DRAFT
Cabral Resources Limited
(Administrators Appointed)(“Cabral”)
Second meeting of creditors
14 January 2015
Agenda

Formalities

Voting

Purpose of the meeting

Administrators’ Report to creditors

Administrators’ remuneration

Vote on the Company’s future

Liquidators’ remuneration

Committee of Inspection

Questions
2
Formalities

Open meeting

Administrator Chairman: Corporations Regulation 5.6.17(1)

Introductions:

Barry Kogan (Administrator)

Damien Pasfield (Senior Manager)

Michael Bogue (Director)

Quorum: Corporations Regulation 5.6.16 (2)

Attendance register

Time and place convenient: Corporations Regulation 5.6.14

Proofs of debt and proxies
3
Formalities (cont.)

Voting on voices unless poll demanded: Corporations Regulation 5.6.19

Poll can be demanded by:



Chairperson; or

2 persons present and entitled to vote; or

Creditors representing at least 10% of claims
When a poll is conducted, a resolution is passed if:

more than half the creditors (in number) vote in favour of the resolution; and

more than half the creditors (in value) vote in favor of the resolution
If there is a deadlock, the Chairperson may use their casting vote
4
Purpose of Meeting

Convened under Section 439A of the Corporations Act to:

report to creditors on the Company’s business, property, affairs and financial circumstances

set out the Administrators’ opinion on the courses of action available to the Company

vote on the Company’s future:
•
return Company to its Directors; or
•
execute a Deed of Company Arrangement (“DOCA”); or
•
enter into liquidation; or
•
meeting be adjourned for up to 45 business days

Consider and (if thought fit) approve the Administrators’ and Liquidators’ remuneration

Consider the appointment of a Committee of Inspection
5
Report to creditors - background

Listed iron ore explorer with a tenement portfolio in Bahia, Brazil

Incorporated in July 1994 and initially listed on ASX in June 1995

Acts as a holding company with investments in:

Subsidiaries with interests in over 100 iron ore tenements in Brazil; and

A joint venture with China Railway Materials Commercial Corporation Group

Provided extensive funding (c.$20 million) to subsidiaries in relation to exploration activities and
securing tenements

Expected future funding in excess of $10 million required to progress projects to commercial scale
mining stage

Attempts to raise capital failed to provide sufficient funding to Cabral to continue to fund the
operations of its subsidiaries, ultimately leading to our appointment

Causes of failure:

Difficulties in securing funding; and

No commercialized operations that generated an income stream
6
Report to creditors – organisational structure
Cabral Resources Limited
China Railway Materials
(Administrators Appointed)
Commercial Corporation Group
ACN 064 874 620
(through subsidiary)
100%
100%
Cabral Brazil Pty Limited
(Administrators
Appointed)
ACN 144 001 043
(“Cabral Brazil”)
100%
50%
50%
Northern Yeelirrie
CRMSC (Australia)
Pty Limited
Pty Limited
ACN 128 458 757
ACN 108 972 676
(“NY”)
(“the JV”)
100%
Cabral Mineração Ltda
Cabral Metias Ltda
(incorporated in Brazil))
(incorporated in Brazil)
(“Mineração”)
(“Metias”)
Key:
Group entity
Non-group entity
Legal owner of Brumado
Beneficial owner of
Complex and Sincorá Area
Sincorá Area
tenements
tenements
Under external administration
Mining tenements
Trust relationship for Sincorá tenements
7
Report to creditors – financial performance
Statement of Financial Performance
Year Ended
30 June 2012
30 June 2013
30 June 2014
$m's
$m's
$m's
Revenue
0.73
0.31
0.13
Total revenue
0.73
0.31
0.13
Operational expenses
(2.07)
(1.35)
(1.20)
Depreciation and amortisation
(0.01)
(0.04)
(0.03)
-
-
(0.88)
Share of JV profit / (loss)
(0.43)
(0.40)
(0.06)
Total expenses
(2.51)
(1.79)
(2.17)
Operating profit / (loss)
(1.78)
(1.48)
(2.04)
Income
Expenses
Impairment expense
1
Source: FY12, FY13 and FY14 management accounts
1
Relates to expenses historically capitalised (e.g. travel)

