SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to 240.14a-11(c) or 240.14a-12
Nord Resources Corporation
Name of Registrant as Specified In Its Charter
N/A
---------------------------------------------------------------------
Name of Person(s) Filing Proxy Statement if other than the Registrant
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for
which such offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NORD RESOURCES CORPORATION
201 Third Street NW, Suite 1750,
Albuquerque, New Mexico 87102
Notice of Annual Meeting of Shareholders
To be held on August ____, 1999
To the Shareholders of
NORD RESOURCES CORPORATION:
The 1999 Annual Meeting (the "Meeting") of shareholders of
Nord Resources Corporation (the "Corporation") will be held at
_______________, New York, New York on August ____, 1999 at 10:30
a.m. for the purpose of considering and voting upon the:
1. Election of seven (7) directors for a one year term;
2. Approval of the sale of the Corporation's 50% ownership
interest in the Sierra Rutile titanium dioxide mine in
Sierra Leone to an affiliate of MIL (INVESTMENTS) S.A.R.L.;
and
3. Transaction of such other business as may properly come
before the meeting or any adjournment thereof.
The close of business on July 8, 1999 has been fixed as the
record date for the determination of shareholders entitled to
notice of and to vote at the Meeting and at any adjournment
thereof.
Your proxy is important to ensure a quorum at the meeting.
Thus, whether or not you expect to be present, you are requested
to date, sign and mail the enclosed proxy in the postage-paid
envelope which has been provided for that purpose. The proxy may
be revoked by you at any time before it is exercised and the
giving of your proxy will not affect your right to vote in person
if you attend the meeting.
By Order of the
Board of Directors,
Ray W. Jenner
Secretary
Albuquerque, New Mexico
July __, 1999
<PAGE>
NORD RESOURCES CORPORATION
201 Third Street NW, Suite 1750,
Albuquerque, New Mexico 87102
PROXY STATEMENT
For the Annual Meeting of Shareholders
To be Held on August __, 1999 at 10:30 a.m.
GENERAL INFORMATION
This Proxy Statement is furnished to the shareholders of
Nord Resources Corporation (the "Corporation") in connection with
the solicitation by its Board of Directors (the "Board") of
proxies in the accompanying form to be used at the annual meeting
of shareholders to be held at _______________ , New York, New
York on August __, 1999 (the "Meeting") and any adjournments
thereof. The Corporation has one class of shares outstanding,
namely common shares, of which there were 23,505,488 outstanding
as of the close of business on July 8, 1999, which date has been
fixed as the record date for the determination of shareholders
entitled to notice of, and to vote at the Meeting. Each share is
entitled to one vote and cumulative voting is not permitted.
Shares cannot be voted at the Meeting unless the shareholder is
present in person or represented by proxy. A list of
shareholders of record entitled to vote at the meeting will be
available for examination by any shareholder for any purpose
germane to the Meeting, for a period of 10 days prior to the
Meeting, during normal business hours at the offices of Spitzer &
Feldman P.C., 405 Park Avenue, New York, New York and at the
offices of the Corporation at 201 Third Street NW, Suite 1750,
Albuquerque, New Mexico 87102. The list will also be available
at the Meeting.
All shares represented by properly executed proxies received
by the Board pursuant to this solicitation will be voted in
accordance with the shareholder's directions specified on the
enclosed proxy. If no directions have been specified by marking
the appropriate squares on the accompanying proxy card, the
shares will be voted in accordance with the Board's
recommendations. A shareholder signing and returning a proxy has
the power to revoke it at any time prior to its exercise by
delivering to the Corporation a later dated proxy or by giving
notice to the Corporation in writing or in open meeting, but
without affecting any vote previously taken.
The holders of a majority of the Corporation's outstanding
shares, present in person or represented by proxy and entitled to
vote, constitute a quorum for the transaction of all business at
the Meeting. Abstentions and broker non-votes are included in
determining if a quorum is present at the Meeting. An
affirmative vote of a majority of the shares present and voting
at the Meeting is required for Items 1 and 3. An affirmative
vote of a majority of the shares present and voting at the
Meeting (not including the shares owned by MIL) is required for
Item 2.
This Proxy Statement and the accompanying proxy card were
first mailed to shareholders on or about July __, 1999.
PRINCIPAL SHAREHOLDERS
The following table sets forth the only persons known by the
Board to be beneficial owners of more than 5% of the outstanding
Common Shares of the Corporation:
Shares Beneficially
Owned as of
Name and Address of July 8, 1999
Beneficial Owner Number % of Class
MIL (INVESTMENTS) S.A.R.L. 7,004,2001 29.8%
Boulevard Royal 25B
L-2449
Luxembourg, Luxembourg
Summo USA Corporation 1,600,0002 6.8%
1776 Lincoln Street
Suite 900
Denver, Colorado 80203
1 MIL (INVESTMENTS) S.A.R.L. ("MIL") acquired 3,160,000 shares
from the Corporation pursuant to a Stock Purchase and Sale
Agreement dated April 15, 1996, 840,000 shares in a Loan
Conversion on June 4, 1996, 2,000,000 shares in a Stock
Purchase and Sale Agreement dated October 2, 1996 and
1,004,200 shares purchased on the open market. The
transactions with the Corporation were private placements in
reliance upon the transaction "safe harbor" afforded by
Regulation S, as promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
If the transaction described in Item 2 occurs, then all of
MIL's shares of the Corporation's Common Stock will be
surrendered to the Corporation and canceled, at which point,
MIL will no longer own any shares of the Corporation.
In the event that the transaction to sell the SRL interest
to MIL does not close for any reason other than MIL's breach
of the Purchase and Sale Agreement, the Corporation has
agreed that MIL shall have the right to acquire additional
shares of the Corporation equal to a pro rata number of any
shares issued by the Corporation, that would re-establish
MIL's percentage ownership of the Corporation's shares at
the 31.5% which existed as at February 26, 1999. Any such
purchase would occur at a price based on the mean average of
the Corporation's shares on the New York Stock Exchange,
provided, however, that the minimum price will be no less
than $0.75 per share and the maximum price no more than
$1.00 per share. On June 8, 1999, the Corporation issued
1,600,000 shares of common stock pursuant to an agreement to
purchase the Johnson Camp Mine copper mining facility in
Cochise County, Arizona. Thus, if the SRL transaction is
not consummated, the Corporation would be required to sell
an additional 735,766 shares to MIL if MIL exercises such
right.
2 The Corporation issued 1,600,000 shares of Common Stock to
Summo USA Corporation ("Summo") as a part of the
consideration paid in connection with the acquisition of the
Johnson Camp Mine copper mining facility in Cochise County,
Arizona by the Corporation's wholly-owned subsidiary, Nord
Copper Corporation. The Corporation issued the shares as a
private placement under Regulation D, as promulgated by the
Securities and Exchange Commission under the Securities Act
of 1933, as amended.
ITEM I - ELECTION OF DIRECTORS
Seven directors are to be elected to hold office until the
next annual meeting and until their successors are elected and
qualified. The Board has nominated for election as directors the
seven persons named below, all of whom presently serve as members
of the Board. The shares represented by proxy, unless the giver
of the proxy dictates otherwise, will be voted at the Meeting in
favor of the election of the nominees named below.
Each of the nominees named below has consented to and is, at
present, available for election. If any nominee should for any
reason become unavailable for election, proxies in the
accompanying form will be voted for a substitute nominee
designated by the Board. There are no family relationships among
any nominees or directors or among them and any officer of the
Corporation or any of its subsidiaries.
In connection with various agreements with MIL, the size of
the Board is required to be seven members. MIL has the right to
designate three nominees to the Board (the "MIL Nominees") and
the Board (excluding the MIL Nominees) has the right to nominate
the four remaining nominees. MIL is obligated to vote its shares
for the four Board nominees at the Meeting. The Corporation has
agreed to nominate and use its best efforts and to take such
actions as may be necessary to obtain the election of the MIL
Nominees at each annual or special meeting of stockholders called
for the purpose of filling positions on the Board. Such actions
shall include, without limitation, soliciting proxies for the
election of directors (including the MIL Nominees) and
recommending the MIL Nominees for election to the Board in the
same manner as all other nominees of the Board for election as
directors. If any MIL Nominee shall resign, be removed or be
unable to serve for any reason prior to the expiration of such
MIL Nominee's term as a director, MIL is required to notify the
Board of a replacement MIL Nominee and the Board is required to
take all action necessary to cause such replacement MIL Nominee
to be elected or appointed to fill the unexpired term of the
withdrawing MIL Nominee. In addition, the size of the Board
cannot be increased or decreased without the approval of at least
two of the MIL Nominees.
If the proposal to sell the Corporation's 50% interest in
SRL to an affiliate of MIL as described in Item 2 is approved by
a majority of the Corporation's shareholders present and voting
at the meeting (not including the shares owned by MIL), MIL has
agreed to cause the MIL nominees to tender their resignations to
the Board. The Corporation has not yet determined whether to
accept all or any of such resignations.
Set forth below is certain information for each nominee for
election as a director and each executive officer named in the
Summary Compensation Table and employed by the Corporation on
July 8, 1999.
