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
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