CSM - Consolidated Minerals

Price of chrome ore up further.

Price Of Charge Chrome For Q3 - 07 Is Reluctantly Settled By Rise Of 18 US-Cents / Lb.
= Nippon Steel & Sumikin Stainless Steel Corp., Decision Was Made For Marathon Negotiations
The negotiations with stainless steel companies in Japan on price of South African charge chrome to be purchased by them for shipments in July - September quarter of 2007 had taken so long time as marathon race but Nippon Steel & Sumikin Stainless Steel Corp. notified on the 2nd of August that a rise of 18 US-Cents per lb. has been agreed by us. Accordingly, its benchmark price will come to 108 US-Cents per lb. as the highest one in its history.

The two South African producers of Samancor Chrome and Xstrata Alloys participated in the negotiations. Apart from the price of South African charge chrome settled for April - June quarter, in the course of July - September quarter when LME nickel prices have fallen to a considerable extent and a circle to decrease stainless steel production is spreading over the world, stainless steel mills in Japan and South Korea have decided to decrease their production of stainless steel, causing an emergent aspect. On the other hand, a tightness on supply situation of ferro-chrome has still continued at present.

In a ravine of the two matters which the request to save cost for production of stainless steel and the requirement to rise substantially price of charge chrome being backed by the tightened supply in July - September quarter placed by producers before consumers, the marathon negotiations were taken place as an extraordinary case. However, it is thought that, by taking into consideration of the sustainable relationship between suppliers and consumers to be maintained for a long period, Japanese side has to incline to reach an judgment to agree to a rise of 18 US-Cents per lb. for July - September quarter, which European mills have already accepted.

Some of the bidders for CSM may be wobbling a bit and the chance remains that one or more could pull out. Investec may be thinking again about their part in the Pallinghurst Consortium and the plunging price of TTY in these markets are a second factor for the Kiernan bid.

One of the reasons for plunging mining stocks is that takeover bids are now unlikely. What looked great 2 weeks ago now looks very expensive.

I have sold my CSM stock (post 407), so take this into account when you read the above, as it's very much, IMHO.

noirua said:

Some of the bidders for CSM may be wobbling a bit and the chance remains that one or more could pull out. Investec may be thinking again about their part in the Pallinghurst Consortium and the plunging price of TTY in these markets are a second factor for the Kiernan bid.

One of the reasons for plunging mining stocks is that takeover bids are now unlikely. What looked great 2 weeks ago now looks very expensive.

I have sold my CSM stock (post 407), so take this into account when you read the above, as it's very much, IMHO.

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***An ASX announcement this morning states that Pallinghurst ( Pallinghurst Consortium ) have withdrawn their on-market order for 11.35 million shares at $3.30***

It does look as if the parties over and those who are able to sell into the market for the promised $3.30 should give it a great deal of thought. Pallinghurst look to be considering their options here and may back out and the TTY Kiernan bid looks like going the same way.

noirua said:

It does look as if the parties over and those who are able to sell into the market for the promised $3.30 should give it a great deal of thought. Pallinghurst look to be considering their options here and may back out and the TTY Kiernan bid looks like going the same way.

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Noirua, you are 100% WRONG. Are you one of those people who panic and follow the herd?? Obviously you don't know WHY, Gilbertson or Kiernan want ConsMin. Gilbertson will NOT BACK OUT, he is trying to scare the SUCKERS and FOOLS.
ConsMin has the largest independent high grade manganese deposit close to China and the ONLY viable chrome ore deposit in Australia. Prices for MN and Cr2O3 are up 140% Mn and 50% Cr2O3, and trending higher.
China has not slowed, not a single ton less has been shipped to China.
Buy a ticket to China, go have a look.

Please someone decode this for me, remembering I am UK investor with CNM shares on the AIM...

