Richard Chase: Raising funds in today's market (Opening Session: What is the new 'normal' for...
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Transcript of Richard Chase: Raising funds in today's market (Opening Session: What is the new 'normal' for...
GLOBAL MININGINVESTMENT CONFERENCE 2010
STATIONERS’ HALL ● CITY OF LONDON ● TUESDAY-WEDNESDAY, 28-29 SEP 2010
www.ObjectiveCapitalConferences.com
Investment Conferences
Raising funds in today’s marketRichard Chase – Managing Director, Ambrian Partners
DAY 1 – OPENING SESSION: WHAT IS THE NEW ‘NORMAL’ FOR MINING?
Other sponsors & participating organisations:
GLOBAL MININGINVESTMENT CONFERENCE 2010
Lead sponsors:
Media partners:
CREATING VALUE ACROSS THE RESOURCES SECTOR
Raising funds in today’s market
RICHARD CHASE
Managing Director
4Expansion and Capital Raising
Raise funds with no loss of control, but• limited availability• income or asset backing • timing
Source of capital and expertise, but • sentiment towards the sector• limited growth • ultimate exit route
Access to capital markets and raises profile, but• cost• change in culture• liquidity• need to augment the management team
• all of the above, and... • dealing with residual liabilities
Raise funds with no loss of control, but• short term solution• identifying a suitable asset / buyer• timing• one off raise modest quantum of funds
Private equity
IPO
Reverse takeover
Sell existing assets
Raise debtMarket to private
funds
Market to trade
Joint Venture
Acquisitions
Expansion and Capital raising
5The basic forms of capital
Project finance
restrictions on what you can do
no dilution of your holding
loan has to be repaid, but interest should be tax deductible
Generally only after (bankable) feasibility study
Private Equity
restrictions on what you can do
dilution of your holding
may have onerous clauses attached (negotiate hard and read the small print!)
Public equity
fiduciary duties
dilution of your holding
potential capital appreciation
easier exit (subject to lock-ins and black-outs)
Joint venture / farm-out
restricted by terms of agreement
Unlikely to provide significant cash injection – but can avoid further cash expenditure
dilution of project equity
dependent on performance of farm-in partner
6Diversity is key in tricky markets
£98.0 million
Nautical Petroleum plc
Secondary Offering raising £30.4 million and £16.3 million Placing of
existing sharesJoint Broker
August 2010
US$47.6 million
Pangea DiamondFields plc
Merger with International Gold by Disposal of
AssetsFinancial Adviser
April 2010
US$40.0 million
Weatherly International plc
Disposal of Namibia Custom Smelters
Financial Adviser
March 2010
7Equity Finance
Bank lending has become more conservative....and expensive
Equity financing can be completed more quickly....and with less rigour ( !? )
Equity investors are readily financing quality projects
Carpe Diem
8AIM: A brief recap
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 to Aug
-
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
0.0
20,000.0
40,000.0
60,000.0
80,000.0
100,000.0
120,000.0
Average daily value £m Average daily shares traded (millions) Market value (£m) (RHS)
9AIM: Outperformance
80
90
100
110
120
130
140
150
16014
Sep
28 Se
p12
Oct
26 O
ct09
Nov
23 N
ov07
Dec
21 D
ec04
Jan
18 Ja
n01
Feb
15 Fe
b01
Mar
15 M
ar29
Mar
12 A
pr26
Apr
10 M
ay24
May
07 Ju
n21
Jun
05 Ju
l19
Jul
02 A
ug16
Aug
30 A
ug13
Sep
Price
(reb
ased
to
100)
AIM Basic Resources ASX All Ord TSX Composite FTSE 250
“…the market is ending the year on a high. The Aim index has risen by 62 per cent since January 1, compared with a rise of 22 per cent in the FTSE 100.
The rate of secondary fundraisings has been picking up, especially in the natural resources sectors.
After the famine of 2008 and 2009, times of plenty might once again return for London’s junior market.”
Source: Financial Times, 15 December 2009
AIM has outperformed the FTSE 250, TSX and ASX over the last twelve months
10London as a source of equity finance
2010 (YTD)
2009 2008 2007 2006 2005 2004 20030.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
70,000.00
80,000.00
90,000.00
Further Money Raised IPO Money raised
2010 (YTD)
2009 2008 2007 2006 2005 2004 20030
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Further Money Raised IPO Money raised
11Choose your broker (and your audience)
AIM FTSE Small Cap FTSE 100
IndividualsMarket Makers
INVESCOBlackRock
ArtemisAviva
FidelityAXA Framlington
SchroderLansdowne Partners
JPMorgan AMF&C
GartmoreM & G
Standard LifeJupiter
HendersonOctopus
LangholmUBS
Hargreave HaleInsight
0% 2% 4% 6% 8%Legal & General
Individuals
Standard Life
M & G
F&C
Schroder
Barclays G.I.