Shares Beneficially
Owned as of
July 1, 19991
Director
Directors Age Since Number % of Class
W. Pierce Carson 56 1994 671,040 (2) 2.8%
Edgar F. Cruft 66 1971 303,869 (3) 1.3%
Terence H. Lang 62 1978 179,633 (4) (9)
Leonard Lichter 71 1974 66,000 (5) (9)
James Askew (10) 51 1998 50,000 (6) (9)
Marc Franklin (10) 45 1996 65,000 (6) (9)
Francis Waldron (10) 55 1998 25,000 (6) (9)
Other Named Executive Officer
Ray W. Jenner 47 1998 19,500 (7) (9)
All nominees for election of 1,380,0428 5.5%
directors and other named
executive officers as a group
(8 persons)
1 Ownership includes sole voting and investment power except as
otherwise noted. When applicable, the number of shares beneficially
owned includes the number of unissued shares which the listed person
(or group) has a right to acquire within 60 days after July 1, 1999.
In determining the number of shares outstanding for computing the
percent of class owned by a listed person (or group), the number of
shares outstanding of the Corporation has been increased by the number
of unissued shares which the listed person (or group) has a right to
acquire from the Corporation within 60 days after July 1, 1999.
2 Includes options to purchase 615,000 shares.
3 Includes options to purchase 246,525 shares. Dr. Cruft's wife and
children own an additional 57,737 shares as to which Dr. Cruft
disclaims beneficial ownership.
4 Includes options to purchase 162,775 shares. Mr. Lang's wife owns an
additional 21,348 shares as to which Mr. Lang disclaims beneficial
ownership.
5 Includes options to purchase 65,000 shares.
6 Consists of options to purchase shares.
7 Includes options to purchase 17,500 shares.
8 Includes options to purchase 1,246,800 shares held by directors and
named executive officer as a group.
9 Represents less than 1% of the shares outstanding.
10 Director is a MIL Nominee. MIL is indirectly 100% owned by Jean-
Raymond Boulle. There is no family relationship between any of the
MIL Nominees and Jean-Raymond Boulle. MIL, as of July 1, 1999,
beneficially owned 7,004,200 shares of Common Stock of the
Corporation, which amount represents 29.8% of the issued and
outstanding shares of Common Stock. Jean-Raymond Boulle also owns
directly 10,000 shares.
Nominees for Election of Directors
Dr. Carson, who holds a Ph.D. in Economic and Structural
Geology, was appointed President and Chief Executive Officer of
the Corporation effective June 1, 1997. He is also President,
Chief Executive Officer and a director of Nord Pacific Limited
("Nord Pacific"), a company which is 28.6% owned by the
Corporation. He has been President and a director of Nord
Pacific since its inception in 1990 and Chief Executive Officer
since 1997. Prior thereto, beginning in 1980, he was Senior Vice
President of Pacific operations for the Corporation.
Dr. Cruft holds a Ph.D. in Geochemistry and is a founder of
the Corporation. He served as its Chairman since the
Corporation's inception in 1972 and as Chief Executive Officer
from inception until May 31, 1997. He was President of the
Corporation from inception to 1985 and from 1988 until May 31,
1997. Dr. Cruft is also Chairman of Nord Pacific.
Mr. Lang served as Senior Vice President-Finance and
Treasurer upon joining the Corporation in 1978 until his
retirement on December 31, 1997. Prior thereto, he had 15 years
of experience in financial planning and management in the
business equipment industry, holding several financial management
positions with NCR Corporation. Mr. Lang is also a director of
Nord Pacific.
Mr. Lichter, an attorney and a CPA, is a principal in the
law firm of Spitzer & Feldman P.C., New York, New York, which is
counsel to the Corporation. He is also a director of Nord
Pacific.
Mr. Askew, a mining engineer, is President and Chief
Executive Officer and a director of Golden Star Resources Ltd., a
publicly owned mining company, and President of International
Mining and Finance Corporation, a private mining and venture
capital company. He was a founder and the Chief Executive
Officer of Golden Shamrock Mines Limited and sits on a number of
boards of mining and exploration companies in North America,
Europe and Australia. Mr. Askew is a MIL nominee.
Mr. Franklin has been employed since 1975 by J&S Franklin
Holdings and Management Services Ltd., London, England, a
manufacturer of military and civil equipment, and has served as a
director and has been a shareholder of such corporation since
1977. Mr. Franklin is a MIL nominee.
Mr. Waldron has been employed by the MONY Group Inc.,
formerly Mutual of New York, in various capacities since 1968 and
is currently Senior Vice President, International Operations, a
position he has held since 1994. Mr. Waldron is also President
and Chief Operating Officer of MONY International Holdings, MONY
Life Insurance Company of the Americas and MONY Bank and Trust
Company. Mr. Waldron is a MIL nominee.
Other Named Executive Officer
Mr. Ray W. Jenner, Vice President - Finance and Chief
Financial Officer of the Corporation and Nord Pacific since
February 1998 and he is also a director of Nord Pacific. He is a
chartered accountant who holds a Bachelor of Commerce Degree in
Management Science and a Bachelor of Science Degree in Physics
and Mathematics. He has 25 years experience in domestic and
international financial environments, and for 14 years was Vice
President and Treasurer of Echo Bay Mines where he was involved
in raising equity and securing debt financing both in Canada and
the United States. Prior to Echo Bay, he spent ten years with
Price Waterhouse in Canada, Australia and Indonesia.
Information Concerning the Board of Directors
The Board held four meetings during 1998 and each current
director, with the exception of Mr. Waldron, who was appointed to
the Board on November 11, 1998, attended at least 75% of the
meetings of the Board and the Committees.
The Corporation has an Audit Committee and a Compensation
Committee but does not have a Standing Nominating Committee.
Initially, the members of the Audit Committee in 1998 were
Messrs. Lichter, Max Boulle, and Lang. In November, 1998, Mr.
Boulle resigned from the Board. Mr. Waldron was appointed to the
Audit Committee on June 3, 1999. The Audit Committee meets
independently with representatives of the Corporation's
independent auditors and senior management. The Audit Committee
reviews the general scope of the Corporation's annual audit, the
fee charged by the independent auditors and other matters
relating to internal control systems. In addition, the Audit
Committee is responsible for recommending the engagement or
discharge of the Corporation's independent auditors. The
Committee held two meetings in 1998.
The members of the Compensation Committee in 1998 were Dr.
Cruft and Messrs. Askew and Franklin. The Compensation Committee
is responsible for approving and reporting to the Board on the
annual compensation for all officers. The Compensation Committee
also is responsible for granting or recommending to the Board the
grant of stock options and other funding and awards to be made
under the Corporation's existing compensation plans. The
Committee did not meet in 1998 and all compensation matters were
discussed at and resolved by the Board.
Members of the Board who are not employed by the
Corporation, except Mr. Lichter, receive an annual retainer of
$10,000, plus $1,000 for attending each meeting of the Board and
$800 for attending each meeting of a Committee of the Board. Mr.
Lichter, counsel to the Corporation, charges his time and
expenses to the Corporation through Spitzer & Feldman P.C.
The Corporation has a deferred compensation program for
directors, other than directors who are employees of the
Corporation, its subsidiaries or affiliates or are affiliated
with entities which provide services to the Corporation. Under
this program, a qualifying director who has served as a director
for ten years will receive a lifetime payment, beginning at the
later of age 65 or his termination as a director, in an amount
equal to the annual retainer paid to the director during his last
year of service as a director. A qualifying director may elect
to receive a reduced payment beginning at age 62, provided he is
not a director at that time. Messrs. Askew, Franklin and Waldron
are eligible for this program.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires the Corporation's
directors, executive officers and beneficial holders of more than
10% of the Corporation's Common Stock to file with the Securities
and Exchange Commission initial reports of ownership and reports
of changes in ownership of the common stock of the Corporation.
Based on the Corporation's review of copies of such forms it
received from directors, executive officers and beneficial
holders of more than 10% of the Corporation's common stock and on
written representations from certain of such persons, the
Corporation believes that, during the year ended December 31,
1998, all filing requirements under Section 16(a) of the Exchange
Act were made by such persons on a timely basis.
The Corporation paid $191,768 for legal services during 1998
to the firm of Spitzer & Feldman P.C. in which Mr. Lichter, a
director, is a principal.
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the
Corporation's Chief Executive Officer and the other most highly
paid executive officers (collectively, "Named Executive
Officers") for the fiscal years ended December 31, 1998, 1997 and
1996.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Awards
Annual Securities
Compensation(1) Underlying All Other
Name and Principle Year Salary) Options Compensation($)
Position (Shares)
<S> <S> <C> <C> <C>
Edgar F. Cruft
Chairman 1998 119,200 (2) 78,750 (5) 59,861 (9)
1997 346,771 (2) 127,775 (6) 91,537 (9)
1996 576,874 (2) 33,750 (5) 25,379 (9)
W. Pierce Carson
President & Chief
Executive Officer 1998 350,000 (3) -- 54,961 (10)
1997 300,580 (3) 600,000 (7) 71,375 (10)
Ray W. Jenner
Vice President -
Finance and Chief
Financial Officer 1998 153,125 35,000 (8) 48,189 (11)
Terence H. Lang
Sr. VP-Finance Treasurer
(in 1997 and 1996) 1998 -- 45,000 (5) 50,000 (12)
1997 271,615 77,775 (6) 19,493 (12)
1996 261,555 5,709 (12)
______________________________
1 Non-cash benefits for each of the Named Executive Officers were less
than 10% of their aggregate compensation.
2 Includes $55,760 salary earned in 1998 as chairman and $112,904 and
$166,810 salary earned in 1997 and 1996, respectively, as Chairman of
Nord Pacific. Dr. Cruft was also President and Chief Executive Officer
of the Corporation until June 1, 1997.
3 Includes $200,000 and $213,080 salary earned in 1998 and 1997,
respectively, as President and Chief Executive Officer of Nord Pacific.
4 Number of shares subject to options granted under stock option plans for
the periods presented.
