FEDERAL COURT OF AUSTRALIA Climax Mining Ltd, in the matter of Climax Mining Ltd [2006] FCA 1276 IN THE MATTER OF CLIMAX MINING LTD (ACN 000 250 500) CLIMAX MINING LTD (ACN 000 250 500) NSD 1734 OF 2006 LINDGREN J 1 OCTOBER 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1734 OF 2006 IN THE MATTER OF CLIMAX MINING LTD (ACN 000 250 500) CLIMAX MINING LTD (ACN 000 250 500) Plaintiff JUDGE: LINDGREN J DATE OF ORDER: 22 SEPTEMBER 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. There be convened by the plaintiff a meeting of its shareholders to be held at 10.00 am on 30 October 2006, for the purposes of considering and, if thought fit, agreeing (with or without modification) to the scheme of arrangement proposed to be made between the plaintiff and its shareholders pursuant to s 411(4)(a)(ii) of the Corporations Act 2001 (Cth) ("Act") in the form set out in Appendix 4 to the draft share scheme booklet, behind Tab 4 of Exhibit BEW1 ("Share Scheme"). 2. There be convened by the plaintiff a meeting of persons holding listed options to acquire shares in the capital of the plaintiff to be held at 10.30 am or so soon thereafter as the Share Scheme meeting shall have concluded or adjourned on 30 October 2006, for the purposes of considering and, if thought fit, agreeing (with or without modification) to the scheme of arrangement proposed to be made between the plaintiff and its listed optionholders pursuant to s 411(4)(a)(i) of the Act ("Option Scheme") in the form set out in Appendix 2 to the draft Explanatory Statement (Options) behind Tab 5 of Exhibit BEW1 (together with the meeting in Order 1 above, "the Meetings"). 3. The share scheme booklet behind Tab 21 of Exhibit BEW1, and the documents at Appendices 1 to 6 inclusive behind Tab 4 of Exhibit BEW1 ("Share Scheme Booklet"), be approved for distribution to the shareholders and listed optionholders of the plaintiff. 4. The Explanatory Statement (Options) behind Tab 22 of Exhibit BEW1 and the documents at Appendices 1 to 4 inclusive behind Tab 4 of Exhibit BEW1 ("Explanatory Statement (Options)"), be approved for distribution to the listed optionholders of the plaintiff. 5. The shareholder proxy form behind Tab 9 of Exhibit BEW1 be sent to shareholders of the plaintiff. 6. The listed optionholder proxy form behind Tab 10 of Exhibit BEW1 be sent to listed optionholders of the plaintiff. 7. The Meetings be held at the Four Seasons Hotel, 199 George Street, Sydney, New South Wales. 8. James Edward Askew or, failing him, Terence Vincent Willsteed be authorised to act as chairperson for the Meetings, and any adjournment of the Meetings, and report to the Court on the outcome of the meetings. 9. The Meetings can resolve to be adjourned. 10. Save for regulation 5.6.13 of the Corporations Regulations, Reg 2.15 of the Federal Court (Corporations) Rules 2000 shall not apply to the meetings referred to in Orders 1 and 2 above. 11. The plaintiff be granted liberty to apply. 12. This proceeding be stood over to 3 November 2006 at 9:30 am before his Honour Justice Lindgren for consideration of Orders approving the Share Scheme and/or the Option Scheme. 13. These Orders be entered forthwith. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1734 OF 2006 IN THE MATTER OF CLIMAX MINING LTD (ACN 000 250 500) CLIMAX MINING LTD (ACN 000 250 500) Plaintiff JUDGE: LINDGREN J DATE: 1 OCToBER 2006 PLACE: SYDNEY REASONS FOR JUDGMENT (First court hearing) 1 The plaintiff ("Climax") has applied under s 411(1) of the Corporations Act 2001 (Cth) ("the Act") for an order that it convene meetings of its shareholders and the holders of its listed options, to consider and, if thought fit, to agree to schemes of arrangement between Climax and them (respectively "the Share Scheme" and "the Option Scheme"). In terms of s 411, the Share Scheme is a members' scheme of arrangement and the Option Scheme is a creditors' scheme of arrangement. 2 By its originating process, Climax also seeks orders under ss 411(4)(b) and (6) of the Act approving the schemes if they are agreed to by the shareholders and option holders. If the schemes are agreed to, there will be a second court hearing at which the issue will be whether the schemes should be approved by the Court. 3 On 22 September 2006, I made orders for the convening of the meetings. The following are the reasons why I did so. 4 Climax is a listed public company which is engaged in the business of exploring for and mining gold and other minerals in Australia and overseas. 