Battery Mineral Resources Limited (Administrators ... · 12/6/2019 · complete under section 477(2B) of the Act. ... At the time, BMR and the Subsidiaries had at least A$9.4 million

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Battery Mineral Resources Limited (Administrators Appointed) ACN 612 991 116

(BMR)

Circular to Creditors

I refer to the appointment of Jamie Harris and I as Administrators of BMR on 11 November 2019.

The purpose of this circular is to provide you with information about the second statutory meeting of creditors. At the meeting, creditors will be entitled to vote on whether BMR should enter a Deed of Company Arrangement, whether the administration should end, or whether BMR should be wound up.

The second meeting of creditors will be held as follows:

Date: 16 December 2019 Time: 9:30 AM (AEST) Address: Level 7, 175 Eagle Street, Brisbane QLD 4000

Teleconference facilities will be available to those unable to attend in person:

Telephone number: 1800 153 721 (Australia) 1888 385 4775 (United States of America) 1888 670 3743 (Canada)

Access participant pin: 829 993 94#

To enable creditors to make an informed decision about the future of BMR, we enclose our Administrators’ Report about the company’s business, property, affairs and financial circumstance, including our opinion as to which outcome of the administration process is in the creditors’ best interests.

We enclose a notice of meeting. To participate in this meeting, you must submit a proof of debt and information to substantiate your claim. If you have already lodged a proof of debt, you are not required to do so again. If the creditor is a person and will attend the meeting, this is all that is required. However, if the creditor is another type of entity (such as a company), they must also appoint a person – a “proxy” or person authorised under a power of attorney – to vote on behalf of the creditor at the meeting. A proxy should also be appointed if the creditor is a person, but is not available to attend the meeting.

You can appoint the chairperson of the meeting as your proxy and direct the chairperson how you wish your vote to be cast. If you choose to do this, the chairperson must cast your vote as directed. Proxy forms lodged by creditors for the first meeting cannot be used for the second meeting.

Proof of debt and proxy forms are enclosed, together with guidance notes to assist you when you complete them. To ensure that the meeting is conducted as efficiently as possible, completed proof of debt and, if applicable, proxy forms must be returned to Emily Hill by post or by email to [email protected] by 5:00 PM (AEST) on 13 December 2019.

We also enclose general information for attending and voting at meetings of creditors.

Remuneration

We will seek your approval of our remuneration at this meeting. Detailed information about what tasks we have undertaken and the costs of those tasks are provided in our Remuneration Report (enclosed).

mailto:[email protected]

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What you should do next

You should:

read the enclosed information;

decide whether you are going to participate in the second meeting; and if so

complete and return your proof of debt and proxy form (if required) by 13 December 2019.

If you have any queries, please contact Emily Hill on (07) 3333 9830. For further information about this engagement, please refer to the website www.mcgrathnicol.com/creditors/battery-mineral-resources-limited/.

Dated: 6 December 2019

Anthony Connelly Administrator

Enclosures:

Administrators’ Report to Creditors

Remuneration Report

Notice of Meeting

Proof of Debt Form (Form 535)

Proof of Debt Guidance Notes

Proxy Form

Proxy Form Guidance Notes

General information for attending and voting at meeting of creditors

http://www.mcgrathnicol.com/creditors/battery-mineral-resources-limited/

Report to creditors pursuant to Insolvency Practice Rules (Corporations) 75-225 Battery Mineral Resources Limited (Administrators Appointed) ACN 612 991 116 (BMR) 6 December 2019

2. D14-191203-BATTMIN01-439A report-PC 2

Contents

Introduction ...................................................................................................................................................................................................................... 4

Executive summary ........................................................................................................................................................................................................ 6

Administrators’ prior involvement ......................................................................................................................................................................... 8

Background and statutory information ............................................................................................................................................................... 9

Books and records ...................................................................................................................................................................................................... 14

Recent financial information.................................................................................................................................................................................. 15

Report on Company Activities and Property ................................................................................................................................................ 18

Offences, insolvent trading and voidable transactions ............................................................................................................................ 21

Administrators’ actions to date ............................................................................................................................................................................ 29

Anticipated return to creditors............................................................................................................................................................................. 32

Alternative courses of action ................................................................................................................................................................................ 33

Creditor information on remuneration ............................................................................................................................................................ 34

Creditor meeting details .......................................................................................................................................................................................... 35


Report Glossary

Abbreviation Description

Act Corporations Act 2001 (Cth)

Administrators Anthony Connelly and Jamie Harris

ARITA Australian Restructuring, Insolvency & Turnaround Association

ASIC Australian Securities and Investments Commission

AUD or A Australian dollars

BMR Battery Mineral Resources Limited (Administrators Appointed)

BMR Group BMR and the Subsidiaries

CAD Canadian dollars

CFO Chief Financial Officer

COI Committee of Inspection

Directors Lazaros Nikeas, George Pirie, Stephen Dunmead, James Hughes, Jonathan Hart and Ian Pringle

DIRRI Declaration of Independence, Relevant Relationships and Indemnities

DOCA Deed of Company Arrangement

ESI ESI Energy Services Inc.

Fusion Fusion Gold Ltd

FYXX Financial year for the period 1 July 20XX to 30 June 20XX

FY20YTD Financial results for the period 1 July 2019 to 31 October 2019

GVM Golden Valley Mines Ltd

IPR Insolvency Practice Rules (Corporations)

k Thousands

P&E Plant and equipment

PPSR Personal Property Securities Register

Purchaser Battery Mineral Resources Corp, a subsidiary of Weston

RTO Reverse takeover

ROCAP Report On Company Activities and Property

SSA Share Sale Agreement with the Purchaser dated 2 December 2019

Subsidiaries Wholly owned subsidiaries of BMR, North American Cobalt Inc. (B.C), North American Cobalt Inc. (US), Battery Mineral Resources (Nevada) Inc., Battery Mineral Resources (California) Inc. and Opirus Minerals Pty Ltd

USD US dollars

Weston Weston Energy LLC

YTD Year-to-date


Introduction

Appointment

Anthony Connelly and Jamie Harris were appointed Administrators of BMR on 11 November 2019 by resolution of the Board of Directors of BMR (Directors), pursuant to Section 436A of the Corporations Act (the Act).

Purpose of this report

The purpose of this report is to provide creditors with details about BMR’s business, assets, affairs and financial circumstances in preparation for the upcoming second meeting of creditors.

This report also informs creditors about the investigations undertaken by the Administrators and the Administrators’ opinion about each of the options available to creditors at the second meeting of creditors, together with the Administrators’ opinion as to the recommended course of action that is in creditors’ best interests.

This report has been prepared in accordance with section 75-225 of the Insolvency Practice Rules (Corporations) (IPR). It has been prepared pursuant to the regulations found in the Insolvency Law Reform Act 2016, which substantially commenced on 1 September 2017.

Object of Administration

In an administration, administrators are empowered by the Act to assume control of a company that is insolvent or likely to become insolvent, superseding the powers of its directors and officers, to manage the company’s affairs and deal with its assets in the interests of its creditors.

The objective of an administration is to maximise the prospects of a company continuing in existence (in whole or in part), or if that it is not possible, to achieve better returns to creditors than would be achieved by its immediate liquidation. During an administration, there is a moratorium (i.e. freeze) over most pre-administration creditor claims.

Administrators are required to investigate the company’s affairs and report to creditors on the administrators’ opinion as to which outcome of the administration process is in the creditors’ best interests in order to inform creditors prior to voting at the second meeting.

First meeting of creditors

Section 436E of the Act required the Administrators to convene the first meeting of creditors within eight business days of being appointed.

The first meeting of creditors of BMR was held on 21 November 2019, at which there were no nominations to appoint an alternative administrator. Creditors resolved at the first meeting of creditors to appoint a Committee of Inspection (COI) with that COI comprising:

Jack Cartmel representing 1173365 B.C. Ltd;

Gary Lewis representing ACT2 Pty Limited;

Mike Hendrickson representing Afton Minerals LLC;

Robert Wetzel representing Rascal Lithium LLC;

Henry Sandri representing Stonebridge Analytics LLC;

Thomas Weis representing Thomas V Weis and Associates Inc.; and

Michael Vickery representing Weston Energy LLC.

Second meeting

Pursuant to the Act, the second meeting is required to be held on or before 16 December 2019 unless an extension to the convening period has been sought from the Court. The Administrators have not applied to the Court for an extension to the convening period.

The purpose of the second meeting is for creditors to:

decide on the future of BMR, with the options available to creditors to vote on being whether BMR should:


− be returned to the control of the Directors; or

− enter into Liquidation; or

− enter into a Deed of Company Arrangement (DOCA), noting that a DOCA has not been proposed;

consider and, if thought fit, approve the Administrators’ actual and future remuneration; and

if creditors resolve that BMR should enter into liquidation:

− consider and, if thought fit, approve the Liquidators’ future remuneration;

− consider the appointment of a COI (for the purposes of a liquidation);

− consider authorising the Liquidators to compromise debts of BMR pursuant to section 477(2A) of the Act; and

− consider authorising the Liquidators to enter into agreements that may take longer than three months to complete under section 477(2B) of the Act.

If creditors do not wish to make an immediate decision, they may also resolve to adjourn the meeting for a period of up to 45 business days.

The second meeting of creditors for BMR has been convened to be held on 16 December 2019 at McGrathNicol, Level 7, 175 Eagle Street, Brisbane QLD 4000 at 9:30 AM (AEST). Details of the second meeting are included at section 13.


Executive summary

Jamie Harris and Anthony Connelly were appointed Voluntary Administrators of BMR on 11 November 2019, following a resolution by the Directors.

BMR is an Australian unlisted company, which owns (directly or indirectly) 100% of the shares in subsidiaries located in Australia, Canada, the United States and South Korea (Subsidiaries). They are a multi-commodity resource group engaged in the discovery and development of battery minerals (cobalt, lithium and graphite). BMR is considered to be in the exploration stage.

Upon appointment, there were insufficient funds available to the Administrators to meet the accrued debts of BMR, urgent ongoing operational costs or to undertake exploration activities required to maintain the value of exploration tenements. At the time, BMR and the Subsidiaries had at least A$9.4 million in secured debt, A$1.8 million in trade creditors and CAD$10.0 million in guaranteed, unsecured debt. Cash holdings totalled A$25k.

Based on the information available to the Administrators, the Administrators determined that the most appropriate course of action to preserve BMR’s business was to seek urgent Expressions of Interest for either the recapitalisation of BMR via a DOCA or sale of the shares in the Subsidiaries and the amounts BMR is owed by the Subsidiaries.

Due to the urgent funding required for existing debts, ongoing operations and the exploration activities of the Subsidiaries, the Administrators considered that a proposal for a recapitalisation or share purchase must involve a very short time period to settlement. In addition, or alternatively, it could involve urgent interim funding to enable the Subsidiaries to meet existing costs and continue operating on a going concern basis to preserve their value or to allow a longer period to further consider other options.

Thirteen expressions of interest were received during the sale process, which resulted in the receipt of three non-binding indicative offers by the due date of 20 November 2019.

Following a comparison of the offers received (including their value, risks and benefits) and consideration of the context of the administration and other information, the Administrators determined that it was appropriate to progress an offer received from the secured creditor, Weston Energy LLC (Weston) as Weston was prepared to enter into a transaction for the Subsidiaries in their current state, provide immediate funding for existing debts and ongoing costs and conclude the transaction in a short timeframe.

The Administrators convened a meeting of the COI on 22 November 2019 to consider a report by the Administrators setting out our analysis regarding the offers received. At that meeting, the Administrators set out their opinion that the offer provided by Weston provided the most certainty of outcome and would result in a likely better and more timely return for creditors compared to the other offers received. The COI subsequently resolved that it had no objection to the Administrators executing a sale agreement with Weston based on its offer.

The Administrators have since executed a Heads of Agreement with Weston, followed by a Share Sale Agreement (SSA) with a Weston subsidiary, Battery Minerals Resources Corp (Purchaser) (guaranteed by Weston). The SSA completed on 5 December 2019.

The Administrators have conducted preliminary investigations in relation to BMR, the conduct of the Directors and other parties, and whether there are any amounts that could be recovered in a liquidation of BMR. Details of those investigations are set out in this report, however further investigations may be required if BMR is wound up, including a commercial assessment of the merits and likelihood of recovery from pursuing any claim.

The Administrators’ preliminary investigations indicate that BMR was likely insolvent from on or around the end of October 2019, but potentially may have become insolvent at an earlier time (or times).

Based on the sale to the Purchaser, the current Proofs of Debt received, but excluding any potential recoveries from insolvent trading or antecedent transactions, the Administrators estimate a return of between 16 to 29 cents in the dollar for unsecured creditors entitled to prove for dividend purposes.

The second meeting of creditors for BMR will be held on 16 December 2019 at McGrathNicol, Level 7, 175 Eagle Street, Brisbane QLD 4000 at 9:30 AM (AEST).


The purpose of the second meeting is for creditors to:

− decide on the future of BMR;

− consider and, if thought fit, approve the Administrators’ actual and future remuneration; and

− if creditors resolve that BMR should enter into liquidation:

＞ consider and, if thought fit, approve the Liquidators’ future remuneration;

＞ consider the appointment of a COI (for the purposes of a liquidation);

＞ consider authorising the liquidators to compromise debts of BMR pursuant to section 477(2A) of the Act; and

＞ consider authorising the liquidators to enter into agreements that may take longer than three months to complete under section 477(2B) of the Act.

