INTERVIEW: Jupiter's Tshipi Buy To Transform Company

Jupiter Mines Ltd.'s (JMS.AU) planned A$245 million purchase of a stake in the Tshipi manganese project in South Africa is a transformational deal that could see the iron ore-focused firm expand into other steelmaking commodities in the future, Pallinghurst Chairman Brian Gilbertson said Thursday.

U.K-based private equity company Pallinghurst and its group of co-investors are selling their 49.9% stake in Tshipi to Jupiter in return for 1.16 billion new shares issued at 21.1 cents a share, boosting their stake in the junior miner to 85%.

Jupiter shareholders are expected to vote on the deal, announced this week, in May.

Gilbertson, a former chief executive of diversififed mining giant BHP Billiton Ltd. (BHP.AU), said bringing together the Tshipi project with Jupiter's Central Yilgarn iron ore project in Western Australia would deliver on Pallinghurst's long-held ambition of creating a mining company focused on raw materials used in the steelmaking process.

"Putting the two together is really to create the steel-feed corporation vehicle that we have referred to in the past," he said.

Pallinghurst and its group of co-investors have, to date, been frustrated in their attempts at creating this vehicle, being outbid by the Ukrainian oligarch Gennadiy Bogolyubov for Consolidated Minerals in 2007 and failing to agree terms on a planned deal with OM Holdings Ltd. (OMH.AU) late last year.

Gilbertson is optimistic he can seal the deal this time and said the initial response from shareholders had been positive.

"It is never over until it is done - who knows what can happen - but the board of Jupiter is enthused about it. All the shareholders we have spoken to are enthusiastic and it seems to make a lot of sense," he said.

"Jupiter is transformed from a company that was trapped in the junior explorer league to a two-commodity company with a very strong stable shareholder base and potentially in production in less than two years."

The focus for the enlarged Jupiter would be on developing Tshipi and the Yilgarn projects, but Gilbertson said that in the longer term the Pallinghurst co-investors could look to vend in other mines producing steelmaking materials like coking coal.

"By doing this transaction, Jupiter will become our preferred vehicle for any steel feed activities," he said.

"But it would be my preference that the Jupiter management should focus on delivering these two projects rather than go off looking for other blue sky transactions."

Pallinghurst's co-investors are private resource investor AMCI, South African investment bank Investec Ltd. (INL.JO), private equity investor Midstream & Resources and South Korean steel giant POSCO (005490.SE).

The cost of developing Tshipi is expected to be about US$200 million and Gilbertson said the Pallinghurst co-investors would take up their share of any equity raising Jupiter carried out to fund its share.

Tshipi is 50.1% owned by a vehicle of black economic empowerment group Ntsimbintle Mining SPV in which OMH has purchased a 26% stake.

A feasibility study at Tshipi pointed to an open cut operation of about 2 million metric tons a year over 28 years and the partners are targeting first production in 2013.

The project is adjacent to the Mamatwan manganese mine owned by BHP Billiton but Gilbertson said there were no plans for integration of the two operations beyond some neighborly cooperation on access.

"I am not suggesting anything beyond that and everything that Jupiter is buying into is a feasibility study that is to develop Tshipi as a standalone project," he said.

Jupiter is due to post information on the deal to shareholders in April ahead of a planned meeting to vote on the transaction in May.

-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094; alex.wilson@dowjones.com

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