B2Gold -- summary under Convertible Debentures

General

B2Gold is a NYSE MKT and TSX listed B.C. corporation indirectly holding international mining properties. On August 19, 2013, B2Gold announced the offering of US$225 million aggregate principal amount of the Notes to "qualified institutional buyers" in accordance with Rule 144A. The net proceeds from the offering, including from the over-allotment, are approximately US$250.3 million. The Notes accrue interest at a rate of 3.25% per year, payable semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2014. The maturity date is October 1, 2018. If as a result of the anti-dilution provisions or other reorganization adjustment provisions, a holder otherwise would be entitled on conversion to receive property other than prescribed securities within five years plus one day of the date of original issuance, B2Gold will have the choice to instead deliver prescribed securities.

Conversion price and conditions

The initial conversion price of the Notes represents a premium of approximately 37.5% to the closing sale price of $2.86 per common share on the NYSE MKT on August 19, 2013. The Notes are convertible prior to July 1, 2018 in the following circumstances: (i) during any calendar quarter commencing after 2013 if the closing sale price of the Company's common shares for at least 20 trading days during the last 30-day trading day period ending at the end of the immediately preceding calendar quarter is 130% or more of the conversion price; (ii) during the five business-day period after any five consecutive trading-day period (the "measurement period") throughout which the trading price of a Note was less than 98% of the product of the B2Gold common share trading price and the conversion rate; (iii) if B2Gold calls the Notes for redemption; or (iv) upon the occurrence of specified (dilutive or fundamental change) corporate events. On or after July 1, 2018 until immediately before October 1, 2018, holders may convert their notes at any time. Delivery of shares or cash on conversion will be deemed to satisfy accrued but unpaid interest.

B2Gold's cash payment option on conversion

Upon conversion of the Notes, holders will receive common shares or, subject to certain conditions, cash or a combination of cash and common shares, at B2Gold's election (provided that it must use the same settlement method for conversions on or after July 1, 2018, as specifed to the trustee no later than that date). Until B2Gold's borrowings under its US$150 million secured revolving credit facility (the "Senior Credit Facility") are repaid in full and the agreement governing the Senior Credit Facility has been terminated or until the agreement governing the Senior Credit Facility has been amended to permit cash settlement or combination settlement, B2Gold is required to settle any conversions in common shares. If B2Gold satisfies the conversion obligation solely in cash or a combination of cash and common shares, the amount of cash and any such common shares will be based in most circumstances on a daily conversion value calculated on a proportionate basis for each trading day in a 20-day trading day observation period generally beginning two trading days after the conversion date.

Fundamental change repurchase condition

If B2Gold undergoes a fundamental change (generally, an acquisition of more than 50% of the voting power, the consummation of specified reorganizations, or a sale of all or substantially all the consolidated assets), it will be required to offer to purchase all or any portion of a holder's Notes for cash, as long as such repurchase is not prohibited under the Senior Credit Facility (the "fundamental change repurchase condition"). The fundamental change repurchase price will be 100% of the principal amount of the Notes to be purchased, plus any accrued and unpaid interest to, but not including, the fundamental change repurchase date.

Redemption conditions

Prior to October 6, 2016, B2Gold may not redeem the Notes, except, subject to certain conditions, in the event of certain changes in Canadian tax law. On or after October 6, 2016, B2Gold at its option may redeem for cash, pursuant to notice given at least 30 days before the redemption date, all or part of the Notes (at 100% of their principal amount plus accrued and unpaid interest) if the last reported sale price of B2Gold's common shares exceeds 130% of the conversion price for at least 20 trading days during any 30 consecutive trading-day period ending within five trading days prior to B2Gold providing the notice of redemption. In the event of a gross-up obligation arising from a change in law or an administrative determination, B2Gold may also redeem. Upon B2Gold giving a notice of redemption, a holder may elect not to have its notes redeemed, in which case such holder would not be entitled to gross-up.

Make-whole

Where a holder elects to convert its Notes in connection with a make-whole fundamental change or a redemption notice, the Company will, under certain circumstances, increase the conversion rate by a number of additional common shares based on a table, so that the specified make-whole is lower for (fundamental change or redemption) triggering dates closer to the maturity date.

Events of default

Include: in the case of a fundamental change, failure to obtain the required consents and waivers from the lenders under the Senior Credit Facility or make any repayments of indebtedness thereunder as necessary to ensure that the fundamental change repurchase condition has been satisfied prior to the fundamental change repurchase date) occurring and continuing.

Canadian tax consequences

From Risk Factors disclosure in Material Change Report:

[I]f holders of notes would otherwise be entitled to receive, upon conversion of the notes, any property (including cash) or securities that would not constitute "prescribed securities" for the purposes of clause 212(1)(b)(vii)(E) of the Tax Act as it applied for the 2007 taxation year (referred to herein as "ineligible consideration"), such holders shall not be entitled to receive such ineligible consideration but we or a successor or acquirer, as the case may be, shall have the right (at the sole option of us or the successor or acquirer, as the case may be) to deliver either such ineligible consideration or "prescribed securities," for the purposes of clause 212(1)(b)(vii)(E) of the Tax Act as it applied for the 2007 taxation year, with a market value equal to the market value of such ineligible consideration. In general, prescribed securities would include our common shares and other shares which are not redeemable by the holder within five years of the date of issuance of the notes. Because of this, certain transactions may result in the notes being convertible into prescribed securities that are highly illiquid. This could have a material adverse effect on the value of the notes.

Accounting treatment

Under IAS 32 Financial Instruments: presentation, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer's economic interest cost. The effect of IAS 32 Financial Instruments: presentation on the accounting for the notes is that the equity component is required to be included as a component of shareholders' equity on our consolidated balance sheet, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the notes. As a result, we will be required to record a greater amount of non-cash finance costs as a result of the amortization of the discounted carrying value of the notes to their face amount over the term of the notes. We will report lower net income or increased net loss in our financial results because IAS 32 Financial Instruments: presentation will require finance costs to include both the current period's amortization of the debt discount and the instrument's coupon interest, which could adversely affect our reported or future financial results, the trading price of our common shares and the trading price of the notes.