Anglo seeks to boot Anaconda management

Anaconda Nickel‘s controlling shareholder, Anglo American (AAUK-Q), has finally blown a fuse over the slow progress of Anaconda’s Murrin Murrin nickel project in Western Australia, and is seeking a shareholders meeting to remove current management from the company’s board of directors. Anaconda has rejected the proposal, calling it “a lunge for control” of Anaconda.

Anglo, which owns 25.4% of the Australian nickel producer, has also proposed an interim, A$100-million rights offering to existing shareholders, to provide the company with enough cash to bring Murrin Murrin into full production.

Murrin Murrin is operating at 65% capacity, or about 80 tonnes nickel per day; it is scheduled to reach full capacity in the third quarter. The company says Murrin Murrin is on schedule, though the target date for full commercial production has been moved back several times. In 1999, the company was predicting full production by early 2000.

Anaconda’s share price has been eroding since last September, when it reached a high of A$4.08, but the price fell dramatically from A$2 at the beginning of March to a low of A$1.06. The Australian Stock Exchange asked for a clarification on March 21 and Anaconda claimed “the market is being materially misinformed” by reports in the daily press that the company had received an ultimatum from Anglo American threatening to cut off further cash infusions.

The exchange halted trading in Anaconda on March 27 and the company took the opportunity to announce that its independent directors were rejecting “certain proposals received from Anglo American” on the grounds that the proposals constituted a bid for effective control.

The proposals, released by Anaconda to the Exchange, called for a shareholders meeting to consider the removal of five of Anaconda’s 10 directors and a rights issue to raise A$100 million “for interim working capital pending a full strategic review of the company.”

Also “interim” would be appointments of a new chief executive officer and new chief financial officer, who would head a committee of directors responsible for conducting the strategic review. Anglo said its rationale for the proposals was a loss of confidence in the ability of the current Anaconda board, led by Chief Executive Officer Andrew Forrest and Chief Financial Officer Michael Masterman, to bring Murrin Murrin to full production on schedule.

Anaconda resumed trading and had closed at A$1.30 per share at presstime.

Anglo has denied it is planning to increase its holding in Anaconda. Currently, Anglo holds 25.4% of the company. Swiss-based metal trader Glencore International owns 21%, and Canadian nickel producer Sherritt International (S-T) holds another 9%.