OM set to enter African manganese

OMH, which has strong trading capacity into the Chinese market, would acquire a 49.9 per cent equity interest in the joint-venture vehicle Tshipi e Ntle Manganese Mining, from Johannesburg Stock Exchange-listed Pallinghurst Resources and its partners, in exchange for more than 139.9 million of its own shares.
The value of the shares was estimated at around $222 million, based on a share price of A$1.82 a share, at September 23rd. The share exchange would constitute a 22 per cent ownership in the enlarged shareholding of OMH.
The Brian Gilbertson-led Pallinghurst owns around 9.98 per cent indirect interest in Tshipi, with its co-investors collectively owning the remainder of the 49.9 per cent interest. Black economic-empowerment consortium, Ntsimbintle, owns the remaining 50.1 per cent Tshipi shareholding.
OMH would also acquire a 20 per cent equity interest in Ntsimbintle, which equated to a 10 per cent indirect investment into Tshipi, for the cash equivalent of about A$49.2 million, or more than 28 million shares.
Pallinghurst chairperson Gilbertson, a former CEO of BHP Billiton, which owns the Wessels and Mamatwan manganese mines in the Kalahari Basin, would join the board of OMH as nonexecutive deputy chairperson. He would also lead a new board committee focusing on global investment opportunities.
Tshipi’s primary assets are located in the Kalahari Basin, which hosts 80 per cent of the world’s manganese reserves, and has a mineral resource estimate of 163.23 million tonnes, at 37.1 per cent manganese, with an expected life-of-mine of over 60 years.
OMH shareholders were now set to vote on the proposed transaction by mid-December, following the completion of due diligence, the execution of formal agreements, as well as an independent expert’s report.
“I see this as a transformational transaction for all parties. It establishes a robust supplier of manganese ores and alloys to the global steel industry, able to source, blend and deliver internationally, for optimum customer satisfaction,” said Gilbertson in a statement.
“With its long-life reserves in South Africa’s Kalahari Basin…the new OMH will be a strong and growing competitor in the industry, for many decades to come,” he said.
OMH said that the proposed transaction would transform the company into globally integrated manganese company with reserves located in strategically significant regions of the manganese industry.
The group runs a Singapore-based metals trading business supported by the Bootu Creek manganese mine in Australia and a ferroalloy smelting facility in China.
The Chinese market is likely to be the primary market for Tshipi’s carbonate ore, OMH stated.

OM takes out NT export award
Closer to home, OM (Manganese) has taken out a Chief Minister’s Northern Territory Export & Industry Award for the second year running.
The award was accepted by Frank Botica, OMM director and chief financial officer at a function in Darwin.
“We are very pleased to have received recognition in these prestigious awards for the second year in a row,” said the CEO of parent company OM Holdings (OMH), Peter Toth.
“It is particularly rewarding for our team at Bootu Creek, who have put in an exceptional effort during what was a very difficult year for the manganese industry and mining companies in general.”
He said that despite the difficult global economic conditions, which saw the operation temporarily suspend shipments in late 2008, the company was able to post a solid production performance - including near-record shipments of manganese ore in the June 2009 quarter. It was able to implement a new production and marketing strategy which leaves it well placed to benefit from the recovery in global markets, according to Toth.
OMM managing director, Paul Thomas said the award reflected OMM’s commitment to increasing value for all of its stakeholders.
“Last year we focused on single grade manganese exports to China, because Darwin’s proximity to Chinese markets provided us with a significant shipping advantage over other manganese producers,” he said.
“However, the onset of the Global Financial Crisis in late 2008 caused us to suspend shipments temporarily and revise our production strategy.
“…we successfully implemented a new production strategy designed to deliver a broader range of multiple manganese product grades to suit niche market demand.
“This more flexible approach has allowed to us to pursue different production strategies for different market conditions so we could cost effectively maximise yield and metal recovery,” said Thomas.
OMM developed the Bootu Creek manganese mine, which is located near Tennant Creek in the Northern Territory, in 2005/06. The first ore was processed in April 2006. The manganese ore is transported 60 kilometres from the mine site to the Muckaty Rail Siding, then railed 800 kilometres to the East Arm Port in Darwin. Product is stockpiled at the railhead, transported to the Port’s shiploader and exported to China and other emerging hungry markets.
OMM was the first mining company to use the Adelaide to Darwin Railway for bulk haulage to East Arm Port.
“We have always received strong support from the Northern Territory Government and our success is largely due to the Government’s vision in building the railway,” Thomas said.
“By the same token, OMM has invested heavily in Territory-based supporting infrastructure because OMM is confident of a long and expanded production future here.”
OMM is spending A$13 million constructing a secondary processing plant at the Bootu Creek mine that is expected to enable OMM to achieve an annualised rate of production of approximately 1 million tonnes heading into 2010. The Company is also spending A$1.6 million to extend the Muckaty Rail Siding to allow the loading and railing of the expanded production capacity