DRAFT
Cabral Resources Limited (Administrators Appointed)(“Cabral”) Second meeting of creditors 14 January 2015
2
Formalities
Voting
Purpose of the meeting
Administrators’ Report to creditors
Administrators’ remuneration
Vote on the Company’s future
Liquidators’ remuneration
Committee of Inspection
Questions
Agenda
Formalities
3
Open meeting
Administrator Chairman: Corporations Regulation 5.6.17(1)
Introductions:
Barry Kogan (Administrator)
Damien Pasfield (Senior Manager)
Michael Bogue (Director)
Quorum: Corporations Regulation 5.6.16 (2)
Attendance register
Time and place convenient: Corporations Regulation 5.6.14
Proofs of debt and proxies
Formalities (cont.)
4
Voting on voices unless poll demanded: Corporations Regulation 5.6.19
Poll can be demanded by:
Chairperson; or
2 persons present and entitled to vote; or
Creditors representing at least 10% of claims
When a poll is conducted, a resolution is passed if:
more than half the creditors (in number) vote in favour of the resolution; and
more than half the creditors (in value) vote in favor of the resolution
If there is a deadlock, the Chairperson may use their casting vote
Purpose of Meeting
5
Convened under Section 439A of the Corporations Act to:
report to creditors on the Company’s business, property, affairs and financial circumstances
set out the Administrators’ opinion on the courses of action available to the Company
vote on the Company’s future:
• return Company to its Directors; or
• execute a Deed of Company Arrangement (“DOCA”); or
• enter into liquidation; or
• meeting be adjourned for up to 45 business days
Consider and (if thought fit) approve the Administrators’ and Liquidators’ remuneration
Consider the appointment of a Committee of Inspection
Report to creditors - background
6
Listed iron ore explorer with a tenement portfolio in Bahia, Brazil
Incorporated in July 1994 and initially listed on ASX in June 1995
Acts as a holding company with investments in:
Subsidiaries with interests in over 100 iron ore tenements in Brazil; and
A joint venture with China Railway Materials Commercial Corporation Group
Provided extensive funding (c.$20 million) to subsidiaries in relation to exploration activities and securing tenements
Expected future funding in excess of $10 million required to progress projects to commercial scale mining stage
Attempts to raise capital failed to provide sufficient funding to Cabral to continue to fund the operations of its subsidiaries, ultimately leading to our appointment
Causes of failure:
Difficulties in securing funding; and
No commercialized operations that generated an income stream
Report to creditors – organisational structure
7 7
Trust relationship for Sincorá tenements
Legal owner of Brumado
Complex and Sincorá Area
tenements
Beneficial owner of
Sincorá Area
tenements
Under external administration
Cabral Mineração Ltda
(incorporated in Brazil))
(“Mineração”)
Northern Yeelirrie
Pty Limited
ACN 128 458 757
(“NY”)
Cabral Resources Limited
(Administrators Appointed)
ACN 064 874 620
CRMSC (Australia)
Pty Limited
ACN 108 972 676
(“the JV”)
50% 100% 100%
100%
100%
Cabral Brazil Pty Limited
(Administrators
Appointed)
ACN 144 001 043
(“Cabral Brazil”)
China Railway Materials
Commercial Corporation Group
(through subsidiary)
Cabral Metias Ltda
(incorporated in Brazil)
(“Metias”)
50%
Mining tenements
Key:
Non-group entity
Group entity
Cabral traded at a loss throughout the period reviewed
Revenue consists of interest on funds held in bank accounts and reimbursement of expenses from the JV under a cost sharing agreement
Expenses relate to employees, occupancy expenses, general administrative expenses and travel for the Directors to visit the offices and tenements of the Brazilian subsidiaries
Report to creditors – financial performance
8
Statement of Financial Performance
30 June 2012 30 June 2013 30 June 2014
$m's $m's $m's
Income
Revenue 0.73 0.31 0.13
Total revenue 0.73 0.31 0.13
Expenses
Operational expenses (2.07) (1.35) (1.20)
Depreciation and amortisation (0.01) (0.04) (0.03)
Impairment expense1 - - (0.88)
Share of JV profit / (loss) (0.43) (0.40) (0.06)
Total expenses (2.51) (1.79) (2.17)
Operating profit / (loss) (1.78) (1.48) (2.04)
Source: FY12, FY13 and FY14 management accounts1 Relates to expenses historically capitalised (e.g. travel)
Year Ended
Report to creditors – financial position
9
Over the period reviewed, Cabral’s most significant liability was employee entitlements, with no secured creditors and minimal unsecured creditors
Assets comprised cash (including term deposits), loans to and investments in subsidiaries (mainly Cabral Brazil), and an investment in the JV
Assets
30 June 2012
$m's
30 June 2013
$m's
30 June 2014
$m's
Cash at bank (incl term deposits) 9.59 2.85 0.65
Bonds / trust funds 0.10 0.10 0.10
Loans to subsidiaries
- Cabral Brazil 11.07 16.62 17.77
- NY 0.15 0.15 0.15
Investments in subsidiaries
- Cabral Brazil 1.25 1.25 1.25
- JV 0.90 0.69 0.63
- NY1 0.00 0.00 0.00
Other assets 0.22 1.00 0.08
Total assets 23.28 22.66 20.63
Liabilities
Employees (0.22) (0.27) (0.28)
Other liabilities (0.08) (0.12) (0.08)
Total liabilities (0.30) (0.39) (0.36)
Net assets 22.98 22.27 20.27
Source: Management Accounts1 Equity invested - $1.00
