2022 01G 0709

IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR

IN BANKRUPTCY AND INSOLVENCY

IN THE MATTER OF the Companies

Creditors Arrangement Act R.S.C., 1985 c. C-
36 as Amended (the “CCAA”)

AND IN THE MATTER OF an application of

Grant Thornton Limited, as Court- Appointed
Monitor of Canada Fluorspar (NL) Inc.,
Canada Fluorspar Inc., and Newspar
(collectively, “CFI” or the “Company”); and

AND IN THE MATTER OF a Plan of

Compromise or Arrangement of the
Company;

SIXTH REPORT OF GRANT THORNTON LIMITED,

IN ITS CAPACITY AS MONITOR
UNDER THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, C. C-36
OF CANADA FLUORSPAR (NL) INC. AND CANADA FLUORSPAR INC. AND NEWSPAR.

October 27, 2022

Grant Thornton Limited,

Court Appointed Monitor

Suite 300 - 15 International Place

St. John’s, NL A1A 0L4
 TABLE OF CONTENTS

INTRODUCTION ............................................................................................................................... 2
PURPOSE OF THE REPORT ............................................................................................................... 6
TERMS OF REFERENCE .................................................................................................................... 6
BACKGROUND ................................................................................................................................. 7
NOTICES AND STATUTORY REPORTING ........................................................................................ 10
MATERIAL ADVERSE CHANGE ....................................................................................................... 10
CASH FLOW UPDATE AND REVISED FORECAST ............................................................................ 10
GENERAL COMMENTS ON THE CASHFLOW.................................................................................. 12

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INTRODUCTION

1. On February 21, 2022, upon the application of PricewaterhouseCoopers Inc., in its

capacity as court-appointed receiver and manager of Bridging Finance Inc. and Bridging
Income Fund LP (collectively referred to as “Bridging”), Grant Thornton Limited (“GTL”)
was appointed as Interim Receiver (the “Interim Receiver”) of all the current and future
assets, undertakings and properties (the “Property”) of Canada Fluorspar (NL) Inc. and
Canada Fluorspar Inc. by Order of the Supreme Court of Newfoundland and Labrador (the
“Court”).

2. The Interim Receivership Order authorized the Interim Receiver, among other things, to:

(a) receive, preserve, protect and maintain control over the Property;

(b) to retain or hire any employees on behalf of the Company;

(c) to report to, meet with and discuss with such Affected Persons (as defined in the
Interim Receivership Order) as the Interim Receiver deems appropriate;

(d) to utilize monies on hand or borrowed by the Interim Receiver to fund payments of
employee payroll obligations, rent, insurance, utilities, and other obligations
determined by the Interim Receiver to be integral to the preservation of the Property;

(e) to commence proceedings for the Company pursuant to the Bankruptcy and
Insolvency Act (“BIA”) or the Companies’ Creditors Arrangement Act (“CCAA”); and

(f) to report to the Court and the creditors of CFI regarding the status of the business and
financial affairs of CFI, including its assets, liabilities, accounts payable and other
matters deemed relevant by the Interim Receiver.

3. On March 8, 2022, the Interim Receiver made application to commence proceedings

pursuant to the CCAA and the Court issued an Initial Order on March 11, 2022. Grant
Thornton Limited was appointed Monitor (“Monitor”).

4. The Initial Order imposed a stay of proceeding against Canada Fluorspar (NL) Inc.,
Canada Fluorspar Inc., and Newspar (a General Partnership) (collectively referred to as
the “Company” or “CFI”).

5. The Initial Order granted an initial stay of proceedings and authorized the Monitor, among
other things, to:

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 (a) Preserve and protect the Business and Property of CFI excluding certain property in
favour of HSBC Bank of Canada (“HSBC”);

(b) Providing the Monitor with certain enhanced powers;

(c) Approving the debtor in possession financing to allow CFI to continue to operate in the
ordinary course pending the comeback hearing; and

(d) Setting down the comeback hearing for March 18, 2022 at 10am NL Time.

