Electric Metals (USA) Limited, in the matter of Electric Metals (USA) Limited

FEDERAL COURT OF AUSTRALIA

Electric Metals (USA) Limited, in the matter of Electric Metals (USA) Limited [2021] FCA 352

File number(s): NSD 33 of 2021

Judgment of: FARRELL J

Date of judgment: 13 April 2021

Catchwords: CORPORATIONS – members' scheme of arrangement – applications under ss 411 and 1319 of the Corporations Act 2001 (Cth) to convene scheme meeting and approve scheme of arrangement – where proposed scheme is a 'reverse takeover' of a listed Canadian company – applications granted Legislation:

Corporations Act 2001 (Cth) ss 411, 1319

Canada Business Corporations Act (R.S.C., 1985, c. C-44)

Securities Act of 1933 (US) s 3 Cases cited:

BRL Hardy Ltd [2003] SASC 97; (2003) 45 ACSR 397

Capilano Honey Limited, in the matter of Capilano Honey Limited [2018] FCA 1568; (2018) 131 ACSR 9

Central Pacific Minerals NL [2002] FCA 239

In re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 CH 213

Permanent Trustee Company Limited [2002] NSWSC 1177; (2002) 43 ACSR 601

Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) [2010] FCA 400; (2010) 77 ACSR 701

Solution 6 Holdings Limited ACN 003 264 006, in the matter of Solution 6 Holdings Limited ACN 003 264 006 [2004] FCA 1049; (2004) 50 ACSR 113

Westgold Resources Ltd (No 2) [2012] WASC 395

Division: General Division

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Number of paragraphs: 49

Dates of hearing: 17–18 February, 31 March, 13 April 2021

Counsel for the Plaintiff: Mr M Oakes SC

Solicitor for the Plaintiff: McCullough Robertson

ORDERS

NSD 33 of 2021

IN THE MATTER OF ELECTRIC METALS (USA) LIMITED ACN 635 062 850

ELECTRIC METALS (USA) LIMITED ACN 635 062 850

Plaintiff

ORDER MADE BY:

FARRELL J

DATE OF ORDER:

18 FEBRUARY 2021

THE COURT ORDERS THAT:

1. Pursuant to ss 411(1) and 1319 Corporations Act 2001 (Cth) (Act):

(a) the plaintiff convene and hold a meeting (scheme meeting) of holders of fully paid ordinary shares in the plaintiff (scheme shareholders) for the purpose of considering and, if thought fit, approving (with or without modification) a scheme of arrangement (scheme) proposed between the plaintiff and the scheme shareholders, being the scheme of arrangement set forth in Annexure B of the explanatory statement in relation to the scheme (scheme booklet), which is the document marked Exhibit A in the proceeding, being the document named 'Amended scheme booklet – 18.02.2021' attached to the plaintiff's solicitors' email sent on 18 February 2021 at 1.54 pm (AEDT) to the Associate;

(b) the scheme meeting be held on Wednesday, 24 March 2021 commencing at 11.00am (AEDT);

(c) the scheme meeting be held as an in-person meeting at Level 36, 1 Farrer Place, Sydney, New South Wales, with an option to view the meeting using audio or audio-visual technology via the online platform or teleconference details specified in Annexure G to the scheme booklet;

(d) the scheme meeting be convened by sending on or before Monday, 22 February 2021:

(i) in the case of scheme shareholders for whom the plaintiff holds an email address and who have elected to receive shareholder communications electronically by way of email (email shareholders), an email substantially in the form of the document marked Exhibit B in the proceeding, being the document named 'Proposed email to shareholders – clean' attached to the plaintiff's solicitors' email sent on 18 February 2021 at 1.54 pm (AEDT) to the Associate, which contains links to an electronic copy of a document substantially in the form of the scheme booklet, which contains, among other things, the Notice of Scheme Meeting at Annexure G to the scheme booklet;

(ii) in the case of scheme shareholders who are not email shareholders (postal shareholders) and whose registered address is in Australia, by pre-paid post addressed to the relevant addresses recorded in the plaintiff's register a document substantially in the form of the document marked Exhibit C in the proceeding, being the document attached to the plaintiff's solicitors' email sent on 18 February 2021 at 2.53 pm (AEDT) to the Associate, which contains a link to an electronic copy of the scheme booklet, which contains, among other things, the Notice of Scheme Meeting at Annexure G to the scheme booklet; and

(iii) in the case of postal shareholders and whose registered address is outside Australia, by airmail addressed to the relevant addresses recorded in the plaintiff's register a document substantially in the form of the document marked Exhibit C in the proceeding, which contains, among other things, the Notice of Scheme Meeting at Annexure G to the scheme booklet;

(e) a proxy in respect of the scheme meeting will be valid and effective if, and only if, it is completed and delivered by email, fax or post in accordance with its terms by 1 pm (AEDT) on Monday, 22 March 2021;

(f) Gary Leon Lewis or, in his absence, Ian James Pringle, act as chairperson of the scheme meeting;

(g) the chairperson of the scheme meeting shall have the power to adjourn the meeting to such time, date and place as he or she considers appropriate;

(h) the plaintiff may provide access to the scheme meeting for such other persons as it thinks fit; and

(i) rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) shall not apply to the scheme meeting.

2. Pursuant to s 411(1) of the Act, a document substantially in the form of the scheme booklet be approved for distribution to the scheme shareholders of the plaintiff.

3. The plaintiff publish a notice of hearing of any application to approve the Scheme on or before Thursday, 18 March 2021, in The Australian newspaper by an advertisement substantially in the form of Annexure A to these Orders, and the plaintiff shall otherwise be exempted from compliance with r 3.4(3)(b) of the Rules.

4. The proceeding be stood over to 10.15 am on Wednesday, 31 March 2021 before Farrell J for the hearing of any application to approve the scheme of arrangement.