Statement of Financial Position
Year ended
Report as to Affairs (“RATA”)
10
Loans to and investments in Cabral Brazil represent the most significant assets of Cabral at $18.57m and $1.25m, respectively
Employee entitlements disclosed in Directors RATAs total approx. $688k. Administrators estimate outstanding liabilities to be approx. $708k, of which approx. $50k relates to preferential employee entitlements
Summary of Financial Position and Directors' RATAs
Assets $m's
Cash at bank (incl term deposits and bonds) 0.14
Loans to subsidiaries
- Cabral Brazil 18.57
- NY 0.15
Investments in subsidiaries
- Cabral Brazil 1.25
- JV 0.63
- NY1 0.00
Other assets 0.09
Total assets 20.83
Liabilities
Employees (0.69)
Unsecured creditors (0.18)
Total liabilities (0.87)
Net assets 19.96
Source: Management Accounts1 Equity invested - $1.00
Investigations
11
Insolvent trading:
Net assets: Positive net asset position throughout entire period reviewed (c. $20m) however, we note no impairment of loans in management accounts, despite impairment of underlying assets in the consolidated accounts.
Cash flow: May have been cash flow insolvent since September 2014. Limited fresh liabilities incurred following this time
Conclusions: Various defences available to Directors which makes claim for insolvent trading difficult to pursue
Voidable transactions:
Transactions totalling $45k identified which may constitute preferences (relatively small amounts to multiple parties)
Breach of Directors’ duties:
At this stage, no matters identified cause concern surrounding the discharge of the Directors’ duties and responsibilities under the Corporations Act 2001
Any potential recoveries are only available to a Liquidator
Further investigations to be undertaken if Liquidator appointed
Sale process
12
Initial discussions held with parties who had previously expressed (or likely to have) an interest in Cabral and/or its assets
Advertised in the Australian Financial Review
Engaged with over 40 parties to date, with formal EOIs received from 11 parties, and a number of non-binding indicative offers received
Timetable:
Expressions of Interest period: 8 December 2014 to 15 December 2014;
Completion of stage 1 due diligence: 19 December 2014;
Submission of non-binding first round offers: 19 December 2014; and
Commencement of stage 2 due diligence for short-list bidders: 12 January 2015
Most of these offers contemplate a DOCA structure to acquire the listed shell
Our overall objective is for final offers to be received and assessed in January 2015 and an agreement to be executed in February 2015
Anticipated return to creditors
13
‘High’ scenario: Sufficient funds to pay preferential employee entitlements in full, some funds for unsecured creditors and no funds for shareholders
‘Low’ scenario: Insufficient funds to meet the costs of the administration/liquidation and no funds available for creditors (including preferential creditors) or shareholders
The above analysis does not include recoveries from Cabral’s business/assets as disclosure of preliminary views could jeopardise the sale outcome. Potential recoveries from voidable transactions are also excluded
Estimated return to creditors in a liquidation
Particulars High $ Low $
Assets
Cash at bank 37,052 37,052
Rental bond 77,532 -
JV 250,000 200,000
Sale of business/assets Unknown Unknown
Voidable transaction recoveries Unknown Unknown
Less costs
Staff, asset maintenance and operational costs (30,000) (50,000)
Administrators' fees to 2 January 2015 (125,476) (125,476)
Estimated Administrators' fees from 3 January to 14 January 2015 (30,000) (36,000)
Estimated Liquidators' fees (70,000) (80,000)
Legal and other professional costs (30,000) (50,000)
Amount available for preferential creditors 79,108 -
Employee entitlements (less non-priority claims from employees) (50,588) (50,588)
Estimated return to preferential creditors 100.00% 0.00%
Amount available for unsecured creditors 28,520 -
Unsecured creditor claims (including non-priority claims from employees) 819,935 819,935
Estimated return to unsecured creditors 3.48% 0.00%
Residual funds available to shareholders Nil Nil
Source: McGrathNicol analysis
Resolutions – Administrators’ remuneration
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Resolution – remuneration incurred from 1 December 2014 to 2 January 2015
I now put the following resolution to the meeting:
“That the remuneration of the Administrators for the period from 1 December 2014 to 2 January 2015, calculated on hours spent at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the amount of $125,475.50 (excluding GST), is hereby approved for payment.”
Resolutions – Administrators’ remuneration (cont.)
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Resolution – estimated remuneration incurred from 3 January 2015 to 14 January 2015
I now put the following resolution to the meeting:
“That the Administrators’ remuneration for the period from 3 January 2015 to 14 January 2015 shall be a sum equal to the time cost spent by the Administrators, their partners and their staff, calculated at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the amount of $35,376.50 (exclusive of GST).