6. On March 18, 2022 (Court order is dated March 21, 2021), the Court issued an Amended
and Restated Initial Order (“ARIO”) which affirmed the terms of the Initial Order and
authorized the Monitor, among other things:

(a) Authority to file, if deemed appropriate, a plan of compromise and arrangement on

behalf of the Company;

(b) Authority to implement operational changes and pursue restructuring opportunities on

behalf the Company;

(c) Authority under s. 32 of the CCAA to disclaim or rescind agreements for real property;

(d) Granted an extension of the stay of proceedings to July 10, 2022;

(e) Empowered to run a Sales and Investment Solicitation Process (“SISP”), with the
terms being outlined in the SISP Process on behalf of the Company and approved by
the Court via a SISP Order;

(f) Provided enhanced powers within the CCAA due to the directors of the Company
resigning and there being no officers;

(g) Authorized an increase to the DIP Financing Agreement to borrow on behalf of the
Company in accordance with the DIP Financing Agreement.

7. On June 10, 2022, the Monitor made application to the Court to extend the stay of
proceedings and extend the SISP process. The Court issued an Order regarding the SISP,
an extension of the stay of proceedings and authorized the Monitor, among other things:

(a) Approved of the Monitor’s activities to the date of the Third Report of the Monitor of
May 30, 2022;

(b) Granted an extension of the stay of proceedings to September 2, 2022;

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 (c) Granted and declared that pursuant to section 5(5) of the Wage Earners Protection
Act (“WEPPA”) the Company’s former employees meet the criteria prescribed by
section 3.2 of the Wage Earner Protection Program Regulations, SOR/2008-222 and
are individuals to whom the WEPPA applies as of March 18, 2022;

(d) Granted approval of amendments to the SISP Order; and

(e) Granted approval of amendments to the ARIO Order.

8. On August 24, 2022, the Monitor made application to the Court for, amongst other things,
an extension of the stay of proceedings and to extend the SISP process. The purpose of
the second extension was to provide additional time for the Monitor to finalize the Definitive
Agreements as required by the SISP Order. The Court issued an Order that, among other
things:

(a) Approved the Monitor’s activities to the date of the Fourth Report of the Monitor of
August 24, 2022;

(b) Granted approval of amendments to the SISP Order;

(c) Granted approval of amendments to the ARIO Order; and,

(d) Granted an extension of the stay of proceedings to October 17, 2022;

9. On October 12, 2022, the Monitor made application to the Court for, amongst other things,
an extension to the stay of proceedings. The purpose of the third extension was to provide
additional time for the DIP Lenders to re-evaluate and determine next steps. The Court
issued an Order that, among other things:

(a) Approved the Monitor’s activities to the date of the Fifth Report of the Monitor of
October 6, 2022;

(b) Granted approval of amendments to the ARIO Order; and

(c) Granted an extension of the stay of proceedings to February 26, 2022.

10. The preceding reports of Grant Thornton Limited as Interim Receiver and Monitor, and all
other information in respect of the interim receivership, and all other information in respect
to the CCAA proceeding, are posted on the Interim Receiver’s and Monitor’s website at
www.GrantThornton.ca/CFI. Readers are encouraged to read the following reports of
Grant Thornton Limited, the materials filed with the court in relation to the applications,
and the orders of the Court to provide additional information:

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 Reports to the Court

a) First Report of Grant Thornton Limited in its capacity as Interim

Receiver and Proposed Monitor dated March 8, 2022

b) Second Report of Grant Thornton Limited in its capacity as Monitor

dated March 15, 2022

c) Third Report of Grant Thornton Limited in its capacity as Monitor dated

May 30, 2022

d) Fourth Report of Grant Thornton Limited in its capacity as Monitor dated

August 24, 2022

e) Fifth Report of Grant Thornton Limited in its capacity as Monitor dated

October 6, 2022

f) First Confidential Report of Grant Thornton Limited in its capacity as

Monitor dated October 5, 2022

Court Orders

a) Interim Receivership Order dated February 21, 2022, including reasons

for judgement

b) CCAA Initial Order dated March 11, 2022, including reasons for
judgement

c) ARIO dated March 21, 2022, including reasons for judgement

d) Order approving the SISP dated March 21, 2022

e) Order approving the Revised SISP, Amended and Restated Initial

Order – Amendment #1, and WEPP eligibility dated June 10, 2022

f) Order approving the Amended and Restated Initial Order – Amendment

#2 dated August 30, 2022

g) Order approving the Amended and Restated Initial Order – Amendment

#3 dated October 12, 2022 and Order dated October 12, 2022 sealing
the Monitor’s First Confidential Report

11. On March 25, 2022, on application by HSBC Bank Canada, the Court appointed Deloitte
Restructuring Inc. (“Deloitte”) as receiver over the accounts receivable of the Company.

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 Stakeholders wishing additional information on that proceeding are encouraged to contact
Deloitte.

12. This is the Sixth Report of the Monitor.

PURPOSE OF THE REPORT

13. The purpose of this report (the “Sixth Report”) is to inform the Court of the following:

(a) That a Material Adverse Change in the CCAA proceeding has occurred and the details
thereon;

(b) That the Monitor has advised the stakeholders that the Monitor has sought an
extension to the stay of proceedings to allow the Monitor, the Company and the DIP
Lenders time to re-evaluate the situation and determine next steps. That extension
was supported by the DIP Lenders, who are the senior secured creditors; and

(c) That the Monitor advised the stakeholders that the Court granted the extension of the
stay of proceedings to February 26, 2023 to allow the DIP Lenders time to evaluate
the situation and determine next steps.

TERMS OF REFERENCE

14. In preparing this Sixth Report, the Monitor has relied upon unaudited financial information,
certain Company’s records, financial information and projections, and discussions with the
Management of the Company, and its legal advisors. While the Monitor reviewed various
documents provided by the Company and its legal advisors (including, among other
things, unaudited internal financial statements and financial projections) and believes that
the information therein provides a fair summary of the transactions as reflected in the
documents, such work does not constitute an audit or verification of such information for
accuracy, completeness or compliance with Generally Accepted Accounting Principles
(“GAAP”) or International Financial Reporting Standards (“IFRS”). Accordingly, the
Monitor expresses no opinion or other form of assurance pursuant to GAAP or IFRS with
respect to such information.

15. Some of the information used in preparing this Sixth Report consists of financial
projections, including the Cash Flow Forecast. The Monitor cautions that these forecasts
are based upon assumptions about future events and conditions that are not

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 ascertainable. The Company’s actual results may vary from the Cash Flow Forecast, even
if the Hypothetical and Probable Assumptions (defined herein) contained therein
materialize, and the variations could be significant. The Monitor’s review of the future
oriented information used to prepare this Sixth Report did not constitute an audit of such
information under Generally Accepted Auditing Standards, GAAP or IFRS.

16. In the course of its mandate, the Monitor has assumed the integrity and truthfulness of the
information and explanations presented to it by the Company, its Management and other
stakeholders, within the context in which such information was presented. To date,
nothing has come to the Monitor’s attention that would cause it to question the
reasonableness of these assumptions, or accuracy of the information. The Monitor has
requested that Management bring to its attention any significant matters which were not
addressed in the course of the Monitor’s specific inquiries. Accordingly, this Sixth Report
is based solely on the information (financial or otherwise) made available to the Monitor
by the Company and its Management.

17. This Sixth Report has been prepared for the use of this Court and the Company’s
stakeholders as general information relating to the Company and to assist the Court in
supervising the administration of the estate. Accordingly, the reader is cautioned that this
Report may not be appropriate for any other purpose. The Monitor will not assume
responsibility or liability for losses incurred by the reader as a result of the circulation,
publication, reproduction or use of this Sixth Report contrary to the provisions of this
paragraph.

18. All references to dollars are in Canadian currency unless otherwise noted.

BACKGROUND

19. On July 22, 2022 the Successful Bidder submitted a binding offer to the Monitor pursuant
to the SISP. The Successful Bidder submitted a deposit of $750,000 with this binding offer.

