An Objector To Compulsory Acquisition’s Narrow Path To Success

Where objections are lodged against a proposed compulsory acquisition under Chapter 6A of the Corporations Act, the residual holders can prevent the compulsory acquisition proceeding only if the 90%+ holder cannot satisfy the Court that the proposed compulsory acquisition price is “fair value”. 
Justice Markovic’s judgment in North Limited v Zentree Investments Limited, in the matter of Energy Resources of Australia Ltd [2026] FCA 695 reinforces that objecting shareholders will have a narrow avenue to attack the proposed acquisition price and difficulty in pursuing that attack in the absence of an obvious and material mistake by the independent expert.

In brief

• North Limited, a subsidiary of Rio Tinto Limited, held 98.43% of the shares in ERA. It sought to acquire the 1.57% of shares in ERA that it did not already own for $0.002 (or 0.2 cents) per share.
• In assessing ERA’s fair value, North’s independent experts considered that the significant rehabilitation costs required to rehabilitate the Ranger uranium mine outweighed any value to be attributed to its assets. Accordingly, the experts concluded that fair value for ERA’s shares fell in the range of negative 0.0513 cents and negative 0.0235 cents, below North’s proposed acquisition price.
• A sufficient number of shareholders objected to North’s proposed price and the case was brought before Markovic J for determination.
• Objecting shareholders raised a range of objections – including that the notice was invalid for failing to comply with the Corporations Act, that the proposed acquisition price was not fair value and also raised arguments more often seen in oppression and directors’ duties cases relating to the conduct of North, the board of ERA and its management in the period leading up to North becoming a 90%+ holder.
• Justice Markovic noted the limited role of the Court in a compulsory acquisition case and rejected the arguments of the objectors, determining that the proposed acquisition price was fair value for ERA.

The Facts

Energy Resources of Australia Limited (ERA) is an ASX-listed uranium miner. ERA has no cash generating activities and significant liabilities associated with its obligations to rehabilitate the Ranger Project Area, the site of its former uranium mine.

ERA has other non-cash-generating assets, including the key contested asset of value: Jabiluka. Jabiluka contains material uranium deposits, but for which ERA does not currently have authority to mine, either from the governments whose permission is required to undertake mining or from the local Traditional Owners with whom ERA has contracted not to mine without their consent (a prospect they have vocally objected to ever occurring).

North became a 90%+ holder following ERA’s renounceable entitlement offer in 2024 which sought to raise funds for rehabilitation at Ranger at 0.2 cents per share (the proposed compulsory acquisition price). That entitlement offer sought to raise up to $880 million but, other than North’s participation for its full entitlement, had limited participation from other existing shareholders or new investors.

North served a compulsory acquisition notice on ERA’s shareholders on 11 April 2025, to which more than 10% of the remaining shareholders objected. That required North to seek the approval of the Court pursuant to s644F of the Corporations Act to proceed with its proposed compulsory acquisition.

North’s experts adopted a “sum of its parts” methodology and assessed negative value for ERA in light of ERA’s own rehabilitation liability provision of $2,403 million and their assessment of fair value for ERA’s residual assets. North’s experts assessment of the value of the Jabiluka deposit was affected significantly by the uncertainty that ERA would ever be able to mine the Jabiluka deposit given government and Traditional Owner objections.

The Objections

Zentree, the only active objector in the proceedings, raised a number of grounds attacking the validity of the notice and the expert’s conclusion as to fair value, including that:

• The notice was invalid because the expert reports were deficient, including because the experts failed to apply the correct or an appropriate methodology and because they relied on subjective decisions made by or at the direction of North and/or ERA to value ERA’s assets at significant undervalue.
• The notice was invalid because it failed to disclose information known to North and material to shareholders in deciding whether to object to the compulsory acquisition, including information to substantiate the large rehabilitation liability provision and how this provision had increased by more than 300% in the period leading up to North becoming a 90%+ holder to eclipse the value of ERA’s residual assets.
• The proposed acquisition price did not reflect fair value. For this purpose Zentree relied on expert reports from a forensic accountant, a minerals consultant, a mineral engineer and a geologist, each of which sought to respond to an aspect of North’s experts assessments.

