The shares of the JSE-listed Pallinghurst rose nearly 2% last week on the new manganese and iron-ore transaction that it is proposing with its ASX-listed associate company, Jupiter Mines.

“This is a key step in our strategy, and will realise significant value for shareholders,” said Pallinghurst CE Arne Frandsen.

Pallinghurst would exchange its indirect interest in Tshipi e Ntle Manganese Mining for new shares in Jupiter, in a deal that could transform it into a manganese and iron-ore explorer and developer.

“As well as being transformational for Jupiter, Tshipi will also benefit from operating within a listed platform as it progresses nearer to production,” Frandsen said.

Jupiter will acquire 49,9% of Tshipi from Pallinghurst and coinvestors and, in return, issue more than one-million new shares to them at a price of A21,10c a share, based on the 30-day volume weighted average price of Jupiter shares prior to the announcement.

Tshipi’s implied valuation is A$490-million, with Jupiter’s proposed acquisition of 49,9% of Tshipi being worth A$245-million. More than 179-million Jupiter shares will be issued to Pallinghurst, worth $35,8-million.

Pallinghurst owns 25,15% of the Jupiter shares in issue, which the transaction will dilute to 17,79%.

If the unanimously Jupiter board-approved deal goes through, Pallinghurst’s Brian Gilbertson will become a nonexecutive director of the Jupiter board.

The rationale for the transaction is that the supply of iron-ore, coking coal and manganese to the global steel industry is intensifying and that the major steel producers are seeking to secure their raw material supplies through equity ownership of mining companies.

As Pallinghurst has been developing a steel-feed corporation investment platform through Tshipi and Jupiter, it sees the housing of the two assets in one company as making sense.

The deal, if done, will result in Jupiter owning the Tshipi and Oakover manganese assets; its already owned 890-km2 manganese project in Western Australia’s East Pilbara region; and iron-ore assets in Western Australia’s prospective central Yilgarn region.

The transaction speeds up the transformation of Jupiter from an exploration company into a production development company and one of the few ASX-listed companies with a large manganese resource.

Tshipi, in which Jupiter already owns an indirect 9,98% and Pallinghurst coinvestors 49,9%, is a joint venture with Ntsimbintle Mining, a black economic-empower- ment consortium that owns the remaining 50,1%.

Tshipi’s primary asset is located in the south of South Africa’s Kalahari basin, next to Samancor Manganese’s Mamatwan mine, which has been mined for more than 45 years.

Turgis Consulting estimates the Tsipi manganese project as having an indicated mineral resource of 61,82-million tons at 7,07% manganese, and an inferred mineral resource of 101,41-million tons at 37,11% manganese, totalling a code-compliant 163,2-million tons of openpit ‘Mamatwan-type’ ore, to a depth of 250 m.

Project construction could start in 2010 to achieve steady-state production by early 2013, in line with expected rail and port infrastructure developments. Present estimates are an openpit mine life of 60 years-plus.

In July, Pallinghurst disposed of an indirect interest of 2,27% in Tshipi for US$6,9-million to a subsidiary of South Korean steel major Posco, reducing its interest to 7,71%.

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