Federal Court of Australia

White (Administrator), in the matter of Calidus Resources Limited (Receivers and Managers Appointed) (Administrators Appointed) [2024] FCA 827

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 439A(6) and s 447A(1) of the Corporations Act 2001 (Cth), the period within which the first plaintiffs (Administrators) must convene the second meeting of creditors of each of the second to seventh plaintiffs (Companies) under s 439A of the Corporations Act be extended to midnight on 28 January 2025.

2.    Pursuant to s 447A(1) of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to the Companies so that, notwithstanding s 439A(2) of the Corporations Act, the second meetings may be held at any time before, or within, five business days after the end of the convening period as extended by order 1 above, provided that the Administrators give notice of the meeting in accordance with r 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR).

3.    Pursuant to s 447A(1) of the Corporations Act Part 5.3A of the Corporations Act is to operate in relation to each of the Companies as if the second meetings may be convened and held concurrently.

4.    Within two business days of these orders being made, the Administrators are to give notice of these orders to the creditors of each of the Companies (including persons claiming to be creditors) by means of a circular:

(a)    to be published on the website maintained by the Administrators in respect of the administration of the Companies; and

(b)    to be sent by email to all known creditors, where email addresses are known.

5.    Liberty be granted to the Administrators on one business days' written notice to the Court in relation to any variation of these orders or any other matter generally arising in the administrations of any or all of the Companies.

6.    Liberty be granted to any person who can demonstrate sufficient interest to discharge or modify these orders on the giving of three business days' written notice to the plaintiffs and the Court.

7.    The Administrators' costs of and incidental to this application be costs in the administration of the Companies, jointly and severally.

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

REASONS FOR JUDGMENT

BANKS-SMITH J:

1    Hayden White and Daniel Woodhouse of FTI Consulting Ltd were appointed joint and several administrators of a group of companies referred to as the Calidus Group by way of resolutions passed on 28 June 2024. They seek a six-month extension of the period for convening the second meeting of creditors of the respective companies.

2    The companies within the group are Calidus Resources Limited, Keras (Pilbara) Gold Pty Ltd, Calidus Blue Spec Pty Ltd, Keras (Gold) Australia Pty Ltd, Millennium Minerals Pty Ltd and Calidus Otways Pty Ltd. Calidus Resources owns 100% of the issued shares in each of the other companies in the group.

3    On the same date, Macquarie Bank Limited appointed Richard Tucker and John Bumbak of KordaMentha as joint and several receivers and managers (Receivers) of Calidus Resources, Keras (Pilbara), and Calidus Blue. Since their appointment, the Receivers have had day to day control over those Companies including their business operations and assets.

4    This application was brought before me as a matter of urgency on Friday, 26 July 2024. Unless extended, the convening period in each administration for calling the second meeting of creditors under s 439A(5)(a) of the Corporations Act 2001 (Cth) would have expired on that day.

5    Having heard from counsel, I made orders at the hearing extending the convening period. These are my reasons for doing so.

Principles

6    The matters that are relevant to an application of this kind are well-recognised. The applicable principles have been stated on many occasions over the years. Among the most-cited authorities in this context are In the matter of Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2009] NSWSC 585 at [13] (Austin J) and Strawbridge, in the matter of Virgin Australia Holdings Ltd (Administrators Appointed) (No 2) [2020] FCA 717 at [64]-[68] (Middleton  J). I recently summarised the principles in Woodhouse (Administrator), in the matter of Panoramic Resources Limited [2024] FCA 22 at [16]-[22]. For convenience, I adopt without repeating that summary.

7    In every case, however, there may be particular issues to be addressed and authorities that have expressly considered those issues.