The Court’s key findings

Justice Markovic noted the binary nature of the decision before the Court. If the 90%+ holder establishes that the terms set out in the compulsory acquisition notice give ‘fair’ value, the Court must approve the acquisition. Otherwise, it must confirm that the acquisition will not take place.

Her Honour noted that objectors, therefore, had a “single and narrow avenue of attack” available, which was restricted to assessment of the proposed price and whether it reflected a price that would be negotiated in a hypothetical transaction between two willing but not anxious parties. In assessing this price, Markovic J noted that the Court’s decision as to fair value will ordinarily be largely based on the expert report served with that notice and that this report does not need to be beyond criticism for a judge to act on it and conclude that the price was fair.

Justice Markovic dealt with Zentree’s grounds of objections as follows:

• even if North’s experts had adopted an incorrect methodology, that would not render North’s notice invalid, noting it is for the Court to consider whether the notice gives fair value;
• Zentree did not explain how North’s experts incorrectly relied upon subjective decisions “at the direction of North and/or ERA” or provide any detail of the alleged subjective directions given to the experts, either in its grounds of objection, its opening submissions or, despite being pressed to do so, its closing submissions. In any event, the report does not need to be beyond criticism for a judge to act on it. It is enough for the expert report to provide sufficient information and explanation so that the securityholders can understand, in general terms, the valuation and are able to critically evaluate the opinion;
• Zentree’s allegations that the reports were missing material information was not substantiated, noting that the case is “not intended to allow some discrete business assessment to be made by a [securityholder] as to whether a better outcome might be achieved” and noting that Zentree had not adduced any evidence that the alleged omissions of information were material;
• the adjustments to the rehabilitation provision proposed by Zentree and its experts were not realistic and Norths’ experts’ adoption of ERA’s rehabilitation provision in their assessment of fair value was not without reliance on independent verification of those figures and was not unreasonable; and
• the contention by Zentree’s expert for an unencumbered value for Jabiluka by reference to global precedent valuations for broadly similar mineral deposits was not appropriate, rather the lack of government and Traditional Owner support for Jabiluka rightly encumbered the value of Jabiluka.

Justice Markovic noted briefly that other shareholders had raised objections, including allegations that:

• North’s experts lacked independence and appropriate qualifications. Justice Markovic found there was no evidence to support that objection;
• North had abused its position as a dominant shareholder to erode shareholder value and prioritise Rio Tinto’s interest over minority shareholders. Justice Markovic noted that this issue does not go to fair value and, in any event, was not supported by any evidence;
• shareholders would generally suffer loss and harm as a result of North’s acquisition price. Justice Markovic noted that it is not the Court’s role to embark on a general enquiry as to fairness;
• North did not engage in negotiation or discussion with shareholders outside of the Court process in respect of the proposed price and insufficient opportunity was given to shareholders to access information that would allow a proper assessment of valuation. Justice Markovic noted that North was not required to engage in individual or any negotiations with shareholders and that it had followed the procedures set out in the Corporations Act; and
• ERA had engaged in insolvent trading, failed to maximise value and potentially misled shareholders about its long-term prospects. Justice Markovic noted that none of these allegations was substantiated by any evidence and, in any event, did not arise for consideration in this application.

Conclusion

This case is the latest in a long line of cases where objectors have failed to upset the compulsory acquisition process.

Despite Markovic J’s engagement with all arguments made by objectors, it is clear from her Honour’s judgement that the role of the Court is more limited than the objectors were encouraging it to take. This limited role demonstrates the difficulty compulsory acquisition objectors will face in attacking a proposed compulsory acquisition price, in the absence of an obvious and material mistake by the expert.

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