Martin Jones, Darren Weaver and Steve Sherman were appointed as Joint and Several Voluntary Administrators to Compass Resources Limited (ASX:CMR) and to its wholly owned subsidiary, Compass Mining Pty Limited on 29 January 2009.

Keiran Hutchinson, Paul Campbell-Wilson and Chris Munday of Ernst and Young were appointed Joint and Several Receivers and Managers on 17 February 2009. (Refer to the Creditors circular dated 20 February 2009).

At the second meeting of creditors held on 30 April 2009, creditors resolved that CMR enter into a Deed of Company Arrangement ('DOCA") providing the Deed Administrators 12 months to:

• enhance the potential return to unsecured creditors through the sale of the company’s assets and / or a financial re-organisation of the company’s affairs;
• ascertain the size of the creditor pool (particularly as to the quantum of and validity of claims by shareholders who assert they are creditors of Compass Resources Limited); and
• further investigate the affairs of the company and as to the possible claims available to the company.

This Deed of Company Arrangement was executed by the company on 21 May 2009. It was, in turn, replaced by DOCA variations submitted by YA Global (DOCA Proponent and major creditor) that were approved by meetings of Compass creditors on 6 January, 5 July, 23 December 2010 and 21 June 2011. Accordingly, Compass is currently suspended from trading on the ASX.

Based upon our report to creditors dated 13 June 2011 and Notice of Meeting dated 19 July 2011, should the YA DOCA complete, stakeholders can expect the following returns:

 *which comprises 9.67% to other Non-Associated Shareholders and 0.43% current HNC shareholding post dilution

An EGM of shareholders was held on 18 August 2011 at which shareholders considered and resolved to approve YA Global's Proposal to recapitalise the Company.

Successful completion of the DOCA occurred on 15 November 2011, which included the following key events:

• The implementation of a Creditors' Trust to which Darren Weaver and Martin Jones were appointed Joint and Several Trustees. The Creditors' Trust provides a structure whereby creditors' claims against CMR which are released by the DOCA are dealt with by the Trustee in accordance with the Trust Deed instead;
• 13.25M was loaned to CMR by YA, pursuant to a new fixed and floating charge in favour of YA, which charge will also secure further funding to be provided by YA;
• $7.5M was paid by CMR to HAR in partial satisfaction of debts due to it;
• $5.75M was paid to the Trustee of the CMR Creditors' Trust to be split as follows:
  • $2.5M to Compass Mining Pty Ltd (CMPL); and
  • $3.25M to CMR unsecured creditors debts;
• CMR being released of the charges previously in favour of CMPL;
• The share issue to both YA (1,083,618,699 shares) and Coffee House Group Limited (172,722,511 shares) in exchange for release of the admitted debts owing to the by CMR;
• Grant of a new charge in favour of Hunan Nonferrous Metals Corp Ltd in respect to the approximately $15.6M owed by CMR;
• The issue of a bond to the Trustee of the CMR Creditors' Trust, for the benefit of creditors of CMR;
• Cessation of the appointments of the Deed Administrators and Receivers and Managers; and
• Control of CMR passed to its new board of directors.

Given the DOCA's completion, CMR creditor claims are now being dealt with in accordance with the Creditors' Trust Deed, specifically:

• $3.25M will be distributed in the manner and priority outlined in accordance with clause 6 of the Creditors' Trust Deed, that being:
• To the Administrators in satisfaction of the Administrators Costs;
• Next, to the Trustees in satisfaction of the remuneration, fees, costs and expenses;
• Next to employee entitlements (if any remain outstanding);
• Next, to those CMR Creditors with admitted claims of less than $100,000, a dividend of 100c in the dollar; and
• Next, to the CMR Creditors with admitted claims of $100,000 or more in proportion to their admitted claims.

CMR Creditors with admitted claims greater than $100,000 should also benefit a dividend of 25 cents in the dollar (subject to costs) from the unsecured bond issued by CMR at completion and payable to the Trustees in November 2014.

The Committee members’ details are as follows:

The Committee of Inspection formed under the DOCA does not apply to the Creditors' Trust. We would like to thank the previous committees for their support in working through the issues to achieve a recapitalisation of CMR.

Subject to various matters, the following list details the expected returns to be available for creditors under the Creditors' Trust and Liquidation scenarios:

1. Compass Mining Pty Ltd – Sulphide Joint Venture creditors – 100 cents in the dollar was paid in August 2009;
2. Compass Mining Pty Ltd – Oxide Joint Venture creditors –
   • 10 cents paid in August 2009;
   • 10 cents paid on 24 February 2010;
   • 20 cents paid on 29 December 2010; 
   • 10 cents paid on 1 July 2011.
   • A further 40 cents will be paid to creditors on or before 4 January 2012 taking the total returns to creditors 90 cents in the dollar and future dividends will be subject to the timing of receipt of a GST refund from the ATO. Indications at this stage are that a final dividend will be payable to CMPL creditors around April 2012. 
3. Compass Resources Limited – employee claims – 100 cents in the dollar paid in August 2009.

The Future

For CMR Creditors a dividend is to be declared on or before 11 January 2012. The following table summarises the dividend timeline:

For CMPL creditors, a fifth or equalising dividend is to be declared on or before 4 January 2012. The following table summarises the dividend timeline:

As a result of the successful completion of the CMR DOCA, creditors which have previously registered claims against CMR and CMPL and whose claims were admitted against CMPL, have had their claims against CMR rejected by the Trustees in order to avoid double proof.

Given the successful completion of the DOCA, control of CMR's affairs has passed to the new CMR board. Accordingly, to the extent that creditors continue to supply goods and services to CMR, we note that CMR's head office in Sydney is now the appropriate point of contact for payment and in respect to any ongoing supply issues.

Shareholders should direct all future queries in relation to the Company's affairs directly to the Company Secretary, Neil Guest at neil.guest@compassresources.com.au.

Contact details:

Creditor queries: cmrg@fh.com.au

Shareholder queries: neil.guest@compassresources.com.au

Creditors and shareholders should continue to visit our website for further updates.