8    In this case, and as there is an absence of any opposition to the orders from stakeholders, the key factor that must be considered is the proposed length of the extension. In this context, I am guided by what was said in Mighty River International Limited v Hughes [2018] HCA 38; (2018) 265 CLR 480 by Nettle and Gordon JJ (in dissent, but not relevantly in this respect), who cited many of the authorities in the area and observed:

[73]    … Generally speaking, courts have been disposed to grant substantial extensions in cases where the administration has been complicated by, for example, the size and scope of the business, substantial offshore activities, large numbers of employees with complex entitlements, complex corporate structures and intercompany loans, and complex recovery proceedings, and, more generally, where the additional time is likely to enhance the return to unsecured creditors. Provided the evidentiary case for extension has been properly prepared, there has been no evidence of material prejudice to those affected by the moratorium imposed by the administration, and the administrator's estimate of time has had a reasonable basis, the courts have tended to grant extensions for the periods sought by administrators. As Barrett J rightly observed in Re Diamond Press Australia Pty Ltd:

'The function of the Court on an application [for an extension under s 439A(6)] is … to strike an appropriate balance between, on the one hand, the expectation that administration will be a relatively speedy and summary matter and, on the other, the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders.'

(footnotes omitted)

9    I also take into account authorities that have addressed an application for a more lengthy extension in the context of a concurrent administration and receivership. It has long been accepted that where receivers and managers are in place over a company, the effect of that appointment on the obligations and role of administrators may justify a longer extension than may otherwise be appropriate: Re Chemeq Ltd (Administrators Appointed) (Receivers and Managers Appointed); Ex parte McMaster [2007] WASC 154 (Le Miere J) (six-month extension sought and granted). See also In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 at [13] (Farrell J) in which her Honour emphasised the additional time required in order to properly provide creditors with sensible information (six-month extension sought and granted). More recent examples include Tucker, in the matter of Aurora Metals Limited [2023] FCA 869 (Feutrill J) (six-month extension refused but four-month extension granted); and Clubb (administrator), in the matter of Town Tavern Blacktown Pty Limited (administrators appointed) (receivers and managers appointed) [2024] FCA 405 (Halley J) (six-month extension sought and granted).

10    In light of the urgency with which this particular application has been brought, it is inevitable that I must give considerable weight to the opinion of the Administrators as to the appropriate length of time for any extension, provided I am satisfied that the evidence discloses a reasonable basis: In the matter of Renex Holdings (Dandenong) 1 Pty Ltd (administrators appointed) [2015] NSWSC 2002 at [9] (Black J).

11    Finally, I note that s 447A(1) of the Corporations Act enables the Court to make a so-called Daisytek order (named for In the matter of Daisytek Australia Pty Limited [2003] FCA 575 at [10]-[14] (Lindgren J)). A Daisytek order enables administrators, if they see fit, to hold a second meeting of creditors at any time before or within five business days after the end of the convening period extended by orders of the Court pursuant to s 439A(6) of the Corporations Act. The Administrators seek such an order in this case.

12    I have considered the material provided by an affidavit of Mr White in taking into account these principles.

The nature of the assets

13    Calidus Resources is an ASX listed gold exploration and development company. According to Mr White, who provided evidence on behalf of the Administrators, the Calidus Group owns 100% of the operating Warrawoona Gold Project and the nearby Nullagine Gold Project which are located in the East Pilbara district of Western Australia.

14    The Warrawoona Gold Project is under the control of the Receivers and although previously it has been in commercial production, on 10 July 2024 the Receivers announced that they intended to transition the Warrawoona Gold Project into care and maintenance over the following weeks. Keras (Pilbara) owns the tenements comprising the project.

15    Calidus Blue and Keras (Pilbara) hold the tenements comprising the Blue Spec Project, which adjoins the Nullagine Gold Project and is within trucking distance of the Warrawoona Gold Project. The Blue Spec Project is under the control of the Receivers.

16    In December 2023, the Calidus Group acquired the Nullagine Gold Project, which includes tenements comprising the Beatons Creek Project. The Nullagine Gold Project is not under the control of the Receivers. Nullagine is an established mine site and hosts significant existing infrastructure. The tenements at the Nullagine Gold Project are held by Millenium Minerals and Keras Gold. The Nullagine Gold Project has been in care and maintenance for some time.

17    In summary, the Calidus Group is said to have consolidated the majority of significant gold deposits in the East Pilbara and has a dominant landholding of 1,153 km2 and installed milling capacity of 4.2 Mtpa.

