Asia’s gold major in the making

PETALING JAYA: LionGold Corp Ltd, the Malaysian-controlled, Singapore listed gold miner, is poised to embark on another series of acquisitions that could nudge it to become one of Asia's largest gold mining players, sources said.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2013/6/3/business/13190316&sec=business
Published: Jun 03, 2013


Journalists visiting the ballarat mine in Victoria.

LionGold, which had embarked on an acquisition-led growth model since 2011, could likely exceed its published 2014 targets by virtue of the imminent acquisitions.

The sources said LionGold was tapping on a slew of buying opportunities that had come about again as a result of depressed share prices of listed gold miners in markets around the world, driven down in part by the softening gold prices in recent weeks.

LionGold's 2014 target is to have an annual production of 200,000 ounces of gold and resources of 10 million ounces.

Achieving this would put it only second in Asia to one or two Chinese-state owned listed gold miners.

However, the sources added that it was likely for LionGold to come close to doubling its 2014 targets if it went through a series of planned acquisitions, thereby potentially putting it in the top three in Australasia.

StarBiz had first reported on the SGX-listed LionGold last September, interviewing its executive chairman Tan Sri Nik Ibrahim Kamil, a former head honcho of KFC Holdings Bhd and the NSTP group.

LionGold has since appointed investment banker Nicholas Ng as its CEO. When contacted, Ng declined to elaborate on the specifics of LionGold's M&A plans. He said: “LionGold has digested what we've acquired so far and we're still in an acquisitive mode. The model continues to be the acquisition of scalable junior minors trading at attractive discounts”.

           Matthew Gill.

 

Ng added that the recent weakening in gold prices was working to LionGold's favour. “The recent gold price volatility has greatly increased opportunities to buy developed mining assets at substantial discounts to market valuation,” he said.

Indeed, that has been LionGold's modus operandi to take advantage of cash-strapped, small and mid-sized listed gold miners trading at a fraction of their true value in markets such as the Australian Securities Exchange (ASX).

LionGold already boasts control over three producing gold mines and a few more mines that are close to the production stage. One of the producing mines is the state-of-the-art Ballarat mine, near Melbourne, whose parent company, Castlemaine Goldfields Ltd, was acquired at a song considering the amount of investment that had previously gone into the Ballarant mine.

Ng reiterated that LionGold had specific requirements in its search for target companies. Among them are they must be producing or have a clear path to production of more than 50,000 ounces of gold per annum, must have a certain low cost of production and a strong working capital position.

The companies should also have a competent management team and a significant amount of investment sunk into the operations.

While that may seem like a tall order, Ng said there were such opportunities around.

LionGold's model has been to use its highly liquid shares as the currency to pay for part of its acquisitions. The ability to do so has been one of its key success factors.

LionGold has a market capitalisation of just over S$1bil, an average daily trading volume of some S$20mil to S$25mil and has been included in the MSCI Small Cap and the FTSE ST Mid Cap indexes. It also counts some big name funds as investors such as Weiss Capital, Nomura, Macquarie, Credit Suisse and the Market Vectors Junior Gold Miners Exchange Trade Fund (ETF).

(The ETF belongs to New York-based asset manager Van Eck Global which had launched the ETF in 2009 aimed at giving investors there exposure to small and mid-cap gold mining companies.)

According to LionGold's website, after acquiring new mining companies, LionGold embarks quickly on enhancing the growth and production capabilities of the assets, by coming up with a 100-day plan as well as a 2-year business plan.

The company says it looks at between 3 and 5 acquisitions a year and aims to list at least one of its subsidiaries on a yearly basis as well.