Consolidated Minerals this morning said it had received an “incomplete and indicative proposal” from Kiernan’s Territory Resources proposing an offer of $1.50 cash and 1.5 Territory shares for each ordinary ConsMin share.
The proposal is conditional on Territory carrying out a due diligence review of ConsMin.
The market responded by pushing ConsMin shares 12c higher to $3.14 in morning trade.
ConsMin has now risen by almost 50% since a consortium led by the Pallinghurst private equity fund headed by ex-BHP Billiton chief Brian Gilbertson brought ConsMin into play with an initial offer in late February.
Based on Territory’s current share price of $1.485 (the company remains in a trading halt called on Monday), the proposed offer price would value ConsMin at $3.75 a share.
In contrast, the recently sweetened bid of Pallinghurst – using ConsMin’s current price of $3.14 – values the miner at $2.94.
Pallinghurst is offering $1.68 in cash and two shares in the ‘new ConsMin’ for every five currently held.
Kiernan confirmed Hong Kong-based commodities trader Noble Group – which holds major shareholdings in both Territory and ConsMin – and Austrian ore trader DMC Decometal were backing the Territory proposal.
Noble and Decometal together market about 80% of the company’s annual manganese production and all of the output from Coobina.
US investment group Lehman Brothers is also backing Territory.
Kiernan told MiningNews.net the Noble relationship was a replica of the successful union between Swiss-based commodities trader Glencore and miner Xstrata, which has grown from a small coal miner into one of the world’s largest miners in part due to Glencore’s marketing clout.
ConsMin’s key asset is the Woodie Woodie manganese mine in the Pilbara of Western Australia.
The company also holds the maturing Coobina chromite mine, also in the Pilbara, as well as the Beta-Hunt nickel complex near Kambalda.
It has investments in several resources companies, most notably a 27% stake in base metals miner Jabiru Metals.
Kiernan said Territory would focus on open pit, bulk commodity operations, meaning the ultimate sale of the nickel assets and the stake in Jabiru if it did take control of ConsMin.
Kiernan was the head of ConsMin for eight years, building the company into a diversified miner with a market capitalisation of around $1 billion.
However, objections from unnamed institutional shareholders over a proposed options package prompted Kiernan to announce plans to retire from the company in 2006.
He left the company on 30 June last year.
Speaking to MiningNews.net this morning, Kiernan said he was sure he could win over the institutions that brought about his departure from ConsMin.
“The institutions have got to work out whether their balance sheet would be better off with us in charge,” Kiernan said.
ConsMin’s share price slide on the back of falling manganese prices continued after Kiernan’s departure, with the company’s shares bottoming out at $1.63 in mid-September last year.
Kiernan will officially begin selling the proposal in a conference call to journalists later today.
Territory, which earlier this year announced plans to move from an iron ore focus into a ‘ConsMin-style’ miner providing a suite of commodities to the international steel industry, last week produced the first ore from its small Frances Creek iron ore mine in the Northern Territory.
ConsMin said the board was assessing Territory’s proposal, and would comment further as soon as it completed its assessment.
Kiernan said the due diligence process would take no more than two weeks.
“No one knows these assets better than me, I just need to make sure no legal, accounting or tax issues have arisen in the past 12 months,” he said.
ConsMin shareholders are due to vote on the Pallinghurst proposal on July 19.
