Mining company OMH Holdings has secured a $294 million deal to acquire a majority stake in a South African manganese project, and will welcome Brian Gilbertson onto its board.
Mining company OMH Holdings has secured a $294 million deal to acquire a majority stake in a South African manganese project, and will welcome Brian Gilbertson onto its board.
Under the deal, the company will acquire a 49.9 per cent interest in the Tshipi project from a group of fine non-related co-investors, including Mr Gilbertson's company Pallinghurst Resources, in exchange for 139.9 million OMH shares valued at $245 million.
As part of the deal, Mr Gilbertson will join OMH as non-executive deputy chairman and lead a new committee within OMH focusing on global investment opportunities.
OMH will also acquire a further 20 per cent in the project from Ntsimbintle Mining, a South African Black Economic Empowerment company, which will own the balance of the project's interest.
OMH will pay Ntsimbintle $49.2 million in cash for the interest.
The Tshipi project resource is capable of supporting a 60-year open cut mine life, with capital expenditure pegged at $US200 million.
Development of the project is anticipated to start next year with first production targeted in 2013.
OMH said the project acquisition will see position the company as one of the world's leading integrated manganese companies. OMH also operates the Bootu Creek manganese mine in the Northern Territory.
OMH added that it will recommence the process of seeking a secondary listing on the Hong Kong Stock Exchange.
Part of the announcement is below:
OM Holdings Limited ("OMH"), a consortium of Co-Investors ("the Pallinghurst Co-Investors") including Pallinghurst Resources Limited ("Pallinghurst") and Ntsimbintle Mining (Proprietary) Limited ("Ntsimbintle") are pleased to advise that a Memorandum of Understanding ("MOU") has been executed in relation to the world class Tshipi é Ntle manganese project in the Kalahari Basin of South Africa ("the Tshipi Kalahari Manganese Project" or "the Project").
The Pallinghurst Co-Investors (through Pallinghurst Kalahari (Mauritius) Limited ("Pallinghurst Kalahari")) and Ntsimbintle presently hold a 49.9% and 50.1% respective interest in the Tshipi Kalahari Manganese Project via Tshipi é Ntle Manganese Mining (Proprietary) Limited ("Tshipi é Ntle"). The Tshipi Kalahari Manganese Project has a mineral resource estimate of approximately 163 million tonnes at 37.1% Mn.
Once concluded, this compelling transaction is expected to create a leading globally integrated manganese company, combining OMH's strong operating cash flows, experienced management team, established mining, smelting and marketing expertise and access to the Chinese market with the long-life of the Tshipi Kalahari Manganese Project. The result will be a unique value proposition combining a world class resource base operating in the strategically critical geographical locations for the manganese business, with operations spanning across the full value chain from mine to market.
Salient features of the Proposed Transaction
OMH has agreed to acquire:
1. the 49.9% equity interest from the Pallinghurst Co-Investors in the Tshipi Kalahari Manganese Project in exchange for 139,906,729 ordinary shares in OMH; and
2. a 20% equity interest in Ntsimbintle for the cash equivalent of 28,093,495 ordinary shares in OMH multiplied by the OMH 30 day volume weighted average price of A$1.75 per share, valued at approximately A$49.2 million, ("the Proposed Transaction").
Subject to the satisfaction (or waiver) of relevant conditions precedent, the Proposed Transaction has the unanimous support and approval of the OMH Board, the Ntsimbintle Board (whose directors control 70% of the Ntsimbintle shares on issue) and each of the Pallinghurst Co-Investors.
Mr Brian Gilbertson will join the OMH Board in the capacity of Non-Executive Deputy Chairman upon completion of the Proposed Transaction. He will also chair a newly formed Investment Committee of the OMH Board. OMH welcomes the appointment of Mr Gilbertson as his extensive experience in the global resources industry will bring a significant new dimension to the existing OMH Board.
Rationale for the Proposed Transaction
OMH's stated strategy is focused on:
extracting maximum shareholder value from its existing operating assets;
developing a pipeline of projects to increase and diversify its resource base; and
exploiting its competitive advantage of operating across the full manganese value chain including its China-focused marketing and distribution expertise.
OMH, the Pallinghurst Co-Investors and Ntsimbintle share a common strategic vision regarding the manganese industry. Each party is committed to:
the creation of a leading globally integrated manganese company with long-life high grade ore resources, sinter and alloy capacity and strong marketing and distribution capabilities;
playing an active role in the further consolidation of the high grade manganese ore sector; and
the establishment of an emerging steel feed materials business.
An integral component of OMH's strategy and the first major step towards the achievement of the shared vision is the development of the Tshipi Kalahari Manganese Project.
Key Features of the Proposed Transaction
The key features of the Proposed Transaction and the Project include the following:
The Project has a mineral resource estimate of 163 million tonnes at 37.1% Mn, with an expected mine life based on its mineral resource of over 60 years and a projected production capacity based upon a feasibility study of between 2.2 to 2.3 million tonnes per annum of run-of-mine metallurgical ore. OMH's Bootu Creek Manganese Project's Mineral Resource (as at 31 December 2008) was 30.6 million tonnes at 24.1% Mn (refer Table 2) and OMH expects to have production capacity from the Bootu Creek Manganese Project expandable to 1.5 million tonnes per annum by 2011. The Project provides an outstanding platform for OMH to become one of the leading globally intergrated manganese companies;
The cash transaction with Ntsimbintle will allow for its share of ongoing development, capital expenditure contributions and ongoing participation to be adequately funded, with the remaining requirements to be sourced from its other investment incomes;
The Project will remain majority Broad Based Black Economic Empowerment ("BEE") owned, satisfying both strategic and practical South African requirements while fully benefiting from the project development, operating and marketing expertise of OMH and the strategic focus and financial strength of the Pallinghurst Co-Investors; and
OMH will negotiate an exclusive marketing arrangement over 100% of the Tshipi Kalahari Manganese Project's production with Ntsimbintle. OMH acknowledges and fully respects the existing off-take agreement between POSCO and Tshipi é Ntle and it is envisaged that OMH and POSCO will conclude a revised off-take agreement covering the full suite of OMH's ore, sinter and alloy product range, on arms length commercial terms and conditions.
OMH and Ntsimbintle are establishing a long term strategic partnership to identify and develop manganese, steel feed and energy related projects in South Africa and on the broader African continent.
OMH also expects to re-commence the process of seeking a secondary listing on The Main Board of the Stock Exchange of Hong Kong Limited ("HKSE"). The HKSE secondary listing will not only allow OMH access to capital to support the development of the Tshipi Kalahari Manganese Project and other business development projects, but also provide a platform for strategic cooperation with potential key Chinese partners.
