26/08/2010 - 00:00

Offshore investment secures African deals

26/08/2010 - 00:00

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Centamin’s move to the AIM in London last year has put it in the right place to attract British and European investment.

IF Australia’s hung parliament and the lingering threat of the mining super-tax were not reasons enough to consider the appeal of investing overseas, here are three other reasons: Australia’s first $200 million personal ‘African’ fortune; a record-breaking African investment conference in Perth; and record share prices for Aussie companies working in Africa, with the promise of more to come via takeover activity.

Sami and Josef El-Raghy cleared the $200 million mark last week when the price of the company they founded hit an all-time high of £1.72 on the main board of the London Stock Exchange.

Best known as a Perth-based father-and-son team Sami and Josef were early movers in the dash for African wealth when they floated their gold stock, Centamin Egypt, on the Australian Securities Exchange back in 1993.

Dismissed for years as a hopeless case because of the problem of doing business in Egypt, and because of over-promotion as the company chasing ‘the gold of the Pharaohs’, Centamin has more recently been an outrageous success – albeit one slightly hidden from view.

Last year, Centamin delisted from the ASX, preferring instead to have its shares quoted only on the London Stock Exchange.

The rationale for the move, and one other Australian miners will be thinking about, was that European investors, especially British and Swiss gold bugs, would rate the stock more highly than Australians who harbour doubts about companies doing business in Africa.

Today, Centamin can be seen as one of the ‘companies that got away’ and the El-Raghy family as big winners from the experience.

With a combined stake in the stock of 6.7 per cent, and with Centamin valued at £1.757 billion in London, the El-Raghy family fortune is measured at £117 million.

On conversion at the current exchange rate of one British pound being worth roughly 57 Australian cents, Centamin is capitalised at $3 billion, and the El-Raghys’ stake is worth $205 million.

It would be churlish to point out that, a few years ago when the pound was a lot more valuable, the family fortune would have been closer to $300 million – such is the peril of currency movement.

The unknown is whether Centamin would be attracting the same $3 billion value it is getting today from European investors.

Whatever the cause or effect, the fact is that the El-Raghys have blazed a trail and other Aussies will follow because this country has become less friendly to mining investment just as Africa becomes more friendly in geological and financial terms.

Opportunity knocks

A MEASURE of how friendly Africa has become relative to Australia can be gauged in the remarkable success of the annual African Down Under (ADU) conference, which starts in Perth next Wednesday and has been extended from its original two-day to a three-day event thanks to a huge increase in delegates, exhibitors and speakers.

According to the conference organiser (and owner) Bill Repard, the event had to have an extra day added to handle demand.

With 1,200 delegates registered, and more certain to blow in for a day, ADU is fast closing in on the size of Australia’s current holder of the title of biggest mining conference, Kalgoorlie’s Diggers & Dealers forum.

It would be a brave man to suggest that ADU will eventually pass Diggers but what the heck and say just that because of the obvious migration of capital and skills from Australia to Africa, and the discomfort of three days in Kalgoorlie, which struggles to handle 2,200 Diggers’ delegates.

There are other reasons why ADU is succeeding. It welcomes government speakers, with seven African ministers making the trip to Perth, plus three permanent secretaries from government departments, plus representatives from the Department of Foreign Affairs and Trade, Austrade, AusAid and the Export Finance & Insurance Corporation.

Unspoken but interesting is the fact that Perth is a safer city than anything in Africa, even the home of that continent’s premier resources event, Mining Indaba in Cape Town.

Boiled down, ADU is a screaming success because money is like water (and people). It always flows to where it is most welcome, and right now Africa is more welcoming than Australia.

Takeover action

THE third reason for the rise of Africa, and one for investors to note, is that more takeover activity seems to be a certainty when it comes to the Aussies already operating over there.

In a note circulated earlier this month, Foster Stockbroking noted that Canada’s Kinross Gold had launched a takeover bid for Red Back Mining, a company that had its roots in Australia until migrating a few years ago.

The Kinross bid, which values Red Back at $US7.1 billion, means that all of the global gold giants now have exposure to West African gold – except Barrick Mines.

This leaves a question hanging: How will Barrick get the exposure it undoubtedly wants if it is to match its peers?

The answer, obviously, is buy an Aussie working in the region because, as demonstrated in the Centamin saga, Australian-listed stocks are relatively cheap.

Names mentioned by Foster include Gryphon Mining, Ampella, Azumah, Mineral Deposits, Castle Minerals, Perseus Mining, Adamus Resources, and Papillon Resources.

It’s not a takeover target list, just the start of a shopping list.

Acountability time

AFTER the crash comes retribution. That’s one way of describing events in a report last week into how investors were enjoying some success in suing advisers for lousy recommendations.

Not many people have the courage, or believe they have the right, to sue their investment adviser; but that’s changing thanks to a few recent successes, including a win by a fund associated with Ceramic Fuel Cells, a Queensland hairdresser suing an investment bank over the loss of $3.7 million, and a Melbourne woman claiming she lost almost $2.5 million after buying collatorised debt obligations (CDOs) on the advice of her bank.

The easy days for investment advisers are certainly over, with government regulators cracking down from above and clients attacking from below. Ouch!

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“People never lie so much as after a hunt, during a war, or before an election.”

Otto von Bismarck

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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