RE LOYAL METALS LTD; EX PARTE LOYAL METALS LTD [2026] WASC 284

[2026] WASC 284 Page 1 JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS CITATION : RE LOYAL METALS LTD; EX PARTE LOYAL METALS LTD [2026] WASC 284 CORAM : HILL J HEARD : 10 JULY 2026 DELIVERED : 10 JULY 2026 PUBLISHED : 14 JULY 2026 FILE NO/S : COR 83 of 2026 MATTER : IN THE MATTER OF LOYAL METALS LTD EX PARTE LOYAL METALS LTD Plaintiff Catchwords: Corporations law - Scheme of arrangement - Application for orders convening scheme meeting under s 411(1) of the Corporations Act 2001 (Cth) - Whether requirements to order scheme meeting are satisfied - Orders made convening scheme meeting Legislation: Corporations Act 2001 (Cth) s 411, s 412, s 1319 Corporations Regulations 2001 (Cth) sch 8 -- 1 of 18 -- [2026] WASC 284 Page 2 Result: Orders made convening scheme meeting Category: B Representation: Counsel: Plaintiff : J M Healey Solicitors: Plaintiff : Steinepreis Paganin Cases referred to in decision: Re Amcom Telecommunications Ltd [2015] FCA 341 Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400 Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 Re Kangaroo Resources Ltd [2018] WASC 327 Re Nzuri Copper Ltd [2019] WASC 189 Re Opes Prime Stockbroking Ltd [2009] FCA 813; (2009) 179 FCR 20 Re Pacific Energy Limited [2019] WASC 443 Re SRG Ltd [2018] FCA 1092 Re Wesfarmers Ltd [2018] WASC 308 -- 2 of 18 -- [2026] WASC 284 HILL J Page 3 HILL J: 1 Loyal Metals Ltd is a public company listed on the Australian Securities Exchange (ASX). On 26 April 2026, Loyal Metals entered a scheme implementation deed (SID) with PT Bumi Resources TBK (Bumi) and Bumi Resources Australia Pty Ltd (Bumi Australia). Under the proposed scheme, Bumi Australia will acquire all of the issued shares in Loyal Metals for $0.45 per share (Scheme Consideration), Loyal Metals will become a wholly owned subsidiary of Bumi and be delisted from the ASX.1 2 On 10 July 2026, the originating process (which was filed 19 June 2026) came before me for the first court hearing. On that date, I ordered that a meeting of Loyal Metals' shareholders be convened to consider and vote on the proposed Scheme (Scheme Meeting). Orders were also made approving the distribution of the Scheme booklet, and for the conduct of the Scheme Meeting. In making those orders, I stated I would subsequently publish written reasons for the orders I made. These are those reasons. Nature of proposed Schemes 3 Loyal Metals is a resource exploration company with projects in both North America and Australia.2 4 As at 8 July 2026, Loyal Metals had the following securities on issue:3 (a) 152,260,515 shares; (b) 2,600,000 unquoted options comprising: (i) 1.2 million unquoted options exercisable at $0.75 each expiring 2 February 2027; (ii) 400,000 unquoted options exercisable at $0.75 each expiring 8 August 2026; (together, Out-of-the Money Options), and (iii) 1 million unquoted options exercisable at $0.30 each expiring 26 September 2028 (In-the-Money Options), 1 Affidavit of William Hugh Benson filed 19 June 2026 'WB-1'. 2 Scheme booklet [11.2]. 3 Affidavit of Adam Caine Ritchie filed 8 July 2026 [26]. -- 3 of 18 -- [2026] WASC 284 HILL J Page 4 (together, Options) (c) 15,400,000 performance rights; and (d) 7,000,000 performance shares. 5 Bumi is a public company listed on the Indonesian stock exchange, with a market capitalisation in excess of USD $3.5 billion. It is one of the largest thermal coal producers and exporters in Indonesia. Its wholly owned subsidiary, Bumi Australia, was incorporated in July 2025.4 6 Under the terms of the SID, Loyal Metals is required to take all necessary steps to ensure that:5 (a) prior to the Effective Date of the Scheme, all Out-of-the-Money Options have lapsed or been cancelled and all In-the-Money Options have been exercised; and (b) prior to the second court hearing, all performance rights and performance shares have vested or converted to Shares in accordance with their terms, and the Shares will then be acquired on the terms of the proposed Scheme. 7 Since the date of entry into the SID, Loyal Metals has entered agreements with the Out-of-the-Money Optionholders, pursuant to which the Out-of-the-Money Options will be cancelled for nil consideration,6 as well as the holders of performance rights7 and performance shares8 for the vesting or conversion of these securities. 