Having considered all of the options available for creditors (including that no party has proposed a DOCA), the Administrators recommend that BMR should be wound up.

Further information regarding the Administrators’ recommendations is outlined at section 11.


Administrators’ prior involvement

In accordance with Section 436DA of the Act and the ARITA Code of Professional Practice, a DIRRI dated 13 November 2019 for BMR was enclosed with the Administrators’ first communication to creditors, which was the notice convening the first meeting of creditors.

Background to the appointment of Administrators

A brief background to the appointment is as follows:

on 8 November 2019, a Director contacted McGrathNicol for the purposes of enquiring about the formal restructuring options available to BMR, including a potential appointment as voluntary administrators;

on 8 November 2019, Anthony Connelly and Jamie Harris consented to act as administrators of BMR;

Mr Connelly exchanged several telephone discussions and emails with the Director and CFO on 9 November 2019 and 10 November 2019 for the purposes of understanding BMR’s current position and outlining the options available to BMR; and

on 11 November 2019 (Brisbane time), the Directors resolved to appoint Mr Connelly and Mr Harris as Administrators of BMR, pursuant to section 436A of the Act.

Ongoing assessment

The Administrators undertook a proper assessment of the risks to their independence prior to accepting the appointment as Administrators of BMR in accordance with the law and applicable professional standards. This assessment identified no real or potential risks to the Administrators’ independence. The Administrators are not aware of any reasons that would prevent them from acting as Administrators.

At the date of this report, the opinion as to the Administrators’ independence has not changed. The Administrators remain of the view that their prior professional interactions as outlined in the DIRRI do not create or give rise to any conflict of interest.


Background and statutory information

Background

BMR is an Australian unlisted company, which owns 100% of the shares in subsidiaries located in Australia, Canada, the United States and South Korea. The Subsidiaries are engaged in the discovery and development of battery minerals (cobalt, lithium and graphite). BMR Group is considered to be in the exploration stage of its life cycle.

Group structure

An overview of BMR’s group stucture is set out below:

The Administrators are appointed to BMR only (green box above). The Subsidiaries continue to be under the control of their boards of directors.

Historically, BMR has funded the operational and exploration activities of the Subsidiaries through raising debt and equity capital. Accordingly, the Subsidiaries were dependent on BMR for ongoing funding to enable continued operational and exploration activities.

Timeline of key events

Based on the Administrators’ enquires and preliminary investigations, outlined below is a timeline of key events prior to the appointment of the Administrators.

Table 1: Timeline of key events

Date Description

19 March 2019 BMR entered into a Bridge Loan Facility with Weston for funding of USD$1.0 million. This was due to repaid by 18 April 2019, including financing fees (USD$100k) and interest. Funds advanced to BMR were subsequently spent, including being loaned to the Subsidiaries to meet their exploration costs.

24 April 2019 BMR entered into an Amended Bridge Loan Facility with Weston to increase the facility by USD$1.0 million, to a total of USD$2.0 million. This facility was due to be repaid by 24 July 2019, including an additional financing fee of (USD$200k) and interest. These funds were exhausted by 30 June 2019.

10 May 2019 BMR’s executive prepared a paper to the Board that recommended the exit of approximately 1,895 km2 of mining area in Ontario, Canada, in an effort to reduce ongoing operating costs of CAD$2.9 million. This was based on a strategic review aimed at reducing expenditure requirements and refocusing on key future exploration areas. A resolution to effect this recommendation was passed by the Board on 21 October 2019.


Date Description

June 2019 BMR attempted to raise additional share capital of approximately USD$4.0 million from its existing shareholders by undertaking investor road shows. The capital raising was not successful.

The draft financial accounts as at 30 June 2019 recognised a A$5.8 million impairment on U.S and Canadian cobalt assets and a A$6.8 million working capital deficiency. Despite this, the accounts were prepared on a going concern basis as Management recorded that it was confident it could raise additional capital.

16 July 2019 BMR issued a notification to its shareholders that the Managing Director, Gary Lewis, would leave his current role as Managing Director and Director of the Board, effective immediately. Mr Lewis formally resigned as a director on 13 September 2019.

2 August 2019 BMR entered into a further Amended Bridge Loan Facility with Weston to increase the facility by USD$1.5 million, to a total of USD$3.5 million. The total loan was due to be repaid by 5 October 2019, including an additional financing fee (USD$200k) and interest. These funds were exhausted by the end of August 2019. At or around this time, Weston advised BMR that it was not prepared to fund the ongoing operations of BMR alone and a material structural change was required.

3 September 2019 Fusion Gold Ltd (Fusion) announced that it had entered into a Letter of Agreement with BMR on 30 August 2019 to undertake a proposed reverse takeover transaction (RTO). Under the agreement, Fusion would acquire all of the shares in BMR in exchange for the shares in Fusion, resulting in the reverse takeover of Fusion by BMR and the listing of its shares on the TSX Venture Exchange.

Pursuant to the Letter of Agreement, the following terms were agreed between BMR and Fusion:

BMR would use reasonable endeavours to complete a private placement of shares in Fusion to raise at least USD$4.0 million; and

BMR would cause Weston to enter into a support agreement with Fusion and BMR, whereby Weston would (amongst other things) agree to convert at least USD$4.0 million of its debt to shares.

16 September 2019 BMR entered into a further Amended Bridge Loan Facility with Weston to increase the facility by USD$2.0 million, to a total of USD$5.5 million. The total loan was due to be repaid by 15 January 2020, including an additional financing fee (USD$300k) and interest. These funds were exhausted by the end of October 2019.

10 October 2019 On or around 10 October 2019, Weston entered into a support agreement with BMR and Fusion. Subject to completion of the RTO, Weston agreed to convert USD$4.0 million of its bridge loan to ordinary BMR shares, enter into a share purchase agreement for shares in Fusion and enter into a lock-up agreement in respect of its shares.

Subsequently, BMR and Fusion entered into a Scheme Implementation Agreement to formalise the terms of the proposed RTO. BMR engaged Lonergan Edwards & Associates (Australia) to prepare an Independent Expert Report. BMR commenced preparing a Scheme Booklet and engaged law firms Fasken (Canada) and Baker McKenzie (Australia) to assist with the transaction.

October 2019 BMR undertook investor road shows in an effort to secure private placement of shares in Fusion totalling at least USD$4.0 million. BMR was only able to secure USD$565k as of 21 October 2019.

By late October 2019, it had become apparent that BMR was not going to raise the requisite USD$4.0 million required to complete the RTO. At or around this time, BMR entered into further discussions with Weston. At this time, Weston advised that it was not prepared to advance further funds to BMR.

11 November 2019 The Board of Directors appointed Anthony Connelly and Jamie Harris as Administrators of BMR.


Date Description

2 December 2019 Fusion formally terminated the Scheme Implementation Agreement between BMR and Fusion, due to the appointment of the Administrators.

Situation on appointment

Upon the appointment of the Administrators, the Administrators undertook an urgent appraisal of BMR’s business. Based on that appraisal, it was noted that:

Cash: BMR’s cash reserves were limited to A$25k and it did not have immediate access to any further debt or equity funding. The Subsidiaries held less than A$1.5k cash and had no access to debt or equity funding, due to their historical reliance on BMR for funding.

Payables: BMR and the Subsidiaries had critical past due payables of approximately A$1.8 million (approximately 83% of them were more than 90 days overdue), which presented the following risks if not paid immediately:

− resignation of key employees and consultants, resulting in a loss of human and intellectual capital;

− unavailability of those employees/consultants to continue to advance BMR’s projects; and

− stand-down by certain contractors who advised they would not work for BMR or the Subsidiaries until their balances were paid in full.

Critical operational stage: the drilling programs in Ontario and California were scheduled to commence in January to April 2020. However, in order to commence the drilling programs, approx. A$3.3 million was required to meet current payables and acquire access to drills and other supplies in preparation for that winter drilling program.

Drill contractor for Canadian cobalt: a A$350k deposit was originally payable in mid-November 2019 to secure a drill rig for the winter drill season in Ontario. The contractor advised that it would instead release the drill rig to another party unless payment was made during November 2019. If this payment was not made, there was a risk that BMR’s subsidiary would not have the required access to a drill rig for 1-2 months of the 4 month winter drilling season (a number of exploration areas can only be drilled during cold and frozen conditions in winter months). Limited drilling activity may constitute a tenement breach and put at risk the security of those tenements.

Transition gold: there was a work commitment of A$0.4 million due by 2 March 2020 on one of BMR’s projects. If this work commitment was not met, BMR’s subsidiary may risk losing the project as it would be in default of its agreement.

Property payment: there was a USD$0.1 million critical land option payment that was due in February 2020. If this payment was not made, there was a risk that BMR’s subsidiary may lose key properties in its strategic land package.

Subsidiary assets: although the Subsidiaries may have held assets of value in the form of exploration tenements, those assets and the Subsidiaries themselves were at material risk as they did not have any sources of funding in order to meet their urgent and overdue financial obligations. The Subsidiaries were therefore, also likely to be insolvent.

Administrators’ costs: BMR was also without funds to pay the costs of the Administrators and advisers for managing operations or for an extended sale campaign. An administrator is not obliged to personally incur debts in their role that they are unable to pay.

Based on the above and other information made available to the Administrators, the Administrators determined it was in the best interests of BMR’s creditors to commence an urgent expression of interest campaign for the recapitalisation of BMR or the purchase of shares in the Subsidiaries. Refer to section 9 for more details regarding the sale process.


Statutory details

A search of the records maintained by ASIC at the date of the Administrators’ appointment revealed the following statutory details:

Table 2: Statutory details of BMR

Company name ACN Registered office Incorporation date

Battery Mineral Resources Limited

612 991 116 Level 16, 1 Market Street Sydney NSW 2000

14 June 2016

Source: ASIC company search

The registered office of BMR had been vacated prior to the Administrators’ appointment. On appointment, the Administrators issued the lessor of the registered office with a Notice pursuant to section 443B of the Act advising that the Administrators’ did not intend to exercise property rights.

Set out below is a summary of BMR’s current and historical directors and officers:

Table 3: List of directors and officers

Name Role Appointment date Cease date

Lazaros Nikeas Director 1 January 2018 Current

George Edward Pirie Director 23 May 2018 Current

Stephen Donald Dunmead Director 8 June 2018 Current

James Hughes Director 14 June 2018 Current

Jonathan Hart Director 13 September 2019 Current

Ian James Pringle Director 6 September 2016 17 November 2019

Gary Leon Lewis Director 14 June 2016 13 September 2019

George Spencer Young Director 28 May 2018 28 January 2019

George Spencer Young Director 24 August 2016 15 May 2018

Jonathan Hart Secretary 13 September 2019 Current

Gary Leon Lewis Secretary 14 June 2016 13 September 2019

Justin Bradley Clyne Secretary 1 September 2016 31 October 2017

Nexia Sydney Audit Pty Ltd Appointed Auditor 8 September 2016 Current

Source: ASIC company search

Set out below is a summary of BMR’s 20 largest registered shareholders based on BMR’s books and records:

Table 4: List of 20 largest shareholders

List of 20 largest shareholders

Registered shareholder Fully paid ordinary shares % of total shares

Lewis Super Admin Pty Limited 10,000,000 8.59%

Weston Energy LLC 10,000,000 8.59%

Weston Cobalt LLC 10,000,000 8.59%

LTL Capital Pty Limited 8,238,076 7.07%

JP Morgan Nominees Australia 5,170,833 4.44%

Merrill Lynch (Australia) 4,784,294 4.11%

Weston Energy LI LLC 3,000,000 2.58%

Asenna Wealth 2,585,328 2.22%


Mr George S Young 2,450,000 2.10%

Jien International Investments Ltd 2,400,000 2.06%

Mr Simon William Tritton 2,250,000 1.93%

Cove Street Pty Ltd 2,000,000 1.72%

Lion Point Capital GP LLC 2,000,000 1.72%

Shomron Pty Ltd 1,941,667 1.67%

Nutsville Pty Ltd 1,700,000 1.46%

Regal Silver Investments Inc 1,600,000 1.37%

Gleneagle Asset Management 1,560,000 1.34%

Ceres Capital Pty Ltd 1,419,615 1.22%

A & J Tannous Nominees Pty Ltd 1,257,917 1.08%

CS Third Nominees Pty Limited 1,250,000 1.07%

Total held by top 20 shareholders 75,607,730 64.93%

Other shareholders 40,840,038 35.07%

Total fully paid ordinary shares on issue 116,447,768 100.00%

Source: Company books and records

Security interest

A search of the PPSR database identified the following security interests held over BMR:

Table 5: List of security interests

Secured party Type of security

Weston Energy LLC All PAP with Exceptions

Source: PPSR search

Outstanding winding up applications

The Administrators are not aware of any outstanding winding up applications against BMR.


Books and records

The Administrators are required to provide an opinion on whether BMR’s books and records were maintained in accordance with the requirements of section 286 of the Act.

This section of the Act requires that a company must keep written financial records that:

correctly record and explain its transactions and financial position and performance; and

would enable true and fair financial statements to be prepared and audited.

Failure to maintain books and records in accordance with section 286 of the Act provides a presumption of insolvency. This presumption can be relied upon by a liquidator in an application for compensation for insolvent trading and other actions for recoveries pursuant to the Act from directors and other related parties.

