In the matter of Peak Rare Earths Limited [2025] NSWSC 916 | Case summary

In the matter of Peak Rare Earths Limited [2025] NSWSC 916 | Case summary | Zoe

By Originating Process filed on 10 July 2025, the Plaintiff, Peak Rare Earths Ltd (“Peak”) applies for orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) that it convene a meeting of the holders of its fully paid ordinary shares (other than Shenghe Resources (Singapore) Pte Ltd (“Shenghe”)) to consider and vote upon a scheme of arrangement.
By way of background, Peak is an exploration and development company focussed on rare earth resources and is listed on Australian Securities Exchange (“ASX”). Its primary asset is the Ngualla Rare Earth Project located in Tanzania. On 15 May 2025, Peak announced to the ASX that it had entered into a Scheme Implementation Deed (“SID”) between Peak and Ganzhou Chenguang Rare Earths New Material Co., Ltd. (“Chenguang”) in respect of an earlier iteration of the proposed scheme. Chenguang subsequently nominated Australian Mining Investment Management Pty Ltd, a wholly owned subsidiary of Chenguang, to acquire the Peak shares under the scheme but that proposal did not proceed. On 25 July 2025, Peak, Chenguang and Shenghe entered into an Amendment and Novation Deed which novated the SID from Chenguang to Shenghe (“Amended SID”) (Rundell [12]; Ex PR-1, 75). On 5 August 2025, Peak and Shenghe entered into a further Amendment Deed which amended the definitions of Excluded Shareholder and Scheme Shareholder in the Amended SID to reflect the fact that Shenghe is the only Excluded Shareholder (Rundell [14]; Ex PR-1, 395).
The calculation of the consideration payable under the scheme is unusually complex. The maximum amount payable by Shenghe for all Peak shares on issue as at the Record Date (as defined in the SID) is $157,992,038, being $150,500,000 (the value of the shares) plus the total funds raised (before costs) pursuant to an earlier Entitlement Offer (to which I refer below), $7,492,038. The amount of the scheme consideration for each Peak share is calculated by dividing $157,992,038 by the total number of Peak shares (including those held by Shenghe) on issue as at Record Date (Rundell [16]; scheme booklet, section 3.2; Ex 1, CB 35). Because the Peak shares already held by Shenghe as at the Record Date will not be acquired by Shenghe under the scheme, the total dollar amount payable by Shenghe on implementation of the scheme is expected to be $127,547,929.42 (provided that Peak’s fully diluted issued capital and Shenghe’s shareholding in Peak does not change prior to the Record Date) (Rundell [17]). On that basis, Peak shareholders (other than Shenghe) will receive a cash amount of no less than $0.359 (rounded to three decimal places) per Peak share if the scheme is implemented, and the final scheme consideration per Peak share will be announced by Peak to the ASX on the effective date of the scheme (Rundell [18]; scheme booklet, section 3.2, Ex 1, CB 35). If the proposed scheme is implemented, Shenghe will acquire all of the Peak shares (other than 19.70% of the total number of Peak shares on issue that are already held by Shenghe) on issue as at the Record Date. Following the implementation of the scheme, Peak will apply for termination of the official quotation of Peak shares on the ASX and for Peak to be removed from the official list of ASX (scheme booklet, section 3.11, Ex 1, CB 41).
I made the orders sought by Peak at the conclusion of the hearing on 8 August 2025. These are my reasons for doing so. I have drawn on the helpful submissions of Mr Wood who appeared for Peak in this judgment.