" Pallinghurst has decided to withdraw its standing on-market order on the ASX to acquire upto 11.35 million Consolidated Minerals shares at $3.30. The withdrawal will be effective after the close of trading on the ASX tomorrow. Consolidated Minerals shareholders that wish receive early payment for their shares (that is, within 3 business days), must seel into the on-market order by 4.10pm on Friday August 2007.
The Pallinghurst off-market takeover offer for Consolidated Minerals (Pallinghurst cash offer) will remain open after this time, but is scheduled to close at 7.00pm (Melbourne time) on 1 September 2007 (unless extended). Shareholders that accept the Pallinghurst Cash Offer will receive payment within one month after the later of teh date taht they accept and the date that the Pallinghurst Cash Offer becomes unconditionnal or in any event no later than 21 days after the end of the offer period (assuming the offer becomes unconditional)."

I note that in the 6 August Corporate Acion letter I received, the deadline for registering my YES vote is 24 August.

So please confirm or correct my interpretation that: being a UK/AIM investor my only mechanism for getting their $3.30 per share was to register YES to Pallinghurst's bid for CNM. I never did have the option of selling shares on market for that price whilst not voting YES, since this option is restricted to Aussie market [though of course, selling them shares = sellinges votes]. So, despite their recent announcement, I still have the option of voting YES and will the get $3.30 per share assuming the overall Pallinghurst bid for CSM is eventually successful (assuming it is not withrawn ater 1st September).

Also,
- when now will the Pallinghurst bid be voted on?
- anything new from Kiernen?

More generally, I never got the logic of offering to buy shares on market for less than market price - why would investors go for that? But now it makes sense. He was banking on a probable fear-inducing pull back in SP after the recent buying by East Europeans. And boy did he get his wish ...market has dropped to/below the 3.30 offer, and so people fear it going even further down (with global drops) and so they are probably going to sell & vote YES to Pallinghurst in droves. Consequently, in the absence of a new Kiernan bid or sudden global market turnaround (both looking less likely), I think Pallinghurst will win. Given this belief, what should one do...? ...stay in while everyone else sells in fear (fear cleverly amplified by Gilbertsons recent announcement about cancelling offers)! ...because whatever you think of Gilbertson personally, he will eventually start to bring out the true share value of this Co, and you can then go along for the ride (after perhaps a blip down while his plans become clear). Remember, he wouldn't be doing all this at 3.30 unless he was 110% confident he could get $10+ for each current share equivalent after a year or two.

Rimtalay said:

Noirua, you are 100% WRONG. Are you one of those people who panic and follow the herd?? Obviously you don't know WHY, Gilbertson or Kiernan want ConsMin. Gilbertson will NOT BACK OUT, he is trying to scare the SUCKERS and FOOLS.
ConsMin has the largest independent high grade manganese deposit close to China and the ONLY viable chrome ore deposit in Australia. Prices for MN and Cr2O3 are up 140% Mn and 50% Cr2O3, and trending higher.
China has not slowed, not a single ton less has been shipped to China.
Buy a ticket to China, go have a look.

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Hi rimtalay, I sold my CSM shares as posted recently. Holding cash, I'm considering my options here. The market price is all I'm interested in and interesting this contest is, and truths and lies be they told a plenty.

MINING FINANCE AND INVESTMENT
BETTER VALUE OFFER?
Kiernan brings the Territory/Consmin message to London, secures Privat support
The ongoing battle for control of Western Australian miner ConsMin between the Pallinghurst group and Territory Resources has reached a new level with Territory claiming an alliance with Privat. But will that put the Brian Gilbertson-managed Pallinghurst out of the race?

Author: Lawrence Williams and Ross Louthean
Posted: Thursday , 16 Aug 2007

LONDON and PERTH -

In a special presentation in London to mining and financial journalists, Territory Resources' chairman, Michael Kiernan, set out his vision for a combined Territory/Consmin entity as part of his battle to woo Consmin shareholders based in the UK in the direction of the Territory take-over offer. He also told the media that Privat, one of Consmin's major customers with mines and metallurgical works in the Ukraine, and which has secured a 13.5% stake in ConsMin, would be ‘supportive' of Territory's bid. Indeed Kiernan's flying London visit followed a visit to Austria to meet with DCM DECOmetal and Privat.

What does this mean?

