CSM - Consolidated Minerals

18 May 2007
India: Curbs sought on chrome ore exports
Anticipating a shortage of chrome ore, a crucial ingredient in stainless steel production, in the coming years, the mining industry wants the Union government to re-examine its export policy.

India is the third largest exporter of chrome ore after South Africa and Kazhakstan, though the reserves constitute only 0.84 per cent of worldwide reserves.

Recently, the government imposed a duty of Rs 2,000 per tonne on exports of all grades of chrome ore to curb overseas sales. The price of Indian chrome ore in the international market ranges between Rs 6,000-10,000 per tonne, depending on the grade.

“However, all the chrome ore mining firms and exporters have absorbed the tax since the price of chrome ore is high. There will be a huge demand-supply gap in the coming years if the exports of chrome ore are not curbed. We have urged the government to allow exports of chrome ore concentrates (produced through beneficiation of low grade chrome ore) and conserve other grades of chrome ore,” S B Chauhan, advisor to the Federation of Indian Mineral Industries (FIMI), told Business Standard.

China is the principal market for Indian chrome ore. Nearly one-third of the demand for chrome ore from China is met by India. Last year, India exported 1.34 million tonnes (accounting for 31 per cent of imports) of chrome ore to China. Chrome ore from South Africa and Turkey accounted for 18 per cent and 17 per cent of the Chinese imports.

The demand for Indian chrome ore is likely to go up this year since China intends to increase its stainless steel output by 37 per cent to 7.35 million tonnes this year.

The proven chrome ore reserves of all grades in India is around 66 million tonnes, with Orissa accounting for the bulk followed by Karnataka. The recoverable reserves of metallurgical grade chrome ore are around 50 million tonnes.

“We anticipate fast depletion of chrome ore at the open cast level in the coming years since Indian companies do not have the technology to undertake underground mining. There will be hardly any chrome ore of metallurgical grade available in the country if exports continue to remain at the present level,” he pointed out.

Besides, many public sector undertakings (PSUs) have control over chromite bearing areas in the country. “These areas are lying idle without witnessing any exploration and development. Considering the alarming status of metallurgical grade chromite resources in the country, the idle chromite-bearing areas should be de-reserved,” Chauhan said.

Friday 25 May 2007
Chinese SiMn gains further as ore shortage persists
BEIJING (Metal-Pages) 25-May-07. Chinese silico-manganese prices have broken through the $1,450/tonne level in a sellers’ market where the strong demand and manganese ore shortage are showing no signs of easing.

Export prices for standard 65/17 grade material are around $1,450-1,500/tonne FOB, up $250 compared to one week ago. The market was at either side of $860/tonne before the weeklong holiday at the start of this month.

Domestic prices have peaked at Rmb9,600-10,000/tonne ($1,255-1,307) ex works. The country’s largest carbon steel mill Angang Group doubled its purchase price /subscr/story.php?id=27641 recently with the purpose of ensuring consistent supply.

“There is strong demand both domestically and internationally,” one silico-manganese trader told Metal-Pages today. “The continued growth of global steel production has increased demand for alloying metals.”

The tight availability of high grade manganese ore has also helped thrust the market. “There isn’t enough supply for ore out there as no large overseas shipments seem to be arriving,” a second trader said. “And it’s a real burden for alloy producers that spot ore prices are at historical highs.”

Spot market for imported lumpy ore (Mn min 48%) has proven far more volatile with prices having surged to Rmb62-65/mtu from Rmb50-52/mtu seen one week earlier. Despite the current strong fundamentals there are concerns that the market could turn around when the supply increases.

“The output for manganese is typically sufficient in the summer,” a manganese producer told Metal-Pages. “And the current good price may have encouraged some companies to shift their furnaces to silico-manganese.”

Silico-manganese previously hit a record Rmb10,000/tonne in early 2004 on an unprecedented steel boom while prices then halved rapidly on oversupply when new production came on stream.

