Small cap waits on Anaconda windfall

A SMALL telecommunications player that has been suspended from trade on the Australian Stock Exchange for more than a year is on the verge of receiving a $19 million payout from nickel producer Anaconda Nickel.

As part of a court settlement, Central Exchange – once known as Central Bore and currently boasting a notional market capitalisation of less than $1.5 million – is waiting for the 12-month average London Metals Exchange nickel price to reach $US4.1077 a pound, the trigger price for its $19,071,610 windfall.

In a recent announcement Central Exchange predicted that the trigger price could occur on November 28.

Anaconda Nickel company secretary John Quayle agreed that the company would have to pay the $19 million but disputed whether the trigger price would be attained on November 28.

He said the company was more likely to have to make the payment in early 2004.

The payout dates back to legal action taken in the mid 1990s by Central Bore and one of its shareholders, Peter Salter, over the Murrin Murrin tenements Central Bore sold to Anaconda Nickel for $12 million.

The legal action was taken because Mr Salter felt that Central Bore had been underpaid for the tenements.

At the time he had a much-publicised altercation with then Anaconda Nickel managing director Andrew Forrest.

As part of the court settlement Anaconda Nickel was ordered to pay Central Bore two lump sum payments – of $4.5 million and $3.3 million – in February 1997 and August 1997 respectively.

It was also ordered to pay another multi-million dollar sum based on a complex formula after several trigger conditions were met.

The first trigger condition was that Anaconda Nickel had to process 250,000 tonnes of ore at its Murrin Murrin plant. That milestone was reached in 1999.

Then followed the wait for a three-year review date to come.

That was completed in September 2002 and the 12-month average LME price was assessed. That price was still below the trigger that would require Anaconda Nickel to be notified and begin the 14 business-day process that would result in Central Exchange getting its payout.

However, with nickel prices performing strongly, that trigger price is coming closer.

Central Exchange company secretary Victor Ho said the company had plans for the windfall but would not be releasing them until after the money was in its hands.

And what will the payout mean for Anaconda Nickel?

Analysts say it is not likely to be overly affected given that it is likely to receive an unencumbered cashflow of around $150 million next year.

Added to that is the six-figure payout it is likely to receive as a result of litigation it took against Fleur Daniel relating to the construction of the Murrin Murrin plant.