If Privat is firmly behind Kiernan then the former chief executive of ConsMin can count on having secured more than 25% support - through the collective holdings in ConsMin of Kiernan's long term associate Noble Group of Hong Kong and the holding of new associate in the Territory bid, metal house DCM DECOmetal which together hold around 12% and, assumedly, Privat's holding.

The situation, at present, is that Brian Gilbertson's London headquartered Pallinghurst Group has put in an offer for Consmin (ASX: CSM, AIM: CNM, FSE: CMN) at A3.30 a share - a little below Consmin's current stock price of A$3.42 a share, while Territory (ASX: TTY) has made a combined cash and stock bid of $2.00 a share cash plus one and a half Territory shares, which Michael Kiernan values as worth around $3.55 based on an independent valuation of Territory at just over $1.00 a share. The only problem with this calculation is that Territory's shares have fallen back in the recent stock market malaise to $0.68 a share today which would only value the offer at A$3.00 a Consmin share.

Both Territory and Consmin profess a vision for their combined entities in the greater iron and steel sector - as the providers of alloying materials. Consmin has some of the world's best manganese assets, and also interests in chromite and nickel, while Kiernan's Territory also has iron ore to bring to the package. Gilbertson looks to Consmin as being a vehicle for a major international production of manganese, and has his eyes on manganese deposits in Southern Africa which could be brought into the equation. Both probably see Consmin as undervalued, although Michael Kiernan, himself a former chief executive of Consmin, makes the statement that he feels the current Consmin board has taken its eye off the ball on operational matters and has made it no secret that he would replace the Board should Territory's bid be successful.

There has obviously been some personal animosity involved in the dealings to date. It would seem that Territory might hold the aces in this, with the backing of Consmin's biggest shareholders and customers in Privat, Noble Metals and DCM DECOmetal.

Despite this backing, Consmin's Board has been decidedly hostile to the Territory bid and, according to Kiernan, been decidedly unhelpful in access to financial data. The Board has, meantime, recommended the Pallinghurst offer unreservedly.

The question then is will the customer support for Territory be enough to douse Pallinghurst which has already produced an upgraded second offer for ConsMin. One thing is certain no peace pipes have been smoked, given the utterances at the Diggers & Dealers Forum in Kalgoorlie last week by Kiernan and by ConsMin's managing director Rod Baxter whose board has made it clear its current directors support Pallinghurst's bid.

Soon after Diggers the Takeovers Panel linked to the Australian Stock Exchange said it had received an application dated August 13 in which Pallinghurst submitted a number of concerns about statements by Territory in relation to both its bid for all of ConsMin's ordinary shares, and Pallinghurst's bid for ConsMin.

Takeover Panel's director Nigel Morris said Pallinghurst seeks a declaration of unacceptable circumstances, and orders that Territory make various corrective disclosures and issue a formal ‘statement of intention' with respect to the consideration payable under the Territory Bid.

"In particular, Pallinghurst seeks orders that Territory confirm the consideration offered or to be offered under the Territory Bid will be varied, along with the nature of the variation and time of effect, or alternatively, confirm the consideration under the Territory Bid will not be varied."

Morris said the Panel had not decided whether to conduct proceedings in relation to the application. "It notes that it has not received submissions from other parties to the application and makes no comment on the merits of the application." However the President of the Panel is appointing a Panel "to consider the application."

When the next shot is fired in this battle is uncertain, but at the time of writing it was likely to be early next week from Territory's side when Michael Kiernan is due back in Perth from Europe.

Kiernan meanwhile made it apparent in is London briefing that Territory is indeed prepared to vary the terms of its offer (i.e. increase it) and claims to have the financial backing from his bid partners - Noble Metals, DCM Decometal and Lehmann Brothers, to enable it to do so if necessary and if markets justify this. Given that he firmly states that the Pallinghurst bid undervalues Consmin, then there may well be scope on both sides for a further upping of the stakes. Territory's Bidders Statement to Consmin shareholders is due out in the next couple of weeks and it will be interesting to see if any changes will be made in this time, or subsequent to it. This takeover battle seems to have some way to run yet.

