bg must be kicking himself, page-2

Solid assembly of suitors for ConsMin
Malcolm Maiden
September 5, 2007

THE takeover feeding frenzy over Consolidated Minerals is an example of the pervasive impact of Australia's commodity price boom. ConsMin is a fairly ordinary company with a variable profit history, but it controls one resource that in its own small way is making the boom possible, and there's a long line of people who want to own it.
The Woodie Woodie manganese mine inland from Port Hedland is no Olympic Dam or Escondida. It is producing just under 1 million tonnes of high-grade manganese ore a year, and in the year to June 30, it boosted revenue by 12.2 per cent to $134.5 million, about half ConsMin's total revenue, which includes nickel and chromite. Annual global manganese production runs to about 30 million tonnes and high-grade production, including production from Woodie Woodie, is about 12 million tonnes, giving ConsMin about 8 per cent of the quality end of the market, which supplies high-grade blending stock to smelters.
Woodie Woodie is no 100-year asset, either. The resource is put at 15.4 million tonnes, and some of it is deep, and relatively high cost. But manganese is critical for the production of stainless steel and ferro alloys which, among other things, are used to make dry-cell batteries. As China's boom continues, the price of manganese is soaring, and transforming the economics of ConsMin's little mine.
The group barely covered its mining cash costs at Woodie Woodie in 2005-06 and 2006-07 after receiving average prices of $2.25 and $2.34 per dry metric tonne unit (DMTU) for manganese, down from $3.46 a year earlier when China was buying the metal and hoarding it. But continuing demand, the drawdown of Chinese stockpiles and bottlenecks in supply from other groups enabled it to strike prices around $6.60 per DMTU for last month, this month and next month.
Prices probably won't stay that high long term, but as Asia's industrialisation continues, they probably won't come back to $2 and change again, either.
Brian Gilbertson's Pallinghurst group started the ball rolling with a scheme of arrangement offer in February that valued ConsMin at $2.28 a share, but was overbid in July by Michael Kiernan's Territory Resources. Gilberston stayed in the hunt with a $3.30 cash offer, but after building up a stake of about 15 per cent in ConsMin, billionaire Ukrainian Gennadiy Bogolyubov's Palmary Enterprises swooped last week, with a $3.95-a-share cash bid. In all, ConsMin's share price has more than doubled since the action began, and it may not be over: Norway's Tinfos ferro-alloy group has built up a 5 per cent stake, and has been granted due diligence, and Kiernan, his bid overrun, is pursuing a tie-in with Bogolyubov.
It's fabulously clubby and convoluted: Bogolyubov's Privat group controls ferro-alloy smelters in Ukraine, Tinfos is in the same business, and Territory's bid was backed by Noble Group and DCMDecometal, commodities trading houses that sell ConsMin manganese in China and Europe respectively.
And nobody will get all of ConsMin unless the others bow out: Gilbertson controls 10 per cent of the group's shares and convertible bonds, Palmary has 15 per cent, Tinfos has 5 per cent and may go higher, and another 12 per cent is controlled by Noble and DCMDecometal.
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The Woodie Woodie manganese mine inland from Port Hedland is no Olympic Dam or Escondida. It is producing just under 1 million tonnes of high-grade manganese ore a year, and in the year to June 30, it boosted revenue by 12.2 per cent to $134.5 million, about half ConsMin's total revenue, which includes nickel and chromite. Annual global manganese production runs to about 30 million tonnes and high-grade production, including production from Woodie Woodie, is about 12 million tonnes, giving ConsMin about 8 per cent of the quality end of the market, which supplies high-grade blending stock to smelters.
Woodie Woodie is no 100-year asset, either. The resource is put at 15.4 million tonnes, and some of it is deep, and relatively high cost. But manganese is critical for the production of stainless steel and ferro alloys which, among other things, are used to make dry-cell batteries. As China's boom continues, the price of manganese is soaring, and transforming the economics of ConsMin's little mine.
The group barely covered its mining cash costs at Woodie Woodie in 2005-06 and 2006-07 after receiving average prices of $2.25 and $2.34 per dry metric tonne unit (DMTU) for manganese, down from $3.46 a year earlier when China was buying the metal and hoarding it. But continuing demand, the drawdown of Chinese stockpiles and bottlenecks in supply from other groups enabled it to strike prices around $6.60 per DMTU for last month, this month and next month.
Prices probably won't stay that high long term, but as Asia's industrialisation continues, they probably won't come back to $2 and change again, either.
Brian Gilbertson's Pallinghurst group started the ball rolling with a scheme of arrangement offer in February that valued ConsMin at $2.28 a share, but was overbid in July by Michael Kiernan's Territory Resources. Gilberston stayed in the hunt with a $3.30 cash offer, but after building up a stake of about 15 per cent in ConsMin, billionaire Ukrainian Gennadiy Bogolyubov's Palmary Enterprises swooped last week, with a $3.95-a-share cash bid. In all, ConsMin's share price has more than doubled since the action began, and it may not be over: Norway's Tinfos ferro-alloy group has built up a 5 per cent stake, and has been granted due diligence, and Kiernan, his bid overrun, is pursuing a tie-in with Bogolyubov.
It's fabulously clubby and convoluted: Bogolyubov's Privat group controls ferro-alloy smelters in Ukraine, Tinfos is in the same business, and Territory's bid was backed by Noble Group and DCMDecometal, commodities trading houses that sell ConsMin manganese in China and Europe respectively.
And nobody will get all of ConsMin unless the others bow out: Gilbertson controls 10 per cent of the group's shares and convertible bonds, Palmary has 15 per cent, Tinfos has 5 per cent and may go higher, and another 12 per cent is controlled by Noble and DCMDecometal.