Intrepid/Blackthorn -- summary under Share repurchases

Overview

In order to give its shareholders a choice between being cashed out and participating in a Zambian copper development property, ASX-listed Intrepid will offer to purchase its ordinary shares for cancellation (subject to an aggregate cap of 2/3 of its cash), with the non-tendering shareholders remaining as shareholders of a company which will acquire all the shares of another listed Australian company (Blackthorn) under an Australian scheme of arrangement in consideration for Intrepid shares. The Australian tax disclosure is subject to a ruling which will not be granted (if at all) until after the results of the share buyback offer are known.

Intrepid

An ASX-listed Australian corporation with 558M ordinary shares outstanding. It received US$80 million in settlement of all disputes surrounding ownership of the Tujuh Bukit copper/gold project in Indonesia and has total assets of US$173M including cash of US$165M. It has no operating activities.

Blackthorn

An ASX-listed Australian corporation with 164M ordinary shares outstanding and indirectly holding a Zambian copper project.

Proposed Buyback

An equal access buyback under s. 257C of the Corporations Act 2001 (Australia) of up to A$110M worth of ordinary shares in Intrepid at A$0.30 per share (the "Proposed Buyback"). Intrepid shareholders will have the option of either participating in the Proposed Buyback or retaining all (or part) of their investment in Intrepid. A cash pool of A$110M is available for the buyback. If the buyback is oversubscribed, Intrepid shareholders will be scaled back on a pro-rata basis.

Merger

This would occur under a scheme of arrangement conditional on completion of the Buyback. All of the issued and outstanding ordinary shares of Blackthorn (the Scheme Shares) will be transferred to Intrepid in consideration for Intrepid ordinary shares (the Share Scheme Consideration) – except that the Scheme Shares which otherwise would be issued to "Ineligible Overseas Shareholders," namely, U.S. and Singapore and potentially other non-resident Blackthorn shareholders (other than New Zealand) shareholders, will be issued to a Nominee, with the net proceeds of sale by the Nominee on the ASX being remitted to them. The Share Scheme Consideration will represent 35.6% of the issued and outstanding Intrepid ordinary shares after giving effect to the Intrepid share buy-back.

Contingent Buyback

In the event that the Proposed Buyback and Merger are not approved, and this alternative buyback (the "Contingent Buyback" is approved by the shareholders in the alternative, there will be an equal access buyback of Intrepid ordinary shares of up to A$153M at A$0.275 per share. Intrepid shareholders would have the option of not participating, so that they would retain their shares.

Australian tax consequences (pp. 76-7)

Shareholder ruling re Buyback. Intrepid currently is applying for a class ruling from the Australian Taxation Office. The ATO is not expected to issue a ruling until after the results of the Buyback offer are known. If the ruling is issued, capital gains or loss treatment will arise on the Buyback to resident shareholders, and there will be no tax consequences to non-residents.

Intrepid ruling re Buyback

Intrepid is seeking a Class Ruling that the dividend substitution anti-avoidance rule will not apply to the Buyback. If this rule does not apply, there should be no adverse tax consequences to Intrepid from the Buyback.

COT

Intrepid must pass a continuity of ownership (COT) test in order to be able to set off prior year revenue and capital losses of approximately A$241M against taxable income in a given taxation year. There is a risk that the proportionate change in ownership of Intrepid as a result of the Buyback will cause Intrepid to fail the COT, and otherwise it will increase the likelihood of failing in the future.

Canadian tax consequences

Capital gains (or loss) treatment for Canadian residents.