Anaconda Nickel Limited 19 – Review Panel Affirms Anaconda 15 Decision in Relation to Anaconda Nickel Limited and, in Addition, Requires Disposal of On-Market Acquisitions by Sherritt [12/05/2003] The Takeovers Panel

Monday, 12 May 2003

REVIEW PANEL AFFIRMS ANACONDA 15 DECISION IN RELATION TO ANACONDA NICKEL LIMITED AND, IN ADDITION, REQUIRES DISPOSAL OF ON-MARKET ACQUISITIONS BY SHERRITT

The Panel advises that the Panel reviewing the decision in the Anaconda 15 proceedings (Anaconda 19 proceedings) has today affirmed the majority of the decision made by the Anaconda 15 Panel to decline the application received from MatlinPatterson Global Opportunities Partners LP (MP Global) on 20 February 2003 in relation to the affairs of Anaconda Nickel Limited (Anaconda). The Anaconda 19 application to the Panel was made on 11 April 2003.

In addition, the Panel has decided to make a declaration that the on-market acquisition of 4,000,000 shares in Anaconda (Old Shares 1 ) by Sherritt International Corporation (Sherritt) on 13 February 2003 constitutes unacceptable circumstances and, in relation to Anaconda 18, to make orders that:

a) The 4,000,000 shares should be vested in ASIC for sale by a book build, with other Anaconda shares vested in ASIC by the Anaconda 16-17 Panel and the Anaconda 18 Panel; and

b) MP Global be allowed to retain 60,000,000 of the Excess Shares 2 which the Anaconda 16-17 and Anaconda 18 Panels had ordered be vested in ASIC for disposal.

In both the Anaconda 15 application and in the Anaconda 19 application, MP Global:

(a) alleged that acquisitions of Old Shares in Anaconda by Glencore International AG (Glencore) and Sherritt on 12 and 13 February towards the close of MP Global's offer (Rights Offer) to acquire rights (Rights) in Anaconda constituted unacceptable circumstances; and

(b) raised concerns about the fact that Sherritt neither sold nor exercised its Rights (which were worth approximately $5.1 million under the Rights Issue and related to 8.4% of the shares and Rights in Anaconda), instead allowing them to lapse.

MP Global sought a declaration of unacceptable circumstances, and remedial orders, in relation to the above.

60,000,000 is fifteen times 4,000,000. If MP Global had been able to acquire 4,000,000 shares on-market on 13 February, it would have been entitled to exercise fourteen times that number of Rights under Anaconda's Rights Issue. The Panel considers that such an order is the closest it can approximate to ensure that MP Global's offers give the result they would have without the acquisitions on-market by Sherritt on 13 February 2003.

MP Global has submitted that the Panel should consider that many more shares than the 4 million that Sherritt acquired would have been available to it on 13 February, when it had declared its Share Offer and Rights Offer free from conditions and was free to acquire Old Shares on-market at 12 cents per share. Glencore has submitted that it is unlikely that MP Global would have acquired any shares in the market on that day.

It is clear to the Panel that it is not possible (whether in Panel proceedings or in a Court) to determine with absolute certainty what the course of trading would have been if Sherritt had not entered the market on 13 February in the way it did.

The Panel has ordered that MP Global may retain 60 million of the Excess Shares which it would otherwise be required to divest. 60 million shares is, necessarily, an subjectively derived figure. However, it is a figure which:

a) has a grounding in the specific aspects of these proceedings;

b) appears to remedy an amount of harm to MP Global's interests which the Panel believes is reasonably open to it to consider is likely to have occurred;

c) causes no unfair prejudice to any person; and

d) is most likely to ensure that the MP Global Share Offer proceeded (as far as possible) in a way, or with a result, that it would have proceeded if the circumstances of Sherritt's buying had not occurred.

Summary

Glencore's acquisition of Old Shares on 12 and 13 February

1. Glencore acquired almost 3% of the total number of Old Shares on 12 and 13 February. It acquired them at prices ranging from $0.11 to $0.145 per share. MP Global's takeover offer for all Old Shares (Share Offer) was set at $0.12 per share, and MP Global did not increase it. MP Global was therefore unable to acquire Old Shares on-market for more than $0.12. Glencore's acquisitions made up approximately thirty percent of the total acquisitions of Old Shares on the two days. The Panel considers it highly likely that the acquisitions by Glencore did affect the market in Old Shares and did move the market price of Old Shares on those days and did contribute to the rise from approximately $0.11 to $0.15 per share on those two days.

