Glencore Finance (Bermuda) Limited - s. 104(2)(c)

Order

Headnote

Paragraph 104(2)(c) -- exemption from the formal take-over bid requirements -- applicant proposed "normal course" purchases of securities of an issuer -- the applicant and party acting jointly or in concert with the applicant acquired approximately 25.7% of the outstanding shares of the issuer (the merger shares) in connection with a merger undertaken by the issuer -- applicant exempt from the requirements of sections 93-99.1 of the Act in connection with proposed "normal course" purchases of the shares of the issuer provided that such purchases comply with the requirements of section 100 of the Act, except that, for the purpose of calculating the 5% threshold, the merger shares would be excluded.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., Sections 100 and 104(2)(c).

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

GLENCORE FINANCE (BERMUDA) LIMITED

 

ORDER

(Section 104(2)(c))

WHEREAS application has been made by Glencore Finance (Bermuda) Limited ("Glencore Finance"), a subsidiary of Glencore International AG ("Glencore International") to the Ontario Securities Commission (the "Commission") for an order ("Order") pursuant to Section 104(2)(c) of the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act") exempting certain acquisitions of ordinary shares (the "Katanga Shares") of Katanga Mining Limited ("Katanga") by Glencore Finance from the provisions of Sections 93 to 99.1 of the Act;

AND WHEREAS considering the application and the recommendation of the staff of the Commission;

AND WHEREAS Glencore Finance has represented to the Commission that:

1. Glencore Finance is organized under the laws of Bermuda and is a subsidiary of Glencore International. Glencore International is a privately held company organized under the laws of Switzerland with its headquarters located in Baar, Switzerland. Glencore International is one of the world's largest suppliers of a wide range of commodities and raw materials to industrial consumers.

2. Katanga is a corporation governed by the laws of Bermuda and operates a major mine complex in the Democratic Republic of Congo. Katanga is currently a reporting issuer in the Provinces of British Columbia, Alberta and Ontario and the Katanga Shares are listed on the Toronto Stock Exchange ("TSX") under the symbol "KAT".

3. RP Explorer Master Fund ("RP Explorer") is a fund managed by RP Capital Group, an investment firm with offices in the United Kingdom and United States.

4. On November 5, 2007, a convertible security (the "Convertible Loan") was issued by Katanga to Glencore Finance in connection with a US$150 million two-year loan facility made available to Kamoto Copper Company SARL, a subsidiary of Katanga, pursuant to a senior secured bridge loan agreement entered into between Glencore Finance and Katanga. Pursuant to the terms of the conversion agreement dated October 31, 2007, up to 9,157,509 Katanga Shares may be issued at the election of Glencore Finance in exchange for the US$150 million bridge loan. The Convertible Loan was approved by the TSX.

5. On January 11, 2008, Katanga completed a merger with Nikanor plc (the "Merger"), pursuant to which 0.613 Katanga Shares were issued and US$2.16 in cash was paid for each Nikanor share held by Nikanor shareholders. The Merger and the issuance of Katanga Shares were approved by the shareholders of Katanga at a special general meeting of shareholders held January 11, 2008. The securityholdings of Glencore Finance and Nikanor in Katanga as well as the terms of a co-operation and voting agreement (discussed below) were disclosed in the management information circular relating to the special general meeting.

6. As a result of the Merger, Glencore Finance received 17,580,482 Katanga Shares in exchange for its Nikanor Shares. Prior to the Merger, Glencore Finance owned 28,679,416 Nikanor Shares and no Katanga Shares.

7. As a result of the Merger, RP Explorer and its affiliates received an additional 35,520,722 Katanga Shares. Prior to the Merger, RP Explorer and its affiliates owned 57,945,713 Nikanor shares and 12,275,000 Katanga Shares.

8. According to the TSX website, as at July 10, 2008 there were 206,278,763 Katanga Shares issued and outstanding.

9. Glencore Finance has no current intention of making a bid for all Katanga Shares.

10. Glencore Finance proposes to make purchases as principal of Katanga Shares in the market from time to time as it considers appropriate pursuant to the normal course purchase exemption contained in Section 100 of the Act.

11. As a result of the Merger, Glencore Finance received 17,580,482 Katanga Shares, representing approximately 8.5% of the outstanding Katanga Shares. If Glencore Finance exercises its conversion right in respect of the Convertible Loan, Glencore Finance will add to its holdings approximately 4.3% of the outstanding Katanga Shares (calculated on a partially diluted basis, assuming conversion of the Convertible Loan).

12. As a result of the Merger, RP Explorer received 35,520,722 Katanga Shares, representing approximately 17.2% of the outstanding Katanga Shares.

13. Glencore Finance and RP Explorer are presumed to be "acting jointly or in concert" within the meaning of Section 91(1) of the Act as a result of a co-operation and voting agreement entered into on January 18, 2008 between Glencore Finance and RP Explorer in respect of Katanga which is intended, among other things, to ensure that the parties exercise their respective rights as shareholders in Katanga in a coordinated manner.

14. Glencore Finance will not purchase Katanga Shares at any time when Glencore Finance has knowledge of any material fact or material changes about Katanga which has not been generally disclosed.

IT IS ORDERED, pursuant to Section 104(2)(c) of the Act, that the proposed purchases of Katanga Shares by Glencore Finance as principal be exempt from the requirements in Sections 93 to 99.1 of the Act, provided that such purchases meet the requirements of Section 100 of the Act, except that for purposes of the 5% threshold in Section 100 of the Act, the Katanga Shares received in connection with the Merger shall be excluded in the calculation of acquisitions of Katanga Shares otherwise made by Glencore Finance and any person or company acting jointly or in concert with Glencore Finance within the previous twelve-month period.

DATED at Toronto this 18th day of July, 2008.

"James E.A. Turner"

"Mary Condon"