20. On August 14, 2022 the Successful Bidder submitted a further improved offer to the
Monitor pursuant to the SISP (the “Improved Offer”).

21. After discussion between the Company, the Monitor, and on consultation with the DIP
Lenders, the Monitor accepted the Improved Offer.

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22. The Successful Bidder had agreed to, and was required, pursuant to the SISP [paragraph
22(i)], to top up the deposit paid by the Successful Bidder in an amount of $1,400,000 to
make the deposit total $2,150,000.

23. On August 29, 2022 the Monitor confirmed the Improved Offer required an increase in the
deposit with the Successful Bidder in writing.

24. On September 15, 2022 the Successful Bidder was to provide the Monitor an update on
the status of the deposit and confirm it was aware of the Monitor’s deadlines. On
September 16, 2022 the Successful Bidder acknowledged with the Monitor the deposit top
up amount and requested confirmation of wire instructions.

25. On September 20, 2022 the Monitor advised the Successful Bidder that it did not believe
the Successful Bidder could finalize the Definitive Agreements in time to have the
Proposed Transaction approved by the Court at a hearing scheduled for September 27,
2022, and that it was NOT changing the Closing Date or Outside Date as defined in the
SISP. The Monitor requested that the deposit top up be paid by September 21, 2022. The
Monitor also warned the Successful Bidder that any delays would put the closing dates at
risk. The deposit top up was not received as requested.

26. On September 29, 2022 the form of Warrants Agreement, a condition of closing under the
Subscription Agreement, and the Subscription Agreement were finalized.

27. On September 29, 2022 the Successful Bidder requested confirmation of wire details for
the deposit top up of $1,400,000 as required pursuant to the Subscription Agreement and
SISP.

28. On September 30, 2022 the Monitor advised the Successful Bidder that the only available
court date to approve the Proposed Transaction was October 12, 2022. The Monitor again
indicated that the deposit top up was required in advance of the hearing.

29. On October 5, 2022 the Monitor advised the Successful Bidder that it would file materials
seeking court approval of the Proposed Transaction relying on the representations made
by the Successful Bidder that it would send the deposit on October 7, 2022. This was
confirmed by the Successful Bidder, at which time it was confirmed that the top up of the
deposit maybe available sooner. The Successful Bidder did not provide the top up of the
deposit and therefore did not achieve this milestone as outlined in the Subscription
Agreement and the SISP.

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30. After multiple missed deadlines, the Successful Bidder had still not paid the top up deposit
as required before the October 12, 2022 hearing date. On consultation with the DIP
Lenders the Monitor adjourned the October 12, 2022 sale approval hearing sine die
(without day).

31. The Monitor does not support the Proposed Transaction without payment of the top up of
the deposit.

32. The DIP Lenders do not support the Proposed Transaction without the payment of the
deposit top up.

33. As a result, the Monitor sought an extension to the stay of proceedings until February 26,
2023. This period will allow the DIP Lenders time to re-evaluate the situation and
determine a revised path forward. The Court approved this application and granted the
order.

34. It is the Monitor’s opinion that no creditors would be prejudiced by extending the stay of
proceedings.

35. The Monitor is supportive of extending the stay of proceeding to allow stakeholders to re-
evaluate the situation.

36. The adjournment of the approval of the Proposed Transaction means that the Proposed
Transaction will not close within the timelines outlined in the SISP.

37. Successful Bidder has not complied with the terms of the SISP. This failure to pay the top
up of the deposit casts significant doubt on the Successful Bidders ability to close the
Proposed Transaction.

38. The DIP Lenders supported the Monitor’s application for an extension to the stay of
proceeding to give the Monitor, Company, and the DIP Lender’s time to re-evaluate their
options. Those options could include re-running the SISP, running a different kind of sales
process, closing the Proposed Transaction with the Successful Bidder, or a liquidation.

