Rex Minerals Limited, in the matter of Rex Minerals Limited (No 2) [2024] FCA 1195

Introduction 1 Following a hearing held on 4 September 2024 (the convening hearing), I made orders (the convening orders) requiring the plaintiff, Rex Minerals Limited (ACN 124 960 523) (Rex), to convene and hold a meeting of its shareholders (Scheme Meeting) to consider a proposed scheme of arrangement (Scheme). I delivered reasons for making those orders on 18 September 2024: Re Rex Minerals Limited [2024] FCA 1051 (Rex (No 1)). 2 The Scheme Meeting was held on 10 October 2024, and the resolution to agree to the Scheme (Scheme Resolution) was passed by 98.30% of the votes cast and by 91.32% of shareholders present and voting (in each case, in person or by proxy). 3 The Australian Securities and Investments Commission (ASIC) has provided a letter stating that, under s 411(17)(b) of the Corporations Act 2001 (Cth) (Act), ASIC has no objection to the Scheme. 4 At the second court hearing held on 15 October 2024 (approval hearing), Rex sought orders approving the Scheme pursuant to s 411(4)(b) of the Act. No shareholder or other person appeared at the hearing to object to the Scheme. 5 At the conclusion of the approval hearing, I made the orders sought by Rex. These are my reasons for making those orders.

Overview of the Scheme 6 The Scheme is described in some detail in Rex No 1. In overview, the Scheme provides for the transfer to MACH Metals Australia Pty Ltd (MACH Metals) of all the shares in Rex other than shares held by a shareholder who is a MACH Group Member (being MACH Metals and any related body corporate) or who holds their shares on behalf of, or for the benefit of, any MACH Group Member (Excluded Shareholders). Rex shareholders other than Excluded Shareholders are referred to as Scheme Shareholders. In consideration of the transfer of their shares, Scheme Shareholders will receive a cash payment from MACH Metals of $0.47 per share. MACH Metals holds approximately 15.52% of Rex's shares and is an "Excluded Shareholder" for the purposes of the Scheme. 7 If the Scheme is approved by the Court, on the Implementation Date (which is anticipated to be 30 October 2024): (a) all Scheme Shareholders who were listed on the share register on the Scheme record date (anticipated to be 23 October 2024) will be paid the Scheme Consideration of $0.47 per share; and (b) all Rex shares, other than those already held by MACH Metals, will be transferred to MACH Metals, and Rex will become a wholly-owned subsidiary of MACH Metals and will be delisted from the Australian Securities Exchange (ASX).

Relevant principles 8 Section 411(4) of the Act provides that a scheme of arrangement is binding if, at a meeting of members, it is passed by a majority of members present and voting (in person or by proxy) and by 75% of votes cast, and it is subsequently approved by order of the Court. 9 In deciding whether to grant approval of a scheme of arrangement, the Court will ordinarily have regard to the following matters: (a) that the orders of the Court convening a meeting of members were complied with; (b) that the meeting of members so convened has approved the Scheme with the requisite majority; (c) that all other requirements of the Act and the Federal Court (Corporations) Rules 2000 (Cth) (Rules) have been satisfied; (d) that the Scheme is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it; (e) that there has been full and fair disclosure to members and creditors of all information material to the decision whether to vote for or against the applicable scheme; and (f) that the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion.

Dispatch of Scheme materials 10 On 4 September 2024 an office copy of the convening orders was lodged with ASIC, as required by r 3.5(b) of the Rules. 11 The convening orders required Rex to convene the Scheme Meeting by providing various documents to Scheme Shareholders on or before 6 September 2024. The principal document to be provided to Scheme Shareholders was the Scheme Booklet. As a result of matters I raised at the convening hearing, and which are summarised at [69]-[70] of Rex (No 1), the Scheme Booklet was amended in relation to the disclosure of director interests, and a copy of the amended Scheme Booklet (Amended Scheme Booklet) was emailed to my chambers following the conclusion of the convening hearing. Subsequently, on 4 September 2024 and pursuant to section 412(6) of the Act, a copy of the Amended Scheme Booklet was lodged with ASIC for registration and ASIC registered the Amended Scheme Booklet on the same date. The Amended Scheme Booklet was then sent or made available to Scheme Shareholders by 6 September 2024. Based on the evidence adduced at the approval hearing, I am satisfied that a copy of the Amended Scheme Booklet was dispatched to Scheme Shareholders in accordance with the orders of the Court convening the meeting.