5. There be liberty to apply.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 Annexure "A"

Notice of hearing to approve compromise or arrangement

(rule 3.4)

No. NSD33 of 2021

FEDERAL COURT OF AUSTRALIA

DISTRICT REGISTRY: NEW SOUTH WALES

DIVISION: GENERAL

IN THE MATTER OF ELECTRIC METALS (USA) LIMITED ACN 635 062 850

ELECTRIC METALS (USA) LIMITED ACN 635 062 850

Plaintiff

TO all the creditors and members of Electric Metals (USA) Limited ACN 635 062 850 (EML)

TAKE NOTICE that at 10.15 am AEDT on Wednesday, 31 March 2021, the Federal Court of Australia at the Law Courts Building, Queen's Square, Sydney will hear an application by EML seeking the approval of a compromise or arrangement between the above-named company and its members, proposed by a resolution to be considered, and if thought fit, passed (with or without modification) at the meeting of the members of the company to be conducted on Wednesday, 24 March 2021, commencing at 11.00 am AEDT.

If you wish to oppose the approval of the compromise or arrangement, you must file and serve on the Plaintiff, EML, a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on the Plaintiff, EML, at their address for service at least one day before the date fixed for the hearing of the application.

The address for service of the Plaintiff is McCullough Robertson Lawyers, Level 32, 19 Martin Place, Sydney, NSW.

Name of person giving notice or of person's legal practitioner: Peter Stokes, McCullough Robertson Lawyers – 07 3233 8714.

ORDERS

NSD 33 of 2021

IN THE MATTER OF ELECTRIC METALS (USA) LIMITED ACN 635 062 850

ELECTRIC METALS (USA) LIMITED ACN 635 062 850

Plaintiff

ORDER MADE BY:

FARRELL J

DATE OF ORDER:

13 APRIL 2021

THE COURT ORDERS THAT:

1. Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the plaintiff and its shareholders, in the form of Exhibit D in the proceeding, be approved.

2. The plaintiff lodge with the Australian Securities and Investments Commission a copy of the approved scheme of arrangement at the time of lodging a copy of these Orders.

3. Pursuant to s 411(12) of the Act, the plaintiff be exempted from compliance with s 411(11) in relation to Order 1.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

FARRELL J:

INTRODUCTION

By an originating process lodged on 18 January 2021, Electric Metals (USA) Limited (EML) sought orders:

(1) Under ss 411(1) and 1319 of the Corporations Act 2001 (Cth) in relation to convening a meeting of the members of EML on Wednesday, 24 March 2021 (scheme meeting) for the purpose of considering and (if thought fit) approving (with or without modifications) a scheme of arrangement between EML and its members (scheme) and authorising the despatch of a scheme booklet; and

The purpose of the proposed scheme is a reverse takeover of NBS Capital Inc (NBS), which is listed on the TSX Ventures Exchange (TSXV), and the "backdoor" stock exchange listing of EML as NBS' wholly owned subsidiary.

The scheme was proposed pursuant to a Scheme Implementation Agreement which EML and NBS entered into on 31 December 2020 (SIA).

Conditions precedent to the scheme becoming effective include:

(2) By 8 am on the date of the second court hearing:

(a) NBS shareholders having authorised the necessary share consolidation and change of NBS' name to "Nevada Silver Corporation";

(c) Receipt of all necessary TSXV, shareholder and regulatory approvals, including all NBS shares issuable as scheme consideration having been conditionally approved for listing by TSXV, such listing being conditional only on conditions standard for a "Qualifying Transaction" of a "Capital Pool Company", standard listing conditions for TSXV, NBS qualifying for listing as a Tier 1 or Tier 2 mining issuer on TSXV and the shareholders of NBS having given any necessary shareholder approval (relevantly the TSXV condition);

(d) Completion of the private placement discussed more fully below; and

(e) NBS holding a minimum of 200,000 Canadian Dollars (C$) in cash and no debts on implementation of the scheme.

Following the first court hearing, I made orders on 18 February 2021 convening the scheme meeting and authorising the despatch of a scheme booklet in the form of Exhibit A in the proceedings.

The scheme meeting was convened and held on Wednesday, 24 March 2021 and the resolution was passed by the majorities required by s 411(4)(a)(ii) of the Corporations Act.

The second court hearing was listed for 10.15 am on Wednesday, 31 March 2021 and the time and place of the hearing was advertised in The Australian, a newspaper circulating nationally, on 16 March 2021. No shareholder or creditor indicated an intention to attend the hearing to oppose the scheme and none did so.

At the second court hearing, senior counsel for EML submitted that it would be appropriate to adjourn the second court hearing as a precondition to the scheme, the TSXV condition, had not been satisfied at the time the matter was called on for hearing. As a result, EML and NBS were not in a position to provide to the Court the usual certification that all conditions precedent to the scheme had been satisfied or waived and the Australian Securities and Investments Commission (ASIC) indicated that it was not yet prepared to issue its "usual letter" under s 411(17)(b) of the Corporations Act indicating that it had no objection to the scheme. ASIC indicated that it would be prepared issue its "usual letter" if the TSXV condition was satisfied. The hearing was adjourned until 2.15 pm on Tuesday, 13 April 2021.

As each of those matters have now been addressed, at the adjourned second court hearing on 13 April 2021, I made orders approving the scheme.

These are the reasons for making orders on 18 February 2021 and 13 April 2021.

BACKGROUND

The following material information is based on the scheme booklet and evidence before the Court.

EML is an unlisted public company registered in New South Wales. It was incorporated as a proprietary company on 24 July 2019 and it converted to an unlisted public company on 17 April 2020. As at 18 February 2021 it had 123 shareholders and 43,820,020 fully paid ordinary shares on issue. EML has two exploration projects in the United States, the Corcoran Canyon Silver-Gold Project in Nevada and the Emily Manganese Project in Minnesota (the Projects).

