From mining news.netTerritory chief tips ConsMin revolt Paul...

From mining news.net

Territory chief tips ConsMin revolt

Paul Garvey
Friday, 29 June 2007

TERRITORY Resources chief Michael Kiernan says Consolidated Minerals shareholders may force an extraordinary general meeting to oust the miner's board, following ConsMin's decision this morning to refuse Territory's request of due diligence.



Michael Kiernan

Territory on Wednesday night asked to conduct limited due diligence on ConsMin to clear the way for an offer of $1.50 cash and 1.5 Territory shares for every share currently held.

The offer is backed by ConsMin's largest shareholder, commodity trader Noble Group, and DCM Decometal and United States investment bank Lehmann Brothers.

This morning, ConsMin revealed it had rejected Territory's request, saying the proposal would create "significant risk and uncertainty" for ConsMin shareholders.

The ConsMin board in particular questioned the value of Territory's shares, pointing out that shares in the new iron ore miner were trading well below $1.00 before this month.

ConsMin noted that an April valuation of Territory by independent expert BDO Consultants valued the company at 35-39c a share.

That assessment was carried out as part of a $30 million investment by Kiernan's private company Crawley Resources at 50c a share.

"The Consolidated Minerals board would find it difficult to recommend that its shareholders accept Territory shares at nearly triple the price that Crawley Resources was willing to pay," ConsMin said in a statement.

ConsMin also raised concerns about the level of debt Territory would have to carry, and questioned "the lack of strategic vision and certainty as to how Territory intends to create long-term shareholder value".

ConsMin is the subject of a takeover bid from a private equity consortium headed by ex-BHP Billiton chief Brian Gilbertson's Pallinghurst Resources.

Pallinghurst is offering $1.68 a share plus two shares in the 'new ConsMin' for every five currently held, having raised the cash component by 30c on Monday.

Early this afternoon, ConsMin released an updated independent expert's report that found Pallinghurst's improved offer to be fair and reasonable.

The previous report, based on Pallinghurst's original offer, described the bid price as "not fair, but reasonable".

Speaking to MiningNews.net this morning, Kiernan described the ConsMin board's decision as "scandalous".

"I think this board is in dangerous waters," Kiernan said.

"They are making decisions on behalf of shareholders that they will refuse another group the same courtesy that Pallinghurst received.

"This particular board agreed to an underwhelming Pallinghurst bid, and it was only as a result of significant pressure from shareholders that Pallinghurst increased their bid. This board did not force Pallinghurst to increase their bid.

"This board agreed to a previously low-priced bid from Gilbertson, and this is the same board that refuses an alternative proposal to be submitted to shareholders.

"All we're asking is for corporate due diligence, which we can complete in two weeks, [and that] shareholders be given an opportunity to receive our bid and decide between alternative A, with Brian [Gilbertson] and Pallinghurst, or alternative B between Territory and Noble."

Allowing Territory's proposal would require ConsMin to defer the shareholder vote on the Pallinghurst scheme of arrangement, which is due to take place on July 19.

Kiernan said he could not see why the meeting could not be deferred.

He also indicated that shareholders may move to call an EGM of ConsMin as a result of this morning's decision.

"I believe it is not natural justice to deny us. At the end of the day, there are enough shareholders that have contacted me that are incensed with this current board that have indicated they may well requisition an EGM to remove this incumbent board.

"We have a board with precious little equity in the company at odds with their major shareholders, and also a group of other shareholders.

"This board and management have shown no forward vision planning. All they've been doing is sitting and nesting on eggs. And in some cases they've cracked those eggs."

A spokesperson for ConsMin said the company found the timing of Kiernan's approach – some four months after Pallinghurst's original offer was announced – curious.

"We find it hard to believe he could not come to the board earlier. This proposal is incomplete, it's only indicative, and its highly conditional."

Kiernan said that at this stage, apart from the corporate due diligence, the only key condition of any offer would be a minimum acceptance of 90%.

He denied a united Territory and ConsMin would be carrying a large amount of debt.

"That's absolute rubbish. At the end of the day, this combined entity would have virtually no debt and $150 million cash in the bank," he said.

Territory shares have been locked in a trading halt since Monday pending the announcement of a joint venture over a high-grade manganese deposit in Burkina Faso.

Sources have suggested Territory has remained in a trading halt to protect the company's shares from falling, but Kiernan says the halt had been maintained as Territory and the ASX debate whether a non-JORC compliant resource of 20 million tonnes grading 51% manganese can be included in the announcement.

ConsMin shares this morning were down 5c to $3.14.

Based on ConsMin's current price, Pallinghurst's offer is worth $2.94 a share.

Using Territory's last trading price – which ConsMin said did not represent the intrinsic value of the company – Territory's proposed offer would be worth $3.72.