FEDERAL COURT OF AUSTRALIA

Blackthorn Resources Limited, in the matter of Blackthorn Resources Limited [2014] FCA 1115

IN THE MATTER OF BLACKTHORN RESOURCES LIMITED

THE COURT ORDERS THAT:

1.    Pursuant to subsection 411 (1) and section 1319 of the Corporations Act 2001 (Cth) (Act):

(i)    the Plaintiff, Blackthorn Resources Limited (Blackthorn), convene a meeting of Blackthorn shareholders (Scheme Meeting) for the purpose of considering, and if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed between Blackthorn and the said shareholders (Scheme) being the Scheme substantially in the form of that contained in the explanatory statement in relation to the Scheme (Scheme Booklet), which is Exhibit 1 in the proceeding;

(ii)    the Scheme Meeting be held on Friday, 21 November 2014 at the offices of Computershare Investor Services Pty Limited, Level 4, 60 Carrington Street, Sydney in the State of New South Wales;

(iii)    the Chairperson of the Scheme Meeting be Michael Carl Oppenheimer and, in his absence, Mark Alexander Mitchell;

(iv)    the Chairperson appointed to the Scheme Meeting has the power to adjourn the Scheme Meeting in his absolute discretion;

(v)    except for procedural motions, all voting at the Scheme Meeting be by poll as declared by the Chairperson; and

(vi)    the Scheme Booklet and a proxy form in respect of the Scheme Meeting substantially in the form of the document which is at Tab 10 to Exhibit "CEB1" of the affidavit of Christopher Effield Brown sworn on 9 October 2014 (Proxy Form) is approved for distribution to Blackthorn shareholders;

2.    Pursuant to section 1319 of the Act, on or before 21 October 2014 there be dispatched to:

(i)    each Blackthorn shareholder who has nominated an electronic address for the purposes of receiving notices of meeting from Blackthorn, at such address, an email substantially in the form of the document annexed at "HP1" to the affidavit of Helen Potbury sworn on 9 October 2014, including PURL links to the Scheme Booklet and Proxy Form; and

(ii)    each other Blackthorn shareholder, by hand at, or prepaid post or courier to, the address of that Blackthorn shareholder as set out in the register of members of Blackthorn, a copy of the Scheme Booklet and Proxy Form;

3.    Regulations 5.6.12 and 5.6.14 to 5.6.36A of the Corporations Regulations 2001 (Cth) will not apply to the Scheme Meeting;

4.    Notice of the hearing of an application pursuant to subsection 411(4)(b) of the Act for orders approving the scheme of arrangement be published by an advertisement in The Australian newspaper substantially in the form of "Annexure A" to this order, such advertisement to be published on or before 20 November 2014, and Blackthorn be otherwise exempted from compliance with rule 3.4 of the Federal Court (Corporations) Rules 2000 (Cth);

5.    The Originating Application filed on 12 September 2014 is adjourned to 9:30 am on 26 November 2014; and

6.    Liberty to apply on 2 days' notice.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE MATTER OF BLACKTHORN RESOURCES LIMITED

REASONS FOR JUDGMENT

1    This is the first court hearing in relation to a proposed scheme of arrangement between the plaintiff, Blackthorn Resources Limited (Blackthorn), and another entity, Intrepid Mines Limited (Intrepid). The orders that I will make today provide for the convening of a meeting of the shareholders of Blackthorn for the purpose of considering and, if thought fit, agreeing, with or without modification, to a scheme of arrangement proposed between Blackthorn and its shareholders (the scheme), as contained in the explanatory statement in relation to the scheme, contained in a document titled the “Scheme Booklet”, which is in evidence.

2    I have been assisted both by the written submissions filed on behalf of the plaintiff and oral submissions taking me through the various affidavits which provide the necessary evidentiary foundation, so as to be satisfied that orders should be made consistent with what is proposed by the plaintiffs in accordance with the principle identified in the plaintiff’s written submissions; namely, that “the court will not ordinarily summon a meeting unless the scheme is of such a nature and cast in such terms that, if it achieves the statutory majority at the… meeting the court would be likely to approve it, on the hearing of a petition which is unopposed” (FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72).

3    I am also satisfied, on the basis of the evidence before me, that there has been, at least at this stage, full and fair disclosure of the matters which need to be disclosed to the shareholders of Blackthorn in order for them to make an informed decision as to whether or not to approve the scheme.

