Canadian or the United States stockholders. The Bearing Shares may be resold in Canada through a registered investment dealer provided that (i) Bearing is and has been a reporting issuer in a jurisdiction in Canada for the four months immediately preceding the trade; (ii) the trade is not a “control distribution” as defined in National Instrument 45-102 (Resale of Securities); (iii) no unusual effort is made to prepare the market or to create a demand for the Bearing Shares; (iv) no extraordinary commission or consideration is paid to any person in respect of such sale; and (v) if the selling stockholder is an insider or officer of Bearing the selling stockholder has no reasonable grounds to believe that Bearing is in default of applicable Canadian Securities Laws. As at the date of this registration statement Bearing complies with all applicable Canadian Securities Law Requirements to allow the resale of its shares without a hold period in Canada, and it is anticipated that Bearing will be similarly compliant upon and immediately following the distribution of the Bearing Shares pursuant to the merger.

  

Treatment of Li3 Warrants and Stock Options

 

Warrants

 

Each warrant to purchase one share of Li3 common stock, referred to as Li3 warrant, that is outstanding immediately prior to the effective time will be converted into and become rights with respect to Bearing common shares, and Bearing will assume each Li3 warrant, in accordance with the terms of the Li3 warrant, except that from and after the effective time, (i) each Li3 warrant assumed by Bearing may be exercised solely for Bearing common shares (or cash, if so provided under the terms of such Li3 warrant), (ii) the number of Bearing common shares subject to such Li3 warrant will be equal to the number of shares of Li3 common stock subject to such Li3 warrant immediately prior to the effective time multiplied by the exchange ratio, rounded down to the nearest whole share, and (iii) the per share exercise price under each such Li3 warrant will be adjusted by dividing the per share exercise price under each such Li3 warrant by the exchange ratio and rounding up to the nearest cent.

 

Stock Options

 

At the effective time, each option to purchase shares of Li3 common stock, whether granted pursuant to a Li3 option plan or otherwise, which are collectively referred to as Li3 options, that is outstanding immediately prior to the effective time, whether vested or unvested, will be disposed of and cancelled by Bearing, and the former holders of Li3 options will receive substantially identical options exercisable for Bearing common shares, which are referred to as Bearing options. All terms and conditions of each Bearing option, including the term to expiry and conditions to and manner of exercising, will be the same as the Li3 option for which it was exchanged (subject to applicable law), and will be governed by the terms of the applicable Li3 option plan and/or stock option agreement, and any certificate or option agreement previously evidencing the Li3 option will thereafter be and be deemed to be evidence of the Bearing option, except that from and after the effective time, (i) Bearing and its compensation committee will be substituted for Li3 and the compensation committee of the Li3 Board administering such Li3 option plan, (ii) the Bearing option may be exercised solely for Bearing common shares (or cash, if so provided under the terms of such Li3 option), (iii) the number of Bearing common shares subject to a particular Bearing option will be equal to the number of shares of Li3 common stock subject to the applicable Li3 option immediately prior to the effective time multiplied by the exchange ratio, rounded down to the nearest whole share, subject to automatic downward adjustments applicable to options held by Canadian persons, as described below, and (iv) the per share exercise price under the Bearing option will be adjusted by converting the per share exercise price under the Li3 option to Canadian dollars using the noon spot rate quoted by the Bank of Canada for the day that includes the effective time (or, if no noon spot rate is quoted for that day, the noon spot rate for the closest preceding day for which a noon spot rate is quoted), and dividing the result of that conversion by the exchange ratio and rounding up to the nearest cent, subject to automatic upward adjustment. Each Li3 option that is an “incentive stock option” or a nonqualified stock option held by a U.S. taxpayer will be adjusted as required by Section 424 of the Code and Section 409A of the Code and the Treasury Regulations thereunder, so as not to constitute a modification, extension or renewal of the option, within the meaning of Section 424(h) of the U.S. Internal Revenue Code and the Treasury Regulations under Section 409A of the Code, or otherwise result in negative tax treatment or penalties under Section 424 of the Code or Section 409A of the U.S. Internal Revenue Code.


 
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Exchange Procedures

 

The merger agreement provides that, on the closing date of the merger, Bearing will make available to its transfer agent or another exchange agent selected by Bearing and which is reasonably acceptable to Li3, which we refer to as the exchange agent, the Bearing common shares issuable pursuant to the merger agreement. Promptly after the effective time, the surviving corporation will instruct the exchange agent to deliver to each record holder of Li3 certificate or book-entry shares immediately prior to the effective time appropriate transmittal materials and instructions (which must specify that delivery will be effected, and risk of loss and title to such Li3 certificates or book-entry shares will pass, only upon proper delivery of such shares to the exchange agent).

 

Each holder of shares of Li3 common stock that have been converted will be entitled to receive the merger consideration in respect of any share of Li3 common stock upon (i) surrender to the exchange agent of such Li3 certificate, together with a duly completed and validly executed letter of transmittal, duly endorsed as the exchange agent may require or (ii) receipt of an “agent’s message” by the exchange agent (or such other evidence, if any, of the transfer as the exchange agent may reasonably request) in the case of book-entry shares. In the event of a transfer of ownership of unregistered shares of Li3 common stock represented by Li3 certificates or book-entry shares, the consideration may be issued to a transferee if Li3 certificates representing such shares or book-entry shares are delivered to the exchange agent, accompanied by all documents required to evidence such transfer and by evidence satisfactory to the exchange agent that any applicable stock transfer taxes have been paid. If any Li3 certificate has been lost, stolen, mislaid or destroyed, upon receipt of (i) an affidavit of that fact from the holder claiming such Li3 certificate to be lost, mislaid, stolen or destroyed, (ii) such bond, security or indemnity as Bearing and the exchange agent may reasonably require and (iii) any other documents necessary to evidence and effect the bona fide exchange thereof, the exchange agent will issue to such holder the consideration into which the shares represented by such lost, stolen, mislaid or destroyed Li3 certificate will have been converted. The exchange agent may establish such other reasonable and customary rules in connection with the distribution of the merger consideration, and procedures in connection with its duties as it may deem appropriate. Bearing will pay all charges and expenses. No interest will accrue or be paid to any holder of Li3 common stock.

 

After the effective time, each holder of shares of Li3 common stock issued and outstanding immediately prior to the effective time who surrenders or transfers the Li3 certificate(s) representing such shares or book-entry shares to the exchange agent together with a duly completed and validly executed letter of transmittal, duly endorsed as the exchange agent may require, will receive Bearing common shares in exchange, as described above, which shares will be in uncertificated book-entry form unless a physical certificate is requested, together with all undelivered dividends or distributions in respect of such shares (without interest thereon).

 

 Each of Bearing, the surviving corporation and the exchange agent will be entitled to deduct and withhold from the merger consideration otherwise payable pursuant to the merger agreement to any holder of shares of Li3 common stock such amounts, if any, as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of any state, local or foreign tax law, unless they have been presented with documentation that eliminates the requirement to withhold, and to request any necessary tax forms, as applicable, or any other proof of exemption from withholding or similar information, from the stockholders of Li3 or other recipient of payments in respect of which such deduction and withholding was made. To the extent that any amounts are so withheld by Bearing, the surviving corporation or the exchange agent, as the case may be, such withheld amounts will be treated for all purposes of the merger agreement as having been paid to the holder of the shares of Li3 common stock in respect of which such deduction and withholding was made by Bearing, the surviving corporation or the exchange agent, as the case may be. Each of Bearing, the surviving corporation and the exchange agent must provide any documentation of such deduction or withholding as reasonably requested by the stockholders of Li3 or other recipient of payments in respect of which such deduction and withholding was made.


 
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Any portion of the aggregate merger consideration that remains unclaimed by the holders of Li3 common stock for one year after the effective time will be returned to Bearing (together with any dividends or earnings in respect thereof). Any holders of Li3 common stock who have not complied with the procedures above will be entitled to look only to Bearing, and only as a general creditor thereof, for payment of the merger consideration deliverable in respect of each share of Li3 common stock that such holder holds, as determined pursuant to the merger agreement, in each case, without any interest.

 

None of Bearing, the surviving corporation or the exchange agent will be liable to a holder of Li3 common stock for any amounts paid or property delivered in good faith to a public official pursuant to any applicable abandoned property, escheat or similar law. Any amounts of consideration remaining unclaimed by holders of shares of Li3 common stock immediately prior to such time when the amounts would otherwise escheat to or become property of any governmental entity will become, to the extent permitted by law, Bearing’s property free and clear of any claims or interest.

 

If you are a Li3 stockholder, you should not surrender stock certificates or book-entry shares for exchange prior to the completion of the merger. Rather, you should wait to surrender such stock certificates and book-entry shares following the completion of the merger, and then only pursuant to instructions set forth in the letters of transmittal which the exchange agent will be required to mail to Li3 stockholders promptly following the completion of the merger. The exchange agent will deliver shares of Bearing common shares to Li3’s former stockholders only in accordance with the procedures set forth in the letter of transmittal.

     

Representations and Warranties

 

The merger agreement contains various representations and warranties made by Li3 to Bearing and Sub, many of which are qualified by concepts of knowledge and materiality and are further modified and limited by confidential disclosure schedules exchanged by Bearing and Li3 and certain filings with the SEC prior to the date of the merger agreement. Such representations and warranties of Li3 relate to, among other things:

 

 

·

corporate power, authority and capacity to enter into the merger agreement and the enforceability of the merger agreement;

 

 

·

corporate organization and similar corporate matters, including the qualification to do business under applicable law;

 

 

·

the absence of certain changes or events since June 30, 2016 in relation to Li3, including but not limited to a capital re-structuring, re-organization, or reclassification, a change of accounting methods or practices, any dividend distribution, the assumption or issuance of debt outside the ordinary course of business, any contractual breaches or disputes, any grant of rights, or any other event which would render any representation of Li3 untrue or inaccurate, or which would have a material adverse effect on the business or assets of Li3;

 

 

·

the absence of the violation of constituent documents, contracts or any applicable laws as a result of the merger and other transactions contemplated by the merger agreement;

 

 

·

third party consents;

 

 

·

capitalization of Li3;

 

 

·

ownership of subsidiaries;

 

 

·

compliance with applicable securities laws and the Sarbanes-Oxley Act of 2002, as amended;

 

 

·

certain SEC filings, including certain financial statements contained in such filings;

 

 

·

disclosure controls and procedures and internal controls over financial reporting;

 

 
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·

the absence of off-balance sheet arrangements;

 

 

·

Li3’s financial position as of September 30, 2016;

 

 

 

books and records and minute books;

 

 

·

the absence of certain liabilities;

 

 

·

taxes;

 

 

·

litigation;

 

 

·

certain material contracts, including that there exists no violation or breach of such material contracts;

 

 

·

possession of and compliance with material permits and other governmental authorizations required for the operation of Li3’s business, including the business of its subsidiaries;

 

 

·

environmental matters;

 

 

·

status of Li3’s projects;

 

 

·

compliance with applicable legal and regulatory requirements;

 

 

·

labor and other employment matters;

 

 

·

related party transactions;

 

 

·

registration rights;

 

 

·

restrictions on business activities;

 

 

·

the absence of undisclosed brokers’ fees;

 

 

·

insurance;

 

 

·

the absence of any cease trade or similar order;

 

 

·

that neither Li3 nor any of its subsidiaries is registered or required to be registered as an “investment company” under the U.S. Investment Company Act of 1940;

 

 

·

certain business practices and anti-bribery laws;

 

 

·

employee benefits plans;

 

 

·

compliance with applicable healthcare regulations and other healthcare regulatory matters; and

 

 

·

the absence of any stockholder rights plan, “poison pill” anti-takeover plan or other similar anti-takeover device and the inapplicability of certain anti-takeover statutes to the transactions contemplated by the merger agreement, including the merger.

