Manganese players jockey for position

IRON ore may have grabbed the headlines as China’s resurgent steel industry has put a rocket under prices, but manganese miners are also now enjoying time in the sun.

Prices for the key steel-strengthening ingredient have doubled since 2006 despite plunging during the global financial crisis. And with Western Australia supplying 10th of the world’s best ore, the local sector has become a hotbed of intrigue as rivals jockey for position.

In 2006, Consolidated Minerals became the target of a three-way tussle between Ukrainian tycoon Gennadiy Bogolyubov, former BHP boss Brian Gilbertson’s Pallinghurst Resources, and (then) Territory Resources chief Michael Kiernan before the Ukrainian’s Palmary Enterprises won out with a $1.1 billion cash offer.

Two years later, Mr Bogolyubov unsuccessfully sought to gain board influence over ConsMin’s main Australian rival, OM Holdings, after acquiring a 12 per cent stake.

Mr Gilbertson then resurfaced with a plan to take equity in OM in return for half of the big Tshipi manganese project in South Africa, which was scrapped when OM instead opted to take only a minor interest in Tshipi.

Mr Gilbertson last month struck a friendly deal to acquire 85 per cent of WA iron ore and manganese explorer Jupiter Mines in return for the same Tshipi stake.

Meanwhile, Perth-based Mineral Resources is poised to become Australia’s biggest independent manganese miner after deals with China’s CITIC group and Sandfire Resources underpinned new mines in the Pilbara and the Northern Territory. It also developed and operates Hancock Prospecting’s new Nicholas Downs mine.

Against that backdrop, Perth junior Mesa Minerals now finds itself in the crosshairs as it attempts to move to full-scale production at its Ant Hill and Sunday Hill manganese projects, 250 kilometres south-east of Port Hedland.

In January, Mesa exported a second trial shipment of manganese to customers in China, ahead of the planned start-up of a 200,000 tonnes per annum operation within three months.

But Mesa is now facing an attempted boardroom coup by a group of shareholders linked to its estranged joint venture partner and thwarted merger proponent, Auvex Resources.

Last November, Mesa issued a default notice to the unlisted Auvex, claiming that a debt restructure by Auvex was a proscribed event under the joint venture terms and entitled it to buy back its partner’s 50 per cent project stake at 90 per cent of market value.

Auvex, run by former Hill 50 Gold and Abelle executive Peter Cunningham, has dismissed the claim and says its stake remains in good standing.

However, the dispute has forced a drastic restructure of Auvex’s proposed float. The Ant Hill stake has been excluded from the float, and the proposed public offer has been halved to $7 million.

Last month, a shareholder group holding almost 15 per cent of Mesa formally requested a general meeting to sack four of Mesa’s five directors and replace them with three of its own nominees.

The targeted Mesa directors include managing director, ex-Rio Tinto and Aurora Gold executive Alan Scott, as well as long-serving chairman Norm Coldham-Fussell, a former chief of MIM Holdings and Thiess Group and one-time chairman of Anaconda Nickel.

The dissident shareholders include Auvex’s former managing director and previous Ant Hill crushing contractor, a former executive director of Auvex’s largest shareholder, the managing director of Auvex’s number two shareholder, and one of Auvex’s corporate advisers.

In a letter to Mesa investors, the group said it had become frustrated with Mesa’s slow progress toward full-scale production, and that the board was devoting too much effort to its own technological process for upgrading low-grade manganese.

The group also claimed its actions were “in no way motivated by any alleged relationship with Auvex” and denied it was seeking control without payment as there would be no change in the ownership of any Mesa shares.

But Mesa chief Alan Scott said it was clearly an attempted takeover by stealth through which control could change hands without any premium being offered to ordinary shareholders.

“This is a quick grab to see if they can get something on the cheap,” Mr Scott told WA Business News. “But we are optimistic we will prevail.”

He added it was “stretching the imagination immensely” to believe there was no connection between the requisitioning parties and Auvex.

Auvex chief Peter Cunningham acknowledged Auvex’s ties to some of the requisitioning shareholders but stressed “we are not involved with this process”.

However, he said the current joint venture was dysfunctional and that he believed the proposed new board would be more likely to seek a mutually acceptable resolution.

“I believe the new directors, if they are successful in their attempt, would have quite a different commercial outlook on where the value lies for shareholders, so I don’t believe there would be a difficulty resolving it with them,” Mr Cunningham said.

He said it was in the interests of shareholders in both companies to get Ant Hill into production as soon as possible, adding that he believed both companies’ manganese assets should ultimately be consolidated.

“The logical thing is to have both corporates together,” Mr Cunningham said, noting that Auvex had mandated stockbroker Taylor Collison to pursue a friendly merger with Mesa until talks collapsed in January.

Board nominee and local corporate adviser, Guy Le Page, said as an outsider he believed he could provide a more objective view of how to get the best outcome for Mesa shareholders.

“I guess my job is not to drive a wedge, but be a bit of an independent umpire and try and represent all Mesa shareholders,” he said. “Whether that’s pursuing some sort of corporate consolidation, getting the joint venture back on foot or some other arrangement, I don’t know.”

Mesa shareholders vote on the board spill on March 26, but the stoush is unlikely to be the last in WA’s increasingly attractive manganese fields.