The Administrators consider that a company operating the type of business undertaken by BMR in order to comply with section 286 of the Act should, as a minimum, maintain the following books and records:

financial statements, including profit and loss, balance sheet and cashflow statements;

general ledger and journal;

cash records, including cash receipts and payments;

bank account statements, bank reconciliations and bank loan documents;

creditor records, including creditor ledgers and outstanding invoices;

statutory records, including annual returns and ASIC forms;

taxation records including tax returns and lodgements;

registers of members; and

minutes of meetings of directors and members.

The majority of BMR’s records are maintained in Canada and are maintained by the BMR Group’s CFO. The Administrators have requested and have been provided with a range of information from the CFO, including the items set out above. In addition, the Administrators have obtained a backup of BMR’s electronic file server.

Based on the information available to the Administrators, the Administrators are of the opinion that BMR has maintained its books and records in accordance with section 286 of the Act. The books and records appear to correctly record and explain its transactions, financial position and financial performance.


Recent financial information

Consolidated financial statements

Summary

BMR prepared annual consolidated financial statements, audited by Nexia Australia.

The Administrators have been provided with BMR’s draft financial statements for the financial year ended 30 June 2019 (FY19), which have been consolidated to include BMR’s wholly-owned subsidiaries. The FY19 financial statements are in draft form and have not yet been signed off by the Directors. Audited financial accounts were not prepared on a stand-alone basis for BMR.

In this section, the Administrators present the draft FY19 comparable financial statements. The Administrators have not carried out an audit nor verified the financial information presented in this section of the Report.

Financial performance

A summary of the BMR Group’s financial performance for FY18 and FY19 is set out below:

Table 6: Summary of financial performance

BMR Group - Statement of financial performance (draft)

AUD$'000 FY19 FY18

Operating Income - -

Operating Expenses

Accounting and audit (408) (256)

Consulting fees (363) (374)

Depreciation of equipment (10) (14)

Director fees (407) (174)

General and administration (330) (416)

Legal fees (1,179) (553)

Management salaries and fees (644) (603)

Marketing (197) (348)

Rent (130) (124)

Share based compensation (34) (2,056)

Travel (612) (820)

Loss from Operations (4,313) (5,740)

Other Income/Expenses

Interest income 27 43

Impairment of investments in mineral property (5,756) (12)

Foreign exchange losses (234) (152)

Financing cost on convertible debt - (658)

Financing cost on bridge loan (614) -

Financing cost on long-term exploration advances (308) -

Interest expense (4) -

Losses on settlements - (188)

Gain on forgiveness of debt 106 -

Profit/(Loss) (11,095) (6,706)

Source: Draft financial statements


Financial position

A summary of the BMR Group’s financial position for FY18 and FY19 is set out below:

Table 7: Summary of financial position

Source: Draft financial statements

Comments on consolidated financial statements

The Administrators have reviewed the BMR Group’s draft financial statements for FY19 and make the following comments:

The accounts were prepared on a going concern basis with a note stating that continued operations were dependent upon the ability of the BMR Group to raise additional financing, which management recorded it was confident would occur.

BMR Group was in the exploration phase of its cobalt, lithium and graphite tenements and had not yet concluded that its exploration assets contained ore reserves that were economically recoverable. Accordingly, BMR Group had not derived any income from operations and its exploration assets were recorded based on capitalised costs attributable to those projects.

As at 30 June 2019, the BMR Group recognised a A$5.8 million impairment expense on its U.S and Canadian exploration assets, had a A$6.8 million working capital deficiency, and had accumulated losses of A$20.0 million since inception.

On 22 May 2018, BMR and one of the Subsidiaries entered into a Process Facility and Cobalt Supply Agreement with ESI Energy Services Inc. (ESI), a related party of Weston. Under this agreement, ESI would finance, build and operate a cobalt processing facility that would be supplied with mineral mined by BMR. BMR received exploration advance funding of CAD$10.0 million (repayable in certain circumstances) from ESI on 16 July 2018. BMR recognised the potential repayment of this as a contingent liability on its balance sheet at 30 June 2019.

There was an increase in management fees and Directors’ fees charged in FY19 (total increase of A$0.3 million).

BMR Group - Statement of financial position (draft)

AUD$'000 30-Jun-19 30-Jun-18

Current Assets

Cash 35 6,584

Receivables 255 640

Prepaid expenses 231 1,201

Total Current Assets 522 8,425

Non-Current Assets

Equipment 171 46

Exploration and evaluation assets 34,152 21,209

Total Non-Current Assets 34,324 21,255

Total Assets 34,845 29,680

Current Liabilities

Accounts payable and accrued liabilities (3,984) (2,072)

Bridge loan - Weston (3,362) (2,662)

Total Current Liabilities (7,345) (4,734)

Non-Current Liabilities

Exploration advance - ESI (10,897) -

Total Non-Current Liabilities (10,897) -

Total Liabilities (18,242) (4,734)

Net Assets 16,603 24,946


BMR Trial Balance

Summary

The Administrators have been provided with BMR’s draft trial balance in Excel form as at 30 June 2019 and 31 October 2019. The trial balance is for BMR only and does not include the financial transactions of the Subsidiaries. The Administrators have not carried out an audit or verified the accuracy of the trial balance information.

Balance sheet

A summary of BMR’s balance sheet based on the trial balance as at 31 October 2019 compared to 30 June 2019 is presented below:

Table 8: Summary of financial position

Source: Draft financial statements Note: the balance sheet above does not included the contingent liability owing to ESI. That liability is recognised in the books of BMR’s subsidiary, which is also a party to the ESI agreement.

Comments on balance sheet

The Administrators have reviewed BMR’s trial balance and make the following comments:

As at 31 October 2019, BMR had advanced A$37.4 million to the Subsidiaries to meet their ongoing operating costs and exploration expenses. The shares in the Subsidiaries and their accounts receivable were BMR’s primary non-current assets.

On both 30 June 2019 and 31 October 2019, BMR had accounts payable and other liabilities well in excess of its cash balances (i.e. a material working capital deficit existed).

Between 30 June 2019 and 31 October 2019, Weston advanced BMR an additional A$6.3 million (USD$3.5 million). By 31 October 2019, almost all of the funds advanced by Weston to BMR had been exhausted.

The contingent liability of A$10.9 million recognised in the draft FY19 financial statements of the BMR Group with respect to the amount received from ESI was not recognised in the books of BMR. Instead, it is recognised in the books of its Subsidiary, who is also a party to that agreement.

BMR - Balance sheet based on trial balance

AUD$'000 31-Oct-19 30-Jun-19

Current Assets

Cash 173 33

Receivables 37 69

Prepaid expenses 44 6

Total Current Assets 255 109

Non-Current Assets

Equipment 18 18

Related party receivables 37,364 34,747

Total Non-Current Assets 37,382 34,766

Total Assets 37,637 34,874

Current Liabilities

Accounts payable and accrued liabilities (1,910) (3,733)

Bridge loan - Weston (9,664) (3,362)

Total Current Liabilities (11,574) (7,094)

Non-current liabilities - -

Total Non-Current Liabilities - -

Total Liabilities (11,574) (7,094)

Net Assets 26,063 27,780


Report on Company Activities and Property

Directors’ ROCAP

The Directors submitted a ROCAP on 30 November 2019, pursuant to section 438B(2) of the Act. A ROCAP is a report summarising the directors’ understanding of the financial position of a company as at the date of the appointment of administrators, as well as their view on the reasons for the company’s financial failure.

Set out below is a summary of BMR’s asset and liability position based on:

the Directors’ ROCAP submitted on 30 November 2019; and

information provided by BMR’s Directors and the CFO to date.

Table 9: Summary of Directors’ ROCAP

Source: Directors’ ROCAP and information provided by BMR’s Directors and management.

The Administrators are of the opinion that whilst the ROCAP, in its own right, completed by the Directors inadvertently omits certain assets and liabilities, the details of those assets and liabilities have been provided to the Administrators in schedules, financial accounts and other information. The details of those assets and liabilities have been reflected in the table above.

Assets

Cash at bank

The Directors advised that BMR had A$25k of cash at bank on appointment.

The Administrators issued a notification to Australian banks and identified accounts held by National Australia Bank in the name of BMR. The Administrators transferred the balance of funds to an Administration bank account on 14 November 2019.

The Administrators have received details of two bank accounts held by BMR in Canada, which were used to manage Canadian and U.S payments. These accounts held less than A$1.5k in cash on appointment and it was not considered commercial to close these foreign bank accounts and transfer those amounts to Australia.

Plant and equipment (P&E)

The Directors advised that BMR had computer hardware (a server) and software based in Canada with a book value of approximately A$18k. The remaining value of P&E disclosed in the FY19 draft financial statements relates to vehicles and exploration equipment owned by the Subsidiaries.

Directors' ROCAP

AUD$'000 Book value Directors' ERV

Assets

Cash at bank 25 25

Plant and equipment 18 18

Shares in subsidiaries and related party loan receivables 37,364 20,780

Total assets 37,407 20,823

Liabilities

Secured debt (9,664) (9,664)

Unsecured creditors: related party (10,897) (10,897)

Unsecured creditors: trade creditors (574) (574)

Total liabilities (21,135) (21,135)

Net assets 16,273 (311)


Evaluation and exploration assets

The Directors advised that BMR held 100% of the shares in the Subsidiaries and had loans receivable from the Subsidiaries, which total A$37.4 million. This is based on the funding provided by BMR to the Subsidiaries to meet their operating costs and exploration expenses.

An estimate of the returns available to shareholders from this administration having regard to the completion of the SSA is set out at section 10.

Liabilities

Secured debt

The Directors advised that BMR had secured debt owing to Weston of approximately A$9.7 million, which consisted of principal debt of USD$5.5 million, together with capitalised interest and unpaid financing fees.

The Administrators have reviewed the security documentation between BMR and Weston and consider that the debt is due and payable. Weston lodged a Proof of Debt for voting purposes at the first meeting of creditors in the amount of A$9.4 million. We understand the variance between the reported amount and the Proof of Debt amount likely relates to exchange rate variations.

Related party, unsecured creditor

The Directors advised that BMR had an unsecured debt owing of approximately A$10.9 million, which related to the Process Facility and Cobalt Supply Agreement with ESI, a subsidiary of Weston. This amount is consistent with the contingent liability recognised in the draft FY19 financial statements.

The Administrators have received correspondence from Weston and ESI’s solicitor, Aird & Berlis LLP, setting out the grounds for why the amount of CAD$10.0 million paid to BMR on 16 July 2018 is now repayable and therefore, why ESI’s debt is provable in the administration of BMR.

Based on a review of that information and following advice from the Administrators’ solicitor, Herbert Smith Freehills, it would appear that the debt became due and payable either shortly prior to or upon the appointment of the Administrators. A Proof of Debt was submitted by ESI in the amount of A$10.9 million.

Unsecured, trade creditors

The Directors disclosed that BMR had unsecured debts of approximately A$574k.

The Administrators consider that there may be additional unsecured debts that were not yet taken to account by BMR at the date of the Administrators’ appointment, given that Proofs of Debt totalling A$1.2 million have been received. Some creditors have claimed debts in excess of the ROCAP amounts.

Directors’ reasons for failure

The Directors disclosed in the ROCAP that the reason for BMR’s failure was a result of cash flow and financing issues, which became apparent from on or around 30 June 2019. Subsequent discussions with BMR’s CFO indicated that a primary reason for BMR’s failure was the failure of the RTO between Fusion and BMR in late October 2019 and BMR not being able to raise alternative debt or equity capital.

Administrators’ view

Based upon investigations to date, the Administrators’ view is that the following factors contributed to BMR’s failure:

BMR experienced difficulties in raising additional share capital to fund its ongoing operations. Capital raisings undertaken on or around June 2019 and then again in October 2019 (the RTO), were both unsuccessful.

On or around August 2019, Weston advised that it was not prepared to fund BMR alone and share capital was required to meet future exploration costs. Following indications towards the end of October 2019 that the RTO was also likely to be unsuccessful, Weston declined to provide additional debt funding to BMR.

Due to a lack of capital, BMR was unable to continue to fund the operating costs and exploration expenses incurred by its Subsidiaries.


BMR may have over-invested in certain exploration tenements, which had resulted in BMR being liable for material property expenditure. This was identified in a paper to the Board prepared by BMR’s executive in May 2019. In October 2019, the Directors passed a resolution to exit approximately 1,895 km2 of mining area in Ontario, Canada, in an effort to reduce ongoing operating costs.

On or around June 2019, there appeared to be a divide amongst the Directors (at the time) together with stakeholder unrest regarding the rate, quantum and occurrence of certain expenditure.

The above is based on the Administrators’ preliminary investigations in relation to BMR. If the Administrators are appointed Liquidators, further investigations may be undertaken which may uncover further reasons for the failure of BMR.


Offences, insolvent trading and voidable transactions

Lazaros Nikeas, George Pirie, Stephen Dunmead, James Hughes, Jonathan Hart and Ian Pringle were the six directors of BMR noted on the ASIC record at the time the administration commenced. Gary Lewis formally ceased being a director on 13 September 2019.

Pursuant to the Act, a person may be considered to be a director of a company even if they are not appointed as director if:

they act in the position of a director; or

the directors of the company are accustomed to act in accordance with the person's instructions or wishes.