5 Replaced expired option for identical number of shares and exercise
price.
6 Includes options to replace expired options to purchase 77,775 shares
for identical exercise prices.
7 Includes 200,000 options which became exercisable on May 27, 1999.
8 Includes 17,500 shares which become exercisable on January 30, 2000.
9 Included in "All Other Compensation" for Dr. Cruft are matching
contributions under 401(k) Retirement and Savings Plan totaling $842 in
1998, $23,099 in 1997, including $20,820 matched by Nord Pacific Limited
under its plan, and $24,921 in 1996, including $20,820 matched by Nord
Pacific. Also includes the dollar value of life insurance premiums paid
by the Corporation with respect to the benefits for Dr. Cruft totaling
$3,780, $6,776 and $458 for 1998, 1997 and 1996 respectively, debt
forgiveness of $50,000 in both 1998 and 1997 respectively, as part of
the restructuring of management as of June 1, 1997, and the fair market
value of $10,627 for an automobile transferred in 1997 to Dr. Cruft.
10 Included in "All Other Compensation" for Dr. Carson are matching
contributions under a 401(k) Retirement and Savings Plan totaling
$10,000 in 1998 matched by Nord Pacific Limited under its plan, and
$20,760 matched by Nord Pacific in 1997. Also includes the dollar value
of life insurance policies paid by the Corporation with respect to
benefits to Dr. Carson of $5,110 in 1998 and $4,925 in 1997 of which
$4,325 was paid by Nord Pacific, the fair market value of an automobile
provided Dr. Carson of $3,350 in 1998 and $3,850 in 1997 paid by Nord
Pacific and cash compensation paid by Nord Pacific of $36,501 and
$41,840 in 1998 and 1997 as a living allowance since Nord Pacific
requires Dr. Carson to spend a portion of his time in Australia.
11 Included in "All Other Compensation" for Mr. Jenner are matching
contributions under a 401(k) Retirement and Savings Plan of $4,813.
Also includes the fair market value of $1,252 for an automobile provided
Mr. Jenner, the dollar value of life insurance premiums paid by the
Corporation of $761 and relocation costs of $41,363.
12 Included in "All Other Compensation" for Mr. Lang are matching
contributions under a 401(k) Retirement and Savings Plan of $4,996 and
$4,750 for 1997 and 1996, respectively. Also included are the dollar
value of life insurance premiums paid by the Corporation with respect to
benefits to Mr. Lang of $5,955 and $959 in 1997 and 1996, respectively,
the fair market value of an automobile provided Mr. Lang of $6,768 in
1997 and debt forgiveness of $50,000 in each of 1999 and 1998 as part of
the restructuring of management as of June 1, 1997.
The Corporation had established a loan program to fund the exercise of
stock options Dr. Cruft and Mr. Lang, who were executive officers. Such
loans were limited to $150,000 for each executive, are callable on 90 day
notice by the Board and bear interest, payable quarterly, at 1/2 percent
over the yield on funds invested by the Corporation. The largest amount of
indebtedness outstanding during 1998 from Messrs. Cruft and Lang was
$100,000 each. $50,000 of Dr. Cruft's loan was forgiven on each of June
1,1999, June 1, 1998 and June 1, 1997 as part of the restructuring of
management as of June 1, 1997. $50,000 of Mr. Lang's loan was forgiven in
each of January 1, 1999 and January 1, 1998 as part of the restructuring of
management as of June 1, 1997. The amount currently outstanding from Mr.
Lang is $50,000. See "Employment Agreements".
</TABLE>
<TABLE>
OPTION GRANTS IN 1998
The following table presents information concerning options granted in
1998 to Named Executive Officers under the Corporation's employee option
plans.
Individual Grants
<CAPTION>
Number of % of
Securities Total Potential Realizable Value at
Underlying Options Assumed Annual Rates of
Options Granted Exercise Expiration Stock Price Appreciation for
Name Granted (1) in 19984 Price(5)($) Date Option Term ($) (6)
<S> <C> <C> <C> <S> <C> <C> <C>
Edgar F. Cruft 45,000 (2) 25.2% 6.67 01/20/00 -- -- --
33,750 (2) 18.9% 4.88 10/25/00 -- -- --
Ray W. Jenner 35,000 (3) 19.6% 1.38 01/30/08 30,380 76,965 --
Terence H. Lang 45,000 (2) 25.2% 6.67 01/20/00 -- -- --
_________________________
1 All options are exercisable at July 1, 1999 unless otherwise noted.
2 Replaced expired option for identical number of shares and exercise
price.
3 Options to purchase 17,500 shares become exercisable on January 30,
2000.
4 The Corporation granted options to purchase 178,750 shares in 1998,
including options to purchase123,750 shares issued to replace expired
options for the identical number of shares and exercise price.
5 Exercise price is equal to market price at date of grant, other than
the replacement grants noted in footnote 2 above, the exercise price of
all of which are in excess of market price at date of their grant.
6 Dollar amounts under these columns are the result of calculations based
on assumed annualized rates of stock appreciation as prescribed by the
Securities and Exchange Commission. The assumed rates are not intended
by the Corporation to forecast possible future appreciation, if any, of
its stock price, which will be determined by future events and unknown
factors.
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table presents information concerning options exercised
during 1998 by the Named Executive Officers and the value of their
respective unexercised options at December 31, 1998.
<CAPTION>
Securities Value (1)
Underlying Unexercised
Unexercised in-the-Money
Shares Options at Options at
Acquired Value December 31, 1998 December 31, 1998
Name On Exercise Realized Exercisable/ Exercisable/
Unexercisable Unexercisable
<S> <S> <S> <C> <S>
Edgar F. Cruft None N/A 246,525 --
W. Pierce Carson None N/A 400,000 --
200,000
Ray W. Jenner None N/A 17,500 --
17,500
Terence H. Lang None N/A 162,775 --
__________________________
1 Based on closing sale price of $1.09375 for the Corporation's Common
Stock on December 31, 1998 on the New York Stock Exchange Composite
Tape.
</TABLE>
EMPLOYMENT AGREEMENTS
Effective May 31, 1997, Dr. Cruft retired as President and
Chief Executive Officer ("CEO") of the Corporation. He continues
to retain the title of Chairman of the Board. Effective June 1,
1997, the Board of Directors appointed Dr. Pierce Carson
President and Chief Executive Officer, titles he currently holds
with Nord Pacific Limited. Further, effective December 31, 1997,
Terence H. Lang retired and resigned as Senior Vice President-
Finance and Treasurer. In February 1998, the Board of Directors
appointed Raymond W. Jenner Vice President-Finance and Chief
Financial Officer.
The Corporation has an Employment Agreement (the "Carson
Agreement") with Dr. Carson describing among other things his
duties as President and CEO, his compensation level and
perquisites. The term of the Agreement is from June 1, 1997
through and including May 31, 2000, and automatically extends
from year to year unless terminated on 90 days prior notice.
(See "Compensation of CEO" below).
The Corporation also has a Continuation of Employment
Agreement (the "Cruft Continuation") with Dr. Cruft which runs
from June 1, 1998 until May 31, 2000, and automatically extends
from year to year unless terminated on 90 days prior notice.
Under the terms of the Cruft Continuation, Dr. Cruft serves as
Chairman of the Board and devotes no less than 12.5% of his time
to the Corporation. For these services, Dr. Cruft is compensated
at a rate of $50,000 per year plus reimbursements for office
expenses, part-time secretarial, and travel and other expenses
incurred on behalf of the Corporation, and, in 1997, also
received title to the vehicle provided by the Corporation at no
cost. Dr. Cruft also receives retirement benefits totaling
$226,653 per year under the terms of the Corporation's non-
qualified retirement plan. This benefit will be paid for the
longer of 10 years or for the life of Dr. Cruft and his spouse.
Further Dr. Cruft received options to purchase 50,000 shares of
the Corporation's Common Stock at $4.00 per share. At May 31,
1997, Dr. Cruft owed $150,000 to the Corporation under the terms
of a loan program as described under "Compensation of Executive
Officers". As per the terms of the Cruft Continuation, $50,000
of his loan was forgiven on each of June 1, 1997, June 1, 1998
and June 1, 1999.
On January 1, 1998, under the terms of the Corporation's non-
qualified retirement plan, Mr. Lang began receiving retirement
benefits. As per the terms of the retirement plan, he elected to
exercise the lump sum payment option. Under the terms of the
option, the Corporation paid to Mr. Lang in cash the present
value of his future benefits, less 12% of such amount in a lump
sum payment, but only to the extent that funds were available in
the related trust established to fund Mr. Lang's benefit. This
payment totaled $877,800. Since the amount received by Mr. Lang
was less than the total accrued benefit, Mr. Lang receives
payments totaling $7,247 monthly. This benefit will be paid for
the longer of 10 years or for the life of Mr. Lang and his
spouse. Further, at December 31, 1997, he owed the Corporation
$150,000 as described under "Compensation of Executive Officers"
in this document. $50,000 of his loan was forgiven on January 1,
1998 and $50,000 on January 1, 1999. The $50,000 balance will be
forgiven on January 1, 2000 so long as Mr. Lang does not
voluntarily terminate his involvement with the Corporation as a
director.
DEFINED BENEFIT RETIREMENT PLAN
The non-qualified retirement agreement with Dr. Carson
designated by the Board provides annual payments for a period of
15 years beginning at age 62, or on termination of employment,
whichever is later (or anytime after age 55 in the event the
provisions of the agreement with respect to early retirement are
satisfied). The payments are equal to 1.5% for each year of
service to a maximum of 30 years times Dr. Carson's average
annual compensation over this last three years of employment.