EML's directors are:

(1) Gary Leon Lewis (chief executive officer and company secretary). Mr Lewis has an interest in 15,800,000 EML shares (or 36.06% of issued EML shares). He also has an interest in 1.5 million EML shares held by a related party which he does not control;

(2) Dr Ian James Pringle (executive director and consultant geologist). Dr Pringle has an interest in 1 million EML shares (or 2.28% of issued EML shares); and

(3) Dr Henry Joseph Sandri (chief operating officer). Dr Sandri has an interest in 7.75 million EML shares (or 17.69% of issued EML shares).

The chairman's letter included in the scheme booklet disclosed that EML's directors believe that the scheme is in the best interests of EML shareholders and they recommended that shareholders should vote in favour of it because:

(1) It will give EML shareholders the opportunity to receive NBS shares that can be traded on the TSXV which will "enhance market presence and create liquidity not presently available" to EML shareholders and the merged group "will be better placed to raise capital and pursue further opportunities, with improved chances of success";

(2) The board and management team of the merged group will have the skills and capacity to advance the development of the Projects;

(3) The scheme consideration represents a "significant premium" to the weighted average price per share of all EML shares issued to date (being C$0.10473 per EML share as disclosed in section 11.4 of the scheme booklet); and

(4) The transaction "enhances the financial capacity of the [m]erged [g]roup, improving the balance sheet to fund future exploration and growth initiatives".

The chairman's letter disclosed the possible reasons to vote against the scheme as being:

(1) Dilution of EML shareholding percentages, primarily as a result of the private placement (see below) which is conditional upon the conclusion of the scheme and in which three current directors of NBS participated;

(2) An EML shareholder may consider that there is potential for a future superior proposal;

(3) An EML shareholder might consider the investment profile of the merged group as inferior to EML's profile; and

(4) NBS shares may expose former EML shareholders to foreign exchange rates.

The chairman's letter also noted that current EML directors have an interest in the outcome of the scheme having regard to their shareholding in EML and the fact that they would be appointed as directors of NBS if the scheme is implemented, consistently with the fact that the proposed scheme is a reverse takeover.

NBS was registered in Canada under the Canada Business Corporations Act (R.S.C., 1985, c. C-44) on 1 March 2018. NBS has been in a trading halt since 22 November 2019. It is a "capital pool company", meaning that it is a company with no assets other than cash and it has not commenced commercial operations. Its directors, prior to implementation of the scheme, are:

(1) Paul Barbeau (President);

(2) David Randall Chow (Chief Financial Officer);

(3) Patrick Andre Murphy;

(4) Michael Labiak; and

(5) John Kutkevicius

The scheme booklet disclosed that:

(1) On 14 December 2020, NBS shareholders passed resolutions to consolidate its common shares on the basis of one (old) share for between 0.7 and 0.75 (subsequently confirmed to be 0.73271) (new) shares and to change its name to "Nevada Silver Corporation" with effect immediately before the record date of the proposed scheme and subject to the scheme becoming effective.

(2) As part of a non‐binding letter of intent dated 17 September 2020 between EML and NBS in relation to a proposed scheme, NBS and EML each determined to proceed with a private placement to raise approximately C$5,000,000 by issuing subscription receipts in multiple tranches (subscription receipts). Subject to certain conditions, each subscription receipt will entitle its holder to receive:

(a) One ordinary share in EML to be issued prior to the record date of the proposed scheme (being the business day following the date that all conditions precedent are satisfied and a copy of the court order approving the scheme is lodged with ASIC) (placement share); and

(b) One half of one ordinary share purchase warrant in EML (placement warrant). Each whole placement warrant will entitle the holder to acquire one NBS share at an exercise price of C$0.60 per share for a period of two years from the implementation date of the scheme.

(3) Three NBS directors participated in the private placement: Mr Barbeau, for 75,000 subscription receipts at C$24,750; Mr Kutkevicius, for 300,000 subscription receipts at C$99,000; and Mr Labiak, for 150,000 subscription receipts at C$49,500.

(4) Gross proceeds of the private placement were C$5,049,635.13 and 15,301,923 subscription receipts were issued. One of the conditions to the conversion of the subscription receipts is the completion of the scheme.

(5) On 18 January 2021, EML and NBS entered into a promissory note in respect of a C$25,000 loan from NBS to EML for transaction costs in relation to the scheme. It is repayable on the occurrence of an event of default (as defined in the note), which includes termination of the SIA.

Upon implementation of the proposed scheme:

(1) NBS will acquire all of the issued shares in EML for a scheme consideration comprising one NBS share for each issued EML share. Those NBS shares will rank equally with NBS shares then on issue.

(2) NBS' fully diluted share capital will be as follows:

Shareholder type No. shares % of share capital EML shareholders 43,820,020 60.07% Holders of placement shares 15,301,923 20.98% Existing NBS shareholders 5,636,372 7.73% Existing NBS option holders 534,878 0.73% Holders of placement warrants 7,650,962 10.49% Total 72,944,155 100.00%

(3) The executive directors of NBS will be Mr Lewis, Dr Pringle, Dr Sandri, and the non-executive directors will be Mr Kutkevicius and a non-executive chairman, Sheldon Inwentash.

(4) Mr Lewis will hold 21.66% of the issued shares in NBS shares, Dr Pringle will hold 1.37% of NBS shares and Dr Sandri will hold 10.62% of NBS shares.

The independent expert, Nexia Sydney Corporate Advisory Pty Ltd (NSCA), concluded that the scheme, while not "fair", is reasonable and in the best interests of EML shareholders in the absence of a superior proposal. In its Report, set out at annexure D of the scheme booklet, NSCA explained guidance given by ASIC in Regulatory Guide 111 (RG 111). It is useful to set out some of that material (as written):

RG 111 provide guidance as to matters that should be considered in determining whether a transaction is fair and reasonable in a range of circumstances.

RG 111 state that in deciding an appropriate form of analysis, the expert needs to consider that the main purpose of the Report is to deal with the concerns that could reasonable be anticipated by those persons affected by the transaction. An expert should focus on the purpose and outcome of the transaction; that is the substance of the transaction, rather than the legal mechanism used to effect the transaction.