39. In order to reduce the holding costs for the mine, the Monitor has determined that it is
necessary to move the mine into a cold idle mode.

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NOTICES AND STATUTORY REPORTING

40. The Monitor has reported to the Court in the Second Report on the CCAA statutory
notices. The Monitor continues to update the estate’s website at
www.GrantThornton.ca/CFI providing estate stakeholders updates when available.

MATERIAL ADVERSE CHANGE

41. The Monitor is of the opinion that the failure of the Successful Bidder to pay the top up of
the deposit and close the Proposed Transaction in accordance with the SISP, is a Material
Adverse Change pursuant to s.23(1)(d) of the CCAA, and the DIP Financing Agreement.

42. The Monitor continues to be of the opinion that s.23(1)(h) of the CCAA does NOT apply
and it would be more beneficial to the Company’s creditors to continue with the SISP within
the CCAA proceeding.

CASH FLOW UPDATE AND REVISED FORECAST

43. The Monitor has prepared an analysis of budget to actual as of September 18, 2022 which
is attached in the Monitor’s Fifth Report.

44. The Monitor has prepared a revised cash flow forecast, attached to the October 11, 2022
affidavit of Phil Clarke, CPA, CA, CIRP (the “Revised Cash Flow Forecast”) as a result
of the Monitor’s proposed extension to the SISP. The Cash Flow Forecast covers the
period from September 19, 2022 to February 26, 2023 (the “Revised Cash Flow Period”);

45. The Revised Cash Flow Forecast has been prepared by the Monitor using probable and
hypothetical assumptions set out therein (the “Probable and Hypothetical
Assumptions”);

46. The requirement of s. 23(1)(b) of the CCAA states that the Monitor is to review the Revised
Cash Flow Forecast for reasonableness. As the Directors of the Company have resigned,
the Monitor has prepared the Revised Cash Flow Forecast based on the actual expenses
incurred since the date of the Interim Receivership and Initial Order. The Monitor is of the
opinion that the Revised Cash Flow Forecast is reasonable in all material respects:

(a) The Probable and Hypothetical Assumptions are consistent with the purpose of the
Revised Cash Flow Forecast;

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 (b) As at the date of this Sixth Report, the Probable and Hypothetical Assumptions
developed by the Monitor are suitably supported and consistent with the Company’s
plans and provide a reasonable basis for the Revised Cash Flow Forecast; and

(c) The Revised Cash Flow Forecast reflects the Probable and Hypothetical Assumptions.

47. The Company’s cash position, held in trust with the Monitor, as of September 20, 2022 is
$2,665,554.84. The Company is forecasting future cash receipt of $750,000 representing
the Successful Bidders non-refundable deposit and $2,070,000 in future disbursements
from September 19, 2022 through to February 26, 2023. This disbursement includes
$77,000 to cover the unremitted withholding taxes payable, and an estimated $85,000 to
pay the WEPP priority claim from Service Canada.

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GENERAL COMMENTS ON THE CASHFLOW

48. In addition, the Monitor makes the following general comments on the Revised Cash Flow
Forecast:

(a) Disbursements appear to be consistent with the level of operations since the date of
the Initial Order;

(b) The Revised Cash Flow Forecast includes the encumbering of estimated priority
claims by the Canada Revenue Agency and Employment and Social Development
Canada relating to WEPPA. The Monitor understands a portion of those claims would
have priority over the secured creditors in relation to the Company’s current assets;
and

(c) Disbursements include forecasted payments to the Company’s legal counsel and
financial advisors, and the Monitor and its legal counsel.

49. The Monitor has the funds in place to support the requested extension of the Revised
SISP and stay of proceedings.

ALL OF WHICH IS RESPECTFULLY SUBMITTED this 27th day of October 2022.

GRANT THORNTON LIMITED,

SOLELY IN ITS CAPACITY AS MONITOR
OF THE COMPANY, AND NOT IN ITS PERSONAL CAPACITY

Per: ________________________________

Phil Clarke, CPA, CA, CIRP, LIT

Senior Vice-President

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