TWO senior executives formerly active in the local mining...

TWO senior executives formerly active in the local mining sector, Brian Gilbertson and Arne Frandsen, are forming part of a team that is making an offer for Australian-listed and headquartered base metals producer Consolidated Minerals.

The move could signal an increase in corporate activity in SA as both executives will form a new group with a strategy that includes pursuing new international growth opportunities.

Consolidated Minerals’ main commodities are almost all ones in which SA is a leading global producer: manganese, chromite and iron ore.

The proposal is to form a new company listed in Australia and Frankfurt and quoted on London’s Alternative Investment Market, which will be 60% owned by an investment vehicle of Pallinghurst Resources and AMCI and 40% by Consolidated Minerals’ existing shareholders, who are being offered cash and shares in the new vehicle in exchange for their existing shares. The offer values the company at $625m.

Pallinghurst Resources, a specialist natural resources investment company, is headed by Brian Gilbertson, president of Russian resources company Sual. Sual is finalising its merger with Rusal and certain Glencore aluminium assets to form one of the biggest aluminium companies in the world.

Gilbertson rose to prominence as CEO of Billiton, which under his leadership merged with Australian group BHP.

Frandsen, who has been working with Gilbertson for the past two years, was CEO of empowerment investment group Incwala Resources until the middle of last year. Incwala was formed from the sale of 18% of Impala Platinum’s 27% stake in Lonplats to a broad-based empowerment consortium. At the time Gilbertson chaired Incwala.

Pallinghurst’s partner in the bid for Consolidated Minerals is AMCI, a company that invests in coal and resources around the world, including in Europe, Australia and southern Africa.

If the bid is successful, Gilbertson will become a nonexecutive director of Consolidated Minerals and Frandsen will become executive director responsible for strategy. Consolidated Minerals is already run by a number of executives who used to work for Anglo Platinum, including MD Rod Baxter, chief operating officer Alistair Croll and GM group services Garth Higgo. It is being proposed that Baxter would become MD of the new company.

The board of Consolidated Minerals is recommending the offer as it would enable the company to accelerate delivery of its current pipeline of projects, participate in consolidation moves in the resources sector and pursue international growth opportunities to diversify the company.

Neither Gilbertson nor Frandsen could be reached for further details on Friday.

Numis Securities analyst John Meyer said in a note to clients the main reason that Pallinghurst and AMCI had chosen Consolidated Minerals was the fact that there was significant potential to add value to the company’s manganese, nickel, chromite and iron ore assets. It was also possible to refinance the balance sheet, as Consolidated Minerals holds A$105m of net debt.

Gilbertson’s arrival at the helm of the new company was likely to generate significant investor interest, Meyer said. But he suggested Pallinghurst and AMCI might need to sweeten the deal to attract sufficient shareholder support and a competing offer was also reasonably likely.

Pallinghurst was targeting $1bn of new investments, of which this deal was only the start, Meyer said.

Another analyst, who asked not to be named, said Pallinghurst would use only about a quarter of its $1bn of funds for the Consolidated Minerals deal. It was rumoured that one of the backers of Pallinghurst was Russian ty/c/oon Viktor Vekselberg of the Renova Group, he said.

Renova Group already has a partnership in SA with empowerment groups Chancellor House and Pitsa ya Setshaba with a concession over manganese properties in Northern Cape.

SA is estimated to contain 80% of the world’s known manganese reserves and 72% of global chromite ore reserves. In 2005 SA was the ninth-biggest producer of aluminium, the biggest producer of alumino-silicates, the biggest producer of chrome ore and ferro-chromium, the second-biggest producer of manganese ore and the ninth-biggest producer of nickel.