8 The directors of Loyal Metals have unanimously recommended that, in the absence of a superior proposal, Shareholders vote in favour of the Scheme. 9 Loyal Metals engaged RSM Corporate Australia Pty Ltd (RSM) as an independent expert to provide an opinion on the proposed Scheme. RSM has concluded that, in the absence of a superior proposal, the proposed Scheme is fair and reasonable and in the best interests of Shareholders. The basis for this conclusion, including the valuation and 4 Scheme booklet [12.1]. 5 SID, cl 3.1(s), (t), (u). 6 Affidavit of Adam Caine Ritchie filed 8 July 2026 [35] - [36], 'AR-6'. 7 Affidavit of Adam Caine Ritchie filed 8 July 2026 [40] - [41], 'AR-7'. 8 Affidavit of Adam Caine Ritchie filed 8 July 2026 [44] - [45], 'AR-8'. -- 4 of 18 -- [2026] WASC 284 HILL J Page 5 methodology used by BDO, is set out in the Independent Expert Report (IER).9 10 The scheme will not be implemented unless and until a number of conditions precedent, set out in the SID10 and summarised in the Scheme booklet,11 are satisfied or waived. The SID also sets out the agreed procedures for the implementation of the proposed Scheme. The obligations of Bumi under the proposed Scheme are supported by a deed poll, which has been executed by both Bumi and Bumi Australia (Deed Poll).12 Legal principles 11 Pursuant to s 411 of the Corporations Act 2001 (Cth) (Act), a scheme of arrangement can be used to re-organise a company which is binding on members and creditors where: (a) the arrangement is agreed by the requisite majorities prescribed by s 411(4)(a) of the Act, namely, 75% of shareholders by value and 50% by number; and (b) the court approves the arrangement pursuant to s 411(4)(b) of the Act. 12 There are three stages to an application under s 411 of the Act. First, the court approves the convening of a scheme meeting. Second, the members vote on the proposed scheme at the scheme meeting. Third, assuming the first two stages have occurred, the court approves the proposed scheme.13 13 There are well established principles that apply to each stage. In relation to the first court hearing, the court will order the scheme meeting to be convened if it is satisfied that:14 (a) there is a pt 5.1 body; (b) there is a compromise or arrangement within the meaning of s 411 of the Act; 9 Affidavit of William Hugh Benson filed 8 July 2026 'WB-16', pages 454 - 512. 10 SID, cl 3.1. 11 Scheme booklet [10.2]. 12 Affidavit of Martin John Costello filed 2 July 2026 [7], 'MC-02'. 13 Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 [7]. 14 Re SRG Ltd [2018] FCA 1092 [11]; Re Wesfarmers Ltd [2018] WASC 308 [60]. -- 5 of 18 -- [2026] WASC 284 HILL J Page 6 (c) the proposed scheme booklet contains the prescribed information15 and provides proper disclosure;16 (d) the scheme is bona fide and properly proposed; (e) the Australian Securities and Investments Commission (ASIC) has had at least 14 days' notice of the proposed hearing date and a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions;17 (f) the procedural requirements of the Act and the Supreme Court (Corporations) (WA) Rules 2004 (WA) have been met; and (g) the scheme is of such a nature that, if it receives the necessary statutory majority at the scheme meeting, the court will be likely to approve it. 14 Any issue about classes of members is usually determined at the first hearing.18 This is so that costs and court time are not wasted which would otherwise occur if this issue was left to the second court hearing.19 15 The standard of review that is undertaken by the court at the first court hearing is whether the proposed scheme is not inappropriate and is one that sensible businesspeople might consider is of benefit to its members.20 If the proposed arrangement is one that appears fit for consideration by a meeting of members and is a commercial proposition likely to gain the court's approval if passed by the necessary majority, leave should be given to convene the meeting.21 Should orders be made for the convening of the Meetings and the dispatch of the Scheme booklet? 16 At the first court hearing, Loyal Metals relied on seven affidavits, being: 15 Corporations Act 2001 (Cth) s 412(1)(a)(ii); Corporations Regulations 2001 (Cth) reg 5.1.01, sch 8 cl 8301 - cl 8310. 16 Corporations Act 2001 (Cth) s 412(1)(a)(i). 17 Corporations Act 2001 (Cth) s 411(2)(b). 18 Re CSR Ltd [73]. 