A BMR shareholder has questioned the involvement of certain Directors and Weston executives in the operations of BMR, failure of the RTO, the decision by the Directors to resolve to place BMR into administration and how any conflicts of interest were managed. Our preliminary investigations have identified a range of correspondence between the Directors, Weston executives and BMR management. It has not identified evidence to suggest that a person or persons may have acted as a “shadow director”.

However, further investigation may be required by a liquidator to consider whether a person or persons may have acted in the position of “Director” and in that case, this section may also extend to that person or persons.

Offences

ARITA has issued an “Offences, Recoverable transactions and Insolvent trading” information sheet providing general information for creditors about insolvent trading and voidable transactions.

This information sheet is available from the ARITA website (www.arita.com.au). If you are unable to access this website, please contact Emily Hill on (07) 3333 9830 to obtain a copy.

The following sections provide an overview of potential recoveries or actions available in a liquidation and provide details around key considerations.

Insolvent trading

Other than in cases of fraud, the director of a company may only be sued for insolvent trading if the company is in liquidation. Where an Administrator has been appointed, assessment of the issue of insolvent trading can be important to creditors if they are being asked to choose between a DOCA and a liquidation. In that instance, creditors have to assess the advantages to them of a DOCA (which does not include proceeds from insolvent trading actions) compared to the likely return to them in a liquidation (which could include the proceeds of any successful insolvent trading action). A liquidation also preserves the possibility of individual creditors taking action in their own right.

Before a court will order that a person pay compensation in respect of insolvent trading, a Liquidator must establish that:

the person was a director of the company at the time the company incurred the debt(s) that are the subject of the claim;

the company was insolvent at that time or became insolvent by incurring the debt;

at that time, there were reasonable grounds for suspecting that the company was insolvent or would become insolvent by incurring the debt; and

the debt the subject of the claim was wholly or partly unsecured and the creditors to whom debts are owed have suffered loss and damage.

In determining whether the Directors traded BMR at a time it was insolvent, we have considered a range of insolvency tests (refer to section 8.2.1 of this report).

http://www.arita.com.au/


Director defences

Section 588H of the Act sets out statutory defences available to Directors in respect of any claim for insolvent trading. These include:

at the time of incurring debts, the Directors had reasonable grounds to expect that the company was solvent;

the Directors relied on information provided by a competent and reliable person, which concluded that the company was solvent at the time debts were incurred; and

the Directors took reasonable steps to prevent the debt being incurred.

Voidable transactions

If BMR is wound up, certain transactions that occurred prior to the appointment of the Administrators, and where the property of BMR was disposed of or dealt with, may be recovered by the Liquidators under Part 5.7B of the Act. This may result in, among other things, a requirement for a third party to return property and/or money to BMR and thereby increase the assets available to the Liquidators and creditors. These are known as voidable or antecedent transactions.

IPR 75-225(3)(b)(vi) requires an Administrator to specify whether there are any transactions that appear to the Administrator to be voidable transactions in respect of which money, property or other benefits may be recoverable by a Liquidator under Part 5.7B of the Act. As with the insolvent trading analysis above, this issue is relevant to creditors if they are being asked to choose between a DOCA and a liquidation, because voidable transactions are only recoverable if a liquidation occurs.

Voidable transactions include:

unfair preference claims: transactions between a company and a creditor, resulting in the creditor receiving from the company, in relation to an unsecured debt owed to the creditor, a greater amount than it would have received in relation to the debt in a winding up of the company;

uncommercial transactions: transactions which a reasonable person in the place of the company would not have entered into, taking into account the benefits and the detriment to the company, the respective benefits to the other parties involved and any other related matters; and

unfair loans: being a loan agreement where the interest or charges are considered to be extortionate. Unfair loans made to the company any time prior to the appointment of the Administrators may potentially be overturned by a subsequently appointed Liquidator, whether or not the company was insolvent at the time the loan was entered into.

We have reviewed BMR’s books and records to determine the existence of voidable transactions. Our commentary with respect to these initial investigations is set out at section 8.3 of this report.

Breach of Directors’ duties

Sections 180 to 184 of the Act set out the duties, obligations and responsibilities imposed on directors, which are designed to promote good governance and ensure that directors act in the interests of a company. These duties include:

duty of care and diligence;

duty of good faith;

duty not to make improper use of position; and

duty not to make improper use of information.

Funding to pursue insolvent trading and voidable transactions

Insolvent trading and voidable transactions can only be pursued in a liquidation and further investigation and any subsequent proceedings may incur significant costs.

Funding may be required from creditors or litigation funders should the liquidators (if appointed) seek to commence such action.


Insolvent trading

Tests of insolvency

The following range of tests and indicators may be considered when determining if and when BMR became insolvent:

Table 10: Tests of insolvency

Tests of insolvency Administrators’ comments

Cash flow test – ongoing losses and poor cash flow

BMR raised debt and equity capital to fund the exploration operations of its Subsidiaries. As is consistent with exploration programs, the BMR Group generated operating losses in the two years prior to the Administrators’ appointment.

On 18 March 2019, BMR entered into a USD$1.0 million Bridge Loan facility with Weston, plus interest and financing fee (USD$100k). On 24 April 2019, BMR extended the Bridge Loan by a further USD$1.0 million, which incurred an additional financing fee (USD$200k). As of 30 June 2019, that facility totalled USD$2.3 million, was fully drawn and the BMR Group had A$3.3 million in trade creditors.

On 10 May 2019, BMR’s executive recommended to the Board that BMR ought to exit approximately 1,895 km2 of mining area in Ontario, Canada, in an effort to reduce CAD$2.9 million in operating costs.

In or around June 2019, BMR attempted to raise additional share capital from its existing shareholders. Shareholder commitments totalling approximately USD$2.0 million were made, conditional on:

a matched investment of USD$2.0 million from other parties;

finance contribution from management; and

partial cancellation of board/management shares (in particular, those of Managing Director, Gary Lewis).

Ultimately, the capital raising did not eventuate. Subsequently, BMR released a shareholder notice on 16 July 2019 advising that Mr Lewis would leave his current role as Managing Director, effective immediately.

On 2 August 2019, Weston extended BMR’s facility to USD$3.5 million. The facility was extended again on 16 September 2019 to USD$5.5 million. Those extensions incurred financing fees of USD$200k and USD$300k, respectively. On or around the August 2019 extension, Weston advised BMR that is was not prepared to continue to fund BMR alone and additional share capital would be required.

On 30 August 2019, BMR entered into a Letter of Agreement with Fusion to undertake a proposed RTO transaction. That transaction was (amongst other things) conditional on BMR using reasonable efforts to raise USD$4.0 million in share capital. Although the agreement had a target completion date of 15 January 2020, it appeared likely to fail by late October 2019 on the basis that subscriptions of only of approximately USD$565k were obtained.

Based on a review of BMR’s cash book:

As at 30 June 2019, BMR had cash of A$35k and trade creditors of A$3.3 million (including the Subsidiaries). At that date, BMR



had fully drawn its Weston facility and had not secured additional share capital funding.

On 24 July 2019, the maturity date of the Weston Amended Bridge Loan Facility executed on 24 April 2019 had expired and BMR did not have sufficient cash available to repay that debt. That facility was subsequently extended on 2 August 2019.

On 4 October 2019 and following the final drawdown of the Weston USD$5.5 million facility, BMR had cash of A$1.3 million and trade creditors of at least A$2.5 million.

On 31 October 2019, BMR had cash of A$167k and trade creditors of A$1.8 million (including the Subsidiaries).

As set out in the Directors’ ROCAP, the Directors have advised that the reason for BMR’s failure was a result of cash flow and financing issues, which became apparent from on or around 30 June 2019.

Balance sheet tests of insolvency BMR’s largest assets were its shares held in the Subsidiaries and the loan receivables from the Subsidiaries. Based on the BMR Group’s draft FY19 financial statements, the value of the Subsidiaries’ exploration tenements were based on the capitalised costs associated with exploration activity.

As at 30 June 2019, the draft FY19 financial statements disclose:

The carrying value of the BMR Group’s exploration assets had been tested for impairment, with impairment expenses of A$5.8 million being recorded in relation to the Canadian and U.S cobalt projects.

BMR Group had a A$6.8 million working capital deficiency and had accumulated losses of A$20.0 million since inception.

The following comment in relation to BMR Group remaining a going concern: “the continuing operations of the company are dependent upon its ability to raise additional financing. These material uncertainties may raise significant doubt about the company’s ability to continue as a going concern”.

Management recorded it was confident that BMR Group would be able to raise additional financing in the future to continue its planned activities. Accordingly, the accounts were prepared on a going concern basis.

Absence of a business plan The Administrators have reviewed corporate presentations prepared for the proposed RTO with Fusion that sets out BMR’s exploration and corporate strategy. Therefore, the Administrators do not consider that BMR lacked a business plan.

Incomplete financial records or disorganised internal accounting procedures

BMR’s financial records and internal accounting procedures appear adequate.

Lack of cash flow forecasts and other budgets

Cash flow forecasts prepared by BMR highlighted the urgent need to raise additional debt and/or equity capital to fund its ongoing exploration activities.



Increasing debt, overdraft limit reached, increased monitoring by financier and inability to obtain finance

BMR was primarily financed through debt and equity capital. The Administrators’ preliminary investigations indicate that:

BMR experienced difficulties in raising additional share capital to fund its ongoing operations. Capital raisings undertaken on or around June 2019 and then again in October 2019 (the RTO), were both unsuccessful.

Weston extended its debt facilities on three occasions from April 2019 to September 2019. On or around August 2019, Weston advised BMR that it was not prepared to fund BMR alone and share capital was required to meet future exploration costs.

Towards the end of October 2019, BMR was concerned that the RTO would likely be unsuccessful. At that time, Weston declined to provide additional debt funding to BMR.

Upon the appointment of the Administrators, neither BMR nor its Subsidiaries had access to secured debt or equity capital.

Problems selling stock or collecting debts BMR held no stock and had no material debtors.

Unrecoverable loans to related parties BMR provided funding to the Subsidiaries in the form of unsecured loans. The repayment of the intercompany loans was dependent on the Subsidiaries generating sufficient cash flows, which did not appear to be possible in the short-to-medium term as the BMR Group was only in the exploration phase of its mining tenements.

Creditors unpaid outside usual terms, special arrangements with creditors and/or payments to creditors of rounded sums

As at the date of appointment, BMR and the Subsidiaries had a number of creditors with unpaid invoices more than 90 days overdue (approximately 83% of total creditors of A$1.8 million).

The Administrators understand that:

trade creditors at 30 June 2019 totalled A$3.3 million, a number of which were outside of payment terms;

the payment of creditors between June 2019 to the date of appointment was largely reliant on the success of capital raising initiatives or obtaining additional finance from Weston; and

informal payment arrangements were made with a number of creditors during the period June 2019 to the date of appointment, with some creditors being paid rounded sums.

Solicitors’ letters, demands and other judgements

The Administrators are not aware of any winding up notices or solicitor’s demand letters, however BMR is a party to proceedings in the Ontario Superior Court of Justice regarding amounts outstanding to Golden Valley Mines Ltd (GVM).

The claim relates to amounts payable to GVM pursuant to a joint venture agreement. GVM took steps to obtain a judgment for the debt (on or around October 2019) on the basis that BMR was unable to pay for that debt. Records indicate that BMR may have made an offer to pay a portion of this debt at one point.



Suppliers placing the company on cash on delivery terms and/or collecting stock

The Administrators understand from discussions with the CFO that:

a number of key consultants and suppliers leading up to the appointment of the Administrators had advised that they were not prepared to undertake further work unless amounts outstanding to them had been paid; and

prior to the appointment of the Administrators, BMR was renegotiating the payment of a A$536k deposit to secure a drill rig for the winter drilling season in Ontario, Canada. The contractor advised that it would release the drill rig to another party unless a payment of A$350k was made during November 2019.

Overdue taxes and superannuation liabilities BMR had no outstanding GST lodgements or GST debts as at the date of the Administrators’ appointment. Income tax returns from FY16 onwards have not been lodged, however it is not envisaged that there would be any income tax liability relating to those lodgements.

Board disputes, director resignations and/or loss of management personnel

During the period July 2019 to the date of the Administrators’ appointment, BMR was in dispute with its former Managing Director, Gary Lewis. Based on legal correspondence, file notes and other information within BMR’s records, we note that:

on 16 July 2019, BMR passed a resolution to replace Mr Lewis as the Managing Director of BMR;

on 5 August 2019, Mr Lewis’ solicitor wrote to BMR and claimed that Mr Lewis was terminated without cause and that an amount owing pursuant to his Consultancy Agreement of A$326k was payable. This included unpaid director fees (A$116k), a termination payment (A$184k) and unpaid expenses (A$25k). Mr Lewis’ solicitor also challenged the validity of the resolution to replace Mr Lewis;

following the receipt of Mr Lewis’ letter, BMR undertook a review into the amounts payable to Mr Lewis. Following that review, BMR alleged that:

− Mr Lewis had not followed company protocol with respect to expense claims and had claimed and was reimbursed by BMR for personal expenditure. The estimated amount of personal expenditure charged to BMR over the period July 2017 to March 2019 was calculated at approximately A$139k;

− Mr Lewis had withdrawn on a number of occasions from BMR’s bank accounts cash advances for “travel purposes, tips and gratuities” that were not supported by some form of receipt, documentation or claimed through the expense reimbursement template (approximately A$14k);

− the amount claimed by Mr Lewis did not factor in all amounts that had been paid to him (A$98k); and

− therefore, BMR considered that approximately A$75k was payable to Mr Lewis;



the Administrators have not yet undertaken a detailed review of this allegation against Mr Lewis, which is no doubt disputed by Mr Lewis. If the Administrators are appointed Liquidators, then further investigations will be undertaken;

on 13 September 2019, Mr Lewis signed a resolution to voluntarily resign as Managing Director; and

prior to the appointment of the Administrators, BMR was considering legal action against Mr Lewis with respect to his claim and his new role as CEO of Element Global Mining, a competitor of BMR.