* * (AMM) Ore shortfall in China keeps pressure on ferromanganese
New York*17 May 2007*19:45
U.S. ferromanganese prices are climbing at a dramatic rate as a manganese ore shortage in China continues to underpin worldwide supply tightness. "China has no manganese ore at a high grade, so they are forced to import manganese ore with a higher grade and blend it in with their low-grade ore to produce manganese that can be used in alloys," a trader said. Prices for manganese alloys have soared on the back of the ore shortage. High-carbon ferromanganese is now trading hands in the United States for between $1,050 and $1,125 per long ton, up from $980 to $1,040 per ton previously. Medium-carbon ferromanganese has jumped to between 82 and 86 cents per pound from a previous range of 78 to 80 cents per pound. One trader reported the recent sale of several truckloads of medium-carbon ferromanganese at 85 cents per pound. "Manganese ore prices are through the roof in China, so once any material makes it to the U.S., prices are well over $1,000 (a ton)," a second trader said. Users who are staying out of the market in the hope that prices will fall could be waiting a long time, sources said. One reason: China is expected to raise the export tax on ferroalloys to 15 percent from 10 percent, and an announcement could come as early as Monday, traders said. "In the next 30 days every unit of manganese will be 30, 40 or 50 percent higher," the first trader said. "We're going to see high's you've never seen before." On Wednesday, the U.S. Defense Logistics Agency released a basic ordering agreement tender for the sale of 10,000 tonnes of high-carbon ferromanganese. The results of the tender will not be known until early June. A pair of traders said they expect Glencore Ltd., U.S. arm of Glencore International AG, and BHP Billiton to make a strong run for the material. *

Manganese ore price lifts to highest level since Sep 05

London 25 May 2007 15:41

Manganese ore spot prices have jumped to levels last seen in September 2005 on supply disruptions at many major producers, while demand for ore has been holding unabated, market participants reported. Manganese alloys in Europe have been pushed up by the rising cost of ore, following similar trends in the USA and Asia . Manganese ore 48/50 percent manganese is now trading at $3.30-3.60 per mtu fob on the spot market, compared with $3.10-3.30 previously. Most tonnages from large suppliers are secured on long-term contracts, but the spot market has revived as demand for the ore surged this year, mainly driven by China . “ The cause of all the drama in the manganese market has been coming from the very high price for ore because of the huge demand increase in China , ” a large ore producer told MB. “ But more important is that this has combined with significant disruptions in deliveries to China from almost all the major suppliers. ” He referred to bottlenecks at ports from which Eramet has been shipping due to electricity problems, reduced ore output at CVRD ’ s Azul mine, which will be exacerbated by the closure of the mine from June for six months, and reduced output from Ghana after the Ukrainian group Privat bought the mine. “ BHP is having problems and not producing as much as they want, ” added a second large producer source. “ All of these are conspiring to put upward pressure on ore prices. The spot market is going through the roof. ” A third producer source said Chinese traders are driving prices up even further by holding onto material, with reports in the market of prices as high as $5-5.30 per mtu cif. “ When the ore price increase, the alloy prices follow, ” said the third producer source. Indeed, the price for ferro-manganese and silico-manganese in Europe jumped to €800-850 ($1,076-1,143) per tonne delivered on both products, from €670- 705 and €700-730 respectively. Silico-manganese spot business has been transacted at levels over €900 per tonne, market participants reported. One silico-manganese producer reported achieving €1,000 in Europe .

“ Steel demand is very strong in Europe , ” said a manganese alloys producer. “ We have customers asking for prompt delivery, but we struggle because we are full. ” He said the European price on ferro-manganese with 7.5 percent carbon and silico-manganese basis 65-75 percent manganese has risen by at least €50 in the past week alone. “ Had we spoken a week ago, the price would certainly have been lower. The market has taken all the fundamentals at play on board and has now just been propelled forward by momentum, ” he said. All the producers said the jump in the spot price bodes well for the third-quarter contract negotiations, which are due to start “ pretty soon ” . Copyright © Metal Bulletin PLC. All rights reserved.

MANGANESE ORE 48% CIF CHINA - PRICES FROM RYAN’S NOTES
DATE RN 48% Mn Ore US$/dmtu LOW RN 48% Mn Ore US$/dmtu HIGH
1 st May 07 3.20 3.60
4th May 07 3.60 4.00
8th May 07 3.80 4.00
11th May 07 4.20 4.30
15th May 07 4.20 4.30
18th May 07 4.35 4.60
22nd May 07 4.70 5.00
25th May 07 4.70 5.00
Percentage increase 47% 40%

Ferro-chrome HC basis Cr 52% C 6-8% del'd N Eur dp 24-may-2007 0.94 - 0.99 $/lb Cr
Ferro-chrome HC basis Cr 52% C 6-8% delivered USA 24-may-2007 0.98 - 1.02 $/lb Cr
Ferro-chrome HC basis Cr 52% C 6-8% FOB China 24-may-2007 0.78 - 0.8 $/lb Cr
Ferro-manganese 73% HC FOB China 24-may-2007 1380 - 1420 $/mt
Ferro-manganese Mn 78% HC 8% delivered USA 24-may-2007 1060 - 1120 $/long ton
Ferro-manganese Mn 78% HC delivered European works 24-may-2007 670 - 700 EUR/mt

MERGERS AND ACQUISITIONS
ConsMin warms to Pallinghurst’s Investec link
Australian resource company, Consmin, which has been the target of an approach by Brian Gilbertson’s Pallinghurst vehicle, feels that the bid may be back on track through the latter’s new tie-up with banker Investec.

