What are the restructuring options for a distressed resources company?
Fixed offtake, streaming, royalty and covenant obligations magnify price falls and cost overruns. The options are:
- Refinancing. Lenders reset covenants or defer repayments.
- Recapitalisation. A placement, rights issue or cornerstone investment. Listing Rule 7.1 generally caps placements without shareholder approval at 15% a year.
- Debt-for-equity swap. Creditors convert debt into shares by agreement, scheme or deed of company arrangement (DOCA).
- Scheme of arrangement (Part 5.1). Needs a majority of creditors voting, holding 75% of the debt voted, plus court approval (s 411(4)).
- Voluntary administration and DOCA. A moratorium while a sale or recapitalisation runs, with share transfers by court leave (s 444GA). See voluntary administration and restructuring.
- Receivership. A secured lender appoints a receiver to sell.
- Project or tenement sale. Subject to the approvals below.
The drilling group schemes in Re Boart Longyear Ltd [2017] NSWSC 567 survived a class challenge in First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116. A court cannot approve a scheme designed to avoid takeovers law unless ASIC states it has no objection (s 411(17)).
A DOCA with a s 444GA transfer can be quicker. In Re Mirabela Nickel Ltd [2014] NSWSC 836, deed administrators transferred almost all shares in a listed nickel miner to noteholders. The court must be satisfied the transfer would not unfairly prejudice members (s 444GA(3)).
What ASX and takeovers rules apply to a recapitalisation?
Listed companies must immediately disclose price-sensitive information (Listing Rule 3.1). Confidential, incomplete negotiations may be carved out (Listing Rule 3.1A). Trading halts last at most two trading days (Listing Rule 17.1); longer voluntary suspensions are at ASX’s discretion (Listing Rule 17.2).
Issues above the 15% cap need shareholder approval under Listing Rule 7.1, unless a Listing Rule 7.2 exception or ASX waiver applies. Companies outside the S&P/ASX 300 with a market capitalisation under $300 million can seek a further 10% mandate (Listing Rule 7.1A). Issues to related parties or 30% holders need shareholder approval (Listing Rule 10.11).
Converting debt into shares can breach the 20% takeovers threshold in s 606. Usual s 611 exceptions are:
- item 7: shareholder approval, with the acquirer, seller and associates unable to vote
- item 9: “creep” of three percentage points in six months, for holders of at least 19%
- item 10: pro rata rights issues, including underwriters
- item 17: a court-approved Part 5.1 scheme.
How are tenements and rehabilitation liabilities dealt with in Queensland?
Tenements are granted and renewed under the Mineral Resources Act 1989 (Qld). Dealings fall under the Mineral and Energy Resources (Common Provisions) Act 2014 (Qld). A prescribed dealing has no effect until the Minister approves it and it is registered (s 17). Prescribed dealings include tenement mortgages and assessable transfers (Common Provisions Regulation 2016, s 4). The Minister weighs the transferee’s technical and financial resources, its capacity to fund rehabilitation and the public interest (Regulation, s 10). Unpaid royalties block registration (s 20 of the Act). Buyers can seek an indicative approval before signing (s 23), then have six months to apply for approval (Regulation, s 13).
The environmental authority must move with the tenement, and the scheme manager must be told of a “changed holder event”. Under the Mineral and Energy Resources (Financial Provisioning) Act 2018 (Qld), holders contribute to a State scheme fund or give a surety. The regulator sets the estimated rehabilitation cost (ERC) under s 300 of the Environmental Protection Act 1994 (Qld). From 1 October 2025, holders with an ERC between $100,000 and $10 million give full surety unless they elect into risk assessment. Larger holders are risk-rated yearly; contributions run from 0.5% to 6.5% of the ERC, and high-risk holders must give surety. Site-specific mining authorities also need a progressive rehabilitation and closure plan.
In Longley v Chief Executive, Department of Environment and Heritage Protection [2018] QCA 32, Linc Energy’s liquidators disclaimed its land, licence and plant (s 568). The Court of Appeal held that s 568D ended the company’s environmental protection order obligations as liabilities “in respect of” the disclaimed property. It rejected the argument that s 5G preserved the Queensland order. The High Court refused the State special leave later in 2018.
The Environmental Protection Act 1994 (Qld) has not been amended to reverse Longley. Since 18 June 2024, environmental enforcement orders have replaced environmental protection orders. They can be issued to “related persons” of a company (ss 369N–369Q). These include holding companies and those who significantly benefited financially from, or could influence, its activities.
Landholder and native title agreements must be carried across on a sale. Written access agreements bind successors (Common Provisions Act, s 79); others may need a deed of assumption. Foreign buyers may need FIRB approval: see distressed acquisitions in Australia.
What happens to joint venture, offtake and finance contracts?
The ipso facto stay covers schemes to avoid insolvent winding up, receivers of substantially all property, and administrations (ss 415D, 434J, 451E). For contracts made on or after 1 July 2018, rights triggered merely by that event, or by the company’s financial position, are stayed. Other defaults, such as a missed cash call, remain enforceable. There is no general exclusion for joint ventures.
The stay does not cover a licence, permit or approval issued by a State (reg 5.3A.50(2)(b)), so tenement conditions sit outside it. Nor does it cover business sale agreements (reg 5.3A.50(2)(m)).
JV agreements often let other parties dilute a defaulter or force a discounted sale. The penalties doctrine is not confined to breaches of contract (Andrews v ANZ [2012] HCA 30). A clause out of all proportion to the interest it protects can be challenged as a penalty (Paciocco v ANZ [2016] HCA 28).
What has changed recently for Queensland resources companies?
Queensland’s progressive coal royalty tiers, which reach 40% above $300 a tonne, have applied since 1 July 2022. In 2025 a Queensland metallurgical coal producer entered administration citing lower prices, higher costs and royalties. Its mines were sold to a foreign-backed buyer in mid-2026.
The 2024 environmental amendments widened enforcement powers and penalties. The financial provisioning reforms took effect on 1 October 2025.
What should you do if your resources project or company is in distress?
- Build a 13-week cash flow and test covenants, offtake and royalties.
- Review disclosure daily and plan any trading halt.
- Map consents: lenders, JV partners, offtakers, the Minister, FIRB and native title parties.
- Quantify rehabilitation exposures, including the ERC and surety position.
- Take advice on directors’ duties and safe harbour.
- Engage key creditors early with a credible plan.
How Taylor David can help
Our principal, Scott D. Taylor, has particular expertise in mining and resources private equity and M&A.
We act across Australia for companies, directors, lenders, offtakers, JV partners and investors, including from the Middle East and Asia. We can:
- negotiate refinancings, recapitalisations and debt-for-equity swaps
- run schemes and DOCAs in the Supreme Court of Queensland and Federal Court
- buy or sell projects and tenements
- enforce or resist JV default rights
- advise overseas directors and foreign creditors on cross-border insolvency.
We advise only on Australian law and Australian-based matters. This work sits within our reconstruction and turnaround and insolvency practices.