Ukraine tycoon tightens grip on manganese market
Ukrainian billionaire Gennadiy Bogolyubov has set his sights on a mine in Australia’s outback to boost his presence in the global manganese market that is dominated by mining majors such as BHP Billiton.
Analysts expect the billionaire to make a grab for OM Holdings Ltd., which owns the Bootu Creek manganese mine in Australia’s Northern Territory, in a push for more than a 15 percent share of the world market.
Bogolyubov built a 12 percent stake in the Australian-listed company late last year and demanded a seat on the board.
But OM Holdings rejected the proposal, saying it would present an unworkable conflict of interest, since Bogolyubov already owned Australia’s Consolidated Minerals Ltd , a major competitor in the manganese market.
“The fact that he’s built a 12 percent stake and now wants a seat on the board shows it’s not a passive play,” said a Sydney-based analyst who declined to be named.
She described as “meaningless” a statement last week from Bogolyubov’s ConsMin saying it had no present intention of lifting its shareholding in OM Holdings.
Greg Chessell, an analyst at Perth-based stockbroker Euroz, said he believed ConsMin’s intentions towards OM Holdings were most likely predatory.
A ConsMin spokesman declined to comment further on the company’s intentions regarding OM Holdings.
Control of OM Holdings would give Bogolyubov a further 5 percent of the world’s high-grade manganese ore supply. He already controls 10 percent after gaining control of ConsMin early last year via a A$1.01 billion hostile offer.
Bogolyubov, 46, has kept in the background, though in the Ukraine he is a high-profile businessman, being a founding shareholder of the country’s largest bank PrivatBank.
He began his entrepreneurial career in 1990 when the Soviet Union was collapsing, first moving into construction and then banking. His other investments include stakes in Ukraine’s largest oil and gas company, Ukrnafta, and Dnepropetrovsk Metallurgical, one of Ukraine’s biggest steel mills.
Apart from ConsMin, his manganese interests include a mine in Ghana, Ukrainian ferroalloys plants and U.S.-based producer Highlanders Alloys.
Manganese is largely used to make steel-alloy products such as engine parts.
Its price tends to move in step with iron ore prices, enjoying heady rises over the past two years. Booming demand pushed prices close to $5,500 a tonne by mid-2007 from around $1,300 at the start of that year. Midway last year, manganese cost more than $4,000 a tonne but as the financial crisis took hold its price nearly halved to trade around $2,200 a tonne, a level it remains close to.
Producers of steel-alloying metals such as manganese across Australia are scaling back production in the face of dramatic declines in steel making due to the global financial crisis.
ConsMin operates the Woodie Woodie manganese mine in western Australia, which has proved disappointing for Bogolyubov due to falling reserves.
Woodie Woodie has the capacity to produce about 1.1 million tonnes of manganese a year while Bootu Creek produces 690,000 tonnes, though there are plans to lift output to 850,000 tonnes annually, markets permitting.
Last month, OM said output from Bootu Creek will be cut by 28 percent to 500,000 tonnes this year.
Bogolyubov paid top dollar for ConsMin after a heated battle for control with a rival group led by former BHP Billiton Chief Executive Brian Gilbertson.
But analysts say he will be unwilling pay much of a premium for OM Holdings, having acquired his stake as the stock fell from A$2.80 in June last year to as low as 66 Australian cents.
OM Holdings will seek approval on Thursday at a shareholders meeting in Singapore for moves to bolster its defences against a hostile takeover bid. Though listed in Australia, OM Holdings is domiciled in Bermuda where there is little protection against takeovers. Its headquarters is in Singapore.
The company wants its constitution amended so that a bidder must make a full offer to all shareholders once it goes beyond 19.9 percent ownership.