African front opens up in Consolidated Minerals battleBy John...

African front opens up in Consolidated Minerals battle

By John Phaceas
July 2, 2007

A SECOND front may soon open in the war between Michael Kiernan's Territory Resources and Brian Gilbertson's Pallinghurst Resources for control of Consolidated Minerals that would take the fight to South Africa.

Pallinghurst has previously named the rich manganese fields of the Kalahari Basin, controlled by black empowerment consortiums, as a prime hunting ground and last week confirmed it would soon lift the curtain on the first deal to be offered to ConsMin before investors vote on its friendly $670 million partial takeover bid on July 19.

The flagship asset up for grabs is a $600 million mine and smelter planned by Kalagadi Manganese, controlled by BEE group Kalahari Resources, which is now sorting through participation offers from 16 international groups including China's Sinosteel and India's Tata Group.

Kalagadi is plan- ning a 3-million-tonnes-a-year manganese mine and associated 350,000-tonnes-a-year ferromanganese smelter in Northern Cape, with mining slated to begin in late 2008.

Pallinghurst director Arne Frandsen last night denied talk that Kalagadi was in Pallinghurst's sights but confirmed the group had signed a memorandum of understanding on a major manganese project in southern Africa that might potentially be offered to ConsMin.

Mr Kiernan yesterday confirmed that he had been approached to participate in Kalagadi and would be keen to become involved if possible. As the founder of ConsMin, Mr Kiernan made its Woodie Woodie mine in the Pilbara one of the world's leading suppliers of high-grade manganese.

"Both directly and through Decometal, we have been approached to become involved for us to provide our manganese mining expertise," he said.

Decometal is a major customer of ConsMin, of which it owns almost 5 per cent, and has offered to co-fund Territory's rival $850 million bid for ConsMin in partnership with investment bank Lehman Brothers and Hong Kong conglomerate Noble Group, ConsMin's single biggest shareholder and customer.

Territory is also finalising its entry to the rich Tambao manganese project in Burkina Faso, which is believed to contain 20 million tonnes of manganese grading over 51 per cent.

Mr Frandsen yesterday criticised Tambao for being in landlocked country, without rail or roads on the 2500-kilometre journey to the sea.

Territory believes the project may be viable, given World Bank-funded plans to build a railway from Burkina Faso to the coast. It also believes participation in Tambao is proof it can match Pallinghurst's promise to deliver global investment opportunities.

Territory has flagged an offer of $1.50 plus 1½ shares for each share in ConsMin, notionally valuing the target at $3.72 a share, versus $2.93 implied by the Pallinghurst offer of $1.68 a share in cash plus two shares in a new ConsMin for every five already held.

But ConsMin on Friday rebuffed Territory's request to undertake due diligence and said its proposal was too risky compared with Pallinghurst's bid. It said Territory stock was worth much less than its last price of $1.48, noting Mr Kiernan and Noble paid just 50¢ a share for a 30 per cent stake last month.

Mr Kiernan yesterday reiterated that ConsMin faced a shareholder revolt if it stymied an alternative bid, given the Pallinghurst bid must be approved by 75 per cent of shares voted at the meeting on July 19.

He claims at least 25 per cent of ConsMin investors do not support Pallinghurst.

http://www.theage.com.au/news/business/african-front-opens-up-in-consolidated-minerals-battle/2007/07/01/1183228957794.html