2. Glencore's buying, and the resultant price rise, may have affected the ability of MP Global to acquire Old Shares on those days, which were crucial days in terms of the success or failure of MP Global's Share Offer and Rights Offer. However, the Panel was not given evidence which would convince it that Glencore's purchases were not primarily directed at acquiring more Old Shares for itself.

3. MP Global should have been aware, at the time that it commenced its offers, and at the time it declared its offers to be free of its earlier defeating conditions, that Glencore was entitled, under the "Creep" exception set out in item 9 of section 611 of the Corporations Act (the Act), to acquire up to 3% of the voting power in Anaconda.

4. MP Global's offers, and its overall strategy for seeking control of Anaconda, were particularly sensitive, or susceptible, to another person acquiring Old Shares during MP Global's offers.

5. The Panel reviewed the course of trading on the relevant days. From that and from the other evidence provided by parties, the Panel did not see evidence that Glencore's acquisitions were made in manipulative ways, or indeed in any other way other than seeking to acquire its desired 3% as cheaply as possible, and as Glencore appeared perfectly entitled to acquire such shares, the Panel considered that Glencore's acquisitions of Old Shares on 12 and 13 February 2003 did not constitute unacceptable circumstances. The acquisitions were within the terms of Item 9 of section 611 of the Act, and the Panel did not accept arguments from MP Global as to why the Creep exemption should not have been available to Glencore in these circumstances.

Glencore's acquisition of New Shares between 17 and 19 February

6. The Panel agreed with the Anaconda 15 Panel that the acquisition by Glencore, on a deferred delivery basis, of Anaconda shares (New Shares) to be issued under the Rights Issue (which amounted to approximately 0.2% of the fully diluted shares in Anaconda following the Rights Issue) was not material in the context of control of Anaconda and did not appear to have contributed to any unacceptable circumstances. The Panel was not satisfied that this acquisition contravened section 606 of the Act. Consequently, the Panel declined the part of MP Global's application that related to these purchases.

Sherritt's failure to sell or exercise its Rights, or accept the Rights Offer

7. The Panel considered Sherritt's evidence for its reasons in allowing its Rights to lapse, for no value, in light of the existence of the Rights Offer. Although Sherritt's explanations in some areas did not appear credible, on balance, the Panel accepted that Sherritt's decision was an exercise of the business judgment of its executives, without agreement with any other parties, based on commercial imperatives that the Panel accepted were plausible. The Anaconda 15 Panel has set out some of the explanations and concerns put forward by Sherritt for its conduct.

8. Sherritt asserted, and the Panel did not receive evidence which adequately rebutted Sherritt's claims, that the potential financial impact on Sherritt associated with these concerns outweighed the value that Sherritt could have received from MP Global for selling its Rights under the Rights Offer.

9. The Panel decided that Sherritt's actions in relation to its Rights did not constitute unacceptable circumstances.

Sherritt's failure to accept the Share Offer

10. The issues in relation to Sherritt's decision to allow its Rights to lapse were also raised in relation to the failure of Sherritt to sell its Old Shares to MP Global under its Share Offer. The Panel decided that Sherritt's decision not to accept the Share Offer was not unacceptable for similar reasons to those relevant to its decision in relation to the Rights lapsing.

Sherritt's acquisition of Old Shares on 13 February

11. The Panel considers that there is sufficient evidence that Sherritt, in acquiring Old Shares on 13 February 2003 (at the same time as Glencore was also purchasing Old Shares), was seeking to create a false market in Old Shares. The Panel bases this on Sherritt's statements in the submissions that Sherritt gave to the Panel. They include statements that its intention was to

"support the market appearance of there being an impending bid with a view to encouraging Glencore to make a bid".

Sherritt was seeking to create an impression in the market of buying pressure from a rival takeover bidder, to reduce the chances of success of the MP Global offers, and to make a higher return on its Anaconda shares.

