Integra Mining Limited, in the matter of Integra Mining Limited [2012] FCA 1414

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 310 of 2012

IN THE MATTER OF INTEGRA MINING LIMITED ABN 54 093 278 436 INTEGRA MINING LIMITED ABN 54 093 278 436

JUDGE: MCKERRACHER J DATE: 12 DECEMBER 2012 PLACE: PERTH

INTRODUCTION 1 These are reasons for orders I made on the application of the plaintiff (Integra) under s 411(1) of the Corporations Act 2001 (Cth) (CA) to convene a meeting to consider a proposed scheme of arrangement (Scheme) between Integra and its members. The application is not without some complexity as to one aspect but it is largely uncontroversial and accordingly I have, in large measure, adopted counsel's helpful written submissions in these reasons for the orders made. 2 Integra is an Australian public company, listed on the Australian Securities Exchange (ASX), with issued share capital of 934,440,899 ordinary fully paid shares as at 12 November 2012. The Scheme involves the acquisition of all of the fully paid ordinary shares in Integra by Silver Lake Resources Limited (Silver Lake), an Australian public company listed on the ASX. One new Silver Lake share will be issued for every 6.28 Integra shares held by an eligible scheme participant (Scheme Consideration). 3 A small percentage of Integra shares (being 0.44% by number and holding 1.16% of Integra's issued capital) are ineligible foreign shareholders (IFS). A nominee of the IFS will receive one new Silver Lake share for every 6.28 Integra shares held by the IFS and the nominee will arrange for the sale of those shares and the distribution of the proceeds to those holders. In that regard, counsel has referred to affidavit evidence which discloses the following matters.

Issue of New Sliver Lake shares to shareholders in the United States 4 Mr Peter Reynold Ironside, company secretary and a director of Integra, deposes that the new Silver Lake shares to be issued pursuant to the Scheme have not been registered in the United States of America (USA) under its Securities Act of 1933 (the Securities Act). Accordingly, in order to issue new Silver Lake shares to shareholders in the USA, Silver Lake must rely on an exemption from the registration requirements of the Securities Act. The laws of the USA require the Court to be informed if a particular exemption is being relied upon. As to the new Silver Lake shares to be issued to shareholders in the USA, Silver Lake will rely on the exemption from registration provided by s 3(a)(10) of the Securities Act, based on the Court's approval of the Scheme.

Options and performance rights 5 Integra has issued 15,350,000 unlisted options to acquire Integra shares (Options). Three million, eight hundred and fifty thousand (3,850,000) of the Options are due to expire on 31 December 2012 (which is prior to the proposed date for implementation of the Scheme). Integra and Silver Lake have entered into deeds of transfer with the holders of these Options pursuant to which: the holders can elect to exercise their Options in accordance with their terms but will receive their Integra shares before the Record Date so that those shares will be acquired by Silver Lake under the Scheme; or the Options will be transferred to Silver Lake upon implementation of the Scheme, and the holders will be entitled to receive shares in Silver Lake outside of the Scheme in an amount calculated by reference to the Scheme Consideration and the Black Scholes option valuation methodology. 6 Integra and Silver Lake have entered into deeds of transfer with the holders of the remaining Options pursuant to which the Options will be transferred to Silver Lake upon implementation of the Scheme, and the holders will be entitled to receive shares in Silver Lake outside of the Scheme in an amount calculated by reference to the Scheme Consideration and the Black Scholes option valuation methodology. 7 Integra has also issued 5,579,786 unlisted performance rights to Integra employees (Performance Rights) where each Performance Right constitutes a performance right to receive an Integra Share. 1,448,807 of the Performance Rights have an exercise price of $0.76 and are due to expire on 17 November 2012 (which is also prior to the proposed date for implementation of the Scheme). Integra and Silver Lake have entered into deeds of transfer with the holders of these Performance Rights pursuant to which: (a) the holders can elect to exercise their Performance Rights in accordance with their terms but will receive their Integra shares before the Record Date so that those shares will be acquired by Silver Lake under the Scheme; or (b) the Performance Rights will be transferred to Silver Lake upon implementation of the Scheme, and the holders will be entitled to receive shares in Silver Lake outside of the Scheme in an amount calculated by reference to the Scheme Consideration and the Black Scholes option valuation methodology. 1,000,000 of the Performance Rights have an exercise price of $0.63 and are due to expire on 30 March 2013. Integra and Silver Lake have entered into deeds of transfer with the holders of these Performance Rights pursuant to which the Performance Rights will be transferred to Silver Lake upon implementation of the Scheme, and the holders will be entitled to receive shares in Silver Lake outside of the Scheme in an amount calculated by reference to the Scheme Consideration and the Black Scholes option valuation methodology. The final 3,131,699 Performance Rights have an exercise price of nil and are due to expire on 1 July 2013. The Board of Integra has exercised its discretion to automatically vest these Performance Rights subject to Court approval of the Scheme and the Scheme becoming effective. The Integra shares to be issued on the vesting of these Performance Rights will be issued before the Record Date so that those shares will be acquired by Silver Lake under the Scheme. 8 If the Scheme is implemented Integra will become a wholly owned subsidiary of Silver Lake.

