Sino Gold Mining Limited, in the matter of Sino Gold Mining Limited [2009] FCA 1277

Sino Gold Mining Limited, in the matter of Sino Gold Mining Limited [2009] FCA 1277

The use of two classes for option holders—one for in-the-money options valued using an intrinsic value methodology, and one for out-of-the-money options valued using the Black-Scholes method—is appropriate; the class division reflects the key differences in rights and consideration under the scheme, and all members have a common interest that allows for consultation; objections regarding the fairness of the valuation may be raised at the final approval hearing.

Parties
Plaintiff: Sino Gold Mining Limited; Interested Party (appeared by Leave): Eldorado Gold Corporation; Objector (appeared by Leave): Kingsway Capital of Canada Inc; Objector: Assif SA
Jurisdiction
Australia
Judgment Date
06 November 2009
Procedural Posture
Corporations – Scheme of Arrangement / First Court Hearing: Application for Orders Convening Meetings of Members and Creditors
Outcome
Application granted; meetings ordered as per proposed classes.
Legal Topics
Schemes of Arrangement, Class Composition for Creditor Meetings, Valuation Methodologies in Option Schemes
Corporations Schemes of Arrangement Class Composition for Creditor Meetings Valuation Methodologies in Option Schemes

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Parties

Sino Gold Mining Limited

Plaintiff

Eldorado Gold Corporation

Interested Party (appeared by Leave)

Kingsway Capital of Canada Inc

Objector (appeared by Leave)

Assif SA

Objector

Procedural Posture

Corporations – Scheme of Arrangement / First Court Hearing: Application for Orders Convening Meetings of Members and Creditors

Legal Issues

  1. 1 Whether the proposed class division for option holders (in-the-money vs out-of-the-money) is appropriate for meetings under s 411 of the Corporations Act 2001 (Cth)
  2. 2 Whether in-the-money options should be valued using intrinsic value method versus Black-Scholes methodology
  3. 3 Whether break fee and exclusivity provisions in the Scheme Implementation Deed are reasonable

Ratio Decidendi

The use of two classes for option holders—one for in-the-money options valued using an intrinsic value methodology, and one for out-of-the-money options valued using the Black-Scholes method—is appropriate; the class division reflects the key differences in rights and consideration under the scheme, and all members have a common interest that allows for consultation; objections regarding the fairness of the valuation may be raised at the final approval hearing.

Court Disposition

Application granted; meetings ordered as per proposed classes.

Orders

  • Meetings of the different classes of shareholders and option holders to consider the schemes of arrangement are to be convened as per the orders.
  • Shareholder meeting (excluding Eldorado interests) set for 2 December 2009 at Hilton Sydney.