RG 111 requires analysis of a transaction under two distinct criteria being:

• is the offer 'fair'?; and

• is it reasonable?

That is the opinion of fair and reasonable is not considered as a compound phrase.

In determining what is fair and reasonable for a control transaction, RG 111 states that:

• an offer is fair if the value of the offer price or consideration is equal to or greater than the value of the securities the subject of the offer, assuming a 100% interest of the target and irrespective of whether the consideration is cash or scrip; and

• an offer is reasonable if it is fair, or if the offer is not fair, the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of a higher bid before the close of an offer.

In determining whether the transaction is fair, the fair value is assumed to be based on a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm's length.

RG 111 states that if an expert concluded that a transaction is 'fair and reasonable' in the form of a takeover bid, an expert would also be able to conclude that the scheme is in the best interests of the shareholders.

If an expert concludes that a transaction is 'not fair but reasonable' then an expert may still determine that a transaction is in the best interest of shareholders with the expert clearly stating that consideration is not equal to or greater than the value of the securities the subject of the scheme but that there are sufficient reasons for security holders to vote in favour of the scheme in the absence of a higher offer.

If an expert concludes that a scheme is 'not fair and not reasonable' then the expert would conclude that the scheme is not in the best interest of shareholders.

NSCA summarised its assessment of fairness as follows:

AUD$/share Low Preferred High Fair value of an EML share on a control basis before the scheme $0.14 $0.18 $0.21 Fair value of a NBS share on a minority basis after the scheme $0.15 $0.17 $0.20

As the fair value of a NBS share is lower than the fair value of an EML share before the scheme at the mid and high points, in accordance with RG 111, NSCA concluded that the scheme was not "fair" to EML shareholders.

In forming its conclusion that the transaction was "reasonable" NSCA took into account:

(1) The advantages of access to ongoing funding through NBS' TSXV listing and the opportunity to own shares in a listed company providing potential future liquidity opportunities;

(2) The disadvantages of dilution of EML shareholders' interests in the mining projects and dilution through the private placement; and

(3) EML directors' advice that there are currently no alternatives to the scheme.

NSCA placed specific emphasis on the fact that the scheme provides EML with funding to undertake exploration activity on its assets and future funding opportunities from access to capital markets in Canada in forming its opinion that the scheme is reasonable.

FIRST COURT HEARING

At the first court hearing, the Court noted that NSCA is a related company of Nexia Sydney Pty Ltd which operates EML's share registry through a division called Next Registries. NSCA included the following disclosure at page 2 of the Financial Services Guide preceding the Report:

Fees NSCA may receive

NSCA charges fees for preparing Reports. These fees will usually be agreed with, and paid by the Client. Fees are agreed on either a fixed fee or a time cost basis. In this instance, the Client has agreed to pay NSCA AUD$22,000 (excluding GST and out of pocket expenses) for preparing the Report. NSCA and its officers, representatives, related entities and associates will not receive any other fee or benefit in connection with the provision of this Report. Referrals

NSCA does not pay commissions or provide any other benefits to any person for referring customers to them in connection with a Report.

Association and Relationships

Through a variety of corporate and trust structures NSCA is controlled by and operates as part of the group of companies of which Nexia Sydney Group Pty Ltd is the ultimate holding company ("Nexia Group"). NSCA's directors and authorised representative may be directors in the Nexia Group. Mr Brent Goldman, authorised representative of [Nexia Sydney Financial Solutions Pty Ltd] and director of Nexia Sydney Group Pty Ltd, has prepared this Report. The financial product advice in the Report is provided by NSCA and not by the Nexia Group.

From time to time NSCA, the Nexia Group and related entities ("Nexia entities"), may provide professional services, including audit, tax and financial advisory services, to companies and issuers of financial products in the ordinary course of their businesses.

Over the past two years AUD$27,100 (excluding GST) in professional fees has been received from the Client in respect of share registry services.

No individual involved in the preparation of the Report holds a substantial interest in, or is a substantial creditor of, the Client or has other material financial interests in the Scheme.

At page 33 of the Report, the following confirmation of independence is made:

Confirmation of Independence

Prior to accepting this engagement Nexia Sydney Corporate Advisory Pty Ltd ("NSCA") determined its independence with respect to EML and NBS with reference to ASIC Regulatory Guide 112: Independence of expert's Reports ("RG 112"). NSCA considers that it meets the requirements of RG 112 and that it is independent of EML and NBS.

Also, in accordance with s648(2) of the Corporations Act we confirm we are not aware of any business relationship or financial interest of a material nature with EML or NBS, its related parties or associates that would compromise our impartiality.

Mr Brent Goldman, authorised representative of NSCA, has prepared this Report. Neither he nor any related entities of NSCA have any interest in the promotion of the Scheme nor will NSCA receive any benefits, other than normal professional fees, directly or indirectly, for or in connection with the preparation of this Report. Our fee is not contingent upon the success or failure of the Scheme, and has been calculated with reference to time spent on the engagement at normal professional fee rates for work of this type. Accordingly, NSCA does not have any pecuniary interests that could reasonably be regarded as being capable of affecting our ability to give an unbiased opinion under this engagement.

NSCA provided a draft copy of this Report to the Directors and management of EML for their comment as to factual accuracy, as opposed to opinions, which are the responsibility of NSCA alone. Changes made to this Report, as a result of the review by the Directors and management of EML, have not changed the methodology or conclusions reached by NSCA.

