Kobold, Is The Valuation All About AI (ie An AI premium?)

Tshepo Magagane: Executive Director – Pangaea Advisory Group / Partner – The Critical Minerals Fund

Maybe at the margins re: having someone like Connie Chan being able to block time out and fly out to Africa then to minesite is an achievement beyond parallel (even AI start-ups in the US will struggle to get a response from her).

BUT this is far bigger than that – it is more fundamental – ie Listed Equity v Private Equity as a way to develop mining projects.

My experience has taught me that to do it successfully, you need anchor investors who are able to advance bespoke, esoteric, bilateral solutions through the development stage.

In summary, with Listed Equity 1. Things going great – always struggle to fill the equity raise book 2. Issues – share price down 80%, equity becomes too expensive

It is not there are no step-downs in the private space but they always understand that mission as to why the invested in the first place.

Real world eg Khoemacau – was at the coalface of this (Merchant Bank I was at had exposure with PF and Offtake-COF)

1. Construction then Commissioning – can see the issues with recoveries (cost blow-out on a monthly basis)

2. For a year seeing the management reports

3. Bid came in from the Chinese (Discovery was ASX listed)

4. Was already pushing the PF relationship lead to setup Discovery meeting for a trip that could include Australia

5. Discovery Mmgt did a defense strategy mistake by appointing UBS Australia (just not sector specialists) – and not focusing on value defense

6. Operational issues become evident to market

7. We are pushed internally in “work-outs”  to find equity solution (3rd party)

8. Share price tanks and Chinese pull bid

9. Mgmt internally gives directive to us “get out at par” [COF waterfalled so easy to  extinguish] – even the irons we are trying to put in the fire dont matter (defense advisor had claimed that they had spoken to Scandis such as  Norsk, Lundin – when my Swedish colleague reaches out they go “no, we this hasnt come through our desk)

10. Barcap Nat Res Investing was being spun-out (same B III issues we were having) and said to my boss (global head) “maybe X will look at this” – X headed up the Barcap team and was his friend

11. Cupric (Barcap) was able to put together an SPV that bought the assets for USD35m and sorting out the issues then selling it for USD2bn

TL;DR, Private Equity is the only suitable way to develop mining projects (if Boseto ie Khoemacau was held in private vehicle, an “equity cure” would have been found) – and why you see this valuation that you find with Kobold – Private Equity with a LT view about the path of development!

For the world to stand a chance to reach even partial Transition targets you are going to need 1. Dedicated African mining Private Equity vehicles (there really are none spot) 2. Increase the AuM in Global Vehicles from the current USD17bn to well into the hundreds of billions.