Source: McGrathNicol analysis

Administrators’ conclusions regarding solvency

Solvency is a question of fact to be ascertained from consideration of a company’s financial position as a whole. Our preliminary conclusions regarding BMR’s solvency are outlined below.

Having regard to the matters set out in section 8.2.1 above, the Administrators’ preliminary investigations indicate that BMR was likely insolvent from the time it appeared likely the RTO would fail and Weston advised that it would not advance any additional funding to BMR (on or around late October 2019). At this time, BMR had no additional secured sources of either debt or equity funding to meet material outstanding trade creditors and other liabilities, nor ongoing costs.

However, BMR may have been insolvent at a time, or times, prior to this date. Whilst a liquidator would be required to undertake more detailed investigations to ascertain the exact point or points of insolvency, we note that BMR may have been in and out of solvency during 2019 based on the following:

at 30 June 2019, BMR had cash of only A$35k, had fully drawn its Weston facility and had not secured additional share capital funding. The trade creditors of the BMR Group at that time totalled A$3.3 million;

on or around 2 August 2019, Weston extended its debt facility with BMR however, it advised BMR that it was not prepared to fund BMR alone and additional share capital would be needed to fund ongoing operations;

on 30 August 2019, BMR entered into a Letter of Agreement with Fusion to undertake a proposed RTO transaction. We understand that there were indications that the RTO was likely to fail from late-October 2019. On or around this time, Weston also advised BMR that it was not prepared to extend further debt to BMR;

approximately 83% of the BMR Group’s accounts payable were greater than 90 days outstanding upon the date of the Administrators’ appointment. As a number of suppliers were on terms of less than a month, this indicates that BMR was likely unable to pay its debts as and when they fell due from at least two to three months prior to the Administrators’ appointment; and

the Directors have advised that the reason for BMR’s failure was a result of cash flow and financing issues, which became apparent from on or around 30 June 2019.

Further investigations by an appointed liquidator would be required to establish the actual date or dates that BMR became insolvent.

Insolvent trading recoveries

After due consideration of all of the relevant issues, the Administrators’ preliminary assessment is that, on balance, a Liquidator may have reasonable prospects of proving that debts were incurred by BMR and its Directors at a time or times when the company was insolvent. If BMR was insolvent when debts were incurred, the Directors may be personally liable for those amounts. The likely maximum claim for damages in respect of insolvent trading would be the total amount of outstanding creditor claims as at the date of the Administrators’ appointment, less the net realisations from BMR’s assets.


However, a Liquidator would be required to take into account the prospects of success of prosecuting any claims as well as weigh up the costs of pursuing claims against the potential recoveries from such claims (including resources available to the Directors to meet any such claims).

The Administrators have not undertaken an assessment of the Directors’ current financial position. However, the Administrators understand that other than Ian Pringle and Jonathan Hart, the remaining Directors reside outside of Australia (Canada and the U.S), therefore any potential recovery from an insolvent trading claim may also need to have regard to the foreign jurisdictions where they reside. The former Managing Director, Gary Lewis, resides in Australia.

If the Administrators are appointed as Liquidators, the Administrators will investigate this matter further.

Voidable transactions

Unfair preference claims

Our preliminary investigations have identified several possible unfair preference claims, which may be recoverable if BMR is wound up. These claims primarily relate to the payment of Directors’ fees and expenses at a time in which it would have been reasonable for the Directors to have suspected that BMR was insolvent. There are also a number of trade creditor payments for smaller or rounded amounts.

Similar to insolvent trading actions, there are a range of defences that may be available to the parties involved in the potential ‘unfair preference claims’ that would need to be considered and investigated prior to commencing recovery action. Additionally, certain of the potential unfair preference claims consist of smaller amounts paid in foreign jurisdictions (e.g. Canada and the United States) that may be uncommercial to pursue.

The Administrators note that the investigations to date are preliminary. If BMR is to be wound up, further investigations and a cost benefit analysis of pursuing recovery action will be undertaken in relation to the matters referred to above.

Uncommercial transactions

Our preliminary investigations have not identified any uncommercial transactions. If BMR is wound up, further investigations will be undertaken.

Unfair loans

Our preliminary investigations have not identified any unfair loans. If BMR is wound up, further investigations will be undertaken.

Breach of directors’ duties

The Administrators have undertaken preliminary investigations into whether any of BMR’s current or former directors breached their duties set out in section 180 to 184 of the Act. The Administrators note that:

As set out in section 8.2.1, prior to the Administrators’ appointment, BMR was in dispute with its former Managing Director, Gary Lewis. BMR was of the view that Mr Lewis had not followed company protocol with respect to expense claims, had not substantiated BMR cash withdrawals and had claimed and was reimbursed by BMR for personal expenditure (total estimated at A$153k). If this allegation is found to be correct, then such behaviour may constitute a breach of director duties by Mr Lewis.

A BMR shareholder has questioned the involvement of certain Directors and Weston executives in the operations of BMR, failure of the RTO, the decision by the Directors to resolve to place BMR into administration and how any conflicts of interest were managed. Our preliminary investigations have identified a range of correspondence between the Directors, Weston executives and BMR management. It has not identified evidence to suggest that a person or persons may have breached their directors’ duties.

If the Directors are found to have breached their duties, recovery proceedings for any losses may be pursued. The Administrators are required to give further consideration to the discharge of duties by the Directors if BMR is wound up and the Administrators are appointed Liquidators.

If BMR is wound up, further investigations and a cost benefit analysis of pursuing recovery action (including a consideration of whether there are funds available to meet any claims) would be undertaken.


Administrators’ actions to date

Context

An administrator is an officer of the company over which they are appointed and has duties of good faith in the context in which they find the company. In the context of BMR, that includes the following, important, non-exhaustive list of matters:

BMR was without funds. It had approximately A$25k in its bank account at the time of the Administrators’ appointment;

the Subsidiaries were also without funds and (between them) had less than A$1.5k in cash;

BMR and the Subsidiaries owed creditors in excess of A$1.8 million (before considering secured and longer term debts);

the significant majority (83%) of those amounts were outstanding for over 90 days, which accords with advice provided to the Administrators that the BMR Group had operated with very limited funding for some months;

the Subsidiaries had no funds to pay for the existing obligations, basic ongoing operating costs, or any future exploration costs; and

BMR was also without funds to pay for its operating costs together with the costs of the Administrators and advisers for managing operations or for an extended sale campaign. An administrator is not obliged to personally incur debts in their role that they are unable to pay.

It therefore appeared that, on or shortly after the appointment of the Administrators, the Subsidiaries were also insolvent as they were unable to access any funds to pay existing debts or any ongoing or future costs. Therefore, although the Subsidiaries may have held assets of value, those assets and the Subsidiaries themselves were at material risk due to their insolvency. For example:

unpaid employees or consultants may cease undertaking basic tasks such as day to day maintenance of tenements;

unpaid accounts may lead to cessation of supply of other essential services;

tenements may be put at risk of cancellation for non-payments or for insolvency event trigger clauses; and

creditors may enforce their overdue debts and wind up (or commence other processes) against the Subsidiaries in their home jurisdictions.

In this context, the Administrators determined it was appropriate to immediately seek urgent expressions of interest for the recapitalisation of BMR or sale of its Subsidiaries.

Sale process

On 12 November 2019, the Administrators sought urgent Expressions of Interest for either the:

recapitalisation of BMR via a Deed of Company Arrangement; or

purchase of the shares in the Subsidiaries and the amounts BMR is owed by the Subsidiaries.

Due to the urgent funding required for ongoing operations and exploration activities for the Subsidiaries, the Administrators determined that a proposal for a recapitalisation or share purchase must involve a very short time period to settlement. In addition, it was determined that a proposal must involve urgent interim funding to enable the Subsidiaries to continue operating on a going concern basis to preserve their value or to allow a longer period to further consider other options.

In short, it was determined that a longer sale timetable was only possible if immediate funds were provided to meet operating and administration costs to preserve value. Accordingly, the Administrators provided interested parties with the following proposed sale timetable:


Table 11: Sale timetable

Event Date

Campaign commenced 12 November 2019

Due diligence documentation available 14 November 2019

Expressions of Interest close date 15 November 2019

Non-binding indicative offers due (NBIO) 20 November 2019

Planned negotiation, acceptance, documentation and completion Late November 2019

Advertisements were placed in the Australian Financial Review and Financial Times. The Administrators also attempted to contact all shareholders via their contact details set out on the share register to outline the sale process and invite them to participate.

Following the receipt of 13 expressions of interest, the Administrators requested that interested parties sign a Confidentiality Deed to obtain access to an Information Memorandum and the vendor’s due diligence data room. Nine parties signed that Confidentiality Deed and were provided with access to the data room, which contained information regarding:

the current and forecast financial position of the BMR Group;

the short term cash requirements of the BMR Group;

technical reports regarding the BMR Group’s mining tenements and details of those tenements;

corporate information (e.g. company search and organisational chart);

previous investor presentation;

BMR agreements (e.g. the ESI Process Facility & Cobalt Supply Agreement); and

sale process information.

By the closing date for non-binding indicative offers, the Administrators had received three ‘all or nothing’ offers that were in various stages of advancement. These offers had been received from Weston and two separate Shareholder Consortia.

Assessment of non-binding indicative offers

Having regard to the context of the administration, other information available to the Administrators and a comparison of the offers received from the three interested parties including the likely returns to creditors those offers may generate, the Administrators determined that it was appropriate to progress the offer received from Weston, for which Weston was prepared to:

enter into a transaction for the Subsidiaries in their current (likely insolvent) state;

provide immediate and ongoing funding for their operations; and

conclude the transaction in a very short timeframe.

The transaction was assessed to provide the most certainty of outcome and likely better return for creditors compared to other offers received.

Approval by COI

The Administrators convened a meeting of the COI on 22 November 2019 to consider a report by the Administrators regarding the non-binding indicative offers received from interested parties and the Administrators’ views with respect to progressing the offer proposed by Weston.

At that meeting, the COI considered the offers from Weston and the Shareholder Consortia and the majority agreed with the recommendation made by the Administrators that the offer from Weston would provide the most certainty of outcome and would result in a likely better and more timely return for creditors compared with other offers received. The following resolution was passed on the voices by the COI:


“That the Committee of Inspection has no objection to the Administrators executing a Share Sale Agreement with Weston Energy LLC for BMR’s subsidiary shareholdings and intercompany receivables based on the key terms outlined in the Administrators’ report to the Committee of Inspection dated 22 November 2019”.

Sale documentation

Following the passing of the resolution by the COI, the Administrators entered into a Heads of Agreement with Weston on 24 November 2019. On 2 December 2019, the Administrators entered into a SSA with a subsidiary of Weston, Battery Mineral Resources Corp (to which Weston remains a guarantor). The key terms of the SSA were as follows:

Purchase price of A$20.8 million allocated or paid as follows:

− Set-off against the Weston secured debt other than A$200k;

− Set-off against the ESI unsecured debt other than A$200k;

− Cash consideration of A$600k; and

− Purchaser to direct-pay A$235k of business critical BMR unsecured creditors.

In addition, the Purchaser will:

− direct-pay A$761k of Subsidiary creditors and A$116k of future Subsidiary creditors;

− procure that Weston and ESI do not participate in a dividend process by the Administrators or subsequent Liquidators; and

− settle the transaction within 5 business days following SSA execution.

The SSA completed on 5 December 2019. The Purchaser and the Administrators are continuing to attend to post-completion matters.


Anticipated return to creditors

Basis and assumptions

The following section provides an estimated return to creditors of BMR on the basis that creditors resolve at the second meeting to wind up BMR (given that no DOCA has been proposed at this time).

The estimated return to creditors has been prepared based on the following assumptions:

the SSA that completed with the Purchaser on 5 December 2019;

creditor claims are based on the Proofs of Debt that have been received to date, less creditors direct paid by the Purchaser, and there are no material additional claims made against BMR; and

recoveries from voidable transactions are not included. All creditors, not only secured creditors, may participate in voidable transaction recoveries.

Estimated return to creditors

Outlined below is an estimated return to creditors from the proposed liquidation of BMR based on the assumptions set out in section 10.1:

Table 12: Estimated return to creditors

Source: McGrathNicol analysis Note: We have excluded the non-cash components of the purchase price set out in the SSA. We have also excluded the purchase price component attributable towards direct-paying certain BMR creditors as well as the value of those claims.

The cash component of the consideration set out in the SSA is A$600k, which has been used to determine the estimated cents in the dollar return to proven unsecured creditors.

Creditors should note that the estimates provided in this section are preliminary only and are subject to change as creditor claims are considered and adjudicated and the realisations and costs of the administration becomes more clear. Other sources of funds, for example from insolvent trading or antecedent transaction recoveries may increase the return to unsecured creditors. No warranty as to the accuracy or reliability of the estimates is provided.

