Australian tax consequences of the Intrepid share buyback will turn on a post-transaction ruling

Australian tax advisors are on the opposite side of the world.

Intrepid Mines, whose only significant asset is US$165M of cash, is proposing to offer to purchase back its outstanding shares at a stipulated price, subject to an aggregate cap of 2/3 of its cash, and to then acquire all the shares of another listed Australian company (Blackthorn) under an Australian scheme of arrangement in consideration for Intrepid shares, so that those Intrepid shareholder who do not tender to the buyback will now have an indirect investment in a Zambian copper project. The tax disclosure states that provided that an Australian tax ruling is received (which is not expected to occur until after the results of the buyback offer are known), Australian shareholders will receive capital gains (or loss) treatment on the buyback. Provided the ruling indicates that the Australian dividend substitution anti-avoidance rule will not apply, there will be no adverse tax consequences to Intrepid from the buyback.

Canadian shareholders will receive capital gains/loss treatment on the buyback.

Neal Armstrong. Summary of Intrepid Circular under Spin-offs & Distributions - Foreign distributions - Share repurchases.