Pequeno minerador. Uma luz no fim do túnel.

LONDON -- There’s no disguising the tremendous influence RAB Capital is having on the mining business, particularly among smaller exploration and mining companies that have to struggle hard to raise money. For example, in the past couple of weeks alone, London based RAB has provided £1.68m for Griffin Mining (LSE:GFM), £730,000 for Southern African Resources (LSE:SFU) and, most recently, £800,000 for African Eagle Resources (LSE:AFE). This largesse does not represent a sudden interest generated by the seeming improvement in the global economic outlook and rising commodity prices. In the past two years or so RAB Capital has pumped about US$50m (£34m) into exploration/mining companies, mostly small ones. What makes this even more unusual is that RAB Capital is a generalist fund management company and not one of its funds is devoted entirely to natural resources investment. The amount of money it has to offer obviously buys big chunks of the companies on the receiving end. Among London listed mining/exploration companies, RAB Capital, following its recent investments, now owns 28.6 percent of African Eagle, 13.4 percent of Griffin and 23.8 percent of Southern African. It also has stakes in Celtic Resources (LSE:CER), 10 percent, Caledon Resources (LSE:CDN), 2.9 percent, GMA Resources (LSE:GMA), and Tertiary Minerals (LSE:TYM), 11.6 percent. It also owned 7 percent of Thistle Mining but sold when it was obvious the weakening of the US dollar against the rand would reduce the attractions of this stock. A 12 percent stake in Oxus Gold (LSE:OXS), has been cut to 6.9 percent, as you might expect, given that the Oxus price is up by more than 400 percent since the start of this year. RAB Capital was set up at the end of 1999 by two investment bankers, Philip Richards and Michael Alen-Buckley – the name comes from their initials. They first met while working for London broker, Smith Newcourt, which was taken over by Merrill Lynch. When they decided to form RAB Capital, Richards was a managing director at Merrill Lynch in London while Alen-Buckley worked for ABN Amro. Today RAB employs 30 and, according to Richards, has nearly US$1bn under management in six main funds and a few other operations. He claims: “Every single one of our funds has made investors money.” Although he does not claim to have any special mining expertise, Richards was attracted to the business two years ago when, he says, “central banks were printing money because of fears of deflation, and that must be good for gold and commodities.” But he stresses that only a relatively small percentage of the money under RAB management has been allocated to mining/exploration stocks. And most of the money invested in mining so far has gone into Toronto listed stocks. The funds have stakes in about 30 companies there. For example, Richards says RAB was an original investor in Kirkland Lake Gold and has seen a four fold increase in the value of that investment. He also mentions Desert Sun Mining, where RAB’s investment is now worth six times the money put in. At random, he also names among the Canadian companies Admiral Bay, America Mineral Fields, Ariane Gold, Black Swan Resources, Cambior, Defiance, European Gold Fields, Northern Orion Resources, Majestic Gold and Yamana. Richards singles out Majestic, which has the Ceske Brezovo gold project in western Slovakia, for special mention – “it is still a very early stage project but it could have one of the biggest gold deposits in the world,” he suggests. RAB also has investments in about six Australian listed mining stocks. Most investment fund managers in London avoid taking big stakes in small companies on the grounds that “buying the shares is easy, selling them can be very, very difficult.” Richards says: “I like to buy things when nobody else wants them and sell when everyone does want them.” When a share rises about 50 percent in price his funds sell some. “By selling we are in no way implying any lack of faith in a company but we help to provide liquidity. We are helping the company in that way because investors won’t buy a stock if they think it lacks liquidity.” RAB is already well in profit on its recent purchase ten days ago of 12m Griffin shares at 14p each. Griffin has traded up to 23p on heavy volume. A few days after accepting RAB’s cash, Griffin announced completion of a feasibility study on its Caijiaying zinc-gold project in China and said it would now look for debt financing for a US$15.7m mine. Caijiaying will initially be a 200,000 tonne a year underground mine exploiting reserves of 2.57m tonnes grading 12.59 percent zinc, 0.42g/t gold and 445.63g/t silver. Griffin said the project in its current guise would generate cumulative after tax cash flow (after capital repayment) at the current zinc price of US$760/t of US$41.2m. That rises to US$67.2m at a price of US$900/t, and US$85.8m at US$1000/t. Payback of capital is expected just over three years after production begins. Roger Goodwin, Griffin’s finance director, dismisses the idea that his company gave too much away by allowing RAB to take the shares at 14p. When talks with RAB started a month ago, Griffin’s share price was 15p, so the placing price represented a small discount. Goodwin said Griffin was influenced also by the struggle it had had in the past when attempting to raise capital. “We thought to ourselves: the feasibility study will be ready in September – but will the money still be there in September?” There is also the potential of more money to come because RAB also took warrants exercisable up to August 2005 at 20p and this would give AIM listed Griffin another £1.2m before costs. Goodwin said another important factor in the decision was that Griffin is worried about a bid coming at a low price. A big investor on the share register offered some protection if that happened. Richards reckons Griffin is worth 30p a share at today’s zinc price and 40p if zinc goes up. “And they are getting very good gold grades.” Richards reckons investors who bought Griffin shares at 23p recently are unlikely to lose money. “There is all the upside of rising zinc and gold prices coming through.” He is also enthusiastic about another recent listing on AIM, GMA Resources, which has Bobby Danchin, the former Anglo American executive director, on its board. GMA won a tender for 52 percent of the company that owns and operates Algeria’s sole producing gold mine. Richards reckons that, if all went to plan, GMA’s present market value is less than the annual cash flow it will generate in 2005. Every regular investor in junior mining stocks will experience some failures to offset the successes. Richards is still smarting from allowing RAB to put money into Navan when the London listed company was fighting for survival under a new management. The struggle did not last long and Navan went into receivership, taking with it US$4m of RAB’s money. Nevertheless, Richards still seems to be talking to the corporate financiers at Canaccord Capital, who persuaded him that Navan was a reasonable bet, because he is still supporting Canaccord’s share placings – RAB acquired its Southern African stock via one of these. Richards simply says the shares in Southern African, which has a platinum project in South Africa, acquired at 2p each, “were cheap.” Most of RAB’s mining investments are held be two particular funds, the Special Situations Fund, and the Europe Fund. Richards says £100,000 invested in the Special Situations Fund on January 1 this year is now worth £600,000, while the mainly blue chip Europe Fund is up by 90 percent past four years compared with a 30 percent fall in the total market. These gains are after fees, he stresses. However, private punters cannot for the time being share in any future RAB Capital successes because it is classified by the UK authorities as a hedge fund group – and the authorities have decided that hedge funds can be very dangerous for unsophisticated investors. Richards agrees with this view and it means you can’t even enter RAB’s website without going through some screening to see if you have the necessary sophistication. He says, however, he is working on a project that eventually might open up some RAB funds to private investors. By: Ken Gooding Posted: 2003/09/07 Sun 08:18 EDT | © Mineweb 1997-2003