PIPE Investment into Gold Mining

Having unlocked the last part of the PIPE Investment into Gold Mining Theme Vitrine, here is the deal:

To recap:

Investment Opportunity

Gold

• The right economic / commodity cycle timing
• A hedge against uncertainty

PIPEs

• Listed undervalued companies with good gold assets but lacking capital
• Upside potential on mine development and leverage on mineral reserves

Africa

• African minerals neglected more than on other continents
• Good, diversified mineral locations across the continent

 

Investment Thesis

• Quality gold mining deal flow of listed companies ready to act upon
  • Direct / easy access to the TSX mining companies and management
• Proactive ownership of significant stakes at various lifecycle stages
  • Gather strong management team covering all investment aspects
• Leverage on Africa’s high potential for gold discovery and development
  • Place on-the-ground presence for project development capacity
• Has the market rebounded from deep cyclical lows, or is there more to come?
  • Evaluate timing to enter the market at discount vs. gold price
• Large demand for gold in around the emerging markets
  • g. Saudi at 3 grams per capita, world’s highest gold jewellery consumption

 

And the proposition:

Value Proposition

Targeting stocks at different stages of mining lifecycle development in order to blend risks and spread liquidity events

 

Targeting & Due Diligence

Given the mining risk, we will pay close attention to the main stock picking parameters as described herein:

• Playing the future production against the current market price
  • Relative valuation leverage that can be achieved

• The geology of the particular mine
  • Its potential mineral content / grade quality

• Strength of the management, their commitment and past gold mining track record
  • Good mining executives do not tend to stick around if the mine prospects are poor

• Specific country political circumstances and past experiences
  • Infrastructure availability, skilled resources, ease of permitting, etc.

• Appraisal of our proposed investment team (see below the references & the contributors to the PIPE Investment into Gold Mining thesis) value added potential
  • Geology, studies, Africa, mine development, finance, operation, business development, etc.

• Know the next steps and related requirements
  • A typical new liquidity event in 1-4 years, depending on the stock stage in the mining lifecycle

 

Target Return

• Investment of an initial USD 50 million to quickly build-up a portfolio of 3 quality stocks, harvest the investments and guide to an upside within a relatively short period of time (1-4 years in PIPE vs. typical 4-8 years in PE)
• Three investments at three basic stages of the mining lifecycle
  • Total investment of USD 50 million expected to generate a net money multiple of 7x in five years (after typical fees)
  • This is a base-case scenario; scenarios with increasing price of gold or additional value to the investment instrument optionality are not included

 

Venture Opportunity

• Seeking an alternative asset manager
  • With significant distribution muscle, probably in MENA or Asian regions, and an African appetite / pallet
  • To seed an investment vehicle with $3-4 million for team setup & putting the foot through the door with select targets
  • To fund-raise up to an initial $50 million for the first fund / vehicle and the proposed targets at various stages of development (see Target Returns)
  • Applying best practice investment processes with the back / middle office functions

• The investment team has a full spectrum of expertise and available deals
  • Gold mining, investment management and African business development
  • An actionable pipeline of known and accessible TSX opportunities
  • Quick yet fully researched new product launch opportunity at minimum price
  • Low investment, high carry and product add-on potential

• Win-win angle:
  • Our proposed investment team lacks sustainable fund-raising capacity required for new market products, so it is quicker & cheaper to partner with an existing platform that has the infrastructure and a few gold coins to risk…

 

Value Added

• Intimate knowledge of the companies, management, assets
  • Private investments into public equities (deals not available to public)
  • Funding through appropriate instruments for the particular mine life-cycles (best deals through convertibles or low valuations)

• Expertise in mining, gold and Africa
  • Mining processes and metal know-how
  • Business and venture development
  • Industrial, entrepreneurial and institutional networks
  • On-the-ground presence and knowledge of important markets

• Hands-on investment management process: including
  • Streamlining the decisions to get to the next level
  • Geological works to help feasibility (exec)
  • Development goals and supervision (non-exec, board)
  • Asset restructuring and disposal (advisor)
  • Financial and structuring advisory, and liquidity events / M&A lead
    • Capital management (high reliance on external consultants)
    • Capacity build-up (getting the steps done)
    • Financial prudence and confidence

• Extensive due diligence know-how

 

Theme Contribution

Discuss a deal?