The author of the Report, Brent James Goodman gave evidence that NSCA and Nexia Sydney are both wholly owned subsidiaries of Nexia Sydney Group Pty Ltd (Nexia Group) and that he is a director of each of those companies and a shareholder of Nexia Group. Mr Goodman says that although he is a director of Nexia Sydney, he does not have any involvement in Next Registries' day to day operations. He states that he has made enquiries as to the amount of fees paid by EML for registry services for the purposes of disclosure in the Report and he has not discussed the scheme with Mr Irving, who gives evidence in these proceedings in relation to services provided by Nexia Sydney in relation to the scheme. Mr Goodman says that Next Registries will receive the same benefit whether or not the scheme is approved and it is his opinion that none of these matters affect his or NSCA's independence for the purpose of providing the Report. Having considered this evidence, including the fees involved, and the disclosure in the Report, I accepted that none of those matters was sufficient to affect NSCA's independence for the purpose of providing the Report.

In accordance with regulatory requirements, EML's board separately commissioned a valuation report prepared by Barr Engineering Company and dated 13 November 2020 in relation to the Projects which is also contained in annexure D to the scheme booklet.

At the first court hearing, senior counsel for EML drew the following matters to the Court's attention:

(1) The evidence read contained proof of:

(a) The fact that EML is a Part 5.1 body;

(b) Details of EML's capital and constitution;

(c) The fact that (through the SIA), EML had committed itself to propounding the scheme, which is prima facie evidence that the scheme is bona fide and properly proposed;

(d) The contents of scheme booklet, which includes the disclosures set out above, the text of the proposed scheme, the SIA, the deed poll (under which NBS commits, for the benefit of EML shareholders, to perform its obligations), the Report, the valuation report, the notice of scheme meeting and the form of the proposed proxy form. The Court notes that the terms of the scheme of arrangement are in usual form and provide for payment of scheme consideration before title to EML shares passes;

(e) The form of the email by which access to the scheme booklet may be obtained;

(f) Evidence of Mr Lewis' consent to act as chairman of the scheme meeting and Mr Pringle's consent to act in lieu of Mr Lewis if he is unable to do so;

(h) Verification of factual information in the scheme booklet, which I note is in the usual form.

(2) Under the SIA (as amended on 12 February 2021), EML agreed to pay NBS a "reimbursement fee" of the lesser of C$100,000 or 1% of the equity value of EML if the scheme did not proceed in the circumstances disclosed in section 10.9 of the scheme booklet. The SIA contains "no talk" and notification of unsolicited approaches obligations which are subject to a usual fiduciary carve out and "no shop" obligations. The reimbursement fee is not payable because EML shareholders vote against the scheme. These arrangements are generally in what has become customary form, having regard to relevant guidance provided by the Takeovers Panel.

(3) The scheme booklet would be despatched to EML shareholders by electronic means. All 123 shareholders had provided email addresses for that purpose. Provision was made for despatch by mail in the event of email delivery failure.

(4) NBS intends to rely on an exemption from prospectus requirements of applicable Canadian provincial and harmonised securities laws under s 2.11 of National Instrument 45-106 – Prospectus Exemptions of the Canadian Securities Administrators in relation to the issue of NBS shares in implementation of the scheme.

I summarised the principles relevant to when a court will convene a scheme meeting in Capilano Honey Limited, in the matter of Capilano Honey Limited [2018] FCA 1568; (2018) 131 ACSR 9 at [32]-[34] as follows:

32 The Court will order that a scheme meeting be convened and approve a draft explanatory statement to be sent to shareholders if it is satisfied that:

(1) The plaintiff is a Pt 5.1 body;

(2) The proposed scheme is a compromise or (relevantly) an "arrangement" within the meaning of s 411. …;

(3) The scheme booklet will provide proper disclosure to shareholders;

(4) The scheme is bona fide and properly proposed;

(5) ASIC has had a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions and it has had at least 14 days' notice of the proposed hearing date;

(6) The procedural requirements of the Federal Court (Corporations) Rules 2000 (Cth) have been met; and

(7) The scheme is of such a nature and cast in such terms that, if it receives a statutory majority at the meeting, the Court would be likely to approve it on the hearing of a petition which is unopposed.

33 The application for leave to summon a scheme meeting is in the nature of an interlocutory proceeding and is a preliminary to the final determination which is to be made when the matter comes back to the Court for approval after the holding of the meetings which have been directed: Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504-05. By granting leave, the Court does not give its imprimatur to the proposed scheme. At the stage of ordering a scheme meeting, the Court does not ordinarily go very far into the question of whether the arrangement is one that warrants the approval of the Court; that question is to be answered when the scheme returns to the Court for final approval. That is not to exclude the possibility that a scheme may appear on its face so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further: see Re Foundation Healthcare Limited (2002) 42 ACSR 252; [2002] FCA 742 at [36] and [44] per French J, cited with approval in Re CSR Limited (2010) 183 FCR 358; [2010] FCAFC 34 at [58] per Keane CJ and Jacobson J. Chief Justice Keane and Jacobson J went on to say (at [59] and [61]) that the adverb "blatantly" and the term "contrary to public policy" emphasise that the enquiry under s 411(1) is not intended to resolve difficult questions on which reasonable minds may differ, although it has long been recognised that a clear want of utility in putting in train the process of s 411(1) is a good reason to decline to order the convening of the first meeting.

34 At the first court hearing, the Court is concerned with whether the proposed scheme is one which is adequately explained to those who have a financial interest in it and whether there is any obvious flaw in the scheme, such that it would be inappropriate even for it to be submitted for consideration: see Re Abacus Funds Management Ltd (2006) 24 ACLC 211; [2005] NSWSC 1309 at [23]. The Court is not required to be satisfied that no better scheme could have been proposed. The question is whether it is reasonable to suppose that sensible business people might consider the arrangement proposed to be of benefit to members: see Centrebet International Limited [2011] FCA 870 at [29] per Emmett J.

Having regard to those principles and the evidence read at the first court hearing, I made orders on 18 February 2021 concerning the convening and conduct of the scheme meeting and approving the scheme booklet for despatch.