19 Re Opes Prime Stockbroking Ltd [2009] FCA 813; (2009) 179 FCR 20 [20]. 20 Re Amcom Telecommunications Ltd [2015] FCA 341 [10]. 21 Re SRG Ltd [12]; Re Wesfarmers Ltd [72] - [76]. -- 6 of 18 -- [2026] WASC 284 HILL J Page 7 (a) three affidavits of William Hugh Benson, an associate of Steinepreis Paganin, the solicitors for Loyal Metals, filed 19 June and 8 and 10 July 2026; (b) an affidavit of Martin John Costello, the chief executive officer of Bumi, filed 2 July 2026; (c) an affidavit of Peretz Schapiro, the chairman of Loyal Metals and proposed chair of the Scheme Meeting, filed 8 July 2026; (d) an affidavit of Benjamin John Purser, a partner of Steinepreis Paganin and the proposed alternate chair of the Scheme Meeting, filed 8 July 2026; and (e) an affidavit of Adam Caine Ritchie, the managing director of Loyal Metals, filed 8 July 2026; 17 These affidavits prove the formal matters that Loyal Metals is required to establish. The proposed Scheme is arrangement or compromise contemplated by s 411(1) of the Act as it is a standard members' scheme for the merger of Loyal Metals and Bumi. 18 On the evidence before me, there was nothing to suggest that the Scheme was not properly proposed nor that any class issues arise. 19 There are a number of conditions precedent to the Schemes. Neither Loyal Metals nor Bumi has any basis to believe that any of the conditions precedent will not be satisfied prior to implementation of the Schemes.22 Disclosure and Scheme booklet 20 I was provided with a copy of the draft Scheme booklet,23 as well as an updated Scheme booklet following its review by ASIC,24 and am satisfied that there will be proper disclosure as to the effect of the proposed Scheme and the material considerations for Shareholders. 21 There is evidence before me as to the due diligence and verification process undertaken by both Loyal Metals and Bumi.25 I accept that Loyal Metals and Bumi have undertaken processes to verify 22 Affidavit of Adam Caine Ritchie filed 8 July 2026 [23]; Affidavit of Martin John Costello filed 2 July 2026 [24]. 23 Affidavit of William Hugh Benson filed 8 July 2026 'WB-7'. 24 Affidavit of William Hugh Benson filed 8 July 2026 'WB-12'. 25 Affidavit of Adam Caine Ritchie filed 8 July 2026 [61] - [66]; Affidavit of Martin John Costello [13] - [23]; Affidavit of William Hugh Benson filed 10 July 2026 'WB-18', 'WB-19'. -- 7 of 18 -- [2026] WASC 284 HILL J Page 8 the accuracy of statements attributable to each of them in the draft Scheme booklet and ensure the Scheme booklet does not omit any material information. 22 Based on the checklist provided by counsel for Loyal Metals,26 I was and am satisfied the draft Scheme booklet contained the prescribed information in accordance with s 411(3) and s 412 of the Act and reg 5.1.01 and sch 8 of the Corporations Regulations 2001 (Cth). 23 In written submissions, Loyal Metals drew my attention to some specific matters which are addressed below. Performance risk 24 Under the terms of the Scheme:27 (a) on the date that is one business day prior to the implementation date of the Scheme, Bumi or Bumi Australia must deposit the total Scheme Consideration into an Australian dollar trust account to be held by Loyal Metals on trust for its Shareholders; (b) transfer of the Shares to Bumi Australian and entry of its name into the share register is subject to the provision of the Scheme Consideration; and (c) the appointment of Bumi as agent and attorney by Shareholders occurs only after the provision of the Scheme Consideration. 25 These arrangements are supported by the Deed Poll, which can be enforced by Loyal Metals and its directors on behalf of any Shareholder.28 26 At the first court hearing, I raised with counsel for Loyal Metals that the Scheme did not require payment of the Scheme Consideration into a trust account with an Australian authorised deposit-taking institution (ADI). This is generally required by courts to ensure that Shareholders have the benefit of the Australian prudential regulation system. Counsel confirmed the parties intended the trust account would be opened with an ADI and that this would be addressed at the second court hearing. 26 Plaintiff's submissions filed 9 July 2026, Appendix B. 27 Scheme cl 5, cl 6.2. 