Nov. 25 (Bloomberg) -- Maxim Finsky, the former deputy chief of OAO GMK Norilsk Nickel, said he plants to buy as much as 40 percent of U.S. gold producer Century Mining Corp. and make acquisitions to raise output to 300,000 ounces a year.
“With further acquisitions the goal is to form a mid-tier gold company with annual production of 300,000 ounces,” Finsky said yesterday in a telephone interview.
Century, which is based in Blaine, Washington, has two mining projects. Lamaque in Canada and San Juan in Peru are scheduled to produce more than 70,000 ounces of gold next year.
Finsky, 43, is also the head of Russian billionaire Mikhail Prokhorov’s mining company Intergeo and is a board member at OAO Polyus Gold, the country’s largest producer of the metal. Finsky doesn’t plan to consolidate his personal projects with Intergeo or Polyus, he said.
Century said yesterday it approved the sale of C$21million ($20 million) of shares. Kirkland Intertrade Corp., whose beneficial owner is Finsky, would be among the buyers, Century said last month.
Century was unchanged at 19.5 Canadian cents as of 11:11 a.m. in Toronto trading, valuing the company at C$38.6 million.
http://www.bloomberg.com/apps/news?pid=20601082&sid=aopFrnQmfT0g
3 comments:
This is very encouraging for the deal closing. Nothing is ever guaranteed, but these types of public statements do not occur unless the current intentions are to move forward with closing the deal.
It's nice to hear from the other side of the deal. Obviously, if he's talking future tense about CMM and making acquisitions, then the plan is still in place. My only question is, how does he plan on funding for these acquisitions? I hope it's further down the road when CMM has the cash, and not more dilution.
Yikes1, that's a good question. I don't think the acquisitions will be done until Century's share price is much higher, unless they are targeting severely undervalued companies. Also, they could be looking at advanced stage projects (not fully valued as yet) then develop them to production with non-recourse debt (maybe from the $25 billion Russian brokerage house, where Finskiy is the CEO of the investment arm).
They could also be looking at merging with an undervalued company that is looking for funding to roll over debt and funding to develop a mine. Finskiy and Scola can arrange non-recourse debt financing for the merging company, which will unlock the value.
Although this is unlikely, they could also arrange non-recourse debt financing to acquire a gold company or asset in a 100% cash transaction. In this case, no shares would be issued.
Non-recourse debt is at the centre of all of the above possibilities (if we can get it). Non-recourse means that no one can touch Lamaque and San Juan or any of our other assets if something to goes wrong with any of the new assets acquired.
The key is that anything we acquire must be accretive. If it’s accretive then share dilution is not as impacting. It’s the accretive market cap that matters, which shows up in share price. For example, I don’t have a problem if we end up with say 600M shares outstanding, 400,000 annual production ounces (200,000 potential in-house from Lamaque and SJ already), 14M 43-101 gold resource ounces (with 7M being Reserves) and a 3.0 billion market cap (as a note, Eldorado Gold has 400M shares outstanding and a 6.0 billion market cap, with still being an average size to better than average size mid-tier producer). Growing the business is important when the time is right, and with the right deals and just as long as it doesn’t remove focus from Lamaque and San Juan. Expanding business is important for many reasons, and not only to increase shareholder value. It’s vitally important for the company to have multiple large producing mines. Right now we are too dependent on Lamaque. We were crippled over the past couple of years due to delays in financing Lamaque. We need to have multiple large operating mines in order to have a more sustainable business, which can withstand one of the mines going down for a period of time. A prime example of this is New Gold Inc. They were recently order by Mexico to close down one of their mines. However, their share price hardly took a hit due to them having a number of other mining operations.
This is why mid-tier companies receive a premium in their share price. This is also why more institutional investors invest with mid-tier and majors, and generally stay away from juniors.
I’m confident that Finskiy and Scola are capable of building Century into mid-tier producer in a manner that enhances shareholder value for all shareholders. As added incentive, they own 40% of the company. I’m sure they are in this investment to make zillions of dollars.
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