The affidavits read at the first court hearing and exhibits tendered were as follows:

(1) Affidavits affirmed by Peter William Stokes, a partner in McCullough Robertson Lawyers, EML's solicitors in this proceeding:

(a) on 15 January 2021, to which are annexed an extract of information obtained from ASIC's records in relation to EML on 14 January 2021 and a corporate profile of NBS obtained from Innovation, Science and Economic Development, Canada on 12 January 2021. This evidence confirms NBS' existence and that EML is a company and therefore a Part 5.1 body; and

(b) on 17 February 2021, to which was attached a letter dated 16 February 2021 from ASIC to the directors of EML confirming that a draft of the explanatory statement (included in the scheme booklet) was first provided to ASIC on 27 January 2021 and indicating that ASIC did not intend to make submissions or intervene to oppose the scheme at the first court hearing;

(2) Affidavits affirmed by Mr Lewis:

(a) on 15 February 2021, in which Mr Lewis consents to act as chair of the scheme meeting, confirms his recommendation in relation to the scheme, discloses his direct and indirect interests in shares in EML and notes that the terms of his employment by NBS and appointment to the board of NBS have not yet been finalised but he understands that his entitlements will not be materially different to those arising from his position with EML;

(b) on 16 February 2021, deposing to EML's incorporation, its share capital, its directors, its business, its constitution, the fact that 37.1% of its shareholders reside in New South Wales, 14.63% in the United States and 8.94% in Canada, the negotiation of exclusivity provisions and reimbursement fees, the verification process for the scheme booklet, the draft scheme booklet and proposals for how the scheme booklet will be despatched and conduct of the scheme meeting. I note that at the first court hearing, senior counsel confirmed his instructions that all EML shareholders were registered at addresses in Australia, Canada or the United States of America; and

(c) on 16 February 2021, deposing that the draft scheme booklet was approved by EML's board on 15 February 2021 pursuant to a circular resolution;

(3) An affidavit affirmed on 12 February 2021 by Mr Pringle in which he consents to act as chair of the scheme meeting if Mr Lewis is unable to do so and he makes declarations as to the nature of his interests in shares in EML, his role at EML and his proposed role at NBS;

(4) An affidavit affirmed on 15 February 2021 by Neil Maxwell Irving, a manager employed by Nexia Sydney whose duties include managing Next Registries. He gives evidence that Next Registries maintains EML's share register and it has been engaged by EML to provide services in relation to dispatching materials and the conduct of the scheme meeting;

(5) Affidavits affirmed by Brent James Goldman, a director of NSCA:

(a) on 15 February 2021, deposing that NSCA is an authorised corporate representative of Nexia Sydney Financial Solutions Pty Ltd which holds an Australian financial services licence; that he had been shown a copy of the Federal Court of Australia's Expert Evidence Practice Note GPN-EXPT; the facts of his curriculum vitae and that he was responsible for the preparation of the draft of the Report annexed to the affidavit and held the opinions expressed in it;

(b) on 16 February 2021, annexing an amended Report; and

(c) on 17 February 2021, deposing to relationships between NSCA, Nexia Sydney and Nexia Group and NSCA's independence, as discussed previously in these reasons and annexing an updated version of the Report;

(6) An affidavit affirmed on 12 February 2021 by Bradley Mark Dunn, a senior mining geologist with Barr Engineering Co annexing a copy of the valuation report and giving evidence that he has the opinions set out in the report and consents to its inclusion in the scheme booklet;

(7) An affidavit affirmed by Mr Barbeau on 15 February 2021 in which he gives evidence as to the verification of information relating to NBS in the scheme booklet and concerning negotiation of the exclusivity and reimbursement fee provisions in the SIA;

(8) An affidavit affirmed on 16 February 2021 by Kathleen Matheson, an overseas qualified solicitor employed by McCullough Robertson, in relation to lodgement of the draft scheme booklet with ASIC. I note that on 16 February 2021, an officer of ASIC advised Ms Matheson that:

As discussed in our conversation yesterday we note that ASIC's preference is for the inclusion of audited financial information in the scheme booklet. However we recognise that in the current unique circumstances of Electric Metals this may not be possible. Accordingly whilst we have no further comments on the draft scheme booklet (in the form attached to your email yesterday at 5:52 PM AEST), we also wanted to advise you of our current position with regards to the scheme and this issue. We understand that the company's audited financial statements for 31 December 2020 is expected to be released after the registration of the scheme booklet and sometime before the second court hearing. In this regard we note that we reserve our right to take any action we deem appropriate including withholding our no objection letter, if we consider that the information in these reports is material to shareholders' decision on how to vote on the scheme and that shareholders have not been provided a reasonable opportunity to consider this information when deciding how to vote.

(9) An affidavit affirmed by Jessica Claire Bland, a solicitor employed by McCullough Robertson, on 18 February 2021 setting out correspondence with ASIC;

(10) Exhibit A being the scheme booklet approved for despatch to EML shareholders;

(11) Exhibit B being the form of the email to be sent to EML shareholders providing access to the scheme booklet and proxy forms and details of how the scheme meeting may be viewed (but not attended) online; and

(12) Exhibit C being a proposed hard copy notice to shareholders advising of how electronic access to the scheme booklet or a hard copy of it may be obtained, voting at the scheme meeting may be achieved and details of how the scheme meeting may be viewed (but not attended) online.

SECOND COURT HEARING

The matters the Court must take into account in deciding whether to approve the scheme are well-established. They include:

(13) Whether the orders of the Court convening the scheme meeting were complied with;

(14) Whether the resolution to approve the scheme was passed by the requisite majorities and whether other statutory requirements have been satisfied;

(15) Whether all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with ASIC) have been satisfied or waived;

(16) Whether the scheme is fair and reasonable so that an intelligent and honest EML shareholder, properly informed and acting alone, might approve it. In considering this question, it is not the role of the Court to usurp the decision of shareholders by imposing its own commercial judgement on the scheme or to consider whether a better scheme might have been proposed;

(17) Whether EML has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; and

(18) Whether there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme.