28 Affidavit of Martin John Costello filed 2 July 2026 'MC-02'. -- 8 of 18 -- [2026] WASC 284 HILL J Page 9 27 Given this confirmation, I was satisfied that this matter did not prevent the convening of the Scheme Meeting. That said, it is necessary for the parties to address this at the second court hearing so that any issues regarding performance risk can be satisfied. Exclusivity provisions and exclusivity fee 28 The SID contains standard lock-up devices which include, where usual, fiduciary carve-outs. In certain circumstances, Loyal Metals will be obliged to pay a reimbursement fee of $750,000 to Bumi (Break Fee).29 A reverse break fee of $750,000 (Reverse Break Fee) may also be payable by Bumi to Loyal Metals in certain circumstances,30 including if Bumi and Bumi Australia fail to pay or procure the payment of the Consideration (together, the Break Fees). 29 In considering whether the exclusivity provisions impact on completion of the transaction and the duties of directors, the court has regard to:31 (a) the period of the exclusivity, which should be no more than a reasonable period and capable of precise ascertainment; (b) whether the provisions are subject to an overriding obligation that the directors do not breach their fiduciary duties or are otherwise unlawful; and (c) whether adequate prominence is given to these provisions in the Scheme booklet. 30 In this case, the exclusivity period is, at most, approximately six months from the date of the SID.32 The exclusivity provisions are subject to appropriate fiduciary carve-outs. 31 The amount of the Break Fees is approximately 1% of the equity value of Loyal Metals, as at the date of the SID.33 This is within the generally accepted commercial parameters and in accordance with 'Guidance Note 7 - Lock up devices' of the takeovers Panel. The Break Fees are intended to compensate the relevant party entitled to payment for its costs if the Scheme does not proceed. Importantly, the Break 29 SID, cl 10. 30 SID, cl 11. 31 Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400 [29] - [35]; Re Kangaroo Resources Ltd [2018] WASC 327 [57] - [61]; Re Pacific Energy Limited [2019] WASC 443 [58]. 32 SID cl 9. 33 Affidavit of Adam Caine Ritchie filed 8 July 2026 [80]. -- 9 of 18 -- [2026] WASC 284 HILL J Page 10 Fees are not payable if Shareholders do not vote in favour of the Schemes. In my view, the amount of the Break Fees is unlikely to influence Shareholders on their decisions to vote on the proposed Scheme. 32 Importantly, the exclusivity arrangements and Break Fees are disclosed in the draft Scheme booklet.34 Directors' benefits and recommendations 33 The directors of Loyal Metals have recommended that, in the absence of a superior proposal, and subject to RSM continuing to conclude the Scheme is in the best interests of Shareholders, Shareholders vote in favour of the proposed Scheme. 34 Each of the directors of Loyal Metals has an interest in the company's securities. Both Mr Schapiro and Mr Ritchie have interests in Shares and Performance Rights, and Mr Way has an interest in one million of the In-the-Money Options, as well as performance rights. 35 For the following reasons, I accept it is appropriate for the directors to make a recommendation in respect of the Scheme. 36 First, the consideration that each director will receive for their Shares is the same consideration that every other Shareholder will receive. 37 Second, and importantly, the draft Scheme booklet sets out in detail the interests of each of the directors and the benefits each will receive under the proposed Scheme.35 These interests are fully disclosed to Shareholders, who can assess the recommendations made by the directors in the context of that disclosure. Shareholder voting intention statements 38 Three shareholders representing 24.08% of the Company's issued capital have provided voting intention letters confirming their intentions to vote in favour of the Scheme, in the absence of a superior proposal and subject to RSM continuing to conclude the Scheme is in the best interests of Shareholders. 34 Scheme booklet [16.2] - [16.4]. 