Cabral traded at a loss throughout the period reviewed

Revenue consists of interest on funds held in bank accounts and reimbursement of expenses from the
JV under a cost sharing agreement

Expenses relate to employees, occupancy expenses, general administrative expenses and travel for the
Directors to visit the offices and tenements of the Brazilian subsidiaries
8
Report to creditors – financial position
Statement of Financial Position
Year ended
30 June 2012
$m's
30 June 2013
$m's
30 June 2014
$m's
Cash at bank (incl term deposits)
9.59
2.85
0.65
Bonds / trust funds
0.10
0.10
0.10
11.07
16.62
17.77
- NY
0.15
0.15
0.15
- Cabral Brazil
1.25
1.25
1.25
- JV
0.90
0.69
0.63
0.00
0.00
0.00
Other assets
0.22
1.00
0.08
Total assets
23.28
22.66
20.63
Assets
Loans to subsidiaries
- Cabral Brazil
Investments in subsidiaries
1
- NY
Liabilities
Employees
(0.22)
(0.27)
(0.28)
Other liabilities
(0.08)
(0.12)
(0.08)
Total liabilities
(0.30)
(0.39)
(0.36)
Net assets
22.98
22.27
20.27
Source: Management Accounts
1
Equity invested - $1.00

Over the period reviewed, Cabral’s most significant liability was employee entitlements, with no
secured creditors and minimal unsecured creditors

Assets comprised cash (including term deposits), loans to and investments in subsidiaries (mainly
Cabral Brazil), and an investment in the JV
9
Report as to Affairs (“RATA”)
Summary of Financial Position and Directors' RATAs
Assets
$m's
Cash at bank (incl term deposits and bonds)
0.14
Loans to subsidiaries
- Cabral Brazil
18.57
- NY
0.15
- Cabral Brazil
1.25
- JV
0.63
Investments in subsidiaries
1
- NY
0.00
Other assets
0.09
Total assets
20.83
Liabilities
Employees
(0.69)
Unsecured creditors
(0.18)
Total liabilities
(0.87)
Net assets
19.96
Source: Management Accounts
1
Equity invested - $1.00

Loans to and investments in Cabral Brazil represent the most significant assets of Cabral at $18.57m and $1.25m,
respectively

Employee entitlements disclosed in Directors RATAs total approx. $688k. Administrators estimate outstanding
liabilities to be approx. $708k, of which approx. $50k relates to preferential employee entitlements
10
Investigations


Insolvent trading:

Net assets: Positive net asset position throughout entire period reviewed (c. $20m) however, we
note no impairment of loans in management accounts, despite impairment of underlying assets in
the consolidated accounts.

Cash flow: May have been cash flow insolvent since September 2014. Limited fresh liabilities
incurred following this time

Conclusions: Various defences available to Directors which makes claim for insolvent trading
difficult to pursue
Voidable transactions:


Transactions totalling $45k identified which may constitute preferences (relatively small amounts
to multiple parties)
Breach of Directors’ duties:

At this stage, no matters identified cause concern surrounding the discharge of the Directors’
duties and responsibilities under the Corporations Act 2001

Any potential recoveries are only available to a Liquidator

Further investigations to be undertaken if Liquidator appointed
11
Sale process

Initial discussions held with parties who had previously expressed (or likely to have) an interest in
Cabral and/or its assets

Advertised in the Australian Financial Review

Engaged with over 40 parties to date, with formal EOIs received from 11 parties, and a number of
non-binding indicative offers received

Timetable:

Expressions of Interest period: 8 December 2014 to 15 December 2014;

Completion of stage 1 due diligence: 19 December 2014;