18    Further, according to an ASX announcement published by Calidus Resources on 11 March 2024 (Interim Report), Calidus Resources also has an interest in Pirra Lithium Pty Ltd, which holds tenements that cover 1,681 km2 of highly prospective lithium tenure across Western Australia, including project areas in the West Pilbara, East Pilbara and Northampton. It is also party to a profit share joint venture in relation to interests in the Blue Bar and Bulletin deposits located adjacent to the Warrawoona Gold Project.

19    Whilst this is not a comprehensive description of the assets, this summary provides some indication of the interrelatedness of the assets of the Calidus Group.

Summary of financial position

20    Unsurprisingly, there is also intercompany indebtedness via intercompany loans. Although some of the entities do not have high levels of external debtors, the Administrators' understanding, based on the directors' reports on company activities and property (ROCAPs) for each Company, is that the overall debt position of the Calidus Group is that over $100,000,000 is owed to external parties.

21    According to the Interim Report, the consolidated statement of financial position for the Calidus Group as at 31 December 2023 discloses total asset values of $317,911,707 and net values of $135,034,931.

22    Macquarie is the main secured creditor. There are other disclosed creditors claiming security or priority by way of various priority agreements (Rio Tinto), caveats over tenements (Atlas Iron), royalty agreements (Franco-Nevada and RSI WA (Gold) Pty Ltd)) and specific security interests (Zenith Energy). The Administrators continue to review these arrangements, together with the Receivers.

Appointment of Administrators

23    The directors have informed the Administrators that despite record gold production during March 2024, they had no alternative but to appoint administrators to each of the entities within the Calidus Group as it did not have access to sufficient unrestricted liquidity and cash reserves to guarantee on-going payments to both secured and unsecured creditors. The Administrators continue to investigate this decline in liquidity.

Initial steps by the Administrators and concurrent first meetings

24    In early July 2024 Mr White had discussions with Mr Tucker relevantly in relation to jointly conducting a sale and recapitalisation process with the Receivers for all the entities within the Calidus Group.

25    According to Mr White:

… based on my review of the books and records and the ROCAPs for the Companies, my discussions with Mr Woodhouse, Mr Tucker and stakeholders concerning the Companies and my experience dealing with sale and recapitalisation processes, a Joint Process is likely to achieve a better return for creditors and stakeholders than if separate processes are pursued by the Administrators and Receivers. I formed this opinion because amongst other things:

(a)    Calidus Resources holds all of the shares in the other Companies in the Calidus Group;

(b)    the projects held by the Calidus Group are generally in close proximity to each other, which provides an opportunity to further consolidate the tenements in the area and utilise assets across the Warrawoona Gold Project and the Nullagine Project including by utilising the Warrawoona mill to process higher grade oxide ore from Nullagine in the short term and a longer-term option of centring a new production hub at Nullagine to treat sulphide ores from both the Warrawoona Gold Project and Nullagine Project;

(c)    potential purchasers may be interested in purchasing or recapitalising the entire Calidus Group and it would be more attractive to do this via one process, rather than engaging in separate processes with the Administrators and Receivers; and

(d)    if multiple sale or recapitalisation processes are advertised, it has the capacity to create confusion for potential purchasers.

26    At a practical level, this recommendation of a joint process is the driver behind this application.

27    The first concurrent creditors' meetings was held via online videoconferencing facilities on 10 July 2024. At that time, Mr White informed the creditors that the Receivers were in control of the Warrawoona Gold Project and the parent company, Callidus Resources, with the Administrators in control of only those assets not captured by the receivership. Accordingly, Mr White conveyed that the Administrators and Receivers intend to work together on the sale and recapitalisation of the companies and their assets, given the likelihood that the best outcome will involve assets being packaged together, rather than being split up and sold through separate processes. The meeting was also informed that at that time about 20 parties had expressed an interest in assets of the group. The Administrators also informed the meeting that it was likely that they would seek a three to six-month extension from the Court for the convening of the second concurrent meeting.

28    The minutes record that there were no objections raised as to these proposed matters by creditors attending the meeting.