12. Sherritt's acquisitions were made at a very significant time for the MP Global offers and for the market in general. It appears to have been a volatile market, with significant professional investor involvement, and the market was interested in the buying or selling activities of the major players. Sherritt entered the market with significant acquisitions, using an institutional/corporate broker that had not previously been a material acquirer in the market, and buying above $0.12 per share. Glencore made detailed submissions on the trading at the time and its analysis and inferences about why MP Global would not have acquired any Old Shares on market if the Sherritt acquisitions had not been made. The Panel also received detailed submissions from MP Global on the days' trading. The Panel considered that Glencore's and MP Global's views were simply that, the views of two of the parties in circumstances where there are a range of views as to what might have happened on that day.

13. The Panel considers that Sherritt's buying, and the way that it was undertaken, is highly likely to have influenced the market. The Panel considers that it is not open to contend that the Sherritt acquisitions, at the time they were made and in the manner they were made, will not have affected the price at which Old Shares traded. As it has said above, it is impossible to determine precisely what the quantum of that effect was. The Panel also accepts MP Global's submissions that it is well possible that Sherritt's actions would have enticed other buyers into the market, making it more difficult for MP Global to acquire Old Shares at its Share Offer price of $0.12 per share.

14. The Panel considers that Sherritt's intention and actions are likely to have adversely affected the efficient, competitive and informed market for control of Anaconda shares at a critical point in the MP Global Rights Offer and Share Offer. The Panel considers that such actions constituted unacceptable circumstances.

Association between Glencore and Sherritt

15. The Panel considers that there is a reasonable inference that Sherritt intended that its actions might generate favour with Glencore. However, no evidence was presented to the Panel that convinced it that Sherritt's actions were reciprocated and that Sherritt and Glencore became associates in relation to the MP Global offers in general or the on-market buying specifically. As there had been no breach of section 606 of the Act, and the Panel did not otherwise believe that unacceptable circumstances had arisen, the Panel also declined that part of MP Global's application.

Misleading of MP Global

16. MP Global asserted that it had been mislead by Sherritt in MP Global's telephone conversations with Sherritt in the period leading up to MP Global's decision to declare its Share Offer (and therefore its Rights Offer) free of conditions. The evidence which MP Global presented was not strong enough to overcome Sherritt's firm statements that it had not mislead MP Global but had always made it clear that it was keeping its options open and that MP Global should not rely on Sherritt acting in any particular way, especially not on Sherritt selling to MP Global.

17. MP Global's lack of firm evidence concerning its recollections of robust commercial discussions between sophisticated commercial participants in a hotly contested takeover meant the Panel could not prefer MP Global's version over those of the other parties which denied MP Global's version of the couple of critical telephone conversations. The Panel declined that part of MP Global's application.

Decision

The Panel decided that there had not been evidence presented to it which indicated that the on-market buying of shares in Anaconda by Glencore constituted unacceptable circumstances. The Panel reached a similar decision in response to Sherritt's decisions in relation to the Rights Offer and the Share Offer. These decisions affirm the majority of the decision by the Anaconda 15 Panel in declining the application by MP Global.

However, the Panel considered that the actions of Sherritt, in acquiring 0.8% of the Old Shares on-market, at a price well above the MP Global Share Offer price, at a critical point in the offers and Anaconda shareholders' decisions, for reasons which according to Sherritt's own evidence, were intended to create a false market, constituted unacceptable circumstances. The Panel has made a declaration to that effect.

The Panel has ordered that those shares be vested in ASIC and disposed of in a bookbuild with the shares to be sold under the Anaconda 16-17 and 18 proceedings.

The Panel has ordered that the number of Excess Shares that MP Global was ordered to dispose of in the Anaconda 16-17 and 18 proceedings be reduced by sixty million shares (i.e. fifteen times the shares ordered to be divested by Sherritt).

The President of the Panel appointed the same members who constituted the Review Panel in the Anaconda 18 and earlier Anaconda applications (Simon McKeon, David Gonski and Ian Ramsay) to consider the review application.

The Panel's reasons for its decision in the Anaconda 19 proceedings will be posted on the Panel's website when finalised.