The compensation covered by the plan is based on Dr. Carson's
annual salary disclosed in the Summary Compensation Table. The
portion of the percentage earned through years of service vests
at the rate of 20% per year, beginning at six years of service,
and becomes fully vested in the event of a change in control of
the Corporation as defined in the agreements. If Dr. Carson dies
prior to reaching retirement, the agreements provide for payment
of a death benefit to his beneficiary in an amount equal to three
times the compensation earned during the year prior to this
death, in lieu of the above payments after retirement.
The following table illustrates the estimated annual benefit
payable upon retirement to Dr. Carson at specified levels of
compensation and years of service to the Corporation.
Years of Service
Compensation 10 15 20 25 30
$ 100,000 $15,000 $22,500 $30,000 $37,500 $45,000
$ 125,000 $18,750 $28,125 $37,500 $46,875 $56,250
$ 150,000 $22,500 $33,750 $45,000 $56,250 $67,500
$ 175,000 $26,250 $39,375 $52,500 $65,625 $78,750
$ 200,000 $30,000 $45,000 $60,000 $75,000 $90,000
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Philosophy
The Corporation applies a consistent philosophy to
compensation for all employees, including senior management.
This philosophy is based on the premise that the achievements of
the Corporation result from the coordinated efforts of all
individuals working toward common objectives. The Corporation
strives to achieve those objectives through teamwork that is
focused on meeting the periodic goals established by the
Corporation, the expectations of customers and stockholders. The
compensation program goals are to enable the Corporation to
attract, retain and reward key personnel who contribute to the
long-term success of the Corporation and to align compensation
with business objectives and performance. The Corporation's
compensation program for executive officers is based on the same
principles applicable to compensation decisions for all employees
of the Corporation.
Competitive Compensation
The Corporation is committed to providing a compensation
program that helps attract and retain key personnel of
outstanding ability. The Corporation ensures that its
compensation is competitive by comparing its compensation
practices with those of other similar companies and reflects this
review in its determination of compensation.
Compensation of CEO
Dr. Carson is compensated by the Corporation at $150,000 per
year. This compensation rate became effective June 1, 1997, the
date of Dr. Carson's appointment as President and CEO of the
Corporation. Dr. Carson's salary increases to $225,000 per year
upon achievement of positive cash flow from operations for three
consecutive months of the Corporation's 50% owned affiliate,
Sierra Rutile Limited. Further, Dr. Carson was issued options to
purchase 600,000 shares of the Corporation's Common Stock,
200,000 shares at $4.00 per share, 200,000 shares at $5.00 per
share and 200,000 shares at $6.00 per share, which options expire
on May 31, 2002 (see "Compensation of Executive Officers").
Compensation and Performance
Executive officers are rewarded based upon corporate
performance and individual performance. Corporate performance is
evaluated by reviewing the extent to which strategic and business
plan goals are met, including such factors as operating profit or
loss and performance relative to competitors. Individual
performance is evaluated by reviewing organizational and
management development progress against set objectives and the
degree to which teamwork and Corporation values are fostered.
Compensation Vehicles
The Corporation has a successful history of using a simple
total compensation program that consists of cash, equity based
compensation and retirement plans. Having a compensation program
that allows the Corporation to successfully attract and retain
key employees permits it to mine and produce its industrial
minerals at competitive levels of production and costs, to
provide useful products and services to customers, enhance
stockholder value, motivate technological innovation, foster
teamwork and adequately reward employees. The vehicles are:
Cash Based Compensation - The Corporation sets base salary for
employees by reviewing the aggregate of base salary and annual
bonus for competitive positions in the market, and by reviewing
the employee's historical compensation and the effect of
inflation on such compensation.
Stock Option Program - The purpose of this program is to provide
additional incentives to employees to work to maximize
stockholder value. The option program also utilizes vesting
periods to encourage key employees to continue in the employ of
the Corporation. The Corporation grants stock options annually
to a broad-based population representing approximately 50% of the
total employee pool.
Deferred Compensation for Senior Executives - The Corporation has
entered into separate retirement agreements with its senior
executives. The agreements provide benefits to the senior
executives upon retirement based on several factors, including
the number of years of service to the Corporation. The purpose
of these retirement agreements is to provide incentive to the
senior executives to continue to provide their services to the
Corporation.
401-K Plan - The Corporation provides a retirement and savings
plan for its salaried U.S. employees pursuant to Section 401(k)
of the Internal Revenue Code. Each employee may contribute up to
15% of his or her salary to this plan, to a maximum of $10,000 in
1998. Under the plan, the Corporation makes a matching
contribution on behalf of each participating employee of 100% of
the lower of the first 6% of each employee's salary or the
percentage actually contributed by the employee. This plan
enables the Corporation to attract and retain employees upon whom
the Corporation relies in operating its business.
Compensation Committee
Dr. Edgar F. Cruft, Chairman
James Askew
Marc Franklin
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee in 1998 were Dr.
Cruft and Messrs. Askew and Franklin. Dr. Cruft, Chairman of the
Compensation Committee, is Chairman of the Board. He retired as
President and CEO effective June 1, 1997. He served as an
officer of the Corporation from 1969 until June 1997.
STOCKHOLDER RETURN ON COMMON STOCK
The following graph compares the total annual return on the
Corporation's Common Stock with the total annual return of the
Dow Jones Equity Market Index and the Dow Jones Mining Index.
The presentation assumes $100 was invested on December 31, 1995
in the Corporation's Common Stock and in each of the indices and
any dividends were reinvested.
<TABLE>
Comparison of Five-Year Cumulative Total Returns
Performance Graph for
Nord Resources Corporation
Prepared by the Center for Research in Security Prices
Produced on 04/26/1999 including data to 12/31/1998
[DELETED GRAPH]
<CAPTION>
Legend
CRSP Total Returns Index for: 12/1993 12/1994 12/1995 12/1996 12/1997 12/1998
<S> <C> <C> <C> <C> <C> <C>
Nord Resources Corporation 100.0 133.3 48.7 87.2 39.7 20.5
NYSE Stock Market (US Companies) 100.0 100.0 135.5 164.3 218.3 262.0
NYSE Stocks (SIC 100-1099 US + 100.0 90.6 105.5 109.4 79.0 63.1
Foreign Metal mining
YEAR 2000 COMPLIANCE
In January 1998, the Corporation initiated a Year 2000
project to address the issue of computer programs and embedded
computer chips being unable to distinguish between the year 1900
and the year 2000 ("Year 2000 Issues"). The project involves
converting to Year 2000 compliant accounting software, testing
existing software, hardware and operational systems and
communicating with third-party customers, suppliers and service
providers to ensure that they are taking appropriate action with
respect to their Year 2000 Issues.
The Corporation has installed Year 2000 compliant accounting
software and is in the process of converting from its existing
system. The Corporation anticipates that the implementation of
this software will be completed by September 30, 1999. The
Corporation's local area network and PC hardware and non-
accounting software, such as spreadsheets and word processing,
have been tested and, to the best of the Corporation's knowledge,
are Year 2000 compliant. Other non-information technology
systems, such as the telephone system and other office equipment,
have been assessed for Year 2000 readiness and are compliant
The Corporation believes that the computer systems and
applications it maintains would not have a material impact on the
operations of the Corporation or its revenues in the event that
the systems fail to operate in the Year 2000. A contingency plan
to replace any non-compliant systems has been developed. If the
conversion to Year 2000 compliant accounting software is not
complete by December 31, 1999, the Corporation temporarily may be
able to use compliant spreadsheet software until the installed
year 2000 compliant accounting software is operational. A
decision regarding the implementation of such contingency plan
will be made by September 30, 1999.
The Corporation is communicating with third party customers
and suppliers and has received notification from its building
manager, its bank, the New York Stock Exchange and other service
providers indicating that they expect to be Year 2000 compliant.
Due to the general uncertainty inherent with respect to Year 2000
Issues, resulting in part from the uncertainty of the Year 2000
readiness of third-party customers, suppliers, and service
providers, the Corporation is unable to determine at this time
whether the consequences of Year 2000 failures will have a
material impact on the Corporation's results of operations or
financial condition.
The estimated total cost of Year 2000 testing and compliance
is expected to be approximately $50,000, which includes costs
related to the purchase and conversion to Year 2000 compliant
accounting software. No costs directly related to Year 2000
Issues have been incurred as of December 31, 1998. The costs of
the project and the expected completion dates are based on
management's current estimates.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP ("KPMG") has been chosen to act as
independent auditors for the Corporation by the Audit Committee
and to serve in such capacity for the fiscal year ending December
31, 1999. A representative of KPMG is expected to be present at
the annual meeting and will have the opportunity to make a
statement, if he so desires, and to respond to appropriate
questions.
On April 27, 1998, with the approval of the Audit Committee,
the Corporation terminated its relationship with Deloitte &
Touche LLP ("D&T"), independent certified public accountants. On
May 8, 1998, KPMG was appointed to act as independent auditors
for the Corporation for the fiscal year ended December 31, 1998.
In the report of D&T for the year ended December 31, 1997,
D&T disclaimed an opinion regarding the Corporation's financial
statements for those years, because of the possible material
effects of the Corporation's ability to continue as a going
concern and the inability of the auditors of Sierra Rutile
Limited ("SRL"), the Corporation's 50% owned subsidiary, to
express an opinion on the financial statements of SRL.