Peak reads the affidavit dated 10 July 2025 of its solicitor, Ms Katrina Sleiman, in support of the application, which exhibits a company search for Peak and ASX announcements in respect of the scheme.
Peak also reads the affidavit dated 5 August 2025 of Mr Philip Rundell, its chief financial officer and company secretary. Mr Rundell describes Peak’s business and refers to the terms of the proposed scheme. Mr Rundell refers to the announcement made by Peak to ASX in July 2025 in respect of the Amendment and Novation Deed, to which I referred above, and outlines the changes made by the Amendment and Novation Deed and by the subsequent Amendment Deed made on 5 August 2025, to which I also referred above. Mr Rundell addresses the conditions precedent to the scheme, exclusivity and reimbursement fee provisions, Peak’s capital structure, and the interests of Peak directors in Peak securities. Mr Rundell also outlines the position in respect of the Entitlement Offer in some detail, and his affidavit exhibited communications between Peak and ASIC in respect of Peak’s application for approval of a nominee under s 615 of the Act in respect of the Entitlement Offer, which indicate that the Australian Securities and Investments Commission (“ASIC”) had carefully scrutinised the potential interaction between the Entitlement Offer and the scheme, prior to ultimately approving that nominee and not intervening in this application to oppose an order convening the scheme meeting. Mr Rundell also addresses the position in respect of performance rights issued by Peak and the process adopted for verification of the scheme booklet which was in conventional terms. He also addresses the proposed mechanism for dispatch of the scheme booklet; the conduct of the scheme meeting; and Peak’s proposed shareholder communications, involving a script for inbound and outbound calls; an institutional discussion guide and other, less substantive, communications. He also addressed the position in respect of three earlier email communications with Peak which I address below.
By her affidavit dated 6 August 2025, Dr Shasha Lu, who is a non-executive director of Peak and a director of Shenghe, addressed the position as to Shenghe and its holding of shares in Peak; the verification process adopted by Shenghe in respect of information concerning it contained in the scheme booklet, which was also in conventional form; and the manner in which the scheme consideration would be funded by Shenghe.
Peak also tendered a letter dated 7 August 2025 from ASIC (Ex 2), in common form, which reserved ASIC’s position under s 411(17)(b) of the Act to the second Court hearing; indicated that ASIC had had a reasonable opportunity to examine the terms of the scheme and the draft explanatory statement to make submissions to the Court and ASIC had had examined the scheme and the explanatory statement; and noted that ASIC did not currently propose to appear to make submissions or intervene to oppose the scheme at the first Court hearing.
In the course of submissions, Mr Wood also took me through the draft scheme booklet in respect of the proposed scheme, which identifies the manner in which the scheme consideration will be calculated. The scheme booklet also refers to the recommendation of Peak’s independent board committee that Peak Shareholders vote in favour of the scheme, in the absence of a superior proposal (as defined) and subject to the independent expert continuing to conclude that the scheme is in the best interests of Peak Shareholders not associated with Shenghe. The scheme booklet also outlines funding for the scheme consideration, which will be funded by Shenghe from its own cash reserves, which exceed the amount required for the scheme consideration. The scheme booklet also discloses that, as part of the Entitlement Offer, Shenghe acquired 14,878,403 Peak shares at a purchase price of $0.10 per Peak share, significantly less than the scheme consideration payable per share. Mr Wood addressed that matter in the course of submissions and I return to it below. The scheme booklet also summarises the conditions precedent to the scheme, which do not include a requirement for Foreign Investment Review Board approval, apparently on the basis that such approval is not required. A further condition precedent requires that Peak has taken steps to ensure that all outstanding performance rights vest, and I will address the question of performance rights below. The scheme booklet also outlines exclusivity provisions and reciprocal break fees payable to Peak and Shenghe. The scheme booklet also sets out (in cl 10.2) the treatment of performance rights, including those held by the Peak directors and the benefit obtained by Peak directors if those rights vest or alternatively lapse before the scheme takes effect.
The scheme booklet also contains an independent expert report prepared by RSM Corporate Australia Pty Ltd (“RSM”), which has valued Peak in the range of $120,115,000 – $150,083,000, with a preferred value of $134,705,000, which corresponds to a value of $0.273 – $0.341 per share with a preferred value of $0.306 per share. That valuation has been derived by aggregating the fair value of the Ngualla Rare Earths Project based on the mine plan, calculated using as discounted cash flow methodology; Ngualla Rare Earths Project resources that are outside of the mine plan; and Peak’s other net assets. The first element of that valuation relies on detailed cashflow forecasts contained in a model maintained by Peak, and the independent expert in turn relies on a review of that model by ERM, a firm with specialist expertise in respect of mining projects, and ERM’s “Independent Technical Specialists’ Report on the Ngualla Rare Earth Project, Tanzania” is annexed to the independent expert report. RSM also adopts a secondary methodology by reference to Peak’s market price. On that basis, RSM has expressed the view that the scheme consideration per Peak share, being an amount of at least $0.359, is greater than the fair value of a Peak share prior to the scheme on a controlling interest basis; the scheme is fair and reasonable for Peak Shareholders not associated with Shenghe; and the scheme is in the best interests of those shareholders.

