Zambian mining fund - Invest in Zambia


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Zambian mining fund - Invest in Zambia

  1. 1. Zambian Mining Fund Using financial and technical skills to create social impact, improve the mining sector, and achieve results for investors. sector investors Target: ZMW 120 Million (US$ 20 Million) : The Vision The ECRUT Mining Fund is a novel collaborative effort to encourage the growth of the smal small scale mining industry in Zambia. Through the introduction of financial capital and human resources, this unit trust/mutual fund aims to invest in small scale miners - aggregating where smal possible - on a for-profit basis. All investments at the outset will have a planned exit strategy profit nvestments through a direct sale to an existing mining house with aligned interests, a buyback agreement with target investee companies shareholders and/or use of the stock market. nies and This fund is an investment vehicle that will provide capital as well as significant technical expertise in all the financial, managerial, training, geological, and geophysical needs of the investee companies. It will also build and foster relationships with Zambian mining companies . to improve overall productivity. The fund aims to explore the opportunities in the small scale mining sector (a sector that has remained largely untapped) and to maximise employment in a untapped targeted manner, improving the mining skills of the target companies, whilst minimising the , companies, inherent risk. The Team The fund will be set up under the Equity Capital Resources Unit Trust (ECRUT). ECRUT has been in operation since 2008 and has three funds under management. The new mining fund will fall under Equity Capital Resources Plc as the management company and the team will include: Nathan De Assis – Executive Director in charge of strategy and oversight of the operations of the funds. t Joe Beale – Fund Manager in charge of fund management and working with target investee companies on a portfolio management aspect.
  2. 2. Independent Geologist –G Geologist providing technical back stopping on the viability of the target investee companies and sectors. BDO Accounting – Provision of reporting accountant services for the fund Standard Chartered –C Custodian Bank for all assets under the fund. Investment Committee – an independent professional panel of country and industry experts will authorise each new investment. The initial Dealflow ealflow Current phased planned rollout, not all deals have completed due diligence or signoff. 1. Mining equipment. ZMW 6 Million ($1 million). This company will be wholly t. wholly-owned, and will provide mining equipment, mining managerial planning and technical services, as well as a full back-office: administrative, financial, risk, and project management , including the vital component of upskilling/training of the miners. Services will be provided to all the investee companies and to the general public if capacity allows. Estimated employment – 7 strategic jobs in the company initially, rising to over 50 skilled initially, Zambian staff. 2. Amethyst. ZMW 6 Million ($ 1 million). This investment will aggregate a fragmented industry by providing a buying office for all 43 licenced small-scale miners. It will also . introduce the mining machinery and infrastructure needed to provide toll-mining services to infrastruc mining the entire industry. This will be done on a product-share basis; mining with shared equipment share to maximise productivity on a round-robin plan that enables all miners to boost productivity. round robin Estimated employment – 10 jobs in the company, 200 jobs in the mines. Exit strategy : sale back to the miners themselves, possibly with own listing. 3. Emeralds. ZMW 7.2 Million ($ 1.2 million). This investment is two-fold : the main mine is fold situated next to the largest emerald mine in the world, has two test pits which show potential and similar geology to the adjacent operational mine. Similar to the amethyst initiative above, offers will be made through the collective association, incorporating the new Government ffers association porating initiative intended to revitalise the industry, to provide toll-mining facilities (machinery, capital and expertise). Due to a lack of reliable machinery and sparse geological work, small scale geologic miners are usually restricted in their abilities to thrive in this industry. Estimated employment – 140 jobs in first stage, 600 jobs when full-scale.
  3. 3. Exit strategy : Listing on the stock exchange (LuSE) ( These investment deals, once bedded down, will be followed by: Investment 4. Manganese. ZMW 6 000 000 (US$ 1 000 000). Several areas have been identified where our “aggregate the small miners” model will add value, and this will proceed to Due Diligence once funds and capacity allow. In order to provide added value within alue Zambia, a manganese smelter will be added once the “single-purchaser-for-a-reasonable reasonable-price” investment is perfected. Investment 5. Alluvial gold. ZMW 600 000 (US$ 150 000). A tiny refinery (capacity only 50 kilograms per month) for grains and nuggets will be set up to purchase and refine the output from this hidden sector. By paying fair prices, livelihoods will be enhanced, and the miners . endeavours can be ultimately brought into the country’s mineral reporting structure. A physical gold-loan will eliminate the arbitrage risk as daily sales at spot from the loaned gold loan will match the weight of the gold purchased. purchase Investment 6. Further deals exist, but have not yet reached the “reportable project” stage. . The Opportunity (The Miners) This fund is being developed on the backdrop of an opportunity within the small scale mining sector, that has largely remained unorganized therefore increasing the chances of meaningful unorganized, investment and returns. The Market There are a myriad of small-scale miners, either at exploration or at early-mining stages, who scale early mining do not have the capital or technical skills available to increase production, mechanise, market their products, plan, or grow efficiently. The fund will capacitate the miners in the small scale segment – a market which is largely untapped and underserved. It is important to mention that the target investee companies are high risk and as such will require that a comprehensive due diligence is conducted that is acceptable and approved by the Investment Committee and will also be presented to the target investors for information.
  4. 4. The Potential Investor Pool Large miners: Historically, the larger mining industry in Zambia has shown little interest in assisting smaller scale miners. The fund will target local and external mining houses that have shown an interest in investing in the mining fund, either for CSR or for the chance to purchase assets once they , chance have been commercialised. Government: The Government of Zambia has budgetary constraints, and –to date– has been unable to grow budg this segment of the Zambian economy to any level of efficiency. The fund will apply for relevant existing incentives from Government that can enhance the growth and development m of the fund, and increase the potential returns to investors. , investors Large investors An investor pool within and outside Zambia will be identified including countries with strong appetite for mining investments - like Canada, Australia, United Kingdom, South Africa, and United Arab Emirates. Subject to regulatory approvals, these documents will be made public ubject to the potential investors. Small investors The fund will provide for any interested Zambian investor to participate with an ultra low u subscription from a minimum price of ZMW 120 ($20). Risk Mitigation The element of risk associated with the fund is herein explained Investment in mining is a long explained: ent term nature and as such investors are expected to take a long term horizon on each investment. Various risk mitigation options are available, including political and credit risk insurance. Internally, the selection of investments will include a full risk assessment. Target investee companies will have successfully completed a due diligence process which ensures ess transparency. It is this selection of the target projects that provide the optimal return for investors. Pilot The fund will open as soon as all relevant regulatory processes have been duly comple process completed. Funds will be raised on an ongoing basis, the Management Company will use the deal pipeline going as the basis for fund raising until the target amount is reached. The first investment will be made once the desired level of the fund is reached. Any new assets in the deal-flow pipeline reached deal will be added on a planned basis as funds and mining, technical and managerial capacity is l available.
  5. 5. Specifics: Open ended unit trust. Annual valuations and dealing • • • • Zambian investors : 5% bid-offer spread, ZMW 120 minimums, open entry and exit bid Offshore investors : 5% spread, ZMW 30,000 minimums, exit option after two years a Large investors : 3%spread, ZMW 1,500,000 minimum, exit option after five years 3%spread, Mining-houses : 2%, ZMW 6,000,000 minimum, exit on planned basis through call options on specific asset or by cash payout when an asset is exited through listing. assets, Structure of Fund tructure Further information from: Equity Capital Resources Plc 12 Mushemi Road Longacres, Lusaka Zambia. Telephone + 260 211 840313 Email: Nathan De Assis +26 0955 378 489 Skype : nathandeassis Joe Beale + 26 0969 505 242 Skype : joe.beale