Conduct of the Scheme Meeting and voting results 12 In accordance with order 1(b) of the convening orders, the Scheme Meeting commenced at approximately 10.00 am (Melbourne time) on 10 October 2024, and was conducted at the offices of Baker McKenzie at level 19, 181 William Street, Melbourne, Victoria. 13 In accordance with order 6 of the convening orders, the Scheme Meeting was chaired by Ian Kingsley Smith. 14 In accordance with order 7 of the convening orders, voting on the resolution to agree to the Scheme was conducted by way of a poll. 15 In accordance with s 411(4)(a)(ii) of the Act, the Scheme Resolution was passed by a majority in number of members present and voting (either in person or by proxy) at the Scheme Meeting, and by 75% of the votes cast on the Scheme Resolution. Specifically, the evidence establishes that the Scheme Resolution was passed by 98.30% of the votes cast and by 91.32% of Scheme Shareholders present and voting (in each case, in person or by proxy). 16 The number of shares voted at the Scheme Meeting as a percentage of Rex's total issued share capital eligible to vote was approximately 46.8% (accounting for the fact that Rex shares held by MACH Metals were not eligible to vote). Rex submitted that, although the level of shareholder turnout was low, this does not give rise to any concern that Scheme Shareholders were deterred from attending the Scheme Meeting or did not have notice of it. Relevantly, Rex adduced evidence that the level of voter turnout at the Scheme Meeting was higher than the level of voter turnout at Rex's 2022 and 2023 Annual General Meetings, at which the number of votes cast constituted approximately 30% of the total number of shares eligible to be voted. 17 I accept that the low voter turnout at the Scheme Meeting does not give rise to any concern that Scheme Shareholders were deterred from attending or did not have notice of the Scheme Meeting. As Farrell J observed in Re TriAusMin Ltd (No 2) [2014] FCA 833 (at [10]), while "[l]ow shareholder turnout may be an indication that some procedural irregularity occurred", it is "inappropriate to assume (in the absence of complaint) that shareholders who did not vote either did not have notice of the meeting or were silent in protest of the scheme". I accept that the matters considered relevant to the matter of low voter turnout in Re Amcor Limited (No 2) [2019] FCA 842 (Re Amcor) (at [19]) are apposite to the present circumstances. Those matters are: (a) there is nothing to suggest that there was any irregularity in the manner of dispatch of material to the Scheme Shareholders; (b) Scheme Shareholders were provided with notice of the Scheme Meeting; (c) there is no evidence of any issue that would have deterred Scheme Shareholders from voting at or from attending the Scheme Meeting, and Rex has not received any complaint from any Scheme Shareholder that they did not receive notice of the meeting; and (d) those Scheme Shareholders who did vote, voted overwhelmingly in favour of the Scheme.

Advertisement of the approval hearing 18 By orders 8 and 9 of the convening orders, the requirements of r 3.4 of the Rules was dispensed with and Rex was required to publish an announcement via the ASX Market Announcements Platform setting out the details for the second Court hearing and the process for any person wishing to appear at that hearing to oppose the approval of the Scheme. Rex has satisfied these requirements. Rex gave evidence that it had not received any notice from any person indicating an intention to oppose the approval of the Scheme or indicating an intention to appear at the approval hearing. No person appeared at the approval hearing to object to the Scheme.

Conditions precedent 19 Before approving a scheme, the Court will ordinarily require that all conditions precedent to the scheme (other than the Court's approval of the scheme and the scheme coming into effect) have been satisfied or waived. On 15 October 2024, Rex and MACH Metals executed a certificate certifying (in respect of matters within their respective knowledge) that each of the conditions precedent had been satisfied.

Full and fair disclosure to members 20 On the basis of the evidence adduced at the convening hearing, I was satisfied that the Scheme Booklet met the disclosure obligations imposed by s 412 of the Act and that appropriate verification processes had been implemented to ensure the accuracy of the statements made in the Scheme Booklet. Rex adduced evidence regarding other communications with Scheme Shareholders in relation to the Scheme and the content of those communications. On the basis of this evidence, I am satisfied that there has been full and fair disclosure to members of all material information.