5 The two schemes concern a proposed merger between Climax and Oceana Gold Limited ("Oceana"). Each scheme is subject to the other becoming effective, although Climax and Oceana may waive this requirement in respect of the Option Scheme. That is to say, in the event of such a waiver, the Share Scheme may proceed even though the Option Scheme does not. 6 I gave Oceana, as an "interested party", leave to appear on the hearing under Rule 2.13 of the Federal Court (Corporations) Rules 2000 and be heard without becoming a party. 7 The mechanism by which the merger is proposed to be effected is that Oceana will acquire all the issued shares in Climax and all listed options to acquire shares in Climax (or, in the case of the options, that they will be cancelled). The consideration to be provided by Oceana is as follows: (a) for each share in Climax – 0.62 Oceana shares and 0.31 options to acquire shares in Oceana; (b) in respect of each option to acquire a share in Climax – 0.2941 shares in Oceana and 0.147 options to acquire shares in Oceana (the Oceana options will entitle the holder to subscribe for one Oceana share at an exercise price of 92.5 cents, and will be able to be exercised during the period from 1 January 2008 to 1 January 2009, or earlier in the event of a successful takeover bid for Oceana). 8 Following the merger: · Climax will be a wholly-owned subsidiary of Oceana; · the former Climax shareholders will own approximately 43 percent of the issued share capital of Oceana; and · the former Climax option holders will own approximately 2 percent of the issued share capital of Oceana. 9 Also following the merger, the Climax shares and options will be removed from the ordinary list of the Australian Stock Exchange ("ASX"). 10 The two meetings (of shareholders and option holders) are proposed to be held on 30 October 2006, the Option Scheme meeting to follow the Share Scheme meeting. The date proposed for the second court hearing is 3 November 2006. 11 The Board of Directors of Climax has recommended that Climax shareholders and option holders agree to the respective schemes. In fact, Climax and Oceana entered into a "Merger Implementation Agreement" dated 11 July 2006 by which they agreed, subject to all necessary approvals and other conditions, to implement the Share Scheme and the Option Scheme. 12 The Option Scheme relates only to Climax options that are listed on the ASX. As at 18 September 2006, there were 39,250,626 such options on issue. In addition, there are two classes of unlisted options. The holders of the unlisted options have apparently agreed to the cancellation of their unlisted options in return for the payment by Oceana to them of an "Unlisted Option Consideration". Accordingly, the unlisted Climax options can be put to one side for present purposes. 13 The Australian Securities and Investment Commission indicated that it did not intend to appear on the first court hearing to raise any objection to the Share Scheme or Option Scheme being placed before the shareholders and option holders for consideration. 14 There was in evidence a report of an independent expert, InterFinancial Limited, expressing the opinion that the respective schemes are reasonable and in the best interests of Climax shareholders and option holders. 15 Details concerning the schemes are contained in a Share Scheme Booklet (Share Scheme) and an Explanatory Statement (Option Scheme). There was evidence before the Court in a familiar form that a "due diligence" process had been implemented by due diligence committees of both Climax and Oceana for the purpose of verifying the information contained in those documents, and that that information had been checked by those committees and found to be correct. 16 It was my opinion that the Share Scheme should be allowed to go forward to a meeting of the Climax shareholders and that the Option Scheme should be allowed to go forward to a meeting of the holders of listed options in Climax. I made orders accordingly. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 1 October 2006 Counsel for the Plaintiff: Mr K Andronos Solicitor for the Plaintiff: Mallesons Stephen Jaques Counsel for Oceana Gold Limited: Mr I M Jackman SC Solicitor for Oceana Gold Limited: Freehills Date of Hearing: 22 September 2006 Date of Judgment: 22 September 2006 Date of Publication of Reasons: 1 October 2006