As the battle for Consolidated Minerals continues, the miner announced a substantial increase in profit for FY2007 (with a lot more in store in FY2008 courtesy of rampaging manganese prices).

Shortly after, Brian Gilbertson’s Pallinghurst announced an extension of its $3.30 per share takeover bid until 8 September. Pallinghurst, which is hoping to acquire 60% of ConsMin has so far acquired a 5% stake in the manganese and nickel miner.

ConsMin profit for the year ending 30 June 2007 was up 573% to $31 million, while operating cash flow rocketed from $9 million to more than $58 million.

Despite the much improved profit result, and booming manganese prices, ConsMin boss, Rod Baxter, seems to be doing his utmost to dampen investor enthusiasm.

Last week, when contacted by the AFR, Baxter denied that ConsMin has been approached by any suitors. However, Baxter’s denials were hollow, with ConsMin revealing only days later that it had received a non-binding proposal with another company, believed to be Norwegian based, Tinfos. At this stage, ASIC has not indicated whether or not it will take any action against Mr Baxter.

This comes only months after ConsMin reluctantly announced to the market that it had negotiated significantly higher prices for the sale of manganese to China (with prices rising from only US$2.35/dmtu to US$7.25/dmtu). The increase is likely to have a material effect on ConsMin’s future earnings.

The actions of ConsMin management and its board show that it long ago ceased acting in the best interests of shareholders. Instead of continuing to recommend Pallinghurst’s $3.30 cash bid, the ConsMin board should be either rejecting all offers which fail to reflect the underlying value of the company (in light of higher commodity prices), or at least attempting to create a formal auction process which will provide the greatest return to shareholders.

Interestingly, ConsMin seems to be aware of shareholder anger at its recommendation, taking the rare step in its Target’s Statement to defend against suggestions that managing director, Rod Baxter, stands to personally gain if Pallinghurst’s bid is successful.

ConsMin noted that “none of the Directors will receive any benefits as a result of Pallinghurst’s offer. Media reports suggesting that Mr Rodney Baxter may receive CSM shares or CSM Options as a result of the success of Pallinghurst’s Offer are incorrect.”

ConsMin shares continue to trade well above Pallinghurst’s offer of $3.30 per share (closing at $3.75 on Friday), with the market expecting Michael Kiernan’s Territory Resources, or Tinfos may make a higher bid for the miner in the coming weeks.

Peter Fray

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