4    In short, Blackthorn proposes a merger scheme. Blackthorn has mining assets which it needs cash to develop, particularly in a project in Zambia. The acquirer, Intrepid, has cash and wishes to invest. Under the scheme, Intrepid will acquire all of the Blackthorn shares. The consideration for the acquisition is by way of scrip in Intrepid involving a particular formula. Blackthorn shareholders will cease to hold shares in Blackthorn. Blackthorn will become a wholly owned subsidiary of Intrepid, and cease to be listed on the Australian Stock Exchange.

5    The one particularly notable matter about the transaction is that there is an associated transaction involving Intrepid shareholders, which is a proposed buyback of existing issued Intrepid shares to a limit of $110 million. The acceptance of the buyback proposal will impact on the quantum of scrip that Blackthorn shareholders will receive as scheme consideration. As disclosed in the Scheme Booklet, the formula for the issue of scrip is dependent on the level of take-up of the Intrepid buyback scheme, such that Blackthorn shareholders will receive in return for each Blackthorn share between 1.079 and 1.147 new Intrepid shares, the former if the buyback is fully accepted and the latter if there are no acceptances of the buyback.

6    As Blackthorn submits, the critical point for Blackthorn’s shareholders is that the effects of the spectrum of take-up of the Intrepid buyback on the quantum of scrip shares to be issued to Blackthorn shareholders are disclosed in the Scheme Booklet and, more importantly, the actual effect of the Intrepid buyback will be known on the day before the day for receipt of proxies for the proposed meeting in respect of the scheme and announced to the market pursuant to Blackthorn’s continuous disclosure obligations. In other words, the Blackthorn shareholders will know the precise result of the application of the scheme consideration formula before they vote.

7    Other relevant matters include:

(1)    The scheme has been unanimously recommended by the Blackthorn board.

(2)    An independent expert report prepared by Ernst & Young Transaction Advisory Services Limited concludes that the scheme is fair and reasonable, and is in the best interests of Blackthorn’s shareholders.

(3)    The documents which have been tendered into evidence disclose a number of other matters, as set out in Blackthorn’s written submissions, including (a) the way in which options over Blackthorn shares are dealt with, (b) the proposed position of the current CEO of Blackthorn, Mr Mark Mitchell, who will become CEO of the scheme group and the way in which his options will be dealt with, (c) dealings with ineligible overseas shareholders, which I am informed constitute less than one percent of the overall shareholding, and (d) the implementation of certain deal protection provisions, including a reciprocal break fee and standard obligations in respect of “no shop”, “no talk”, and “no due diligence”.

(4)    Importantly, the proposed break fee, which under the scheme is one per cent of the equity value of Blackthorn, is, according to the evidence, a sum which Intrepid’s costs have already exceeded.

(5)    Intrepid and Blackthorn will seek to rely on the exemption to the US Securities Registration and Prospectus requirements, as set out in § 3(a)(10) of the US Securities Act of 1933. It is appropriate that I record that I have been informed of this proposed reliance.

(6)    In evidence are: (a) details of the proposed electronic notification of shareholders who elected to receive notices by email, and the requirements of which are incorporated in the orders that will be made today, (b)  details of the verification process which has been undertaken by both Blackthorn and Intrepid in respect of the information contained in the scheme booklet, and (c) the usual “no-objections” letter from the Australian Securities and Investments Commission (ASIC), dated 10 October 2014.

8    I am satisfied that all procedural and substantive requirements necessary for the first court hearing have been established. In short, (i) Blackthorn is a Pt 5.1 body under the Corporations Act 2001 (Cth) (Corporations Act), (ii) the proposed scheme is an arrangement within the meaning of s 411 of the Corporations Act, (iii) there has been proper disclosure to shareholders of the material aspects of what is proposed, (iv) the scheme is bona fide and properly proposed, (v) ASIC has had a reasonable opportunity to examine the proposed scheme and explanatory statement and to make submissions, and has otherwise had 14 days’ notice of the proposed hearing date, and (vi) all other procedural requirements have been met.

9    In these circumstances, I am satisfied that orders should be made in accordance with paragraphs 1, 2, 3, 4, 5 and 6 of Blackthorn’s short minutes of order providing for the scheme meeting to be conveyed, and other procedural directions.

Associate:

Dated:    17 October 2014