During the two-year period ended December 31, 1998, and the
interim period from that date to July 8, 1999, there were no
disagreements with the auditors on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of the auditors, would have caused them to
make reference to the subject matter of the disagreement in
connection with their report, except that during the audit of the
Corporation's financial statements for 1997, D&T had a
disagreement with management over the Corporation's accounting
for its investment in and advances to SRL. The Corporation had
accounted for its investment using the cost method for 1995, 1996
and the nine-month period ended September 30, 1997. As a result
of changes in the political environment in Sierra Leone
subsequent to September 30, 1997, D&T believed that the
Corporation should change its method of accounting for its
investment in SRL from cost to the equity method which would
require restatement of the Corporation's financial statements for
1995 and 1996. The matter was reviewed by management and
discussed with the Audit Committee and, as a result thereof,
management conformed to the position of D&T and recorded
adjustments to the Corporation's financial statements to account
for the Corporation's investment in and advances to SRL under the
equity method and the disagreement was resolved to the
satisfaction of D&T.
ITEM II - APPROVAL OF THE SALE OF THE CORPORATION'S 50%
INTEREST IN SIERRA RUTILE LIMITED
Overview
The Board unanimously recommends that the shareholders
approve the proposal to sell the Corporation's 50% interest in
Sierra Rutile Limited and its related entities ("SRL") to an
entity controlled by MIL (INVESTMENTS) S.A.R.L. ("MIL"), the
largest shareholder of the Corporation. A Purchase and Sale
Agreement for the sale of the Corporation's interest in SRL to
MIL was executed on June 16, 1999 ("Purchase and Sale
Agreement"), and provides for consideration to be paid to the
Corporation, consisting of (a) a cash payment of $1,250,000, (b)
a 5% carried interest in the acquiring entity, (c) the release of
the Corporation from its current guaranty obligation of
approximately $6,000,000 to the development bank lenders to SRL,
and (d) the redemption and cancellation of MIL's 7,004,200 shares
in the Corporation, which shares currently represent
approximately 29.8% of the issued and outstanding shares of the
Corporation. The sale is subject to several conditions, the most
important of which are: (a) the approval by a majority of the
Corporation's shareholders present and voting at the Meeting (not
including the shares owned by MIL), and (b) the consent of the
development bank lenders to SRL to the release of the Corporation
from its guaranty of SRL's obligation to repay 50% of the
development bank loans, and the substitution by MIL of a guaranty
or other undertaking of MIL and/or its principal, Jean-Raymond
Boulle or such other entity satisfactory to the development
banks.
The Board believes that SRL, which shut down its operations
in January 1995 in Sierra Leone, West Africa, as a result of
being overrun by rebels, represents a significant drain on the
limited resources of the Corporation. In view of the ongoing
political, military and economic instability and civil conflict
in Sierra Leone, the prohibitive costs associated with
maintaining and providing security for SRL's mine and assets,
rehabilitating assets and restarting operations, the amount of
capital required to fund SRL's repayment obligations to the
development banks, and the amount of capital the Corporation must
set aside as security for the guarantee of SRL's outstanding
development bank loans, the Board has determined that the
Corporation can no longer afford to fund SRL from its own
resources without risking the viability of the Corporation as a
going concern. On that basis, and with the understanding that an
independent appraisal has determined the transaction to be fair
to the shareholders of the Corporation, the Board recommends that
the shareholders approve the sale of the Corporation's interest
in SRL pursuant to the Purchase and Sale Agreement described in
more detail herein.
Background
The Corporation owns a 50% interest in the SRL titanium
dioxide mine in Sierra Leone, West Africa. All of the interest
in the mining operations is owned through Nord Rutile Company, a
limited partnership of which the Corporation owns a 1% limited
partnership interest and the Corporation's wholly-owned
subsidiary, Nord Rutile Corporation, owns a 99% interest, as
general partner. The transaction will be effectuated by the
purchaser, SRL Acquisition No. 1 Ltd. ("Acquisition Ltd."), a
newly formed British Virgin Islands company, acquiring all the
interest in Nord Rutile Company from the Corporation and Nord
Rutile Corporation.
SRL was principally engaged in the mining and processing of
rutile and ilmenite, both industrial minerals, and was the
largest producer of natural rutile in the world until the mine
was shut down in 1995. SRL marketed these products throughout
the United States, Europe and the Far East. Both rutile and
ilmenite are used in the production of more highly concentrated
titanium dioxide, which is used as a pigment in the manufacture
of paint and in many types of paper and plastic products.
Titanium dioxide is also used in the production of fiberglass,
enamels and coated fabrics. Rutile is used to a lesser extent in
welding rod electrode coatings and in the production of titanium
metal. SRL has leased a total of 224 square miles from the
government of Sierra Leone until the year 2014, when the lease is
subject to a renewal option of fifteen years on terms to be
established at the time of renewal.
Exploration and development work on SRL's mining facilities
began in Sierra Leone in 1971 and culminated in limited
production in 1979. At its full capacity following various
expansion programs and processing improvements, annual rutile
production at SRL was approximately 150,000 tonnes per annum. The
Board determined that further expansion would be necessary in
order to meet projected increased demand for titanium dioxide
pigment and implemented the initial stages of a capital
improvement program to increase its overall production of Ti02
feedstock to over 200,000 tonnes annually with a scheduled start-
up of increased production capability in the fourth quarter of
1995. Pursuant to loan agreements entered into in November 1992
with the International Finance Corporation (a subsidiary of the
World Bank), Overseas Private Investment Corporation (an agency
of the United States of America), Commonwealth Development
Corporation (a statutory corporation incorporated in the United
Kingdom), and Deutsche Investitions - Und
Entwicklungdgesellschaft MBH (a private limited company
incorporated under the laws of the Federal Republic of Germany),
SRL received approximately $48,000,000 in loan commitments, a
significant portion of which was to be used as working capital,
and to fund previous capital expenditures as part of the
Corporation's plans for the expansion of SRL's production
facilities. Including prior loans outstanding to the Export-
Import Bank of the United States, at the time of the shutdown of
the mine in 1995, the outstanding indebtedness to the development
banks was $45,522,838. Fifty percent of this debt was guaranteed
by each of the shareholders of SRL.
SRL has been 50% owned by the Corporation and Consolidated
Rutile Limited ("CRL") since November 17, 1993, when, in an
effort to reduce substantially the Corporation's domestic bank
debt and obtain capital to fund additional mining opportunities,
the Corporation sold a 50% interest in SRL to CRL for a cash
investment and other consideration. CRL, which is controlled by
Iluka Resources Pty. Limited, is a major producer of rutile,
ilmenite and zircon with operations in Australia and the United
States. Under the terms of the agreement with CRL, both the
Corporation and CRL have equal representation on the board of
directors of SRL and each own equal interests in SRL and its
related entities.
The potential sale of the Corporation's SRL interest to MIL
was discussed with CRL prior to the execution of the Purchase and
Sale Agreement. CRL did not evince an interest in acquiring the
50% interest in SRL and, in fact, has facilitated the sale to MIL
by agreeing not to exercise certain remedies available to it
under the Joint Venture Agreement between the Corporation and CRL
relating to SRL and consenting in writing to the transfer prior
to execution of the Purchase and Sale Agreement.
Sale Decision
SRL operated under a relatively stable environment
throughout its involvement in Sierra Leone through the end of
1994. However, in January 1995, SRL's mining operation was
attacked and overrun by rebel forces. Due to concern for the
safety of SRL's employees, the minesite was evacuated.
Substantial damage was done to the minesite and there was
extensive looting. Mining operations remained suspended, as
security could not be assured for personnel in and around the
minesite. In 1996 a civilian president was elected and in
December 1996, a peace accord between the government and the
opposing faction was signed. However, on May 25, 1997 the
democratically elected government was overthrown by a military
coup. On October 23, 1997 an accord was reached between the
Economic Community of West Africa States ("ECOWAS"), a coalition
of sixteen West African countries and the Armed Forces
Revolutionary Council ("AFRC") of Sierra Leone. The accord
provided, among other things, for the reinstatement of the
democratically elected government of President Kabbah; immediate
cessation of hostilities; disarmament, demobilization, and
reintegration of combatants; provision of humanitarian
assistance; the return of refugees and displaced persons; and the
broadening of the power base in Sierra Leone. Although this
accord was signed, sporadic, isolated acts of aggression
continued to occur. After several abortive attempts for a
peaceful resolution, in February 1998, ECOWAS provided a military
force ("ECOMOG"), to forcibly remove the AFRC from power and
President Kabbah and his government were reinstated in Sierra
Leone on March 10, 1998. Throughout 1998 there were sporadic
outbreaks of rebel activity, especially in the northern and
eastern parts of the country. In December 1998, fighting broke
out between ECOMOG forces and Revolutionary United Front ("RUF")
rebels in the areas surrounding the capital city of Freetown. On
January 6, 1999 rebels attacked Freetown and took control of the
eastern part of the city, destroying much of the city and
terrorizing the civilian population. Nigerian led ECOMOG forces
ultimately pushed the rebels out of Freetown and the surrounding
area. On May 24, 1999, the government and the rebel forces
negotiated a cease fire in order to initiate peace talks brokered
by the Government of Togo, ECOWAS, the Organization of African
Unity and the United Nations. Peace talks between the government
and the opposing faction resumed in Lome, Togo in May 1999.
According to recent press reports, the government has agreed to a
sharing of power with rebel forces, but that talks have bogged
down over the scope of the role the rebels should play. While
the talks to this point have been somewhat encouraging, there is
no assurance that they will result in a peace accord between the
parties or political stability in Sierra Leone.