Author: Ross Louthean
Posted: Tuesday , 29 May 2007

PERTH -

The West Perth-based miner Consolidated Minerals Ltd (ConsMin) has implied that the bid for the company by Brian Gilbertson's Pallinghurst Resources and North American mining associate AMCI may be getting back on track by welcoming those two bidding partners' link with Investec plc.

In a brief announcement today ConsMin's managing director Rod Baxter said it was "pleased" Investec has been invited by Pallinghurst and AMCI to "participate in the proposed transaction with Consolidated Minerals" first detailed by the West Australian manganese, chromite and nickel miner in late February.

"Further details on the implications of Investec's involvement in the proposed transaction will be provided in the Scheme booklet," Baxter said.

The draft scheme documentation for the proposal has been lodged with the Australian Securities and Investment Commission (ASIC).

However, Perth stockbrokers that Mineweb spoke to were of the view there would need to be a new carrot introduced by the Pallinghurst-AMCI-Investec party to excite ConsMin shareholders as the stock has lifted since the time of the late February bid from a range around $A2.00/share ($US1.66) to trading late today at $A2.94/share ($US2.44).

On April 11 Mineweb reported that Gilbertson's bid for ConsMin had been holed, as the then stock price of $A1.63 ($US1.35) was considered above the Pallinghurst offer which was $A1.38/share ($US1.13/share) plus two shares in a new Consmin vehicle for every five shares held, with shareholders receiving a 40% stake in the new company. Pallinghurst wanted to achieve 50.1% ownership. At the time ConsMin's board supported the Pallinghurst bid, saying the transaction valued the company at an enterprise value of $A625 million ($US515), or at $A2.28/share ($US1.87/share).

The ConsMin share price has been on a solid climb since the bid, thanks in part to an improving price for manganese though the foundering bid has attracted the attention of others, and it has been reported in the Australian business media several times that big brokers UBS and Goldman Sachs JBWere were running the numbers on a counter offer.

Mining columnist John Phaceas of The West Australian said in his Spinifex column that Gilbertson would arrive in Sydney today to begin briefings with investors, institutions and the media to convince them of the merits of the Pallinghurst offer.

Phaceas said rumours suggest any rival offer may include splitting ConsMin's underground nickel mine at Kambalda from the open pit manganese and chromite mines in the Pilbara. One possible contender named by Phaceas is cashed-up Broken Hill zinc-lead-silver miner Perilya Ltd.

Yesterday a Johannesburg-filed statement said Pallinghurst, AMCI (interestingly through subsidiary AMCI ConsMin (Cayman) LP and Investec would become "Cooperation Partners" to pursue investment opportunities.

The agreement has earmarked $US200 M and the partners were in "advanced discussions with a leading Asian steelmaker on an additional commitment of $US100 M.

The statement also said Investec had been invited to join the bid for ConsMin

What did others think of the announcement this evening?? Sounded like a bunch of waffle to me

No mention of possibly increasing the bid, it almost sounded like they were planning to continue on without changing anything and still offer shareholders $2.28 per share (hoping that people would be impressed that they had another partner)... I must admit I've been extremely slack with keeping up with announcements lately, but this one certainly didn't seem to offer anything of substance to me!!

Tony.

Confirmation that Investec are to join Pallinghurst & AMCI in the bid for CSM, increases the buying power substantially.

At $2.94, the offer for CSM is valued at $2.55. The cash part of the offer at $1.38 appears set to be raised.

I imagine that there are quite a few other suitors for CSM. Perilya's mentioned, but Surely there are some others...eg, major steelmakers (Chinese particularly) that would love to secure control over Mn/Cr/Ni supplies.
If the CSM directors havent sold out already.
I am a bit cynical as to the inclusion of Investec, and the welcoming by the CSM honchos. Seems to be a bit of a South African club forming here.
As in sport, we all know how the S.African's dream/strive and plot to get one over the Aussies....

noirua said:

Confirmation that Investec are to join Pallinghurst & AMCI in the bid for CSM, increases the buying power substantially.

At $2.94, the offer for CSM is valued at $2.55. The cash part of the offer at $1.38 appears set to be raised.