Creditors acknowledge that if actual costs incurred are below the amount approved, the Administrators are only authorised to draw the amount incurred. Creditors also acknowledge that if actual costs incurred exceed the amount approved, the Administrators will seek further approval from creditors.
The Administrators are approved to draw their remuneration as and when it is incurred from funds under their control.”
Resolutions – Administrators’ remuneration for Cabral Brazil
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Cabral is the overwhelming largest creditor of Cabral Brazil (only one other creditor for $124)
Accordingly, we consider it useful that the creditors of Cabral consider passing a resolution noting their support for the following resolutions passed by creditors of Cabral Brazil:
“That the remuneration of the Administrators for the period from 1 December 2014 to 2 January 2015, calculated on hours spent at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the amount of $24,758.00 (excluding GST), is hereby approved for payment.”
and
“That the Administrators’ remuneration for the period from 3 January 2015 to 14 January 2015 shall be a sum equal to the time cost spent by the Administrators, their partners and their staff, calculated at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the amount of $9,054.50 (exclusive of GST).
Creditors acknowledge that if actual costs incurred are below the amount approved, the Administrators are only authorised to draw the amount incurred. Creditors also acknowledge that if actual costs incurred exceed the amount approved, the Administrators will seek further approval from creditors.
The Administrators are approved to draw their remuneration as and when it is incurred from funds under their control.”
Resolutions – Administrators’ remuneration for Cabral Brazil
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Resolution – regarding remuneration from 1 December 2014 to 14 January 2015 for Cabral Brazil
I now put the following resolution to the meeting:
“That the creditors of Cabral are supportive of the remuneration resolutions passed by creditors of Cabral Brazil, and payment of these amounts as and when incurred from funds on hand.”
Resolutions – Cabral Brazil’s future
18
We also request that the creditors of Cabral consider the following resolutions put to creditors of Cabral Brazil:
“That the second meeting of creditors be adjourned for a period of up to 45 business days”
Resolution – adjourn Cabral Brazil meeting for up to 45 business days
I now put the following resolution to the meeting:
“That the creditors of Cabral are supportive of the adjournment resolutions passed by creditors of Cabral Brazil.”
Vote on Cabral’s future: Administrators’ recommendations
19
Administration to end
As Cabral is insolvent, control of the company should not be returned to the Directors
DOCA
No final/binding DOCA has been proposed, therefore not recommended
Cabral to be wound up
As there is no DOCA and Cabral is insolvent, in the event that creditors wish to immediately resolve the future of the company, the Administrators’ recommendation is that creditors vote in favour of the company being placed into liquidation
Adjourn meeting for up to 45 business days
Various bidders are proposing to transact via a DOCA structure
In order to leave this option open for creditors (which may ultimately increase the proceeds received and therefore the return to creditors), we recommend that creditors resolve to adjourn the meeting for a period of up to 45 business days
Vote on Cabral’s future – resolution
20
Adjourn meeting for up to 45 business days
I now put the following resolution to the meeting:
“That the second meeting of creditors be adjourned for a period of up to 45 business days”
Liquidation
I now put the following resolution to the meeting:
“That Cabral be Wound Up and Barry Kogan and Joseph Hayes be appointed Joint and Several Liquidators”
Resolutions – Liquidators’ remuneration
21
I now put the following resolution to the meeting:
“That the remuneration of the Liquidators, for the period of the liquidation, shall be a sum equal to the time cost spent by the Liquidators, their partners and their staff, calculated at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the amount of $75,006.00 (exclusive of GST).
Creditors acknowledge that if actual costs incurred are below the amount approved, the Liquidators are only authorised to draw the amount incurred. Creditors also acknowledge that if actual costs incurred exceed the amount approved, the Liquidators will seek further approval from creditors.
The Liquidators are approved to draw their remuneration as and when it is incurred from funds under their control.”
Resolutions – Liquidators’ remuneration for Cabral Brazil
22
Cabral is the overwhelming largest creditor of Cabral Brazil (only one other creditor for $124)
Accordingly, we request that the creditors of Cabral consider the following resolutions put to creditors of Cabral Brazil:
“That the remuneration of the Liquidators, for the period of the liquidation, shall be a sum equal to the time cost spent by the Liquidators, their partners and their staff, calculated at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the amount of $20,370 (exclusive of GST).
Creditors acknowledge that if actual costs incurred are below the amount approved, the Liquidators are only authorised to draw the amount incurred. Creditors also acknowledge that if actual costs incurred exceed the amount approved, the Liquidators will seek further approval from creditors.
The Liquidators are approved to draw their remuneration as and when it is incurred from funds under their control.”
Resolution – regarding Liquidators’ remuneration for Cabral Brazil
I now put the following resolution to the meeting:
“That the creditors Cabral are supportive of these resolutions put to creditors of Cabral Brazil, and payment of these amount as and when incurred from funds on hand.”
Resolutions – Committee of Inspection
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I now put the following resolution to the meeting:
“That a committee of inspection be formed, with the following to be members:
………………………… representing …………………………
………………………… representing …………………………
………………………… representing …………………………
………………………… representing …………………………
………………………… representing …………………………”
Q & A