consmin its a done deal management said, page-16

This Sean Gilbertson thinks its a done deal, he better up the price then. If they can only afford $320 million then better only give them 40%. That would mean $1.38/share plus 3 shares for 5.
They're smart they realise ConsMin is undervalued by the market. "we like to identify assets that have been unloved, are not well supported, are not well understood "

Sean Gilbertson: Partner, Pallinghurst Resources Fund

28 May 2007 23:09

MONEYWEB: Sean Gilbertson joins us now. Sean, the reason we wanted to chat to you was the announcement made from Pallinghurst and Investec and AMCI that you are going to be getting together and raising about $1bn to $1.5bn to invest in the resources sector. Why these partners in particular?

SEAN GILBERTSON: Well, Geoff, we've spent some time working with AMCI in the past and, as you may or may not know, I spent the early part of my career working in the coal business with a thing called Global Coal, and came across AMCI then. And we've always found AMCI to be a very pragmatic partner, so I think that's why probably they came to the table first. And Investec, of course, one of the famous home-grown South African names, again is an outfit that shares many of the strategic visions that we do. And accordingly, in part given their expertise in the resources sector, we thought they would make perfect partners together with AMCI - and that's resulted in today's announcement.

MONEYWEB: David was saying that we can draw from this partnership that assumingly you feel that there is some value still left in the resources sector. What sorts of companies are you going to be looking at?

SEAN GILBERTSON: Absolutely. And I like to think that, while I can tell you today about two of those opportunities, there is actually a pipeline of opportunities which we think are absolutely first rate. The first transaction, which we announced in February of this year, was a transaction with Consolidated Minerals of Australia, which is a producer of manganese ore, chromite nickel, tungsten and so forth - all of the things that you effectively need for steel companies. And under that transaction, which is fully supported by the Board of Consolidated Minerals, we would be acquiring 60% of that business for A$320m, which is approximately US$260m. And the idea is that we would use Consolidated Minerals as a growth vehicle to expand then, both by geography and also by commodity. So that's really opportunity number one. Opportunity number two is our long-held belief that there's a lot of merit in branding precious stones. And having looked at that opportunity over he last several years, we felt that by far and away the best brand name we could possibly get our hands on would be the Fabergé brand name of Russian and French heritage. And we spent some two years trying to do it, but in January of this year, I'm pleased to say that we were successful in acquiring the Fabergé brand name from Unilever, and will now set about creating a brand of gemstone strategy and acquiring access to appropriate underlying assets.

MONEYWEB: Looking at the Consolidated Minerals deal, you've taken 60% and Brian Gilbertson will be on the board, as well as the two founders of AMCI. Is this the way you are going to go about these deals - you're going to take board control, or not control necessarily, but play an active role in the companies you invest in?

SEAN GILBERTSON: Absolutely. Together with AMCI and Investec and our press release earlier today, we've also alluded to the involvement of the leading Asian steel player.

MONEYWEB: I take it you can't release the name?

SEAN GILBERTSON: Unfortunately Geoff, I can't tell you who that was. However, the documentation relating to the Consolidated Minerals transaction has just been filed in Australia, and will very soon be in the public domain. And what I can suggest to you is that if you get a copy of those documents when they're available, you will find the name of that steel company in the documents. To answer your question, yes, Consolidated Minerals is a good example of the type of transaction that we want to do. We are going to have, depending on the amount of money that we raise within Pallinghurst Resources itself, and together with the deal that we've announced today with Investec, and of course AMCI and the steel company, somewhere between a billion and $1.5bn. And with that money we would like to go after five to seven different platforms. Consolidated Minerals is one of those platforms, our precious stones player is another one of those platforms. We are not quite in a position to talk about the others yet, but I can tell you that the remaining opportunities are pretty well developed. So in general, yes, we do like to take controlling interests, 50% plus, with corresponding board representation - it doesn't necessarily have to be control. But the whole idea is that, rather than taking a shotgun approach whereby we just buy as many things as we possibly can and hope that an appropriate number of them work out, we would much prefer to pay very careful attention to each one of the businesses and ensure that they become world-class businesses.

MONEYWEB: Clearly, though, it's a lot of work for the board representees?

SEAN GILBERTSON: Yes, indeed it will be, and in fact, Arne Frandsen, whom I suspect you are probably familiar with, who has had a sterling track record in South Africa despite the fact that he's originally Danish, is a member of the Pallinghurst team, and I guess it's a token demonstration of our commitment to these assets that he will actually be inserted on a full-time basis with Consolidated Minerals, and that means that he's got to up-ship as it were and move to Perth, and he will take an executive position on the board as head of strategy and work very carefully and closely with that team for the foreseeable future in delivering the strategies that we've outlined for Consolidated Minerals.

MONEYWEB: Sean, you obviously are positive about the resources sector, but how do you see it placed at the moment - where do you see it going?

SEAN GILBERTSON: Well, if I could answer that question, Geoff, I probably wouldn't be sitting here talking to the day, or maybe I would be doing so from the back of a yacht parked somewhere in the Mediterranean. I think the difference is that the team of people that we've been privileged to put together in Pallinghurst Resources are not experts at calling the market - and what we do is not based on calling the market. What we believe we do doesn't depend on whether the market is going up, down or sideways, and that really means that we like to identify assets that have been unloved, are not well supported, are not well understood - and that we can strategically reposition those assets. And we believe that we can do that whether the markets are up, down or sideways.

MONEYWEB: Sean Gilbertson is a partner at Pallinghurst Resources. David, they sound like they've got a plan and they're looking to do quite a lot of things?

DAVID SHAPIRO: Sure. Well, he's got good DNA, old Sean. I think if you take Brian, his father's track record, he's been a superb miner and done very well. I'm very interested in the Fabergé branding, because De Beers started that with diamonds, or they've started to brand their diamonds so that you know the source of the stone. And also, what's interesting about De Beers, if ever you've gone to London to Bond Street there, they have a shop there - they have got actual retail outlets where they are branding the name. So I don't know whether we're going to get a Fabergé out where you can actually buy branded stones as well. But interesting strategy, and sounds confident. I think the only concern is it just shows you how much mining development is taking place outside of South Africa, and just how much we've got to catch up. And, having been a leader there, we are actually kind of playing catch-up now, or people are snapping at our heels in all respects.