PRINCIPLES 9 It is well established that there are three stages to an application under s 411 CA. First, Court approval to convene a scheme meeting and approval of a draft explanatory statement to be sent to the members. Second, members vote on the scheme at the scheme meeting. Third, Court approval of the scheme: Re CSR Ltd (2010) 265 ALR 703 (at 706). 10 The principal questions relevant to the first stage are as follows: Is there a compromise or arrangement? Is there a Part 5.1 body? Are there members of a company? Are there classes of members? Should the Court make orders to convene a meeting?

Nature of Review 11 The nature of review at this stage is to enquire whether the Scheme is not inappropriate and is one that sensible business people might consider is of benefit to its members: Re Sonodyne International Ltd (1994) 15 ACSR 494 (at 499) per Hayne J. If the proposed arrangement is one that seems fit for consideration by a meeting of members and is a commercial proposition likely to gain the Court's approval if passed by the necessary majorities, then leave should be given to convene the meeting: Re ACM Gold Ltd (1992) 34 FCR 530 (at 535) per O'Loughlin J. The Court is not required to be satisfied either at the convening or approval stage that no better scheme could have been devised: Re Foundation Healthcare Ltd (2002) 42 ACSR 252 (at 265) per French J (as his Honour then was). 12 The Court should order the convening of the Scheme Meeting and approve the dispatch of the Scheme Booklet (explanatory statement) if satisfied as to the following five matters: The Scheme is an arrangement in respect of which the Court may order a meeting of the members: s 411(1) CA. That is: the Scheme is an arrangement; Integra is a Pt 5.1 Body; the Scheme participants are members of Integra; and the Scheme Meeting will be convened between members of the same class. the Australian Securities and Investments Commission (ASIC) has had a reasonable opportunity to examine the terms of the Scheme and explanatory statement and make submissions to the Court in relation thereto: s 411(2)(b) CA. The explanatory statement provides adequate disclosure (s 412(1)(a)(i) CA) and contains the prescribed information: s 412(1)(a)(ii) CA, r 5.1.01 and Sch 8 cl 8301- 8310 of the Corporations Regulations 2001 (Cth) (Corporations Regulations). The procedural requirements of the Federal Court (Corporations Rules) 2000 (Cth) have been met. That there is no apparent reason why the Scheme should not, in due course, receive the Court's approval if the necessary majority of member's votes is achieved: Re NRMA Insurance Ltd (No 1) (2000) 156 FLR 349 (at [3], [14]-[41]) per Santow J; Re Ranger Minerals Ltd (2002) 42 ACSR 582 (at [21]-[23], [31]-[36], [40] and [47]) per Parker J; Re Hills Motorway Ltd (2002) 43 ACSR 101 (at [5]) per Barrett J; Re International Goldfields Ltd (2003) 21 ACLC 1199 (at [9]-[32]) per Barker J; Re Orica Ltd [2010] VSC 231 (at [7]) per Davies J; Re MAC Services Group Ltd (2010) 80 ACSR 390 (at [5]) per Barrett J.