Submission of non-binding first round offers: 19 December 2014; and

Commencement of stage 2 due diligence for short-list bidders: 12 January 2015

Most of these offers contemplate a DOCA structure to acquire the listed shell

Our overall objective is for final offers to be received and assessed in January 2015 and an agreement
to be executed in February 2015
12
Anticipated return to creditors
Estimated return to creditors in a liquidation
Particulars
High $
Low $
37,052
37,052
Assets
Cash at bank
Rental bond
JV
77,532
-
250,000
200,000
Sale of business/assets
Unknown
Unknown
Voidable transaction recoveries
Unknown
Unknown
Less costs
Staff, asset maintenance and operational costs
(30,000)
(50,000)
(125,476)
(125,476)
Estimated Administrators' fees from 3 January to 14 January 2015
(30,000)
(36,000)
Estimated Liquidators' fees
(70,000)
(80,000)
Legal and other professional costs
(30,000)
(50,000)
Amount available for preferential creditors
79,108
Employee entitlements (less non-priority claims from employees)
(50,588)
(50,588)
Estimated return to preferential creditors
100.00%
0.00%
Amount available for unsecured creditors
28,520
Administrators' fees to 2 January 2015
Unsecured creditor claims (including non-priority claims from employees)
-
-
819,935
819,935
Estimated return to unsecured creditors
3.48%
0.00%
Residual funds available to shareholders
Nil
Nil
Source: McGrathNicol analysis

‘High’ scenario: Sufficient funds to pay preferential employee entitlements in full, some funds for unsecured creditors and no funds for
shareholders

‘Low’ scenario: Insufficient funds to meet the costs of the administration/liquidation and no funds available for creditors (including
preferential creditors) or shareholders

The above analysis does not include recoveries from Cabral’s business/assets as disclosure of preliminary views could jeopardise the sale
outcome. Potential recoveries from voidable transactions are also excluded
13
Resolutions – Administrators’ remuneration
Resolution – remuneration incurred from 1 December 2014 to 2 January 2015

I now put the following resolution to the meeting:
“That the remuneration of the Administrators for the period from 1 December 2014 to 2 January
2015, calculated on hours spent at the rates detailed in the Schedule of Remuneration Methods
and Hourly Rates provided to creditors, in the amount of $125,475.50 (excluding GST), is hereby
approved for payment.”
14
Resolutions – Administrators’ remuneration (cont.)
Resolution – estimated remuneration incurred from 3 January 2015 to 14 January 2015

I now put the following resolution to the meeting:
“That the Administrators’ remuneration for the period from 3 January 2015 to 14 January 2015
shall be a sum equal to the time cost spent by the Administrators, their partners and their staff,
calculated at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates
provided to creditors, in the amount of $35,376.50 (exclusive of GST).
Creditors acknowledge that if actual costs incurred are below the amount approved, the
Administrators are only authorised to draw the amount incurred. Creditors also acknowledge
that if actual costs incurred exceed the amount approved, the Administrators will seek further
approval from creditors.
The Administrators are approved to draw their remuneration as and when it is incurred from
funds under their control.”
15
Resolutions – Administrators’ remuneration for Cabral Brazil

Cabral is the overwhelming largest creditor of Cabral Brazil (only one other creditor for $124)

Accordingly, we consider it useful that the creditors of Cabral consider passing a resolution noting
their support for the following resolutions passed by creditors of Cabral Brazil:
“That the remuneration of the Administrators for the period from 1 December 2014 to 2 January
2015, calculated on hours spent at the rates detailed in the Schedule of Remuneration Methods and
Hourly Rates provided to creditors, in the amount of $24,758.00 (excluding GST), is hereby approved
for payment.”
and
“That the Administrators’ remuneration for the period from 3 January 2015 to 14 January 2015 shall
be a sum equal to the time cost spent by the Administrators, their partners and their staff, calculated
at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates provided to
creditors, in the amount of $9,054.50 (exclusive of GST).
Creditors acknowledge that if actual costs incurred are below the amount approved, the
Administrators are only authorised to draw the amount incurred. Creditors also acknowledge that if
actual costs incurred exceed the amount approved, the Administrators will seek further approval from
creditors.
The Administrators are approved to draw their remuneration as and when it is incurred from funds
under their control.”
16
Resolutions – Administrators’ remuneration for Cabral Brazil
Resolution – regarding remuneration from 1 December 2014 to 14 January 2015 for Cabral Brazil
 I now put the following resolution to the meeting:
“That the creditors of Cabral are supportive of the remuneration resolutions passed by creditors
of Cabral Brazil, and payment of these amounts as and when incurred from funds on hand.”
17
Resolutions – Cabral Brazil’s future