It is well-established that the Court’s role at a first Court hearing in respect of a scheme is primarily to determine, in the exercise of its discretion, whether to convene a scheme meeting and approve the explanatory statement if it is satisfied of several matters, namely that the plaintiff is a “Part 5.1 body”; the proposed scheme is an “arrangement” within the meaning of s 411 of the Act; there has been proper disclosure to members (or creditors if a creditors’ scheme); the scheme is bona fide and properly proposed; ASIC has had reasonable opportunity to examine the proposed scheme and explanatory statement, to make submissions and has had 14 days’ notice of the proposed hearing date of the first Court hearing; the procedural requirements of the Supreme Court (Corporations) Rules 1999 (NSW) have been met; and there is no apparent reason why the scheme should not, in due course, receive the Court’s approval if the necessary majority of votes is achieved: Re Ellerston Global Investments Ltd [2020] NSWSC 879 at [25]–[26]; Re Vocus Group Ltd [2021] NSWSC 630 at [12]; Re Invocare Ltd [2023] NSWSC 1180 at [14]; Re Pacific Smiles Group Ltd [2024] NSWSC 812 at [9]; Re APM Human Services International Ltd [2024] NSWSC 1095 at [11] (“APM”).
Each of the preconditions to the exercise of s 411(1) of the Act is met here. Peak is registered under the Act and is a Part 5.1 body; the proposed scheme is an “arrangement” between Peak and Peak Shareholders. On 4 July 2025, Peak lodged the initial draft scheme booklet with ASIC (Rundell [24]). Following its entry into the Amendment and Novation Deed (to which I referred above), on 25 July 2025, Peak lodged the amended which annexed an amended scheme and deed poll with ASIC (Rundell [24]); on 28 July 2025, Peak lodged an updated draft scheme booklet (excluding the scheme, deed poll and independent expert’s report attachments) with ASIC (Rundell [25]); and, on 30 July 2025, Peak lodged an updated version of the draft independent expert’s report with ASIC (Rundell [25]). ASIC was given notice of this hearing and ASIC has been given at least 14 days’ notice as required under s 411(2) of the Act, and I have referred to Peak’s tender of ASIC’s customary letter above. There is evidence that the draft scheme booklet has been the subject of a verification process. The procedural requirements under the Supreme Court (Corporations) Rules 1999 have been met, on the basis that I will dispense with r 3.4 where Peak proposes to give notice of the second Court hearing by way of ASX announcement in accordance with common practice.
Where the preconditions to the exercise of power under s 411(1) of the Act are satisfied, then it is necessary for the Court to consider whether the Court should, in its discretion, exercise its power under s 411(1) of the Act. The Court will then consider whether the proposed scheme is fit for consideration at the proposed scheme meeting, in the sense that it 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 and that members (or creditors) are to be properly informed as to the nature of the scheme before the scheme meeting: APM at [12]. As I noted above, Peak’s independent board committee unanimously recommend that Peak’s shareholders vote in favour of the scheme at the scheme meeting, in the absence of a Superior Proposal (as defined in the SID) and subject to the independent expert continuing to conclude that the scheme is in the best interest of Peak Shareholders. As I also noted above, the independent expert, RSM, has expressed the opinion that the scheme is “fair” and “reasonable” and, on that basis in the absence of any other information or a superior proposal, the scheme is in the best interests of Peak Shareholders.