Section 411(1) members' scheme 13 In relation to the five factors, the following may be noted:

Arrangement 14 The word 'arrangement' is of wide import. As Santow J said in Re NRMA Ltd (No 1) (at [20]): Generally speaking, unless the arrangement is ultra vires the company or seeks to deal with a matter for which a special procedure is laid down by the Corporations Law or to evade a restriction imposed by the Corporations Law, almost any arrangement otherwise legal which touches or concerns the rights and obligations of the company or its members or creditors, and which is properly proposed, may come under s 411 … 15 The proposal before the Court is an arrangement.

Pt 5.1 Body 16 Section 411 CA confers jurisdiction on the Court in respect of a Pt 5.1 body. 17 The term 'Part 5.1 body' is defined in s 9 CA to mean, relevantly, a company. Integra is a company.

Members 18 The term 'member' is defined in s 9 CA to mean, in relation to a company, a person who is a member under s 231 CA. Broadly, a person is a member of a company if they are a member of the company on its registration, or agree to become a member of the company after its registration and their name is entered on the register of members.

Classes of Members 19 An arrangement to which s 411(1) CA applies is one between a company and its members or any class of them. It is only such an arrangement to which the Court may grant its approval pursuant to s 411(6) CA. 20 There is only one class of shares in Integra and therefore all members have the same rights against Integra. All members receive the same consideration under the Scheme in that they receive, either directly or to a nominee, one new Silver Lake share for each 6.28 Integra shares held. In respect of the IFS their nominee arranges for the sale of the New Silver Lake shares received and the distribution of the proceeds less sale costs. 21 In those circumstances, the rights of all members under the Scheme are not so dissimilar as to require more than one class of members to be constituted for the purpose of the Scheme Meeting.

Options and Performance Rights 22 To the extent that a member also holds Options and/or Performance Rights which are exercised and result in the issue of Integra shares before the Record Date, the member will receive the Scheme Consideration for these Integra shares. To the extent that a member also holds Options and/or Performance Rights which are transferred to Silver Lake, the member will receive consideration in addition to the Scheme Consideration. 23 The receipt of such consideration does not result in the member receiving a right or benefit under the Scheme that is different to other members. Such consideration will be received by the member not as member, but as holder of and in exchange for Options and/or Performance Rights. The terms of the transferred Options and Performance Rights have been calculated by reference to the Scheme Consideration and the Black Scholes option valuation methodology. In these circumstances, the members in question will not receive any benefit that could be regarded as a benefit or right that is additional to or different from the benefits and rights the other members will receive under the Scheme.

ASIC consideration 24 The jurisdiction of the Court to make an order convening meetings under s 411(1) CA is conditional upon the matters set out in s 411(2). Section 411(2) CA requires that the Court be satisfied of two matters before making an order. First, that ASIC has been given 14 days notice of the hearing, or such lesser period of notice as the Court or ASIC permits: s 411(2)(a) CA. Second, that ASIC has had a reasonable opportunity to examine the terms of the scheme and the draft explanatory statement and to make submissions to the Court: s 411(2)(b) CA. 25 The Scheme Booklet was first lodged with ASIC on 23 October 2012. On 29 October 2012 ASIC was given notice of the hearing listed for 15 November 2012. 26 ASIC advised that it did not wish to be heard on this application.

Draft Explanatory Statement 27 The complete Scheme Booklet comprises the body of the text, a summary of the terms of the Implementation Agreement, the deed poll, the scheme of arrangement, the notice of scheme meeting, a list of Integra's ASX announcements from 14 September 2012, a list of Silver Lake's ASX announcements from 31 August 2012, the independent expert's report, which appends the independent technical specialist's report and the investigating accountant's report. 28 The emphasis is on proper disclosure: Re Seven Network Ltd [2010] FCA 220 (at [8]). The explanatory statement must provide proper disclosure as required in s 411(3) CA. It must essentially set out 'all the main facts as will enable shareholders to exercise their judgment on the proposed scheme': Re Dorman Long & Co Ltd, South Durham Steel & Iron Co Ltd [1934] Ch 635 (at 665-666) per Maugham J; applied by Santow J in Re NRMA Ltd (No 1) (at 354) and French J in Re Foundation Healthcare Ltd (at 263). 29 The Scheme Booklet prepared by Integra in relation to the Scheme has been drafted to satisfy the disclosure requirements prescribed in: ASIC Regulatory Guides 60, 111 and 112; and s 411(3) and s 412 CA and Sch 8 of the Corporations Regulations. 30 Regulation 5.1.01 of the Corporations Regulations prescribes the information for the explanatory statement as required by s 411(3)(b) and s 412(1)(a)(ii) CA. In respect of a scheme between a Pt 5.1 body and its members, or a class of its members, reg 5.1.01(1)(b) requires the explanatory statement to state the matters set out and have annexed to it the reports and copies of documents mentioned in Pt 3 of Sch 8 to the Corporations Regulations. 31 Part 3 of Sch 8 to the Corporations Regulations (Pt 3) is entitled 'Prescribed information relating to proposed compromise or arrangement with members or a class of members' and contains ten items, item 8301 to item 8310 inclusive. Each of these items is considered in the checklist attached to Integra's submissions filed on 14 November 2012.

