Raising finance in today’s market place



                       RICHARD CHASE
                       Managing Director

...
2




“At some point the quantitative
  easing will come to an end,
    but until it does this bull
     market is sponsor...
3

              New Issues on AIM




Global Mining Offers – Market Share by Number



Global Mining Offers – Market Shar...
China: Driving demand for natural resources
                                                                              ...
Sharp Recovery in Natural Resources Sector
                                                                               ...
6




www.cartoonstock.com
Equity Finance – Deeply discounted issues in H1 2009
                                                                     ...
Junior Company Equity Finance
                                                                                 8




     ...
Equity Finance – A Currency for Acquisitions
                                                                             ...
Equity Finance – Financing for Growth
                                                                             10


  ...
Equity Finance – Deeply Discounted Rights Issue
                                                               11




    ...
Equity Finance – Rescue Finance
                                                                                          ...
Equity Finance – Choose your broker (and your audience)
                                                                  ...
Debt
                                                                14


       Debt has re-appeared

       It is starti...
Alternative loan options
                                                                                                 ...
Private Equity
                                                                                                           ...
Private equity and investment companies
                                                                                  ...
Private equity and investment companies
                                                                                  ...
Sovereign Wealth Funds
                                                                                  19


SWF’s have f...
20


But the last word on why the equity and debt markets are booming must go to Alex.......
Richard.chase@ambrian.com                                                                                 +44 (0)207 634 4...
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Objective Capital Global Mining Investment Conference - Raising Finance in Today's Marketplace: Richard Chase

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Objective Capital Global Mining Investment Conference
Raising Finance in Today's Marketplace
30 Sep 2009
by Richard Chase, Ambrian Partners

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Objective Capital Global Mining Investment Conference - Raising Finance in Today's Marketplace: Richard Chase