Anaconda 18

Following the decision in the Anaconda 19 proceedings, the Anaconda 18 Panel today executed the orders it had decided to make following making a declaration of unacceptable circumstances in relation to MP Global's acquisition of Excess Shares by exercising all of the Rights it acquired under its Rights Offer and then contracting to pass those Excess Shares on to Australian Investments United Pty Ltd. See Annexure B for a copy of the Anaconda 18 Orders.

The Anaconda 18 Panel also ordered that for the purpose of calculating its future 3% "Creep" entitlement under item 9 of section 611 of the Act, MP Global be taken to have acquired the 60,000,000 shares to which the Anaconda 19 decision relates, and none of the other Excess Shares to which the Anaconda 18 decision relates, on 21 February 2003, when the Anaconda New Shares were issued under the Rights Issue.

Nigel Morris,

Director,

Takeovers Panel

Level 47 Nauru House,

80 Collins Street, Melbourne VIC 3000

Ph: +61 3 9655 3501

nigel.morris@takeovers.gov.au

Annexure A - Anaconda 19 Panel Declaration and Orders

Corporations act 2001

Sections 657A and 657D

Declaration and orders

In the matter of Anaconda Nickel Ltd (No. 19)

WHEREAS:

A. Mongoose Pty Ltd (MP Global) offered to acquire rights to subscribe for ordinary shares in Anaconda Nickel Ltd (ANL) at 1 cent/right. Those offers were dated 30 January 2003 and closed at midnight on 13 February 2003;

B. MP Global also made takeover offers to acquire all of the fully paid shares in ANL on issue before completion of the rights issue at 12 cents/share. Those offers were dated 5 February 2003 and closed on 5 March 2003;

C. On 13 February 2003, MP Global declared the offers for the rights and the shares free from all defeating conditions;

D. On 13 February 2003, Sherritt International Corporation (Sherritt) held 40,000,000 shares in ANL (approximately 8% of the shares then on issue);

E. On 13 February 2003, Sherritt caused 4,000,000 shares in ANL (approximately 0.8% of the shares then on issue) to be purchased on market at a weighted average price of 13.75 cents/share;

F. Sherritt gave evidence that part of its motive in causing those shares to be purchased on 13 February 2003 at that price was to give the impression that someone other than MP Global intended to make a takeover bid for ANL at a higher price than 12 cents/share;

G. On 13 February 2003, Sherritt did not intend to make such a bid itself and did not suppose and had no basis for supposing that any other person would do so, except as a result of its actions;

H. Sherritt's actions were intended and calculated to induce in other participants in the market an unfounded belief that someone other than MP Global intended to make a takeover bid for ANL at a higher price than 12 cents/share;

I. Sherritt's actions were calculated to cause acquisitions of control of shares in ANL (whether by MP Global or by other people) to take place in a market which was less efficient, competitive and informed than it would otherwise have been;

J. Because of the effect of Sherritt's actions on the acquisition and proposed acquisition of shares in ANL under the bid made by MP Global, the circumstances to which those actions gave rise are unacceptable circumstances in relation to the affairs of ANL;

the Takeovers Panel:

(a) declares that the circumstances set out in recitals E to J are unacceptable circumstances in relation to the affairs of ANL;

(b) orders that 4,000,000 shares in ANL held by Sherritt (the Bought Shares) be vested in the Australian Securities and Investments Commission (ASIC), to sell the Bought Shares and account to Sherritt for the proceeds of sale, nett of the costs, fees and expenses of the sale;

(c) orders ASIC to sell the Bought Shares in the same way and at the same time as it sells the shares vested in ASIC by Panel order in the matter of Anaconda Nickel Ltd (No. 18), and to divide the nett proceeds of sale between MP Global and Sherritt in proportion to the number of Excess Shares and Bought Shares respectively;

(d) orders Sherritt not to sell, transfer, mortgage or otherwise deal with the Bought Shares (except to give effect to the vesting or sale), or to exercise the votes attached to the Bought Shares, until the vesting or sale is completed by registration of a transfer or transmission of the Bought Shares (Transfer);

(e) orders ANL not to register any transfer or transmission of the Bought Shares (except to give effect to the vesting or sale) or pay any dividend on the Bought Shares, until Transfer; and

(f) orders that any exercise of the voting or other rights attached to the Bought Shares be disregarded, until Transfer.

