The bidding WAR is about to start, private equity has started to...

The bidding WAR is about to start, private equity has started to realise the potential of ConsMins value of manganese and chromite.

Private equity group mulls move on ConsMin

25th April 2007, 9:00 WST


A private equity consortium led by investment banks UBS and Goldman Sachs JBWere is believed to be running the numbers on WA miner Consolidated Minerals to counter Brian Gilbertson’s floundering $320 million partial takeover offer.




The former BHP Billiton chief’s Pallinghurst Resources is seeking a 60 per cent stake in a revamped ConsMin via a friendly cash and scrip offer notionally valuing the miner at $2.28 a share.

But the offer has failed to gain traction due to its lack of any control premium and the expectation that the deal will have to be sweetened to succeed.

That has kept ConsMin shares, which yesterday eased 4¢ to $2.50, well above the notional offer price since it was unveiled in February.

Against that backdrop, industry sources said the two banks were working on a potential rival deal backed by fresh private equity funding from Australian and overseas investors.

UBS and Goldman Sachs JBWere declined to comment.

But on Monday, Goldman Sachs coincidentally raised $415 million to launch a new Australasian private equity fund with a “mid-market focus looking at deals of around $100 million to $500 million”.

Rumour suggests any rival offer may include splitting ConsMin’s underground nickel mining operations from its open pit mines in the Pilbara for sale to new operators.

Speculation also suggests the proponents may seek to lure back ousted ConsMin founder Michael Kiernan to take charge of the Pilbara operations, which account for 10 per cent of the world’s manganese supplies.

ConsMin’s share price plunged after Mr Kiernan quit over a pay dispute in late 2005 and the company has since struggled in the face of volatile manganese prices and difficulties at its nickel mines.

But manganese and chromite prices have rebounded strongly, and nickel prices have blasted past $US50,000 a tonne since Pallinghurst began negotiating with ConsMin in October.

Yet Pallinghurst has refused to budge from its initial offer of $1.38 a share in cash, plus two shares in a new ConsMin for every five shares held in the current company. The new Cons-Min would be 60 per cent owned by Pallinghurst and bid partner AMCI Holdings.

Mr Gilbertson will return to Australia next month for an investor roadshow but faces a tough task convincing wavering investors to accept.

“The clock is well and truly ticking, and Brian desperately has to pull a rabbit out of the hat,” one source said yesterday. “At the end of the day, if someone comes up with a reasonable alternative, it may be all over.”

A ConsMin spokesman said the company did not comment on “market speculation”.

JOHN PHACEAS