Gold part3

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

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

go2em

Marc-Henri Veyrassat

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

go2em

David Bodenberg

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

go2em

Reginald Duquesnoy

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

go2em

Discuss a deal?

 

 

Theme Related Tracker

Some metal thinking:

Rogue Economics

go2em

Jim Rickard’s Blog

go2em 

A bulge bracket

go2em

Global Mineral Deposits Mapped

go2em

Gold Hub Library

go2em

World Diamond Market

go2em

    No news at this time

Leave a Reply

Your email address will not be published. Required fields are marked *