March/April 2012

Desert springs

Gold miners explore the Middle East for capital

By Natasha Tourish and Peter Braul

 

Representatives of some of Canada’s largest mining companies gathered in Dubai in January to attend the Precious Metals Commodities Investment Summit. It was a bid to attract wealthy foreign investors to Canadian ventures and to create partnerships to tap into new mining markets in Africa.

The Canadian delegation included Goldcorp, Iamgold and Osisko, as well as Canada-focused exploration companies Virginia Mines, Northern Shield Resources, Orbite Aluminae Inc. and Altair Ventures. “We had a good mix of large and small operators, and it wasn’t strictly limited to gold,” said Jean Vavrek, executive director of CIM, which sponsored the event. Sam Hamad, the Quebec minister of economic development, was in attendance to promote the province’s long-term multi-billion dollar infrastructure development project Plan Nord.

This was the first time that such a summit was hosted in the Middle East. “We saw the opportunity to work with Minister Hamad, and there was interest from a large group of investors,” said Vavrek. “The first time is always difficult, and we’ll be evaluating what worked and what didn’t, but I think we proved there is major potential for this event.”

Close to 200 investors registered for the two-day summit. However the audience, made up mainly of fund managers and institutional investors, as well as some private investors and local family offices, was often much smaller, hovering between 35 and 50. “We’ve got a lot more education to do,” Vavrek pointed out.

“We selected Dubai because it offers the most developed infrastructure for such high-level events and its financial industry is by far the most advanced in the Middle East,” said Alexandre Teodoresco, managing director of Middle East Trade Development Agency, which organized the summit. “It takes savvy investors to be able to appreciate the complexity of investing in the precious metals mining sector.”

Despite the presence of free-flowing capital in the Gulf Cooperation Council (GCC) and the well-known appetite amongst local businessmen for gold, very few companies have invested in actual precious metals mining companies.

The reason, explained Teodoresco, is that until now there has been no platform to educate the market on the immense investment opportunities in this industry and no event has brought together mining executives from North America and investors from the GCC.

Paul Walker, global head of precious metals for the research and consultancy firm Thomson Reuters GFMS, said, “Dubai is an obvious place to tap into for capital, not just for the wealth of the UAE but also for the surrounding states like Saudi Arabia. Everybody in the mining industry is always looking for capital; it’s a risky business and an expensive one. Canada’s got huge potential.”

Walker went on to say the jurisdiction is investor friendly. However, despite this potential for investors, he was quick to point out that it is always about the timing in these markets. “Gold in the next five years is going to face some tough challenges. It’s going to be crucial for the miners to access funding that will help them get through if there is a correction in the price.”

Speaking during the event, Gordon Stothart, COO of Iamgold, said his company was looking to expand its investor base beyond North America and Europe into the GCC and further east. He acknowledged that volatility was a risk, but that Iamgold remains focused on building well into the future.

Stothart said it was the “obvious association” between the Mideast and Africa that brought his company to Dubai in search of investors to complement its three existing mining operations in West Africa.

“On a fundamental basis we’re looking for shareholder participation in our company,” he said. “At a higher level, we’re looking for partners to bring new mines into operation and/or partners that themselves might have gold assets that they’re looking to get developed — we could help them with that.”

“Investors in this area have a more nuanced view of the risks of investing in Africa,” said Stothart, “whereas this is sometimes a road block for investors in North America.”

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