Click to expand...

Hmmm I think I need to do some calculations again... I guess that the total number of shares in the new company will basically be the same as the current number so market cap is market cap.... and the new shares should be worth the same as the old ones... so if I had 10,000 shares, I'd get 4000 shares worth $2.94 each, and 10,000 * $1.38 (ie $13,800 cash) making my investment worth $25560, but if I sold at market it would be worth $29,400!

yes I think that the deal needs some tweaking This was my argument from the begining, I bought CSM for the potential growth, not because of some takeover rumour (I actually didn't even know about the takeover rumour when I bought my first parcel)... buy giving me cash and 40% I'm being robbed of 60% of my potential growth!!

Tony.

Hi Tony,
You are 100% right, you are being robbed of 60% of the growth and by giving Pallinghurst your shares for only $1.38 share you are effectively giving Pallinghurst 0.38 c / share of your profit for nothing.
Surely ConsMin shareholders aren't that stupid.
If only a few more shareholders would email Rod Baxter and tell him they want more and that he is NOT looking after shareholder interests. I reckon $2.10/share plus 2 for 5 this would value the shares at $3.50 that would be fair and reasonable to shareholders.
Our ConsMin management think its a done deal. If you don't put pressure on now then we don't stand a chance.
email Baxter rbaxter@consminerals.com.au
Don't always leave the fighting to someone else. Help us

This has just come out in the Sydney Morning Herald today.
It's a done deal already, unless we tell them now, they won't up the price after the VOTE

ConsMin bidder recruits allies
Jamie Freed
May 30, 2007
FORMER BHP Billiton boss Brian Gilbertson's $625 million partial private equity tilt at Perth miner Consolidated Minerals has gained additional backing from South African investment bank Investec and an Asian steelmaker.

As Mr Gilbertson began selling the ConsMin offer to investors and analysts in Sydney yesterday, his London-based fund, Pallinghurst Resources, said it raised $US200 million ($244 million) from private coalminer AMCI and Investec.

Pallinghurst added it was in "advanced discussions" with an Asian steelmaker - believed to be Korea's Posco - for another $US100 million.

In total, Mr Gilbertson expects to raise $US1 billion to $US1.5 billion to help pursue investment opportunities in the resources sector, including its bid for ConsMin.

In a statement, Investec chief executive Stephen Koseff implied his bank agreed to participate in part due to the corporate advisory fees it would gain from Pallinghurst's deal flow.

Mr Gilbertson has often been cited as the consummate mining dealmaker. He was the driving force behind BHP's $US30 billion merger with Billiton in 2001, but was later ousted after more acquisition plans - such as a tie-up with Rio Tinto - were deemed too ambitious by the BHP board.

His latest deal, the offer for ConsMin, has been controversial from the start. Pallinghurst has offered shareholders $1.38 in cash and 0.4 of a share in a rejuvenated ConsMin, in which Mr Gilbertson's group would own 60 per cent.

ConsMin shares yesterday closed 1c higher at $2.94, meaning the bid values the company at $2.56.

In an interview with South Africa's Business Day, Mr Gilbertson said ConsMin was attractive because its assets had been undervalued by the market.

Argo Investments managing director Rob Patterson yesterday morning deemed the bid price "obviously inadequate".

But after listening to a presentation by Mr Gilbertson and his associates in the afternoon, he was marginally more optimistic.

"There's no doubt they will bring quite a lot to the table," Mr Patterson said. "The problem we see is the transaction was priced quite some time ago when commodity prices were different. We'll wait and look at the documents now. The way we vote will depend on the circumstances."

The scheme of arrangement booklet should be released in mid-June, about two months behind the originally scheduled April release date.

Meanwhile, prices of the commodities produced by ConsMin - nickel, manganese and chromite - have performed strongly.

There have also been market rumours an independent expert report already submitted to the corporate regulator for approval might have valued ConsMin shares above the offer price.

It sounds like our dear Chairman Mr Carter is accepting for us. Of course Baxter thinks it's great, he doesn't own a single share.
You need to email Baxter NOW and tell him to up the price , otherwise you vote NO. We need the price increased before we get the scheme documentation.

email rbaxter@consminerals.com.au

ConsMin buyer's $1.8bn war chest
Andrew Trounson and Kevin Andrusiak
May 30, 2007

FORMER BHP Billiton boss Brian Gilbertson has begun a whistle-stop tour of Consolidated Minerals shareholders, bringing a $US1.5 billion ($1.83 billion) war chest to sway investors on a proposed takeover of the miner.
Pallinghurst, Mr Gilbertson's private equity vehicle, has teamed with privately owned US coal miner and bid partner AMCI and South African bank Investec to build the fund, as Consolidated Minerals shareholders begin to get a taste of what their company could achieve through the a $625 million scheme of arrangement.