Estimated return to creditors

AUD$'000 Low High

Cash on appointment 25 25

Pre-appointment GST refund 3 3

SSA - Cash component only 600 600

Recovery actions - antecedent transaction & insolvent trading TBC TBC

Total asset realisations 628 628

Less:

Administration expenses (e.g legal fees, consultants, incurred costs, etc.) (100) (75)

Administrators' remuneration and disbursements (180) (180)

Liquidators' costs, remuneration and disbursements (200) (100)

Amount available for distribution to creditors 149 273

Provable claims for distribution purposes:

Secured and contingent liability claims - -

Unsecured creditors (939) (939)

Cents in the dollar return to proven unsecured creditors $0.16 $0.29

Residual funds available to shareholders - -


Alternative courses of action

Administrators are required to provide creditors with a statement of the Administrators’ opinion about each of the courses of action in respect of which creditors are entitled to vote at the meeting on 16 December 2019.

The matters requiring the Administrators’ opinion are:

whether it would be in the creditors’ interests for the administration to end, with control of BMR reverting to the Directors; or

whether it would be in the creditors’ interests for BMR to enter into a DOCA; or

whether it would be in the creditors’ interests for BMR to be wound up.

In addition, creditors are entitled to adjourn the meeting for up to 45 business days.

Administration to end

Creditors may consider ending the administration and returning control of BMR to the Directors. The Administrators do not consider this to be a commercially viable option, given that BMR is currently without any material assets to meet creditor liabilities, and is therefore insolvent or likely to become insolvent.

In the Administrators’ opinion, it is not in the best interests of creditors to vote for the administration of BMR to end.

Deed of Company Arrangement

A DOCA is a binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with. It aims to maximise the chances of the company, or as much as possible of its business, continuing, or to provide a better return for creditors than an immediate winding up. A DOCA binds all unsecured creditors, even if they voted against the proposal.

There has been no DOCA proposal submitted for BMR and the Administrators are not aware of any party that intends to propose a DOCA prior to the second meeting of creditors.

In the absence of a DOCA proposal for BMR, the Administrators cannot recommend nor propose a resolution that would result in BMR entering into a DOCA.

BMR be wound up

An Administrator would usually recommend that creditors vote for the winding up of a company that is insolvent or likely to become insolvent in the absence of an acceptable DOCA proposal. An Administrator would also recommend liquidation in preference to a DOCA if there is a strong likelihood that recoveries in a liquidation (for example, voidable transaction recoveries) will improve the return to creditors in comparison to the return expected under a DOCA.

A liquidation of BMR would involve:

the completion of a more detailed investigation into the affairs of BMR and the conduct of the Directors;

further enquiries regarding potential insolvent trading and voidable transaction actions;

reporting to ASIC in relation to offences (if any) committed by the Directors of BMR; and

adjudicating creditor claims and payment of any dividends.

The costs of administering the liquidation would depend, to a large extent, on the nature of any further investigations in respect of potential voidable transactions and other recovery actions.

In the absence of a DOCA proposal for BMR, the Administrators recommend a resolution that would result in BMR entering into Liquidation.

Opinion summary

The Administrators’ overall recommendation to the creditors of BMR is that creditors resolve to wind up BMR.


Creditor information on remuneration

Enclosed with this report is the Administrators’ Remuneration Approval Report with respect to BMR. This report deals with the remuneration incurred to date and future remuneration required to deal with the remainder of the Administration and the future of BMR (depending on the outcome of the meeting of creditors convened for 16 December 2019).

ARITA has issued an “Approving remuneration of an external administrator” information sheet providing general information for creditors on the approval of an External Administrator’s fees in a liquidation scenario, a voluntary administration or a DOCA.

This information sheet is available from the ARITA website (www.arita.com.au). If you are unable to access this website, please contact Emily Hill on (07) 3333 9830 to obtain a copy.

http://www.arita.com.au/


Creditor meeting details

The second statutory meeting of creditors has been convened to be held on 16 December 2019 at McGrathNicol, Level 7, 175 Eagle Street, Brisbane QLD 4000 at 9:30 AM (AEST).

Creditors who have already lodged a Proof of Debt do not need to complete a new Proof of Debt.

Under the Act, the proxy forms lodged by creditors for the first meeting cannot be used for the second meeting. Accordingly, creditors who are unable to attend the meeting and wish to be represented should ensure that a proxy form, power of attorney or evidence of appointment of a company representative is completed. Documents may be lodged with the Administrators’ office prior to the meeting or may be brought to the meeting.

A formal notice of meeting, Proof of Debt form and proxy form are enclosed with the accompanying circular to creditors. Teleconference facilities will also be available for the second meeting, details of which are set out in the notice of meeting.

If you have any queries in relation to this report or the administration, please contact Emily Hill on (07) 3333 9830.



Remuneration Approval Report Battery Mineral Resources Limited (Administrators

Appointed)

ACN 612 991 116

(BMR)

6 December 2019

3. D14-191204-BATTMIN01-Remuneration report-PC 1

This remuneration approval report provides you with information to assist you to make an informed decision regarding the approval of our proposed remuneration for undertaking the Administration of BMR.

The report has the following information:

Declaration ........................................................................................................................................................................................................................ 2 Executive Summary ....................................................................................................................................................................................................... 2 Remuneration................................................................................................................................................................................................................... 2

Retrospective remuneration...................................................................................................................................................................................... 2 Prospective remuneration .......................................................................................................................................................................................... 6 Estimated future remuneration ............................................................................................................................................................................ 11 Total remuneration reconciliation ....................................................................................................................................................................... 11 Likely impact on dividends .................................................................................................................................................................................... 11 Remuneration recovered from external sources ......................................................................................................................................... 12

Disbursements .............................................................................................................................................................................................................. 12 Internal disbursements ............................................................................................................................................................................................. 12 Further explanation of data hosting disbursements ................................................................................................................................. 13

Summary of receipts and payments.................................................................................................................................................................. 13 Queries ............................................................................................................................................................................................................................. 13


Declaration

We, Jamie Harris and Anthony Connelly of McGrathNicol, have undertaken a proper assessment of this remuneration claim for our appointment as Administrators of BMR in accordance with the law and applicable professional standards. We are satisfied that the remuneration claimed is in respect of necessary work, properly performed, or to be properly performed, in the conduct of this matter.

Executive Summary

To date, no remuneration or internal disbursements have been approved and paid in this administration.

This remuneration approval report details approval sought for the following remuneration:

Approvals sought (if creditors vote for liquidation) Report

Reference Amount (ex GST)

Remuneration

Retrospective: 11 November 2019 to 3 December 2019 3.1 $144,788.00

Prospective: 4 December 2019 to finalisation of the Administration 3.2 $35,000.00

Prospective: Commencement to finalisation of the Liquidation 3.2 $200,000.00

Total remuneration $379,788.00

*Approval sought for future remuneration is based on an estimate of the work necessary to the completion of the Administration and to the completion of the Liquidation (if applicable). Should additional work be necessary beyond what is contemplated, further approval may be sought from creditors.

Please refer to the report section references detailed in the above table for full details of the calculation and composition of the remuneration and internal disbursements for which approval is sought.

Remuneration

Retrospective remuneration

We will request that the following resolution be passed to approve our retrospective remuneration. Details to support this resolution are included further below.

Retrospective remuneration resolution(s) Appointment Type Amount (ex GST)

Resolution 1: 11 November 2019 to 3 December 2019 Administration $144,788.00

Total retrospective remuneration resolution $144,788.00

Resolution 1: 11 November 2019 to 3 December 2019

“That the remuneration of the Administrators for the period 11 November 2019 to 3 December 2019, calculated at hourly rates as detailed in the Initial Remuneration Notice dated 13 November 2019, is determined in the sum of $144,788.00, exclusive of GST.”

We will withdraw funds from the administration account in respect of the Administrators’ remuneration immediately upon approval if funds are available. If funds are not available, we will withdraw funds progressively over time as funds become available.

The below table sets out the time charged to each major task area by staff members working on the Administration for the period 11 November 2019 to 3 December 2019, which is the basis of Resolution 1. More detailed descriptions of the tasks performed within each task area, matching the amounts below, are contained further below.



hrs $ hrs $ hrs $ Hrs $ ex GST

Anthony Connelly Administrator 660 55.80 36,828.00 48.20 31,812.00 6.30 4,158.00 0.90 594.00 0.40 264.00

Jamie Harris Administrator 660 4.00 2,640.00 3.00 1,980.00 - - - - 1.00 660.00

Employee A Director 550 114.50 62,975.00 58.20 32,010.00 40.40 22,220.00 10.40 5,720.00 5.50 3,025.00

Employee B Senior Accountant 390 5.00 1,950.00 1.50 585.00 - - 3.50 1,365.00 - -

Employee C Senior Accountant 390 92.20 35,958.00 19.10 7,449.00 59.40 23,166.00 0.70 273.00 13.00 5,070.00

Employee D Accountant 305 9.70 2,958.50 1.30 396.50 0.20 61.00 - - 8.20 2,501.00

Employee E Administration 335 1.80 603.00 - - - - - - 1.80 603.00

Employee F Administration 335 2.10 703.50 - - - - - - 2.10 703.50

Employee G Administration 335 0.20 67.00 - - - - - - 0.20 67.00

Employee H Administration 175 0.60 105.00 - - 0.60 105.00 - - - -

Total (ex GST) 285.90 144,788.00 131.30 74,232.50 106.90 49,710.00 15.50 7,952.00 32.20 12,893.50

Average hourly rate 506.43 565.37 465.01 513.03 400.42

Investigation Administration

Employee Position$/hour

(ex GST)Total actual

hours Total ($)

Task Area

Assets Creditors


The below table sets out a detailed description of work undertaken on the Administration for the period 11 November 2019 to 3 December 2019, which is the basis of Resolution 1.


Task Area General description Includes

Assets 131.30 hours $74,232.50

Monies Secured bank accounts and cash on hand

Sale of the subsidiaries Conducted an urgent appraisal of BMR and its subsidiaries

Reviewed various information regarding urgent funding requirements

Discussions with Directors and CFO regarding BMR’s current financial position and a requirement for an urgent sale or recapitalisation process

Undertook sale campaign Placed advertisements in national and

international newspapers for expressions of interest

Issued notification of sale campaign to shareholders

Prepared information memorandum Prepared and maintained due diligence

data room Liaised with interested parties and

responded to questions Liaised with CFO regarding due

diligence information Discussed, reviewed and conducted

analysis with respect to offers received Liaised with interested parties regarding

key terms of their offers Prepared, negotiated and executed

heads of agreement Prepared, negotiated and executed

share sale agreement

Assets searches Conducted asset searches, including the PPS register and other public registers

Leasing Liaised with lessor and disclaimed head office lease

Creditors 106.90 hours $49,710.00

Creditor Enquiries, Requests & Directions

Received and responded to creditor enquiries

Considered reasonableness of creditor requests

Obtained legal advice on requests from creditors for information



Secured creditor reporting Notified PPSR registered creditors of appointment

Liaised with Weston Energy LLC (Weston) regarding its outstanding debts

Provided updates to Weston as secured creditor

Creditor reports Prepared Administrators’ Report to creditors

Considered recommendation to creditors Prepared estimated returns to creditors

calculation

Deal with proofs of debt (POD)

Received PODs from claimants and adjudicated for voting purposes

Sought additional substantiating information from certain creditors

Reviewed POD received from ESI Energy Services Inc. (ESI), sought additional information and obtained legal advice

Meeting of Creditors Prepared and sent meeting notice Advertised notice of meeting Prepared meeting file Chaired the meeting and discussed

administration with creditors Prepared and lodged minutes of

meeting with Australian Securities and Investments Commission (ASIC)

Responded to stakeholder queries and questions following the meeting

Meeting of Committee of Inspection (COI)

Prepared and sent meeting notice Prepared detailed COI report regarding

the outcome of the sale campaign Advertised notice of meeting Prepared meeting file Chaired the meeting and discussed the

COI report with the COI Prepared and lodged minutes of

meeting with ASIC Responded to stakeholder queries and

questions following the meeting

Shareholder queries Responded to various shareholder enquires

Investigation 15.50 hours $7,952.00

Conduct investigations Sent initial request to directors for Report on Company Activities & Property (ROCAP)

Reviewed company’s books and records Prepared comparative financial

statements Commenced investigations for the

purpose of reporting to creditors



Administration 32.20 hours $12,893.50

Document maintenance/file review/checklist

Maintained physical and electronic engagement file

Updated checklists

Insurance Corresponded with insurer regarding initial and ongoing insurance requirements

Reviewed insurance policies

Bank account administration

Prepared correspondence to open Administration accounts

Requested bank statements Performed bank account reconciliations

ASIC forms Prepared and lodged ASIC forms Corresponded with ASIC regarding

statutory forms

ATO and other statutory reporting

Notified statutory authorities of appointment

Planning/Review Discussed status of external administration

Prospective remuneration

Should creditors vote in favour of the liquidation of BMR and the Administrators become the Liquidators, we will request that the following resolutions be passed to approve our prospective remuneration. Details to support these resolutions are included further below.