 
 
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The merger agreement also contains various representations and warranties made by Bearing and Sub to Li3, many of which are qualified by concepts of knowledge and materiality and are further modified and limited by confidential disclosure schedules exchanged by Bearing and Li3 and certain filings with the Canadian Securities Administrators prior to the date of the merger agreement. Such representations and warranties of Bearing and Sub relate to, among other things:

 

 

·

corporate power, authority and capacity to enter into the merger agreement and the enforceability of the merger agreement;

 

 

·

corporate organization and similar corporate matters, including the qualification to do business under applicable law;

 

 

·

the absence of certain changes and events since October 30, 2016 in relation to Bearing, including but not limited to a capital re-structuring, re-organization, or reclassification, a change of accounting methods or practices, a dividend distribution, the assumption or issuance of debt outside the ordinary course of business, any contractual breaches or disputes, any grant of rights, or any other event which would render any representation of Li3 untrue or inaccurate, or which would have a material adverse effect on the business or assets of Bearing;

 

 

·

the absence of the violation of constituent documents, contracts or any applicable laws as a result of the merger and other transactions contemplated by the merger agreement;

 

 

·

third party consents;

 

 

·

capitalization of Bearing;

 

 

·

ownership of subsidiaries;

 

 

·

compliance with applicable securities laws with regulatory authorities and the TSXV;

 

 

·

certain SEC filings, including certain financial statements contained in such filings;

 

 

·

disclosure controls and procedures and internal controls over financial reporting;

 

 

·

Bearing’s financial position as of October 31, 2016;

 

 

·

books and records and minute books;

 

 

·

the absence of certain liabilities;

 

 

·

taxes;

 

 

·

litigation;

 

 

·

certain material contracts, including that there exists no violation or breach of such material contracts;

 

 

·

possession of and compliance with material permits and other governmental authorizations required for the operation of Bearing’s business including the business of its subsidiaries;

 

 

·

environmental matters;

 

 

·

intellectual property;

 
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·

status of Bearing’s mineral projects

 

 

·

compliance with applicable legal and regulatory requirements;

 

 

·

labor and other employment matters;

 

 

·

related party transactions;

 

 

·

registrations rights;

 

 

·

restrictions on business activities;

 

 

·

the absence of undisclosed brokers’ fees;

 

 

·

insurance;

 

 

·

the absence of any cease trade or similar order;

 

 

·

that neither Bearing nor any of its subsidiaries is registered or required to be registered as an “investment company” under the U.S. Investment Company Act of 1940;

 

 

·

certain business practices and anti-bribery laws;

 

 

·

employee benefits plans;

 

 

·

compliance with applicable healthcare regulations and other healthcare regulatory matters; and

 

 

·

the absence of any stockholder rights plan, “poison pill” anti-takeover plan or other similar anti-takeover device and the inapplicability of certain anti-takeover statutes to the transactions contemplated by the merger agreement, including the merger.

 
Certain Covenants of the Parties

 

Affirmative Covenants

 

Each of Bearing and Li3 has undertaken customary covenants in the merger agreement relating to the conduct of its business prior to the completion of the merger or the earlier termination of the merger agreement (subject in some cases to exceptions specified in the merger agreement, as required by legal requirements, with the prior written consent of the other company, which consent may not be unreasonably withheld or delayed, or as set forth in the confidential disclosure schedules exchanged by Bearing and Li3).

 
 
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In general, Li3 has agreed, among other things, to, and to cause its subsidiaries to:

 

 

·

operate its business in the ordinary course consistent with past practice;

 

 

·

use its reasonable efforts to preserve intact its business organization and material assets and maintain its rights and franchises and keep available the services of present employees, consultants, independent contractors and executive officers of Li3 and its subsidiaries;

 

 

·

notify Bearing promptly after receipt of any material communication (written or oral) between Li3 or any of its subsidiaries, on the one hand, and any healthcare regulatory authority, on the other hand, and before giving any material submission to any healthcare regulatory authority; and

 

 

·

take no action that would reasonably be likely to (i) materially adversely affect the ability of any party to obtain any consents required for the transactions contemplated under the merger agreement or (ii) materially adversely affect the ability of any party to perform its covenants and agreements under the merger agreement.

 

In general, Bearing has agreed, among other things, to, and to cause its subsidiaries to:

 

 

·

operate its business in the ordinary course consistent with past practice;

 

 

·

use its reasonable efforts to preserve intact its business organization and material assets and maintain its rights and franchises and keep available the services of present employees, consultants, independent contractors and executive officers of Bearing and its subsidiaries;

 

 

·

take no action that would reasonably be likely to (i) materially adversely affect the ability of any party to obtain any consents required for the transactions contemplated under the merger agreement or (ii) materially adversely affect the ability of any party to perform its covenants and agreements under the merger agreement.

 

Negative Covenants

 

Prior to the effective time or the earlier termination of the merger agreement, each of Li3 and Bearing have agreed, with respect to itself and its subsidiaries not to (except as otherwise contemplated by the merger agreement, as required by legal requirements or with the prior written consent of the other company, which consent may not be unreasonably withheld or delayed), take certain actions specified in the merger agreement (subject in some cases to exceptions specified in the merger agreement or set forth in the confidential disclosure schedules exchanged by Li3 and Bearing).

 

In general, Li3 has agreed that it will not do or agree or commit to do, or permit any of its subsidiaries to do or agree or commit to do, any of the following:

 

 

·

adopt any change to its organizational documents;

 

 

·

 

subject to limited exceptions, incur any debt obligation or other obligation for borrowed money (other than (i) intercompany indebtedness and (ii) trade payables incurred in the ordinary course of business) or impose, or suffer the imposition, on any material asset of Li3 or any of its subsidiaries of any lien or permit any such lien to exist, other than in connection with liens in effect as of the date of the merger agreement;

 

 

 

·

 

repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under the Li3 option plans), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of Li3 or any of its subsidiaries;

 

 

·

 

subject to limited exceptions, except for the merger agreement, issue, sell, pledge, encumber, authorize the issuance of, enter into a contract to do any of the foregoing, or otherwise permit to become outstanding, any additional shares of Li3 common stock, preferred stock or warrants or any other capital stock of any subsidiary of Li3;

 

 

·

 

except as otherwise required by any employment agreement or Li3 options agreement to which Li3 is a party as of the date of the merger agreement, accelerate the exercisability of any share of restricted stock, option, warrant or other right to purchase shares of Li3 common stock or any other capital stock of any Li3 subsidiary;


 
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·

declare, set aside or pay any dividend or distribution payable in cash, stock or property in respect of its capital stock;

 

 

·

 

adjust, split, combine or reclassify any share of its or its subsidiaries’ capital stock or issue or authorize the issuance of any other securities in respect of or in substitution for shares of its capital stock, or sell, lease, mortgage or otherwise dispose of or encumber any of its subsidiaries’ stock or any asset other than in the ordinary course of business;

 

 

·

 

(i) except for purchases of U.S. Treasury securities or U.S. government agency securities, which in either case have maturities of three years or less, purchase any securities or make any material investment, whether by purchase of stock or securities, contributions to capital, asset transfers, loans or advances, or purchase of any assets, in any person other than a wholly owned Li3 subsidiary, or otherwise acquire direct or indirect control over any person or (ii) merge, consolidate or adopt a plan of liquidation;

 

 

·

 

(i) enter into any new line of business or into any new commercial territory outside of the United States or make or agree to make any new capital expenditures, or (ii) dispose of, grant, obtain or permit to lapse any material rights in any intellectual property or dispose of or disclose to any person, except pursuant to confidentiality obligations or requirements of law, other than to representatives of Bearing, any material trade secret;

 

 

·

 

except as required by any plan or contract or as required by law, increase the benefits available to any current of former executive officer or director; increase the base salary, wages, or bonus of any current or former Li3 executive officer or director, except for an increase in bonus of not more than 10% of the target bonus set forth in the employment agreement or established by the Li3 Board or committee for any current employee, executive officer or director in the ordinary course of business; or grant any severance, bonus, termination pay, equity or equity-based awards to any current or former Li3 executive officer or director other than as required by agreement or plan prior to the date of the merger agreement;

 

 

·

 

except as required by law, establish, adopt, amend or terminate any plan or any agreement, program, policy, trust, fund or other arrangement that would be a plan if it were in existence as of the date of the merger agreement;

 

 

·

 

terminate without “cause” any executive officer; forgive or discharge in whole or in part any outstanding loans or advances to any present or former Li3 director, officer, employee, individual consultant or independent contractor;

 

 

·

 

(i) make or change any material tax election, (ii) file any materially amended tax return, (iii) settle any material tax claim or assessment relating to Li3 or its subsidiaries or (iv) surrender any right to claim a refund of material taxes;

 

 

·

make any material change in any accounting methods, except as may be required by changes in statutory or regulatory accounting rules or GAAP or regulatory requirements with respect thereto;

 

 

·

 

except to the extent expressly set forth in the merger agreement, take any action that is intended or would reasonably be expected to result in failure of any of the conditions to the consummation of the merger;

 

 

·

 

except in the ordinary course of business, enter into, modify, amend or terminate any material contract or waive, release, compromise or assign any material rights or claims with respect to any material contract;

 

 

·

commence, settle or compromise any pending or threatened litigation except with respect to compromises, settlements or agreements in the ordinary course of business;

 

 

·

pay, discharge or satisfy any material liabilities, other than the payment, discharge or satisfaction of liabilities in the ordinary course of business consistent with past practice;

 

 

·

terminate or allow to lapse, or modify in any material respect, any material insurance policy; or

 

 

·

take any action, or knowingly fail to take any action, which action or failure to act prevents or impedes, or would reasonably be expected to prevent or impede, the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

 
 
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In general, Bearing has agreed that it will not do or agree or commit to do, or permit any of its subsidiaries to do or agree or commit to do, any of the following:

 

 

·

adopt any change to its organizational documents;

 

 

·

subject to limited exceptions, incur any debt obligation or other obligation for borrowed money (other than (i) intercompany indebtedness and (ii) trade payables incurred in the ordinary course of business) or impose, or suffer the imposition, on any material asset of Bearing or any of its subsidiaries of any lien or permit any such lien to exist, other than in connection with liens in effect as of the date of the merger agreement;

 

 

·

repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under the Bearing option plan), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of Bearing or any of its subsidiaries;

 

 

·

subject to limited exceptions, except for the merger agreement, issue, sell, pledge, encumber, authorize the issuance of, enter into a contract to do any of the foregoing, or otherwise permit to become outstanding, any additional shares of Bearing common shares, preferred stock or warrants or any other capital stock of any subsidiary of Bearing;

 

 