As a result of the continuing uncertainty resulting from the
political, military and economic situation in Sierra Leone and
the suspension of full production at SRL's mining facility,
significant uncertainty exists as to the Corporation's ability to
recover its investment in SRL. The costs associated with resuming
operations of SRL's mining facility in Sierra Leone are
considerable. Although SRL's major assets remain substantially
intact, significant restoration efforts would be required to
repair much of the equipment which has been idle for over four
years. In 1998, the Corporation completed a feasibility study, a
portion of which described certain rehabilitation procedures
which are critical to the mine reopening plan at SRL. These
procedures include development of a master plan for the
rehabilitation of the mine and repair of the powerhouse and a dam
located in the Lanti mining deposit. At the time of
discontinuance of operations, SRL was in the process of a major
expansion of the facility, including construction of a second
dredge and new powerhouse. The feasibility study indicates
approximately $112 million would be required for asset
rehabilitation, completion of a new powerhouse and dredge, mine
development and working capital in order to resume operations at
the mine.
Because of the continued political, military and economic
instability in Sierra Leone and the uncertainty as to when the
mine can be reopened, the Corporation's investment in SRL was
completely written off in the Corporation's audited financial
statements.
The Board believes that retaining ownership of the interest
in SRL has and will continue to represent a significant drain on
the Corporation's resources without the prospect of recovering
the Corporation's investment. While SRL has not generated any
significant revenue since the suspension of its operations in
1995, the Corporation has continued to provide significant
amounts of money for the protection and maintenance of the mine
site, the payment of 50% of SRL's loan obligations to development
bank lenders, and the establishment of cash reserves to guarantee
SRL's future payments of principal and interest. From January
1995 through June 30, 1999, the Corporation has provided funding
to SRL in the amount of $35,614,797. Based on these factors
described in more detail below, the Board believes that it is in
the best interests of the Corporation to sell its interest in
SRL.
The Board engaged NM Rothschild & Sons LLC ("Rothschild"), a
leading investment banking firm with substantial experience and
contacts in the mining industry, and particularly in Africa, to
perform investment banking services in connection with a possible
sale of the Corporation's interest in SRL and to evaluate SRL for
the purpose of establishing its fair market value. Rothschild,
on behalf of the Corporation, attempted in 1998 and early 1999 to
solicit proposals to purchase the Corporation's interest in SRL.
Such solicitations included discussions with a number of major
mineral sands companies, but did not generate any purchase or
joint venture interest.
Transaction Specifics
The only offer received for the Corporation's interest in
SRL was from MIL. Thereafter the parties negotiated and
concluded an agreement in principle on February 26, 1999, subject
to the execution of a definitive agreement and contingent upon
the approval of the Board. On June 16, 1999, the Purchase and
Sale Agreement, was entered into by the Corporation, as seller,
and by MIL and an affiliate of MIL, as buyer, pursuant to which
the Corporation will sell, and MIL's affiliate will purchase the
Corporation's 50% ownership interest in SRL.
The Purchase and Sale Agreement provides for consideration
to be paid to the Corporation for the Corporation's interest in
SRL consisting of (a) a cash payment of $1,250,000, (b) a 5%
carried interest in the acquiring entity, (c) the release of the
Corporation from its current guaranty obligation of approximately
$6,000,000 to the development bank lenders to SRL, and (d) the
redemption and cancellation of MIL's 7,004,200 shares in the
Corporation, which shares currently represent approximately 29.8%
of the issued and outstanding shares of the Corporation.
The closing of the transaction is subject to several
conditions, the most important of which are: (a) the approval of
a majority of the Corporation's shareholders present and voting
at the Meeting (not including the shares owned by MIL), and (b)
the consent of the development bank lenders to SRL to the release
of the Corporation from its guaranty of 50% of SRL's obligation
to repay the development bank loans and the substitution by MIL
of a guaranty or other undertaking of MIL and/or its principal,
Jean-Raymond Boulle or such other entity satisfactory to the
development banks. The Corporation has further covenanted that,
until the closing, it will not take any action intended to cause
the business of SRL to be conducted inconsistently with past
practice and shall notify and consult with MIL regarding any
major decisions affecting the operation of SRL.
If the sale to MIL is consummated, the shares evidencing
MIL's 29.8% interest in the Corporation will be canceled and the
other existing shareholders percentage interest in the
Corporation would increase from 70.3% to 100%.
In the event that the transaction to sell the SRL interest
to MIL does not close for any reason other than MIL's breach of
the Purchase and Sale Agreement, the Corporation has agreed that
MIL shall have the right to acquire additional shares of the
Corporation equal to a pro rata number of any shares issued by
the Corporation, that would reestablish MIL's percentage
ownership of the Corporation's shares at the 31.5% which existed
as at February 26, 1999. Any such purchase would occur at a
price based on the mean average of the Corporation's shares on
the New York Stock Exchange, provided, however, that the minimum
price will be no less than $0.75 per share and the maximum price
no more than $1.00 per share. On June 8, 1999, the Corporation
issued 1,600,000 shares of common stock pursuant to an agreement
to purchase the Johnson Camp Mine copper mining facility in
Cochise County, Arizona. Thus, if the SRL transaction is not
consummated, the Corporation would be required to sell an
additional 735,766 shares to MIL if MIL exercises such right.
The Purchase and Sale Agreement is terminable if the
transaction has not closed by August 20, 1999. The Corporation
has agreed to use its best efforts to obtain shareholder approval
of the Purchase and Sale Agreement at the meeting.
Fairness Opinion
The Corporation's agreement to the consideration to be paid
by MIL for the Corporation's interest in SRL is based on an
assessment of the financial value of its interest in SRL and the
Corporation's strategic business objectives. To ensure that the
Corporation received fair market value from MIL in exchange for
the Corporation's interest in SRL, the Corporation engaged
Rothschild to evaluate the fairness, from a financial point of
view, to the shareholders of the consideration to be paid by MIL
pursuant to the Purchase and Sale Agreement. Rothschild is one
of the world's leading independent merchant banking organizations
with substantial experience in advising clients on mergers and
acquisitions, divestitures, project finance, equity offerings and
other capital market operations. Rothschild has participated in
a significant number of transactions involving mining and
resource companies, particularly in emerging markets, and has
extensive experience in undertaking valuations and fairness
opinions relating to mining industry transactions.
In formulating an opinion on the matter, Rothschild, among
other things, (i) reviewed and considered the feasibility study
for the restart plan of SRL produced by IMC Mackay & Schnellman,
(ii) reviewed and considered certain financial and operating
data, including financial forecasts concerning SRL and provided
by the management of SRL, and (iii) held discussions with the
managements of SRL and the Corporation regarding the past and
present operations and financial condition and prospects of SRL
and the Corporation, including, without limitation, information
relating to certain strategic, financial, and operating benefits
anticipated from the sale of the Corporation's interest in SRL.
In an opinion letter dated June 21, 1999 ("Rothschild
Fairness Opinion"), Rothschild concluded that:
"[T]he consideration to be paid by Buyer
pursuant to the Agreement in respect of the
transaction is fair, from a financial point
of view, to the shareholders of Seller."
A copy of the Rothschild Fairness Opinion setting forth the
assumptions made, the matters considered, the scope and
limitations on the review undertaken and the procedures followed
by Rothschild in rendering its opinion is attached to the Proxy
Statement as Exhibit A. In addition to the Rothschild Fairness
Opinion, Rothschild prepared a valuation report dated June 1999
("Rothschild Valuation Report") relating to the proposed sale
which report shall be made available for inspection and copying
at the Corporation's principal offices in Albuquerque, New Mexico
during regular business hours by any interested shareholder or
his representative who has been so designated in writing. The
Corporation will also mail a copy of the Rothschild Valuation
Report upon written request to any interested shareholder or his
representative who has been so designated in writing.
Related Party Purchaser/Conflict of Interest
MIL is an affiliate of the Corporation by virtue of its
29.8% ownership of the outstanding shares of the Corporation.
MIL acquired 3,160,000 shares from the Corporation pursuant to a
Stock Purchase and Sale Agreement dated April 15, 1996, 840,000
shares in a Loan Conversion on June 4, 1996, 2,000,000 shares in
a Stock Purchase and Sale Agreement dated October 2, 1996 and
1,004,200 shares purchased on the open market.
Under various agreements currently in effect with MIL, MIL
has the right to nominate three persons to the Board while the
Board (excluding the MIL nominees) retains the right to designate
the remaining four nominees. MIL is obligated to vote its shares
for the four Board nominees through and including voting at the
meeting. In addition, the size of the Board cannot be increased
or decreased without the approval of at least two MIL nominees.
Pursuant to the Purchase and Sale Agreement, MIL will be
able to vote its shares in support of the Board's recommendation
to sell the Corporation's interest in SRL, but an affirmative
vote by majority of the Corporation's shareholders present and
voting at the Meeting (not including the shares owned by MIL) is
required to approve the transaction.
MIL's affiliation with the Corporation is the predicate for
a derivative suit filed on December 2, 1998 ("Derivative Action")
by MIL on behalf of the Corporation in the District Court of
Dallas County, Texas, naming as Defendants Nord Pacific, W.