  1. 1. Raising finance in today’s market place RICHARD CHASE Managing Director CREATING VALUE ACROSS THE RESOURCES SECTOR
  2. 2. 2 “At some point the quantitative easing will come to an end, but until it does this bull market is sponsored by governments and everyone Global financial model: should enjoy it.” 1.Find rainbow 2.Borrow against expectation of finding crock of gold
  3. 3. 3 New Issues on AIM Global Mining Offers – Market Share by Number Global Mining Offers – Market Share by Proceeds
  4. 4. China: Driving demand for natural resources 4 Home Appliances 1% Iron Ore 58% Autos & Shipbuilding 5% Other Energy Coal 38% Metal Goods 6% 6% Zinc 35% Construction Aluminium 35% 48% Machinery 20% Copper 28% Infrastructure Nickel 27% 14% Source: BHP Billiton Estimates 0% 10% 20% 30% 40% 50% 60% 70% Source: CRU, Brook Hunt, IISI, PEL, China Customs, BHP Biliton estimates China’s Urban Residential Floor Space (Billions of Square Metres) 35 33 30 25 24 20 18 15 10 9 Source: McKinsey & Co, BHP Billiton Estimates 5 2000 2008 2015 2025
  5. 5. Sharp Recovery in Natural Resources Sector 5 China’s Economic Recovery in 2009 Rebound in Natural Resources (% growth year-on-year to August 2009) 160 Industrial Production +12.3% 140 120 Fixed Asset Investment +33.3% 100 80 Construction Materials Sector +36.6% 60 Passenger Car Sales +90.0% 40 20 Apr 08 Apr 09 Jan 08 Feb 08 Sep 08 Nov 08 Jan 09 Feb 09 Sep 09 May 08 May 09 Jun 08 Jul 08 Jun 09 Jul 09 Mar 08 Dec 08 Mar 09 Aug 08 Oct 08 Aug 09 Exports (23.4%) FTSE All Share Mining Oil Copper Gold
  6. 6. 6 www.cartoonstock.com
  7. 7. Equity Finance – Deeply discounted issues in H1 2009 7 • UK financings in H1 were dominated by balance sheet repair • 25% of institutional cash flow was hoovered-up by the top 3 transactions Current Price (p) Discount Raised (£m) Price RIO TINTO RIGHTS June 1400 50% 7,342 2664 XSTRATA RIGHTS March 210 40% 4,106 916 LONMIN RIGHTS May 900 40% 316 1681 GEM DIAMONDS PLACING April 100 33% 75 248 AQUARIUS PLATINUM PLACING March 180 10% 83 282 AQUARIUS PLATINUM RIGHTS April 115 36% 48 282
  8. 8. Junior Company Equity Finance 8 Bank lending has become more conservative....and expensive Equity financing can be completed more quickly....and with less rigour ( !? ) Carpe Diem: gold companies, in particular, feel an urgency Quality projects are finding equity financing.
  9. 9. Equity Finance – A Currency for Acquisitions 9 Shares are the obvious currency for juniors whose share prices have risen sharply in the last nine months. $86.5 million $314.7 million £1.8 million Avocet Mining plc Sylvania Resources Dwyka Resources Limited Limited Recommended all share Recommended all share offer for Minerva Recommended all share offer for Wega Mining Resources offer by Ruukki Group Joint Financial Adviser and Financial Adviser, Nominated Broker Nominated Adviser Adviser and Broker April 2009 June 2009 July 2009
  10. 10. Equity Finance – Financing for Growth 10 • Financing to participate in rights • 100% Equity finance of mine offer by Extract Resources development and start-up • World class uranium asset in Namibia
  11. 11. Equity Finance – Deeply Discounted Rights Issue 11 Pangea DiamondFields • Critical stage of ramp-up to become cash flow positive • Massively diluting 15 : 1 open offer • Fully underwritten by management and key institutions • Raised £8.7 million at 0.5p/share • 33% discount • Repaid loan obligation • Exercised option to acquire 100% of operations • Price has recovered to 2p/share
  12. 12. Equity Finance – Rescue Finance 12 African Copper (“ACU”) • Natasa Mining agrees bridging loan and and equity financing • ACU offers debt for equity swap to bond holders. • Natasa buys US$21m secured loan note at 60% face value and calls the loan • ZCI subscribes for shares at 1p for gross proceeds of £6.76m, giving it 82% interest • Natasa is repaid in full and releases security over the assets • ZCI and African Copper agree a re-financing of inter-company loans : • US$8.4m convertible loan note at 1p for 4 years, with a coupon of 12% • US$22.7m of ordinary 4 year loan notes with a coupon of 14%
  13. 13. Equity Finance – Choose your broker (and your audience) 13 AIM FTSE Small Cap FTSE 100 % Market Share by Value (Thomson Reuters data)
  14. 14. Debt 14 Debt has re-appeared It is starting to occur further up the development cycle The two primary drivers are: security means debt holders are first in line if the project is derailed debt comes with interest payments which diminish the risk incrementally The current economic landscape supports debt: a debt investor's exposure is limited to a finite time horizon A potentially inflationary environment makes debt more attractive.
  15. 15. Alternative loan options 15 Instrument Comments Equity Swap • legally binding subscription for shares • subscription reference price at a premium to the prevailing price • monthly “swap” of equity for cash • cash receipt adjusted according to prevailing price in relation to the agreed reference price Convertible loan note • unsecured • typically 10 -12% coupon • can limit future corporate flexibility Gold Participating Bond* • up to 20% of annual mine production • loan effectively converts to a securitised gold loan • repaid quarterly as ETF • pays a coupon Gold Exchangeable Bond ** • gold secured loan • exchangeable into physical metal at holder’s option • callable by the issuer at trigger price • can be utilised for any exchange traded commodity * marketed by Canaccord Adams ** marketed by Ambrian
  16. 16. Private Equity 16 Historically avoided cyclical businesses At the peak they specifically avoid miners because valuations are too high to provide the returns they seek And booming investor demand meant smaller companies could obtain capital through share placings Through high interest rates, private equity financing can provide a solution to the troubles facing companies at the pre-production / feasibility stage The expectation is that over a 3 – 5 year timeframe the return will be 2 – 5 times the investment The latest development is the tie-up between banking and trading groups with commodity expertise and Sovereign Wealth Funds (SWF’s) to buy assets
  17. 17. Private equity and investment companies 17 Polo Resources Aim listed group focused on investing in uranium and coal assets Capitalised at £120 million Investments include Extract Resources, West Australian Metals, Impact Minerals, Uranex Endeavour Financial Classical merchant bank Capitalised at US$174 million with cash of US$122m and investments of US$71m Recently acquired up to 54% of Etruscan Resources through a US$43m finance and restructuring plan
  18. 18. Private equity and investment companies 18 Och Ziff “Alternative asset” management firm US$21.7 billion of assets under management African Global Capital created in January 2008, biased towards natural resources Noble Started in 1987, it has moved upstream to secure commodity off take for trading CIC invested US$850m Distressed asset acquisitions incldue: Gloucester Coal (US$430m) US fuel terminal & storage assets (US$65m)
  19. 19. Sovereign Wealth Funds 19 SWF’s have focussed on Resources Companies An Example China Investment Corporation US$200 billion seed with the goal of improving returns on foreign exchange reserves 17% of Teck Corporation 14.5% of Noble Group ( for US$850m at a 8% discount to market) US$1.9bn in PT Bumi Approved investment partners increase access to global raw Source: SWF Institute materials (eg: Glencore) 10 = Overweight / 0 = Underweight
  20. 20. 20 But the last word on why the equity and debt markets are booming must go to Alex.......
  21. 21. Richard.chase@ambrian.com +44 (0)207 634 4700 21 CORPORATE FINANCE & EQUITIES COMMODITIES AMBRIAN PARTNERS LIMITED AMBRIAN COMMODITIES LIMITED AMBRIAN METALS LIMITED _______________________________________ _______________________________________ _______________________________________ Nominated Adviser Broker-Dealer of LME Futures & Options Physical metals trader Corporate Finance - Aluminium Focus on: Corporate Broker - Copper - Copper (wire-rod/cathode) Equity New Issues - Nickel - Aluminium Market Making - Lead - Lead Equity Sales & Trading - Tin Research - Zinc Bullion Dealer _______________________________________ _______________________________________ _______________________________________ Authorised and Regulated by the FSA Authorised and Regulated by the FSA London and Shanghai Member of the London Stock Exchange Member of the London Metal Exchange Agents in Calcutta, New York, Santiago, Seoul and Tokyo   #1 #1 AIM Advisers Extel Sm al l Caps Basic Materials Metals & Mining Nomad & Broker Broker Ambrian Partners Am bri an Partners April 2009 2009

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