Is the Scheme fair and reasonable? 21 Rex submitted that the Scheme is fair and reasonable in the sense that an intelligent and honest shareholder, properly informed and acting alone, might approve the Scheme. I accept that submission. The overwhelming support of the Scheme Shareholders as reflected in the voting results of the Scheme Meeting is particularly relevant to this conclusion: see Re Amcor at [11]. 22 The following matters submitted by Rex are also relevant: (a) the recommendation from all Rex directors that Scheme Shareholders vote in favour of the Scheme, for the reasons given in the Scheme Booklet, and the fact that each Rex director stated their intention to vote the Rex shares held or controlled by them in favour of the Scheme; (b) the opinion of the independent expert that the Scheme is fair and reasonable and therefore in the best interests of Rex shareholders; (c) the disclosures in the Scheme Booklet which set out a detailed description of the Scheme, including its potential benefits and disadvantages; (d) the absence of any application to oppose the orders approving the Scheme, and no evidence suggesting any oppression in the conduct of the Scheme Meeting; and (e) the measures in the Scheme to protect shareholders against performance risk.

Other matters brought to the attention of the Court 23 At the convening hearing, Rex brought to the Court's attention two related matters. 24 The first concerned the funding available to MACH Metals to fulfill its payment obligations pursuant to the Scheme Implementation Deed and the Deed Poll. The company secretary of MACH Metals, Michael Howard, deposed that the total estimated Scheme Consideration payable by MACH Metals is $323.5 million (which includes approximately $5.5 million to pay cancellation consideration under the option cancellation deeds described in Rex (No 1)). The Scheme Booklet disclosed that MACH Metals intended to fund payment of the Scheme Consideration from a combination of equity funding from the MACH Group and debt funding under a term loan facility with various banks. Mr Howard deposed that MACH Metals had: (a) received $100 million in equity funding from the MACH Group; and (b) entered into a syndicated facility agreement for an aggregate debt commitment of $250 million. 25 Mr Howard deposed that all conditions precedent under the facility agreement had been satisfied, save for delivery of customary legal opinions and verification certificates (which must be provided at the time of draw down), satisfaction of the conditions precedent under the Scheme Implementation Deed, and the Scheme becoming effective. Based on the foregoing, Mr Howard deposed to his belief that MACH Metals will be able to satisfy its obligations to fund the Scheme Consideration. 26 The second matter concerned an amendment made on 7 October 2024 by Rex and MACH Metals to the funding warranty given by MACH Metals in the Scheme Implementation Deed. The amendment was of a technical nature. MACH Metals had warranted that, as at the date of the approval hearing, it would have available sufficient funding to satisfy its payment obligations on an unconditional basis. As referred to in the preceding paragraph, the facility agreement remains subject to customary conditions precedent. Rex and MACH Metals agreed to amend the warranty to allow for those customary conditions precedent.

Section 411(17) 27 Section 411(17) of the Act provides that the Court must not approve a compromise or arrangement unless: (a) it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Ch 6; or (b) there is produced to the Court a statement in writing by ASIC to the effect that ASIC has no objection to the compromise or arrangement, but the Court need not approve a compromise or arrangement merely because a statement by ASIC that it has no objection to the compromise or arrangement has been produced to the Court as mentioned in s 411(17)(b). 28 A "no objection statement", dated 14 October 2024, has been provided by ASIC, satisfying the requirement of s 411(17)(b). Accordingly, the pre-requisite in s 411(17) is satisfied and the Court is not aware of any reason why the Scheme should not be approved.

Exemption from s 411(11) 29 Rex sought an order under s 411(12) exempting it from compliance with s 411(11), which requires a copy of the Court's order under s 411(4)(b) to be annexed to the company's Constitution. 30 In Re Equinox Resources Ltd [2004] WASC 143; 49 ACSR 692 the Court indicated that the purpose of s 411(11) is (at [22]): ... to ensure that any modification of the rights of shareholders of the company which is the subject of the scheme or any other provision in the scheme which may affect the interests of persons dealing with the company, such as prospective creditors or purchasers of shares, will be sure to have the opportunity of seeing what the exact rights of shareholders in the company or of its creditors are, as modified, if at all, by the scheme which has been approved. This passage has been cited with approval in several subsequent decisions: see for example Re Clemenger Group Limited (No 2) [2023] FCA 974 at [31]; Re Costa Group Holdings Limited [2024] FCA 59 at [33]; Re iSelect Ltd (No 2) [2022] FCA 1528; 166 ACSR 41 at [52]-[53]; Re Amcor at [40]. 31 Exemption from compliance with s 411(11) is appropriate in circumstances where: (a) the Scheme will not alter the constitution of Rex or the rights of Rex's members, creditors or other persons dealing with the company; and (b) no ongoing purpose will be served by requiring the orders approving the Scheme to be annexed to Rex's constitution in circumstances where Rex will become a wholly-owned subsidiary of MACH Metals following implementation of the Scheme.

Conclusion 32 For the reasons given, I made the orders sought by Rex approving the Scheme pursuant to s 411(4)(b) of the Act. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.