Dated 12 May 2003

Simon McKeon

President

Annexure B - Anaconda 18 Panel Declaration and Orders

Corporations Act
Section 657D
Final Orders

In the matter of Anaconda Nickel Limited (No. 18)

Pursuant to section 657D of the Corporations Act 2001 and pursuant to a declaration of unacceptable circumstances made by the President of the sitting Panel on 17 April 2003, the Takeovers Panel HEREBY ORDERS:

(a) that the agreement between Mongoose Pty Limited (MP Global) and Australian Investments United Pty Limited (AIU) dated 14 February 2003 or thereabouts pursuant to which the shares mentioned in the Schedule (the Shares) were sold to AIU by Mongoose is cancelled, from its outset;

(b) that the legal and beneficial title to the Shares vest in the Australian Securities and Investments Commission (ASIC) to sell the Shares by bookbuild and account to MP Global for the proceeds of sale, nett of the costs, fees and expenses of the sale;

(c) that ASIC retain a competent and independent Broker to conduct the sale;

(d) that none of AIU, MP Global, Anaconda Nickel Limited (Anaconda) and Glencore International AG or their respective associates (the Parties) may buy any of the Shares;

(e) that ASIC instruct the Broker to seek to maximise the sale price of the Shares while not selling more than 1% of the total shares in Anaconda to any person, alone or together with its associates (the 1% cap);

(f) that the Broker obtain from any prospective purchaser of Shares a statement in accordance with rule 7.1(c) of the Panel's Rules for Proceedings:

(i) that it is not associated with any of the Parties; and

(ii) setting out, to the best of its knowledge, the identity of any associate who is bidding for any of the Shares;

(g) that ASIC seek further orders from the Panel if:

(i) the Broker is unable to dispose of the whole parcel within the 1% cap within 6 weeks from the date of this order, at a price not below $0.06 per share, and without unduly depressing the market price of Anaconda shares;

(ii) the Broker receives bids which are so high as to suggest that the bidder is indifferent as to the price it pays;

(iii) it appears to the Broker, in the course of the bookbuild, that the 1% cap would materially reduce the return to MP Global on the sale;

(h) that AIU or MP Global not sell, transfer, mortgage or otherwise deal with the Shares (except to give effect to the vesting or sale), or to exercise the votes attached to the Shares, until the vesting or sale is completed by registration of a transfer or transmission of the Shares (Transfer);

(i) that Anaconda not register any transfer or transmission of the Shares (except to give effect to the vesting or sale) or pay any dividend on the Shares, until Transfer;

(j) that any exercise of the voting or other rights attached to the Shares be disregarded, until Transfer; and

(k) that the sale of the Shares be conducted together with the sale of 4,000,000 shares in Anaconda ordered by the Panel in the matter of Anaconda Nickel Limited (No. 19);

(l) that in determining how many shares it may acquire under item 9 of section 611, MP Global (and any person the application to whom of item 9 of section 611 is affected by the number of shares in Anaconda in which MP Global has a relevant interest) calculate that number on the basis that MP Global acquired 60,000,000 (but no more) of the shares mentioned in the Schedule when those shares were issued.

Schedule - the Shares

407,051, 769 ordinary shares held by MP Global in Anaconda Nickel Limited, being the Excess Shares mentioned in the Panel's decision in the matter of Anaconda Nickel Limited (No. 18), less 60,000,000 shares deducted for reasons set out in the Panel's decision in the matter of Anaconda Nickel Limited (No. 19).

Dated 12 May  2003

Simon McKeon

President of the Sitting Panel

1 Old Shares are the 461,502,243 shares on issue at the time of MP Global's Share Offer and before the issue of 6,461,031,402 New Shares under the Rights Issue. New Shares are the Anaconda shares issued on 21 February 2003 under the 14 for 1 Rights Issue which Anaconda offered to its shareholders in a prospectus dated 20 January 2003.

2 The Excess Shares are the 467,051,769 shares acquired by MP Global on 21 February which would have increased MP Global's percentage voting power above the percentage it had acquired at the close of its Rights Offer at Midnight on 13 February 2003. They are the subject of the Anaconda 16/17 and 18 Panel decisions.