Procedural matters 32 Integra has filed, pursuant to Pt 3, an affidavit stating the names of the persons who have been nominated to be the chairperson and alternate chairperson of the meeting, that each person nominated is willing to act as chairperson, has had no previous relationship or dealing with Integra, or any other person interested in the Scheme except as disclosed in the affidavit, and has no interest or obligation that may give rise to a conflict of interest or duty if the person were to act as chairperson of the meeting, except as disclosed in the affidavit. 33 The conclusion of the independent expert is that the Scheme is in the best interests of the members. It confirms that the Scheme is one which sensible business people would consider to be of benefit to the members.

Proper Purpose 34 The Court should be satisfied that the Scheme is properly proposed (bona fides and intra vires). There is no suggestion of an improper purpose on the material before me. Bona fides will be a matter for consideration on any application to approve the Scheme: Re NRMA (No 1) (at [22] - [24]). 35 The Scheme is not precluded by Integra's constitution. There is nothing in the material before me to suggest the Scheme has not been properly proposed.

Proper disclosure 36 The Court should be satisfied, prima facie, that there has been proper disclosure with nothing misleading or deceptive in any material sense: Re NRMA Ltd (No 1) (at [3]). The Scheme Booklet meets the disclosure requirements as set out above. I am satisfied that there has been proper disclosure.

Performance Risk 37 The Integra shares are transferred in consideration of the issue, allotment and entry into the register of the new Silver Lake shares on the implementation date. In the circumstances, there is no significant performance or credit risk.

Encumbrance provisions 38 The Scheme contains a provision in which the Shareholders are deemed to have warranted that their shares are fully paid and unencumbered. Warranties in these terms generally do not give rise to the concern, expressed by some Courts, that encumbrancees may gain the impression that the transfer adversely affects their security: Re Macquarie Private Capital A Ltd [2008] NSWSC 323 (at [13]-[14]).

CONCLUSION 39 For the foregoing reasons, I was satisfied that each of the matters relevant to an order convening meetings under s 411 CA had been addressed. The orders were made as sought, subject to a minor amendment on 21 November 2012 deferring the date of dispatch of the Scheme Booklet to members due to logistical difficulty encountered by Integra. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

Associate: Dated: 12 December 2012 Annexure "A" Annexure "B" Integra Mining Limited ABN 54 093 278 436 ("Integra") NOTICE TO MEMBERS OF INTEGRA OF HEARING OF APPLICATION TO APPROVE A SCHEME OF ARRANGEMENT UNDER SECTION 411 OF THE CORPORATIONS ACT 2001 (CTH) TAKE NOTICE that at [insert] (AWST) on [date] December 2012, the Federal Court of Australia, at 1 Victoria Avenue, Perth, Western Australia, will hear an application by Integra seeking approval for a scheme of arrangement between Integra and its members as proposed by a resolution passed by the meeting of the members of Integra held on [date] December 2012. If you wish to oppose the approval of the scheme of arrangement, you must file and serve on Integra a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on Integra at its address for service at least one day before the date fixed for the hearing of the application. The address for service on Integra is 168 Stirling Highway, Nedlands, Western Australia. This notice is inserted by Ashurst Australia, solicitors for Integra. Dated this [insert] day of December 2012.