·

accelerate the exercisability of any share of restricted stock, option, warrant or other right to purchase shares of Bearing common shares or any other capital stock of any Bearing subsidiary;

 

 

·

declare, set aside or pay any dividend or distribution payable in cash, stock or property in respect of its capital stock;

 

 

·

adjust, split, combine or reclassify any share of its or its subsidiaries capital stock or issue or authorize the issuance of any other securities in respect of or in substitution for shares of its capital stock, or sell, lease, mortgage or otherwise dispose of or encumber any of its subsidiaries’ stock or any asset other than in the ordinary course of business;

 

·

 

(i) purchase any securities or make any material investment, whether by purchase of stock or securities, contributions to capital, asset transfers, loans or advances, or purchase of any assets, in any person other than a wholly owned Bearing subsidiary, or otherwise acquire direct or indirect control over any person or (ii) merge, consolidate or adopt a plan of liquidation;

   

 

·

 

(i) enter into any new line of business or into any new commercial territory outside of the United States or make or agree to make any new capital expenditures, or (ii) dispose of, grant, obtain or permit to lapse any material rights in any intellectual property or dispose of or disclose to any person, except pursuant to confidentiality obligations or requirements of law, other than to representatives of Bearing, any material trade secret;

  

 

·

 

except as required by any plan or contract or as required by law, increase the benefits available to any current of former executive officer or director; increase the base salary, wages, or bonus of any current or former executive officer or director of Bearing or any of its subsidiaries, except for an increase in bonus of not more than 10% of the target bonus set forth in the employment agreement or established by the Bearing Board or any committee for any current employee, executive officer or director in the ordinary course of business; or grant any severance, bonus, termination pay, equity or equity-based awards to any current or former executive officer or director of Bearing or any of its subsidiaries other than as required by agreement or plan prior to the date of the merger agreement;


 
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·

 

except as required by law, establish, adopt, amend or terminate any plan or any agreement, program, policy, trust, fund or other arrangement that would be a plan if it were in existence as of the date of the merger agreement;

 

 

·

 

terminate without “cause” any executive officer; forgive or discharge in whole or in part any outstanding loans or advances to any present or former director, officer, employee, individual consultant or independent contractor of Bearing or any of its subsidiaries; or, except for the hiring or engagement of non-officer employees or individual independent contractors who are compensated no more than $200,000 annually each, hire or engage any employee or individual independent contractor of Bearing or any of its subsidiaries;

 

 

·

 

(i) make or change any material tax election, (ii) file any materially amended tax return, (iii) settle any material tax claim or assessment relating to Bearing or its subsidiaries, or (iv) surrender any right to claim a refund of material taxes;

 

 

·

 

make any material change in any accounting methods or policies or systems of internal accounting controls, except as may be required by changes in statutory or regulatory accounting rules or IFRS or regulatory requirements with respect thereto;

 

 

·

 

except to the extent expressly set forth in the merger agreement, take any action that is intended or would reasonably be expected to result in failure of any of the conditions to the consummation of the merger;

 

 

·

 

except in the ordinary course of business, enter into, modify, amend or terminate any material contract or waive, release, compromise or assign any material rights or claims with respect to any material contract;

 

 

·

 

commence, settle or compromise any pending or threatened litigation except with respect to compromises, settlements or agreements in the ordinary course of business that involve only the payment of monetary damages not in excess of $50,000 individually or $100,000 in the aggregate;

 

 

·

pay, discharge or satisfy any material liabilities, other than the payment, discharge or satisfaction of liabilities in the ordinary course of business consistent with past practice;

 

 

·

terminate or allow to lapse, or modify in any material respect, any material insurance policy; or

  

 

·

take any action, or knowingly fail to take any action, which action or failure to act prevents or impedes, or would reasonably be expected to prevent or impede, the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

 

Certain Notifications

 

Li3 and Bearing have agreed to notify one another promptly upon becoming aware of:

 

 

·

any notice or other communication from any person or entity alleging that its consent may be required in connection with the transactions contemplated by the merger agreement;

   

 

·

any notice or other communication from any governmental entity or regulatory authority in connection with the transactions contemplated by the merger agreement;

   

 

·

certain pending, threatened or likely litigation against such party or any of its officers, directors or affiliates;

   

 

·

any final, non-appealable decisions from a court, patent office or other regulatory agency rendering any of its registered intellectual property invalid or unenforceable; or

   

 

·

any facts or circumstances that would, or would reasonably be expected to, affect in any material respect its use or value of any of its intellectual property.

 
 
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Preparation of Proxy Statement/Prospectus and Registration Statement on Form F-4

 

Pursuant to the merger agreement, Bearing and Li3 have agreed to cooperate in the preparation and filing with the SEC of the registration statement on Form F-4, of which this proxy statement/prospectus forms a part, and to cause such registration statement to be declared effective under the Securities Act as soon after such filing as possible and to cause such registration statement to remain effective for as long as is necessary to consummate the merger and the transactions contemplated by the merger agreement. Bearing and Li3 have also agreed to make all required filings with respect to the merger and the transactions contemplated by the merger agreement under the Securities Act and the Exchange Act, the rules of TSXV, the rules of any stock exchange on which their securities are listed, applicable state securities and “blue sky” laws and the rules and regulations thereunder and any applicable foreign securities laws or with any foreign securities authorities.

 

Li3 Stockholder Meeting and Bearing Shareholder Meeting

 

Li3 has agreed to cause the Li3 stockholders’ meeting to be duly called and held as soon as reasonably practicable after the SEC declares the registration statement on Form F-4, of which this proxy statement/prospectus forms a part, effective for the purpose of obtaining the required stockholder vote for the approval of the merger agreement, the merger and the other transactions contemplated by the merger agreement. In connection with such meeting, Li3 will (i) use its reasonable best efforts to obtain the required stockholder vote and (ii) otherwise comply with all legal requirements applicable to such meeting.

 

It is not anticipated that Bearing will require the approval of its shareholders to complete the merger as contemplated by the merger agreement. However, if required by the TSXV, Bearing will prepare a management information circular, referred to as the Bearing circular, in compliance with applicable securities laws and file and mail the Bearing circular in all jurisdictions in which the same is required to be filed in connection with the special meeting of Bearing’s shareholders to approve, among other things, the issuance of the merger consideration, referred to as the Bearing shareholder approval. If approval of the Bearing shareholders is required by the TSXV, Bearing will use its reasonable best efforts to:

 

 

·

file the Bearing circular with all such jurisdictions as soon as reasonable practicable;

 

 

·

mail the Bearing circular to its shareholders as promptly as practicable following its filing in all jurisdictions where the same is required; and

 

 

·

duly call and hold the Bearing meeting as soon as reasonably practicable after the filing of the Bearing circular in order to obtain Bearing shareholder approval.

 

Restrictions on Solicitation

 

Pursuant to the merger agreement, neither Li3 nor Bearing is permitted to solicit, initiate or knowingly encourage or otherwise take any action to facilitate from any third party a competing proposal to acquire the assets of, equity interest in, or business of Li3 and its subsidiaries, taken as a whole, or Bearing and its subsidiaries, taken as a whole, any of which we refer to as a company acquisition proposal.

 

In addition, except as permitted pursuant to the merger agreement as set forth below, neither Li3 nor Bearing is permitted to:

 

·

 

conduct or engage in any discussions or negotiations with, or disclose any non-public information relating to it or any of its subsidiaries to, or knowingly assist, participate in, facilitate or encourage any effort by, any third party that is seeking to make, or has made, any company acquisition proposal;

 

  

·

endorse or recommend any company acquisition proposal;

 

  

·

 

enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other similar contract (in each case, whether or not binding) relating to any company acquisition proposal; or

 

  

·

grant any waiver, amendment or release under any standstill or confidentiality agreement or any anti-takeover laws or otherwise fail to enforce any of the foregoing.


 
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Recommendation of Li3’s and Bearing’s Respective Boards of Directors

 

The Li3 Board has approved and adopted the merger agreement and the transactions contemplated thereby, including the merger, and recommended approval and adoption of the merger agreement by Li3’s stockholders, which we refer to as the Li3 board recommendation. Similarly, the Bearing Board has determined that the merger is fair to and in the best interests of Bearing and its shareholders and has declared it advisable to enter into the merger agreement and consummate the transactions contemplated thereby, including the merger, which we refer to as the Bearing board recommendation.

 

Pursuant to the merger agreement, if Li3 fails to include the Li3 positive recommendation in the final Proxy Statement/Prospectus or (y) the Li3 Board shall have changed its recommendation to not support the merger agreement and the transaction, then Bearing may terminate the Agreement by giving written notice to Li3.

  

Efforts to Complete the Merger; Regulatory Approvals

 

Under the terms of the merger agreement, each of Li3 and Bearing has agreed, and to cause its subsidiaries, to use its reasonable best efforts to take all actions, and to assist and cooperate with the other party in doing all things necessary, proper or advisable to complete the merger in the most expeditious manner practicable, including:

 

·

preparing and filing as soon as practicable all documentation to effect all necessary undertakings, notices, reports and other filings; and

  

 

·

obtaining all regulatory approvals and all other consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any government or regulatory entity or other third party in order to consummate the merger or any of the other transactions contemplated by the merger agreement.

 

Indemnification and Insurance for Directors and Officers

 

The merger agreement provides that, for a period of six years commencing at the effective time, Bearing and the surviving corporation must:

 

·

indemnify and hold harmless against any costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any proceeding, and provide advancement of expenses to, each person who is now, or has been at any time prior to the effective time, an officer or director of Bearing or Li3 or who was serving at the request of Bearing or Li3 as an officer or director of another corporation, joint venture or other enterprise, to the fullest extent permitted under applicable law, the Bearing’s organizational documents and Li3’s organizational documents; and

  

 

·

honor the provisions regarding elimination of liability of directors, indemnification of officers, directors and employees and advancement of expenses contained in such organizational documents immediately prior to the effective time and ensure that the certificate of incorporation and bylaws of the surviving corporation contains provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of present and former directors, officers, employees and agents of Li3 and its subsidiaries than are presently set forth in Li3’s organizational documents.


 
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Employee Benefits

 

Under the terms of the merger agreement, as of the effective time and for at least six months thereafter, Bearing will provide, and cause the surviving corporation to provide, pension, welfare and fringe benefits (other than incentive compensation, equity-based compensation, defined benefit pension benefits and retiree medical benefits) to the employees of Li3 and its subsidiaries which when taken as a whole are substantially similar to the pension, welfare and fringe benefits (other than incentive compensation, equity-based compensation, defined benefit pension benefits and retiree medical benefits) that are provided to such employees pursuant to plans on the date of the merger agreement.

