VAs Report

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Report by Administrators pursuant to Section 439A 29 March 2016| Page 58
9 Return to creditors
9.1 Liquidation The funds received from the sale of the Company’s assets will be applied to the secured debt due to the noteholders. It appears likely that any proceeds realised will be insufficient to discharge the secured debt due to BNYM and thus, there will be no funds available to unsecured creditors. As noted above, based upon our preliminary investigations to date we have not identified any material claims that we consider would be recoverable by a Liquidator, however a Liquidator would need to conduct further detailed investigations. If the Company is placed into liquidation, employees may be eligible for payment of their outstanding employee entitlements (excluding unpaid superannuation) under FEG, a scheme operated by the Department of Employment. Employees can obtain further information on the eligibility requirements of FEG at www.employment.gov.au /fair-entitlements-guarantee-feg.

9.2 Proposed DOCA We have been advised by the R&M that it is likely that a return under the DOCA to be proposed would be better than a liquidation scenario. We are unable however to provide further details of the likely of a dividend until such time that a DOCA proposal is received. 5792187_15792187v1

Report by Administrators pursuant to Section 439A 29 March 2016|
Page 59 10 Administrators’ opinion
We recommend that it would be in the creditors’ best interests to resolve to adjourn the Second Meeting for a period not exceeding forty-five (45) business days. Pursuant to Section 439A(4)(b) of the Act, we are required to provide creditors with a statement setting out our opinion on whether it is in creditors’ interests for the:  Administration to end; or  Company to be wound up; or  Company to execute a DOCA; or  Second Meeting to be adjourned for a period not exceeding forty-five (45) business days.
In forming our opinion, it is necessary to consider an estimate of the dividend creditors might expect and the likely costs under each option however in the current circumstances such estimates are not available or may be difficult to predict with accuracy.
We provide our comments on each alternative below:
10.1 Administration to end
Creditors may resolve that the administration should end if it appears the Company is solvent or, for some other reason, control of the Company should revert to its directors. Based on our preliminary investigations and analysis of the Company’s financial information, the Company is insolvent. There appears to be no valid commercial reason why control of the Company should revert to its directors. If the administration were to end, there is no mechanism controlling an orderly realisation of assets and distribution to creditors. In those circumstances, we are unable to say what the Company may ultimately pay creditors or what costs it might incur. Therefore, our opinion is that it is not in the creditors’ interest for the administration to end.
10.2 DOCA
We have been advised by the R&M that they are currently liaising with the Secured Creditor who have expressed an interest in proposing a DOCA, but required further time to put forward a more formal (and detailed) proposal. As the Administrators have not received a DOCA proposal which is capable of creditor acceptance at this point of time, this option is not available to creditors. 5792187_15792187v1 Report by Administrators pursuant to Section 439A 29 March 2016|Page 60
10.3 Winding up of the Company
Based on the information in the Report, detailed particularly in section 5 of this Report, where the Company is wound up, prima facie any dividends to unsecured creditors is contingent upon the net proceeds from the realisation of the Group’s mining assets over and above that of the secured debt owed to the noteholders. The R&M are finalising their sales program for Santa Rita however, given the current market conditions (i.e. declining / depressed nickel price), it appears unlikely that there will be a return to unsecured creditors if the Companies are wound up. If the Companies are placed into liquidation, employees (other than excluded employees, i.e. directors) may be eligible for payment of their outstanding employee entitlements (excluding unpaid superannuation) under FEG, a scheme operated by the Department of Employment. Employees can obtain further information on the eligibility requirements of FEG at www.employment.gov.au /fair-entitlements-guarantee-feg. The costs of winding up MBN’s and MNI’s affairs are estimated at $100k and $35k (plus GST) respectively. It is unclear as to whether there will be any assets available to meet these costs or to enable a return/dividend to creditors.
10.4 Adjournment of Second Meeting
In view of our comments in section 10.1, 10.2 and 10.3 above, we consider it would be in creditors’ best interests to resolve to adjourn the Second Meeting for a period not exceeding forty-five (45) business days as it would enable the Administrators to: 
Allow interested parties additional time to conduct their due diligence with an intention to put forward a DOCA proposal for creditors’ consideration. 
Report back to creditors with sufficient information to accurately determine whether entering into a DOCA provides a better return to creditors as compared to an immediate winding-up of the Company.
We note that there is no certainty that a DOCA proposal will be received from interested parties. That said, in our opinion, while there are costs associated with adjourning the Second Meeting and the risk that a proposal will not ultimately be received, there is potentially a substantial benefit to creditors from a DOCA proposal that will only be possible if the meeting is adjourned for a period not to exceed 45 business days. An adjournment at this time would be consistent with the “spirit” and objectives of the section 435A of the Act, which provides that the Voluntary Administration facilitates a process whereby a company’s affairs be managed in a way that:  Maximises the chances that the Company, or as much as possible of its business continuing in existence; or  If it is not possible for the company or its business to continue in existence – results in a better return for the Company’s creditors and members that would result from an immediate winding up of the Company. 5792187_15792187v1
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In the event that creditors adopt that course, the Administrators will continue their interrogation of the Company’s records with a view to a restructure of the Company, work together with the interested parties and the Directors with a view developing a DOCA proposal and compile a supplementary report to creditors. This would be done so that we at we may better inform creditors (and provide more certainly as to the assets values and potential recoveries which would lead to quantification as to the likely returns from the alternatives available). The reconvened second meeting of creditors would then be held on or before 10 May 2016. It is difficult to estimate the cost of adjourning the meeting of creditors. During the period of the adjournment, some costs will be incurred in continuing investigations that would otherwise be undertaken in a liquidation, while other costs will relate more specifically reporting to creditors on the outcome of the investigation and to re-convening the second meeting of creditors (in the event that creditors resolve to adjourn the forthcoming meeting). Our estimate of the marginal costs is $25,000 (plus GST), upon which we would report to creditors in a supplementary report pursuant to section 439A of the Act in order that approval of such costs may then be considered by creditors.
11 Further information and enquiries The ASIC has released several insolvency information sheets to assist creditors, employees and shareholders with their understanding of the insolvency process. You can access the relevant ASIC information sheets at www.asic.gov.au We will advise creditors in writing of any additional matter that comes to our attention after the release of this report, which in our view is material to creditors’ consideration. In the meantime, should creditors have any enquiries, please contact Lauren McCann or Robert Krachler of this office on (08) 9214 1444.
Dated this 29th day of March 2015. Martin Jones Joint and Several Administrator