Column published in TheBusinessWeekly on 20 April 2008 Page 21

1. TheBusinessWeekly n 20 April 2008 n 21
Amlak Finance, the largest real
estate financier in the Middle
East, announced the signing of
a Dh1.4 billion syndication facil-
ity with Emirates Islamic Bank
(EIB).
The Wakala facility is prima-
rily intended to support Amlak’s
real estate investments.
“Amlak Finance’s finalising a
financial transaction of this mag-
nitude with a respected industry
leader such as EIB is an impor-
tant milestone in our continuing
journey to drive growth through
innovative and flexible funding
structures and instruments,” said
Arif Alharmi, chief executive of-
ficer of Amlak.
“We have aggressive growth
plans for 2008 and beyond and
will continue our strategy to focus
on our core business and compe-
tencies, real estate financing and
investments. This transaction
forms part of our overall funding
requirements for 2008 to support
our growth plans and interna-
tional expansion. The syndication
facility, which was substantially
oversubscribed, exhibits the con-
fidence in Amlak’s growth plans
and strategy,” he added.
“Emirates Islamic Bank has
always been at the forefront of
the economic growth in the UAE.
Our portfolio of strategic alli-
ances includes many of the most
prominent organisations in the
UAE, and Amlak is another sig-
nificant addition to it. Getting
together with such high-profile
partners adds a new dimension to
the agreement,” Ebrahim Fayez
Alshamshi, chief executive officer,
Emirates Islamic Bank, said.
EIB’s partners in this venture
are Al Watani Al Islami (ENBD),
Dubai Islamic Bank, Habib Bank
AG Zurich, Khaleeji Commercial
Bank, Abu Dhabi Islamic Bank,
National Bank of Abu Dhabi, Na-
tional Bank of Umm Al Qaiwain,
Sharjah Islamic Bank and Union
National Bank.
“We look forward to combin-
ing our mutually proactive and in-
novative approaches to the finance
market to ensure that both organ-
isations remain at the forefront of
this rapidly developing industry,”
Alharmi said.
Amlak signed in 2007 with
EIB a Dh800 million Wakala fa-
cility, which was aimed at sup-
porting the company’s multitude
of activities in the UAE.
Amlak, EIB sign Dh1.4b facility
TBW Bureau
Monarch Gold Mining Co Ltd., Australia, listed on DIFX, has pub-
lished its quarterly activities report for the quarter ended December
31, 2007. The activity report has disclosed the consolidated statement
of cash flows while the half-year ending report of even date disclosed
the full set financial information, as reviewed by PriceWaterhouse-
Coopers, Perth.
The half-year ended report discloses an accumulated loss of A$65
million, which grew by 1.37 times over the 2007 year ending June 30,
an accumulated loss of A$47 million.
The total equity funds shrunk to 0.98 times, due to loss and boost-
ed by contributed equity growth of 1.15 times from A$103 million to
A$119 million.
Internal conflict
The gross revenue grew to A$13 million, against a mine operat-
ing cost of A$24 million, and other overheads, a depreciation of A$6
million. Thus, the internal conflict in the financial structure of the
company is driven by increasing loss, increasing and then drowning
equity funds.
The exploration expenditure deferred grew to A$57 million, by
1.39 times in the half year. The break-up of the exploration cost, if
disclosed, could have thrown more insight into what drove the explo-
ration costs so fast and uncontrolled with respect to the operating cash
flow, if not the financing cash inflows.
Once the company crosses a certain level of liquidity, working capi-
tal deficiency, the game becomes very tight. Then miners have a great
history of hopes lost and gold mined.
The current liabilities, which were 64 per cent of current assets
in June, grew to 229 per cent by six months. This should have placed
tremendous pressure on the mining exploration and operations.
The annual report needs to disclose what went wrong with the ex-
ploration financial control to drive the company to disclose in the notes
that ‘Going Concern’ assumption is distressed by a working capital
deficiency of A$13 million.
The turnaround of the company will be a great lesson in leadership
and we need to expect to welcome a phoenix ris-
ing from its ashes in the gold mines in Western
Australia.
Inadequate recovery
Companies explore, mine and miss, but what makes Monarch pour
more cash when the gold recovery was not adequate in terms of quan-
tity with respect to the cash resources planned? The cash resources
shrunk from A$22 million to A$1 million in the half year ending De-
cember 31, 2007.
Controlling this descend should have been the lesson for the capi-
tal-budgeting process at Monarch.
Monarch apparently has erred on its exploration and investment
practice as it burned up its capital without increasing the capital ad-
equately and ahead of exploration costs, risks and delays.
Contrary to the Monarch practice of investment control, we have
a few companies in the UAE which have raised huge capital to keep
them deposited in banks, innovating ways of not spending the capital.
Design a business model which does not burn up equity as much as
cash while implementing the business model.
The company should be the target for takeover by another success-
ful management which has done its capital budgeting more shrewdly,
which has the collective art to judge the risks and rewards of explora-
tion and has reserved adequate capital to cover the risks of explora-
tion.
Since the risk assessment has gone wrong with respect to the capi-
tal budget, its equity raisings, the shareholders should review the Go-
ing Concern with the same set of decision-makers or change them.
Or a set of new shareholders will buyout and place new management
control anyway, if the Monarch mines more risk than gold.
If the existing management does not provide the leadership to
change, there could be action, run by not-so-marginal investors. That
alone may protect the interest of the marginal investors.
banking&finance
Monarch:Need equity and management?
E.Michael Johnson
CORPORATE TICKET
E Michael Johnson is a member of the UAE Chapter of ICWAI. The views expressed
here are as a marginal investor in the financial markets.
Dow Jones Indexes, a leading glo-
bal index provider, has increased
its presence in the UAE by open-
ing an office in Dubai, its first in
the Middle East. The office begins
operations immediately and will
handle business activities in the
Middle East region.
The Dubai office will provide
client support, manage client rela-
tions, promote and support Dow
Jones Indexes’ conventional as
well as sharia’a-compliant prod-
ucts and develop new licensing
opportunities in the Middle-East
and North Africa region.
Dow Jones Indexes’ expansion
reflects the increasing interest in
Middle East financial markets in
recent years.
Dow Jones
Indexes in Dubai
TBW Bureau
TBW April 20 (b).indd 21 17/4/08 16:57:28