The Possibility Of Consolidated Minerals Making A Hostile Bid For Portman Below The Market Price Should Not Be Ruled Out.
Whenever Michael Kiernan appears in London, as he does on a very regular basis, everyone knows about it. Brokers notes on his company, Australian listed Consolidated Minerals, fly around and one- on- one meetings take place with fund managers, brokers and journos. Small wonder that over 30 per cent of the stock is now held in London, and the company only listed on AIM in May 2003. Compare that with Portman, the Australian based iron ore producer. This company recently cancelled its listing on AIM which is freely acknowledged to be Europe’s most successful junior market. The reason given was that there was little trade in the shares. The truth of the matter was that Messrs Jones and Eldridge, chairman and managing director, made little attempt to attract attention up here. Agreed Barry Eldridge spoke at our 15th Minesite Mining Forum in April this year, but the decision to stick to Oz had probably been made by that time anyway.
A listing on AIM is not a magic potion. It has to be worked at and much depends on the choice of broker and nominated adviser. Portman, as an Australian company, had to be off its trolley to pick Canaccord, a Canadian broker. Canaccord may be very good at what it does, but it is under certain restrictions on the clients with which it can deal and the amount of research carried out on Australian companies is virtually zilch. The result was that many investors and commentators only heard that the duo from Portman had been in London after they left. Not a very successful state of affairs and one which raises questions as to how efficient they will be in repelling Michael Kiernan who already has one foot on board the good ship Portman with a 14.8 per cent shareholding.
Quite clearly he is not going to let matters rest there and told Minews that he expects to be back in London before Christmas with more news on the subject. Both companies supply bulk materials to the world’s steel industry - manganese and chromite from Consolidated Minerals and iron ore from Portman. China is therefore the single biggest client for both companies with Japan and other countries in the Far East as well as Europe on the list. There are therefore plenty of opportunities for increased efficiency and cost savings in marketing, transport and management to be reaped from merging the two companies
Both companies are making a lot of money, but not long ago Portman was buying back its own shares in recognition of the fact that it could not find any suitable acquisitions. Since then part of the sea wall has fallen down at its Cockatoo island operations and plans have been announced to increase iron ore production from Koolyanobbing .Consolidated Minerals, on the other hand, is advancing an expansion plan in nickel and iron ore and has just landed initial orders with India and Bangladesh which is a significant breakthrough on the sales side.
Exploration at its Mindy Mindy iron ore project has delineated a resource of 75 million tonnes of 58% iron ore on the southern extension of the Yandicoogina deposits. ConsMins optioned 50 per cent of the project to Twiggy Forest’s Fortescue Metals last year in order to obtain access to its proposed new railroad to Hopes Downs. China Railway Engineering recently signed a contract to build and partly finance the scheme, but there is always the possibility that the Hancock family or Anglo might step in with a similar scheme if it is seen to be profitable. Either way the chances of bringing Mindy Mindy into production are improving steadily. ConsMins also has a 20 per cent holding in Reed Resources which has an iron ore resource of just under 20 million tonnes near Portman’s Koolyanobbing project. As a stand-alone it has no great future, but with access to Portman’s rail infrastructure could be very profitable. It is called forward thinking.
On the nickel side the company has a 17 per cent stake in Mithril Resources which means that it has access, at one remove, to the BHP Billiton nickel databank. Mithril is involved a strategic alliance with the major and any discoveries of less than 50 million tonnes fall back to it . ConsMins would then step in as its partner of choice to help fund development. It also is earning into a 65 per cent interest in the Nepean nickel mine which is 25 kms southwest of Coolgardie and close to a swathe of other nickel deposits. It was mined to a depth of 480 metres between 1970 and 1897 to produce ore averaging 3% nickel with additional gold, cobalt and platinum. When the mine closed a resource of 409,000 tonnes grading 2.39% nickel was said to be still in place and ConsMin already reckons that it has found another lookalike deposit to the south. Bringing the two into production by 2006 looks a possibility as they are sulphide deposits and WMC’s smelter at Kambalda and LionOre’s facilities at Bulong are no great distance away.
CSM Price at posting:
0.0¢ Sentiment: ST Buy Disclosure: Held