 

Conditions to Completion of the Merger

 

The obligations of Li3, Bearing and Sub to effect the merger and the other transactions contemplated by the merger agreement are subject to the satisfaction or waiver (other than the required Li3 stockholder vote and Bearing shareholder approval, neither of which may be waived in any circumstance) on or prior to the closing date of the following conditions:

 

 

·

Li3 must have obtained the required vote of its stockholders to approve the merger agreement, the merger and the transactions contemplated by the merger agreement;

 

  

 

 

·

If required, Bearing must have obtained the Bearing shareholder approval;

 

 

 

 

·

conditional approval of the TSXV to list the Bearing common shares issuable pursuant to the merger agreement on the TSXV, with final approval being subject to Bearing shareholder approval (if required) and to satisfying the customary filing requirements of the TSXV;

 

 

 

 

·

absence of any statute, rule, regulation, executive order, decree or ruling, or temporary restraining order, preliminary or permanent injunction or other order issued by a court or other U.S. governmental entity of competent jurisdiction in effect, having the effect of making the merger or the other transactions contemplated by the merger agreement illegal or otherwise prohibiting consummation of the merger or the other transactions contemplated by the merger agreement;

 

 

 

 

·

receipt of all consents, waivers, authorizations and approvals of any governmental entity or any third party required in connection with the execution, delivery and performance of the merger agreement;

 

 

 

 

·

effectiveness under the Securities Act of the registration statement on Form F-4, of which this proxy statement/prospectus is a part, the absence of a stop order issued by the SEC suspending the effectiveness of such registration statement and the absence of a proceeding seeking a stop order or any similar proceeding with respect to this proxy statement/prospectus initiated or threatened by the SEC;

 

 

 

 

·

completion of Bearing’s offer to each Li3 stockholder, who is a Canadian resident for purposes of the Canadian Tax Act, to purchase, subject to the required approval of the merger agreement by Li3 stockholders and Bearing shareholders, all of such resident’s shares of Li3 common stock in consideration for that number of Bearing common shares equal to the product of the number of shares of Li3 common stock held by such Canadian resident and the exchange ratio, rounded down to the nearest whole number of Bearing common shares; and

 
 
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In addition, the respective obligations of Bearing and Sub to effect the merger and the other transactions contemplated by the merger agreement are subject to the satisfaction or waiver of the following additional conditions:

 

·

accuracy in all material respects of Li3’s representations and warranties (without giving effect to any limitation indicated by the words “company material adverse effect,” “in all material respects,” “in any material respect,” “material” or “materially” used with respect to Li3 or any of its subsidiaries, which we refer to as a company materiality qualifier) when made and as of the closing date, as if made at and as of such date (except those representations and warranties that address matters only as of a particular date, which must be accurate in all respects as of such date), other than certain representations and warranties of Li3, which must be accurate in all respects (without giving effect to any company materiality qualifier), when made and as of the closing date, as if made at and as of such date (except those representations and warranties that address matters only as of a particular date, which must be true and correct in all respects as of that date); and

 

 

·

Li3 performance and compliance in all material respects with all of its agreements and covenants required by the merger agreement to be performed or complied with by it before completion of the merger.

 

In addition, the obligations of Li3 to effect the merger and the other transactions contemplated by the merger agreement are subject to the satisfaction or waiver of the following additional conditions:

 

·

accuracy in all material respects of Bearing’s and Sub’s representations and warranties (without giving effect to any limitation indicated by the words “Bearing material adverse effect,” “in all material respects,” “in any material respect,” “material” or “materially” used with respect to Bearing, its subsidiaries or Sub, which we refer to as a Bearing materiality qualifier) when made and as of the closing date, as if made at and as of such date (except those representations and warranties that address matters only as of a particular date, which shall be true and correct in all respects as of such date), other than certain representations and warranties of Bearing and Sub, which must be accurate in all respects (without giving effect to any Bearing materiality qualifier), when made and as of the closing date, as if made at and as of such date (except those representations and warranties that address matters only as of a particular date, which shall be true and correct in all respects as of that date); and

  

 

·

Bearing and Sub will have performed or complied in all material respects with all of its agreements and covenants required by the merger agreement to be performed or complied with by it before completion of the merger.

 

Termination of the Merger Agreement

 

Generally and except as specified below, the merger agreement may be terminated and the merger may be abandoned at any time prior to the completion of the merger, including after the required approval of the Li3 stockholders or the Bearing shareholders:

 

·

by mutual written consent of Bearing and Li3, by action of their respective boards of directors;

 

 

·

by either Li3 or Bearing if:

 

·

the merger has not been consummated on or prior to December 31, 2017, subject to an automatic 60-day extension under certain circumstances, and provided that the failure to have consummated the merger on or prior to such date, as it may be extended, is not primarily due to the failure of the party seeking to terminate to have fulfilled any of its obligations under the merger agreement in breach of the merger agreement;

 

 

·

a court of competent jurisdiction or other governmental entity issues a final and non-appealable order, or has taken any other action having the effect of permanently restraining, enjoining or otherwise prohibiting or making illegal the transactions contemplated by the merger agreement, provided that the party seeking to terminate the merger agreement for such reason must have first used its reasonable best efforts to resist, remove or resolve such restraint or prohibition as required by the merger agreement and provided further that such termination right will not be available to a party whose material breach of any provision of the merger agreement results in the imposition of such order, decree or ruling or the failure of such order, decree or ruling to be resisted, resolved or lifted;

 

 
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·

the required approval by Li3’s stockholders of the merger agreement, the merger and the other transactions contemplated by the merger agreement has not been obtained at the Li3 stockholder meeting; or

 

 

·

the approval of Bearing shareholders (if required) has not been obtained;

·

by Bearing if:

·

Li3 has breached or failed to perform in any respect any of its representations, warranties, covenants or agreements contained in the merger agreement, and such breach or failure to perform (A) is not cured by Li3 within 30 days following written notice by Bearing of such breach or failure to perform and (B) would result in a failure of any condition of Bearing or Sub to consummate the merger; provided, that such termination right will not be available if either Bearing or Sub is in material breach of any of its representations, warranties, covenants or agreements under the merger agreement that would result in the failure of any conditions to the obligations of Li3 to consummate the merger;

   

·

(A) the Li3 Board fails to include the Li3 board recommendation in this proxy statement/prospectus or the Li3 Board shall have made a change of recommendation; or (C) Li3 or the Li3 Board publicly announces its intention to do any of the foregoing;

  

·

there is a change of recommendation by the Bearing Board after complying with its obligations under the merger agreement with respect to effecting such change; or

·

all of the conditions to the obligations of Li3 to complete the merger have been satisfied or waived by Li3 and Li3 fails to complete the closing within three business days.

·

by Li3 if:

·

Bearing or Sub has breached or failed to perform in any respect any of its representations, warranties, covenants or agreements contained in the merger agreement, and such breach or failure to perform (A) is not cured by Bearing or Sub within 30 days following written notice by Li3 of such breach or failure to perform and (B) would result in a failure of any condition of Li3 to consummate the merger; provided, that such termination right will not be available if Li3 is in material breach of any of its representations, warranties, covenants or agreements under the merger agreement that would result in the failure of any conditions to the obligations of Bearing or Sub to consummate the merger;

·

(A) the Bearing Board fails to include the Bearing board recommendation in the circular to be mailed to Bearing’s shareholders in respect of the special meeting of Bearing’s shareholders to approve, among other things, the issuance of the merger consideration, or the Bearing Board shall have made a change of recommendation; (B) the Bearing Board fails to publicly reaffirm the Bearing board recommendation in the absence of a publicly announced acquisition proposal within two business days after Li3 so requests in writing; (C) Bearing enters into a written agreement with respect to an acquisition agreement; or (D) Bearing or the Bearing Board publicly announces its intention to do any of the foregoing;

·

there is a change of recommendation by the Li3 Board after complying with its obligations under the merger agreement with respect to effecting such change; or

·

all of the conditions to the obligations of Bearing and Sub to complete the merger have been satisfied or waived by Bearing or Sub and Bearing and Sub fail to complete the closing within three business days.


 
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Merger Expenses

 

Pursuant to the merger agreement, Bearing and Li3 have agreed that they will each generally bear their own expenses under the merger agreement, provided, that the termination of the merger agreement shall not relieve any party from any liability for any fraud, intentional misrepresentation or intentional and material breach of the merger agreement prior to termination. Currently, Li3 has nominal cash on hand, and Bearing is advancing funds to Li3 on an as-needed basis to satisfy Li3’s expenses incurred in relation to the merger agreement, among other expenses. If the merger agreement is terminated, any funds advanced by Bearing to Li3 will become payable on demand.

 

Governing Law

 

The merger agreement is governed by and construed in accordance with the laws of the State of Nevada, except to the extent that mandatory provisions of federal law apply or mandatory principles of law require the application of the NRS.

 

Amendment

 

The merger agreement may be amended by the parties, by action taken or authorized by their respective boards of directors, at any time before or after receipt of the required Li3 stockholder vote, but, after any such approval, no amendment may be made which by law requires further approval by such stockholders without such further approval. The merger agreement may not be amended except by an instrument in writing singed on behalf of each of the parties.

 

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

 

General

 

The following general discussion sets forth the anticipated material U.S. federal income tax consequences of the merger and the ownership and disposition of Bearing common shares to U.S. holders (as defined below) of Li3 common stock. This discussion is based on the Internal Revenue Code, referred to as the Code, applicable Treasury regulations, judicial authority, administrative rulings, and the Canada-U.S. Tax Treaty, all as of the date of this proxy statement/prospectus, and all of which are subject to change, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service, referred to as the IRS, with respect to any of the U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position.

 

This discussion 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 U.S. holder as a result of the merger or as a result of the ownership and disposition of Bearing common shares. This discussion does not take into account the individual facts and circumstances of any particular U.S. holder that may affect the U.S. federal income tax consequences to the U.S. holder, including specific tax consequences to a U.S. holder under an applicable tax treaty, and is not intended to be, and should not be construed as, legal or tax advice with respect to any U.S. holder. In addition, this discussion does not address any U.S. state or local or any non-U.S. tax considerations, any U.S. federal estate, gift, generation skipping or alternative minimum tax considerations, or any U.S. federal tax consequences other than U.S. federal income tax consequences of the merger and the ownership and disposition of Bearing common shares.


 
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This discussion assumes that the U.S. holders of Li3 common stock hold their Li3 common stock, and, after the effective time, their Bearing common shares, as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address the consequences to U.S. holders subject to special tax rules, such as:

 

 

·

banks, financial institutions, underwriters, or insurance companies;

 

·

real estate investment trusts and regulated investment companies;

 

·

tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts;

 

·

former citizens or residents of the United States;

 

·

entities or arrangements that are treated as partnerships for U.S. federal income tax purposes and investors in such partnerships;

 

·

dealers or traders in securities, commodities, or currencies;

 

·

grantor trusts;

 

·

S corporations;

 

·

U.S. holders subject to the alternative minimum tax;

 

·

U.S. holders whose “functional currency” is not the U.S. dollar;

 

 

·

U.S. holders whose shares of Li3 stock constitute “Section 306 stock” under Section 306 of the Code;

 

·

U.S. holders who received Li3 common stock, or, after the merger, Bearing common shares, through the exercise of options or otherwise as compensation or through a tax-qualified retirement plan;

 

·

U.S. holders who own (directly, indirectly, or through attribution) 5% or more by vote or value of the outstanding Li3 common stock, or, after the merger, of the outstanding Bearing common shares; or

 

·

U.S. holders holding Li3 common stock, or, after the merger, Bearing common shares, as part of a straddle, synthetic security, hedge, conversion transaction, or other integrated investment.

 

U.S. holders that are subject to special provisions under the Code, including U.S. holders described immediately above, should consult their tax advisors regarding the tax consequences of the merger and the ownership and disposition of Bearing common shares.