A THIRD player has entered the takeover battle for Perth-based manganese miner Consolidated Minerals, raising the prospect of a counter-bid emerging to trump rival offers from private equity group Pallinghurst and former ConsMin boss Michael Kiernan's Territory Resources.

The new entrant started due diligence work on ConsMin yesterday and is believed to be an offshore player.

It is not believed to be the Ukrainian-based Privat Group that has manganese alloying operations and has grabbed a 13.5per cent stake in ConsMin. There is some speculation that it is another European alloyer, possibly Norway-based Tinfos.

ConsMin yesterday said it had granted due diligence to a third party, after last week receiving a "confidential, non-binding, indicative and incomplete approach" from the unnamed group. "We don't have a definitive proposal from them, but they said they wanted to do due diligence and we've granted that to them," a ConsMin spokesperson said.

"Once they've done that, they may or may not come with a formal proposal."

Pallinghurst, which is led by former BHP Billiton chief executive Brian Gilbertson, announced yesterday it had secured a 5.19 per cent stake in ConsMin.

The ConsMin board has recommended the Pallinghurst all-cash offer of $3.30 cash a share, which is valued at $752 million.

Territory is offering $2 cash and 1.5 Territory shares for each ConsMin share, valuing the nickel and manganese miner at about $696 million. Territory is backed by commodity traders Noble Group and DECOmetal and investment bank Lehman Brothers.

ConsMin shares added 11c to $3.34, while Territory gained 1c to65c.

Prices for stainless steel flat products and Nickel/Chrome/Molybdenum have not been as strong as has been mentioned and in some cases appear to be weakening: http://www.crumonitor.com/80256B48004C7375/vWeb/wpCWAN56XHA8 http://www.crumonitor.com/80256B48004C7375/vWeb/wpCWAN56XHZN

Hi Noirua,
Sorry to dispute your findings, but ConsMin produces manganese not moly. Manganese has increased further. I would like to introduce you to some professional commodity trading websites
www.asianmetals.com
www.metal-pages.com
www.ferro-alloys.com
Read the bottom of this commodity bulletin and you'll note the price of Australian 48% Mn ore ( ie ConsMin Mn ore) note 65-67yuan/dmtu = US$8.56 -8.82/dmtu . ConsMin's contracts for Sept -Oct 07 is for US$7.25- 7.40/dmtu.
This new price is US$1.25/dmtu higher than contract prices. This will mean that next contracts will be settled higher, US$1.25/dmtu means another $80 million profit.

Manganese ferroalloy] early August manganese ferroalloy market analysis

Enter August, ferroalloy products showed signs of rising, especially iron and molybdenum Electrolytic Manganese rose very obvious, but the main reason is in August after the cash shortage. In mid - to late July to early August, the south part of the disaster mines and smelters home production affected to a certain degree, resulting in a sharp decline in output. Since July of steel procurement of raw materials off-season, ferroalloy production the impact does not seem apparent, ferroalloy market also made plain in late July the market to maintain a stable situation. But in the August, as demand for steel gradually restored, the supply of hidden contradictions gradually emerged, some ferroalloy product prices have risen accordingly.

Electrolytic Manganese DJMn99.7 price increases are very strong, but at the current market price, confusion has emerged tight supply on the market. In late July manufactured quotations in the domestic 17300-17500 yuan / ton to early August prices have risen 20000-21000 yuan to the price, ended last weekend (August 10) the area manufacturers are generally Price 22000-22500 yuan / ton, or even individual manufacturers reported 23,000 yuan / tons of high prices, while most manufacturers face a rapidly rising market is no longer offer. Not only manufacturers, including consumer and commercial traders of all market participants need time to adapt and accept such a market.

By contrast, manganese, silicon, manganese prices stable, manganese ore prices will not continue weak. It is learned that the ports along the supply of manganese ore spot tense situation, 48% of Australian ore prices for the 65-67 yuan / ton, Gabon 46-47% of the manganese ore prices 62 yuan / ton degrees. HCFeMn 65C7.0 current prices in 7200-7500 yuan / ton, carbon ferromanganese prices in the mainstream 17000-18000 yuan / ton; Domestic silicomanganese prices, FeMn65Si17 Price in the southern part of the 7300-7500 yuan / ton, in the northern region Price 7600-7900 yuan / ton .