Prospective remuneration resolution(s) Appointment Amount (ex GST)

Resolution 2: 4 December 2019 to finalisation of the Administration Administration $35,000.00

Resolution 3: commencement to finalisation of the Liquidation Liquidation $200,000.00

Total Prospective remuneration resolutions $235,000.00

Resolution 2: 4 December 2019 to finalisation of the Administration

“That the future remuneration of the Administrators from 4 December 2019 to finalisation of the Administration is determined at a sum equal to the cost of time spent by the Administrators and their partners and staff, calculated at the hourly rates as detailed in the Initial Remuneration Notice dated 13 November 2019, up to a capped amount of $35,000.00, exclusive of GST.”

We will withdraw funds from the administration account in respect of the Administrators’ remuneration progressively over time as funds become available and only once it is incurred. If actual costs incurred are below the capped amount, the Administrators are only authorised to draw the amount incurred. If actual costs incurred exceed the amount approved, the Administrators will seek further approval from creditors.

The below table sets out the expected costs and a detailed description of the work by task area to be undertaken on the Administration for the period 4 December 2019 to finalisation of the Administration, which is the basis of Resolution 2.


Resolution 2: 4 December 2019 to finalisation of the Administration

Task Area General Description Includes

Assets $15,000.00

Sale of the subsidiaries Negotiate and agree the transfer of relevant agreements

Liaise with the Purchaser and its solicitors

Preparation of tax material required for sale

Attend to settlement tasks Settle the sale of the subsidiaries Attend to post-completion obligations

Creditors $15,000.00


Receive and respond to creditor enquiries

Consider reasonableness of creditor requests

Obtain legal advice on requests from creditors for information, documents or a report

Compile information requested by creditors

Provide updates to Weston as secured creditor

Creditor reports Finalise Administrators’ opinion and recommendation to creditors

Finalise estimated return to creditors calculation

Finalise Administrators’ Report

Deal with proofs of debt Receive PODs from claimants

Meeting of Creditors Prepare and send meeting notices Advertise notice of meeting Prepare meeting file Chair second creditors’ meeting Prepare and lodge minutes of meeting

with ASIC

Shareholder queries Respond to shareholder enquires

Investigation $3,000.00

Conduct investigations Review company’s books and records Review specific transactions and liaise

with the Directors and CFO regarding certain transactions

Conduct investigations into the reasons for the company’s failure

Conduct investigations into the conduct of the directors

Administration $2,000.00


Conduct first month review Maintain physical and electronic

engagement file Update checklists

Insurance Correspond with insurer regarding ongoing insurance requirements

Consider claims




Request bank statements Perform bank account reconciliations Correspond with bank regarding specific

transfers

ASIC forms Prepare and lodge ASIC forms Correspond with ASIC regarding

statutory forms


Prepare BAS

Planning/Review Discuss status of external administration

Books and records / storage

Deal with records in storage Send job files to storage

Total $35,000.00

Resolution 3: Commencement to finalisation of the Liquidation

“That the future remuneration of the Liquidators from the commencement of the Liquidation to the finalisation of the Liquidation is determined at a sum equal to the cost of time spent by the Liquidators and their partners and staff, calculated at the hourly rates as detailed in the Initial Remuneration Notice dated 13 November 2019, up to a capped amount of $200,000.00, exclusive of GST.”

We will withdraw funds from the administration account in respect of the Liquidators’ remuneration progressively over time as funds become available and only once it is incurred. If actual costs incurred are below the capped amount, the Liquidators are only authorised to draw the amount incurred. If actual costs incurred exceed the amount approved, the Liquidators will seek further approval from creditors.

The below table sets out the expected costs and a detailed description of the work by task area to be undertaken on the Liquidation from the commencement to the finalisation of the Liquidation, which is the basis of Resolution 3.

Resolution 3: Commencement to finalisation of the Liquidation


Assets $30,000.00

Sale of the subsidiaries Effect the transfer of relevant agreements, assets and other records

Finalise tax matters relating to the sale Liaise with the Purchaser and its

solicitors regarding the sale Attend to post-completion obligations

Creditors $40,000.00


Receive and respond to creditor enquiries

Maintain creditor request log Consider reasonableness of creditor

requests Obtain legal advice on requests from

creditors for information, documents or a report

Document reasons for not complying with requests or directions

Compile information requested by creditors



Creditor reports Prepare Statutory Report by Liquidator Prepare general reports to creditors

Deal with proofs of debt Receive PODs from claimants

Proposals to Creditors Prepare proposal notices and voting forms

Forward notice of proposal to all known creditors

Review votes and determine outcome of proposal

Prepare and lodge proposal outcome with ASIC

Shareholder queries Respond to shareholder enquires Issue ITAA Section 104-145(1)

declarations Respond to shareholder legal action or

claims

Investigation $70,000.00

Conduct investigations Review company’s books and records Review specific transactions and liaise

with directors regarding certain transactions

Conduct investigations into possible voidable transactions, including unfair preferences, uncommercial transactions, and/or unfair loans

Conduct investigations into possible insolvent trading by the directors

Conduct investigations into possible misconduct by the directors

Conduct investigations into the financial position of the directors

Consider viability of any potential recovery actions

Examinations (if identified) Prepare brief to lawyer Attendance at examination Review examination transcripts Liaise with lawyer(s) regarding outcome

of examinations and further actions available

Litigation/Recoveries (if identified)

Discuss status of litigation Prepare brief to lawyers Liaise with lawyers regarding recovery

actions Attend to settlement matters Attend hearing

ASIC reporting Prepare report to ASIC under s533 Liaise with ASIC



Dividend $40,000.00

Process proofs of debt Prepare correspondence to potential creditors inviting lodgement of POD

Receive PODs Maintain POD register Correspond with claimants regarding

PODs

Dividend procedures Correspond with creditors regarding dividend

Adjudicate PODs Obtain further substantiating

information from creditors Adjudicate on further information Advertise intention to declare dividend Deal with POD adjudications that have

been challenged by creditors Obtain clearance from ATO Calculate increasing or decreasing

adjustment regarding ATO’s claim Calculate equalising dividend Calculate and pay dividend

Administration $20,000.00


Conduct six monthly file reviews Maintain physical and electronic

engagement file Update checklists

Insurance Correspond with insurer regarding ongoing insurance requirements

Consider/action claims


Request bank statements Perform bank account reconciliations Correspond with bank regarding specific

transfers Prepare correspondence to close

accounts

ASIC forms Prepare and lodge ASIC forms Correspond with ASIC regarding

statutory forms


Prepare BASs

Finalisation Notify ATO of ceasing to act Cancel ABN/GST/PAYG registration Complete final statutory lodgements Complete checklists

Planning/Review Discuss status of external administration

Books and records/storage Send job files to storage

Total $200,000.00


Estimated future remuneration

In preparing this report, our prospective remuneration approval is our best estimate of what we believe the Administration and subsequent Liquidation will cost to complete and we do not anticipate that we will have to ask creditors to approve any further remuneration. However, should the Administration and subsequent Liquidation not proceed as expected, we will advise creditors and we may seek approval of further remuneration. Matters that may affect the progress and the cost of the Administration and subsequent Liquidation, include:

time spent preparing for and conducting the second creditors’ meeting;

time spent completing the sale of BMR’s subsidiaries and the extent of post-completion tasks requiring attention by the Administrators or Liquidators;

time to adjudicate on any PODs and pay dividends; and

time spent conducting the statutory investigations into BMR’s affairs and pursuing any recovery actions (if identified).

Total remuneration reconciliation

At this point in time we estimate that the total remuneration for the Administration (excluding the Liquidation) will be approximately $180,000 (GST exclusive), as shown in the table below.

Remuneration type for Administration Amount (ex GST)

Current remuneration approval being sought:

Retrospective remuneration approval (refer to section 3.1) $144,788.00

Prospective remuneration approval (refer to section 3.2) $35,000.00

Estimated total remuneration – Administration $179,788.00

This differs to the estimate provided in our Initial Remuneration Notice dated 13 November 2019, which estimated remuneration of $100,000 to $150,000 (excluding GST), for reasons that include the following:

time spent preparing, negotiating and executing a binding heads of agreement and share sale agreement with the purchaser; and

time spent responding to shareholder queries regarding the sale campaign and the Administration generally.

We estimate that the time costs of the Liquidation will be no more than $200,000 (excluding GST).

We have provided an explanation of the tasks that remain to be completed, including our estimated costs to complete those tasks, to support our current remuneration approval request, at section 3.2 of this report.

Likely impact on dividends

It is both reasonable and appropriate for a professional service provider to be remunerated for their services. An external administrator is entitled to be remunerated for necessary work that is properly performed. That work generates the funds that may be recovered for the benefit of creditors and other stakeholders.

The impact of the approval of the external administrator’s remuneration is that the remuneration will then be paid provided sufficient funds are generated to enable it to be paid. The remuneration will be paid from those funds that are generated prior to the payment of most creditors in the external administration.

It is noted that funds would only be available to any stakeholder as a consequence of the work necessarily undertaken by the external administrator.

If a dividend or distribution is to be paid to stakeholders during a subsequent appointment, there is also necessary work that must be undertaken by the external administrator to properly adjudicate on claims and distribute any available funds.


Remuneration recovered from external sources

The Administrators have not recovered any remuneration from external sources or received any indemnities or up-front payments.

Disbursements

Disbursements are paid for by McGrathNicol and are recovered from the Administrators’ bank account.

Disbursements are divided into two types:

External disbursements - these are recovered at cost. Examples are travel, accommodation, postage, advertising, couriers and search fees.

Internal disbursements – these disbursements are charged at a rate which recoups both fixed and variable costs and may include an element of profit or advantage to the External Administrator or a related party of the External Administrator. Examples are printing and data storage. The recovery of these costs must be on a reasonable commercial basis. Details of the basis of recovery of each of these costs is discussed below.

At this stage, we have not yet claimed any disbursements.

Internal disbursements

Future disbursements provided by McGrathNicol will be charged to the external administration on the following basis:

Disbursement type Rate (GST exclusive)

External disbursements

Postage At cost

Stationery and other incidental disbursements At cost

Telephony – conference calls At cost

Searches At cost

Advertising At cost

Courier At cost

Staff per diem travel allowance* $89.00 per day**

Staff vehicle use $0.68 per km**

ASIC user pays levy At cost

Internal disbursements (that may have an element of profit or advantage)

Data processing – data loading & processing fee $20-$60 per gigabyte (GB)***, minimum $3,000 for matters less than 50GB.

Data hosting – monthly hosting fee $10 per GB, per month. Minimum $1,000 for small matters.

Large matters are priced on application.

Printing – black and white $0.09 per page

Printing – Colour $0.28 per page

* Payable when partners or staff are required for business purposes to stay away from their usual place of residence overnight.

** These rates are deemed reasonable by the Australian Taxation Office.

*** Tiered pricing model depending on volume of data to be hosted.


Further explanation of data hosting disbursements

In the conduct of this Administration, we may use McGrathNicol’s Forensic Technology team to extract, aggregate, electronically process and/or host electronic data, which could be used for the:

trade or sale of the business or assets; and/or

investigations regarding transactions or potential recoveries available to creditors.

If data hosting is required and we choose not to use the services of McGrathNicol’s Forensic Technology team, we will otherwise have to purchase those services from an alternative provider and/or use another method to achieve the same end, which will not be as efficient as using these available internal services.

We note that the data hosting rates above are no more than our standard commercial pricing available for the same services when they are provided to external parties.

Summary of receipts and payments

A summary of the receipts and payments for the Administration for the period 11 November 2019 to 3 December 2019 is detailed below.

Queries

If you have any queries regarding the information in this report, please contact Emily Hill on (07) 3333 9830.

You can also access information that may assist you on the following websites:

ARITA at www.arita.com.au/creditors

ASIC at www.asic.gov.au (search for “fees of insolvency practitioner”).

Dated: 6 November 2019


Receipts and payments for the period 11 November 2019 to 3 December 2019

Account AUD$ (GST incl.)

Receipts

Pre-appointment bank account 5,834

Refunds 18,276

Deposit on share sale agreement 100,000

Sundry receipts 429

Total receipts 124,539

Payments

Advertising (7,230)

Legal fees (24,030)

Total payments (31,260)

Net receipts (payments) 93,279

1

Notice of Meeting

Battery Mineral Resources Limited (Administrators Appointed) ACN 612 991 116

(BMR)

NOTICE OF MEETING OF CREDITORS OF COMPANY UNDER EXTERNAL ADMINISTRATION

1. Notice is now given that a meeting of the creditors of the company will be held at McGrathNicol, Level 7, 175 Eagle Street, Brisbane QLD 4000, Australia on 16 December 2019 at 9:30 AM (AEST).

2. The purpose of the meeting is:

a. to receive the report by the Administrators about the operations, property, affairs and financial circumstances of BMR;

b. to receive a statement of the Administrators’ opinion and reasons for the opinion whether it would be in the creditors’ best interests for BMR:

(i) to be returned to the control of its directors;

(ii) to execute a deed of company arrangement;

(iii) to enter into liquidation; or

(iv) to adjourn the meeting for a period of up to 45 business days;

c. to receive a statement of such other information known to the Administrators that will enable the creditors to make an informed decision about the future of BMR;

d. to receive details of any transactions that appear to the Administrators to be a voidable transaction in respect of which money, property, or other benefits may be recoverable by a liquidator under part 5.7B of the Corporations Act 2001 (Cth);

e. for the creditors of BMR to resolve that:

(i) control be returned to BMR’s directors; or

(ii) BMR executes a deed of company arrangement; or

(iii) BMR enters into liquidation; or

(iv) the meeting be adjourned.

f. to consider, and if thought fit, approve the Administrators’ remuneration; and

g. if BMR is wound up, to consider, and if thought fit, approve the Liquidators’ remuneration.