 

As used in this discussion, a “U.S. holder” means a beneficial owner of Li3 common stock or, after the merger, Bearing common shares who is for U.S. federal income tax purposes:

 

 

·

A citizen or resident of the United States;

 

 

·

A corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any state or political subdivision thereof;

 

 

·

A trust that (A) is subject to the primary jurisdiction of a court within the United States and the control of one or more U.S. persons with respect to all of its substantial decisions, or (B) has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person; or

 

 

·

An estate that is subject to U.S. federal income tax on its income, regardless of source.

 

If a partnership, including for this purpose any entity or arrangement that is treated as a partnership for U.S. federal income tax purposes, holds Li3 common stock or Bearing ordinary shares after the merger, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. A holder that is a partnership and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of the merger and the ownership and disposition of Bearing ordinary shares.


 
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PLEASE CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER AND THE OWNERSHIP AND DISPOSITION OF BEARING COMMON SHARES, INCLUDING, WITHOUT LIMITATION, THE APPLICABLE U.S. FEDERAL, STATE, LOCAL, AND NON-U.S. TAX CONSEQUENCES TO YOU OF THE MERGER AND THE OWNERSHIP AND DISPOSITION OF BEARING COMMON SHARES.

 

U.S. Federal Tax Status of Bearing Following the Merger

 

Generally, for U.S. federal tax purposes, a corporation is considered a tax resident in the place of its organization or incorporation. Because Bearing is a Canadian incorporated entity, it would be classified as a foreign corporation (and, therefore, a non-U.S. tax resident) under these general rules. Section 7874 of the Code, referred to as Section 7874, however, contains rules that can result in a foreign corporation being treated as a U.S. corporation for U.S. federal tax purposes. The application of these rules is complex, and there is little or no guidance on many important aspects of Section 7874.

 

Under Section 7874, a corporation created or organized outside the United States (i.e., a foreign corporation) will nevertheless be treated as a U.S. corporation for U.S. federal tax purposes (and, therefore, a U.S. tax resident) when (i) the foreign corporation directly or indirectly acquires substantially all of the assets held directly or indirectly by a U.S. corporation (including the indirect acquisition of assets by acquiring all the outstanding shares of the U.S. corporation), (ii) the shareholders of the acquired U.S. corporation hold at least 80% (by either vote or value) of the shares of the foreign acquiring corporation after the acquisition by reason of holding shares in the U.S. acquired corporation (including the receipt of the foreign corporation’s shares in exchange for the U.S. corporation’s shares), and (iii) the foreign corporation’s “expanded affiliated group” does not have substantial business activities in the foreign corporation’s country of organization or incorporation relative to the expanded affiliated group’s worldwide activities. For purposes of Section 7874, “expanded affiliated group” means the foreign corporation and all subsidiaries in which the foreign corporation, directly or indirectly, owns more than 50% of the shares by vote and value.

 

Pursuant to the merger, Bearing will indirectly acquire all of Li3’s assets through the indirect acquisition of Li3 common stock in the merger. Li3 is a U.S. corporation. As a result, for Bearing to avoid being treated as a U.S. corporation for U.S. federal tax purposes under Section 7874, either (i) the former stockholders of Li3 must own (within the meaning of Section 7874) less than 80% (by both vote and value) of Bearing common shares by reason of holding shares in Li3, which we refer to as the ownership test, or (ii) Bearing must have substantial business activities in Canada after the transactions (taking into account the activities of Bearing’s expanded affiliated group), which we refer to as the substantial business activities test.

 

Bearing may not be deemed to have substantial business activities in Canada for purposes of Section 7874. However, based on the rules for determining share ownership under Section 7874, the holders of Li3 common stock are expected to receive less than 80% (by both vote and value) of the Bearing common shares by reason of their ownership of shares of Li3 common stock. Accordingly, Bearing is expected to be treated as a foreign corporation for U.S. federal tax purposes under Section 7874, and the remainder of this discussion assumes such treatment. We cannot provide any assurance, however, that the IRS or a court will agree with the conclusion that Bearing will not be treated as a U.S. corporation for U.S. federal income tax purposes. In addition, there have been, and there are expected to be future, legislative proposals to expand the scope of U.S. corporate tax residence, and there could be prospective or retroactive changes to Section 7874 and the Treasury regulations promulgated thereunder, any of which could result in Bearing being treated as a U.S. corporation.

 

Material U.S. Federal Income Tax Consequences of the Merger to U.S. Holders

 

In General

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes. Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, tax advisor to Bearing and Li3, is expected to issue an opinion that (i) the merger should qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and (ii) the merger should not result in gain being recognized by U.S. holders under Section 367(a) of the Code upon the exchange of Li3 common stock for Bearing common shares in the merger (other than by a U.S. holder who is a “five-percent transferee shareholder” within the meaning of the rules under Treasury regulations Section 1.367(a)-3(c) and who does not file the agreement with the IRS as described in Treasury regulations Section 1.367(a)-3(c)(l)(iii)(B)). We are reasonably certain that the conclusions in this opinion are accurate, but they are not free from doubt, as there are significant factual and legal uncertainties concerning these conclusions. For example, one requirement for the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, is that the fair market value of the foreign acquiring corporation (Bearing) equals or exceeds that of the domestic target corporation (Li3) at the time of the transaction. The determination of fair market value for purposes of Section 367(a) of the Code is complex, taking into account certain special rules for measuring fair market value and, with respect to the merger, subject to factual and legal uncertainties, and therefore no assurance can be given that the IRS will not challenge the conclusions reflected in the opinions rendered by tax accountant with respect to the merger or that a court would not sustain such a challenge.  See, “Risk Factors, Risk factors Related to the Merger”. This opinion will rely on certain assumptions, including assumptions regarding the absence of changes in existing facts and law and the completion of the merger in the manner contemplated by the merger agreement, and covenants and representations made by Bearing and Li3, including those contained in representation letters of Bearing and Li3. If any of those assumptions, covenants, or representations is inaccurate, the opinions may not be relied upon, and the U.S. federal income tax consequences of the merger could differ from those discussed here. In addition, the conclusions in the opinions are not certain, and they are not binding on the IRS or any court, and none of Bearing, Li3, or Sub intends to request a ruling from the IRS regarding the U.S. federal income tax consequences of the merger. Consequently, no assurance can be given that the IRS will not challenge the conclusions reflected in the opinion or will that a court would not sustain such a challenge.

  

 
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If the merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, and Section 367(a) of the Code does not apply, then:

 

 

·

A U.S. holder of Li3 common stock will not recognize income, gain, or loss upon the U.S. holder’s receipt of Bearing common shares in exchange for the U.S. holder’s Li3 common stock in the merger;

 

 

·

The aggregate tax basis of the Bearing common shares received by a U.S. holder in the merger will be the same as the aggregate tax basis of the Li3 common stock surrendered in exchange therefor; and

 

 

·

The holding period for Bearing common shares that a U.S. holder receives in the merger will include the holding period of the Li3 common stock surrendered in exchange therefor.

 

If a U.S. holder acquired different blocks of Li3 common stock at different times and at different prices, the U.S. holder’s tax basis and holding period in the Bearing common shares received will be determined by reference to each block of Li3 common stock surrendered.

 

If the merger were to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code, then a U.S. holder of Li3 common stock would recognize taxable gain or loss on the merger equal to the difference, if any, between the fair market value of the Bearing common shares received by the U.S. holder in the merger and the U.S. holder’s tax basis in the Li3 common stock surrendered by the U.S. holder in the merger. In general, such gain or loss would be capital gain or loss and would be long-term capital gain or loss if the U.S. holder’s holding period for the U.S. holder’s Li3 common stock at the time of the exchange is greater than one year. Long-term capital gain of non-corporate stockholders is subject to reduced rates of taxation.

 

Additionally, based on the rules for determining share ownership under Section 7874, the holders of Li3 common stock are expected to receive less than 60% (by both vote and value) of the Bearing common shares by reason of their ownership of shares of Li3 common stock. Accordingly, Li3 is not expected to be subject to the “inversion gain” rules of Section 7874.

 

Taxation under Section 367(a) of the Code

 

Section 367(a) of the Code and the applicable U.S. Treasury regulations promulgated thereunder provide that when a U.S. shareholder exchanges stock in a U.S. corporation for stock in a non-U.S. corporation in a transaction that would otherwise qualify as a “reorganization” within the meaning of Section 368(a) of the Code, the U.S. shareholder is required to recognize gain, but not loss, realized on such exchange unless certain requirements are met. Subject to the discussion below, we believe that the merger should satisfy such requirements and should not result in a U.S. holder of Li3 common stock being required to recognize gain because of the application of Section 367(a) of the Code.


 
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One requirement of Section 367(a) of the Code is that the fair market value of Bearing must equal or exceed that of Li3 at the effective time, taking into account certain special rules for measuring fair market value, which we refer to as the Substantiality Test. For purposes of the Substantiality Test, certain distributions to its shareholders and stock repurchases made by Li3 in the 36 months prior to the Closing Date must be included in the fair market value of Li3. The value of certain acquired passive assets (if any) held by Bearing at the effective time potentially would be excluded from the fair market value of Bearing. Changes in the relative fair market values of Li3 and Bearing could also affect this calculation. The determination of fair market value for this purpose is complex, and may be unknown at the effective time of the registration statement. While the tax opinions referred to above will take into account this complexity in applying the legal rules, they will nevertheless be subject to these factual and legal uncertainties, and therefore no assurance can be given that the IRS will not challenge the conclusions reflected in the opinions or that a court would not sustain such a challenge. None of the parties intend to request a ruling from the IRS regarding the U.S. federal income tax consequences of the merger. Accordingly, it will not be possible to reach a definitive conclusion regarding the fair market values of Bearing and Li3 at the effective time, and no assurance can be given that the IRS will not challenge the conclusions in the opinions or that a court would not sustain such a challenge.

 

If the IRS were to determine that at the effective time the fair market value of Li3 exceeded that of Bearing or that any other requirement under Section 367(a) for the non-recognition of gain by U.S. holders was not satisfied, then a U.S. holder of Li3 common stock would recognize gain (but not loss) in an amount equal to the excess, if any, of the fair market value as of the closing date of Bearing common shares received in the merger over such holder’s tax basis in the Li3 common stock surrendered by the holder in the merger, as calculated separately for each block of Li3 common stock held by the holder. Any gain so recognized would generally be long-term capital gain if the holder has held the Li3 common stock for more than one year at the time the merger is completed, as determined separately for each block of Li3 common stock held by the holder.

 

Five Percent Transferee Shareholders

 

Even if the merger is afforded non-recognition treatment, a U.S. holder who is a five-percent transferee shareholder, as defined in the applicable Treasury regulations under Section 367(a) of the Code, with respect to Bearing after the merger will qualify for non-recognition treatment as described in this proxy statement/prospectus only if the U.S. holder files a “gain recognition agreement,” as defined in the Treasury regulations, with the IRS. Any U.S. holder of Li3 common stock who will be a five-percent transferee shareholder with respect to Bearing after the merger is urged to consult with his, her, or its tax advisor concerning the decision to file a gain recognition agreement and the procedures to be followed in connection with that filing.

 

Reporting Requirements

 

A U.S. holder who is required to file a U.S. federal income tax return and who is a “significant holder” that receives Bearing common shares in the merger will be required to attach a statement to the U.S. holder’s U.S. federal income tax return for the taxable year in which the merger is completed that contains the information set forth in Section 1.368-3(b) of the Treasury regulations. The statement attached by the U.S. holder must include the fair market value of, and the U.S. holder’s tax basis in, the Li3 common stock surrendered in the merger. A “significant holder” generally is a holder of Li3 common stock who, immediately before the merger, owned at least 5% by vote or value of the total outstanding stock of Li3.

 

Material U.S. Federal Income Tax Consequences to U.S. Holders of Owning Bearing Common Shares

 

The following discussion is subject to the rules described below under the heading “Passive Foreign Investment Company Rules.”

 

Taxation of Dividends

 

A U.S. holder that receives a distribution, including a constructive distribution, with respect to Bearing common shares will be required to include the amount of the distribution in gross income as a dividend (without reduction for any foreign income tax withheld from the distribution) to the extent of the current or accumulated “earnings and profits” of Bearing, as computed for U.S. federal income tax purposes. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of Bearing, the 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 Bearing common shares, and thereafter as a gain from the sale or exchange of the Bearing common shares (see “Sale or Other Taxable Disposition of Bearing Common Shares,” below). However, Bearing may not maintain the calculations of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. holder may have to assume that any distribution by Bearing with respect to its common stock will constitute dividend income. Dividends received on Bearing common shares by corporate U.S. holders generally will not be eligible for the “dividends received deduction.”


 
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Subject to certain significant conditions and limitations, any Canadian taxes paid on or withheld from distributions from Bearing and not refundable to a U.S. holder may be credited against the U.S. holder’s U.S. federal income tax liability or, alternatively, may be deducted from the U.S. holder’s taxable income. The election to deduct, rather than credit, foreign taxes, is made on a year-by-year basis and applies to all foreign taxes paid by a U.S. holder or withheld from a U.S. holder that year. Dividends paid on the Bearing ordinary shares generally will constitute income from sources outside the United States and be categorized as “passive category income” or, in the case of some U.S. holders, as “general category income” for U.S. foreign tax credit purpose. If the dividends are taxed as qualified dividend income (as discussed below), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be subject to certain limitations.

 

It is possible that Bearing is, or at some future time will be, at least 50% owned by U.S. persons. Dividends paid by a foreign corporation that is at least 50% owned by U.S. persons may be treated as U.S. source income (rather than foreign source passive income) for foreign tax credit purposes to the extent the foreign corporation has more than an insignificant amount of U.S. source income. The effect of this rule may be to treat a portion of any dividends paid by Bearing as U.S. source income, which may limit a U.S. holder’s ability to claim a foreign tax credit with respect to foreign taxes payable or deemed payable in respect of the dividends. The Code permits a U.S. holder entitled to benefits under the Canada-U.S. Income Tax Treaty to elect to treat any Bearing dividends as foreign source income for foreign tax credit purposes if the dividend income is separated from other income items for purposes of calculating the U.S. holder’s foreign tax credit with respect to Canadian taxes withheld, if any, on the distribution of such dividend income. The rules relating to the determination of the foreign tax credit are complex, and U.S. holders should consult their advisors regarding the availability of a foreign tax credit in their particular circumstances.

 

With respect to certain non-corporate U.S. holders, including individual U.S. holders, dividends will be taxed at the lower capital gains rates (currently, up to 20%) applicable to “qualified dividend income,” provided that (i) Bearing is neither a passive foreign investment company nor treated as such with respect to a U.S. Holder (as discussed below under “-Passive Foreign Investment Company Rules”) for its taxable year in which the dividend is paid and the preceding taxable year, and (ii) certain holding period requirements are met.

 

“Qualified dividend income” includes dividends received from “qualified foreign corporations”. Subject to certain exceptions, a qualified foreign corporation includes a foreign corporation that is eligible for benefits of a comprehensive income tax treaty with the U.S. that meets certain requirements. As IRS Notice 2011-64 lists the US-Canada Income Tax Convention as satisfying the requirements of this provision, Bearing should meet the definition of a qualified foreign corporation. You should consult your tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend income for any dividends Bearing pays with respect to the Bearing common shares.

 

Dividends may be paid in foreign currency. Generally, a U.S. holder should not recognize any foreign currency gain or loss if the foreign currency is converted into U.S. dollars on the date the payment is received. However, any gain or loss resulting from currency exchange fluctuations during the period from the date the U.S. holder includes the dividend payment in income to the date such U.S. holder actually converts the payment into U.S. dollars will be treated as ordinary income or loss. That currency exchange or loss (if any) generally will be income or loss from U.S. sources for foreign tax credit purposes.

 

The additional 3.8% Medicare surtax (described below) may apply to dividends received by certain U.S. holders who meet certain modified adjusted gross income thresholds.

 

The dividend rules are complex, and U.S. holders should consult their own tax advisor regarding the application of such rules.


 
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Sale or Other Taxable Disposition of Bearing Common Shares

 

A U.S. holder will recognize gain or loss on the sale or other taxable disposition of Bearing common shares in an amount equal to the difference, if any, between (a) the amount of cash plus the fair market value of any property received and (b) the U.S. holder’s tax basis (determined under U.S. federal income tax rules) in the Bearing common shares sold or otherwise disposed of. Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if, at the time of the sale or other disposition, the Bearing common shares has been held for more than one year. The source of any such gain or loss is generally determined by reference to the residence of the holder, such that it generally will be treated as U.S. source income for foreign tax credit limitation purposes in the case of a sale, exchange, or other taxable disposition by a U.S. holder.

 

Preferential tax rates (currently, with a maximum rate of 20%) 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.

 

The additional 3.8% Medicare surtax (described below) may apply to gains recognized upon the sale, exchange, or other taxable disposition of Bearing common shares by certain U.S. holders who meet certain modified adjusted gross income thresholds.

 

U.S. holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currency other than U.S. dollars upon the disposition of their Bearing common shares.

 

Passive Foreign Investment Company Rules

 

PFIC Status of Bearing

 

If Bearing were to constitute a “passive foreign investment company” within the meaning of Section 1297 of the Code, referred to as a PFIC, as defined below, for any year during a U.S. holder’s holding period, then potentially adverse rules may affect the U.S. federal income tax consequences to a U.S. holder from the ownership and disposition of Bearing common shares.

 

Bearing generally will be a PFIC if, for any tax year, (a) 75% or more of the gross income of Bearing is passive income, which we refer to as the income test, or (b) 50% or more of the value of Bearing’s assets either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of those assets, which we refer to as the asset test. “Passive income” generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.

 

For purposes of the PFIC income test and asset test described above, if Bearing owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, Bearing will be treated as if it (a) held a proportionate share of the assets of the other corporation and (b) received directly a proportionate share of the income of the other corporation. In addition, for purposes of the PFIC income test and asset test described above, and assuming certain other requirements are met, “passive income” does not include certain interest, dividends, rents, or royalties that are received or accrued by Bearing from certain “related persons,” to the extent those items are properly allocable to the income of the related person that is not passive income.

 

Based on current business plans and financial expectations, including those resulting from the consummation of the merger, it is expected that Bearing will not be a PFIC immediately after the closing date and for the foreseeable future. The determination of whether any corporation is, or will be, a PFIC for a tax year depends, in part, on the application of complex and fact-sensitive U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC for any tax year depends on the assets and income of the corporation over the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this summary. Accordingly, there can be no assurance that that Bearing will not be a PFIC for 2017 or any subsequent year. Each U.S. holder should consult its own tax advisors regarding the PFIC status of Bearing and any subsidiary of Bearing.


 
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In any year in which Bearing is classified as a PFIC, a U.S. holder will be required to file an annual report with the IRS containing the information required by Treasury regulations and/or other IRS guidance. In addition to penalties, a failure to satisfy these reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S. holders should consult their own tax advisors regarding the requirements of filing these information returns under these rules, including the requirement to file an IRS Form 8621.

 

Under applicable attribution rules, if Bearing is a PFIC, U.S. holders will generally be deemed to own their proportionate share of Bearing’s direct or indirect equity interest in any company that is also a PFIC, which we refer to as a Subsidiary PFIC, and will generally be subject to U.S. federal income tax on their proportionate share of (a) any “excess distributions,” as described below, on the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by Bearing or another Subsidiary PFIC, both as if the U.S. holders directly held the shares of the Subsidiary PFIC. In addition, U.S. holders may be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC or on the sale or disposition of Bearing common shares. Accordingly, U.S. holders should be aware that they could be subject to tax under the PFIC rules even if no distributions are received and no redemptions or other dispositions of Bearing common shares are made.

 

Default PFIC Rules under Section 1291 of the Code

 

If Bearing is a PFIC for any tax year during which a U.S. holder owns Bearing common shares, the U.S. federal income tax consequences to the U.S. holder of the ownership and disposition of Bearing common shares will depend on whether and when the U.S. holder makes an election to treat Bearing and each Subsidiary PFIC, if any, as a “qualified electing fund” or “QEF” under Section 1295 of the Code, which we refer to as a QEF Election, or makes a mark-to-market election under Section 1296 of the Code, which we refer to as a Mark-to-Market Election. A U.S. holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a Non-Electing U.S. Holder.

 

A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code (described below) with respect to (a) any gain recognized on the sale or other taxable disposition of Bearing common shares and (b) any “excess distribution” received on the Bearing common shares. A distribution generally will be classified as an “excess distribution” to the extent that the distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S. holder’s holding period for the Bearing common shares, if shorter).

 

Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of Bearing common shares (including an indirect disposition of the stock of any Subsidiary PFIC), and any “excess distribution” received on Bearing common shares or with respect to the stock of a Subsidiary PFIC, must be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for the respective Bearing common shares. The amount of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to years before the entity became a PFIC, if any, would be taxed as ordinary income (and not eligible for certain preferred rates). The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such year, calculated as if the tax liability had been due in each such year.

 

If Bearing is a PFIC for any tax year during which a Non-Electing U.S. Holder holds Bearing common shares, Bearing will continue to be treated as a PFIC with respect to the Non-Electing U.S. Holder, regardless of whether Bearing ceases to be a PFIC in one or more subsequent tax years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above), but not loss, as if the Bearing common shares were sold on the last day of the last tax year for which Bearing was a PFIC.

 

If a Non-Electing U.S. Holder who is an individual dies while owning Bearing common shares, the Non-Electing U.S. Holder’s successor would be ineligible to receive a step-up in tax basis of such shares.


 
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QEF Election

 

A U.S. holder that makes a timely and effective QEF Election for the first tax year in which the holding period of its Bearing common shares begins generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to its Bearing common shares. A U.S. holder that makes a timely and effective QEF Election will be subject to U.S. federal income tax on the U.S. holder’s pro rata share of (a) the net capital gain of Bearing, which will be taxed as long-term capital gain to the U.S. holder, and (b) the ordinary earnings of Bearing, which will be taxed as ordinary income to the U.S. holder. Generally, “net capital gain” is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and “ordinary earnings” are the excess of (a) “earnings and profits” over (b) net capital gain. A U.S. holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax year in which Bearing is a PFIC, regardless of whether such amounts are actually distributed to the U.S. holder by Bearing. However, for any tax year in which Bearing is a PFIC and has no net income or gain, U.S. holders that have made a QEF Election would not have any income inclusions as a result of the QEF Election. If a U.S. holder that made a QEF Election has an income inclusion, the U.S. holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge.

 

A U.S. holder that makes a timely and effective QEF Election with respect to Bearing generally (a) may receive a tax-free distribution from Bearing to the extent that the distribution represents “earnings and profits” of Bearing that were previously included in income by the U.S. holder because of the QEF Election and (b) will adjust the U.S. holder’s tax basis in the Bearing common shares to reflect the amount included in income or allowed as a tax-free distribution because of the QEF Election. In addition, a U.S. holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of Bearing common shares.

 

The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether the QEF Election is timely. A QEF Election will be treated as “timely” if the QEF Election is made for the first year in the U.S. holder’s holding period for the Bearing common shares in which Bearing was a PFIC. A U.S. holder may make a timely QEF Election by filing the appropriate QEF Election documents with a timely filed U.S. federal income tax return for such year. If a U.S. holder does not make a timely and effective QEF Election for the first year in the U.S. holder’s holding period for the Bearing common shares, the U.S. holder may still be able to make a timely and effective QEF Election in a subsequent year if the U.S. holder meets certain requirements and makes a “purging” election to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such Bearing common shares were sold for their fair market value on the day the QEF Election is effective. If a U.S. holder owns PFIC stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. holder is a direct shareholder and the Subsidiary PFIC in order for the QEF rules to apply to both PFICs.

 

A QEF Election will apply to the tax year for which the QEF Election is timely made and to all subsequent tax years, unless the QEF Election is invalidated or terminated or the IRS consents to revocation of the QEF Election. If a U.S. holder makes a QEF Election and, in a subsequent tax year, Bearing ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which Bearing is not a PFIC. Accordingly, if Bearing becomes a PFIC in another subsequent tax year, the QEF Election will be effective and the U.S. holder will be subject to the QEF rules described above during any subsequent tax year in which Bearing qualifies as a PFIC.

 

Bearing will use commercially reasonable efforts to make available to U.S. holders, upon their written request: (a) information as to its status as a PFIC and the PFIC status of any subsidiary in which Bearing owns more than 50% of such subsidiary’s total aggregate voting power, and (b) for each year in which Bearing is a PFIC, the information and documentation that a U.S. holder making a QEF Election with respect to Bearing and any more than 50% owned subsidiary which constitutes a PFIC is reasonably required to obtain for U.S. federal income tax purposes. Bearing may elect to provide such information on its website. Because Bearing may hold 50% or less of the aggregate voting power of one or more Subsidiary PFICs at any time, U.S. holders should be aware that there can be no assurance that Bearing will satisfy record keeping requirements that apply to a QEF, or that Bearing will supply U.S. holders with information that the U.S. holders are required to report under the QEF rules, in the event that a subsidiary of Bearing is a PFIC and a U.S. holder wishes to make a QEF Election with respect to any such Subsidiary PFIC. With respect to Subsidiary PFICs for which Bearing does not obtain the required information, U.S. holders will continue to be subject to the rules discussed above that apply to Non-Electing U.S. Holders with respect to the taxation of gains and excess distributions.


 
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U.S. holders should consult their own tax advisors regarding the availability of, and procedure for making, a QEF Election with respect to Bearing and any Subsidiary PFIC.

 

A U.S. holder makes a QEF Election by attaching a completed IRS Form 8621, including a PFIC Annual Information Statement, to a timely filed U.S. federal income tax return. However, if Bearing does not provide the required information with regard to Bearing or any of its Subsidiary PFICs, U.S. holders will not be able to make a QEF Election for the entity and will continue to be subject to the rules discussed above that apply to Non-Electing U.S. Holders with respect to the taxation of gains and excess distributions.

 

Mark-to-Market Election

 

A U.S. holder may make a Mark-to-Market Election only if the Bearing common shares are marketable stock. The Bearing common shares generally will be “marketable stock” if the Bearing common shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) the foreign exchange has trading volume, listing, financial disclosure, and surveillance requirements, and meets other requirements and the laws of the country in which the foreign exchange is located, together with the rules of the foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of the foreign exchange effectively promote active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, the stock generally will be “regularly traded” for any calendar year during which the stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Bearing common shares are expected to constitute “marketable stock” as long as they remain listed on the TSX Venture Exchange and are regularly traded.

 

A U.S. holder that makes a Mark-to-Market Election with respect to its Bearing common shares generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to such Bearing common shares. However, if a U.S. holder does not make a Mark-to-Market Election beginning in the first tax year of the U.S. holder’s holding period for the Bearing common shares for which Bearing is a PFIC or the U.S. holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, the Bearing common shares.

 

A U.S. holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which Bearing is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the Bearing common shares, as of the close of such tax year over (b) the U.S. holder’s adjusted tax basis in the Bearing common shares. A U.S. holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (a) the U.S. holder’s adjusted tax basis in the Bearing common shares, over (b) the fair market value of the Bearing common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).

 

A U.S. holder that makes a Mark-to-Market Election generally also will adjust the U.S. holder’s tax basis in the Bearing common shares to reflect the amount included in gross income or allowed as a deduction because of the Mark-to-Market Election. In addition, upon a sale or other taxable disposition of Bearing common shares, a U.S. holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years). Losses that exceed this limitation are subject to the rules generally applicable to losses provided in the Code and Treasury regulations.

 

A U.S. holder makes a Mark-to-Market Election by attaching a completed IRS Form 8621 to a timely filed United States federal income tax return. A Mark-to-Market Election applies to the tax year in which the Mark-to-Market Election is made and to each subsequent tax year, unless the Bearing common shares cease to be “marketable stock” or the IRS consents to revocation of the election. Each U.S. holder should consult its own tax advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.


 
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Although a U.S. holder may be eligible to make a Mark-to-Market Election with respect to the Bearing common shares, no such election may be made with respect to the stock of any Subsidiary PFIC that a U.S. holder is treated as owning, because that stock is not marketable. Hence, the Mark-to-Market Election will not be effective to avoid the application of the default rules of Section 1291 of the Code described above with respect to deemed dispositions of Subsidiary PFIC stock or excess distributions from a Subsidiary PFIC.

 

Other PFIC Rules

 

Under Section 1291(f) of the Code, the IRS has issued proposed Treasury regulations that, subject to certain exceptions, would cause a U.S. holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of Bearing common shares that would otherwise not be subject to U.S. federal income tax (e.g., gifts and exchanges pursuant to corporate reorganizations). However, the specific U.S. federal income tax consequences to a U.S. holder may vary based on the manner in which Bearing common shares are transferred.

 

Certain additional adverse rules may apply with respect to a U.S. holder if Bearing is a PFIC, regardless of whether the U.S. holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. holder that uses Bearing common shares as security for a loan will, except as may be provided in Treasury regulations, be treated as having made a taxable disposition of the Bearing common shares.

 

Special rules also apply to the amount of foreign tax credit that a U.S. holder may claim on a distribution from a PFIC. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. holder should consult with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC. In addition, special rules apply with respect to PFICs under the 3.8% Medicare surtax.

 

The PFIC rules are complex, and U.S. holders should consult their own tax advisors regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the ownership and disposition of Bearing common shares.

 

Medicare Surtax

 

Individuals, estates. and certain trusts whose income exceeds certain thresholds will be required to pay a 3.8% Medicare surtax on “net investment income” including, among other things, dividends and net gain from disposition of property (other than property held in certain trades or businesses). U.S. holders should consult with their own tax advisors regarding the effect, if any, of this tax on their disposition of Li3 common stock in the merger and their ownership and disposition of Bearing common shares.

 

Information Reporting and Backup Withholding Tax

 

In general, information reporting requirements will apply to dividends received by U.S. holders of Bearing common shares and the proceeds received on the disposition of Bearing common shares effected within the United States (and, in certain cases, outside the United States), in each case, other than U.S. holders that are exempt recipients (such as corporations). Backup withholding (currently at a rate of 28%) may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification number (generally on an IRS Form W-9 provided to the paying agent or the U.S. holder’s broker) or is otherwise subject to backup withholding. Backup withholding is not an additional U.S. federal tax. Any amounts withheld under the backup withholding tax rules generally will be allowed as a refund or credit against a U.S. holder’s U.S. federal income tax liability, if any, provided the U.S. holder furnishes required information to the IRS in a timely manner.


 
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Under U.S. federal income tax law, certain categories of U.S. holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. holders that hold certain specified foreign financial assets in excess of certain thresholds. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person, and any interest in a foreign entity. U.S. holders may be subject to these reporting requirements unless their shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. holders should consult with their own tax advisors regarding the requirements of filing information returns, including, without limitation, the requirement to file an IRS Form 8938.

 

MATERIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

 

The following is a summary of the principal Canadian federal income tax considerations relating to the merger and the receipt and ownership of Bearing common shares, generally applicable to Li3 stockholders.

 

This summary is restricted to Li3 stockholders each of whom, at all relevant times for the purposes of the Income Tax Act (Canada), referred to as the Tax Act,

 

 

·

deals at arm’s length with Li3 and Bearing;

 

·

is not affiliated with Li3 or Bearing;

 

·

holds Li3 common stock, and will hold all Bearing common shares acquired pursuant to the merger, as capital property;

 

and is not at any relevant time for those purposes:

 

 

·

a “financial institution” for the purposes of the “mark-to-market” property rules contained in the Tax Act,

 

·

a “specified financial institution” as defined in the Tax Act,

 

·

an entity or partnership an interest in which is a “tax shelter” or “tax shelter investment” as defined in the Tax Act,

 

·

a taxpayer who reports its “Canadian tax results” (within the meaning of section 261 of the Tax Act) in a currency other than Canadian currency, or

 

·

a taxpayer that has or will enter into a “derivative forward agreement” as defined in the Tax Act with respect to the Bearing common shares,

 

(each such stockholder referred to as a Holder). All other Li3 stockholders should consult their own tax advisers with respect to the Canadian federal income tax consequences of the merger applicable to them.

 

A Holder’s Li3 common stock or Bearing common shares, as applicable, will generally be considered to be capital property of the Holder unless the Holder holds them in the course of carrying on a business of buying and selling securities, or acquired them in one or more transactions considered to be an adventure or concern in the nature of trade. A Holder who is resident in Canada and whose Bearing common shares might not otherwise be capital property may, subject to certain restrictions and limitations in the Tax Act, be entitled to elect irrevocably pursuant to subsection 39(4) of the Tax Act that the Holder’s Bearing common shares, and every other “Canadian security” (as defined in the Tax Act) of the Holder, be capital property. Any Holder who is considering making a subsection 39(4) election should consult the Holder’s Canadian tax advisers before making the election. A subsection 39(4) election will not apply to, or to a disposition of, a Holder’s Li3 common stock.


 
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This summary is based on the current provisions of the Tax Act and regulations thereunder, all specific proposals to amend the Tax Act and regulations publicly announced by or on behalf of the Minister of Finance (Canada) to the date hereof, referred to as the Proposed Amendments, and the current administrative practices and assessing policies of the Canada Revenue Agency, referred to as the CRA, published to the date hereof. It is assumed that the Proposed Amendments will be enacted as currently proposed and that there will be no other change to the Tax Act, the regulations thereunder, or any administrative practice or assessing policy, although no assurance can be given in these respects. Except for the Proposed Amendments, this summary does not take into account or anticipate any change in law, whether by legislative, governmental, regulatory, or judicial action or decision, or change in the administrative practices or assessing policies of the CRA, and does not take into account any provincial, territorial, or foreign income tax considerations, which may differ from the Canadian federal income tax considerations discussed below.

 

This summary does not address the Canadian federal income tax consequences of the merger applicable to the exchange of Li3 options for Bearing options or Li3 warrants for Bearing warrants pursuant to the merger. Holders of Li3 options or Li3 warrants should consult their own tax advisers.

 

Subject to certain exceptions that are not discussed in this summary all amounts relevant to computing a taxpayer’s liability for tax (including dividends, adjusted cost base, and proceeds of disposition) under the Tax Act, must, for the purposes of the Tax Act, be determined in Canadian dollars based on the daily noon rate as quoted by the Bank of Canada for the applicable day or such other rate of exchange that is acceptable to the CRA.

 

THIS SUMMARY IS OF A GENERAL NATURE, DOES NOT ADDRESS ALL CANADIAN FEDERAL INCOME TAX CONSIDERATIONS, AND IS NOT, AND IS NOT INTENDED TO BE AND SHOULD NOT BE CONSTRUED AS, LEGAL OR TAX ADVICE TO ANY PARTICULAR Li3 STOCKHOLDER. EACH Li3 STOCKHOLDER SHOULD CONSULT HIS, HER OR ITS OWN LEGAL AND TAX ADVISERS WITH RESPECT TO LEGAL AND TAX CONSEQUENCES OF THE MERGER AGREEMENT APPLICABLE TO HIS, HER OR ITS PARTICULAR CIRCUMSTANCES.

 

Holders Resident in Canada

 

The following portion of the summary applies solely to Holders each of whom is or is deemed to be resident solely in Canada at all relevant times for the purposes of the Tax Act, each referred to as a Canadian Holder.

 

Disposition of Li3 common stock and receipt of Bearing common shares pursuant to the merger

 

A Canadian Holder who disposes of his, her or its Li3 common stock and receives Bearing common shares pursuant to the merger agreement, will generally realize a capital gain (or capital loss) equal to the amount by which the fair market value of the Li3 common stock, determined at the time of the merger exceeds (or is exceeded by) the adjusted cost base, or ACB, of the Canadian Holder’s Li3 common stock determined immediately before the merger and reasonable costs of disposition. Any such capital gain or capital loss will generally be subject to tax or deductible as described below. See “Material Canadian Federal Income Tax Consequences of the Merger - Holders Resident in Canada - Taxation of Capital Gains and Capital Losses”.

 

The Canadian Holder will acquire the Bearing common shares at a cost equal to the fair market value of those shares at the time of the merger and receipt of those Bearing common shares, which cost will be averaged with the ACB of all other Bearing common shares held by the Canadian Holder immediately before the merger and the receipt of Bearing common shares pursuant to the merger (if any) to determine the ACB of all of the Canadian Holder’s Bearing common shares owned immediately after the merger.

 

A Canadian Holder will not be eligible to wholly or partly defer recognition of any capital gain that might otherwise arise as a result of the merger and the receipt of the Bearing common shares.


 
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Dividends on Bearing common shares

 

A Canadian Holder who is an individual and receives a dividend on his or her Bearing common shares in a taxation year generally will be required to include the amount of the dividend in income for the taxation year, 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 dividend that Bearing designates as an “eligible dividend” in accordance with the Tax Act.

 

A Canadian Holder that is a corporation and receives or is deemed to receive a dividend on its Bearing common shares in a taxation year generally will be required to include the amount of the dividend in income for the taxation year, and is entitled to deduct an equivalent amount in computing its taxable income. In certain circumstances, subsection 55(2) of the Tax Act will treat a taxable dividend received by a Canadian Holder that is a corporation as proceeds of disposition rather than a taxable dividend. Canadian Holders that are corporations should consult their own tax advisers in this regard.

 

A Canadian Holder that is a “private corporation” or “subject corporation” (as those terms are defined in the Tax Act), may be subject to refundable tax under Part IV of the Tax Act equal to 38⅓% of the amount of the dividend to the extent that the dividend is deductible in computing the corporation’s taxable income. This refundable tax generally will be refunded to the corporate Canadian Holder at the rate of C$1.15 for each C$3.00 of taxable dividends that it pays while it is a private corporation.

 

Disposition of Bearing common shares

 

A Canadian Holder that disposes or is deemed to dispose of a Bearing common share in a taxation year will generally realize a capital gain (or capital loss) equal to the amount by which the proceeds of disposition for the Bearing common share exceeds (or is exceeded by) the Holder’s ACB of the share determined immediately before the disposition and reasonable costs of disposition. Any such capital gain or capital loss will generally be subject to tax or deductible as described below: see “Material Canadian Federal Income Tax Consequences of the Merger - Holders Resident in Canada - Taxation of Capital Gains and Capital Losses”.

 

Taxation of Capital Gains and Capital Losses

 

A Canadian Holder who disposes or is deemed to dispose of one or more shares of Li3 common stock or Bearing common shares in a taxation year, whether pursuant to the merger or otherwise, will generally be required to include one half of any resulting capital gain (a taxable capital gain) in income for the taxation year, and be entitled to deduct one half of any resulting capital loss (an allowable capital loss) from taxable capital gains realized by the Canadian Holder in the taxation year or, to the extent not so deductible, in any of the three preceding taxation years or any subsequent taxation year, subject to the detailed rules regarding the deductibility of allowable capital losses in the Tax Act.

 

A capital loss realized on the disposition of Li3 common stock or Bearing common shares by a Canadian Holder that is a corporation may, to the extent and under the circumstances set forth in the Tax Act, be reduced by the amount of dividends (if any) that the corporation received or is deemed to have received on the Li3 common stock or Bearing common shares, as applicable (or on another share for which the Li3 common stock or Bearing common shares was substituted or exchanged). Similar rules may apply to Li3 common stock or Bearing common shares owned by a partnership or trust of which a corporation, trust or partnership is a member or beneficiary. Canadian Holders to whom these rules may apply should consult their own advisers.

 

Additional Refundable Tax on Canadian-Controlled Private Corporations

 

A Canadian Holder that is a “Canadian-controlled private corporation” (as defined in the Tax Act) may be subject to an additional 10 2 / 3 % refundable tax on certain investment income including taxable capital gains, and dividends or deemed dividends that are not deductible in computing taxable income. This refundable tax generally will be refunded to a corporate Canadian Holder at the rate of C$1.15 for each C$3.00 of taxable dividends that it pays while it is a private corporation.

 

Minimum Tax

 

A Canadian Holder who is an individual (including certain trusts) and realizes a capital gain or receives a dividend may thereby be subject to minimum tax under the Tax Act.


 
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Holders Not Resident in Canada

 

The following portion of the summary applies solely to certain Holders, referred to as Non-Canadian Holders, each of whom, at all relevant times for the purposes of the Tax Act:

 

 

·

is not, and is not deemed to be, resident in Canada,

 

·

does not use or hold, and is not deemed to use or hold, Li3 common stock or Bearing common shares in connection with carrying on a business in Canada, and

 

·

is not an insurer that carries on business in Canada and elsewhere.

 

Disposition of Li3 common stock under the Merger and Subsequent Dispositions of Bearing common shares

 

A Non-Canadian Holder will not be subject to tax under the Tax Act on any capital gain that it realizes on a disposition of Li3 common stock pursuant to the merger, or on a subsequent disposition of Bearing common shares acquired on the merger, unless the relevant share:

 

 

·

is “taxable Canadian property”, and

 

·

is not “treaty-protected property”

 

(as those terms are defined in the Tax Act) of the Non-Canadian Holder, at the time of the disposition.

 

Generally, a Non-Canadian Holder’s Li3 common stock or Bearing common share, as applicable, should not be taxable Canadian property to the Non-Canadian Holder at the time of disposition if at that time it is listed on a designated stock exchange (which currently includes the TSXV) unless, at or at any time in the 60 months preceding, the time of disposition:

 

 

·

the Non-Canadian Holder, one or more persons with whom the Non-Canadian Holder with whom the Non-Canadian Holder did not deal at arm’s length for the purposes of the Tax Act, or one or more partnerships in which the Non-Canadian Holder or persons with whom the Non-Canadian Holder did not deal at arm’s length holds a membership interest (either directly or indirectly through one or more partnerships), alone or in any combination, owned 25% or more of the issued shares of any class or series of Li3 or Bearing, as applicable, and

 

·

the share derived more than 50% of its fair market value directly or indirectly from, or any combination of, real or immovable property situated in Canada, “Canadian resource properties”, “timber resource properties” (as those terms are defined in the Tax Act), or options in respect of, interests in, or for civil law rights in, any such property, whether or not the property exists,

 

or the relevant share was otherwise deemed by a provision of the Tax Act to be taxable Canadian property at the time of disposition.

 

Generally, a Non-Canadian Holder’s Li3 common stock or Bearing common shares will be treaty-protected property at the time of disposition if, at that time, the terms of a tax treaty between Canada and another country would exempt the Non-Canadian Holder from tax under Part I of the Tax Act on any income or gain from the disposition of the relevant share.

 

Non-Canadian Holders should consult their own tax advisers regarding whether their Li3 common stock or Bearing common shares are taxable Canadian property or treaty-protected property.

 

A Non-Canadian Holder who disposes or is deemed to dispose of a share of Li3 common stock or a Bearing common share in a taxation year at a time when the share is taxable Canadian property and is not treaty-protected property generally will be required to file a Canadian tax return and include one half of any resulting taxable capital gain in the Non-Canadian Holder’s taxable income earned in Canada for the taxation year, and entitled to deduct one half of any resulting allowable capital loss from taxable capital gains included in the Non-Canadian Holder’s taxable income earned in Canada for the year or, to the extent not so deductible, in any of the three preceding taxation years or any subsequent taxation year, subject to the detailed rules regarding the deductibility of allowable capital losses in the Tax Act.

 

Dividends on Bearing common shares

 

A Non-Canadian Holder to whom a dividend is or is deemed to be paid or credited on the Non-Canadian Holder’s Bearing common shares generally will be subject to Canadian withholding tax equal to 25% of the gross amount of the dividend, or such lower rate as may be provided by an applicable income tax treaty between Canada and another country. The rate of withholding tax under the Canada-U.S. Income Tax Convention (1980), referred to as the U.S. Treaty, applicable to a dividend paid or credited to a Non-Canadian Holder who beneficially owns the dividend and is a resident of the United States under the U.S. Treaty, and entitled to its benefits, generally is 15% (5% if the beneficial owner is a company that is a resident of the United States under the U.S. Treaty, and entitled to its benefits, which owns at least 10 per cent of Bearing’s voting stock).


 
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BEARING MANAGEMENT FOLLOWING THE MERGER

 

The following table sets forth the names and ages of the directors and executive officers of Bearing following the merger. The officers are appointed by, and serve at the pleasure of, the Bearing Board.