Consmin looks to reorganize with Gilbertson (March 12, 2007)

Former BHP Billiton (BHP-N, BLT-L, BHP-A) chief executive Brian Gilbertson and the low-profile Swiss-based coal house AMCI have made a joint bid to finance Consolidated Minerals (CNM-L, CNM-A).

Gilbertson comes to the deal with a private-equity firm he heads, Pallinghurst Resources Fund. AMCI holds a number of coal properties around the world, and minority interests in American coal producers Alpha Natural Resources (ANR-N) and Foundation Coal Holdings (FCL-N).

Under the deal, existing Consmin shareholders get A$1.38 ($1.27) and two shares in the new company for every five shares they tender. Gilbertson’s group, Pallinghurst Resources Fund, and AMCI would own 60% of the new company and Consmin shareholders 40%. It would retain its listings on the Australian Stock Exchange and London’s Alternative Investment Market (AIM).

Consmin management would stay in place and Gilbertson, AMCI’s Hans Mende, and Gilbertson associate Arne Frandsen would join the board of the new company.

The restructuring of the company would run on three tracks, plans of arrangement for common shareholders, noteholders, and option holders. All three groups would have to approve their plans of arrangement with a 75% vote in favour. Those meetings are currently planned for late May.

The deal also needs approvals from the Australian courts and from the Foreign Investment Review Board.

The deal is not a huge one; it values Consmin at A$625 million ($577 million). The parties to it are presenting it to Consmin shareholders as a springboard for acquisitions that would make Consmin into a large mining company on the pattern of the departed WMC or MIM Holdings.

“I would be extremely disappointed. . . if we don’t achieve substantial growth in the years, indeed, in the months ahead,” offered Gilbertson in a conference call with analysts.

The analysts on the conference call with Gilbertson, Frandsen, and Consmin executives Richard Carter and Rod Baxter were generally positive about the merger, except for one who found the valuation low. Ray Chantry of investment house E.L.C. Baillieu said he had not found a company with a price-to-earnings ratio as low as Consmin’s “anywhere, in any sector.”

Consmin’s half-year financials bear out the turnaround the company has made, from a loss in fiscal 2006 (ended June 2006) to earnings of A$14.8 million ($13.6 million) on revenue of A$121 million ($111 million) in the six months ended Dec. 31, 2006. In the six months ended Dec. 31, 2005, Consmin made a loss of A$12.9 million ($11.9 million) on revenue of A$111 million ($102.2 million). Managing director Baxter noted that the company’s manganese and chromium operations had reduced costs in an environment of rapidly rising costs, especially in Consmin’s home turf of Western Australia.