3. The effect of Insolvency Practice Rules (Corporations) section 75-85 (entitlement to vote as a creditor at meetings of creditors) is:

a. A person other than a creditor (or the creditor’s proxy or attorney) is not entitled to vote at a meeting of creditors.

b. Subject to subsections (c) and (d), each creditor is entitled to vote and has one vote.

2

c. A person is not entitled to vote as a creditor at a meeting of creditors unless:

(v) his or her debt or claim has been admitted wholly or in part by the external administrator; or

(vi) he or she has lodged, with the person presiding at the meeting, or with the person named in the notice convening the meeting as the person who may receive particulars of the debt or claim:

＞ those particulars; or

＞ if required—a formal proof of the debt or claim.

d. A creditor must not vote in respect of:

(vii) an unliquidated debt; or

(viii) a contingent debt; or

(ix) an unliquidated or a contingent claim; or

(x) a debt the value of which is not established;

unless a just estimate of its value has been made.

4. Proofs of debt and proxies must be submitted by 5:00 PM (AEST) on 13 December 2019.

5. Should a person be unable to attend the meeting in person, teleconference facilities will be available asfollows:

Telephone number: 1800 153 721 (Australia)

1888 385 4775 (United States of America)

1888 670 3743 (Canada)

Access participant pin: 829 993 94#



McGrathNicol GPO Box 9986 Brisbane QLD 4001 Australia +61 7 3333 9800

Subregulation 5.6.49(2)

FORM 535

FORMAL PROOF OF DEBT OR CLAIM (GENERAL FORM)

ACN

“the Company”

To the Liquidator/Administrator of the Company

1. This is to state that the Company was on , and still is, justly and truly indebted to:

___________________________________________________________________________________________________ (name of creditor)

of _____________________________________________________________________________________________ (address of creditor)

for $_________________________and____________cents (GST inclusive) GST amount _______________________________

Date Consideration (state how the

Debt arose)

Amount

$ c

Remarks (include details of

voucher substantiating payment)

2. To my knowledge or belief the creditor has not, nor has any person by the creditor's order, had or received any

satisfaction or security for the sum or any part of it except for the following: (insert particulars of all securities

held. If the securities are on the property of the company, assess the value of those securities. If any bills or

other negotiable securities are held, show them in a schedule in the following form).

Date Drawer Acceptor Amount $c Due Date

3. Select which of the below applies (choose one):

The creditor is a company and I am signing as

a director of the company The creditor is a partnership and I am signing as

a partner of the partnership


an authorised representative/duly constituted

attorney of the company

I am signing in my personal capacity as a

member or contributory of the Company

I am an individual and I am signing in my

personal capacity (which includes employees) Other: ____________________________________________

The creditor is a sole trader and I am signing

as the proprietor

Page 1 of 2

4. If you are a related party, state your relationship ________________________________________________________________

☐ I nominate to receive electronic notifications of documents in accordance with Section 600G of the

Corporations Act at the following email address

Email: __________________________________________________

This debt was inncurred for the consideration stated and the debt, to the best of my knowledge and belief,

remains unpaid and unsatisfied.

Signature ............................................................................................ Dated ………………………………………………………..

Name: ___________________________________________________________

Address: ____________________________________________________________________________________________________________

Page 2 of 2

5. Is this debt claimed on the basis of an assignment? Yes☐ No☐ If so, what consideration was paid for the debt? _________________________

1

Proof of Debt

Guidance Notes

(Please read carefully before filling in Form 535 or Form 536)

It is a creditor’s responsibility to prove their claim to our satisfaction.

When lodging claims, creditors must ensure:

the proof of debt form is properly completed in every particular; and

evidence, as set out under “Information to support your claim”, is attached to the Form 535 or Form 536.

Directions for completion of a Proof of Debt

1. Insert the full name and address of the creditor.

2. Under “Consideration” state how the debt arose, for example “goods sold to the company on

______________________”.

3. Under “Remarks” include details of any documents that substantiate the debt (refer to the section “Information

to support your claim” below for further information).

4. Where the space provided for a particular purpose is insufficient to contain all the information required for a

particular item, please attach additional information.

Information to support your claim

Please note that unless you provide evidence to support the existence of the debt, your debt is not likely to be

accepted. Detailed below are some examples of debts creditors may claim and a suggested list of documents that

should accompany a proof of debt to substantiate the debt.

Trade Creditors

Invoice(s) and statement(s) showing the amount of the debt; and

Advice(s) to pay outstanding invoice(s) (optional).

Guarantees/Indemnities

Executed guarantee/indemnity;

Notice of Demand served on the guarantor; and

Calculation of the amount outstanding under the guarantee.

Judgment Debt

Copy of the judgment; and

Documents/details to support the underlying debt as per other categories.

Deficiencies on Secured Debt

Security Documents (eg. mortgage);

Independent valuation of the secured portion of the debt (if not yet realised) or the basis of the creditor’s

estimated value of the security;

Calculation of the deficiency on the security; and

Details of income earned and expenses incurred by the secured creditor in respect of the secured asset since the

date of appointment.

Loans (Bank and Personal)

Executed loan agreement; and

2

Loan statements showing payments made, interest accruing and the amount outstanding as at the date of

appointment.

Tax Debts

Documentation that shows the assessment of debts, whether it is an actual debt or an estimate, and separate

amounts for the primary debt and any penalties.

Employee Debts

Basis of calculation of the debt;

Type of Claim (eg. wages, holiday pay, etc);

Correspondence relating to the debt being claimed; and

Contract of Employment (if any).

Leases

Copy of the lease; and

Statement showing amounts outstanding under the lease, differentiating between amounts outstanding at the

date of the appointment and any future monies.

PROXY FORM

Battery Mineral Resources Limited (Administrators Appointed)

ACN: 612 991 116

(BMR)

APPOINTMENT OF PROXY

I/We (if a firm, strike out “I” and set out the full name of the firm) ______________________________________________________ of

_______________________________________________________________________________________________________________ (insert address)

a creditor of Battery Mineral Resources Limited (Administrators Appointed) appoint

___________________________________________________________ (insert name, address and description of the person appointed)

or in his or her absence

___________________________________________________________ (insert name, address and description of the person appointed)

as my/our (choose one):

general proxy special proxy

to vote at the meeting of creditors to be held on 16 December 2019 at 9:30 AM (AEST) or at any adjournment of that

meeting.

Resolution (only complete where appointing a special proxy) For Against Abstain

1 That BMR be wound up at the close of this meeting and Anthony Connelly

and Jamie Harris be appointed as Liquidators.

2

That the remuneration of the Administrators for the period 11 November 2019

to 3 December 2019, calculated at hourly rates as detailed in the Initial

Remuneration Notice dated 13 November 2019, is determined in the sum of

$144,788.00, exclusive of GST.

3

That the future remuneration of the Administrators from 4 December 2019 to

finalisation of the Administration is determined at a sum equal to the cost of

time spent by the Administrators and their partners and staff, calculated at the

hourly rates as detailed in the Initial Remuneration Notice dated

13 November 2019, up to a capped amount of $35,000.00, exclusive of GST.

Resolution (only complete where appointing a special proxy) For Against Abstain

4

That the future remuneration of the Liquidators from the commencement of

the Liquidation to the finalisation of the Liquidation is determined at a sum

equal to the cost of time spent by the Liquidators and their partners and staff,

calculated at the hourly rates as detailed in the Initial Remuneration Notice

dated 13 November 2019, up to a capped amount of $200,000.00, exclusive of

GST.

5

That so far as is necessary for the beneficial winding up of BMR, the

Liquidators are hereby authorised pursuant to subsections 506(1A), 477(2A)

and 477(2B) of the Corporations Act to compromise any debt to BMR greater

than the prescribed amount (currently $100,000) and to enter any agreement

on behalf of BMR involving a term or obligations extending for more than

three months.

6

That the books and records of BMR may be destroyed following the

deregistration of BMR, subject to the consent of the Australian Securities &

Investments Commission being obtained.

DATED this ___________ day of ________________________ 20

Name ___________________________________________________

Signature ___________________________________________________

Select which of the below applies (choose one):


a director of the company The creditor is a partnership and I am signing

as a partner of the partnership


an authorised representative/duly constituted

attorney of the company

I am signing in my personal capacity as a

member or contributory of Battery Mineral

Resources Limited (Administrators Appointed)

I am an individual and I am signing in my

personal capacity (which includes employees) Other: ____________________________________________

The creditor is a sole trader and I am signing

as the proprietor

Proxy forms should be completed and returned by no later than 5:00 PM (AEST) on 13 December 2019.

RETURN TO:

c/-

Address:

Phone:

Fax:

Email:


McGrathNicol

GPO Box 9986, Brisbane QLD 4001, Australia

+61 7 3333 9800

+61 7 3333 9899

[email protected]

mailto:[email protected]

1

Proxy

Guidance Notes

Insert full name and address of creditor, contributory or member on the top line.

On the second line, insert the address of the creditor, contributory or member.

On the next line insert the name of the person you appoint as your proxy. You may insert “the

Chairperson of the meeting” if you wish.

You may appoint an alternate proxy on the fourth line who may act if your first appointed proxy cannot

attend the meeting. You may insert “the Chairperson of the meeting” if you wish.

Make sure you select whether the proxy is a general or special proxy.

A general proxy is where you leave it to the proxy to decide how to vote on each of the resolutions put

before the meeting.

A special proxy is where you specify how the proxy is to vote on each resolution and the proxy must vote

in accordance with that instruction.

If the proxy is a special proxy, the form must include details of each resolution and whether the proxy

holder is to cast their vote in favour or against each resolution or abstain from voting.

Date and sign the Proxy form, indicating in which capacity you are signing the form. The person signing

must be authorised to do so.

1


ACN 612 991 116

General Information for Attending and Voting at Meetings of Creditors

Time and Place of Meeting

Pursuant to Insolvency Practice Rules (Corporations) (IPR) 75-30, a meeting of creditors must be convened at the

time and place the Chairperson believes are convenient for the majority of creditors entitled to receive notice of the

meeting.

Quorum

Pursuant to IPR 75-105, unless a quorum is present, a meeting must not act for any purpose other than:

the election of a chairperson; and

the proving of debts; and

the adjournment of the meeting.

A quorum is present if two (2) or more persons are entitled to vote and at least two (2) persons are present

at the meeting in person, by proxy or by power of attorney.

A quorum is present if only one (1) person is entitled to vote and that person is present at the meeting in

person, by proxy or by power of attorney.

A person who participates in the meeting using electronic facilities is taken to be present in person at the

meeting.

A meeting is sufficiently constituted if only one (1) person is present in person, if the person represents

personally or by proxy or otherwise a number of persons sufficient to constitute a quorum.

Chairperson

Pursuant to IPR 75-50, the external administrator is appointed Chairperson of the meeting. Alternatively, pursuant

to IPR 75-50 and IPR 75-152 the external administrator may appoint someone else to act as chairperson of the

meeting and authorise that person to use any proxies held by the external administrator on the external

administrator’s behalf.

For the second meeting of creditors in a Voluntary Administration, the Administrator must chair the meeting

pursuant to IPR 75-50.

Voting

Pursuant to IPR 75-85, creditors will not be eligible to vote at the meeting unless they have lodged

particulars of their debt or claim prior to or at the meeting.

Accordingly, creditors who intend to vote at the meeting should ensure that they lodge a formal proof of

debt with the external administrator prior to or at the meeting.

Pursuant to IPR 75-110, a resolution put to the meeting is to be decided on the voices or by a poll, if one

is requested.

A poll may be requested by:

the chairperson; or

a person participating and entitled to vote at the meeting.

2

Pursuant to IPR 75-115, should a poll be requested:

a resolution is passed if a majority in number and a majority in value vote in favour of the

resolution; and

a resolution is not passed if a majority in number and a majority in value vote against the

proposed resolution.

In the event of a deadlock, the chairperson may exercise a casting vote. In such situations, the minutes of the

meeting must specify the chairperson’s reasons for exercising, or not exercising, their casting vote.

Proxies

Pursuant to IPR 75-150, a person entitled to vote at a meeting may, in writing, appoint an individual as

their proxy to attend and vote at the meeting on their behalf.

Accordingly, creditors who are unable to attend the meeting but who wish to be represented should ensure

that a validly executed proxy form is lodged with the external administrator prior to the meeting.

Corporate Creditors

Corporate creditors who wish to attend the meeting should note that an individual may only represent them if the

corporation validly grants that person a proxy or power of attorney.

Alternatively, section 250D of the Corporations Act provides that a corporation may, by resolution of its board,

provide a standing authority for a specified person to represent the corporation at a specified meeting of creditors.

A copy of any such resolution should be provided to the external administrator prior to attending the meeting.

Committee of Inspection

Pursuant to IPR 80-5, a person may only serve as a member of a Committee of Inspection if the person is:

a creditor of the company personally; or

the attorney of a creditor under a general power of attorney; or

authorised in writing by a creditor; or

a representative of the Commonwealth if a FEG claim has been, or the Commonwealth considers a claim is

likely to be, made in relation to unpaid employee entitlements.

Corporate creditors who are members of a Committee of Inspection may be represented by an individual authorised

in writing by the member to represent the member on the committee.