See Solution 6 Holdings Limited ACN 003 264 006, in the matter of Solution 6 Holdings Limited ACN 003 264 006 [2004] FCA 1049; (2004) 50 ACSR 113 at [18]-[24] (Jacobson J); Permanent Trustee Company Limited [2002] NSWSC 1177; (2002) 43 ACSR 601 at [8]-[10] (Barrett J); Central Pacific Minerals NL [2002] FCA 239 at [12]-[14] (Emmett J); Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) [2010] FCA 400; (2010) 77 ACSR 701 at [35]-[39] (Jacobson J).

I was satisfied of each of those matters on the basis of the evidence read.

On 18 February 2021, the Court's orders made on that day and the scheme booklet were lodged with ASIC.

The scheme booklet was served on EML shareholders in accordance with the Court's orders, and there were follow up communications designed to promote participation in the scheme meeting. Changes to the scheme booklet despatched to shareholders from the form of Exhibit A were identified to the Court, and I am satisfied that they were minor and immaterial.

The scheme meeting was held at the time and place required by the Court's orders, Mr Lewis chaired the meeting and four shareholders were present in person while 42 shareholders attended by proxy. The Court has been provided with evidence as to the manner in which proxy forms were received and collated, the number of proxies received and the votes cast at the meeting.

The statutory majorities required by s 411(4)(a)(ii) were achieved at the scheme meeting. No votes were cast against approving the scheme and there were no abstentions by those attending the meeting in person or by proxy.

(1) The votes cast in favour of approving the scheme on the poll taken at the scheme meeting were as follows:

Number of shares voted 37,926,280 % of all issued shares 86.55% Number of holders present in person

(2) Votes cast by EML directors or entities they control and related parties were tagged. Those votes were all in favour of the resolution to approve the scheme as follows:

Companies controlled by Mr Lewis 15,800,000 Dr Pringle 1,000,000 Dr Sandri and another 7,750,000 Mr Lewis' parents 1,500,000 % of all issued shares 59.45%

I note the resolution to approve the scheme was passed unanimously and the votes cast were in respect of 86.55% of the issued capital. Voter turn-out was roughly a third of all shareholders. While this is not a large headcount, there is nothing to indicate that shareholders were in any way prevented or discouraged from participating in the vote.

I also note that more than two thirds of the votes cast were cast by or on behalf of the EML directors or their related parties but the scheme would have been approved in any event as no shareholder voted against the scheme.

No shareholder or creditor appeared, or gave notice of an intention to appear, to oppose the Court making orders approving the scheme, despite having been given several opportunities to do so.

A circular resolution of directors of EML was signed on 25 March 2021 passing a resolution that, for the purpose of section 11.11 of the scheme booklet, the board determined that it was lawful and not unduly onerous or impractical for EML to issue EML shares to holders of subscription warrants in Singapore, the United Kingdom, Panama, Mexico and Paraguay.

There is evidence given by a qualified Canadian lawyer of the due execution of the deed poll by NBS and its enforceability according to relevant Canadian law.

Certificates signed on behalf of NBS by Mr Barbeau (NBS Certificate) and on behalf of EML by Messrs Lewis and Pringle (EML Certificate) that all conditions precedent (other than Court approval of the scheme and lodgement with ASIC of the Court's order) had been satisfied or waived by 8 am on 13 April 2021 were tendered.

I note that on 8 April 2021, TSXV advised EML's Canadian legal representative, Fasken Martineau DuMoulin LLP (Fasken), that:

The purpose of this letter is to inform you that the Exchange has conditionally approved the Company's proposed Qualifying Transactions ("QT") with Electric Metals (USA) Limited ("the Target") as more fully described in the Company's Filing Statement which is expected to be dated before April 30, 2021. As such the Exchange has also conditionally approved the listing of the Resulting Issuer, to be listed on Tier 2. …

Final Exchange approval of the QT, including all related transactions, is conditional to, among others:

1. Exchange review and approval of the final copy of the Filing Statement disclosure. …;

2. With regards to the 750,000 Resulting Issuer shares to be issued to Mr. Inwentash, the shares will represent 1.14% of the resulting issuer. For this reason, as a condition to listing, the shares must be reduced to represent < 1% of the capital structure or the amount that exceeds 1% is subject to disinterested shareholder approval;

3. The Principal Securities are subject to a Tier 2 Value Escrow Agreement. Please confirm the number of Resulting Issuer shares will be owned by Mr. Inwentash, how they were acquired and which shares are subject to Principal Escrow;

4. The Non Principal Securities are subject to Seed Share Resale Restrictions; and

5. Reception of final documentation on or prior to July 8, 2021.

By a letter (Fasken letter) dated 12 April 2021 addressed to the Court, Myroslav Chwaluk, a partner in Fasken, said:

On April 8, 2021, TSXV issued a conditional approval letter addressed to Fasken (the "TSXV Letter"), approving the RTO and listing of the issuer resulting from the Scheme, subject to certain conditions. Pursuant to Section 3.1 of the SIA, among other things, it is a condition of effectiveness of the Scheme that the listing on TSXV of the NBS Shares (as that term is defined in the SIA) to be issued in the Scheme be conditional only on conditions "standard for a "qualifying Transactions" of a "Capital Pool Company"" (as those terms are defined under applicable TSXV Policies) and the "standard listing conditions" of TSXV.

This letter is provided to you at the Company's request as additional evidence of the satisfaction of the condition precedent described above.

It is customary for TSXV to grant "conditional" approval of transactions prior to "final" listing approval in accordance with its policy applicable to listed issuers. TSXV Policy 2.4 – Capital Pool Companies of the TSXV ("Policy 2.4") describes a process for completing a Qualifying Transactions of a Capital Pool Company such as the transactions contemplated by the Scheme including the expected conditions for granting final approval.

