PIPE Investment into Gold Mining
Having unlocked the last part of the PIPE Investment into Gold Mining Theme Vitrine, here is the deal:
- The right economic / commodity cycle timing
- A hedge against uncertainty
- Listed undervalued companies with good gold assets but lacking capital
- Upside potential on mine development and leverage on mineral reserves
- African minerals neglected more than on other continents
- Good, diversified mineral locations across the continent
- 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:
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
- 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
- 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…
- 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
Dr. John-Mark Staude
John-Mark’s Arriva Management is an independent mining consultancy with a global remit and credentials, specialised in mineral prospecting and project evaluation & valuation
Marc-Henri’s African Resources Capital is an independent advisory and venture development firm, specialised in structuring and raising capital for corporates & projects in Africa
David is a seasoned global research analyst with strong institutional research lead in firms such as Stein Roe&Farnham, IIT, Oppenheimer, A.G.Becker Securities (Warburg Paribas), Merrill Lynch, Morgan Stanley and Moseley Securities. He also has over 10 years of independent emerging market research, and has a specific interest & expertise in mining and oil & gas
Reginald has a 40 year investment experience spanning four continents and multitude of sectors. He was both on the buy and sell side on & off Wall street, with stints in Paris, London, Istanbul, Cairo and Moscow
Most recently, he was a director and consultant to a number of European hedge funds looking at emerging market opportunities
Theme Related Tracker
Some metal thinking:
- Markets at risk of ‘waterfall event’, this is how gold would perform – Lobo Tiggreon May 21, 2022
(Kitco News) - Markets at risk of ‘waterfall event’, this is how gold would perform – Lobo Tiggre
- Gold's bull versus equities' bearon May 20, 2022
(Kitco News) - The Federal Reserve is cliff-walking on a very narrow ledge, and that is making equity investors very nervous; however, the gold market continues to do its job holding steady in volatile waters.
- The real 2022 'shocker' is coming, and it has to do with U.S. natural gas prices – Goehring & Rozencwajgon May 20, 2022
(Kitco News) - Anomalies and risk events of 2022 are far from over, with the next crisis developing in the U.S. natural gas market, according to Goehring & Rozencwajg Associates managing partner Leigh Goehring.
- Gold's 'luster' against equities, inflation, is weak; will it pick up in 2023? - Gary Wagneron May 20, 2022
(Kitco News) - Gary Wagner, Editor of TheGoldForecast.com, thinks gold has recently lost its “luster” as a hedge against equities and inflation.
- South African platinum producer Tharisa expects up to 54% increase in 6M basic earningson May 20, 2022
(Kitco News) - South African platinum group metals (PGM) producer Tharisa (LSE: THS) announced today that its basic earnings per share (EPS) for the six months ended 31 March 2022 are expected to be between $32.0 cents and $33.0 cents per share with a tolerance of 10%.
- Gold's big $1,800 test on the radar next week as stocks' steep selloff intensifieson May 20, 2022
(Kitco News) - With the U.S. stock market still at risk, should gold be trading higher? Analysts see next week as an important test for gold as markets debate the effects of the Federal Reserve's oversized hikes.
- Atico receives enviro approval for its La Plata gold and copper project in Ecuadoron May 20, 2022
(Kitco News) - Atico Mining (TSX.V: ATY) announced Thursday that it has received approval of the Environmental Impact Assessment (“EIA”) for the construction and operations of its La Plata gold-copper-zinc-silver mining project located in Ecuador.
- Uncertainty rocks equity markets but boosts bullish sentiment in goldon May 20, 2022
(Kitco News) - Bullish sentiment is starting to rise in the gold market as the precious metal is looking to end its four-week losing streak after bouncing off support below $1,800 an ounce.
- Chilean lithium giant SQM boosts net income 1,071% in first quarter, increases capacityon May 20, 2022
(Kitco News) - Chilean mining company Sociedad Quimica y Minera de Chile (SQM), a major lithium producer, yesterday reported net income of US$796.1 million in Q1 2022, an increase of 1,071% compared to net income of US$68.0 million in Q1 2021.
- Real estate 'slowdown' starts in 2023; The Fed caused "housing inflation" - Danielle DiMartino Boothon May 20, 2022
(Kitco News) - The U.S. Federal Reserve is to blame for inflation and rising housing prices, said Danielle DiMartino Booth, CEO of Quill Intelligence, who said that 2023 is the year a housing crash could start.