35 Scheme booklet [1.1], [11.7]. -- 10 of 18 -- [2026] WASC 284 HILL J Page 11 39 I was and am satisfied that these statements are appropriately disclosed in the Scheme booklet,36 consistent with both the Takeovers Panel Guidance Note 23: Shareholder Intention Statements, and previous authorities.37 Potential royalty claim 40 Counsel drew to my attention the notification Loyal Metals had received from a third party contending that a royalty was payable in relation to certain of the tenements in the Highway Reward Copper- Gold Project. Loyal Metals has undertaken investigations of the claim, which are ongoing. Documents in relation to this claim were provided to both RSM and the independent technical expert who advised that this notification did not impact the opinions each had expressed. 41 I accept that the potential claim is disclosed in the Scheme booklet and that Shareholders are able to assess this matter in making their decision in how to vote on the proposed Scheme.38 Financial Provisioning Scheme agreement 42 On 26 April 2026, Loyal Metals entered into an agreement with Bumi Australia and Highway Copper Gold Pty Ltd (HCG) whereby Bumi Australia agreed to procure the issue of an environmental bond of approximately $8.2 million on behalf of HCG which is required on completion of the acquisition of the Highway Project. At this stage, the environmental bond has not been procured although this is expected to occur prior to the Scheme Meeting. An interest rates of 10% per annum is payable on repayment. In the event the Scheme is implemented, the funding will be treated as intercompany debt. In the event the SID is terminated, repayment is required within 30 business days. 43 In considering agreements where a bidder has provided a loan to the target, the court considers whether it operates as a lock-up device or is a break fee that might prevent shareholders freely considering the proposed scheme or schemes.39 44 In this case, I was and am satisfied that the agreement (if drawn down) (particularly in terms of the quantum of the loan and the obligations for repayment) are not a lock-up device that would have a coercive effect on the Shareholders and prevent them from considering 36 Scheme booklet [4], [7.11]. 37 See, eg, Re Azure Minerals Ltd [2024] WASC 58 [66]. 38 Scheme booklet 11.2. 39 Re Nzuri Copper Ltd [2019] WASC 189 [67] - [68]. -- 11 of 18 -- [2026] WASC 284 HILL J Page 12 the merits of the proposed Scheme. The terms of the agreement is disclosed in the Scheme booklet,40 and is, in my view, a matter for Shareholders to consider in determining how to vote at the Scheme meeting. Deemed warranties and no encumbrances 45 Loyal Metals drew my attention to the deemed warranty and no encumbrance provisions in the proposed Scheme.41 These clauses are not unusual and are acceptable provided there is adequate disclosure. 46 These provisions are drawn to the attention of Shareholders in the Scheme booklet.42 I was and am satisfied that adequate disclosure has been given of these clauses. Proposed Shareholder communications 47 Loyal Metals also drew my attention to the steps it proposes to take in terms of Shareholder communications. Loyal Metals have engaged Automatic Pty Ltd (Automatic) to operate an inbound telephone line. 48 A script will be provided to all staff who communicate with Shareholders. Automatic has been instructed that the information provided must be consistent with, and reflect the information in the Scheme Booklet.43 Dispatch of the Scheme booklet 49 Loyal Metals sought orders pursuant to s 1319 of the Act for the dispatch of the Scheme booklet and related materials by email and post. 50 I was and am satisfied that the orders proposed for the dispatch of the Scheme booklet are appropriate. Conclusion and orders 51 At the first hearing before me, I was satisfied that the substantive and procedural requirements under s 411(1) and s 1319 of the Act had been satisfied and that the proposed Scheme was fit for consideration by Loyal Metals' shareholders. 40 Scheme booklet [16.7]. 41 Scheme cl 5.5. 42 Scheme booklet FAQ, [10.11]. 43 Affidavit of William Hugh Benson filed 8 July 2026 [30] - [32], 'WB-15'. -- 12 of 18 -- [2026] WASC 284 HILL J Page 13 52 On this basis, at the conclusion of the hearing on 10 July 2026, I made orders in terms of Annexure 'A' to this judgment in respect of the Scheme. -- 13 of 18 -- [2026] WASC 284 HILL J Page 14 Annexure 'A' -- 14 of 18 -- [2026] WASC 284 HILL J Page 15 -- 15 of 18 -- [2026] WASC 284 HILL J Page 16 -- 16 of 18 -- [2026] WASC 284 HILL J Page 17 -- 17 of 18 -- [2026] WASC 284 HILL J Page 18 I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia. VA Associate to the Hon Justice Hill 14 JULY 2026 -- 18 of 18 --