Nickel and chrome prices are weaker now and they are mined by Consolidated Minerals.

Companies generally have forward contracts for sales which are up to one year ahead and as we know, they may sometimes have to buy in ore to make up shipping orders. They also sell ore, that is over production, at spot market prices. So pointing out forward prices for contracts tends to forget the affect of recent events and the credit crunch in the USA, that is gradually being admitted elsewhere as being a problem.

The value put on Consolidated Minerals assets is sometimes inflated by failing to take certain matters into account. Taxation, and that includes taxes on capital gains. The cost of mine development and infrastructure is a seriously heavy expense and until fully funded is a risk factor that can lead to a reduction in value of as much as 50%. The asset valuations, often given, are heavily skewed to a figure that forgets the above factors.

noirua said:

Nickel and chrome prices are weaker now and they are mined by Consolidated Minerals.

Companies generally have forward contracts for sales which are up to one year ahead and as we know, they may sometimes have to buy in ore to make up shipping orders. They also sell ore, that is over production, at spot market prices. So pointing out forward prices for contracts tends to forget the affect of recent events and the credit crunch in the USA, that is gradually being admitted elsewhere as being a problem.

The value put on Consolidated Minerals assets is sometimes inflated by failing to take certain matters into account. Taxation, and that includes taxes on capital gains. The cost of mine development and infrastructure is a seriously heavy expense and until fully funded is a risk factor that can lead to a reduction in value of as much as 50%. The asset valuations, often given, are heavily skewed to a figure that forgets the above factors.

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Noirua,
Yes the price of nickel is now lower, BUT ConsMin was hedged for most of FY 07 at prices FAR less than the price of nickel now at US$12 spot price. They are no longer hedged. If you think that nickel is going down, then as I said before buy yourself a plane ticket to China. Take a trip around the country, like Chengdu, Kumming, Yichan, places analysts never talk about, and most likely have never been.
Yes, the price of chrome ore is a LITTLE softer, BUT ConsMin's contracts last year DID NOT get much of these increases. In fact their prices for new contracts now are 25% higher than last year.
Again, the softening is only a leveling off getting ready for another leg up. I 'm in contact with a manager of a chrome producer in the USA and he is very bullish on Chrome ore, ferro-chrome etc going forward.
If ConsMin doesn't make $50 million NPAT FY08 then we can say that you are right, but I bet they will make $100 million PLUS. So we'll see who is right.
Why do you think Gilbertson, Kiernan and now ferro-alloy producer Tinfos want ConsMin, because it's cheap for the commodities it produces.
Did you read what Keith Goode said of CSM in his latest research note?

Tinfos firms as rival suitor for ConsMin

28th August 2007, 9:30 WST



Norwegian ferro-alloys producer Tinfos has boosted expectations that it is seriously considering its own $1 billion offer for Consolidated Minerals, engaging a Sydney-based public relations firm to represent it in Australia.

Tinfos, the world’s biggest producer of low-carbon silico-manganese and a significant supplier of titanium dioxide slag and pig-iron, was granted access to ConsMin’s books last week after indicating its potential interest in making an offer for the WA manganese and nickel miner.

At the weekend it engaged Sydney PR firm Third Person to work on its behalf, sending a clear signal that a third bid for ConsMin is likely.

Tinfos currently has no operations or even customers in Australia, making the engagement of a PR firm pointless unless it is planning to establish a substantial base here.

Importantly, it is now understood that Tinfos is acting completely independently of any other party, and has sufficient financial firepower to proceed with a stand-alone bid.

Nor is the privately controlled company, which is 68 per cent owned by Norwegian group Holta, itself up for sale as had been rumoured.

Last week, speculation suggested Tinfos was a front for other interests eyeing ConsMin, rumoured to include Ukrainian group Interpipe, which shares ownership of ferro-alloy producer Nikopol with 14 per cent ConsMin shareholder Privat Group.