Pierce Carson, Edgar F. Cruft, Terence H. Lang, and Hicor
Corporation. Counsel for Messrs. Carson, Cruft and Lang removed
the case on December 31, 1998 to the United States District Court
for the Northern District of Texas, Dallas Division. Together
with its Notice of Removal, Messrs. Carson, Cruft, and Lang filed
a Motion to Realign the Corporation as party defendant and, in
addition, filed a Motion to Dismiss the case for lack of personal
jurisdiction and, alternatively, to transfer venue of the case to
the United States District Court for the District of New Mexico
at Albuquerque. The Corporation, Pacific and each individual
defendant is being represented under directors and officers
liability policies. On behalf of Nord Pacific, on January 13,
1999, a Motion to Dismiss the case was filed, asserting that the
Court lacked personal jurisdiction over Nord Pacific and that the
Plaintiff had failed to state a claim upon which relief could be
granted against Nord Pacific. On January 13, 1999, the Plaintiff
filed a Motion to Remand the case to the 298th Judicial District
Court of Dallas County, Texas, a Motion for Leave to Amend the
Complaint and a Response to the Corporation's Motion to Realign
the Parties. All of these Motions have not yet been considered
by the Court. The Plaintiff's Original Petition and Jury Demand
objects to a number of alleged corporate events involving the
Corporation's relationship with Nord Pacific, although the
Corporation has asserted that all of such actions had been
approved by MIL's nominees to the Corporation's Board of
Directors. Causes of action are alleged against Messrs. Carson,
Cruft, and Lang for breach of fiduciary duties, negligence and
gross negligence. The damages sought in connection with those
causes of action are stated to be "in excess of the minimum
jurisdictional limits of this Court of not more than $50
million." No specific causes of action are alleged against Nord
Pacific. Nonetheless, a prayer for punitive damages against all
defendants is alleged in the amount of $50 million. The
Corporation has contested the claims vigorously and expects the
claim to be dismissed for lack of jurisdiction by the courts in
Texas.
An action was instituted on behalf of the Corporation and
Nord Pacific in the Supreme Court, New York County on January 15,
1999 ("New York Action"), seeking a determination that MIL is not
entitled to demand representation on the Board of Directors of
Nord Pacific and that the failure to designate such a
representative does not constitute a violation or breach of any
of the Corporation's obligations to MIL. The time within which
to respond to that complaint has been extended.
If the SRL transaction closes, the Corporation, Nord Pacific
and MIL have agreed to cause the Derivative Action and the New
York Action to be dismissed, subject to approval by the court.
The above-referenced related party interest and potential
conflict of interest of the Board and MIL has been fully
disclosed to the entire Board. After considerable discussion and
deliberation the Board, having the understanding that the sale of
the Corporation's interest in SRL is clearly in the best
interests of the shareholders of the Corporation, that MIL's is
the only offer for the Corporation's interest in SRL, and that
the consideration offered by MIL for said interest in SRL is
deemed to be fair by an independent financial consultant,
concluded that it was in the best interests of the shareholders
of the Corporation to consummate the transaction with MIL
notwithstanding the conflict of interest, upon the terms and
conditions of the Purchase and Sale Agreement negotiated at arms
length subject to the direct supervision of the Board.
Financial Burden of Maintaining SRL
Due to the lengthy suspension of its operations, SRL has
relied and will continue to rely on funds from the Corporation
and its other 50% owner to sustain its operations. From January
1995 through June 30, 1999, the Corporation provided SRL with
$35,614,797, as its 50% share of funding required by SRL for
support of a limited maintenance force, payment to vendors, costs
of security at the mine and payments of principal and interest on
the outstanding development bank loans. Due to the continuing
unstable political, military and economic situation in Sierra
Leone, it is doubtful that the SRL mining facility will restart
operations at any time in the near future. The best case
scenario used in the fairness opinion is a restart in 2003. If
the sale of the Corporation's interest in SRL is not approved by
the shareholders and consummated pursuant to the Purchase and
Sale Agreement, SRL will continue to represent a significant
drain on the Corporation's resources without any reasonable
prospect of the Corporation receiving a return on its investment,
thus risking the viability of the Corporation as a going concern.
At the time of the mine shutdown in January 1995, SRL owed
the development banks $45,522,838, including $12,529,960 owed to
the Export-Import Bank of the United States from a prior
financing. Since that time, the Corporation has funded the
repayment of its one-half share of $33,415,373 of principal, plus
interest and fees of $5,674,288. In May 1998, SRL's debt
agreements were amended. The amendments provided for a reduction
in the interest rate payable on SRL's loans outstanding to a
fixed rate of 6.875% as opposed to the variable rate in effect
prior to the amendments. The amendments also provided that the
current remaining balance of the loans would be payable in two
installments of $3,026,866 in September 1999 and 2000, with the
balance of $6,053,733 due in September 2001. The total remaining
principal payable by SRL to the development banks as of the date
of the proxy statement aggregates $12,107,465. The loans are
guaranteed 50% by the Corporation and 50% by CRL.
The amendments require that the Corporation comply with
certain financial covenants, including a covenant to maintain
cash, cash equivalents and/or marketable securities with an
aggregate value equal to 150% of its guaranteed portion of the
outstanding loans. Since December 31, 1998, the Corporation has
been in violation of this covenant. As a result, the lenders
could demand repayment of the loans, although as of the date of
this proxy statement they have not done so.
New Strategic Business Plan
The Board's recommendation to sell the Corporation's
interest in SRL is consistent with its development of a strategic
business plan of the Corporation focused on the acquisition of
other mining properties which require less financial commitment
and which the Corporation believes can be profitable when metal
prices recover, without concern as to local political and
military conditions.
The Corporation's operating assets currently consist of (a)
a 50% ownership in SRL, (b) a 28.5% ownership in Nord Pacific,
which is principally engaged in the production of copper and the
exploration for gold, copper, nickel, cobalt and other minerals
in Australia, Papua New Guinea, Mexico, and North America, and
(c) ownership of a newly-acquired copper mining facility in
Arizona described below. Nord Pacific owns a 40% interest in the
Girilambone Copper mine which has been in production since May
1993, and a 50% interest in the Girilambone North Copper mine
which has been in production since July 1996. Nord Pacific also
owns a 50% interest in the Tritton Copper Project in Australia, a
100% interest in the Tabar Islands Gold Project and a 35%
interest in the Ramu Nickel-Cobalt Project in Papua-New Guinea,
all of which are considered to be in the development stage, and
various interests in certain exploration properties.
On June 8, 1999, Nord Copper Corporation ("NCC"), a
wholly-owned subsidiary of the Corporation, acquired from
Arimetco, Inc. a copper mining facility ("Johnson Camp Mine")
located in Cochise County, in southeastern Arizona 65 miles east
of Tucson, which includes 2,723 acres consisting of patented and
unpatented mining claims and fee simple lands. The total
consideration paid by the Corporation and NCC was (a) $310,000 in
cash, (b) the issuance of 1,600,000 unregistered shares of the
Corporation's common stock and (c) a promissory note ("Promissory
Note") from NCC in the amount of $1,550,000, payable in three
principal payments of $500,000, $500,000 and $550,000, due on
June 8, 2000, June 8, 2001 and June 8, 2002, respectively,
together with interest at the rate of 8% per annum payable
quarterly. In addition to the purchase price, NCC assumed the
obligation to pay up to $1,000,000 out of revenues from the
Johnson Camp Mine to Arimetco, Inc., at a rate of two cents per
pound of copper sold, except that no payment is due where the
price is less than $1.00 per pound.. The payment of the
Promissory Note is guaranteed by the Corporation and is secured
by a lien on the Johnson Camp Mine until the Promissory Note is
paid in full.
Since 1975 the Johnson Camp Mine has produced over 150
million pounds of cathode copper from open pit mining, heap
leaching and solvent extraction-electrowinning (SX-EW) processing
of oxide ores. Although significant reserves remain, mining
operations ceased in 1997. Heap leaching continues and the mine
has been producing one to two million pounds of copper cathode
annually.
Under an arrangement with Nord Pacific, which operates a
SX-EW copper mining facility in Australia and was instrumental in
identifying and assessing the Johnson Camp Mine opportunity, Nord
Pacific will participate in management of the Johnson Camp Mine
and will be entitled to 20% of cash flow after the Corporation
has fully recovered its past and future investment in the
property.
The Corporation continues to seek other acquisitions in the
metal mining business that are consistent with its business
objectives.
Recommendation of the Board of Directors
The Board has carefully weighed the options of retaining the
Corporation's interest in SRL. Resumption of the Sierra Leone
operations would depend upon a number of conditions including,
(1) Sierra Leone having an acceptable political environment
within which to operate, (2) SRL having adequate levels of
security in and around the mine site area, (3) SRL successfully
renegotiating its operating agreements with the government of
Sierra Leone, (4) SRL having adequate capital to meet the equity
required, and (5) SRL obtaining adequate levels of additional
debt financing at acceptable terms.
In view of the continuing uncertainty in Sierra Leone, which
could continue well into the foreseeable future, the limited
resources of the Corporation and the significant amounts of
capital that would be required to retain ownership and restart
the mine, without a reasonable prospect of receiving a return on
the Corporation's investment in SRL, it is the unanimous
recommendation of the Board that the shareholders approve the
proposal to sell said interest pursuant to the Purchase and Sale
Agreement.
In addition, the Board is not confident that the Corporation
can afford to maintain SRL until such time as the political
climate and the security of the mine site reach acceptable levels
without risking the ongoing viability of the Corporation as a
going concern.
It is the unanimous recommendation of the Board that the
shareholders approve the sale of the Corporation's interest in
SRL as proposed herein for the basic and inherent reason that no
other alternative is currently or feasibly available to
accomplish the stated goals of the Corporation of relieving the
financial burden on the Corporation's resources associated with
maintaining ownership in SRL and focusing on the acquisition of
other mining properties which require less financial commitment
and contain minimal political and country risk. A vote against
this proposal will endanger the Corporation's viability and
attainment of its goals designed to limit the risk to its ongoing
viability, promote the growth of the Corporation and enhance the
value of its stock.
