Miner marriage a perfect match?

Miner marriage a perfect match?

CHINA has become such an important trading partner for Australia that it should come as no surprise to see Chinese interests playing a lead role in Australian corporate manoeuvres, including the potential merger of two of Perth’s favourite resources stocks, Consolidated Minerals and Portman.

On paper, such a deal looks to be a sound match. But, like any marriage, there is the issue of personality, and Michael Kiernan at Consolidated and George Jones at Portman have personality to burn.

But if the small matter of individual peculiarities can be put to one side there is a strong case emerging for Consolidated and Portman to make a trip to the altar, with the only real question being whether it is a union of consenting adults, or a shotgun coalition.

On the numbers, Consolidated and Portman have much in common. At a recent share price of $1.12, Consolidated was valued at $200 million. At $1.69, Portman was valued at $289 million, though some of the Portman price reflects heavy recent share buying by interests said to be associated with legendary Chinese investor, Lee Ming Tee – but more about him and the China connection later.

On product mix, a theoretical marriage of Consolidated and Portman looks even more attractive. Both companies sell commodities to the Asian steel sector. Portman sells iron ore from its Koolyanobbing and Cockatoo Island mines and wants to expand because demand from China is so strong. Consolidated sells manganese and chromite in steadily increasing quantities (both minerals are used to harden steel), and wants to get into the iron ore game, as shown by its joint exploration deal with Andrew (call me Twiggy) Forest and his Fortescue Metal Group.

The common destination for much of Portman’s iron ore and Consolidated’s manganese and chromite is not the only China factor at work. Both companies appear to have Chinabased investors as their major shareholders – Consolidated via the 15 per cent stake held by the Hong Kong commodities trader, Noble Resources, and Portman via a recently acquired 7.6 per cent interest held by China Online (Bermuda), a business believed to be associated with Mr Lee.

‘Believed to be’ are the key words in describing Mr Lee’s activity on the Portman share register because Portman chief executive, Barry Eldridge, says he’s not too sure whether it really is Mr Lee, and if it is, he’s not sure what game is being played.

"Only time will tell whether it [China Online] decides to increase its current shareholding or propose any other corporate activity," Eldridge told The West Australian on May 20.

At first glance, Eldridge and his chairman George Jones are being very polite about the sudden advent of a China player on the Portman register. In truth, they are probably very concerned because Mr Lee has a track record as a corporate entrepreneur with a taste for mergers and acquisitions, at a rapid pace.

There has already been speculation in The Australian Financial Review that Mr Lee might have plans for Portman in the Aldoga Aluminium smelter in Queensland, a deal on which he is working. "The Portman board fears that Lee plans to put the Aldoga project into Portman, or alternatively, to sell the iron ore mines to Chinese interests." – AFR, May 22.

Briefcase, which will decline a spotter’s fee or merchant banker’s compensation if (when?) it is offered by Mike or George for suggesting that they get hitched, reckons that the fear bubbling away inside Portman, when combined with Consolidated’s unconcealed expansion ambitions, may produce the same result as a boy scout rubbing two sticks together.

The logic, once those personalities are put aside, is compelling. A compatible product range, similar customers, strong demand, and growing China connections should be drawing Portman and Consolidated closer by the day.

THE battle for St Barbara Mines, if it did not involve a company with such an interesting history, and with people saying rude things about each other, would probably not be worth the headlines it is attracting.

For starters, there is the question of what St Barbara is actually doing that makes it an object of desire for the Rothschilds (the rich family behind the RCF group), or interests associated with St Barbara’s chief executive, Stephen Miller.

In its most recent production report, for the three months to March 31, St Barbara produced 4,660 ounces of gold, an unchallenging amount, which came from treating low-grade ore stockpiles. Exploration revealed a few interesting shows, and plans are advancing for the 55 per cent-owned Paulsens mine development.

Miller, in his review, said exploration commitments, non-core asset rationalisation and planning for sustainable operations at the company’s Meekatharra operations, plus the Paulsens project were the highlights of the quarter – together with managing a large "landbank and infrastructure base" at Meekatharra.

To outsiders this is not terribly inspiring stuff, though tracking down a copy of the quarterly is a bit of fun because the St Barbara web site appears to be locked down, demanding a user name and password to see public domain reports that are obtainable on the Australian Stock Exchange web site.

Briefcase, as was said earlier, may be missing something. Perhaps there is hidden value in Paulsens that eludes Briefcase. Perhaps the exploration tenements held by St Barbara hold a treasure trove of gold. But with a share price lingering at less than 5 cents and a market capitalisation of just $28 million there is a feeling that personality rather than corporate factors are at work in the argument between the differing parties.

To put this theory in a somewhat more comprehensible form, it is possible to picture recent events at St Barbara as being similar to a seagull fight at Cicerellos fish shop in Fremantle as the birds battle over a chip wrapper.

 "Pride goeth before destruction, and a haughty spirit before a fall." Proverbs 16:18.