Tinfos was established more than a century ago, employs more than 500 people across Europe, the US and Brazil, and last year generated total sales in excess of $1.2 billion.

But Tinfos’ late appearance has further taxed the patience of Brian Gilbertson’s Pallinghurst Resources, which yesterday turned up the heat under ConsMin shareholders to accept its board-endorsed $3.30-ashare cash bid.

Pallinghurst extended its offer by another week to September 13, but ruled out any further extensions unless another offer emerged from rival bidder Territory Resources or any other party. It also pledged to declare its offer unconditional if it secured at least 35 per cent of Cons-Min by next Tuesday.

After picking up 5.3 per cent of ConsMin shares just over a week ago, it yesterday revealed it had also acquired another $30 million in convertible notes that could potentially double its stake.

Despite expectations that either Territory or Tinfos will make a new offer for ConsMin, Pallinghurst said it believed the chances of a “deliverable and superior offer materialising from them to be low”.

The warning sent ConsMin shares tumbling 10 ¢ to $3.65. In comparison, Territory closed 3 ¢ higher at 87.5 ¢, valuing its bid of $2 cash and 1.5 Territory shares at $3.31 per ConsMin share.

Territory is required to lodge its bidders statement by tomorrow night but is understood to have sought permission to postpone another fortnight to decide whether to sweeten its offer.

JOHN PHACEAS

I thought it rather amusing that Palinghurst released a new statement of substantial holding at the same time they extended their offer (for the second time), and that it had hardly changed at all from the initial 5% odd that I suspect they only managed to get because the market was in general panicking.

I think they grossly underestimated the intelligence of CSM investors

Tony.

...so is it reasonable or legally permissible for Pallinghurst to offer $3.60 to CSM shareholders in Australia, whilst we UK shareholders have no option but to sell into the general market or vote yes and get just 3.30 ?

Rimtalay said:

Noirua,
Yes the price of nickel is now lower, BUT ConsMin was hedged for most of FY 07 at prices FAR less than the price of nickel now at US$12 spot price. They are no longer hedged. If you think that nickel is going down, then as I said before buy yourself a plane ticket to China. Take a trip around the country, like Chengdu, Kumming, Yichan, places analysts never talk about, and most likely have never been.
Yes, the price of chrome ore is a LITTLE softer, BUT ConsMin's contracts last year DID NOT get much of these increases. In fact their prices for new contracts now are 25% higher than last year.
Again, the softening is only a leveling off getting ready for another leg up. I 'm in contact with a manager of a chrome producer in the USA and he is very bullish on Chrome ore, ferro-chrome etc going forward.
If ConsMin doesn't make $50 million NPAT FY08 then we can say that you are right, but I bet they will make $100 million PLUS. So we'll see who is right.
Why do you think Gilbertson, Kiernan and now ferro-alloy producer Tinfos want ConsMin, because it's cheap for the commodities it produces.
Did you read what Keith Goode said of CSM in his latest research note?

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Hi Rimtalay, I'm not a follower of Keith Goode and his website is only average. I doubt he has that much insight into the goings on of the three bidders, prospective or otherwise.

Raising cash is going to be very difficult in these increasingly tricky markets. CSM have their own financing problems and need Pallinghurst to help them get the best out of their holdings.

Chrome and nickel are highly priced at the moment and could soften further. I doubt the prices will tank, but who knows?

bigtbigt said:

...so is it reasonable or legally permissible for Pallinghurst to offer $3.60 to CSM shareholders in Australia, whilst we UK shareholders have no option but to sell into the general market or vote yes and get just 3.30 ?

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Having now made a new offer at $3.60 I believe Pallinghurst must now pay that as a minimum for all future shares they buy through any offer.

Pallinghurst are probably standing in the market, offscreen, ready to mop up any stock at $3.60, until the end of trading today.

At the moment CSM are at $3.65 so Pallinghurst have no luck so far.

Action day today!

TTY bid is in - firm at last offer of $2 plus 1.5 TTY shares per share.

Bidders statement available here (note: 6MB file).

There's more! Palmary have made a cash offer of $3.95 per share.


No response yet from Pallinghurst.