We also request that the creditors of Cabral consider the following resolutions put to creditors of
Cabral Brazil:
“That the second meeting of creditors be adjourned for a period of up to 45 business days”
Resolution – adjourn Cabral Brazil meeting for up to 45 business days
 I now put the following resolution to the meeting:
“That the creditors of Cabral are supportive of the adjournment resolutions passed by creditors
of Cabral Brazil.”
18
Vote on Cabral’s future: Administrators’ recommendations

Administration to end


DOCA


No final/binding DOCA has been proposed, therefore not recommended
Cabral to be wound up


As Cabral is insolvent, control of the company should not be returned to the Directors
As there is no DOCA and Cabral is insolvent, in the event that creditors wish to immediately resolve the
future of the company, the Administrators’ recommendation is that creditors vote in favour of the
company being placed into liquidation
Adjourn meeting for up to 45 business days

Various bidders are proposing to transact via a DOCA structure

In order to leave this option open for creditors (which may ultimately increase the proceeds received and
therefore the return to creditors), we recommend that creditors resolve to adjourn the meeting for a
period of up to 45 business days
19
Vote on Cabral’s future – resolution
Adjourn meeting for up to 45 business days

I now put the following resolution to the meeting:
“That the second meeting of creditors be adjourned for a period of up to 45 business days”
Liquidation

I now put the following resolution to the meeting:
“That Cabral be Wound Up and Barry Kogan and Joseph Hayes be appointed Joint and Several
Liquidators”
20
Resolutions – Liquidators’ remuneration

I now put the following resolution to the meeting:
“That the remuneration of the Liquidators, for the period of the liquidation, shall be a sum equal
to the time cost spent by the Liquidators, their partners and their staff, calculated at the rates
detailed in the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the
amount of $75,006.00 (exclusive of GST).
Creditors acknowledge that if actual costs incurred are below the amount approved, the
Liquidators are only authorised to draw the amount incurred. Creditors also acknowledge that if
actual costs incurred exceed the amount approved, the Liquidators will seek further approval
from creditors.
The Liquidators are approved to draw their remuneration as and when it is incurred from funds
under their control.”
21
Resolutions – Liquidators’ remuneration for Cabral Brazil

Cabral is the overwhelming largest creditor of Cabral Brazil (only one other creditor for $124)

Accordingly, we request that the creditors of Cabral consider the following resolutions put to creditors
of Cabral Brazil:
“That the remuneration of the Liquidators, for the period of the liquidation, shall be a sum equal to
the time cost spent by the Liquidators, their partners and their staff, calculated at the rates detailed in
the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the amount of
$20,370 (exclusive of GST).
Creditors acknowledge that if actual costs incurred are below the amount approved, the Liquidators
are only authorised to draw the amount incurred. Creditors also acknowledge that if actual costs
incurred exceed the amount approved, the Liquidators will seek further approval from creditors.
The Liquidators are approved to draw their remuneration as and when it is incurred from funds under
their control.”
Resolution – regarding Liquidators’ remuneration for Cabral Brazil
 I now put the following resolution to the meeting:
“That the creditors Cabral are supportive of these resolutions put to creditors of Cabral Brazil,
and payment of these amount as and when incurred from funds on hand.”
22
Resolutions – Committee of Inspection

I now put the following resolution to the meeting:
“That a committee of inspection be formed, with the following to be members:
………………………… representing …………………………
………………………… representing …………………………
………………………… representing …………………………
………………………… representing …………………………
………………………… representing …………………………”
23
Q&A