Mr Wood recognises Peak’s ex parte disclosure obligations in an application of this kind and draws several matters to the Court’s attention. First, Mr Wood draws attention to the interests of Peak directors in Peak securities. Mr Wood recognises that, where a director will receive a substantial benefit if a scheme is approved, the nature and extent of that benefit should be disclosed as a matter for shareholders to take into account when considering that director’s recommendation: Re Kidman Resources Ltd (2019) 139 ACSR 122; [2019] FCA 1226 at [115]; Re DWS Ltd (2020) 148 ACSR 616; [2020] FCA 1590 at [41]–[49]; Re Oz Minerals Ltd [2023] FCA 197 at [10], [18]. Mr Wood notes that the benefits that each Peak director stands to receive are set out in section 10.1 of the scheme booklet, and this disclosure has been extended to include the amount that directors will receive if performance rights alternatively vest or lapse. I accept that the shares held by Peak directors and the treatment of their performance rights are sufficiently disclosed in the scheme booklet and this matter does not give rise to any reason not to convene the scheme meeting.
Second, Mr Wood addresses the position as to the Entitlement Offer which, as I noted above, appears to have been the subject of close review by ASIC. Section 5.6 of the scheme booklet and Mr Rundell’s evidence (Rundell [46]–[61]) describes a non-underwritten, pro-rata non-renounceable entitlement offer that Peak undertook to raise up to approximately $7,500,000 (before costs) through the issue of new fully paid ordinary shares, prior to the scheme. That Entitlement Offer was announced to the ASX on the same date that Peak announced to the ASX that it had entered into the initial SID with Chenguang (which was subsequently novated and amended pursuant to the Amendment and Novation Deed) (Sleiman [8]; Ex KAS-1, 155). The offer price of $0.10 per share represented a 16.7% discount to the last closing price of $0.12 per Peak share on 9 May 2025, being the last day Peak’s shares traded before that announcement and is significantly less than the scheme consideration. The Entitlement Offer was not conditional on the scheme and the scheme was also not conditional on the Entitlement Offer. Mr Rundell’s affidavit sets out Peak’s reasons for proceeding with the Entitlement Offer (Rundell [47]), although I recognise that evidence has not been tested by any adversarial process.
Although shareholders in several foreign jurisdictions could participate in the Entitlement Offer, 19 ineligible foreign shareholders (representing 0.46% of the total number of registered shareholders as at the Entitlement Offer Record Date, who together held entitlements to 320,510 shares under the Entitlement Offer, worth $32,051 at the offer price of $0.10 per share) were not entitled to do so (Rundell [56]–[57]). The Peak shares to which those Ineligible Shareholders would otherwise have been entitled to subscribe under the Entitlement Offer were issued to a nominee appointed by Peak and sold on their behalf, and the net proceeds of sale were distributed to the Ineligible Shareholders. Peak completed the Entitlement Offer on 30 June 2025 and issued 74,920,378 Peak shares at $0.10 per share, raising $7,492,038 (Rundell [59]).
Mr Wood also addresses the question whether the Entitlement offer gives rise to any need for separate classes of shareholders in respect of the scheme. He submits and I accept that:

I do not address this matter further, where it seems to me that any control issues arising from the Entitlement Offer under Ch 6 of the Act were matters for ASIC, which closely reviewed the matter, or the Takeovers Panel, had that offer been referred to it, and do not seem to me to be relevant to the Court’s exercise of its discretion in respect of the scheme. Mr Wood also submits that the difference in treatment of the Eligible Shareholders and the Ineligible Shareholders under the Entitlement Offer is not of a kind, and is not of a dimension, as to make it impossible for those shareholders to consult together with a view to their common interest. I accept that submission, so far as ineligible foreign shareholders will be entitled to vote their original shares at the scheme meeting although they were unable to take up additional shares under the Entitlement Offer.
Third, Mr Wood addresses the position as to performance rights issued by Peak. Section 10.2 of the scheme booklet (Ex 1, CB 100) indicates that Peak has granted performance rights under several incentive plans, and it is a condition to the proposed scheme that Peak does all things necessary to ensure that all Performance Rights vest or lapse (Rundell Affidavit [65], [68]). Mr Wood submits, and I accept, that the fact that holders of performance rights may receive benefits as a result of the scheme by reason of early vesting does not place them in a different class: Re ELMO Software Pty Ltd [2023] NSWSC 12 at [25] (“ELMO”); Re Probiotic Ltd [2024] FCA 298 at [62]–[65]. For completeness, Mr Wood points out, and I recognise, that the vesting or lapse of performance rights prior to the effective date of the scheme may impact (although not materially) the final scheme consideration per Peak share, which depends on the number of Peak shares on issue as at the Record Date (Rundell [70]).
Fourth, Mr Wood points out that cl 12 of the SID contains exclusivity provisions which impose “no existing discussions”, “no-shop”, “no-talk”, and “no due diligence” obligations on Peak; require Peak to notify Shenghe if Peak becomes aware of any approach with respect to a Competing Proposal (as defined); require Peak to provide Shenghe with any information provided to a third party in connection with a Competing Proposal; allow Shenghe a “matching right” in respect of any Competing Proposal; and are subject to a fiduciary exception to the “no talk” and “no due diligence” obligations on Peak. The exclusivity provisions operate during the Exclusivity Period, which ends on the earlier of the End Date (defined as the later of the date seven months from the date of the SID and such other date agreed between Peak and Shenghe); the Implementation Date (as defined); or the date the SID is terminated in accordance with its terms. I accept that the exclusivity period is not an unreasonable period and that the exclusivity provisions are consistent with market practice and sufficiently disclosed in the scheme booklet: Re Coca-Cola Amatil Ltd [2021] NSWSC 270 at [22]; Re Ansarada Group Ltd [2024] NSWSC 411 at [23] (“Ansarada”).
Fifth, Mr Wood addresses the question of reimbursement or break fees in respect of the scheme. He points out that cl 10.2 of the SID requires that Peak pay Shenghe a reimbursement fee of $1,550,000 in specified circumstances and that cl 11.2 of the SID requires Shenghe to pay Peak a reverse reimbursement fee of the same amount in specified circumstances. The reimbursement fees are disclosed in sections 9.7 and 9.8 of the scheme booklet and the amount of each of the reimbursement fees is less than 1% of the total equity value of Peak as implied by the scheme consideration (Rundell [35]) and falls within the Takeover Panel’s 1% guideline. Mr Wood submits, and I accept, that reimbursement fees of this kind are common features in schemes of arrangement and will generally be permitted unless the amount of the fee is such that it could influence voting at the meeting to be convened or if there are some unusual circumstances: Ansarada at [24]. This matter provides no reason not to convene the scheme meeting.
Sixth, Mr Wood addresses the proposed manner of despatch of scheme materials, which is conventional and provides no reason not to convene the scheme meeting. Seventh, Mr Wood addresses Peak’s proposed communications with Peak Shareholders, which consists of an outbound and an inbound information line operated by a third party and proposed communications with institutional investors (Rundell [100]ff). My attention was drawn to the scripts for those communications although, consistent with current scheme practice, I was not asked to approve them. Mr Wood also drew my attention to three email communications that took place between Peak and individual Peak Shareholders who had raised questions between the announcement of the proposed scheme and this hearing: (Rundell [110]ff) and copies of each of the emails were exhibited to the affidavit. Mr Wood submits that these communications would not compromise the integrity of the voting process at the scheme meeting and would not give rise to any reason not to approve the scheme. It is sufficient here to find that they provide no reason not to convene the scheme meeting and the question of approval of the scheme should be deferred to the second Court hearing.
For completeness, I am also satisfied that there is sufficient evidence of Shenghe’s capacity to pay the scheme consideration and that the deed poll and payment of the scheme consideration by Shenge to a trust account maintained by Peak are well-established means of managing performance risk: ELMO at [27]–[28]. These matters also do not give rise to any reason not to convene the scheme meeting.

In the matter of Peak Rare Earths Limited

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment

JUDGMENT

Nature of the application

Affidavit and other evidence

Role of the Court at the first Court hearing

Particular matters

Exercise of the Court’s discretion whether to convene the scheme meeting

Orders

Legislation Cited (2)

Cited By (1)