If approved, Pallinghurst Investor - a mix of the three players - will take a 60 per cent stake in a vehicle dubbed NewConsMin, which will be used to house ConsMin and other acquisitions made with the $US1.5 billion. The other 40 per cent will be owned by ConsMin shareholders, who will also collect $1.38 for every share.

No extra money from the fund has been set aside to boost the scheme of arrangement's value.

Draft scheme documents have been lodged with the Australian Securities and Investments Commission with a scheme booklet expected in mid-June.

But many shareholders are disappointed with the cash-and-scrip offer and say the deal, struck on February 23 with the support of the ConsMin board, does not account for nickel and manganese price rises.

"I never thought it was a good deal from the outset," said one fund manager, who declined to be named. "I'm not sure about giving away 60 per cent of the company but I am very comfortable Gilbertson is involved."

Neither Mr Gilbertson nor his Deutsche Bank advisers could be contacted for comment. ConsMin is being advised by JP Morgan.

ConsMin chairman R Carter welcomed news of Investec's participation, saying it added clout to the Pallinghurst consortium and that ConsMin would be the beneficiary.

"It diversifies and deepens the resources that Pallinghurst has been able to bring together, and we like the look of it," Mr Carter told The Australian.

Mr Carter remains upbeat on the prospects of shareholders backing the deal, with a vote on the proposed scheme of arrangement expected to be held in July.

ConsMin shares closed at a record high of $2.97, a substantial premium to the Pallinghurst-led offer valued at $2.28 a share.

--------------------------------------------------------------------------------

This takeover bid is different to most as CSM Directors favour the bid, subject to no counter-bid, and 40% of the new set-up stays with existing shareholders in CSM. Therefore, as the CSM shareprice rises so does the value of the bid, albeit only 40% of it. That we know.

Other factors are: The value to the new company of all the bidders expertise and heavyweight backing. The improved value of CSM with commodity price rises. There appear to be no other important matters.

The CSM shareprice is close to $3.00 and many may see speculation in that. A fair cash increase is in the region of 30c to 40c, IMHO.

For a fair and reasonble offer to shareholders, it should be $2.10/share plus 2 shares for 5. This would value CSM at $3.50 /share.
Any less than that you would have to be a fool in accepting. Yes they can bring upside but you'll only get 40% of the upside.
Manganese prices are back up to 2005 levels and ConsMin will be making an extra $100million profit FY on manganese alone on these new prices.
We are now talking US$5.00/dmtu CIF China which equates to US$4/dmtu FOB which equals sales revenue FY of $230 million at present costs of $108/ton This would leave a FY profit of $130 million.
Most shareholders wouldn't have a clue what is happening in the manganese and chrome ore markets and are just being lead like little lambs to the slaughter

"ConsMin shares closed at a record high of $2.97, a substantial premium to the Pallinghurst-led offer valued at $2.28 a share"
Does anyone know who is major shareholder of CSM?
What the chance of the take over be approved by shareholder given the bid price is substantially below the market price? If there is no chance, why these investo push the deal? If the take over fail, it is no good for everybody involved.

ta2693 said:

"ConsMin shares closed at a record high of $2.97, a substantial premium to the Pallinghurst-led offer valued at $2.28 a share"
Does anyone know who is major shareholder of CSM?
What the chance of the take over be approved by shareholder given the bid price is substantially below the market price? If there is no chance, why these investo push the deal? If the take over fail, it is no good for everybody involved.

Click to expand...

I'm not sure where the $2.97 'record high' number came from.. I think the record high should read something like $4.25 in september 2005..

Another question, where is the buyer from? If people know they will end in 2.28, why they pay 3 now to get 2.28 month later? From the volume and price behavior, I do not think the buyer are crazy speculators. So the result of CSM takeover would end in 1 bid price going to increase, 2 another bidder is collect the shares, maybe GS and JB were, maybe some Chinese or Indian. I do not believe the shareholder will end in 2.28.

Yes, $2.97 was a record for the last 12 months, it's $3.03 today, but CSM was $4.25+ in September 2005 when manganese was at record highs.
Most people don't realise it is back at that price again, but Rod Baxter doesn't want to tell you. He's worried his deal will fall over.
Baxter doesn't have any shares, it tell you a lot about a CEO who doesn't buy shares in his company.