The value of the Corporation's 50% interest in SRL as a
separate entity on the Corporation's 1998 audited financial
statements is zero. In accordance with Delaware Corporation Law
Section 271, the Corporation's 50% interest in SRL does not
represent all or substantially all of the Corporation's property
and assets, and thus, this transaction is not required by
Delaware state law or by the By-Laws of the Corporation to be
submitted to a shareholder vote. However, due to the related-
party interest and conflict, the potential impact on the
Corporation, the advice of counsel and by resolution by the
Board, the sale of SRL is submitted to the Corporation's
shareholders for approval by a majority of the shares present and
voting at the Meeting (not including the shares owned by MIL)
although, under Delaware law, only the affirmative vote of at
least a majority of the total number of shares present and voting
at the annual meeting would be required to adopt this proposal.
If the shareholders do not approve the divestiture proposal, the
proposed transaction will be abandoned.
OTHER MATTERS
The Board is not aware of any matter not referred to in the
enclosed form of proxy that will be presented for action at the
meeting. If any such matter properly comes before the meeting,
the proxies in the accompanying form will be voted with respect
thereto in accordance with the judgement of the person or persons
voting such proxies.
The Corporation's Transfer Agent is to perform certain
services in connection with the solicitation of the proxies,
including tabulation of proxies and personal or telephone
inquiries to shareholders or brokers, banks or other persons
acting as custodians. For these services, the Transfer Agent
will receive a fee at its customary rate and reimbursement of
certain out-of-pocket expenses. Brokers, banks and other persons
acting as custodians may be reimbursed for certain expenses
incurred by them in obtaining instructions from beneficial owners
of the Corporation's Common Shares. In addition to use of the
mails, directors and officers of the Corporation may, without
compensation other than their regular compensation, solicit
proxies from shareholders by telephone or in person. All costs
of solicitation will be borne by the Corporation.
SHAREHOLDER PROPOSALS
A proposal by a shareholder intended for inclusion in the
Corporations proxy statement for the 2000 annual meeting must be
received by the Corporation at the address noted immediately
above, to the attention of Ray W. Jenner, Secretary, on or
before ______________, 1999, in order to be eligible for such
inclusion.
ANNUAL REPORT
The Corporation's 1998 Annual Report to Shareholders, which
includes a copy of the Corporation's Annual Report on Form 10-K
for 1998 (including the financial statements and schedules
thereto), as filed with the Securities and Exchange Commission
("1998 Annual Report") is being delivered concurrently with this
Proxy Statement. Shareholders are urged to review carefully the
financial information contained in the 1998 Annual Report.
Please sign the proxy and return it promptly in the
enclosed envelope to which no postage need be affixed if mailed
within the United States.
Albuquerque, New Mexico
__________, 1999
<PAGE>
PROXY - NORD RESOURCES CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
AUGUST ____, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W. PIERCE CARSON and EDGAR
F. CRUFT and each or any one of them (with powers of
substitution), proxies for the undersigned to vote all shares of
Common Stock held of record on July 8, 1999, of NORD RESOURCES
CORPORATION (the "Corporation") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of
Shareholders (the "Meeting") to be held in New York, New York on
August ___, 1999, and at any adjournment thereof, upon the
matters set forth in the Notice of and Proxy Statement for said
Meeting, copies of which have been received by the undersigned,
and in their discretion, upon all other matters which may
properly come before said Meeting. Without otherwise limiting
the generality of the foregoing, said proxies are directed to
vote as follows:
Please mark your votes
as in this example. FOR AGAINST ABSTAIN
1. Election of Directors: ____ ____ ____
For, except vote withheld from the following
nominee(s):_____________________
Nominee(s): W. Pierce Carson
Edgar F. Cruft
Terence H. Lang
Leonard Lichter
Marc Franklin
James Askew
Francis Waldron
2. Approve the sale of the
Corporation's 50% ownership
interest in the Sierra Rutile ____ ____ ____
titanium dioxide mine in Sierra
Leone to an affiliate of MIL
(INVESTMENTS) S.A.R.L.
3. In their discretion to act upon
such other matters as may properly ____ ____ ____
come before the Annual Meet-ing or
any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed herein
by the shareholder. If no specification is made, this proxy will be voted in
favor of the above proposals.
Your proxy is important to assure a quorum at the Annual Meeting whether or
not you plan to attend the Meeting in person. You may revoke this proxy at
any time, and the giving of it will not effect your right to attend the Annual
Meeting and vote in person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
SIGNATURE(S)_________________________DATE_______
NOTE: Please sign exactly as name appears. When shares are
held as joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized
officer and if a partnership, please sign in the partnership
name by authorized person.
</TABLE>
ROTHSCHILD
June 21, 1999
Board of Directors
Nord Resources Corporation
201 Third Street, N.W.
Suite 1750
Albuquerque, NM 87102
Dear Sirs:
You have requested our opinion ("Opinion") as to the
fairness, from a financial point of view, to the
shareholders (the "Shareholders") of Nord Resources
Corporation (the "Company"), other than MIL (Investments)
S.A. ("MIL"), of the consideration (the "Consideration")
which is proposed to be paid by SRL Acquisition No. 1
Limited ("Buyer") as designee of MIL pursuant to the Sale
and Purchase Agreement between the Buyer and the Company
(the "Agreement") pursuant to which the Buyer is to acquire
all of the interests of the Company in Nord Rutile Company
and related entities ("NR Company") for (i) US$1,250,000 in
cash; (ii) an assumption of the obligations of the Company
and Nord Rutile Corporation as limited partner and general
partner, respectively, of NR Company; (iii) an assumption of
the obligations of the Company with respect to the related
entities; (iv) the issuance by the Buyer to the Company of
one B Share of the Buyer; (v) MIL surrendering to the
Company for redemption and cancellation all MIL Shares,
representing 7,004,200 shares of common stock of the Company
outstanding; and (vi) the procurement of the release of the
Company of its obligations to the Development Banks (the
"Transaction").
Capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Agreement.
In formulating our Opinion, we have reviewed, among other
things, the Agreement and the terms and conditions of the
Transaction set forth therein and have (i) reviewed and
considered the feasibility study for the Restart Plan of
Sierra Rutile Limited produced by IMC Mackay & Schnellmann
("IMC") in April 1997 (the "Feasibility Study") which was
provided to us by the Company and SRL; (ii) reviewed and
considered a revised version of the feasibility study
prepared by SRL in November 1998 (the "SRL Study"), which
was provided to us by SRL; (iii) reviewed and considered
certain financial and operating data, including financial
forecasts, concerning SRL publicly available or prepared and
provided to us by the management of SRL; (iv) held
discussions with the managements of SRL and the Company
regarding the past and current operations and financial
condition and prospects of SRL and the Company, including,
without limitation, information relating to certain
strategic, financial and operating benefits anticipated from
the Transaction; and (v) considered such other public
information and factors we deemed appropriate. We have not
considered any benefit other than the Consideration which
the Company or the Buyer may receive pursuant to the
Transaction.
Rothschild Inc. N M Rothschild & Sons
(Washington) LLC
1251 Avenue of the Americas 1101 Connecticut Avenue NW
New York, New York 10020 Washington, DC 20036
Telephone: (212) 403-3500 Telephone: (202) 862-1660
<PAGE>
Board of Directors
Nord Resources Corporation
June 21, 1999
Page 2
In connection with this review, we have not assumed any obligation
independently to verify any information utilized, reviewed or
considered by us in formulating our Opinion and have relied on it
being accurate and complete in all material aspects.
With respect to the financial forecasts for SRL provided
to us by SRL, we have assumed for purposes of our Opinion that the
forecasts have been reasonably prepared on bases reflecting the best
available estimates and judgments of SRL's management at the time of
preparation as to the future financial performance of SRL. We
have also assumed that there has not occurred any material change in SRL's
assets, financial condition, results of operation, business or prospects
since the date on which SRL's most recent financial projections were
made available to us. We have not assumed responsibility for making an
independent evaluation, appraisal or physical inspection of any assets or
liabilities (contingent or otherwise) of SRL and have been provided with
and relied upon the completeness and accuracy of the Feasibility Study and
the SRL Study made available to us.
It is agreed that any such independent verification of the
information provided to us orally, in writing, or electronically or
publicly available is beyond the scope of our assignment. Our Opinion
is based on economic, monetary and market and other conditions as in
effect on, and the information made available to us as of, the date
hereof. Accordingly, although subsequent developments may affect
this Opinion, we have not assumed any obligations to update, revise or
reaffirm this Opinion.
We have further assumed that the Transaction will be
consummated substantially in accordance with the terms and
conditions described in the Agreement without any further amendments
thereto and without waiver of any of the conditions or obligations
thereunder.
We have been retained to render this Opinion and are being
compensated therefor. We have received customary compensation for
advisory services rendered to the Company previously.
This Opinion is directed to the Board of Directors of the
Company in its consideration of the fairness of the Transaction and does
not constitute a recommendation to any of the Shareholders as to how any
Shareholder of the Company should vote with respect to the Transaction
at any meeting called to approve the Transaction.
Based upon the foregoing and other factors we deem relevant
and in reliance thereon, it is our Opinion that as of the date hereof
the Consideration to be paid by the Buyer pursuant to the Agreement in
respect of the Transaction is fair, from a financial point of view, to
the Shareholders, other than MIL or any affiliate thereof.
Very truly yours,
N M Rothschild & Sons (Washington) LLC
Rothschild Inc.
