Window open for mine floats, says EMR, after Ravenswood buy
EMR Capital boss Jason Chang says the IPO window is still firmly open for mining floats with the right assets and operating mines.
EMR Capital boss Jason Chang says the IPO window is still firmly open for mining floats with the right assets and operating mines, as the private equity play adds Resolute Mining’s Ravenswood operations to its portfolio.
The surging gold price has ramped up the value of gold sector mergers and acquisitions in recent months, with Kalgoorlie’s iconic Super Pit fetching more than $2.2bn across two tranches.
But Mr Chang said there was still value to be found in the sector, pointing to the structure of EMR’s deal with Resolute.
EMR and Singapore-listed Golden Energy and Resources (GEAR) will pay $100m upfront for Ravensthorpe, with $50m to be funded by Resolute itself through a promissory note.
Another $200m could flow to the Africa-focused gold miner, linked to the gold price and the success of EMR’s work in bringing Ravenswood’s expansion and extension project — tipped to turn the ageing mine into a 200,000-ounce-a-year gold producer — to fruition.
Mr Chang said the structure of the deal was aimed at ensuring EMR had enough capital available to fund the expansion plan — last tipped at about $150m.
“That’s why we structured the payment to the vendors the way we did — $100m upfront, of which they are funding half. So a lot of our money is going to be in the capital spend — it’s not actually buying gold as such,” he said.
“This acquisition is unique in a sense that it’s not based on the gold price per se, so our job is very much to execute the plan — the capital spend to develop that orebody.”
Half of Ravenswood’s $300m potential price tag is linked to the outcome of any on-sale or float of the mine, and EMR — which operates two mines in Queensland already, the Capricorn copper mine near Mt Isa and the Kestrel coking coal mine in the Bowen basin — was last year linked to an IPO of some or all of its producing assets.
EMR also runs the Lumbabe copper mine in Zambia and the Golden Grove copper and base metals mine in WA.
Mr Chang said he believed the IPO window was very much open for the right project, although he did not comment on EMR’s plans.
“In gold and copper there would be definitely appetite for quality assets and quality management and the right story and the right angle,” he said.
“So I think in the non-mining sector there have been some that have got away very well globally, so the IPO market is still open for the right type of investment.
“For gold and copper we’ve got no doubt it’s open so long as the thematic and upside is right for investors.”
And while the gold price, which surged briefly above $US1600 an ounce a week ago for the first time since 2013 after Iran’s missile attack on two US bases in Iraq, has pushed up price expectations across the sector, Mr Chang said EMR still saw opportunities in both gold and particularly copper.
“We think there is a good window of opportunity for people like EMR.
“Gold is a bit of an interesting one, but even within gold we see opportunities that require a bit of work, assets that require a bit of work or improvement. And if you have the ability to make those improvements you can outperform the market,” he said.
“Many people would say (copper) pricing is below where the long term is, so we are seeing a lot of good copper opportunities. We would say that we still see a hectic market for buying, and also selling, so it’s a very interesting situation where we are seeing a growing appetite from capital markets for going into mining metals — not just in Australia, but globally.”
Resolute shares last traded up 1c at $1.18.