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Latest Ryan's Notes on ConsMin

After Territory Resources increased its original proposal
for Consolidated Minerals’ (CSM) stock, CSM’s board
granted Territory limited access to conduct due diligence to
assist Territory to determine whether it will make a formal
takeover offer. Access is conditional on due diligence being
finalized by July 13. However, CSM’s board emphasized
that Territory has not made an offer and that Pallinghurst’s
bid, which CSM’s board favors, is due for a vote on July 19.
CSM’s earlier rejection on Territory’s first request for due
diligence came under fire by both Territory’s and a few of
CSM’s shareholders. “CSM’s Directors are merely custodians
of the company’s assets which places on them a fiduciary
duty to act in the best interests of all the shareholders,"
Territory’s Chairman, Michael Kiernan, said. "The shareholders
of CSM should be provided with an opportunity to
receive a superior alternative proposal to the scheme currently
before them."
Territory’s revised offer is A$2 per CSM in cash and one
Territory share or three Territory shares. According to
Territory, the new offer has a headline value of A$3.25 per
share based on Territory’s share price.
CSM’s directors have questioned the value of Territory’s
shares, saying that current stock prices don’t reflect the actual
value of the company.
Territory also answered CSM’s questions on funding. The
Noble Group and DCM DECOmetal will provide A$200-
million in acquisition funding comprising A$150-million at
A$1 per Territory share together with an A$25-million loan.
In addition, Lehman Brothers has provided a "highly confident"
letter for up to A$25-million of bridging funding on
commercial terms and subject to due diligence. Euroz
Securities has been appointed as Territory’s institutional broker
to raise the balance of the funding through European and
Australian institutions.
The ball is now in Pallinghurst’s court. Most analysts think
even with CSM’s board backing, it will lose unless it substantially
increases its bid. "CSM’s current directors are toast
if Territory buys CSM," one analyst pointed out. "Their fate
is in the hands of Pallinghurst."
Finally, Pallinghurst, in a possible move to bolster its bid,
is the subject of rumors that it wants to take an interest in
Kalahari Resources, with a Pallinghurst executive saying the
company has signed a MOU on a major manganese project
in southern Africa. "It’s either Kalahari or Samancor
Manganese," another observer suggested. "And, both are
long shots."
Meanwhile, Kalagadi Manganese is aiming to decide on
"preferred" strategic partners (two or possibly three), to
negotiate with by the end of July 2007 in order to conclude
a deal with the most appropriate partner.
In terms of selection criteria, the overarching criteria are
the anticipated value added that the prospective partners will
bring to Kalagadi Manganese and its current shareholders, a
Kalagadi advisor explained. The proposed price to be paid
for an interest in Kalagadi is important, as it will limit the

dilution of Kalahari Resources participation in Kalagadi
Manganese going forward. Remaining criteria includes the
partner’s ability to facilitate project (debt) financing, operational
expertise (mining / processing / smelting) which need
not be manganese specific, securing / committing to product
offtake, and the level of control that the partner wishes to
secure.
A separate IPO for Kalagadi Manganese or Kalahari
Resources is definitely under investigation, specifically as an
alternative to sourcing funding from a SEP.
Japan Oil, Gas & Metals National Corp. will host a tender
for 11,073.5 mt of standard-grade ferromanganese (73-78%
Mn) from the Japanese national stockpile on July 20.
Japanese consumers and producers can bid for the material
but traders cannot. Japan Oil, Gas & Metals will set up the
minimum price. In April 2004, Japan Oil, Gas & Metals sold
15,000 mt of high-carbon ferromanganese. The national
stockpile contains 32,665 mt of high-carbon ferromanganese
equivalent of 31.8 days of national consumption.