Tasks undertaken since appointment

29    Consistent with their statutory duties, since their appointment the Administrators have also undertaken the following significant tasks:

(a)    corresponded with the directors about the requirements to submit a report as to affairs and obtained and reviewed the ROCAPs provided by the directors;

(b)    sought to obtain the books and records of the companies;

(c)    undertaken urgent investigations into the companies and their key assets for the purpose of considering a possible sale or recapitalisation;

(d)    taken control of the bank accounts and other assets of the Group that are not controlled by the Receivers;

(e)    undertaken an initial review of the security agreements referred to above;

(f)    corresponded with parties holding security interests registered on the Personal Property Security Register against the assets of the companies to request copies of documents supporting those security interests;

(g)    sought to identify other key contracts that will need to be reviewed and obtain copies of those contracts;

(h)    considered the rights of royalty holders;

(i)    attended to preparing and filing statutory notifications and lodgements as required;

(j)    made all necessary ASX announcements;

(k)    corresponded with shareholders, creditors and employees, and their legal representatives as necessary;

(l)    caused members of FTI staff to attend the Warrawoona Gold Project and the Nullagine Gold Project on 23 July 2024;

(m)    engaged in discussions with the Receivers in relation to the proposed joint sale process and funding terms; and

(n)    reviewed the tenement expenditure commitments for the Nullagine Gold Project and prepared a cashflow analysis of the payments required to be made in order to maintain the Nullagine Gold Project.

Status of joint sale process

30    Mr White deposed to the fact that on 17 July 2024 he met with Mr Tucker (and others) and reached an in-principle agreement as to the approach to be adopted for the joint sale process. The process involves the Receivers engaging advisors and an investment bank to facilitate the joint sale. Mr White's evidence is to the effect that the Receivers' work in relation to those tasks is ongoing and:

… it is likely that any sale process will not commence before October 2024 as additional time is required to firm up the life of the mine plan and other strategic plans which will be critical to evidencing the significant value proposition to interested parties.

31    I note that the Receivers have also taken steps to arrange funding for the Administrators to ensure they could bring this application for an extension of the convening period.

Reason for six-month extension

32    Mr White states in his affidavit that the Administrators have been unable to complete their investigations into the affairs of the Calidus Group within the statutory period and are of the view that further work is required in order to properly report to creditors on the future of the companies. In particular they need to progress the sale process with the Receivers and consider the likelihood of a sale or restructure of assets, including potentially by way of a deed of company arrangement, and establish whether there are any other assets or claims to be pursued in the interests of creditors.

33    Mr White deposed that the Administrators are of the view that an extension of the convening period is likely to result in a better outcome for creditors of the Calidus Group for the following reasons:

(a)    absent the receipt of offers by way of a sale or recapitalisation process, the Administrators will not be able to properly report to creditors on the future of the Companies and will likely recommend that the Companies be placed into liquidation;

(b)    if the Companies are placed into liquidation, it would likely lead to a worse outcome for creditors of the Companies because it would:

(i)    disrupt the Joint Sale Process and any other sale and recapitalisation process that the Receivers may seek to pursue in respect of the assets under their control;

(ii)    limit the possible avenues for the sale or restructure of the Companies; and

(iii)    likely damage the reputation and goodwill of the Companies resulting in the receipt of lower offers than if the Companies remain in administration;

(c)    the extension of the Convening Period would allow potential purchasers to recapitalise or purchase the Companies (or some of them) through a deed of company arrangement (DOCA) and, if that is desirable to the purchaser, may increase the value of their offer;

(d)    if a sale or recapitalisation occurs while the Companies remain in administration, the Companies may be able to retain licences, contracts or other rights that may be unavailable in a liquidation scenario;

(e)    Calidus Resources' status as a public company listed on the ASX may have key potential value, which the Administrators are ensuring is preserved during the administration, however Calidus Resources will be de-listed if it goes into liquidation;

(f)    if a sale is conducted after the Companies go into liquidation, there may be a perception that it is a 'fire sale', resulting in receipt of less favourable offers;

(g)    based on our investigations to date, absent a successful sale or recapitalisation, the anticipated return to creditors will be limited; and

(h)    proceeds from the sale or recapitalisation will increase the funds available to distribute to creditors and stakeholders of the Calidus Group.

