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
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
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
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
Theme Related Tracker
Some metal thinking:
- No news at this time
Some feedback that came directly but could spark some comm:
– Don’t subscribe & don’t quote ft,economist,wsj,nyt…and all that crap
– Merrill and BofA both went bankrupt in 2008-9 and should have disappeared altogether. Saved by Washington and NYC, swept the problems under the rug by merging the two
– The world gold leaders, such as Newmont and Barrick, got there through other people’s work – Newmont via Buenaventura and the Yanacocha mine, Barrick through acquiring Placer Dome among others…
– In oil business a similar trend: Shale will prevail. The problem is in the stock and commodity exchanges. BIG MONEY popularizes climate change, drives down the price of oil and then the smaller oil companies when they try to refinance their debt, BIG BANKS don’t cooperate, and the BIG RATING AGENCIES add salt… So small companies and all their reserves get swallowed up by BIG COMPANIES. Plays again and again in hard-rock mining, and now we see it in shale
Reggie’s Last Warning…
After many years of schooling in the “science”of economics and finance at various so-called “educational” institutions and then confronting what I was taught with the “real/virtual” dystopian world of phynance, it was my luck, somewhat late in the day, to come across Alasdair Macleod, who, in my humble opinion, is the best economist/geostrategist alive.
Cutting through the mumbo-jumbo layers of bullshit proffered by the establishment over the past century, he is straight in the tradition of the great classical Scottish/French moral philosophers/economists who provided guidance to governments, before being displaced in the 1930’s by the spurious theory of John Maynard Keynes, which inverted that simple premise, by making governments the deus ex-machina of the markets. No more the subtle invisible hand , but instead the heavy hand of authority, at least for those with open eyes, in your back pocket and in your daily private life. Freedom no more.
We are about to unravel 100 years of errors, lies and compromissions…
I encourage you to listen to this one, though the Laurel &Hardy duo from down under, are not the best faire-valoir for his wisdom. Alasdair is generous in sharing his thinking but sadly I have never heard him being debated by an intellectual alter ego. That is the conundrum when you tower above the vulgum pecus. Being a true contrarian has a price, which makes it all the more precious.
Accept the buffoons as a comical interlude. As Karl said, history always repeats as farce…
https://www.youtube.com/watch?v=tSv2NyoQhz4