Based on our examination of Policy 2.4, and our experience with transactions similar to the RTO and our previous interaction with TSXV, we believe the conditions to which the RTO and the issuance of the NBS Shares issuable thereunder are subject pursuant to the TSXV Letter and "standard" conditions for a "Qualifying Transaction" of a "Capital Pool Company" (as those terms are defined under TSXV Policies), and "standard listing conditions" of TSXV.

ASIC has given its "usual letter" dated 12 April 2021 indicating that it has no objection to the scheme under s 411(17)(b) of the Corporations Act.

The time and place of the second court hearing on 31 March 2021 was advertised in The Australian on 16 March 2021. EML shareholders were advised of the adjournment of the second court hearing to 2.15 pm on 13 April 2021 by an email sent by Next Registries at 7.30 pm on 31 March 2021.

The following evidence was read at the second court hearing:

(1) An affidavit affirmed by Mr Lewis on 29 March 2021 in which Mr Lewis gave evidence as to the despatch of the scheme booklet, communications with EML shareholders, the conduct of and voting at the scheme meeting at the time and place required by the Court's orders, and the then status of communications with TSXV;

(2) An affidavit affirmed by Mr Irving on 29 March 2021 in which he gave evidence concerning the despatch of the scheme booklet and related materials, receipt and collation of proxies, and voting at the scheme meeting;

(3) An affidavit affirmed on 29 March 2021 by Alfred Ingo Wiens, a partner in Wildeboer Dellelce, the Toronto based legal adviser to NBS, qualified to practice in relation to the laws of the Province of Ontario and Canadian federal laws. Mr Wiens gave evidence as to NBS' incorporation and the due execution and enforceability of the deed poll;

(4) An affidavit affirmed on 30 March 2021 by Georgina Maxine Michel Buckley, a solicitor employed by McCullough Robertson, giving evidence of any departures between the scheme booklet as despatched and Exhibit A on the basis of which I am satisfied that there are no material departures;

(5) An affidavit affirmed by Ms Matheson on 29 March 2021 in which Ms Matheson gave evidence of the filing of the Court's orders dated 18 February 2021 and the scheme booklet with ASIC on 18 February 2021, an extract of ASIC's records in relation to those matters, and the publication of a notice of the time and place of the second court hearing in The Australian on 16 March 2021;

(6) An affidavit affirmed by Mr Stokes on 31 March 2021 in which Mr Stokes gave evidence as to the absence of notice from any EML shareholder of an intention to appear at the second court hearing and of his communications with ASIC which indicated that ASIC had received copies of the materials to be provided to the Court and its advice that:

… subject to satisfaction of the outstanding condition precedent in clause 3.1(i) of the Scheme Implementation Agreement, we intend to provide a no-objection statement at the time of the hearing of an application to the court to approve the scheme of arrangement.

(7) An affidavit affirmed by Mr Barbeau on 29 March 2021 in which Mr Barbeau confirmed that NBS executed the deed poll on 26 January 2021;

(8) Two affidavits affirmed by Mr Lewis on 12 April 2021 in which Mr Lewis deposed to the matters set out at [43] and [47] above; and

(9) An affidavit affirmed by Ms Bland on 13 April 2021 deposing to having received no notice of intention to appear at the adjourned second court hearing to oppose the approval of the scheme and annexing ASIC's "usual letter" dated 12 April 2021, the EML Certificate, the NBS Certificate and the Fasken letter.

US SECURITIES ACT EXEMPTION

For the purpose of NBS' reliance on the exemption from registration requirements under s 3(a)(10) of the Securities Act of 1933 (US), the Court notes the following matters:

(1) The scheme contemplates the issue of NBS securities in exchange for the EML securities;

(3) The Court and EML shareholders have been fully informed of the value of the securities to be surrendered and the value of the securities to be offered in consideration of that surrender. The valuation has been prepared by an expert independent of the scheme company. The Court has taken this evidence into account in determining whether the scheme should be approved. The Court has not acted as a valuer in this process, but has received the assistance of an unaligned expert;

(4) The Court, as statutorily required, has held a hearing to consider the scheme proposal;

(5) It is well established that, in determining whether to approve a scheme of arrangement, the Court must be satisfied that the proposed scheme is at least so far fair and reasonable such that an intelligent, honest and reasonable shareholder properly informed about the terms of the scheme would be prepared to enter into it having regard to their own interests; see BRL Hardy Ltd [2003] SASC 97; (2003) 45 ACSR 397 [20]-[21], In re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 CH 213 at 247. It is open to the Court to approve a scheme, even where, as here, the expert which prepared the Report for inclusion in the scheme booklet has concluded, having regard to ASIC's RG 111, that the scheme was not "fair" but was "reasonable": see Westgold Resources Ltd (No 2) [2012] WASC 395 and the cases cited at [41] . The Court is satisfied that the scheme meets the requisite standards because:

(a) The valuation of an EML share prior to the scheme (on a controlling basis) is only A$0.01 higher at the mid-point and high point of the value of a NBS share (on a minority basis) following the implementation of the scheme. I note that at the low point of the valuation the converse was true;

(b) Importantly, the independent expert concluded that that the scheme was reasonable (having regard to the benefits conferred by the scheme, including funding of EML's current projects and access to the TSXV market) and in the best interests of EML shareholders;

(c) Shareholders were informed of these facts in the scheme booklet and no shareholder voted against the scheme or appeared at the final hearing to oppose the scheme. It is not for this Court to usurp their commercial judgement;

(d) Shareholders approved the scheme by requisite majorities, being more than 75% of the shares voted at the meeting by more than 50% of the shareholders attending the meeting in person or by proxy; and

(6) The hearing to approve the scheme was open to the public and any person to whom securities are to be issued had standing to appear. Notice of that fact was provided in the scheme booklet and in a newspaper circulating throughout Australia as well as in the Court's lists. Email notice was given to EML shareholders of the adjourned second court hearing held on 13 April 2021, and no shareholder appeared at that hearing to oppose the scheme being approved.

I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Farrell. Associate:

Dated: 13 April 2021