34    Mr White states that a six-month extension is reasonable and in the best interests of the creditors and stakeholders because the sale process is currently at an early stage; based on his experience, the process could take months to complete, having regard to the nature of the business; the Receivers have indicated the sale process will not commence before October 2024; and the option of adjourning the meeting for 45 days (s 75-140(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth)) would simply add costs and not permit sufficient time to seek to maximise the potential return to creditors.

Prejudice and notice

35    I am satisfied that the relevant stakeholders have notice of this application. Notice of the intended application and its listing for hearing were published by way of a circular on the relevant FTI website portal on 22 July 2024.

36    This circular was also distributed to known creditors (or parties claiming to be creditors) by email via a specialist software that records the number of people who have received, opened and responded to an email. Mr White states that the circular was sent via email to 291 recipients including ASIC and the ATO and delivered to 290 of those recipients. Separately, ASIC and the ATO confirmed receipt of the email and have not indicated any opposition to the extension sought.

37    The members of the only Committee of Inspection (for Keras (Pilbara)) have indicated they do not object to the proposed extension.

38    Macquarie, as secured creditor, formally confirmed its support for the proposed extension of the convening period by way of an email from their solicitors King and Wood Mallesons to the Administrator's solicitors on 24 July 2024.

39    In the circumstances I am satisfied that no party has indicated that they will be prejudiced by the proposed extension in a manner that must be given any particular attention.

Extension appropriate

40    In my view this is an example of a large and complex group administration where a substantial extension of the convening period for the second meeting is clearly justified and appropriate, as explained in Mighty River International. The assets are extensive and there is scope for a sale and recapitalisation if undertaken in tandem and with the cooperation of the Receivers. Having regard to the joint process being undertaken, the October 2024 start date for that formal process and the likely intervention of the Christmas and New Year break, experience suggests this is a strong example of the circumstances where a six-month extension is appropriate.

41    The Administrators have provided comprehensive evidence for the purpose of this application. Counsel was able to take me through that evidence at the hearing in some detail. The reasons the Administrators have given as to the need for and the purpose of the extension are cumulatively persuasive.

42    I accept that having regard to the complexity of this group administration, the Administrators will not be in a position in the short term to properly make recommendations to creditors. The position will be enhanced by an extension of the convening period as sought.

43    If no extension is granted the Administrators would be placed in the position that the second meetings would proceed, but the Administrators would inevitably recommend that the meeting be adjourned until the necessary work and investigations can be undertaken.

44    The additional time will facilitate an orderly joint sale process being carried out. I accept on the information currently available that if such a sale process is successful, it is likely to enhance the position for creditors, as compared with an immediate liquidation.

45    There is no evidence of material prejudice to those affected by the extension, and I accept that the Administrators have endeavoured to give appropriate explanations to all stakeholders. There was disclosure to creditors at the first meeting of the intention to seek the extension, including disclosure that the extension period might be as long as six months. Rather than being prejudicial, the extension would generally seem to be in the interests of the various stakeholders, having regard to the joint sale process that is being considered by the Administrators together with the Receivers. The purpose of the extension falls within the principles set out in Riviera Group.

46    The Administrators' current estimate of time (six months) has a reasonable basis, and I accept that it is appropriate to give weight to the Administrators' views as to the appropriate length of any extension. I am also guided by the desirability of reaching an appropriate balance between expediency and the potential for an enhanced return.

47    For those reasons there will be an extension of the period within which the Administrators must convene the second meeting of creditors in respect of each of the companies under s 439A of the Corporations Act to midnight on 28 January 2025. There will also be a Daisytek order to facilitate any prospect of convening the meeting earlier than the latest possible date (order 2).

Other matters

48    The other ancillary orders sought are standard in nature and appropriate.

49    There will be liberty to apply to the Administrators and interested parties to seek to vary these orders.

Associate:

Dated:    29 July 2024

SCHEDULE OF PARTIES