JPMorgan AM
Insight
Aberforth
BlackRock
Market Makers
Aviva
Rathbone
Artemis
Scottish Widows
AXA Framlington
Henderson
Fidelity
INVESCO
Rensburg
Threadneedle
0%1%2%3%4%5%6%7%8%
Legal & General
Barclays G.I.
Capital
M & G
AXA Framlington
State Street
Fidelity
Standard Life
Norges Bank
BlackRock
Insight
Scottish Widows
INVESCO
Capital World Investors
Aviva
UBS
Threadneedle
Schroder
F&C
Newton
USS
Gov't of Singapore
0% 2% 4% 6% 8%
% Market Share by Value
(Thomson Reuters data)
12Alternatives: Private equity and investment companies
Vallar
Special situation vehicle, IPO in July raised £687m
Initial target is one major takeover financed with debt and by issuing additional new shares
Endeavour Financial – now re-named Endeavour Mining
Classic merchant bank
Acquired Etruscan through a finance and restructuring plan
Sold 43% Crew Gold for US$215m, giving an annualise rate of return of 124%
Noble
Started in 1987, it is firmly established as an investor and commodity trader
CIC invested US$850m
13Alternatives: Sovereign Wealth Funds
Source: SWF Institute10 = Overweight / 0 = Underweight
Q3 2009 Q3 2010
14Current trends
Timing has been key
Non-deal road shows are essential to “warm-up” investors
Include the Private Client Brokers: private investor shareholdings have hit a two-year high
Less conventional sources of equity finance have shown clear signs of indigestion
Commodity Financing for traded metals has become more common
as an alternative to equity finance, and as a cornerstone to equity finance
Financing of advanced exploration – especially for gold – is “in”
15Debt
Debt has re-appeared
It is starting to occur further up the development cycle
The two primary drivers are:
securitization means debt holders are first in line if the project is derailed
interest payments incrementally diminish the risk for the lender and provide yield
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.
16Alternative loan options
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
Metal Off-take Financing / Commodity Financing
• pre-payment for future metal off-take• unsecured • pricing mechanism and term of the off-take can have a significant economic impact
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
17
Company
What financiers look for
Sponsorship / Group
Structure
Sovereign & Political
Technical
Commodity: demand and price
Environmental & Social
Financial Structure
An initial resource estimate is a must
Transparent markets with prices and volumes quoted
Key to management’s reputation
Sound financial structure and procedures is
essential
These risks are increasingly
becoming less palatable
Do they know what are doing?
18Ambrian Capital: Full service banking
Single asset Company or greenfield development
Intermediate Producer with small number of operating assets
Development and evolution of AMBRIAN Client Companies
Project Finance
• Equity
• Off-take Finance
• Debt
Structured Facilities with hybrid project and corporate aspects
Major Company with multiple established operating assets
Feasibility Stage Company in the process of completing Feasibility/Bankable
Advisory Services
Ambrian advises on various financial solutions
Equity Financetakes an equity position to fund potential exploration companies
Exploration
19
[email protected] +44 (0)207 634 4700
CORPORATE FINANCE
& EQUITIESCOMMODITIES
PRINCIPAL INVESTMENTS
AMBRIAN PARTNERS LIMITED
AMBRIAN COMMODITIES LIMITED
AMBRIAN METALS LIMITED
AMBRIAN ENERGYLIMITED
AMBRIAN ASSET MANAGEMENT LIMITED
Nominated AdviserCorporate FinanceCorporate BrokerEquity New IssuesMarket MakingEquity Sales & TradingResearch
Broker-Dealer of LME Futures and Options - Aluminium - Copper - Nickel - Lead - Tin - ZincBullion Dealer
Physical metals merchant
Focus on: - Copper (wire-rod/ cathode) - Aluminium - Lead
Physical oils merchant
Focus on: - Crude Oil and Refined Products Structured Trades - Strategic Inventory Management Specialist - Biofuels supply and blending
Manages Ambrian Principal Investments Limited, wholly owned Jersey investment company
Ambrian Resources AG, majority owned Swiss subsidiary - Arranges and
manages strategic principal investments
FSA Authorised
Member of the London Stock Exchange
FSA Authorised
Associate Broker Member of the London Metal Exchange
London and Shanghai
Agents in Calcutta, New York, São
Paulo, Santiago, Seoul and
Tokyo
London, Geneva, Hamburg, Singapore
Agents in Istanbul, Johannesburg
FSA Authorised
Office in Zug
LONDON METAL EXCHANGE
Other sponsors & participating organisations:
GLOBAL MININGINVESTMENT CONFERENCE 2010
Lead sponsors:
Media partners: